index [] · human development index ... giffin goods = when prices goes up demand of inferior goods...
TRANSCRIPT
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INDEX
Topic Page 1 Introduction 2 Market Forces 3 Monetary policy Reserve bank of India 4 Money Supply Micro finance 5 Financial Inclusion 6 Capital Market SEBI 7 Inflation 8 Fiscal Policy Goods and Services Tax 9 Budget 10 National Income Human development Index 11 Trade Policy Foreign direct investment Special economic zones Exchange rate 12 International institutions World trade organization 13 Poverty 14 Agriculture 15 Industries 16 General Agreement on Trade in Service (GATS) 17 Miscellaneous
1 2 5 7 18 20 24 26 32 36 43 48 52 58 64 71 75 81 87 92 97 103 116 122 130 136
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INDIAN ECONOMY
ECONOMY
1. SOCIALISM 2. CAPITALISM
EQUALITY LIBERTY
French Revolution 1789 gave three points –
1. Equality
2. Liberty
3. Fraternity
Russian Revolution – 1917
Government controlled Individually controlled
Non-Profitable Profitable
Mostly adopted by all Mostly adopted by all
backward countries developed/developing countries
- India has a mixed Economy.
- India adopted Capitalism in 1991
This gap of 12 years remains
- China adopted Capitalism in 1979 the gap in Economy.
Till 1980, India Economy> Chinese Economy.
Economy is all-over based on Market Forces.
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MARKET FORCES
Demand = Supply
Currency (RBI) Production (more production
D>S (more money) more supply) D<S (less money)
Inflation (value of money falls) Deflation (value of money rises)
RBI (Monetary policy) Go t s Fis al Poli y
Liquidity is a condition in which money in the market is kept by the owner
and they did not buy anything form market. The degree to which it can be
easily converted into cash.
4
3
2 Price Increase # Demand Decrease
Demand 1
0 1 2 3 4
Price
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There is Positive Relation between Supply
and Demand
Price
Exceptions-
1. Essential Goods = Salt
2. Veblen Goods = Goods which belong to social status
- More Demand of Veblen goods because their prices are high
3. Giffin Goods = When prices goes up demand of Inferior goods increases.
4. Fashionable Goods
I. Monetary Policy:-Banking
Share Market
Inflation
II. Fiscal Policy:- Budget
Several Types of deficits
Planned Expenditure
Non-planned expenditure
Taxation
III. Trade policy:- Balance of Payment
B.O.P criss
Foreign investment
SEZS
Exchange rate of rupee
Full Convertibility of rupee
International Institution – IMO
-- WTO
-- IBRD
IV. National Income:- GDP
GNP
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NNP
GVA
V. Economic Development:- Human Development Report
Human Development Index
DHI
GII
HPI
VI. Poverty:- Relative
Absoute
VII. Unemployment
VIII. Planning—Planning Commission
Finance Commission
IX. Agriculture
X. Industries
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MONETARY POLICY
BANKING
Banking:- Currency system came in existence in
1770 – Established Bank of Hindustan which was first Bank of India
1881 – Awadh commercial Bank- First Bank which was run by Indians
1894 – Punjab National Bank which was first Indian Bank
History of SBI:-
1. Bank of Bengal – 1806
2. Bank of Bombay – 1840
3. Bank of Madras – 1843
1921 – These three presidential Banks were merged and established
Imperial Bank of India
1955 – It was Partially Nationalized
It was given new Name – State Bank of India
1959 –Princely Banks were made its subsidiary Banks
8 Princely Banks
- 1961 – Bikaner and Jaipur State Banks were merged
- 2010 – State Bank of Indore was merged in SBI
- 2008 – SBI was purchased from RBI By Government of India
IDBI – 1996
SBI – 2008
RBI NABARD – 2010
NHB – National Housing Bank
DICGC
According to Regulatory Act 1981, In IDBI 1% of shares
Nationalization of Banks:-
In 1969, Indira Gandhi Government nationalized 14 largest Banks of India,
which had capital of 50 crore or more.
In 1980, 6 more Banks were nationalized which had 200 crore or more
capital.
In 1993, New Bank of India was merged in Punjab National Bank.
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At present, there are 19 Nationalized Banks.
Cooperative Banks:-
Established in 1982
DFI – Development Financial Institution
Commercial Banks Cooperative Banks
Subject of concurrent list Subject of State list
These are established by
parliamentary Act
These are established by legislative
Assembly Act
One Tier Structure Three Tier Structure
1 State level - Apex Bank
2 District level – Central Bank
3 Gram Panchayat level – Cooperative
Society
No fixed functioning area Fixed functioning area
RBI is an apex body NABARD is an apex body
Scheduled Banks:-
Banks which are included in the second schedule of the RBI Act 1934
Scheduled Banks can issue cheque book and they can get all kinds of
financial facilities from RBI
They have to follow the rules and regulations of RBI
500 crore capital is required
Regional Rural Banks:-
Established on 2 October 1975
Its major objective is to provide banking facility in the rural areas
It is established by central government, state government and commercial
banks.
Their share is = 60:20:20.
No Regional Rural Bank in Goa and Sikkim
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Reserve Bank of India:-
RBI started functioning on 1 April 1935.
It was established by the RBI Act 1934.
There was a provision for establishment of Central Bank in Government of
India ACT 1935.
RBI was founded by the recommendation of Young Hilton committee.
From the very beginning it was founded as central bank.
It was a private Bank
It was nationalized on 1st
January 1949
It is an autonomous body
It also functioned as a central bank of Burma and Pakistan.
Functions of RBI
To issue currency notes
Two rupee or above value rupee notes are issued by RBI
one rupee note and coins are issued by finance ministry
But One rupee note and coins are circulated in market by RBI
RBI issues currency note by the minimum reserve system
RBI has to maintain 200 crore reserve
200 core 115 crore gold
85 crore rupees – Foreign Assets
In 1956, RBI adopted minimum Reserve System
Before it, Proportional Reserve System was used.
According to MRS, RBI Reduced its reserves from 515 crore to 200 crore.
- RBI is a regulatory body for Banking system
- It frames rules and regulations for banking system and implement them.
- It works as a Banker of Government of India and arranges all kinds of
borrowings for Government of India.
DMO – Debt Management Office
Established in 2008
In future it would arrange borrowings for Government of India.
To maintain Forex Reserve
At present, RBI has 371 billion Forex Reserves
Forex Reserve-
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I. Foreign Assets
II. Gold
III. Our deposits at IMF( Reserve Tranche IMF)
IV. SDR – Special Drawing Rights ( issued by IMF, used as an international
Currency)
To manage the exchange rate of rupee.
It provides the facility of clearing house to Banks ( clearing house –
solve the mutual disputes)
To control the liquidity of Market
Two types of measures to control the liquidity use by RBI –
1. Quantitative
2. Qualitative
QUANTITATIVE MEASURES:-
Tools of RBI:
- Bank Rate\
- CRR – Cash Reserve Ratio
- SLR – Statutory Liquidity Ratio
- Repo Rate
- Reverse Repo Rate
- MSF – Marginal Standing Facility
- BANK RATE:-
Interest Rate at which RBI provides long term loans to the Banks. It is also
known as Penal Rate, because the Bank which not maintains the SLR, RBI
uses this interest rate as a punishment.
2. CASH RESERVE RATIO:-
- All Banks have to deposit certain percentage of their total liabilities with
RBI, on which there is no provision of Interest.
- It is for emergency conditions
- At present, CRR is 4 %.
3. SLR:-
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- Statutory Liquidity Ratio = 21 %
- All Banks have to maintain certain percentage of their total liabilities as
liquid assets.
- All Banks have to invest certain percentage of their total liabilities into
government securities.
LAF – Liquidity Adjustment Facility
Repo Rate
LAF
Reserve Repo Rate
- RBI started this facility in 2000 for adjustment of liquidity
- In this Repo market was developed
4. REPO RATE:-
- Repurchase Option
- Repo Market – Market in which seller of money always keep option to
repurchase his money after a certain time.
- Under this the Government Securities are kept as a mortgage.
- In India short term transaction between RBI and Banks comes under the
Repo market.
- Repo Rate- Interest Rate at which RBI provides short term loans.
5. REVERSE REPO RATE:-
Interest Rate at which Banks deposit their money with the RBI for the short term
loans.
6. MSF – MARGINAL STANDING FACILITY
- This facility was started in 2000
- In which banks can borrow money for overnight from RBI. This
Facility is available only in Mumbai. In which bank have to borrow
minimum 1 crore rupees, it should be multiple of 1 crore and
maximum it can be 2% of total deposits of Bank.
- It is borrowed to maintain CRR and SLR
- Its Interest Rate is known as MSF Rate.
7. OPEN MARKET OPERATIONS
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RBI uses Open Market Operations to control the liquidity of Market. In
which it buys and sells the securities. If problem of Inflation arises, then it
sells securities and if there is Deflation, than it buys the securities.
To control the Inflation, RBI increases all of these.
Open Market Operation is comparatively for long term as the Repo
Market. As, in Repo Market securities are kept as a mortgage, whereas, in
open market operations, securities are either sold or purchased.
QUALITATIVE MEASURES:-
1. Marginal Requirement
2. Consumer credit
3. Rationing of Credit
4. Moral Pressure
1. MARGINAL REQUIREMENT:-
If there is Inflation, than margin money is increased and vice-versa
2. CONSUMER CREDIT:-
The consumer amount/value of down payment is increased/ decreased.
3. RATIONING OF CREDIT:-
- To fix the limits of lending of Banks in various sectors
- In case of Inflation, limit of consumer loan is reduced and vice-versa
4. MORAL PRESSURE:-
- RBI creates moral pressure on Banks.
- During the recession, it encourages Banks to give more loans to the
consumer and during Inflation, it encourages Banks to control their
consumer loans.
CALL MONEY MARKET:-
It is a very short- term market.
During, day to day business, some Banks faces the shortage of money and
on the other hand some Banks have surplus money, and the transactions
among the Banks is known as call money market.
Its maximum duration is 14 days.
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But generally, money is given/taken for one day.
Its interest rate is called call rate.
It is also known as Reference Rate, because the Central Bank takes the
reference of call on rates, when it frames its Monetary Policy.
- London – Is the Wo ld s la gest all o ey a ket. - The call rate of London is known as LIBOR – London Inter- Bank Offer Rate
- The LIBOR is calculated by – BBA (British Bank Association)
- In 2012, LIBOR scam took place
- Mumbai is I dia s la gest all o ey a ket - The call rate is known as MIBOR
PRIORITY SECTOR LANDING:-
All Banks have to lend at least 40% of their loanable amount to priority
sectors and its minimum interest rate can be 12%.
Agriculture – 18%
Small Scale Industries
Exporters
SC/ST
Women
Home Loan – upto 25 lakh
Slum Dwellers
NBFC-MFI – Non-bank finance companies- Micro Finance institution.
Priority Sector Lending Certificate (PSLCS)
- On 7th
April 2016, RBI issued a notification, in which RBI allowed Banks to
buy and purchase priority sector lending certificate.
- Those banks which lend in priority sector, more than their target, they can
sale su h ki ds of e tifi ate. A d those Ba ks hi h a t a hie e the target the priority sector lending can purchase these kinds of certificates.
CARBON CREDIT TRADING
PSLCS – This Facility is started on the basis of Carbon Credit Trading
- It is issued for four types of PSLCS.
1. Agriculture
2. Small and Marginal Farmers
3. Micro- industries
4. General
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C.A.R (CAPITAL ADEQUACY RATIO)
- Banks have to maintain certain percentage in the risk assets, it must be of
thei a ks o apital - The concept of C.A.R is taken from BASEL Standards.
BIS (BANK FOR INTERNATIONAL SETTLEMENT)
- Established in the year 1930.
- Its headquarter is in BASEL (Switzerland)
- It is an organization of Central Banks.
- RBI became its member in the year 1996.
- It works for the development of Banking Sector.
- It encourages the research in Banking Sector.
- It issues direction for the development of Banking Sector which are known
as Basel Standards.
- Till now BASEL I, BASEL II and BASEL III standards have been issued.
- In India BASEL III standards are being implemented from 2013 – 2019.
NARSIHMAN COMMITTEE – 1992
- No more Nationalization of Banks.
- Encouragement should be given to private banks.
- Foreign Banks should also be encouraged.
- There should be no discrimination between foreign banks and domestic
banks.
- Government Shareholding in the public sector banks should be reduced to
51% from 100%.
- Credit Information Bureau should be established.
- DRT (Debt Recovery Tribunal) should be established.
- ARF (Assets Reconstruction Fund) should be established or ARC (Assets
Reconstruction Company) should be established.
- Rate of CRR and SLR should be reduced.
NARSIHMAN COMMITTEE II – 1998
- The merger of the banks should be encouraged, so that the Indian Banks
can compete with foreign banks.
- The weaker Banks should not be merged with the stronger Banks.
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NARROW BANKINGS:-
- Those Banks which do not invest in risky sectors.
- In the Government shareholding in Public sector banks should be reduced
from 51% to 33%.
- BASEL standards should be implemented.
- C.A.R should be implemented
- NBFCshould be implemented.
- Non-banking finance company.
- Computer technology of Banks should be encouraged.
BANKING OMBUDSMAN ( LOKPAL)
- In 1995, RBI appointed 15 Banking Ombudsman in different cities.
- They hear the complaints of customers against the Banks.
- They hear the complaints of-
Scheduled Banks
Regional Rural Banks
Cooperative Banks
NBFCs (complaints regarding finance)
Types of Complaints
- Hidden Charges
- clearance of DD and cheques
- If Ba k does t ope a a ou t, e e if a pe so has all do u e ts ith him.
- If Bank refuses to grant loans.
Co plai ts hi h a t e ade:- - If the matter related is of more than 10 lakhs rupees.
- O e Yea old atte , o plai ts a t e ade. - If DRT is hea i g the atte , that o plai t a t e hea d y the Ba ki g
Ombudsman.
- General complaints
- Any complaints should be first made or reported to Bank manager, if he
does not solve the problem within a month, than you can go to banking
Ombudsman.
- If the Customer is not satisfied by the decision of banking ombudsman
than he can go to the deputy governor of RBI and appeal for it.
- Problems or complaints of Net Banking can be done before Banking
Ombudsman.
- Online complaint can also be made.
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- There should be an advertisement of banking ombudsman is each branch
of the bank.
NPA ( NON-PERFORMING ASSETS)
- If Bank does not get principle amount and interest for continuously 90 days
than such assets are included in NPA category
- NPA is of Three Types: 1 Sub-standard NPA
2 Doubtful NPA
3 Loss NPA
Sub-Standard NPA
- If Bank does not get principle amount and interest for continuously 90
days. Till one year it is called as Sub-Standard NPA.
- After remaining Sub-Standard NPA for 1 year it comes under Doubtful NPA
category.
Loss NPA
When all possibilities to get the loans back are ended, then the Banks
includes it in loss NPA category, but still it is mentioned in the Balance
Sheet.
Measures taken for this problem:
- NPA is the major problem of banks and to solve this problem government
has made number of efforts such as
1. CIBIL – Credit Information Bureau of India Limitation in the year 2000.
- CIBIL collects the information of the lending of the banks and makes them
available for all finance institutions. Collect data from all the Banks.
2. DRT- Debt Recovery Tribunal was established in the year 1994.
- In 1994, Government established 29 DRT and 5 Tribunals.
- These are specialized Tribunals for banking sector and they were established
because of hearing can be done for the matter related to NPA and the matter
can be closed soon.
Securitization and Reconstruction of Financial Assets and Enforcement of
Security Interests Act 2002 :
- In short it is known as Securitization Act 2002
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- On the basis of this act, banks are given rights that after giving the notice
of 60 days mortgage assets they can take possession of the property.
- T i u al o DRT a t gi e stay ithout hea i g a k s lai . - On the basis of this Act, there is a provision of establishing ARC (Assets
Reconstruction Company).
- For Solving the problem of NPA, ARC was established.
- ARC purchases the NPA of banks and disposes it in the market, It first does
the reconstruction of the assets and dispose it.
Urjit Patel Committee Recommendations – 2013
- It was constituted in the year – 2013.
- This committee gave its recommendations in the year January 2014.
- The only objective of RBI should be to control the Inflation.
- To increase the growth rate, providing ample opportunities, maintain the
exchange rate of money. These all should not be the objectives of RBI.
- CPI should be made the major index in place of WPI.
- Target inflation should be 4% it can be (+) or (-)
- CPI should be gradually controlled
- There should be a monetary policy committee to frame the monetary
policy.
- There should be five members in the monetary policy committee, three
members from RBI, Governor of RBI, Deputy Governor and Executive
director.
- Two Independent Members appointed by the Government of India whose
term of office or tenure should be 3 years.
- They should not hold the post of profit.
- There should be transparency in the functioning
- There should one sitting in two months
- The decision should be taken by the majority.
- The Governor of RBI Should be the Chairperson of this Committee.
- The casting of vote is compulsory for all the members.
- In case of equal vote, Governor has the power of casting vote.
- If this Co ittee a t o t ol the i flatio fo o ti uous th ee ua te s, then committee has to give clarification. They have to give three
clarifications.
1. Why Inflation could not be controlled.
2. The Time within which the inflation could be controlled.
3. How the Inflation would be controlled.
- Monetary policy should be received within 60 days.
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- Earlier the time period to review the monetary policy was within every 45
days.
- Government should control its social welfare programmes.
- Fiscal deficit should also be controlled.
- The Target of FRBM Act 2003 should be achieved.
- Therefore, the recommendation of Kelkar Task force should be
implemented.
- The RBI s fu tio to o o o ey fo the go e e t of I dia should be
given to DMO.
- Fixed Income financial Products should be counted as Assets. Bank should
give loan against them, so that people invest less in gold.
- Some of these recommendations have been accepted:-
- CPI has been made the major Index.
- Targeting Inflation – 4% has been done.
- The review of Monetary Policy is done within the gap of 60 days instead of
45 days.
- Monetary Policy committee have been formed and now there are 6
members in this committee.
- Three members are of RBI and three members are from Government.
Marginal Cost of Fund Based Lending Rate-
In April 2016, RBI replaced base rate by MCFBLR.
Why it was replaced?
- Despite edu tio i the Repo Rate, a k did t edu e thei ase ate, a d the efo e the e efit of edu tio did t ea hed to onsumers or
investors.
Factors affecting the fixing of Base Rate
Cost for the fund (Interest Rate given for deposits)
Operating Expenses
Minimum Rate of Return (profit)
Cost of CRR
- While fixing the Marginal cost of Fund based lending Rate it comprises of
the following:
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- Its Main factors are as follows:-
Marginal cost of Fund
Negative carry on account of CRR
Operating Cost
Tenure Premium
Operating Expenses and cost for CRR are similar factors in both.
Whereas in cost for fund, only interest rate given on deposits was included,
but now in marginal cost of fund interest rate on deposits, Repo Rate and
different kinds of interest rate on other fund arrangement is also included.
Profit has been removed and in place of minimum rate of return Tenure
Premium has been included.
- Tenure Premium or high interest rate for long term loans.
- MCLR should be revised monthly, it is compulsory to revise MCLR on
Monthly basis.
- Now, with the reduction of Repo rate, bank has to reduce its MCLR.
BASE RATE:-The minimum interest rate declared by the bank is called base rate.
- It was started in 2010
- Prime lending rate was replaced by base rate
- The concept of PLR was started in 2004.
- The concept of MCLR is started in2014.
- PLR – The Interest Rate which was provided to the best customer of the
banks.
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MONEY SUPPLY-
M1 = Cash with people + Demand deposits with the Bank + other deposits with
RBI.
M2= M1+ Deposits with Post Office
M3 = M1+ Time deposits with the Bank
M4 = M3 + Deposits with Post Office
There are Four types of Account:-
1. Current Deposit Account
Demand Deposit
2. Saving Deposit Account
3. Recurring Deposit
Time Deposit
4. Fixed Deposit
NM1 = Cash with people + Demand Deposits with the Banks + other deposits
with RBI
NM2 = NM1 + Short term time deposits of residents
NM3 = NM2 + long term time deposits of residents + Term deposits of the Banks
L1 (Liquidity) = NM3 + Post office deposits
- (National saving certificate are not included in this post office deposits)
L2 = L1 + Refinance or financial Institutions (FI) - Deposits
- Borrowings
- Certificate of Deposit
L3 = L2 + Non-Banking Finance Company (NBFC)
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Mo
- Total currency issued by RBI
- The date is issued weekly
- NM1 + NM2 + NM3 – They are issued once in 15 days
- L1 + L2 – They are issued monthly
- L3 – They are issued quarterly
DICGC ( Deposit Insurance and Credit Guarantee Corporation)
- Established in the year 1978
- Its ownership is with RBI
- Its objective is to give the insurance on the deposits of the customer with
the Banks and it provides guarantee to the credit creation by the Bank.
Financial Stability and Development Council (FSDC)
- Established in the year 2010
- Its chairman is Finance Minister
- Its members are from RBI, SEBI, IRDA ( Regulatory Bodies)
- Secretaries of Finance Minister and Economic advisor of Finance Minister
are its members.
- Its objective is to provide a common platform for regulatory bodies to
resolve their disputes.
- It does not interfere in the internal affair of the regulatory bodies.
- It gives advises on financial inclusion
- It recommends financial inclusion
- To encourage the stability in financial sector.
Prepaid Instruments (PPI)
- Its objective is to provide payment related facilities to the customer
- They provide online payment facility
- They can take maximum 50,000 deposits
- They do t le d o ey a d do ot gi e loa s
- They do not provide the facility of cash withdrawal
- They follow the norms of KYC (Know Your Customer)
- They do t follo CRR a d SLR, the efo e Na hiketa Mo Co ittee criticized it and in place of it payment bank should be established instead
of PPI
Payment Bank
- Established in the year 2015
- To establish a payment bank 100 crore capital is needed
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- Promoters capital amount should be 40% and after 12 years it can be
reduced to 26%
- They Provide online Payment facility to their customers
- They can take maximum 1 lakh deposit
- They Provide debit card, therefore cash withdrawal can be done
- They a t le d o ey
- They do not provide credit card
- They follow the norms of CRR
- The 75% of remaining amount have to be invested in SLR as Government
securities.
- The remaining 25 % amount to be deposited in the Banks.
Small Banks
- Established in the year 2015
- To establish a small bank 100 crore capital is required
- The promoters share in it should be 40%
- It gives small loans to small-scale Industries, micro-industries and small
farmers.
- This Banks provides 50% of its total amount as 25 lakh or less amount of
loans.
- Remaining 50% amount of money can be lended in which one loan can be
more tha lakh. But its si gle loa a t e o e tha % of its total loan.
- These banks would lend 25 lakhs or less amount of loan of its 50% amount.
- Small Banks should lend minimum 75% of their loanable amount to private
sector lending.
Micro Finance
- The financial activities done at micro-level are included in Micro finance.
- Its objective is to provide small loans and collect the small savings and
provide small insurance facility.
- The economist of Bangladesh Mohammad Yunus made the concept of
Micro-finance popula a d his i stitutio as a ed as G a i Ba k . - By the help of Self Help Group (SHG) provided small loans.
- He was awarded the Nobel Prize for peace.
- Later on, this Micro-Finance became popular in India.
- Many farmers did suicide in India, due to which these micro finance
companies came into Limelight.
- RBI imposed restrictions on the functioning of Micro Finance Company and
Malegam committee was formed in 2011.
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Recommendations given by Malegam committee:-
- There should be a new category as NBFC-MFI who do micro –finance
- There should be a separate Ombudsman for NBFC likewise, there should
be a separate credit information bureau for these companies
- They can lend money to the families which have less than 50,000 Income.
- Single loan should not be more than 25,000.
- A family can borrow money from maximum two companies.
- No mortgage loan should be provided
- There should be no harassment done on farmers.
- Maximum interest should be 24%.
- NBFC-MFI should be included in the priority sector lending.
MUDRA BANK-
Micro unit development and Refinance Agency Bank (or mudra bank) is a
new institution set up by the Government of India for development of
micro units and refinance of MIFs to encourage entrepreneurship in India
and to provide the findings to the non-corporate small business sector.
It provides loans at low rates to micro-finance institutions and non-
banking financial institutions.
It was launched by Prime Minister Narendra Modi on 8 April 2015
The Bank will classify its clients into three categories and the maximum
allowed loan sums will be based on the category, to signify the stage of
growth and funding needs of Micro units or entrepreneurs.
- Shishu – Allowed loans upto Rs 50,000
- Kishor – Allowed loans upto Rs 5 lakh
- Tarun – Allowed loans upto Rs 10 lakh
Mudra Bank will need two type of Product like refinance for the micro
units having loan requirement from Rs 50,000 to 10 lakh and support of
Micro Finance Institutions for on lending.
Mudra Bank is refinancing through state level institutions, Mudra Bank will
deliver loans through NBFCs, MFIs, Rural Banks, district Banks, Nationalized
Banks, Private Banks, Primary lending Institutions and other
intermediaries.
There is no fixed interest rate in Mudra loan
Benefits of Mudra Banks:-
- Providing low cost funding for MFIs. Priority for SMEs in lending.
A-1, Keshav Vihar, Riddhi Siddhi main chauraha, Gopalpura Bye pass, Jaipur , M-9636977490
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- It will increase liquidity and access for funds for small scale business.
Introduce appropriate technologies to assist in the process of efficient
lending, borrowing and monitoring distributed capital.
NBFC-MFI-
RBI has given a separate category to NBFC-MFI
To start a NBFC-MFI the minimum capital should be 5 crore and minimum
2 crore capital for North-East States.
85% qualifying assets must be of its total capital.
Qualifying Assets
- The loan which is given to people having Income of 100,000 in urban and
Semi-urban areas.
- The loan should not exceed more than 1 lakh
- The loan must be given without conditions.
- The loan amount does not exceed 60,000 in first cycle and 100,000 in
successive cycle/installments
- The return of loan should not be less than 24 months (for loans of 15,000
and more).
- The aggregate amount of loans given for income generation is not less than
50% total loans given by the NBFC.
- Loan is repayable on weekly, fortnight or monthly installments at the
choice of borrower.
- Remaining 50% assets, there is no restrictions on it.
- Those institution which does not qualify as NBFC-MFI should not extend
loans to micro-finance sectors. Exceeding 10 % of loan its total assets.
Interest Rate
- Cost of fund + Margin
- The margin of large NBFC-MFI should be 10%
- The margin of small NBFC-MFI should be upto 12%
- Those NBFC-MFI whose assets is more than 100 crore rupees, loan
exceeding portfolio of 100 crore rupees, comes under large NBFC-MFI.
- Small NBFC-MFI – The loan exceeding portfolio is less than 100 crore.
The Average of commercial banks base rate х 2
- Cost of fund + 10% margin
A-1, Keshav Vihar, Riddhi Siddhi main chauraha, Gopalpura Bye pass, Jaipur , M-9636977490
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- The rate among these two, whichever among them is lower becomes the
interest rate.
- NBFC-MFI can charge differential rate of interest to its customers but the
diffe e e a t e o e tha %.
NBFC-MFI can charge only three types of charges
- Interest Rate
- Processing charges, which can be 1% of total amount.
- Insurance
The way of the returning the money or the repayment of loan should be
simple.
- It has been included in priority sector lending.