SBI and LIC's Rural Connect

SBI and LIC's Rural Connect
SBI and LIC's Rural Connect
The Reserve Bank has been strictly against non-banking finance companies. Experts believe that at such a time, such non-banking financial services company will eliminate the small financial services companies in the country ...

Some financial companies (Shadow Banking) responsible for the problem of NPAs in the banking sector are at risk of sinking. Infrastructure Leasing and Finance Services (IL & FS - IL & FS) is a major shadow banking company in the country and 91,000 crores of many legendary banks in the country are owed to the company.

Banking industry experts claim that the Reserve Bank can cancel the license of about 1,500 (Shadow Bank) non-banking financial companies in the country. These Shadow Banks do not have adequate capitals. Apart from this, the Reserve Bank is looking to make the process of getting a new license of Shadow Banking in the country.

Significantly, in the last few days, the Reserve Bank has been strictly against non-banking finance companies. Experts believe that such non-banking financial services company will eliminate the small financial services companies in the country at such a time.

Experts also believe that due to the ongoing problem in the Shadow Banking sector, the country can face difficulties in taking small loans in rural areas. Significantly, about two-thirds of the country's 130 million population is in rural areas.

There are more than 11,400 companies in the country's Shadow Banking Sector and their total turnover is more than 22 trillion rupees ($ 304 billion). Monitoring of government and banking regulators on these financial companies is low.

During the past few years, due to the NPA of the banking sector, where new loans by banks were slowed down, Shadow banks were constantly getting new customers. According to the Reserve Bank data, the speed of new borrowing of Shadow banks is almost double the bank's new debt, which has given them a good boost in credit ratings.

Due to IL & FS, the shadow banking of the country has been threatening for some days. During the past few months, the company's credit rating has consistently declined. At the same time, it is believed that IL & FS and other shadow banks have done a large number of loans to people who do not have the ability to return the loan.

While the use of shadow banks for money laundering has also raised the question of the whole sector. Looking at IL & FS's annual report 2018, it shows that the company has actually taken loans to give good returns to its share holders.

Economic analysts also say that a major reversal of shadow banking sector can act as a break on private consumption, which could pose a risk of adverse impact on the growth rate in the country. While there are some savvy claiming in the banking sector that NPAs of shadow banks in the Indian economy may be like America's notorious financial crisis, 'Lehman Crisis', though some financial experts are saying that this problem is not so serious.

However, the Central Government has already clarified that the Shadows banks will not be allowed to drown. They are being tried to save. Shareholder banks such as LIC and SBI have told them to provide adequate funds for repayments.

The Reserve Bank is going to meet its big shareholders to discuss the plan to improve the situation of infrastructure companies leasing and finance services (IL & FS-IL & FS), which is in debt.

The sources of the central bank gave this information. It is estimated to participate in this meeting with Life Insurance Corporation of India (LIC) and Japan's Oryx Corporation (ORIX), which hold 25.34 percent and 23.54 percent respectively. However, HDFC, including two public banks, has not been called in the meeting due to a minority stake.

A shareholder said, "Friday's meeting has been canceled because the Reserve Bank wants information about the steps taken and the outline of the company." Meanwhile, the annual general meeting of IL & FS is also being held. The company has outstanding debt of over Rs 91,000 crore.

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