{"id":293999,"date":"2024-05-01T19:52:15","date_gmt":"2024-05-01T14:22:15","guid":{"rendered":"https:\/\/forumias.com\/blog\/?p=293999"},"modified":"2024-05-01T19:52:15","modified_gmt":"2024-05-01T14:22:15","slug":"issues-with-credit-system-in-india-credit-penetration-must-not-become-a-nightmare","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/issues-with-credit-system-in-india-credit-penetration-must-not-become-a-nightmare\/","title":{"rendered":"Issues with credit system in India: Credit penetration must not become a nightmare"},"content":{"rendered":"

Source<\/strong>: The post issues with credit system in India has been created, based on the article \u201cCredit penetration must not become a nightmare\u201d published in \u201cLive mints<\/strong>\u201d on 1st May 2024.<\/p>\n

UPSC Syllabus Topic: GS Paper 3<\/strong>– Economy-mobilisation of resources<\/p>\n

Conext<\/strong>: The article discusses the importance of credit in India’s economy. It highlights issues like low credit uptake, and harmful loan recovery practices, including a recent scandal involving abusive recovery methods by a loan company. It calls for stricter regulations to protect borrowers.<\/p>\n

For details information on Microfinance<\/strong> read here<\/a><\/p>\n

What is the role of credit in the economy?<\/strong><\/h2>\n

Economic Expansion:<\/strong> Credit is essential for economic growth, allowing for the utilization of bank deposits in commerce and business expansion.<\/p>\n

Supports the Underprivileged:<\/strong> Credit helps improve the lives of those at the bottom of the economic ladder in India, emphasizing financial inclusion through initiatives like rural microfinance.<\/p>\n

Expansion of Banking Services:<\/strong> Increasing the reach of banking services into underserved areas is crucial for improving credit availability, which echoes the objectives of bank nationalization in 1969.<\/p>\n

What are the issues with credit system in India?<\/strong><\/h2>\n

Uneven Credit Distribution: <\/strong>Credit availability varies significantly across regions; for example, in 56 eastern districts, the credit-to-deposit ratios range from under 11% in West Singhbhum to over 96% in Chandel.<\/p>\n

Predatory Lending Practices:<\/strong> Some digital lending apps engage in harsh recovery methods. A notable incident involved the Finsara app, where employees used sexual shaming as a tactic against a borrower who failed to repay a small loan.<\/p>\n

How are regulations being enforced?<\/strong><\/h2>\n

Interest Charge Regulations:<\/strong> The central bank has warned lenders against calculating interest charges from the day a loan is sanctioned rather than from the day it is disbursed. This measure is designed to protect retail borrowers from unfair financial burdens.<\/p>\n

Strengthening Capital Requirements:<\/strong> Last year, the regulator tightened capital backup norms for collateral-free lending. This aims to keep the burgeoning fintech boom of app-given personal loans within safe prudential limits and reduce the risk of banks’ financial buffers being depleted by defaults.<\/p>\n

Question for practice:<\/strong><\/p>\n

Discuss the role of credit in India’s economy and the issues with the credit system.<\/p>\n","protected":false},"excerpt":{"rendered":"

Source: The post issues with credit system in India has been created, based on the article \u201cCredit penetration must not become a nightmare\u201d published in \u201cLive mints\u201d on 1st May 2024. UPSC Syllabus Topic: GS Paper 3– Economy-mobilisation of resources Conext: The article discusses the importance of credit in India’s economy. It highlights issues like… Continue reading Issues with credit system in India: Credit penetration must not become a nightmare<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[216,8184,10501],"class_list":["post-293999","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-3","tag-indian-economy","tag-live-mint","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/293999","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=293999"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/293999\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=293999"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=293999"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=293999"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}