INDIAN BANKS 2.0?
What to expect from the Indian Banking sector in times ahead.?
RBI GOVERNER comes out loud to media -
The RBI Governor today announced that the banks in the Indian banking sector are showing resilience, and the RBI here has 3 pivotal roles to play from hereafter
Give the banks some space from the typical old One fit for all solution style to a more Fing your own path approach style that will help them grow and find their own footings in the growing Indian economy.
Stability = North Star, RBI is here to supervise the banks and keep them safe and secure over the longer period of time ahead. They will be monitoring that no things are played out for short term gain.
Creating Balance is something RBI is committed to. What does this balance mean is RBI’s main focus is on getting growth and innovation together so that the banks will make more money from new innovative products at the same time ensuring the systems remains robust.
New rules came in to help the banks grow (Banking 2.0)
The RBI has over the past few weeks have come up with some new rules that will make the third largest growing economy’s banking sector more competitive and profitable. what are the new norms?
Here they are -
Acquisition Financing
Previously the Banks in India were not allowed to finance an acquisition which implies now a company can get a loan in order to buy out another company, but RBI added a clause that only 70% of financing is allowed the rest 30% will be coming from the acquiring company. This will keep the banks protected while allowing them to enter a new field of financing.
Foreign loans
The cost ceiling for getting loans from the foreign institute has been called off.
They can pay whatever interest rate without needing an approval from the RBI.
RBI says that the foreign reserves are quite strong and because of such strong conditions the rules have been taken out.
Now the Banks will be able to raise foreign capital and the deciding factor for that would not be the RBI rather bank’s own net worth. The better the company’s financial condition the more the credit line.