Credit

Following the announcement of demonetisation on 8 November 2016, India saw the withdrawal of nearly 86% of the cash in circulation. This caused prolonged currency shortages and impacted employment, sales, income, loan payback capacity, savings and by extension, financial inclusion. A survey conducted among two distinct groups in Mumbai and Pune, three months after demonetisation, in April–May 2017, reveals the adverse impact of currency shortages on the incomes and livelihoods of those employed in tiny, informal enterprises. With a decline in the sales in their businesses, their income and savings fell, and so did the demand for credit.

Credit is essential for small and marginal farmers in India, whose low incomes limit savings, making them more vulnerable to several risks. Priority sector lending norms have channelled more formal credit to this sector. The interest subvention scheme for short-term crop loans makes formal credit more economical for farmers. However, there are issues of accessibility, most notably arising out of difficulties in presenting documentation, giving rise to a prevalence in the use of gold/jewellery as collateral. Loan data from three districts in Karnataka has highlighted some important lessons. The use of gold tends to exclude poorer farmers from availing all the benefits of the scheme, and poses issues of accessibility to formal credit. Digitisation of land records and farmer information, coupled with reduced recognition of gold loans in priority sector lending can be valuable to the Indian agriculture sector.

The implementation of the Insolvency and Bankruptcy Code, 2016 has led to aggressive competition to acquire firms that have been subjected to the resolution process. This suggests that the default that required the creditors to bring these firms to the National Company Law Tribunal was not due to poor fundamentals. Moreover, the decision of the original promoters to try and enter the fray as bidders for defaulting firms indicates that they too do not see the firms and the activities they are engaged in as unviable. Yet, there is much pressure on the government to favour those who seek to game the system.

In spite of their distinct organisational structure and banking philosophy based on mutuality, there is scant evidence on efficiency of cooperative banks. The efficiency of district central cooperative banks in India is investigated by constructing a panel of 297 cooperative banks over the period 2002–14. Using parametric and non-parametric frontier analysis, it is found that efficiency estimates vary depending upon whether advances or investments of DCCBs are used as output. The efficiency of cooperative banking is mapped, and shows considerable variation in efficiency of DCCBs across states. The findings suggest the need for innovative strategies to improve cooperative banking efficiency in the country.

The debate around the conversion of Scheduled Urban Cooperative Banks into commercial banks warrants an investigation into their performance. The larger objective is to examine whether SUCBs are able to compete with their peer group and remain viable when subjected to stringent regulatory requirements, in the event of their conversion. The performance of SUCBs as a group is comparable with that of their peer group, that is, old private sector banks, with the exception of non-performing assets. Performance rankings reveal that the smaller SUCBs are better performers than larger ones, calling for a relook at the threshold for conversion. In the event of conversion of SUCBs into commercial banks, some of the converted entities will be as good as some of the existing OPSBs, or may even be a shade better.