Financial Awareness at a Glance (07 May – 13 May 2018)

Dear readers,

Today, we are sharing the next part of our Banking and Finance Awareness Series “Financial Awareness at a Glance “. Go through this now to get all the important insights which took place last week in Banking and Finance Sector in India and world. This will immensely help you in upcoming exams.

Financial Awareness at a Glance

1. RBI imposed PCA on Dena Bank

  • The Reserve Bank of India (RBI) imposed Prompt Corrective Action (PCA) against public sector lender Dena Bank in view of high non-performing loans.
  • Also, RBI restricted the bank from giving fresh credit and new hiring. This means the bank can disburse loans for the credit facilities already sanctioned but cannot sanction fresh loans and also bank cannot recruit new staff.
  • Despite the earlier restrictions, the financial health of the bank did not show any signs of improvement, which has now prompted the banking regulator to freeze lending. RBI had imposed PCA framework on Dena Bank in May 2017.

Note:

  • Once, PCA has enforced the bank faces restrictions on expenses such as opening branches, recruiting staff and giving increments to employees.

Gross NPA of Dena bank stood at 22.4%

  • The gross non-performing assets of the bank, as a percentage of gross advances, was 22.4% as on end-March as compared with 16.17% a year ago.
  • In absolute terms, bad loans rose to ₹16,361.44 crore from ₹12,618.73 crore.
  • The bank’s net NPAs were up to 11.95% or ₹7,838.78 crore from 10.66% or ₹7,735.12 crore.
  • The bank’s return of assets for 2017-18 is -1.59 as compared to – 0.67 a year ago.

The second level of risk threshold

  •  Returns on Assets (ROA)– ROA is one of the parameters on which banks are judged for prompt corrective action.
  • According to RBI’s PCA norms, the bank is at the second level of risk threshold since it reported three consecutive years of negative RoA and net NPA more than 9%.
  • The fourth and final risk threshold is four years of negative RoA and more than 12% net NPA.

 Note:

  • Earlier in January this year, RBI imposed PCA on Allahabad Bank.
  • The RBI initiated similar action against other public-sector banks, including IDBI Bank, Indian Overseas Bank and UCO Bank before this.
  • The RBI in April 2017 had issued a new set of enabling provisions under the revised PCA framework with a clause that if the bank does not show improvement then it could be either be merged or taken over by another bank.

About PCA

  • A prompt Corrective action is a qualitative tool introduced by the Reserve Bank of India under which direct action is taken on weak banks to ensure the financial health of a bank is maintained and it does not go bust.
  • In India, it was first introduced in 2002 during the period of Bimal Jalan as RBI governor and was tightened by RBI governor Urjit Patel on April 2017. It is applicable to all the Scheduled Commercial Banks (SCBs) except RRB. It also does not take into its ambit the payment banks, NBFCs and MUDRA banks.

2. India fastest growing economy at 7.4 percent in 2018: IMF

  • According to the IMF latest report, India will be the fastest-growing major economy in 2018, with a growth rate of 7.4 percent that rises to 7.8 percent in 2019.
  • In Asia and Pacific Regional Economic Outlook report, IMF said that India was recovering from the effects of demonetisation and the introduction of the Goods and Services Tax and “the recovery is expected to be reinforced by a reflection from transitory shocks as well as strong private consumption.”
  • In India the consumer price increase in 2017 was 3.6 percent and projected it to be five percent in 2018 and 2019; the report said.
  • After India, Bangladesh is projected to be the fastest-growing economy in South Asia with growth rates of seven percent for 2018 and 2019.
  • Overall, the report said that Asia continues to be both the fastest-growing region in the world and the main engine of the world’s economy.

3. ADB projected India’s GDP growth to rise at 7.3 percent in 2018-19

  • The Asian Development Bank (ADB) projected that India will remain the fastest growing Asian nation with 7.3 percent growth in 2018-19, and 7.6 percent in 2019-20.
  • The Indian economy is forecast to grow at 6.6 percent in the 2017-18 fiscal ended March 31, slower than 7.1 percent in 2016-17.
  • The size of India’s economy is about USD 2.5 trillion currently, making it the sixth largest in the world.
  • According to the Economic Affairs Secretary Subhash Chandra Garg, India is on track to double the size of its economy to USD 5 trillion by 2025.

4. 15th Asia Media Summit held in New Delhi

  • The 15th Asia Media Summit was held in New Delhi.
  • The summit was inaugurated by Information and Broadcasting Minister Smriti on 10 May 2018.
  • The theme of the two-day Summit was ‘Telling Our Stories – Asia and More.’
  • An array of issues including media business models in a new era and emerging technologies in broadcasting were discussed during the two-day long summit.
  • Over 300 representatives and delegates from 41 nations attended the summit.

Note:

  • The AMS 2018 is an annual summit of the Asia-Pacific Institute for Broadcasting Development (AIBD) Kuala Lumpur.
  • It is a prestigious summit in the Asia Pacific Region and India hosted the event for the first time.

5. India offered 10 million dollar line of credit for Bio-Technology to Panama

  • During the visit of Vice President of India M.Venkaiah Naidu to Panama, India offered two lines of credit – 10 million dollar line of credit for Bio-Technology and 15 million dollar for Innovation sector- to Panama.
  • Also, both the countries agreed to work together to deal with the menace of terrorism.

Other key agreement –

  • India and Panama signed two Memorandum of Understandings (MoU)- one on visa exemption for diplomatic official and consular passport and the other on the work plan for cooperation in the agriculture sector.
  • The MoUs were signed in presence of Vice President Venkaiah Naidu and Panama President Juan Carlos Varela.
  • Vice President Naidu was on a three-nation visit to Guatemala, Panama and Peru which commenced from May 6, 2018.

6.  India, World Bank sign USD 200 million loan deal for national nutrition mission

  • The Government of India signed a loan deal worth $ 200 million with the World Bank for the National Nutrition Mission (POSHAN Abhiyaan).
  • The loan would help the Government of India in achieving its goal of reducing stunting in children 0-6 years of age from 38.4% to 25% by the year 2022.
  • The loan will support the first phase scale up to 315 districts across all states and union territories.

Note:

  • The POSHAN Abhiyaan, an overarching scheme for holistic nourishment, was launched by Prime Minister Narendra Modi in 8th March 2018 at Jhunjhunu, Rajasthan.
  • POSHAN Abhiyaan (National Nutrition Mission) is a scheme of Ministry of Women and Child Development.

7. India & Peru ink agreement in the field of Renewable Energy

  • India and Peru signed the agreement on the renewable energy sector in Lima on May 12, 2018.
  • The pact was signed after a bilateral meeting between Vice President M Venkaiah Naidu and Prime Minister of Peru Cesar Villanueva Arevalo in Lima.
  • Both countries agreed to work together to combat the menace of terrorism.
  • Also, the discussions were held in the field of pharmaceuticals, space, defence, the supply of LPG, clean energy, agriculture and science & technology.
  • They also discussed the possibility of collaboration in Quinoa cultivation and processing with Peru.

Note:

  • Vice President’s visited Peru was the last leg of his first state visit to three Central American nations Guatemala, Panama and Peru.
  • The visit of Vice President Naidu to Latin American countries will help to enhance and strengthen India’s bilateral relations with these nations and will increase trade, investments and cooperation among these countries.
  • Peru is an important country for multilateral issues for India and it supported India’s candidature for the permanent seat in United Nations Security Council (UNSC).

8. India & Guatemala ink agreement to boost cooperation in the education sector

  • India & Guatemala signed an agreement to boost cooperation in the education sector.
  • The agreement was inked after a meeting between Vice President M Venkaiah Naidu and his Guatemala counterpart, Jafeth Cabrera Franco in Guatemala City.
  • During his visit Vice – President, M.Venkaiah Naidu also visited the historic Antigua (old) Guatemala city for understanding how it’s rich heritage is being maintained since it was declared as a World Heritage City by the UNESCO in 1979.
  • The first-ever ministerial visit from India to Guatemala was in June 2007 by the then Minister of State for External Affairs, Anand Sharma.

Key agreements 

Supply of Solar Panels

  • India will supply solar panels to Guatemala’s airports.

Support candidature for UNSC membership

  • India and Guatemala agreed to support each other’s candidature for Non-Permanent Membership in the United Nations Security Council.
  • Guatemala will support India’s candidature for UNSC membership for 2021-22 while India will do so for Guatemala for 2031-32.

Note:

  • Guatemala is a country located in Central America, in the north-west of Mexico, the Pacific Ocean in the southwest, Belize in the north-east, the Caribbean in the east and Honduras and El Salvador in the southeast.
  • Guatemala City is the capital of Guatemala.
  • The Currency of Guatemala is Quetzal.

9. RBI cancels Certificate of Registration of 3 NBFCs

  • The Reserve Bank of India (RBI) cancelled the certificate of registration of the three non-banking financial companies (NBFCs).
  • The Reserve Bank of India, in an exercise of powers conferred on it under Section 45-IA (6) of the Reserve Bank of India Act, 1934, cancelled the Certificate of Registration of the following companies –
  1. M/s Jagannatha Financial Services Limited
  2. M/s SCF Finance Limited
  3. M/s Mansar Finance Limited
  • Following the cancellation of the registration certificate, these companies cannot transact the business of a non-banking financial institution as laid down under clause (a) of Section 45-I of the Reserve Bank of India Act, 1934.

10. SCO ‘Tourism Ministers’ conference held in Wuhan, China

  • The Shanghai Cooperation Organization (SCO) Tourism Ministers’ conference was held in Wuhan, China.
  • From India Minister of State (Independent Charge) for Tourism K. J. Alphons attended the conference.
  • The meeting approved joint action plan that will serve as a guideline for tourism cooperation between SCO member states for 2019-2020.
  • It agrees with cooperation among national tourism administrations, as well as measures member states could take to improve tourist experience and safety, develop tourist products and promote smart tourism.
  • This is the first meeting of SCO tourism ministers since the organization was established in 2001 in Shanghai.

 Key points

  • Shanghai Cooperation Organisation (SCO) was founded in 2001 is a political and security group.
  • The member’s countries of SCO are – China, Russia, Kazakhstan, Uzbekistan, Tajikistan, Kyrgyzstan, India and Pakistan.
  • They represent over 40% of humanity and nearly 20% of the global GDP.
  • At present, Afghanistan, Belarus, Iran and Mongolia are observer status.

Note:

  • The 18th Shanghai Cooperation Organization (SCO-2018) will be hosted by China in the city of Qingdao in June 2018.
  • The17th SCO summit 2017, was held in Astana, Kazakhstan in June 2017.

11. India ranks fourth in Asia-Pacific on power index

  • India ranked at 4th positions among 25 nations in the Asia-Pacific region on an index.
  • India scores well on the parameters of cultural influence and future trends and pegged as a “giant of the future” but scores low on the measure of economic relationships and in defence networks.
  • The index is published by an Australian think tank firm the Lowy Institute of.
  • Top three countries in the index are – US, China & Japan.
  • In 2018 index – the US remains the pre-eminent power in Asia, while China, the emerging superpower, is rapidly closing in on the United States.
  • “Three of the world’s four largest economies are in Asia, and the fourth, the United States, is a Pacific power.
  • By 2025, two-thirds of the world’s population will live in Asia, compared with just over a tenth in the West,” the Institute said.
  •  A country’s overall power is its weighted average across eight measures of power–economic resources, military capability, resilience, future trends, diplomatic influence, economic relationships, defence networks and cultural influence.

12. India slips to 6th spot in business optimism index

  • India slipped to the 6th position globally in the business optimism index for the first quarter of this year, says a survey.
  • With a score of 89, India is at the sixth place in the index.
  • The top five nations are Austria, Finland, Indonesia, the Netherlands and the US.
  • Noting that business sentiment in India has been the weakest since 2014 in the first quarter, the advisory firm said the confidence has been shaken since the third quarter of 2017 with weakening currency and a surge in oil prices.
  • Business optimism is however at an “all-time high” globally with the index at net 61 percent, the highest figure recorded in 15 years of research, as per Grant Thornton’s quarterly global business survey released.
  • India has been topping the chart since the new government came into power in 2014,” Grant Thornton’s International Business Report said.
  • The report is based on a quarterly global business survey of 2,500 businesses in 37 economies.
  • Last year, India was at a 7th position in business optimism’ index.

13. Walmart buys 77% stake in Flipkart

  • On 9 May 2018, Walmart Inc announced that it would pay $16 billion for an initial stake of approximately 77% in India e-commerce company Flipkart.
  • This is one of its biggest foreign investment ever as it battles rival Amazon in one of the world’s biggest emerging markets.
  • With this deal, Flipkart co-founder and chairman Sachin Bansal will leave the company and sell his 5.5-6% stake in the company.
  • Flipkart’s other founder Binny Bansal will continue as Flipkart group CEO and Kalyan Krishnamurthy will retain his position as Flipkart CEO.
  • Flipkart’s largest shareholder SoftBank will sell its 20%-plus holding entirely.
  • Tiger Global Management, Flipkart’s most influential shareholder, is also selling much of its 20% stake.

Note:

  • Walmart will invest $2 billion directly into Flipkart and buy the rest of its stake from existing Flipkart investors including SoftBank Group, Accel Partners, Naspers and eBay Inc.

 

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