Imagine a situation where a large infrastructure company in India wants to build a new highway or expand its manufacturing facilities. Such projects require huge long-term funds, which cannot always be financed through bank loans alone. At the same time, millions of households across the country have savings that they want to invest to earn…
In the financial system, the Money Market deals with short-term borrowing and lending of funds, generally for periods of less than one year. Governments, banks, and financial institutions frequently face temporary mismatches between their receipts and payments. To manage these short-term liquidity needs, they rely on instruments such as Treasury Bills (T-Bills), Cash Management Bills…
Imagine an economy as a vast network of people and institutions where some participants have surplus money, while others need funds to expand their activities. For instance, a household may save part of its income but may not know where to invest it profitably. At the same time, a growing company may need capital to…
Think of the economy like a large marketplace. If a large section of people cannot access banks, insurance, or credit, they remain outside this marketplace. Financial inclusion is essentially the effort to bring these excluded individuals into the formal financial system so that they can participate fully in economic activity. What is Financial Inclusion? Financial…
To understand banking sector reforms in India, we must first recall the historical context. Until the early 1990s, India’s banking system was highly regulated and dominated by Public Sector Banks (PSBs). Interest rates were controlled, credit allocation was directed by the government, and banks were required to maintain very high SLR (Statutory Liquidity Ratio) and…
To understand the NPA crisis in India, we must first recall a basic idea:A banking system functions on trust and repayment discipline. Banks lend money today with the expectation that borrowers will repay it tomorrow with interest. However, when a large number of loans stop being repaid, they turn into Non-Performing Assets (NPAs). When this…
To understand Basel Norms, imagine the global banking system as a large network of interconnected institutions. If one major bank collapses, it can create a chain reaction affecting many economies. Therefore, the world needed common rules to ensure banks remain financially strong and stable. Basel Norms were developed to address exactly this concern. Let us…
To understand the financial health of a bank, we must think of a bank just like a business enterprise. Any business must answer three basic questions: In banking, these questions are answered through three broad analytical pillars: Let us understand each of these. Profitability of a Bank Profitability shows how efficiently a bank converts its…
All India Financial Institutions (AIFIs) are specialized financial institutions established by the Government of India to provide long-term finance and developmental support to crucial sectors of the economy. Unlike commercial banks, whose primary function is deposit-taking and short-term lending, AIFIs focus on developmental financing. Their objective is not merely profit but economic development. Why were…
While the term “Non-Banking Financial Company” may sound technical, the idea behind it is actually quite intuitive. If we place the financial system in a broad framework, we can imagine two major pillars: banks and non-bank financial institutions. NBFCs belong to the second category. A Non-Banking Financial Company (NBFC) is a financial institution that provides…
