Dear readers, This GK Digest is a complete docket of important news and events that occurred in last 5 months (July – 20th December 2016). The GK Digest is important and relevant for all competitive exams like – IBPS Clerk VI, RBI Assistant, IPPB 2016, Insurance and UPSC Exams.
RBI in News
RBI Keeps interest rate unchanged - On December 07, 2016, Reserve Bank of India (RBI) in its fifth bi-monthly monetary policy review, kept key policy rates unchanged.
Current Policy & Reserve Rates:
1.Repo Rate
6.25% (changed)
2.Reverse Repo
5.75% (changed)
3. CRR (Cash Reserve ratio)
4.00% (unchanged)
4.SLR (Statutory Liquidity Ratio)
20.75% (as per RBI website)
5.MSF (Marginal Standing Facility)
6.75% (changed)
6.Bank Rate
6.75% (changed)
Below are the basic definitions of the Policy Rates -
(i) Repo Rate – It is the rate at which RBI lends money to commercial banks.
(ii) Reverse Repo rate – It is the rate at which RBI borrows money from commercial banks.
(iii) Cash Reserve Ratio (CRR) – The share of net demand and time liabilities (deposits) that banks must maintain as cash balance with the Reserve Bank.
(iv) Statutory Liquidity Ratio (SLR) – The share of net demand and time liabilities (deposits) that banks must maintain in safe and liquid assets, such as, government securities, cash and gold.
(v) Bank Rate – It is the rate at which the Reserve Bank is ready to buy or rediscount bills of exchange or other commercial papers for long term.
(vi) Marginal Standing Facility Rate (MSF) – The rate at which the scheduled banks can borrow funds from the RBI overnight, against the approved government securities is termed as MSF.
Note: Basis points – ‘one’ Basis Point is a unit equivalent to 0.01% i.e. 1/100th of a percent.
THE DEMONETIZATION
On 8th November 2016 GOI made history by taking a striking bold step to demonetize Rs.500 & Rs.1000 note to reform the finance sector.. Making 86 per cent of the currency in circulation illegal in one stroke.
History of Demonetization in India:
First demonetization : Pre Independence era in year 1946.
The highest denomination note ever printed by the Reserve Bank of India was the Rs 10,000 note in 1938 and again in 1954. But these notes were demonetized in January 1946 and again in January 1978, according to RBI data to curb counterfeit and black money.
Countries Implemented Demonetisation: a. Nigeria: During the government of Muhammadu Buhari in 1984, Nigeria introduced new currency and banned the old notes. However, the debt-ridden and inflation hit country did not take the change well and the economy collapsed.
b. Ghana: In 1982, Ghana ditched their 50 cedis note to tackle tax evasion and empty excess liquidity. This made the people of the country support the black market and they started investing in physical assets which obviously made the economy weak.
c. Pakistan: From December 2016, Pakistan will phase out the old notes as it will bring in new designs. Pakistan legally issued the tender a year and a half back, and therefore, the citizens had time to exchange the old notes and get newly designed notes.
d. Zimbabwe: Zimbabwe used to have $100,000,000,000,000 note. Yes, a one hundred trillion dollar note! The Zimbabwean economy went for a toss when President Robert Mugabe issued edicts to ban inflation through laughable value notes. After demonetisation, the value of trillion dollars dropped to $0.5 dollar and were also put up on eBay.
e. North Korea: The demonetisation that happened in North Korea in 2010 left people with no food and shelter. Kim-Jong ll introduced a reform that knocked off two zeros from the face value of the old currency in order to banish black market.
f. Soviet Union: Mikhail Gorbachev ordered to withdrew large-ruble bills from circulation to take over the black market. The move didn’t go well with the citizens which resulted into a coup attempt which brought down his authority and the led to Soviet breakup.
g. Australia: Australia became the first country to release polymer (plastic) notes to stop widespread counterfeiting. Since the purpose was to replace paper with plastic and only the material changed, it did not had any side-effects on the economy.
h. Myanmar: In 1987, Myanmar’s military invalidated around 80% value of money to curb black market. The decision led to economic disruption which in turn led to mass protests that killed many people.
The Reserve Bank of India (RBI) has clarified that banks will have to bear the full liability in the event of any security breach or compromise in the authorised card network.
Reserve Bank of India has given an approval to British payments company Earthport for outbound cross-border payment services to banks in India.
RBI has opened a second office of the Banking Ombudsman in New Delhi, taking into account the significant increase of the banking network
The first office of the banking ombudsman at RBI, New Delhi, would have control over Delhi and Jammu & Kashmir. The second office would have jurisdiction over Haryana
The Reserve Bank of India on November 23, 2016 declared to increase the limit of the Prepaid Payment Instruments (PPIs) from Rs. 10,000 to Rs. 20,000 per month and Rs. 50,000 for Merchant Bank to facilitate digital transactions.
The Reserve Bank of India increased the Cash Reserve Requirement (CRR) for incremental deposits between September 16 and November 11 to 100% while the current CRR is 4%, effective from November 25, 2016
The RBI has planned to open “Islamic window” in conventional banks.
Aim: Gradual introduction of Sharia-compliant ( interest-free banking) in the country.
Due to Increase in NPA, 16 of 22 public sector banks skipped Dividends in FY 16.
Total - Rs 1,444.6 crore as dividend from PSB
SBI alone - Rs 1,214.6 crore, which makes 84% of the total dividend.
The RBI has directed banks to waive ATM charges on all transactions done by savings bank customers till - 30th December 2016
Construction company Hindustan Construction Company (HCC) became India’s first firm to get Reserve Bank of India's (RBI) approval for debt recast under Scheme for Sustainable Structuring of Stressed Assets (S4A).
Note:
Reserve Bank of India (RBI) hands over West Bengal govt. list of entities raising money illegally___194.
The Reserve Bank of India (RBI) has permitted startups to raise external commercial borrowings (ECBs) of up to $3 million in a financial year for three year tenure.
The Reserve Bank of India (RBI) released the Report of the Internal Working Group (IWG) on Rationalisation of Branch Authorisation Policy. The Group is chaired by Lily Vadera, Chief General Manager, and Department of Banking Regulation.
RBI cancelled certificate of registration of five NBFCs - The certificates were cancelled in exercise of the powers conferred on it under Section 45-IA (6) of the Reserve Bank of India Act, 1934.
The NBFCs whose certificate of registration were cancelled includes
Simco Consultants Private Limited, Lunkad Securities Ltd, Rajvir Marketing and Investment Private Limited, Crystal Investments Limited, Shri Jaya Investments Agency Limited (formerly known as Arcot Finance & Agency Limited).
Interest subvention scheme announced by RBI for Women Self-Help Groups – Reserve Bank of India (RBI) directed all commercial and Co-operative banks to provide loans to women self-help groups (SHGs) in rural areas at 7 percent per annum.
Key points –
The loans will be provided for the financial year 2016-17 under the Deendayal Antyodaya Yojana - National Rural Livelihoods Mission (NRLM) in 250 districts.
All women self-help groups (SHGs) will be eligible for interest subvention on credit up to three lakh rupees at 7 percent per annum.
All banks will be subvented to the extent of difference between the weighted average interest charged and 7%, subject to the maximum limit of 5.5% for 2016-17.
RBI launches Sachet portal to check illegal money collection - The Reserve Bank of India (RBI) has launched Sachet portal, sachet.rbi.org.in, to check illegal money collection. The portal will help anyone can obtain information regarding entities that are allowed to accept deposits, lodge complaints and share information regarding illegal acceptance of deposits by unscrupulous entities.
RBI constitutes Tarun Ramadorai Committee on Household Finance - The Reserve Bank of India (RBI) constituted a committee to look at various facets of household finance in India. The Committee will be chaired by Tarun Ramadorai, Professor of Financial Economics, University of Oxford.
RBI fixes MSS ceiling at Rs30,000 crore for current fiscal year - Reserve Bank of India (RBI) fixed the ceiling under market stabilisation scheme (MSS), a tool to manage liquidity, at Rs.30,000 crore for the current fiscal.
Note:
(i) This ceiling will be reviewed when the outstanding balance reaches the threshold limit of Rs.15,000 crore.
(ii) The current MSS outstanding balance is zero.
(iii) MSS are securities issued with the objective of providing RBI with a stock of securities with which it can intervene in the market for managing liquidity. These securities are not issued to meet government’s expenditure.
The Reserve Bank of India (RBI) released draft guidelines for issuing ‘on-tap’ universal bank licences. Under the ‘on tap’ mechanism an application for banking licence can be made at any time subject to certain conditions.
Tap licensing of universal banks in the private sector:
Allowing individuals with 10 years of experience in banking and finance to apply for a licence successful track record for at least 10 years are eligible to apply for a licence.
The initial minimum paid-up voting equity capital required is Rs.500 crore, and thereafter the bank should maintain a minimum net worth of Rs.500 crore at all times.
Applications will be screened by the RBI to assess the eligibility of applicants with regard to the criteria laid down in the guidelines.
RBI may apply additional criteria to determine the suitability of applications, in addition to the ‘fit and proper’ criteria.
Minimum capital requirement: The promoters and the promoter group shall hold a minimum of 40% of the paid-up voting equity capital of the bank which shall be locked in for a period of five yearsfrom the date of commencement of business of the bank.
The promoter group’s shareholding shall be brought down to 15% within a period of 12 years from the date of commencement of business of the bank.
As per the Reserve Bank of India (RBI)’s annual report 2015-16, India’s GDP growth forecast for FY 17 is 7.6 %.
RBI cuts maturity of masala bonds to three years to raise their appeal - To make masala bonds more attractive, the Reserve Bank of India (RBI) has reduced the minimum tenure of such bonds that an Indian company can issue offshore to three years from the previously stated five years.
Marginal cost of funds-based lending rates (MCLR) - The Reserve Bank of India (RBI) had proposed a new methodology to calculate Base Rate (Base Rate). It is based on marginal cost of funds methodology. The new methodology is aimed at bringing uniformity among BRs of banks so that they will be more sensitive to any changes in policy rates of the RBI like Cash Reserve Ratio (CRR), Statutory Liquidity Ratio (SLR), etc.
Key points -
It was effective on 1 April 2016.
MCLR is the new benchmark lending rate and replaces the base rate for new borrowers
The MCLR rates are revised every months.
It is calculated on the marginal cost of borrowing and return on net worth for banks.
Base Rate
It is defined as the minimum interest rate of a bank below which it is not viable to lend.
It was introduced on 1 July 2010 by the RBI.
It replaced the benchmark prime lending rate (BPLR), the interest rate which commercial banks charged their most credit worthy customer.
RBI formed Financial Inclusion Fund with 2000 crore rupees corpus: The Reserve Bank of India (RBI) formed a single Financial Inclusion Fund (FIF) with a corpus of 2000 crore rupees. The fund was formed by merging the Financial Inclusion Fund (FIF) and Financial Inclusion Technology Fund (FITF). This fund will support the developmental and promotional activities covered under the financial inclusion initiatives.
RBI likely to pay Rs 57,000 crore in dividends to government in 2016-17 - The Reserve Bank of India is likely to pay the government Rs 57,000 crore in dividends in 2016-17, slightly less than the amount it paid in the current fiscal but much higher than that in earlier years.
Note: The government has budgeted Rs 69,897 crore through dividends from state-owned banks, financial entities and RBI, lower than the Rs 73,905 crore it is expected to receive this fiscal.
The budget documents do not provide a break-up of the amount expected from banks and RBI.
Under Section 47 of the RBI Act, 1934 the central bank is mandated to pay balance profits to the government.
The Reserve Bank of India has extended the timeline for full implementation of the Basel III capital regulations from March 31, 2018 to March 31, 2019.
Banking/Financial/Economy News
India has received over US $300 billion US Foreign Direct Investment (FDI) milestone between April 2000 and September 2016. The cumulative FDI inflows during the period amounted to US $310.26 billion
Hailakandi district of Assam has become the first district to pay wages to tea garden workers through individual bank accounts.
The Public Financial Management System (PFMS) is to implemented on full scale to help Union Government to save a significant amount on interest costs.
NITI Aayog announces launch of the schemes - Lucky Grahak Yojana and Digi-Dhan Vyapar Yojana - for incentivising digital payment
The primary aim of these schemes is to incentivize digital transactions so that electronic payments are adopted by all sections of the society, especially the poor and the middle class.
The scheme will become operational with the first draw on 25th December, 2016 (as a Christmas gift to the nation) leading up to a Mega Draw on Babasaheb Ambedkar Jayanti on 14th April 2017.
a) Lucky Grahak Yojana [Consumers]:
Daily reward of Rs 1000 to be given to 15,000 lucky Consumers for a period of 100 days;
Weekly prizes worth Rs 1 lakh, Rs 10,000 and Rs. 5000 for Consumers who use the alternate modes of digital Payments.
This will include all forms of transactions viz. UPI, USSD, AEPS and RuPay Cards but will for the time being exclude transactions through Private Credit Cards and Digital Wallets.
b) Digi-dhan Vyapar Yojana[ Merchants]:
Prizes for Merchants for all digital transactions conducted at Merchant establishments
Weekly prizes worth Rs. 50,000, Rs 5,000 and Rs. 2,500
c) Mega Draw on 14th of April – Ambedkar Jayanti
3 Mega Prizes for consumers worth Rs 1 cr, 50 lakh, 25 lakh for digital transactions between 8thNovember, 2016 to 13th April, 2017 to be announced on 14th April, 2017
3 Mega Prizes for merchants worth Rs 50 lakhs, 25 lakh, 12 lakh for digital transactions between 8th November, 2016 to 13th April, 2017 to be announced on 14th.
BRICS nations, including India, pledged to share tax information automatically and adopt global standards on tax transparency to check cross border tax evasion. The two day meeting of the heads of Revenue of Brazil, Russia, India, China and South Africa (BRICS) also resolved to support other developing nations in increasing their tax administrations’ capacity to implement the OECD/G20 standard on Automatic Exchange of Information (AEOI).
Telangana government joined hands with Mumbai based IDFC Bank to enable cashless transactions
BSE is now available in 24 cities across the country with the opening of this new service centre
Bharti Airtel Starts First Payments Bank Service in Rajasthan
Interest rate of 7.25% per annum on deposits in savings accounts.
Accidental insurance of Rs. 1 lakh
YES Bank, Gujarat Roadways join hands to digitise bus travel payments.
The Securities and Exchange Boardof India has relaxed the rules for angel funds in order to boost more investment for new start-ups in the country.
raised the total number of angel investors to invest in a start-ups to 200 from 49 and reduced the minimum investment amount to Rs. 25 lakh from the previous Rs. 50 lakhs.
The minimumlock-in periodhas also been reduced to 1 year from previous 3 years. Angel investors will also be allowed to invest up to 25% of their funds in overseas start-ups
Note:An angel investor is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.
The amount per district will be provided by NITI Aayog to encourage digital payment system____ Rs. 5 lakh
As per updated report “Asian Development Outlook 2016” of Asian Development Bank (ADB) India’s economic growth forecast for Financial year 2017 - 7.0%.
The first Indian state to launch crop insurance claim distribution programme___ Madhya Pradesh.
The Union Government has decided to waive service tax on debit and credit card transactions up to Rs. to promote digital transactions____2,000 rupees.
Who has become first cashless village in Maharashtra____Dhasai.
The union Government has decreased the import duty on wheat to zero from ___10%.
Who has become first Canadian woman to appear on bank note____Viola Desmond.
Yes Bank’ has tied-up with a grocery delivery startup to deliver up to Rs. 2,000 cash to customers when they order grocery worth minimum Rs.1,000 online_____Grofers.
Who has been adjudged “Best Bank for SME Lending” by The Associate Chambers of Commerce and Industry of India (ASSOCHAM)____ Vijaya Bank.
Reserve Bank of India (RBI) has extended the deadline for deployment of Aadhar-enabled devices that process card transactions using Aadhaar-based biometric authentication___30th June 2017. Reserve Bank of India (RBI) has extended the deadline for deployment of Aadhar-enabled devices that process card transactions using Aadhaar-based biometric authentication___30th June 2017.
Who will immediately transfer 5 lakh rupees for every district in the country as seed money to kick start to encourage digital payment system___NITI Aayog.
The union govt. has allocated an initial sum for celebrating the 350th birth anniversary of Guru Govind Singh___one hundred crore rupees.
The union government has extended the minimum import price (MIP) on 19 products for two months to protect domestic steel industry from below-cost imports till _____4th of February 2017.
Bharti Airtel has announced the completion of the merger of its subsidiary unit in Bangladesh with ____Robi Axiata.
Public sector company MMTC will tie-up with the State Bank of India (SBI) to sell government-minted ____Indian Gold Coin.
U.S. Agency for International Development (USAID) and Mumbai-based RBL Bank announced $75 million Loan Guarantee for clean energy.
Union Minister of Road Transport, Highways and Shipping Nitin Gadkari lays foundation stones for Rs 1152 Cr projects in Manipur
YES BANK, country’s 5th largest private sectorlender has launched its “YES MOBILE 2.0” mobile Banking app.
India’s third largest private sector bank Axis Bank has announced its partnership with Flipkart to launch ‘Axis Bank Buzz Credit Card’.
Banks to report frauds of Rs 1 crore and above to Central Vigilance Commission (CVC)
Vigilance Commissioner - TM Bhasin
Standard Chartered Bank launched ‘Unified Payments Interface’ (UPI) solution
This UPI solution will enable clients to send and receive money through a Virtual Payment Address without entering additional bank account details
