India’s Leading BFSI Companies 2020

XIX expansionwere the primary drivers of durable liquidity during the year, government spending shaped frictional liquidity movements. Reserve bank employed fixed and variable rate repo and reverse repo under the liquidity adjustment facility (LAF) and outright open market operations (OMOs), to align the weighted average call rate (WACR) – the operating target – with the policy repo rate. 2. Prudential policies: The Reserve Bank introduced a prudential framework for resolution of stressed assets, which aimed at ring-fencing and protecting the banking sector from build-up of non-performing assets (NPAs) stress. The modified framework aims at providing early recognition, reporting and time bound resolution of stressed assets, while providing strong disincentives in the form of additional provisioning for delays in initiation of resolution or insolvency proceedings. 3. Regulatory policies: New policies like corporate governance, central information system for banking infra, branch authorization policy for RRBs, new KYC framework were put in place and other policies were initiated for improving governance and reporting practices of banks. 4. Other supervisory policies like Prompt Corrective Action (PCA) framework was formulated. Also, Vijaya Bank and Dena Bank were merged with the Bank of Baroda; and central govt has proposed an amalgamation of 10 PSBs to form 4 merged entities with a view to creating next generation banks with strong national and global presence. Steps taken to resolve liquidity constraints: 1. Resolution of stressed assets: Effective mechanisms for faster resolution of stressed assets remain key to the revival of the banking system. The applicability of IBC has been expanded to cover certain categories of financial service providers (FSPs) as well, which would help in making the law comprehensive and more effective. 2. Sectoral stress: Subdued profitability of corporates has led to lower interest coverage ratio, also with risk aversive approach of banks led to higher non-performing assets (NPA) ratios. Due to these lenders have shifted from large industrial loans to retail loans. This diversification tool has been effective to some extent. 3. Recapitalization of PSBs: Government of India has been infusing capital in some PSBs for maintaining regulatory buffer. 4. Mechanism for early fraud detection: New initiatives like dedicated market intelligence units and increased use of data analytics are being taken up, also banks have been advised to monitor unconventional sources of information on a continuous basis confined not only to the borrowing entity but to the group as a whole. Dun & Bradstreet