Under this centralised system, customers will have a single point of reference to file their complaints, submit documents, track status and provide feedback On November 12, 2021, Prime Minister Narendra Modi launched two innovative customer-centric initiatives of Reserve Bank of India — Retail Direct Scheme (RB-RDS) and the Reserve Bank-Integrated Ombudsman Scheme (RB-IOS). The RDS is intended to give retail investors – mostly the middle class, employees, small businessmen and senior citizens – an option of ‘directly’ investing in their hard-earned savings/surpluses in Government securities, making capital markets ‘easily accessible’ and ensuring that the investment is ‘more secure’. The RB-IOS is aimed at improving customer grievance redress mechanism. What are the schemes? How do these propose to achieve the stated...
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Category: Savings & Investment
Banks bail out – make it transparent
In the Union Budget for 2021-22, Finance Minister Nirmala Sitharaman had proposed setting up of a bad bank. Crafted as National Asset Reconstruction Company Limited (NARCL), it will bundle up all the non-performing assets (NPAs) of banks and sell them to investors such as private equity funds, alternative investment funds (AIFs) and so on, by putting a turnaround plan in place. On September 16, 2021, she announced the broad contours of the action plan. Under it, the NARCL will purchase NPAs from banks under 15:85 structure, wherein it will pay up to 15% of the agreed/discounted value of the loans in cash and issue Security Receipts (SRs) for the rest. The Government will provide sovereign guarantee – valid for a...
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Asset monetization – will it take off
In her maiden budget presented to Parliament on July 5, 2019, Finance Minister Nirmala Sitharaman laid a roadmap for catapulting the Indian economy to $5 trillion by 2024-25, its most crucial component being investment in infrastructure to the tune of a mammoth Rs 100,00,000 crore (US$1.4 trillion) over a period of five years (read: 2020-21 to 2024-25). As for funding, 39% of this amount was to come from the Union Government and States each and the balance 22% from the private sector. The Centre’s contribution at 39% works out to around Rs 40,00,000 crore over 5 years or Rs 800,000 crore per annum. Against this, the revised estimate (RE) for capital expenditure during 2020-21 was Rs 439,000 crore. Even assuming...
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Bank frauds – no fetters on CBI please
Even as the Government is making all out efforts to ensure that the GDP (gross domestic product) – after contracting by 8% during 2020-21 – returns to a high growth trajectory, it is concerned at the tepid recovery in credit availability which is considered to be the sine qua non of growth. According to the latest data of the Reserve Bank of India (RBI) annualized non-food bank credit growth in January this year was slower at 5.7% compared to 8.5% in the same period last year. Credit to industry, however, contracted by 1.3% in January 2021 as compared to 2.5% growth in January 2020. A major (perceived) bottleneck is the reluctance of bank officials to sanction loans who fear they...
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Don’t squeeze PSUs
The Govt should collect money from all those who owe it instead of squeezing CPSEs for bridging fiscal gaps. This is neither healthy for the economy nor good for the enterprises The Department of Investment and Public Asset Management (Dipam) has come out with a circular requiring Central Public Sector Enterprises (CPSEs) to pay interim dividend every quarter or half-yearly, depending on whether it is a relatively higher dividend (100 per cent or Rs 10 on a share of Rs 10) or less. Even those which can’t pay the prescribed “minimum” must give an interim dividend. Further, at least 90 per cent of the projected annual dividend should be paid as interim. Even as the bureaucrats justify this in terms...
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Don’t squeeze PSUs for fiscal gains
Vide a letter addressed to the central public sector enterprises (CPSEs) the department of investment and public asset management (Dipam) under Ministry of Finance has asked (i) enterprises which pay relatively higher dividend (100% or Rs 10/- on a share of Rs 10/-) may consider paying interim dividend every quarter after declaration of quarterly results; (ii) enterprises which pay less than 100% may consider paying interim dividend usually on half-yearly basis; (iii) those which can’t pay as per the prescribed ‘minimum’ should pay interim dividend during October/November each year based on projected profit after tax (PAT) following second quarter (July – September) results. All CPSEs should consider paying at least 90% of projected annual dividend, in one or more installments, as...
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Checks and balances
Crony capitalism has also happened in public sector banks. There is a dire need to strengthen regulatory oversight to guard against irregularities in running all banks The recommendation of an Internal Working Group (IWG) set up by the Reserve Bank of India (RBI) to allow industrial houses to own banks — if they meet the criterion — has invited strident criticism from experts, including the former RBI Governor Raghuram Rajan. Asking how a borrower could also be a lender, they have debunked the idea, stating that this would lead to misdirected lending, mostly to entities belonging to the industrial house that owns the bank. This apprehension is valid but the misuse of public money can happen in any bank, irrespective of the...
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Banking reforms – can borrower also be a lender
An Internal Working Group (IWG) set up by the Reserve Bank of India (RBI) has made far reaching recommendations in regard to ownership guidelines and governance structures of private sector banks. These include inter alia (i) allowing their promoters hold 26% equity stake in steady state or after 15 years (up from existing norm of 15%) from the start when it should be a minimum of 40% of the equity for the first five years; (ii) take a sympathetic review of whether industrial houses should be allowed to own banks if they meet the fit and proper criterion; (iii) allow non-bank finance companies (NBFCs) with assets of > Rs 50,000 crore, and in operation for over 10 years, to convert...
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Nix priority sector lending
The policy — a legacy of the socialist era — has led to blatant misuse and misappropriation of funds and is far from helping those for whom it is intended On September 4, the Reserve Bank of India (RBI) introduced changes in the norms for priority sector lending (PSL) with the stated objective of “enabling better credit penetration to credit-deficient areas, increase in lending to small and marginal farmers and boosting credit to renewable energy and health infrastructure.” Under PSL, the RBI mandates a certain percentage of a bank’s lendable resources to specified areas. The policy — a legacy of the socialist era — has led to blatant misuse and misappropriation of funds and is far from helping the most vulnerable groups...
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Monetary stimulus – does it matter
In the last bi-monthly monetary policy review announced by the Governor, Shaktikanta Das on August 6, 2020, the Reserve Bank of India (RBI) had kept the policy repo rate — the interest rate charged by the RBI on loans it gives to banks — unchanged at 4%. It had also kept the reverse repo rate or the interest rate the banks get on their surplus funds parked with the RBI unchanged at 3.35%. It also continued with the “accommodative” stance of the monetary policy as long as necessary to revive growth and mitigate the impact of Covid-19, while ensuring that inflation remains within the target. In the build-up to the next bi-monthly review (originally scheduled for October 1, 2020, this...
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