Capital Infusion in Public Sector Banks Quiz

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Questions and Answers

What is the primary expected benefit of the government's capital infusion for PSBs?

Improvement in employee performance

Increase in asset management efficiency

Enhanced investor attractiveness (correct)

Reduction in operating costs

How are PSBs expected to perform in the capital markets post infusion?

They will only raise funds domestically

Their performance will deteriorate

They will be better positioned to raise capital (correct)

They will be unable to raise any capital

What overall improvement is expected for shareholders after the capital infusion?

Reduction in stock prices

Expansion into international markets

Increase in dividend payouts

Improved financial performance (correct)

What strategic advantage do PSBs gain from increased investor attractiveness?

Access to diverse funding sources Signup and view all the answers

What implication does the capital infusion have on the market for new investments?

It creates opportunities for new investments Signup and view all the answers

What was one of the primary objectives of the 4R’s strategy implemented by the government?

Bring transparency and accountability to the financial system Signup and view all the answers

How many inoperative companies were identified for deregistration under the reforms?

2.26 crore Signup and view all the answers

What action was taken against the identified inoperative companies by the end of FY18?

Their bank accounts were frozen Signup and view all the answers

The number of companies identified as inoperative was aimed at improving which aspect of the financial system?

Corporate governance Signup and view all the answers

Which of the following best describes a 'shell' company as mentioned in the context?

A company without significant assets or operations Signup and view all the answers

What is one of the key responsibilities of the dedicated Stressed Asset Management Verticals (SAMVs) established by PSBs?

Overseeing large-value NPA accounts Signup and view all the answers

What issue do many PSBs face that affects their decision-making?

Timeliness in decision-making Signup and view all the answers

How many PSBs have established dedicated Stressed Asset Management Verticals (SAMVs)?

21 Signup and view all the answers

What has been a consequence of the reforms under the PSB Agenda?

Changes in resource allocation Signup and view all the answers

What are PSBs required to secure for effective decision-making?

Higher-level approvals Signup and view all the answers

Which aspect indicates the specialized nature of resources in the PSBs according to the Agenda?

Creation of specialized departments Signup and view all the answers

What is one of the constraints faced by PSBs in relation to the EASE Agenda?

Timeliness in decision-making Signup and view all the answers

What type of accounts are primarily managed by the dedicated Stressed Asset Management Verticals (SAMVs)?

Large-value NPA accounts Signup and view all the answers

What was the primary action taken by the Government in FY19 regarding financial regulation?

Frozen bank accounts Signup and view all the answers

Who continues to operate regulations in the financial sector?

National Financial Regulatory Authority Signup and view all the answers

What was a key focus of the Government's regulatory activities?

Regulating the quality of compliance Signup and view all the answers

Which statement best describes the context of the operational changes made in FY19?

They dealt with freezing accounts to ensure compliance. Signup and view all the answers

What does the term 'operationalised' refer to in this context?

Implementing specific regulatory measures Signup and view all the answers

What does the JAM trinity consist of?

Jan Dhan, Aadhaar, and Mobile Signup and view all the answers

Which platform enables industry-wide digital lending?

psbloansin59minutes.com Signup and view all the answers

What is the role of e-KYC in digital banking?

It helps in customer identity verification. Signup and view all the answers

Which of the following is NOT a component of digital banking infrastructure?

Direct Transfer Intelligence Signup and view all the answers

What does UPI stand for in the context of digital banking?

Unified Payment Interface Signup and view all the answers

What is the primary focus of the document?

Promotion exercise for executives Signup and view all the answers

In what year is the promotion exercise scheduled?

2025-26 Signup and view all the answers

What does the term 'internal circulation only' indicate?

The content is confidential to internal staff Signup and view all the answers

Which of the following terms describes the nature of this document?

Internal memo Signup and view all the answers

What is implied regarding the individuals mentioned in the document?

They are candidates for promotion Signup and view all the answers

Why might the document specify 'Do Not Print'?

To prevent unauthorized sharing Signup and view all the answers

What is a likely outcome of the promotion exercise mentioned?

Identification of high-potential employees Signup and view all the answers

What is the significance of the 'Baroda Academy' mentioned?

It provides executive training programs Signup and view all the answers

What type of information is likely excluded from the document?

External marketing strategies Signup and view all the answers

What can be inferred about timelines mentioned in the document?

They are strict and adhere to scheduled dates Signup and view all the answers

Which aspect of the document might indicate its intended audience?

References to company policies and procedures Signup and view all the answers

The repeated presence of 'Mr KUM' throughout the document suggests what?

It highlights the importance of a single individual Signup and view all the answers

How might the phrase 'required' in the document affect its interpretation?

It implies urgency in actions to be taken Signup and view all the answers

What effect does the format of the document have on its usability?

It complicates the retrieval of information Signup and view all the answers

Study Notes

Reference Study Material for Promotion Exercise 2025-26

This booklet supplements learning efforts for promotion aspirants.
Topics are indicative in nature, and readers should refer to Bank Circulars, SOPs, and policy guidelines.
Avoid using this booklet as an instruction manual.
Information is based on previous trends, not an exhaustive guide.

Overview

Public Sector Banks (PSBs) experienced excessive stress in their loan portfolios.
Hidden stress, particularly in Standard Restructured Assets (SRAs), became apparent in 2015.
This led the Government to implement a 4-R strategy (Recognizing NPAs, Resolution & Recovery, and Reforms).
Recognizing hidden stress as NPAs, significant recoveries, and provisions against NPAs have improved PSB balance sheets.
A common PSB Reforms Agenda (EASE), with 30 action points, is tracking progress using the EASE Reforms Index.

Recognition

Since FY09, stressed assets in PSBs rose to 12% of gross advances.
This included 7% in SRAs (hidden).
Subsequent transparent NPA (Non-performing Asset) recognition and the withdrawal of credit forbearance reduced hidden SRAs.
NPAs for PSBs increased from 5.0% to 13.7% of gross advances between 2009 and 2019.

Reducing Stress

The IBC (Insolvency and Bankruptcy Code) reduced NPAs from 8.96 lakh crore (FY18) to 8.64 lakh crore (Q3 FY19).
This was 70 basis points reduction in Q3 FY19 compared to RBI projected 50 basis point YOY reduction.

Record Growth in Recovery

NPA resolution and recovery processes have improved due to the IBC.
PSBs have set up Stressed Asset Management Verticals (SAMVs) to manage high-value NPA accounts and this resulted in 89% of high-value NPA cases to SAMVs, up from 35% in 2018.
This ensures timelier decision-making and dedicated resources for large NPA cases.
Banks have filed suits and register acts against wilful defaulters to discourage future defaults.

Recapitalization

The Government infused approximately ₹2.5 lakh crore into PSBs from FY15 until February 2019.
This recapitalization alongside improved financial performance bolsters PSBs' positions in the market.

Driving Clean & SMART Banking

The Government initiated system-wide reforms to improve transparency and accountability in the banking system.
This includes freezing accounts of inactive companies.
PSBs now collect details of key borrowers to strengthen risk management.
Initiatives like GST databank access improve data quality for informed lending decisions.

Enabling Transformative Reforms

The recommendations from PSB Manthan (2017), including representatives from PSBs and the government, led to 30 action points for the EASE Reforms Agenda.
A comprehensive, independent, and benchmarked EASE Reforms Index is used to measure progress in the 6 themes. This Index tracks 140 metrics.
Quarterly Board Reviews, along with the Index, help track and improve EASE Reforms in all PSBs.
Workshops are held for peer-to-peer knowledge sharing of best practices.

Digital Banking

Increased adoption of mobile and internet banking by PSBs.
Services are provided through Bank Mitras to enhance last-mile access, with 87% of large PSB customers able to receive service in their regional language.
Digitization of transactions has improved with the inclusion of more features in mobile apps and online platforms.
Enhanced digital services increased transactions by over 80% YOY in Q3 FY19.

EASE Reforms Index

Provides comparative evaluation of PSBs on 140 metrics.
A transparent methodology enables banks to track progress and identify improvement areas.

EASE Reforms Index Themes

PSB Performance is measured across Customer Responsiveness, Responsible Banking, Credit Off-take, Udyami Mitra for MSME, Deepening Financial Inclusion and Digitalisation, & Development of Personnel for Brand PSB.

PSB Balance Sheets

Significant increase in recapitalization by the Government.
This led to infusions of nearly ₹70,000 crores over 4 years (Indradhanush Plan).
PSBs increased capital base through equity capital raising and asset monetization.

Performance of Banks under PCA (Prompt & Corrective Action)

PCA banks improved performance by focusing on deleveraging, improving lending practices, and accelerating recovery.
This led to successful improvement in responsible banking.

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Description

Test your knowledge on the government's capital infusion strategy for Public Sector Banks (PSBs). This quiz covers the expected benefits, market impacts, strategic advantages, and the objectives behind the reforms. See how well you understand the implications for shareholders and the financial system.