Working Capital Control And Banking Policy 5b511c

Working Capital Control and Banking Policy CAPITAL CONTROL In economics, capital manage is the monetary policy device that a country‘s government (i.e., sovereign authority) uses to regulate the flows into and out of a country‘s capital explanation, i.e., the flows of investment-oriented money into and out of a country or currency. The decade as the Asian Currency Crisis in 1997-1998 has rekindled debate in excess of the wisdom of developing markets having capital controls. As globalization advanced with the formalization of the World Deal Institutions and Uruguay Round of Common Agreement on Tariffs and Deal (GATT), developing countries were urged through the International Monetary Finance and others to liberalize their capital controlled environments. As it became clear that countries doing this, including Malaysia, Thailand and Mexico, essentially ceded manage of their economies to external forces, namely international capital movements, hot money and capital flight; and countries that did not, like China and India, retained manage and were not almost as vulnerable to the volatility of international capital movement, some argued that capital controls were advisable for smaller economies to exploit, and to transition absent from them only in excess of extensive, common evolutionary timelines. Malaysia is an instance of a country that switched regimes, from open in the late 1990s, to close. Economists ing capital controls in sure cases were not only from the left, but also liberal economists like Jagdish Bhagwati and news publications like The Economist. Banking Policy and Trends Policy Events These contain freedom for banks to lend at interest rates below their respective PLRs to exporters and other creditworthy borrowers (including public enterprises), permission to formulate fixed deposit plans offering higher and fixed interest rates to senior citizens, flexibility in the composition of working capital as flanked by cash credit and loan components, reduction in exposure limits for borrowers, revised guidelines for exposure of banks to capital market, and guidelines for investment in nonSLR securities by the private placement circuit. The initiatives specially aimed at strengthening the operational efficiency of banks relate to the Voluntary Retirement Plan, the Banking Service Recruitment Boards, Credit Fact Bureau, and enlargement of the reach and scope of the electronic funds transfer facility. Voluntary Retirement Plan (VRS) VRS was implemented through 26 out of 27 public sector banks in 2000-2001. Indian Banks.

Association (IBA), the total staff strength in public sector banks at the end of March 2000 was 8, 63,188 out of whom 1, 26,714 or 14.7 per cent applied for VRS. In relation to the80 per cent of the number of applications were carried, and the staff relieved under VRS until December 31, 2001 were 1, 01,300. This constituted 11.7 per cent of the total staff strength at the end of March 2000. Banks were advised through the Reserve Bank to treat the ex-gratia payment as deferred revenue expenditure (DRE), which would not be reduced from Tier I capital. The location will be regularized through the end of the ing year in which the DRE gets completely wiped out. The maximum era of deferment has been fixed at five years, including the year of acceptance of VRS applications through the banks. Banking Service Recruitment Boards In pursuance of the announcement made through the Fund Minister in his Budget speech, the Banking Service Recruitment Boards (BSRBs) have been abolished. Accordingly, banks have been advised to frame their own recruitment strategies, with the approval of the respective Boards, to meet future necessities. While framing such strategies, banks are required to ensure, inter alia, that the recruitment policy is transparent and fair, with due symbols of the of SC/ST and minority societies in selection committees. Banks have also been advised to ensure that reservations in posts and related concessions/relaxations in fees and spots, as laid down through the Government of India, are strictly followed. Electronic Funds Transfer (EFT) EFT facilitates transfer of funds electronically within and crossways municipalities and flanked by branches of a bank and crossways banks. EFT is operated through RBI, and is accessible for funds transferred crossways 13 biggest municipalities in the country as on January 11, 2002. With effect from October 1, 2001, big value transactions upto Rs. 2 crore have been permitted under EFT. Transfer of funds on a ―similar-day‖ foundation was implemented effective from January 2, 2002 at the four metro centers with three settlements per day. Little and Medium Enterprises (SMEs) Troubles Facing the SSI Sector The SSI sector confronts many troubles despite its strategic importance in any industrialization strategy and its immense potential for employment generation. The problem which continues to be a large hurdle

for the development of the sector is lack of access to timely and adequate credit. The Abid Hussain Committee on SSIs (1997) examined the troubles of the SSI sector and recommended a package of policies to restructure the industry in the context of current global economic changes. The Expert Committee was of the view that the existing institutional building for delivering credit to SSEs requires a thorough overhaul. It endorsed the recommendations of the Nayak Committee and urged the RBI to implement the similar. The Committee recommended restructuring of financial