25 November, 2019
Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
News: Lenders seek exemption from RBI to relax the large exposure framework requirements for state-run firms
Prelims and Mains focus: about the recent disinvestments made by the govt and its impact on the credit flow and growth
What is the issue?
What the RBI said:
All these entities are exceptions and only a few such companies are there with such large requirements and RBI’s objective is to de-risk large exposures of banks, said former RBI deputy governor R. Gandhi. “These entities are to raise capital and debt directly from the market. They have good ratings and can raise funds at competitive terms. Further, the merger of banks into international size can also help take care of these large requirements. These merged banks will have higher net-worth and, therefore, would be able to sanction larger limits to these entities,” he said.
Does disinvestment really helps?
Credit has to flow and move and while there is ?2 trillion in the system, banks and the financial sector are sitting on extra credit. It is important that they get diverted. NPAs are part and parcel of any credit delivery system but that cannot be allowed to paralyse the flow of money.
About Basel Committee on Banking Supervision(BCBS)
The Basel Committee on Banking Supervision (BCBS) is an international committee formed to develop standards for banking regulation; as of 2019, it is made up of Central Banks and other banking regulatory authorities from 28 jurisdictions. It has 45 members.
Formed without a founding treaty, the BCBS is not a multilateral organization. Instead, the Basel Committee on Banking Supervision seeks to provide a forum in which banking regulatory and supervisory authorities can cooperate to enhance the quality of banking supervision around the world, and improve understanding of important issues in the banking supervisory sphere. The BCBS was formed to address the problems presented by globalization of financial and banking markets in an era in which banking regulation remains largely under the purview of national regulatory bodies.
Primarily, the BCBS serves to help national banking and financial markets supervisory bodies move toward a more unified, globalized approach to solving regulatory issues.
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