Answer 1

INTRODUCTION
The Indian banking system comprises a very complex system with an apex body that deals with all
the financial planning, implementation, and control, and this apex body is called the Reserve Bank
of India. The RBI was established under the RBI act 1934. As per this act RBI's independence is
not enshrined in law. RBI act 1934 gives the government the power to issue policies directly.In
recent years there is an increase in the debate that if the RBI should be under the full control of the
government or if it should be fully independent. Government can implement the policies much
more smoothly and quickly if the central bank is under the control of the government. But this also
raises a very complex dilemma that political parties can use the leverage of financial policies to
attract voters rather than thinking about the future of the economy.

RBI AND CENTRAL GOVERNMENT

The Reserve bank of India holds the utmost position as per the Indian constitution. Among other
functional bodies of the government, RBI deals with financial execution and implementation. The
relationship between the central government and the RBI is quite deep and they work in a
systematic progressive approach.One of the functions of the central government is to form policies
and these policies require financial aid for execution. RBI holds the money that a government has
and can provide financial aid that can help the central government to execute these policies.Before
providing financial aid to the central government the RBI studies the plan at an individual level and
figures out whether this policy is going to hinder or smoothen the economic growth of the country. If
the RBI is under the control of the central government the policy made can not be double-checked
by the financial body and the result can lead to disaster for the economy thus the independence of
the RBI is very important for a perfect economy flow. There is one more big concern that political
parties can take advantage of the RBI if it comes under them and make lucrative policies, providing
unnecessary financial help in order to gain political votes and destroying the long-term health of the
economy.
RBI AS AN INDEPENDENT BODY
RBI is a Statutory financial body of the Indian Government and is not constitutionally independent.
The RBI act 1934 gives the Indian government right to control. The central government has the
power to appoint the governor of the RBI and 4 deputy governors. This act gives additional power
to the government to advise or can give direct direction to RBI on the matter connected to the
public interest after concerning with the governor of the RBI.The power of government can also
supersede the decision of the RBI if it believes that RBI fails to perform its responsibility in an
effective manner.
I believe that the RBI should remain independent from the government because the independence
of the RBI will give the following advantages.

1. Long-term Nation Growth:- RBI's main focus is not on the short-term development but on
the long-term development of the nation. While the government can focus on the quick fix
method to solve the problems and that can leads to a permanent dent in the long-term
economy of the nation. Thus, the independence of the RBI can help in future economic
development.
2. The difference in the strategies:- The aim set of the RBI is for the long run of the country
and thus the strategies that are formed are focused on the long-term goals. RBI can sometimes
ignore the short-term goal and make strategies that can give the result, in the long run, ignoring
the temporary goals. On the other hand, the government keeps short-term goals in mind to
please the nation though it can affect the future economy.
3. Balancing the Inflation:- RBI can form the policies that can affect the flow of inflation, for
example, inflation is considered to be a good indicator of the economy until it is controlled so
the RBI can make policies that can affect the money flow in the market and increase the
inflation but on the other hand government doesn't support the inflation and it is big problem for
them.
4. Political Gains:- RBI if under the control of the central government can be a disastrous
situation for the nation as if in case the political party is not loyal to the nation they can use the
power of RBI for political gains. So it is very important for the RBI to remain independent so the
political parties can not take advantage of the power of the RBI.

CONCLUSION
RBI is a financial apex body and the central government is an overall planning and executing body.
Both have importance in the national system. In order to have proper functioning of any national
system, there should be a balance among all bodies. For a healthy economy, the fiscal policies of
the central government and the monetary policies of the RBI should be in conjunction with each
other. RBI regulates both private as well as public banks and it should is very important for RBI to
safeguard the interest of the public as well as private banks. Has been seen in the past, the
departure of the two governors Mr. Rahuram Rajan and Mr. Urjit Patel, and the case of transfer of
991.22 billion rupees for 9 months from July 2020 to March 2021 points finger at the independence
of the RBI. RBI should be independent of the central government so that it will not be used for
political gains.
 Answer 2

INTRODUCTION
When we talk about the Indian economy in past it was a form of a socialist kind. The focus of the
government is on narrowing the gap between the poor and the rich. But as time change the system
of the economy also change. The formation of the banking system in 1934 by the RBI act helped in
the transformation of the Indian economic system. Traditionally banking systems focus on branch
expansion and personal relationship management but in the case of the modern banking system, it
focuses on fast and anytime banking. Indian financial market has changed a lot, earlier before the
1990s the techniques that are used can now no longer attract the market. That led to the adaption
of modern techniques that can satisfy the latest needs of the market.

NEO BANKING VS TRADITIONAL BANKING

The traditional banking system comprises of a physical system that believes in personal contact
with the customer. In the early time before the 1990s people are not much aware of the bank
facilities benefits and thus prefer to not show interest in the system. In order to solve this problem,
the bank's system has to work in such a way that it can insure the trust of its customer. In order to
create trust, the banking system tries to reach them by opening physical branches in more and
more places. This helped in reaching customers and the brick-and-mortar technique was quite
effective in the traditional banking system. The traditional technique of personal contact with the
customer also helps in building trust and encourages them to save their money with the bank. But
the change in the market trend and the introduction of modern technology change the requirement
of the modern customer and this led to the formation of the Neo banking system. Neo banking is a
modern banking technique that focuses on 24x7 facilities and at the waste of your home. Neo
banking has no physical branches and so there is no time phase under which one can avail of the
banking facilities.
FUTURE OF TRADITIONAL BANKING IN INDIA
Since the change in the market and the introduction of digital banking, traditional banking in India
are encountering difficulty. The Neo Banking system which comprises digital banking and retail
banking is posing many difficulties for the survival of traditional banks in India. Customers can be
seen over the past few years moving from the traditional banking platform to the Neo banking
platform. Traditional banking is facing a lot of challenges in the modern market some of them are
as follows
1. Time-consuming process:- As the customer has to visit the branch for any facility that they
want to make use of this requires time and the modern consumer knows the value of time.
2. High installation cost:- Traditional banking required a physical branch and that brings the
cost of installation very high as compared to the Neo banking system.
3. Fixed time issue:- The working hours of the traditional banking system are fixed and the
banking facilities are provided during the set fixed time only.
4. Emerging of new technology:- Emerging of new technology lead to the shift of consumers
towards the Neo banking system as it is fast and can be assessable easily.
5. Difficulty in Operation:- Traditional banking is hard to operate both from the banking staff
as well as from the customer's point of view. Dependence of a customer on the bank staff can
also create difficulty.

CHANGES IN INDIA IN FOLLOWING YEARS

Traditional banking requires changing its practice if they want to survive the future Indian market.
Indian banking system requires modern transformation and the introduction of Neo banks and retail
banking are welcoming in the Indian market. In recent years there is a shift in consumer demand
from the banking sector. Consumers are shifting toward internet banking and switching from
traditional banking to the Neo banking concept. In order to catch up with the modern demand,
traditional banks must have to switch themselves to transform them into a modern banking system.
In India, there is a mixed market because still there is a major portion of rural areas that still remain
away from the Neo banking concept. The traditional banks must have to switch the working system
and adopt the concept of modern banking in the urban area and traditional banking in rural areas.
Reachability of the mobile and internet also raises the reachability of mobile banking which can be
enhanced to give access to the Indian market.

CONCLUSION
A shift in the modern digital world has changed the viewpoint of the Indian market. Digital platforms
are much more convenient and can be accessible anytime and by anyone. Introduction of the
mobile technology enhances the reach of the digital market. The banking sector also comes under
this blanket and thus has to modify itself to reach the modern market. The challenges with Neo
banking should be taken seriously. Neo bank and digital bank's major problems are they are much
more affected by fraud, digital crime, and hacking. With big transformation, their come big
challenges so the banks must have to face the challenges and bring out some suitable solutions to
the table.
 Answer 3(a)

INTRODUCTION
In India, banks perform all the financial activities they receive deposits and also perform the act of
loaning and advancing. These facilities are given at a particular rate of interest in order to make a
profit the rate that banks receive from loaning and advancing is always higher that the rate that
they give on deposits. Sometimes when the advances and loan remain for a certain period of time
this is called NPA or Non-Performing Assets.They can be either internal reasons or external
reasons that create the increase in the NPA of a bank.

REASONS FOR INCREASE IN NPA IN INDIA IN LAST

DECADE
With effects from March 31, 2004, any interest on a loan, out-of-order accounts, bills, principle
amount, or any other receivable that remain overdue for more than 90 days are termed as Non-
Performing Assets. In India, the rate of NPA's are increasing over the last 10 years and can be
classified into two categories Internal or Incremental components and External or Overhang
Components. Incremental components are the internal management issues that can be credit
policies, terms, and conditions of the credit, etc and the Overhang components are the external
factors that can be business policies or the financial environment.
The factors that affect the increase in the rate of NPA in India in the last decade are as follow
1. Inadequate legal framework:- Some banks provide a less legal framework for the
application of loans and advances after a while these less legal frameworks can turn into an
NPA.
2. Poor Law enforcement:- Regarding the system of law enforcement on the defective debtors
India is far behind. No proper collection facility is provided to the banks that can deal with the
collection of overdue payments.
3. Loaning as a Customary Practice:- It become a customary practice in most of the banks
in India to give loans to an individual without properly exploring the requisite problems.
4. Hard to Reveal wilful defaulter:- The system to finger out whether an individual is a wilful
defaulter still has loops and holes and anyone can take advantage of it thus making it hard for
the banks to distinguish a wilful defaulter.
5. GDP stagnation:- It has been seen that in the last 10 years the GDP has seen an abrupt loss
which is one of the major factors in the increase in the rate of NPA. Loss in the worldwide
economy led to turning an individual into a defaulter as he was facing losses.

CONCLUSION
NPA when increased can lead to losses for the banks so it is very important for the banks to
analyse these reasons and come up with a plan to resolve the problems. Some of the factors are
external and they cannot be detected or can not be predicted but the internal and controllable
factors must be thoroughly examined before providing loans and advances It is the utmost duty of
the banking management to minimise the NPA as low as they can.
 Answer 3(b)

INTRODUCTION
NPA or Non-Performing assets are the loans or the advances that are dispersed by the bank to an
individual and an individual has not been active on his account for more than 90 days. NPA is the
root cause of a bank's downfall, so it is very important for banks to minimise NPA. A proper
banking system must have to focus on the causes and try to eliminate these causes. In the Indian
economy system reduction in NPA can be performed by several controlling measures.

NPA MANAGEMENT IN INDIA

NPA is a major problem for the banking sector in India. The problem with the NPA is that it is
carried forward every year and thus at last club up to a big amount and then it gets noticed. One
more problem with an increase in NPAs is it becomes very hard for the banks to differentiate a
wilful defaulter and thus the loans are provided to the wrong individual.
Some of the steps that can be taken to reduce the NPA in the Indian banking system are as
follows.
1. Debts recovery tribunal:- The recovery of Debt and Bankruptcy Act (RDB) 1993 was
passed in the Indian parliament which gives the power to the financial institution that they can
quickly collect the debt of 10 lakhs or more. Under this act, DRT was established and they are
able to handle more cases than conventional courts.
2. Lok Adalat:- Guidelines are given by RBI in 2001 that if there is a loan of fewer than 5 lakhs
then it can be recovered through the Lok Adalat. There can be both lawsuits and non-lawsuits
that can be done through Lok Adalat.
3. Compromise Settlement:- Under this system, there is a compromise made between the
bank and a defaulter candidate and the bank and defaulter try to reach some even settlement
amount.
4. Credit Information Bureau:- CIBIL is a third-party agency that gives credit scores to an
individual by analysing his financial position. A greater score denotes a good track record of
previous loan payments.
5. Sarfaesi Act, 2002:- This act gives banks three options without going to court that are asset
reconstruction, security enforcement, and securitisation. It covers any amount of more than 1
lakhs. This act also gives banks the power to give notice.
6. Penalising banks:- Banks can also be punished if they are found to be not performing their
duties before passing loans and advances to an individual.

CONCLUSION
100% prevention of NPA is impossible because some of the NPA are unfortunate and can not be
predicted. A financial market is dynamic as it got affected by the external environment. But it can
be minimised if the banking management took some extra efforts before providing loans and
advances. Recovery of the NPA must be practiced at the right time before it is too late and a
regular check over the loan must also be performed.