[ESB16] Economic Survey → Banking → Twin Balance-sheet Problem, Bankruptcy Code, BASEL Norms, NPA-Classification, Indradhanush Plan, Bank Board Bureau & More

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Prologue

  1. ESB161-P1: Overview of Economic Survey for UPSC-2016
  2. ESB161/P2: Twin Balance sheet problem, NPA, Insolvency & Bankruptcy Code 2015
  3. ESB161/P3: “4R” Solution to resolve Twin Balancesheet Problem
  4. ESB161/P4: BASEL Norms & Bank Recapitalization
  5. ESB161/P5: Indradhanush Plan to revamp PSB; Bank Board Bureau, Bank Consolidation

Prologue

  • Here starts this year’s lecture series on Economic survey and budget for various competitive exams in India.
  • The titles of these videos may look fragmented/incoherent, but they are part of the larger framework of “Banking” topic.
  • Powerpoints available under Mrunal.org/download (goto mediafire folder=>Economy=>Banking)

ESB161-P1: Overview of Economic Survey for UPSC-2016

Overview of Economic Survey

  • Six pillars of economy- (1) banking finance (2) budget (3) balance of payment (4) sectors of economy (5) Infrastructure (6) human resources Development.
  • Brief summary of all chapters of economic survey 2015-16 volume – 1 and volume –2.
  • Why should you read economic survey, even if their readymade notes and material is available?
  • 9 pillars of Budget 2016 for transforming India
  • Putting it all together: budget, economic survey into the six pillars of economy.
  • List of theory topics already covered under Banking sector
  • Chakravyuh Challenge in India economy: meaning and its three negative consequences (1) political cost (2) fiscal cost (3) economic cost

Youtube Link: https://youtu.be/g_YC3L3T-eA

ESB161/P2: Twin Balance sheet problem, NPA, Insolvency & Bankruptcy Code 2015

Insolvency and Bankruptcy Code

  • Twin balance sheet problem in public sector banks and large corporates India: what, why and how?
  • Classification of bank’s assets: standard asset, non-performing asset (NPA), substandard asset, doubtful assets, loss assets
  • RBIs new mechanism for early detection of stress and recovery of the non-performing assets: special mention accounts (SMA), joint lenders forum (JLF), corrective action plan (CPA) and central repository of information on large credits (CRILC) for loans worth Rs. 5 cr. And above
  • RBI “3R” Framework for Revitalizing Distressed Assets: rectification, restructuring, recovery
  • Sarfaesi Act: Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest – salient features and provisions related to debt recovery tribunals (DRT)
  • Insolvency and Bankruptcy Code Bill 2015: Salient features, appeal structure, statutory body for supervision
  • Budget-2016: new provisions for faster resolution of bankruptcy.
  • Corporate Balance sheet problems: top five contributors to Bank’s NPA: Textile, Mining, Steel, Infrastructure and Aviation
  • Why corporates are having difficult arranging new capital?
  • Consequences of twin balance sheet problem in (1) Public sector banks (2) Large corporates

Youtube Link: https://youtu.be/4Dhw6pR8s04

ESB161/P3: “4R” Solution to resolve Twin Balancesheet Problem

Twin Balancesheet problem

  • In the previous part, we learned about the twin balancesheet problem in public sector banks and large corporates.
  • Economic survey-2015:  “4R” solutions: Recognition, Resolution, Recapitalize, Reform
  • Economic survey-2014: “4D” solutions: Disinter, Differentiate, Diversify, Deregulate; Government plan to reduce shareholding in IDBI Bank ltd. Below 50%
  • BASEL norms are separately discussed in the next clip
  • Controversy regarding loan write-off by public sector banks – meaning, implications
  • Meaning of stressed assets
  • Supreme court vs RBI on disclosure of loan defaulters, and the need for separating NPA from Morality.

Youtube Link: https://youtu.be/GS9YJbXTlsA

ESB161/P4: BASEL Norms & Bank Recapitalization

BASEL norms for Bank recapitalization

  • Bank of International Settlement (BIS) and its Committee on banking supervision in BASEL city of Switzerland.
  • Technically wrong illustrations to simplify BASEL norms for laymen.
  • Understanding the requirement of minimum capital to risk weighed asset ratio (CRAR) of 9%; tier-1 and tier-2 capital of a bank
  • Requirement of additional 1.8 lakh cr. Capital for public sector banks (PSB) to comply with BASEL-III norms.
  • How this recapitalization will be provided by Government of India (Rs.70,000) via Indradhanush plan, and remainder as equity and debt.
  • How twin balance sheet problem is aggravating the recapitalization drive of public sector banks (PBSs)?

Youtube Link: https://youtu.be/OR9SrdijLc0

ESB161/P5: Indradhanush Plan to revamp PSB; Bank Board Bureau, Bank Consolidation

Bank Board Bureau (BBB)

  • Need for third set of Narshimhan Reforms in Indian banking sector.
  • Major recommendations of RBI’s P.J.Nayak Committee, Gyan Sangam-I, II and
  • Finance ministry’s Indradhanush Plan to revitalize public sector banks through seven pillars- appointment, BBB, Capitalization, destressing, empowerment, accountability framework and governance reforms
  • Concept of BIC-Bank investment company; how it’ll bring professionalism in the governance of Public sector banks?
  • Bifurcation of CMD posts in public sector Bank- its meaning and benefits
  • Bank Board Bureau (BBB): origin, structure, functions, controversy surrounding Ex-CAG Vinod Rai’s appointment.
  • Brief economy of the SBI associated banks, then bank consolidation – its benefits and opposition

Youtube Link: https://youtu.be/wkRmxVHlR0U
Next Lecture: Monetary policy updates.
Visit Mrunal.org/Economy for archive of previous lectures/articles on Economy.

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108 Comments on “[ESB16] Economic Survey → Banking → Twin Balance-sheet Problem, Bankruptcy Code, BASEL Norms, NPA-Classification, Indradhanush Plan, Bank Board Bureau & More”

  1. Thank You, a lot Sir.

    You are God to us.

  2. SARFAESI applies only to loans above how much amount and what is the criteria for maximum amount in case of DRT if i have claim of 1 lakhs rupee where i can move please reply if any one knows this.

  3. hello sir,
    if in CRAR requirement of 9% is reduced then how it is harmful for banks.
    As 7% of 120 ll be 8.4. so amount required by banks to comply with norms would be less.

    what i,m missing please tell me.
    thankyou in advance

  4. Hi Mrunal Sir,

    Thanks for the lecture on Economic Survey.

    I have watched all 25 ppt uploaded till now on You tube.

    Request you to upload the ppt lecture on this site which will be helpful for revision after watching the videos.

    Please do the needful.

  5. Mrunal sir,
    You are like a sun among many stars…your lectures are damn easy to digest……you made economics ridiculously simple..

    You are THE GOD OF ECONOMICS….

  6. Hello Sir,
    Sir I can not find PPT Economic Survey 2016. Please help and if possible do provide the link.

  7. Sir, please make the videos in English sir, so that you provide a level playing field to all of us. I would be really grateful to you if you could do so.

  8. Hello Sir,

    I have been reading these article since 5-6 years. whenever i stuck with any concept of economy, i go through this site and brush up my all knowledge. you have been a great help to all the students like me.

    thank you so much.
    just one thing i need more clarity on basel norms, how it is relate or diff from RBI rules.

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