Gold
Deposit Scheme
Banking
Policy
RBI
guidelines in circular dated Oct 05, 1999 have been modified by RBI (on Feb 14,
2013) as
under, on the basis of Central Govt. notification dated Jan 24, 2013:
1.
At present, the banks may either issue a passbook or statement of
account or
a certificate or bond to the depositors for deposit of gold, which will
be
transferable by endorsement and delivery
As per
revision, the
'Gold Certificate would also mean the final receipt, in dematerialised form or otherwise,
issued to a subscriber of the Scheme
after the gold tendered by him has been assayed and accepted as
deposit
by the bank. In case of
certificates issued
in dematerialized form, the depository rules
for transfer would apply.
2.
Presently, the Resident Indians (Individuals, HUF, Trusts, Companies)
can invest
in the scheme. As per revision, a Trust including Mutual Funds/Exchange
Traded
Funds registered under SEBI (Mutual Fund) Regulations may deposit under
the
scheme.
3. At
present, the
deposits may be made available within a maturity range from 3 to 7
years. As
per revision, the maturity period, of gold deposits, will range from 6
months
to 7 years.
4.
As per revision,
authorised banks would not be required to obtain prior approval of RBI
for
introducing the scheme.
5. Banks will report the
gold mobilised under the scheme by all branches in a consolidated manner
on a monthly basis in the revised
format.
Import of precious and semi precious stones-
Clarification
In
terms of circular dated Sep 24, 2012, AD Category — I banks were permitted
to approve Suppliers' and Buyers` Credit (trade credit) including the
usance period of Letters of
Credit opened for
import of gold in any form including
jewellery made of gold/ precious metal or and studded with diamonds/semi
precious/
precious stone should not exceed 90 days from the date of shipment. RBI
clarified (Feb 20, 2013) that Suppliers' and Buyers' Credit (trade
credit)
including the usance period of Letters of Credit opened for import of
precious
stones and semi-precious stones should not exceed 90 days from the date of shipment.
NEFT
-
Continuous Release of Credit Messages
RBI
has decided (Feb 18, 2013) to implement the feature of continuous release
of credit messages in the National Electronic Funds Transfer (NEFT) system with effect from 9th March 2013.
The
feature of continuous release of credit messages has been
introduced
with the objective of providing maximum
time to beneficiary/destination banks to process the inward NEFF transactions,
thereby
facilitating more efficient handling of growing transaction volumes in
the system. Further, the feature also envisages the optimum use of
network
resources and processing capacity by spreading the release of messages throughout the one hour time
window
between 2 batch settlements.
Membership in SEBI approved Stock Exchanges for
PDs
With
a view to further
developing the debt market in India,
RBI decided to permit standalone
PDs to
become members of SEBI approved stock exchanges for the purpose
of
undertaking proprietary transactions in corporate bonds. Opening of
accounts by
entities of Bangladesh
ownership shall continue to require
approval
of RBI.
Advances
Restructured
by Banks / FIs
In terms of
extant
guidelines, banks are required disclose in their published Annual
Balance
Sheets, under "Notes on Accounts", information relating to number and amount of advances
restructured, and
the amount of diminution in the fair value of the restructured advances.
Under
each category advances restructured under CDR Mechanism, SME Debt
Restructuring
Mechanism and other categories of restructuring, are required to
be
shown separately.
At
presents the banks are required to disclose annually all accounts
restructured in their
books on a cumulative basis even though many of them would have
subsequently
shown satisfactory performance
over a
sufficiently long period. This position of disclosures do not
take into
account the fact that in many of these accounts the inherent weaknesses
have disappeared and the accounts
are in fact standard
in all respects, but continue to be disclosed as restructured
advances.
On
recommendations of the Working Group to Review the existing Prudential
Guidelines on Restructuring of Advances
(Chairman:
Shri B. Mahapatra) RBI has advised the banks that they
should disclose the information by giving (1) details of accounts
restructured
on a cumulative basis excluding the standard restructured accounts which cease to attract higher
provision
and risk weight (2) provision made on restructured account under various
categories
(3) details of movement of restructured account.
Financial
Literacy
Material
In
terms of RBI circular dated Jun 06, 2012, Financial Literacy Centres
(FLCs) and
all the rural branches of scheduled
commercial
banks should scale up financial literacy efforts through
conduct of outdoor Financial Literacy
Camps
at least once a month, to facilitate financial inclusion through
provision of two essentials i.e. 'Financial Literacy' and easy
'Financial
Access:
RBI circulated (Jan 31, 2013) a comprehensive
Financial
Literacy Guide for conduct of Financial Literacy Camps & Financial
Literacy
Material as also a Financial Diary and a set
of 16 posters.
Operational
Guidelines
All the Financial Literacy Centres and rural
branches
are required to prepare an annual calendar of
locations for conduct of outdoor Financial Literacy Camps. At every location, the program should be
conducted in 3
stages to be spread over a period of 3 months comprising of 3 sessions of minimum 2 hours each plus a
visit to
ensure timely delivery of cards. 2"d session is to be
conducted
a fortnight after first session. After 15 days of the second session, branch officials should visit
the village
to ensure delivery of cards
to the
villagers. They will also make sure
that the BC has started operations and villagers are able to make transactions. 3'd
Session
is to be conducted, 2 months after holding of second session.
NRO accounts
by individuals of Bangladesh
Nationality
In terms of extant guidelines, opening of
Non-Resident Ordinary Rupee (NRO) accounts by individuals/ entities of Bangladesh/
Pakistan
nationality/ ownership requires approval
of Reserve Bank. RBI has decided (Feb 11, 2013) that Authorised banks would be
permitted to open NRO
account of individual/s of Bangladesh nationality without the approval
of the
Reserve Bank if they hold valid
visa and
valid residential permit issued by Foreigner Registration Office
(FRO)/Foreigner Regional Registration Office (FRRO) concerned, Banks
are to
furnish details of such accounts on quarterly basis to the Under
Secretary (Foreigners), Ministry of Home Affairs, Govt. of India.
Licensing
of New Banks in Private Sector
RBI
had placed a Discussion Paper on its website on August 11, 2010 and the
draft guidelines were released on August 29,
2011 inviting
views and comments. After consulting
the Government of India, the guidelines for 'Licensing of New Banks in
the
Private Sector', RBI issued the guidelines on Feb 22,
2013.
The key
features of
the guidelines are:
(i)
Eligible Promoters: Entities/
groups in the private sector, entities in public sector and Non-Banking Financial Companies (NBFCs)
shall be
eligible to set up a bank through a
wholly-owned
Non-Operative Financial Holding Company (NOFHC).
(ii) 'Fit and Proper'
criteria: Entities / groups should have a past record of sound credentials and integrity, be financially sound
with a
successful track record of 10 years. For
this purpose, RBI may seek feedback from other regulators and
enforcement and investigative
agencies.
(iii) Corporate structure of the NOFHC: The
NOFHC
shall be wholly owned by the Promoter / Promoter Group. The NOFHC shall
hold
the bank as well as all the other financial
services entities
of the group.
(iv)
Minimum voting equity capital requirements for banks and shareholding by NOFHC: The initial minimum paid-up
voting
equity capital for a bank shall be Rs.5 billion (Rs.500 cr). The NOFHC shall initially
hold a
minimum of 40% of the paid-up voting equity
capital of the bank which shall be locked in for a period of 5 years. It
shall
be brought down to 15%
within 12 years. The bank shall get its shares listed on the stock exchanges
within 3 years of the commencement of business by the bank.
(v)
Regulatory framework: The
bank will be governed by the provisions of the relevant Acts, relevant Statutes and the
Directives,
Prudential regulations and other Guidelines/Instructions
issued by RBI and other regulators. The NOFHC shall be registered as a non-banking finance company (NBFC)
with the
RBI and will be governed by a separate set
of
directions issued by RBI.
(vi)
Foreign shareholding in the bank: The aggregate non-resident shareholding in the new bank shall not exceed 49% for the
first 5
years after which it will be as per the extant
policy.
(vii) Corporate governance of NOR-IC: At
least 50% of
the Directors of the NOFHC should
be independent directors. The corporate structure should not impede
effective supervision
of the bank and the NOFHC on a consolidated basis by RBI.
(viii) Prudential norms for the NOFHC: The
prudential
norms will be applied to NOFHC
both on stand-alone as well as on a consolidated basis and the norms
would be on
similar lines as that of the bank.
(ix)
Exposure norms: The
NOFHC and the bank shall not have any exposure to the Promoter Group. The bank shall not invest in
the equity /
debt capital instruments of any financial
entities
held by the NOFHC.
(x)
Business Plan for the bank: The
business plan should be realistic and viable and should
address how the bank proposes to achieve financial inclusion.
(xi) Other
conditions
for the bank :
1)
The
Board of the bank should have a majority of independent Directors.
2)
The
bank shall open at least 25% of its branches in
unbanked rural centres (population
upto 9,999 as per the latest census)
3)
The
bank shall comply with the priority sector lending
targets and sub-targets as applicable
to the existing domestic banks.
4)
Banks promoted by groups having 40% or more assets/income from
non-financial business will require RBI's prior
approval for raising
paid-up voting equity capital beyond
Rs. 10 billion (Rs. 1000 cr) for every block of Rs.5 billion (Rs.500
Cr).
5)
Any non-compliance of terms and conditions will attract penal measures
including cancellation of licence of the bank.
(xii) Additional
conditions
for NBFCs promoting / converting into a bank : Existing
NBFCs, if considered eligible, may be permitted to promote a new bank or
convert
themselves into banks.
Submission
of application : In
terms of Rule 11 of the Banking Regulation (Companies) Rules, 1949, applications shall be submitted by
interested entities, in the prescribed form
(Form III) by Jun 30, 2013, to RBI.
The
validity of the in-principle approval issued by RBI
will be one year.
Fiscal
Policy
The
fiscal policy is the policy relating to government expenditure
and revenue collection, to influence the economic
activity. The two main instruments of fiscal policy are
government
expenditure and taxation.
The change
in the
level and composition of taxation and government spending can impact the
following variables
1.
Aggregate
demand and the level of economic activity;
2.
The
pattern of resource allocation;
3.
The
distribution of income.
Stance of
fiscal policy
The
3 possible stances of fiscal policy are neutral, expansionary
and contractionary.
(a)
A neutral stance of fiscal policy
implies a balanced economy. This results in a large tax revenue.
Government
spending is fully funded by tax revenue and overall, the budget outcome has a neutral effect on
the level of
economic activity.
(b)
An
expansionary stance of fiscal policy
involves government spending exceeding tax revenue.
(c)
A
contractionary fiscal policy occurs when government spending is lower
than tax
revenue.
Deficits
If
the govt. spending is higher than the govt. revenue, there
will be deficit, which can be a revene deficit, fiscal deficit or
primary
deficit.
(a)
Revenue
deficit = Revenue expenditure - revenue receipts.
(b)
Fiscal deficit = Total expenditure -
(revenue receipts +
capital receipts other than borrowing).
(c)
Primary
deficit = Fiscal deficit - interest payments. There
are various methods of funding of these deficits. Fiscal deficit
is
generally financed by way of borrowing by the
govt. by selling treasury bills or by raising long term loans etc. This borrowing entails
interest cost and
in case it increase beyond
the
reasonable level, it can create default problem and resultant effects as
happened in certain European countries during 2010.
Methods of
funding
Govt. spends
money on
a wide variety of things, from general
administration
to the military and police to services like education and healthcare, as well
as transfer
payments such as welfare
benefits.
This expenditure can be
funded by
way of Taxation, Seigniorage (by printing money), borrowing money
from
the public or from abroad,
consumption of fiscal
reserves, sale of fixed assets (e.g., land) i.e. disinvestment.
All of these
except,
taxation are forms of deficit financing.
Economic
effect of fiscal policy
Governments
use fiscal policy to
influence the level of aggregate demand in the economy, in an effort to
achieve
economic objectives of price
stability, full
employment, and economic growth. Increasing the govt spending and
decreasing tax rates, are the
methods to stimulate
aggregate demand. This can be used in times of recession or low economic activity as an
essential tool for building
the framework for strong economic
growth and working towards full employment.
National Income Concepts
A no. of
measures of
national income and output are used to
estimate
total economic activity in a country. These help in counting
the total amount of goods and services produced within geographically
boundary
or by citizens. Gross Domestic
Product (GDP): It is total money value of all final goods and
services
produced within a country's domestic territory during a particular
period. The
goods should be consumer goods or
capital
goods (should should not include intermediary goods and
services).
(GDP
= Money value of final goods
and services)
Net Domestic Product (NDP): When, out of gross domestic product,
the amount of depreciation on fixed capital is reduced, we get net
domestic
product.
(NDP = GDP
- Depreciation)
Gross
National Product (GNP):
It is seen in the context of citizenship,
which
means adding the net factor income from abroad to gross domestic
product.
The net
factor
income from abroad can be positive or negative depending upon as to
how
much wages, rent, interest and
profit is
earned by foreign citizens in India
and Indian citizens in foreign countries.
(GNP = GDP +
or - net
factor income from abroad)
Net National
Product (NNP) : It can be worked as
gross national product reduced by the amount of depreciation. (NNP =
GNP -
Depreciation)
National
Income: It means the net national product at factor cost, which include total of net
domestic
product at factor cost plus net
factor income from abroad. Net domestic
product at
factor cost : It means the total amount
earned
by various factors of production with in the domestic territory.
The NDP at factor cost is the net domestic product at market price
(-)
indirect taxes (+) amount of subsidies given by the government.
Net domestic
product at market price:
It means market value of all the final goods and services produced
within domestic territory of a
country. In practice the
net domestic product at
factor cost
and at market price are not equal although they should be equal.
The
NDP at market price is the net
domestic product at factor cost (+) indirect taxes (-) subsidies.
Calculation
of GDP - Different
approaches
(1)
Output approach: GDP
at market price = value of output in an
economy minus
intermediate consumption
NNP at factor cost= GDP at market price -
depreciation +
NFIA (net factor income from abroad) - net
indirect taxes
(2)
Income approach : NDP
at factor cost = Compensation of employees +
Net
interest + Rental & royalty income + Profit of incorporated and
unincorporated firms + Income from self- employment.
National income = NDP at factor cost + NFIA
(net factor
income from abroad).
(3) The
expenditure
approach
GDP = C + I +
G + (X
- M)
Where: C =
household consumption expenditures / personal consumption
expenditures.
I = gross
private
domestic investment
G
= govt. consumption and gross investment expenditures
X
= gross exports of goods and services
M = gross
imports of
goods and services.
Economic
Policy
Economic policy refers to policy actions of the
government
initiated in the economic
field. The policy has a direct bearing on
the economic strength, general economic welfare of citizens and economic
ranking of a country in the world.
The
policy sets the economic priorities of the govt. such as (a) national ownership of resources (b) the
level of
government income and spending (c) money supply and interest
rates (d)
conditions in the labour market and (e) many other areas of government
interventions.
Economic
policy is influenced by the social and political environment within the country and by the
degree of integration with
other economies of the world (called
globalization) and the international institutions like IMF or
World Bank.
Objectives of economic policy
1.
Full employment - This ensures creation
of opportunities where there are
jobs for all
of those, who are willing to work (it
needs to be noted that full employment does not mean employment
for all).
2. Inflation
control
- This keeps the purchasing power of the currency
stable and real wage high. Increasing prices reduce the purchasing power of the currency and
indirectly affect the standard of living.
3.
GDP growth - This is major
objective of the economic policy as
it
increases the income of the people. If there is increase in per capita income of the population, it
leads to
better standrd of life, provided there is equitable distribution
of
income.
Important policies that support the economic
policy
1.
Fiscal policy - It is the income,
expenditure and tax policy of the
govt
executed through annual budget. Through this, the govt. can impact all sectors of the
economy. The
policy determines the
duty/tax rates
or tax concessions. In addition, the policy about investments or
disinvestments.
2. Monetary policy - It relates to monetary stabilisation to stimulate the economy. The policy regulates the
money
supply to ensure adequate
liquidity for growth and not to allow excessive
liquidity that results into inflation.
3. Credit policy - This policy announced by RBI, ensures availability of credit to all productive sectors
of the
economy at reasonable interest
rates. Through the policy actions, RBI impacts
the flow of credit, the cost of deposit Et credit etc.
4. Trade policy : This policy announced by Ministry of Commerce, covers internal and external trade of the
country. The
issues relating to tariffs,
trade agreements and the international institutions
are also dealt with through this policy
Measures of
Economic
Growth and Welfare
Economic growth
is measured through GDP, GNP and Per capita income. Economic
welfare is measured through
Human Development Index.
Human Development Index (HDI)
The
UN Human Development Index (HDI) measures poverty, literacy, education, life expectancy, and other
factors.
It is a standard means of
measuring well-being, especially child welfare. The index was developed
in 1990
by the Pakistani economist
Mahbub ul Haq. It is used since 1993 by the United Nations Development Programme in its annual
report.
The HDI measures
the average achievements in a country in 3
basic dimensions of human development:
1.Long
& healthy life (measured by life expectancy at birth). 2 Knowledge, as measured by adult literacy rate
(with
two- thirds weight) and the combined primary,
secondary and tertiary gross enrollment ratio (with
one-third weight).
3. Decent
standard of living, as measured by Gross Domestic Product per capita
(Purchasing Power Parity in $US). Each
year, countries are ranked according to these
measures. HDI is
considered by many to be an excellent tool for measuring development,
since
both economic and social indicators are covered.
Value - HDI
can have a
value between 0 and 1. Nearer it is to
1, higher the level of human development.
Countries and
regions have classified into three categories: Low human
development: <0 o:p="">
Medium
human development: from 0,500 to 0,799 High
human development: > 0,800
HDR 2011:Country Ranking
Released
on 2.11.2011, it covered 185 countries out of 193 UN
member nations (2013 report to be released on Mar 14, 2013)
|
Norway
|
India
|
China
|
Overall
ranking
|
1
|
134
|
101
|
HDI
Ranking (max 1)
|
0.943
|
0.547
|
0.687
|
Life
Expectancy at birth (yr)
|
81.1
|
65.4
|
73.5
|
Mean
years of schooling (Yr)
|
12.6
|
4.4
|
7.5
|
Expected
years of schooling
|
17.3
|
10.3
|
11.6
|
Gross
National Income $
|
47557
|
3468
|
7476
|
(Per
Capita) PPP
|
|
|
|
Non-income HDI value
(max 1)
|
0.975
|
0.568
|
0.725
|
Limitation:
The
data availability determines HDI country coverage. To enable
cross-country comparisons, the HDI is, to the extent possible,
calculated based
on data from leading international data
agencies and other credible data
sources available at the time of
writing.
Genuine Progress Indicator (GPI)
GPI is a
metric used
to measure the economic growth of a country. It is considered as a
replacement
to gross domestic product (GDP) economic indicator, The GPI indicator
takes
everything the GDP uses into account. GPI
also adds other figures that represent the cost of the negative effects related
to
economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion,
among
others). The GPI nets the
positive
and negative results of economic growth to examine whether or not
it has
benefited people overall,
The
GPI metric was developed out of the theories of green economics. Proponents of the GPI see it as a
better measure
of the sustainability of an economy
when compared to the GDP measure.
Multidimensional
Poverty
Index (MPI)
Replacing
the previous Human Poverty Index, MPI was developed in 2010 under United
Nations Development Program.
It is uses different factors to determine poverty
beyond the income base
poverty.
MPI is an index of acute multi-dimension
poverty. It indicates the no. of multi-dimensionally
poor people who are
deprived in
rudimentary services.
MPI uses the same 3 dimensions as the Human
Development Index, i.e. health, education and
standard of living.
These are measured by using 10 indicators as under:
A. Health
- (1) Child mortality (2) Nutrition
B. Education - (1) Year of schooling (2) Children enrolled
C.
Living
standard - (1)
Cooking fuel (2) Toilet (3)
Water (4) Electricity (5)
Floor (6) Assets.
Each
dimension and each indicator within a dimension is equally
weighted. MPI is calculated as
under:
MPI = H x A [H = %age of people who are MPI
poor i.e. incidence of poverty. A = Average
intensity of MPI
across ,the
poor (%)]
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