Banking and Financial Inclusion

Bad Bank : Analysis – UPSC GS3

Utility: Direct question can be asked on Bad Bank. Content can be used in question on NPAs, Banking etc. What are bad banks? A ‘bad bank’ is designated financial institutions that purchase and resolve nonperforming assets (NPAs) from banks and help banks to help clear their balance sheets. National Asset Reconstruction Company Ltd (NARCL), the proposed bad bank for taking over stressed …

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IBC Amendment Ordinance 2021 : Analysis – UPSC GS3

Background: The President has promulgated the Insolvency and Bankruptcy Code (Amendment) Ordinance 2021. About the amendment: It tries to address the structural weakness in IBC by allowing a pre-packaged insolvency resolution process (PPIR). PPIR is a form of restructuring that allows creditors and debtors (or promoters) to work on an informal plan within the IBC structure. It is …

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Privatisation of Banks – UPSC GS3

Context: The Union Budget 2021 has announced the privatisation of two public sector banks and one general insurance company in the upcoming fiscal 2021-22. Background: The government decided to nationalise the 14 largest private banks in 1969. The idea was to align the banking sector with the socialistic approach of the then government. State Bank of India (SBI) had been nationalised in 1955 …

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Regulating NBFCs : RBI Recommendations – UPSC GS3

Reserve Bank of India (RBI) has proposed a tighter regulatory framework for non-banking financial companies (NBFCs) by creating a four-tier structure. The intensity of regulations will be greatest at the top layer and lowest at the base layer. Objective: It is to keep the big NBFCs in good financial health. It has become important after the …

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SC order on Section 32A of IBC – UPSC GS3

Context: Section 32A was introduced in the IBC by the amendment act of March, 2020. By this section, government provided protection to successful bidders during corporate insolvency resolution process (CIRP). Why this Provision was introduced? Since implementation of IBC in 2016, insolvency resolution plan for many big companies could not be implemented. It was because …

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Bank Investment Company – UPSC GS3

Context: Government is planning to for a Bank Investment Company (BIC) to handle investment in PSBs. What is Bank Investment Company (BIC): BIC is envisaged to become a holding company for government’s share in PSBs. Its formation will ultimately transform all PSBs into BICs’ subsidiaries. It was proposed by P J Nayak Committee (formed in 2014 by RBI) P J …

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Loan App Harassment Issue – UPSC GS3

Context: Unauthorised digital lending apps harass consumers which leads to suicide. Loan Apps: Digital apps make intensive use of popular social media platforms like Facebook, Instagram and (now banned) TikTok to aggressively advertise their services, while also engaging in wide-scale email and SMS marketing campaigns. These platforms charge excessive rates of interest and additional hidden …

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RBI working group report on Bank Reforms – UPSC GS3

 Reserve Bank of India (RBI) released a report of its Internal Working Group (IWG) on ownership guidelines and corporate structure of Indian private-sector banks.   Recommendations of IWG : Allow large corporate/industrial houses to become promoters of banks. Give bank licences to Non-Banking Finance Companies (NBFCs). Conversion of payment banks to small finance banks; after three years …

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Lakshmi Vilas Bank Issue – UPSC GS3

Context: Reserve Bank of India (RBI) has decided to impose a 30-day moratorium on Chennai-based Lakshmi Vilas Bank Ltd (LVB). Background: LVB was placed under the prompt corrective action (PCA) framework in September 2019 considering the breach of PCA thresholds as on 31st March, 2019. The RBI has specified certain regulatory trigger points for initiation of certain structured and discretionary actions in …

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