Co-operative Banking in India

Recently, the Reserve Bank of India (RBI) imposed restrictions on withdrawals from Punjab and Maharashtra Cooperative (PMC) Bank, which triggered a panic among bank customers. It has brought to the fore the issue of riskiness of banks, especially co-operative banks and the need to restore confidence among customers. Cooperative Banking A Co-operative bank is a financial entity…

RBI transfer ‘surplus’ to government

Context Reserve Bank of India (RBI) Board has approved a transfer of Rs 1,76,051 crore to the government, including a surplus or dividend of Rs 1,23,414 crore, and a one-time transfer of excess provisions amounting to Rs 52,637 crore. Bimal Jalan Committee The outflow from the RBI’s reserves was limited to this amount only because…

Rediscovering Development Banks

Context Finance Minister recently announced a slew of measures to boost the economy and financial market sentiments. One of the measures was a proposal to establish an organisation to provide credit enhancement for infrastructure and housing projects with an aim to enhance fund flows towards such projects. The announcement can have far-reaching implications for India’s financial system.…

With 10 branches, first small finance bank kicks off operations

Jalandhar-based Capital Small Finance Bank Ltd, India’s first small finance bank, has commenced operations. The bank kicked off operations with ten branches. Capital Small Finance Bank has been set up by converting the erstwhile Capital Local Area Bank Ltd. It was one of the 10 applicants to be given in-principle approval for setting up SFBs…

The neglected impact of a rate cut

Issue Impact of a rate cut on the exchange rate Problems before the Indian economy A gloomy world economic scenario Over-leveraged corporate balance sheets An extremely weak rural demand. How could rate cut depreciate the exchange rate? Ninety-five per cent of India’s investment comes from domestic sources. Further, a significant portion of foreign direct investment…

RBI to ease registration process for NBFCs

Reserve Bank of India (RBI)  has decided to simplify the registration process for non-banking finance companies (NBFCs). What is a Non-Banking Financial Company (NBFC)? A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority…

No sanctity for sovereign guarantee

Livemint Issue A mismatch between the value of stocks kept in warehouses and loans taken against them. Context It has been found that the stocks of foodgrains kept in the warehouses of the Punjab government are inadequate to cover the loan against such stocks, so the Reserve Bank of India (RBI) has directed banks to…

Deepak Mohanty Committee on Financial Inclusion

The Reserve Bank of India (RBI) has released the Report on Medium-term Path on Financial Inclusion submitted by 14-member committee headed by RBI Executive Director Deepak Mohanty RBI had constituted the committee in July 2015 to examine the existing policy regarding financial inclusion and a five-year (medium term) action plan It was tasked to suggest…

Relation between fiscal deficit and bank credit

There is  an inverse correlation between fiscal deficit (fiscal expansion) and bank credit (monetary expansion). That is, if credit growth falls, fiscal deficit may need to rise and if credit rises, fiscal deficit ought to fall — to ensure adequate money supply to the economy. The FRBM Act says it cannot borrow more than 3…

Banks need an autonomy stimulus

Article Link Until recently, Indian banks were believed to be performing better compared to their global counterparts. However, recent reported losses of some Indian banks have raised concerns. Global Banks Vs Indian Banks: Globally bank shares are falling because of an expected fall in bank earnings as interest rates have become negative. In India, however,…