The document summarizes recent developments in India's monetary policy, financial sector, and insolvency reforms. Key points include: - The Reserve Bank of India cut policy rates in 2019 to support economic growth amid a slowdown. Broad money growth improved marginally due to rising bank deposits. - Non-performing assets declined for scheduled commercial banks and public sector banks from 2018 to 2019. Credit growth to non-financial corporations also improved. - The Insolvency and Bankruptcy Code led to faster resolution of stressed assets and higher recoveries compared to previous regimes. Several reforms are planned to further strengthen insolvency proceedings. - Other sections cover developments in capital markets, banking, non-

1. Monetary Management and
Financial Intermediation
CA. Divakar Vijayasarathy
DVS Advisors LLP
India-Singapore-London-Dubai-Malaysia-Africa
www.dvsca.com

2. Credits and Acknowledgments
Dania Mary Gracia D
Bharathi Priya R D

3. Presentation Schema
Monetary
Developments
Revision in Policy
Rates & Growth
in Monetary
Aggregates
Reverse Money &
Broad Money
Growth
Variation in
Deposits &
Money Multiplier
Liquidity
Conditions & G-
Sec Market
Banking Sector &
Credit Growth
Non-Banking
Financial Sector
& its Growth
Developments in
Capital Markets
Insurance Sector
Insolvency and
Bankruptcy Code
– Progress and
Categorisation
Impact of
Insolvency and
Bankruptcy Code
Reforms in
Pipeline

4. Monetary Developments
The policy rate was further cut by 25 bps each in the First and the Second Bi-monthly Monetary Policy Statement for
2019-20
The MPC noted the pause in the rate hiking cycle by the Fed, positive outcome from US-China trade negotiations and
downward risks to domestic inflation. The MPC changed the policy stance from “calibrated tightening” to “neutral” and
reduced repo rate by 25 bps to 6.25 per cent.
The policy stance was changed from “neutral” to “calibrated tightening”
Subsequently, MPC decided to increase the policy repo rate by 25 basis points (bps) each while keeping the policy stance
as neutral.
In April 2018, the Monetary Policy Committee (MPC) decided to keep the policy repo rate unchanged at 6%

5. Revision in Policy Rates

6. Year-on-Year Growth in Monetary Aggregates
During 2018-19, the growth rate of monetary aggregates reverted to their long-term trend due to
Demonetisation and process of Remonetisation

7. Reserve Money Growth
Reserve Money recorded a growth of 14.5 per cent over the previous year. On the component side, the
expansion was mainly driven by Currency in Circulation

8. Broad Money Growth
Broad money growth has been on declining trend since 2009. However, in 20018-19,it improved
marginally by aggregate deposits
In%

9. Variation in Deposits
The expansion in broad money growth was contributed by both currency and deposits. Deposits with the
banking system, lead to an increase in aggregate deposits by 9.6% in 2018-19 where as it was 5.8% during
2017-18. Credit from Scheduled Commercial Bonds (SCBs) to the commercial sector & bank credit to
government contributed to increase in broad money growth.
AD– Aggregate Deposits, DD– Demand Deposits, TD– Time Deposits

10. Money Multiplier
The money multiplier expanded sharply between 1996 and 2003 and stabilizing thereafter till 2008. It started
rising again till 2017 but declined for two successive years in 2017-18 & 2018-19. On March 31, 2019, it stood
lower at 5.7 per cent
In%

11. Liquidity Conditions and Management
In 2018-19, liquidity conditions were comfortable till August 2018 but has been systematically tight since
September 2018. Liquidity situation, on average, moved in the deficit zone in the last two quarters of 2018-19
as well as in first quarter of 2019-20

12. Developments in G-Sec Market
During 2018-19, the 10-year benchmark g-sec yields were volatile and closely tracked the movement in oil
prices, domestic liquidity and rupee exchange rate. It hardened in the first quarter but witnessed softening in
the second and third quarters

13. Banking Sector
The performance of the banking sector & PSBs improved in 2018-19. The GNPA ratio of SCBs decreased
from 11.5 % to 10.1 % between Mar & Dec 2018. SA ratio decreased from 12.1 % to 10.5 %
GNPA ratio of PSBs decreased from 15.5 % to 13.9 % bet Mar & Dec 2018. SA ratio of PSBs decreased
from 16.3 % to 14.4 %
CRAR of SCBs increased from 13.8 % to 14.0 % bet Mar 2018 & Dec 2018 due to improvement of CRAR of
PSBs.
SCBs’ RoA decreased from 0.21 % in 2017-18 to 0.03 % in 2018-19 while their RoE decreased from 2.41 %
to 0.4 %

14. Credit Growth
Growth in NFC, remained sluggish in last few years, showed improvement in 2018-19. The average NFC growth
in 2018-19 improved to 11.2 %

15. Non-Banking Financial Sector
In the recent past, the NBFCs have played increasingly important role in resource mobilization and credit intermediation
NBFCs bring in diversity and efficiency to the financial sector and makes it responsive to the customers

16. Growth in NBFC
Growth in Bank Credit to NBFCs Growth in Deployment of funds by MFs to NBFCs

17. Contd…
Growth in Loans and Advances of NBFCs

18. Developments in Capital Market
Primary Market - Public Issue. In 2018-19 witnessed a significant decrease in resource mobilization through
public issue and rights issue of equity. Resource mobilization through issuance of debt public issue rose quite
significantly during 2018-19.

19. Contd…
Primary Market -Private Placement. During 2018-19, Indian corporates preferred private placement route to
gear up the capital requirement. There were 416 issues which raised `2,17,632 crore in 2018-19 compared to
460 issues which raised `1,26,711 crore during 2017-18

20. Mutual Fund Activities
Investment by Foreign Portfolio Investors

21. Offshore Derivatives Instruments Vs Assets
Under Custody

22. Movement of Indian Benchmark Indices

23. Insurance Sector
Insurance has evolved as a tool of safeguarding the interest of people from loss and uncertainty and it encourages
savings and provides long-term funds to individuals
The potential and performance of the insurance sector are generally assessed on the basis of two parameters, viz.,
insurance penetration and insurance density
The measure of insurance penetration and density reflects the level of development of insurance sector in a country
While insurance penetration is measured as the % of insurance premium to GDP, insurance density is calculated as the
ratio of premium to population (measured in US$ for convenience of international comparison).

24. Insurance Sector – Statistics
Penetration in Life Insurance
Penetration in General Insurance

25. Insolvency and Bankruptcy-CY Code 2016
The IBC was enacted on May 28, 2016
IBC registered three Insolvency Professional Agencies (IPAs) -
977 individuals with professional qualifications and 15 years of experience
were granted temporary registration

26. Quarterly Progress Made By IBC

27. Sector Wise Distribution of Cases Admitted

28. Category – Wise Corporate Insolvency
Resolution Progress Initiated

29. Region Wise Insolvency Proceedings
Registered As On March 2019

30. Impact Of IBC
It is often difficult to tangibly measure the contribution of an efficient insolvency system in national
prosperity
Direct measures of the impact tend to underestimate its importance as they may fail to account for the
‘enabling’ and ‘preventive’ role played by the insolvency system
Behavioural change and Increase in the resolution of stressed Assets are the major impacts of IBC

31. Average Recovery under Various Recovery
Regimes
In%

32. Number Of Days Taken To Approve Resolution
Plans

33. Reforms In Pipeline
Cross Border Insolvency
Group Insolvency
Insolvency and Bankruptcy of Individuals
Improving NCLT capacity

34. Thank You
DVS Advisors LLP
India-Singapore-London-Dubai-Malaysia-Africa
www.dvsca.com
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