What is Commercial Bank?

A commercial bank is a kind of financial institution that carries all the operations
related to deposit and withdrawal of money for the general public, providing loans
for investment, and other such activities. These banks are profit-making
institutions and do business only to make a profit.
The two primary characteristics of a commercial bank are lending and borrowing.
The bank receives the deposits and gives money to various projects to earn interest
(profit). The rate of interest that a bank offers to the depositors is known as the
borrowing rate, while the rate at which a bank lends money is known as the
lending rate.

Function of Commercial Bank:

The functions of commercial banks are classified into two main divisions.
(a) Primary functions
Accepts deposit : The bank takes deposits in the form of saving, current, and
fixed deposits. The surplus balances collected from the firm and individuals are
lent to the temporary requirements of the commercial transactions.
Provides loan and advances : Another critical function of this bank is to offer
loans and advances to the entrepreneurs and business people, and collect interest.
For every bank, it is the primary source of making profits. In this process, a bank
retains a small number of deposits as a reserve and offers (lends) the remaining
amount to the borrowers in demand loans, overdraft, cash credit, short-run loans,
and more such banks.
Credit cash: When a customer is provided with credit or loan, they are not
provided with liquid cash. First, a bank account is opened for the customer and
then the money is transferred to the account. This process allows the bank to create
money.
(b) Secondary functions
Discounting bills of exchange: It is a written agreement acknowledging the
amount of money to be paid against the goods purchased at a given point of time in
the future. The amount can also be cleared before the quoted time through a
discounting method of a commercial bank.
Overdraft facility: It is an advance given to a customer by keeping the current
account to overdraw up to the given limit.
Purchasing and selling of the securities: The bank offers you with the facility of
selling and buying the securities.
Locker facilities: A bank provides locker facilities to the customers to keep their
valuables or documents safely. The banks charge a minimum of an annual fee for
this service.
Paying and gathering the credit : It uses different instruments like a promissory
note, cheques, and bill of exchange.

Types of Commercial Banks:

There are three different types of commercial banks.
Private bank –: It is a type of commercial banks where private individuals and
businesses own a majority of the share capital. All private banks are recorded as
companies with limited liability. Such as Housing Development Finance
Corporation (HDFC) Bank, Industrial Credit and Investment Corporation of India
(ICICI) Bank, Yes Bank, and more such banks.
Public bank –: It is a type of bank that is nationalised, and the government holds
a significant stake. For example, Bank of Baroda, State Bank of India (SBI), Dena
Bank, Corporation Bank, and Punjab National Bank.
Foreign bank –: These banks are established in foreign countries and have
branches in other countries. For instance, American Express Bank, Hong Kong and
Shanghai Banking Corporation (HSBC), Standard & Chartered Bank, Citibank,
and more such banks.

Characteristics of Commercial Banks:

1. Commercial banks lend money to almost all sizes of businesses and firms.
2. The credibility and paying capacity of the firm is examined comprehensively
before lending loan to any firm.
 3. A commercial bank is an easy and flexible source of accepting and
withdrawing money.
4. These are the economical source of funds as it manages deposits and
withdrawals at a low cost and involves no hidden cost.
5. It generally provides the loan against some security.
6. Loans from commercial banks do not require much formality, but have to
fulfil the terms and conditions laid by the banks.

What is 'Payments Banks'

Definition: A payments bank is like any other bank, but operating on a smaller
scale without involving any credit risk. In simple words, it can carry out most
banking operations but can’t advance loans or issue credit cards. It can accept
demand deposits (up to Rs 1 lakh), offer remittance services, mobile
payments/transfers/purchases and other banking services like ATM/debit cards, net
banking and third party fund transfers.

Description: In September 2013, the Reserve Bank of India constituted a

committee headed by Dr Nachiket Mor to study 'Comprehensive financial services
for small businesses and low income households'. The objective of the committee
was to propose measures for achieving financial inclusion and increased access to
financial services.

The committee submitted its report to RBI in January 2014. One of the key
suggestions of the committee was to introduce specialised banks or ‘payments
bank’ to cater to the lower income groups and small businesses so that by January
1, 2016 each Indian resident can have a global bank account.
Why payments banks? The main objective of payments bank is to widen the spread
of payment and financial services to small business, low-income households,
migrant labour workforce in secured technology-driven environment.

With payments banks, RBI seeks to increase the penetration level of financial
services to the remote areas of the country.

Existing prepaid payment instruments (PPI model) like Airtel Money does not give
pay any interest on deposits.

Features of Payment Banks

 They are differentiated and not universal banks.
 These operate on a smaller scale.
 It needs to have a minimum paid-up capital of Rs. 100,00,00,000.
 Minimum initial contribution of the promoter to the Payment Bank to the
paid-up equity capital shall at least be 40% for the first five years from the
commencement of its business.

Activities That Can Be Performed By Payment Banks

 Payment banks can take deposits up to Rs. 2,00,000. It can accept demand
deposits in the form of savings and current accounts.
 The money received as deposits can be invested in secure government
securities only in the form of Statutory Liquidity Ratio (SLR). This must
amount to 75% of the demand deposit balance. The remaining 25% is to be
placed as time deposits with other scheduled commercial banks.
 Payments banks will be permitted to make personal payments and
receive cross border remittances on the current accounts.
 It can issue debit cards.
Activities That Cannot Be Undertaken By Payment Banks
 Payment banks receive a ‘differentiated’ bank license from the RBI and
hence cannot lend.
 Payment banks cannot issue credit cards.
 It cannot accept time deposits or NRI deposits.
 It cannot issue loans.
 It cannot set up subsidiaries to undertake non-banking financial activities.

Small Finance Bank

Meaning
 Small Finance Banks are the financial institutions which provide financial
services to the unserved and unbanked region of the country.
  They are registered as a public limited company under the Companies Act,
2013.
Objective
 Access to financial services: The main purpose behind having small finance
banks is to expand access to financial services in rural and semi-urban areas.
These banks can do almost everything that a normal commercial bank can
do but at a much smaller scale.
 Basic banking services: It will offer basic banking services, accept deposits
and lend to underserved sections of customers, including small business
units, small and marginal farmers, micro and small industries, and even
entities in the unorganised sector.
 Alternative institution: Small finance banks have the potential to provide
an alternative to some of the existing institutions with their mandated focus
on small and medium businesses, the informal sector, small and marginal
farmers and thus on increasing financial inclusion and serving a variety of
unserved clients in the hinterland and tier three and four cities and towns.

Importance of Small Finance Banks:

The small finance banks being an important part of the banking system have
various important features that are mentioned below:

 The small finance banks have no restrictions on where they can operate
 They have open permission to operate in any desired location given they fall under
proper proximity
 Small Finance Banks are just like any other commercial bank when it comes to risk
management
 The company has to submit CRR and SLR like commercial banks
 The small finance banks should mainly focus on the important sectors like
agriculture and small business
 The small business bank needs to have at least half of its loan portfolio as loans
and advances to microfinance business
Co-operative Banks in India

A co-operative bank is a small-sized, financial entity, where its members are the
owners and customers of the Bank. They are regulated by the Reserve Bank of
India (RBI) and are registered under the States Cooperative Societies Act.
The Co-operative Banks have recently been in news after RBI’s restrictions on one
of the leading banks, where they were denied any kind of money withdrawal. This
incident of the Punjab and Maharashtra Co-operative Bank (PMC) has raised
questions over the reliability of such financial entities.

features of Co-operative Banking in India:

 They work on the principle of ‘one person, one vote’. Since these banks are
owned by the members, a Board of Directors is chosen democratically and
then they are responsible for controlling the Organisation
 Farmers can avail agricultural loans on minimum interest rates from the Co-
operative Banks
 Providing easy and accessible loans and credit benefits in the rural areas
with scarce banking facilities
 The annual profit earned is spent on financial reserves and required
resources and a part of it is distributed among the Co-operative members, as
per the prescribed limitations

Advantages of Co-operative Banks

The Co-operative banks have acted as a boon to various sectors of Indian society
and also played an important role in the development of the economy.
Given below are a few advantages of the Co-operative Banks in India:
 These banks have provided aid to the rural population by granting loans and
credits with interest rates, lower in comparison to that asked by local money
lenders
 They have their reach at every corner of the country and have managed to
maintain a personal rapport with the customers
 Since the bank is owned and governed by the members themselves, they do
not seek huge profits and believe in mutual help
 The interest rate on deposits is high and on loans is low
 They promote productive borrowing, in order to reduce the risk of loss
 Co-operative Banks have helped the farmers by providing them agricultural
credits to buy basic products like fertilizer, seeds, etc.
Disadvantages of Co-operative Banks
Discussed below are a few disadvantages of the Co-operative Banks in India:
 To lend money, they need investors which are tough to find
 Over the years, the number of NPAs and overdues have been increasing
 Since the lack of investors and money, few of them have not been delivering
the credits and money to the rural population
 Rather than small industrialists, the benefits from Co-operative Banks have
been enjoyed by rich landowners
 The Co-operative Banks across the country are not equally developed. A few
states have more functioning and beneficial units, while some states have
faced loss
 Political interference has also been observed in these banks
 With new types of banks opening up, the Co-operative Banks are facing the
risk of losing their customers
LATEST INITIATIVE IN FINANCIAL SECTOR-

Pradhan Mantri Jan Dhan Yojana (PMJDY)

Hon’ble Prime Minister announced Pradhan Mantri Jan Dhan Yojana as the
National Mission on Financial Inclusion in his Independence Day address on 15th
August 2014, to ensure comprehensive financial inclusion of all the households in
the country by providing universal access to banking facilities with at least one
basic bank account to every household, financial literacy, access to credit,
insurance and pension facility. Under this, a person not having a savings account
can open an account without the requirement of any minimum balance and, in case
they self-certify that they do not have any of the officially valid documents
required for opening a savings account, they may open a small account. Further, to
expand the reach of banking services, all of over 6 lakh villages in the country
were mapped into 1.59 lakh Sub Service Areas (SSAs), with each SSA typically
comprising of 1,000 to 1,500 households, and in the 1.26 lakh SSAs that did not
have a bank branch, Bank Mitras were deployed for branchless banking.
Thus, PMJDY offers unbanked persons easy access to banking services and
awareness about financial products through financial literacy programmes. In
addition, they receive a RuPay debit card, with inbuilt accident insurance cover of
Rs. 2 lakh, and access to overdraft facility upon satisfactory operation of account
or credit history of six months. Further, through Prime Minister’s Social Security
Schemes, launched by the Hon’ble Prime Minister on 9th May 2015, all eligible
account holders can access through their bank accounts personal accident
insurance cover under Pradhan Mantri Suraksha Bima Yojana, life insurance cover
under Pradhan Mantri Jeevan Jyoti Bima Yojana, and guaranteed minimum
pension to subscribers under Atal Pension Yojana.
PMJDY was conceived as a bold, innovative and ambitious mission. Census 2011
estimated that out of 24.67 crore households in the country, 14.48 crore (58.7%)
had access to banking services. In the first phase of the scheme, these households
were targeted for inclusion through opening of a bank account within a year of
launch of the scheme. The actual achievement, by 26th January 2015, was 12.55
crore. As on 27.3.2019, the number of accounts has grown to 35.27 crore. Further,
in 2011, only 0.33 lakh SSAs had banking facility and through provision of Bank
Mitras in 1.26 lakh branchless SSAs, banking services were extended throughout
rural India. The inclusive aspect of this is evident from the fact that 20.90 crore
(60%) of PMJDY accounts are in rural areas and 18.74 crore (over 53%) PMJDY
account holders are women.
The deposit base of PMJDY accounts has expanded over time. As on 27.3.2019,
the deposit balance in PMJDY accounts was Rs. 96,107 crore. The average deposit
per account has more than doubled from Rs. 1,064 in March 2015 to Rs. 2,725 in
March 2019.
The Bank Mitra network has also gained in strength and usage. The average
number of transactions per Bank Mitra, on the Aadhaar Enabled Payment System
operated by Bank Mitras, has risen by over eightyfold, from 52 transactions in
2014-15 to 4,291 transactions in 2016-17.
From Jan Dhan to Jan Suraksha
For creating a universal social security system for all Indians, especially the poor
and the under-privileged the Hon’ble Prime Minister launched three Social
Security Schemes in the Insurance and Pension sectors on 9th of May, 2015.
Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)
The PMJJBY is available to people in the age group of 18 to 50 years having a
bank account who give their consent to join / enable auto-debit. Aadhar is the
primary KYC for the bank account. The life cover of Rs. 2 lakh is for the one year
period stretching from 1st June to 31st May and is renewable. Risk coverage under
this scheme is for Rs. 2 lakh in case of death of the insured, due to any reason. The
premium is Rs. 436 per annum which is to be auto-debited in one installment from
the subscriber’s bank account as per the option given by him on or before 31st May
of each annual coverage period under the scheme. The scheme is being offered by
the Life Insurance Corporation and all other life insurers who are willing to offer
the product on similar terms with necessary approvals and tie up with banks for
this purpose. As on 30.06.2022, cumulative gross enrollment reported by banks
subject to verification of eligibility, etc. is over 13.11 crore under PMJJBY. A total
of 6,21,372 claims were registered under PMJJBY of which 5,92,192 have been
disbursed.
Pradhan Mantri Suraksha Bima Yojana (PMSBY)
The Scheme is available to people in the age group 18 to 70 years with a bank
account who give their consent to join / enable auto-debit on or before 31st May
for the coverage period 1st June to 31st May on an annual renewal basis. Aadhar
would be the primary KYC for the bank account. The risk coverage under the
scheme is Rs. 2 lakh for accidental death and full disability and Rs. 1 lakh for
partial disability. The premium of Rs.20 per annum is to be deducted from the
account holder’s bank account through ‘auto-debit’ facility in one instalment. The
scheme is being offered by Public Sector General Insurance Companies or any
other General Insurance Company who are willing to offer the product on similar
terms with necessary approvals and tie up with banks for this purpose. As on
30.06.2022, cumulative gross enrolment reported by Banks subject to verification
of eligibility, etc. is over 29.01 crore under PMSBY. A total of 1,26,505 Claims
were registered under PMSBY of which 1,00,052 have been disbursed.
Atal Pension Yojana (APY)
APY was launched on 9th May, 2015 by the Prime Minister. APY is open to all
saving bank/post office saving bank account holders in the age group of 18 to 40
years and the contributions differ, based on pension amount chosen. Subscribers
would receive the guaranteed minimum monthly pension of Rs. 1,000 or Rs. 2,000
or Rs. 3,000 or Rs. 4,000 or Rs. 5,000 at the age of 60 years. Under APY, the
monthly pension would be available to the subscriber, and after him to his spouse
and after their death, the pension corpus, as accumulated at age 60 of the
subscriber, would be returned to the nominee of the subscriber. The minimum
pension would be guaranteed by the Government, i.e., if the accumulated corpus
based on contributions earns a lower than estimated return on investment and is
inadequate to provide the minimum guaranteed pension, the Central Government
would fund such inadequacy. Alternatively, if the returns on investment are higher,
the subscribers would get enhanced pensionary benefits.
In the event of pre-mature death of the subscriber, Government has decided to give
an option to the spouse of the subscriber to continue contributing to APY account
of the subscriber, for the remaining vesting period, till the original subscriber
would have attained the age of 60 years. The spouse of the subscriber shall be
entitled to receive the same pension amount as that of the subscriber until the death
of the spouse. After the death of both the subscriber and the spouse, the nominee of
the subscriber shall be entitled to receive the pension wealth, as accumulated till
age 60 of the subscriber. As on 31st March, 2019, a total of 149.53 lakh
subscribers have been enrolled under APY with a total pension wealth of Rs.
6,860.30 crore.
Pradhan Mantri Mudra Yojana
The scheme was launched on 8th April 2015. Under the scheme a loan of upto Rs.
50,000 is given under sub-scheme ‘Shishu’; between Rs. 50,000 to 5.0 Lakhs
under sub-scheme ‘Kishore’; and between 5.0 Lakhs to 10.0 Lakhs under sub-
scheme ‘Tarun’. Loans taken do not require collaterals. These measures are aimed
at increasing the confidence of young, educated or skilled workers who would now
be able to aspire to become first generation entrepreneurs; existing small
businesses, too, will be able to expand their activates. As on 31.03.2019, Rs.
3,21,722 crores sanctioned (Rs. 142,345 cr. - Shishu, Rs. 104,386 cr. Kishore and
Rs. 74,991 cr. - Tarun category), in 5.99 crores accounts.
Stand Up India Scheme
Government of India launched the Stand Up India scheme on 5th April, 2016. The
Scheme facilitates bank loans between Rs.10 lakh and Rs.1 crore to at least one
Scheduled Caste/ Scheduled Tribe borrower and at least one Woman borrower per
bank branch for setting up greenfield enterprises. This enterprise may be in
manufacturing, services or the trading sector. The scheme which is being
implemented through all Scheduled Commercial Banks is to benefit at least 2.5
lakh borrowers. The scheme is operational and the loan is being extended through
Scheduled Commercial Banks across the country.
Stand Up India scheme caters to promoting entrepreneurship amongst women, SC
& ST category i.e those sections of the population facing significant hurdles due to
lack of advice/mentorship as well as inadequate and delayed credit. The scheme
intends to leverage the institutional credit structure to reach out to these
underserved sectors of the population in starting greenfield enterprises. It caters to
both ready and trainee borrowers.
To extend collateral free coverage, Government of India has set up the Credit
Guarantee Fund for Stand Up India (CGFSI). Apart from providing credit facility,
Stand Up India Scheme also envisages extending handholding support to the
potential borrowers. It provides for convergence with Central/State Government
schemes. Applications under the scheme can also be made online on the dedicated
Stand Up India portal(www.standupmitra.in). As on 31.03.2019, Rs. 16,085 crore
has been sanctioned in 72,983 accounts (59,429 – women, 3,103-ST and 10,451 –
SC).
Pradhan Mantri Vaya Vandana Yojana
The ‘Pradhan Mantri Vaya Vandana Yojana (PMVVY) has been launched by the
Government to protect elderly persons aged 60 years and above against a future
fall in their interest income due to uncertain market conditions, as also to provide
social security during old age. The scheme is implemented through the Life
Insurance Corporation of India (LIC) and open for subscription upto 31st March,
2023.
PMVVY offers an assured rate of return 7.40% per annum for the financial year
2020-21 for policy duration of 10 years. In subsequent years, while the scheme is
in operation, there will be annual reset of assured rate of return with effect from
April 1st of the financial year in line with applicable rate of return of Senior
Citizens Saving Scheme(SCSS) upto a ceiling of 7.75% with fresh appraisal of the
scheme on breach of this threshold at any point.
Mode of pension payment under the Yojna is on a monthly, quarterly, half-yearly
or annual basis depending on the option exercised by the subscriber. Minimum
purchase price under the scheme is Rs. 1,62,162/- for a minimum pension of Rs.
1000/- per month and the maximum purchase price is Rs. 15 lakh per senior citizen
for getting a pension amount of Rs. 9,250/- per month.

Pradhan Mantri Mudra Yojana (PMMY)

Pradhan Mantri MUDRA Yojana (PMMY) is a scheme launched by the Hon’ble
Prime Minister on April 8, 2015 for providing loans upto 10 lakh to the non-
corporate, non-farm small/micro enterprises. These loans are classified as MUDRA
loans under PMMY. These loans are given by Commercial Banks, RRBs, Small
Finance Banks, Cooperative Banks, MFIs and NBFCs. The borrower can approach
any of the lending institutions mentioned above or can apply online through this
portal. Under the aegis of PMMY, MUDRA has created three products namely
'Shishu', 'Kishore' and 'Tarun' to signify the stage of growth / development and
funding needs of the beneficiary micro unit / entrepreneur and also provide a
reference point for the next phase of graduation / growth.
 What is Financial Inclusion?
Financial inclusion refers to the provision of equally available and affordable
access to financial services for everyone, regardless of their level of income. It
applies to providing services to both individuals and businesses.

Understanding Financial Inclusion

Financial inclusion is not only important for people in undeveloped countries. It’s
estimated that as many as one-fourth of people in the United Kingdom are low-
income individuals with limited access to financial services.
A policy of financial inclusion is a focus of the World Bank, as demonstrated by
its Universal Financial Access 2020 initiative. The initiative aims to provide at
least one billion people worldwide with at least basic access to financial services,
such as maintaining a bank account or other financial account from which they can
send and receive payments and store their money.
By the World Bank’s estimate, about 1.7 billion adults – roughly one-third of the
world’s adult population as of 2020 – are unbanked or underbanked.
The United Nations Development Programme (UNDP) is another initiative that
lists increased financial inclusion as one of its goals. The UN’s financial inclusion
projects also include a particular focus on aiding unbanked or underbanked
women.
The private sector also strives for greater financial inclusion, which has been
shown to provide an economic boost to countries. Of course, greater financial
inclusion also means greater potential profits for banks and other financial
institutions.

Benefits of financial inclusion:

 The rural masses will get access to banking like cash receipts, cash
payments, balance enquiry and statement of account can be completed using
fingerprint authentication. The confidence of fulfilment is provided by issuing
an online receipt to the customer.
 Reduction in cash economy as more money is brought into the banking
ecosystem

 It inculcates the habit to save, thus increasing capital formation in the country
and giving it an economic boost.

 Direct cash transfers to beneficiary bank accounts, instead of physical cash

payments against subsidies will become possible. This also ensures that the
funds actually reach the intended recipients instead of being siphoned off
along the way.

 Availability of adequate and transparent credit from formal banking channels

will foster the entrepreneurial spirit of the masses to increase output and
prosperity in the countryside.
Hence, it is believed that financial inclusion can initiate the next revolution of
growth and prosperity. In the 21st century, India has been pulling all the right
levers to advance financial inclusion and economic citizenship by channeling
its own transactions to lubricate the system. India’s journey towards economic
ascension relies on how the 65% unbanked population of India (conservative
2012 estimate by World Bank) is enabled with financial infrastructure.
What Is a Nonperforming Asset (NPA)?
A nonperforming asset (NPA) refers to a classification for loans or advances that
are in default or in arrears. A loan is in arrears when principal or interest payments
are late or missed. A loan is in default when the lender considers the loan
agreement to be broken and the debtor is unable to meet his obligations.

How Nonperforming Assets (NPA) Work

Nonperforming assets are listed on the balance sheet of a bank or other financial
institution. After a prolonged period of non-payment, the lender will force the
borrower to liquidate any assets that were pledged as part of the debt agreement. If
no assets were pledged, the lender might write-off the asset as a bad debt and then
sell it at a discount to a collection agency.
In most cases, debt is classified as nonperforming when loan payments have not
been made for a period of 90 days. While 90 days is the standard, the amount of
elapsed time may be shorter or longer depending on the terms and conditions of
each individual loan. A loan can be classified as a nonperforming asset at any point
during the term of the loan or at its maturity.

Categories of NPA
There are different types of non-performing assets depending on how long they
remain in the NPA category.
a) Sub-Standard Assets
An asset is classified as a sub-standard asset if it remains as an NPA for a period
less than or equal to 12 months.
b) Doubtful Assets
An asset is classified as a doubtful asset if it remained as an NPA for more than 12
months.
c) Loss Assets
An asset is considered as a loss asset when it is “uncollectible” or has such little
value that its continuance as a bankable asset is not suggested. However, there may
be some recovery value left in it as the asset has not been written off wholly or in
parts.

Reasons behind NPAs

 Restrictions on mining projects, options, delays in environmental permits
affecting the iron and steel sector, fluctuations in raw material prices and reduced
availability of electricity have all affected the repayment efficiency of these loans.
 Non-discriminatory lending by some state-owned banks during the period of high
growth 2004 is a major reason.
 Lack of strictness in credit assessment system and monitoring of warning signs in
state-run banks.
 Banks use poor recovery and coercion techniques to recover loans.
 Debt waiver policy is one of the main reasons for the NPA.
 Rising system of fraud in India who left the country after taking loans from
banks.
 Poor monitoring system and poor banking management.
 The wait-and-watch approach of banks is often cited as the reason for the rising
NPAs.
 Slow legal system (judiciary in India) and lack of systematic and sustained
efforts by banks make it difficult to recover these loans from both corporate and
non-corporate countries.

REASONS FOR NPA

The following are the reasons for the mounting NPAs in banks during the recent
past:
• Diversion of funds by borrowers.
• No strong legal actions against defaulters
• Political interferences in the lending process.
• Lack of follow-up supervision
• Loans to economically weaker section contributes for more NPA
• Credit guarantee schemes and waiving of collateral security increase NPA level
• Government Schemes such as debt waiver, debt restruc- turing increase NPAs.

How to avoid or reduce Non-Performing Assets?

 To release a notice to borrower asking them to release the payment within 60
days from the receipt of notice.
 Compromise or use various settlement schemes. Use alternative dispute
resolution mechanisms for faster settlement of dues such as use Lok Adalats
and Debt Recovery.
 A ‘4R’ strategy of Recognition, Resolution, Recapitalization and Reforms.
“After recognition, quantification of NPAs started in a planned manner,
recovery also started.
 Banks write off an NPA when all recovery measures are exhausted and
chances of recovery of loan are remote.
 Lenders have options to recover their losses, including taking possession of
any collateral or selling off the loan at a significant discount to a collection
agency.
IMPACT OF NPA ON BANKING SECTOR-

IMPACT OF NPA ON BANKS

LIQUIDITY POSITION
If the bank evaluates less capital the future business concern, which affects the
position of banks and creating a mismatch between the assets and liability and they
force the bank to raise the resources at a high rate. So, there will be an impact on
the profitability of banks, were they not able to recover the amount from the
borrower the level of profits will come down.
UNDERMINE BANK’S IMAGE
Increase in non-performing assets which shadows the domestic markets and global
level markets, on that situation the bank profitability decreases which lead to the
bad image to banks.
EFFECT ON FUNDING
Increase in non-performing assets leads to scarcity in funding to other borrowers.
As well as the Indian capital market also get affected. And then there will be only a
few banking institutions lend money.
HIGHER COST OF CAPITAL
It shall result in increasing the cost of capital as banks will now have to keep aside
more funds for smooth operations.
HIGH RISK
High on non-performing assets, low profitability, high risk in business and work
against the bank and may take the two circumstances survival of the bank. And it
affects the risk-bearing capacity of the bank.
BANK PROFITABILITY
The which makes low profits have lower capital adequacy ratio and the low
capital ratio which limits the further creation of assets. Such kind of banks face
difficulties in their growth, expansion, and plans and there they need not
wherewithal to march boldly on these fronts. In these growth failures in the
expansion, the only consequences and stagnation and negative growth. They
reduce net interest income as they do not charge the interest to these accounts.
Servicing non-performing assets need to be prudentially provided for. This will
again lead to reduced profitability.
What is Industrial Sickness?
Industrial sickness can be defined as a steady imbalance in the debt-equity ratio
and distortion in the financial position of the unit. A sick unit is one which is
unable to support itself through the operation of internal resources.
Once the sick units continue to operate below the break-even point (at which total
revenue = total cost), industries are forced to depend on the external sources for
funds of their long-term survival.
According to the criteria accepted by the Reserve Bank of India, “a sick unit is one
which has reported cash loss for the year of its operation and in the judgment of the
financing bank is likely to incur cash loss for the current year as also in the
following year.

Causes of Industrial Sickness

The reasons for industrial sickness in India can be divided into two categories:
1. Internal causes – which includes
 Faults at the initial levels of planning and construction.
 Financial constraints.
 Labour and management problems.
 Defective, inefficient, and age-old machinery.
 Incompetence on the parts of entrepreneurs.
 Unskilled laborers to work with modern technology.
2. External causes are those which are beyond the control of its management
and include –
 Sudden changes in government policies.
 Erratic supply of inputs.
 Non-availability of energy resources and raw materials.
 Increased competition.
 Power cuts.
  Demand and credit restraints.
 Delay on the part of the Government in sanctioning licenses, permits,
etc.

The government undertakes the following measures to revive and rehabilitate the
sick industrial units.
Financial Assistance
As per the directions of the RBI, the commercial banks granted the following
concessions to sick industrial units:
 Rescheduling of loans and interest:
 Grant of additional working capital:
 Waiving off interest on loans:
 Moratorium on payment of interest, etc.
Organizational measures
The different organizational measures are given below:
 State-level inter-institutional committees: These are set up by the RBI to
ensure better coordination between the banks, state governments, and other
concerned financial institutions.
 Special Cell: It was set up by the Rehabilitation Finance Division of the
IDBI to assist the banks for the revival of sick units.
Fiscal Concessions
 The government amended the Income Tax Act in 1977 to provide a tax
benefit to those units which take over the sick units for reviving them.
 The government announced a scheme for the grant of excise loans to
sick/weak units.
 Under this scheme, selected sick units are eligible for excise loans not
exceeding 50% of the excise duty paid over the preceding 5 years.
DEVELOPMENMT FINANCIAL INSTITUTIONS-

The development finance institutions or development finance companies are

organizations owned by the government or charitable institution to provide funds
for low-capital projects or where their borrowers are unable to get it from
commercial lenders. Development finance institutions (DFIs) occupy an
intermediary space between public aid and private investment, facilitating
international capital flows.
Types of Finance provided are –
 Medium (1 – 5 years) and
 Long term ( >5 years).

Objectives of Development Finance Institutions

 The prime objective of DFI is the economic development of the country
 These banks provide financial as well as the technical support to various
sectors
 DFIs do not accept deposits from people
 They raise funds by borrowing funds from governments and by selling their
bonds to the general public
 It also provides a guarantee to banks on behalf of companies and
subscriptions to shares, debentures, etc.
 Underwriting enables firms to raise funds from the public. Underwriting a
financial institution guarantees to purchase a certain percentage of shares of
a company that is issuing IPO if it is not subscribed by the Public.
 They also provide technical assistance like Project Report, Viability study,
and consultancy services.

ROLE OF DFI’S IN INDIAN ECONOMY –

 (i) Improving Rates of Savings and Investment:\

In initial years rate of capital formation was low. At the time of independence
saving rate was around at 5 per cent of national income. India had a fairly
diversified industrial base for a developing country, with a number of well-
established industrial houses at the time of independence. So necessary guarantee
was expected from the DFIs otherwise entrepreneurs and promoters would have
not been able to generate resources from the market.
(ii) Infancy Stage of Capital Market:
The capital market was at infancy stage and industries had to depend on their own
profits and banks for financing for further development programmes. That is why
these funds institutions, investment institutions, other trusts, etc. has been declared
as DFIs in terms of public financial institutions (PFI) under Section IV-A of
Companies Act, 1956.
(iii) Risk Averse Commercial Bank:
Commercial banks were not interested in venture financing as they are quite risky
one. DFIs are specialised financial institutions and well equipped in risky venture.

(iv) Arrangement of Loan in Foreign Currency:

Earlier, DFIs had access to lines of credit in foreign currencies from various
multilateral and bilateral agencies at low rates of interest mainly for project
financing. The Central Government had assumed all foreign currency risks due to
fluctuation in the exchange rates.
(v) Specialized Credit Support System:
DFIs could sanction and disburse credit at fixed/assured rates spread over their
borrowing rates till the early 1990. Moreover, under the existing industrial
licensing policy system obtaining a license itself was taken as license to get credit
from DFIs, without the investor going through the elaborate procedures normally
associated with projected appraisal for credit sanction based on commercial
judgment and viability.
(vi) Arrangement of Priority Sector Financing:
DFIs did not have competition in deploying their funds to public companies.
However, some commercial banks had started providing term capital as priorities
for investments in various sectors in the economy were given, along with targets
set in successive plans.

(vii) Coordinating Financing Agencies:

The DFIs were expected to work as conduits between the government/other
financing agencies and the ultimate borrowers for an assured margin. They also
acquired skills and expertise to study the viability and technical efficiency of
projects which was called as the directly productive activities.

CHALLENGES OF DFI IN INDIA –

The DFIs are facing the following challenges:

(i) Problems in Mobilisation of Resources:
The DFIs have to mobilize funds from the market but they suffered from structural
inflexibility as they did not have good network of branches all over the country.
There are restrictions on the amount of funds that could float in the market. Now
interest rates are quite competitive and these DFIs are not getting funds at
competitive rates.

(ii) Problem of Competitive Interest Rate:

The DFIs have to also cut down their lending rates to levels set by commercial
banks and also provide access to their funds as liberally as the banks without, a
matching reduction in their own borrowing costs. The DFIs are not habitual of
flexible interest rates and they are losing their business from the corporate sector.
(iii) Removal of Concessional Rate Regime:
DFIs’ access to borrowings from the Central Government at a highly concessional
rate of interest was withdrawn in a phased manner, since the fiscal deficit which
led to the external current account deficit. Since 1991 banking sector reforms have
changed the business environment of DFIs.
(iv) Flexible Mode of Fund Generation:
DFIs access to short term sources of funds is quite limited. It is notable that Term
deposits, certificates of deposits, term money borrowing inter-corporate deposits
and commercial papers all put together are equivalent to their Net Owned Fund.
Thus, it is inflexible as well as expensive for DFIs to generate fund in present
scenario.
The Insolvency and Bankruptcy Code

The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021 was

promulgated on April 4, 2021. It amends the Insolvency and Bankruptcy Code,
2016. Insolvency is a situation where individuals or companies are unable to repay
their outstanding debt.
The Code provides a time-bound process for resolving the insolvency of corporate
debtors (within 330 days) called the corporate insolvency resolution process
(CIRP). The debtor himself or its creditors may apply for initiation of CIRP in the
event of a default of at least one lakh rupees. Under CIRP, a committee of
creditors is constituted to decide regarding the insolvency resolution. The
committee may consider a resolution plan which typically provides for the payoff
of debt by merger, acquisition, or restructuring of the company. If a resolution
plan is not approved by the committee of creditors within the specified time, the
company is liquidated. During CIRP, the affairs of the company are managed by
the resolution professional (RP), who is appointed to conduct CIRP.

What does the IBC aim to do?

IBC aims to reorganise and resolve the insolvency of corporations, individuals, and
partnerships in a time-bound manner.
The sole intention of the Insolvency and Bankruptcy Code, 2016 is to provide a
justified balance between
 the loss that a creditor might face because of the default, and
 the interest of all the stakeholders of the company so that they enjoy credit
availability.

What are the objectives of IBC?

 To consolidate all existing insolvency laws in India and make amends if
needed.
 To make the process of Insolvency and Bankruptcy Proceedings in India
simple and fast
 To protect the interest of creditors, including stakeholders in a company
 To help creditors who have been waiting for the payments for a long time
get necessary relief
 To timely revive the company
 To resolve India’s bad debt problem by creating a database of defaulters
 To promote entrepreneurship
 To create a new and timely recovery procedure to be adopted by the
financial institutions, banks, or individuals.
 To maximise the value of assets of interested persons
What is Investment Banking?
Investment banking is the division of a bank or financial institution that serves
governments, corporations, and institutions by providing underwriting (capital
raising) and mergers and acquisitions (M&A) advisory services. Investment
banks act as intermediaries between investors (who have money to invest)
and corporations (who require capital to grow and run their businesses). This guide
will cover what investment banking is and what investment bankers actually do.

How does Investment Banking Work?

Investment banking service is offered by the investment banks that act as an
intermediary between company and investors and primarily deals with shares and
stock exchanges. The investment banking service helps the large companies and
organisations in making and creating a viable plan for investments which involves
the proper pricing of the financial instruments. An investment bank buys most of
the shares directly on behalf of the company when the company holds an IPO or
Initial Public Offer.
These shares are then sold on the market by the investment bank, which is now
acting as a proxy to the company. By doing so, the investment bank maximises the
company's revenue while also making sure that all the regulatory policies are being
followed. By helping the company to gain maximum profit from this action, the
investment bank also gains profit by marking up on the initial price of shares while
selling it to investors. The investment bank also faces a risk of losing money by
selling the stock at a lesser price if a situation arises in the market where the stock
becomes overvalued.
When going to an investor banker for advice, a company should consider its needs
to do so and weigh out all its options first. There are certain important factors that
the company needs to consider before visiting an investment bank. These factors
include the size of the capital that is being raised and the competition in the
market. Once the company is clear in these aspects it can take the help of the
investment banker to research new ventures to invest in.

Roles of an Investment Banker

A brief overview of the roles of an Investment banker will be ideal before we delve
into the advantages of investment banking. Investment bankers may also be
addressed as financial consultants that assist businesses and other organizations in
raising capital for a range of purposes, including business expansion. They
frequently perform a wide variety of jobs each day, and some typical duties
include:
 Examining a company's books of accounts before its initial public offering
(IPO)
 Examining marketing trends to apply to a company's financial condition
 Carrying out financial modeling to forecast a company's performance and
profitability
 Establishing a company's organizational structure in order to sell bonds,
equity, or stock to raise money
 Presenting potential investors with investment opportunities in a company
 Giving a client contact details for possible investors to expand their pool of
available funds
 Planning and negotiating mergers, acquisitions, and other business
transactions and deals.
NON BANKING FINANCIAL COMPANY-

A non-banking financial company is that financial institution which provides the

banking services to the customers without having a banking license. An NBFC
needs to be compulsorily registered under the Companies Act 1956 however, it can
be owned privately or by the government.

Objectives of NBFCs

 Provides Long-Term Credits: NBFCs facilitate lengthy credit periods to

suit the long term financial needs of the commerce, trade, infrastructure and
construction companies, for accomplishing massive projects.
 Growth of National Income: They provide capital to various private
companies, accelerating the growth of industries and thus improving the
Gross Domestic Product (GDP) of the country.
 Generate Employment Opportunities: By promoting and supporting small
and medium enterprises (SMEs), NBFCs indirectly develops job
opportunities in the country.
 Movement of Funds: NBFCs are always good for the economy since it
mobilizes the funds by transforming the savings into investments and
utilizing these funds to provide loans to the companies.
 Better Living Standard: With the growth of industrialization and loans
provided by the NBFCs increases the purchasing power of the individuals,
ultimately enhancing the standard of living.
 Strengthening the Financial Market: The NBFCs are the soul of the
financial market. Most of the startups and SMEs solely rely upon the NBFCs
to acquire loans for meeting the capital requirement.

Types of NBFCs
There are different types of NBFCs fulfilling multiple objectives of the investors
and the borrowers. These are as follows:
Non-Banking Financial Company (NBFC)
February 14, 2019 by Anjali J Leave a Comment
Definition: A non-banking financial company is that financial institution which
provides the banking services to the customers without having a banking license.
An NBFC needs to be compulsorily registered under the Companies Act 1956
however, it can be owned privately or by the government.
Example
Bajaj Finserv Ltd. is the NBFC belonging to Bajaj Finance Limited. It provides
different types of loans, such as capital for small and medium enterprises,
corporate finance, vehicle loan, insurance, home loan, wealth management, etc.
Content: Non-Banking Financial Company (NBFC)
1. Objectives
2. Types
3. Advantages
4. Drawbacks
5. In Case of NBFC Non-Payment or Default
Objectives of NBFCs
NBFCs serve the financial needs of individual customers as well
as business organizations. The various other purposes of the non-banking financial

companies are as follows:

  Provides Long-Term Credits: NBFCs facilitate lengthy credit periods to
suit the long term financial needs of the commerce, trade, infrastructure and
construction companies, for accomplishing massive projects.
 Growth of National Income: They provide capital to various private
companies, accelerating the growth of industries and thus improving the
Gross Domestic Product (GDP) of the country.
 Generate Employment Opportunities: By promoting and supporting small
and medium enterprises (SMEs), NBFCs indirectly develops job
opportunities in the country.
 Movement of Funds: NBFCs are always good for the economy since it
mobilizes the funds by transforming the savings into investments and
utilizing these funds to provide loans to the companies.
 Better Living Standard: With the growth of industrialization and loans
provided by the NBFCs increases the purchasing power of the individuals,
ultimately enhancing the standard of living.
 Strengthening the Financial Market: The NBFCs are the soul of the
financial market. Most of the startups and SMEs solely rely upon the NBFCs
to acquire loans for meeting the capital requirement.
Types of NBFCs
There are different types of NBFCs fulfilling multiple objectives of the investors
and the borrowers. These are as follows:

Non-Banking Financial Company-Factors: NBFC-factors is that form of NBFCs

which functions as a factoring business. At least 50% of the total assets, is the
financial assets, and the business income should constitute at least 50% of the
gross income.
Investment Companies: The principal function of an investment company is
dealing in securities.

Mutual Benefit Finance Company: These companies invest the money collected
by multiple investors or customers having similar investment objective, and pool
the clubbed amount into the particular securities or bonds.
Asset Finance Company (AFC): An asset finance company usually provides a
loan for the purchase of physical assets. These are used for business or production
purpose such as automobiles, machinery, equipment, etc. The income generated by
an AFC should not be less than 60% of its total assets or income.
Equipment Leasing Company: The companies which either give out equipment
on lease or carry out the financing of such lease contracts are known as equipment
leasing company.
Hire-Purchase Company: These companies provide the facility of buying goods
on instalment where the hirer, i.e. the buyer needs to pay the amount (principal +
interest) regularly in parts; till the total payment is made to the hiree.
Housing Finance Company: The housing finance companies are engaged in
providing loans to the clients for constructing or acquiring houses along with the
development of the land available.
Loan Company: Except for the AFC, any company sanctioning loans or advances
to the public for any activity is called a loan company.
Residuary Non-Banking Company: The RNBCs are engaged in accepting
deposits as per specific schemes or arrangements or through other means except
the loan company, investment or asset financing.
Infrastructure Finance Company (IFC): These NBFCs grant loans (project loans
and term loans) to the companies belonging to the infrastructure sector including
social and commercial infrastructure, transport, communication, water, energy and
sanitation.
Non-banking Financial Company: Micro Finance Institution (NBFC-MFI): A
NBFC-MFI is that NBFC which has at least 85% of assets as qualifying assets, i.e.
microfinance or the funds given out as loans; without any collateral and the
repayment is in the form of regular instalments.
Infrastructure Debt Fund: Non-Banking Finance Company (IDF-NBFC):
With the aim of generating fixed income on the investment value, these NBFCs
engage the client’s funds into the infrastructure sector for the long term.
Systematically Important Core Investment Company (CIC-ND-SI): The
companies which own a net asset of at least Rs. One hundred crores out of which
90% of the value is invested in the shares and debts while 60% of it must be out
into equity shares or other instruments which can be easily converted into cash.
Chit Fund Company: A chit fund company runs, manages and controls various
chit schemes by making the subscribers or investors subscribe for such plan by
paying the sum in regular instalments up to a specific period. Every subscriber is
then liable to receive a prize amount as per the lot, tender or auction.
What Is a Financial Intermediary?

What Is a Financial Intermediary?

A financial intermediary is an entity that acts as the middleman between two
parties in a financial transaction, such as a commercial bank, investment bank,
mutual fund, or pension fund. Financial intermediaries offer a number of benefits
to the average consumer, including safety, liquidity, and economies of
scale involved in banking and asset management. Although in certain areas, such
as investing, advances in technology threaten to eliminate the financial
intermediary, disintermediation is much less of a threat in other areas of finance,
including banking and insurance.
How a Financial Intermediary Works
A non-bank financial intermediary does not accept deposits from the general
public. The intermediary may provide factoring, leasing, insurance plans, or other
financial services. Many intermediaries take part in securities exchanges and utilize
long-term plans for managing and growing their funds. The overall economic
stability of a country may be shown through the activities of financial
intermediaries and the growth of the financial services industry.
Financial intermediaries move funds from parties with excess capital to parties
needing funds. The process creates efficient markets and lowers the cost of
conducting business. For example, a financial advisor connects with clients
through purchasing insurance, stocks, bonds, real estate, and other assets.
Banks connect borrowers and lenders by providing capital from other financial
institutions and from the Federal Reserve. Insurance companies collect premiums
for policies and provide policy benefits. A pension fund collects funds on behalf of
members and distributes payments to pensioners.
HUDCO-
Housing and Urban Development Corporation Limited or HUDCO was set up in
1970 and is now a premier techno-financial organisation. HUDCO’s primary
mission is to assist, establish, collaborate, promote and provide consultancy
services for planning and designing of projects. These plans are related to housing
and urban development programmes in India and other countries.
With an immaculate experience of five decades, HUDCO offers sustainable and
integrated solutions to design and analyse challenges in the urban sector and for all
stages of the project cycle. From conceptualisation to project delivery, all actions
are taken keeping in mind the local conditions and the priorities of people.
The main aim of HUDCO is to create livable and sustainable cities with the help of
pragmatic solutions which are a reflection of the local ethos and culture.

Objectives of HUDCO
The main objectives according to the Memorandum of Association are:-
 To offer finance for the long term for construction of houses for finance or
residential purposes or undertake housing and urban development
programmes.
 To undertake or finance, partly or wholly, the establishment of satellite or
new towns;
 To subscribe to bonds and debentures which are issued by the State Housing
(or/and Urban Development) Boards, Development Authorities,
Improvement Trusts, etc., especially for financing urban development and
housing projects.
 To undertake or finance the establishment of industrial enterprises of
construction material.
 To keep a track of the money received from the Government of India and
other sources in the form of grants or otherwise, in regular intervals, for the
purpose of undertaking or financing the housing and urban development
projects in the country.
 To establish, collaborate, promote, assist and provide consultancy services
for the designing and planning projects of work related to Housing and
Urban Development programmes in India and other countries.
What is NABARD?
National Bank for Agriculture and Rural Development or NABARD is the main
regulatory body in the country’s rural banking system and is considered as the peak
development finance institution which is established and owned by the government
of India. This bank aims to provide and regulate credit to the rural areas, which
will be a first step towards enhancing the rural development in the country.
NABARD has been given many responsibilities related to the formulation of
policies, planning, and operations in agriculture and financial development.
NABARD carries these responsibilities efficiently and works towards promoting
and developing man industries in the rural areas like the agriculture industry,
cottage industries, other small scale industries, and rural crafts in an effort to create
better infrastructure and better employment opportunities for the people living in
these regions.
The Government of India established this bank considering all the guidelines of the
National Bank for Agriculture and Development Act of 1981. To put it in simple
terms, you can say that the National Bank for Agriculture and Rural Development
or NABARD is the main and specific bank of the country for agriculture and rural
development.

OBJECTIVES OF NABARD-

The main objectives of NABARD scheme for providing long-term loans are:

 Rendering capital investment support in agriculture, fishery, poultry,

horticulture, etc. activities
 Creating credit flow in the activities incorporated by NABARD and the
government
 Identification and fulfilment of self -help groups (SHGs) and joint -libality
groups (JLGs) credit requirements
  Promotion of non-agriculture employment opportunities by encouraging the
semi-rural and rural people to explore and opt for alternate professions and
job options
 Extending support and assistance for mitigation and climate adaptation
projects
 Refinancing the credit linked with subsidy on capital investments by the
Indian government under the authority of the NABARD subsidy

Features of NABARD Scheme

The following are some of the features of the NABARD loan scheme.
 Offering support for funding or refinancing.
 Growing the infrastructure of rural communities in India.
 Creating credit plans available at a district level for these communities.
 Offering guidance and support to the banking sector so the latter can achieve
their own credit targets for the year.
 Carrying out the supervision of cooperative banks and Regional Rural Banks
(RRBs) in India.
 Devising new projects that aid in rural development of the country.
 Putting into place any of the government’s developmental schemes aimed at
helping the growth of rural areas.
 Offering training services for handicraft artisans.
What Is Microfinance?
Microfinance, also called microcredit, is a type of banking service provided to
unemployed or low-income individuals or groups who otherwise would have no
other access to financial services.
While institutions participating in the area of microfinance most often provide
lending—microloans can range from as small as $100 to as large as $25,000—
many banks offer additional services such as checking and savings accounts as
well as micro-insurance products, and some even provide financial and business
education. The goal of microfinance is to ultimately give impoverished people an
opportunity to become self-sufficient.

Objectives of Microfinance Companies

Various objectives of the micro-finance companies are as follows:
 Promoting socio-economic development at the community level;
 Developing and strengthening self-help groups and facilitating sustainable
development through them;
 Providing vocational training to unskilled population;
 Empowerment of women;
 Conducting programs for the poor;
 Promoting sustainable agriculture and sound conservation of natural
resources;
 Organizing and coordinating based on the grass-root level;
 Making efficient use of the available resources for the generation of
livelihood
What Is Postal Banking?

In postal banking, your local post office offers some basic financial services, much
like a commercial bank. Postal banking is common in much of the world and was
once available in the United States. Now some advocates believe bringing it back
could be a low-cost solution for the country’s large unbanked population.
 Postal banking is common in other countries but hasn’t been seen in the
United States for decades.
 Advocates believe that bringing it back could make low-cost banking
services available to low-income Americans.
 Approximately 7.1 million American households don’t have checking or
savings accounts.1
 High fees and account minimums often prevent people from opening
accounts.
 Unbanked individuals rely on retailers for basic financial services like check
cashing or bill payments, which can be expensive.
National Housing Bank

NHB is a statutory body that has been set up by the Parliament. NHB is wholly
owned by the Government of India post the 24 April 2019 notification of RBI i.e.
the entire paid-up capital of NHB is held by the government. The Head office of
NHB is at New Delhi. The general superintendence, direction and management of
the affairs and business of NHB vests in its Board of Directors.
Functions of National Housing Bank
 Regulation and Supervision of Housing Companies operating in India is one
of the most important and foremost functions of this apex Institute, powers
of which are derived from the National Housing Bank Act.
 Raising of Funds on large scale and onward refinancing to Housing Finance
companies, Cooperative Banks and other housing agencies for onward
lending to Individual and Infrastructure companies in Housing Segment.
 Ensure Housing Finance Companies meet regulatory Capital requirements as
required by BASEL norms, have proper risk management framework in
place, good governance practices, etc.
Benefits of National Housing Bank
 Exclusive and focused Institute for Housing Infrastructure finance.
 Acts as a guaranteeing institute for small Housing finance companies who
lack the capability to raise funds from the market.
 Expertise in Underwriting Housing Finance with a solid credential, skilled
staff.
 Creation of Housing Stock and facilitate the construction of new houses
through refinancing.
 Due to the support extended by National Housing Bank to Housing Finance
Companies, there were more than 100 Housing Finance companies that have
established themselves in India and together these companies have more
than 5100 branch offices spread across the country contributing to the
achievement of Housing for all goal of the government.
 There is an exclusive institution that focuses on housing finance
infrastructure making it easy to avail refinancing options.
 It also acts as a guaranteeing institute for small Housing finance companies
that are unable to raise funds from the market.
 Provides expertise in underwriting housing finance.
 Helps in the creation of housing stock and facilitates construction of new
houses.