Banking Awareness of 14, 15 and 16 December 2022

Topic: Banking System

1. As per Finance Ministry data, scheduled commercial banks (SCBs) have recovered only 13% of total write-off loans in the last five years.

• SCBs wrote-off more than 10.09 lakh crore rupees during Fiscal Year 2017-18 to Fiscal Year 2021-22.
• SCBs recovered more than 1.32 lakh crore rupees from written off loan accounts loan accounts made during previous five years.
• Gross NPAs of SCBs increased from more than 2.51 lakh crore rupees (gross NPA ratio of 4.1%) as on March 31, 2014.
• Gross NPAs peaked to more than 9.62 lakh crore rupees (gross NPA ratio of 11.46%) as on March 31, 2018.
• NPAs have since declined to more than 6.97-lakh crore rupees (gross NPA ratio of 5.9%) as on March 31, 2022.
• Stressed assets as percentage of gross advances in SCBs has declined from 9.8% as on March 31, 2014 to 7.8% as on March 31, 2022.

Topic: Reports and Indices

2. NBFC-MFIs have stood at first place in microfinance sector for the first time in years.

• NBFC-MFIs account for nearly 38% of the industry. Banks have stood at second place with close to 36% market share.
• As per latest quarterly report compiled by Sa-Dhan, the microfinance industry recorded 20% growth in second quarter of the current fiscal compared to the same period last year.
• Sa-Dhan is the association of inclusive finance institutions and SRO (Self-regulatory organizations) for microfinance sector.
• As per the report, all lenders have shown double digit growth, except banks. Banks recorded a growth of around 5%.
• NBFCs and NFPs (not-for-profit MFIs) have shown growth of 59% and 48% respectively.
• NBFC-MFIs and SFBs (Small finance banks) have shown a growth of around 29% and 21% respectively.
• As per the report, SFBs, NBFCs, and NFPs account for around 17%, 9% and 1% market share respectively.
• West Bengal, Madhya Pradesh, Chhattisgarh and the North-eastern states have PAR (Portfolio at Risk) 30+ levels higher than the national average of 4.94%.

Topic: Regulatory Bodies/Financial Institutions

3. IRDAI has made provision for Private Equity (PE) funds to exit smoothly as promoters.

• Private Equity players have been allowed to dilute their holding up to 26% in listed firms with 5-year solvency record.
• Earlier, promoters of insurers were required to maintain minimum shareholding of 50% in an insurer at all times.
• IRDAI has enabled direct entry of private players into insurers. It has also made exits smoother for PE/VC Funds that are promoters of unlisted and listed companies.
• IRDAI has recently made setting up of special purpose vehicles (SPVs) “optional” for investing into insurers.
• Earlier, it was mandatory to form a SPV for foreign investors to invest in insurers.
• Previously, investment through the SPV structure was required for a PE/VC (Venture Capital) fund to acquire more than 10% stake (and being categorised as a promoter).

Topic: Banking System

4. Bank of Baroda is planning to divest its majority stake in its subsidiary Nainital Bank Ltd.

• Presently, Bank of Baroda holds 98.57% stake in the Nainital Bank.
• It has decided to bring in a strategic partner in its subsidiary Nainital Bank Ltd (NBL).
• The strategic partner will help Bank of Baroda to reduce its stake in percentage terms.
• Late Bharat Ratna Pandit Govind Ballabh Pant originally promoted NBL in 1922. Its registered office is situated at Nainital.
• In 1974, RBI directed Bank of Baroda to manage affairs of NBL.
• The Nainital Bank Limited is a scheduled commercial bank. It is a wholly owned subsidiary of Bank of Baroda. Its CEO is Dinesh Pant.

Topic: Indian Economy/Financial Market

5. India has been upgraded from ‘Underweight’ to ‘Benchmark’ for 2023 by Credit Suisse.

• Credit Suisse's Global Equities Strategy team has upgraded India on the back of its underlying economic strength.
• It held back from upgrading India to ‘Overweight’ because of high-valuation premium and the weakening balance of payments (BoP).
• India’s BoP reached to record deficit earlier this year. Credit Suisse said it is likely to remain in deficit for the next year.
• Future GDP growth is anticipated by Credit Suisse to be higher than the current consensus estimate of 6% for the upcoming fiscal year.
• The optimistic view of Credit Suisse is anticipated to boost the inflow of foreign capital into India.
• Dependence on imported energy, reliance on foreign capital and a slowing global economy continue to be the risk factors.
• In 2022, domestic institutional investors (DIIs) inflows overtook the foreign portfolio investments. Credit Suisse expects this trend to continue.
• It anticipates that insurance funds will contribute $12 billion to DIIs, the Employees' Provident Fund Organization would contribute $7-8 billion to DIIs, and Systematic Investment Plans (SIPs) will contribute $18–20 billion to DIIs.
• As per Credit Suisse analysis, FPI outflows will continue in 2023.
• Credit Suisse is a global investment bank and financial services firm based in Switzerland.

Topic: Miscellaneous

6. US Federal Reserve has raised interest rates by 50 basis points to 4.25%.

• The decision has come after four consecutive 75 basis point hikes that have increased the rates at fastest pace since Paul Volcker led Fed Reserve in 1980s.
• The hike in the overnight benchmark interest rate by 50 bps by US Fed and indications of more hikes in 2023 weakened the rupee and pushed up yields of G-Secs (Government Securities).
• The Indian unit (INR) ended 30 paise weaker at 82.76 per dollar (USD).
• The yield on the benchmark 10-year G-Sec increased about 5 basis points to close at 7.2676%.
• Jerome Powell is the 16th chair of the Federal Reserve since 2018.

Topic: Banking System

7. HDFC Bank launched 6^th annual grants program for social startups.

• The program has been launched in partnership with the Government of India’s flagship initiative ‘Startup India’.
• The program is known as Parivartan SmartUp Grants. It aims to identify startups working in the social impact space.
• It aims to support them through monetary grants to their incubators.
• The bank has already given more than Rs 30 crore to over 45 incubators, which have helped more than 165 start-ups.
• This year the focus of the bank will also be on building capacities of incubators and startups and working in tier-II & III cities.
• The bank will fund social impact startups developing solutions in environmental conservation, affordable healthcare, sustainable rural economy, technologies for better governance, economic growth of SMEs, gender diversity and inclusion space.
• Startup India initiative:
  • It was launched by the Prime Minister on 16 January 2016.
  • It aims to foster entrepreneurship by creating an ecosystem for the growth of Startups.

Topic: Indian Economy/Financial Market

8. Wholesale price-based inflation has declined to 21-month low in November.

• After the reduction in the prices of food, fuel and manufactured items, wholesale price-based inflation has declined to 5.85%.
• The decline in the rate of Inflation is primarily due to the fall in the prices of food articles, basic metals, textiles, chemicals and paper products.
• The wholesale price index (WPI) based inflation was declined to 8.39 per cent in October after remaining in double digits for 19 months.
• In November, Inflation in the ‘Fuel and power’ basket was 17.35 per cent and in manufactured products, it was 3.59%.
• The Reserve Bank of India uses retail inflation for formulating monetary policy.
• Recently, retail inflation has dropped to 5.8 per cent for the month of November.
• The inflation has declined to below RBI's upper tolerance level of 6 per cent for the first time in 11 months.

Topic: Miscellaneous

9. First G20 Finance and Central Bank Deputies (FCBD) meeting organized from 13th-15th December 2022 in Bengaluru.

• This meeting was jointly hosted by the Ministry of Finance and the Reserve Bank of India.
• During the meeting, the discussion was focused on the agenda for the Finance Track under the Indian G20 Presidency.
• Many topics including financing cities of tomorrow, managing global debt vulnerabilities, advancing financial inclusion and productivity gains, etc. were discussed.
• The first Finance Ministers and Central Bank Governors meeting will be held during 23-25 February 2023 in Bengaluru.
• Around 40 meetings of the Finance Track will be organized at several locations in India.
• The theme of ‘One Earth One Family, One Future’ will guide the discussions of the G20 Finance Track.

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