Present time banking systems are backbone of any economy mostly governments use banks for loan distribution so this money create demand to help GDP growth but this systems big problem are NPA (Non performing assets). Banking lended which loan neither interest nor principle amount covered are NPA in normal language bad loans.
Two types of NPA
1. Individuals lending
2. Corporate or Company lending
Individuals lending NPA may cover by providing earning solutions to people.
Corporate lending NPA needs many changes like management, financial cost, Sectoral market etc.
For individuals earnings many initiatives taken by governments like skill development, professional course, new industrial opportunities etc. But present time covid-19 era is running so need a long term regular income method so individuas can free from debts.
Corporate NPA solutions need two ways first earning increasing plan & second costing reducing plan. But today we discuss how banks reforms may reduce new NPA.
Govt need now three measures
1. Finance for deficit & investment
2. Bank NPA resolution in time bound
3. Employment Generation
1.Need to change solutions of banking bad loans. Stressed companies 30% bank loan should convert in equity preferential shares this will reduce interest cost for stressed enterprises & chances of bad loan become very low, in future sell those preferential shares to private equity or investment firm thus bank can recover their principle amount many time that may be on premium or discount.
2. At the time of the auction of stressed enterprise need to use my method for maximum recovery in present and future. - After auction bidding remain amount convert in preferential shares so creaditors can sell their shares to other companies.
3. Use gold as side digital currency to boost currency . Accept deposit & lending in gold termology as 100 gm gold deposit interest 2% and lending interest 3%. Apply this method in banking system.
For Gold term loan lending use GFIR (Gold fluctuations interest rate) so corporate and institutions can borrow on low interest near 4% - 5% annual rate. GFIR is a tool that cut the interest rate and risk of banking system.
Present time only big businesses group borrow as ECB ( external commercial borrowing ) on 4% to 5% interest rate.
Three ways to boost economy -
First give cash in hands of people but government have no more fiscal space to do so.
Second distribute loans to marginal people to boost expenditure but it's depend on borrowers to accept loan or not and after distribution cent percent recovery not possible.
Third give tools of earning by increasing saving interest rate but this step will hurt corporate and increase government expenditure so not possible.
But a new idea can provide extra regular income to households so need to use gold as side currency. Bank should accept deposit and lending in gold termology.
As per indian example If 10% of household gold (2000 ton) deposited in banks then GDP may expand 15% nominal.
When any household earn regular interest on gold then this extra earning will boost economy short to long term. Banking lending capacity will increase and this will create derivative deposits 4 to 5 times.
Government should work on three front. First Use gold as currency to strengthen rupee against other foreign currencies. Gold near house hold can play important role for economy. Government should allow to add a gold transaction law for term deposit and gold term lending in banking system. Need to add a section of gold measurement in All types of savings, Current and dollar account. then make a deposit center of gold inside or outside of the bank. Give interst of gold term deposit in gold measurement.
like 100 gram gold saving account interest 2.5 gram of annual interest. Give also interest on Current account gold deposit 1% per annum this step will increase HNI & businessman to deposit their gold for extra earning. people are free to deposit & withdraw any time. Need to start gold term time deposit like F.D., Bond, debenture etc. Start gold term loan as 100 gram lending interest 6% per annum. Thus RBI (central bank) will get benifit through gold reserve ratio without interest like CRR near 4%, government will get statutory gold ratio like SLR near 18% in low interest rate, banks get more fund for lending, public get more choice for earning. Corporate and MSME enterprise get gold term loan which is beneficial at time of downtrend prices. allow after six month gold term lending change in rupees and rupees lending in gold. If in next five year banks will become successful to attract gold term deposit and lending then Indian economy may touch 10 trillion dollar in next 5 years. Last conclusion Use gold as side digital currency.
Covid-19 hit USA economic issues create unstability in jobs & new employment generation. So I want to say that USA govt should apply Economic and Employment method of gopal maheshwari for increase tax revenue. Create new 5 millions jobs in service sector within 90 days in minimum investment. These jobs are unaffected by recession and company failure. These are Life long earnable jobs. This theory will reduce corruption and black money. Citizens of USA will became more aware and accountable. So need to work together federal and provinces governments.
How to increase government enterprises -
Government can increase public sector units (government companies) count & strength by Gopal Maheshwari Economic and Employment method. PSU banks NPA on high now ever in history. So government should allow banks to accept share preferential or general at the time of restructuring of loans so future NPA possibility will become very low. This capital infusion limit set maximum 30% of loan amount thus interest burden of companies will become low and profitable companies shares will sell on high premium thus bank can sell their stack partialy time to time & gain good profit.
Second at the time of OTS (one time settlement) and NCLT ( National company law tribunal ) bidding for auction allow FDI (foreign direct investment ) and allows foreign companies to participate in auction bidding. Which amount bank recover that will good and remaining principle and interest amount will convert in preferential shares so this banks stack can give good return in future at time of boom in sectoral demand. It's sure shot formula to strength PSU and their numbers.
Government should use my economic method to reduce bank NPA( Non performing assets ). Present time government banks are facing liquidity for NPA provisining. We have seen mostly all companies after NPA settlement go to NCLT (National company law tribunal) or OTS (One time settlement ). NCLT invite bids from others for auction company. After auction company sold in 25% to 50% of the bank lending amount and bank recover only 25% to 50% of lending principle amount. Bank lost their interest amount also in that period NPA time to auction period gap but after auction company shares rise sharply and reached 10 times to 70 times more then their price at auction. This example present time as per Indian companies ruchi soya (patanjali owning now) and alok Industries (Reliance Industries owning now). Govt should make a rule that after auction which amount shortfall in principle & interest amount shall convert them as preferential shares so in future price hike of shares banks can get good amount of selling those shares.
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