Banking Awareness of 15, 16 and 17 October 2022

Topic: RBI

1. RBI has issued Reserve Bank of India (Unhedged Foreign Currency Exposure) Directions, 2022.

• The Circular containing directions is applicable to all commercial banks (excluding Payments Banks and Regional Rural Banks).
• As per RBI, the directions shall come into force from January 1, 2023.
• As per the general guideline contained in directions, the banks shall ascertain the Foreign Currency Exposure (FCE) of all entities at least on an annual basis.
• To arrive at FCE of entities, their exposure from all sources including foreign currency borrowings and external commercial borrowings (ECBs) shall be taken into account.
• Banks shall assess the Unhedged Foreign Currency Exposure (UFCE) of entities with FCE.
• RBI said information on unhedged foreign currency exposures must be audited and certified by statutory auditors at least annually.
• As per the directions, the potential loss to an entity from UFCE shall be determined by the bank using the largest annual volatility in the USD-INR exchange rates during the last 10 years.
• The susceptibility of the entity to adverse exchange rate movements shall be determined by the bank by computing the ratio of the potential loss to entity from UFCE and the entity’s EBID (Earnings before Interest and Depreciation) over the last four quarters.
• Banks shall apply incremental capital and provisioning requirements to such entities as given in the following table.

• The incremental provisioning and capital requirements shall be calculated by the banks at a minimum on a quarterly basis.
• RBI said in the context of the directions, the EBID for banks has the same meaning as defined for computing the debt service coverage ratio.
• The RBI noted in its Financial Stability Report (FSR) of June that of the $180 billion in outstanding ECBs, 44%, or $79 billion, were unhedged.

Topic: Regulatory Bodies/Financial Institutions

2. On 12 October 2022, RBI placed on its website Standard Operating Procedure (SOP) for Inter-operable Regulatory Sandbox (IoRS).

• The SOP for IoRS has been prepared by the Inter-Regulatory Technical Group on FinTech (IRTG on FinTech).
• IRTG on FinTech has prepared the SOP for IoRS to facilitate testing of innovative products/services falling within the regulatory ambit of more than one financial sector regulators viz. RBI, SEBI, IRDAI, IFSCA and PFRDA.
• IRTG on FinTech was constituted under the aegis of the Financial Stability and Development Council-Sub Committee (FSDC-SC).
• It has representations from the members from financial sector regulators, Department of Economic Affairs, Ministry of Finance and Ministry of Electronics and Information Technology.
• FinTech Department of RBI shall act as nodal point for receiving applications under IoRS. It will be designated as Coordination Group for IoRS.
• The regulatory sandbox (RS) framework of the regulator, under whose remit the 'dominant feature' of the product falls, governs it as 'Principal Regulator (PR)'.
• The "Principal Regulator (PR)", under whose purview the "primary feature" of the product falls, is governed by the regulatory sandbox (RS) framework of the regulator.
• The "Associate Regulator (AR)" is the regulator or regulators whose purview includes the other aspects of the product in addition to its primary feature.
• Two sets of factors would be considered or deciding the dominant feature.
• These factors are type of enhancement to the existing products and number of relaxations sought by the entity for undertaking the test under the IoRS.

Topic: Banking System

3. South Indian Bank has launched first Digital Banking Unit at Chalakudy in Thrissur district of Kerala.

• It is one of 75 units dedicated to the nation by Prime Minister Narendra Modi.
• Karnataka Bank has opened its two Digital Banking Units in Mangaluru and Mysuru.
• The two Digital Banking Units (DBUs) are part of the 75 DBUs of various banks dedicated to the nation by PM Modi.
• The Central government announced the setting up of DBUs across 75 districts by scheduled commercial banks.
• South Indian Bank is a private sector bank. It is headquartered in Thrissur, Kerala.

Topic: Banking System

4. Banks’ request to exempt certificates of deposit from deposit insurance coverage has been rejected by DICGC.

• At the present, banks pay an insurance premium of 12 paise per 100 of deposit, including certificates of deposit (CDs).
• CDs have a tenor of up to one year. They are issued in minimum denomination of ₹5 lakh and in multiples of ₹5 lakh thereafter, usually to institutional investors.
• CDs issued by banks have to be taken into account for paying deposit insurance premium.
• DICGC Act does not differentiate between various classes of depositors— institutional and non-institutional.
• DICGC’s deposit insurance cover is only available for deposits up to ₹5 lakh.
• But CDs are issued by banks in lot size of ₹25 crore/ ₹50 crore/ ₹100 crore, etc.
• Certificates of deposit (CDs):
  • They are money market instruments of unsecured and negotiable nature. They are regulated by RBI. 
  • They are issued by a bank as a Usance Promissory Note against funds deposited at the bank for a maturity period upto one year.
  • Eligible Financial Institutions can issue them for the period from 1 year to 3 years.

Topic: Indian Economy/Financial Market

5. India’s goods exports in September 2022 increased 4.82% (year-on-year) to $35.45 billion.

• India’s imports in September 2022 increased 8.66% to $61.16 billion.
• Trade deficit in September 2022 widened by 14.42% to $25.71 billion.
• This is as per quick estimates for trade data for September 2022 released by the Commerce & Industry Ministry on 14 September 2022. 

• In April-September 2022 period, goods exports increased 16.96% to $231.88 billion.
• In the same period, imports increased 38.55% to $380.34 billion. As a result, the trade deficit nearly doubled to $148.46 billion.
• Non-petroleum, non-gems & jewellery (gold, silver & precious metals) imports in September 2022 increased 20.64% to $37.71 billion.
• Gold imports in September 2022 declined 24.62% to $3.8 billion.
• In 2021-22, exports recorded an increase of over 40% to reach an all-time high level of $422 billion.

Topic: Reports and Indices

6. FDI in India has seen a consistent rise in the last decade said the report titled “Vision – Developed India: Opportunities and Expectations of MNCs”.

• India received an inflow of $84.8 billion in FY22. It has the potential to attract FDI flows of $475 billion in next five years, CII-EY report projected.
• Nearly 71% of multinational companies (MNCs) working in India consider the country an important destination for expansion.
• India recently emerged the fifth-largest economy in the world.
• As per the report, estimated real growth in consumption is the third highest, behind only the US and China.
• The fast-expanding digital economy is likely to reach $1 trillion by 2025.
• Over 60 % of MNCs said there was an improvement in the business environment in the last three years.

Topic: Indian Economy/Financial Market

7. WPI Food Index based food inflation decreased to 8.08% in September 2022 from 9.93% in August 2022.

• As per the Commerce and Industry Ministry data released 14 October, WPI inflation declined amid a fall in prices of Food index.
• WPI inflation eased to 18 month low of 10.7% in September 2022 as compared to 12.41% in August 2022.
• The rise in prices of crude petroleum and natural gas, mineral oils, chemicals, and chemical products, basic metals, electricity, and textiles were the main contributors to inflation in September 2022.
• The WPI inflation was 11.8% in the corresponding month of the previous year (September 2021).
• The WPI inflation continued to fall in September for the fourth consecutive month.
• It remained in double-digits for the 18th consecutive month beginning April last year.
• The Wholesale inflation reached at a record high level of 15.88% in May this year.

Topic: Banking System

8. PM Modi dedicated 75 Digital Banking Units across 75 districts to the country on October 16.

• As part of the Union budget speech for 2022-23, Finance Minister Nirmala Sitharaman announced the setting up of 75 Digital Banking Units in 75 districts of India.
• Eleven Public Sector Banks, twelve Private Sector Banks and one Small Finance Bank are participating in this initiative.
• PM Modi urged every bank branch to bring 100 local businessmen within 100% digital banking fold.
• The Indian Army has signed a historic MoU with 11 Banks for providing banking facilities to Agniveers on enrollment.
• The 11 Banks are SBI, PNB, Bank of Baroda, IDBI Bank, ICICI Bank, HDFC Bank, Axis Bank, Yes Bank, Kotak Mahindra Bank, IDFC First Bank and Bandhan Bank.
• The Agniveer Salary Package's features and perks are similar to the Defense Salary Package.
• Additionally, the banks will also offer soft loans to Agniveers for promoting their entrepreneurial skills.
• The Agnipath scheme was launched on 14 June for the recruitment of youths in defence forces.

Topic: Reports and Indices

9. India ranks 107th position out of 121 countries on Global Hunger Index 2022.

• In 2021, India’s rank was 101st in the Global Hunger Index. India slipped six places in the Global Hunger Index.
• India with a score of 29.1 has been kept in the ‘serious’ category of hunger level.
• India is behind its neighbours Nepal (81), Pakistan (99), Sri Lanka (64), and Bangladesh (84).
• India’s GHI score has reduced from 38.8 in 2000 to 28.2 by 2014. Since then India’s registered higher scores in GHI than 28.2.
• The proportion of undernourishment in India has increased from 14.8 in 2014 to 16.3 in 2022 and wasting in children under five years jumped from 15.1 in 2014 to 19.3 in 2022.
• India’s score has improved in stunting in children under five. It has reduced from 38.7 in 2014 to 35.5 in 2022.
• India’s under-five mortality has reduced from 4.6 in 2014 to 3.3 in 2022.
• 17 countries have been collectively ranked between 1 and 17 with a score of less than 5. China is one of these seventeen countries.
• South Asian region has the highest hunger level, highest child stunting rate, and highest child wasting rate in the world.
• Yemen is at the last position in the Global Hunger Index 2022.
• The Global Hunger Index scores are based on four indicators- Undernourishment, Child stunting, Child wasting, and Child mortality.

Topic: Reports and Indices

10. Ministry of Commerce and Industry has released the fourth LEADS (Logistics Ease Across Different States) 2022 report.

• Andhra Pradesh, Assam and Gujarat have been kept in the ‘achievers’ category of the logistics index chart 2022.
• Chandigarh, Delhi, Haryana, Himachal Pradesh, Karnataka, Maharashtra, Odisha, Punjab, Tamil Nadu, Telangana, Uttar Pradesh and Uttarakhand are the other states and UTs in the ‘achievers’ category.
• Bihar, Chhattisgarh, Goa, Mizoram, Andaman and Nicobar Islands, Lakshadweep, Ladakh, Nagaland, Jammu and Kashmir, and Arunachal Pradesh are in the ‘aspirers’ category.
• Kerala, Madhya Pradesh, Rajasthan, Puducherry, Sikkim and Tripura are in the ‘fast movers’ category.
• The first logistics report was released in 2018. This index is an indicator of the efficiency of logistical services across India.
• The main objective of the Index is to improve logistics performance across states, which is essential for promoting trade and reducing transaction costs.
• The LEADS survey assessed many key points including shippers, terminal infrastructure service providers, logistics service providers, etc.
• The report ranks the states on the basis of the logistics ecosystem. Gujarat was at the top in the 2018 and 2019 rankings.

Topic: Reports and Indices

11. India has moved up six places in the CRII 2022.

• India has been ranked 123 out of 161 countries in the Commitment to Reducing Inequality Index (CRII) 2022.
• It has been prepared by Oxfam International and Development Finance International (DFI).
• It measures government policies and actions in three areas: public services (health, education, and social protection), taxation, and workers' rights.
• Norway tops the Commitment to Reducing Inequality Index (CRII). Germany and Australia are in the second and third spots, respectively.
• Through progressive spending, India’s rank has improved by six places from 129 in 2020 to 123 in 2022.
• India ranks 16 in progressive taxation with an improvement of three places.
• India has fallen 73 places due to the country being reclassified as not having a national minimum wage.
• India has moved up 27 places in the 'Impact of public spending on reducing inequality’ indicator.
• Along with India, twelve countries in the Index have no national minimum wage.
• According to the Index, most countries’ governments have failed to take the necessary steps to fill the inequality created by COVID-19.

Read Banking Awareness PDF - 15, 16 and 17 October 2022