Banking, Financial and Economic Awareness of 06 December 2019

1. GDP growth forecast cut to 5% and repo rate kept unchanged at 5.15%

• RBI has cut GDP growth forecast for 2019-20 to 5%.
• In October, RBI's GDP growth forecast for 2019-20 was 6.1%.
• During the last 10 months, RBI has cut its GDP growth forecast by 2.4 %.
• During 2012-13, RBI has lowered its GDP growth forecast by 1.8 % from 7.3 to 5.5 %.
• So, 2.4% cut in GDP growth forecast by RBI in 2019-20 is the sharpest change in GDP growth forecast during the decade.
• Monetary Policy Committee has kept the repo rate unchanged for the first time in the last 10 months.
• Monetary Policy Committee:
  • It has 3 Reserve Bank of India officials and 3 Government of India nominated external members.
  • Its meetings are held minimum 4 times in a year to decide repo rate, the rate at which RBI lends money to banks.
  • Ex officio Chairperson: Shaktikanta Das (Governor of RBI)

2. RBI revises exposure norms of UCBs

• New exposure norms of Urban Co-operative Banks (UCBs) will apply to single as well as group/interconnected borrowers of primary UCBs.
• Changes in norms will strengthen UCBs and safeguard the interest of depositors.
• UCBs having assets of Rs 500 crore and above will now come under the Central Repository of Information on Large Credits (CRILC) framework.
• RBI will also order a comprehensive cyber security framework for UCBs.
• The norms have been revised after Punjab and Maharashtra Co-operative (PMC) bank scam.

• Urban Cooperative Banks (UCBs):
  • They are primary cooperative banks that may be located in an urban or semi-urban area.
  • Until 1996, they could lend money for non-agricultural reasons only.
  • They are governed by RBI and state governments.

3. RBI suggests introduction of new Prepaid Payment Instruments (PPIs)

• They can be used only for purchasing goods and services up to Rs 10,000.
• They can be loaded and reloaded only from a bank account.
• RBI will provide directions about the new PPI by December 31, 2019.
• RBI has also permitted International Financial Service Centre Banking Units (IBUs).
• RBI has also proposed to allow transactions of maximum USD 10 million through over the counter (OTC) currency derivatives (contracts directly traded between two parties)

• Prepaid Payment Instruments (PPIs):
  • They are used for digital payments of goods and services.
  • Presently, they can be issued and reloaded by banks and non-bank organizations.
  • Presently, loading and reloading of PPIs up to a maximum amount of Rs 50,000 per month can be done through cash, debit to the bank account, credit card or other PPIs.

4. Maharashtra government may merge PMC bank with MSC bank

• Maharashtra government aims to protect small depositors by merging PMC bank with Maharashtra State Cooperative (MSC) bank.
• RBI had earlier found irregularities in the financial records of PMC bank. PMC bank diverted nearly 73% of its total loans to Housing Development and Infrastructure Limited (HDIL).
• RBI banned money withdrawal from PMC bank for 6 months, and account holders were permitted to withdraw an amount up to Rs. 1,000 only.  
• RBI may sell land owned by PMC bank in order to ensure that depositors receive their payments.
• Currently, forensic auditors are examining the financial record of PMC and may give their report by 31^st December. 
• Punjab and Maharashtra Co-operative (PMC) bank :
  • It was founded in 1983.
  • It was made a scheduled bank in 2000.

5. $600 million will be invested in NIIF of India

• The investment will be made by the Canada Pension Plan Investment Board (CPPIB) through NIIF Master Fund.
• After this investment, CPPIB will also be a shareholder in NIIF.
• In August, AustralianSuper and Ontario Teachers’ Pension Plan invested $2-billion in NIIF Master Fund.
• Abu Dhabi Investment Authority, Temasek, Axis Bank, HDFC Group, ICICI Bank and Kotak Mahindra Life Insurance and Union government are other investors in NIIF Master Fund.

• National Investment and Infrastructure Fund (NIIF):
  • It was formed by the Union government in February 2015.
  • It is the first sovereign wealth fund of India.
  • Its objective is an investment in Infrastructure.
  • CEO: Sujoy Bose
•  NIIF Master Fund:
  • It is one of the three funds managed by NIIF.
  • Fund of Funds and Strategic Fund are other funds managed by NIIF.
  • Its primary objective is investment in core infrastructure sectors like roads, ports, airports, and power.