There are several announcements made on a regular basis regarding the banks and their newly made regulations. The recent announcement of the central bank in India stated the proportional of non-performing assets to fall by March. There will be an approximate of 9% downfall owing to the introduction of measures and the bankruptcy code. There are several important points related to the recent reforms like the Financial Stability Report and the Non-banking financial companies.
What were the major reforms with the bank guidelines?
The following are some of the major improvements and steps incurred for the bank reforms:
- The bank accounts run by the state are currently in bad debt putting an extra load. This needs a good billion dollars as the capital in the coming years to match the regulations of global Basel III capital. There were steps taken in this direction to improve the situation.
- The Bankruptcy and Insolvency Law was passed in 2017, the law helped in the faster performance of non-performing assets. The Reserve bank also carried some reviews of quality assets for improving the stressed account’s assets.
- There are also strict measures implemented by the Reserve Bank of India on the banks. There were penalties imposed on the banks for under reporting the stressed profiles. The stricter guidelines were too enforced stating the end of the worse crunch as optimistic.
These reforms were made in order to stabilise the bad debts hanging as a liability on the state. Along with this, the stability report was also summarised.
The announcement of the Financial Stability Report
The following important points were mentioned along the Financial Stability Report by the RBI:
- The summary of the Financial Stability Report was stated by the Reserve bank of India. It mentioned the recognition of non-performing assets as the turnaround for the non-performing assets cycle.
- The RBI added the hope of gross nonperforming asset for the commercial banks to fall within the year. It is expected to fall from 9.3% in this year March to 9% in March 2020.
What is in the interest of Non-banking finance sectors?
- RBI has also shown concern about liquidity issues like mortgage and auto lenders. The RBI is in interest about the issues facing by the non-banking finance companies should not become any systematic problems.
- The flow of the same problem is seen among many of the non-banking institutions. Dewan Housing Finance which is among one of the largest home loan lenders of India is an example of the same. The NBFC has stopped accepting new deposits because of the cash flow difficulties. It has also delayed some of the debt repayments.
- The recent reforms in the Non-banking financial companies are turning out to bring better market discipline from the earlier times. The companies with the good performances were in continuation to increase funds while the ones with concern regarding assets quality faced higher borrowing costs.
The whole of the guidelines by RBI was to get a better picture of the financial status in the country to maintain a smooth flow.