CURRENT AFFAIRS : BANKING & FINANCE
Reserve Bank of India Imposes Business Restrictions on Edelweiss Asset Reconstruction Company and ECL Finance
- The Reserve Bank of India (RBI) imposed business restrictions on Edelweiss Asset Reconstruction Company (EARCL) and ECL Finance due to material concerns observed during supervisory examinations.
- EARCL is barred from acquiring financial assets, and ECL Finance is prohibited from undertaking structured transactions for its wholesale exposures.
- The action is based on material concerns observed during supervisory examinations, primarily arising from the group entities’ conduct.
- EARCL and ECL Finance were found to be “acting in concert” by entering into a series of structured transactions for “evergreening stressed exposure of ECL, using the platform of EARCL and connected alternative investment funds (AIFs), thereby circumventing applicable regulations.
- The structures against the Edelweiss Group companies follow similar measures taken by the RBI against JM Financial Products and IIFL Finance.
Key Highlights :
- The RBI also observed that security receipts (SRs) in the case of both ECL and EARCL had been incorrectly valued.
- Moreover, it found that ECL had indulged in a slew of wrong practices.
- These included the submission of incorrect details of its eligible book debts, to its lenders, for computing drawing power.
- Moreover, loan-to-value norms for lending against shares had not been complied with.
- The RBI also encountered incorrect reporting to the Central Repository for Information on Large Credits (CRILC) system.
- Besides, the entities had not adhered to the Know Your Customer (KYC) guidelines by ECL, the RBI observed.
- In April 2024, Kotak Mahindra Bankwas barred from taking on new customers through its online and mobile banking channels and issuing fresh credit cards due to deficiencies in its IT systems.
- Restrictions were also imposed on Bank of Baroda and Paytm Payments Bank.
What is a Security Receipt?
- Security receipts are instruments issued by asset reconstruction companies (ARCs) as consideration for their purchase of distressed assets from banks/Non-Banking Financial Companies (NBFCs).
About Edelweiss Asset Reconstruction Company (EARC) :
- EARC is sponsored by Edelweiss, a leading diversified financial services conglomerate in India, and CDPQ Private Equity Asia Pte Limited (CDPQ).
- EARC specializes in acquiring Non-Performing Assets (NPAs) from banks and financial institutions.
- The company resolves NPAs through strategies outlined in the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002 (SARFAESI).
- EARC operates two distinct business divisions: Wholesale Assets and Retail Assets.
HDFC Bank to Discontinue SMS Alerts for Unified Payments Interface Transactions Below ₹100
- HDFC Bank has informed the customers it will stop sending SMS alerts for any UPI (Unified Payments Interface) payment spent below Rs 100 or receipt of money less than Rs 500.
- As per the bank, this step will be effective from June 25, 2024.
- From this date, SMS notifications will be pushed only for transactions above Rs 100 (for money sent/paid) and above Rs 500 (for money received).
- Reason for Change: The decision is due to the high cost of sending bulk messages, which costs banks a few crores of rupees daily due to the large volume of UPI transactions, averaging around ₹40 crore per day.
What is UPI?
- UPI, or Unified Payments Interface, has become the backbone of digital transactions in India.
- The UPI was introduced in India on April 11, 2016, by Dr Raghuram G Rajan, Governor, RBI at Mumbai, Maharashtra and developed by the National Payments Corporation of India (NPCI).
- It allows you to instantly transfer money between any two parties’ bank accounts.
- UPI transactions require the authorisation of a Personal Identification Number (PIN), a 4-6 digit pass code set by the customers as a security measure to ensure safe and approved transactions.
- For normal UPI the transaction limit is up to Rs 1 Lakh per transaction.
- 3 prominent UPI applications are the Walmart-owned PhonePe, Google Pay and Paytm.
- In 2023, UPI transactions in India reached a record high with 117.6 billion transactions and a value of ₹183 trillion.
- Besides India, the popular digital payment method has spread to seven countries.
- These include Bhutan, France (for e-commerce), Mauritius, Nepal, Singapore, Sri Lanka, and UAE.
- The share of UPI in digital payments in India has reached close to 80% in 2023.
- India accounts for nearly 46% of the world’s digital transactions (as per 2022 data).
About HDFC Bank :
- Founded : 1st July 2023 (via the merger between HDFC-HDFC bank)
- Headquarters : Mumbai, Maharashtra, India
- MD & CEO : Sashidhar Jagdishan
- Tagline : We Understand Your World
Reserve Bank of India Fines HSBC Rs 36.38 Lakh for Foreign Exchange Management Act Regulation Violations
- The Reserve Bank of India (RBI) imposed a fine of Rs 36.38 lakh on foreign lender HSBC for Foreign Exchange Management Act (FEMA) violations.
- The violations pertain to the reporting requirements under the Liberalised Remittance Scheme of FEMA, 1999, which HSBC did not follow.
- RBI issued a show cause notice to HSBC.
- The bank responded with a written reply and made oral submissions.
- After reviewing the facts and HSBC’s responses, the RBI concluded that the violations were substantiated, leading to the imposition of the penalty.
What is the Foreign Exchange Management Act (FEMA)?
- The Foreign Exchange Management Act, 1999 (FEMA), is an Act of the Parliament of India “to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India”
- This new Act is in consonance with the frameworks of the World Trade Organisation (WTO).
- It also paved the way for the Prevention of Money Laundering Act, 2002 which came into effect on July 1, 2005.
Recent News :
- In May 2024, The Reserve Bank of India (RBI) imposed a penalty of ₹1 crore on ICICI Bank and fined Yes Bank ₹91 lakh for non-compliance with regulatory directions.
About HSBC :
- Headquarters : London, England, UK
- Group Chairman : Mark Tucker
- Group Chief Executive :Noel Quinn
Asian Development Bank Pledges $2.6 Billion in Sovereign Loans to India
- The Asian Development Bank (ADB) committed $2.6 billion in sovereign lending to India in 2023 for projects that aim to strengthen urban development, support industrial corridor development, promote power sector reforms, build India’s climate resilience, support horticulture, and enhance connectivity.
- The loans aim to foster India’s structural transformation, job creation, infrastructure enhancement, green growth, and socioeconomic inclusiveness, and integrate smart technologies and innovations.
- ADB also extended $23.53 million in technical assistance and $4.1 million in grants under the sovereign portfolio.
- In addition, ADB committed over $1 billion for private sector projects during the year.
Key Highlights :
- India’s Relationship with ADB: India is a founding member and one of the largest shareholders of ADB, headquartered in the Philippines.
- ADB focuses on development in the Asia-Pacific regions.
- ADB-Funded Projects in India : Projects funded by ADB in India include the Visakhapatnam–Chennai Industrial Corridor Development project, road connectivity projects in Bihar and Madhya Pradesh, the expansion of the Delhi–Meerut rapid rail transit corridor, horticulture development projects in Himachal Pradesh.
- ADB’s Portfolio in India: As of 31 December 2023, ADB had committed 623 public sector loans, grants, and technical assistance totalling $55.3 billion to India, with its current sovereign portfolio in India including 67 loans worth $14.15 billion.
What is Sovereign Debt?
- Sovereign debt is the government debt of a country, a sovereign nation.
- It is also referred to as government debt, national debt, public debt, or country debt.
- The sovereign debt of a country consists of all its debt liabilities to both domestic and foreign creditors.
About ADB :
- Established : 1966
- Headquarters : Manila, Philippines
- President : Masatsugu Asakawa
- Membership : 68 members, including 49 regional members (countries in Asia and the Pacific) and 19 non-regional members (countries outside the region)
Axis Bank Collaborates with Mastercard to Introduce NFC Soundbox
- Axis Bank, in partnership with Mastercard, has introduced the NFC Soundbox, a new payment solution.
- The NFC Soundbox serves as an all-in-one payment solution, enabling users to accept Bharat QR, UPI, Tap & Pay, and Tap + Pin payments.
- Axis Bank claims to be the first bank in India to offer a Soundbox capable of accepting Tap + Pin payments, facilitating transactions exceeding Rs 5000 via card instruments.
Key Highlights :
- Dual Confirmation Feature: The device features a dual confirmation mechanism, providing audio cues through its speaker and visual feedback on the screen in over 7 languages.
- This ensures a smooth and secure transaction experience for both merchants and consumers.
- Connectivity and Network: The NFC Soundbox is equipped with 4G + WiFi capability and is compatible with leading payment networks such as Visa, RuPay, and American Express.
- Enhanced Security and Convenience: The launch of the NFC Soundbox underscores a commitment to providing consumers with quick and highly secure card transactions while offering small merchants a cost-effective and comprehensive payment solution.
About Axis Bank :
- Established : 3 December 1993
- Headquarters: Mumbai, Maharashtra, India
- MD & CEO: Amitabh Chaudhry
- Tagline : Badhti Ka Naam Zindagi
About Mastercard :
- Founded : 1966
- Headquarters : New York, U.S
- CEO : Michael Miebach
