Showing posts with label capital adequacy. Show all posts
Showing posts with label capital adequacy. Show all posts

Saturday, July 29, 2017

'For Whom the Bell Tolls?' Bank Mergers

Consolidation, Convergence and Competition of Banks in India

Cooperative Banking suffering weak governance, poor legal framework, dual regulation, and excessive politicisation is in search of sustainable solutions and the consolidation move in the three states rightly highlighted by Bloomberg in its article a few days ago is perhaps the right move. Following the recommendations of Vyas Committee (2005) NABARD amalgamated the 196 RRBs established under the Multi-Agency approach to rural lending in the country during a fifteen year period till 1990 into 64 by 2013. This amalgamation has only partial success as the RRBs are still distant from the objectives of their creation in 1975.
1991-2001 saw bank disintermediation in the wake of financial liberalisation, prudential norms and profitability focus. Directed credit program was blamed for the rising NPAs till then. I recall Dr.Y.V.Reddy mentioning in his latest book ‘Advice and Dissent’: “the seeds for bad times are always sown in good times.” 2003 was the year of ‘crazy credit’ that took the route of CDRs in 2010 and 2011. This grew into a immature NPA adult and aged along to reach the unsustainable level of around Rs.8trillion. Courtesy this situation, lazy banking had set in.

Saturday, March 26, 2016

Basel Committee Core Principles for Effective Financial Inclusion

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Bank for International Settlements released a consultative document in December 2015, entitled: “Guidance on the application of the Core principles for effective banking supervision to the regulation and supervision of institutions relevant to financial inclusion” inviting comments before 31st March 3016. This document meant for effective supervision of the non-banking financial intermediaries is the outcome of a survey Basel Committee on Banking Supervision (BCBS) conducted a range of practice survey in 2013 (ROP) on the regulation and supervision of institutions of relevance to financial inclusion and on financial consumer protection across 59 jurisdictions with 52 respondents.

I have kept the following ground rules in view while reviewing the Draft Document:
Ø  Cost of compliance must be less than the cost of avoidance.
Ø  Regulations and rules must be simple and straight forward inviting easy compliance.
Ø  Multiple regulators impacting on financial inclusion agenda should be able to strengthen and accelerate the implementation.
Ø  Financial Institutions engaged in financial inclusion should be able to deal with it as a portfolio for generating data and information required for proper regulation.
Ø  Instruments, tools and techniques of supervision should be uniform across the nations.
Ø  Financial Inclusion achievements should be subject to social audit as well.