Daily Current Affairs January 28 & 29 2024 | Latest News

 

CURRENT AFFAIRS: BANKING & FINANCE NEWS

RBI allows LIC to acquire up to 9.99% stake in HDFC Bank

  • The Reserve Bank of India has allowed Life Insurance Corp. of India to acquire as much as 9.99 percent of HDFC Bank, the country’s largest private lender told stock exchanges on January 25.
  • LIC owns a 5.19 percent stake in the bank, according to the lender’s shareholding pattern as of December 31.
  • As per the bank’s exchange notification,  the RBI informed the decision to the LIC through a letter dated  January 25, under which LIC can acquire an aggregate holding up to 9.99 percent of the paid-up share capital or voting rights of HDFC Bank Limited.
  • Recently, HDFC Bank shares had witnessed heavy sell offpushing the shares to near 52-week lows, post the announcement of the bank’s third quarter
  • Some analysts speculate that the sell off is due to foreign investors panicking over a recent Sebi proposal concerning foreign portfolio investors.

Daily Current Affairs January 07 & 08 2024 | Latest News

 

CURRENT AFFAIRS : BANKING & FINANCE

RBI Implements Measures to Safeguard Individual Investors from Losses in Case of Issuer Default on Short-Term Financial Instruments

  • The Reserve Bank of India (RBI) has taken this step to make sure that individual investors’ losses are minimised if issuers default on short-term financial instruments.
  • These Directions shall come into force with effect from April 01, 2024.

Key Highlights :

  • Individual Investor Limits : Individual investors’ investment in short-term Commercial Papers (CPs) and Non-Convertible Debentures (NCDs) is now capped at 25% of the issue size.
  • Previously, there were no specific limits for individual investors’ investments in such instruments.
  • Applicability of the Rule : The 25% limit applies to the total subscription by all individuals, including Hindu Undivided Families (HUF), in any primary issuance of CPs or NCDs.

Daily Current Affairs January 06 2024 | Latest News

 

CURRENT AFFAIRS : BANKING & FINANCE

Reserve Bank of India plans to tighten dividend declaration criteria for banks

  • The Reserve Bank of India (RBI) has proposed new rules of dividend payout for domestic and overseas banks operating in India.
  • The proposed rules for dividend payout by banks will be effective from the fiscal year 2024-25 onwards.
  • The RBI has invited public feedback on the proposed rules, and the deadline for submission is 31 January 2024.

Key Highlights :

  • Dividend Declaration Criteria : Banks with an NNPA (Net Non-Performing Asset) ratio exceeding 6% and a Capital Adequacy Ratio (CAR) below 11.5% are prohibited from declaring dividends.
  • Minimum Capital Adequacy Ratio : Minimum capital adequacy ratio has been kept at 15% for a small finance bank and payment banks.
  • It has been kept at 9% for local area banks and regional rural banks.
  • Dividend Computation Basis : According to the RBI’s circular, banks must compute dividends on the basis of the “dividend payout ratio”.
  • Dividend payout ratio is the ratio between the amount of the dividend payable in a year and the net profit for the financial year for which the dividend is proposed.
  • Inclusion in Dividend Payable : Only dividend on equity shares shall be included in the proposed dividend payable.
  • Upper Ceiling on Dividend Payout Ratio : The RBI has proposed increasing the upper ceiling on dividend payout ratio, which is the ratio between the amount of the dividend payable in a year and the net profit to 50 per cent if the net NPA is zero from the earlier ceiling of 40 per cent.
  • NNPA Requirement for Dividend Eligibility : Presently, banks require an NNPA ratio of up to 7% to become eligible for declaration of dividends.
  • Review Basis : The guidelines have been reviewed in the light of implementation of Basel III standards, the revision of the prompt corrective action (PCA) framework, and the introduction of differentiated banks.
  • Applicability : This circular is applicable to all commercial banks (including Regional Rural Banks, Local Area Banks, Small Finance Banks, and Payments Banks).

About RBI :

  • Established : 1 April 1935
  • Headquarters : Mumbai, Maharashtra, India
  • Governor : Shaktikanta Das
  • Deputy Governors : Swaminathan Janakiraman, Michael Patra, M. Rajeshwar Rao, T Rabi Sankar

India’s FY24 GDP Growth Expected to Surpass Earlier Projection of 6.5% – Finance Ministry

  • According to the Finance Ministry, India’s FY24 Gross Domestic Product (GDP) growth rate is expected to exceed its earlier forecast of 6.5%.
  • The GDP growth rate is expected to comfortably exceed the Finance Ministry’s earlier forecast after Q2 GDP growth performance at 7.6%.

Key Highlights :

  • India’s GDP already grew 7.7% in the first half of this fiscal.
  • Union Budget 2023-24 had mentioned a nominal GDP of 10.5% for current fiscal.
  • In the latest half-yearly economic review report, the Finance Ministry has highlighted that the headline inflation outlook is on a declining trend.
  • India had recorded an economic growth of 7.2% in 2022-23 and 9.1% in 2021-22.
  • RBI has raised its growth forecast for 2023-24 to 7%.
  • RBI has projected inflation to average at 5.4% in FY24.
  • The International Monetary Fund (IMF) has kept India’s growth rate at 6.3% for 2023 and 2024.
  • At present, the IMF expects India to become a $5-trillion economy by 2028.
  • S&P Global Ratings expects India to become the 3rd largest economy by 2030.
  • According to S&P Global Ratings, India will be the world’s fastest growing economy for the next 3 years.
  • According to JP Morgan, India is expected to become the world’s 3rd largest economy by 2027.
  • It expects the Indian economy to hit $7 trillion by 2030.

Daily Current Affairs January 05 2024 | Latest News

 

CURRENT AFFAIRS : BANKING & FINANCE.

RBI plans to introduce a new category of money changers

  • In a move aimed at enhancing the ease of doing business and adapting to the evolving economic landscape, the Reserve Bank of India (RBI) has proposed the introduction of a new category of money changers.

Key Highlights :

  • This new category, known as Forex Correspondents (FxCs), would operate through an agency model, conducting money-changing business on behalf of Category-I and Category-II Authorised Dealers.
  • The existing framework involves the issuance of licences to authorised dealers, which are banks authorised to engage in foreign exchange transactions and full-fledged money changers.
  • The proposed category of Forex Correspondents seeks to streamline and simplify the licensing framework for Authorised Persons (APs) under the Foreign Exchange Management Act, 1999 (FEMA).
  • The current framework, last reviewed in March 2006, is undergoing changes to align with the progressive liberalisation under FEMA, the increased integration of the Indian economy globally, and the digitization of payment systems.
  • The new category, Forex Correspondents, will operate under a principal-agency model.
  • In this model, AD Category-I or AD Category-II will act as the principal entity, overseeing the operations of the FxCs.
  • One notable aspect is that such entities will not be required to seek authorisation from the Reserve Bank separately.
  • The central bank has invited comments and feedback from stakeholders on the draft Licensing Framework for Authorised Persons (APs) under FEMA till January 31, 2024.

Daily Current Affairs January 04 2024 | Latest News

 

CURRENT AFFAIRS : BANKING & FINANCE

RBI Directs Banks to Conduct Annual Review of Accounts Inoperative for Over a Year

  • The Reserve Bank of India (RBI) has asked banks to annually review accounts that have not seen customer-induced transactions for over a year, and term deposit accounts where there is no explicit renewal mandate and the funds have not been withdrawn after maturity.

Key Highlights :

  • Penalty Waiver for Inoperative Accounts : It also barred banks from levying penal charges for non-maintenance of minimum balance in any account classified as inoperative or for activation of inoperative accounts.
  • The instructions are part of fresh guidelines for inoperative accounts and unclaimed deposits to reduce the quantum of unclaimed deposits and frauds and improve grievance redressal.
  • Comprehensive Framework Guidelines : The revised framework follows a review by the central bank and includes measures to be put in place by banks on classification of such accounts, their periodic review, ways to prevent fraud, expedite grievance redress, trace account holders or their nominees/heirs, claims settlement, and the account closure process.
  • Applicability and Effective Date : The guidelines are applicable to all commercial and co-operative banks and will come into effect from April 1, 2024.
  • However, they will not be applicable for zero-balance accounts opened for credit of scholarship amount or Direct Benefit Transfer under Central and State government schemes.
  • Communication Requirements : Under the new framework, banks will be required to inform account and deposit holders through letters, email or on their registered number that there has been no activity in the last one year, and caution them that the account will become ‘inoperative’ if no operations are carried out during the ‘extended period’ of the next one year.
  • Public Disclosure of Unclaimed Deposits : Banks will also need to display details of unclaimed deposits, which have been transferred to the RBI-maintained Depositor Education and Awareness Fund(DEA), on a monthly basis on their website or branches.
  • Activation Process Information : Banks are obligated to provide information on the activation process for inoperative accounts and claiming balances in unclaimed deposits.
  • Long-Term Unclaimed Balance Transfer : Currently, the credit balance in any deposit account that has been inoperative for at least 10 years, or any amount that has been unclaimed for 10 years, is required to be transferred by banks to the DEA Fund.
  • Regulatory Authority : These instructions are issued in exercise of the powers conferred by Sections 35A of the Banking Regulation Act, 1949.

About RBI :

  • Established : 1 April 1935
  • Headquarters : Mumbai, Maharashtra, India
  • Governor : Shaktikanta Das
  • Deputy Governors : Swaminathan Janakiraman, Michael Patra, M. Rajeshwar Rao, T Rabi Sankar

Small Finance Banks Launch “Small Banks: Empowering Big Dreams” Initiative

  • While each small finance bank (SFB) has a different tagline to capture customers’ attention, they will also have a common one-“Small Banks: Empowering Big Dreams” to highlight the success of their business model to all stakeholders.
  • Uma Shankar Paliwal, CEO, Association of Small Finance Banks of India (ASFBI), observed that over the last 7 years, SFBs have given a good account of themselves, fulfilling the purpose, of meeting the financial needs of the marginalised sections of society for which they were allowed to be set up by RBI.

Key Highlights :

  • SFBs are mandated to lend at least 75% of their total advances to priority sectors such as agriculture, micro, small and medium enterprises (MSMEs), education, housing, and others.
  • Further, at least 50 per cent of their loan portfolio should comprise loans and advances of up to ₹25 lakh.
  • 10 SFBs commenced operations in the 2016-2017.
  • In 2021, Shivalik Mercantile Co-operative Bank transitioned to become an SFB.
  • In 2021, Unity SFB was given a license on the condition that it take over the fraud-hit Punjab & Maharashtra Co-operative Bank.
  • The tagline “Small Banks: Empowering Big Dreams” reflects the philosophy of all 12 SFBs.
  • Each SFB has its own tagline. For example, Equitas SFB has “Beyond Banking” as its tagline, ESAF SFB (Joy of Banking), Jana SFB (‘Likho Apni Kahani’/‘Write Your Destiny’) and Suryoday SFB (A Bank of Smiles).
  • As of March-end 2023, high-cost term deposits constituted about 68 per cent of SFBs’ total deposits of ₹1,91,372 crore.
  • The balance of 32 per cent were CASA deposits.
  • In its latest “Report on Trend and Progress of Banking in India”, RBI noted that SFBs serve a critical role in delivering credit to under-banked segments.
  • However, many SFBs have low CASA deposits and a greater reliance on bulk term deposits, often acquired at higher rates, especially from cooperative banks.

RBI Broadens Coverage of Card-on-file Tokenization to Include Banks Issuing Debit Cards

  • In order to make digital payments more secure, safe and sound the Reserve Bank of India (RBI) has now enabled card-on-file tokenization (CoFT) through card-issuing banks and institutions.

About Card-on-File Tokenization :

  • Tokenization refers to the replacement of actual credit and debit card details with an alternate code called the “token”.
  • It is a combination of card, token requestor and device.
  • The card detail when stored with a merchant is known as card-on-file (CoF).
  • This token is a randomly generated string of characters that has no intrinsic value and is meaningless outside of the context of a specific transaction.
  • The token is used as a surrogate for the actual card details, making it more secure to store and transmit.

Requirements for enabling CoFT through card issuers :

  • Generation of CoFT tokens for a card can be enabled through mobile banking and internet banking channels.
  • The token can be generated only on explicit customer consent and with AFA (additional factor authentication) validation.
  • The cardholder may tokenize the card at any time of their convenience, either on receipt of the new card or at a later stage.
  • The cardholder can select the merchants with whom he/she wishes to maintain tokens.
  • The card token so issued may be either by the card network or the issuer or both.

Advantages :

  • Tokenization replaces a debit or credit card’s 16-digit number with a unique token that is specific to just your card and is valid for one merchant at a time.
  • The token masks the true details of your card, so in case there is a data leak from the merchant website, the fraudster cannot misuse the card.

Muthoot FinCorp Secures ₹200 Crore through Private Placement of NCDs from SBI

  • Muthoot FinCorp, the flagship company of Muthoot Pappachan Group (Muthoot Blue), has announced ₹200 crore investment by State Bank of India (SBI) in the non-convertible debentures (NCDs) under private placement with a face value of ₹1 lakh for each NCD.
  • The maturity/tenure options of this issue is 5 years with half yearly being the frequency of the interest payment.
  • The secured issued NCDs is rated as AA-/stable by CRISIL and listed on the debt market segment of BSE.
  • CEO of Muthoot FinCorp : Shaji Varghese

What are Non-Convertible Debentures (NCD)?

  • Non-Convertible debentures are long-term debt instruments issued by companies that carry a fixed interest rate for the investment tenor.
  • The issuer redeems these at maturity and is not eligible for conversion into equity shares at maturity.
  • Typically, NCDs are less risky than equity investments since they provide a fixed rate of return.
  • NCDs benefit investors with increased returns, low risk, liquidity, and tax benefits.
  • Some Non-Convertible Debentures in India also offer additional benefits, such as a higher interest rate for senior citizens or those who apply during the initial subscription period.

Types of Non-Convertible Debentures:

  • Secured NCDs
  • Company assets are collateral for secured NCDs, and the risk is relatively lower. Consequently, interest rates on secured NCDs also tend to be lower.
  • Non-Secured NCDs
  • Non-secured non-convertible debentures do not have any underlying collateral.
  • Hence, it tends to be high-risk and offers attractive interest rates.
  • Usually, companies with strong creditworthiness issue non-secured NCDs

RBI Increases Bulk Deposit Limit for Large Urban Cooperative Banks 6.66 Times to ₹1 Crore and Above

  • The Reserve Bank of India (RBI) has decided to increase the bulk deposit limit for large urban co-operative banks (UCBs).
  • The earlier limit was ₹15 lakh and above.
  • The new bulk deposit limit is ₹1 crore and above.

Key Highlights :

  • Applicability to Tier 3 and Tier 4 UCBs : The new bulk deposit limit of ₹1 crore and above is applicable to UCBs in Tier 3 (with deposits more than ₹1,000 crore and up to ₹10,000 crore) category.
  • It is also applicable to UCBs in Tier 4 (with deposits more than ₹10,000 crore) category.
  • Exception for Other UCBs : According to RBI, all other UCBs (other than scheduled UCBs in Tiers 3 and 4) will continue to have a bulk deposit limit as “single rupee term deposits of ₹15 lakh and above.”
  • Uniform Rate of Interest for Lower Deposits : As per Co-operative banking experts, with the increased bulk limit, customers’ placing deposits below this threshold of ₹1 crore and above will get a uniform rate of interest.
  • Earlier, customers could negotiate the rate of interest since a deposit of ₹15 lakh and above was taken as a bulk deposit by all UCBs till now.

Daily Current Affairs January 02 & 03 2024

 

CURRENT AFFAIRS : BANKING & FINANCE

RBI Reports Indian Banks Achieve Decadal High in Asset Quality Improvement                 

  • The Reserve Bank of India (RBI) released a report titled ‘Trend and Progress of Banking in India’.

Key Highlights :

  • As per the report, the Indian scheduled commercial banks (SCBs) Gross Non-Performing Assets (GNPA) ratio improved in the second quarter of this financial year.
  • According to the report, the consolidated balance sheet of SCBs grew by 12.2% in 2022–23.
  • The improvement in asset quality is measured by GNPA ratios.
  • The GNPA ratio for Scheduled Commercial Banks (SCBs) dropped to 3.9% at the end of March 2023 and further decreased to 3.2% at the end of September 2023.
  • The agricultural sector had the highest GNPA ratio, while retail loans had the lowest.
  • About a 45% reduction in the GNPAs of SCBs is due to recoveries and upgrades.
  • The combined balance sheet of urban cooperative banks has increased by 2.3% in 2022–23.
  • The consolidated balance sheet of non-banking financial companies increased by 14.8% in 2022–23.
  • The capital to risk weighted assets ratio (CRAR) of SCBs was 16.8 per cent at end-September 2023, with all bank groups meeting the regulatory minimum requirement and the common equity tier 1 (CET1) ratio requirement.

RBI Prolongs Payments Infrastructure Development Fund Scheme By 2 Years Till December 2025

  • The Reserve Bank of India (RBI) announced its decision to extend the Payments Infrastructure Development Fund (PIDF) for two years up to December 31, 2025.
  • The Scheme was operationalized by the RBI in 2021 for three years (extendable up to 2 years) to encourage deployment of payment acceptance infrastructure in India.
  • It includes physical Point of Sale (PoS) terminals, Quick Response (QR) codes, in tier-3 to tier-6 centers, North Eastern states and Union Territories (UTs) of Jammu & Kashmir and Ladakh.
  • Purpose: To strengthen the payment acceptance infra by including 30 lakh touch points, which includes 10 lakh physical and 20 lakh digital payment devices every year.

Key Highlights :

  • Inclusion of PM Vishwakarma Scheme Beneficiaries: Merchants benefiting from the PM Vishwakarma Scheme are now included as eligible participants in the PIDF scheme.
  • Eligibility of Devices for Subsidy: Soundbox devices and Aadhaar-enabled biometric devices are recognized as eligible devices to claim subsidies under the PIDF scheme.
  • Standardised Subsidy for Special Focus Areas: The subsidy for special focus areas, including North Eastern states, Jammu and Kashmir, and Ladakh, has been standardised at 90% of the device cost, up from the previous 75%, regardless of the device type.
  • PIDF Corpus: As of November 30, 2023, the PIDF corpus is reported to be Rs 1,026.37 crore, according to an RBI release.
  • Acceptance Device Expansion Goal: The scheme aims to enhance the country’s acceptance device landscape by adding 30 lakh touch points annually.

About RBI :

  • Established : 1 April 1935
  • Headquarters : Mumbai, Maharashtra, India
  • Governor : Shaktikanta Das
  • Deputy Governors : Swaminathan Janakiraman, Michael Patra, M. Rajeshwar Rao, T Rabi Sankar

RBI Grants Extension for the Implementation of Penalty Charge Norms on Loan Accounts

  • The Reserve Bank of India (RBI) has decided to extend the timeline for implementation of guidelines for lenders on penal charges in loan accounts by three months.
  • In August,2023 the RBI had issued fresh guidelines for lenders on penal charges in loan accounts to ensure that penal interest/ charges is not used as a revenue enhancement tool by them, over and above the contracted rate of interest.
  • The central bank’s instructions were supposed to come into effect from January 1, 2024.
  • Accordingly, REs shall ensure that the instructions are implemented in respect of all the fresh loans availed from April 1, 2024 onwards.
  • Under the new rules, penalties, if charged, for non-compliance with the material terms and conditions of the loan contract by the borrower should be treated as ‘penal charges.’
  • These guidelines apply to a range of financial institutions, including commercial banks, Small Finance Banks, Local Area Banks, Regional Rural Banks, Primary (Urban) Co-operative Banks, Non-Banking Financial Companies (NBFCs), and All India Financial Institutions.

RBI Designates SBI, HDFC Bank, and ICICI Bank as Domestic Systemically Important Banks (D-SIBs)                        

  • State Bank of India (SBI) and HDFC Bank, both domestic systemically important banks (D-SIBs), will be required to set aside higher capital for the loans they make with effect from April 1, 2025, in the backdrop of their balance sheets growing bigger.

Key Highlights :

  • The central bank has prescribed higher additional Common Equity Tier (CET) 1 requirement for SBI (bucket 3 to bucket 4 ) and HDFC Bank (bucket 1 to bucket 2) at 0.80 per cent (against 0.60 per cent up to March-end 2025) and 0.40 per cent (0.20 per cent), respectively, as a percentage of their Risk Weighted Assets (RWAs).
  • For ICICI Bank, the additional CET 1 requirement continues at 0.20%.
  • SBI, HDFC Bank and ICICI Bank continue to be identified as D-SIBs.
  • While ICICI Bank continues to be in the same bucketing structure as last year, SBI and HDFC Bank move to higher buckets.
  • RBI’s latest D-SIB update is based on the data collected from banks as on March 31, 2023 and factoring in the increased systemic importance of HDFC Bank post the merger of erstwhile HDFC Limited into HDFC Bank on July 1, 2023.
  • Within the CRAR (capital to risk-weighted assets ratio) of 11.5% for banks, the CET-1 is at 5.5%.
  • Beginning FY26, if SBI wants to make a loan, it will have to back it up with 12.3% of the loan amount as capital against 12.1% now, going by the D-SIB prescription.
  • If HDFC Bank wants to make a loan, it will have to back it up with 11.9% of the loan amount as capital against 11.7% now, going by the D-SIB prescription
  • RBI stated that SIBs are perceived as banks that are ‘Too Big To Fail (TBTF)’.
  • This perception of TBTF creates an expectation of government support for these banks at the time of distress.

RBI permits ICICI Pru Mutual Fund to acquire 10% stake in Federal, RBL Bank     

  • Federal Bank stated that the Reserve Bank of India (RBI) has accorded approval to ICICI Prudential Asset Management Company Limited (ICICI AMC) for acquiring up to 9.95 per cent stake in the bank.
  • The approval granted by the Reserve Bank of India (RBI) is subject to the compliance with the relevant provisions of the Banking Regulation Act, 1949, RBI’s Master Direction and Guidelines on Acquisition and Holding of Shares or Voting Rights in Banking Companies dated January 16, 2023.
  • Meanwhile, RBI also accorded approval to ICICI AMC to acquire 9.95 per cent stake in RBL Bank and Equitas Small Finance Bank.

About Federal Bank :

  • Headquarters : Aluva, Kochi, Kerala, India
  • MD & CEO : Shyam Srinivasan

About RBL Bank :

  • Founded : August 1943
  • Headquarters : Mumbai, Maharashtra, India
  • MD & CEO : R. Subramania kumar

About Equitas Small Finance Bank :

  • Founded : 2007
  • Headquarters : Chennai, Tamil Nadu
  • MD & CEO : Vasudevan P N

Daily Current Affairs January 01 2024

 

CURRENT AFFAIRS : BANKING & FINANCE

NPCI set to Introduce UPI for secondary market from Jan 1, 2024        

  • The National Payments Corporation of India (NPCI) is set to kick off an Application Supported by Blocked Amount (ASBA)-like facility in the secondary market from January 1, 2024.

Key Highlights :

  • The Unified Payments Interface (UPI) for the secondary market will start its beta phase next week for the equity cash segment.
  • It will be supported by key stakeholders, including clearing corporations, stock exchanges, depositories, stockbrokers, banks, and UPI app providers.
  • This Beta launch is facilitated by Groww as the brokerage app, alongside BHIM, Groww, and YES PAY NEXT as UPI apps.
  • Initially, HDFC Bank and ICICI Bank customers will be able to avail this facility.
  • Further, HDFC Bank, HSBC, ICICI Bank, and Yes Bank are sponsor banks for the clearing corporation and exchanges.
  • Other stakeholders, including stockbrokers such as Zerodha, banks like Axis Bank and Yes Bank, and UPI apps like Paytm and PhonePe are in the certification stage and set to participate in beta launch soon.
  • The facility will enable investors to block funds in their bank accounts for secondary market trading rather than transferring the funds upfront to the trading member.
  • The offering will be rolled out by integrating the UPI mandate service of single block and multiple debits with the secondary market trading.
  • NPCI added that the ‘beta phase’ of the service will initially be available for a limited set of users.