March 2016
Issue No. 4
  1. What lies beneath

    While the Reserve Bank of India (RBI) governor has been stressing on the discussion around non-performing assets (NPAs), he has also highlighted the contrast between the banking sector in the country and that of China’s. In India, the governor pointed out, what underlined many of the stressed loans was an economically viable productive asset, not ghost townships.

    He stressed that if it came to choosing between cleaning up the bank balance sheet and tending to economic growth, he would prefer, cleaning up. However, that may be difficult because sustained economic growth is not possible without a healthier bank balance sheet. In theory, while it is easier to address stressed assets when growth is good: in reality, problems are forgotten in good times except in times of crisis.

    (Source: Mint, February 15, 2016)

  2. Of public debts and capital markets

    The top priorities for the country in 2016 include preserving hard-won macro stability, and reviving growth. Macro stability can mean different things at different times. The year 2013 was all about the current account deficit, however, with that problem in check, the entire focus is on the fiscal deficit, along with public debt.

    The government’s debt, mostly domestic, is among the highest among emerging markets (EMs). While it is low compared to developed economies, the important difference is that EMs are the victims of debt intolerance, which may cause trouble in access to capital markets.

    (Source: Mint, February 9, 2016)

  3. Financial technology and why it is essential

    Founder of one of the world’s largest software businesses, Bill Gates had said in 1994, “We need banking, but we don't need banks any more.“ However, globally, banks, appear to have forgotten the quote until the recent frenzy over `fintech' startups. The opaque, multilayered and transaction cost-laden financial systems is now facing competition from a combination of technological advances, the pervasiveness of smartphones and venture capital-backed entrepreneurs. It is expected that this disruption will allow direct aces between depositors and borrowers, thus reducing the margins of banks that today operate in the middle.

    (Source: The Economic Times, February 3, 2016)

  4. Enabling direct transfers through JAM

    The last Economic Survey stressed on the JAM Trinity (Jan Dhan Yojana + Aadhaar number + mobile number), an acronym that highlights the government’s Direct Benefits Transfer (DBT) programme. Although, the DBT has been operational since 2013, the Trinity makes it easier, because each element in the JAM needs some work to operate effectively. More than 227 million beneficiaries were part of the programme under 36 schemes, by March 2015, with the highest enrolments under DBTL (DBT for liquefied petroleum gas subsidy). However, the DBT programme is yet to become a universal national scheme.

    Since it was launched in August 2014, the Pradhan Mantri Jan Dhan Yojana (PMJDY), the J of the Trinity, has succeeded in changing the financial inclusion landscape with the bundling of a bank account with the RuPay card, pension and insurance schemes, along with strong advertisements across all media created high levels of awareness for financial services

    More importantly, the focus under the PMJDY has now moved to monitoring parameters that are important for sustainable inclusion, like agent remuneration and transaction readiness.

    (Source: Mint, February 11, 2016)