Financial Awareness at a Glance (14 May – 20 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 modified norms for setting up of IFSC Banking Units

  • The Reserve Bank of India modified the norms for setting up International Financial Services Centres (IFSC) Banking Units (IBUs) by banks in IFSCs.
  • According to the new norms – the parent bank will be required to provide and maintain at all times a minimum capital of $20 million or equivalent in any foreign currency to its IBU.
  • In April 2015, RBI framed a scheme for setting up of International Financial Services Centres Banking Units by banks in IFSCs.
  • Still, the minimum prescribed regulatory capital, including for the exposures of the IBU, should be maintained on an on-going basis at the parent level.
  • Also, the parent bank will be required to provide a Letter of Comfort for extending financial assistance, as and when required, in the form of capital/liquidity support to IBU.
  • According to the RBI, the modification has been made based on suggestions from stakeholders to consider minimum prescribed regulatory capital at the parent level rather than at the IBU level.

 Note:

  • The government has set up an IFSC in Gujarat namely Gujarat International Finance Tec-City (GIFT) in Gandhinagar, Gujarat.
  • The guidelines are applicable to IBUs set up in the GIFT as well as in other IFSCs which may be set up in India.

2. RBI proposes 100% net stable funding ratio for banks

  • On 17th May 2018, Reserve Bank of India (RBI) issued final guidelines suggesting on net stable funding ratio (NSFR) to ensure banks have sufficient stable sources of funding to finance their activities over the long term.
  • RBI suggest 100 percent net stable funding ratio (NSFR) for banks a long-term liquidity measurement included in the Basel III liquidity standards.
  • Banks will have to submit NSFR data for every quarter within 15 days.

About NSFR

  • NSFR is defined as the amount of available stable funding (ASF) relative to the amount of required stable funding (RSF).
  • It promotes resilience over a longer-term time horizon by requiring banks to fund their activities with more stable sources of funding on an ongoing basis.
  • The above ratio should be equal to at least 100 percent on an ongoing basis.

Objective

  • The objective of NSFR is to ensure that banks maintain a stable funding profile in relation to the composition of their assets and off-balance sheet activities.

 Note:

  • The Basel Committee on Banking Supervision (BCBS) proposed certain reforms to strengthen global capital and liquidity regulations during the global financial crisis of 2007.
  • In this regard, two minimum standards, viz., Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) for funding liquidity were prescribed by the Basel Committee for achieving two separate but complementary objectives.
  • In India, LCR would be fully implemented from 1 January, 2019.

3. India pulled US to WTO over steel, aluminium duties

  • India had dragged the US to the World Trade Organisation’s dispute settlement mechanism over the imposition of import duties on steel and aluminium.
  • India has stated that the decision will impact exports of these products to the US and it is not in compliance with global trade norms.
  • “India has filed a dispute under the aegis of the WTO on the issue of imposing import duties by the US on certain steel and aluminium products,” the official said.
  • India’s exports of steel and aluminium products to America stood at about USD 1.5 billion every year.
  • India’s exports to the US in 2016-17 stood at USD 42.21 billion, while imports were USD 22.3 billion.
  • Both the countries are already involved in disputes at the global trade body. The disputes are in the areas of poultry, solar and steel.
  • The US recently filed a dispute against India on export incentives alleging these support measures harm its workers by creating an uneven playing field.

Note:

  • On March 9, US President Donald Trump imposed heavy tariffs on imported steel and aluminium items, a move that has sparked fears of a global trade war.
  • Trump signed two proclamations that levied a 25 percent tariff on steel and a 10 percent tariff on aluminium imported from all countries except Canada and Mexico.
  • India too has sought exemptions from the hefty tariffs.

4. India economy to grow 7.6% in 2018-19: UN report

  • According to UN World Economic Situation and Prospects (WESP), India’s economic growth is expected to grow to at 7.6% in the fiscal year 2018-19.
  • GDP growth in India is expected to grow at 7.5 in 2017-18.
  • The forecast is mainly in accordance with this year’s Economic Survey that pegged growth at 7% to 7.5% in 2018-19.
  • Whereas, the Central Statistics Office projected growth at 6.6% in 2017-18 compared with 7.1% in the previous year.
  • China Economy – The report projected to gradually moderate from 6.9% in 2017 to 6.5%  in 2018 and 6.3% in 2019.
  • World Economy – The world economy is projected to grow a slightly higher 3.2% in both 2018 and 2019, compared with 3.1% in 2017, because of quickening wage growth and favourable investment conditions in developed economies.

 Note:

  • The report is a joint product of UN Department of Economic and Social Affairs (UN/DESA), UN Conference on Trade and Development (UNCTAD) and five United Nations regional commissions.

5. NABARD authorized Solar street lighting system in Arunachal

  • The National Bank for Agriculture and Rural Development (NABARD) had authorized LED Solar Street Lighting system for Arunachal Pradesh under its Rural Infrastructure Development Fund with a total grant of Rs 87.83 lakh.
  • The project would be implemented in the four districts of the state Tirap, Longding, Namsai and Tawang.
  • The government on May 16 approved a dedicated Rs 5,000 crore fund under NABARD to bring more land area under micro-irrigation as part of its objective to boost agriculture production and farmers’ income.

6. RBI imposed Rs5 crore penalty on South Indian Bank

  • On 18th May 2018, Reserve Bank of India (RBI) imposed a Rs 5 crore penalty on South Indian Bank for not following its rules on asset classification, know-you-customers (KYC) and treasury functioning.
  • South Indian Bank had reported divergence in reporting of gross non-performing assets for fiscal 2017. It said that gross bad loans reported on 31 March 2017 were Rs8.39 crore lower than the assessment of the RBI.

7. Paytm introduces automatic recurring payments

  • On 14th May 2018, Paytm introduced a new feature i.e. automatic recurring payment.
  • This new feature will allow users configure the payments app to pay for periodic recurring expenses automatically.
  • For same instructions for bank accounts, the ‘My Payments’ feature can be used for high-value payments for a variety of cases.
  • The company expects the feature to significantly boost bank-to-bank transactions on Paytm, which it sees crossing Rs60,000 crore a month by December.
  • Currently, Paytm processes about 1 billion transactions every quarter.

8. World Bank extends $300 mn credit to scale up energy efficiency program

  • The World Bank Board of Executive Directors approved $300 million credit guarantee for the India Energy Efficiency Scale-Up Program.
  • The aim of the program is to increase private sector participation in energy efficiency, including through private sector energy service companies.
  • The program will be implemented by the Energy Efficiency Services Limited (EESL).
  • Under the Program, EESL will deploy 219 million LED bulbs and tube lights, 5.8 million ceiling fans, and 7.2 million street lights, which will be supplied by private sector manufacturers and suppliers.
  • India’s climate change commitments to reduce carbon intensity by 33-35 percent by 2030 from 2005 level will require a significant focus on energy efficiency improvements.

9. PNB post biggest ever loss quarterly loss by any bank in India

  • On 15th May 2018, the Punjab National Bank reported a Rs13,417-crore loss for the January-March period of the financial year 2017-2018, the largest quarterly loss posted by any bank in India.
  • This is the biggest ever quarterly loss in the history of India’s banking sector.
  • The bank’s profit in the same quarter last year was Rs 261.9 crore.

The rise in bad loans

  • The bank’s total NPAs (non-performing assets) rose to 18.38 percent for Q4 to 12.53 percent a year ago.
  • Its net NPAs ratio soured to 11.24 per cent against 7.81 percent a year ago and 7.55 percent in Q3.
  • Besides, the bank’s provision for NPAs was Rs 16,203 crore in Q4 compared to Rs 2,996 crore in Q3.

10. BSE is first Indian exchange to get US SEC recognition

  • On 16 May 2018, BSE became the first Indian exchange to be selected as a ‘Designated Offshore Securities Market’ (DOSM) by the United States Securities and Exchange Commission (SEC).
  • The DOSM status allows the sale of securities to US investors through the trading venue of BSE without registration of such securities with the US SEC, which eases the trades by US investors in India.
  • The recognition will also enhance the attractiveness of Indian Depository Receipts (IDRs) amongst US investors.
  • BSE’s new status will provide additional benefits to companies whose securities are traded both in the US and on BSE, it added.

 About BSE

  • BSE is established in 1875 formerly known as Bombay Stock Exchange Ltd. is Asia’s first stock exchange.
  • It is located at Dalal Street, Mumbai.
  • India INX, India’s 1st international exchange, located at GIFT CITY IFSC in Ahmedabad is a fully owned subsidiary of BSE.
  • BSE is also the 1st listed stock exchange of India.
  • Shri S. Ravi is the current Chairman of BSE.

11. China’s bank launches country’s first India-dedicated investment fund

  • The Industrial and Commercial Bank of China, a top state-run Chinese bank had launched China’s first India-dedicated publicly offered investment fund.
  • The bank urges the Chinese to invest heavily asserting that the Indian economy is entering the “golden age of economic take-off”.
  • The fund, named as the Industrial and Commercial Bank Credit Suisse India Market Fund, will “invest in exchange-traded funds listed on more than 20 exchanges in Europe and the US that are based on the Indian market.”
  • It is China’s first publicly offered fund for investing in India, state-run Global Times reported.

 Note

  • The ICBC bank, the largest in the world with over USD 3.6 trillion in assets, has given an upbeat picture of India’s economic growth path, while launching the fund.

 12. India’s economy to grow at 7.3% in FY19: Fitch

  • According to the report of credit rating agency Fitch, India’s economic growth will accelerate to 7.3 percent in the fiscal 2018-19 and 7.5 percent in fiscal 2019-20.
  • The report stated that in India money supply recovered to its pre-demonetisation level and disruptions related to the rollout of GST have reduced.
  • The Indian economy continued to bounce back in the final quarter of 2017, growing 7.2 percent.
  • In April 2018, Fitch kept India’s sovereign rating unchanged at ‘BBB-‘ for the 12th year in a row.

 Note:

  • The budget deficit target for FY19 is set at 3.3 per cent of GDP, down from an expected 3.5 per cent in FY18, implying fiscal slippage of 0.3 per cent of GDP in both FY18 and FY19 relative to last year’s budget targets.

13India third largest solar market in the world: Mercom Communications

  • According to the Mercom Communications, India emerged as the third largest solar market in the world in 2017 behind China and the US.
  • As per the report, India set a new record with 9.6 GW of solar installations in 2017, which was more than double the 4.3 GW installed in 2016.
  • The robust growth boosted the country’s total solar installed capacity to 19.6 GW as of December 2017, it added.
  • Of the total 1.6 GW cumulative solar rooftop installations in India by 2017, 995 MW was installed last year.
  • Mercom Communications India is an arm of global clean energy consulting firm Mercom Capital Group.

14. India to clock GDP growth of 7.7% in January-March: Nomura

  • According to the Nomura report, India’s GDP is expected to grow by 7.7% in January-March, up from 7.2% in the preceding quarter.
  • According to the Japanese financial services major, despite the moderation in March, industrial production growth averaged 6.2% in the January-March period, up from 5.9% in Q4 (October-December).
  • The report further noted that India is expected to witness cyclical recovery led by both investment and consumption.
  • According to official data, industrial output growth fell to a five-month low of 4.4% in March due to decline in capital goods production and deceleration in mining activity and power generation.

15. DoT approves the merger of Bharti Airtel and Telenor India

  • The Department of Telecom (DoT) approved the merger of Telenor India with Bharti Airtel.
  • The guarantee included Rs 1,499 crore for one-time spectrum charge for the radiowaves allocated to Airtel without auction, and over Rs 200 crore for spectrum payment which Telenor has to make.
  • The merger will boost Airtel’s spectrum footprint in seven telecom circles, with the addition of 43.4 MHz spectrum in the 1800 MHz band.
  • Telenor India runs operations in seven circles — Andhra Pradesh, Bihar, Maharashtra, Gujarat, UP (East), UP (West) and Assam.
  • The National Company Law Tribunal (NCLT) had approved the proposed merger on March 8.
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