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prelims Test Series 2019
बेसिक इंग्लिश का दूसरा सत्र (कक्षा प्रारंभ : 22 अक्तूबर, शाम 3:30 से 5:30)
Major Reform Initiatives in Banking, Insurance and Financial Sector
May 01, 2015

According to Economic Survey 2014- 15 liquidity conditions (money supply) have remained broadly balanced during 2014-2015 except for some temporary tight conditions due to delayed government expenditure. Steps taken by the Reserve Bank of India (RBI) played a positive role in managing the liquidity conditions.

Till January 2015, RBI had kept the policy rates unchanged. As inflationary conditions eased, RBI softened the monetary policy by cutting the Repo rates by 25 basis points in January 2015 (from 8% to 7.75%).

The Reserve Bank of India (RBI) also adopted new Consumer Price Index (combined) as the measure for nominal anchor (Headline CPI) for policy communication.

Banking Sector

  • Banks being allowed to raise capital from the market to meet capital adequacy norms by diluting the government’s stake up to 52 per cent.

  • Pradhan Mantri Jan Dhan Yojana launched to provide universal access to banking facilities with at least one basic banking account for every household.

  • In April 2014, two applicants have been granted ‘in principle’ approval to set-up new banks in the private sector within 18 months.

  • RBI released guidelines and invited applications for setting up payments banks and local area banks.

2014- 2015 saw some stress on the asset quality of the Scheduled Commercial Banks as there was an increase in gross NPA (Non Performing Advances) to the total gross advances. NPA increased from 4.1 % (March 2014) to 4.5 % (September 2014). As on June 2014 , five subsectors, viz. Infrastructure, Textiles, Iron & Steel, Mining and aviation hold 54% of total stressed advances of Public Sector Banks.

Actions taken by RBI to deal with NPAs

  • Issued guidelines, prompting banks to act as soon as a sign of stress is noticed in borrower’s actions and not to wait for it to become a NPA.

  • Tightened norms to Asset Reconstruction Companies, increasing the minimum investment in security receipts to 15% from 5%.

  • Issued guidelines to bring flexibility in project loans to infrastructure and core industry projects.

  • 2014- 2015 also saw a decline in the growth of bank credit due to high accretion of NRI deposits and also due to low deposit mobilization. 

Insurance Sector

Insurance penetration in India has grown from 2.3% in 2000 to 3.9% in 2013. This insurance penetration level compares well with the emerging market economies. The sector registered a growth of 9.4% during 2013- 14 with Life Insurance Corporation of India registering 13.5 % growth.

Promulgation of Insurances Laws (Amendment) Ordinance 2014:

  • To remove archaic and redundant provisions in insurance laws.

  • Empowering Insurance Regulatory and Development Authority to enable more effective regulation.

  • To increase the foreign equity cap in Indian Insurance Companies from 26% to 49%.

Financial Sector

Equity Markets continue to do well for the financial year 2014-2015. The benchmark indices, BSE Sensex and NIFTY showed a general upward trend in the current year with growth rates of 29.9 % and 31.4 % year on year.

  • Improvement in Corporate Governance norms.

  • Establishment of a foreign portfolio investor for better functioning of both primary and secondary markets.

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