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Kerala PSC Indian Economy Book Study Materials Page 341Book's First Page
an in in ndia 12.17 its reports in April 1998, which included the (x) Board for financial Regulation and following major suggestions:28 Supervisions (BFRS) should be set up (i) Need for a stronger banking system for the whole banking, financial and the for which mergers of the PSBs and NBFCs in India.29 the financial institutions (AIFIs) were suggested—stronger banks and the DFIs Dri (development financial institutions, i.e., The differential rate of interest (DRI) is a lending AIFIs) to be merged while weaker and programme launched by the government in April unviable ones to be closed. 1972 which makes it obligatory upon all the (ii) A 3-tier banking structure was suggested public sector banks in India to lend 1 per cent after mergers: of the total lending of the preceding year to ‘the (a) Tier-1 to have 2 to 3 banks of poorest among the poor’ at an interest rate of 4 international orientation; per cent per annum. (b) Tier-2 to have 8 to 10 banks of national orientation; and Priority sector lenDing (c) Tier-3 to have large number of local All Indian banks have to follow the compulsory banks. target of priority sector lending (PSL). The The first and second tiers were to take priority sector in India are at present the sectors— care of the banking needs of the corporate agriculture, small and medium enterprises sector in the economy. (SMEs), road and water transport, retail trade, small business, small housing loans (not more (iii) Higher norms of Capital-to-Risk— than Rs. 10 lakhs), software industries, self help Weighted Adequacy Ratio (CRAR) groups (SHGs), agro-processing, small and suggested—increased to 10 per cent. marginal farmers, artisans, distressed urban poor (iv) Budgetary recapitalisation of the PSBs is and indebted non-institutional debtors besides the not viable and should be abandoned. SCs, STs and other weaker sections of society.30 (v) Legal framework of loan recovery should In 2007, the RBI included five minorities— be strengthened (the government passed Buddhists, Christians, Muslims, Parsis and Sikhs the SARFAESI (Act, 2002). under the PSL. In its new guidelines of March (vi) Net NPAs for all banks suggested to be 2015, the RBI added ‘medium enterprise, sanitation cut down to below 5 per cent by 2000 and renewable energy’ under it.31 The PSL target and 3 per cent by 2002. must be met by the banks operating in India in (vii) Rationalisation of branches and staffs of the following way: the PSBs suggested. 29. An integrated system of regulation and supervision (viii) Licencing to new private banks (domestic was suggested by the Committee so that soundness of as well as foreign) was suggested to the financial system could e ensured the concept of a financial super-regulator gets vindicated, as opines continue with. Y. V. Reddy, in Lecturers on Economic and Financial (ix) Banks’ boards should be depoliticised Sector Reforms in India, 38. under RBI supervision. 30. See Publication Division, India 2007 (New Delhi: Government of India, 2008) and Economic Survery, 28. Based on the Report of the Committee on Banking Sector 2006-07. Reforms, April 1998 (Chairman: M. Narasimham). 31. RBI, New Guidelines on the PSL, 2 March, 2015.