Peer-To-Peer Lending (P2P)

Peer-To-Peer Lending (P2P)
A method of debt financing that enables individuals to borrow and lend money - without the use of an official financial institution as an intermediary. Peer-to-peer lending removes the middleman from the process, but it also involves more time, effort and risk than the general brick-and-mortar lending scenarios. This is also known as "social lending".
The advantage to the lenders is that the loans generate income in the form of interest, which can often exceed the amount interest that can be earned by traditional means (such as from saving accounts and CDs). Plus P2P loans give borrower’s access to financing that they may not have otherwise got approval for by standard financial intermediaries.

The method is not without its disadvantages as the lender has very little assurance that the borrower, who traditional financial intermediaries may have rejected due to a high likelihood of defaults, will repay their loan. Furthermore, depending on the lending system employed, in order to compensate lenders for the risk that they are taking, the amount of interest charged for peer to peer loans may be higher than traditional prime loans.

The key differences on P2P lending platforms are:
• The lenders are individuals who are lending their own money.
• These individual lenders look for a certain amount of responsible behaviour from potential loan seekers which means if one has too many cheques bouncing, their chances of getting a loan is very low.
• Articulating your need and being truthful about your repayment capacity is something lenders look for when they look at a borrower listing for giving him a loan.
• Month end balances are a key factor in deciding which borrower to give loan to and lenders place a great emphasis on this as this signifies spending patterns.
• Being accurate about the end use of the loan amount is very important in getting an offer from a lender.
• Vague statements do not inspire confidence in lenders. So if one needs money for education or for an function or to buy something , be specific on the end use of the loan. This will help in building credibility with lenders.
• Finally one has to give as much information as much as possible

Leading P2P lenders online are : www.faircent.com , www.i-lend.in,www.lendbox.in .

Source:

Peer-to-Peer Lending | Personal Loans | P2P Loans India | Faircent

a community loan exchange platform offers P2P lending and personal loan at low interest rates in India. Best investment plans for your money.

FAIRCENT.COM

Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises (MSMEs)

The Reserve Bank of India has come up with a revised framework for revival and rehabilitation of Micro, Small and Medium Enterprises so that incipient sickness can be detected by banks in the units and a corrective action plan can be set in motion for them.

The revised framework, which supersedes RBI’s earlier guidelines on rehabilitation of sick micro and small enterprises, is applicable to MSMEs having loan limits up to Rs. 25 crore, including accounts under consortium or multiple banking arrangement.

"In order to enable faster resolution of stress in an MSME account, every bank shall form Committees for Stressed MSME," RBI said in a notification.  "Restructuring of loan accounts with exposure of above Rs 25 crore will continue to be governed by the extant guidelines on Corporate Debt Restructuring (CDR) or Joint Lenders' Forum (JLF) mechanism," the notification said. 

The committee will have to come up with a corrective action plan for the account, which shall look at rectification, restructuring, recovery and also additional finance if needed, the apex bank said.  Corrective action plan (CAP) may include rectification or restructuring. The RBI said before a MSME turns into a non-performing asset, banks should identify incipient stress in the account by creating three sub-categories under the special mention account (SMA).

Under the SMA-0 sub-category, principal or interest payment is not overdue for more than 30 days but account showing signs of incipient stress; SMA-1 (principal or interest payment is overdue between 31-60 days); and SMA-2 (principal or interest payment is overdue between 61-90 days).

On the basis of these early warning signals, the branch maintaining the account should consider forwarding the stressed accounts with aggregate loan limits above Rs. 10 lakh to the Committee (for Stressed Micro, Small and Medium Enterprises) within five working days for a suitable corrective action plan (CAP). Forwarding the account to the Committee for CAP will be mandatory in cases of accounts reported as SMA-2.

As regards accounts with aggregate loan limits up to Rs. 10 lakh identified as SMA-2, the account should be mandatorily examined for CAP by the branch itself under the authority of the branch manager / such other official as decided by the bank in terms of their Board approved policy.

However, the cases, where the branch manager / designated official has decided the option of recovery under CAP instead of rectification or restructuring, should be referred to the Committee for their concurrence.

Any MSME borrower may voluntarily initiate proceedings under this revised framework, if the enterprise reasonably apprehends failure of its business or its inability or likely inability to pay debts or there is erosion in the net worth due to accumulated losses to the extent of 50 per cent of its net worth during the previous accounting year, by making an application to the branch or directly to the Committee.

When such a request is received by lender, the account with aggregate loan limits above Rs. 10 lakh should be referred to the Committee. The Committee should convene its meeting at the earliest but not later than five working days from the receipt of the application, to examine the account for a suitable CAP.

The accounts with aggregate loan limit up to Rs. 10 lakh may be dealt with by the branch manager / designated official for a suitable CAP.

The RBI said the Board approved policy to operationalise the framework may be put in place by the banks not later than June 30, 2016.

Source: ET, Business Line & RBI Circular

For Further reading please click on the following RBI link :Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises (MSMEs)

RBI amends capital recognition rules

"The RBI has made some amendments to the treatment of certain balance sheet items for the purposes of determining banks' regulatory capital. The review was carried out with a view to further aligning the definition of regulatory capital with the internationally adopted Basel III capital standards," it said in a press release on 1st March 2016.

In a bid to ease those fundraising pressures, the RBI said lenders can now apply gains from revaluation of property to core capital requirements under certain conditions. 

The RBI also said conversions of foreign currency in financial statements can now more easily be considered common equity capital, while also easing rules on counting deferred tax assets. 

Reserve Bank of India Governor Raghuram Rajan said in January the central bank was working on identifying undervalued assets and other types of capital that could be counted as capital under Basel III requirements.

The Reserve Bank of India  eased rules on what lenders can count towards their core capital requirements under upcoming Basel III rules, in moves intended to ease pressure on the cash-constrained sector. 

The changes introduced today include recognition of revaluation reserves arising from change in the carrying amount of a bank's property consequent upon its revaluation as common equity tier-I capital instead of the earlier tier 2 capital, it said, adding that these would continue to be reckoned at a discount of 55 per cent. 

In a new addition, the RBI said banks can recognise foreign currency translation reserves arising due to translation of financial statements of a bank's foreign operations to the reporting currency as CET1 capital. RBI said that these will also be reckoned at a discount of 25 per cent. 

Deferred tax assets arising due to timing differences may be recognised as CET1 capital up to 10 per cent of a bank's CET1 capital, it added. 

These relaxations will free approximately Rs 30,000-35,000 crore for the state-run banks and over Rs 5,000 crore for the private sector ones, going by the December 2015 numbers. 

The unlocking of additional capital will be of help to lenders who witnessed huge jump in bad assets in the December quarter on account of the asset quality review, where RBI gave them a list of accounts to be classified as NPAs and make provisions for those accordingly. 

Enclosed here is the Master Circular issued by RBI

Master Circular – Basel III Capital Regulations - Revision

RBI/2015-16/331 DBR.No.BP.BC.83/21.06.201/2015-16 March 1, 2016 All Scheduled Commercial Banks (Excluding Local Area Banks and Regional Rural Banks) Madam / Sir, Master Circular – Basel III Capital Regulations - Revision Please refer to Master Circular DBR.No.BP.BC.1/21.06.201/2015-16 dated July 1, 2015 on ‘Basel III Capital Regulations’. The treatment of certain balance sheet items, as per the extant regulations on banks’ capital, differs from what is prescribed by the Basel Committee on Banking Supervision (BCBS). It has also been represented to the Reserve Bank that the current framework places on the banks in India the need to raise more capital than would be required had the Basel rules been applied as they are. The Reserve Bank has reviewed the position in this regard and it has been decided to align, to some extent, the current regulations on treatment of these balance sheet items, for the purpose of regulatory capital, with the BCBS guidelines. Accordingly it has been decided as detailed herein below: 2.1 Treatment of revaluation reserves Revaluation reserves arising out of change in the carrying amount of a bank’s property consequent upon its revaluation may, at the discretion of banks, be reckoned as CET1 capital at a discount of 55%, instead of as Tier 2 capital under extant regulations, subject to meeting the following conditions: bank is able to sell the property readily at its own will and there is no legal impediment in selling the property; the revaluation reserves are shown under Schedule 2: Reserves & Surplus in the Balance Sheet of the bank; revaluations are realistic, in accordance with Indian Accounting Standards. valuations are obtained, from two independent valuers, at least once in every 3 years; where the value of the property has been substantially impaired by any event, these are to be immediately revalued and appropriately factored into capital adequacy computations; the external auditors of the bank have not expressed a qualified opinion on the revaluation of the property; the instructions on valuation of properties and other specific requirements as mentioned in the circular DBOD.BP.BC.No.50/21.04.018/2006-07 January 4, 2007 on ‘Valuation of Properties - Empanelment of Valuers’ are strictly adhered to. 2.2 Treatment of foreign currency translation reserve (FCTR) Banks may, at their discretion, reckon foreign currency translation reserve arising due to translation of financial statements of their foreign operations in terms of Accounting Standard (AS) 11 as CET1 capital at a discount of 25% subject to meeting the following conditions: the FCTR are shown under Schedule 2: Reserves & Surplus in the Balance Sheet of the bank; the external auditors of the bank have not expressed a qualified opinion on the FCTR. 2.3 Treatment of deferred tax assets (DTAs) (i) Deferred tax assets (DTAs) associated with accumulated losses and other such assets should be deducted in full from CET1 capital. (ii) DTAs which relate to timing differences (other than those related to accumulated losses) may, instead of full deduction from CET1 capital, be recognised in the CET1 capital up to 10% of a bank’s CET1 capital, at the discretion of banks [after the application of all regulatory adjustments mentioned from paragraphs 4.4.1 to 4.4.9(C)(ii) of the Master Circular]. (iii) Further, the limited recognition of DTAs as at (ii) above along with limited recognition of significant investments in the common shares of unconsolidated financial (i.e. banking, financial and insurance) entities in terms of paragraph 4.4.9.2(C) (iii) of the Master Circular taken together must not exceed 15% of the CET1 capital, calculated after all regulatory adjustments set out from paragraphs 4.4.1 to 4.4.9 of the Master Circular. Please refer to the Annex of this circular clarifying this applicable limited recognition. However, banks shall ensure that the CET1 capital arrived at after application of 15% limit should in no case result in recognising any item more than the 10% limit applicable individually. (iv) The amount of DTAs which are to be deducted from CET1 capital may be netted with associated deferred tax liabilities (DTLs) provided that: both the DTAs and DTLs relate to taxes levied by the same taxation authority and offsetting is permitted by the relevant taxation authority; the DTLs permitted to be netted against DTAs must exclude amounts that have been netted against the deduction of goodwill, intangibles and defined benefit pension assets; and the DTLs must be allocated on a pro rata basis between DTAs subject to deduction from CET1 capital as at (i) and (ii) above. (v) The amount of DTAs which is not deducted from CET1 capital (in terms of para (ii) above) will be risk weighted at 250% as in the case of significant investments in common shares not deducted from bank’s CET1 capital as indicated in paragraph 4.4.9 (C)(iii) of the Master Circular. 3. These instructions are applicable with immediate effect. Yours faithfully, (Sudarshan Sen) Principal Chief General Manager Annex Calculation of 15% of common equity limit on items

Companies Act- 2013- Highlight

The Rajya Sabha on 8th August, 2013, gave its assent to Companies Bill 2013, and it became Companies Act, 2013 on 29th August, 2013. Companies Act- 2013 introduced significant changes in provisions relating to: E-Governance; E-Management; Compliance and Enforcement; Disclosure Norms; Auditors and Mergers and Acquisitions.

From Banker’s point of view, it is extremely necessary to understand following new concepts incorporated in the act so as to entertain corporate clients more effectively:

a)One Person Company,

b)Small Companies,

c)Dormant Companies,

d)Class Action Suits,

e)Registered Valuers,

f)Corporate Social Responsibility

One Person Company:

A One Person Company (OPC) means a company with only one person as its member (Sec.3 (1)). This can be formed as a private limited company. The concept is introduced to restrict the liability of one investor limited to his share holding and also to crystallize assets as well as the liabilities of the entity. The company is required to comply with all the requirements of the Act and must indicate the status as “OPC” after its name. In memorandum, the name of the person who, in the event of death of the subscriber, shall become the member of the company must be stated. In case the Banker insists for guarantee of the promoter of OPC, the very spirit of introducing this type of company will be defeated.

Small Company:

Act has defined / classified the Small Company since few relaxations in compliance are envisaged in the Companies Act, 2013: (Section 2 (85))

A company other than a Public Company where in “Paid up Capital does not exceed Rs. 50 Lakhs Or such higher amount as may be prescribed which shall not be more than Rs. 5 Crores; or Turnover of which as per its last Profit and loss account does not exceed Rs. 2 Crores Or such higher amount as may be prescribed which shall not be more than Rs.20 Crores. However, this section does not apply to a Holding company or Subsidiary Company and a Company or Body Corporate governed by any Special act.

Dormant Company:

(Section 455) This is a new section which deals with Dormant Company i.e. where no business activities are being carried out and the company has not made any significant accounting transactions in the last two financial years. Further, many a times, the promoters intent to have some legal entity for any future projects and in such eventuality a company can be formed. Act defines Dormant company as: A Company can be classified as a Dormant Company when it is form and registered under this act for future Projects or to hold an Asset or Intellectual Property and has no significant accounting transaction.

Such company or an inactive one may apply to the ROC in prescribed manner for obtaining status of a Dormant Company.

Class Action Suit:

A class action is a Legal Form of Lawsuit where a large group of individuals collectively bring the claim to Court. To protect the interest of Small shareholders, Act empowers shareholders to take joint action against the Management of the company for any fraud or irregularity. For such action, minimum number of members should not be less than 100 OR not less than such percentage of the total number of its members as prescribed, whichever less is or member / members holding not less than such percentage of the issued share capital of the company (Sec.245).

This concept is more prevalent in USA and implementation in India will be very interesting to watch as there will always be apprehensions about misuse of this provision. This leverage should not be an impediment in the day to day operations / business growth of the company.

Registered Valuers:

Act has mandated the Valuation report from the Registered valuer approved / appointed by the Audit Committee or in its absence by the Board of Directors of the company in issues relating to: a) Further Issue of Capital; b) Non Cash Transactions involving Directors ; c) Compromises, arrangements and amalgamations; d) Purchase of Minority Share holding; e) Submission of report by the company liquidator; and f) Declaration of solvency in case of proposal to wind up voluntarily. (Sec 247).

The Registered Valuer is expected to have qualifications / knowledge and experience in the relevant area. He is expected to make valuation in a most impartial, true and fair valuation of assets required to be valued. Generally, various professional bodies will maintain the panel of such valuers who are registered with Institute of Valuers. Act provided penal action in case of Fraud / misrepresentation and non compliance of the provisions made in the Act.

 

Corporate Social Responsibility (CSR):

Companies Act, 2013, has dealt with CSR issue in detail. Provisions apply to every company with- a) Net Worth of Rs.500 Crores or more, ; or b) Turnover of Rs.1000 Crores or more, or c) A Net Profit of Rs. 5 Crores or more, during the Financial Year. It is prescribed that a CSR Committee of the Board to be formed of three or more Directors and the Company to spend at-least 2% of average of Net Profit made during immediate three preceding financial years. It is directed that Board to monitor / review the CSR initiatives periodically.

Following are few aspects / other issues in Companies Act, 2013, concerning a banker:

a)Private Company :

Limit of the Number of members increased from 50 to 200 (Sec. 2(68)

b)Act defines Promoter as:

A person who has been named as such in a Prospectus Or is identified by the company in annual return Or who has a control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise Or in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act. (Sec.2 (69)). This provision is not applicable to Professional Director.

c)Independent Director:

a. Appointment of Independent Director is made as mandatory requirement for compliance by the companies viz. a) Listed Public Companies; b) Other Public Companies having Paid up Share Capital of Rs.100 Crores or more or Turnover of Rs.300 Crores or more Or Aggregate Outstanding Loans or borrowings or debentures or deposits, exceeding Rs.200 Crores must have at least One Third of the total number of Director as Independent Director.

b. Independent Director is to be appointed from the panel of Data Bank of Independent Directors maintained by any Body, Institute or association notified by the Central Government and the Director has to follow the prescribed code as mentioned in the Act. (Schedule IV Sec. 149 (7))

c. Appointment of Independent Director shall be approved by the company in General Meeting.

d)No. Of Directors:

Companies can have Maximum of 15 Directors.

 

e)Resignation:

The Director is required to mandatorily forward resignation with detailed reasons for the resignation to the Registrar within 30 Days of resignation in prescribed manner.

f) Woman Director:

Act requires appointment of at least One Woman Director in a) Every Listed Company; b) Every Other Public company having paid up Share capital of Rs.100 Crores or more; OR Turnover of Rs.300 Crores or more.

g)Memorandum of Association:

The Company is no more required to classify the main object, incidental or ancillary or other object of the company.

h)Articles of Association:

Act introduced Entrenchment provision for alteration of any specific clause in Article without any need of Special Resolution. This is a restrictive provision. For a Private Company consent of all members is required for such provisions.

i)Commencement of Business:

Provision is made applicable to ALL the companies. The company cannot commence its business activity unless the Directors file declaration about raising of minimum paid up capital applicable for Public / Private Ltd. Company.

j)Issue of Shares at Discount:

Companies are not permitted to issue the shares at discount except in case of sweat equity where in shares are issued to employees in lieu of their services.

k)Filing of Charge with ROC:

All types of charges are required to be filed by the company with ROC on movable / immovable assets in favor of charge holder within a period of 30 Days from the date of creation. In case of failure to file the charge within 30 days, the Registrar can permit filing of charge before 300 Days of creation after payments of additional fees / penalty.

l)Remuneration to Executives / Key Managerial personnel:

Central Government prescribed ceiling on annual managerial remuneration in respect of companies with inadequate profits or no profits in the preceding year. The Companies with less than Capital of Rs. 100 Cr. - Rs.42 Lakhs p.a. and companies with Capital of Rs.100 Crores or more- Rs. 60 Lakhs p.a. In respect of all Public Limited Companies the total remuneration not to exceed (maximum) 10% of the Net Profit. In case company intends to pay more than above remuneration, permission from the Central Government is required.

m)Re Opening of Books of Accounts:

A New Sec. 130 is added which seeks to provide for re- opening of Books of accounts and recasting of Financial Statements only against the order from the competent court or Tribunal is available. The court will issue order when the accounts were maintained in fraudulent manner and the Financial Statements are not reliable. (Sec 131)

n)Voluntary Revision of Financial statement:

If the Financial Statements or Report of the Board is not in accordance with Sec. 129 or Sec.134, the company may approach Tribunal for approval to revise statements / report in respect of any of the three preceding financial years.

o)Fraud:

Act provides for specific provisions relating to act of Fraud in relation to affairs of the company. The fraud has been defined in the act and it covers Omission, Concealment of Facts, Abuse of position committed by any person in connivance to deceive, to gain undue advantage, Injury to interest of company, its shareholders, creditors or any other person for wrongful gain or wrongful loss

p)Dissolution of Company Law Board:

As per Section 466, with the constitution of Tribunal and Appellate Tribunal, the Company Law Board stand dissolved.

 

Source:

Suneel V. Joshi, Joint Director (Faculty) Indian Institute of Banking and Finance, 21.01.2015.

Further Reading @ : Companies Act, 2013 | Bare Acts | Law Library | AdvocateKhoj ;

Ministry Of Corporate Affairs - The Companies Act

  

Why Banking is a Growing Sector when Banks’ are having higher NPA?

The Indian Banking Industry is governed by the Banking Regulation Act of India, (1949) and is closely monitored by the Reserve Bank of India (RBI). According to Govt, and various Credit rating agencies the domestic banking industry is set for an exponential growth in coming years with its assets size poised to touch USD 28,500 billion by the turn of the 2025.

ICRA the credit rating agency analyzed 26 public sector and 15 private sector banks which make up 90% of the credit and deposit portfolio of banks in India, lowered its estimated gross NPA for March 2016 to 5%-5.5% from 5.3%-5.9%  despite the fact that stressed assets remained largely unchanged at 10.7% as of September 2015 vs. 10.6% as of March 2015. The so called 5/25 scheme, allows banks to extend long-term loans of 20-25 years, while refinancing them every five or seven years
Public sector banks continue to bear the brunt of bad loans as gross NPAs of these banks increased to 5.6% as on September 2015 (vs. 5.0% as on March 2015). In comparison private banks' gross NPAs were 2.2% (vs. 2.0% as on March 2015). 

Under ‘Uday Scheme’ the Central Government allowed the State Govts. which owned DISCOMs to take 75 % of the debts from the lenders by issuing State Govt Bonds. ICRA has mentioned that if all the states participated in the scheme the operating profitability of the Banks would decline and NIM’s would shrink by 7-12 basis points.( One basis point is 0.01 percentage )

"Impact (will be) higher for banks with higher exposure to DISCOMs (Central Bank of India, Punjab & Sindh Bank, Vijaya, Oriental Bank of Commerce and UCO Bank), lower for banks with less exposure to State DISCOMs (State Bank of India, Bank of Baroda)," ICRA said adding that the scheme will impact credit growth of public sector banks.

Thus it is quite clear that higher the NPA level it would impact profitability and restrict credit growth. But this being the feature for the existing credit portfolio there is ample scope for credit growth in the Banking sector. Apart from the credit growth the Banks are now poised for various Para Banking Activities including latest Technological Products viz. Internet Banking, Mobile Banking, IMP’s, APP’s etc.

Retail banking will be the key growth area for banks, other areas like Corporate Credit, SME Banking, cross selling of other financial products and services like Insurance, Mutual Funds, fee-based sources of income and technological up gradation will also be key growth drivers. The Govt. has emphasised on developing various payment and settlement systems in the form of various APP’s.  More and more emphasis is laid on better and optimum usage of this products.The stress is on expansion of branches and financial inclusion.

Banking, one of the fastest growing segments of the economy, faces challenges of scarcity of resources and skilled manpower. Such skilled manpower is not easily available in adequate numbers to meet the growing requirements of the Banking Industry.

As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalised and well-regulated. The financial and economic conditions in the country are far superior to any other country in the world. Credit, market and liquidity risk studies suggest that Indian banks are generally resilient and have withstood the global downturn well. 

Indian banking industry is expected to witness better growth prospects in 2015 as a sense of optimism stems from the Government’s measures towards revitalizing the industrial growth in the country. In addition, RBI’s new measures may go a long way in helping the restructuring of the domestic banking industry. 

Standard & Poor’s estimates that credit growth in India’s banking sector would improve to 12-13 per cent in FY16 from less than 10 per cent in the second half of CY14. 

Investments/developments

In the past few months, there have been many investments and developments in the Indian banking sector

• Global rating agency Moody's has upgraded its outlook for the Indian banking system to stable from negative based on its assessment of five drivers including improvement in operating environment and stable asset risk and capital scenario.
• Lok Capital, a private equity investor backed by US-based non-profit organisation Rockefeller Foundation, plans to invest up to US$ 15 million in two proposed small finance banks in India over the next one year.
• The Reserve Bank of India (RBI) has granted in-principle licences to 10 applicants to open small finance banks, which will help expanding access to financial services in rural and semi-urban areas.
• IDFC Bank has become the latest new bank to start operations with 23 branches, including 15 branches in rural areas of Madhya Pradesh.
• The RBI has given in-principle approval to 11 applicants to establish payment banks. These banks can accept deposits and remittances, but are not allowed to extend any loans.
• The Bank of Tokyo-Mitsubishi (BTMU), a Japanese financial services group, aims to double its branch count in India to 10 over the next three years and also target a 10 per cent credit growth during FY16.
• State Bank of India has tied up with e-commerce portal Snapdeal and payment gateway Paypal to finance MSME businesses.
• The United Economic Forum (UEF), an organisation that works to improve socio-economic status of the minority community in India, has signed a memorandum of understanding (MoU) with Indian Overseas Bank (IOB) for financing entrepreneurs from backward communities to set up businesses in Tamil Nadu
• The RBI has allowed third-party white label automated teller machines (ATM) to accept international cards, including international prepaid cards, and said white label ATMs can now tie up with any commercial bank for cash supply.
• The RBI has allowed Indian alternative investment funds (AIFs), to invest abroad, in order to increase the investment opportunities for these funds.
• In order to boost the infrastructure sector and the banks financing long gestation projects, the RBI has extended its flexible refinancing and repayment option for long-term infrastructure projects to existing ones where the total exposure of lenders is more than Rs 500 crore (US$ 75.1 million).
• RBI governor Mr Raghuram Rajan and European Central Bank President Mr Mario Draghi have signed an MoU on cooperation in central banking. “The memorandum of understanding provides a framework for regular exchange of information, policy dialogue and technical cooperation between the two institutions. Technical cooperation may take the form of joint seminars and workshops in areas of mutual interest in the field of central banking,” RBI said on its website.
• RBL Bank informed that it would be the anchor investor in Trifecta Capital’s Venture Debt Fund, the first alternative investment fund (AIF) in India with a commitment of Rs 50 crore (US$ 7.51 million). This move provides RBL Bank the opportunity to support the emerging venture debt market in India.
• Bandhan Financial Services raised Rs 1,600 crore (US$ 240.2 million) from two international institutional investors to help convert its microfinance business into a full service bank. Bandhan, one of the two entities to get a banking licence along with IDFC, launched its banking operations in August 2015. 

Government Initiatives

The government and the regulator have undertaken several measures to strengthen the Indian banking sector.

• The Government of India is looking to set up a special fund, as a part of National Investment and Infrastructure Fund (NIIF), to deal with stressed assets of banks. The special fund will potentially take over assets which are viable but don’t have additional fresh equity from promoters coming in to complete the project.
• The Reserve Bank of India (RBI) plans to soon come out with guidelines, such as common risk-based know-your-customer (KYC) norms, to reinforce protection for consumers, especially since a large number of Indians have now been financially included post the government’s massive drive to open a bank account for each household.
• To provide relief to the state electricity distribution companies, Government of India has proposed to their lenders that 75 per cent of their loans be converted to state government bonds in two phases by March 2017. This will help several banks, especially public sector banks, to offload credit to state electricity distribution companies from their loan book, thereby improving their asset quality.
• The Reserve Bank of India (RBI), the Department of Industrial Policy & Promotion (DIPP) and the Finance Ministry are planning to raise the Foreign Direct Investment (FDI) limit in private banks sector to 100 per cent from 74 per cent.
• Government of India aims to extend insurance, pension and credit facilities to those excluded from these benefits under the Pradhan Mantri Jan Dhan Yojana (PMJDY).<
• The Government of India announced a capital infusion of Rs 6,990 crore (US$ 1.05 billion) in nine state run banks, including State Bank of India (SBI) and Punjab National Bank (PNB). However, the new efficiency parameters would include return on assets and return on equity. According to the finance ministry, “This year, the Government of India has adopted new criteria in which the banks which are more efficient would only be rewarded with extra capital for their equity so that they can further strengthen their position."
• To facilitate an easy access to finance by Micro and Small Enterprises (MSEs), the Government/RBI has launched Credit Guarantee Fund Scheme to provide guarantee cover for collateral free credit facilities extended to MSEs upto Rs 1 Crore (US$ 0.15 million). Moreover, Micro Units Development & Refinance Agency (MUDRA) Ltd. was also established to refinance all Micro-finance Institutions (MFIs), which are in the business of lending to micro / small business entities engaged in manufacturing, trading and services activities upto Rs 10 lakh (US$ 0.015 million).
• The central government has come out with draft proposals to encourage electronic transactions, including income tax benefits for payments made through debit or credit cards.
• The Union cabinet has approved the establishment of the US$ 100 billion New Development Bank (NDB) envisaged by the five-member BRICS group as well as the BRICS “contingent reserve arrangement” (CRA).
• The government has plans to set up a fund that will provide surety to banks against loans given to students for higher education.
• On 7^th Jan 2016 Cabinet approved ‘Stand Up India’ Scheme and Credit Guarantee Fund to back Mudra Yojana.
• On 13^th Jan 2016 In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers. In a major farm sector sop, the Centre on Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers.Govt. announced Rs. 17600 cr.Crop Insurance Scheme to cover loss of crops due to natural Calamities.
• The NDA Govt. has on 16^th Jan 2016 launched PM’s ambitious plan ‘Stand Up India’ for the Start ups, thereby giving several reliefs to the start ups. 

Road Ahead

The Indian economy is on the brink of a major transformation, with several policy initiatives set to be implemented shortly. Positive business sentiments, improved consumer confidence and more controlled inflation are likely to prop-up the country’s economic growth. Enhanced spending on infrastructure, speedy implementation of projects and continuation of reforms are expected to provide further impetus to growth. All these factors suggest that India’s banking sector is also poised for robust growth as the rapidly growing business would turn to banks for their credit needs. 

Also, the advancements in technology have brought the mobile and internet banking services to the fore. The banking sector is laying greater emphasis on providing improved services to their clients and also upgrading their technology infrastructure, in order to enhance the customer’s overall experience as well as give banks a competitive edge. 

Many banks, including SBI’s SBI-INTOUCH, ICICI and AXIS too, have launched contact-less credit and debit cards and other Banks are exploring to launched in the market shortly. The cards, which use near field communication (NFC) mechanism, will allow customers to transact without having to insert or swipe. 

Thus it is quite evident that despite the Banks having large NPA’s Banking Sector will see growth and will provide large current as well as the future demand for trained manpower in banking. The banks will require a large number of people trained not only for specific skills in the banking domain, but more importantly in customer service skills, selling skill, banking application software skills and with an infectious positive attitude. 

More Readings:

Indian banks are too stressed out | Business Line

‘India’s growth story stands at an inflection point’ | Business Line

Cabinet approves ‘Stand Up India’ scheme, credit guarantee fund for Mudra Yojana to be created - The Economic Times

Government's nod to new crop insurance plan for farmers - Times of India