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.