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Banking & Financial Awareness Class-13 Merger, Priority Sector Lending

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Priority Sector lending

➢ Priority Sector refers to those sectors of the economy which may not get timely and adequate credit. ➢ Priority Sector Lending is an important role given by the Reserve Bank of (RBI) to the for providing a specified portion of the bank lending to few specific sectors. ➢ The sectors may be agriculture and allied activities, micro and small enterprises, poor people for housing, students for education and other low income groups and weaker sections. ➢ This is essentially meant for an all round development of the economy as opposed to focusing only on the financial sector. ➢ As per the RBI circular released in 2016, there are eight broad categories of the Priority Sector Lending. ➢ They are: (1) Agriculture (2) Micro, Small and Medium Enterprises (3) Export Credit (4) Education (5) Housing (6) Social Infrastructure (7) Renewable Energy (8) Others. ➢ The others category includes personal loans to weaker section, loans to distressed persons, loans to state sponsored organisations for SC/ST. Merging of banks/ Other Company be more of good or bad for the Indian economy?

Some of these banks have high NPA So government want to merge them that the balance sheet of these banks looks good. India needs investment and setup of new companies. Currently, Investment is down in India due to slowdown in consumption and lack of liquidity. We are in a locked situation. low consumption is giving signal not to invest and at the same time investment is needed for growth. 1. It will also help in upgradation of technology, increase in profit and raise the standard of living. 2. Through mergers, it will help the banks to scale up its business and gain a large no. of customers quickly. 3. For the bank, retaining and enhancing its identity as a larger bank becomes easier. After the merger, benefits of merger are enormous and the biggest is generation of a brand new customer base, empowering of business, increased hold in the market share, opportunity of technology upgrade. Thus overall it proves to be beneficial to the overall Economy. 4. Help to Reducing the NPA 5. Larger Bank/ Company is capable of facing global competition 6. The merger will reduce the cost of internal and external operation

daily_current_affairs Telegram Channel - @ambitiousbaba s 7. Minimization of overall risk is there due to mergers and acquisitions which is always good from the business point of view 8. Leads to increase in profitability and helps in raising the standard of living which is absolutely crucial for a growing economy like India 9. Chances of survival of under performing banks increases hence customer trust remains intact which is vital for the Economy. The weaker bank gets merged into stronger one and gets the benefit of large scale operations 10.Larger size of the Bank will help the merged banks to offer more products and services and help in integrated growth of the Banking sector 11.A larger bank can manage its short and long term liquidity better. There will not be any need for overnight borrowings in call money market and from RBI under Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF)

daily_current_affairs Telegram Channel - @ambitiousbaba s Most of the problems arising due to mergers and acquisitions are more emotional and social in nature than technical or managerial. The major problems which arise are:-

1. The foremost disadvantage is compliance and risk consistency and both the merged organizations have different perspective of thinking, different risk culture so it creates a negative impact on the profitability of the organization. 2. Banks are merged only on papers. Their people and culture are difficult to change. It is a recipe for disaster as it leads to poor culture fit not ideal for the organization or the economy. 3. of the organization as a whole.

daily_current_affairs Telegram Channel - @ambitiousbaba s 4. Managing Director of , V.A. Joseph is of the view that Co-existence of the big, medium and regional banks would be preferable in the present scenario. According to him most acquisitions in India were borne out of compulsions and over 90 per cent of past acquisitions had failed to achieve the objectives.

5. Compliance needed in every decision which might not be favorable as thinking perspectives and risk taking abilities of different organizations are different. It leads to friction and rift which, if not managed well may lead to the downfall

daily_current_affairs Telegram Channel - @ambitiousbaba s 1. The period from 1961-1969: The period is called pre-nationalization period because in 1969 the government nationalized 14 private banks. As many as 46 mergers took place mostly of private sector banks in order to revive the poorly performing banks which proved to be quite a successful move for the underperforming banks. 2. The period from 1969-1991: The period was called post-nationalization period. 3. 1969 and nationalized the 14 largest commercial banks with effect from the midnight of 19 July 1969. 4. Later on, in the year 1993, the government merged New with . It was the only merger between nationalised banks and resulted in the reduction of the number of nationalised banks from 20 to 19.

daily_current_affairs Telegram Channel - @ambitiousbaba s The Period from 2017 – 5. This phase saw five associates of SBI (, , , State Bank of Bikaner and Jaipur and ) and Bhartiya Mahila Bank getting merged in SBI. Five associates and the became the part of (SBI) beginning April 1, 2017. 6. Merger of Banks 2018- The government had merged and with , creating the third-largest bank. 7. Mega Merger of Banks 2019– With the mega merger announce on August 30, 2019, ten public sectors banks will be reduced into four large banks.

daily_current_affairs Telegram Channel - @ambitiousbaba s Banking order (Largest to Smallest) ➢ State Bank of India ➢ PNB +OBC +United Bank:- Punjab National Bank ➢ Bank of Baroda + Vijya Bank+ Dena Bank:- Bank of Baroda ➢ Canara + :- ➢ Union Bank + + ➢ Bank of India ➢ + :- Indian Bank ➢ of India ➢ ➢ UCO Bank ➢ ➢ Punjab and Sind Bank Class 1 (7 June)- RBI, Subsidiaries of RBI, NABARD, NHB, ECGC

Class 2 (9 June) - Banks in India , Exim Bank of India, Payment Bank, Co- operative Banks, Regional Rural Banks, Small Finance Banks

Class 3 (11 June) - Banking Ombudsman, National Income

Class 4 (15 June) - Capital Market & Money Market

Class 5 (19 June) - Inflation

Class 6 (21 June) - Negotiable Instrument, Mutual Fund, Money Laundering

Class 7 (23 June) - Types of Cheque

Class 8 (25 June) - Types of Account

Class 9 (28 June) - Types of Payment Cards, Fund transfer services

Class 10 (30 June) - Basics of Bond and their Types & Features Class 11 (2 June) - PARA Banking, , Green Banking, Core banking Solution

Class 12 (5 July) - Initial Public Offering (IPO), Mortgage, Unified Payments Interface

Class 13 (7 July) –Bank Merger, Priority Sector Lending

Class 14 (9 July) - Basel Norms 1,2 and 3

Class 15 (12 July) - Cheque Truncation System (CTS), Assets and Liabilities of A Bank, Bancassurance, Shadow banking system

Class 16 (14 July) - SARFAESI ACT, 2002, Non-performing asset

Class 17 (16 July) - Skimming, Proportional reserve system, Minimum Reserve System lass 18 (19 July) - Camels rating, Bank Credit Operations, CIBIL

Class 19 (21 July) - LIBOR & MIBOR, SWIFT Codes for banks

Class 20 (23 July) - GDP, Forex Market, Currency Swap Link in the Description Online Mock Tests for Bank, SSC, Railway, JAIIB, CAIIB, Para 13.2 and Others Visit: test.ambitiousbaba.com