APEX Banks

NABARD

At the instance of Government of India Reserve Bank of India (RBI), constituted a

committee to review the arrangements for institutional credit for agriculture and rural
development (CRAFICARD) on 30 March 1979, under the Chairmanship of Shri
B.Sivaraman, former member of Planning Commission, Government of India to review
the arrangements for institutional credit for agriculture and rural development. The
Committee, in its interim report, submitted on 28 November 1979, felt the need for a
new organisational device for providing undivided attention, forceful direction and
pointed focus to the credit problems arising out of integrated rural development and
recommended the formation of National Bank for Agriculture and Rural
Development(NABARD). The Parliament, through Act,61 of 1981, approved the
setting up of NABARD. The bank came into existence on 12 July 1982 by transferring
the agricultural credit functions of RBI and refinance functions of the then Agricultural
Refinance and Development Corporation (ARDC). NABARD was dedicated to the
service of the nation by the late Prime Minister Smt. Indira Gandhi on 05 November
1982.

NABARD was set up with an initial capital of 100 crore. Consequent to the revision
in the composition of share capital between Government of India and RBI, the paid up
capital as on 31 March 2015, stood at 5000 crore with Government of India
holding 4,980 crore (99.60%) and Reserve Bank of India 20.00 crore (0.40%).

Mission

Promote sustainable and equitable agriculture and rural prosperity through effective
credit support, related services, institution development and other innovative
initiatives.

Functions Of NABARD

1) Financial

Refinance:

Refinancing may refer to the replacement of an existing debt obligation with

another debt obligation under different terms. NABARD does refinance short
term, medium terrn and long term loans.

Direct Finance

• Loans for Food Parks and Food Processing Units in Designated Food
Parks

• Loans to Warehouses, Cold Storage and Cold

Chain Infrastructure
 • Credit Facilities to Marketing Federations

Rural Infrastructure Development fund

Direct refinance to cooperative banks

Financing and supporting producer organisations

2) Developmental

• Institutional Development
• Farm Sector
• Non Farm Sector
• Financial Inclusion
• Micro Credit Innovations
• Research and Development
• Core Banking Solution to
Co-operative Banks
• Climate Change

3) Supervisory

Section 35(6) of the Banking Regulation Act, 1949, empowers NABARD to conduct
inspection of State Cooperative Banks (SCBs), Central Cooperative Banks (CCBs)
and Regional Rural Banks (RRBs). In addition, NABARD has also been conducting
periodic inspections of state level cooperative institutions such as State Cooperative
Agriculture and Rural Development Banks (SCARDBs), Apex Weavers Societies,
Marketing Federations etc., on a voluntary basis.

Objectives of Supervision

• To protect the interest of the present and future depositors

• To ensure that the business conducted by these banks is in conformity with the
provisions of the relevant Acts/Rules, regulations/Bye-Laws
• To ensure observance of rules, guidelines, etc., formulated and issued by
NABARD / RBI/ Government
• To examine the financial soundness of the banks and
• To suggest ways and means for strengthening the institutions so as to enable
them to play more efficient role in purveying rural credi
SIDBI

Small Industries Development Bank of India (SIDBI), set up on April 2, 1990 under an
Act of Indian Parliament, acts as the Principal Financial Institution for the Promotion,
Financing and Development of the Micro, Small and Medium Enterprise (MSME)
sector and for Co-ordination of the functions of the institutions engaged in similar
activities.

Mission

"To facilitate and strengthen credit flow to MSMEs and address both financial and
developmental gaps in the MSME eco-system"

Business Domain of SIDBI

The business domain of SIDBI consists of Micro, Small and Medium Enterprises
(MSMEs), which contribute significantly to the national economy in terms of
production, employment and exports. MSME sector is an important pillar of Indian
economy as it contributes greatly to the growth of Indian economy with a vast network
of around 4.6 crore units, creating employment of about 11 crore, manufacturing more
than 6,000 products, contributing about 45% to manufacturing output and about 40%
of exports in terms of value, about 37% of GDP, directly and indirectly.

The business strategy of SIDBI is to address the financial and non-financial gaps in
MSME eco-system. Financial support to MSMEs is provided by way of (a) Indirect
refinance to banks / Financial Institutions for onward lending to MSMEs and (b) direct
finance in the niche areas like risk capital/equity, sustainable finance, receivable
financing, service sector financing, etc. As on March 31, 2015, SIDBI has made
cumulative disbursements of over `3.90 lakh crore benefitting about 346 lakh persons.
By this way, SIDBI would be complementing and supplementing efforts of banks/ FIs
in meeting diverse credit needs of MSMEs.

Development Outlook

In order to promote and develop the MSME sector, SIDBI adopts a ‘Credit+’ approach,
under which, besides credit, SIDBI supports enterprise development, skill upgradation,
marketing support, cluster development, technology modernisation, etc., in the MSME
sector through its promotional and developmental support to MSMEs.
Functions of SIDBI
Direct Credit:

Service Sector Assistance

Loan Facilitation & Syndication Service
Financing Schemes For Sustainable Development - Energy Efficiency & Cleaner Production

Receivable Finance

We realise that Financial Health of a Small and Medium Business

(MSME) depends significantly upon the speed with which their receivables are
realised.
We have, therefore, devised a scheme to to mitigate the receivables problem of
suppliers belonging to Micro, Small and Medium Enterprises (MSMEs) and
improve their cash flow / liquidity.

The scheme helps the MSMEs in Quicker realization of receivables.

Discounting at competitive rates.

Efficient Cash Management.

SIDBI helps mitigate the problem of delayed payments to MSMEs in respect of their
credit sales to large purchaser companies by offering them finance against bills of
exchange / Invoices arising out of such sales.
Micro Finance
SFMC's mission is to create a national network of strong, viable and sustainable Micro
Finance Institutions (MFIs) for providing micro finance services to the economically
disadvantaged people, especially women. SFMC is the apex wholesaler for micro
finance in India providing a complete range of financial and non-financial services such
as loan funds, grant support, equity and institution building support to the retailing
Micro Finance Institutions (MFIs) so as to facilitate their development into financially
sustainable entities, besides developing a network of service providers for the sector.
SFMC is also playing significant role in advocating appropriate policies and regulations
and to act as a platform for exchange of information across the sector. The launch of
SFMC by SIDBI has been with a clear focus and strategy to make it as the main
purveyor of micro finance in the country. Operations of SFMC in the coming years, are
expected to contribute significantly towards development of a more formal, extensive
and effective micro finance sector serving the poor in India with focus on innovation
and action research.
EXIM Bank
Export-Import Bank of India is the premier export finance institution of the country. It
commenced operations in 1982 under the Export-Import Bank of India Act 1981.
Government of India launched the institution with a mandate to not just enhance
exports from India, but also to integrate the country’s foreign trade and investment with
the overall economic growth. Exim Bank of India has been both a catalyst and a key
player in the promotion of cross border trade and investment. Commencing operations
as a purveyor of export credit, like other Export Credit Agencies in the world, Exim
Bank of India has evolved into an institution that plays a major role in partnering Indian
industries, particularly the Small and Medium Enterprises through a wide range of
products and services offered at all stages of the business cycle, starting from import
of technology and export product development to export production, export marketing,
pre-shipment and post-shipment and overseas investment.

FLAG SHIP PROGRAMS

Overseas Investment Finance

Project Finance
Line of Credit
Corporate Banking
Buyer's Credit Under NEIA
More details on the website http://www.eximbankindia.in/
Committees
First Narasimham Committee

The Narasimham Committee was established under former RBI Governor M.

Narasimham in August 1991 to look into all aspects of the financial system in India.
The report of this committee had comprehensive recommendations for financial sector
reforms including the banking sector and capital markets. In broad acceptance to this
committee, the government announced slew of reforms.

The key recommendations with respect to the banking sector were as follows:
Reduction in the Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR):
The Narasimham Committee had recommended bringing down the statutory pre-
emptions such as SLR and CRR. It recommended that SLR should be reduced to 25%
over the period of time and CRR should be reduced to 10% over the period of time.
When these ratios are reduced, bank would have more funds in their hands to deploy
them in remunerative loan assets. The committee also recommended that banks
should get some interest on the CRR balanced.
Redefining the priority sector: The Narasimham Committee redefined the priority
sector to include the marginal farmers, tiny sector, small business and transport sector,
village and cottage industries etc. The committee also recommended that there should
be a target of 10% of the aggregate credit fixed for the Priority Sector at least.
Deregulation: The committee recommended deregulation of the Interest Rates, so
that banks can themselves set the interest rates for their customers.
It did an splendid work in Asset Classification, defining the Non Performing Assets (or
bad debts) and recommendations towards transparency in the banking system
It also recommended setting up tribunals for recovery of Loans, tackling doubtful
debts, restructuring the banks and allowing entry of the new private Banks
Actions on recommendations of First Narasimham Committee
Many of the recommendations of the committee were acceded to by the government.
The SLR , which was around 38.5% in 1991-1992 was brought down to some 28% in
five years.
The CRR was also brought down from 14% to 10% by 1997.
The RBI introduced the CRAR or Capital to Risk Weighted Asset ratio in 1992 for the
soundness of the banking industry. RBI also included new prudential reforms for
classification of assets and provisioning of the non-performing assets.
Some strong banks (such as SBI) were allowed to seek access to capital markets.
The banks which were relatively weaker, were recapitalized by the government via
budgetary support. More private banks were allowed. More freedom was given to
banks to open branches. The RBI’s supervision system was strengthened. Rapid
computerization of the banks was adopted. RBI started helping the commercial banks
to improve the quality of their performance.
The government also enacted Recovery of Debts Due to Banks and Financial
Institutions (RDDBFI) Act, 1993 Debt Recovery Tribunals with an Appellate Tribunal
at Mumbai for quicker recovery of bad debts. In 1995, Banking Ombudsman scheme
was launched with an objective to provide quicker solutions to customers’ complaints.

Padmanabhan Committee
he first step towards rating of banks in India was taken up in 1995, when the Reserve
Bank of India established the S Padmanabhan Committee to take a fresh look at the
banking
Supervision. S Padmanabhan Committee recommended that Banking supervision
should focus on the parameters of the Financial Soundness, Managerial and
Operational Efficiency and firmness.
The Padmanabhan Committee recommended 5 points rating, which was based upon
the CAMELS Model.
CAMELS ratings is a Banks rating used in United States.
The 6 alphabets in CAMELS denote the following:
C: Capital Adequacy Ratio
A: Asset Quality
M: Management Effectiveness
E: Earning (profitability)
L : Liquidity (using the ALM Asset Liability Mismatch Considerations)
S: Sensitivity to market risk

The Padmanabhan Committee recommended the following ratings:

A: Fundamentally sound in every aspect
B: Fundamentally sound but with moderate weakness
C: Financial, Operational and / or compliance weakness and raises supervisory
concerns.
D : Serious or moderate Financial , operational and / or managerial weaknesses that
could impair the future viability.
E: Critical Financial Weakness that has the possibility of failure Internal rating:
Latest Developments:
 In May 2010, the RBI has told the banks that they should be ready with a new
methodology of internal rating of Capital Requirement. This is called Advanced Internal
Rating Based (AIRB) approach. As of now the banks had been following the
standardized approach, wherein banks assign risk to the asset based on the rating
given by external rating agencies. This makes the banks a step closer to becoming
Basel III compliant institution. Since the minimum CAR required is 9%, it is low for the
borrowers with best rating and higher for lower rating. RBI now wants banks to develop
their own methodology to rate borrowers rather than rely on external agencies.

Kannan Committee
A committee constituted by the Indian Banks' Association to examine the relevance
of the concept of Maximum Permissible Bank Finance (MPBF) as a method of
assessing the requirements of bank credit for WORKING CAPITAL, and to suggest
alternative methods. The committee was headed by K. Kannan, Chairman, Bank of
Baroda and its report submitted in 1997, includes the following recommendations :
• The MPBF prescription is not to be enforced and banks may use their discretion to
determine the credit limits of corporates.
• The CREDIT MONITORING ARRANGEMENT may cease to be regulatory
requirements.
• The financing bank may use its discretion to determine the level of stocks and
receivables as security for working capital assistance.
• The mechanism for verifying the end-use of bank credit should be strengthened.
• A credit Information Bureau may be floated independently by banks.

Since April 1997, banks have been given the freedom to assess working capital
requirement within prudential guidelines and exposure norms. Banks may evolve their
methods to assess the working capital needs of borrowers – the Turnover Method or
the Cash Budget Method or the MPBF System with necessary modifications or any
other system.