Banking, Financial and Economic Awareness of 14 and 15 April 2020

1. HDFC Chairman demands change in NPA classification norm

• Chairman of Housing Development Finance Corporation (HDFC), India’s most important housing finance company has demanded change in Non Performing Assets (NPA) classification norm from 90 days to 180 days.
• HDFC Chairman, Deepak Parekh has also demanded that stressed accounts in the real estate sector should be restructured for one time.
• He has also said that this will give more liquidity to real estate sector.
• Deepak Parekh is non-executive chairman of HDFC. He was awarded Padma Bhushan in 2006.
• HDFC is headquartered in Mumbai. Renu Sud Karnad is its Managing Director.

2. FPIs shares in IndusInd Bank increase

• The shareholding of Foreign Portfolio Investors (FPIs) in IndusInd Bank has increased from 55.22% in December 2019 to 72.07% in August 2020.
• On 13 April 2020, NSDL has issued the notification to limit buying of shares by FPIs at 13.98 million shares. This is equal to 2% paid-up equity of bank.
• Currently, FPIs can have 74% shareholding in India’s private banks.  
• In March 2020, the share prices of bank have fallen significantly. This also happened earlier in case of Yes Bank.
• But, the government took measures to solve the problem of Yes Bank. FPIs are more confident as they feel the government will help troubling private banks.
• National Securities Depository Limited (NSDL) is Mumbai based Indian central securities depository. It was formed in 1996.
• IndusInd bank:
  • It is headquartered in Pune. Its maximum branches are in Mumbai.
  • It is owned by the Hinduja group.
  • Sumant Kathpalia is its MD and CEO. He was appointed on 24 March 2020.
  • Tagline of bank is ‘we make you feel richer’. 

3. IMF lowers India’s GDP growth

• In latest World Economic Outlook (WEO), IMF has lowered India’s GDP growth for financial year 2020-2021 to 1.9%.
• As of now, only one chapter has been released. This is titled ‘The Great Economic Lockdown’. The complete report is due for release in May.
• In January, IMF has predicted 5.8% GDP growth for India. IMF has also said that GDP growth will remain at 7.4% in 2021-2022.
• IMF report also finds that the only region with positive growth in 2020 will be Asia and global economic growth may remain at 5.8% in 2020-21.

4. IAMAI wants digital integration of NBFCs customers

• Internet and Mobile Association of India (IAMAI) has requested government to help in digital integration of customers of regulated NBFCs.
• Digital integration would prevent the physical contact of customers with NBFC employees.
• Due to the coronavirus spread and physical Know Your Customer (KYC), customers are not able to avail NBFC services.
• Digital integration will help customers in making payments for electricity, water and other essential items bought through e-commerce. 
• Internet and Mobile Association of India (IAMAI) is a not for profit organization. It was formed in 2004. It is headquartered in New Delhi.

Topic of the Day – “Inflation and Its Types”

• Inflation: It occurs when prices of goods increase, due to which our purchasing power decreases.
• Types of Inflation
  • Creeping Inflation: When Inflation exists at very low rate (between 0 to 9%). It is also known as mild inflation.
  • Galloping Inflation: When Inflation is large and accelerating, E.g. Russia Economies in the late 1980’s. Hyperinflation is the other word used for galloping inflation.
  • Demand-Pull Inflation: When Inflation is due to rising demand. In demand-pull inflation, there is excessive money available. As a result, there is an excessive demand for goods. But, there is a shortage of supply of goods. So, the price rise.
  • Cost-push Inflation: When Inflation is due to rise in factor cost or cost of inputs for production.
  • Bottleneck Inflation: When Inflation is due to a fall in the supply side.
  • Core Inflation: When Inflation is calculated by excluding food articles and energy. It is calculating inflation for the long term.
  • Headline Inflation: When Inflation is calculated by including food articles and energy. It is calculating inflation for short term.
• Deflation: It occurs when prices of goods decrease, due to which our purchasing power increases or when inflation becomes negative.
• Stagflation: It is a situation where inflation, recession & unemployment altogether exist in the economy.
• Disinflation: Disinflation is a temporary slowing of the rate of price rise. It is used to portray instances when the inflation rate has reduced slightly over the short term. It should not be confused with deflation, which can be unsafe for the financial system.

Multiple Choice Questions (MCQs)

1. Who has recently demanded change in NPA classification norm from 90 days to 180 days?

1. Renu Sud Karnad
2. Sumant Kathpalia
3. Ashok Kumar
4. Deepak Parekh
5. Devesh Singh

2. The shareholding of Foreign Portfolio Investors in Indusind Bank has recently increased from 55.22% to

1. 72.07%
2. 74.07%
3. 75.07%
4. 80.07%
5. None of the above

3. In the latest World Economic Outlook (WEO), the International Monetary Fund has lowered India’s GDP growth for the financial year 2020-2021 to

1. 1.7%
2. 1.8%
3. 1.9%.
4. 2.0%
5. 2.3%

4. Internet and Mobile Association of India (IAMAI) has requested government to help in digital integration of customers of regulated NBFCs. When was IAMAI formed?

1. 1994
2. 1999
3. 2004
4. 2009
5. 2014

5. Which of the following term is used for the simultaneous presence of inflation, recession and unemployment?

1. Core inflation
2. Deflation
3. Disinflation
4. Hyperinflation
5. Stagflation

Solution:

1. D

2. A

3. C

4. C

5. E

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