Weekly Economic Round-up by Maggu Bhai

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1. RBI enters top-10 list of gold holders with 52.3-tonne purchase in FY19

World Gold Council

 The World Gold Council is the market development organisation for the gold
industry.
 The World Gold Council derives data on gold reserves from International
Financial Statistics under International Monetary Fund.
 All signatory central banks have to provide monthly updates to the IMF on their
gold purchases forming part of their foreign exchange reserves.
 Headquartered in London United Kingdom

Key points

 The Reserve Bank of India purchased 52.3 tonnes gold in FY19 to augment its
foreign exchange reserves.
 With this, it has entered league of world's top-10 gold holding central banks.
RBI currently holds 612.6 tonnes of the metal as part of its foreign exchange
reserves.
 Till about a month ago, the central bank was ranked 11th, but in March it
added 3.7 tonnes of gold to its forex reserves and dislodged the Netherlands
from the 10th spot.

2. RBI may shun sectoral exceptions, ease timelines for stressed assets (as on
6th June)

Key points

 The Reserve Bank of India is unlikely to announce special sectoral exceptions

in its new circular on stressed assets, contrary to demands of power, sugar,
shipping and textile industries.
 The banking regulator may also seek resolution plans for stressed assets to be
approved by 90% lenders in a consortium, as against 100% in the previous
notification that Supreme Court had quashed.

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  RBI is also expected to raise the timeline for a project to be categorised as
stressed from one-day default in the previous circular to 30 days of default.

3. Corporates may have to wait for a day to issue a new Commercial Paper (CP)
after redeeming a maturing CP

Commercial paper

 Commercial paper, or CP, is a short-term debt instrument issued by

companies to raise funds generally for a time period up to one year.
 CPs have a minimum maturity of seven days and a maximum of up to one
year from the date of issue

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Key points

 Corporates may have to wait for a day to issue a new Commercial Paper (CP)
after redeeming a maturing CP
 The Reserve Bank of India is considering mandating this cooling period to deal
with the tendency of some corporates to continuously replace one CP — an
unsecured short-term debt paper — with another.
 What the new norm will mean is that a corporate will have to first repay a
‘maturing’ CP from its internal accruals and only thereafter raise resources via
a fresh CP issuance the following day

4. Retail e-payment transactions jump 95% in FY19: RBI report

Key points

 Driven by efforts aimed at “higher financial inclusion and adoption of mobile

payments”, India posted an accelerated growth rate of 95 per cent in the
volume of retail electronic payment transactions in 2018-19.
 The high growth in FY19 was largely due to steep growth in Unified Payments
Interface (UPI).
 The RBI undertook a comprehensive exercise for benchmarking India’s
payment systems by selecting a mix of 21 nations, spread across all
continents.

5. Banks can now name and shame over 9,000 wilful defaulters in newspap

Key points

 The Department of Financial Services (DFS) has asked public sector banks to
advertise the names and pictures of the over 9,000 wilful defaulters with
unpaid dues of over Rs 1 lakh crore.
 The move of "naming and shaming" the wilful defaulters is expected to act as a
deterrent to borrowers who do not repay and default the system.
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  The banking sector is saddled with non-performing assets (unpaid loans)
worth Rs 12 lakh crore as of March 2019.
 The Reserve Bank of India (RBI) had in April told banks to put the names in
public domain but this was not made mandatory.
 Now with the Department of Financial Services insisting on naming and
shaming the wilful defaulters, banks have to publicise the names of borrowers
who have deliberately not repaid their loans.

6. India to grow at 7.5 per cent in FY19-20: World Bank

Key points

 India is projected to grow at 7.5 per cent in the next three years, supported by
robust investment and private consumption.
 India is estimated to have grown 7.2 per cent in fiscal year 2018-19, which
ended March 31. A slowdown in government consumption was offset by solid
investment, which benefitted from public infrastructure spending.
 India will continue to retain the position of being the fastest growing emerging
economy.
 And by 2021, its growth rate is projected to be 1.5 per cent more than China’s
6 per cent.
 According to the World Bank, growth in India is projected at 7.5 per cent in
Fiscal Year 2019-20 (April 1, 2019 to March 31, 2020), unchanged from the
previous forecast, and to stay at this pace through the next two fiscal years

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7. Highlights of the Monetary Policy Committee (MPC) meeting announcement-
June 06, 2019

Key points

 The Monetary Policy Committee (MPC) decided to reduce the policy repo rate
under the liquidity adjustment facility (LAF) by 25 basis points to 5.75 per cent
from 6.0 per cent with immediate effect.
 The reverse repo rate under the LAF stands adjusted to 5.50 per cent, and the
marginal standing facility (MSF) rate and the Bank Rate to 6.0 per cent.
 The Reserve Bank has announced that it would conduct an OMO purchase
auction of ₹15,000 crore (₹150 billion) on June 13, 2019.
 The path of CPI inflation is revised to 3.0-3.1 per cent for H1:2019-20 and to
3.4-3.7 per cent for H2:2019-20, with risks broadly balanced.
 GDP growth for 2019-20 is revised downwards from 7.2 per cent in the April
policy to 7.0 per cent – in the range of 6.4-6.7 per cent for H1:2019-20 and
7.2-7.5 per cent for H2 – with risks evenly balanced.

8. RBI waives RTGS, NEFT charges

Key points

 The RBI has decided to waive all charges on Real Time Gross Settlement
System (RTGS) and National Electronic Funds Transfer (NEFT) transactions
— two preferred routes for instantly transferring funds digitally.
 RTGS is an electronic form of funds transfer on a real-time basis. The system
is primarily meant for large-value transactions.
 The minimum amount to be remitted through RTGS is Rs 2 lakh with no upper
or maximum ceiling.
 NEFT is a nation-wide payments system facilitating one-to-one funds transfer,
usually on the same day. Under this, individuals, firms and corporates can
electronically transfer funds from any bank branch to any individual, firm or

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 corporate having an account with any other bank branch in the country. The
operating hours of NEFT is from 8am to 7pm.
 The move comes on the heels of the RBI-appointed Nandan Nilekani-led
committee report for deepening digital payments.

9. Draft norms for ‘on-tap’ licensing of small finance banks by August end

Key points

 The Reserve Bank of India (RBI) will issue draft guidelines for ‘on-tap’
licensing of Small Finance Banks (SFB) by the end of August 2019 with a view
to enhance supply of credit to small borrowers and encourage competition.
 On-tap licensing is a time-efficient feature that will allow parties to obtain the
licence on-demand basis and eligible parties won’t have to wait.
 The RBI had also expressed its intention to use the learning from the licensing
round to appropriately revise the guidelines and move to giving licences more
regularly or virtually ‘ón tap’.
 Eight of the ten small finance banks have also been included in the second
schedule of the RBI Act, 1934.

10. RBI issues revised circular on stressed loans: Here are all the details

Key points

 Under the new 'Prudential framework for resolution of stressed assets', lenders
will have complete discretion to design, implement resolution plan.
 Banks may start resolution, IBC process within 30 days of default.
 Once a borrower is reported to be in default by any lenders, they may review
of the borrower account within 30 days from the day of default.
 Lenders should follow a board-approved policy for resolution of bad loans.
 Mandatory to sign inter-creditor agreement (ICA) by all lenders, which will
provide for a majority decision making criteria.

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 *RBI changed its earlier norm of 100 percent approval from creditors. ICA shall
now provide any decision agreed by lenders representing 75 percent by value
of total outstanding credit facilities and 60 percent of lenders by number shall
be binding upon all the lenders, helping speed up the resolution process.
 Lenders must resolve over Rs 2000 crore NPA account within 180 days.
 Higher provisioning for delay in resolution. L enders will have to make 35
percent provisions--first 20 percent for 180 days and then an additional 15
percent if no resolution is found within 365 days.
 The joint lenders' forum (JLF) as mandatory institutional mechanism for
resolution also stands discontinued.
 The accounts would be classified according to this time table

 In the case of revolving credit facilities like cash credit, the SMA sub-
categories will be as follows:

 In addition, the lenders shall submit a weekly report of instances of default by

all borrowers (with aggregate exposure of Rs 50 million and above) by close of
business on every Friday, or the preceding working day if Friday happens to
be a holiday
 For borrowers with exposure between Rs 1,500 crore and Rs 2,000 crore, the
new norms will be applicable from January 1, 2020, while for loans up to Rs
1,500 crore will be announced in due course.
 RBI also warned that any action by lenders to conceal the actual status of
accounts or evergreening the stressed accounts, will be subjected to stringent
supervisory/enforcement actions

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11. RBI imposes Rs 2 crore penalty on Kotak Mahindra Bank

Key points

 The Reserve Bank of India (RBI) has imposed a penalty of Rs 2 crore on

private lender Kotak Mahindra Bank for failing to provide information about
promoter shareholding in the bank and the course of action the bank was
taking to dilute promoters’ shareholding as per the regulator’s norms.
 Headquater - Mumbai

12. India has 597 ATMs less in 2019 than 2017

Key points

 The number of ATMs in India dropped to 2,21,703 as on March 31, 2019 from
2,22,300 at the end of 2017, recording a decrease of 597 ATMs during the
period, according to a report released by the Reserve Bank of India.
 India also has one of the lowest ratios of ATM cash withdrawal relative to cash
in circulation, revealed the report titled "Benchmarking India's Payment
Systems".

13. Chief statistician to remain head of statistics system

Key points

 Under criticism for restructuring the statistical system, the government has
clarified that the chief statistician will continue to be the head of the country's
official statistics system.
 The Ministry of Statistics and Programme Implementation (MoSPI) on
Thursday partially modified its May 23 order to say that the newly-constituted
National Statistical Office (NSO) will be headed by "chief statistician of India-
cum-Secretary (Statistics and Programme Implementation)."

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  The government had last month approved the merger of National Sample
Survey Office (NSSO) with the Central Statistics Office (CSO) under MoSPI.
 The proposed NSO would be headed by MoSPI secretary, according to the
previous order

14. RBI nudges banks to offer these five services to no-frills account holders

Key points

 The Reserve Bank of India (RBI) directed banks to offer to basic savings bank
deposit (BSBD) account holders five services for free and without any
requirement for maintaining minimum balance.
 The five services are: deposit of cash at bank branches as well as ATMs and
cash deposit machines (CDMs), receipt of money through any electronic
channel or by means of deposit or collection of cheques drawn by government
agencies and departments, unlimited deposits, a minimum of four withdrawals
in a month, including ATM withdrawals, and an ATM card or ATM-cum-debit
card.
 The regulator also observed that the BSBD account shall be considered a
normal banking service available to all.
 It added that banks are free to provide additional value-added services,
including issue of cheque book, beyond the above minimum facilities, which
may or may not be priced and must be disclosed.
 Holders of BSBD accounts will not be eligible for opening any other savings
bank deposit account in the same bank.
 If a customer has any other existing savings bank deposit account in that
bank, they will be required to close it within 30 days from the date of opening a
BSBD account.
 Further, before opening a BSBD account, a bank should take a declaration
from the customer that she/he does not have a BSBD account in any other
bank

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15. Government mulling tax on cash withdrawal of Rs 10 lakh a year

Key points

 Centre plans to impose tax on those withdrawing Rs 10 lakh in cash a year as

it seeks to discourage use of paper currency.
 Another proposal under consideration is mandating Aadhaar authentication for
all high-value cash withdrawals, which it believes will make it easy to track
individuals and tally tax returns.
 In doing this, the government will go beyond just seeking the unique
identification number, as is the case with deposits of over Rs 50,000 where
PAN is given

16. RBI approves RK Chhibber’s appointment as interim CMD of J&K Bank

Key points

 Jammu & Kashmir Bank said it has received RBI’s approval for appointment of
R K Chhibber as its interim CMD for three months. Chhibber, Executive
President of J&K Bank, was appointed following removal of Parvez Ahmed as
CMD of the bank by the Jammu & Kashmir administration.

17. NHB notification asks housing finance companies to increase liquid assets

Key points

 The National Housing Bank (NHB) has asked deposit-taking housing finance
companies (HFCs) to slightly increase their liquid assets, stepping in as some
sector players face a liquidity crisis.
 The NHB, through a notification issued on May 25, has asked HFCs to keep
6.5 per cent of the public deposits in debt-free securities, instead of the 6-per
cent limit earlier.

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  HFCs have to in keep 13 per cent as liquid assets--instead of 12.5 per cent
earlier--with the remaining share of public deposits to be kept in the form of
term deposits or certificate of deposits or in bonds issued by the NHB.
 Recently, NHB directed HFCs with asset size of more than Rs 5,000 crore to
appoint a chief risk officer (CRO) in a bid to improve risk management
practices.

18. Sebi looks to reward company insiders who turn whistleblowers

Key points

 The Securities and Exchange Board of India has proposed rules that will allow
employees to expose fraud and wrongdoing in a company and get a reward for
it.
 The regulator said it will provide adequate safeguards against victimisation of
the informant.
 The original information may be shared with other regulators and law
enforcement authority within or outside India at Sebi's discretion.
 The information provided by the informant under this policy would be
exempted from disclosure.
 Sebi said it would reward the informant with 10 per cent of the monies
collected but it would not exceed Rs 1 crore.

19. RBI sets up panel to review ATM charges

Key points

 The Reserve Bank has constituted a high-level committee under IBA Chief
Executive V G Kannan to examine ATM charges and fees by banks amid
demands for reviewing the levies.
 The six-member panel will review the existing structures and patterns of costs,
charges and interchange fees for ATM transactions.

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20. Bank frauds worth ₹2.05 trillion happened in last 11 years

Key points

 Of over 50,000 frauds that hit banks in India in the last 11 fiscal years, the
ICICI Bank, State Bank of India (SBI) and HDFC Bank reported highest
number of cases, according to an RBI data.

21. TCS to implement RBI’s information and management system for 310 cr

Key points

 IT major Tata Consultancy Services will implement Reserve Bank’s a

centralised information and management system (CIMS) for seamless data
collection and validations at a cost of Rs 310.52 crore.
 TCS pipped other IT majors like IBM India, Infosys, Larsen & Toubro Infotech
to get the key project of the central bank.
 The project has to be completed within a year of the commencement of the
contract with the RBI.
 The RBI had invited of expression of interest (EOI) in July 2018 for
identification of solution provider for implementation of CIMS by overhauling
the data warehouse (DW) of the apex bank.

22. After RBI Action Against Manipur, Biren Singh Takes Over Key Departments

Key points

 Manipur Chief Minister N Biren Singh reshuffled the state cabinet to take over
the key departments of finance, public works and power today, a day after the
Reserve Bank of India directed nationalised banks to stop honouring bills and
cheques issued by his government.

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  The central bank had taken the step in response to an "overdraft" of Rs. 300
crore arising from withdrawal of funds in excess to pre-determined
arrangements.

23. Govt achieves Mudra loan target of Rs 3-lakh crore in FY19

Key points

 Pradhan Mantri Mudra Yojana (PMMY) has for the third successive year
accomplished its annual lending target of Rs 3 lakh crore in FY 2018-19.
 The government had set this ambitious target in the last year's Budget. Small
loans worth more than Rs 3.21-lakh crore have been ratified in 2018-19 under
the PMMY scheme as against the set target of Rs 3-lakh crore, according to
the latest official data.
 Furthermore, loan disbursement also crossed the target mark at around Rs
3.12-lakh crore.
 Mudra loans are classified into three categories depending on the beneficiary
unit's growth stage and funding needs.
- While 'Shishu' covers loans up to Rs 50,000, the Kishore category covers
loans above Rs 50,000 and up to Rs 5 lakh, and Tarun for higher loan
amounts.
 These loans are given bycommercial banks, RRBs, small finance banks,
cooperative banks, MFIs and non-banking financial companies.

24. Sebi prescribes norms for rating agencies to improve rating standards

Key points

 The Securities and Exchange Board of India (Sebi) prescribed guidelines

including probability of default (PD) benchmarks in a bid to strengthen the
disclosures made by credit rating agencies.
 The regulator introduced computation of cumulative default rates (CDR),
standard operating procedure (SOP) in respect of tracking and timely
recognition of default, probability of default (PD) benchmarks, rating symbol for

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 instruments having explicit credit enhancement feature, disclosure of rating
sensitivities in press release, disclosure on liquidity indicators and tracking
deviations in bond spreads.

25. RBI asks banks to grout ATMs to wall, pillar or floor to enhance security

Key points

 The Reserve Bank asked banks to ensure their ATMs are grouted to a wall,
pillar, or floor by September-end, except those installed in high secured
premises such as airports, to enhance security of the cash vending machines.
 In 2016, the RBI had set up a Committee on Currency Movement (CCM) to
review the entire gamut of security of treasure in transit.
 Based on the recommendations of the panel, the central bank has now issued
the instructions aimed at mitigating risks in ATM operations and enhancing
security.
 As part of the security measures, all "ATMs shall be operated for cash
replenishment only with digital One Time Combination (OTC) locks.
 Further, banks may also consider rolling out a comprehensive e-surveillance
mechanism at the ATMs to ensure timely alerts and quick response.

26. RBI sets up panel under UK Sinha to study MSMEs

Key points

 The Reserve Bank Tuesday set up an eight-member expert committee under

the leadership of former chairman of Sebi UK Sinha to review the current
framework for the MSME sector.
 The committee will suggest long-term solutions for the economic and financial
sustainability of the micro, small and medium enterprises.
 The committee will examine the factors affecting the timely and adequate
availability of finance to the MSME sector.

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27. India among top 20 host economies for FDI inflows in 2017-18: UN report

Key points

 Foreign Direct Investment (FDI) to India grew by 6 per cent to USD 42 billion in
2018.
 The World Investment Report 2019, released by the UN Conference on Trade
and Development (UNCTAD) Wednesday, said global FDI flows slid by 13 per
cent in 2018 to USD 1.3 trillion from USD 1.5 trillion the previous year the third
consecutive annual decline.
 Investment in India the subregion's largest recipient rose by 6 per cent to USD
42 billion with strong inflows in manufacturing, communication, financial
services and cross-border merger and acquisition (M&A) activities.
 The report added that India and the UAE, not traditionally in the top 20
outward investor countries, were also considered as among the top 10 most
important sources of FDI for the 2019 to 2021 period.

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