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

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

• 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

• 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

• 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

• 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

• 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.