BANKING SYSTEMS

ROLE AND OBJECTIVES OF NABARD

NABARD’s role can be summarized into the following categories:

• Credit Functions
• Developmental and Promotional Functions
• Supervisory Functions
• Institutional and Capacity building
• Role in Training

Credit Functions
NABARD's credit functions cover planning, dispensation and monitoring of credit.
• Framing policy and guidelines for rural financial institutions
• Providing credit facilities to issuing organizations
• Preparation of potential-linked credit plans annually for all districts for identification of
credit potential
• Monitoring the flow of ground level rural credit

Developmental and Promotional Functions

Credit is a critical factor in development of agriculture and rural sector as it enables
investment in capital formation and technological up gradation... In order to reinforce the
credit functions and to make credit more productive, NABARD has been undertaking a
number of developmental and promotional activities such as:-
• Help cooperative banks and Regional Rural Banks to prepare development actions plans
for themselves
• Enter into MoU with state governments and cooperative banks specifying their
respective obligations to improve the affairs of the banks in a stipulated timeframe
•Help Regional Rural Banks and the sponsor banks to enter into MoUs specifying their
respective obligations to improve the affairs of the Regional Rural Banks in a stipulated
timeframe
•Monitor implementation of development action plans of banks and fulfillment of
obligations under MoUs
•Provide financial assistance to cooperatives and Regional Rural Banks for establishment
of technical, monitoring and evaluations cells
•Provide organisation development intervention (ODI) through reputed training institutes
like Bankers Institute of Rural Development (BIRD), Lucknow www.birdindia.com,
National Bank Staff College, Lucknow www.nbsc.in and College of Agriculture
Banking, Pune, etc.
•Provide financial support for the training institutes of cooperative banks
•Provide training for senior and middle level executives of commercial banks, Regional
Rural Banks and cooperative banks
•Create awareness among the borrowers on ethics of repayment through Vikas Volunteer
Vahini and Farmer’s clubs
•Provide financial assistance to cooperative banks for building improved management
information system, computerisation of operations and development of human resources

Supervisory Functions
As an apex bank involved in refinancing credit needs of major financial institutions in the
country engaged in offering financial assistance to agriculture and rural development
operations and programmes, NABARD has been sharing with the Reserve Bank of India
certain supervisory functions in respect of cooperative banks and Regional Rural Banks
(RRBs).
As part of these functions, it
• Undertakes inspection of Regional Rural Banks (RRBs) and cooperative banks (other
than urban/primary cooperative banks) under the provisions of Banking Regulation Act,
1949.
• Undertakes inspection of State Cooperative Agriculture and Rural Development Banks
(SCARDBs) and apex non-credit cooperative societies on a voluntary basis
• Undertakes portfolio inspections, systems study, besides off-site surveillance of
cooperative banks and Regional Rural Banks (RRBs)
• Provides recommendations to Reserve Bank of India on opening of new branches by
State Cooperative Banks and Regional Rural Banks (RRBs)
• Administering the Credit Monitoring Arrangements in SCBs and CCBs.
Institutional and Capacity building
• Enter into MoU with state governments and cooperative banks specifying their
respective obligations to improve the affairs of the banks in a stipulated timeframe
• Help RRBs and the sponsor banks to enter into MoUs specifying their respective
obligations to improve the affairs of the RRBs in a stipulated timeframe
• Monitor implementation of development action plans of banks and fulfillment of
obligations under MoUs.
• Provide financial assistance to cooperatives and RRBs for establishment of technical,
monitoring and evaluations cells.
• Provide organisation development intervention (ODI) through reputed training institutes
like Bankers Institute of Rural Development (BIRD), Lucknow, National Bank Staff
College, Lucknow, College of Agriculture Banking, Pune, etc.
• Provide financial support for the training institutes of cooperative banks
• Provide training for senior and middle level executives of commercial banks, RRBs and
cooperative banks
• Create awareness among the borrowers on ethics of repayment through Vikas Volunteer
Vahini/farmer's clubs
• Provide financial assistance to cooperative banks for building improved management
information system, computerisation of operations, development of human resources, etc.

Role in Training

Section 38 of the NABARD Act provides that the Bank shall:

• maintain expert staff to study all problems relating to agriculture and rural development
and be available for consultation to the Central Government, the Reserve Bank, the State
Governments and the other institutions engaged in the field of rural development.

• provide facilities for training, for dissemination of information and the promotion of
research including the undertaking of studies, researches, techno-economic and other
surveys in the field of rural banking, agriculture and rural development.

• provide technical, legal, financial, marketing and administrative assistance to any

person engaged in agriculture and rural development activities;

• may provide consultancy services in the field of agriculture and rural development and
other related matters in or outside India, on such terms and against such remuneration, as
may be agreed upon

OBJECTIVES OF NABARD

NABARD was established in terms of the Preamble to the Act, "for providing credit for
the promotion of agriculture, small scale industries, cottage and village industries,
handicrafts and other rural crafts and other allied economic activities in rural areas with a
view to promoting IRDP and securing prosperity of rural areas and for matters connected
therewith in incidental thereto". The main objectives of the NABARD as stated in the
statement of objectives while placing the bill before the Lok Sabha were categorized as
under:

1. The National Bank will be an apex organisation in respect of all matters relating to
policy, planning operational aspects in the field of credit for promotion of Agriculture,
Small Scale Industries, Cottage and Village Industries, Handicrafts and other rural crafts
and other allied economic activities in rural areas.

2. The Bank will serve as a refinancing institution for institutional credit such as long-
term, short-term for the promotion of activities in the rural areas.

3. The Bank will also provide direct lending to any institution as may approve by the
Central Government.

4. The Bank will have organic links with the Reserve Bank and maintain a close link with
in.
ROLES AND OBJECTIVES OF SEBI

SEBI has to be responsive to the needs of three groups, which constitute the market:

• the issuers of securities

• the investors
• the market intermediaries.

SEBI has three functions rolled into one body quasi-legislative, quasi-judicial and quasi-
executive. It drafts regulations in its legislative capacity, it conducts investigation and
enforcement action in its executive function and it passes rulings and orders in its judicial
capacity. Though this makes it very powerful, there is an appeals process to create
accountability. There is a Securities Appellate Tribunal which is a three-member tribunal
and is presently headed by a former Chief Justice of a High court - Mr. Justice NK Sodhi.
A second appeal lies directly to the Supreme Court.

SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively and
successively SEBI has been active in setting up the regulations as required under law.

ROLES

 Section 11 of the Securities and Exchange Board of India Act.

A) Regulation Of Business In The Stock Exchanges

A review of the market operations, organizational structure and administrative

control of the exchange

– All stock exchanges are required to be Body Corporates

– The exchange provides a fair, equitable and growing market to investors.
– The exchange’s organisation, systems and practices are in accordance with the
Securities Contracts (Regulation) Act (SC(R) Act), 1956

B) Registration and Regulation of the Working of Intermediaries

Regulates the working of the depositories [participants], custodians of securities,

foreign institutional investors, credit rating agencies and such other intermediaries
C) Registration and Regulation Of Mutual Funds, Venture Capital Funds &
Collective Investment Schemes

 AMFI-Self Regulatory Organization-'promoting and protecting the interest

of mutual funds and their unit-holders, increasing public awareness of
mutual funds, and serving the investors' interest by defining and
maintaining high ethical and professional standards in the mutual funds
industry'.
 Every mutual fund must be registered with SEBI and registration is
granted only where SEBI is satisfied with the background of the fund.
 SEBI has the authority to inspect the books of accounts, records and
documents of a mutual fund, its trustees, AMC and custodian where it
deems it necessary



 SEBI (Mutual Funds) Regulations, 1996 lays down the provisions for the
appointment of the trustees and their obligations

 Every new scheme launched by a mutual fund needs to be filed with SEBI and
SEBI reviews the document in regard to the disclosures contained in such
documents.

 Regulations have been laid down regarding listing of funds, refund procedures,
transfer procedures, disclosures, guaranteeing returns etc

 SEBI has also laid down advertisement code to be followed by a mutual fund in
making any publicity regarding a scheme and its performance

 SEBI has prescribed norms / restrictions for investment management with a view
to minimize / reduce undue investment risks.

 SEBI also has the authority to initiate penal actions against an erring MF.
 In case of a change in the controlling interest of an asset management company,
investors should be given at least 30 days time to exercise their exit option.

D) Promoting & Regulating Self Regulatory Organizations

– In order for the SRO to effectively execute its responsibilities, it would be

required to be structured, organized, managed and controlled such that it
retains its independence, while continuing to perform a genuine market
development role

E) Prohibiting Fraudulent And Unfair Trade Practices In The

Securities Market

– SEBI is vested with powers to take action against these practices relating
to securities market manipulation and misleading statements to induce
sale/purchase of securities.

F] Prohibition Of Insider Trading

– Stock Watch System, which has been put in place, surveillance over
insider trading would be further strengthened.

G] Investor Education and the Training of Intermediaries

– SEBI distributed the booklet titled “A Quick Reference Guide for

Investors” to the investors
– SEBI also issued a series of advertisement /public notices in national as
well as regional newspapers to educate and caution the investors about the
risks associated with the investments in collective investment schemes
– SEBI has also issued messages in the interest of investors on National
Channel and Regional Stations on Doordarshan.

H) Inspection And Inquiries

 I) Regulating Substantial Acquisition Of Shares And Take-overs

J) Performing Such Functions And Exercising Such Powers Under The

Provisions Of The Securities Contracts (Regulation) Act, 1956 As May Be
Delegated To It By The Central Government;

K) Levying Fees Or Other Charges For Carrying Out The Purposes Of

This Section

L) Conducting Research For The Above Purposes

VETTING BY SEBI

 A company cannot come out with public issue unless Draft Prospectus is filed
with SEBI. Prospectus is a document by way of which the investor gets all the
information pertaining to the company in which they are going to invest. It gives
the detailed information about the Company, Promoter / Directors, group
companies, Capital Structure, Terms of the present issue etc.
 A company cannot file prospectus directly with SEBI. It has to be filed through a
merchant banker. After the preparation of prospectus, the merchant banker along
with the due diligence certificates and other compliances and sends the same to
SEBI for Vetting.
 SEBI on receiving the same scrutinizes it and may suggest changes within 21
days of receipt of prospectus
 The company can come out with a public issue any time within 180 days from the
date of the letter from SEBI or if no letter is received from SEBI, within 180 days
from the date of expiry of 21 days of submission of prospectus with SEBI

? If the issue size is more than Rs. 20 crores, merchant bankers are required to file
prospectus at SEBI, Mumbai office.

OBJECTIVES OF SEBI
 Securities & Exchange Board of India (SEBI) formed under the SEBI Act, 1992
with the prime objective of
– Protecting the interests of investors in securities,
– Promoting the development of, and
– Regulating, the securities market and for matters connected therewith or
incidental thereto.’

Focus being the greater investor protection, SEBI has become a vigilant
watchdog

ROLES AND OBJECTIVES OF EXIM BANK

Roles:

The Bank's roles are segmented into several operating groups including:
Corporate Banking Group which handles a variety of financing programmes for
Export Oriented Units (EOUs), Importers, and overseas investment by Indian
companies.
Project Finance / Trade Finance Group handles the entire range of export credit
services such as supplier's credit, pre-shipment credit, buyer's credit, finance for
export of projects & consultancy services, guarantees, forfaiting etc.
Lines of Credit Group Lines of Credit (LOC) is a financing mechanism that provides
a safe mode of non-recourse financing option to Indian exporters, especially to SMEs,
and serves as an effective market entry tool.
Agri Business Group, to spearhead the initiative to promote and support Agri-exports.
The Group handles projects and export transactions in the agricultural sector for
financing.
Small and Medium Enterprises Group to the specific financing requirements of export
oriented SMEs. The group handles credit proposals from SMEs under various lending
programmes of the Bank.
Export Services Group offers variety of advisory and value-added information
services aimed at investment promotion
Fee based Export Marketing Services Bank offers assistance to Indian companies, to
enable them establish their products in overseas markets.
Besides these, the Support Services groups, which include: Research & Planning,
Corporate Finance, Loan Recovery, Internal Audit, Management Information
Services, Information Technology, Legal, Human Resources Management and
Corporate Affairs. its

FINANCE AND SERVICES

INTRODUCTION
Exim Bank plays four-pronged role with regard to India's foreign trade: those
of a coordintator, a source of finance, consultant and promoter.

Exim Bank is the Coordinator of the Working Group Mechanism for

clearance of Project and Services Exports and Deferred Payment Exports (for
amounts above a certain value currently US$ 100 million).
The Working Group comprises Exim Bank, Government of India
representatives (Ministries of Finance, Commerce, External Affairs), Reserve
Bank of India, Export Credit Guarantee Corporation of India Ltd. and
commercial banks who are authorised foreign exchange dealers.

EXPORT CREDITS
Exim Bank offers the following Export Credit facilities, which can be availed
of by Indian companies, commercial banks and overseas entities :
¬ For Indian Companies executing contracts overseas
¬ For commercial Banks
¬ Other Facilities for Indian Companies
¬ For Overseas Entities

FINANCE FOR EXPORT ORIENTED UNITS

Term Finance
¬ Project Finance
¬ Equipment Finance
¬ Import of Technology & Related Services
¬ Domestic Acquisitions of businesses/companies/brands
¬ Export Product Development/ Research & Development
¬ General Corporate Finance
Working Capital Finance (For Exporting Companies)
¬ Funded
♣ Working Capital Term Loans [< 2 years]
♣ Long Term Working Capital [upto 5 years]
♣ Export Bills Discounting
♣ Export Packing Credit
♣ Cash Flow financing
¬ Non-Funded
♣ Letter of Credit Limits
♣ Guarantee Limits
Export Finance
♣ Pre-shipment Credit
♣ Post Shipment Credit
♣ Buyers' Credit
♣ Suppliers' Credit [including deferred payment credit]
♣ Bills Discounting
♣ Export Receivables Financing
♣ Warehousing Finance
♣ Export Lines of Credit (Non-recourse finance)
Working Capital Finance (For Non- Exporting Companies)
Bulk Import of Raw Material

SMALL & MEDIUM ENTERPRISES (SME) FINANCE

The importance of SME sector is well-recognized world over owing to its
significant contribution in achieving various socio-economic objectives, such
as employment generation, contribution to national output and exports,
fostering new entrepreneurship and to provide depth to the industrial base of
the economy. India has a vibrant SME sector that plays an important role in
sustaining economic growth, increasing trade, generating employment and
creating new entrepreneurship in India

DEBT RESTRUCTURING SCHEME

FOR (SMEs)
AGRI FINANCE
Exim Bank has a dedicated Agri Business Group to cater to the financing
needs of export oriented companies dealing in agricultural products. Financial
assistance is provided by way of term loans, pre-shipment/post-shipment
credit, overseas buyers' credit, bulk import finance, guarantees etc. Term loans
with varying maturities are provided for setting up processing facilities,
expansion, modernization, purchase of equipment, import of
equipment/technology, financing overseas joint ventures and acquisitions etc.

FILM FINANCE
The Bank has till date sanctioned loans more than Rs 33.15 crores for film
production. The first three films financed by Exim Bank have been
commercially successful across India and overseas markets.

PROJECT & SERVICE EXPORTS

¬ Exim Bank plays a pivotal role in promoting and financing project exports.
¬ Exports of projects and services, broadly categorized into:
♣ Civil engineering construction projects
♣ Turnkey projects
♣ Consultancy services
♣ Capital goods and transport vehicles
¬ Over the past two decades, increasing number of contracts have been
secured by Indian companies in West Asia, North Africa, Sub Saharan Africa,
South & South East Asia, CIS and Latin America.
¬ Such projects have supplemented the efforts of the host country
governments in achieving their developmental objectives.

PROMOTING INVESTMENT
¬ Comprehensive assistance:
♣ Pre investment advisory services
♣ Finance through debt and equity
¬ Exim Bank finance available for:
♣ Greenfield projects
♣ Brownfield expansion
♣ Overseas acquisitions directly or through special purpose vehicles
¬ Exim Bank also undertakes direct equity participation in Indian ventures
abroad to enhance credibility and acceptability of Indian ventures overseas
♣ Direct minority equity participation upto $10mn in overseas WOS / JV in
FC
¬ Exim Bank also facilitates joint investments by Indian and overseas
company in third country markets in addition to facilitating investments into
India.

PROMOTIONAL ACTIVITIES
Exim Bank as Consultant
♣ Setting up an Exim Bank in Malaysia
♣ Establishing an Export Credit Guarantee Company in Zimbabwe
♣ Blueprint for establishing Exim Bank in Zimbabwe
♣ Feasibility study for setting up the Afriexim Bank
♣ Designing of Export Financing Programmes –Turkey, South Africa
♣ Export Development Project : Ukraine, Vietnam, Armenia
♣ Mauritius –Study on Projecting Mauritius as an Investment Hub for Indian
Firms

EXIM’S CATALYTIC ROLE

Exim Bank is promoting India’s integration into the global economy through
innovative programmes

¬ First institution to finance & promote computer software exports(1986)

♣ Infosys was one such company supported by Exim Bank

¬ Set up Global Trade Finance Ltd. as a joint venture with IFC and West LB
(now acquired by FIM Bank of Malta) in 2001 for providing export factoring
facility as an alternate trade financing instrument for SME sector.
¬ Introduced new trade financing instruments like pre-export financing,
factoring & forfaiting. Bank offers structured financing solutions using
financial derivatives
¬ Introduced programmes for financing R&D, export product development,
quality certification, export oriented film financing etc.
OBJECTIVES

“… for providing financial assistance to exporters and importers, and for

functioning as the principal financial institution for coordinating the working
of institutions engaged in financing export and import of goods and services
with a view to promoting the country’s international trade…”

“… shall act on business principles with due regard to public interest”