(GIST OF YOJANA) Banking: Focus on New Responsibilities and Good Governance : MARCH-2023
(GIST OF YOJANA) Banking: Focus on New Responsibilities and Good Governance
Banking: Focus on New Responsibilities and Good Governance
The Union Budget 2023-24 for the banking sector can be analyzed by dividing it into five parts:
New savings schemes and changes in existing savings schemes
Sources of government borrowing
Campaign to promote digital transactions
Loan for a specific sector
Reforms in banking governance
In the Budget, measures have been taken to promote savings among women and secure the future of the elderly through savings.
‘Azadi ka Amrit Mahotsav Mahila Samman Bachat Patra’ has been announced in the budget to promote economic empowerment.
Under this, a new small savings scheme, Mahila Samman Savings Certificate, will be available for two years until March 2025. It will offer a deposit facility of up to Rs 2 lakh for women or girls for two years at a fixed interest rate of 7.5 percent with a partial withdrawal option.
The interest rate on Mahila Samman Savings Certificate is much higher than the existing schemes.
Currently, there is a special scheme for girls, viz. Sukanya Samriddhi Yojana. It was launched on January 22, 2015, by Prime Minister Narendra Modi under the ‘Beti Bachao Beti Padhao’ initiative.
The maximum deposit limit for Senior Citizen Savings Scheme has been increased from Rs 15 Lakh to Rs 30 lakh.
The maximum deposit limit for the Monthly Income Account Scheme has been increased from Rs 4.5 lakh to Rs 9 lakh for a single account and from Rs 9 Lakh to Rs 15 Lakh for a joint account.
Under both these schemes, an account can be opened in the post office. Also, the interest rates for both are reviewed quarterly.
Sources of government borrowing:
Net market borrowing from dated securities has been estimated at Rs 11.8 lakh crore against a fiscal deficit of Rs 17.87 lakh crore in the Union Budget 2023-24.
Banks will play an important role in fulfilling this estimate because on such dated securities (dated securities, tenure from 1 year to 40 years) interest is received at a fixed rate and the government guarantees both interest and principal.
Banks invest a large amount of money in these bonds, with the objective to meet the statutory requirements and, on the other hand, to take advantage of the market conditions.
For active participation in this system, the financial condition of the banks must be sound. The deposits of public sector banks are continuously increasing, making it easier for them to participate in the government’s borrowing.
Agriculture is most important for specific sector lending. It was stated in the budget that about 86 percent of small farmers in the country had significantly benefited from the Kisan Credit Card (KCC).
The agricultural loan target has been increased to Rs 20 lakh crore, focusing on animal husbandry, dairy, and fisheries.
The government assists farmers with short-term crop loans up to Rs 3 lakh. The interest rate on such loans is 7 percent, but if the farmer repays the loan on time, he gets an interest subvention of 3 percent, making the effective interest rate 4 percent.
On the other hand, for allied activities including fisheries, animal husbandry and dairy, short-term loans up to Rs 2 lakh are also available at an interest rate of 7 percent, but in case of timely repayment of the loan, the interest subvention of 3 percent is available, due to which the effective interest rate here also becomes 4 percent.
The government has also been running targeted schemes for MSMEs. Considering this, it is stated now that the renewal of the Credit Guarantee Scheme for MSMEs in the last budget was proposed.
After the addition of 9 thousand crore rupees, this renewed scheme will commence from April 01, 2023. This will enable collateral-free loans of an additional Rs 2 lakh crore, besides bringing down the cost of credit by about one percent.
Neither in the budget of the financial year 2022-23 nor in the budget of the financial year 2023-24 has there been a move for the recapitalization of public sector banks.
The main reason for this is that the financial health of public sector banks has improved a lot, bad loans have come down, and the situation is likely to remain the same in the future.