The performance of the banking sector, Public Sector Banks (PSBs) in particular, continued to be subdued in the current financial year.
The Gross Non-Performing Advances (GNPA) ratio of Scheduled Commercial Banks (SCBs) increased from 9.6% to 10.2% between March 2017 and September 2017, whereas, their Restructured Standard Advances (RSA) ratio declined from 2.5% to 2.0%.
The Stressed Advances (SA) ratio rose marginally from 12.1% to 12.2% during the same period.
GNPA ratio of PSBs increased from 12.5% to 13.5% between March and September 2017.
Stressed advances ratio of PSBs rose from 15.6% to 16.2% during the period.
The New Insolvency and Bankruptcy Regime
The Insolvency and Bankruptcy Code, 2016 (IBC) was passed in May 2016.
The entire mechanism for the Corporate Insolvency Resolution Process (CIRP) has been put in place.
A number of rules and regulations have been notified to create the institutions and professionals necessary for the process to work.
A large number of cases have entered the insolvency process, and a few have even exited the process.
The Insolvency and Bankruptcy Code (Amendment) Bill, 2017
The Insolvency and Bankruptcy Code (Amendment) Bill, 2017, was passed by the Lok Sabha on December 29, 2017, and by the Rajya Sabha on January 2, 2018.
It replaces the IBC (Amendment) Bill, 2017, which was promulgated on November 23, 2017.
In the CIRP the Committee of Creditors (CoC) invites resolution plans from resolution applicants, and may select one of these plans.
The Code originally does not specify any restrictions on who these resolution applicants might be.
The thrust of the Bill is to prevent a range of undesirable persons from bidding for the debtor. The Bill may prevent promoters from bidding for their own firms.
A resolution plan would typically involve significant haircuts on the parts of the financial and operational creditors. Thus, allowing a promoter to bid without restriction would mean countenancing a situation where an owner, having driven a firm into insolvency, is now able to purchase it back at a discount.
Non Banking Financial Sector
Non-Banking Financial Companies (NBFCs) bring in diversity and efficiency to the financial sector and make it more responsive to the needs of the customers.
Peer to Peer (P2P) and Account Aggregators are the new categories of NBFC that have been introduced recently.
To further financial inclusion through direct interaction between small lenders and small borrowers and to address the associated consumer protection issues, the Reserve Bank has introduced a new category of Non-Banking Financial Company (NBFC) called NBFC-P2P (NBFC- Peer to Peer Lending Platform) with light touch regulation and emphasis on adequate disclosures.
Insurance Sector
Insurance, being an integral part of the financial sector, plays a significant role in India’s economy.
The potential and performance of the insurance sector should be assessed on the basis of two parameters, viz., Insurance Penetration and Insurance Density.
Insurance penetration is defined as the ratio of premium underwritten in a given year to the gross domestic product (GDP).
Insurance density is defined as the ratio of premium underwritten in a given year to the total population (measured in US$ for convenience of international comparison).
The Insurance penetration which was 2.71% in 2001, increased to 3.49% in 2016.
Insurance Penetration in some of the emerging economies in Asia, i.e., Malaysia, Thailand and China during the same year i.e. 2016 was 4.77, 5.42 and 4.15% respectively.
Globally insurance penetration and density were 3.47% and US$ 353 for the life segment in 2016 and 2.81% and US$ 285.3 for the non-life segment respectively.
