Demonetisation – Absorbing the Excess Liquidity

The decision to raise the limit for issue of bonds under MSS (Market Stabilization Scheme) is a prudent move and brings this innovative scheme in focus again. The arrangement also shifts the burden of holding cash from the Banks and RBI on to the government and would help stabilise the money market. A look at the scheme and how money is flowing after it is being deposited in the banks as a result of demonetization. Continue reading “Demonetisation – Absorbing the Excess Liquidity”



In the wake of declining exports, the government took various measures to boost exports in the Union Budget 2015-16 and a new Foreign Trade Policy (FTP). The Foreign Trade Policy is also known as Export-Import Policy.

A new FTP for the period 2015-20 was announced on 1 April 2015, with a focus on supporting both manufacturing and services exports and improving the ‘Ease of Doing Business’.

The new FTP aims to increase India’s exports to US$900 billion by 201920. Continue reading “EXPORT IMPORT POLICY”

Financial Awareness-September(21-30) 2016

  1. RBI plans fund to push card swipe machines (Source: ET)
  • Concerned over low use of debit cards in electronic payments, the Reserve Bank of India wants banks that are not installing card accepting machines to contribute to a fund that will subsidise installation of point of sales (PoS) terminals.
  • There are over 68-crore debit cards in India. Over a third of these have been added in the last two years following the implementation of the Jan-Dhan Yojana. But the number of PoS terminals (credit card accepting machines) has gone up marginally from 12 lakh to 14 lakh. The average debit card holder in India uses his/her card only once at a PoS machine for every 10 transactions in an ATM.
  • The proposal envisages creation of an ‘acceptance development fund’ which will subsidize installation of PoS machines with smaller merchants and in small towns and villages. The RBI has come out in support of a fund rather than mandating installation of PoS terminals for banks as some lenders are not interested in the business. Today, four lenders dominate the merchant acquisition business -State Bank of India, HDFC Bank, ICICI Bank and Axis Bank.

Continue reading “Financial Awareness-September(21-30) 2016”

Financial Awareness-September(1-10) 2016

  1. Non-food credit growth marginally falls to 9.72 (Source: Financial Express)credit
  • The growth rate of Non-Food Credit of banks slightly declined to 9.72% (Y-o-Y) during the fortnight ended August 19, compared with 9.92% in the previous fortnight, Reserve Bank of India (RBI) data released.
  •  The outstanding non-food credit in the banking system stood at Rs 71.72 lakh crore as on August 19, compared with Rs. 65.63 lakh crore in the same fortnight last year — a rise of Rs 6.09 lakh crore.
  • On the other hand, the rate of growth in deposits improved slightly to 9.19% (Y-o-Y) compared to 8.71% in the previous fortnight.
  • With hardly any growth in project loan sanctions, the credit growth of 9.72% was most likely a function of demand from the retail segment, something which the managements of several large banks have lately spoken about as their focus areas.
  • Another relatively bright spot for loan growth in recent months was the demand for working capital loans.
  • Companies have been moving their borrowings to the corporate bond market due to lower interest rates. In the first quarter of the current fiscal, firms mopped up over Rs 1.3 lakh crore through the corporate bond market, as against Rs 4.6 lakh crore raised in FY16, indicating a shift from bank borrowing.

2. Relief for banks, as FinMin relaxes ‘FATCA’ compliance norm. (Source: Business Line) Continue reading “Financial Awareness-September(1-10) 2016”

Financial Inclusion in India – The Journey so far and the Way Ahead

Speech by Shri S. S. Mundra, Deputy Governor – September 19, 2016 – at the BRICS Workshop on Financial Inclusion in Mumbai

Financial Inclusion is a much-cherished policy objective for us in India and our economic policy has always been driven by an underlying intent of a sustainable and inclusive growth. Although I would not dwell at length about the virtues of financial inclusion before this learned audience, I would still like to draw reference to a profound ILO Declaration of Philadelphia (1944) which states that Poverty anywhere is a threat to prosperity everywhere.” The policy makers in India too i.e. Government of India and the RBI had an early realisation about the implications of poverty for financial stability and have endeavoured to ensure that poverty is tackled in all its manifestations and that the benefits of economic growth reaches the poor and excluded sections of the society.

“Financial Inclusion is the process of ensuring access to appropriate financial products and services needed by all sections of the society in general and vulnerable groups such as weaker sections and low-income groups in particular at an affordable cost in a fair and transparent manner by mainstream institutional players”.

Role of RBI in Financial Inclusion Continue reading “Financial Inclusion in India – The Journey so far and the Way Ahead”