Loading...

⚠ ✕
❮ Top
☎ Help
☰
×

By creating an account you can:

Logo TaxTMI
Call Us / Help / Feedback✕

Contact Us At :

✉ E-mail: [email protected]

✆ Call / WhatsApp at: +91 99117 96707

For more information, Check Contact Us

FAQs :

To know Frequently Asked Questions, Check FAQs

Most Asked Video Tutorials :

For more tutorials, Check Video Tutorials

Submit Feedback/Suggestion :

Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters 0/2000
Make Most of Text Search ✕
  1. Checkout this video tutorial: How to search effectively on TaxTMI.
  2. Put words in double quotes for exact word search, eg: "income tax"
  3. Avoid noise words such as : 'and, of, the, a'
  4. Sort by Relevance to get the most relevant document.
  5. Press Enter to add multiple terms/multiple phrases, and then click on Search to Search.
  6. Text Search
  7. The system will try to fetch results that contains ALL your words.
  8. Once you add keywords, you'll see a new 'Search In' filter that makes your results even more precise.
  9. Text Search
╳
Add to...
You have not created any category. Kindly create one to bookmark this item!
✕
Create New Category
Hide
Title :
Description :
❮❮ Hide
❮ Default View
Expand ❯❯
Close ✕
🔎 Filters / Advanced Search ❯
TEXT

Press 'Enter' to add multiple search terms. Rules for Better Search

Search In
Main Text + AI Text ❯
  • Main Text
  • Main Text + AI Text
  • AI Text
Category: ?
Categorized by AI
---- All Categories ---- ❯
  • ---- All Categories ----
  • Income Tax
  • GST
  • Customs, DGFT & SEZ
  • FEMA & RBI
  • Corp. Laws, SEBI & IBC
  • PMLA, Black Money & ED
  • Budget
  • News and Press Release
  • PTI News
Month:
---- All Months ---- ❯
  • ---- All Months ----
  • January
  • February
  • March
  • April
  • May
  • June
  • July
  • August
  • September
  • October
  • November
  • December
Year:
---- All Years ---- ❯
  • ---- All Years ----
  • 2026
  • 2025
  • 2024
  • 2023
  • 2022
  • 2021
  • 2020
  • 2019
  • 2018
  • 2017
  • 2016
  • 2015
  • 2014
  • 2013
  • 2012
  • 2011
Sort By: ?
In Sort By 'Default', exact matches for text search are shown at the top, followed by the remaining results in their regular order.
Relevance Default Date
    Gross and Net GST revenue collections for the month of September, 2026
    Release of the Annual Survey of Industries (2024-25) results
    5th Kautilya Economic Conclave to be held in New Delhi from 3 to 5 October 2026 under the theme “Resilience in an Age of Flux”
    CCI approves the acquisition of certain equity share capital in IndiaFirst Life Insurance Co. Ltd. by BNP Paribas Cardif
    CCI approves acquisition of certain equity shareholding in Continuum Green Energy Ltd by Chubu Electric Power Company Netherlands B.V.
    CCI approves acquisition of majority of the shares and voting rights in Volkswagen subsidiary Everllence SE by funds managed and/or advised by Bain Ca...
    CCI approves acquisition of 100% shareholding of FMC India by Crystal Crop Protection Ltd
    Commerce and Industry Minister Shri Piyush Goyal Arrives in Milwaukee, U.S. to Attend G20 Trade Ministers’ Meeting
    Monthly Review of Accounts of Union Government of India upto the month of August 2026 (FY 2026-27)
    Union Minister of Commerce and Industry Shri Piyush Goyal to Visit the United States to Participate in G20 Trade Ministers’ Meeting
    14th India-UAE High Level Joint Task Force Meeting Held in Mumbai
    CBDT extends due date for furnishing Return of Income for AY 2026-27 in respect of persons subject to audit under the Income-tax Act, 1961
    DRI busts pan-India gold smuggling network and seizes around 6.6 kg of foreign-origin gold worth more than Rs. 10 crore; 11, including a mastermind, a...
    CBN conducts anti-drug awareness programme for students under Mission Yuva Raksha for Nasha Mukt Bharat in Jaora, Madhya Pradesh
    CBN Rajasthan Unit seizes nearly four tonnes of contrabands in intensified enforcement operations across Rajasthan
    Union Minister of Commerce and Industry Shri Piyush Goyal Highlights Uttar Pradesh’s Growing Global Trade and Investment Opportunities
    Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman will embark on an official visit to Qatar from 27 to 29 September 2026
    USIBC bats for early conclusion of India-US trade deal
    Banks advise customers to complete essential transactions ahead of 3-day strike
    Centre to borrow Rs 7.86 lakh cr in Oct-Mar, FY27 borrowing slashed by Rs 1.2 lakh cr
❮
❯
❯❯
Maximize Maximize Maximize
0 / 200
Expand Note
Add to Folder

No Folders have been created

+

Are you sure you want to delete "My most important" ?

NOTE:

News
Showing Results for :
Reset Filters
Results Found:
Show All Summaries Hide All Summaries
October 1, 2026
Show AI Summary
GST revenue accounting distinguishes gross collections, refunds, net domestic and customs revenue, and SGST-IGST settlement reporting.
Gross GST revenue for September 2026 distinguishes domestic collections and IGST on imports; after domestic and ICEGATE refund adjustments, net revenue is calculated separately for domestic and customs GST. Cumulative collections through September similarly distinguish gross receipts, refunds and net revenue. SGST reporting compares pre-settlement receipts with post-settlement amounts that include the SGST portion of IGST settled to States and Union Territories. State and Union Territory revenue comparisons exclude GST on imported goods, while April-September domestic collections are split between Central and State formations.
October 1, 2026
Show AI Summary
Annual Survey of Industries results record broad manufacturing growth and define survey coverage, enumeration, digital data collection, and reliability limits.
ASI 2024-25 records broad-based growth in registered manufacturing, including establishments, output, Gross Value Added, employment, emoluments, fixed capital, invested capital, net income and net profit. The survey covers specified registered factories, bidi and cigar establishments, certain electricity undertakings, and qualifying large units in State-maintained business registers. Data are collected electronically under the statutory framework for collection of statistics using an establishment-based approach, with quality checks and caution required because the estimates arise from a sample survey.
October 1, 2026
Show AI Summary
Economic resilience policy dialogue examines financial stability, digital governance, trade fragmentation, and investment priorities amid global uncertainty.
The fifth Kautilya Economic Conclave will examine economic resilience amid global shocks through discussions on macroeconomic stability, monetary policy, financial stability, investment, fiscal federalism and capital-market development. Its agenda also covers digital economy governance, artificial intelligence, trade fragmentation, strategic autonomy, climate resilience, food systems, demographic change and global health security. Plenaries, parallel sessions and closed-door roundtables will consider policy responses and mobilisation of domestic and foreign capital for long-term investment.
September 30, 2026
Show AI Summary
Equity acquisition in a life insurer receives competition clearance for BNP Paribas Cardif's proposed investment.
Competition Commission of India approval covers a proposed combination under which BNP Paribas Cardif will acquire certain equity share capital in IndiaFirst Life Insurance Company Limited. The transaction is an acquisition of an ownership interest in an Indian life insurer. IndiaFirst Life Insurance Company Limited is incorporated in India, is an IRDAI-licensed insurer, and provides life insurance in India.
September 30, 2026
Show AI Summary
Merger control clearance permits Chubu's acquisition of equity in Continuum Green Energy through primary and secondary transactions.
Competition Commission of India approval covers the acquisition of certain equity shareholding in Continuum Green Energy Limited by Chubu Electric Power Company Netherlands B.V. The proposed combination comprises a primary subscription for, and secondary purchase of, the Target's equity shares from Continuum Green Energy Holdings Ltd., Singapore. The Target and its Indian subsidiaries primarily generate and sell renewable power from wind and solar sources.
September 30, 2026
Show AI Summary
Competition clearance authorises Bain Capital funds to acquire majority control of Everllence through a share transfer from Volkswagen.
Competition approval covers the indirect acquisition of a majority of the shares and voting rights in Everllence SE and its direct and indirect subsidiaries by funds managed or advised by Bain Capital Investors, LLC, from Volkswagen Aktiengesellschaft through a share transfer. Nikolaus (BC) Bidco GmbH acts as the purchaser and is a special purpose vehicle ultimately controlled by Bain Capital-managed or advised funds.
September 30, 2026
Show AI Summary
Full-shareholding acquisition in crop protection receives competition clearance, combining businesses spanning agrochemicals, seeds, and agricultural equipment.
Competition Commission of India approved Crystal Crop Protection Limited's acquisition of the entire, fully diluted shareholding of FMC India Private Limited from FMC Netherlands Holdings II B.V. and its affiliates. The approved combination comprises the acquisition of 100% of FMC India's shareholding by Crystal Crop. Crystal Crop is an Indian public limited company engaged in development, manufacture, and distribution of crop protection products, seeds, and agricultural equipment.
September 30, 2026
Show AI Summary
Investment facilitation supports cross-border manufacturing, technology, supply-chain, and business expansion partnerships between the two economies.
India-U.S. economic engagement extends beyond conventional trade to investment, manufacturing, technology, innovation, resilient supply chains, and high-value capabilities. Business engagement with manufacturing and technology companies addresses opportunities in India and expansion of partnerships. The Government of India indicates readiness to facilitate corporate operations, expansion, and investments in India.
September 30, 2026
Show AI Summary
Monthly fiscal accounts report receipts, tax devolution, and revenue and capital expenditure against budget estimates.
Monthly accounts up to August 2026 record total receipts of Rs.13,67,709 crore, comprising net tax revenue, non-tax revenue and non-debt capital receipts. Tax devolution to State Governments totals Rs.5,90,391 crore. Total expenditure is Rs.20,77,958 crore, divided between revenue expenditure of Rs.15,68,009 crore and capital expenditure of Rs.5,09,949 crore, with revenue expenditure including interest payments and major subsidies.
September 28, 2026
Show AI Summary
Rules-based multilateral trade engagement supports bilateral agreement negotiations, enterprise opportunities, investment partnerships, and developing-country policy space.
India's G20 trade engagement promotes a rules-based, open and non-discriminatory multilateral trading system while preserving policy space for developing countries. Bilateral discussions seek to expand opportunities for farmers, fishermen, women entrepreneurs, startups, MSMEs and other enterprises. India-United States engagement is intended to advance a balanced Bilateral Trade Agreement and an interim trade deal, alongside investment and industry outreach promoting manufacturing partnerships with Indian enterprises.
September 28, 2026
Show AI Summary
Cross-border investment facilitation under CEPA supports local-currency settlement, payment integration, joint projects and timely resolution of investor concerns.
Financial-sector cooperation covers local-currency settlement, integration of payment and messaging systems, and central-bank digital currencies, with steps to support timely implementation for more efficient, accessible and resilient bilateral trade and investment. The UAE-India Fast Track Mechanism remains available for addressing outstanding concerns affecting investments and companies in both jurisdictions, and the parties agreed to support timely resolution of such matters.
September 28, 2026
Show AI Summary
Return filing and tax audit deadlines are extended for the identified taxpayer category under the applicable statutory framework.
CBDT extends the Assessment Year 2026-27 Return of Income filing deadline for persons identified at serial no. 2 in the Table below Explanation 2 to section 139(1) of the Income-tax Act, 1961, from 31 October 2026 to 21 November 2026. The specified date for furnishing the audit report for the same class is extended from 30 September 2026 to 21 October 2026.
September 28, 2026
Show AI Summary
Courier-based gold smuggling enforcement targets concealed distribution through paper entities and foreign-origin gold consignments nationwide.
Coordinated customs enforcement targeted an organised gold-smuggling network that used courier consignments to distribute foreign-origin gold after cross-border entry. The operation led to seizure of 6.61 kg of gold bars under the Customs Act, 1962, and arrests of eleven associated persons. The network allegedly split gold into small consignments and used paper entities or persons without legitimate gold transactions to conceal distribution through courier channels.
September 28, 2026
Show AI Summary
Anti-drug awareness and cultivator outreach combine prevention, direct grievance redressal, and safeguards against illicit narcotics diversion.
Jan Sunwayi programmes provide direct, prompt and accessible grievance redressal for opium cultivators, including name corrections, Namantaran, and eligibility connected with the upcoming Settlement Operation. Cultivators are advised to avoid middlemen or intermediaries and seek clarification or assistance directly. These measures complement anti-drug awareness and preventive outreach aimed at preventing illegal trafficking, diversion and abuse of narcotic drugs and psychotropic substances.
September 28, 2026
Show AI Summary
NDPS enforcement targets concealed poppy straw, opium and cannabis trafficking through seizures, arrests, and continuing supply-chain investigation.
Narcotics enforcement operations in Rajasthan led to seizures of poppy straw, opium, hydroponic cannabis, cash, vehicles and a loaded country-made pistol, with four arrests. Poppy straw was recovered from vehicles and premises, including a truck where it was concealed beneath cement bags. Opium and cash were recovered from residential premises, while hydroponic cannabis concealed in an international parcel was recovered at the Foreign Post Office, Jaipur. The seized articles were taken under relevant provisions of the Narcotic Drugs and Psychotropic Substances Act, 1985, and supply-chain investigation continues.
September 28, 2026
Show AI Summary
Free trade agreement market access is positioned to expand export opportunities and international investment for local entrepreneurs.
Free Trade Agreement-led market access is positioned to expand international opportunities for entrepreneurs in Uttar Pradesh by supporting exports, investment inflows and access to overseas markets. International trade engagement is supported through direct business access to global markets, buyer-seller meetings and promotion of the State's products, cuisines and services. Export expansion, international investment, tourism and global recognition of State brands form the stated next phase of economic development, supported by coordination between governments and trade and industrial stakeholders.
September 28, 2026
Show AI Summary
Multilateral infrastructure cooperation guides annual development bank participation and bilateral engagement on sustainable investment and economic connectivity.
The official visit includes participation, as India's Governor, in the Annual Meeting of the Board of Governors of the Asian Infrastructure Investment Bank, alongside bilateral meetings and engagement with governmental leadership, business leaders and investors. The AIIB focuses on sustainable infrastructure and productive-sector investment in Asia to promote sustainable economic development, wealth creation and infrastructure connectivity.
September 25, 2026
Show AI Summary
Reciprocal trade agreement negotiations face tariff and subsidy pressures as both governments pursue lower bilateral trade barriers.
India-US bilateral trade negotiations seek completion of the first-phase Bilateral Trade Agreement through a reciprocal trade arrangement lowering trade barriers and tariffs. Further negotiations are required because of changed US tariff conditions, forced-labour tariffs on Indian goods, a possible investigation into excess industrial capacity and subsidies, and sanctions legislation relating to Russia. Ministerial and bilateral engagements will review progress on the proposed reciprocal arrangement.
September 25, 2026
Show AI Summary
Banking strike contingency measures direct customers toward advance transactions and digital channels as branch operations may be disrupted.
Banking-service continuity measures anticipate possible disruption from a three-day employee strike. Customers are advised to complete essential transactions in advance and use ATMs/ADWMs, mobile and internet banking, UPI, business correspondent points and other digital channels. Branch and office operations at participating institutions may be affected, while essential services are to be maintained where possible. Union demands include a five-day banking week, pension improvements and transition options from the National Pension System to the old pension scheme.
September 25, 2026
Show AI Summary
Government borrowing calendar: Reduced dated-securities borrowing will use weekly auctions, green bonds, switches and buyback operations.
Second-half dated-security borrowing will be completed through weekly auctions across maturities ranging from 3 years to 50 years, including Sovereign Green Bonds. Switching and buyback operations will continue to smooth the redemption profile, while a greenshoe option may permit retention of additional subscriptions. Treasury Bill borrowing will proceed through 91-day, 182-day and 364-day instruments. Auctions will offer non-competitive bidding for specified retail investors, and flexibility is retained to modify issuance terms or introduce non-standard maturity instruments, floating-rate bonds and inflation-indexed bonds.

News

Back

All News

Showing Results for :
Reset Filters
No Records Found

News

Back

All News

Customs, DGFT & SEZ

Indian Banking Sector: Role in Triggering Future Growth (Valedictory address delivered by Shri R. Gandhi, Deputy Governor at 6th ICC Banking Summit on June 14, 2014 at Taj Bengal, Kolkata)

June 16, 2014

Contents
Summary
Note

Note

-

Bookmark

Print

Print

Good evening, Ladies and Gentlemen!

2. It is both an honour and a privilege to attend this important Conference at the Indian Chamber of Commerce (ICC) in Kolkata. From humble beginnings in the early 1920s, the ICC has come a long way and has presently evolved into a leading national chamber operating from Kolkata. With banks being the mainstay of the financial system, I am sure that the deliberations in the Conference would have provided important insights to all attendees on how the banks' role is getting re-oriented in the new milieu. The Conference has a healthy mix of participants spanning not only representation from the Government and eminent commercial bankers, but also people from auditing firms and general audience. I am sure that this diversified representation would have provided a varied perspective to each of the issues being debated and thrown up possible solutions.

Financial Sector and Economic Growth

3. Banks' primary purpose is to mobilize otherwise idle savings for the purpose of lending to productive investments. A lot of research work has been undertaken to study the relationship between the financial sector and real sector economic growth. The old model of economic growth as a function of land i.e. capital, labour, technology and entrepreneurship has been modified. The new paradigm of economic growth is that it is a function of savings rate, return on investment and cost of intermediation. We can easily see the role and importance of the financial sector with regard to all of these three factors. Thus while there is consensus about finance having significant impact on the quantity, quality ie productivity and the efficiency of capital, jury is still out in determining whether it is the banks or capital market which drives economic growth. Research opinions and conclusions are equally divided. Very often the examples of the United States of America and the United Kingdom are quoted to prove that it is the capital market which drives growth. To counter that, the examples of Germany and Japan are quoted to establish that it is the banks which drive the growth.

4. Banks constitute the backbone of a nation’s financial system, performing manifold functions through liquidity, maturity and risk transformation. Indeed, it needs no gainsaying that the health of the economy is, in a way, the mirror reflection of the banking system, especially in bank-based financial systems such as ours. Of course, the reverse is also equally true. I am reminded of a saying that a bank is like heart of the human body and the capital it provides is akin to the blood in it. So long as the blood circulates seamlessly, the organs remain sound and healthy. However, if for any reason, the blood were not supplied to any organ, then that part would be rendered useless. Not surprisingly therefore, there is always a conscious attempt on the part of the Reserve Bank to provide adequate liquidity and credit to all productive sectors of the economy.

Indian Experience

5. India has the distinction of long history of both banks and capital market. Economic history of India narrates how both have been vibrant in many important cities, though Mumbai did dominate all others. However, slowly and steadily, especially in the last twenty five years or so after the financial sector reforms, the banking sector has emerged as THE source for investment funding.

6. What has been the actual contribution of banks for engineering investments in the Indian economy? Bank credit increased from Rs. 5 billion as at end March 1951, to Rs. 13 billion by March 1961, Rs. 47 billion by March 1971, Rs. 254 billion by March 1981, Rs. 1164 billion by March 1991, Rs. 5114 billion by March 2001, Rs. 39420 billion by March 2011 and Rs. 52604 billion by March 2013. What has been the contribution of capital market in these years? During the 1970s, while capital market helped raising Rs. 10 billion worth of equity, bonds and debentures, banks extended credit worth Rs. 207 billion in that period. During the 1980s, the corresponding figures were Rs. 233 billion and Rs. 910 billion. In the 1990s, they were Rs. 1172 billion and Rs. 3950 billion respectively and in 2000s they were Rs. 2115 billion and Rs. 34206 billion respectively. In the fiscal 2011 and 2012, Rs. 318 billion by the capital market and Rs. 13284 billion by banks.

7. Actually banks do extend funds by way of investment in the bonds and debentures. As these are heavily in government bonds, rather than in those issued by corporates and the split figures are not readily available, I have not included them here.

8. While we can lament the lackluster performance of the capital market, a redeeming feature has been the growth of private placement market in the past twenty years. Though the issues thereat had been predominantly in the form of bonds and debentures, the growth in size has been very reassuring. It gained popularity from mid 1990s; from 1995-96 to 2000-01, this market raised Rs. 752 billion, in the next ten years, it helped raise Rs. 7614 billion and in fiscal 2011-12 and 1012-13, this market raised Rs. 2009 billion.

9. While we are happy that banks have been doing such a wonderful yeoman service for the growth of the economy, will we be happy to continue to depend on bank financing as the predominant mode? Are we compelling the banks take too much risk, thereby endangering the depositors’ money?

10. However, taking note of the predominant position of banks in the Indian financial system and taking a realistic view, can we expect the bank finance to comprehensively cater to all types of investment needs? Irrespective of whether it is short, medium or long term, or whether it is loan, debt or equity financing, or it is with low, medium or higher risk propositions? Should we turn our banks like the universal banks in Germany, catering to every type of investment demand of the entire economy?

11. Or, alternatively, should we develop capital market so that it can cater the increasing need for investment and also risky investments? Like those in the USA?

12. These are sets of questions that we need to ponder over and take strategic decisions.

Twelfth Plan

13. 12th Five Year Plan aims to usher in faster, more inclusive and sustainable economic growth. It notes that today, India can sustain a GDP growth of 8 percent a year. Increasing this to 9 or 10 percent will need more mobilization of investment resources; better allocation of these resources through more efficient capital markets; higher investment in infrastructure through both public and PPP routes; and more efficient use of public resources.

14. Twelfth Plan has ambitious target for investments to usher in high growth rate of 8 percent during 2012-17. It aims to mobilise resources worth Rs. 5.4 trillion. The total public sector investment in infrastructure envisaged in the Twelfth Plan is Rs. 16 trillion by the Centre and Rs. 12.89 trillion by the States. Investment by the private sector, which includes PPP projects, makes up the balance of Rs. 26.83 trillion, which is 48.14 percent of the required investment during the Twelfth Plan, a much higher share than the anticipated 36.61 percent during the Eleventh Plan. Accordingly the Plan aims for an eclectic mix of development of capital market, more specifically debt market, besides exhorting bank finance.

15. Being from the Reserve Bank, let me ponder more over banks' role in the coming years.

Banking Sector Reforms

16. Leading economists most often cite the importance of sound financial sector reforms as being central to a healthy banking system that aids economic growth. India is the largest country in South Asia with an extensive financial system characterized by varied financial institutions, comprising of both banks and non-banks. Banks are the mainstay of the financial system with bank assets comprising, on average, around 70 percent of GDP during the post-reform period. The commercial banking segment comprises of 26 public sector banks in which government has majority equity stake, 20 private sector, including 7 de novo (which became operational after initiation of economic reforms in 1991) private banks, although RBI has recently done away with this distinction and over 40 foreign banks, which operate as branches.

17. Prior to the inception of financial sector reforms in 1991, the Indian financial system can best be characterized as highly regulated and financially repressed. The prevalence of high reserve requirements, interest rate controls and allocation of financial resources to pre-designated sectors adversely affected banks’ resource mobilization and allocation.

18. The period 1992-97 laid the foundations for reforms in the banking system. The reforms comprised of five major planks: cautious and proper sequencing, mutually reinforcing measures, complementarities between banking reforms and other associated policies (e.g., monetary, external, etc.), developing financial infrastructure and nurturing and developing financial markets. Some of the salient reforms undertaken in the financial system, included, among others, lowering of statutory reserve requirements; liberalizing the interest rate regime, first on the lending side and later, on the deposit side; infusing competition by allowing more liberal entry of foreign banks and permitting the establishment of de novo private banks; institution of prudential measures (capital adequacy requirements, income recognition, asset classification and provisioning norms for loans, exposure norms, accounting norms) and enhanced disclosures and levels of transparency in their annual audited statements to promote market discipline.

19. Over the period of reforms beginning 1992 through 2013, real bank assets have grown at a compound annual rate of about 10%; the growth rate of deposits and credit both in real terms, during the same period has been roughly of the order of 10% and 12%, respectively.

20. I am happy to note that the issues deliberated today are those that are likely to shape the future of the industry, going forward. I would like to take this opportunity to share with you my views on some of these and other related concerns, which, as I see it, will shape the contours of the industry in the years ahead.

Financing of infrastructure

21. The first issue, which immediately comes to my mind, is the issue of infrastructure financing. I am sure that this issue will also be uppermost in your minds as well. Inadequate infrastructure exerts a cascading impact on the economy, negatively affecting productivity, employment, personal income and international competitiveness and costs. The 12th Five Year Plan as mentioned earlier has estimated the infrastructure requirement at around INR 56 trillion, with a gradually increasing role for the private sector. Given the limited fiscal headroom and the long gestation lags involved in its fructification, there is a need to rope in long-term providers of funds.

Can banks chip in? Yes and in fact has already done so. As the capital market's significance has been waning, bank finance for infrastructure steadily grew. The outstanding bank credit to the infrastructure sector, which stood at Rs. 72 billion in 1999-2000, has increased to Rs. 7860 billion in 2012-13, registering a compounded annual growth rate (CAGR) of over 40 per cent against an overall CAGR of bank finance to all industries at 20 percent during the same period. However, this kind of growth and the general economic downturn and policy conundrum have resulted in concentration risk for banks (Infra funding is as high as 15% in the banking books); banks are saddled with large scale stress assets in the infra segment. Further, there is the structural problem of using short term nature of the bank funds for very long term funding. Banks did evolve a midway solution, of medium tenor funding for 12 to 15 years. This, though solved the initial problems, is fundamentally a weak arrangement and the recent stress period has brought the cracks into open. Banks will have to appropriately structure their infrastructure lending keeping in view their asset-liability mix; they also may have to raise long term resources. They should develop long-tenor fixed rate or floating rate products or develop appropriate hedging instruments to tackle counterparty and other risks. Takeout finance is another possible solution, as do Infrastructure Debt Funds (IDFs). These initiatives are presently at a nascent stage, but hold long-term promise.

22. Over the longer-term, an efficient and vibrant corporate bond market is a sine qua non for ensuring viable financing of infrastructure. By facilitating long-term funding for the sector, it can provide much-needed debt capital that will be beneficial to both borrowers and investors alike. This will also ensure deep and broad financial markets, one of the key pillars of RBI’s financial sector policies.

Financing of SMEs

23. A second issue I would like to touch upon is the financing of micro, small and medium enterprises or MSMEs, as we call them. In 2011-12, the sector accounted for a significant proportion of manufactured output and over 12 per cent of our GDP. In addition to their strong export orientation, they also have a strong employment potential, providing bread- and butter to nearly 100 million people, perhaps next only to the agricultural sector. With a big chunk of them being located in rural areas, it also offers tremendous potential for rural development. Given their forward and backward linkages with the corporate sector, I view them as "silent" engines of growth, especially in slow economic cycles.

24. Numerous studies have documented that, given the lack of reputation and tangible collateral, debt financing, mostly from informal sources, comprises the primary source of external funds for these entities. Given the often onerous documentation requirements for banks, these entities tend to get a raw deal when it comes to bank finance. The Fourth Census of MSME revealed that only 5.2 per cent of the units (both registered and unregistered) had availed of finance through institutional sources; the majority of units - 93% of them in fact - had either no finance or depended on self-finance. A World Bank Enterprise Survey in 2011 also reinforces these conclusions. The moot point is that the credit flow to MSMEs from institutional sources is not commensurate with the economic activity undertaken by them.

25. A RBI Discussion Paper in 2013 had propounded an innovative combination of banks and private equity, with a potential role of state in providing credit enhancement mechanisms/ solutions as a way out of this credit constraint. It also put forth the proposal that small banks can provide a useful role by catering to the needs of this segment, for example, through relationship banking.

26. There is also an oft-heard complaint from bankers that MSMEs are often quite lackadaisical when it comes to settling their dues. It needs to be recognised that MSMEs often act as ancillaries to large industries, and their cash flows are lumpy. The business orientation of large industries often affects the MSMEs directly, in turn hampering the recycling of funds and business operation of MSME units. Banks need to take a proactive view, carefully analyzing the linkages of the MSME units, when sanctioning funds. The existing provisions of the Interest on Delayed Payment Act, 1998 for these entities have been suitably modified taking on board their unique characteristics. In addition, banks have been advised to sanction separate sub-limits within the overall limits sanctioned to the corporate borrowers for meeting payment obligations in respect of purchases from MSME sector. The Parliament has passed the Factoring Regulation Bill that is expected to address delays in payment and liquidity problems of micro and small enterprises. I am sure that these measures will contribute in no small measure towards alleviating the extant constraints that plague this sector.

Mobilising Resources

27. As we have seen, country needs enormous resources for its development. How do we raise them? Banking sector has a major role here, in mobilizing the savings of the people. As at end March 2014, the scheduled commercial banks had mobilized deposits to the tune of Rs. 76 trillion. There are 146 scheduled commercial banks (including the Regional Rural Banks) in the country, with more than 1.2 lakh branches undertaking this activity. However, to support economic growth, we need to reach out more and hence there is a need for more banks to be functioning in India. Not just more banks, perhaps we need more variety of banks. I am not talking about public, private, foreign bank variety here. I am talking about the variety of functions that they will undertake, the niche in which they want to excel. Accordingly, the Reserve Bank has decided to license more banks. Two licenses we have given recently. We intend to offer this on tap basis. We are working on new set of guidelines for both full service commercial banks and differentially licensed banks. We hope that with more number of players, the banking sector will mobilize more resources for funding faster economic growth, will bring in financial inclusion and thereby support inclusive growth in a sustainable way.

Conclusion

28. I have touched upon several issues that are of contemporary relevance and are expected to remain important for quite some time in the near future. Conferences such as these offer a platform for interchange of views in a structured and systemic manner, whilst taking into consideration the regional-specific concerns as well. I hope that the organizers will not stop at this one-off Conference and instead, will arrange follow-up discussions to further brain storm the issues and ensure that the discussions reach their logical conclusion.

29. Thank you.

Topics

Acts Income Tax