Banking Awareness of 15, 16 and 17 December 2021

Topic: RBI

1. RBI releases Prompt Corrective Action (PCA) framework for NBFCs.

• RBI has released Prompt Corrective Action (PCA) framework for Non-Banking Financial Companies (NBFCs).
• Until now, the RBI had imposed Prompt Corrective Action (PCA) framework only on banks.
• PCA for NBFCs will come into effect from October 1, 2022 on the basis of financial position of NBFCs on or after March 31, 2022.
• PCA for NBFCs will apply to all deposit-taking NBFCs, excluding government companies. It will also apply to all non-deposit taking NBFCs existing in the middle, upper and top layers.
• Three indicators for invocation of PCA are capital to risk-weighted assets ratio (CRAR), Tier I ratio and net non-performing assets (NNPAs), including non-performing investments (NPIs).
• Adjusted net worth/aggregate risk weighted assets, leverage ratio and NNPAs, including NPIs are indicators in case of core investment companies (CICs).
• RBI said that the PCA framework for NBFCs will be reviewed after three years.

Topic: Reports and Indices

2. Reliance was biggest wealth creator for third consecutive year.

• According to Motilal Oswal 26th Annual Wealth Creation Study, Reliance was biggest wealth creator for third consecutive year.
• Reliance created wealth of ₹9.7-lakh crore during 2016-21, which is higher than its own previous record of ₹5.6-lakh crore in 2014-19.
• TCS, HDFC Bank, Hindustan Unilever, Infosys, Bajaj Finance are other companies on the list of biggest wealth creators.
• Adani Transmission became fastest wealth creator. Adani Enterprises is ranked third fastest wealth creator.
• Only two PSUs (Gujarat Gas and Indraprastha Gas) appear in the top 100 wealth creators.

Topic: RBI

3. Draft master directions on minimum capital requirements for operational risk released by RBI.

• RBI has released draft master directions on minimum capital requirements for operational risk.
• RBI has released master directions as part of convergence of its regulations for banks with Basel III standards.
• The directions will apply to all commercial banks excluding local area banks, payments banks, regional rural banks, and small finance banks.
• RBI said that the directions will come into effect from April 1, 2023. It has sought comments from stakeholders on the draft master directions by January 31, 2022.
• RBI said that Basel III Standardised Approach will replace all existing approaches for measuring minimum operational risk capital requirements.
• These approaches are - Basic Indicator Approach (BIA), The Standardised Approach (TSA)/ Alternative Standardised Approach (ASA) and Advanced Measurement Approach (AMA).
• Basel III SA calculation methodology is dependent on Business Indicator (BI), Business Indicator Component (BIC) and Internal Loss Multiplier (ILM).
• BI is a financial-statement-based proxy for operational risk. BIC is calculated by multiplying the BI by a set of marginal coefficients (αi).
• Internal Loss Multiplier (ILM) is a scaling factor based on a bank’s average historical losses and the Business Indicator Component (BIC).

Topic: Banking System

4. HomeFirst enters into a strategic co-lending partnership with Union Bank of India.

• HomeFirst has entered into a strategic co-lending partnership with Union Bank of India (UBI) to offer home loans to customers.
• Under this partnership, HomeFirst will originate loans based on agreed credit policy of UBI in line with provisions of RBI’s Co-Lending Model.
• HomeFirst will retain minimum 20% of the loan on its book while 80% will be on UBI’s book.
• HomeFirst will act as a servicing agent for the loan accounts sourced under this partnership.

Topic: Indian Economy/Financial Market

5. Wholesale inflation increases to 14.23% in November.  

• Producers’ inflation based on the Wholesale Price Index (WPI) has increased to 14.23% in November.
• This increase is highest in current series. November is the eighth consecutive month of double digits WPI.
• High rate of inflation in November 2021 is mainly due to increase in prices of mineral oils, basic metals, crude petroleum & natural gas, chemicals and chemical products, food products etc.
• Retail inflation based on Consumer Price Index (CPI) increased to a three-month high of 4.9% in November.

Topic: Agriculture

6. CCEA grants approval to extension of PMKSY up to 2025-26.

• Cabinet Committee on Economic Affairs (CCEA) has granted approval to extension of Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) by four years up to 2025-26.
• This would involve estimated expenditure of ₹93,068 crore, which will help complete 60 on-going irrigation projects.
• Total 106 irrigation projects which were at least 50% complete were identified by government. So far, 46 projects have been completed.
• CCEA has also approved central funding of 90% of water component for two national projects. These projects are Renukaji Dam (Himachal Pradesh) and Lakhwar Multipurpose (Uttarakhand).
• PMKSY was launched in 2015 by amalgamation of Accelerated Irrigation Benefit Programme (AIBP), Integrated Watershed Management Programme (IWMP) etc.

Topic: Banking System

7. Samunnati enters into a co-lending agreement with IndusInd Bank.

• Samunnati has entered into a co-lending agreement with IndusInd Bank to increase credit accessibility for farmer producer organisations (FPOs) across India.
• The main aim is to endure self-sustainability and profitability of Farmer Collectives and their members.
• The partnership will enable easy access to working capital to Samunnati’s growing network of 1,500 Farmer Collectives.
• In November 2020, RBI issued guidelines on Co-Lending Model between Scheduled Commercial Banks and NBFCs.
• Samunnati is an Agri value chain solutions provider.

Topic: Indian Economy/Financial Market

8. India has registered the highest ever annual FDI inflow of 81.97 billion dollar in 2020-21.

• India has registered the highest ever annual Foreign Direct Investment (FDI) inflow of 81.97 billion dollar in 2020-21.
• FDI inflows in the last seven financial years is over 440 billion dollar. This is nearly 58% of the total FDI inflow in last 21 financial years.
• Singapore, Mauritius, USA, Netherlands and Japan are top five countries from where FDI Equity Inflows were received during 2014 to 2021.
• Computer Software and Hardware sector received largest share of FDI inflows, followed by Service, Trading and Telecommunications.

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