Banking Awareness of 1 and 2 July 2022

Topic: Reports and Indices

1. Index of Eight Core Industries (ICI) for the month of May 2022 was released by DPIIT on 30 June 2022.

• In May 2022, the Index of Eight Core Industries (ICI) stood at 148.1.
• The combined ICI increased at 18.1% (provisional) in May 2022 as compared to the Index of May 2021.
• Core industries output recorded growth of 18.1% in May 2022 against 16.4% in the corresponding month of previous year (May 2021).
• The final growth rate of ICI for February 2022 has been revised to 5.9% from its provisional level of 5.8%.
• In May 2022, the cement industry recorded the highest growth of 26.3%.
• Index of Eight Core Industries (ICI):
  • It is released by Department for Promotion of Industry and Internal Trade (DPIIT).
  • It measures combined and individual performance of production in selected eight core industries.
  • The eight core industries are Coal, Crude Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement and Electricity.
  • The Eight Core Industries comprise 40.27% of the weight of items included in the Index of Industrial Production (IIP).

Topic: Reports and Indices

2. An assessment report of States/UTs based on the implementation of BRAP 2020 has been released.

• In the report, seven states are listed as top achievers in the best performers category.
• These states are Tamil Nadu, Andhra Pradesh, Telangana, Gujarat, Haryana, Karnataka, and Punjab.
• This year, the report classifies states/UTs into four categories.
• These categories are Top Achievers, Achievers, Aspirers, and Emerging Business Ecosystems.

• Department for Promotion of Industry and Internal Trade (DPIIT) has been releasing BRAP since 2014.
• So far 4 editions of the assessment of States/UTs have been released. The latest edition is the assessment of BRAP 2020.

• About Business Reforms Action Plan (BRAP) 2020:
  • It includes 301 reform points. They cover 15 business regulatory areas such as Access to Information, Single Window System, Labour, Environment, Sectoral Reforms and other reforms.
  • Sectoral reforms have been introduced for the first time in BRAP 2020 with 72 reforms across 9 key sectors.

Topic: Banking System

3. Government has taken a decision to set up Financial Services Institution Bureau (FSIB).

• FSIB will have a wider mandate. Government has decided to set up it to replace the Banks Board Bureau (BBB).
• The BBB was practically dysfunctional after the end of the term of its chairman Bhanu Pratap Sharma in April 2022.
• Last year, Delhi High Court has ruled that BBB is not a competent body and it could not select the general managers and directors of state-run general insurers.
• On June 30, ACC gave approval to a proposal by the department of financial services (DFS) to appoint Bhanu Pratap Sharma as head the new body for two years or until further orders.
• Appointments Committee of the Cabinet (ACC) also appointed three members of the new entity (FSIB). They are given next.
  • Animesh Chauhan, former chairman and managing director of Oriental Bank of Commerce
  • Shailendra Bhandari, former managing director and chief executive of ING Vysya Bank
  • Deepak Singhal, former Reserve Bank of India executive director
• Steps required for setting up of FSIB:
  • DFS will first modify Nationalised Banks (Management and Miscellaneous Provisions) Scheme of 1970/1980 (as amended) with the approval of the finance minister.
  • DFS will then “notify the government resolution for establishing FSIB as a single entity for making recommendations” for the appointments in PSBs, state-run non-life insurance companies and other financial institutions.
• Banks Board Bureau (BBB): It was formed in 2016. It was formed to recommend appointment of whole-time directors and non-executive chairpersons of public sector banks (PSBs) as well as of state-owned financial institutions.

Topic: Regulatory Bodies/Financial Institutions

4. SEBI has imposed a penalty of Rs 1.6 crore on seven entities.

• The penalty has been imposed on Kotak Mahindra Trustee Company (Rs 40 lakh).
• The penalty has also been imposed on Managing Director of Kotak AMC Nilesh Shah (Rs 30 lakh), for flouting rules pertaining to mutual funds at the time of investing in Essel Group companies.
• Kotak Mahindra Asset Management Co Limited’s appeal is pending with Securities Appellate Tribunal.
• The case pertains to six Fixed Maturity Plan that matured in April and May 2019.

Topic: Reports and Indices

5. RBI has released Financial Stability Report, June 2022.

• This is the 25^th issue of FSR. As per the report, the capital to risk weighted assets ratio (CRAR) of scheduled commercial banks (SCBs) increased to a new high of 16.7%.
• Their gross non-performing asset (GNPA) ratio fell to a six-year low of 5.9 % in March 2022. It could reach 5.3 % by March 2023.
• GNPAs of scheduled commercial banks were at 7.4 % in March 2021.
• The asset quality of SCBs improved across all major sectors. Net NPA ratio declined during 2021-22 and stood at 1.7% at year-end.
• Provisioning Coverage Ratio (PCR) increased to 70.9 % in March 2022 from 67.6 % a year ago.
• The report reveals that delinquency levels in aggregate consumer credit from fintechs have declined to 2.26% by March 2022.
• Provisioning Coverage Ratio (PCR) is the ratio of provisioning to GNPAs. It indicates the extent of funds a bank has kept aside to cover loan losses.
• Financial Stability Report:
  • The Financial Stability Report is the collective assessment of the Sub-Committee of the Financial Stability and Development Council.
  • It reflects the risk to financial stability and the resilience of the financial system.

Topic: Indian Economy/Financial Market

6. India’s external debt recorded an increase of $47.1 bn in FY22 as per RBI data.

• India’s external debt increased by 8.2 % to $620.7 billion in FY 22 as compared to the previous year.
• According to the latest data by RBI, short-term debt has risen by 20 % but the Debt-GDP ratio has declined to 19.9 % at end-March 2022 from 21.2 % percent a year earlier.
• The long-term debt has grown by 5.6 % and stood at $499 billion. The share of short-term debt in total external debt has increased to 19.6%.
• The ratio of short-term debt to foreign exchange reserves has increased to 20 % (17.5 % at the end of March 2021) by end-March 2022.
• US dollar-denominated debt remains the largest component (53.2%) of India’s external debt at end-March 2022.
• It is followed by the Indian rupee-denominated debt (31.2 %), SDR (6.6 %), yen (5.4 %), and the euro (2.9 %).
• Debt service (i.e., principal repayments and interest payments) has declined from 8.2 % in March 2021 to 19.9 % in March 2022.
• The share of outstanding debt of non-financial corporations in total external debt was the highest at 40.3 %.
• It is followed by deposit-taking corporations (except the central bank) (25.6 %), general government (21.1 %) and other financial corporations (8.6 %).
• External debt means money borrowed from a source outside the country. Government and corporations are eligible to borrow loans from abroad.

Topic: Taxation

7. One percent tax deducted at source (TDS) has become applicable on the transfer of Virtual Digital Assets (VDA) from 1 July 2022.

• The Central Board of Direct Taxes (CBDT) has excluded certain items from the definition of virtual digital assets in a notification dated 30^th June 2022.
• As per the Central Board of Direct Taxes (CBDT), following items are not virtual digital assets:
  • Gift card or vouchers, being a record that may be used to obtain goods or services or a discount on goods or services
  • Reward points, mileage points, or loyalty cards, being a record given without direct monetary consideration under a reward, award, loyalty, benefit, incentive, promotional or rebate program that may be redeemed or used only to obtain goods or services or a discount on goods or services
  • Subscription to websites or platforms or application

Topic: Taxation

8. Government increased Basic Custom Duty (BCD) on gold from 7.5% to 12.5%.

• Agriculture Infrastructure Development Cess of 2.5% will continue. Surcharge on BCD has been removed.
• Effectively, import duty on gold is now 15% as against earlier 10.75%.
• Import duty on gold has been raised from 10.75% to 15% to control current account deficit (CAD) and rising import of gold.
• As per World Gold Council reports, India's gold imports reached their highest level in ten years in 2021.
• India's current account balance recorded a deficit of 1.2% of GDP in FY22 against a surplus of 0.9% in F21.
• Special additional excise duty/cesses have been imposed on exports of petrol and diesel at ₹6 per litre and ₹13 per litre, respectively.
• A special additional excise duty of ₹6 per litre has been imposed on exports of Aviation Turbine Fuel (ATF).
• Windfall gain tax by way of cess at ₹23,250 per tonne has been imposed on domestically produced crude oil.
• This tax has been imposed to take away windfall gains accruing to oil producers from high international oil prices.
• A windfall gain tax is a higher tax rate imposed on sudden big profits of a company or industry.
• Upstream oil companies exporting petrol have to sell the equivalent of 50% of the amount sold to the domestic market for FY23. In case of diesel, this requirement is 30% of the volume exported.

Read Banking Awareness PDF - 1 and 2 July 2022