INNOVATIVE BANKING - IMPORTANT KEY POINTS
Essential for All Upcoming Bank ExamsIntroduction:
Innovative Banking implies the application of new techniques, new methods and novel schemes in the areas of deposit mobilization deployment of credit and bank management.
To attract more deposits, Indian banks have introduced many attractive saving schemes such as education deposit plan, perennial pension plan, retirement scheme, recurrent deposit scheme, loan linked recurring deposit plan, Akshaya Nidhi Scheme, pygmy deposits scheme, unfixed deposit scheme etc.
Novel/Innovative Credit Schemes/Facilities:
In India, Commercial Bank pay special attention to the various novel and innovative credit schemes and facilities in their operations for the benefit of the society at large some of these are as following:
Credit Authorization Scheme (CAS) –
- The credit authorization scheme for bank advances was introduced by the RBI on 1965. Under the scheme all scheduled commercial banks have to obtain prior authorization of the Reserve Bank before granting any fresh credit limit of Rs. 1 crore or more to any single borrower. This limit was raised to Rs. 2 crore in 19.
- The CAS is being reviewed by the RBI from time to time and is progressively liberalized.
- Recently, following the Vaughn committee’s Report on money market certain changes have been introduced in the CAS for promoting the bill financing:
- In the case of borrowers who enjoy aggregate working capital facility exceeding the cut-off point under the CAS from 1st April, 1988, the limit sanctioned against book debts should not be more than 75% of aggregate limits sanctioned to such a borrower for financing his inland credit sales.
- All borrowers subject to the CAS have to attain a ratio of bill acceptances to total inland credit purchase of 25%.
- Sanctioning of separate additional ad hoc inland bill limit is left to the discretion of the banks.
Advances to Minority Community –
In July 1986 banks were advised to ensure that adequate credit flow is made available to certain identified minority communities, namely Muslims, Christians, Neo-Buddhists, Sikhs and Zoroastrians.
Differential Rates of Interest Scheme –
- The Public Sector Banks have introduced the Differential rates of interest (DRI) scheme in 1912 to extend bank credit to the weaker sections at concessional rates of interest. Under the deposit ratio scheme the banks are directed by the Reserve Bank to finance:
- The Physical handicapped people on a modest scale by offering loans for cottage and rural industries and vocations like sewing garments, making reasonably cheap edibles, running way side tea stalls, basket making etc.
- SC/ST and others engaged on a modest scale in agriculture and allied activities.
- Village artisans in the decentralized sector.
- People engaged in elementary processing of forest product.
Employment oriented Scheme –
- Commercial banks actively participated in the employment-oriented schemes introduced by the government during the 6th and Seventh Five years’ plan period.
- The scheme called self-employment oriented schemes for educated unemployment youth was introduced by the government on 15th August. Its object is to encourage the educated unemployment youth to get self-employed in manufacturing or service industries or business availing themselves of the provision of a package of assistance in the form of bank loan.
- The government introduced a new poverty alleviation programme called the “Self-Employment Programme” for the urban poor (SEPUP) in September 1986. The scheme envisaged the provision of bank credit to create self-employment opportunities for the urban poor.
- The borrower’s eligibility criterion is fixed at a monthly family income of Rs.600. The credit limit is fixed at Rs.5000. Interest rate is fixed at 10% per annum.
Housing Finance –
Banks are providing housing finance. The government has proposed to set up a National Housing Bank as statutory corporations. Its major function would be to promote and develop specialized housing finance institutions at regional and local level which will provide loans for acquisition of housing.