government to introduce ifrs
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Financial Sector Reforms, 2011
Presented by :
Srikrishan Rana
Sourav Pal
Saurabh Kirti
Sukhwant Singh
Shruti KaleShalini Singh
Sunil Yadav
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Financial Sector Reforms
Financial sector reforms are at the centre stage of the
economic liberalization that was initiated in India in mid
1991.
This is partly because the economic reform processitself took place amidst two serious crises involving the
financial sector :
the balance of payments crisis that threatened the international
credibility of the country and pushed it to the brink of default;and
The grave threat of insolvency confronting the banking system
which had for years concealed its problems with the help of
defective accounting policies.
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The deeper rooted problems of the
Indian economy were:
the problem of financial repression in the sense of McKinnon-Shaw(McKinnon, 1973;Shaw, 1973) induced by administered interestrates pegged at unrealistically low levels;
large scale pre-emption of resources from the banking system bythe government to finance its fiscal deficit;
excessive structural and micro regulation that inhibited financialinnovation and increased transaction costs;
relatively inadequate level of prudential regulation in the financialsector;
poorly developed debt and money markets; and Outdated (often primitive) technological and institutional structures
that made the capital markets and the rest of the financial systemhighly inefficient.
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RBI measures to extend credit support to
MFIs
The Reserve Bank of India announced certain
relaxation to banks in its present restructuring
guidelines in order to enable them to extend
credit support to micro finance institutionsMFIs.
ANALYSIS / IMPLICATIONS Extending financial support to MFIs
Proper upbringing of MFIs in India through this
credit support.
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Government to introduce IFRS
The government proposes to stick to theinternational time frame for introduction of International Financial Reporting Standards(IFRS) and would amend various laws and
regulations in due course of time to usher thisin
ANALYSIS / IMPLICATIONS
Making the financial statements more transparent Faithfully representing the actual financial position
and performance of an entity.
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LOK SABHA PASSES SBI AMENDMENT BILL,
2010
The Lok Sabha passed by a voice vote theState Bank of India (Subsidiary Banks)Amendment Bill, 2010 aimed at deleting allreferences to the word 'State Bank of Indore'
which has now been merged with the SBI.
ANALYSIS / IMPLICATIONS Customers of 472 branches of State Bank of Indore
will have access to 13,323 domestic SBI branchesand in over 150 overseas branches
Minimizing the shortage of banks in rural areas
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RBI ACCOMODATES IMC¶s
RECOMMENDATIONS ON NBFCs
The Reserve Bank of India has
accommodated the Indian Merchants¶
Chamber¶s (IMC) plea for including telecom
towers in infrastructure finance definition for Non-Banking Financial Companies (NBFCs).
ANALYSIS / IMPLICATIONS Authorising NBFCs to include telecom towers in its
infrastructure loans.
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PARLIAMENT APPROVES APPROPRIATION
BILL FOR 2011-12
Parliament approved the Appropriation Bill for 2011-12, that the Government had netted inRs 100,000 crore during the last 18 months by
strengthening the transfer pricing mechanismto stop capital which would have fled out of theshores.
ANALYSIS / IMPLICATIONS Minimizing and locking black money reserves in
India
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GOODS AND SERVICES TAX BILL
INTRODUCED IN LOK SABHA
The Goods and Services Tax (GST) Bill, which
aims to bring far-reaching reform in the tax
system, was introduced in the Lok Sabha.
Finance Minister Pranab Kumar Mukherjee
moved the Constitution (One hundred and
Fifteenth) Amendment Bill, 2011 to give effectto the provisions of the Bill.
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SEBI ENHANCES FII INVESTMENT LIMIT BY
20 BILLION DOLLARS
Securities and Exchange Board of India(SEBI) issued a circular enhancing the FII limitby 20 billion dollars, taking the limit to 25billion dollars, for investment in the corporate
bonds with a residual maturity of over fiveyears and issued by companies in theinfrastructure sector.
ANALYSIS / IMPLICATIONS Increasing the flow of Foreign Investments in India
to boost its economy
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GOVERNMENT OKAYS BANKING
AMENDMENT LAW 2011
This Bill seeks to among other things liftthe 10 per cent voting rights cap inprivate sector banks and pave the way
for the Reserve Bank of India to givesome additional banking licenses toprivate sector players.
ANALYSIS / IMPLICATIONS
Private sector players to get banking license
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GOVERNMENT DECIDES TO RAISE
HOLDINGS IN STATE OWNED BANKS
The government has decided to raise itsholding in all state-owned banks to a minimumof 58%. It has also identified the banks where
it would infuse capital to increase its stake.
ANALYSIS / IMPLICATIONS
Strengthen banks financial health
provide banks greater headroom to raise capital
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INDIA RIDING THE ATM WAVE
Usage of ATM machines in the country is
increasing .
The amount of cash withdrawal has gone up
by 142%.
Large number of services offered by ATM is
the reason.
The rising use of ATMs is also an indicator that India is gradually progressing from its
status of a developing economy
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BASEL COMMITTEE
The Basel Committee on Banking Supervision provides a
forum for regular cooperation on banking supervisory
matters. Its objective is:
� enhance understanding of key supervisory issues
� improve the quality of banking supervision worldwide
It seeks to do so by exchanging information on nationalsupervisory issues, approaches and techniques, with a
view to promoting common understanding.
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The Committee encourages contacts and
cooperation among its members and other
banking supervisory authorities. It circulates tosupervisors throughout the world both published
and unpublished papers providing guidance on
banking supervisory matters. Contacts have been
further strengthened by an InternationalConference of Banking Supervisors (ICBS) which
takes place every two years.
Contd..
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NEED FOR BASEL NORMS
Capital Adequacy Requirements
banks should maintain a minimum capital adequacy
requirement of 8% of risk assets. For India, the
Reserve Bank of India has mandated maintainingof 9% minimum capital adequacy requirement.
Supervisory Review
to ensure that not only banks have adequate capital
to support all the risks, but also to encourage themto develop and use better risk management
techniques in monitoring and managing their risks.
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NEEDS (CONTD)
Market Discipline:
Market discipline imposes banks to conduct their
banking business in a safe, sound and effective
manner. Mandatory disclosure requirements oncapital, risk exposure (semiannually or more
frequently, if appropriate) are required to be made
so that market participants can assess a bank's
capital adequacy. Qualitative disclosures such as
risk management objectives and policies,definitions etc. may be also published.