- 10% Quota for general category
- NITI Aayog proposes all India Judicial Service Examination
- CAG Report on government spending
- Need for Citizenship (Amendment) Bill
- Clause 6 of Assam accord : indepth analysis
- Collegium system for appointment of judges
- Fear of Executive Courts
- Tamilnadu Reservation Policy
Governance & Social Justice
- Bhasha Sangam Program : Celebration of Linguistic Diversity
- Cabinet approves revision in list of scheduled tribes of Arunachal Pradesh
- Does India need a coal commission?
- Concerns in Ayushman Bharat
- Depression at workplaces : A major health issue in India
- How to bridge Gender gap in India : Mckinsey Global Institute Report
- Government plans to rename Indian Forest Service
- IGOT Program for Competent Civil Services
- Indian Medical Council Amendment Bill 2018
- National Commission for Indian Systems of Medicine and Homoeopathy
- Government bats for National Medical Devices Promotion Council
- Parental consent for vaccination
- India Signs Agreement with OECD for PISA 2021
- Kerala’s wall of resistance
- Should an IAS officer use Social Media?
- Social media addiction
- Legal Status for SSC
- Tripal Talaq Bill 2018
- Web Wonder Women Campaign by Ministry of WCD
- West Bengal Leaves Ayushman Bharat : In-depth Analysis
- Why Asian Infrastructure Investment Bank Is Important For India
- What Is The Asia Reassurance Initiative Act
- E-Passport for Indians
- What Is G-77
- Failed Coup In Gabon
- Bagladesh Election
- Powering South Asian Integration
- ISRO’S New Station In Bhutan
- Kenya Replace Pictures Of Leaders on Coins With Animal
- Macedonia Name Change
- Why Norway Is Important For India
- Why India Need Membership Of NSG
- Pakistan Declared A Hindu Temple A Heritage Site
- Raisina Dialogue 2019
- India’s Republic Day Guest
- India To Take Over Sittwe Port Operation In Myanmar
- U.S. Mexico Border
- US Government Shutdown
- US Venezuela Crisis
- What is Angel Investment?
- Byorung Bridge
- India’s Airport Privatization Plan
- Rationalisation of GST Rates
- 1st Advance Estimates of Economic Growth by CSO
- Democracy Index 2018
- E-DRISHTI Software by Ministry of Railways
- What is GAFA tax
- Ganga Expressway to be Built in UP
- Green-Ag Project launched by India with UN FAO
- Issue of Tax Evasion under GST
- Improvements under GST Regime
- ICAT Certification for Automobilies
- What is Indian Bridge management System?
- Draft Information Technology Amendmenet Rules 2018
- Jamrani multipurpose DAM Project
- What is KALIA Scheme?
- MANDAL DAM
- Mega Merger!
- MSP for minor forest produce
- NITI Aayog suggestions on farm Economy
- India’s first vertical-lift Bridge
- Paradip Hyderabad pipeline
- Measures to address issues in Sugar industry
- Capital infusion in PSBs
- Renukaji dam
- PM Modi inaugrates Rice Research Institute
- Section 74 of the insolvency and Bankruptcy Code
- Social & Environmental Cost of Building dams
- Solar feeder Maharashtra model
- RBI Tokenisation
- Sikkim-Universal basic income
- Global Risks Report 2019
Science & Technology
- Why Beech Trees Dying
- Beat Plastic Pollution Resolve by India
- Why USA Is Killings California Sea Lions
- Carbon Tax
- China’s War On Particulate Air Pollution Is Causing More Serve Ozone Pollution
- CITES Washington Convention
- Coastal Regulation Zone
- Melting Ice Sheets And Release Of methane
- National Clean Air Programme Feature &Critical Analysis
- Oceans Are Heating Up 40% Faster Than Previous Estimates
- Revival Of Iran’s Lake Urmia
- India submitted sixth national report to Convention on Biological Diversity
- How Wild Fire Affect crop and vegetation Production
- NITI Aayog’s SDG Index
Spice of the Month
- GS 3 || Economy || Banking & Financial Sector || NPA
Why in News?
- Government recently announced funds for recapitalization plans for PSBs.
- Package – Around 88,000 crore rupees into 20 Public Sector Banks. These 20 banks accounts for the around 80% of the total bad loans. 1st– NPA (Non-Performing Assets), 2nd – Return on Assets, 3rd – Return on Capital employed are the parameters of bad loans.
- Themes – the recapitalization package includes SIX themes:
- Customer Responsiveness
- Responsible Banking
- Credit Off take
- PSBs as UdyamiMitra (Being affable to Entrepreneurs)
- Deepening the financial inclusion and digitalization
- Developing personnel for brand public sector banks
- Differential Approach: for the banks will be followed which means that weaker banks will get more money in this recapitalization. Weakest banks are classified on the basis of PCA (Prompt Corrective Action) by the RBI.
- Banks under the PCA will (means economically weaker banks) get 50,000 crore and the banks which are comparatively healthier will get 35,000 crore.
- PCA (Prompt Corrective Action) – RBI’s measure primarily aim to take appropriate corrective action on weak and troubled banks.
The RBI has put in some trigger points for the PCA:
- 1st – CRAR (Capital to Risk Awaited Ratio, which measures the balance sheets of the banks), 2nd – NPA, 3rd – Return on Investments
- RBI can also provide the discretionary action plan apart from the mandatory action plan.
- Recapitalization – Capital infusion will be done partially by recapitalization bonds and partially by budgetary support. This recapitalization bond will have a maturity period of 10 -15 years and will be issued in six different slots. They will not hve a statutory liquidity requirements and it will be non-tradable.
- Impact on Fiscal Consolidation – Govt. will have to cut down the expenditure in order to bring down the fiscal deficit. By the recapitalization package, the expenditure would go up.
- Fiscal Deficit – but the recapitalization package may widen up it further level.
- Increased lending capacity – it will infusing more capital into the PSBs. In consequence of that, PSBs will be able to lend more money. The money is expected to revive the capital investments cycle in the economy. It refers to Gross Capital Formation (GCF). With more money supply, the investments will further go up in the economy, and more GDP in the economy.
- Regulatory capital requirements – Can lead to growth of those banks. PCA is taken based on these trigger points. Capital Infusion will help to come over the PCA.
- If PCA is taken, what is left for a bank?
Banks are not allowed to re new or access costly deposits or take steps to increase their fee-based income. Banks will also have to launch a special drive to reduce the stock of NPAs and contain generation of fresh NPAs. They will also not be allowed to enter into new lines of business. RBI will also impose restrictions on the bank on borrowings from interbank market.
RBI has placed eleven PSBsunder the PCA framework:
- Dena Bank,
- Central Bank of India,
- Bank of Maharashtra,
- UCO Bank,
- IDBI Bank,
- Oriental Bank of Commerce,
- Indian Overseas Bank,
- Corporation Bank,
- Bank of India,
- Allahabad Bank and
United Bank of India
NPA’s & PCA’s Information
(Click on the image above to watch the video)
The comprehensive information on NPA and the lessons learned on it.