Banking Awareness of 15, 16 and 17 December 2021

By PendulumEdu | Last Modified: 27 Dec 2021 18:52 PM IST
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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.

Union Bank of India was founded in 1919. Its CEO is Rajkiran Rai G. It is headquartered in Mumbai. It is a government-owned bank.

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.

IndusInd Bank:

It is a Pune-based bank. It was started in 1994.

Sumant Kathpalia is its CEO. Its tagline is we make you feel richer.

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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