Scribd
Upload
19 views

Lecture 4 (Autosaved)

NABARD is the apex regulatory body for rural banks in India. It oversees rural development initiatives and ensures the availability of credit to support agriculture and rural economic activities. NABARD operates through regional offices and partners with various organizations to implement programs related to livelihoods, watershed management, and information dissemination in rural areas.

Uploaded by

Mona Gavali
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
19 views

Lecture 4 (Autosaved)

NABARD is the apex regulatory body for rural banks in India. It oversees rural development initiatives and ensures the availability of credit to support agriculture and rural economic activities. NABARD operates through regional offices and partners with various organizations to implement programs related to livelihoods, watershed management, and information dissemination in rural areas.

Uploaded by

Mona Gavali
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 18

 National Bank for Agriculture and Rural Development (NABARD) is an apex

regulatory body for overall regulation of regional rural banks and apex cooperative banks
in India.
 It is under the jurisdiction of Ministry of Finance, Government of India.
 The bank has been entrusted with "matters concerning policy, planning, and operations in
the field of credit for agriculture and other economic activities in rural areas in India".
NABARD is active in developing and implementing financial inclusion.
 NABARD has been instrumental in grounding rural, social innovations and social
enterprises in the rural hinterlands. As of May 2020
 NABARD operates at 32 Regional Offices in the country.
 It has in the process partnered with about 4000 partner organisations in grounding many of
the interventions be it, SHG-Bank Linkage programme, tree-based tribal communities’
livelihoods initiative, watershed approach in soil and water conservation, increasing crop
productivity initiatives through lead crop initiative or dissemination of information flow to
agrarian communities through Farmer clubs.
 NABARD is the most important institution in the country which looks after the
development of the cottage industry, small scale industry and village industry, and other
rural industries.
 NABARD also reaches out to allied economies and supports and promotes integrated
development.
NABARD discharge its duty by undertaking the
following roles
1. Serves as an apex financing agency for the institutions providing investment and production credit for promoting the
various developmental activities in rural areas
2. Takes measures towards institution building for improving absorptive capacity of the credit delivery system, including
monitoring, formulation of rehabilitation schemes, restructuring of credit institutions, training of personnel, etc.
3. Co-ordinates the rural financing activities of all institutions engaged in developmental work at the field level and
maintains liaison with Government of India, state governments, Reserve Bank of India (RBI) and other national level
institutions concerned with policy formulation
4. Undertakes monitoring and evaluation of projects refinanced by it.
5. NABARD refinances the financial institutions which finances the rural sector.
6. NABARD partakes in development of institutions which help the rural economy.
7. NABARD also keeps a check on its client institutes.
8. It regulates the institutions which provide financial help to the rural economy.
9. It provides training facilities to the institutions working in the field of rural upliftment.
10. It regulates and supervise the cooperative banks and the RRB's, throughout entire India.
CAMEL Framework
 The CAMELS acronym stands for "Capital adequacy, Asset quality, Management,
Earnings, Liquidity, and Sensitivity
 CAMELS is an international rating system used by regulatory banking authorities to rate
financial institutions, according to the six factors represented by its acronym.
Understanding the CAMELS Rating System

 Banks that are given an average score of less than two


are considered to be high-quality institutions. Banks
with scores greater than three are considered to be less-
than-satisfactory institutions. The acronym CAMELS
stands for the following factors that examiners use to
rate bank institutions:
Capital Adequacy
 Examiners assess institutions' capital adequacy through capital
trend analysis.
 Examiners also check if institutions comply with regulations
pertaining to risk-based net worth requirements. To get a high
capital adequacy rating, institutions must also comply with interest
and dividend rules and practices.
 Other factors involved in rating and assessing an institution's
capital adequacy are its growth plans, economic environment,
ability to control risk, and loan and investment concentrations.
Asset Quality

 Asset quality covers an institutional loan's quality, which reflects the


earnings of the institution. Assessing asset quality involves rating
investment risk factors the bank may face and balance those factors against
the bank's capital earnings. This shows the stability of the bank when faced
with particular risks.
 Examiners also check how companies are affected by the fair market value
of investments when mirrored with the bank's book value of investments.
 Lastly, asset quality is reflected by the efficiency of an institution's
investment policies and practices.
 Management
Management assessment determines whether an institution is able to properly react to financial
stress. This component rating is reflected by the management's capability to point out, measure,
look after and control risks of the institution's daily activities. It covers management's ability to
ensure the safe operation of the institution as they comply with the necessary and applicable
internal and external regulations.
 Earnings
A bank's ability to produce earnings to be able to sustain its activities, expand, remain
competitive are a key factor in rating its continued viability. Examiners determine this by
assessing the bank's earnings, earnings' growth, stability, valuation allowances, net margins, net
worth level, and the quality of the bank's existing assets.
 Liquidity
To assess a bank's liquidity, examiners look at interest rate risk sensitivity, availability of assets
that can easily be converted to cash, dependence on short-term volatile financial resources and
Sensitivity
 Sensitivity covers how particular risk exposures can affect
institutions. Examiners assess an institution's sensitivity to
market risk by monitoring the management of credit
concentrations. In this way, examiners are able to see how
lending to specific industries affects an institution. These loans
include agricultural lending, medical lending, credit card
lending, and energy sector lending. Exposure to foreign
exchange, commodities, equities, and derivatives are also
included in rating the sensitivity of a company to market risk.
What a Non- Performing Asset?
a) As asset including a leased asset, becomes non- performing when its not abel to
generate income for the Bank.
b) A non-performing asset is a loan/or an advance where:
1) Interest and /instalment of Principal remains overdue for a period of more
than 90days in respect of a Term Loan.
2) The account remains out of order in respect of overdraft/cash credit.
3) The bill remains overdue for a period of more than 90 days in the case of
bills purchased and discounted.
4) Interest /instalment of Principal remains overdue for two crop seasons for
short duration crops.
5) Interest/instalment of Principal remains overdue for one crop season for long
term crops.
6) Amount due to Bank under any facility is overdue for a period of more than
90 days.
7) Account where regular/adhoc credit facilities have not been renewed
/reviewed within 180 days from the due date /date of sanction
What is a Non- Performing Asset?

c) Overdue
Any amount due to the Bank under any facility is overdue if it is not paid on the
due date fixed by the Bank.
1) In the case of temporary overdraft, the outstanding will not be overdue up to
7 days. Hence the temporary overdraft if remaining outstanding for more
than 7 days only should be reported as overdue.
2) in the case of excess over sanctioned limit/drawing power the accounts
become overdue from the date of such excess.
3) in the case of Term loans and loans repayable on demand the instalments
become overdue from the due date of instalments.
4) interest due and charged remaining unadjusted becomes overdue from the
last day of the quarter irrespective of interest charged at monthly intervals.
5) A bill becomes overdue from its due date. In case of sight bills they become
overdue if it remains unpaid on presentation.
What Is a Nonperforming Asset?
 A nonperforming asset (NPA) is a debt instrument where the borrower has not
made any previously agreed upon interest and principal repayments to the
designated lender for an extended period. The nonperforming asset is, therefore,
not yielding any income to the lender in the form of interest payments.
 Carrying nonperforming assets, also referred to as nonperforming loans, on the
balance sheet places three distinct burdens on lenders. The nonpayment of
interest or principal reduces cash flow for the lender, which can disrupt budgets
and decrease earnings. Loan loss provisions, which are set aside to cover
potential losses, reduce the capital available to provide subsequent loans. Once
the actual losses from defaulted loans are determined, they are written off
against earnings

You might also like