Money and Banking (part – II)

• Macroeconomic and Financial development
• Broadening Access to finance
• Levelling the playing field
• Creating more efficient and liquid markets
• A growth-friendly regulatory framework
• Creating a robust infrastructure for credit

The plan of the Raghuram Rajan committee was the need at the time, as it addresses financial inclusion and domestic financial development, but this also meant that the political challenges of this report were more extensive. The underlying theme of this report was the need to enhance inclusion, growth, and stability by allowing players more freedom, even while strengthening the financial and regulatory infrastructure.
The macroeconomics frameworks were the most disputed and likely to be the most challenging to implement. Inflation targeting and float exchange rate were very far from that practice. The current approach for the market is very different. The report provides a direct and simple way in this area. It encourages the introduction of the missing markets, stopping the creation of investor uncertainty in banned markets, encourages the setup of financial markets and exchanges between products and investors. It also helped create a more friendly environment by decreasing the time needed for approval of new financial products.
The report has several recommendations for modifying the current regulatory architecture to improve the coordination, coverage and quality. The key idea for it is the reduction of micromanagement.
Certainly, structural change may help increase incentives, but there is a danger of getting bogged in new institutions or making legislative changes. An improved credit structure will better inform, educate, and protect small participants in the financial market. Doing all this will not automatically increase financial inclusion, but it will be the beginning of the modern financial sector. The positive approach to this Raghuram Rajan Report is that these changes show more potential for change in the future.

The mandate of the Committee:

• Review status, needs, and justification of various provisions, reserves, and buffers presently provided for by the RBI.
• To review best practices followed by the central banks globally in making assessment and provisions for risks, to which central Bank Balance sheets are subjected.
• Suggest an adequate level of risk provisioning that the RBI needs to maintain, and to determine whether it is holding provisions, reserves, and buffers in surplus or deficit of the required level.
• Propose a suitable profit distribution policy taking into account all the likely situations of the RBI, including holding more provisions than required and the RBI holding fewer provisions than required.

• The committee advocated for a more strategic approach to disinvestment, suggesting that the government could disinvest up to any level in identified public sector units, except in defense and atomic energy where the government should retain majority ownership.
• The committee emphasized the need for a transparent process in disinvestment, ensuring the protection of stakeholders' rights, including workers.
• The report recommended the establishment of an autonomous body to oversee and monitor the disinvestment program.
• The committee's recommendations led to the formation of the Disinvestment Commission in 1996, an advisory body tasked with advising the government on the extent, method, timing, and pricing of disinvestment.

• The committee advocated for a more strategic approach to disinvestment, suggesting that the government could disinvest up to any level in identified public sector units, except in defense and atomic energy where the government should retain majority ownership.
• The committee emphasized the need for a transparent process in disinvestment, ensuring the protection of stakeholders' rights, including workers.
• The report recommended the establishment of an autonomous body to oversee and monitor the disinvestment program.
• The committee's recommendations led to the formation of the Disinvestment Commission in 1996, an advisory body tasked with advising the government on the extent, method, timing, and pricing of disinvestment.

The Wholesale Price Index represents the price of a basket of wholesale goods. WPI focuses on the price of goods that are traded between corporations. It does not concentrate on goods purchased by the consumers.

• The main objective of WPI is monitoring price drifts that reflect demand and supply in manufacturing, construction and industry.
• WPI helps in assessing the macroeconomic as well as microeconomic conditions of an economy.

• 70,000 habitations have been covered so far under the 'Swabhimaan' campaign out of 73,000 identified habitations till March 2012.
• The tag line of this scheme is "Mera khata, Mera Swabhiman".
  The Objectives of this scheme are:
• To bring banking within the reach of the masses of the Indian population.
• To enable small and marginal farmers to obtain credit at lower rates from banks and other financial institutions.
• To empower people to achieve their own goals by enhancing their financial capabilities.

• 70,000 habitations have been covered so far under the 'Swabhimaan' campaign out of 73,000 identified habitations till March 2012.
• The tag line of this scheme is "Mera khata, Mera Swabhiman".
  The Objectives of this scheme are:
• To bring banking within the reach of the masses of the Indian population.
• To enable small and marginal farmers to obtain credit at lower rates from banks and other financial institutions.
• To empower people to achieve their own goals by enhancing their financial capabilities.