Q.3 Over the last decade, banks have increasingly shifted away from providing credit to industry, favouring instead lending to consumers. What are the factors responsible for this shift? What are its implications for the economy? (10 Marks)

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Staff @CD

Mentor’s comment-

https://indianexpress.com/article/opinion/columns/what-the-rbis-financial-stability-report-reveals-about-the-banking-sector-8071499/
In the intro, mention the RBI’s latest Financial Stability Report (FSR) giving the banking system a reasonably clean bill of health.
In the body mention the reasons for the shift such as lessons learned from the global financial crisis and lending boom of 2004-2009. That created issue from both the supply side as well as the demand side as industries prefering to use the excess capacity. In the implications mention the impact on economic growth due to lack of credit.
Conclude by mentioning the need for deep structural reforms — to the infrastructure framework, the resolution process, and indeed, in the risk management processes at the banks themselves.

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2 responses to “Q.3 Over the last decade, banks have increasingly shifted away from providing credit to industry, favouring instead lending to consumers. What are the factors responsible for this shift? What are its implications for the economy? (10 Marks)”

August 11, 2022

AbhisheK SingH

abhishek..plz review

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1. August 24, 2022
  
  Staff @CD
  
  Abhishek
  
  Good answer. In intro, you can mention some data point to substantiate- share of industry in total banking credit has declined from 43% in 2010 to 30% in 2020, and consumer loans have increased from 19% to 29%.
  Next two parts are fine, points mentioned are good.
  Before concluding you can mention a short way forward where you can talk about deepening of structural reforms and the need to take some risks by both banks and firms.
  Conclusion is fine.
  Keep practicing. 🙂

Q.3 Over the last decade, banks have increasingly shifted away from providing credit to industry, favouring instead lending to consumers. What are the factors responsible for this shift? What are its implications for the economy? (10 Marks)

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2 responses to “Q.3 Over the last decade, banks have increasingly shifted away from providing credit to industry, favouring instead lending to consumers. What are the factors responsible for this shift? What are its implications for the economy? (10 Marks)”

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