- BAD NEWS FOR RENEWABLE ENERGY COMPANIES: The government has ruled out the possibility of giving priority status for renewable energy sector for limit less borrowing. At a time when Banks are reluctant to grant loans to renewable projects, it has been a long standing demand of this sector to give it priority status to trigger easy cash flow. Banks have been reluctant to fund renewable energy projects due to low tariffs, power evacuation issues and NPAs in the thermal sector.
- NO MORE COMMISSION FOR PSB STAFF FOR CROSS SELLING PRODUCTS: The government has asked the Public Sector Banks (PSBs) not to pay any commission to its employees for cross-selling of products. This could discourage PSB employees from cross-selling products like retail loans, insurance and mutual funds as now banks will stop paying cash incentives, rewards and recognition. On the other hand this would mean Public Sector banks like SBI and Bank of Baroda who were till now giving commission to its staff, are at a disadvantage over Private banks who have such schemes of rewarding its staff for cross selling.
- GOVERNMENT BEGINS CONSOLIDATION OF REGIONAL RURAL BANKS: The government has initiated the process of consolidation of Regional Rural Banks (RRBs) along with the Public Sector Banks and intends to bring down their numbers to 36 from the present 56. In this regard, the Centre has begun consultations with States as respective States are one of the sponsors of RRBs. The Sponsor banks have also been informed to formulate a road map for the amalgamation of RRBs within a State. The proposed amalgamation of RRBs will bring in better efficiency, higher productivity, improved Financial Inclusion and greater flow of credit to rural areas.
- RBI SETS THE RULE FOR JOINT PRIORITY SECTOR LENDING: The Reserve Bank of India has directed Public Sector banks to jointly lend to priority sector along with Non-Banking Finance Companies (NBFCs). RBI has now allowed this joint lending along with NBFCs to push priority sector loans and to reap the benefit of the strengths of two sets of lenders. The Priority sector will have the benefit of low cost funds from the banks and lower cost of operations of NBFCs which would be passed on to the ultimate beneficiary through blended rate and weighted average rate. A single blended fixed rate of interest will be offered to the ultimate borrower based on respective interest rates and proportion of risk sharing.
- GOVERNMENT TO TAKE ALL MEASURES TO ENSURE LIQUIDITY IN NBFCs: In the backdrop of the default on a series of its coupon payments by one of the biggest names in the Non-Banking Finance Companies (NBFCs)- Infrastructure Leasing & Financial Services (IL&FS) due to which there was panic selling in the equity market which pulled the markets down, the Finance Minister Mr. Arun Jaitley said that the government is ready to ensure credit is available to Non-Banking Financial Companies and adequate liquidity is maintained/provided to the NBFCs.
- CURRENCY CIRCULATION SLOWS DOWN: Currency In Circulation (CIC), which increased substantially since the note ban in November 2016 has seen some slow down since May 2018. The Currency In Circulation increased from Rs. 9 trillion in January 2017 to Rs 19.5 trillion in May 2018. And the same is being maintained till September 2018. This may be because of a possible reason that people have cut down on their spending with the recent hike in petrol and Diesel prices particularly in rural areas.
- THREE STATES- MAHARASHTRA, KARNATAKA & TAMILNADU ACCOUNT FOR 40% OF TOTAL RETAIL LOANS: Maharashtra, Karnataka and Tamil Nadu together account for 40% of the total retail loans in the country as on June 30, 2018. This is despite having only 20% of the total population of the country. The growth in retail advances is driven by robust economic development and urbanisation.
This post first appeared on IMPACT OF DEMONITIZATION OF CURRENCY IN INDIA IN 2016, please read the originial post: here
