PressInformationBureau

GovernmentofIndia
MinistryofFinance
27February201512:12IST

MajorReformInitiativesUndertakenbyGovernmentinBanking,InsuranceandFinancial
Sector
EconomicSurvey201415statesthatliquidityconditions(moneysupply)
haveremainedbroadlybalancedduring20142015exceptforsometemporarytightconditionsdue
to delayed government expenditure. Steps taken by the Reserve Bank of India (RBI) played a
positiveroleinmanagingtheliquidityconditions.
Till January 2015, RBI had kept the policy rates unchanged. As inflationary conditions
eased, RBI softened the monetary policy by cutting the Repo rates by 25 basis points in
January2015(from8%to7.75%).
TheReserveBankofIndia(RBI)alsoadoptednewConsumerPriceIndex(combined)asthe
measurefornominalanchor(HeadlineCPI)forpolicycommunication.

EconomicSurvey201415alsomentionsaboutthemanyreforminitiatives
undertakeninthebankingsectorduring20142015.Theseinclude

1. Banks being allowed to raise capital from the market to meet capital adequacy norms by
dilutingthegovernmentsstakeupto52percent.

2. PradhanMantriJanDhanYojanalaunchedtoprovideuniversalaccesstobankingfacilities
withatleastonebasicbankingaccountforeveryhousehold.

3.InApril2014,twoapplicantshavebeengrantedinprincipleapprovaltosetupnewbanksin
theprivatesectorwithin18months.

4.RBIreleasedguidelinesandinvitedapplicationsforsettinguppaymentsbanksandlocalarea
banks.

AccordingtoEconomicSurvey,FY20142015sawsomestresson
theassetqualityoftheScheduledCommercialBanksastherewasanincreaseingrossNPA
(NonPerformingAdvances)tothetotalgrossadvances.NPAincreasedfrom4.1%(March
2014) to 4.5 %( September 2014). As on June 2014 , five subsectors, viz. Infrastructure,
Textiles, Iron & Steel, Mining and aviation hold 54% of total stressed advances of Public
SectorBanks.
ActionstakenbyRBItodealwithNPAs
1. Issued guidelines, prompting banks to act as soon as a sign of stress is noticed in
borrowersactionsandnottowaitforittobecomeaNPA.
2. Tightened norms to Asset Reconstruction Companies, increasing the minimum
investmentinsecurityreceiptsto15%from5%.
3. Issuedguidelinestobringflexibilityinprojectloanstoinfrastructureandcoreindustry
projects.

20142015alsosawadeclineinthegrowthofbankcreditduetohigh
accretionofNRIdepositsandalsoduetolowdepositmobilization


EconomicSurveypointsoutthatinsurancepenetrationinIndiahas
grownfrom2.3%in2000t03.9%in2013.Thisinsurancepenetrationlevelcompareswell
withtheemergingmarketeconomies.Thesectorregisteredagrowthof9.4%during2013
14withLifeInsuranceCorporationofIndiaregistering13.5%growth.
ReforminitiativesinInsurancesectorduring20142015

1.PromulgationofInsurancesLaws(Amendment)Ordinance2014:
toremovearchaicandredundantprovisionsininsurancelaws
empoweringInsuranceRegulatoryandDevelopmentAuthoritytoenablemore
effectiveregulation
toincreasetheforeignequitycapinIndianInsuranceCompaniesfrom26%to
49%

EquityMarketscontinuetodowellforthefinancialyear20142015as
pertheEconomicSurvey201415.Thebenchmarkindices,BSESensexandNiftyshoweda
general upward trend in the current year with growth rates of 29.9 % and 31.4 % year on
year.
Reforminitiativesinfinancialsectorduring20142015
1.ImprovementinCorporateGovernancenorms
2. Establishmentofaforeignportfolioinvestorforbetterfunctioningofbothprimary
andsecondarymarkets

Overall Economic Survey 201415 talks about increased financial inclusion,

improvedinsurancepenetrationandfastgrowingequitymarketsinIndia.Italsodwells
into the problems faced by the banking sector and the major policy initiatives by the
governmenttoenablethegrowthofbanking,insuranceandfinancialsectors.

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DSM/AR