Economics
16-Nov-2020 08:15 AM
07-Nov-2020 09:07 AM
RBI on 5th
Nov 2020 issued guidelines regarding Co-Lending (or Co-origination) by
Banks and NBFCs for lending to priority sector. Earlier (in 2018) RBI had
released guidelines for co-origination of loans which now stands replaced by
the Co-lending guidelines.
1.
The Co-lending of loans provides a
unique opportunity for formal lenders to come together and share their synergies
to create a winning proposition for all the stakeholders. It enables banks
and Non-Banking Finance Companies (NBFCs) to enter into an arrangement
where the risks and rewards are shared by all parties to the co-lending
agreement throughout the lifecycle of the loan, as per a pre-decided ratio.
2.
NBFCs often face challenges in getting cheaper
access to funds for lending purposes, which in turn results into higher
interest rates for their borrowers and hence less demand for their loans;
whereas large commercial banks find it difficult and expensive to extend their
reach to certain locations, where the NBFCs have a stronger presence.
Co-lending helps in bridging these gaps.
3.
The co-lending model empowers multiple
stakeholders of the lending ecosystem. While NBFCs can leverage their strong
presence in local markets, commercial banks have the cheap availability of
funds for credit disbursal. (This becomes even more relevant in the current
scenario where many NBFCs are battling against the liquidity crunch). Another
advantage of this partnership is that NBFCs have mastered the art of assessing
the creditworthiness of certain niche customer segments, which the banks have
been ignoring, primarily due to differences in their core target segment and
credit risk management approach. The NBFCs use a number of innovative
mechanisms for credit risk assessment including usage of non-traditional
sources of data, observing an individual’s modus operandi and cash-flow at
work, building customized scorecards, etc. for both small-ticket retail &
MSME segment. This is a big pie for banks to look forward to.
4.
But while the present RBI guidelines
highlight co-lending as an initiative to propel priority sector lending, the
model has a much broader potential to go beyond just lending to the priority
sectors.
5.
Example/Explanation:
·
Total Loan given to a customer (the
customer will not know separate amounts) = Rs. 50 lakhs
·
NBFC gave Rs. 10 lakhs @ 10% (which will
on NBFC account books)
·
Bank gave Rs. 40 lakh @ 8% (which will
be on Bank’s account books)
·
So, the customer will see that he has
got loan of Rs. 50 lakhs @ 8.4% (10% of Rs. 10 lakhs = Rs. 1 lakh. And 8% of Rs. 40 lakhs = Rs. 3.2 lakh. So,
total interest = Rs. 4.2 lakh/year on Rs. 50 lakh loan. So, effective interest
rate will be (Rs. 4.2 lakh/ Rs. 50 lakhs) * 100% = 8.4%)
6.
In Co-Lending, banks are permitted to
co-lend with all registered NBFCs based on a prior agreement. Co-lending
enables both the partners to price their portions of the loan as they want.
The co-lending banks will take their share of the individual loans (on a
back-to-back basis) in their account books. However, NBFCs shall be required to
retain a minimum of 20 per cent share of the individual loans on their
books.
7.
Each lender shall adhere to the provisioning
requirement and other guidelines, as per the respective regulatory guidelines
applicable to each of them including reporting to Credit Information Companies,
under the applicable regulations for its share of the loan account.
8.
While the co-lending model is a winning
proposition for all stakeholders, it demands extensive use of robust technology
to simplify the operational challenges. While NBFCs will be the front end
for customer servicing, all decisions, transactions and funds require
multi-directional information flow at various points between the banks and
NBFCs, highlighting the urgency for mature technology solutions. Since
co-lending involves multiple lenders, the compliance check requires a seamless
sharing of customer data between them. The assessment of creditworthiness is
another critical aspect. Co-lending requires configuration of one’s credit
assessment module to also consider the additional decision parameters from the
partner’s credit risk team.
9.
At a time when we are witnessing the
biggest disruption of our lives in the form of a pandemic and businesses across
the globe have been badly hit, co-lending can provide the much-needed impetus
with greater access to credit. It is a win-win situation for all as NBFCs get easy
and cheaper access to funds, banks extend their business reach to new
markets/segments and consumers get easier and better access to much-needed
credit at lower costs.
on 11-Nov-2020 10:41 PM
please give pdf of direct and indirect taxes and current terms pdf..
on 11-Nov-2020 10:48 AM
Hello sir, your Economy modular course will be included in GS weekends batch OR thats a completely separate course w.r.t coverage/content ?
29-Oct-2020 10:20 AM
Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry has released its "Consolidated FDI Policy 2020" yesterday. Generally, DPIIT keeps on uploading only the sector specific changes happening in FDI rules from time to time on its website BUT after some time gap (1/2 years) it releases the consolidated FDI policy document incorporating all previous changes. AND this document is not for reading but just for reference in case you want to check/verify ho
25-Oct-2020 01:24 PM
23-Oct-2020 01:37 PM
22-Oct-2020 11:49 AM
21-Oct-2020 12:56 PM
on 22-Oct-2020 11:51 AM
I have ordered for reprint. Will again be available in 3/4 days. For further queries you can reach me at viveksingheconomy@gmail.com
on 21-Oct-2020 09:20 PM
sir where we will get your Indian economy book sir.....it is not available on Amazon and flipkart
19-Oct-2020 01:42 PM
17-Oct-2020 10:56 AM
16-Oct-2020 10:14 AM
13-Oct-2020 09:55 AM
12-Oct-2020 07:52 PM
10-Oct-2020 12:37 PM
09-Oct-2020 08:49 AM
08-Oct-2020 09:48 AM
02-Oct-2020 07:37 AM
01-Oct-2020 10:16 AM
27-Sep-2020 01:03 PM
25-Sep-2020 08:03 AM
24-Sep-2020 10:04 AM
23-Sep-2020 02:17 PM
16-Sep-2020 01:41 PM
13-Sep-2020 09:29 PM
11-Sep-2020 10:09 AM
09-Sep-2020 09:58 AM
08-Sep-2020 10:22 AM
06-Sep-2020 05:17 PM
03-Sep-2020 11:02 AM
01-Sep-2020 11:20 AM
01-Sep-2020 11:20 AM
30-Aug-2020 09:29 PM
28-Aug-2020 09:59 AM
22-Aug-2020 06:17 PM
19-Aug-2020 12:33 PM
on 20-Aug-2020 07:26 PM
upper half is in ur book , bottom half is updatation ,thank you sir
18-Aug-2020 10:06 AM
17-Aug-2020 10:20 AM
16-Aug-2020 09:36 AM
14-Aug-2020 09:09 AM
14-Aug-2020 09:08 AM
11-Aug-2020 02:11 PM
11-Aug-2020 02:10 PM
10-Aug-2020 10:02 AM
07-Aug-2020 11:26 PM
Budget includes spending and taxes. A balanced budget has an equality between spending and taxes. Balanced-budget multiplier analyzes what happens when there is an equality between changes in government purchases/expenditure and taxes, that is, actions that keep the budget "balanced."
In other words, the balanced-budget multiplier indicates the overall impact on aggregate production/output of a change in government expenditure that is matched (or paid for) by an equivalent change in taxes. So, BBM is basically the multiplier effect of a balanced budget.
BBM = change in output/change in govt. expenditure (and this change in govt. expenditure has come from change in taxes)
05-Aug-2020 09:49 AM
03-Aug-2020 10:42 PM
29-Jul-2020 10:54 AM
27-Jul-2020 10:42 AM
25-Jul-2020 10:39 PM
on 29-Jul-2020 10:58 AM
Now govt has clarified that it will be reversed after two years. This means that after two years Sri Lanka will have to give back dollars to India and India will give back Sri Lankan rupee
on 29-Jul-2020 10:58 AM
Now govt has clarified that it will be reversed after two years. This means that after two years Sri Lanka will have to give back dollars to India and India will give back Sri Lankan rupee
22-Jul-2020 10:22 PM
22-Jul-2020 01:03 AM
14-Jul-2020 01:36 PM
11-Jul-2020 02:03 PM
06-Jul-2020 10:18 PM
05-Jul-2020 09:48 PM
04-Jul-2020 09:46 AM
28-Jun-2020 01:59 PM
19-Jun-2020 07:53 PM
1) India's imports from China is $65 billion and exports is $16 billion, making it a total trade between India and China worth $ 81 billion 2) Our imports is getting localized/concentrated mostly from China (and few other countries). And India imports wide variety of things from China, from capital goods, machinery, machinery, consumer goods etc. 3) China started industrializing in 1990s (reforms initiated in 1978)...........by moving its surplus labour from Agriculture to Industries (labour i
useful link: https://www.thehindu.com/opinion/op-ed/can-india-decouple-itself-from-chinese-manufacturing/article31864821.ece
13-Jun-2020 10:50 AM
When Central govt was planning to introduce GST, states were worried that after implementation of GST the tax revenue of States may fall and they will not have the freedom under GST regime to impose extra taxes. So, government of India........... calculated the tax revenue growth of State's indirect taxes from 2012-13 to 2013-14, 2013-14 to 2014-15 and 2014-15 to 2015-16......... i.e. for three years and there was on an average growth of 14% compounded annually. So, Govt. of India promised Sta
05-Jun-2020 10:40 AM
the above news relates to the PLFS survey done for the period July 2018 - June 2019 and its report released in June first week of 2020. And as per this survey for 2018-19: *Unemployment Rate = 5.8% *Labour Force Participation Rate = 37.5% *Women's Unemployment Rate = 5.2% *Male's Unemployment Rate = 6% *Urban Unemployment Rate = 7.7% *Rural Unemployment Rate = 5% It is to be noted that there is improvement in all the above
03-Jun-2020 09:38 PM
15-May-2020 01:19 PM
The Economic Stimulus Package in the name of "Aatmanirbhar Bharat" is worth Rs. 20 lakh crore (which is 10% of GDP of 2019-20 i.e. Rs. 200 lakh crore). The measures/package announced yesterday is just one part of the total package which means there will be further announcements in the days to come. Rather than reading this package from various newspapers, you can refer the above PDF directly (which is from govt. source i.e. PIB). Ofcourse its impact and analysis you can read from the different
06-May-2020 08:31 PM
Petroleum products (Petrol, Diesel, LPG etc.) are out of GST which means GST is not imposed on them rather these products are used to be taxed as per the previous regime. So, on Petrol and Diesel Central Govt. imposes "Basic Excise Duty", "Special Additional Excise Duty" and "Road and Infrastructure Cess". And State Govt imposes its own VAT rate.
30-Apr-2020 01:12 AM
The article talks about how RBI, in the last few months, has bypassed the MPC in setting the interest rate in the market by using other tools like OMO, FOREX SWAP, OPERATION TWIST and LTRO
22-Apr-2020 02:16 PM
on 01-Sep-2020 10:47 PM
Thank you sir. I have a question - if the aim of TLTRO is to increase liquidity, why are the banks required to invest in INVESTMENT GRADE corporate bonds? aren't these supposed to be low-risk?
on 01-Sep-2020 10:47 PM
Thank you sir. I have a question - if the aim of TLTRO is to increase liquidity, why are the banks required to invest in INVESTMENT GRADE corporate bonds? aren't these supposed to be low-risk?
19-Apr-2020 12:13 PM
29-Mar-2020 05:56 PM
07-Feb-2020 03:43 PM
29-Jan-2020 09:19 AM
28-Jan-2020 12:06 PM
Related party transactions: The transactions which happen between group companies i.e. companies of the same owner. And these transactions should be at market rate which is also called arms length principle.
useful link: https://indianexpress.com/article/business/sebi-panel-proposes-overhaul-of-related-party-transaction-norms-6238541/
24-Jan-2020 12:48 PM
Bail-in and bail-out : A bail-in is rescuing a financial institution on the brink of failure by making its creditors and depositors take a loss on their holdings. A bail-in is the opposite of a bail-out, which involves the rescue of a institution/ financial institution by external parties, typically government using taxpayers money.
24-Jan-2020 12:47 PM
It is a situation where income growth or inflation moves taxpayers into higher tax brackets. This in effect increases government tax revenue without actually increasing tax rates. The increase in taxes reduces aggregate demand and consumer spending because a larger share of the people’s income now goes into taxes, which leads to deflationary pressures or drag on the economy.
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Comments
on 24-Nov-2020 01:26 PM
can one country put some restrictions on other country's goods by way of increasing tariff or by non tariff barriers under WTO rules? Because without signing FTA (with China) indian market is flooded with Chinese goods so if , RCEP will allow to put restrictions after import cross certain limit India's signing make some sense isn't it?
on 24-Nov-2020 01:26 PM
can one country put some restrictions on other country's goods by way of increasing tariff or by non tariff barriers under WTO rules? Because without signing FTA (with China) indian market is flooded with Chinese goods so if , RCEP will allow to put restrictions after import cross certain limit India's signing make some sense isn't it?