.......Ananya Roy, also doing an internship with the RBI, has been assigned a project on FDI in retail. She has to assess the current scenario of the Indian retail sector and then evaluate the benefits (if any) of introducing FDI to the sector. Roy has so far become aware of some of the consequences of FDI in the Indian scenario on the face of infrastructure, policy and supply chain issues. “Since regulation of FDI has been a debatable issue, the perspectives of RBI and its working methods have provided me with immense takeaways. It has also helped me get better clarity on the issues of employment, food price volatility and in understanding the condition of current retailers and farmers as well,” says Roy...........
Read - Hindustan Times
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A recent RBI Committee has reviewed bank credit exposure to Priority Sectors and debate on redefining Priority Sector is on. Some thoughts come to mind:
As public sector banks including State Bank of India and its associates, old private sector banks, new private sector banks, RRBs and cooperative banks have different approaches to resource mobilization, lending and profitability, varying capabilities in terms of outreach and expertise and different mandates from the stake-holders, each category of these institutions will have to be given resource mobilization and credit delivery tasks factoring in these structural and policy aspects.
As the reorganization of the banking system may be further delayed, in the medium term, GOI and RBI may consider the following steps:
• Redefine sub-sectors in the priority sector reckoning the changes that have taken place during the last two decades and realign the targets for sub-sectors
• Ask banks to ensure that their rural, semi-urban, urban and metro branches realign their credit portfolios to meet local credit needs
• Instead of prescribing straight-jacket targets for lending to sub-sectors like agriculture, make necessary policy changes which will reflect the availability of expertise and outreach of each category of banks. E.g. If a bank has more branches in urban areas and cities and are able to lend more to microfinance, allow a set-off their disbursal to microfinance over and above a bench-mark against their target for lending to agriculture.
• Route all concessions and subsidies in interest rates through the banking channel and make the lending banker responsible to ensure that the ultimate borrower is charged a minimum interest of, say the rates paid on savings bank deposits by the bank.
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