10 Remarkable Developments in Banking & Finance in 2015

  1. Prime Minister Jan Dhan Yojna enters into Guinness book of world records

Guinness book of World Records has given certificate stating that in one week, 18,096,130 bank accounts were opened as part of the financial inclusion campaign from 23rd to 29th August, 2014. Initially, after its launch the scheme had a target of opening 7.5 crore bank accounts by 26 January, 2015, but later it was revised and raised to 10 crore bank accounts. As on 17th January 2015, PMJDY has achieved feat of opening of 11.50 crore bank accounts under it in the short span of 5 months since it was launched.

  1. Indradhanush Mission for Public Sector Banks

Union Government has launched a seven pronged plan called Indradhanush Mission to revamp functioning of public sector banks (PSBs). It was launched by Union Finance Minister Arun Jaitley in New Delhi.
The seven shades of Indradhanush mission include appointments, de-stressing PSBs, capitalisation, empowerment, framework of accountability and governance reforms. It seeks to achieve the objective of economic growth revival through improving credit and minimising the political interference in the functioning of PSBs.

  1. PM launches Mudra Bank to provide credit to small entrepreneurs

Prime Minister Narendra Modi on 8 April 2015 launched Micro Units Development Re-finance Agency (MUDRA) Bank in New Delhi. MUDRA Bank acts as a regulator for ‘Micro-Finance Institutions’ (MFIs) involved in manufacturing, trading and service activities to promote their growth. The MUDRA bank was proposed in Budget 2015-16 by Union Government with an initial corpus of 20,000 crore rupees. Apart from this, 3,000 crore rupees also has been earmarked as credit guarantee corpus. The envisaged roles for MUDRA Bank include Formulate policy guidelines for micro-enterprise financing business and registration of MFI entities. Undertake rating and accreditation of MFI entities. Develop standardized set of guidelines in order to govern last-mile lending to micro enterprises. Promote appropriate technology solutions for the last mile. Formulate and operate a credit guarantee schemes in order to provide guarantees to loans and portfolios that are extended to micro enterprises.

  1. RBI approves 10 entities to set up Small Finance Banks

The Reserve Bank of India (RBI) has granted in principle approval to 10 entities to set up small finance banks to provide basic banking services to small farmers and micro industries. The in-principle approval will enable these entities comply with the guidelines on Small Finance Banks and will be valid for 18 months. 10 entities are: Au Financiers (India) Ltd, Capital Local Area Bank, Disha Microfin Private Ltd, Equitas Holdings P Limited, ESAF Microfinance and Investments Private Ltd, Janalakshmi Financial Services Private Limited, RGVN (North East) Microfinance Limited, Suryoday Micro Finance Private Ltd, Ujjivan Financial Services Private Ltd and Utkarsh Micro Finance Private Ltd. As per RBI guidelines, the small finance banks can provide basic banking services in order to promote financial inclusion.

  1. Government Initiatives on Gold Investments

The Prime Minister Shri Narendra Modi launched the three Gold related Schemes i.e. Gold Monetisation Scheme (GMS), Gold Sovereign Bond Scheme and the Gold Coin and Bullion Scheme on Thursday, 5th November, 2015 in the national capital.

  1. BRICS Bank starts its operations from Shanghai, China

The New Development Bank (NDB) created by Brazil, Russia, India, China and South Africa (BRICS) nations formally started its operations from its headquarters in Shanghai, China. Chinese Finance Minister Lou Jiwei, Shanghai Mayor Yang Xiong and the bank’s first President K V Kamath from India attended the opening ceremony. About New Development Bank (NDB)  the agreement for establishing NDB was signed during the 6th BRICS Summit being held in Fortaleza, Brazil in April, 2014. It is seen as an alternative institute to west dominated World Bank and the International Monetary Fund (IMF). It will have initial capital of US 50 billion dollars and will be raised to US 100 billion dollars within the next couple of years. Each member will have an equal say in the bank’s management, regardless of GDP size and contribute an equal share in establishing a startup capital. President: Eminent banker Kundapur Vaman Kamath from India is President of Bank for the first five years i.e. till 2020.

  1. IDFC and Bandhan Bank  gets banking licence from RBI

Infrastructure Development Financing Company (IDFC). Ltd became second lender to enter the banking sector since 2004, as the Reserve Bank of India granted Banking licence on 24 July 2015. It was Yes Bank that got banking licence in 2004. However, IDFC and Microfinance Company Bandhan Financial Services Pvt Ltd were granted preliminary bank permits by RBI in April 2014 and Bandhan got Banking licence from RBI in June 2015. IDFC has started its operations with 20 branches and with initial loan book of 55,000 crore rupees.          

  1. RBI granted approval to 11 applicants to start a payment bank

Reserve Bank of India granted ‘in-principle’ approval to 11 applicants to start payments banks. The Committee of the Central Board (CCB) of RBI has selected 11 entities among the 41 applicant who has the reach and the technological and financial strength to provide service to the customers and promote government’s initiative of financial inclusion across the country. The selected applicants are: Reliance Industries, Airtel M Commerce, Services Tech Mahindra Vodafone, m-pesa, Aditya Birla Nuvo, Department of Posts Cholamandalam, Distribution Services Fino PayTech, PayTm, National Securities Depository Ltd (NSDL), Sun Pharma. Their holding are restricted to a maximum balance of Rs 1 lakh per individual customer. They can issue ATM/debit cards but not credit cards and can also issue other prepaid payment instruments. Finance Minister had directed RBI to create a framework for licensing payment banks so as to meet government’s financial inclusion target. It is mandatory for payment banks to hold minimum capital of Rs. 100crore. FDI of 74 per cent is allowed in payment bank.

9. NITI Aayog replaces Planning Commission of India

NITI Aayog (National Institution for Transforming India Aayog), a government policy think-tank that replaced the 64-year-old Planning Commission early this year.

The NITI Aayog has created a knowledge, innovation and entrepreneurial support system through a collaborative community of national and international experts, practitioners and partners. In addition, the NITI Aayog monitors and evaluates the implementation of programmes, and focus on technology upgradation and capacity building.

  1. Monetary policy review committee

The MPC would consist of seven members including the RBI chairperson. The other members would include one executive member of the Reserve Bank Board nominated by the Reserve Bank Board; one employee of the Reserve Bank nominated by the RBI chairperson; and four persons appointed by the Central government. Additionally, the Centre would be allowed to nominate one representative to attend all the meetings of the MPC and take part in deliberations but he or she will not have a vote. The RBI has expected to publish a report every two months on the sources of inflation and the forecast for inflation for next six to 18 months. Further, in case if  the inflation target is not met, the RBI would submit a report to the Centre on the reasons.

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