Financial Sector Stability Analysis
5.1.
Introduction
Promotion of an efficient financial system is one of the important objectives of
RBI according to the preamble to the Reserve Bank of India Act. The financial
landscape of India has grown in coverage and complexity, especially during the
1990s. Apart from commercial banks, there are various types of entities like Cooperative Banks, Regional Rural Banks, Financial Institutions, Investment
Institutions and Non-Banking Finance Companies, which form part of the
Financial System. To ensure the health of the financial system, RBI on one hand
defines the performance norms for these banking and non-banking entities and on
the other hand supervises their business operations for assessing their performance
and growth. Over the years, the banking policies have moved away from a highly
regulated to a more market oriented system and hence it has become very
important to have a strong and efficient supervisory system. Thus the need for a
good decision support system has become paramount.
Apart from the above, orderly development of the financial system is also one of
the important focus areas of RBI. The focus of development is to ensure:





Adequate banking network across the country
Banks / FIs cope with the dynamic changes in the global financial markets
Growth in Savings & Banking habits of the people
Public confidence in the financial system
Availability of credit to Priority Sectors
In the light of the above ‘Financial Sector Stability Analysis’ encompassing
functions of RBI relating to Regulation, Supervision and Development emerges as
one of the distinct subject areas for RBI.
5.2.
Scope and Objective
One of the key objectives under this subject area is to ensure maintenance of
systemic integrity and aid overall development. The diagram below shows various
departments in RBI that are engaged in meeting this objective.
Financial Supervision,
Regulation & Development
Developmental
Financial
Institutions
Scheduled
Commercial Banks
Policy & Regulation
DBOD
Supervision
DBS
Industrial & Exports Credit
of SCBs
IECD
Regional Rural
Banks
Urban Cooperative Banks
Regulation and
supervision
UBD
Developmental
Lending
Regulation & Supervision
of DFI's
FID
Non-Banking Financial
Companies
Regulation and
supervision
DNBS
Regulation and
Supervision
RPCD
Board for Financial Supervision
As depicted in the above diagram, various departments of RBI are involved in
achieving the regulatory, supervisory and developmental objectives under this
subject area. Hence, the information for analysis flows from the respective
departments / entities and helps in arriving at an integrated view on various issues
relating to their financial performance, compliance, risk management and meeting
developmental objectives.
The observations in this chapter relate to SCBs, FIs, UCBs and NBFCs. (RRBs,
Central & State Co-op banks are supervised by NABARD though RBI monitors
compliance of statutory requirements)
5.3.
Business Functions
Within the subject area of Financial Sector Stability Analysis of banks and non
bank entities, RBI carries out the following main functions:
1. Formulate policy, rules and regulations governing their working and
operations. RBI has introduced prudential norms on capital adequacy, asset
classification, income recognition & provisioning and risk management
2. Ensure their compliance of statutory requirements. To ensure compliance with
the prudential norms, through a set of specially designed returns that are
submitted by the banks and institutions.
3. Conduct on site inspection for evaluating the operations
4. Carry out off site surveillance for ensuring effective supervision
5. Monitor and follow-up the redressal of customer complaints and investigation
of frauds registered Approve opening of new banks / branches and extension
counters within and outside the country.
6. Monitoring entry of NBFCs by registering only those which comply with the
entry norms
7. Monitoring the performance of all banks operating in India and international
branches of Indian banks
8. Undertake rehabilitation of weak banks to ensure that a sound banking system
prevails in the country
9. Ensure availability of adequate resources to priority and rural sectors and their
utilization
10. Regulate the foray of banks into Para-banking activities and monitor their
performance on a periodic basis
11. Formulating Policy for new types of Para-banking activities and constantly
evolving policy on banks investment in government securities
5.4.
Analytical Perspective
The broad analytical framework in which the above objective is addressed can be
classified into analysis encompassing both the micro (entity level) and macro
(aggregate level) aspects. The various types of analysis that may be considered
are:







Trend analysis,
Comparative analysis,
What if (scenario based) analysis,
Ratio analysis,
Intra group / sector analysis (i.e. comparing entities of banks, institutions
and NBFCs against each other),
Cumulative analysis (i.e. at bank group, Term lending institutions,
Investment institutions, RRBs, SCBs, UCBs level),
Top ‘n’ analysis etc.
The
above
type
of
analyses
helps
in
drawing
important
conclusions/generalisations and looking for early warning signals, on the basis of
which the supervisory actions may be initiated and/or guidelines be formulated.
The information base for the above kind of analysis consists of annual balance
sheet, form A, form B, BSR returns, section 42(a) returns and other statutory as
well as non statutory returns.
The analytical needs outlined above may be further divided into following
analytical areas:
1. Financial performance and health: To analyse the financial health of banks,
institutions and non-banking financial companies through formulation of
prudential norms and performance standards and monitoring their compliance.
Here the focus would be to monitor the performance and growth of financial
sector within the prudential guidelines issued for their operations.
2. Compliance with statutory requirements: To analyse compliance with
statutory requirements by banks, institutions and NBFCs. Though in the era of
liberalisation, the statutory requirements are being scaled down, some of the
significant requirements include CRR, SLR and submission of periodic
information to meet the statutory requirements.
3. Risk Management: To formulate risk management policies and guidelines
and to monitor adherence to them. Here the focus is on early identification of
the areas of risks for the financial sector as a whole as well as for each
individual entity and provide guidelines for their mitigation.
4. Financial system infrastructure: The focus here is to analyse whether the
branch network of Banks/NBFCs is adequate, efficient and self-sustaining
enough to support the financial system of the country Besides, the analysis
would enable RBI to gauge the performance of the various banking entities
and to decide upon areas of improvement with respect to demographics and
economic activity in the region.
5. Rehabilitation of Weak/Sick/Problem Entities: The focus here is to analyse
whether a particular bank / institution / NBFC is prone to becoming sick/weak
and identify possible reasons for the same. Such analysis will also help to
formulate and implement the rehabilitation strategy for the sick/weak/problem
Banks, NBFCs and financial institutions. The causal analysis of such entities
over a period of time can assist in suitable modification of the related policy
framework.
6. Para-banking Activities of Banks: The focus here is to analyse whether the
para-banking activities undertaken by the banks and/or their subsidiaries are
synchronizing with the operations of the bank and are profitable in nature,
while they extend value added services to the customers. This analysis also
helps to ensure that forays of banks into para-banking activities and risks
associated with their operations are monitored on a regular basis.
7. Rural Credit and Priority Sector Advances: The focus here is to analyse
whether the advances to the rural and priority sectors through various schemes
and channels and the utilizations thereof is adequate for the development of
these sectors, as also to analyse whether the institutions are adhering to the
norms specified for lending to these sectors.
The following context diagram depicts the broad information source and the
analytical domains as identified above.
Financial System Stability Analysis
Data on
Macroeconomics
variables
Market Intelligence
Reports
Supervision
Regulation
Para
Banking
Risk
Management
Rehabilitation
Onsite Inspection
Reports &
Off- site
surveillance reports
Statutory
Requirement
Policies and
Directives
Development
Financial
Health
Infrastructure
Development
Priority
Sector
Advances
Returns Data
&
Balance Sheet Data
The major business issues and the significant variables that are tracked / studied in
each of the above mentioned analytical domains (sub subjects) are explained in detail
in the following sections.
5.5.
Financial Performance and Health
Introduction
RBI has defined prudential norms for Capital Adequacy, Asset Classification,
Income Recognition and Provisioning to provide benchmarks for monitoring of
banks’ performance on these counts.
Analytical Issues
The key parameters used in the analysis of Capital Adequacy, Non Performing
Assets etc. are outlined below. An estimate of the Operational Efficiency and
Profitability may be carried out through the analysis of various ratios like, CD
ratio, asset and liability items, revenue and expenditure items etc.
The main source of information for such analysis is the balance sheet, BSR returns
and other non-statutory returns with information on profitability, sectoral
deployment, large borrowers, asset quality, capital constitution, deposit profile etc.
Some of the significant analyses along with the related variables that are required
for supporting the business issues are detailed as under.
1. Capital Adequacy
RBI has stipulated certain absolute minimum capital requirements for banks
depending on the spread of the bank's area of operations, NBFCs and FIs. This
capital requirement is linked to the risk assets of the entity. In case of private
sector banks though the minimum capital requirements have been prescribed
separately as an absolute amount. Some of the key issues, which need to be
addressed, are:

Whether adequate capital (stipulated CRAR%) has been maintained for
backing the risk assets in the financial system? Whether the computation and
constitution of capital funds is as per the stipulated norms?

What is the trend and variance in constitution of capital funds and CRAR?

What is the impact on Tier I / Tier II capital of Banks with change in CRAR
and the given Risk Weighted Assets portfolio? This would help in prescribing
future capital adequacy requirements.
Variables to be tracked:

Details on capital funds including Tier I and Tier II capital - for each
Bank/NBFCs/FIs on an half yearly/annual basis

Risk Weighted Assets for each Bank/NBFC/FI on half yearly/annual basis
2. Asset Quality
RBI has stipulated the norms for the quality of assets being generated in the
financial system. For this purpose, the assets of any bank or financial institution
are classified into standard, sub-standard, doubtful and loss category based on the
overdue status of interest / principal. Further, based on the quality of asset,
provisioning norms have also been stipulated. Some of the key issues, which need
to be addressed with respect to asset quality norms, are:

What is the extent and classification of non-performing assets in the
Banks/FIs/NBFCs and whether any Bank (Bank Groups)/FIs/NBFCs is more
prone to generating NPAs?

What is the extent of deviation of income recognition from the norms by
banks / FI’s?

Whether adequate provision has been made on the NPAs and what is the status
of recoveries of NPAs?

What is the percentage composition of NPAs in the total advances and
migration pattern of NPAs for each bank over period of time?

What is the status of investments - in terms of yield, maturity pattern,
provisioning etc.?
Variables to be tracked:

Total loans and advances, Gross and Net NPAs by entity and age for each year
(quarterly for bank group level)

Classification of assets in Standard, Sub-standard, Doubtful, Loss by bank and
age for each year (quarterly for bank group level)

Interest charges on NPAs (not recognized as income) for each bank on a
yearly basis

Asset-wise Provisioning amount for each bank every year

Classification of investments for each bank on annual basis to arrive at
maturity pattern, yield, provisioning etc.,
Constraints
The extent of deviation of income recognition norms has to be sourced from
reports, which is not in soft form.
3. Deposits & Advances
Deposits and Advances form significant parameters of performance for financial
entities. The analysis of interest would include, understanding the pattern and
composition mix of Deposits and Advances and of deposit holders and borrowers.
Further, comparing the trends and growth in deposit base of a financial entity or of
a group against the trend in credit off-take would give some meaningful insight on
the operations and functioning of the financial sector. Some of the key issues,
which need to be addressed with respect to deposits and advances of various
financial entities, are:

What is the composition and pattern of deposits with respect to their interest
rates, maturity, geographical spread and average size and category of deposits
(to be viewed by grouping into appropriate buckets)?

What is the pattern of advances with respect to their interest rates, industry and
category etc. (to be viewed by grouping into appropriate buckets)?

How are the banks mobilizing deposits and other resources to meet
incremental demand for credit to industry/other sectors and what is the growth
pattern in deposits & advances? How are the incremental resources deployed?

What is the sectoral and geographical pattern of deposits and advances? How
is it changing over a period of time?

What is the correlation of industrial and economic growth (production indices,
GDP etc) with the credit off take (loans and advances) in various industry
segments?
What are the growth pattern of Deposits and Advances of various players in
the financial system like Banks, NBFCs, FIs etc., and which segment is
growing faster?


Whether the NOF criterion is being complied with by NBFCs and FIs?

What is the composition and pattern of sources and application of funds of FIs
and how are they changing over a period?

What are the trends of the funded and non-funded advances of banks, FI’s
Variables to be tracked:

Deposits with classification into type of deposit, interest rate range, maturity
period, average size, ownership and geographical pattern from each
bank/branch on annual basis (source: BSR returns)

Deposits with classification into type of deposit

Break-up of advances by industry, category (cash credit, loans, bills etc.)
sector, size and lending rate

Net Owned Funds for each FI on monthly basis and for each NBFC on a
quarterly basis

Macro Economic variables like GDP, IIP etc. on periodic basis

Sources and Deployment of funds by FIs on quarterly basis
4. Operating Performance
Apart from prescribing the prudential norms and monitoring their fulfillment, RBI
would also be interested in studying the performance of banks and non-bank
entities, both in isolation and in comparison with general economic activity. The
analysis would be based on parameters such as profit, revenue, asset turnover
ratios, investment details, expense details etc. Some of the key issues that may be
considered are:

How is the turnover and profitability of the banks changing vis-à-vis
developments in the industry and economy (IIP, GDP etc)?

How is the profitability and revenue composition changing over a period of
time?

What is the portfolio of investments by their type (e.g. Government securities,
investments in other subsidiaries etc.) and what is the yield on these
investments over a period of time?

How is the performance of SCBs, Urban Co-operative banks, FIs and NBFCs
with respect to certain key indicators (viz. Return on Net-worth, Return on
Equity, Return on Working Funds etc.) and how do they compare against each
other? To study the operational efficiency and profitability of each segment
and entity over a period of time and comparison between segments may be of
interest.
Variables to be tracked:

Derived variables for analysing operational efficiency / profitability. These
are available for each entity on a quarterly/ half yearly / annual basis.
o
o
o
o
o
o
Staff performance and Efficiency Ratios
Profitability and Balance Sheet Ratios
Revenue to Assets Ratios
Cost to Liability Ratios
Asset –Liability Ratios
Revenue- Expenditure Ratios

Revenue, gross profit, operating profit, net profit for each entity on
quarterly / half yearly / annual basis. For SCBs this information is
available on bank group level while at bank level – frequency is annual.

Liability and Asset Items of each entity (except for NBFCs) on monthly
basis. For NBFCs, these details would be available on half yearly basis.

Macro Economic variables like GDP, IIP, CPI, Inflation rate etc. on
periodic basis.
Constraints
1. During the course of user survey, it was stated that the data on specific SCBs
being confidential in nature would not be available on a quarterly basis from
DBS. However, bank group level data will be available at quarterly intervals.
5.6.
Compliance with Statutory Requirements
Apart from the prudential guidelines, RBI has also stipulated certain statutory
requirements. Banks (including UCBs) and NBFCs have to comply with the SLR
(Statutory Liquidity Ratio) requirements. Banks are also required to comply with
the CRR (Cash Reserve Ratio) requirements. RBI specifies these requirements
from time to time and compliance of the same is vigorously monitored. Further,
these entities have to also comply with certain mandatory reporting to RBI, which
is also tracked and followed up by RBI.
The compliance with such statutory requirements is ensured by calling for
fortnightly returns from SCBs, SSCBs, UCBs and RRBs and quarterly returns
from NBFCs. In addition to monitoring compliance, RBI would be interested in
also understanding the impact of such requirements on the general functioning of
financial sector and that of the individual banks. Some of the major business
issues, which can be addressed, are:
Analytical Issues

Whether the required levels of SLR and CRR are being maintained by the
concerned entities regularly? Which banks or non-banking entities have been
irregular and need close follow-up?

What are the trends in frequency and amounts of defaults in maintenance of
CRR and SLR?

Which are the banks or bank groups or NBFCs that are consistently
maintaining excess CRR/SLR? Whether any policy changes is needed?

What is the interest paid on CRR reserves and amount of penalties levied in
case of defaults in CRR and SLR, for each entity over a period of time?

What is the correlation between changes in SLR / CRR requirements and the
growth in deposit / advances and profitability of banks, bank groups, NBFCs
etc.
Variables to be tracked:

Net Demand and Time Liabilities - Provisional and Final figures every
fortnight for each bank / NBFC.

Effective CRR amount - Provisional and Final figures every fortnight for each
bank.

Effective SLR amount to be maintained – every quarter for each bank / NBFC.

Actual CRR maintained – by each bank every fortnight.

Actual SLR maintained – by each bank / NBFC for each quarter.

Prescribed CRR and SLR as a percentage of NDTL (daily and fortnightly).

Interest Amount on cash reserves for banks on fortnightly basis.

Penalty amounts levied in case of default in CRR / SLR maintenance – for
each bank every fortnight.

Number of times a Bank has defaulted on CRR / SLR and NBFC defaulting on
SLR in a year and amount of default.

Average daily balances maintained by the banks with the average and the total
for the fortnight.

Deposits, Advances and Profitability figures for each entity on quarterly basis.
5.7.
Risk Management
Banks / Financial Institutions assume various kinds of risks in their day-to-day
operations. It is important to identify, measure and manage these risks. RBI has
laid down policies toward risk management and monitors their adherence by these
institutions. It also undertakes measurement of their risk exposures on a periodic
basis.
The various types of credit and market risks arise from

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
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Credit concentration,
Connected lending,
Interest rate sensitivity,
Exchange risk exposure,
Asset liability mismatches and
Operational inefficiency
RBI monitors the above-mentioned risks by collecting information through a set
of special returns from banks and non-banking entities on a periodic basis.
Important statements are on Structural Liquidity, statements on Interest Rate
Sensitivity on Domestic and Foreign Assets and Liabilities, statement on
connected lending / group lending, statement on large borrowers, frauds and
complaints etc.
Analytical Issues
The objective is to gauge the level of risk of various financial entities and advise
appropriate action / guidelines to mitigate the same. Such understanding would be
required at individual banks/non-banking entities level, as well as at the group
level and overall financial sector level. The essence of analysis is in getting the
up-to-date information on the above-mentioned parameters on a periodic basis so
that the potential risks are identified and managed before they can actually create
an adverse impact on the performance of a financial entity or the financial system
at large. Some of the business issues that may be addressed are:

Who are the large customers? To which industry the exposures of banks / FIs
/ NBFCs are large?

Whether the banks / FIs are adhering to the prescribed exposure norms?
Which are the parties where the exposure norms have been exceeded?

What is the extent of exposure on interested parties and subsidiaries? What is
the asset class of such exposures?

How is the assets and liabilities composition of these institutions? Are there
any large gaps with respect to maturity pattern and currency exposure that
need to be addressed? What sort of changes in its composition is observed
over a period? Are these gaps within the prescribed or desired levels?

What is the trend in frauds and complaints registered for each bank?

What is the quantum of forex exposure for each Bank / FI and how would the
change in exchange rates impact the revenue / expenditure position?

What are the ownership composition and its pattern of change for banks,
NBFCs and FIs? What is market trend in respect of prices of stocks of listed
banks/ FIs / NBFCs?
Variables to be tracked
The key variables tracked in the areas of risk management are:

Large credits and industry exposures by banks on annual basis

Loans given to directors, associates and their associate companies by each
bank on an annual basis. For cooperative banks, information is available on
monthly basis.

Liabilities, assets, other products, gross and net gap and cumulative gap –
bank group wise (SCBs) on a monthly basis.

Foreign currency liabilities, assets, other products, gross and net gap and
cumulative gap – bank group wise (SCBs) on a monthly basis.

Off balance sheet exposures for each bank / NBFC / FI on an annual basis

Outflows, inflows, mismatch and cumulative mismatches for various maturity
buckets – for bank group and each FI on a quarterly basis

Ownership pattern of Bank / FIs / NBFCs on an annual basis

Market rate of scrips of Banks/FIs/NBFCs

Number and amount of frauds for each entity (Bank, NBFC, FI) on a quarterly
basis

Number and type of complaints registered for each entity (Bank, NBFC, FI)
on a quarterly basis
Constraints

The risk management systems in most of the banks are not computerized and
hence would pose a difficulty in sourcing the information. In case of SCBs,
this information is available with the DBS, which may be sourced bank groupwise.

Details on frauds and complaints are not available in electronic format for
NBFCs and FIs.
5.8.
Financial System Infrastructure
Specific permission is required for floating a new bank, entry of a foreign bank,
opening a foreign branch by an Indian bank and floating a NBFC. RBI has also
laid down norms for branch expansion by banks in India. To ensure optimum
financial system network and for facilitating review of existing entry level norms,
the following analytical issues may be considered:
Analytical Issues:

Whether the distribution of commercial and cooperative banks and their
branches and non-banking finance companies in the country is adequate vis-àvis the following:
 Geographical spread (city/state/region)
 Size of the bank and its branches within a region (population serviced,
amount of deposits, advances etc.)
 Economic activity in the region (industrial output, per capita income
etc.)

What is the trend in level of advances and deposits of SCBs branch-wise? This
can be viewed by bank/bank group/geographical region/population
group/economic activity. For FIs/NBFCs and co-operative banks, such data
can be analysed for the entity as a whole.

What is the share of various categories of branches (Rural/Semi
Urban/Urban/Metro) in total number of branches?

Which of the Indian banks have international branches country-wise?

How are the international branches performing in terms of deposit base, size
of advances and profitability? What is the extent of profits repatriated?

How many branches were opened and closed during the year and over the
years by banks internationally and domestically?

How many new banks (category-wise) started operating during the year?

Whether the existing entry-level norms for Banks / NBFCs are adequate or
need any revision?
Variables to be tracked:
These important issues are addressed by tracking the following variables:

Number of bank branches per city/state/region and country on an annual basis
along with the population figures.

Classification of branches according to Rural/Semi Urban/Urban/Metro
categories and share in total

Classification of deposits and advances by interest rate, maturity period, size
for each branch on annual basis

Number of international branches of a bank in each country on annual basis

Key performance variables of international branches of Indian Banks viz.
Deposits and Advances, Income and Expenditure, NPA figures, branch profits,
number of employees, profitability per employee etc. on annual basis

Number of branches opened/closed in each country in a year on an annual
basis

NBFCs registered/rejected in a year and their respective NOF and deposit
amounts

Number of new banks licensed/scheduled in a year under each category
(SCBs, UCBs, RRBs etc.)
Constraints

The required data on bank / branch network and profile for Urban co-operative
banks is not available in electronic format. The system for urban co-op banks
is currently under testing.

Details of region-wise economic activity (Industrial output, per capita income
etc.) is not available with RBI.
5.9.
Rehabilitation of weak /sick/problem entities
Identification of sick/weak banking entities, problem cases of NBFCs and timely
action for their rehabilitation is an important area addressed by RBI. The following
analytical issues are considered:
Analytical Issues:

How many entities have become sick /weak/problem cases over the years and
during the year?

Which particular entities are heading towards weakness/sickness?

What are the special attributes of entities becoming weak/sick/problem (e.g.
location, type, size and type of exposure viz. to a particular segment of
business and industry)?

What is the financial position of the sick/weak/problem entities under the
rehabilitation program?
Variables to be tracked:
The key variables on which the above issues are analysed are:

Net Owned Funds of all weak/sick/problem entities on an annual basis

CRAR of all sick/weak/problem entities on an annual basis

Net NPA of all entities classified as sick/weak/problem on an annual basis

History of Losses of all sick/weak/problem entities on an annual basis

Defaults on maturity of deposits of problem NBFCs on a quarterly basis

Size of borrowing and nature of business of problem NBFCs on a quarterly
basis
Constraints
The required data is not available in electronic format for SCBs, UCBs and RRBs.
5.10.
Para-banking activities
RBI approves forays of banks into para-banking activities. Either SCB’s itself may
carry out these activities depending on their nature or it may have a separate
subsidiary for carrying out the same. RBI monitors these para-banking activities and
the relative operations closely to ensure that they are done efficiently and do not
adversely affect the health of the parent bank. The information required for the
analysis of para-banking activities is collected through the annual balance sheets and
income statements of the banks and their subsidiaries:
Analytical Issues:

What are the types and extent of para-banking activities undertaken by each
bank?

Which are the Para-banking subsidiaries floated by banks and what is the level
of investment?

What is the performance of various para-banking subsidiaries of a bank?
Variables to be tracked:

Profits/losses of each para-banking subsidiary of banks on an annual basis

Total NPAs of para-banking subsidiaries and its classification on a annual
basis

Investment amount in each para-banking subsidiary of a bank on an annual
basis

Return on Investments in each para-banking subsidiary of a bank on an annual
basis

Extent of liabilities of subsidiary companies that are borne by the parent bank
on an annual basis
Constraints

Balance sheets of bank subsidiaries are not available in electronic form.

Separate data regarding performance / profitability relating to Para-banking
activities undertaken departmentally by banks is not available.
5.11.
Priority Sector Advances
As a Central Bank of the country, RBI plays an active role in the development of rural
financial infrastructure and creates an environment conducive for banks’ lending in
the rural areas. Apart from rural areas, RBI also plays an important prescriptive role in
poverty alleviation programmes of the Government in non-rural areas. All these
advances form what is known as Priority Sector advances. Broadly, they include
credit to Small Scale Industries, Agricultural Advances and advances given for
services like Small Traders, Professional and Self Employed, Retail Trade, Small
Road and Water Transport Operators, Housing Loans, Educational Loans and
Consumption Loans. RBI monitors these advances on sectoral and regional basis. For
foreign banks, advances for exports are also considered as priority sector advances.
Special emphasis is given to that portion of priority sector advances which is given to
weaker sections like SC/ST, women, disabled persons, marginal farmers, agricultural
landless labourers and minorities. RBI also monitors the progress of special
programmes announced by GOI like PMRY, SGSY, SJSRY and micro credit through
self-help groups. It actively formulates policies, sets targets and ensures compliance
with the norms laid down for priority sector advances. To meet this objective, the
following analytical issues are addressed:
Analytical Issues:

To what extent various banks are meeting the norms and targets relating to
priority sector advances by sector, by category of borrower, by scheme, by
region, by state over time.

What is the extent of NPAs in priority sector lending for each bank by sector,
by category of borrower, by scheme, by region, by state over time?

What is the effectiveness of Lead Bank Scheme and Service Area Approach,
in terms of their reach, amount of advances and recovery position? This
analysis is done vis-à-vis Annual Action Plans and District Credit Plans.

What is the extent of contribution to Rural Infrastructure Development Fund
(RIDF) by banks and what is the pattern of its utilization by NABARD?

What is the extent of subsidy given by Government of India and its utilization
by scheme (like PMRY, IRDP etc.), by bank, by state on annual basis?

What is the extent of export credit provided by banks by facility (Post
shipment credit, Packing credit etc.) over time?
Variables to be tracked:
The main variables on which above analysis is sought are:

Advances sanctioned / disbursed by banks to priority sector by District/State/
region, by sector, by bank on quarterly basis

Beneficiary wise classification of priority sector advances i.e., to SC/ST,
Women, disabled persons, minorities and marginal farmers under various
schemes by sector, by bank on a quarterly basis

Net bank credit to priority sectors on a quarterly basis and its share in total
advances

NPAs in priority sectors, bank-wise under various sectors, categories and
schemes on an annual basis

Percentage recovery in priority sectors, bank-wise under various categories
and schemes on annual basis

Details of sanctions and disbursements at state/district level as per annual
action plan (includes district credit plan) on a quarterly basis

Contribution to RIDF by banks on annual basis

Sanctions and utilizations by NABARD under RIDF scheme from DADs on
an annual basis

Receipt and Utilization of subsidy in Integrated Rural Development
Programme (IRDP), Prime Minister’s Rojgar Yojana (PMRY) and other
subsidy bearing schemes by banks on an annual basis

Amount of export credit provided by banks under various facilities annually
Constraints

Delay in receipt of the required information from RRBs and Banks is an area
of concern

Most of the above data continues to be in manual form and will be a constraint
at the time of uploading the data in the data warehouse.