THE GIST of Editorial for UPSC Exams : 30 December 2019 (Bank outreach to MSMEs and transmission of rate cuts continues (Indian Express))

Bank outreach to MSMEs and transmission of rate cuts continues (Indian Express)

Mains Paper 3 : Economy
Prelims level : eBक्रय
Mains level : Steps for enhancing towards digital transactions

Context:

• Union Finance Minister Smt. Nirmala Sitharaman here today discussed banking issues with chiefs of Public Sector Banks (PSBs), chief executive of Indian Banks’ Association and representatives of leading private sector banks.
• Finance Secretary, Revenue Secretary, Economic Affairs Secretary, Electronics and Information Technology Secretary, CBI Director, RBI representative and the chief executive officer of NPCI were also present.

Steps for enhancing digital transactions:

• In order to strengthen the digital payment eco-system and move towards less-cash economy, Hon’ble FM in her budget speech of 2019-20 had, inter alia, announced that business establishments with annual turnover of more than Rs. 50 crore shall offer low cost digital modes of payment ( such as BHIM UPI, UPI QR Code, Aadhaar Pay, Debit Cards, NEFT, RTGS etc.) to their customers, and no charge or Merchant discount rates (MDR) shall be imposed on customers as well as merchants.
• To facilitate implementation of this announcement, it was decided as under:
• Department of Revenue (DoR) will notify RuPay and UPI as the prescribed mode of payment for undertaking digital transactions without any MDR.
• Accordingly, all companies with a turnover of Rs. 50 crore or more shall be mandated by DoR to provide the facility of payment through RuPay Debit card and UPI QR code to their customers.
• All banks will also start a campaign to popularise RuPay Debit card and UPI.

Banks restored to health for lending:

• Extensive reforms carried out by the Government have restored banks to health, with the gross NPAs of PSBs declining from Rs. 8.96 lakh crore in March 2018 to Rs. 7.27 lakh crore in September 2019, their provision coverage ratio rising to their highest level in seven years, and banks returning to profitability, with as many as 13 banks reporting profits in H1FY20.
• With the Essar resolution decision, banks have recovered Rs. 38,896 crore, in addition to Rs. 4.53 lakh crore recovered in the last 4½ years.
• PSBs have attached assets worth over Rs. 2.3 lakh crore over the last three financial years and to enable online auction by banks of attached assets transparently and cleanly for improved realisation of value, eBक्रय, a common e-auction platform was launched today by the Finance Minister.
• The platform is equipped with property search features and navigational links to all PSB e-auction sites, provides single-window access to information on properties up for e-auction as well as facility for comparison of similar properties, and also contains photographs and videos of uploaded properties.
• As on 27.12.2019, a total of 35,000 properties had been uploaded on the platform by PSBs.
• To strengthen banks, in addition to the recent infusion of Rs. 60,314 crore, additional infusion of Rs. 8,855 crore (Rs 4360 crore to Indian Overseas Bank, Rs 2153 crore to Allahabad Bank, Rs 2142 crore to UCO Bank and Rs 200 crore to Andhra Bank) has been approved and would be released shortly.
• Having improved asset quality and internal resource generation, PSBs are now fully poised to support prudential credit growth towards a $ 5 trillion economy by 2025.

Robust banks to lend without undue apprehensions:

• Bankers were assured that prudent commercial decision-making would be protected.
• To allay any apprehensions in this regard and to take feedback, Director, CBI also attended the meeting. It was decided that—
• CBI would develop a mechanism as recently introduced for income tax notices, so that CBI notices carry a registration number to avoid any scope for unauthorised communication and consequent harassment.
• While pursuing criminal action against those responsible, the agency shall be sensitive to the distinction between genuine commercial failures and culpability. It was also noted that there is need for preserving the value of the business enterprise by treating it on a separate footing from culpability of individuals, if any.
• PSBs may report instances of fraud through e-filing of FIRs on a designated email address of CBI so as to avoid scope of any arbitrage due to information asymmetry.
• CBI would create a dedicated phone number on which any person could give information regarding any undue harassment by the investigative machinery.
• Banks were also advised to ensure rigor and adherence to objective standards in selection of forensic auditors and devising objective SOPs for carrying out of forensic audit. To this end, the Indian Banks’ Association was requested to—
• To strengthen the forensic auditor empanelment process;
• To put in place robust arrangements for assessing adherence to standards by forensic auditors; and
• Tie up with CBI for training forensic auditors.

Credit outreach by banks:

• PSBs have sanctioned over 11.68 lakh Repo-linked loans to retail borrowers for home/vehicle/education/personal loans and to micro and small enterprises, amounting to Rs. 1.32 lakh crore post Finance Minister’s announcements on 23.8.2019 on measures to boost the economy.
• All PSBs have introduced checkbox-based OTS and have sanctioned settlements under OTS in over 5.26 lakh accounts amounting to Rs. 16,716 crore, post Finance Minister’s announcements on 23.8.2019.
• In order to address the working capital needs of MSMEs on account of stress arising from delayed payments, PSBs are offering up to 25% enhancement in working capital limits for standard MSME accounts as a Standby Line of Credit and have launched a MSME Outreach Initiative for restructuring of stressed standard assets as needed on priority and in a timely manner, besides providing new term loans, payment solutions for delayed receivables, bill discounting and trade finance.
• A total of 5,38,440 MSME loan accounts have been restructured in terms of RBI’s circular dated 1.1.2019, out of which 1,65,104 accounts have been restructured since October, 2019.

Support to NBFCs and HFCs by PSBs:

• The Cabinet has approved the recently launched Partial Credit Guarantee Scheme (PCGS) that would now cover NBFCs/HFCs which may have slipped into SMA-0 (up to 30 days overdue) category during the one-year period prior to 1.8.2018, and asset pools rated BBB+ or higher. Under PCGS, Government has already approved issuance of guarantee for buy-outs of NBFC asset pools worth Rs. 4,294 crore from 10 NBFCs/HFCs covering a wide spectrum of entities.
• Post ILandFS default, aided significantly by Government support, assets of NBFCs have grown by 12.83% from Rs 28.31 lakh crore to Rs 31.94 lakh crore, and assets of the 211 larger NBFCs with 81% of market share have grown at an even higher rate of 19.69%. Bank exposure to NBFCs has grown at a much higher rate of 17.46% as compared to market financing.
• Similarly, 76 out of 101 HFCs with 82% of market share have shown a positive asset growth of 18% post ILandFS default from Rs 8.45 lakh crore to Rs 10 lakh crore. Exposure of banks and NHB to the 76 performing HFCs has grown by 38% post ILandFS default, as compared to 14% growth in market financing to these HFCs.

Conclusion:

• Thus, the NBFC/HFC sector post IL&FS default, is now stabilizing and good NBFCs/HFCs are able to raise funds from market even at times at rates less than the pre-ILandFS rates.
• The market is, however, distinguishing between good and not-so-good entities which is reflected in the better entities being able to obtain higher financing from both banks and the market.

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Prelims Questions:

Q.1) With reference to the Digital Communications Commission (DCC), consider the following statements:
1. The Secretary to the Government of India in the Department of Telecommunications is the ex-officio Chairman of the DCC.
2. It is responsible for preparing the budget for the Department of Telecommunications for each financial year and getting it approved by the Government.

Which of the statements given above are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) None of the above

Ans: C
Mains Questions:
Q.1) What are the steps taken by the government to enhancing digital transaction?