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    Assignment 3

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    RiturajPaul
    The document outlines 20 important developments in the Indian banking sector over the last 5 years. These developments include interest subvention schemes for MSMEs, allowing payment banks and small finance banks to participate in the call money market, enhancing priority sector lending, introducing certified credit counsellors for MSMEs, revamping the lead bank scheme, and introducing tri-party repos to improve liquidity in the corporate bond repo market. The developments were aimed at increasing credit access, improving financial inclusion, strengthening smaller banks, and promoting priority sectors like agriculture and MSMEs.

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    Assignment 3

    Uploaded by

    RiturajPaul
    41 views3 pages
    The document outlines 20 important developments in the Indian banking sector over the last 5 years. These developments include interest subvention schemes for MSMEs, allowing payment banks and small finance banks to participate in the call money market, enhancing priority sector lending, introducing certified credit counsellors for MSMEs, revamping the lead bank scheme, and introducing tri-party repos to improve liquidity in the corporate bond repo market. The developments were aimed at increasing credit access, improving financial inclusion, strengthening smaller banks, and promoting priority sectors like agriculture and MSMEs.

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    Assignment3_Naveen&Trishul_012&061.pdf

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    The document outlines 20 important developments in the Indian banking sector over the last 5 years. These developments include interest subvention schemes for MSMEs, allowing payment banks and small finance banks to participate in the call money market, enhancing priority sector lending, introducing certified credit counsellors for MSMEs, revamping the lead bank scheme, and introducing tri-party repos to improve liquidity in the corporate bond repo market. The developments were aimed at increasing credit access, improving financial inclusion, strengthening smaller banks, and promoting priority sectors like agriculture and MSMEs.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    41 views3 pages

    Assignment 3

    Uploaded by

    RiturajPaul
    The document outlines 20 important developments in the Indian banking sector over the last 5 years. These developments include interest subvention schemes for MSMEs, allowing payment banks and small finance banks to participate in the call money market, enhancing priority sector lending, introducing certified credit counsellors for MSMEs, revamping the lead bank scheme, and introducing tri-party repos to improve liquidity in the corporate bond repo market. The developments were aimed at increasing credit access, improving financial inclusion, strengthening smaller banks, and promoting priority sectors like agriculture and MSMEs.

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    of 3

    Trishul Paul Chowdhury (PGP/23/061)

    Naveen Shankar (PGP/23/012)

    ASSIGNMENT 3
    There have been many developments in the Indian banking sector in the last 5 years, the 20
    most important ones are as follows:

    1. Interest Subvention scheme for MSMEs (2019) – PM announced 2% interest


    subvention on all fresh or incremental loans for the MSMEs. The reason behind this
    initiative was free flow of credit to the MSMEs to ensure faster growth and
    sustainability. Credit at reduced cost will also improve the productivity of the MSMEs
    thereby contributing to the GDP.
    2. Payment Banks and SFBs allowed to participate in the call money market – Payment
    banks and SFBs can act as both lenders and borrowers in the call money market. This
    will help in improving the digital payments system.
    3. Amendment to the master direction on KYC – Bringing in norms like digital KYC,
    relief for small accounts. This will help the customers in difficult times like Covid.
    Giving extra period to small accounts will increase the liquidity in the system thereby
    stabilising it.
    4. Regulation on P2P lending platform for NBFCs – The reason behind this regulation
    was to use an online platform for matching the lenders and the borrowers and provide
    them with unsecured loans/credit. Thereby increasing the cash flow in the market.
    5. Financial Literacy Centres (FLCs) and rural banks to educate the masses – FLCs and
    rural banks were asked to spread financial awareness among the population by
    showing audio-visuals and doing poster based campaigns on financial topics. This
    will help in improving the financial literacy of the nation.
    6. Constitution of MPC – The Monetary Policy Committee is responsible to clarify the
    interest rate in the country. The MPC mainly formulates the monetary policy in the
    economy, and plays an important role in the cash inflow and outflow in the economic
    system of the country.
    7. Improved framework for governing the sales of stressed assets – After this
    development, banks can monitor the sale of stressed assets to Securitisation Company
    / Reconstruction Company / NBFCs / other financial institutions to measure the
    effectiveness of the assets and resolve the issues related to these assets effectively.
    8. Change in monetary policy stance to calibrated tightening from neutral tightening –
    When the economy was expecting a repo rate hike after the IL&FS crisis, the RBI
    brought in this development. This ensured that there need not be an increase/decrease
    in repo rate every meeting of the committee.
    9. Housing loans eligibility criteria changed and were revised for RRBs and SFBs – This
    will strengthen the position of the RRBs and SFBs in comparison to the other
    commercial banks and will bring them all on a level playing field. Loan amounts for
    housing specified as per the metropolitan and non-metropolitan residential status.
    10. RBI introduced the framework for resolving stressed assets by the banks – This was a
    big step with regards to the high number of NPAs. Lenders got a 30 days period to
    review the account of the borrowers before classifying those accounts as NPAs.
    Trishul Paul Chowdhury (PGP/23/061)
    Naveen Shankar (PGP/23/012)
    11. Enhancing credit delivery through priority sector lending - This emphasizes on
    enhanced flow of credit to more employment intensive sectors. Priority sector loans
    include small value loans to farmers for agriculture and allied activities, MSMEs,
    housing, education, and other low-income groups and weaker sections. Social
    infrastructure and renewable energy have also been brought under the ambit of PSL.
    12. Penetration of banking services - Innovative initiatives such as
     Train the Trainers’ Programme for Capacity Building of Business
    Correspondents and Counsellors
     Skill Upgradation for Performance of Resources – Business Correspondents
     Help in strengthening the backbone of financial system in the economy
    13. Promote financial literacy - Introduced “Train the Trainers” Programme for Rural
    Branch Managers and Financial Literacy to delivering basic financial literacy at the
    ground level in rural and semi-urban branches to bring more people under financial
    inclusion.
    14. Launch of e-Kuber & Trade of Priority Sector Lending Certificates (PSLCs) -
    Scheme introduced in April 2016 as a mechanism to incentivise banks which surpass
    their targets in lending to different categories under the priority sector. For instance, a
    bank with an expertise in lending to small and marginal farmers can exceed targets
    and derive benefit by selling the over-achieved credit target through PSLCs.
    15. Launch of Certified Credit Counsellors (CCCs) Scheme for micro, small and medium
    enterprises (MSMEs) - CCCs are expected to advise the MSMEs in preparing
    business proposals, and financial documents/ statements and promote awareness to
    MSMEs on suitable credit instruments available in the market. This sector has played
    a crucial role in not only providing large employment opportunities and increasing
    exports but also in promoting industrialisation of rural and backward areas, thereby
    reducing regional socio-economic imbalances.
    16. Kisan Credit Card (KCC) - An innovative credit delivery mechanism to provide
    adequate and timely bank credit to farmers under a single window for their cultivation
    and other needs, including consumption, investment and insurance. The KCC Scheme
    has now been extended to farmers involved in animal husbandry and fishery to enable
    them to meet their working capital requirements.
    17. Co-origination model - This model was rolled out which enables the scheduled
    commercial banks (SCBs) to co-originate loans with non-deposit taking systemically
    important NBFCs (NBFCs- ND-SI) for credit delivery to the priority sector.
    18. Revamping of the Lead Bank Scheme (LBS) to ensure economic development of
    districts by establishing co-ordination between banks and government agencies
    19. SPD: Standalone Primary Dealers (SPDs) have been gradually permitted to diversify
    their activities beyond G-sec activities into alternate streams, within acceptable limits.
    In order to facilitate SPDs to provide comprehensive services to their FPI clients, it
    has been decided to provide the SPDs a limited Foreign Exchange licence.
    20. Tri-Party repo: Tri-Party repo is a financial market instrument where a repo
    transaction between two parties is administered by a tri-party agent which is a
    licensed financial institution. The aim to introduce Tri-party repo was that would
    Trishul Paul Chowdhury (PGP/23/061)
    Naveen Shankar (PGP/23/012)
    contribute to better liquidity in the corporate bond repo market, thereby providing
    markets an alternate repo instrument to Government securities repo. Tri-Party repos
    are transacted through a Tri-Party agent in terms of Tri-Party Repo The tri-party repo
    is a financial market instrument like the market repo and not like the Central Bank
    repo (RBI’s repo). This means that it may not have a monetary policy significance
    rather will have financial market significance.

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