28 MAR,2021 | MEDC
Some major banking sector reforms have been announced in Budget 2020-21. They include the setting up of a Bad Bank, in which banks can offload their NPAs, the formation of a Development Finance Institution (DFI) for infrastructure financing, and the privatization of some PSBs. The banking sector is an important tool to revive the economy, but in India it has become rather wobbly. The call for privatization is rewinding the clock to pre-nationalization days, but in a different economic milieu. Only time will tell if it works out. Covid has spurred digitization in the sector, but the review of major banking laws is still an unfinished agenda. This does not bode well for the safety of deposits in the system, especially as frauds in value terms (as well as cyber risks) have risen exponentially. Financial stability is now at the crossroads, but we do believe that joint efforts by the RBI and the Finance Ministry along with the guidance of market signals will help to rectify the situation.
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