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Financial Awareness Capsule 2014
Financial Awareness Capsule 2014
INANCIAL A
AWARENESS FOR SBI PO EXAM
Specially compiled for Banker
Bankersadda by Mr. A.K. Gupta, Ex Chief Manager, PNB
P
JAN 2014
1. Sumit Bose is new Finance Secretary: Sumit
Bose, has been designated
ed as the new Fin
Finance
Secretary. He will continue
ue to hold the pos
post of
Revenue Secretary.
2. Harsh Bhanwala is new Nabard
d Chairma
Chairman: The
Centre has appointed Harsh
rsh Kumar Bhanwa
Bhanwala as
Chairman of the National
al Bank for Agricul
Agriculture
and Rural Development (Nabard). Prior to this
appointment, Bhanwalaa was an Execu
Executive
Director at India Infrastructure
ucture Finance Company
Comp
Ltd (IIFCL), a state-owned
ed infrastructure len
lender.
Bhanwala, succeeds Prakash
kash Bakshi, who
w retired
as Nabard Chairman in September.
3.
4.
5.
6.
7.
8.
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Affairs Ministry,
istry, shares held by
b a company in a
fiduciary capacity
apacity should not be
b counted for the
purpose of determining holding-subsidiary
h
relationship.
p. Further, the powe
powers that a company
can exercisee in another compa
company in a fiduciary
capacity (only
nly in the capacity as a trustee) will be
excluded for determining h
holding-subsidiary
relationship.
9. Bank of India plans
lans to get
g
into merchant
banking: Bank
ank of India is planning
plan
to enter the
merchant banking space via BOI Shareholding
Ltd. Public sector banks which have a merchant
banking subsidiary
bsidiary include State
Sta Bank of India,
IDBI Bank and Bank of Baroda.
10. Pradeep Kumar is new MD of SBI: P. Pradeep
Kumar has been appointed by tthe Government as
Managing Director
irector of State Bank of India. Prior to
his elevation,
on, Kumar was the Deputy Managing
Director and
d Group Executive of the Corporate
Banking Group
oup in Indias largest
large bank.
11. Cabinet nod for cancer
ancer institute
insti
at Jhajjar: The
Union Cabinet,
net, has approved the
th proposal to set
up a National
nal Cancer Institute at a cost of Rs
2,035 crore.. The institute, which
whic would be set up
at the Jhajjar
ar campus of the All India Institute of
Medical Sciences
iences in Haryana,
Haryana is likely to be
completed within 45 months.
12. Insurance broking: In major relief
r
to insurance
companies without bancassurance
bancassura
partners, the
finance ministry
istry has asked all public
p
sector banks
to act as insurance
nsurance brokers to boost insurance
penetration in the country. Currently,
Cu
insurance
penetration (the ratio of the percentage
p
of total
insurance premia to gross domestic
dom
product) is
about five per cent. The ministry
min
has advised
banks to leverage their branch
bra
network for
insurance penetration.
enetration. The ccorporate agency
model should
ld be done away with
w
and each bank
to train and
d orient its staff to conform to new
provisions. Currently, bancassurance
bancassu
follows the
corporate agency model, through
throu which a bank
can only tie up with one life, on
one non-life and one
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at pre-determined
ermined exchange rates instead of
trading in US dollars.
16. Women gaining ground in banks financial
inclusion: The share of female
fema depositors has
increased to
o 28 per cent of the
th total number of
individual deposit accounts in 2012 against 24
per cent in the previous year. The
Th total number of
individual deposit accounts in the country stood
at 77.32 crore
ore in 2012 against 72.50 crore in the
previous year.
ar. In terms of amount,
amou womens share
in the totall individual deposits has improved to
26 per centt in 2012 from 22 per
pe cent in 2011. In
2012, individual
vidual deposits aggregated
agg
Rs 30.78
lakh crore against Rs 28.05 lakh
l
crore in the
previous year.
ear. The share of fem
female loan accounts
in the total number of loan accounts
acco
has gone up
to 15.82 perr cent in 2012. Womens
Wom
share in the
total outstanding
g loans (individuals)
(individ
has risen to
18 per centt in 2012 against 15 per cent in 2011.
The total outstanding loans in the case of
individuals aggregated Rs 11.
11.69 lakh crore in
2012 against
st Rs 9.63 lakh crore in 2011.
17. Insurance policy will cost more from Jan 1:
The Government
ment has widened its service tax net
to cover thee policy premiums paid. Service tax
rates will be 12.36 per cent
cen on Unit-Linked
Insurance Polices (only on charges, such as
mortality and
nd administration), 3.09 per cent on
traditional products ass most of the premium goes
into savings,
s, and 12.36 per cent on term plans.
18. SEBI proposes framework
amework for
f infra trusts: To
aid the financing
ancing and refinancing
refinanc
of long-term
infrastructure
ure projects in India,
In
the capital
market regulator
ulator SEBI has proposed
prop
a framework
for the introduction
oduction of infrastructure
infrastru
investment
trusts (InvIT).
IT). According to th
the 12th Five Year
Plan, India requires an investment
investm
of Rs 65 lakh
crore in infrastructure
frastructure between 2012 and 2017.
SEBI suggested
ested that the trust could either be
floated usingg the mutual fund
fu
structure or
through a separate
eparate structural framework.
fr
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responsibility
ity towards the customer
custo
while selling
insurance products
roducts under the broking
br
regulation.
39. ATM density still low in Indi
India: According to RBI
data outlining
ing global financial inclusion
in
indicators
for 2011, there
here are just 25.4 machines
m
in every
1,000 sq. km in India. This translates
tr
into 8.9
ATMs for every
very one lakh population,
popu
one of the
lowest densities
sities in the world. Bank
B
customers in
China have access to 2,975 machines
mac
in the same
geographical
al expanse, with 49.6
49 ATMs per one
lakh population.
tion. In UK, ATM den
density stands at 261
per 1,000 sq km. But the numb
number of ATMs per 1
lakh population
ation is higher at 122.8
1
ATMs. ATM
density in populous Malaysia stands at 34 per
1,000 sq km, with 56.4 mach
machines per 1 lakh
population.. While the density
densi
in terms of
machines per
er 1,000 sq km is lower
lo
in countries,
such as Indonesia,
donesia, Mexico and the Philippines,
they have more machines per one lakh people
owing to thee lower population. H
However, in terms
of bank branch
anch density, India fares better than
many developing
loping countries. Bank
Ban branch density
in India is 30.4
4 per 1,000 km, compared
co
to just 9.6
in the US, 3.1 in South Africa and 7.9 in Brazil.
China rankss highest in terms of bank branch
density.
40. Funding for specialised
cialised entities:
e
RBI, in its
discussion paper on resolution
resolutio of NPAs, has
stated that RBI will allow
ow banks to extend finance
to specialised
lised entities put
pu together for
acquisition of troubled companies.
compan
However, the
lenders should
ould ensure that these
t
entities are
adequately capitalized. The Reserve
R
Bank will
withdraw the minimum holding
holdin period for any
initial loan sale. However, the bank purchasing
the NPA will
ll have to hold the asset
as in its books for
at least one year before selling the
t asset.
41. Curbs on firms roping
ping in directors
dir
who are on
boards of wilful defaulters:
defaulters The provisioning
in respect of existing
ing loans/exposures
loans/exp
of banks to
companies having director/s,
director/s whose name/s
appear more
re than once in the
t
list of wilful
defaulters, could be set higher at 5 per cent in
case of standard
andard accounts (against
(a
the usual
provisioning
g of 0.40 per cent
ce
for standard
accounts).
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49.
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3.
4.
75. RBI move permitting banks
ks entry into
insurance broking biz hailed: It will exp
expand
coverage and offer more choice to customer
customers. As
per RBIs draft guidelines,
elines, banks will be
permitted to undertake insurance
ce bro
broking
business departmentally.
y. For undertaking the
business, a banks capital-to-risk
risk weighted as
assets
ratio (CRAR) should not be less than 10 per cent
(as against the regulatory
ory minimum of 9 per
cent); and its net non-performing
performing assets rratio
should not be more than 3 per cent. Further,
Further the
bank should have made profits for the last tthree
consecutive years; its net
et worth should not
no be
less than Rs 500 crore; and
nd the track record o
of the
performance of the subsidiaries/
idiaries/ joint ventur
ventures, if
any, should be satisfactory.
FEB 2014
1. Fiscal deficit hits 95% of estimate
ate in 9 mo
months:
According to data published
ished by the Contr
Controller
General of Account, the total
otal deficit at the en
end of
December touched Rs. 5.16-lakh
lakh crore, whic
which is
95.2 per cent of the budget
get estimate of Rs. 5.42lakh crore.
2. GDP growth in 2012-13 scaled
caled down to
decadal low of 4.5%: The downward revision
revi
has been prompted by lower than provision
provisionally
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5.
estimated agricultural
gricultural and man
manufacturing output.
The revised
d GDP growth of 4.5
4 per cent is a
decadal low the previous low of 4 per cent was
recorded in 2002-03.
03. The C
CSO has however
raised GDP growth for 2011-12
2011
to 6.7 per cent
(second revised
vised estimate) from
fro 6.2 per cent.
Economic growth
rowth for 2010-11
2010
was lowered to 8.9
per cent (third
third revised estima
estimate) from 9.3 per
cent projected
cted earlier. Accord
According to the first
revised estimate
imate of national income
inc
for 2012-13,
agriculturall growth stood at 1.4
1. per cent (5 per
cent in 2011-12),
12), and mining declined 2.2 per
cent (0.1 perr cent growth in 201
2011-12).
Core industries output
ut up 2.1%: The latest
output of the
he eight core industries
indust
coal, crude
oil, naturall gas, refinery products,
pro
fertilisers,
steel, cement,
nt, electricity was however lower
than 7.5 per
er cent growth recorded
recor
in December
2012. In April-December
December 2013,
2
eight core
industries output grew a me
mere 2.5 per cent
against 6.8 per cent in same period year. Coal
output fell (-)) 0.6 per cent in D
December year-onyear. Petroleum
leum refinery production
produc
shrank by (-)
1.7 per cent.
Banks to rethink fee on ATM use: One of the six
action points
ts mooted at a recent
recen annual Banking
Ombudsmen
n conference related
relate to fee on ATM
use. In order
der to provide enh
enhanced security at
ATMs, bankss plan to cap the number
nu
of free ATM
transactionss to five a month
month, irrespective of
whether customers
ustomers use thei
their own bank or
another banks
nks ATMs. RBI Dep
Deputy Governor KC
Chakrabarty
y had said it would b
be unfair to charge
customers transacting at their own
o
banks ATMs.
The practice
ice of levying a p
penalty for nonmaintenance
ce of a minimum ba
balance in ordinary
savings bank accounts
ounts was also discussed at the
conference.. Henceforth, banks
bank may consider
converting such accounts into Basic
B
Savings Bank
Deposit accounts.
ounts. The IBA may issue instructions
to discontinue
nue levying a pre-payment
pre
penalty on
all floating-rate
rate loans. Further,
Further it has to ensure
that fixed rate loans are truly
tru fixed and not
referenced to any floating rate b
benchmark. Banks
and the IBA
A will also formulate a policy on zero
liability off customers in electronic
el
banking
transactions,
s, when a bank is u
unable to establish
customer-level
evel negligence. The onus of proving
customer-level
evel negligence would
wou be on the bank
and when such negligence is not established
beyond doubt,
ubt, the benefit of su
such doubt may be
given to the customer.
Need for more specialised
ecialised b
banks: According to
Mr Nachiket
ket Mor, Chairman
Chairma
of the RBIs
committee on financial inclusion,
inclusio there is a need
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6.
7.
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terms of foreign
oreign investment flows. Global FDI
inflows in 2012 had shrunk 18 per cent to $1.31
trillion duee to the weakening macroeconomic
environment,
nt, slow growth in trade, GDP and
employment.
t. India attracted FDI worth $27.3
billion in 2012
012 which was 13.5
13 per cent lower
than $31.5 billion worth of FDI attracted in 2011.
Brazil, Russian
sian Federation, India
India, China and South
Africa, popularly
ularly known as the BRICS economies,
accounted for 22 per cent of global FDI flows,
which was nearly twice that of
o their pre-crisis
level.
8. Trade deficit with
th China set
se to touch $40 b:
According to data from Directorate-General
Direc
of
Foreign Trade,
ade, Indian exports to China touched
$9 billion between April-November
April
2013, while
imports totalled
alled $34.5 billion.
9. IRDA officials meet
et RBI, bank
ban chiefs to discuss
concerns over insuranc
insurance broking: The
concerns relate
elate to taking the broking route for
selling insurance
rance policies. Three
Thre major concerns
of banks relate to their contracts
con
with joint
venture partners,
rtners, equity arrangement
arran
and noncompete clause
lause with insurance companies. The
other majorr concern is the IRDA
IRD provision that
banks will have to cap business
busines from their own
group companies
es at 25 per cent for life insurance
with a similar
ilar cap on non
non-life insurance business
too. Banks, as insurance broker
brokers, will also have a
fiduciary responsibility
esponsibility to the customer for the
policies sold
d by them. However,
However banks can take a
professional indemnity
ty policy to cover their
liabilities. By selling products
produ
of multiple
insurers, thee customer will have more choice and
will be ablee to choose the product
prod
best suited to
his needs rather
ather than the insurers
insur
product with
whom the bank has a an exclusive
exclu
tie up. Under
the presentt system of distribution
distribu
of insurance
products
through
bank
ba
branches
(bancassurance),
ance), banks act as corporate agents
and sell thee policies of only one
on life insurer, one
non-life insurer
urer and a standalone
standalon health insurer.
10. Currency notes issued
ed before
be
2005 to be
withdrawn: RBI has decided
decide to withdraw
banknotes printed prior to 2005.
20
The rationale
behind move
ve to withdraw b
banknotes printed
prior to 2005
05 is to remove them from the market
as they havee fewer security feat
features compared to
banknotes printed after 2005
2005. The public can
easily identify
tify the notes to be withdrawn as the
notes issued
d before 2005 do no
not have the year of
printing on
n the reverse side.
sid The recall of
banknotes comes in the backdrop
backdr of rising cases
of counterfeit
feit currency and the
t
role of black
money in stoking inflation in the economy.
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12.
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microfinance institutions
ns and local mo
money
services business could bee added on to the SF
SFRC.
59. Bank design horizontal & vertical
vertical: The
committee on financial inclusion has come up
with two broad designs for
or the banking syste
system in
the country the Horizontally
zontally Differenti
Differentiated
Banking System (HDBS)
S) and the Verti
Vertically
Differentiated Banking System
ystem (VDBS). In H
HDBS
design while all configurations
ations are deposit
deposit-taking,
the variations between them
em are on account o
of: (i)
the ways in which they
ey originate risks and
transmit them throughout
ut the system; and (ii)
their size and focus whether regional
regiona or
sectoral. The HDBS has six design categorie
categories
national bank with branches;
ches; national bank with
agents; regional bank; national consumer
bank; national-wholesale bank;
k; and natio
nationalinfrastructure bank. Thee rational for VDBS
VDB is
usually linked to niche capabilities
apabilities such as credit
cr
under-writing for specialised
lised business segments
segm
or network management in the case of paym
payments.
The HDBS has five design categories payments
network operator; payments
ents bank; full-service
full
bank; wholesale consumer
er bank; and whole
wholesale
investment bank.
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costs at ATMs,
TMs, put in place by many State
Governments,
ts, following the grievous
gri
attack on a
woman inside
ide an ATM kiosk in Bangalore last
November. Currently, there is no cap on the
number off transactions that a customer can
undertake at his own banks AT
ATM. Given that the
country hass about 1.40 lakh ATMs at present,
banks will roughly see an outgo
outg of about Rs 560
crore a month on account of providing
p
security
alone.
64. Company Law Tribunal
ribunal: The Corporate Affairs
Ministry hass invited applications
application for filling up two
posts of technical member in the National
Company Law Appellate Tribunal
Tr
(NCLAT).
Under the new company law, NCLAT will hear
appeals against
gainst the orders of the National
Company Law Tribunal, an o
overarching body
being set up
p for implementation
implementatio of company law
in India.
65. Early warning system
stem to help
he SBI zero in on
stressed loans: Faced with a pile of bad loans,
State Bank of India plans to set up an earlywarning system
stem to identify signs
sign of stress in such
loans so that
at it can act immediately
imme
to resolve
them. The move comes in the w
wake of the banks
gross non-performing
performing assets increasing
in
by about
40 per centt to Rs 64,206 crore
cro at the end of
September 2013 against Rs 49
49,202 crore at the
end of September 2012.
66. SEBI names 3 qualified
ualified cl
clearing houses for
securities market: The capital market regulator
SEBI has said
aid that National Securities
S
Clearing
Corporation
n Ltd (NSCCL), Indian Clearing
Corporation
n Ltd (ICCL) and MCX-SX Clearing
Corporation
n Ltd (MCX
(MCX-SXCCL) are the only
qualified central
entral counterparties
counterpartie (QCCPs) in the
Indian securities
urities market. Clearing Corporations
are designated
nated as Market
Marke
Infrastructure
Institutions for oversight considering
co
its systemic
importance in securities markets
market regulated by the
SEBI. They
y are also subject
subjec to rules and
regulations that are based on International
Organisation
n of Securities Commissions
Com
(IOSCO)
Principles for Financial Market
Marke Infrastructures
(PFMIs). These
hese principles were issued by IOSCO
in April 2012
12 to enhance the safety
sa
and efficiency
in payment,, clearing, etc.
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3.
4.
MAR 2014
1. India, Dubai reach air services pact, to increase
seats by 11,000: The increase in the seats is to be
in three phases, extending up to March 2015.
2. DK Saraff to head ONGC: DK Saraff, MD of ONGC
Videsh, will take over as the new Chairman from
March 1. He will hold the post till September
2017.
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6.
7.
8.
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RBI
eases
forex
x
hedgi
hedging
rules
for
exporters/importers: Contracts booked
bo
up to 75 per
cent of the eligible
ible limit may be cancelled
c
with the
exporter/importer
ter bearing/being en
entitled to the loss
or gain as the case may be. The el
eligible limit in the
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departure (April
il 25) than the scheduled
sche
one (Juneend).
IRDA may ask life insurers to tie up with
repositories: The Insurance Regulatory and
Development Authority
uthority (IRDA) is likely to make it
mandatory for life
ife insurance compan
companies to tie up with
all five insurance
ce repositories by JJuly.The insurance
repository system
m lets policyholder
policyholders keep policies in
electronic form,, and make changes and revisions in
the policy. IRDA has licensed Karvy,
Karvy NSDL Database,
Central Insurance
ce Repository, SHCIL
SHC
Projects, and
CAMS Repository
y Services as repositories.
reposit
New secretarial audit rules likely
likel from April 1: The
Institute of Company
ompany Secretaries
Secretarie of India has
recommended that
hat the norms for proposed
pr
secretarial
audit should be on par with that of internal financial
audit. The Government
vernment needs to approve the
recommendation
n as a rule under the
t new company
law.
Private banks at higher
her risk of losing customers
than State-run lenders:
ers: According to a study
commissioned by IBM and con
conducted by the
International Data
ata Corporation (IDC),
(ID
private sector
banks are at a higher risk of losin
losing customers than
their public sector
ector counterparts, chiefly due to
unsatisfactory customer
ustomer services. Ab
About 41 per cent of
private bank customers
stomers transact wi
with more than one
bank, compared
d with 24 per cent at public sector
banks. The prime reasons
ons for customer
custom dissatisfaction
are unsatisfactory
ry branch experience (63.6 per cent of
respondents), problem
roblem resolution (5
(55.3 per cent) and
channel experience
nce (41 per cent).
Govt mulls new wayss to raise capital for banks:
These include investment by pension
pe
funds and
insurance companies,
panies, rights issue
issu for minority
shareholders att the time of capital
capita infusion by the
Government and
d issuance of shares to employees. It is
estimated that banks need around Rs. 1-lakh crore
capital in the next
xt few years to meet business needs.
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JULY 2014
XLRI receives recognition as top educational
institution: XLRI, was felicitated in London at the
first-ever SkillTree Great Place to Study India
Edition. The other institutions felicitated include
Great Lakes Institute of Management, IMT-CDL,
Ghaziabad, ICFAI University, Manipal University, AIMS
Institutes, Apeejay Education Society and Apeejay Stya
University, among others.
SBI launches digital touch banking branches: State
Bank of India has launched six digital branches in
Mumbai, Bangalore,Chennai and Ahmedabad, besides
Delhi. Named as sbiINTOUCH, these branches will
have digital banking capabilities, which include instant
account opening with personalised debit cards, instant
loan approvals for education, car and home and
remote expert advisors available via video links. The
bank has engaged Accenture to develop the digital
business strategy for its programme.
Manufacturing output registers strongest growth
since Feb: The HSBC Purchasing Manager Index (PMI)
rose to 51.5 in June from 51.4. Though the increase is
marginal the important thing is that the
manufacturing output has increased for the eighth
successive month.
Fiscal deficit hits 45% of full-year target in 2
months: The countrys fiscal deficit in the first two
months of the current fiscal (2014-15) touched 45.6
per cent of the Budget Estimate for the whole year; it
was 33.3 per cent in the same period last year.
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information
ation
dissemination,
dissemina
transparency, customer centricity,
icity, grievance redre
redressal
and customer feedback.
Insurance firms eye telecom operators
perators to sell
products: Insurers have written
ten to the Departme
Department of
Financial Services to allow them to approach the
Telecom Regulatory Authority
y of India. This will help
in using the wide distribution
ion network of tele
telecom
companies to sell basic insurance
rance products, suc
such as
health and personal accident covers. If the distribu
distribution
of insurance products is allowed
llowed through tele
telecom
operators, then they can sell the products and
facilitate premium payments through mobile phones.
phon
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EDI is calculated
ted using a set of 24 indicators
regrouped into
to four sub-groups
sub
access,
infrastructure, teachers
eachers and outcomes.
outcome
Power sector: A risky
ky asset for
f
Indian banks:
According to Moodys
oodys Investor Serv
Service, power sector
will continue to be a source of
o asset quality risk for
public and private
te sector banks in India
In
if the financial
condition of State electricity board
bo
distribution
companies (discoms)
scoms) do not improve
i
through
structural reforms.
Crackdown on hoarders
ers tops measures
m
to tame
inflation: With the prices of essential
esse
food items
shooting up, Finance Minister Arun
A
Jaitley has
announced a series
ries of measures, incl
including free trading
of fruits and vegetables
getables and releasing
releasin rice in the open
market, to tame inflation. The Centr
Centre has also advised
States to crack down on hoarders.
hoarder There are 22
commodities under active observation
obse
of the
Government.
Sops for electronics production
roduction in 8 cities: In a bid
to boost electronics
nics manufacturing,
manufacturing Communications
and Information
n Technology Minister
Minis
Ravi Shankar
Prasad said incentives
entives would be gi
given to companies
that set up greenfield
nfield factories in eight
e
cities namely
Ghaziabad, Vadodara,
dodara, Gandhinagar,
Gandhinag
Ahmedabad,
Nagpur, Nashik,, Aurangabad and Thane.
Th
The scheme,
called Modified Special Incentive Su
Subsidy Scheme (MSIPS), was launched
ched by the UPA Gov
Government in 2012.
It provides refunds
efunds for investments
investm
in capital
expenditure 20 per cent in SEZs and
a 25 per cent in
non-SEZs. It also
lso provides for rreimbursement of
countervailing duty/excise for cap
capital equipment in
the non-SEZ units.
its. Prasad also announced
anno
the setting
up of greenfield electronic manufac
manufacturing clusters in
Bhopal, Bhubaneshwar,
neshwar, Hyderabad,
Hyderabad Maheshwaram,
Bhiwadi, Jabalpur,
lpur, Hosur and Kakkanad. The
Electronic Manufacturing
facturing Cluster Scheme,
Sch
also notified
in 2012, offers financial
inancial assistance through
th
aid grants.
For greenfield clusters,
lusters, the assistance
assistanc is 50 per cent of
the project cost,, subject to a ceiling of Rs. 50 crore for
every 100 acres of land.
Dont blame us for emissions: Ahead of the UN
Climate Summitt 2014 to be held in New York in
September, Environment
ironment Minister Prakash
P
Javadekar
said, dont blamee us for carbon emissions.
emi
While the
country definitely
ly needs to reduce its
it emissions, India
and other developing
loping countries also have a right to
grow which can entail some rise in
i emissions. Last
year, the Indian delegation, along with
wi more than 100
developing countries,
ntries, had walked o
out of the United
Nations Climatee Change Conference
Conferenc (UNCCC) 2013
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