[ESB16] Economic Survey → Banking → Why Incomplete Transmission of Monetary Policy, MCLR, PSL-Certificates, New Differential Banks?

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Mrunal's Win22 Series for Economy Updates for UPSC Prelims & Mains 2022
  1. Prologue
  2. ESB161/P6: Monetary Policy Framework between RBI & FinMin
  3. ESB161/P7: Decline in Bank Deposit & Credit Growth & incomplete transmission of monetary Policy?
  4. ESB161/P8: MCLR Vs. Base Rate, Small Savings Schemes & incomplete transmission of monetary Policy?
  5. ESB161/P9-Priority Sector Lending Certificates: Features, Purpose
  6. ESB161/P10: Differential Banks- Small Finance Banks, Payment Banks, Wholesale Bank, Custodian Banks

Prologue

  • Continuation of last week’s lecture on banking sector updates with main focus on budget and economic survey.
  • last time we had focused on NPA related issues such as twin balance-sheet problem, insolvency and bankruptcy code 2015 among other.
  • this new lecture focuses mainly on the factors behind incomplete transmission of monetary policy.
  • Powerpoints available under Mrunal.org/download (goto mediafire folder=>Economy=>Banking)

ESB161/P6: Monetary Policy Framework between RBI & FinMin

Monetary Policy Framework

  • Recap of the previous lecture: Chakravyuh Challenge, Twin Balance sheet problem, classification of bank’s assets, SARFAESI and NPA, new insolvency and bankruptcy code 2015, BASEL-III norms on recapitalization of public sector banks; Indradhanush reforms.
  • Quick revision of quantitative tools of monetary policy and UPSC-2015 prelim questions from this topic.
  • Latest bimonthly monetary policy on April 2016; changes in the policy corridor
  • Overall trend of monetary policy rates in last three years.
  • Reforms in Monetary policy: Urjit Patel Committee, Monetary policy framework with flexible inflation targeting (FIT) and Budget-2016 announcement for amending RBI Act 1934

Youtube Link: https://youtu.be/bhhwvCwou0g

ESB161/P7: Decline in Bank Deposit & Credit Growth & incomplete transmission of monetary Policy?

ES161-P07-decline-deposit-deposit-growth

  • Factors/Reasons behind incomplete transmission of monetary policy?
  • Revision of the cash reserve ratio (CRR) and statutory liquidity ratio (SLR)
  • question asked in UPSC 2015 prelims: When RBI reduces the Statutory Liquidity Ratio by 50 basis points, what will happen?
  • How does a high SLR rate lead to financial repression of public sector banks on asset side?
  • High level of stressed assets encourage PSB to overinvestment in risk free G-sec to maintain a respectable risk-weighted capital adequacy ratio to comply with BASEL-III
  • Why is growth in deposit and credit either negative or sluggish?
  • Connection between real interest rate and growth in bank deposits- substitution effect and wealth effect.
  • How liberalized remittance scheme (LRS) is creating negative spillover on the economy?
  • Double financial repression of public sector banks on both asset and liability side.
  • Four factors behind sluggish growth in Bank credit (Y-o-Y) in India? 1) incomplete transmission of monetary policy 2) corporates have halted their expansion plans and banks are reluctant to loan them anyway. 3) lucrative rates offered in the bond market 4) oil marketing companies are borrowing less from commercial banks.

Youtube Link: https://youtu.be/hv5XmW6h5lE

ESB161/P8: MCLR Vs. Base Rate, Small Savings Schemes & incomplete transmission of monetary Policy?

Small Savings Schemes EPF Rates revised MCLR vs Base Rate

  • How small savings schemes have hindered the complete transmission of monetary policy? Why did Government reduce the small savings rates?
  • Who decides the loan interest rates of banks? Base rate system vs Marginal cost of funds based lending rates (MCLR)?
  • List of structural rigidities that are preventing complete transmission of monetary policy?
  • Why Monetary Policy alone can’t combat inflation/low-growth?

Youtube Link: https://youtu.be/do7d1ci839o

ESB161/P9-Priority Sector Lending Certificates: Features, Purpose

PSL certificates

  • Which banks have to comply with the PSL norms?
  • List of new categories added in the priority sector from 2015?
  • Definition of small and marginal farmers, MSME industry.
  • Does Jan Dhan Overdraft count as PSL lending to weaker section?
  • What happens if banks fail to meet PSL target?
  • New categories in PSL: renewable energy, social infrastructure
  • RBI’s Deepak Mohanty Committee on Med-term path on financial inclusion and its recommendations about replacing Interest subvention scheme with universal crop insurance subsidy.

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

ESB161/P10: Differential Banks- Small Finance Banks, Payment Banks, Wholesale Bank, Custodian Banks

Differential Banks Local Area Banks

  • Recap of the classification of financial intermediaries
  • Local area banks: origin, restrictions, features.
  • What is a scheduled bank? What are the disadvantages of not being a scheduled bank?
  • Small finance bank and Payment banks: origin, purpose, equity requirement, CRAR norms, functions, similarities, differences.
  • Usha Thorat Committee and list of 10 winners of small finance bank license
  • Nachiket Mor Committee and list of 11 winners of payment bank license.
  • Criticism against small finance bank and payment banks by Subramanium Swami and Arundhati Bhattacharya.
  • Proposed Differential banks: wholesale banks and custodian banks
  • Side topic: National payment Corporation of India (NPCI)’s unified payment system (UPI)

Youtube Link: https://youtu.be/8Qlj6eqd4SY
This concludes (most of the) Banking topics from this year’s budget and economic survey.

Indian History Freedom Struggle Pratik Nayak

52 Comments on “[ESB16] Economic Survey → Banking → Why Incomplete Transmission of Monetary Policy, MCLR, PSL-Certificates, New Differential Banks?”

  1. Thanks sir for updating your wonderful lecture video… Really Thank you very much for your generous efforts… Sir I request you from all your viewers side to kindly notify regarding prospect of history lecture series…

  2. mrunal sir .. no words to express .. thanks a tonne … absolutely , totally n very very indebted to you sir … its worth the wait …

    1. can any one tell me how do i get mrunal sir banking basics videos i am not able to find those videos. plz help

  3. complete satisfaction ..amazing ppts.. thank you so much mrunal sir .. by going through these ppts one can easily recognize that you take a lot of care regarding our studies n all sir they are perfectly explained … really indebted sir .. \,,/

      1. L1 banking_finance folder uske andar hai … dont go inside theory n all .. front mein hai and sab niche hai

          1. bro,ESB 161/P1-P10 KE POWERPOINT KAHA SE DOWNLOAD KARNA HAI,L1-P1 LEKAR L1P9 TAK KE OLD WAALE KARLIYE HAI,YE LATEST WAALE NAHI MEEL RAHE BHAI,PLZ HELP.

        1. Inside L1 banking_finance folder, I can find PPTs of first three lectures only! From where to get the rest of the PPTs?
          Thanks in advance!

  4. THANK YOU MRUNAL SIR.. BUT THEIR ARE SO MANY THINGS IN SURVEY RATHER THAN BANKING.. SIR.. PLZZZ COVER THOSE TOPICS..

  5. sir, its a very humble request to upload the rest of history videos. Those videos are as good as yours and is a boon for student likes us who can’t afford to go to Delhi.
    thank you

  6. your style has made the subject topic seem much easier..fantastic job..thanks and please keep up the good show.

  7. Sir, unable to find PPTs for ESB. Searched the mediafire folder and the download page. Can you please upload it ?

      1. ppts are there … the names of old and new ones are same so little confusion is on … it is there in L1banking _finance section … if still unable to find … i will mail you guys

  8. Is it compulsory to be graduate in English literature if you want to opt English literature as an optional for upsc main examination 2016. Please tell me I really want to know.

  9. HOW TO ACCEES 5015 AUGUST ALL ARTICLE ON REVISION ENVIROMENT UP
    TO 2016 PLZ INFORMED REPLY

  10. Sir, kindly WRITE articles on ECONOMICS, FINANCE, MANAGEMENT for the purpose of RBI Examinations.

    Regards

  11. as i have 3 years for my csat exam,i want to inquire that reading this year economic survey help me at that time of my exams?

  12. Mrunal sir, I’m a first timer on your site. I want to improve my knowledge about general awareness for banking exams. For that I want to learn from the start. Could you please point out where should I start looking in the site to attain my goal?

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