The Great Leap Forward: A Public Sector Banker's View on India's New Banking Epoch (2022-2025)
As a banker in a Public Sector Bank (PSB), I’ve witnessed an unparalleled transformation in the Indian banking landscape over the last three years (2022–2025). This period hasn't just been about incremental change; it has marked a true structural overhaul—a "Great Leap Forward"—driven by digital public infrastructure (DPI), robust regulatory reforms, and a fundamental cleanup of our balance sheets. For PSBs, this journey has been one of resurgence, moving from an era of stressed assets to one of sustained profitability and high-velocity credit growth.
The Digital Revolution: DPI as the Backbone of Finance
The most palpable change for a frontline banker is the complete shift in how transactions and customer interactions are managed, largely thanks to India's DPI.
Unified Payments Interface (UPI) and Beyond
UPI remains the undisputed champion, with transaction volumes soaring to unprecedented levels (crossing 20 billion monthly transactions by August 2025). What’s new, however, is the depth of its integration. UPI is no longer just for person-to-person payments; it is evolving to facilitate:
Offline and Feature Phone Payments: Enhancing financial inclusion for users in Tier-II, III, and rural areas who may not have constant internet access or smartphones.
e-RUPI and CBDC Pilot: The Reserve Bank of India’s (RBI) push for a Central Bank Digital Currency (CBDC) has seen pilot programs, positioning us at the forefront of digital currency experimentation globally.
Open Networks: Account Aggregator and ONDC
The emergence of two new open frameworks is fundamentally changing how credit is assessed and commerce is conducted:
Account Aggregator (AA) Framework: This has been a game-changer for credit delivery. As a Financial Information User (FIU), our PSB can now, with the customer’s explicit, revocable consent, pull authenticated financial data (bank statements, tax returns, insurance details) from Financial Information Providers (FIPs). This transition from a document-driven process to a consent-based, data-driven one has significantly reduced the friction and turnaround time for retail and MSME loan underwriting, ensuring better risk assessment and a superior customer experience.
Open Network for Digital Commerce (ONDC): While primarily a commerce initiative, ONDC's impact on banking is profound. By standardizing catalogue, inventory, and order management, it creates an ecosystem where small businesses can be easily discovered. For us, the banker, this opens the door to embedded finance—providing credit, insurance, and working capital solutions directly at the point of commerce on the network, thereby expanding our lending reach to verified, digitally active MSMEs.
A Clean and Stronger Balance Sheet
The operational and financial resurgence of PSBs is largely attributable to the relentless focus on asset quality and governance.
NPA Cleanup and Credit Growth
The results are staggering: the Gross Non-Performing Asset (GNPA) ratio for PSBs has shown a dramatic reduction, falling from 9.11% in March 2021 to a provisional 2.58% by March 2025. This is a direct outcome of the twin-engines of reform:
Insolvency and Bankruptcy Code (IBC): Continued effectiveness of the IBC has instilled robust credit discipline.
The ‘Bad Bank’ (NARCL-IDRCL): The operationalisation of the National Asset Reconstruction Company Limited (NARCL) and the India Debt Resolution Company Ltd. (IDRCL) is a critical development. By the end of 2024, NARCL had managed over ₹1 lakh crore of identified legacy bad loans. This dedicated structure allows PSBs to de-clog their balance sheets of large, complex stressed assets (₹500 crore and above), freeing up significant management bandwidth to focus on core lending activities and business growth.
This cleanup has restored market confidence, leading to robust credit growth, especially in the retail and MSME segments.
Governance and Regulatory Modernisation
The government and RBI have actively worked to modernise the legal framework, notably with the Banking Laws (Amendment) Act, 2025. Key provisions, effective from August 1, 2025, aim to:
Improve Audit Quality: Allowing PSBs to offer higher remuneration to statutory auditors, which is vital for attracting top-tier talent and enhancing the independence and quality of bank audits.
Enhanced Compliance: Aligning PSBs with the Companies Act for transferring unclaimed funds to the Investor Education and Protection Fund (IEPF), streamlining our reporting and investor protection standards.
EASE Reforms: Continued implementation of the Enhanced Access and Service Excellence (EASE) reforms has professionalised governance, promoted data-driven lending, and fostered a performance-oriented culture within PSBs.
Future-Ready Banking: ESG and Sustainable Finance
A crucial, forward-looking development is the institutionalisation of environmental, social, and governance (ESG) considerations and the strong push for Green Finance.
In line with India’s ambitious climate targets, including the 2070 net-zero goal, PSBs are actively integrating ESG into their credit assessment and operational strategy. We are now seeing:
Green Lending: A significant increase in financing renewable energy projects, energy-efficient infrastructure, and electric vehicle adoption.
Green Bonds: Several PSBs have successfully issued Green Bonds, mobilising capital specifically for sustainable projects, positioning Indian banking as a key global player in climate finance.
Internal Sustainability: Banks are adopting green banking practices themselves, such as reducing our carbon footprint through paperless transactions and investing in energy-efficient branch infrastructure.
This shift ensures that our lending portfolio not only generates healthy returns but also contributes positively to the nation’s sustainable development goals.
In conclusion, the last three years have redefined the role of a PSB in the Indian economy. We have successfully leveraged the national DPI to drive unprecedented financial inclusion and efficiency, cleaned up our legacy issues through dedicated institutions like NARCL, and adopted a modern, compliant, and forward-looking governance structure. The PSB sector today is healthier, more agile, and poised to be the primary growth engine for the next phase of India’s economic journey. The focus remains on leveraging technology to enhance last-mile delivery and ensuring that responsible credit and robust risk management remain the cornerstones of this new, vibrant banking epoch.
Top Banking News Headlines of 22nd October 2025
Bank Holidays for Diwali Week: Banks in several states across India are closed today, October 22, for festivals like Bali Pratipada, Vikram Samvant New Year Day, and Govardhan Pooja/Balipadyami.
Credit Demand Revival Expected: Large private sector banks in India are seeing "green shoots" and anticipate a revival in credit demand in the second half of FY26, attributing this to supportive fiscal and monetary measures.
RBL Bank and Emirates NBD Deal: The recent news of Emirates NBD's potential large stake acquisition in RBL Bank (reported as high as 60% for a $3 billion investment) continues to be a major talking point, with RBL Bank reportedly eyeing a move into wealth management and aiming for a "large lender" status.
PNB Estimates Impact of New RBI Credit Rules: Punjab National Bank (PNB) is one of the first major public-sector banks to quantify the potential financial hit from the Reserve Bank of India's proposed Expected Credit Loss (ECL) framework.
Net Interest Margins (NIMs) on the Mend: Following Q2 earnings announcements, reports suggest that the Net Interest Margins (a key profitability measure) for many Indian banks are improving or "bottoming out," with both private and public sector lenders like Indian Overseas Bank, DCB Bank, and Federal Bank reporting sequential improvements.
What is Commercial Paper
Commercial papers (CPs) are short-term, unsecured debt instruments issued by corporations, financial institutions, and other entities to raise funds for their short-term operational needs, like inventory purchases, payroll, or short-term liabilities. Typically, they are issued at a discount and redeemed at face value upon maturity, which usually ranges from a few days to up to 270 days.
Key features of commercial papers:
1. **Unsecured**: They are not backed by any collateral, so only financially sound and creditworthy companies can issue them.
2. **Short-Term**: The maturity period is short, typically between 1 and 270 days.
3. **Issued at a Discount**: CPs are usually sold at a discount to their face value, and investors receive the full face value at maturity.
4. **High Denominations**: CPs are typically issued in large denominations, making them a popular investment for institutional investors rather than individuals.
5. **Liquidity**: Because of their short-term nature and high-quality issuers, they are considered a liquid asset.
Commercial papers are an important tool for companies to meet their working capital needs without going through more expensive and time-consuming long-term borrowing methods like bank loans or bonds.
What is Letter of Credit (LC) ? Types of LC
Letters of credit (LC) are financial instruments used in international trade to ensure that payment will be made as per the agreed terms between the buyer and the seller. Various types of letters of credit are used, each serving different needs and purposes. Here's a detailed look at the most common types:
### 1. **Revocable Letter of Credit**
- **Definition**: A revocable LC can be altered or canceled by the issuing bank at any time without prior notice to the beneficiary (seller).
- **Details**: This type of LC offers little protection to the seller because the buyer or issuing bank can change terms or withdraw the LC without consent. It’s rarely used in practice due to its inherent risk.
### 2. **Irrevocable Letter of Credit**
- **Definition**: An irrevocable LC cannot be changed or canceled without the consent of all parties involved: the issuing bank, the beneficiary, and the applicant (buyer).
- **Details**: This type provides a strong guarantee to the seller that payment will be made as long as all terms and conditions are met. It is commonly used in international trade.
### 3. **Confirmed Letter of Credit**
- **Definition**: In addition to the issuing bank, another bank (often in the seller’s country) guarantees the payment.
- **Details**: This type adds a second layer of security for the beneficiary, especially in cases where the issuing bank is in a country with political or economic instability. It is often used when the beneficiary has doubts about the issuing bank's credibility.
### 4. **Unconfirmed Letter of Credit**
- **Definition**: This LC is guaranteed only by the issuing bank, without any additional confirmation from another bank.
- **Details**: The beneficiary relies solely on the issuing bank’s creditworthiness. It is less secure compared to a confirmed LC.
### 5. **Standby Letter of Credit (SBLC)**
- **Definition**: A standby LC acts as a safety net, ensuring payment only if the buyer fails to fulfill the contract terms.
- **Details**: Often used as a guarantee rather than a primary payment mechanism. The beneficiary can claim payment under the SBLC only if the primary contract is breached.
### 6. **Transferable Letter of Credit**
- **Definition**: A transferable LC allows the original beneficiary to transfer part or all of the credit to another party, usually the supplier.
- **Details**: Commonly used in transactions involving middlemen, where the beneficiary may need to pay their own suppliers without using their own funds.
### 7. **Back-to-Back Letter of Credit**
- **Definition**: Involves two separate LCs used together, where the beneficiary of one LC uses it as collateral to secure a second LC.
- **Details**: Often used in complex trading arrangements involving intermediaries who do not have sufficient funds or credit to finance the deal themselves.
### 8. **Red Clause Letter of Credit**
- **Definition**: This LC allows the beneficiary to receive an advance payment before shipping goods.
- **Details**: The clause is written in red ink, hence the name. It provides the beneficiary with working capital, and the advance is later deducted from the total payment.
### 9. **Green Clause Letter of Credit**
- **Definition**: An extension of the red clause LC, providing the beneficiary with advance payment not only for pre-shipment but also for storage and insurance costs.
- **Details**: Offers even more flexibility and financial assistance compared to the red clause LC.
### 10. **Revolving Letter of Credit**
- **Definition**: This LC automatically renews itself after each cycle or use until the total amount is exhausted.
- **Details**: Suitable for ongoing, repetitive transactions between the same buyer and seller, such as monthly shipments.
### 11. **Sight Letter of Credit**
- **Definition**: Payment is made immediately upon presentation and verification of the required documents.
- **Details**: The seller receives payment as soon as the issuing bank examines and approves the documents.
### 12. **Usance (Deferred Payment) Letter of Credit**
- **Definition**: Payment is made at a specified future date after the presentation of documents.
- **Details**: This LC allows the buyer a grace period before payment is due, providing short-term credit.
### 13. **Negotiation Letter of Credit**
- **Definition**: Allows the beneficiary to receive payment by presenting the documents to any bank, not just the issuing bank.
- **Details**: Encourages multiple banks to negotiate the LC, often leading to quicker payments.
Each type of LC serves specific purposes, balancing the needs of the buyer and seller while managing risks in international trade.
Public Provident Fund
Public Provident Fund
Public Provident Fund is a scheme of Central
Govt. framed under the Public Provident Fund Act, 1968. The scheme came into
force w.e.f. 01.07.1968. This is a government backed, long term small savings
scheme. The account under this scheme can be opened in selected branches of
banks and post offices.
Eligibility: A Resident Indian individual on his behalf or
on behalf of a Minor or a person of unsound mind of whom he is a guardian is
eligible to open a PPF account. The account
on behalf of a minor can be opened either by the father or mother of the minor
only and not by both. In case of death
of both father & mother, grand parents can open the account as guardian of
the grandchild. Only one PPF account can
be opened by the individual, except an account that is opened on behalf of a
minor or person of unsound mind. Opening
of PPF account by NRI (Non-Resident Indian), HUF (Hindu Undivided Family),
Person of Association (POA), Trust or in Joint Name is not permitted. Also,
Joint account shall not be opened under this scheme. Documents required to open
a PPF account: PPF Account opening
form In case of existing accounts,
Aadhaar number is to be obtained (If Aadhaar number is not available, proof of
enrolment is to be obtained) Nomination
Form Passport size Photograph Copy of Pan Card / Form 60-61 ID Proof and Residence proof as per Bank’s
KYC norms.
Monetary Limit: The minimum deposit is Rs. 500 and maximum
limit is Rs.1, 50,000/- can be invested in a financial year under this
scheme. The combined deposit amount in
the PPF account of an individual and in the account operated by this individual
on behalf of a Minor together cannot exceed Rs.1,50,000. If the subscription is done through Cheque /
DD, the date of realization will be the date of deposit.
Duration: The term of the account is 15 financial
years, excluding the financial year in which the account was opened. In case of death of the account holder, their
nominee/legal heirs can close the account before maturity.
Extension of Account: After maturity of the
account, the account holder has three options: ✓ First, the account can be
closed immediately ✓ Second, the account can be continued
without deposits for any period ✓ A customer can extend the
tenure of the PPF investment for a block period of 5 years at a time beyond the
maturity period by submitting account extension form within one year from the
date of maturity.
Rate of Interest: Rate of interest payable on the investment is
as declared by the Central Govt. from time to time. Interest is calculated on
the lowest balance between the close of the fifth day and last day of every
month. Interest shall be credited in account at the end of year irrespective of
change of account office due to transfer of account during the year.
Withdrawals: Any time after the expiry of five years from
the end of the year in which the account was opened, the account holder may,
avail withdrawal by applying in Form-2, from the balance to his credit, an
amount not exceeding fifty per cent. of the amount that stood to his credit at
the end of the fourth year immediately preceding the year of withdrawal or at
the end of the preceding year, whichever is lower: ✓ Provided that the amount
of loan outstanding, if any, along with interest shall be paid by the account
holder before availing the facility of withdrawal under this paragraph: ✓
Provided further that the facility of withdrawal may be availed only once in a
year only from the accounts which have not become discontinued. In case of an account opened on behalf of a
minor, or a person of unsound mind, the guardian may apply for the withdrawal
for the benefit of the minor or a person of unsound mind by submitting
certificate to the account’s office.
Premature closure of account: Premature closure is allowed after the
completion of 5 financial year from the account opening date under following
cases: ✓ That the amount is required for the
treatment of serious ailments or life threatening diseases of the account
holder, spouse or dependents on production of supporting documents from
Competent Medical Authority. ✓ That the amount is required for
higher education of account holder or the minor account holder on production of
documents and fee bills in confirmation of the admission from recognized
institute. ✓ On change in residency status of the
account holder on production of copy of Passport and visa or Income tax return.
Note: Provided further that on such
premature closure, interest in the account shall be allowed at a rate which
shall be lower by one per cent than the rate at which interest has been
credited in the account from time to time since the date of opening of the
account, or the date of extension of the account, as the case may be. a) In
case of extended accounts for blocks of 5 years, partial withdrawal is allowed
up to 60% of the balance at the beginning of the extension period. b) A
resident who opened an account under PPF Scheme, subsequently becomes a
Non-Resident during the currency of the maturity period, the account shall be
deemed to be closed with effect from the day he / she becomes a non-resident.
Interest in account shall be allowed at rate lower by one percent than the rate
at which interest has been credited in account from time to time since date of
opening of account or date of extension.
Loans & repayment: At any time after the expiry of one year from
the end of the year in which the initial subscription was made but before
expiry of five years from the end of the year in which the initial subscription
was made. The customer must apply in Loan
application form, amount cannot exceed 25% of the balance at the credit at the
end of 2nd preceding year. No loan is
permitted if an earlier loan is outstanding or the customer is eligible for
withdrawals. Subsequent loan cannot be taken in same financial year even if the
1st loan is fully repaid.
In case of death of account holder,
the nominee or legal heir shall be liable to pay interest on loan availed by
account holder but not repaid before his death. Such amount of due interest
shall be adjusted at the time of final closure of the account.
Nomination: Nomination facility is available in the name
of one or more persons. The shares of
the nominees can also be defined by the customer. If the minor is a nominee, then the customer
should also appoint somebody to receive and hold the PPF funds until the
nominee attains the maturity. No
nomination is permitted in case of minor’s account. Nominee cannot continue the
account after the death of the customer.
Nominee can apply to close the account and receive the fund after the
death of the customer in premature closure form.
Transfer of Account: The account can be transferred to/from other
branches/banks/post offices. The transferee bank branch must be a designated
branch for opening PPF Account. No charges for transferring the account.
Tax benefits: Subscriptions during the financial year up to
Rs.150000 only qualify for rebate under sec 80 C of Income Tax Act. Interest accrued in PPF account and
withdrawals thereof are fully exempt under sec. 10(11) of Income Tax Act. The investment under the scheme is fully
exempt from wealth tax.
Discontinued Accounts: Accounts in which the minimum subscription of
Rs. 500/- is not made during a financial year, is called a default in the
subscription. It can be condoned by
depositing Rs.500 (subscription amount) and Rs.50 (default fee) for each
financial year of default. The account
holder of discontinued account shall not be eligible to open new account before
closure of such discontinued account after maturity. Facility of loan and partial withdrawals
shall not be allowed in such accounts, and to be allowed only for regular
accounts only.
Passbook: Passbook will be issued to every subscriber.
In the event of loss of passbook, a duplicate passbook can be issued on payment
of a fee.
SUKANYA SAMRIDDHI ACCOUNT (SSA)
SUKANYA SAMRIDDHI ACCOUNT (SSA)
This is one of the flagship savings
schemes launched by Government of India and adequate publicity has been
accorded by different agencies to this scheme, it has generated much interest
in General public. Since Sukanya Samriddhi scheme offers a host of benefits to
its account holders as far as tax benefit, rate of interest etc. are concerned.
Sukanya Samriddhi Account Yojana
offers a small deposit investment for the girl children as an initiative under
‘Beti Bachao Beti Padhao’ campaign. One of the key benefits of the scheme is
that it is quite affordable and offers one of the highest rates of interest and
interest benefits as well.
Account opening:
A natural/legal guardian on behalf of
a Girl Child up to the age of 10 years.
Maximum number of accounts: Up to two
girl children or three in case of twin girls as second birth or the first birth
itself results in three Girl Children.
Monetary Limit: Account can be opened
with Min. Rs.250 as initial deposit. A minimum of Rs. 250 is to be deposited in
the financial year and thereafter in multiple of fifty rupees with annual
ceiling of Rs.150000 in a FY.
Documents Required: Birth Certificate
of Girl child; Address proof of parents/guardians; Identity Proof of the
parents/guardian.
Tenure of the Deposit: Maximum period
of the deposit is 15 years from the date of opening of the account & the
tenure of the deposit is 21 years from the date of opening of the account.
Transfer of Account: Permissible from
one post office to another, from bank to post office or from one bank to
another bank.
Interest on Deposit: As notified by
the GOI, compounded annually.
Tax Rebate: As applicable under
section 80C of the IT Act, 1961 up to Rs.1.5 lakh p.a. Interest accrued in the
account and withdrawals thereof are fully exempt under sec. 10(11) of Income
Tax Act.
Premature Closure: After 5 yr. in cases of extreme compassionate
grounds such as medical support in life threatening diseases or death of the
guardian that the operation or continuation of the account is causing undue
hardship to the account holder, to be authorized by an order by the Central
Government supported by complete document.
In the event of change of status of account holder i.e. citizenship or
residential status. Premature closure is
also permitted in the event of marriage of the account holder if she has
attained the age of 18 years. The
account can be prematurely closed in the event of death of the account holder
at any point of time after opening subject to payment of interest at Post
Office Savings Bank rate for the balance held in the account.
Irregular Payment/ Revival of account:
If there is no deposit in a financial year, is called a default in the
subscription. It can be condoned by depositing Rs.250 (subscription amount) and
Rs.50 (default fee) for each financial year of default.
Mode of Deposit: Deposit can be made
through Cash/Cheque/ Demand Draft/Online.
Withdrawal: Withdrawal is permissible only when the girl
has attained the age of 18 years or has passed 10th standard whichever is
earlier. To meet the financial requirements at the time of higher education.
50% of the previous financial year’s balance can be withdrawn in lump sum or in
five yearly installments. The application for withdrawal shall be accompanied
by documentary proof in the form of a confirmed offer of admission of the
account holder in an educational institution or a fee-slip from such institution
indicating such financial requirement. Closure on Maturity: Completion of 21
years from the date of opening of the account & where the marriage of the
account holder takes place before completion of such period of 21 years.
(Affidavit verifying Account Holder’s 18 years of age as on date of closing of
account provided that no such closure shall be allowed before one month from
the date of intended marriage or after three months from the date of marriage).
No interest is payable after completion of 21 years from the date of opening.
Know all about Senior Citizen’s Deposit Scheme: An healthy way to invest you life earning for secure return
Know all about Senior Citizen's Deposit SchemeAs per Government of India notification dated 12.12.2019, this scheme is called as Senior Citizens’ Saving Scheme, 2019. Senior Citizen’s Deposit Scheme, 2019 is a Central Government Scheme for Senior Citizens for better returns.All the nationalized banks, private Banks (Only HDFC, ICICI and Axis) and Post Offices are authorized to open account under this Scheme.Eligibility:1. An Individual who has attained the age of 60 years and above on the date of opening of the account. (Except NRIs and HUFs).2. An Individual who has attained the age of 55 years or more but less than sixty years, and who has retired on superannuation or otherwise on the date of opening of an account under this Scheme, subject to the condition that the account is opened by such individual within one month of the date of the receipt of retirement benefits and proof of date of disbursal of such retirement benefit(s) along with a certificate from the employer indicating details of retirement on superannuation or otherwise, retirement benefits, (“Retirement benefits”: means any payment due to the depositor on account of retirement gratuity, commutation, leave encashment, group linked insurance, Ex-gratia payment and provident fund)employment held and period of such employment with the employer, is attached with the application form.3. The age limit for Retired Defence Personnel (Excluding civil defence) retired on superannuation, are eligible at the age of 50yrs. (as per GSR 1235 (E) Dt. 3 Oct 2017)4. The Account can be opened in individual capacity or a jointly with spouse of the senior citizen/ Retiree.5. In case of Joint account, the age of the first account holder shall be considered to determine the eligibility to open the account and there shall be no age limit for the second applicant.Monetary Limits:The individual may open one or more accounts in multiples of Rs.1000/-. • Subject to a maximum of Rs.30 Lac including all the investments made by the customer in various accounts. There shall be only one deposit in the account.Both the spouse can open single account and joint account with each other with the maximum deposit of up to thirty lakhs rupee in each account provided both are individually eligible to open the account.The whole amount of deposit in the Joint account shall be attributable to first account holder only.Duration:The deposits are for a period of 5 years. The same can be extended once for a further period of 3 years by the depositor.Extension of an account shall be available only once. Rate of Interest: As declared by the Central Government from time to time and which is payable from the date of deposit to 31st march/30th June//30th September/31st December on first working day of April/July/October/January, as the case may be, in the first instance and thereafter interest shall be payable on first working day of April/July/October/January.
Loan Facility: Not available
Nomination:
. The depositor may nominate a person or more than one person at the time of opening the account or any time before the closure of the account.The nomination can be varied/cancelled by submitting fresh nomination form.In case of joint account, the nominee’s claim will arise only after the death of both the account holders.
Transfer of Account:
The account can be transferred to other branches/banks/post offices. The depositor must apply in the prescribed format FORM G.
Tax Benefits:
Qualify for tax rebate under sec 80 C of Income Tax Act. Interest earned is fully taxable. TDS is applicable.
Passbook:
A passbook will be issued to every depositor.
Closure of the Account:
The account will be closed after five years unless extended by the depositor. FORM 3 is used for closure of the account. Premature closure of the account is permitted, the account holder may withdraw the deposit and close the account at any time on an application in Form-2 subject to following condition namely: - 1. In case the account is closed before one year after the date of opening of account, interest paid on the deposit in the account shall be recovered from the deposit and the balance shall be paid to the account holder. 2. In case the account is closed after the expiry of one year but before the expiry of two years from the date of its opening, an amount equal to one and a half percent of deposit shall be deducted and balance should be paid to account holder. 3. In case the account is closed after the expiry of two year from the date of its opening, an amount equal to one percent of deposit shall be deducted and balance should be paid to account holder. 4. If the depositor is availing the facility of extension of account, then he/she can close the account after one year from the date of extension without any deduction. 5. In case of death of the depositor before maturity the account will be closed, and deposit will be refunded to nominee/legal heir. 6. In case of a joint account, or where the spouse is the sole nominee, the spouse may continue the account on the same terms and conditions as specified under this Scheme, if the spouse meets eligibility conditions under the Scheme on the date of death of the account holder.
https://youtu.be/dWZVdT6PGIc
SIDBI Make in India Soft Loan Fund for Micro Small and Medium Enterprises".(SMILE)
Friends, As you know during the lock down due to COVID-19 pandemic, our Honorable Prime Minister Shri Narendra Modi has given a slogan i.e. Vocal for Local and given his focus to make India self reliant.
To achieve the self reliant, the country should focus in Make In India. Unless and until our production/manufacturing power increases, we can't be self reliant.
There are many people in our country who are having knowledge and new ideas and wish to start their own business but due to lack of financial support restrict them for doing so.
Here I came with a new scheme of Government of India which is promoted by the SIDBI( Small Industrial Development Bank of India).
The name of the scheme is "SIDBI Make in India Soft Loan Fund for Micro Small and Medium Enterprises".(SMILE).
The objective of the Scheme is to provide soft loan, in the nature of quasi-equity and term loan on relatively soft terms to MSMEs to meet the required debt-equity ratio for establishment of an MSME as also for pursuing opportunities for growth for existing MSMEs.
- Emphasis will be on covering new enterprises in the manufacturing as well as services sector.The emphasis will however, be on financing smaller enterprises within MSME
- Existing enterprises undertaking expansion, to take advantage of new emerging opportunities, as also undertaking modernization, technology up gradation or other projects for growing their business will also be covered
- Minimum Loan Size - ₹ 10 lakh for Equipment Finance & Others : ₹ 25 lakh.
CREDIT GUARANTEE SCHEME FOR SUBORDINATE DEBT (CGSSD)
CREDIT GUARANTEE SCHEME FOR SUBORDINATE DEBT (CGSSD)
Ministry of Micro, Small and Medium Enterprises, has framed a Scheme for the purpose of providing guarantees in respect of credit facilities extended by eligible and registered scheduled commercial banks to borrowers in Micro, Small and Medium Enterprises (MSMEs). The scheme will be operationalized through a special window created for this purpose under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).
Details of the scheme are as under: The Scheme is named as ‘Distressed Assets Fund - Subordinate Debt for Stressed MSMEs’ and the credit product for which guarantee would be provided under the Scheme shall be named as ‘Credit Guarantee Scheme for Subordinate Debt (CGSSD)’(hereinafter referred as the ‘Scheme’)
Purpose of the Scheme: To provide guarantee coverage for the CGSSD to provide Sub-Debt support in respect of restructuring of MSMEs. 90% guarantee coverage would come from scheme/ Trust and remaining 10% from the concerned promoter(s). The objective of the scheme is to provide personal loan through banks to the promoters of stressed MSMEs for infusion as equity / quasi equity in the business eligible for restructuring, as per RBI guidelines for restructuring of stressed MSME advances.
The Scheme is applicable for those MSMEs whose accounts have been standard as on 31.03.2018 and have been in regular operations, either as standard accounts, or as NPA accounts during financial year 2018-19 and financial year 2019-20.
Fraud/ Willful defaulter accounts will not be considered under the proposed scheme. Personal loan will be provided to the promoters of the MSME units. The MSME itself may be Proprietorship, Partnership, Private Limited Company or registered company etc. iv. The Scheme is valid for MSME units which are stressed, viz. SMA-2 and NPA accounts as on 30.04.2020 who are eligible for restructuring as per RBI guidelines on the books of the Lending institutions.
Loan Amount eligible under the Guarantee Coverage The guarantee coverage will be provided to the eligible borrower for the credit facilities extended under this scheme. Under this arrangement, promoter(s) of the MSME unit will be given credit equal to 15 % of his/her stake (equity plus debt) or Rs 75 lakh whichever is lower.
The financial assistance provided as part of the scheme is to be operated as a separate loan account and the promoter need to infuse the sub-debt / loan amount as promoter’s contribution in the form of equity (including sub-debt or quasi equity) into MSME entity.
Any guarantee approved under this scheme shall be over and above the existing loan / guarantee sanctioned by the trust (over and above the eligible limit of Rs.200 lakh). In case a borrower has existing limits with more than one lender, the CGSSD can be availed by the borrower through one lender only. A declaration from the borrower regarding its other banking arrangements and that it has not availed funding under the scheme from the other lenders to be obtained by the lending MLI.
Post-restructuring, NPA classification of these accounts shall be as per the extant IRAC norms.
The tenor of sub-debt facility provided under CGSSD shall be as per the repayment schedule defined by the lender, subject to a maximum tenor of 10 years from the guarantee availment date or September 30, 2021 whichever is earlier.
The maximum tenor for repayment will be 10 years. There will be a moratorium of 7 years (maximum) on the payment of principal. Till the 7th year, only interest will be paid.
The sub-debt facility so sanctioned by MLIs will have 2nd charge of the assets financed under existing facilities for the entire tenor of the sub-debt facility. Guarantee Fee i. 1.50% per annum on the guaranteed amount on outstanding basis. Guarantee fee may be borne by the borrowers as per the arrangements between the borrower and the MLIs.
Extent of the Guarantee Coverage - 90% guarantee coverage would come from scheme/ Trust and remaining 10% from concerned promoter(s) on the credit extended by MLIs under the scheme.
Get benefit of Resolution Framework 2.0- Resolution of stress in COVID 19 in Individual and other Small Businesses
Get benefit of Resolution Framework 2.0- Resolution of stress in COVID 19 in Individual and other Small Businesses.
Get benefit of Resolution Framework 2.0- Resolution of stress in MSMEs in COVID-19
RBI issued Resolution Framework 2.0 for MSMEs who are facing stress in COVID-19. watch the video for full details.
https://youtu.be/hMONh51vSUg
Why is it better to issue a passbook to a savings bank account holder
Saving Bank accounts meant for saving purpose or to do the personal transaction through this account. The Bank provides interest on the sum kept in saving account. Further in Saving account we need to keep a minimum balance except in few variant of saving account. We do very few transactions in saving account and to keep the records ,Bank issue a Passbook to saving Bank account holder.
After the digitalization of Banking services and launching of UPI and payment apps, most of the transactions are being done using these apps and the number of transactions have been increased.
The Banks are providing digital passbook that can be used through mobile banking app of the concerned bank.
In the other hand, the current accounts holders are being issued with Statement. Since the current account is meant for business transaction , the number of transactions are more. Monthly statement is being issued at free of cost in current account.
Risk in Forex Operations
Risk in Forex Operations:
The arena of international trade and foreign exchange
operations is also prone to risks, mainly due to the complex nature of transactions,
individual characteristic of different currencies as also a vast area of
operations.
The foreign exchange operations are plagued with
exchange risk, settlement risk, liquidity risk, country risk, sovereign risk,
interest rate risk, and operational risk.
1.
Exchange Risk
2.
Settlement Risk
3.
Liquidity Risk
4.
Country Risk/Sovereign Risk
5.
Interest Rate Risk
6.
Operation Risk
7.
Legal Risk
The risks need to be accepted and managed effectively and
efficiently to minimize the adverse effect and maximize the profit of the
organizations.
Derivatives:
Derivative are such instruments offer a vehicle to manage risks. Derivatives when
added to the exposure will neutralize or alter to acceptable levels, the uncertainty
profile of the exposure. The values of these financial instruments are derived
from the values of the underlying exposures.
Some of the popular derivative instruments in foreign
exchange market are, forward contracts, options, swaps, forward rate agreement
and futures.
Forward Contract: It is a binding contract for
purchase/sale at a future date.
Swap: It is an exchange of specific streams of
payments over an agreed period of time.
Forward rate: Value to be settled beyond spot date.
Options: A foreign exchange option is a contract for future
delivery of currency in exchange for another, where the holder of the option
has the right, without an obligation, to buy (or sell) the currency at an
agreed price, the strike or exercise price, on a specified future date.
Futures: Futures are forward contracts with a standard
size, standard maturity date governed by a set of guidelines stipulated by the
exchange concerned for settlement and payments.
Foreign Exchange Market and its Regulators:
International banking and trade involve transactions
between two countries, currencies and as such are controlled, supervised, regulated
and supported by the central bank of country, while assisted and supported by
various other agencies like EXIM Bank, Insurance companies, ECGC, FEDAI etc.
Forex Exchange Operation- useful for CAIIB and Certificate Course on Foreign Exchange
Forex Exchange Operation:
What is Forex Exchange?
Forex Exchange is used to denote Foreign Currency i.e. Currency of any country as well as the exchange of currency of one country into that of another.
Section 2 of Foreign Exchange Management Act-1999
defines the foreign exchange as:
1. All deposits, credits and balance payable in foreign
currency and any drafts, traveler’s cheque, letter of credit and bill of
exchange expressed or drawn in Indian currency and payable in foreign currency.
2.
Any instrument payable at the option of the drawee or
holder, thereof or any other party thereto, either in Indian currency or in
foreign currency, or partly in one and partly in other.
Foreign Exchange: $-USD, ¥-JPY €-Euro, £-Sterling,
AUD, CAD etc.
Forex Market:
Forex Market is communication-based market, with no
boundaries and operates round the clock.
It comprises a large spectrum of market participants, which include
individuals, business entities, commercial bank, investment bank, etc.
Features of forex market:
Ø A 24-hour market
Ø An over-the-counter market (OTC)
Ø A global market with no barriers/ no specific location.
Ø A market that supports large capital and trade flows.
Ø Highly liquid market
Ø High fluctuation currency rates (every 4 seconds)
Ø Settlement effected by time zone factor
Ø Market effected by government policies & controls.
Exchange Rate:
The price or the ratio or the unit at
which one currency is exchanged for another currency:
1 USD= 72.49 INR
Two-way quotes or buy-sell. 1 USD= 72.49/51 INR.
Types of quoting exchange rate.
|
Sl No |
Types of Rate |
Trade |
Contract date |
Settlement Day |
|
1 |
Today (Cash or Ready |
Cash or ready or TOD basis |
Today (T) |
Same day |
|
2 |
Tomorrow (TOM) |
TOM Basis |
Today (T) |
Next
working day (T+1) |
|
3 |
SPOT |
SPOT Basis |
Today (T) |
Second
working day(T+2) |
|
4 |
Forward |
Forward Basis |
Today (T) |
Any day
after spot (>T+2) |
In the forex market, all rates quoted are generally
SPOT Rates.
The volume, depth and volatility of the spot market is
higher due to large participation of market players in the spot trade.
Forward Rate- Forward Rates are derived from spot rate,
and are the function of sot rate, forward premium/discount of the currency
being quoted.
Forward Rate= Spot Rate+ Premium or Spot
Rate-Discount.
Note: (if you are buying, margin would be subtracted
or if purchasing margin would be added)
Direct & Indirect
quotes:
Direct Quotes: Under direct quote, local currency is
variable.
1 USD= 72.49
INR.
Indirect Quotes: under indirect quotes, the local
currency remain fixed.
Rs.100= 1.38 USD
Note: In case of GBP, Euro, AUD, and NZD, the currencies
are quoted as indirect rate.
1 GBP=1.38 USD
Bid and Offered
Rate:
The buying rate is referred as Bid Rate and selling
rate is referred as Offered Rate.
1 USD=72.49/51 INR
The quoting bank is bidding (buying) for USD at 72.49
and is offering ( selling) the USD at 72.51.
Cross Rate:
Where rate for a particular currency pair is not
directly available, the price for the said currency pair is then obtained
indirectly with the help of cross rate mechanism.
If,
USD/INR= 72.49/51 (1 USD= 72.49/51 INR)
GBP/USD=1.38/40(1 GBP=1.38/40 USD)
What is GBP/INR=?
GBP/USD*USD/INR=72.49*1.38=100.04
72.51*1.40=101.51
GBP/INR=100.04/51
Fixed Rate and
Floating Rate:
The fixed exchange rate is the official rate set by
the monetary authorities for one or more currencies. It is usually pegged to
one or more currencies. Under floating exchange rate, the value of the currency
is decided by supply and demand factors for a particular currency.
Per cent and Per
Mille.
A percentage is a proportion per hundred while per
mille means per thousand.
EUR/USD=1.1910/20
Value Date:
This is the term used to define the date on which
payment of funds or an entry to an account becomes actually effective and/or
subjected to interest.
Factors Determining Exchange Rate:
(a) Fundamental Reasons
Ø Balance of Payments-
Ø Economic Growth Rate
Ø Fiscal Policy
Ø Monetary Policy
Ø Interest Rates
Ø Political issues
(b) Technical Reasons
Ø Capital tends to move from lower yielding to higher yielding currencies, and results is movement in exchange rate.
(c) Speculation
Ø Speculative deals provide depth & liquidity to the market and at times act as a cushion too if the views do not lead to a contagious effect.
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