Role of DFS in improving bank asset quality in 2023

Role of DFS in improving bank asset quality in 2023

Subject :Economy

Section: Monetary Policy

1. Reduction of Non-Performing Assets (NPAs):
   • The DFS have played a crucial role in significantly reducing NPAs in Scheduled Commercial Banks (SCBs).
   • Gross NPAs decreased from ₹9,33,779 crore in March 2019 to ₹5,71,515 crore in March 2023.
2. Measures Affecting NPAs:
   • The effectiveness of measures such as the Insolvency and Bankruptcy Code (IBC), amendments to the SARFAESI Act, and the Prudential Framework for Resolution of Stressed Assets is highlighted.
3. Financial Inclusion Initiatives:
   • The DFS emphasizes initiatives taken for financial inclusion, including schemes such as Pradhan Mantri Jan Dhan Yojana (PMJDY), Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Suraksha Bima Yojana, MUDRA, Stand Up India, and Atal Pension Yojana.
   • These initiatives aim to provide basic banking services, insurance, and pension schemes to vulnerable sections of society.
4. Debt Recovery Measures:
   • The government and RBI have taken comprehensive measures for debt recovery, enabling SCBs to recover a total amount of ₹7.16 lakh crore during the last five financial years.
   • Changes in credit culture, especially through the IBC, are highlighted.
5. Digital Payments and Financial Reforms:
   • The DFS has been actively promoting a robust digital payments ecosystem.
   • The DIGIDHAN Mission, under the DFS, has contributed to the significant growth of digital payment transactions.
   • The DFS continued the momentum of financial reforms, focusing on risk assessment, NPA management, financial inclusion, customer service, digital transformation, and more.
6. Agriculture Sector Initiatives:
   • The DFS facilitated robust credit disbursement in the agriculture sector, with agricultural credit increasing from ₹8.45 lakh crore in FY15 to ₹21.55 lakh crore in FY23.
   • The Kisan Credit Card (KCC) scheme is mentioned as playing a pivotal role in providing credit to farmers.
7. EASE Reforms:
   • The DFS continued the momentum of reforms, building on initiatives like the Enhanced Access and Service Excellence (EASE) Reform agenda.
   • The EASE Reforms focus on various aspects, including digital customer experience, analytics-driven business improvement, tech and data-enabled capability building, and HR operations enhancement.

Brief on various schemes under DFS –

1.   Pradhan Mantri Jan Dhan Yojana (PMJDY):

• Objective: PMJDY, launched in August 2014, aims to provide financial inclusion to every household in India.
• Key Features:
  • Opening of basic savings bank accounts with no minimum balance requirement.
  • Access to financial services such as insurance, credit, and pension.
  • RuPay debit card for account holders.
  • Direct Benefit Transfer (DBT) and subsidies directly credited to the accounts.
  • Overdraft facility for eligible account holders.

2. Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY):
   • Objective: PMJJBY, launched in May 2015, provides life insurance coverage at an affordable premium.
   • Key Features:
     • Life insurance coverage of ₹2 lakhs in case of the insured’s death due to any reason.
     • Annual premium is low, making it accessible to the economically weaker sections.
     • The scheme is available to individuals aged 18 to 50 years.

3. Pradhan Mantri Suraksha Bima Yojana (PMSBY):
   • Objective: PMSBY, also launched in May 2015, provides accidental death and disability insurance coverage.
   • Key Features:
     • Accidental death and disability coverage of ₹2 lakhs.
     • Premium is affordable, making it accessible to a large population.
     • The scheme is available to individuals aged 18 to 70 years.

4. MUDRA (Micro Units Development and Refinance Agency) Scheme:
   • Objective: Launched in April 2015, MUDRA aims to provide financial support to microenterprises and promote entrepreneurship.
   • Key Features:
     • MUDRA provides funding to microenterprises through various loan products.
     • Three categories of loans: Shishu (up to ₹50,000), Kishor (₹50,000 to ₹5 lakhs), and Tarun (₹5 lakhs to ₹10 lakhs).
     • The loans support a variety of income-generating activities.

5. Stand Up India:
   • Objective: Launched in April 2016, Stand Up India promotes entrepreneurship among women and SC/ST communities.
   • Key Features:
     • Provides bank loans between ₹10 lakhs and ₹1 crore to at least one SC/ST borrower and one woman borrower per bank branch.
     • Aims to support greenfield enterprises in the non-farm sector.

6. Atal Pension Yojana (APY):
   • Objective: Launched in May 2015, APY encourages the unorganized sector to save for their retirement.
   • Key Features:
     • Provides a fixed pension between ₹1,000 and ₹5,000 per month after the age of 60.
     • Contributions based on age and chosen pension amount.
     • Accessible to individuals aged 18 to 40 years.

7. DIGIDHAN Mission:
   • Objective: DIGIDHAN Mission focuses on promoting a robust ecosystem for digital payments in India.
   • Key Features:
     • Aims to reduce cash transactions and promote digital financial transactions.
     • Encourages the use of digital payment methods such as UPI (Unified Payments Interface), mobile wallets, and digital banking.
     • Seeks to enhance financial inclusion and reduce the reliance on physical currency.
     • Enhances the security and efficiency of transactions in the digital space.

8. Kisan Credit Card (KCC):
   • Objective: The Kisan Credit Card scheme was introduced to provide timely and hassle-free credit to farmers.
   • Key Features:
     • Offers farmers a revolving credit facility to meet their agricultural needs.
     • Enables farmers to access short-term credit for crop cultivation, harvest, and post-harvest expenses.
     • Simplifies the credit delivery process for farmers, making it more accessible and farmer-friendly.
     • Promotes financial inclusion and ensures farmers have timely access to credit.

9. Enhanced Access and Service Excellence (EASE) Reform:
   • Objective: The EASE Reform agenda aims to bring about positive changes in the functioning of Public Sector Banks (PSBs) in India.
   • Key Features:
     • Focuses on multiple areas, including risk assessment, NPA (Non-Performing Asset) management, financial inclusion, customer service, and digital transformation.
     • Aims to improve the overall efficiency, transparency, and accountability of PSBs.
     • Promotes the use of technology and data-driven approaches for better decision-making.
     • Evolved through multiple versions (EASE 1.0 to EASE 6.0) with a focus on digital customer experience and operational enhancements.
     • EASE index is prepared by the Indian Banking Association (IBA) and Boston Consulting Group and commissioned by the Finance Ministry.