banking sector n NBFC, Monetary policy, growth n development, statutory bodies, government policies n intervention, Employment

RBI released 19th FINANCIAL STABILITY REPORT which mentions indian financial system remains stable in backdrop of improving banking sector.

Major global n domestic micro financial challenge -  lower global growth predicated by IMF n world bank, trade tension, current account deficit, subdued new investment

* Just job index - Just job network with support from Azim premji University  based on 5 dimention - employment, formality, benifits, income equality n gender equality.

State performance- 

1. quality of employment- chattisgarh n AP topped. GJ topped in employment dimention but poorly in quality of employment.

2. Formal employment- kerla performed poorly with high rate of youth unemployment.UP n jharkhand performed worst mainly due to its informal Agri sector as well as wholesale n retail sector. Chattisgarh low unemployment rate but high informality.

3. Benifits to employee - J&K topped, other performed poorly.

4. Income inequality - MH & chattisgarh topped n kerla being worst. Kerla having second lowest number of poverty after Goa.

5. Gender equality- HP & Chattisgarh topped with UP & Bihar worst.

Suggestion - labour intensive job creation , investment in human capital n strengthening labour market institution

* Union budget 19-20, expanded RBI's power by bringing Hosing Finance companies  under its ambit after IL&FS crisis by proposed amending the RBI Act 1934.

• RBI can supersede the board of NBFCs  (other than those owned by the government) 
• remove and can further appoint the director of a board of NBFC. Can also remove Auditors.
• amalgamating, splitting and reconstructing an NBFC.

* Economic survey 2019 -20 -  https://www.drishtiias.com/images/uploads/294Image-1.webp

Economic survey prepared by economic division of Dept of economic affairs under min of financa under overall guidance of cheif economic advisor. First economic survey prepared 1950 - 51.

* SEBI got new power to act against entities destroying, n forging electronic machine n data n fine of 10 cr or 3 tyms more than unlawfully gain.

* Utakarsh 2022 - 3 yr roadmap to improve regulation N supervision among central bank to avoid further IL&FS crisis.

* as per recent report india to surpass UK to bcm 5th largest economy in the world in 2019 & with  $5.9 trillion in 2025 surpassing japan to bcm 3rd largest (However as per economic survey india has to have growth of 12% nominal and 8% real gdp growth a year to achieve the target)

Factor sustaining the growth  are  Investment, Startups, Saving (saving of people in bank, bank to lend more to companies for investment) and Export.

Challenges - Ease of doing bussiness (Contract enforcement @ 163 = Economic survey suggested to reform leagl system and hire more judicial office to wave off the pending hearings), Ageing and Infrastructure for growing population.

* Complaint management system by RBI to address the complaint by customer under banking Ombudsman scheme 2006, ombudsman scheme for NBFC 2018

* RBI has approved White label ATMs to take bulk cash directly from RBI or currency chest as earlier white label atms (under companies act 1956 is totally owned n operated by min bank entity usually NBFC) were totally dependent on sponsor bank for cash.

http://www.drishtiias.com/images/uploads/813image4.webp

The move is taken by RBI to enhance the geographical access to ATMs in country

* MH to be first state to adopt automated multi modal biometric identification system.

AMBIS with facial recognition technologyfeature is an updated version of the Automated Fingerprint Identification System(AFIS), which has been used by Indian law enforcement agencies to search finger and palm prints. Can b used to identify a person through CCTV footage.

* Unregulated deposited scheme bill 2019

Deposited takers are not registered with the regulator n running the scheme will b fined with 10 lacs or 2 to 7 years jail.

Fradulant Defaulting company will be Fined with 5 to double the amount collected or 3 to 10 yrs jail.

Repeated offenders will b fined 10 to 5 crore or 5 to 10 yrs jail.

Dedicated court - will b heard by judge of not less than session judge, joint session judge etc

* According to IMF report World economic outlook –July (Twice a year) India’s growth for year 2019 will be 7% and 7.3% for 2020 (0.3% less than last predicted) same as predicted by RBI, CEA and ADB. However india will be fasted growing economy in the world.

Global growth has been forecast at 3.2% in 2019, picking up to 3.5% in 2020. emerging market and developing economy group is expected to grow at 4.1% in 2019, rising to 4.7% in 2020.

Slow growth is due to Increase trade tension between US –China, Prolonged uncertainity of Brexit and Weaker than expected activity in emerging market.

* Periodic labour force survey - Released by nsso ,mentions that 6.1% people n 17.8% young (15-29) are unemployed.

Earning if Urban employees over rural and men over women are higher.

45% regular best salary paid are below 10k n only 4% are having salary above 50k while 72% gets salary if 18k as per 7th pay commission.

Govt initiative- MNAREGA, PMGKY (min of rural dev) ,PMEGP (min of micro n small enterprises) &  DAY NULM (Min of housing b Urban affairs).

* Finance ministry has released its 1st Time release study. The TRS is an internationally recognized tool advocated by the World Customs Organization to measure the efficiency and effectiveness of international trade flows.

It is used to identify the bottlenecks in trade practices and taking measures to improve efficiency and effectiveness. It will also improve Ease of doing business.

* Environment Clearing Process –  Govt Planning to reduce it to 60 days.

• Specifying Terms of Reference(ToR).
• Preparing Environmental Impact Assessment (EIA) report.
• Holding Public Consultation

* Min of MSME launched Enterprises Development center for developing cadre of indigenous entrepreneur in MSME.

* RBI's Liquidity coverage Ratio for NBFC (Class 1 NBFC-ND is exempted from this which have no interaction with public n doesn't intend to). This will b in force from dec 1st 2020. 50% LCR would b high quality liquid assets & gradually becomes 100% by 2024. 

* National Pharmaceuticals Pricing Authority

• NPPA is an organization under Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers which was set up in 1997 controls the bulk production,p Pricing n availability of drugs throughout india under Drug (Price control) order ,DPCO 1995.
• The prices are now fixed/revised under Drugs (Prices Control) Order (DPCO), 2013. Prices can not be raised more than 10% annually.

Central Drugs Standard Control Organisation (CDSCO)

• The CDSCO is the Central Drug Authority for discharging functions assigned to the Central Government under the Drugs and Cosmetics Act.
• Controls the import of drugs, clinical trial for drugs n certain licensing under central license approving authority.

 

* Govt planning to introduce policy to give rating to MSME based on Digital data.

Current scenario - 

1. Under served by financial institution

2. Credit flow

3. Availability to funds

4. Credit worthiness availability to lender

 

* DICGC (created by DICGC act 1961 n came into effect in 1978 after merging Deposited insurance corporation n credit guarantee n insurance of India LTD & fully owned subsidiary of RBI) - currently only 1 lac amount can b claimed which was revised in 1993. Damodaran committee on customer service in bank 2014 recommended 5 times increase in insurance due to rising income n deposited level.

All banks including foreign bank have to get insured under DICGC with 10 paise per 100rs deposited held by bank.

 

* Small Financial Bank rules -

1. Paid up capital 200 cr( initial 100cr n can b extended upto 200cr in 5 years time span. Whereas for Payment bank it is 100 Cr.

2. 25% of it's branches in unbanked area same as payment bank.

3. 75% loans to priority sector whereas 75% deposit of Payment bank should be in government bonds n 25% deposited can b in other Banks.

4. 10% n 15% loans, of networth of individual n company respectively. Whereas Payment bank can't extend loans.

5. Resident individual or company with 10yrs experience in finance can opens SFB.

 

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