Banking Current Affairs

2013

Banking Current Affairs

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Banking Current Affairs

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CCEA takes steps for operationalization of IDFs
September 29th, 2013

The Cabinet Committee on Economic Affairs (CCEA) has taken the following steps to promote the operationalization of Infrastructure Debt Funds (IDFs).  The annual Guarantee Fee payable to the Concession Authority has been capped at 0.05% per annum, of outstanding debt financed by the IDF NBFCs (Non -Banking Financial Companies) for the first 3 years of operation of the IDF NBFC. IDFs will be given the status of Public Financial Institutions (PFI). Infrastructure Debt Funds are allowed to file Shelf Prospectus under Section 60 A of the Companies Act, 1956 and access to provisions of the SARFAESI Act, including to the adjudicatory process through Debt Recovery Tribunals. Post-successful COD PPP (Commercial Operation Declaration) projects shall now be eligible for investment by Insurance Companies, Provident Funds (PFs), EPFO, Mutual Funds (MFs), etc.
What are Infrastructure Debt Funds (IDF)?

As per Reserve Bank of India, IDFs are investment vehicles which can be sponsored by commercial banks and NBFCs in India in which domestic/offshore institutional investors, specially insurance and pension funds can invest through units and bonds issued by the IDFs. IDFs would essentially act as vehicles for refinancing existing debt of infrastructure companies, thereby creating fresh space for banks to lend to fresh infrastructure projects. IDF-NBFCs would take over loans extended to infrastructure projects which are created through the Public Private Partnership (PPP) route and have successfully completed 1 year of commercial production. Such take-over of loans from banks would be covered by a Tripartite Agreement between the IDF, Concessionaire and the Project Authority for ensuring a compulsory buyout with termination payment in the event of default in repayment by the Concessionaire.
What legal forms can IDF be set up as and who will be the regulators?

Infrastructure Debt Funds (IDFs), can be set up either as a Trust or as a Company. A trust based IDF would normally be a Mutual Fund (MF), regulated by SEBI, while a company based IDF would normally be a NBFC regulated by the Reserve Bank.
Do the NBFCs/IFCs need prior permission from Reserve Bank for sponsoring IDFs?

Yes NBFCs and NBFC-IFCs need to take prior approval from the Reserve Bank for sponsoring IDFs.
How do IDF- NBFCs and IDF-MFs (Mutual Funds) raise resources?

IDF-NBFCs will raise resources through issue of either Rupee or Dollar denominated bonds of minimum 5 year maturity. IDF-MFs will raise resources through issue of units of MFs.

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What does ―sponsorship‖ mean?

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―Sponsorship‖ means equity participation by the NBFC between 30 to 49% of the IDF.
Who can invest in the bonds of IDF-NBFCs and Units of IDF-MFs?

Domestic/offshore institutional investors, especially insurance and pension funds can invest through units and bonds issued by the IDFs.

IDBI Bank launches „Own Your NPA‟ campaign
September 27th, 2013

In a bid to speedily recover Non-Performing Assets (NPA), the campaign named „Own Your NPA‟.
What is ‗Own Your NPA‘ campaign?

IDBI Bankhas launched a

It is a NPA recovery drive launched by the IDBI Bank through which it has tasked its managers — at the zonal, regional and branch levels — to focus their on making recoveries from the top 20 bad loan accounts in their jurisdiction. As part of the campaign, each zonal, regional and branch manager will personally go and meet the customers. The bank has identified 1522 cases, involving an aggregate principal outstanding of Rs 5,805 crore which is approximately 73% of its total NPAs of Rs 7,959 crore as on June-end 2013.
What is Non-Performing Assets (NPA)?

In simple words, the assets of the Banks which don‘t perform (means don‘t bring any return) are called Non Performing Assets. In more general sense they are ―bad Loans‖.  Any asset, including a leased asset, becomes non performing when it ceases to generate income for the bank. However, there is a prescribed definition by the RBI which defines the NPAs as:  Terms Loans on which interest and / or installment of principal remain overdue for a particular quarter for a period of more than 90 days from the end of that particular quarter. The Bills those remain overdue for a period of More than 90 Days from the end of a quarter. Any amount to be received remains overdue for a period of more than 90 days. The Cash Credit account remains out of order for a period of more than 90 days. Out of order means over the sanctioned limit. Note: This period of 90 Days for the above categories was 180 days prior to 2004. So 90 Days is the thumb rule in the deciding the NPAs. However, there is an exception to this. Go through the following case:

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A farmer has taken a loan for a paddy crop in the beginning of the Rabi Season and has not made a repayment. In which of the following situations, if Installment or interest is not paid for this loan, it would become a NPA (Non-Performing Asset)? 1. 2. 3. 4. 90 Days from the due date 90 Days from the end of the Rabi Season 1 crop season from the due date 2 crop seasons from the due date The answer of the above question is (4) i.e. 2 crop seasons from the due date. Please note the following: For short duration crop agriculture loans such as paddy, Jowar, Bajra etc. if the loan (installment / interest) is NOT paid for 2 crop seasons (means Kharif, and next Rabi in the above question), it would be termed as a NPA. For long duration crops, the above would be 1 Crop season from the due date.

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Investment through P-Notes hits 3-month high of $26 billion
September 26th, 2013

As per share market regulator SEBI, investments into Indian shares through participatory notes (P-Notes), hit a three-month high of Rs 1.65 lakh crore (about $26 billion) in August 2013.
What are Participatory Notes?

Participatory Notes or P-notes are derivative instruments, used by Foreign Institutional Investors (FIIs) who are NOT registered with SEBI. The major characteristics of P-notes are: 1. They are derivative instruments 2. They are used by Foreign Institutional Investors (FIIs) who are NOT registered with SEBI. 3. They are used on Indian shares, but at a location outside of India. This means that the FIIs who are not registered with SEBI but wish to take exposure in the Indian securities markets can use P-notes. P-Notes, mostly used by overseas HNIs (High Net worth Individuals), hedge funds and other foreign institutions, allow them to invest in Indian markets through registered Foreign Institutional Investors (FIIs), while saving on time and costs associated with direct registrations. Brokers buy or sell securities on behalf of their clients on their proprietary account and issue such notes in favor of such foreign investors.

Moody‟s lowers SBI‟s debt and local currency rating to junk
September 26th, 2013

Global rating firm, Moody‘s Investors Service, has downgraded State Bank of India‘s senior unsecured debt and local currency deposit ratings to Baa3 or lowest investment grade

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rating from Baa2 and altered the outlook on SBI‘s financial strength to negative from stable as the economic slowdown impacts bank‘s credit quality.
Why did Moody‘s downgrade SBI‘s rating?

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rating

As per rating agency, the combination of mounting pressure on credit fundamentals and the ongoing dependence on the fiscally constrained Indian government to maintain Capital Adequacy Ratio (CAR) are key players behind the rating downgrade at a level no higher than the sovereign.

Impasse over RBI‟s 80:20 gold import scheme ends
September 24th, 2013

The government cleared the confusion that was going between the Customs Department and gold importers regarding the RBI‘s 80:20 scheme which was introduced in July 2013.
What is 80:20 scheme of RBI?

Under this scheme, the importers are directed to export back 20% of the total gold imports. It prohibits further imports if this 20% norm is not met by importers. The step was aimed at curbing rising gold import which led to high Current Account Deficit.
Why there was a deadlock over 80:20 scheme of RBI?

The RBI 80:20 norm left many confused, leading to imports being held up at customs. It was wrongly interpreted that an importer could not export more than 20%. Whereas, the case was otherwise as it means that at least 20% is given for exports and one can export more than 20% of total imports. Due to this confusion the customs officials had stopped stocks from entering the country. With this clarification, gold imports are likely to resume.

Fitch slashed India‟s growth projection
September 23rd, 2013

Global rating agency Fitch has scaled down its projections on India‘s growth to 4.8% for the current fiscal from the earlier estimate of 5.7% made in June, 2013.
Why did Fitch scaled down India‘s growth prospects?

The following are the key reasons behind the cut in growth projections:    Weak Indian currency against dollar Expanding Current Account Deficit (CAD) on account of rising crude prices and falling rupee Weak demand

RBI confident of financing CAD without drawing much from reserves
September 23rd, 2013

RBI Governor Raghuram Rajan evinced confidence that the country would be able to finance the Current Account Deficit (CAD) without drawing down much from the forex reserves.

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RBI is of the view that CAD could be brought down to $70 billion or even below that. In fiscal 2012-13, CAD stood at a historic high of 4.8%, or $88 billion, of the GDP. The government has set a target of 3.7% CAD, or $70 billion, this fiscal. The efforts of the RBI through FCNR-B and swap facility have yielded a total of nearly $1.4 billion. The market has also recuperated considerably after the US federal bank postponed the tapering of stimulus. Mr. Rajan stressed on improving country‘s economic parameters regardless of the actions that the U.S. took.

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RBI slashes MSF rate to 9.50%
September 23rd, 2013

The Reserve Bank of India slashed the Marginal Standing Facility rate (MSF) by 75 basis points from 10. 25% to 9.50%. The central bank also rolled back minimum daily maintenance of the Cash Reserve Ratio (CRR) from 99% to 95% keeping the CRR unchanged at 4%. RBI has assured that it will reduce the difference between the MSF and repo rate to 100 basis points. RBI raised the repo rate by 25 basis points to 7.50%.
What is MSF?

Marginal Standing Facility (MSF) was introduced by the Reserve Bank of India in 2011-12 as part of its monetary policy. Under this facility, banks can borrow funds from RBI at 8.25%, which is, generally, 1% or 100 basis points above the Liquidity Adjustment Facility-repo rate against pledging government securities. Banks can borrow funds through MSF when there is a considerable shortfall of liquidity. This measure was introduced by RBI to regulate short-term asset liability mismatches more effectively.
What is the difference between Liquidity Adjustment Facility-repo rate (LAF) and Marginal Standing Facility (MSF) rate?

Banks can borrow from the RBI under LAF-repo rate, which stands at 7.50%, by pledging government securities over and above the Statutory Liquidity Requirement of 24% (SLR). Banks cannot sell government securities to RBI that is part of its SLR quota while availing LAF on the other hand they can do so while availing MSF. MSF is open to the banks that want to borrow from the RBI even if the credit is costlier by a percentage point or so. Through MSF banks can borrow funds up to 2% of their Net Demand and Time Liabilities (NDTL), at current 9.50%. However, it can be availed with securities above the SLR of 24% and even below.

RBI relaxes for opening new bank branches in Tier I cities
September 22nd, 2013

Now banks will have freedom to open branches in tier-I cities (those with population over 1 lakh) without seeking RBI‘s approval in each case.

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However, as per RBI guidelines, there are some conditions on opening branches, these are stipulated below:     Banks should open 25% of their branches in a financial year in Un-banked tier-V and tierVI centres as earlier. Total number of branches in tier –I centre‘s can‘t exceed the number of branches opened in tier-2 to tier-6 centres during a year. If the banks are unable to open all tier – 1 branches during that year, they can carry it over for next 2 years. If the banks unable to open requisite branches in tier- II to tier- VI centres for some reason, it should necessary correct the shortfall in the next financial year.

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Bharatiya Mahila Bank to recruit POs
September 22nd, 2013

India‟s first all-women bank, Bharatiya Mahila Bank, which expected to be operational
from November 2013, has invited online applications from female candidates for the 115 Probationary Officer posts. The last date for online application is till September 30, 2013.
About Bharatiya Mahila Bank:

Bharatiya Mahila Bank is India‘s first all -women public sector bank. The bank proposes to complete the first six branches at Mumbai, Delhi, Kolkata, Chennai, Indore and Guwahati by October 2013. The Government has already approved Rs 1,000-crore seed capital for the bank as announced by Finance Minister P. Chidambaram in Budget 2013-14. The bank was already given in-principal approval by the RBI and the banking company is being set up.   Headquarter of Bharatiya Mahila Bank will be in Delhi. Objective: One of the key objectives of Bharatiya Mahila Bank is to focus on the banking needs of the women and promote economic empowerment. It will also address the gender related issues and will be helpful in financial inclusion.

Draft norms on new Company Law make companies to disclose management‟s pay
September 22nd, 2013

As per norms stipulated in the second set draft rules for the new company law, listed firms have been mandated to disclose in the board‘s report the ratio of the remuneration of each director to the median remuneration of employees. The new company law seeks to improve the regulatory framework around disclosure of managerial remuneration. The new rules also prohibit companies from issuing shares with differentiated rights as to voting, dividend or otherwise unless certain conditions are fulfilled. A key condition is that shares with differential rights should not exceed 25% of the post issue paid up capital.

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It has also been stipulated that the company should have a 10% dividend payment track record for the last 3 financial years immediately proceeding the financial year in which such shares are to be issued.

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RBI hikes repo rate by 25 basis points to 7.5%
September 22nd, 2013

In a surprising move, the Reserve Bank of India Governor Raghuram Rajan, in his maiden mid-quarter monetary policy review, hiked the short-term lending (repo) rate to 7.5%, seeking to control inflation. The Cash Reserve Ratio (CRR) was left untouched at 4%. To ease liquidity, the Marginal Standing Facility (MSF) rate, at which banks borrow from the RBI, was reduced to 9.5% from 10.25% and the minimum daily maintenance of the CRR was lowered to 95%. In reaction to RBI‘s decision the rupee slipped 46 paise to close at 62.23 against the dollar in line with a sharp decline in local stocks. However, RBI Governor Raghuram Rajan has made his stance clear that RBI wants lower inflation and aims to curb it to 5% mark.

China launches its first direct bank
September 22nd, 2013

China launched its first direct bank, a new mode of providing online banking services without any entity outlets. The direct bank has been launched by the Bank of Beijing in cooperation with the Netherlands-based ING Group.
What is a Direct Bank?

A direct bank is a bank without any branch network that offers its services remotely via online banking and telephone banking and may also provide access via ATMs (often through interbank network alliances), mail and mobile. By eliminating the costs associated with bank branches, direct banks can make substantial savings which they may pass on to clients via higher interest rates or lower service charges.

RBI tightens norms for companies lending against gold
September 21st, 2013

As per the notification by the RBI, the central bank has tightened rules for finance companies which lend against gold, in line with the suggestions of an internal panel. As per the new rules:  The lenders need to value the pledged gold at the average closing price of 22-carat gold for the preceding 30 days as quoted by the Bombay Bullion Association Ltd, to arrive at the loan-to-value ratio. The ratio would remain at 60% for loans against jewellery. At present, there is no standard method for arriving at the value of gold accepted as collateral and valuation is arbitrary.

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 The process by which lenders auction gold when a borrower defaults has also been streamlined by the RBI. Lenders will now need to declare a reserve price for the pledged ornaments. Lenders would also need RBI clearance to open branches exceeding 1,000. New branches would not be allowed without sufficient storage facility for gold.

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RBI invites bids to implement global Legal Entity Identifier system
September 16th, 2013

In order to have a better control on financial transactions, such as equity and currency derivatives, the Reserve Bank of India has invited limited bids from about six entities, including depositories, depository participants and custodians, to issue unique identification codes to market participants. The RBI will select one or two entities to assign them the responsibility of implementing a global Legal Entity Identifier (LEI) system that will uniquely identify parties to financial transactions. What is Legal Entity Identifier (LEI) system? LEI is a unique global identifier for each legal entity operating in the financial markets. The need to have such a system was felt after the global financial crisis of 2008. The system will work under the supervision of the RBI. LEI will aid in identification of participants in different trading, clearing and settlement systems, thus enabling aggregation of exposures and identification of linkages across markets as well as institutions, both domestic as well as global. What are the objectives of LEI system? The key objectives of Legal Entity Identifier (LEI) system are:      Improved risk management in firms Better assessment of micro- and macro-prudential risks Facilitation of orderly resolution Containing market abuse and curbing financial fraud Enabling higher quality and accuracy of financial data overall
How would the LEI system help?

As per Financial Stability Board, the LEI system would cut operational risks within firms by extenuating the need for tailored systems to reconcile the identification of entities and support aggregation of risk positions and financial data, which inflict substantial burdensome costs across the economy. It would also facilitate easy processing.
What is Financial Stability Board (FSB)?

FSB is an international body which was established after the 2009 G-20 London summit in April 2009 as a successor to the Financial Stability Forum. FSB work is to coordinate at the

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international level the work of national financial authorities and international standardsetting bodies and to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies. The Board includes all G-20 major economies, FSF members, and the European Commission. It is headquartered in Basel, Switzerland.
Who are the members of FSB form India?

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The Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI) and the Ministry of Finance are the members of FSB from India.

Definition of „control‟ in relation to FDI notified by RBI
September 16th, 2013

The Reserve Bank of India notified the definition of term ‗control‘ in the context of Foreign Direct Investment (FDI) and revised the list of states where FDI is allowed in multi-brand retail.
What is ‗Control‘ as per RBI notification?

„Control‟ shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements. The tighter definition is to ensure foreign investors do not acquire indirect control in sectors where FDI is prohibited or capped at 49%.
States ready to implement FDI in Multi-Brand Trading:

The list of states which have given consent to implement FDI in Multi-Brand trading has been modified with the addition of Pradesh and Karnataka. With this, the number of states and Union Territories which have given consent to implement the FDI policy on multi-brand retail has increased to 12.
Latest in FDI:

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Norms for multi-brand retail trading have been relaxed and the mandatory 30% local sourcing norms for companies have also been eased. FDI in insurance stands at 26%. The cap in telecom enhanced to 100% with automatic route allowed for FDI of up to 49%.

Union Cabinet‟s nod to RBI for buying $4.3 bn World Bank bonds
September 16th, 2013

The Reserve Bank of India (RBI) was given nod by the Union Cabinet to invest $4.3 billion in special bonds of the World Bank as it would help in securing extra funding from the multilateral lending agency for infrastructure development projects.

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How would this move benefit?

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With this decision, RBI will be able to sign a special private placement bond agreement with the International Bank for Reconstruction and Development, the World Bank‘s lending arm, which will provide additional borrowing space.

ATMs, PoS machines to scan UID biometrics
September 14th, 2013

The RBI is understood to be preparing a directive for banks to introduce additional facilities in all new credit card swipe (Point of Sales, or PoS) machines and Automated Teller Machines (ATMs) for providing a mechanism for Aadhaar authentication using biometrics. The central bank intends to have an Aadhaar-based authentication to provide additional security for card transactions. Although RBI seems to have accommodated to a combination of ‗chip and PIN‘ authentication for existing customers and biometric checks for hitherto unbanked cardholders, the challenge is in the acceptance devices. Banks are of the view that the additional facilities would significantly increase investment costs. The other challenge is that conventional phone lines may not work to transmit scanned fingerprint images for verification. As per banks, the new machines will require the equivalent of 3G data speeds to transmit biometric data.

RBI asks banks to consider using business correspondents to distribute currency
September 12th, 2013

In the backdrop of growing currency demands, the RBI, in a notification, asked banks to explore the possibility of distributing banknotes and coins through business correspondents. Earlier, RBI, in its Monetary Policy Statement 2013-14, had acknowledged the need to identify alternative distribution possibilities to effectively meet the rising demand for banknotes and coins.
What role the business correspondents are currently playing?

Currently, business correspondents are in the activities which include identification of borrowers, collection and preliminary processing of loan applications, creating awareness about savings and other products and processing and submission of applications to banks.
What did the RBI suggest banks to enhance currency distribution?

RBI has said that services of business correspondents could be used for distributing banknotes and coins. Their services could also be used by banks for follow-up for recovery, disbursal of small value credit and collection of small value deposits. As per the notification by RBI, NGOs, micro-finance institutions, section 25 companies and post offices, among others, could act as business correspondents.

Banking Current Affairs RBI notifies norms for banks to swap overseas borrowings
September 12th, 2013

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The Reserve Bank of India, in a notification, said that banks can raise funds overseas above 50% of their Tier I capital with a minimum maturity of 3 years and swap these borrowings with the RBI at a concessional rate of a 100 basis point below the market rate with a minimum tenor for 1 to a maximum of 3 years. Bank can use this swap facility to sell dollars in multiples of a million to RBI. At the end of the swap period, the bank would have to buy the same amount of dollars.
As per the new norms by the RBI for banks to swap overseas borrowings:

The swaps should be available at a concessional rate of a 100 basis points below the market rate for all fresh borrowing with a minimum tenor of 1 year and a maximum tenor of 3 years, irrespective of whether such borrowings are in excess of 50% of their unimpaired Tier I capital or not. While the swaps would be for the entire tenor of the borrowing, the rate would be reset after every 1 year from the date of the swap at 100 basis points lower than the market rate prevailing on the date of reset. Although the banks are permitted to borrow in any freely convertible currency, the swap will be available only for conversion of US dollar equivalent into rupees and the American currency equivalent would be computed at the relevant cross rate prevailing on the date of the swap. Banks can now borrow funds from their Head Office, overseas branches and correspondents and overdrafts in nostro accounts up to a limit of 100% of their unimpaired Tier I capital as at the close of the previous quarter or $10 million, whichever is higher, as against the existing limit of 50%. Issue of corporate guarantee on behalf of second generation or subsequent level step down operating subsidiaries will be considered under the approval route for Overseas Direct Investment, provided the Indian Party indirectly holds 51% or more stake in the overseas subsidiary for which such guarantee is intended to be issued.

OMCs seek compensation in case of loss through RBI‟s currency swap w indow
September 11th, 2013

Oil Marketing Companies (OMCs) are not content with RBI‘s currency swap facility through which it sells and buys dollars from OMCs as part of its measures to control the rupee decline. Though the rupee has gained some stability but the OMCs are unhappy with the hedging mechanisms as they feel that with RBI‘s swap window, there is uncertainty of being compensated if they incur loss in the swap transactions.
Why OMCs are unhappy with RBI‘s currency swap window facility?

RBI has recently started a currency swap window to sell dollars to oil companies in exchange for rupees on condition that they reverse the transaction at a future date. The swap window is for fresh Foreign Currency Non-Resident (banks) (FCNRB) dollar funds, mobilized for a minimum tenor of three years and over. This is similar to RBI lending dollars to oil companies. Since OMCs are the biggest buyers of foreign currency which they use to

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buy petroleum/oil, RBI selling dollars directly to them will keep them away from FOREX market thereby helping the rupee to recuperate. Under the swap arrangement, the RBI will sell dollars to OMCs on condition that OMCs will repay the same amount of dollars. However, the OMCs are unhappy over the facility as they feel insecure about the future adverse changes in the rates of dollar which could cause loss to them. There are apprehensions that if something bad- US strike on Syria impacting oil supply and further tightening of dollar (expensive dollar)- happens then there will be losses to OMCs who will have to pay the dollars they bought under swap arrangement. Although, in such a situation, RBI has the option to roll over the transactions until the rupee stabilizes, OMCs seek compensation for any future losses.

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RBI notifies norms for currency swap window
September 9th, 2013

RBI has notified norms for currency swap window. As per the notification, the swap facility will be available to scheduled commercial banks for fresh Foreign Currency Non-Resident Bank – FCNR(B) deposits mobilized for a minimum period of 3 years. It further says that the deposits raised may be in any permitted currency, but the swap would be available only in dollars. Although the swap window will be operated on a daily basis on all working days in Mumbai, a particular bank can avail of the swap facility only once in a week.
What is Currency Swap?

A currency swap is a foreign-exchange agreement between two institutions to exchange aspects (namely the principal and/or interest payments) of a loan in one currency for equivalent aspects of an equal in net present value loan in another currency. Currency swaps are over-the-counter derivatives, and are closely related to interest rate swaps. However, unlike interest rate swaps, currency swaps can involve the exchange of the principal.
What are the main uses of Currency Swap?

Currency swaps have two main uses:   To secure cheaper debt (by borrowing at the best available rate regardless of currency and then swapping for debt in desired currency using a back-to-back-loan). To hedge against (reduce exposure to) exchange rate fluctuations.

ECB keeps key rate unchanged at 0.5%
September 6th, 2013

The 23-member governing council of European Central Bank has left its benchmark interest rate unaltered at a record low of 0.5%. The council said that the slowly recuperating Eurozone economy didn‘t need a further stimulus.

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The 17 European Union member countries that used the euro came out of recession in the second quarter when the economy posted 0.3% growth from the quarter before, discontinuing a series of 18 months of falling output.
About European Central Bank

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Established in 1998 through Treaty of Amsterdam in 1998. It is one of the seven institutions of the European Union (EU) listed in the Treaty on European Union (TEU). Headquarters: Frankfurt,

Germany.

Current President: Mario Draghi It is central bank for the euro and administers the monetary policy of the17 EU member states which constitute the Eurozone. However, capital stock of the bank is owned by the central banks of all 28 EU member states. Primary Objective: To maintain price stability within the Eurozone. It has this single illdefined primary objective, with other objectives subordinated to it.
Basic Tasks of ECB:

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To define and implement the monetary policy for the Eurozone To conduct foreign exchange operations To take care of the foreign reserves of the European System of Central Banks To promote smooth operation of the financial market infrastructure under the TARGET2 payments system and the technical platform (currently being developed) for settlement of securities in Europe (TARGET2 Securities). Exclusive right to authorize the issuance of euro banknotes.

RBI allows companies to use ECB for general corporate purposes
September 5th, 2013

In a bid to attract capital flows, the RBI relaxed the External Commercial Borrowing (ECB) norms by permitting companies to use funds raised from their foreign equity holder company with minimum average maturity of 7 years for general corporate purposes. Till now borrowings in the form of ECB were not allowed to be used for general corporate purpose. Nevertheless, the RBI has put certain conditions. As per the conditions, the minimum paidup equity of 25% should be held directly by the lender (overseas partner) and the repayment of the principal will commence only after completion of minimum average maturity of seven years and no prepayment will be allowed before maturity.
What is External Commercial Borrowing (ECB)?

Any money that has been borrowed from foreign sources for financing the commercial activities in India are called External Commercial Borrowings.

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 The Government of India permits ECBs as a source of finance for Indian Corporates for expansion of existing capacity as well as for fresh investment.
The ECBs are defined as money borrowed from foreign resources including the following:

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Commercial bank loans Buyers‘ credit and suppliers‘ credit Securitized instruments such as Floating Rate Notes and Fixed Rate Bonds etc. Credit from official export credit agencies and commercial borrowings from the private sector window of Multilateral Financial Institutions such as International Finance Corporation (Washington), ADB, AFIC, CDC, etc.
Objective of External Commercial Borrowing (ECB):

Government permits the ECBs as an additional source of financing for expanding the existing capacity as well as for fresh investments. The ECB policy of the Government seeks to emphasize the priority of investing in the infrastructure and core sectors such as Power, telecom, Railways, Roads, Urban infrastructure etc. There is also emphasis on the need of capital for Small and Medium scale enterprises.
How ECB is different from FDI?

It must be noted that ECB means any kind of funding other than Equity . If the foreign money is used to finance the Equity Capital, it would be termed as Foreign Direct Investment. The ECB should satisfy the ECB regulations stipulated by the Government or its agencies such as RBI. The Bonds, Credit notes, Asset Backed Securities, Mortgage Backed Securities or anything of that nature are included in ECB.
The following are not included in the ECBs

Any Investment made towards core capital of an organization such as equity shares, convertible preference shares or convertible debentures. We should note here that those instruments which can be converted into equity are called convertible. The convertible instruments are covered under the FDI Policy. Any other direct capital is not allowed in ECB.

Lok Sabha passes PFRDA Bill 2011
September 5th, 2013

The Pension Fund Regulatory and Development Authority Bill (PFRDA), 2011 which aims to regulate the New Pension System (NPS) has been passed in the Lok Sabha with official amendments. The bill was introduced in the lower house in March 2011 to provide for a statutory regulatory body. Currently the PFRDA has a non-statutory status. The legislation seeks to empower PFRDA to regulate the New Pension System (NPS).

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Some highlights of PFRDA Bill 2011:

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It provides subscribers a wide choice to invest their funds for assured returns by opting for government bonds as well as in other funds depending on their capacity for risk. It allows for withdrawals from the individual pension account subject to the conditions, such as, purpose, frequency and limits, as may be specified by the regulations. It makes the Pension Fund Regulatory and Development Authority a statutory authority. Presently, it has non-statutory status.
What is the main reason behind providing PFRDA a statutory status?

NPS which is compulsory for government employees (except defence) has been launched for all citizens of the country including un-organized sector workers, on voluntary basis, with effect from May 1, 2009. Further, the Government has launched the cocontributory pension scheme titled “Swavalamban Scheme” in the Budget of 2010-11. Currently, the number of subscribers under NPS is 52.83 Lakh with a corpus of Rs. 34, 965 crore. In order to effectively invest and manage huge funds belonging to a large number of subscribers and to ensure the integrity of NPS, establishment of a statutory PFRDA with well-defined powers, duties and responsibilities is considered absolutely necessary and would benefit all NPS subscribers.

RBI asks banks to consider e-KYC a valid process
September 5th, 2013

In a notification issued by the Reserve Bank of India, banks have been asked to avail the electronic Know Your Customer, e-KYC service, launched by the Unique Identification Authority of India, UIDAI. The notification directed banks to revise their KYC policy by accepting the e-KYC as a valid process for KYC verification under the Prevention of Money (Maintenance of Records) Rules, 2005. As per the notification, the information containing demographic details and photographs made available from UIDAI as a result of e-KYC process may be treated as an „Officially Valid Document‟ under PML Rules. What is e-KYC? The e-KYC service was launched by the UIDAI to help people link their existing records, like ration cards, pension accounts, license and certificates, to their Aadhaar numbers in a safe and easy manner.

Current Affairs: Top Headlines for September 1, 2013
September 1st, 2013

RBI forbids overseas buying, plus point for Indian realty

In a bid to curb the outflow of capital from the country, the RBI has cut down the annual cap on automatic outflows from $2,00,000 to $75,000 per individual. In addition to this, the central bank has also imposed a ban on overseas real estate purchases with immediate effect. The move expected to benefit the domestic real estate as the capital which otherwise would have been diverted overseas will now remain in the country.

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India‘s foreign exchange reserves deplete by $1.08 billion

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As per RBI‘s data, India‘s foreign exchange (forex) reserves reduced by $1.08 billion to $277.72 billion for the week ended Aug 23, 2013. The Special Drawing Rights (SDRs) decreased by $4.5 million to $4.38 billion for the same period. Gold reserves remained at the same level at $20.74 billion.
Decline in Rupee may not impact agriculture sector: NABARD

According to National Bank for Agriculture and Rural Development (Nabard) head Prakash Bakshi the continuing depreciation of rupee against the dollar is unlikely to make any negative impact on the agriculture sector. In the event rupee decline impacts the prices of fertilizers or diesel it would be compensated either by the way of subsidy or by hiking the minimum support price.
Delhi‘s tops in per capita income in India

As per Delhi Development Report 2013, Delhi‘s average per capita income stands at more than Rs 2 lakh per year in 2012-13 which makes it the highest in India. It is around 3 times more than the national average per capita income.
India approaching IMF for foreign exchange not imminent: Planning Commission

Planning commission deputy chairman Montek Singh Ahluwalia has assured that India has
adequate forex reserves to manage the current situation and ruled out approaching the International Monetary Fund (IMF) for help, saying the economic situation has not reached a point where outside aid is warranted. India‘s foreign exchange reserves were up at 278.602 billion $ as of August 9, 2013.
RBI not considering to convert idle gold into bullion

Responding to the reports that Reserve Bank of India (RBI) is mulling over multiple measures, including using thousands of tone of idle gold jewellery in temples, to replace for import, the central bank said it did not have any proposal to convert idle gold from temples and individual trusts into bullion.

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Banking Current Affairs Current Affairs: Top Headlines for August 31, 2013
August 31st, 2013

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India‟s fiscal deficit is around 63% of target
As per government data, India‘s fiscal deficit during the April-July period was Rs 3.41 trillion ($50.91 billion), or 62.8% of the full-year target. Net tax receipts for the first 4 months of the current fiscal year to March 2014 touched Rs 1.45 trillion, while total expenditure was Rs 5.21 trillion. India‘s fiscal deficit during the 2012-13 fiscal year ending March decreased to 4.9% of the country‘s GDP, compared to 5.8% in 2011-12. The fiscal deficit target is 4.8% of GDP for the current fiscal year.

India registers 4.4% GDP growth in Q1 slowest in 4 years
The first quarter of the current fiscal has been slowest in over 4 years with GDP growth of 4.4%. The decline implies a deepening slowdown and aggravating the widespread negative sentiment brought on by the sharp depreciation of rupee depreciation and plunging stock markets.

7000 tickets/min will be the booking speed of IRCTC website
The Centre for Railway Information System is developing ‗next generation‘ e -ticketing system for IRCTC‘s website which will have an efficiency to book 7200 tickets e-tickets per minute. It will render the website to perform faster and hassle free access even at peak time and have high availability and business continuity, scalability to meet the needs of future growth and security to prevent frauds and unauthorized access.

„Mars One‟: 8,000 Indians register for one-way trip to the Red Planet
So far 8,107 Indians have registered for the one-way trip to Mars and to live on the red planet, as ‗Mars One‘ project is planning to set up a colony there in the next 10 years. A not-for-profit initiative, ‗Mars One‘, intends to establish a permanent human settlement on Mars in 2023 and is signing up those inclined to fly there. India has fourth highest number of participants among other nations of the world. The top 10 nations to register are the USA (37,852), China (13,124),Brazil (8,686), India (8,107), Russia (7,138), Britain (6,999), Mexico(6,771), Canada (6,593), Spain (3,621) and Philippines (3,516).

RBI permits premature encashment of 8% Savings (Taxable) Bonds
As per a statement released by the Reserve Bank of India, individual investors who are 60 years are allowed to avail premature encashment of 8% Savings (Taxable) Bonds. This facility is available after a minimum lock-in period of 3 years from the date of issue. Those desiring to avail of the facility will have to submit documentary evidence in support of his/her date of birth to satisfaction of the agency bank.

Saudi Arabia makes domestic violence a criminal offence

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The cabinet of Saudi Arabia approved a new law that criminalizes domestic violence, usually targeting women and children. The Protection from Abuse law is meant for protecting people from all forms of abuse and providing them shelter as well as social, psychological, and medical help.

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Current Affairs: Top Headlines for August 30, 2013
August 30th, 2013

Melbourne tops the list of liveable cities in world
According to a survey conducted by the Economist Intelligence Unit, the Australian city of Melbourne is the most live able city in the world while conflict battered Syria‗s capital Damascus is the least live able city. The survey also lists Karachi and Dhaka among the least live able cities.

HDFC Bank expands its rural business
HDFC Bank further expanded its rural presence by announcing the launch of 18 new rural branches in Haryana, taking its total network to 200 branches in the state. Of the 18 new branches 14 are in unbanked places which will bring formal banking services to around
90,000 people in the state. At the national level, the bank has 53% of its branches in semiurban and rural areas supporting the idea of inclusive growth.

Rupee could depreciate to 75, more measures needed: BofA-ML
According to a report by Bank of America Merrill Lynch (BofA-ML), if the current stance towards declining rupee is maintained then the scenario could be worse, rupee could touch 75 per US dollar by the end of 2014. It suggested the Reserve Bank of India (RBI) to take more proactive measures to rebuild forex reserves. It also suggested the RBI to launch a scheme to attract significant forex inflows where the INR risk would be borne by the RBI to comfort investor confidence like issue of NRI or sovereign bonds or reviving FCNRA deposits.

National Sports Day celebrated across India
August 29 was celebrated as National Sports Day across the country to commemorate the birth anniversary of “the Wizard” of Hockey, Major Dhyan Chand. Various sporing events were organized across the nation to mark the day. It was 118th birth anniversary of Dhyan Chand, the legend who helped India win three Olympic gold medals in 1928, 1932, and 1936.

Scientists discover Sun‟s twin
An 8.2-billion-year-old twin of the Sun has been discovered by the astronomers. Astronomers in Brazil used ESO’s Very Large Telescope to locate the star HIP 102152 located 250 light-years away. It is very similar to the Sun- except that it is nearly four billion years older. Studying the ancient star allows researchers to predict what may happen to our own Sun when it reaches that age. Rupee registers biggest single-day gain in 15 years with RBI’s intervention

Banking Current Affairs
With the step taken by the Reserve Bank of India to open a special dollar facility for PSU oil firms, the rupee, which is under severe pressure, posted sharp 225 jump to end at 66.55 against the dollar and the sensex increased by over 400 points. The dollar facility will allow PSU oil companies to buy dollars directly to pay for the import of petroleum.

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Right to Education anthem launched by Ministry of HRD
With a view to disseminate the message of Right to Education, the Human Resources Development Ministry launched an anthem on the same which ideates to make education for children interesting and friendly. The ministry hopes that children will now imbibe the RTE message from popular public figures in a musical form. The anthem will be dubbed in English and 15 regional languages.

Second quarter brings sharp growth for US GDP
The U.S. Gross Domestic Product (GDP) speeded up more quickly than expected in the second quarter owing to increase in its exports, strengthening the case for the Federal Reserve Bank to taper the quantitative easing programme started in 2008 global financial crisis. As per revised estimates GDP rose at a 2.5% annual rate. The quarter’s growth rate was more than double the growth rate recorded in the previous 3 months.

Government approves RIL‟s $3.18 bn gas field development project with BP
The Reliance Industries Ltd. and Bharat Petroleum’s plant invest $3.18 billion in the development of R-series gas field in the KG-D6 basin, which is expected to produce up to 13 million standard cubic meters gas, has been given government’s approval. The government has asked the operator to fast track the development of R-series discoveries to reverse falling output from the block, which declined to around 14 mmscmd from 62 in March 2010. At present, gas is produced from D1, D3 and MA fields in the KG-D6 block.

LIC raises it shareholding in SBI to 13.26%
Insurance giant Life Insurance Corporation (LIC) has increased its equity stake by 2.86% in the country‘s largest public sector bank State Bank of India from 10.4 % to 13.26% by buying 19.57 lakh shares from open market. The additional stake would have been acquired by paying Rs 49.15 crore at current market price. With this, the equity share capital of the LIC has increased to Rs 684.03 crore from Rs 634.88 crore.

Offshore markets affecting rupee fluctuations
August 27th, 2013

The RBI stated in its annual report that the Non-Deliverable Forwards (NDF) markets are exerting more pressure on the onshore currency market, especially when rupee is under stress. The rupee has nearly declined 21 % so far this fiscal. As per RBI, during the period of the rupee fall the shocks originating in the NDF market may carry more information which is mirrored in the onshore segments of the market through mean and volatility spill over.

Banking Current Affairs
It further says that during the period of the rupee appreciation the NDF market and the rupee spot market exhibit a bi-directional relationship. However at times of rupee fall relationship turns unidirectional from the NDF to onshore market.
What is NDF (Non-Deliverable Forwards)?

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Non-Deliverable Forwards (NDF) is a foreign exchange derivative instrument traded over the counter and is operated in currencies that are not freely convertible such as the rupee. The market enables hedging of exchange rate risks irrespective of any restrictions arising in the currency of origin.

No proposal to increase FDI ceiling in banks
August 24th, 2013

The government has clarified that there is no proposal to raise foreign investment limit in the banking sector.
What is the current status of foreign investment in banking sector?

Currently, the aggregate foreign investment (FDI, FII and NRI) cannot be more than 74% in private sector banks while the limit is at 20% for nationalized banks, State Bank of India and its associate banks.
What is the status of FDI in insurance sector?

The government intends to increase the FDI limit in insurance sector. For this it introduced the Insurance Laws Amendment Bill, 2008 in Parliament to increase it from current 26% to 49%. The coverage of life insurance in India has enhanced from 2.15% in 2001 to 3.17% which is above Brazil, Russia, Malaysia, Pakistan, China, Sri Lanka, Australia and Germany. However, the penetration is below France, Switzerland, the UK, the US, Japan, Singapore, South Korea, Taiwan and Hong Kong.

RBI eases portfolio investment scheme for NRIs
August 23rd, 2013

The Reserve Bank of India eased the rules governing portfolio investments such as equity and debt by Non-Resident Indians (NRIs) to pull in foreign currency. Under the Portfolio Investment Scheme (PIS) for NRIs, banks were given a unique code for each branch making it unwieldy for them to administer the scheme. Now, RBI has allowed banks to do away with the unique code for branches making banks free to administer the PIS scheme for NRI. As per the guidelines of the RBI:   The designated branch of the bank will grant a one-time permission to the NRI applicant for the purchase and sale of shares or convertible debentures of an Indian company. Two distinct permission letters (for repatriation basis and non-repatriation basis) shall be issued as per the prescribed format.

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 The designated branch will open a separate sub-account of NRE/NRO account (opened and maintained by an NRI in terms of the Foreign Exchange Management (Deposit) Regulations, 2000) for the exclusive purpose of routing the transactions under PIS on behalf of an NRI. If NRI is eligible to make investment in India his resident power of attorney holder can be permitted by AD bank to operate NRE (PIS)/NRO (PIS) account to facilitate investment under the scheme. Shares or debentures purchased will be held and registered in the name of the NRI and the shares or debentures acquired by the NRI under the scheme will not be pledged for giving loan to a third party without prior permission of the RBI. Banks must ensure that NRIs are not allowed to invest in any Indian company which is engaged or proposes to engage in the business of chit fund, Nidhi Company, agricultural or plantation activities. NRIs investments can‘t be made in real estate business excluding development of townships, construction of residential or commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships.

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RBI takes measures to ease liquidity
August 23rd, 2013

RBI took a few measures to ease liquidity including Rs 8,000 crore bond buyback, to ensure adequate credit flow to the productive sectors of theeconomy to counter the surge in interest rates following its steps to support falling rupee.
RBI has decided to take following measures to ease liquidity:

 

Conduct open market purchase of government bonds of Rs 8,000 crore to inject liquidity. More Open Market Operations (OMO) would be undertaken when required. Retain the Statutory Liquidity Ratio (SLR) which is the portion of total deposits banks are required to park in G-Secs at 24.5 % to help banks reduce Market-to-Market (MTM) losses resulting from abnormal market condition. Relax SLR requirement by allowing banks to retain SLR holdings in Held To Maturity (HTM) bonds category at 24.5 % until further instructions. Banks have the option of valuing these securities for the purpose of such transfer. As per RBI the hardening of long term yields has resulted in banks incurring large MTM losses in their investment portfolio and these MTM losses are partially resulting from abnormal market conditions and could be expected to be largely recouped going forward.

India‟s sovereign outlook remains negative on S&P ratings
August 23rd, 2013

Global sovereign rating agency Standard & Poor‘s said it will maintain negative outlook for the India as currency depreciation is adversely impacting investors‘ confidence. They will maintain a negative outlook on India‘s BBB sovereign credit ratings. S&P‘s statement came when the rupee slid down to a record low of 64.11 to a dollar.

Banking Current Affairs
What is BBB?

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BBB is the lowest investment grade and a downgrade would mean pushing the country‘s sovereign rating to junk status making overseas borrowings by corporates costlier.
According to S&P:

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India‘s long term growth prospects could weaken on a sustained basis, with negative implications for the sovereign credit fundamentals. The capital outflows and depreciating rupee is an indication of weakening investor confidence in India. This is a result of the declining economic growth in the past two years and insufficient long term policy response that could reverse the decline and revive investments. Investments continue to be strangled by inadequate infrastructure, rigidities in labour and product markets, and red tape, among other issues. Future credit rating action would depend upon the response of policy-makers to the latest economic developments.

RBI lowers remittance limit, discourage green card dreams
August 23rd, 2013

Taking further measures to reduce the burden on the already weakened rupee, RBI reduced the limit for remittances made by individuals to $75,000 from $200,000 per financial year and banned the purchase of property outside India. The rich Indians with a view to invest in business or buy property in some foreign countries to gain permanent residency find their dreams crushed with this measure. Various countries and their conditions to afford a green card:  Countries such as the US, UAE, Australia, Bahamas, Spain, Mauritius and parts of Canada offer permanent residency and fast track green card to those who invest in businesses or property there. The US EB 5 visa offers a fast track green card if one invests $500,000 in a business. Buying a property worth $500,000 one can get a permanent residency in the Bahamas. In Australia one has to invest $5 million to het the green card. In the UAE foreign property buyers are automatically given a three year residency permit. Canada‘s Quebec province runs an investor programme which gives permanent residency to immigrants who can invest $800,000 in the province in the form of a guaranteed, interest-free loan.

    

SEBI auctions Govt. debt securities worth $9.34 bn
August 22nd, 2013

With the aim to attract foreign investors towards Indian debt market, market regulator SEBI auctioned government debt securities worth $9.34 billion (Rs 58,264 core) and it received bids worth $10.4 billion (Rs 64,908 crore). The FIIs were in a trend of selling their holdings after the US announced that it would taper the the $85-billion-a-month bond purchase programme as early as next month and end it next year if the US economic recovery is up to its expectations.

Banking Current Affairs
This is the biggest ever auction for such bonds and exceeds the previous record of Rs 42,022 crore, auctioned two months ago on June 20, and neutralizes the prevailing concerns in markets with regard to foreign investments. As per experts, the fall in the Indian currency has been instrumental in overseas investors exiting debt markets as the rising cost of hedging a volatile rupee hurt the yield differential the FIIs work with. With a view to attract foreign investments, the government recently raised the investment limits for FIIs in government debt to $30 billion, from $25 billion previously.

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FDI limit in Asset Reconstruction Companies hiked to 74% – RBI
August 20th, 2013

As per the RBI, the limit on Foreign Direct Investment (FDI) in Asset Reconstruction Companies (ARCs) has been increased to 74% from 49%, another measure to attract capital inflows to support a declining Rupee. The foreign investment limit of 74% in the company will include both FDI and Foreign Institutional Investment (FII) with a single portfolio investor not allowed to exceed 10% of paid-up capital in the ARC.

NBFCs must be under RBI watch: Subbarao
August 20th, 2013

As per Reserve Bank of India (RBI) Governor D. Subbarao, banking as well as NonBanking Financial Companies (NBFCs) must be under a unified regulation of the central bank to prevent 2008 like crisis. He said that there were strong inter-linkages between Banks and Non-Banking Financial Companies (NBFCs) and suggested that a unified regulation by the same regulator was essential for financial stability.
What is the need to include NBFCs under unified regulation?

The government has plans to take away the regulation of NBFCs from the central bank and put it under a unified financial authority. As per RBI, such a move would prove detrimental to financial stability. It said that for the Monetary Policy to be effective the credit creation (that is by banks and credit institutions such as NBFCs) should be regulated by the central bank. it pointed that the major reason behind the 2008 crisis was credit intermediation activities conducted by non-banks which were mainly outside the regulatory purview so post crisis the trend has been to entrust more, not less, regulation by central banks.

Sharp rise in Internet related bank frauds: Banking Ombudsman
August 20th, 2013

There was a sharp increase in complaints relating to Internet related bank frauds. The total number of complaints increased marginally from 3,486 in 2011-12 to 3,494 in 2012-13. The complaints related to credit card and Internet based transactions increased from 732 to 1,279 as per Banking Ombudsman for Karnataka M. Palanisamy.

Banking Current Affairs
Reserve Bank of India (RBI) has adopted new guidelines that require banks to ensure that customers authenticate through an alternative network typically via a text message which make Card based transactions more secure. The online transactions through net banking channels or using credit cards remain a concern for not only the banks but for the regulator also.
How did fraudulent transactions happen?

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The scamsters who were mainly based overseas skimmed the details on the debit or credit cards of ordinary people including drivers, housewives and mechanics. The uncertified websites such as lyca.uk, sports.com, entropay.uk and denguemail.ru were among those that pilfered their victims by drawing money in foreign currency. There were a few cases of Indians as in one of the case a gang in Bangalore masked IP addresses to make it appear to the user that the website was based overseas. In most cases the banks have re-credited the disputed amounts to the victims. The possible explanation for the banks‘ readiness to settle disputes could be the burden of proof on them to establish that they had not been responsible for the user id or password being compromised.

India‟s forex reserves dips by $2.99 billion
August 15th, 2013

As per the Reserve Bank of India, the country‘s foreign exchange reserves lowered by an immense USD 2.995 billion to USD 277.167 billion. Foreign currency assets which are a major component of the forex reserves, dropped USD 2.155 billion to USD 249.895 billion in the first weekend of August 2013. Foreign currency assets expressed in US dollar terms include the effect of appreciation or depreciation of the non-US currencies, such as euro, pound and yen, held in the reserves. The gold reserves dropped USD 808.5 million at USD 20.747 billion. The Special Drawing Rights (SDRs) were down by USD 21.4 million to USD 4.352 billion, while the country‘s reserve position with the IMF also fell by USD 10.7 million to USD 2.171 billion.

IRDA relaxes investment norms
August 14th, 2013

Insurance Regulatory and Development Authority (IRDA) has relaxed the investment norms for the firms like Housing finance and infrastructure finance companies to allow these companies to get higher funding from the insurance companies.
Steps taken by IRDA:

The investments in debt instruments issued by housing finance companies as specified in the investment regulations shall not be included under the exposure to financial and insurance activities. Currently, such exposure to housing finance companies and infrastructure finance companies is treated as exposure under financial and insurance activities but the industry exposure limits will continue to apply for such investments. The single investee debt exposure limits in housing finance companies have been enhanced to 20% of equity plus free reserves from existing 10% limit. The limit

Banking Current Affairs
mentioned above can be further increased by an additional 5% with the prior approval of board of company. The group and promoter group exposure norms will continue to apply on the investments made in a housing finance company.

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Rajya Sabha passes Companies Bill 2012
August 14th, 2013

Rajya Sabha has passed the Companies Bill 2012 in order to replace the outdated Companies Act, 1956. Both the houses of Parliament have passed the Bill and before it becomes law it will go to President Pranab Mukherjee for his assent. The existing statute for regulation of companies in the country, viz. the Companies Act, 1956 had been under consideration for quite long for comprehensive revision in view of the changing economic and commercial environment nationally as well as internationally. The Companies Act of 1956 replaced the first Companies Act that was created in 1919 (the pre-independent India). The Act of 1956 has been amended 25 times in all these years since its formation.
Key features of Companies Bill 2012:

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Spending of funds by companies for Corporate Social Responsibility (CSR) will be mandatory. Companies are required to spend at least 2 % of their net profit on CSR. The companies will also have to give preference to the local areas of their operation. If the companies are unable to meet CSR norms, they will have to give explanations and may even face penalty. The amended legislation will help to control major source of corporate law-breaking for falsely inducing a person to enter into any agreement with bank or financial institution with a view to get credit facilities. With view of interests of employees, company will have to pay 2 years‘ salary to employees in case it shuts operations. The appointment of auditors for five years shall be subject to ratification by members at every annual general meeting. The limit in respect of maximum number of companies in which a person may be appointed as auditor has been proposed as 20. The maximum number of directors in a private company has been increased from 12 to 15 and which can be increased further by special resolution. The financial year of any company can end only on March 31 and the only exception is for companies which are holding subsidiary of a foreign entity requiring consolidation outside India. It makes auditors subject to criminal liability if they consciously or carelessly omit certain information from their reports. It has a stipulation that keeps a check on very expensive remunerations for the board of directors and other executives of the companies. This will protect the interest of shareholders as well as employees. The amended legislation also limits the number of companies an auditor can serve to 20 besides bringing more clarity on criminal liability of auditors.

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 The proposed legislation would ensure setting up of special courts for speedy trial and stronger steps for transparent corporate governance practices and curb corporate misdoings.

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Can‟t opt for high inflation to promote growth: RBI
August 14th, 2013

RBI has clarified that it could not espouse a policy of tolerating higher inflation in order to promote growth because such a stance would not yield the desired results. RBI cited a study which, although, gave empirical evidence that lower real interest rates could stimulate growth and investment, it didn‘t recommend a policy of higher inflation tolerance as the means to lower real rates. The study was conducted in the backdrop of criticism that the RBI was adopting an anti-inflationary monetary policy stance to the impediment of growth. As per the study, the incremental capital output ratio has increased in recent quarters and correspondingly, the implicit marginal productivity of investment has also declined. As a result, lower levels of real interest rate would have also contributed to the slowdown in growth.
Why RBI can‘t adopt a policy which tolerates high inflation?

 

The negative impact of inflation on growth outweighs its positive impact if real rates are lowered beyond a threshold. Tolerating higher inflation with growth supportive monetary policy response is unlikely to stimulate growth to the desired extent since the adverse impact of higher inflation on growth would more than offset the favorable impact of growth supportive monetary policy. The adverse growth impact of high inflation was seen to operate primarily through compression of consumption demand since investment demand is more sensitive to lower real rates than higher inflation.
What is real interest rate?

The real interest rate is the rate of interest an investor expects to receive after allowing for inflation. It can be described more formally by the Fisher equation, which states that the real interest rate is approximately the nominal interest rate minus the inflation rate. If, for example, an investor were able to lock in a 5% interest rate for the coming year and anticipated a 2% rise in prices, he would expect to earn a real interest rate of 3%.

RBI to auction Cash Management Bills (CMBs) to control liquidity
August 14th, 2013

Taking further measures to control the liquidity in order to boost the position of rupee which has been on a decline for past some time, the RBI has decided to auction short-term Cash Management Bills (CMBs) for an amount of Rs. 22,000 crore every Monday. RBI will be selling Rs.11, 000 crore each in two CMBs maturing in 35 and 34 days on Monday and Tuesday, respectively. The bills will mature on 17 September, 2013, when banking system liquidity gets strained on account of advance tax outflow. The

Banking Current Affairs
auctions will be conducted using ―Multiple Price Auction‖ method and the Cash Management Bills will have the generic character of Treasury Bills.
What are Cash Management Bills?

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CMBs are short-term paper with the flexibility of fixing tenure according to the requirement of the government. The basic difference between a treasury bill and a CMB is that the former has fixed tenure of 30, 91, 182 and 364 days, while a CMB can be anything between seven days and one year. CMBs can be structured in such a way that they are redeemed at that time to infuse liquidity but treasury bills do not offer that flexibility.
Why the RBI is auctioning CMBs (Cash Management Bills)?

Past few months have brought some serious depreciation in the value of rupee against the dollar with rupee crossing the 6o mark versus dollar. The country is also facing the problem of inflation. RBI has been taking liquidity tightening measures to curb the instability of the currency. As part of its liquidity tightening measures, on 15 July, RBI said banks can borrow up to Rs.75,000 crore of money from it at 7.25%. Any excess of it shall be borrowed at a special rate called Marginal Standing Facility (MSF), which it raised to 10.25% from 8.25%. However, the rupee continued to fall and RBI, on July 23, further restricted this liquidity to 0.5% of a bank‘s own demand base. This effectively halved the money a bank can borrow from RBI to Rs.37,500 crore. It also directed banks to keep 99% of their cash reserve ratio, or the portion of deposit that banks need to keep with RBI on a daily basis. The central bank has clarified that it gives priority to contain rupee-volatility and it chooses to curb inflation over growth. The latest measure of auctioning CMBs is aimed at absorbing the excess liquidity from the economy even as demand for such short-term bills is high. This is expected to bring some positive effect in terms of improving the position of Rupee as well as some impact on inflation.

Raghuram Rajan appointed as the next RBI Governor
August 8th, 2013

Raghuram Govind Rajan (50), who is currently the Chief Economic Adviser to the Govt. of India, has been appointed as Governor of the Reserve Bank of India(RBI) for 3 years. He will take over from D. Subbarao who demits office on September 4, 2013. The appointment was approved by Prime Minister Manmohan Singh. Dr. Rajan, who is credited to have correctly predicted the 2008 financial crisis, is set to take over the helm of the central bank at a time when the economy is grappling with a multipronged crisis of high consumer price inflation, industrial slowdown, sharp depreciation of the rupee and a widening current account deficit.

Banking Current Affairs Arundhati Bhattacharya is the new managing director of SBI
August 6th, 2013

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The Govt. has appointment Arundhati Bhattacharya has been appointed as the new managing director of the State Bank of India (SBI). Previously, Bhattacharya was the managing director of SBI Capital, the merchant banking arm of the bank.
Who is SBI‘s first woman MD (Managing Director)?

Ms Arundhati Bhattacharya will be State Bank of India‘s first woman managing director.
Who was the first Woman MD (Managing Director) of a Public Sector bank in India?

The first woman MD of a Public sector bank in India was Ms Ranjana Kumar. The Government of India appointed Ms Ranjana Kumar as the Chairperson and managing Director of the Indian Bank, she became the first woman to become head of a public sector bank in India.
Some other ladies who are at present heading banks in India:

Public Sector Banks:   United Bank of India: Ms. Archana Bhargav (Chairman & MD) Allahabad Bank: Ms Shubhalakshmi Panse (Chairman & MD) Private Sector Banks:   ICICI Bank: Ms.Chanda Kochhar (MD & CEO) Axis Bank: Ms Shikha Sharma (MD & CEO)

Rajeev Rishi appointed as Chairman and MD of Central Bank of India
August 6th, 2013

The Central Government has appointed Rajeev Rishi, Executive Director, Indian Bank has been appointed as the Chairman and Managing Director, Central Bank of India. He will have tenure of five years from the date of taking over charge. Prior to his appointment as Chairman & Managing Director of Central Bank of India Shri Rishi was the Executive Director of Indian Bank since October 2010.

Banking Current Affairs RBI‟s cash-tightening measures to stay until Forex market stabilizes: Subbarao
August 4th, 2013

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RBI Governor D Subbarao has defended the central bank‘s stance on choosing inflation over growth, saying that when the ―inflation threshold limit is crossed, it becomes difficult to make a trade-off.‖ He explained that there is a threshold level of inflation. If the inflation is below that level, then RBI can make that trade-off. But if it isn‘t, then it can‘t afford to do the same as inflation hurts the poor section of the country the most and for this reason some sacrifice of growth is inevitable to curb inflation. He said that this sacrifice in growth is only for the short-term. In the long-term, curbing inflation will be supportive of growth. He refused to give any time-frame of the current cash-tightening measures taken by the central bank and indicated that these measures will stay until volatility in the foreign exchange market is curbed.

RBI lowers GDP growth to 5.7%
August 3rd, 2013

The GDP growth for the current fiscal has been fixed lower by the Reserve Bank of India‘s professional forecaster‘s survey. From the earlier estimation of 6% it has now been fixed as 5.7%. Forecast by RBI:      The growth is expected to rise further to 6.5% in 2014-15. The bank credit growth forecast for 2013-14 has also been revised downward to 15 % from 16 %. For money supply has been revised downwards in 2013-14 to 13% from 14.6 %. Agricultural prospects for 2013-14 are encouraging given the good monsoon so far. Revival in mining and manufacturing will take some more time but some improvement can be seen. Inflation and Risk:      RBI revised the inflation target to 5.3 % from the earlier target of 6.5 %. Average WPI inflation is expected to moderate to 5.3 % during 2013-14. The rupee depreciation of about 9 % in Q1 of 2013-14 is likely to put pressure on domestic inflation. Fuel under-recoveries have raised sharply due to the exchange rate depreciation and domestic price rigidities. Businesses have weakened but signs are there that the downturn can be contained.

Banking Current Affairs Weakening rupee is biggest risk to inflation: Subbarao
August 3rd, 2013

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Duvvuri Subbarao, Governor of the Reserve Bank of India, stated that the declining of the rupee is the biggest risk to inflation. RBI left interest rates unchanged as it supports a battered rupee but it would roll back recent liquidity tightening measures when stability returns to the currency market enabling it to resume supporting growth. RBI also has reservations on issuing sovereign bonds and as it feels that sovereign bond issue would compromise financial stability. As per RBI, the cost of a sovereign bond issue outweighs the benefits at current juncture.

RBI leaves key rates unchanged to curb the depreciation of Rupee
August 3rd, 2013

The Reserve Bank of India (RBI) kept the indicative policy (repo) rate unchanged at 7. 25 % and the Cash Reserve Ratio (CRR) at 4% in order to suppress the instability in the foreign exchange market. The RBI had brought down the repo rate from a peak of 8.50% by 125 basis points in 201213 and CRR from a high of 6 % in the last one-and-a-half years by 200 basis points. RBI‟s revised Growth Projection: The RBI revised its growth projection for the current financial year from 5.7 The depressed global conditions were undermining export performance, heightened instability in capital flows had raised external funding risks. economies, activity has weakened. Emerging and developing economies are are also experiencing sell-offs in their financial markets. % to 5.5 %. even as the In advanced slowing, and

Kumar Mangalam Birla steps down from RBI Board
July 30th, 2013

Kumar Mangalam Birla who was nominated as a member of the directors of the Central Board of the RBI in 2006 stepped down from RBI Board.
Why did K.M.Birla stepped down from the RBI Board?

To avoid any conflict of interest as few weeks back his group firm applied for a bank license.   Among the 26 entities his group firm “Aditya Birla Nuvo” is one of the entities which have applied for a bank license. The RBI is expected to grant new licenses by March 2014 as the last date for applying for a bank license expired on July 1, 2013.

Banking Current Affairs RBI decreases realization period for exporters from 12 to 9 months
July 30th, 2013

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Responding further to the increasing pressure on Current Account Deficit (CAD) due reduced exports and depreciation of rupee against dollar, the Reserve Bank of India has brought down the period of realization and repatriation for exporters of goods and software from 12 to 9 months with a view to increase foreign exchange inflows. The period of realization and repatriation to India of the full export value of goods or software exported by a unit situated in a Special Economic Zone (SEZ) as well as exports made to warehouses established outside India remains unaltered . India‘s exports reduced by 4.6% for the 2nd consecutive month to USD 23.79 billion in June 2013 compared to year ago interval. The rupee has depreciated by over 12% against the dollar since the beginning of the fiscal. Central bank and capital markets regulator SEBI had to take unconventional measures to control the market.

India emerges as the 2nd largest investor in London
July 25th, 2013

India has come up as the 2nd largest investor in the city of London with Indian companies led by software major Infosys with the investment eagerness generated by the 2012 Olympic Games in the British capital. Infosys leads the inward Foreign Direct Investment (FDI) made by a total of 28 Indian companies, which generated 429 additional jobs for the British economy in 2012. Major sectors of growth:   India has registered exceptional growth in the common areas of interest, such as transport and city planning. India brought in a large amount of additional 2.5 billion-pound foreign investment into the UK since the Games and Indian FDI projects in 2012-13 are estimated to generate 24 million pounds in gross value added for London‘s economy over the next 3 years. Information and communications technology (ICT) was the key sector in terms of Indian FDI into London, followed by financial services and retail. In the financial services sector Axis Bank stood out for setting up its global operations in London as it has the right mix of potential wholesale and retail business to make it the ideal location for their first international subsidiary. The latest figures were released as part of an overall estimate of the economic impact of the Olympic Games on London‟s economy. British government research

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Banking Current Affairs
indicated that the UK economy has seen a 9.9 billion-pound boost in trade and investment from hosting the Games.

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China lifts control on Bank lending rates
July 24th, 2013

In a move toward creating a market oriented financial system to support economic growth, the People‟s Bank of China and its Central Bankpromulgated to lift the controls on bank lending rates.
Background for why China lifted the control on Bank lending rates:

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Beijing has long used its banks to subsidize state industry with low-interest loans. Depositors who put their money were paid low rates on deposits in recent years. Families failed to keep up with inflation and lost money by leaving it in the bank. The household spending was suppressed which is among the lowest in the world as a percentage of the economy and efforts were made for domestic sustenance rather than China‘s growth from exports and investment to more self -sustained domestic consumption. Chinese families looking for a better return on their savings invested into stocks and real estate. They have also shifted money into wealth management products which are indeed too risky for household investors.
How China‘s lifting of control on bank lending rates will affect its economy?

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A change in the China‘s interest rate policy will be one of the major changes required to keep its growth strong. Allowing banks to negotiate their own rates with borrowers could bring in more credit to private enterprise. Until now, banks were lending generally to state industry instead of entrepreneurs who create China‘s new jobs and wealth so this can bring a chang e. This will be a noteworthy development for China‘s financial sector in the direction of having interest rates determined by market forces rather than government. This reform is to further develop the basic role of market allocation of resources to promote financial support for the development of the real economy. It will allow banks to charge lower rates to more valuable borrowers, cutting down costs for healthy businesses and strong growth. Till now the lower limit on lending rates was set at 0.7 times the state-set interest rate. Private sector borrowers may get more access to credit by paying more and this could help to reduce their dependence on a vast, unregulated credit market.

Rs 25,000 crore window opened by RBI to help Mutual Fund industry
July 21st, 2013

A special borrowing window of Rs 25,000 crore was opened by the RBI to help mutual funds industry over liquidity problems. The crisis occurred due to different merger schemes in the industry and profit booking. This facility will be made available for a brief period only.

Banking Current Affairs
A special 3-day REPO auction was decided to be conducted by RBI under which banks can raise funds upto to Rs 25,000 crore at 10.25 per cent for on lending to the mutual funds. In 2012-13 the mutual fund industry lost more than 36 lakh investors. During the last 3 financial years, the mutual fund industry had lost over 15 lakh new investor accounts. In April-June 2013-14 as per the latest SEBI data, Mutual Funds lost 10 lakh investors in terms of individual accounts or folios.

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RBI calibrates MSF to ease rupee volatility
July 21st, 2013

In the wake of continuing depreciation of rupee disturbing the monetary and fiscal calculations, the Reserve Bank of India (RBI), fine-tuned the Marginal Standing Facility (MSF) rate to 10.5% from previous 8.25%. This will be 300 basis points above the policy repo rate under the Liquidity Adjustment Facility (LAF). The increase comes into effect with immediate effect. As a consequence of the increase in the MSF rate, the Bank Rate also stands adjusted to 10.25%. As per RBI, the overall allocation of funds under the LAF would be limited to 1% of the net demand and time liabilities of the banking system. This is estimated to be around Rs.75,000 crore.
What is MSF?

Marginal Standing Facility (MSF) allows banks to borrow funds from the RBI at a rate which is 100 basis points above the LAF (or the repo rate), against pledging the approved government securities.
How will RBI‘s caliberation of MST to ease Rupee volatility impact the market?

The increase in MSF is expected to make the loans costlier.

RBI penalizes 22 banks for violating KYC norms
July 21st, 2013

The Reserve Bank of India (RBI) has fined 22 banks by imposing penalty for violating KnowYour-Customer (KYC) norms and anti-money laundering guidelines. The banks who have been fined include SBI, Bank of Baroda, Canara Bank and some other banks all of whom have been fined Rs.3 crore each. The central bank also issued ―cautionary letters‖ to seven other banks including Citibank, Standard Chartered and Barclays as no violation of serious nature by them was established. The violations by the public sector banks were revealed in a sting operation by online portal, Cobrapost. As per the RBI, the investigation against the fined banks did not reveal any prima facie evidence of money laundering. The banks who have been penalized for violating Know Your Customer (KYC)/Anti-Money Laundering norms includes the country‘s largest bank, State Bank of India, and other public

Banking Current Affairs
sector banks such as PunjabNational Bank, Bank of India and Canara Bank. Earlier, three ‗new generation‘ private banks were slapped with stiff fines by the central bank whose investigations followed an expose by online portal Cobrapost. The latest list includes the relatively new Yes Bank as well as some old private banks such as Lakshmi Vilas Bank.

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RBI allows asset financing NBFCs to access ECB market
July 10th, 2013

As per a notification by the Reserve Bank of India which reviewed theExternal Commercial Borrowing (ECB) policy, Non-Banking Finance Companies (NBFCs) categorized as Asset Financing Companies (AFCs) by the RBI have been allowed to access the ECB market. The access is subject to certain conditions, including availing of ECB under the automatic route with minimum average maturity of 5 years to finance import of infrastructure equipment for leasing to infrastructure projects. Besides, NBFC-AFCs availing of ECB through Foreign Currency Bonds (FCB) will be allowed to raise capital only from markets, subject to regulations by the host country complaint with Financial Action Task Force (FATF) guidelines. Such 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. NBFC-Infrastructure Finance Companies (IFCs) are allowed to access ECB for on-lending to infrastructure sector both under automatic and approval routes.

Supreme Court: If a cheque from joint a/c bounces, liability is on person signing cheque
July 3rd, 2013

The Supreme Court has held that in case of issuance of cheque from joint accounts, only the person who signs the cheque can be prosecuted in a cheque bouncing case under Section 138 of the Negotiable Instruments Act. The other joint account members cannot be held culpable unless the cheque has been signed by them also. As per the apex court, the proceedings filed under Section 138 cannot be used as an arm twisting tactics to recover the amount allegedly due from the appellant. The court clarified that the culpability attached to dishonour of a cheque can, in no case except in case of Section 141 of the N.I. Act (offences by companies), be extended to those on whose behalf the cheque is issued. This Court reiterates that it is only the drawer of the cheque who can be made an accused in any proceeding under Section 138 of the Act. Distinguishing Individual and Company: The court distinguished b/w individuals and companies and held that Section 141 of the N.I. Act is an instance of specific provision that in case an offence under Section 138 is committed by a company, the criminal liability for dishonor of a cheque will extend to the officers of the company. In case of the company, the officers of the company, who are

Banking Current Affairs
accountable for the acts done in the name of the company, can be made accused for the acts which result in criminal action being taken against the company.

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JUNE

Banking Current Affairs Fact Box: White Label ATMs
June 29th, 2013

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RBI gives nod to Muthoot Finance to set up White Label ATMs Indian gold loan company Muthoot Finance Ltd has obtained the RBI‘s in -principle approval to set up the white label ATMs,as the government seeks to take financial services to the remote regions of the country. What are White Label ATMs? ATMs set up and run by non-banking entities are called White Label ATMs (WLAs). Earlier, only banks were allowed to establish and operate ATMs. RBI had allowed the company under the guidelines it released in June 2012 which set certain minimum net worth and obligation for permitting independent non-banking firms to operate such ATMs, as per three different schemes. The Muthoot Finance has been given approval as per Scheme A under which Muthoot Finance will set up WLAs, a minimum of 1,000 WLAs have to be installed in the first year; a minimum of twice the number of WLAs installed in the first year have to be installed in the second year; and a minimum of three times the number of WLAs installed in the second year have to be installed in the third year. What is the purpose of this move? The fundamental objective of permitting non-banks to operate WLAs is to enhance the penetration of the machines in semi-urban and rural areas, where bank-run ATMs are a few or none. The move is in line to the governments objective of achieving financial inclusion.

India: World‟s 3rd most attractive FDI destination
June 29th, 2013

As per the World Investment Report 2013 by the United Nations Conference on Trade and Development (UNCTAD), India is world‘s third most attractive destination for investment by Transnational Corporations (TNCs) during 2013-15. In the survey based on responses of 159 companies, India has been positioned after China and United States. Thus India has retained its previous ranking. As per UNCTAD the top five countries in attracting FDI are: 1. 2. 3. 4. 5. China United States India Indonesia Brazil

Banking Current Affairs
As per the report, developing countries make up four of the top five host economies. Six of the top 10 prospective host countries also come from the developing world, with Mexico and Thailand appearing for the first time.

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SEBI tightens buyback rules
June 27th, 2013

SEBI has released new buyback norms and a number of other market friendly measures. Under the new rules:  It is mandatory for companies selling shares to purchase at least 50% of the offer size. If they fail to do so, the amount in the escrow account will be forfeited, subject to a maximum of 2.5% of the total amount earmarked. Companies will have to create an escrow account towards security for performance equivalent to at least 25% of the amount earmarked for buyback. Companies are prohibited to come out with another buyback offer within one year from the date of closure of the preceding offer, and the promoters of the company are not allowed to execute any transaction, either on-market or off-market, during the buyback period. Maximum buyback period has been reduced to 6 months from current 12 months. Start-ups and SMEs (Small and Medium Enterprises) can be listed in Institutional Trading Platform (ITP) without making an Initial Public Offering (IPO). However, these companies in ITP will be able to raise capital only from investors such as Angel Investors, VCFs (Venture Capital Funds) and PEs (Private Equities). They will not be permitted to raise capital. However, they can continue to make private placements. 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, SEBI has relaxed entry rules for offshore portfolio investors to attract more foreign capital into the country at a time of currency weakness and worries over a record high current account deficit. Foreign investors will now be permitted to trade in Indian stocks without any prior registration with SEBI. Foreign Portfolio Investors: Different categories of investors like Foreign Institutional Investors (FIIs), sub-accounts (or an investment vehicle) and Qualified Foreign Investors (QFIs) have been clubbed under a new category called Foreign Portfolio Investor (or FPI).

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SEBI relaxes foreign investment norms; a new category Foreign Portfolio Investors (FPIs) approved
June 27th, 2013

In a bid to attract a larger number of foreign investors to Indian capital markets, SEBI approved a slew of changes. Among the major changes are simplification of registration and compliance requirements for foreign investors. As per new measures:

Banking Current Affairs
 A new category Foreign Portfolio Investors (FPIs) has been approved; it blends various classes of investors such as FIIs, their Sub Accounts and Qualified Foreign Investors (QFIs) to set up a simplified and uniform set of entry norms for them. Recommendations of K M Chandrasekhar Committeeon Rationalisation of Investment Routes and Monitoring of Foreign Portfolio Investments‟. Any portfolio investments would be defined as investment by any single investor or investor group, which shall not exceed 10% of the equity of an Indian company. Investments beyond this threshold of 10% will be considered as FDI. With the aim to make the entry norms easier, SEBI has also approved eliminating the current practice of FIIs and their sub-accounts requiring a prior direct registration of the regulator to operate in Indian markets. In addition, SEBI would adopt a risk-based KYC (Know Your Client) approach in dealing with the overseas investors. It includes FPIs to be divided into three categories which are: 1. Low-risk (for multi-lateral agencies, government and other sovereign entities): This category will have simplest KYC requirements, not required to submit personal identification documents. 2. Moderate risk (for banks, asset management companies, investment trusts, insurers, pension funds and university funds), not required to submit personal identification documents. 3. 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: These measures have been introduced at a time when the rupee has depreciated considerably against the dollar reaching an all time low recently. Also, FIIs have been pulling out money from the Indian debt market, which has resulted in the hardening of yields on government bonds.

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RBI auctions Inflation Indexed Bonds
June 26th, 2013

The government has announced the sale of 1.44% „Inflation-Indexed government stock 2023‟ for a notified amount of Rs.1,000 crore through price-based auction on June 25, 2013. The results of the auction, to be conducted using the uniform price method by the Reserve Bank of India in Mumbai, will be announced on the same day. Up to 20% of the notified amount of bonds on sale will be allotted to eligible individuals and institutions as per the scheme for non-competitive bidding facility in auction of government securities. Both competitive and non-competitive bids for the auction are to be submitted in electronic format on RBI’s Core Banking Solution (e-Kuber) system. What are IIBs? Inflation-Indexed Bonds or IIBs are are bonds where the principal is indexed to inflation. They are thus designed to cut out the inflation risk of an investment. These bonds will be

Banking Current Affairs
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 inflation, higher the returns. 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), whi ch had surged to a historic high of 6.7% in the third quarter of 2012-13. Last month, imports of gold and silver soared by 138% on an annual basis to $ 7.5 billion. How would IIBs help? As per RBI, IIBs would help in:   Boosting domestic savings and reversing the declining savings-to-GDP ratio. Providing households and other investors a competitive option against gold and real estate. In the wake of rising inflation last year, there was considerable flow of investments from financial savings to safe-haven assets like gold that resulted into higher imports of the metal. This led to current account deficit or CAD widening to 4.9% of GDP at the end of September 2012. Giving investors choice to use IIBs as good hedging instruments against inflation. 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, and the final inflation data based on the Wholesale Price Index (WPI) will be used for providing inflation protection. Besides, in case of revision in the base year for WPI series, base splicing method would be used to construct a consistent series for indexation.

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Fact Box: „Diaspora Bonds‟
June 25th, 2013

India thinks over „Diaspora Bonds‟ India is examining to introduce “Diaspora Bonds” to attract investment from NRIs (NonResident Indians), to facilitate greater inflow of funds in the infrastructure sector. The government is examining longer-term investment instruments for overseas Indians so that the NRI community could participate and benefit from India‘s growth. Current Status: At present most of investments of a short-term nature. the diaspora investments are in portfolio

Plan of Govt: The government is considering the option of ‗diaspora bonds‘ for longer -term investment instruments to provide opportunities for overseas Indians and thus facilitate greater inflow of funds in the infrastructure sector.

Banking Current Affairs
What are Diaspora Bonds (DBs)?  A sovereign bond that targets investors that have emmigrated to other countries and the relatives of those emmigrants. For example, the Government of India tries to sell a government bond to Americans of Indian origin. Diaspora bonds are marketed to members of the diaspora. Attraction for issuing countries:  ―Patriotic discount‖ - Diaspora investors sometimes offer what is called a ―patriotic‖ discount to governments in their country of origin/ancestry. As per George Washington University‘s Liesl Riddle, when diaspora members invest in their homelands, they are motivated by more than just profit: ―Social and emotional motivations also play a role.‖ Stable source of finance, especially in bad times Support to sovereign credit rating Diaspora investors might be willing to accept a lower rate of return and have a greater tolerance for uncertainty when buying diaspora bonds than a mainstream investment. Diaspora investors might partially view the purchase of a diaspora bond as an act of charity and might also have a greater understanding of a country‘s level of risk than other foreign investors. Attraction for investors:   Patriotism & desire to do ―good‖ in the country of origin Risk management – Diaspora investors are likely to view the risk of receiving debt service in local currency with much less apprehensions. What is difference b/w Foreign Currency Deposits (FCDs) and DBs ? Foreign Currency Deposits (FCDs) are also used by countries to attract foreign currency inflows.   But, Diaspora bonds are typically long-dated securities to be redeemed only upon maturity. FCDs, in contrast, can be withdrawn at any time. FCDs are likely to be much more volatile, requiring banks to hold much larger reserves against their FCD liabilities, thus decreasing their ability to fund investments. Diaspora bonds, on the other hand are a source of foreign financing that is long-term in nature. What is India‟s Experience in DBs? Diaspora bonds are not yet widely used as a development financing instrument. Diaspora bonds issued by the government-owned State Bank of India (SBI) have raised over $11 billion to date. 3 separate occasions on which the Indian government has tapped its diaspora base of nonresident Indians (NRIs) for funding on –

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Banking Current Affairs
1. India Development Bonds (IDBs) following the balance of payments crisis in 1991 ($1.6 billion) 2. Resurgent India Bonds (RIBs) following the imposition of sanctions in the wake of the nuclear explosions in 1998 ($4.2 billion) 3. India Millennium Deposits (IMDs) in 2000 ($5.5 billion). Features of the IDBs, RIBs and IMDs:         Opportunistic issuance in 1991, 1998 and 2000 Balance of payments support Fixed rate bonds Maturitiy: 5 year bullet maturity Limited to diaspora No SEC registration Non-negotiable SBI distribution in conjunction with international banks. The conduit for these transactions was the government-owned State Bank of India (SBI). Thus, the proceeds from such bonds can be used to finance investment. Issues were done in multiple currencies – US dollar, British pound, Deutsche Mark/Euro.

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EXIM Bank of India receives license to open representative office in Myanmar
June 24th, 2013

Myanmar has provided the Export Import (EXIM) Bank of India with a licence to open a representative office in Yangon. Key Points:   Exim Bank has extended seven Lines of Credit (LOC), amounting USD 247.43 million to Myanmar Foreign Trade Bank (MFTB). These LOCs are carrying out various projects, including upgradation of the Yangon – Mandalay railway system, setting up Moreh-Tamu OFC link, Thanlyin refinery projects, assembly/manufacturing plant for assembly and manufacturing of Tata vehicles, setting up of three transmission lines and upgradation of Thanbayakan Petrochemical Complex. It should be recalled that an MoU was signed b/w the EXIM and the MFTB during the visit of PM Manmohan Singh in May 2012, for LOCs aggregating to USD 500 million. The MoU covers sixteen ongoing irrigation schemes, two irrigation projects, project for procurement of rolling stock, equipment and upgradation of three major railway workshops in Myanmar. India‘s total trade with Myanmar has expanded 4.1% to touch $1.9 billion in FY13.

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Fitch upgrades India‟s sovereign outlook to „stable‟
June 19th, 2013

Fitch Ratings has revised India‘s sovereign credit outlook to ‗stable‘ from ‗negative‘ and affirmed the ‗BBB-‘ rating assigned earlier.

Banking Current Affairs
Why this upgrade? Fitch revised the outlook to stable after noticing the steps taken by the government to control the budget deficit, including the commitments made in the 2013-14 budget, as well as some, albeit limited, progress in addressing some of the structural hindrances to investment and economic growth. Although slow and modest, a recovery in the real GDP growth has been forecasted with real GDP expected to expand 5.7% and 6.5% in 2013-14 and 2014-15, respectively. Key Strengths:    Fitch has pointed to India‘s inherent economic strength despite declension in the Current Account Deficit (CAD), which in part has been due to a surge in gold imports. India‘s foreign debt is moderate and RBI‘s international reserves, which stood at $288 billion which serve as shock absorber in case of any external impact. India‘s investment-grade ratings are supported by high domestic savings rates that limit the reliance on foreign savings for private investment and fiscal funding, as well as by a relative long maturity of government debt issued in its own currency. Success in containing the upward pressure on the Central government budget deficit in the face of a weaker-than-expected economy. Government has started to address structural factors that have dampened the investment climate and growth prospects, notably regulatory uncertainty, delays in approvals of investment projects and supply bottlenecks in the power and mining sectors.

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Fact Box: “Hindu rate of growth”
June 18th, 2013

Are we moving towards „Hindu‟ rate of growth again? As India registered a meager GDP growth of 4.8% in the first quarter of 2013 it has rendered dreams of achieving a double-digit growth somewhat blurred. It has also opened the window to the vilipending term – Hindu rate of growth. What is Hindu rate of growth? The term „Hindu rate of growth‟ was coined by Professor Rajkrishna, an Indian economist, in 1978 to characterize the slow growth and to explain it against the backdrop of socialistic economic policies. The term came into being to show India‘s contentment with the low growth rate, post independence. While the other countries clamored for more growth, Indian fatalism was cited as a possible reason why policy makers were not seeking ways to boost the economy. The word ―Hindu‖ in the term was used by some early economists to imply that the Hindu outlook of fatalism and contentedness was responsible for the slow growth. However many later economists pointed out that the so-called Hindu rate of growth was a result of socialist policies implemented by the then staunch secular governments and had nothing to do with Hinduism.

Banking Current Affairs
Counter-views: In contrast to the term, GDP data estimates by Paul Bairoch, a Belgian economic historian, published in 1982 questions this contentment. This data, later confirmed by British economist Angus Maddisson, showed that India held close to a quarter of the world‟s share of GDP in 1750. After colonization started, India‘s share dropped to 20% by 1800 and fell precipitously to 3% in 1880. When do we say that a country is having Hindu rate of growth? Small growth rate alone does not characterize Hindu rate of growth. Prolonged low growth rate, albeit not an economic contraction, is not sufficient to be deemed as the Hindu rate of growth. In addition to growth being low and extending over a long period of time, the term also captures a low per-capita GDP, by factoring in the population growth. For eg: India‘s annual population growth rate was over 2% in the 1980′s and the per-capita GDP growth rate, with 3.5% GDP growth, was a meager 1 % characterizing Hindu rate of growth. Current Picture: Annual population growth has been on a decline and is around 1.4 per cent currently, helping higher per capita income growth. So, while the phrase Hindu rate of growth may have characterized a phase, it cannot be considered a generic term for India‘s growth rate. In an open global economy, we cannot get back to this phase, even if we try. The phrase may have been obsolete in a few years of being coined, as we entered the neo-Hindu cycle of growth – being in tune with the global economy.

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Fitch revises outlook of 10 banks and FIs to „Stable‟
June 16th, 2013

The outlook of ten Indian banks and Financial Institutions (FIs) have been revised to ‗stable‘ from ‗negative‘ by rating agency Fitch. The upgrade is despite the fact that the rating agency expects Non-Performing Loans (NPLs) and restructured assets to continue to rise in the financial year ending March 2014. The banks and financial institutions whose ratings have been revised include State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BOB), Bank of Baroda (New Zealand) Limited (BOBNZ), Canara Bank (Canara), IDBI Bank Ltd. (IDBI), ICICI Bank Ltd. (ICICI), Axis Bank(Axis), Export-Import Bank of India (EXIM), and Housing and Urban Development Corporation Ltd. (HUDCO). The international rating agency has also affirmed their „BBB-‟ long-term Issuer Default Ratings (IDRs). As per Fitch Ratings, Non-Performing Loans (NPLs) and restructured assets may continue to rise in the financial year ending March 2014. Government banks‘ stressed assets were at 11.59% as of end-2012 against the sector average of 9.61%.

Banking Current Affairs Fact Box: e-BRC (Bank Realization Certificate)
June 8th, 2013

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MoU inked b/w DGFT and Government of Delhi to use e-BRC (Bank Realization Certificate) An MoU was signed b/w the Directorate General of Foreign Trade (DGFT) and Commissioner (Trade and Taxes) and Government of NCT of Delhi for making use of electronic Bank Realization Certificate (e-BRC). With this, Delhi has become the second state to sign the MoU. The first state to sign this MoU was Maharashtra. What is e-BRC?  e-BRC is electronic form of earlier physical Bank Realization Certificate. It was launched in 2012 by thethe Directorate General of Foreign Trade (DGFT) to reduce transaction cost to exporters, who will not be required to make any request to bank for issuance of bank export and realisation certificate (BRC). 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, BRC data is used by VAT, Income Tax and Drawback departments.

Fact Box: Indian Banks‟ Association (IBA)
June 7th, 2013

K R Kamath re-elected as IBA‟s Chairman K R Kamath, the chairman and managing director of Punjab National Bank (PNB), has been e-elected as the Chairman of the Indian Banks‘ Association (IBA) for 2013 -14 tenure. Indian Banks‟ Association (IBA)      Established on September 26, 1946. It is an association of Indian banks and financial institutions. It is based in Mumbai. Currently represents a total of 173 banking companies which are operating in India. Objective: Strengthening, development and coordination of the Indian banking. It also facilitates various member banks. The Managing Committee of the IBA consists of a chairman, three deputy chairmen, one honorary secretary as well as 26 members.

IndusInd Bank ties up with American Express to launch credit card for affluent customers
June 2nd, 2013

IndusInd Bank has joined hands with American Express to unveil IndusInd Bank Iconia American Express Card for its rich customers.

Banking Current Affairs
Card Benefits The card offers its customers reward golf, entertainment, travel and dining. points and lifestyle benefits such as

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Subscribers of the card will get a reward of 1.5 point on weekdays and of 2 points on the weekends on every Rs 100 they spend. These points can then be redeemed for cash credit at full value, i.e, a rupee for each reward point and for partner air miles. IndusInd Bank ventured into the credit card sector after acquiring Deutsche Bank‘s loss making credit card business from its Indian operations in 2011.

Banking Current Affairs

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MAY

Banking Current Affairs SEBI to double charges for Algorithmic (Algo) trading
May 23rd, 2013

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Market regulator SEBI has announced that it will double the charges for orders based on Algorithms (algo) in stock exchanges from May 27, 2013. What is Algo Trade?  Algorithmic (Algo) trading refers to orders generated by use of advanced mathematical models that involve automated execution of trade. It is mostly used by large institutional investors and has raised concerns that algo exposes small investors to possible systemic risks. Charges on an algo trade vary among exchanges. Why SEBI is increasing the charges on Algo trade?   Algo trading method is mostly used by large institutional investors and has raised concerns that algo exposes small investors to possible systemic risks. The move to increase the algo trade charges is intended to disincentivise those having high order-to-trade ratio using algo. Brokers with repetitive instances of high daily orderto-trade ratio will face additional penalty in the form of suspension of their proprietary trading book.

Shashi Kant Sharma sworn-in new CAG
May 23rd, 2013

The President of India has appointed Shashi Kant Sharma, IAS, as Comptroller & Auditor General of India, in terms of Article 148 (1) of the Constitution of India. Sharma (61) is a 1976 batch Indian Administrative Service (IAS) officer of the Bihar cadre and was before serving as secretary in the Ministry of Defence. Sharma succeeds Vinod Rai whose audit reports on 2G spectrum and coal block allocations during triggered a number of controversies and brought in the concept of presumptive loss in audit. The CAG has tenure of 6 years, or till the incumbent is 65, whichever is earlier. What is the controversy over appointment of Shashi Sharma as CAG ? Mr. Prashant Bhushan (Aam Aadmi Party leader and a Supreme Courtlawyer) objected Sharma‘s appointment as the CAG, terming it illegal and unconstitutional. Mr. Prashant Bhushan‘s laid the contention was that Sharma in the last 10 years held many sensitive positions in the defence ministry that dealt with procurements and his appointment as the CAG would mean a “conflict of interest‖ as he will be auditing defence deals in which he had a role as defence secretary. A public suit has also been filed in the Supreme Court challenging Sharma‘s appointment as the CAG.

Banking Current Affairs RBI directs banks to adhere to „Clean Note Policy‟
May 18th, 2013

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The Reserve Bank of India, under its Clean Note Policy, has directed banks to eliminate stapling of note packets and issue only clean currency notes to the public. What is Clean Note Policy? Clean Note Policy is a policy being run by the RBI with an objective to give the citizens good quality currency notes and coins, while the soiled notes are withdrawn out of circulation. Under this policy Banks have been directed the following:     Stop stapling of note packets and instead secure note packets with paper bands. Sort notes into re-issuables and non-issuables. Issue only clean notes to public. Stop writing of any kind on the watermark window of bank notes. As per RBI, on an average, one out of five paper notes in circulation (over 20%) is disposed every year after getting soiled and the number of such soiled currency bills stood at over 13 billion units during the fiscal ended March 31, 2012. RBI will launch a pilot project for plastic or polymer currency notes with an aim to enhance the shelf-life of notes.

Fact Box: Inflation Indexed Bonds (IIBs)
May 18th, 2013

RBI to launch Inflation Indexed Bonds in June 2013 As stipulated in the Budget 2013-14, the government, in consultation with the RBI, has decided to launch Inflation Indexed Bonds (IIBs) to wean away investors from the yellow metal (Gold) to paper-based savings instruments. This new investment instrument with provide an alternative for those who were in recent times going in for investment in gold as a hedge against inflation. IIBs with a maturity period of 10 years will be launched each month by RBI with the objective of diverting household savings from gold into these hedged bonds up to Rs.15,000 crore this fiscal. For appropriate price discovery and market development the IIBs will also be auctioned to institutional investors such as Pension Funds, Insurance, and Mutual Funds as it will create demand for IIBs and help in making them tradable in the secondary market. What are IIBs? Inflation-Indexed Bonds or IIBs are are bonds where the principal is indexed to inflation. They are thus designed to cut out the inflation risk of an investment. 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 inflation, higher the returns.

Banking Current Affairs
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), which had surged to a historic high of 6.7% in the third quarter of 2012-13. Last month, imports of gold and silver soared by 138% on an annual basis to $ 7.5 billion. How would IIBs help? As per RBI, IIBs would help in:   Boosting domestic savings and reversing the declining savings-to-GDP ratio. Providing households and other investors a competitive option against gold and real estate. In the wake of rising inflation last year, there was considerable flow of investments from financial savings to safe-haven assets like gold that resulted into higher imports of the metal. This led to current account deficit or CAD widening to 4.9% of GDP at the end of September 2012. Giving investors choice to use IIBs as good hedging instruments against inflation. 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, and the final inflation data based on the Wholesale Price Index (WPI) will be used for providing inflation protection. Besides, in case of revision in the base year for WPI series, base splicing method would be used to construct a consistent series for indexation. The conflict b/w International Olympic Committee (IOC) and the Indian Olympic Association (IOA) is expected to end soon with both the Indian representatives from the government and sports bodies reached an agreement in a meeting with IOC officials. The IOC has agreed to lift the ban on IOA once it holds fresh election as per the amended constitution of the IOA. What is the issue? The membership of the IOA was suspended in December 2012 owing to differences in election procedures of IOA administration body. IOC wanted that election for top posts of IOA to be held as per Olympic Charter, which insists that organizing committees for each country remain autonomous and free of government influence. But India‘s national sports code does not adhere to these requirements, and consequently, a New Delhi court ordered the IOA to hold an election as per government‘s sports code instead of adhering to the IOC‘s charter. What is the solution reached?

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Banking Current Affairs
The IOA has acquiesced to the demand of IOC to amend its constitution in line with the government‘s Sports Code. Following this a fresh election will be held for top administrative posts of IOA.

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Government to set up Financial Stability and Development Council (FSDC)
May 15th, 2013

The Central Government is at consensus to establish Financial Stability & Development Council (FSDC) to strengthen and institutionalize the mechanism for maintaining financial Stability and Development. What would be the role of FSDC? FSDC will perform following role:    To engage in macro prudential supervision of the economy, including the functioning of large financial conglomerates and address inter-regulatory coordination issues. To focus on financial literacy and financial inclusion. To periodically look into issue relating to financial development. Who would be the head of the Council? The Council would have one Sub-Committee which would be headed byGovernor, RBI. The Secretariat of the Council would be in theDepartment of Economic Affairs, Ministry of Finance.

Banking Current Affairs

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APRIL

Banking Current Affairs NABARD opens first Farmers‟ Club in Kargil
April 30th, 2013

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Kargil got its first Farmers’Club, as NABARD inaugurated Trespone Farmer‘s Club at Trespone TSG Block in the district. What is Farmers‟ Club (FCs) ?   Farmers‘ Clubs (FCs) are grassroot level informal forums of farmers. Such Clubs are organized by rural branches of banks with the support and financial assistance of NABARD for the mutual benefit of the banks concerned and the village farming community/rural people. With the enhancement of the programme, other agencies like NGO, VAs, KVKs, SAUs etc. are also now included as agencies included in the formation and promotions of FCs. Background:    The Farmers‘ Clubs programme which was earlier known as ―Vikas Volunteer Vahini (VVV) Programme‖ was launched by NABARD in 1982. The programme was directed towards development in rural areas through credit, technology transfer, awareness and capacity building. The “VVV Programme” was renamed as “Farmers‟ Club Programme‖ in 2005 by revisiting its earlier mission. What is the need of Farmers‟ Clubs? Around 60% of country‘s population depends on agriculture which contributes18% to India‘s GDP. The Tenth Five Year Plan and National Agriculture Policy documents envisage a growth level of 4% in Agriculture. However the growth of the sector has not been satisfactory with less than 2% growth in the last 50 years. To meet the targeted growth it is imperative improve productivity and reduce costs by improving efficiency. Keeping that in mind NABARD devised FCs strategyto provide package of initiatives for transfer of technology, improving input use efficiency, promoting investments in agriculture both in private and in public sectors and creating a favourable and conducive economic environment. The emerging needs in agriculture sector now are adoption of location specific skill and knowledge based technologies, promote greater value addition to agriculture produce, forge new partnerships between public institutions, technology users and the corporate sector, harness IT more effectively to realize financial sustainability and compete in the international market. Who can form FCs?  All Institutional Agencies (Commercial Banks, Cooperative Banks and Regional Rural Banks) and all grassroot level organisations (NGOs, PRIs, State Agricultural Universities, KVKs, ATMA, Post Offices etc.) are eligible to form Farmers‘ Clubs. What are the functions of FCs?

Banking Current Affairs
The broad functions of the Farmers‟ Clubs are:    Coordinate with banks to ensure credit flow among its members and forge better bank borrower relationship, Organise minimum one meeting per month and depending upon the need, there would be 2-3 meetings per month. Non-members can also be invited to attend the meetings, Interface with subject matter specialists in the various fields of agriculture and allied activities etc., extension personnel of Agriculture Universities, Development Departments and other related agencies for technical know how upgradation. For guest lectures, even experienced farmers who are non members from the village/ neighbouring villages could be invited, Liaison with Corporate input suppliers to purchase bulk inputs on behalf of members, Organise/facilitate joint activities like value addition, processing, collective purchase of inputs and farm produce marketing, etc.; for the benefit of members. They can also sponsor / organise SHGs, Undertake socio-economic developmental activities like community works, education, health, environment and natural resource management etc. Market rural produce and products How a bank is benefitted by opening FCs? FCs concept is a win-win situation for both the banker and the borrower. As per a study, the following benefits were accrued to a bank branch operating FCs:        Increase in deposits. Increase in the credit flow and diversification of lending. Generation of new business avenues. Increase in the recoveries and decline in the non-performing assets. Reduction in the transaction costs of financial institutions/ Banks. Socio economic development of the village. Besides these benefits to the banks, the Farmers‘ Club has also been instrumental in certain social welfare measures like free eye check-up camp, Animal Health Care Camp, Mass vaccination camp, community works like road, check-dams, afforestation, etc. Enhancement in bargaining power for bulk purchase of inputs and marketing of their produce. How NABARD supports FCs? NABARD‘s policy support for Farmers‘ Club Programme lays stress on linking tec hnologies with farmers‘ club members and also facilitating market access through the following mechanism:     Capacity building of members of Farmers‘ Clubs including leadership training. Linkage with technology/markets Self Help Groups (SHGs)/Joint Liability Groups (JLGs) formation Forming Federations of Farmers‘ Clubs/Producers‘ Groups/Companies

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Banking Current Affairs
Financial Support from NABARD  NABARD also provides financial assistance of Rs.10,000/- per club per annum for a period of 3 years to all agencies irrespective of whether they are institutional or other agencies and also the region concerned. What is the current status of FCs?  During 2009-10, 16,590 Farmers‘ Clubs have been formed taking the cumulative number of farmers‘ Clubs to 54,805 as on 31st March 2010.

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S. Gopalakrishnan new head of CII
S. Gopalakrishnan, Co-Founder Infosys elected as new President for Industry body Confederation of Indian Industry (CII) for 2013-14. S. Gopalakrishnan will replace Adi Godrej, Chairman of Godrej Group.

Krishna Kumar is new ED of Canara Bank
V. S. Krishna Kumar took charge as the ED (Executive Director) of Canara Bank with effect from April 4, 2013.

India and Singapore ink MoU on Air Services
India and Singapore inked a new Memorandum of Understanding (MoU) on bilateral air services. The MoU rationalizes the capacity entitlements of both India and Singapore in terms of seats per week in each direction with a route specific cap for Singapore on each route. The MoU increases by 10%, the capacity entitlement with India.

Reconstitution of Central Press Accreditation Committee
Central Press Accreditation Committee (CPAC), reconstituted by the Ministry of Information & Broadcasting. Function of CPAC: To approve applications for accreditation from the media, both Indian as well as foreign.

Jammu and Kashmir Bank wins FE India’s Best Banks Award-2012-13
In recognition of its strong fundamentals and dynamic growth model, J & K Bank won the prestigious FE India‟s Best Banks Award for 2012-13.    Ranked as No. 1 in ‗Best Old Private Sector Bank‘ category 3rd in the overall banking industry in terms of ‗Profitability‘. 1st in terms of ‗Profitability‘ in the category of ‗Old private sector banks‘.

Fact Box: Caratometer ( Karatmeter )
April 6th, 2013

Banking Current Affairs
Corporation Bank to use „caratometers‟ in order to check purity of Gold pledged Corporation Bank planning to use ‗cartometers‘ in order to check the purity of Gold pledged. Corporation Bank‘s gold loan portfolio more than doubled to Rs 3,662 crore as of December 2012 from Rs 1,585 crore as at December 2011. To encourage boost agriculture lending, the Corporation bank has opened ‗gold loan shoppe‘ at 7 places. Karatmeter (also spelt as caratometer):        A scientific and non-destructive method for testing the purity of Gold. Internationally used device. Used as a confirmatory test (after the assayer gives his report on the quality of gold), thus assuring the purity of gold pledged with the bank by borrowers. Uses X-rays to give an exact reading of the purity of gold in about 3 minutes. However, it only checks the purity of the gold on the top layer. Most showrooms across India use it. Other ways to determine the gold content include – melting Gold down, the touchstone method or XRF (x-ray fluorescence) method.

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IRDA passes credit rating norm for choosing foreign reinsurers
April 5th, 2013

Insurance Regulatory and Development Authority (IRDA). As per the IRDA (General Insurance – Reinsurance) Regulations 2013, Foreign reinsurers who have a credit rating of at least BBB from Standard & Poor‘s Corp. or an equivalent rating by any other internationalagency for the past five years, can reinsure Indian insurers. In the reinsurance framework, multiple insurance companies share the risk by purchasing insurance policies from other insurers in order to limit the total loss the original insurer would face in the case of a disaster.

What are the Objectives of this move by IRDA ?    Increase retention (the portion of risk which an insurer assumes for its own account). IRDA was finding it difficult to track the audit trail of many transactions with regard to reinsurance placements and coinsurance. There was a demand from the general insurers that a level playing field be created for foreign insurance companies and Indian reinsurers. This was because, as yet there have been no restrictions in place for the foreign firms.

Banking Current Affairs

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MARCH

Banking Current Affairs SEBI issues framework for colour coding, product labelling for mutual funds
March 20th, 2013

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With the aim to inform investors with the amount of risk involved in various mutual funds scheme, market regulator- the Securities and Exchange Board of India (SEBI) has issued guidelines on ‗product labelling‘ with colour coding for mutual funds. The guidelines would be effective from July 1, 2013, for all existing and forthcoming schemes, Securities and Exchange Board of India (SEBI). As per the norms:   The front page of initial offering application forms will carry product labels with details about the schemes. The labels would have to be placed in common applications forms and advertisements. Color and Risk    Blue colour : Low risk Yellow color : Medium risk Brown color: High risk Labels would include details about the nature of schemes ―such as to create wealth or provide regular income in an indicative time horizon(short/ medium/ long term)”. Mutual funds should give a brief about the investment objective in a single sentence followed by kind of product in which investor is investing(equity or debt). Mutual funds would have to include a disclaimer that ―investors should consult their financial advisers if they are not clear about the suitability of the product‖.

Fact box: IFRS
March 19th, 2013

Investors prefer accounting levels close to IFRS: Survey Majority of investors want the government to keep national accounting standards as close to the international norms (called IFRS) as possible, says a survey conducted by the global accounting firm Ernst & Young.

What is IFRS ? International Financial Reporting Standards (IFRS):  A set of international accounting standards stating how particular transactions and other events should be reported in financial statements. types of

Banking Current Affairs
  IFRS are issued by the International Accounting Standards Board (IASB). The rules to be followed by accountants to maintain books of accounts which is comparable, understandable, reliable and relevant as per the users internal or external. What is the need of IFRS? Now, when huge number businesses are going global the international shareholding is also increasing. However, international investors face difficulties in understanding a company‟s financial statements as companies in different countries follow different kinds of financial reporting standards like the US GAAP which is different from Canadian GAAP. Hence, the need was felt to evolve such standards in the form of IFRS which can even out these disparities across international boundaries.  IFRS was started with an aim to synchronize accountingacross the European Union but the value of harmonization quickly made the concept attractive around the globe. IFRS are sometimes confused with International Accounting Standards (IAS), which are the older standards that IFRS replaced. (IAS were issued from 1973 to 2000). How is IFRS being implemented in India?    India is also gradually trying to comply with IFRS. Indian companies had been till now using the U.S. GAAP (Generally Accepted Principles of Accounting) for reporting financial statements. As per RBI banks were to become IFRS-compliant for periods beginning on or after April 1, 2011. Companies are to comply with the new set of rules in a phased manner. As per the plan IFRS proposed Roadmap for INDIA: Opening balance sheet as at April 1* using IFRS-converged accounting standards. *If the financial year of a company commences n a date other than April 1, then the opening balance sheet needs to be prepared from the beginning of the new financial year of the company. 2011:     NSE – NIFTY 50 companies BSE – Sensex 30 companies Companies whose shares or other securities listed outside India Companies listed or NOT having a net worth in excess of Rs 1,000 Crore <This excludes insurance companies, banks and non-banking companies (NBFCs)> 2012:  All Insurance Companies 2013:

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Banking Current Affairs
 Companies listed or Not, but having a net worth between Rs 500 Crores and Rs 1000 Crores <This excludes insurance companies, banks and non-banking companies (NBFCs)> All Scheduled Commercial Banks Urban Co-operative banks having a networth in excess of Rs 300 crores NBFCs – Nifty 50 or Sensex 30 NBFCs listed or NOT, but having a networth more than 1,000 Crores 2014:    Listed companies having a networth less than Rs 500 Crores <This excludes insurance companies, banks and non-banking companies (NBFCs)> Urban co-operative banks having a networth between Rs 200 to Rs 300 crores NBFCs (all other Listed) NBFCs (Other Unlisted) haveing net worth between Rs 500 to Rs 1000 Crores.

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Financial inclusion plan main criteria for getting new bank licences: RBI
March 8th, 2013

The Reserve Bank of India (RBI) has said in its new banking license guidelines that the important criteria for processing the application would be the business model of the applicants and it should provide for financial inclusion.As per these guidelines, new banks are required to establish at least 25% of their branches in places with less than 10,000 population.As per the new norms, private corporates and public sector entities must have 10 years experience to be eligible to apply for new licence. The initial paid-up capital for new banks has been set at Rs 500 crore.

SEBI enables two-way fungibility of IDRs
March 6th, 2013

Holders of Indian Depository Receipts (IDRs) will now have an option to convert it into shares of the issuing company. The Securities and Exchange Board of India (SEBI) has issued detailed guidelines which will allow shareholders to convert their depository receipts into equity shares of the issuer company and vice-versa. The issuer could provide exchangeability to IDR holders by converting IDRs into underlying shares; or converting IDRs into underlying shares and selling the underlying shares in the foreign market where the shares of the issuer are listed and providing the sale proceeds to the IDR holders. Existing IDR issuers can follow the new framework, and have to provide the option of redemption/conversion within three months from the date of completing a year of listing. What are IDRs?  IDRs are generally instruments denominated in rupees and allow overseas companies to raise funds from the Indian market.

Banking Current Affairs
How this step would help India‟s capital market?   This move of allowing for two-way fungibility of IDRs will encourage greater foreign participation in the Indian capital market. So far only the UK-based banking major Standard Chartered PLC was listed as an IDR.

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Budget Box: Government to infuse Rs 14, 000 cr in PSU banks next fiscal
March 3rd, 2013

In the Budget speech it has been announced that the government will infuse Rs 14,000 crore in public sector banks in next fiscal (2013-14). Objective: To ensure that PSU Banks meet the Basel III regulations regarding capital adequacy. Implementation of Basel III capital regulations envisages enhancing the requirement of core equity capital by banks due to higher capital ratios.The Basel III capital ratios will be fully phased in as on March 31, 2018. The RBI has extended the date for implementing Basel III regulations by 3 months to April 1, 2013. The Government had poured in about Rs 20,117 crore in public sector banks during 201011 and Rs 12,000 crore in 2011-12.

Banking Current Affairs

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FEBRUARY

Banking Current Affairs AmEx unveils „ezeClick‟ service
February 24th, 2013

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Credit card selling company American Express (also AmEx) has launched a service ‗ezeClick‘ which will enable its customers to carry out online transactions without entering card details. To avail the facility, the AmEx card members need to register just once, create their ezeClick ID and use it for all future online purchases across all participating merchants.

NTPL signs pact with banks for 1,000-MW project
February 22nd, 2013

A consortium of banks which includes Bank of India, Indian Bank and Central Bank of India has agreed to lend Rs. 937 crore for the 1,000-MW NTPL power project, a joint venture of the Neyveli Lignite Corporationand the Tamil Nadu Power Generation and Distribution Corporation.The project is being set up at Tuticorin in Tamil Nadu. The project would be taken up at an estimated cost of Rs. 4,909.54 crore. The first unit of 500 MW is expected to start operating in December 2013 and the second unit with the similar capacity would begin operation in March 2014. The power generated from the project would be distributed among Tamil Nadu, Kerala, Karnataka and Puducherry.

Dishonoring of cheque given as security is not punishable: Supreme Court
February 21st, 2013

The Apex Court has held that dishonoring of a cheque given as security is not liable to be visited with a penalty under Section 138. It is generally thought that dishonoring of a cheque in any circumstances can attract penal action. However, the Negotiable Instruments Act itself contemplates the presumption of a cheque having been issued for consideration or discharge of debt being amenable to rebuttal.

Fact Box: Saxo Bank
February 20th, 2013

Saxo Bank enters Indian market  Saxo Bank has announced its entry into the Indian market to provide trading platform for foreign equities. About Saxo Bank: An Online Danish investment Founded: Headquarters: Copenhagen, Denmark bank. 1992

Banking Current Affairs
Chairman: Kurt K. Larsen, Chairman Vice Chairman: Dennis Malamatinas CEO: Kim Fournais Founder members: Lars Seier Christensen, Kim Fournais and Marc Hauschildt.   1992: Saxo was originally founded as a brokerage firm under the name ‗Midas Fondsmæglerselskab‘. 2001: The company obtained a banking license and its name was later changed to ―Saxo‖. Services offered:     Trading via an online platform SaxoTrader in Forex, Stocks, CFDs, Futures, Funds and Bonds. Private Wealth Management services. The bank provides online trading and investment across global financial markets. Saxo Bank is well known internationally for its success in Internet brokerage and it has bagged number of awards for the same.

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Fact Box: Priority sector lending (PSL)
February 16th, 2013

Priority sector lending (PSL) by public sector banks to minorities to minorities surpassed 15% mark. Priority sector lending by public sector banks to minorities has increased from 10.6% in 2007-08 to 15.01% in 2012-13 with a total lending of Rs 1,71,960.71 crore to minorities. Priority sector lending to minorities is one of the schemes covered under prime minister‘s new 15 point programme for the welfare of minorities. What is Priority Sector Lending? Priority Sector Lending is an important role given by the Reserve Bank of India (RBI) to the banks for providing a specified portion of the bank lending to few specific sectors like agriculture or small scale industries. Basically this is meant for all round development of the economy apart from only focusing on the financial sector. Are there minimum limits?

Banking Current Affairs
The limits are prescribed according to the ownership pattern of banks. While for local banks, both the public and private sectors have to lend 40 % of their net bank credit, or NBC, to the priority sector as defined by RBI, foreign banks have to lend 32% of their NBC to the priority sector. Are there specific targets within the priority sector? Domestic banks have to lend 18 % of NBC to agriculture and 10 % of the NBC has to be to the weaker section. However, foreign banks have to lend 10 % of NBC to the small-scale industries and 12 % of their NBC as export credit. However, for the balance, there are a vast number of sectors that banks can lend as priority sector. The Reserve Bank has a detailed note of what constitutes a priority sector, which also includes housing loans, education loans and loans to MFIs, among others. What if a bank does not achieve priority sector lending targets? Domestic banks having a shortfall in lending to priority sector/ agriculture are allocated amounts for contribution to the Rural InfrastructureDevelopment Fund ( RIDF ) established in NABARD. In case of foreign banks operating in India, which fail to achieve the priority sector lending target or sub-targets, an amount equivalent to the shortfall is required to be deposited with SIDBI for one year.

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Equity investment limit for Insurance companies raised to 15 %
February 15th, 2013

The Insurance Regulatory and Development Authority (IRDA) has raised the equity investment limit for the Insurance companies to 15% up from existing 10%.   The move follows the Finance Ministry pitching for raising the equity investment limit for insurance giant LIC to up to 30%. With this permit Insurance companies will be allowed to increase their investments in equity in a given company from the present level of 10% to a higher level of 12% and 15% depending upon the size of the controlled fund of any given insurer. The move would not have any adverse effect on the financialhealth of the insurer as the insurance companies control sizeable funds. Four years back, IRDA had amended investment norms to forbid an insurer from holding more than a 10% stake in a company. Other steps:  IRDA also approved the health insurance regulations to enable a more consumer-friendly system. It has referred the matter to insurance advisory committee to add more clarity onbancassurance regulation. IRDA also gave nod to standard proposal form to record full details of a policyholder as per the KYC norms for sale of life insurance products.

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RBI directs Co-op banks to not grant loans for gold purchase
February 15th, 2013

Banking Current Affairs
The RBI has directed State and Central co-operative banks not to give loans for purchase of gold in any form to curb the considerable increase in its import in recent years. Currently, these banks are allowed to grant loans against pledge of gold ornaments, but not permitted to grant any advance for purchase of gold in any form. They offer loans for various purposes against the security of gold/gold ornaments as part of their lending policy.

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Financial Institutions Syndicated Deal of the Year 2012 award goes to YES Bank
February 11th, 2013

YES Bank has been awarded the Financial Institutions Syndicated Deal of the Year 2012 in its Asia Pacific Region. The award was given for $155 million loan syndicated by YES bank which was distributed across 9 different countries from 14 banks. The award was given away by Asia Pacific Loan Market Association (APLMA), which is a leading trade association for syndicated loan market in this region.

Corporation Bank offers new variants of savings bank accounts: “SB Super” and “SB Signature”
February 11th, 2013

‗SB Super‘ and ‗SB Signature‘ are the new variants of savings account launched by Corporation Bank. Facilities with these accounts:     Both offer preferential loan processing by affixing ‗priority‘ seal by the branch while forwarding loan applications. Bundled demat and trading account including a waiver of annual maintenance charges for the first year. Free NEFT, SMS banking, and 25 per cent concession in bank charges for gold coins, Condition: A customer should maintain a minimum quarterly average balance (QAB) of Rs 15,000 for SB Super and Rs 1 lakh for SB Signature.

Government nominates C R Naseer Ahmed on the Board of Directors of Syndicate Bank
February 11th, 2013

The Central Government has nominated Mr. C R Naseer Ahmed as part-time non-official director on the Board of Directors of the Bank for a period of three years from February 01, 2013 or until further orders, whichever is earlier.Source.

Dell ready to become private in $24 billion deal
February 11th, 2013

PC manufacturer Dell is ready to go private in a $24.4-billion buyout. The company which is facing slump will pay its stockholders $13.65 per share to leave the company on its own.

Banking Current Affairs
The company will be sold to a group of investors that includes investment firm Silver Lake. Once this is done, DELL will stop trading on the NASDAQ. Dell did rapid growth through the 1990s which brought its founder Michael Dell into one of the world‘s richest people. Michael Dell, who owns nearly 16% stake in the company, will remain the CEO after the sale closes. Dell‟s sale is the highest-priced leveraged buyout of a technology company. What is a “Leveraged buyout (LBO)”?  LBO = Acquisition of a company (or a part of a company or it can also be single asset like a real estate) using a substantial amount of borrowed money (bonds or loans / debt) to meet the cost of acquisition. The financial buyer (e.g. private equity fund) puts a small amount of equity (relative to the total purchase price) and utilizes leverage (debt or other non-equity sources of financing) to fund the rest of the amount that is paid to the seller. LBOs can have many different forms such as Management Buy-out (MBO), Management Buy-in (MBI), secondary buyout, tertiary buyout, etc. Can LBO be employed in public companies also?  YES. Though, mostly LBOs occur in private companies, but it can also be employed with public companies. The +ves of Leveraged buyout::   In LBO transactions, financial buyers seek to generate high returns on the equity investments and use financial leverage (debt) to increase these potential returns. Financial backers of Dell are of the view that it will be easier to engineer a turnaround without having to pander to the stock market‘s fixation on whether the company‘s earnings are growing from one quarter to the next. Taking the company private will leave it without publicly traded shares to attract and reward talented workers or to help buy other companies. The -ves of Leveraged buyout:   LBOs need companies to reserve some of their incoming cash to reduce the debt taken on as part of the process of going private. The obligations mean Dell will have less money to invest in innovation and expansion of its business. Equity holders – Risk arises due to significant financial leverage. Interest amount that has to be paid for the debt taken by the company are are "fixed costs" and thus they can in future force the company into default if they not paid.

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Banking Current Affairs
Debt holders – The debt holders assume the risk of default compared with higher leverage as well, but as they have claims on the assets of the company, they are likely to realize a partial, if not full, return on their investments, even in bankruptcy. What is “Management Buyout (MBO)”? MBO is quite similar to a LBO, but the difference is that in an MBO the Management Team of the target company acquires the company instead of a financial sponsor as in case of a LBO. Example: Mr. Ram is the sole owner of XYZ company. Mr. Ram is now 65 years old and is set to retire in coming months and exit the business. Now, the Higher Management Team at the company believes strongly that the company has good future ahead and so the Management people come together and they buy out the Mr. Ram‘s (owner‘s) equity in the company and assume control in the XYZ company.

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Sharad Sharma becomes ED of Geojit BNP Paribas
February 9th, 2013

Sharad Sharma has been appointed as the Executive Director of Geojit BNP Paribas to oversee the company‘s operations. Satish Menon, also the Executive Director, will be responsible for all business lines. Things you should know about BNP Paribas and Geojit BNP Paribas - Logo: Geojit BNP Paribas: - BNP Paribas is a French global banking group, headquartered in Paris. - BNP Paribas was formed in 2000 via the merger of Banque Nationale de Paris (BNP) and Paribas in 2000. - Bloomberg and Forbes in 2012 ranked BNP Paribas as the 3rd largest bank in world on basis of the total assets held by the bank. - SBI Life Insurance is a Joint-Venture b/w SBI (74%) and BNP (26%) Paribas Assurance. - ‗Geojit‘ was a company started in 1987 by Mr. C. J. George and Mr. Ranajit Kanjilal. In 1994, it became a Public Limited Company named ‗Geojit Securities Ltd‘. - In 2007, BNP Paribas took a stake majority stake in Geojit Securities Ltd. and consequently, evolved ‗Geojit BNP Paribas Financial Services Ltd.‘

Kotak Mahindra Bank acquires Barclays India‟s business loan portfolio
February 9th, 2013

Kotak Mahindra Bank has acquired the business loans portfolio from Barclays Bank plc India branch and Barclays Investment and Loan (India Ltd) for an undisclosed sum.

Banking Current Affairs Aircel offers „Mobile Money‟
February 9th, 2013

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The Telecom operator Aircel has launched a new service called„Mobile Money‟ in collaboration with ICICI Bank and Visa to enable its customers transfer money, pay bills and withdraw cash by using only their mobile phones—without having to make a trip to the bank or an ATM. It is similar to Vodafone‘s M-Pesa service which first pioneered to great success in Africa. The service will be initially rolled out in Tamil Nadu, specifically for the Chennai – Tirunelveli corridor – to help migrant labourers send back money to their villages. How does it work? A person who wishes to transfer money from A location to B destination will have to deposit the money with a correspondent in the A area, after which an SMS is sent to the recipient confirming the transaction details. The recipient has to merely go to a banking correspondent in their respective area (B) to retrieve the cash. This plan will work even if both parties have no ICICI bank account, with the minimum amount needed to start an account being Rs. 100. The company will make money by charging commission ranging from 1.5 to 3% on each transaction.

Corporation Bank launches new variants of savings bank accounts
February 8th, 2013

Corporation Bank has rolled Super and SB Signature.

out

two

new

types

of

savings

accounts

namely SB

A customer should maintain a minimum Quarterly Average Balance (QAB) of Rs 15,000 for SB Super and Rs 1 lakh for SB Signature. Customers having any of the two accounts will be offered preferential loan processing. Both accounts offer bundled demat and trading account including a waiver of annual maintenance charges for the first year. They also bring concessions and offers like free NEFT, SMS banking, and 25 % concession in bank charges for gold coins.

PNB buys 30% stake in MetLife India
February 8th, 2013

Punjab National Bank which is India‘s second-largest bank has acquired a 30% stake in the Indian subsidiary of the biggest US life insurer MetLife at an unrevealed amount.

Banking Current Affairs ICICI Bank ties with Aircel for Mobile Money
February 7th, 2013

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India‘s largest private sector bank, ICICI Bank has partnered with Aircel to launch a mobile banking service, ‗Mobile Money‘. With the help of this service the unbanked customers of these two companies will be able to transfer money securely and instantly through their mobile phones without getting connected to data services. The service will work towards financial inclusion of those who face problems in transferring money due to absence of branches or ATMs closer to them by offering a range of financial services such as deposits and cash withdrawals, money transfer to third parties, self-reload of prepaid mobile credit, and various utility bill payments. The service will be first launched in Tamil Nadu to specifically cater to the needs of migrant working population.

Union Cabinet gives nod to amendments to Regional Rural Banks (RRBs) Act, 1976
February 6th, 2013

The Union Cabinet approved the amendments proposed in the Regional Rural Banks (RRBs) Act, 1976 Objective:     To enhance authorized and issued capital to strengthen their capital base. The term of the non official directors appointed by the Central Government is proposed to be fixed not exceeding 2 years. How these amendments will it help RRBs? These amendments are aimed at bringing financial stability in RRBs which will make then capable to play a larger role in financial inclusion and meet the credit requirements of rural areas and strengthen the Boards of RRBs. A brief account of RRBs Regional Rural Banks (RRBs) were set up under Regional Rural Banks Act, 1976 (the RRB Act) to build an alternative channel to the ‗cooperative credit structure and to ensure sufficient institutional credit for the rural and agriculture sector. The ownership of RRBs is jointly with the Government of India, the concerned State government and sponsor banks, with the issued capital shared in the proportion of 50%, 15 % and 35%, respectively. As per provisions of the Regional Rural Banks Act, 1976 the authorized capital of each RRB is Rs. 5 crore and the issued capital is a maximum Rs. 1 crore.

Banking Current Affairs

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JANUARY

Banking Current Affairs Canara Bank to launch e-Lounge services
January 28th, 2013

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Canara Bank is about to unveil its e-Lounge services in Bangalore andDelhi. What this service would offer? e-Lounge will cater to the needs of corporate, IT and businessprofessionals. It would offer Services of ATM, cash deposit kiosk, check deposit kiosk, pass book update, internet banking terminal, online trading terminal, corporate web site terminal to offer latest information of bank‘s services all under one roof. The bank would launch first e-Lounge at Koramangala Branch, Bangalore.

„Vision Life Income‟ launched by Birla Sun Life Insurance
January 26th, 2013

Birla Sun Life Insurance has launched its first participating plan „Vision Life Income‟. It offers a perfect blend of income and financial protection for the customer‘s family as it pays survival benefits every year from the end of the premium paying term till maturity and life insurance benefit. The plan offers guaranteed regular income for life post-premium paying term, a discount in premium on high sum assured and income-tax benefits.

Govt to infuse Rs 681 crore in UCO Bank
January 26th, 2013

As part of government‘s plan to infuse Rs 12,517 crore in around 10 state -owned banks by March, 2013, UCO Bank will be infused with Rs 681 crore. The bank will issue equity shares on preferential basis in favour of Government of India for an amount aggregating to the tune of Rs 681 crore.

25 RRBs merged into 10
January 24th, 2013

Restructuring of RRBs by merging geographically contiguous RRBs sponsored by different banks within a state is in progress in order to consolidate RRBs segment. During the first 9 months of the current fiscal 25 such banks have been merged into 10. Now the number of RRBs stands at 67 till the first week of Jan 2013. RRBs have a network of about 16,000 branches spread across the rural and semi-urban centres of the country. What is the aim of consolidation?  The consolidation of RRBs has been progressing since 2005 following the recommendation of a committee chaired by RBI Deputy Governor K C Chakrabarty which decided to recapitalize 40 selected RRBs in 21 states. These mergers will boost the capital base of RRBs and improving efficiencies as well as optimizing the use of modern technology.

Banking Current Affairs
Where did these mergers take place?  States where the mergers took place are Bihar, Karnataka,Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh andUttarakhand. The Centre‘s shareholding in RRBs is 50%, while 35% and 15% are with the sponsor banks and state governments, respectively.

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PNB to get Rs 1,248 cr from Central Govt
January 24th, 2013

The Central Government will to infuse Rs 1,248 crore in Punjab National Bank (PNB) through preferential allotment of shares. The decision is part of recently approved capital infusion plan of Rs 12,517 crore in around 10 state-owned banks by March, 2013.

S S Mundra appointed as the new CMD of BoB
January 24th, 2013

S S Mundra has been appointed by the Government of India as theChairman and Managing Director (CMD) of India‘s second largest lender- Bank of Baroda. He is the former Executive Director of Unionbank of India.

SBI to set up „by-invitation-only‟ branches to serve Super-rich and NRIs
January 20th, 2013

India‘s largest public sector bank, State Bank of India (SBI), along with its associates, plans to set up „by-invitation-only‟ branches under the ‗Kohinoor‘ brand in 20 cities to serve uber-rich customers and Non-Resident Indians (NRIs). What would be so special with these branches? These branches will be operational 24X7 and have amenities like lounges, conference rooms, personal business centres and cafeterias. The branches will offer all the banking products and services of SBI and its subsidiaries. The bank will assign personal banker to each client. Clients can either visit the branch or interact with staff over video chat for their banking needs. SBI had launched first such branch — Kohinoor Banjara — in Hyderabad in 2010. While the bank has not specified any minimum deposit requirement, it expects customers to have at least Rs 1 crore of deposits in the branch. SBI had launched first such branch — Kohinoor Banjara — in Hyderabad in 2010.

Proceeds of NIF allowed to be used to fund bank recapitalization: CCEA
January 19th, 2013

In a move made to enhance disinvestment policy, the Cabinet Committee on Economic Affairs (CCEA) chaired by PM Dr. Manmohan Singh has permitted the National Investment Fund (NIF) to buy shares of public sector enterprises, including banks and insurance companies.

Banking Current Affairs
Now the fund will be use for subscribing to the shares being issued by the Central Public Sector Enterprise (CPSE) including Public Sector Banks (PSBs) and Public Sector Insurance Companies, on rights basis so as to ensure that 51% ownership of the government is not compromised. National Investment Fund (NIF) NIF was established in 2005 to channelize the proceeds generated through the sale of minority shareholding of CPSEs. The Fund would be maintained outside the Consolidated Fund of India. For what purposes the fund is being used currently? Who manages the Fund? Continue reading…

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Axis Bank offers e-Gift Card service
January 19th, 2013

Axis Bank has launched „Axis Bank e- Gift Card‟which is an online version of physical plastic gift cards. What does it offer? The e-Gift card allows the customers to buy gift cards in an alternate way. The card carrying a particular value can be bought by using debit or credit card. This card can be gifted via email or SMS to the recipient who can use it to purchase anything online across categories like apparels, airline tickets, books etc. It also saves the sender from the puzzling situation of ―what to buy for gift‖. All purchase transa ctions shall be limited to sites that support verified by Visa and MasterCard secure code for two factor authentication.

World Bank cuts Global Growth estimates for 2013
January 19th, 2013

World Bank sharply slashed the global growth outlook for 2013 to 2.4%from earlier estimate of 3%. As per World Bank, major economies around the world are still facing hurdles towards recovery, despite improved conditions in financial markets. It also cut its forecast for developing countries, which last year grew at their slowest pace in a decade, to 5.5 % in 2013 from 5.9% in a June, 2012 forecast. The growth in these countries should slowly gather up, touching 5.7% in 2014 and 5.8% in 2015. As per projections, growth in advanced economies should reach 1.3 % in 2013 dragged down by spending cuts, high unemployment and weak consumer and business confidence. It would touch 2% in 2014 and2.3% in 2015.

Banking Current Affairs
The Bank called on the developing countries to focus on internal productivity-enhancing policies to give growth a fillip.

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RBI introduces Dollar- Rupee swap facility
January 18th, 2013

RBI has introduced a dollar-rupee swap facility. Objective: To increase the flow of credit to the export sector to support incremental Pre-shipment export Credit in Foreign Currency (PCFC) by banks. As per RBI, banks will have the option to avail rupee refinance to the extent of the swap with RBI under a special export credit refinance facility. The facility will be available to banks from January 21 till June 28, 2013, for a fixed tenor of three or six months. The total limit for the banking system works out to $6.5 billion. Banks will be able to buy US dollars up to its eligible swap limit from RBI and at the same time sell the same amount of dollars forward as per the term of the swap, at the prevailing market rates for swaps of similar tenor. At the end of the swap term, the banks will exchange the dollars against the rupees with RBI. RBI will decide upon the number of banks that can access the facility, the maximum amount of swap that RBI would contract with banks and the maximum limit each bank can do on a particular day after taking into account market conditions.

Banks to ask RBI to permit interest on current accounts
January 18th, 2013

In the run up to the RBI‘s Monetary Policy Review, banks will ask the central bank to allow them to pay interest on current account deposits. Currently, there is no interest given by banks on current accounts. Banks are of the view that providing interest on current account will generate more cash flow into the system which otherwise stays with the establishments. Current accounts make 9.85 % of total deposits with banks. Banks will also demand a slash in CRR as well as in repo rate.

Allahabad Bank signs MoU with CIMSME to shore up priority sector lending
January 16th, 2013

Allahabad Bank has inked an MoU with the Chamber of Indian Micro, Small and Medium Enterprises (CIMSME) to prop up its priority sector lending. CIMSME communicates the interests of companies in MSME sector, with banks, financial institutions, concerned ministries and other organizations. What is the agreement?

Banking Current Affairs
As per the pact, CIMSME would mobilize proposals from its members for consideration of the bank. Once the loan is approved, the organization would support the bank in follow-up and recovery of dues and provide early warning signals, if any. How will it help? The agreement will help speed up the process of disposal of loan proposals under MSME and help the bank collect quality proposals and enhance credit flow to the sector.

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Raj Kumar Goyal is new ED of Central Bank of India
January 16th, 2013

Raj Kumar Goyal has been appointed as the new Executive Director of Central Bank of India. Goyal comes in place of Rajeev Kishore Dubey, who has taken over the control of Canara Bank as its Chairman & Managing Director.

Corporation Bank unveils RuPay Aadhar card
January 16th, 2013

Corporation Bank has launched Corp RuPay Aadhaar cardwhich has a primary aim to provide easy and smoothbanking services to the financially excluded and underprivileged sections of the society having Aadhaar number. The card can be used at the conventional ATMs, micro ATMs or at the handheld machines used by business correspondents and at point-of-sale terminals at merchant establishments. Corporation Bank is an associate in the direct cash/benefit transfer scheme launched by the Government which will enable direct transfer of various social security benefits and subsidies straight into the accounts of the beneficiaries.

Money laundering, banking bills turn into law with President assent
January 15th, 2013

President Pranab Mukherjee gave assent to the three financial sectors reforms laws namely, Prevention of Money Laundering (Amendment) Bill, Banking Laws (Amendment) Bill, Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2012. The money laundering bill seeks to remove existing limit of Rs 5 lakh as fine under the Act. It proposes to make provision for attachment and confiscation of the proceeds of crime even if there is no conviction so long as it is proved that offence of money laundering has taken place, and property in question is involved in money-laundering.

Banking Current Affairs Government approves Rs.12,517 cr capital infusion in PSBs
January 13th, 2013

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The Union Cabinet cleared infusion of Rs.12,517 crore in about 10 Public Sector Banks (PSBs) during the current fiscal to boost their lending potential and also assist them in meeting the stricter capital adequacy norms under Basel-III. Besides this, the Cabinet also gave an in-principle approval for providing need-based recapitalization of banks till 2018-19 for ensuring compliance with the Basel-III capital adequacy norms. In previous years also, same kinds of measures were taken by the government when it infused about Rs.20,117 crore in PSBs during 2010-11 and poured in another Rs.12,000 crore in 2011-12 to comply with the capital adequacy norms. Accordingly, keeping in mind the capital requirements in the coming years, the Cabinet gave an in-principle nod for need-based additional capital infusion in banks from 2013-14 to 2018 -19 to ensure compliance with Basel-III global banking norms aimed at minimizing financial risks. Implementation of Basel-III capital regulations increases requirement of core equity capital by banks due to higher capital ratios. The Basel-III capital ratios will be fully phased in as on March 31, 2018.

RBI establishes Working Group to review Banking Ombudsman Scheme
January 12th, 2013

Taking into consideration the suggestions by Committee on Customer Service in Banks (Damodaran Committee) relating to BankingOmbudsman Scheme 2006 and the Rajya Sabha Committee on Subordinate Legislation, Reserve Bank of India (RBI) has constituted a Working Group which will be headed by Suma Verma with an aim to review, update, and revise the Banking Ombudsman Scheme, 2006. The background of Banking Ombudsman Scheme. What sort of complaints doest this scheme handles?

Urjit Patel is the new deputy governor of RBI
January 6th, 2013

Urjit Patel succeeded Subir Gokarn to become new deputy governor at the Reserve Bank of India. Patel is PhD in economics from the Yale University and a non-resident senior fellow at the Brookings Institution, a US-based think-tank. He will have a 2-year term at the regulator.

Banking Current Affairs SBI unveils MobiCash Easy
January 3rd, 2013

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State Bank of India (SBI) has unveiled its mobile wallet namedState Bank MobiCash Easywhich provides facilities such as fund transfer, bill payment, balance inquiry, mini statement, mobile top-ups and DTH recharge etc. How does SBI‟s MobiCash works?

Astra‟s third launch also successful one
January 1st, 2013

India achieved a third consecutive success in the launch of anti-aircraft air-to-air Astra missile, which was fired from a static launcher on the ground at Chandipur, Odisha. Astra destroyed Lakshya, a pilotless target aircraft, successfully. Future plans:  After three more ground-to-air launches in 2013, Astra will be fired from aircraft such as Sukhoi-30 MI, MiG-29 and the Light Combat Aircraft, Tejas. It can be launched from different altitudes and the distance at which it can kill an enemy aircraft depends on the altitude from which it is fired.

Investment slumps in textiles; “R-TUFS” scheme to promote investments in sector
January 1st, 2013

In 2012, the textile and clothing industry in the country has made minimal investment in expansions and new projects. In 2011, the Union Ministry of Textiles had announced the Restructured Technology Upgradation Fund Scheme (R-TUFS) with subsidy cap for each value adding segment, such as spinning, weaving and processing. The total subsidy amount provided for 20112012 was Rs. 1,972 crore. It was anticipated to leverage total investment of Rs. 46,900 crore. The subsidy claimed was only Rs. 362 crore. Though 3,542 applications were received, proposing a total investment of Rs. 35,892 crore (April 2011 to November 2012), implementation of the projects are delayed. What is R-TUFS?  It is a scheme introduced by Govt. of India, Ministry of Textiles, to channelize investments towards hitherto low investments segments to facilitate a balanced growth across the value chain.

Banking Current Affairs
Objectives of the Scheme:  Addressing the issues of fragmentation and promoting forward integration by providing 5% interest reimbursement for spinning units with matching capacity in weaving/knitting/processing/garmeting Promoting investments in sector with low investment like processing Technology upgradation in weaving by providing higher capital subsidy for establishment of new shuttle-less looms Ensuring greater participation of SSI (Small Enterprises) units by increasing the limits under this category

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