Central Bank of Indus

The CBI is the Government body that performs the functions of acting as the Governments bank,
maintaining the gold reserves for the nation and managing all other commercial banks in the Country

Main Aims for the Central Bank of Indus

Sustain monetary Policies with changes, as and when needed
Maintain proper for-ex reserves
Payments for deficit Fianancing (interest)
Orgainisational Budgeting
Promotion of government Securities
Creating an environment suited for Commercial banks


Tentative Budget:
7.4% of the Indus Budget i.e 1,08,780 Crore

Budget Break up:

Organisational Expenses 6.9%
For-ex/ gold Reserves 27%
Monetary Policy Management -43%
Interest payments 14%
Securities Promotion 6%
Managing Commercial banks 2%
Miscallaneous Buffer 1.1%

The CBI would like such a high Budget for Monetary Policy Management as the inflation/ money
supply is in control as of now and we most likely will have to pay financial institutions for parking
their money in our schemes.

Also gold and for-ex reserves need to be increased to have a stronger Currency.





Overview

Monetary policy in 2014-15 had to continue to address the risk to growth while guarding against the
risks of inflation pressures re-emerging and adversely impacting inflation expectations. With the
liquidity deficit remaining above the comfort level for most of the year due to a mix of structural and
frictional factors, the Central Bank had to undertake active liquidity management to inject durable
primary liquidity through OMOs, and reduction in the CRR and the SLR to ensure adequate credit flow
to productive sectors of the economy. After a frontloaded reduction in the policy rate at the beginning
of the year and active liquidity management during the year, with the ebb in inflation, the Central Bank
reduced policy rate further since January 2014 in a calibrated manner taking into account the evolving
growth-inflation dynamics. During 2014-15, the Central Bank eased monetary policy further in early
May, but undertook liquidity tightening measures subsequently to address macro-financial risks from
exchange rate volatility
Central Bank rationalised import of gold by making it incumbent on all nominated banks/entities to ensure
that at least one fifth of imported gold is exclusively made available for the purpose of exports

Financial inclusion is a flagship programme of the Central Bank. Its objective is to bring people,
hitherto excluded, under the ambit of formal financial institutions. To push towards universal financial
inclusion, the Central Bank has taken several initiatives. These include advising banks on devising their
Financial Inclusion Plan and constituting a Financial Inclusion Advisory Committee (FIAC). The
Committee is helping banks develop a viable and sustainable model of banking services that focuses on
accessible and affordable financial services. To sensitise financially illiterate people, financial literacy
programmes have been initiated by the Central Bank in collaboration with commercial banks. Opening
multiple channels of credit delivery is expected to improve access to institutional credit for excluded
people, which, in turn, may help bring them within the ambit of the growth process.
The Central Bank has taken steps to intensify the credit delivery mechanism and financial inclusion by
changing the guidelines for priority sector lending and trying to bring excluded people, both rural and
urban, under the coverage of institutional finance. It is now an established fact that without access to
formal finance at an affordable cost, inclusive growth is not possible. In order to provide credit to the
productive sector, which has the potential for employment generation, the Central Bank has taken a
host of measures including revising the priority sector lending guidelines, which have been in existence
since the 1970s. Apart from providing credit under this scheme, the Central Bank has adopted a policy
of providing credit through multiple channels, viz., involving self-help groups (SHGs) and micro-
finance institutions (MFIs), expanding the scope of the business correspondence (BC) model,
simplifying procedures and processes for micro and small enterprises (MSEs) and adopting information
and communication technology (ICT) solutions for greater outreach and lower transaction costs.

Flow of credit to the Agriculture Sector
Flow of credit to Micro, Small and Medium Enterprises


Policies and Inititiatives planned by the Central Bank of Indus



Financial Literacy initiatives
Building financial capability through financial literacy is a key component of financial inclusion. It
means providing financial education so that individuals can identify and use appropriate
financial products and services in order to build and preserve their assets over time. It should make
people better informed, better educated and more confident, able to take greater responsibility for their
financial affairs and able to play a more active role in the market for financial services .


Regulation of Financial Institutions
Focussed regulation and supervision of the financial system is a key tool for maintenance of financial
stability. Taking this into consideration, the Central Bank continued to pay significant attention to pro-
active regulation and supervision. The commercial banking sector presently remains well-capitalised,
although reduced profitability, rising delinquent loans and future capital requirements to comply with
Basel III requirements are challenges that need to be addressed. A slew of regulatory and supervisory
initiatives have been undertaken to improve the overall functioning of the sector. The legal framework
governing banks has also been revamped in line with modern market practices. Reflecting the growing
complexity of NBFCs, a new category was created during the year. The Financial Sector Legislative
Reforms Commission has made several recommendations on the legal and regulatory architecture
governing the financial sector. These will need to be carefully examined.


Introduction of New Banking Licences in the Banking Sector:
Indus has recently Liberalised it's economy and there is a great need for new players in the
banking field so as to have proper management of the fianaces in the economy and expansion of
the banking sector.
The main requirements for the firms applying for a license are:
Firms need to be more than 5yearsold
revenue of the firm needs tobe more than 500 cr in the last quaryer
the firm should not have more than 20% of it's capitalisation as debt
the firm needs to be in profit, over the last 6 quarters


Introduction of the new banking debt management system
CBI will manage debts of the commercial banks by using the funds parked in the government
securities and all the money supply control mechanisms, subject to the banks accounts and a
proper audit
Lending rates for the same are
upto 50cr 7%
50- 100 cr 7.65%
100-175cr 8.6%
175-300cr- 9%
300-500cr 9.1%
This implies that the money held by the CBI is utilised by the economies at time of need and at
the same time being a means of last resort for the commercial banks

Introduction of Rural/ Regional Bank Initiatives
The CBi will give banking licenses to rural groups with norm relaxations pertaining to the fact that the
banks remain fixed in the same regional belt and are not allowed to expand. The main aim for this is to
have banks that have a grassroot level operational platform that gives it a better connect with the people
and leads to a widespread formal banking system in the nation


Monetary and Liquidity Measures
On the basis of an assessment of the current and evolving macroeconomic situation, it has been decided
to:
keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.0 per cent;
keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand
and time liability (NDTL); and
increase the liquidity provided under 7-day and 14-day term repos from 0.5 per cent of NDTL
of the banking system to 0.75 per cent, and decrease the liquidity provided under overnight
repos under the LAF from 0.5 per cent of bank-wise NDTL to 0.25 per cent with immediate
effect.
Consequently, the reverse repo rate under the LAF will remain unchanged at 7.0 per cent, and the
marginal standing facility (MSF) rate and the Bank Rate at 9.0 per cent.


For-ex Purchases
The Central Bank will inititiate Purchase of Foreign Exchange primarily the Yen, Euro, USD,British
Pound and the Yuan. This mainly aimed at having a firm hold on the exchange rate of our Currency.


Employee Initiatives
The central bank is initiating an employee welfare scheme that will include
housing facilities in tier I and II cities
tuition expenses for the children of bank officers
Insurance schemes
Loans with a lower Interest rate
Savings schemes with a higer rate of return



FDI in Banking
The Central Bank proposes a minority stake in Indus banks, so as to have an international exposure in
the banking sector and make the sector competitive in the international market.
This will also bring for-ex to the economy and international banks will get an idea of the market so as
to come and operate here in the future.


Rural Sector Co-operative initiatives
The Central Bank will support rural co-operative bank initiatives and provide them with loans with
rates at par to the other banks. And will also lead to them being able to provide proper and effective
credit facilities to all the people in the rural regions and will lead to the formal credit sector flourishing.


Bond Trading Regulations
Bonds are one of the most important form of government securities that the Central bank has to offer.
The bond market needs proper regulations with high return, long term and high capital bonds' trading
being in a highly controlled environment to make it a safe and reliable form of investment.


Mutual Fund Regulations
Mutual funds are a main source of investment for the economy and is the means by which the public in
lieu of saving park their money supply bringing down inflation.
The Central Bank would like to make it a safe and less volatile to have more people to start investing in
mutual funds and have our stock markets rallying so as to have more and more foreign investment to go
with our liberalisation policies.


E-commerce Research
E-commerce is the way where the global economy is headed to, Indus wants to be the first economy to
have officially adopted e-commerce to such an extent that currency circulation reduces. Thus the
Central bank is going to conduct research into the same to get to know what all is needed for the same
and to know the feasablity of the idea.


Bit-coin Backing
Bit coin is the new global economic currency which has taken the world by surprise. The centarl banks
is in talks to make bit coins more viable and to promote international trade in the same. This will in
turn reduce for-ex exchange related deficits.
Gold Purchase
The Central Bank is working towards stabalising the indus currency and to be ready for the expected
growth in exports. Thus Gold backing the currency is set to increase by purchase of goldfor the national
treasury.


Platinum Purchase Initiatives
Platinum is another means to back currencies and the Central bank wants to the first in the world to use
it as a means to back our currency.




Allotted Budget:
8% of the I ndus Budget ie.1,76,600 Crores