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Money and Finance
New resolution framework for stressed assets: Challenges and opportunities
The Insolvency and Bankruptcy Code (IBC), 2016 aims to expedite resolution of stressed assets, and provide an exit route to failed entities. A simplified, generic framework has been developed by RBI for stressed assets of Rs. 20 billion and above, effective from March 2018. In this post, Srinivasa Rao draws lessons from the ongoing resolution processes of the first lot of large delinquent corporate loan accounts for which IBC has been invoked.
Does your cultural background affect your credit profile?
In many economies – both developed and developing – economic transactions tend to cluster by ethnic or social group. Using data from a large, state-owned bank in India, this article presents evidence that social proximity between lenders and borrowers, increases access to credit and reduces default. The findings suggest that the information benefits of social proximity outweigh the effects of taste-based discrimination.
Public bank privatisation: No panacea for the ills of the banking sector
The recent Punjab National Bank fraud has rekindled the debate on bank privatisation, often considered a solution for the poor management in public sector banks. In this article, Sengupta and Roy contend that privatisation may solve other problems in the Indian economy, free up fiscal resources, and may even reduce corruption, but it is not a solution for regulatory weaknesses.
Where is the cash?
In recent weeks, reports of currency shortages have emerged from several parts of the country. In this post, Nalini Gulati contends that the cash crunch appears to be temporary and is likely to be resolved once the demand-supply mismatch is addressed. What may persist is the ‘ATM run’ and it is important to examine that issue. #CashCrunch Body: In November 2016, Prime Minister Modi announced that Rs. 500 and Rs. 1,000 notes were no longer legal tender and needed to be exchanged for new currency, thus withdrawing 86% of the cash in the economy. The cash shortage that followed had a significant adverse impact on the informal sector in particular, which predominantly uses cash for transactions and depends largely on informal cash credit. In recent weeks, reports of currency shortages have emerged from several parts of the country. The government is attributing the cash crunch to “unusual†high demand for currency, while maintaining that there is sufficient cash supply for normal transaction
Informal Insurance under Group Lending with Individual Liability
This study aims to provide empirical support to the hypothesis that informal insurance plays an important role in the context of group lending under individual liability, and to evaluate the impact of informal insurance on repayment rates.
A study on the impact of financial market reforms on investment, financing and governance structures of the publicly traded firms in India
This project empirically studies financial benefits of equity market integration at the firm level in emerging economies. It explores the unique setting of public firms cross-listing on a new domestic stock exchange, as a means to enhance their access to capital and overcome market frictions in previously fragmented equity markets.
Repayment flexibility, contract choice, and investment decisions among Indian microfinance borrowers
Borrowers’ difficulties to comply with repayment obligations, for entrepreneurial and consumption motives, have pushed several microfinance institutions to introduce some degree of flexibility during the loan cycle.
Understanding the recent ordinance amending the Insolvency and Bankruptcy Code
The Insolvency and Bankruptcy Code, 2016 (IBC) is a landmark reform for India. One year after the notification of the law, an Ordinance to amend IBC has been promulgated, which bars several categories of persons and entities from participating in the IBC processes. In this article, Sengupta and Sharma discuss how the Ordinance goes against some of the core principles of the IBC and analyse how it is likely to impact bankruptcy outcomes.
Huge bank losses, frauds, and economic risks
Banks have incurred humongous losses in India. The public authorities have taken corrective measures primarily in the form of strengthening laws, audits, and the enforcement processes. In this article, Gurbachan Singh argues that while this is indeed required, at the margin there is a much greater and urgent need to improve assessment of the economic risks in a dynamic economy.
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