Skip to main content

Govt, RBI drawing up list of new banking reforms

Govt, RBI drawing up list of new banking reforms
The finance ministry and the Reserve Bank of India (RBI) are drawing up a list of reform measures to accompany the recent Rs 2.11-lakh- crore bank recapitalisation plan.These are being prepared in consultation with banks and might be classified into short-, medium- and longterm measures.
Officials are tight-lipped about what these reforms might entail as preparations are still on. However, there are indications that some of the measures announced in Indradhanush — a seven-point plan to revamp state-owned banks but not completed — might be taken up again.“If there are some areas which have already been identified and on which action has not been taken, these will be included in the new effort,” outgoing Finance Secretary Ashok Lavasa told Business Standard
“It has been made amply clear that injection of capital, by itself, is not enough. It has to be accompanied by several other measures, internal and external, to the banks. I think all these measures have to come in for a healthy turn around package.”How these measures would be carried out, whether alongside recapitalisation or after it, is being decided by the government in consultation with the RBI and the banks, he said. “It is up to the department of financial services to sit with the banks and the RBI and identify what are the measures to be taken in the immediate short term and what are the measures that the banks should initiate for medium and longer terms.”
The Narendra Modi government had announced Indradhanush in 2015 to recapitalise the lenders based on certain performance parameters. A Banks Board Bureau was set up, large-scale management changes introduced in public sector banks and steps announced to clean up banks’ books, including the setting up of joint lenders’ forums and more debt recovery tribunals. While a number of these steps have been taken, many have floundered. Experts and banking sector insiders have been doubtful about the effectiveness of these steps.
Government sources said restructuring of banks, including through mergers and reduction of government’s stakes, were pending reforms.This would happen after the recap as the new bonds would lead to a temporary increase in the Centre’s stake in these banks, they said. Additionally, banks might be asked to write off some of the smaller non-performing loan accounts to clean up their books further. This would be apart from the cases being referred to the National Companies Law Tribunal under the Insolvency and Bankruptcy Code.
The Rs 2.11-lakh-crore recapitalisation plan includes Rs 1.35 lakh crore as bonds, Rs 58,000 crore of fresh capital from the markets and Rs 18,000 crore in government outlay. Finance Minister Arun Jaitley had while announcing the recap measures said these would be accompanied by more banking reforms.These reforms are being prepared in consultation with banks and might be classified into short-, medium and long-term measures

The Business Standard, New Delhi, 30th October 2017

Comments

Popular posts from this blog

RBI minutes show MPC members flagged upside risks to inflation

RBI minutes show MPC members flagged upside risks to inflation Concerns about economic growth and easing inflation prompted five of the six monetary policy committee (MPC) members to call for a cut in the repo rate, but most warned that prices could start accelerating, show the minutes of the panel’s last meeting, released on Wednesday. The comments reflected a tone of caution and flagged upside risks to inflation from farm loan waivers, rise in food prices, especially vegetables, price revisions withheld ahead of the goods and services tax, implementation of house rent allowance under the 7th pay commission and fading of favourable base effect, among others. On 2 August, the panel chose to cut the repurchase rate—the rate at which the central bank infuses liquidity in the banking system—by 25 basis points to 6%. One basis point is one-hundredth of a percentage point. Pami Dua, professor at the Delhi School of Economics, wrote that her analysis showed “a fading economic growth outlook, as …

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

Differential Tax Levy under GST: Food Firms May De-Register Trademarks

Differential Tax Levy under GST:Food Firms May De-Register Trademarks The government’s decision to charge an enhanced tax rate on trademark food brands is leading several rice, wheat and cereal manufacturers to consider de-registering their product trademarks. Irked by the June 28 central government notification fixing a 5 per cent goods and services tax (GST) rate on food items packaged in unit containers and bearing registered brand names, the industry has made several representations to the government to reconsider the differential tax levy, which these players say is creating an unlevel playing field within these highly-competitive and low-margin industries. Sources say that the move has affected the packaged rice industry the hardest and allowed the un-registered market leaders, India Gate and Daawat, to gain advantage as compared to other registered brands such as Kohinoor and Lal Qilla. Smaller players are even more worried with this enhanced rate of tax (against the otherwise …