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10th FICCI-IBA Bankers’ Survey July-Dec 2019 released in New Delhi; Highest NPAs in Infrastructure sector

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On March 8, 2020, FICCI has released the 10th round of FICCI-IBA survey in New Delhi which was conducted by Federation of Indian Chambers of Commerce & Industry (FICCI) and Indian Banks’ Association (IBA) for the period of July to December 2019. The survey has analyzed 18 banks consisting of public sector, private sector and foreign banks which together represented 50% of the banking industry, as classified by asset size. The survey required view of bankers on the measures that would help in improving the economic situation. So, as per survey the viewpoints are:10th FICCI IBA Bankers Survey

  • Rural infrastructure development
  • Stimulation of demand: By increasing the pace of fund transfers under the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) and MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) schemes.
  • Undertake structural land and labour reforms
  • Addressing of taxation issues: By launching Goods and Services Tax (GST) 2.0 regime and bringing a direct income tax code should be the top priority of the government.

Bankers views on increasing the fund flow to MSME sector:

-Capacity building of Ministry of Micro, Small and Medium Enterprises (MSMEs) through various training programs.

-Acceleration in SME lending process is required which can possible with the development of an online platform.

-Requirement of creative ways for credit assessment like psychometric testing.

-To keep non-performing assets (NPAs), Cash flow estimates or Qualitative Credit Assessment (QCA) under check through measures.

Responding banks reporting NPAs declined to 39%; Highest NPAs in Infrastructure sector

-Responding banks reporting NPAs declined to 39% in the 10th round of survey as compared to 52% of first half of 2019 survey.

-The proportion of respondent banks reporting a rise in the NPA levels on the other hand has shown slight increase to 28% as against 26% in the preceding survey.

-Sector with High NPAs are Infrastructure, Metals and Iron & Steel, Engineering Goods and Textiles.

-As per the survey, 93% of the respondents claimed Infrastructure and Metals as the key sector of NPA as compared to 73% in last survey while 60% respondents reported NPAs in Iron & Steel in comparison with 55% earlier.

-About 36% of these respondents have reported an increase in NPA in infrastructure sector during July- December 2019 period.

Decrease in Marginal Cost of Funds based Lending Rate (MCLR)
About 11% of the respondents having reported a reduction in the MCLR by more than 50 bps, 28% of the respondents reported reduction by 40-50 bps, 17% of the respondents reduced MCLR by 30-40 bps, another 17% reduced it by 20-30 bps and 22% reduced it by 0-20 bps.

Rates decreased for term deposits above one year and below one year
In case of term deposits above one year, 67% of the responding banks have decreased interest rates by upto 50 bps while 28% have decreased the rates by more than 50 bps. For term deposits below one year, majority respondents (67%) have reduced the interest rates, while 28% have kept the interest rate unchanged.

Share of corporate loans of banks rose to 58%; retail loan share decreased
The share of corporate loans of banks has increased to 58% as against 55% in the last round while the share of retail loans has reduced from 42% as against 45% in the preceding round.

Shifting towards External Benchmark based Lending Rate (EBLR) from MCLR showed positive reviews
For faster transmission of rate cuts to consumers, the RBI has mandated banks to link all retail and SME loans to an external benchmark effective from October 1, 2019. Most of the banks have adopted repo rate as the EBLR by shifting from MCLR and gained positive response from borrowers as well.

  • During October-December 2019, the Weighted Average Lending Rates (WALRs) of domestic banks on fresh rupee loans declined by 18 bps for housing loans, 87 bps for vehicle loans and 23 bps for loans to micro, small and medium enterprises (MSMEs).

About the Survey:
FICCI and IBA conduct a Survey of Bankers twice every year. The survey gives an outlook on the status of the Indian Banking Sector, highlighting key operational and financial indicators of the banks.

About FICCI:
Establishment– 1927
President– Sangita Reddy
Secretary General– Dilip Chenoy
Headquarters– New Delhi

About IBA:
Establishment– 1946
Chairman– Rajnish Kumar
Headquarters– Mumbai, Maharashtra
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