Page 10 - Banking Finance July 2020

RBI CORNER

Maharashtra Co-operative (PMC) Bank, March 2020," the RBI's data on out- billion. In addition to the forex inflows
the RBI is engaged with all stakehold- standing credit of scheduled commer- due to the fund-raising by Reliance In-
ers to find out a workable solution. cial banks for March 2020 showed. dustries, dollar supplies have also been
Creation of a resolution corporation boosted by a trade surplus in June - the
The data captures various character-
was part of the financial resolution and istics of bank credit such as population first in 18 years.
deposit insurance bill introduced in group (rural/semi-urban/ urban/ met- "This (trade surplus) could be reflective
2017 but subsequently withdrawn for ropolitan); occupation/activity and of weak domestic demand, relative to
closer consideration. One of the con- organisational sector of the borrower; global demand. The weakness in im-
troversial items in the bill was the 'bail-
type of account; and interest rates. ports was spread across investment
in' clause where creditors sacrifice and consumption goods. India is
part of their dues like in an insolvency The data covered 1,24,984 bank likely to post a strong current account
process. Although bank deposits are branches (excluding regional rural surplus in 1Q (FY21), which along
banks). It showed overall credit expan-
secured only to the extent of deposit with strong FDI inflows and a
insurance, creditors to commercial sion has been supported by a robust stabilisation in FII outflows, has helped
banks have not lost money as failed growth in personal loans. The share of the RBI shore up record FX reserves,"
banks were always merged with stron- individuals in total bank credit has in- said HSBC chief economist Pranjul
ger banks. creased to 40.1 per cent in March 2020 Bhandari in a note.
(37.4 per cent a year ago and 30.8 per
The governor pointed out that a revi- cent five years ago), whereas that of Forex reserves comprise of foreign cur-
sion to the Insolvency and Bankruptcy the private corporate sector has de- rency assets, gold and drawing rights
Code had given RBI powers to initiate clined. with multilateral institutions. In the
a resolution process for finance com- week ended June 10, the reserves were
panies. Das also said that the RBI could Within individuals, the share of female up due to a $2.3-billion increase in for-
only issue early warning signals, flag borrowers has been consistently on the eign currency assets. Also, the increase
emerging risks and continue to take rise, it said. in the value of gold, pushed up gold
measures to interact with the man- All bank groups recorded moderation reserves in dollar terms by $712 million
agement to identify vulnerabilities but in credit growth during 2019-20, to $34.72 billion.
there has to be a legally-backed ar- though private sector banks continued
rangement for resolution of failed in- to lead the growth. The overall RBI sets up panel to study
stitutions. weighted average lending rate (WALR)
on outstanding credit declined by 17 QR codes for contactless
Industrial credit in total basis points during the quarter ended transactions
March 2020, the data showed.
bank credit dips to 31.5% RBI has set up a high-level committee
to study the use of Quick Response
in March RBI's forex reserves rise by (QR) codes to process contactless trans-
The share of industrial credit in total $3.1bn to record $516bn actions in light of the ongoing Covid-19
bank credit declined to 31.5 per cent Reliance Jio's multi-billion-dollar fund- situation, three people aware of the
in March 2020 as against 33.1 per cent raise, a foreign trade surplus and a matter told ET, and the panel is in the
a year ago, Reserve Bank data surge in gold's value are helping to final stage of submitting its report.
showed. Bank credit growth (year-on- boost the country's foreign exchange The committee - comprising academi-
year) continued to decelerate across reserves. The recent weeks saw forex cians, scientists and industry executives
all population groups and stood at 6.3 reserves rise by $3.1 billion to a record -- has been asked to figure out the
per cent in March 2020. However, $516 billion. According to bankers, the economics of QR deployment at mer-
bank branches in rural areas main- reserves are moving up on account of chant locations, the benefits of having
tained a double-digit growth. the continued dollar purchases by the an interoperable and open-loop system
"The share of industrial credit in total Reserve Bank of India. as well as recommend guidelines for
bank credit declined to 31.5 per cent Last month, the country's reserves hit standardising deployments, they said.
in March 2020 as against 33.1 per cent the half-a-trillion mark for the first Professor Deepak Pathak of IIT
a year ago, as it recorded a meagre 0.9 time to $501 billion. In little over a Bombay heads the six-member panel.
per cent growth (year-on-year) in
month, the RBI has added another $15 Former Punjab National Bank CEO Sunil

10 | 2020 | JULY | BANKING FINANCE