Banking, Financial and Economic Awareness

Topic: Banking System

1. As per FSR released by RBI, GNPA ratio of SCBs may increase to 13.5% by September 2021.

  • As per the Financial Stability Report (FSR) released by RBI, Gross Non Performing Assets (GNPA) ratio of Scheduled Commercial Banks (SCBs) may increase to 13.5% by September 2021.
  • RBI has released the Financial Stability Report (FSR), January 2021. This is the 22nd issue of FSR.
  • The report says that both GNPA and net NPA (NNPA) ratios continued to decline. In September 2020, GNPA ratio stood at 7.5%. NNPA ratio stood at 2.1% in September 2020.  In March 2020, NNPA ratio was 3%.
  • The report says that GNPAs may increase to 13.5% by September 2021 under the baseline scenario. GNPA ratio may increase to 14.8% by September 2021 under the severe stress scenario. 
  • As per the collective assessment of FSDC sub-committee in July 2020 FSR, GNPA ratio should increase from 8.5 % in March 2020 to 12.5 % by March 2021. As per July 2020 FSR, GNPA ratio should increase to 14.7% under the severe stress scenario in March 2021. 
  • FSR released in January 2021 says that banks have sufficient capital at the aggregate level. It says that at individual level, capital with banks may come down below regulatory requirements in case of severe stress scenario. 
  • 22nd issue of FSR shows an increase in capital to risk-weighted assets ratio (CRAR) of SCBs from 14.7% in March 2020 to 15.8% in September 2020.
  • Stress tests are carried out to know the effects on the asset quality of banks under hypothetical scenarios. In addition to baseline scenario, RBI carries out stress tests under medium, severe and very severe scenarios.
  • FSR was for the first time released in May 2010. It is released biannually in June and December every year.
  • GNPA and NNPA: GNPA shows the absolute value of NPAs. NNPA is calculated by subtracting provisioning made by banks from GNPA. 

Topic: Indian Economy

2. Net inflow into mutual fund schemes increase by two times in H1 current fiscal.

  • Net inflows into mutual fund schemes have increased by two times in H1 of current fiscal.
  • As per the Financial Stability Report released by RBI, they increased to ₹1.5-lakh crore. In first half (H1) of last fiscal year, they stood at ₹60,000 crore.
  • Inflows into income and debt-oriented schemes were higher than inflows in growth and equity-oriented schemes.
  • The assets of mutual fund industry have increased by 11%. Investors preferred Systematic Investment Plans (SIPs) and asset under management through SIP increased.

Topic: Indian Economy

3. Consumer Price Index (CPI) based retail inflation declines to 4.59% in December.

  • Consumer Price Index (CPI) based retail inflation has declined to 4.59% in December from 6.93%.
  • The inflation remained within a target range of 2-6%. The target range is valid till 31 March, 2021
  • The decline is mainly due to the prices of vegetables, particularly onion and potato. As per the experts, core CPI inflation is likely to be higher despite declining food inflation.
  • Index of Industrial Production (IIP) based industrial growth declined by 1.9% in November.
  • Decline was seen in both manufacturing (1.7% decline) and mining (7.3% decline).

Changes in Key Economic Indictors

Retail inflation based on CPI

November

December

Industrial growth based on IIP

October

November

Headline inflation

6.93

4.59

Manufacturing

4.11

(-) 1.7

Food inflation

9.5

3.41

Mining

(-) 1.3

(-) 7.3

Rural inflation

7.2

4.07

Electricity

11.24

3.5

Urban inflation

6.73

5.39

General

4.19

(-) 1.9

Topic: Regulatory Bodies/Financial Institutions

4. Finance Ministry takes decision against imposition of Anti-dumping duty on imports of carbon black from China and Russia.

  • Revenue Department under Finance Ministry has taken a decision against the imposition of Anti-dumping duty on imports of carbon black from China and Russia.
  • Director General of Trade Remedies (DGTR) under the Ministry of Commerce has recommended imposition of Anti-dumping duty on imports of carbon black from China and Russia for five more years.
  • On 22 December 2020, DGTR has recommended continuation after Sunset Review investigations.
  • Carbon black is used in the rubber industry by tyre makers and small and medium-sized rubber goods manufacturers. It is also used in plastics, paints and inks as a colour pigment.
  • Sunset Review investigations are done to investigate the effects of discontinuation of Anti-dumping duty.
  • It decides whether dumping and injury to the domestic industry will continue or recur after discontinuation of Anti-dumping duty. Domestic industry can file an application for sunset review.

Topic: Banking System

5. Six-member Working Group set up by RBI to examine all aspects of digital lending activities.

  • RBI’s executive director, Jayant Kumar Dash will be the chairman of the Working Group on digital lending activities. It has four senior RBI officers and two external members.
  • The Working Group will not only study all aspects of digital lending activities in regulated financial sector but also study all aspects of digital lending activities by unregulated players.
  • RBI has advised the Group to submit its report within three months. The names of external members are Vikram Mehta and Rahul Sasi.

Topic: Banking/Financial Schemes

6. DPIIT asks for implementation of Credit Guarantee Scheme for Startups (CGSS) and Startup India Seed Fund Scheme (SISFS) in Budget 2021-22.

  • DPIIT has asked Finance Ministry to implement Credit Guarantee Scheme for Startups (CGSS) and Startup India Seed Fund Scheme (SISFS) in Budget 2021-22.
  • Credit Guarantee Scheme for Startups (CGSS) for startups was proposed in Startup India Action Plan of 2016.
  • In India, the number of startups was 50,000 in 2018. Startup India Action Plan was released by government on 16 January 2016.
  • For the purpose of government schemes, Startups are entities registered or incorporated in India at an annual turnover or equal to or less than Rs 25 crore in any preceding financial year.   
  • Department for Promotion of Industry and Internal Trade (DPIIT):
    • It comes under the Ministry of Commerce and Industry. It was formed in 1995.
    • It was known as the Department of Industrial Policy & Promotion before January 2019.

Topic: Banking System

7. RBI fines Deutsche Bank for non-compliance with Reserve Bank of India (Interest Rate on Deposits) Directions, 2016.

  • RBI had fined Deutsche Bank for non-compliance with Reserve Bank of India (Interest Rate on Deposits) Directions, 2016.
  • RBI had imposed a fine of Rs. 2 crore in the exercise of its powers under the Banking Regulation Act, 1949.
  • Deutsche Bank is a German multinational investment bank.

 

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