Economy current affairs July1

Non-Banking Finance Companies (NBFCs) categorized as Asset Financing Companies (AFCs) by the RBI have been allowed to access the ECB market.

 automatic route  minimum average maturity of 5 years to finance import of infrastructure equipment for
leasing to infrastructure projects

 host country complaint with Financial Action Task Force (FATF) guidelines  ECBs can be availed up to 75% of owned funds of NBFC-AFCs, subject to a maximum of
$200 million or its equivalent per financial year.

 ECBs by AFCs above 75% of their owned funds will be considered under the approval
route and currency risk of such ECBs is required to be fully hedged to infrastructure sector both under automatic and approval routes.

 NBFC-Infrastructure Finance Companies (IFCs) are allowed to access ECB for on-lending
2 If a cheque from joint a/c bounces, liability is on person signing cheque
bouncing case under Section 138 of the Negotiable Instruments Act case of Section 141 of the N.I. Act (offences by companies), be extended to those on whose behalf the cheque is issued june 3 RBI gives nod to Muthoot Finance to set up White Label ATMs  ATMs set up and run by non-banking entities are called White Label ATMs (WLAs)  Purpose enhance the penetration of the machines in semi-urban and rural areas  move is in line to the governments objective of achieving financial inclusion.

4 India: World’s 3rd most attractive FDI destination

     World Investment Report 2013 by the United Nations Conference on Trade and Development (UNCTAD) China United States India Indonesia Brazil

5 SEBI tightens buyback rules  companies selling shares to purchase at least 50% of the offer size  create an escrow account towards security for performance equivalent to at least 25% of
the amount earmarked for buyback no buyback offer within 1 yr max buy back period reduced from 1yr to 6 months Start-ups and SMEs can be listed under institutional trading methods Incorporating the recommendations of the K. M. Chandrasekhar Committee on ‘Rationalisation of investment routes and monitoring of foreign portfolio investments’ to simplify the norms for foreign institutional investors  Foreign investors will now be permitted to trade in Indian stocks without any prior registration with SEBI

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a new category Foreign Portfolio Investors (FPIs) approved  new category Foreign Portfolio Investors (FPIs)  defined as investment by any single investor or investor group. Foreign Portfolio Investors: Different categories of investors like Foreign Institutional Investors (FIIs).  Moderate risk (for banks. not required to submit personal identification documents.000 crore through price-based auction on June 25. which has resulted in the hardening of yields on government bonds 7 RBI auctions Inflation Indexed Bonds  RBI’s Core Banking Solution (e-Kuber) system. asset management companies. which h ad .  High-risk (all the FPIs not included in the first two categories): This category FPIs would not be allowed to issue Participatory Notes and will have most stringent KYC requirements Note measures have been introduced at a time when the rupee has depreciated considerably against the dollar reaching an all time low recently. Investments beyond this threshold of 10% will be considered as FDI  no prior registration required  SEBI would adopt a risk-based KYC (Know Your Client) approach in dealing with the overseas investors Divided FPI into 3 Categories  Low-risk (for multi-lateral agencies. These bonds will be linked to the inflation index of the country (Wholesale Price Index or WPI) and serve as a better investment option as compared to physical assets like real estate and gold. higher the returns.44% ‘Inflation-Indexed government stock 2023’ for a notified amount of Rs. government and other sovereign entities): This category will have simplest KYC requirements. not required to submit personal identification documents. insurers. They are thus designed to cut out the inflation risk of an investment.  1. Higher the inflation. investment trusts. 2013 What are IIBs? Inflation-Indexed Bonds or IIBs are are bonds where the principal is indexed to inflation. Why this step? The step is being taken to de-motivate investments in gold as bulging imports of the yellow metal has been adversely affecting the country’s Current Account Deficit (CAD). sub-accounts (or an investment vehicle) and Qualified Foreign Investors (QFIs) have been clubbed under a new category called Foreign Portfolio Investor (or FPI) 6 SEBI relaxes foreign investment norms. Also. FIIs have been pulling out money from the Indian debt market.1. which shall not exceed 10% of the equity of an Indian company. pension funds and university funds).

surged to a historic high of 6. and units financed should have a maximum carpet area of 60 square metres. For example. and the final inflation data based on the Wholesale Price Index (WPI) will be used for providing inflation protection.30 lakh. and the loan should not exceed Rs. IIBs would help in:   Boosting domestic savings and reversing the declining savings-to-GDP ratio. Purpose  To increase the inflow of fund in infra sector  To benefit NRI community from Indian growth story . This led to current account deficit or CAD widening to 4.3 yrs  No minimum pais up capital requirements  Minimum net owned fund for 3 yrs-Rs 300cr  HFCs should ensure that the cost of such individual units should not exceed Rs.9% of GDP at the end of September 2012. there was considerable flow of investments from financial savings to safe-haven assets like gold that resulted into higher imports of the metal. 8 Diaspora Bonds’ What are Diaspora Bonds (DBs)?  A sovereign bond that targets investors that have emmigrated to other countries and the relatives of those emmigrants. Last month. In the wake of rising inflation last year. the Government of India tries to sell a government bond to Americans of Indian origin. Diaspora bonds are marketed to members of the diaspora. How would IIBs help? As per RBI. in case of revision in the base year for WPI series. Besides.5 billion.25 lakh.7% in the third quarter of 2012-13. Giving investors choice to use IIBs as good hedging instruments against inflation. imports of gold and silver soared by 138% on an annual basis to $ 7. Providing households and other investors a competitive option against gold and real estate. base splicing method would be used to construct a consistent series for indexation.  7 RBI relaxed ECB norms for low cost housing projects As per RBI notification  Experience. How will the Index ratio be determined? The IR (index ratio) will be computed by dividing reference index for the settlement date by reference index for the issue date.

2015. the government raised import duty on gold to 8% from 6%  The monthly average of gold import in 2012-13 was 70 tonnes 13.  .9 EXIM Bank of India receives license to open representative office in Myanmar 10 Project Monitoring Group to be set up to expedite infra projects 11 Banks to audit documents of credits of Rs 5 Crore and above periodically 12. RBI imposes restrictions on gold loans by Co-op banks  Recently. BRC is issued by a bank after realization of export proceeds in the country. It is an important document required for claiming benefits under various Foreign Trade Policy schemes. In addition. The first state to sign this MoU was Maharashtra. e-BRC? e-BRC is electronic form of earlier physical Bank Realization Certificate. Finance Ministry asks IBA to set up independent body to oversee CDR  mechanism Why? witnessing a surge in the number of debt restructurings over the past two years 2012-12-106 cases of CDR(Rs76470 cr) 50 cases (Rs 39000cr) the previous year Features of independent body 1 No govt or serving banker as its member 2 advisory role 3The Reserve Bank of India has also made the debt recast norm tougher.1 14. who will not be required to make any request to bank for issuance of bank export and realisation certificate (BRC). Income Tax and Drawback departments. It has said all loans to be restructured after April 1. MoU inked b/w DGFT and Government of Delhi to use e-BRC (Bank Realization Certificate)  Delhi has become the second state to sign the MoU. BRC data is used by VAT. It was launched in 2012 by thethe Directorate General of Foreign Trade (DGFT) to reduce transaction cost to exporters. should be classified as NPA.

15 Shashi Kant Sharma sworn-in new CAG  Article 148 (1) of the Constitution of India  The CAG has tenure of 6 years. whichever is earlier. . 17 NABARD opens first Farmers’ Club in Kargil 18. To periodically look into issue relating to financial development. To focus on financial literacy and financial inclusion. RBI.10 denomination and continue with other small denominations    Plastic notes can withstand more wear-and-tear than their paper counterparts Have a longer life than paper counterparts Plastic notes are more difficult to fake and could therefore be a means of countering counterfeiting. including the functioning of large financial conglomerates and address inter-regulatory coordination issues. Government to set up Financial Stability and Development Council (FSDC) What would be the role of FSDC? FSDC will perform following role:    To engage in macro prudential supervision of the economy. RBI to start plastic money project on trial basis introduction of Rs. or till the incumbent is 65. Ministry of Finance.  Who would be the head of the Council?  The Council would have one Sub-Committee which would be headed byGovernor. The Secretariat of the Council would be in theDepartment of Economic Affairs. 16.

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