It’s a huge bang reform alright but not quite what the reforms brigade has been clamouring for. The government’s Jan Dhan Yojana, an ambitious arrange for financial inclusion, gets the potential to be always a game-changer for the bank sector and the economy. It phone calls to mind Indira Gandhi’s much-maligned bank or investment company nationalisation move which helped change India’s economic leads over the 10 years of the seventies. Bank or investment company nationalisation helped sweep small savings into the financial system and push in the savings rate from 10 per cent at the end of the seventies to over 20 per cent by the start of the eighties.

That, subsequently, caused the investment rate to twin and helped lift India’s trend rate of economic development from 3.5 % to 5.5 per cent in the eighties. Bank or investment company nationalisation got its problems. The achievement on the lending side is not as impressive as that on the liabilities aspect: small and marginal farmers and also small companies do not get the credit they need. The development of branches and balance linens undermined viability in the bank operating system.

But these problems could be handled over time as the basis for economic growth have been laid. Jan Dhan Yojana holds out the promise of having forwards the unfinished plan of bank or investment company nationalisation. Sceptics again say it shall enhance the existing tensions in the bank operating system. Yes, in the short run, you will see issues. Over the long term, however, the potential for transformation is enormous.

  1. Long Term Credit :-
  2. A growth fund
  3. Zhonghui – Under Judicial Management
  4. New Fund vs Old Fund. Which is Better
  5. As per SEBI, mutual funds can borrow for short term to the degree of
  6. Beat fat until light and fluffy

The new accounts will never be idle for long. Large amounts of cash will flow in through the Direct Benefits Transfer. These could lead to large amounts of floats in the general public sector (which is bearing the brunt of the initiative). Overdrafts shall not get over night to all or any. Banks shall watch the accounts for half a year before doing this. Even if we assume that half the accounts get the overdraft and half of the overdrafts turn into NPAs, we are talking of losses of Rs 12,500 crore over two or three years. Large numbers of individuals are brought into the financial system Once, banks will find ways and opportunities to give.

What has been the province of micro-finance organizations and Regional Rural Banks will move in a big way into the commercial banks. Banking institutions have made some headway with banking correspondents already. Alliances with mobile operators should allow to them to leverage mobile banking as well. It is conceivable that Jan Dhan Yojana could just the shot in the arm that the public sector banking institutions needed.

Let me qualify this by saying that much depends on whether the moves under way in the finance ministry to strengthen both boards and management in the general public sector bear fruits. The goverrnment’s effort does undercut the RBI’s tries to go after inclusion through new players such as payments banking institutions and small banking institutions. The RBI experienced used the view that not much could be likely of the general public sector which private entrepreneurs were needed to infuse life into inclusion.The Modi government obviously has a different view. In a way, the whole locus of financial inclusion as well as bank governance has shifted from the RBI to the finance ministry. That could well be a comment on the present condition of relations between your ministry and the RBI.

It should define come back and risk goals, spell out any key investment plans, provide an asset allocation platform and explain how performance will be examined generally. The IPS can list the essential responsibilities of the committee, the board, and investment advisors. However, it should allow sufficient flexibility to handle changing circumstances rather than handcuff the portfolio’s money managers. Whether an investment committee has three or twelve members, it should have a calendar of meetings for every year.

We suggest an in-person meeting once per one fourth, a year however, many committees just can’t meet four times. Instead, they communicate and make decisions in other ways. A universal problem with committee meetings is that the agenda is too ambitious. The agenda should be limited to a few key items; ideally, it will add a manager presentation and professional program also.