FINANCE CURRENT AFFAIRS

MAY WEEK II
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Contents

RBI
RBI gives NOC for merger of Equitas SFB and Equitas Holdings ........................................................................ 2
RBI extends validity of Directions ...................................................................................................................... 3
RBI imposes Monetary Penalty on certain Banks .............................................................................................. 4
RBI appoints Dr. Sitikantha Pattanaik as new Executive Director ..................................................................... 5

SEBI
SEBI amends norms for InvITs............................................................................................................................ 6
SEBI constitutes advisory committee on Environmental, Social and Governance (ESG) matters .................... 7
SEBI grants recognition to NDML as an Accreditation Agency for 3 years ........................................................ 8
SEBI tightens promoter norms........................................................................................................................... 9

OTHERS
EXIM Bank to provide additional Line of Credit (LoC) to the SBM (Mauritius) Infrastructure Development
Company Ltd .................................................................................................................................................... 11
Current Economic Trends ................................................................................................................................ 12
“Repco Subiksham”: New deposit scheme for senior citizens ........................................................................ 13

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RBI
RBI gives NOC for merger of Equitas SFB
and Equitas Holdings
What
Recently, RBI issued a No-Objection Certificate (NOC) with certain conditions on the voluntary merger of
Equitas Holdings Ltd (EHL) and its subsidiary, Equitas Small Finance Bank Ltd (ESFBL).
➢ The merger is being carried out to comply with the RBI norms on Small Finance Banks, which
mandates the promoter to reduce its stake in the subsidiary to 40% within 5 years of
commencement of operations by the SFB.

Conditions laid down by RBI on issuing NOC

Prior to the merger:

1. EHL will have to divest its shareholding in its subsidiary, Equitas Technologies.
2. Equitas SFB will have to take RBI approval to bring Equitas Development Initiatives Trust (EDIT) and
Equitas Healthcare Foundation (EHF) under its ambit.

RBI also indicated that the no-objection should not be treated as granting exemption from any of the
regulatory requirements of RBI, and any deviation from the existing regulatory instructions would have to
be taken separately and RBI may impose additional conditions as it deems appropriate.

Tell me more

Small Finance Banks (SFBs)

❖ These are banking institutions aimed at developing a viable

business model to cater to the financial needs of the
marginalised sections of the society.

❖ The primary objective of creating SFBs was to improve

financial inclusion through an effective deployment of
deposits and extension of credit facilities to micro, small
and unorganised entities at low processing costs.

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RBI norms on Small Finance Banks

According to RBI conditions laid down for SFBs in June 2016 and guidelines for licensing of SFBs in private
sector in November 2014:

▪ Equity shares of SFBs should be listed on recognised stock exchange(s) within 3 years from the date the
net worth of SFB reaches Rs 500 crore.
o In case of ESFB, the applicable date for listing was September 4, 2019 as it commenced its
banking operations with a net worth of more than Rs 500 crore.
o Thus, compliance with regard to listing was honoured through an IPO and listing of shares of
ESFB on exchanges from November 2, 2020.

▪ The other condition is that if a promoter holds more than 40% stake in the subsidiary (ESFBL), it should
be brought down to 40% within 5 years from the date of commencement of banking operations.
o The applicable date for ESFBL is September 4, 2021.

RBI extends validity of Directions

Name of the Bank
Babaji Date Mahila Sahakari
Bank Ltd., Yavatmal,
Maharashtra
Sri Guru Raghavendra Sahakara
Bank Niyamitha, Bengaluru
Laxmi Co-operative Bank Ltd.,
Solapur
Shankarrao Pujari Nutan Nagari
Sahakari Bank Limited,
Ichalkaranji, Kolhapur
Extension Period Details of the Direction
The Directions stipulate certain
3 months from May 09, 2022 to
restrictions and ceiling on
August 08, 2022, subject to
withdrawal / acceptance of
review.
deposits.
The Directions stipulate certain
6 months from May 11, 2022 to
restrictions and ceiling on
November 10, 2022, subject to
withdrawal / acceptance of
review.
deposits.
The Directions stipulate certain
3 months from May 12, 2022 to
restrictions and / or ceiling on
August 11, 2022, subject to
withdrawal / acceptance of
review.
deposits.
The bank should not, without
prior approval of RBI in writing,
grant or renew any loans and
advances, make any investment,
incur any liability including
borrowal of funds and
acceptance of fresh deposits,
6 months from the close of
disburse any payment in
business on May 13, 2022 and
discharge of its liabilities and
are subject to review.
obligations, enter into any
compromise or arrangement and
sell, transfer or otherwise
dispose of any of its properties
or assets except as notified in
the RBI Direction dated May 13,
2022.
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RBI imposes Monetary Penalty on certain Banks

Bank on which Amount
Monetary Penalty of Reasons for the Penalty
imposed penalty
For contravention of directions issued by RBI on:
▪ ‘Loans and advances to directors, relatives and firms /
concerns in which they are interested’,
Shree Kadi Nagarik ▪ ‘Loans and advances to directors etc- directors as
Sahakari Bank Ltd., ₹4.00 lakh surety/guarantors- Clarification’,
Kadi (Gujarat) ▪ ‘Bank Finance against Shares and Debentures- UCBs’
and
▪ ‘Donations to Trusts and Institutions where Directors,
their relatives hold position or are interested’.
KKR India Financial
For non-compliance with the ‘Monitoring of Frauds in NBFCs
Services Limited, ₹5.00 lakh
(Reserve Bank) Directions, 2016’ issued by RBI.
Mumbai
Daimler Financial
Services India Private For non-compliance with the ‘Monitoring of Frauds in NBFCs
₹5.00 lakh
Limited, Pune, (Reserve Bank) Directions, 2016’ issued by RBI.
Maharashtra
Noida Commercial Co-
For contravention of Section 35A and section 36 (1) read
operative Bank Ltd., ₹1.00 lakh
with Section 56 of the Banking Regulation Act, 1949.
Ghaziabad, U.P.
For non-compliance with the directions issued by RBI on:
▪ ‘Placement of Deposits with Other Banks’,
Abhyudaya Co- ▪ ‘Monitoring and Reporting Mechanism of Frauds’,
operative Bank ₹58.00 lakh ▪ ‘Income Recognition, Asset Classification,
Limited, Mumbai Provisioning and Other Related Matters (IRAC
norms)’ and
▪ ‘Management of Advances’.
For non-compliance with the instruction contained in
Unimoni Financial
₹29,79,000 paragraph 9.1(i) of the Master Direction on Issuance and
Services Limited Operation of Prepaid Payment Instruments (PPI MD).
For non-compliance with the directions issued by RBI on
KEB Hana Bank ₹59 Lakh “Reserve Bank of India (Interest Rate on Deposits)
Directions, 2016”.
Kalupur Commercial For non-compliance with the directions issued by RBI on
Co-operative Bank ₹44.00 lakh ‘Interest Rate on Deposits’ and on ‘Frauds in UCBs: Changes
Ltd., Ahmedabad in Monitoring and Reporting mechanism’.

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RBI appoints Dr. Sitikantha Pattanaik as new

Executive Director
▪ RBI has appointed Dr. Sitikantha Pattanaik as Executive Director (ED) with effect from May 02,
2022.
▪ As Executive Director, Dr. Pattanaik will look after the Department of Economic and Policy
Research (DEPR).

❖ Prior to being promoted as ED, Dr. Pattanaik was an Adviser in the Department of Economic and Policy
Research (DEPR).
❖ Dr. Pattanaik has, over a span of 3 decades, worked in the areas of economic research and monetary
policy in RBI’s Monetary Policy Department and Department of Economic and Policy Research. He was
with the Central Bank of Oman on deputation from RBI for about 5 years.

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SEBI
SEBI amends norms for InvITs
What
Recently, SEBI came out with a new norm to implement draft filing fees to be paid by Infrastructure
Investment Trusts (InvITs) for initial offers (IPO) and rights issues.
It will be known as the Securities and Exchange Board of India (Infrastructure Investment Trusts)
(Amendment) Regulations, 2022; which will be effective from 4th May, 2022.
According to the amendment, InvITs are required to pay non-refundable filing fees at the time of filing of
draft placement memorandum or offer letter (in case of private placement).
Draft filing fees will be paid as a %age of the total issue size, including green shoe option as under:

Types of Issue Present Provision Earlier Provision

Initial Offering (IPO) 0.1% of the total issue size 0.1% of the total issue size,
Rights Issues 0.05% of the total issue size irrespective of the type of issue.

Tell me more
Terms Meaning
IPO (Initial ▪ An IPO (also known as stock market launch) is the process by which a
Public Offering) privately held company, or a company owned by the government such as LIC,
raises funds by offering shares to the public or to new investors in the
primary market.
o Primary market deals with new securities being issued for the 1st
time. It is also known as the new issues market.
Rights Issue ▪ Right issue is an offering to the existing shareholders to purchase additional
[Section 62(1) shares of the company in proportion to their existing shareholding of the
of Companies company.
Act, 2013] ▪ However, shareholders are not obliged to purchase shares offered in a rights
issue.
Private ▪ When a company issues financial securities such as shares and convertible
Placement securities to a particular group of investors (not more than 49 in number) it is
known as private placement. There are mainly 2 kinds – preferential
allotment and qualified institutional placement.
Green Shoe ▪ A green shoe option is an over-allotment option.
Option ▪ In the context of IPO, it is a provision that grants the underwriter the right to
sell investors more shares than initially planned by the issuer, if the demand
for a security issue proves higher than expected.
Offer For Sale ▪ Under this method, securities are not issued directly to the public but are
(OFS) offered for sale through intermediaries like issuing houses or stock brokers.

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SEBI constitutes advisory committee on

Environmental, Social and Governance (ESG) matters
What
Recently, SEBI constituted a committee for advising on ESG-related matters in the securities market.
Chairman: Mr. Navneet Munot (CEO, HDFC Mutual Fund).

Terms of Reference of the Committee:

Enhancements in Business Responsibility and Sustainability Report (BRSR)
▪ Review of leadership indicators - including those related to value chain.
▪ Developing sector specific sustainability disclosures.
▪ Evolving disclosures / metrics that are relevant to the Indian context.
▪ Identify areas for assurance and roadmap for its implementation.

ESG Ratings
▪ Developing separate/ parallel approach for ESG rating adapted to emerging market.
▪ Developing uniform indicators of ‘G’ as input to ESG ratings and / or credit ratings.
▪ Disclosures in the rationale by ESG rating providers on what and how qualitative factor were
factored in the ESG ratings / observations.

ESG Investing
▪ Continuous enhancement of disclosures specific to ESG Schemes of Mutual Funds with particular
focus on mitigation of risks of mis-selling and greenwashing.
▪ Examine whether ESG funds need to have prudential norms, if any.
▪ Long term plan to prescribe ESG disclosures for all Mutual Fund schemes.

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SEBI grants recognition to NDML as an

Accreditation Agency for 3 years
What
NSDL Database Management Ltd (NDML), a wholly-owned subsidiary of National Securities Depository
Limited (NSDL), has been granted recognition as an accreditation agency by SEBI for a period of 3 years,
to be effective from 10th May, 2022.
o NDML will now issue accreditation certificate to ''accredited investors''.

“Accreditation Agency” means a The accreditation agency will be

subsidiary of a recognized Stock
Exchange or a subsidiary of a
Depository or any other entity as may
be specified from time to time.
An accreditation agency issues
accreditation certificate to the
investors seeking accreditation.
responsible for:
verification of documents submitted
by applicants, timely processing of
applications and issuance of
accreditation certificate, maintaining
data of accredited investors and
verification of accreditation status.

Accredited Investors
The class of investors who have an understanding of various financial products and the risks and
returns associated with them, and therefore, can make informed decisions regarding their
investments, is recognized by many securities and financial market regulators around the globe. These
investors are typically termed accredited investors, qualified investors or professional investors.

Tell me more
▪ In August 2021, SEBI had introduced the framework for “accredited investors" in the Indian
securities market.

▪ Under the framework, accredited investors may avail of flexibility in minimum investment
amount (lower ticket size) or concessions from specific regulatory requirements applicable to
investment products, subject to conditions applicable for specific products or services.

▪ According to the norms, a person will be identified as an accredited investor on the basis of net
worth or income.
o Individuals, HUFs, family trusts, sole proprietorships, partnership firms, trusts and body
corporates can get accreditation based on financial parameters specified by the regulator.

Earlier, wholly owned subsidiaries of BSE Ltd and Central Depository Services (India) Limited (CDSL) — BSE
Administration and Supervision Ltd (BASL) and CDSL Ventures Limited (CVL) — had received SEBI’s
approval to set up an accreditation agency for a period of 3 years, effective from February 1, 2022.

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SEBI tightens promoter norms

What
❖ SEBI mandates companies planning IPO to disclose certain information about their promoters.
o Under SEBI’s Issue of Capital and Disclosure Requirements (ICDR), an immediate relative of the
promoter, such as the spouse, parent, brother, sister or child, is necessarily considered part of
the promoter group.
o Any company where such relatives hold more than 20% stake is also considered part of the
promoter group, and both the relative and the company must furnish necessary information
in the offer document and to SEBI and exchanges.

Earlier Provision New Provision

▪ Earlier, IPO-bound companies had to
follow a process to send out a
communication to these family members,
followed by frequent reminders over a
certain time.
▪ In case of failure to respond to the
correspondence, the company could seek
an exemption to remove the said family
member from the promoter group.
▪ This process takes up to a month and is
usually undertaken along with filing the
Draft Red Herring Prospectus (DRHP).
▪ However, SEBI recently issued an advisory
to investment banks, asking them to
furnish either an affidavit from such family
member, clearly stating they do not want
to be classified as part of the promoter
group, or a Memorandum of
Understanding (MoU) between the
promoter and the family member.
▪ Companies unable to furnish such
documents must be disclosed as a
promoter group, along with prescribed
disclosures about such promoter group, in
the DRHP.
▪ Also, the exemption based on such
documents has to be obtained from SEBI
before filing DRHP.

Tell me more
The meaning of ‘promoter’ and ‘promoter group’ is defined in Companies Act, 2013 and
SEBI (ICDR) Regulations, 2018 (amended in 2022).
▪ Generally, a promoter conceives an idea for setting-up a particular business at a
Promoter given place and performs various formalities required for starting a company.
▪ Promoter group includes:
o Any body corporate in which a group of individuals or companies hold 20%
or more of the equity share capital in that body corporate.

A Draft Red Herring Prospectus (DRHP) is a legal preliminary document. It serves as an

DRHP important communication link between the IPO-bound company and its investors and
stakeholders.

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Initial Public Offering (IPO)

▪ It is a process by which a company raises funds by offering
shares to the public. [Primary Market]
▪ After the IPO, the company is listed on the stock exchange
for trading.
▪ While coming up with an IPO, the company has to file its
offer document with the market regulator (SEBI).
o The offer document contains all relevant
information about the company, its promoters, its
projects, financial details, the object of raising the
money, terms of the issue, etc. and is used for
inviting subscription to the issue being made by
the issuer.

Who all can invest in an IPO?

Qualified Institutional Buyers (QIBs): It is a category of investors that

includes Foreign Portfolio Investors (FPIs), mutual funds, commercial
banks, insurance companies, pension funds, etc.
QIBs are those institutional investors who are generally perceived to
possess expertise and the financial capacities to evaluate and invest in
the capital markets.

Retail investors: All individuals who invest up to Rs 2 lakh in an issue (now,

they can bid up to Rs 5 lakh through UPI) are classified as retail investors.

HNI: Retail investors investing above Rs 2 lakh (now Rs 5 lakh) are classified
as high net worth individuals.

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OTHERS
EXIM Bank to provide additional Line of
Credit (LoC) to the SBM (Mauritius)
Infrastructure Development Company Ltd
What
Export-Import Bank of India (Exim Bank) entered into an agreement with SBM (Mauritius) Infrastructure
Development Company Ltd (SBMIDCL), to provide to the latter, Government of India (GOI) supported Line
of Credit (LoC) of USD 190 million.
▪ This is in addition to the existing Credit of USD 500 million.
▪ The agreement under the LoC is effective from April 18, 2022.
Line of Credit (LoC)
A Line of Credit is a financing mechanism through which Exim Bank extends support for export of
projects, equipment, goods and services from India. Exim Bank extends LOCs on its own and also with
the support of Government of India.
LOC provides a safe mode to Indian exporters, especially to Small and Medium Enterprises (SMEs), to
enter new export markets or expand business in existing export markets without any payment risk
from the overseas importers.

Why
For the purpose of financing its participation (Exim Bank) through Redeemable Preference Shares in public
sector entities for implementing the ongoing Metro Express Project and other infrastructure projects in
Mauritius.

Tell me more
Terms of the Agreement
▪ Under the agreement, financing of export of eligible goods and services from India would be
allowed subject to it being eligible for export under the Foreign Trade Policy of GOI and whose
purchase may be agreed to be financed by the Exim Bank.
▪ Out of the total credit by Exim Bank, goods and services of the value of at least 75% of the
contract price should be supplied by the seller from India.
o Remaining 25% may be procured by the seller from outside India
▪ Under the LoC, the terminal utilization period is 60 months from the scheduled completion date of
the project.
▪ Shipments under the LoC should be declared in Export Declaration Form as per instructions issued
by RBI from time to time.
▪ No agency commission is payable for export under the LoC.

The above directions are issued under section 10(4) and 11(1) of the Foreign Exchange Management Act
(FEMA), 1999.
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Current Economic Trends

What
The Indian rupee fell to an all-time low of 77.79 against the U.S. Dollar. [as of May, 2022].
▪ Rupee depreciation means that the rupee has become less valuable with respect to the dollar.

Reasons for Current Depreciation of Indian Rupee

Sell-off of the Equity Outflow of Dollar

• A sell-off in the global equity markets, • High crude prices and the ongoing Russia-
triggered by the hike in interest rates by the Ukraine war, has caused the import bill of
U.S. Federal Reserve, war in Europe and India to increase.
increase in inflation, led to the rupee
depreciation. • As imports rise, the dollar demad rises,
• As a result, global investors who had been causing adverse flow of dollars.
putting their money in India (for which
they demanded rupees) would consider
taking it out and investing in the US.

Impact of Depreciation of Indian Rupee:

Depreciation in rupee is a double-edged sword for RBI.

Weaker rupee can boost India’s Risk of imported inflation, and may
Negative

exports as exporter will receive more make it difficult for the central bank to
Positive

rupee for the same dollar.
But in an environment of uncertainty
and weak global demand, a fall in the
external value of rupee may not
translate into higher exports.
maintain interest rates at a record low
for longer.
A weaker currency will further escalate
imported edible oil prices and lead to
a higher food inflation.

Impact of Depreciation of Rupee on the Overall Economy

▪ The current account deficit will widen, depleting foreign exchange reserves and weakening the
rupee.
▪ With higher prices of crude oil and other crucial imports, the cost-push inflation will increase.
o Cost-push inflation (also known as wage-push inflation) occurs when overall prices
increase (inflation) due to increases in the cost of wages and raw materials.

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“Repco Subiksham”: New deposit scheme for

senior citizens
What
Recently, Union Minister of State for Home Affairs Ajay Kumar Mishra launched several special schemes
for Chennai based Repco Bank and also assured it of RBI banking license.

The schemes include:

▪ New Repatriate Welfare Scheme
▪ Repco Subiksham: a deposit scheme of Repco Bank
▪ a micro finance loan scheme and
▪ an app for Repco Micro Finance Ltd. (RFML)

Repco Subiksham
It is a retail deposit scheme meant for senior citizens (aged above 60) and super senior citizens (age above
80).

Tell me more
Repco Mahila Samriddhi Scheme
▪ It is a scheme for SHGs, which aims at supporting income generation activities for the
underprivileged sections.
▪ It provides collateral-free loans (between Rs 50,000 and Rs 2.5 lakh) to women with a household
income of up to Rs 3 lakh.

Repco Bank (Repatriates Cooperative Finance and Development Bank Ltd)

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▪ It was established as a Cooperative Society under the Union Ministry of Home Affairs with the
primary objective of rehabilitation of repatriates from Myanmar and Sri Lanka.
▪ Repco Bank has promoted 2 financial institutions:
o Repco Home Finance Ltd (RHFL) is a housing company, and
o Repco Micro Finance Ltd (RMFL) provides Micro Finance to Self Help Groups.

❖ Established: 19th November 1969

❖ Head Office: Chennai
❖ Chairman: E. Santhanam

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