Focus in 2014-15 was on financial sector reforms: Economic Survey

Promulgation of the insurance ordinance, allowing banks to dilute government holdings up to 52% and launch of Jan Dhan Yojana for financial inclusion are some of the reforms undertaken by the government during 2014-15, the Economic Survey tabled in parliament on Friday by Finance Minister Arun Jaitley said.

According to the survey, the reforms measure taken in the insurance sector was the promulgation of the Insurance Laws (Amendment) Ordinance 2014, removing the archaic provisions and also allowing 49% foreign direct investment (FDI) from the current cap of 26%.

The ordinance also allows Insurance Regulatory and Development Authority of India (IRDAI) to effective regulation of the sector.

In respect of the banking sector, the government banks were allowed to tap the market for funds by diluting the government's stake up to 52%.

In April 2014, two applicants have been granted 'in principle' approval to set-up new banks in the private sector within 18 months.

The RBI released guidelines and invited applications for setting up payments banks and local area banks, the survey noted.

The period under review also saw the launch of the Pradhan Mantri Jan Dhan Yojana to provide universal access to banking facilities with at least one basic banking account for every household.

On the increase in the non-performing assets (NPA), the economic survey notes that as on June 2014, five sub-sectors - infrastructure, textiles, iron and steel, mining and aviation hold 54% of the total stressed advances of government owned banks. According to the Survey, the Reserve Bank of India (RBI) issued guidelines for the banks to act fast as soon as a sign of stress is noticed in loan accounts.

The RBI also tightened norms to asset reconstruction companies, increasing the minimum investment in security receipts to 15% from five%.

The central bank also issued guidelines to bring flexibility in project loans to infrastructure and core industry projects.

According to the survey, 2014-15 also saw a decline in the growth of bank credit due to high accretion of NRI deposits and also due to low deposit mobilisation.

The survey noted that the equity markets continued to do well during 2014-15 with the benchmark indices, BSE Sensex and Nifty showed a general upward trend in the current year with growth rates of 29.9% and 31.4% year on year.

The survey lists improvement in corporate governance norms and establishment of a foreign portfolio investor for better functioning of both primary and secondary markets.