Banking Awareness of 18, 19 and 20 February 2023

Topic: Appointments

1. Aruna Sundararajan IAS (Retd.) has been appointed the chairperson of Broadband India Forum (BIF).

• Aruna Sundararajan is former Secretary (Telecom), Department of Telecommunications, Ministry of Communications.
• She also served as Chairperson, Digital Communications Commission.
• She was the Chairperson of the 5G High-Level Forum. She played a key role in formulating India’s policy on 5G.
• Broadband India Forum is a think tank for digital transformation. It was formed in 2015.

Topic: Miscellaneous

2. Textile Ministry will host ‘Technotex 2023’ in Mumbai to boost manufacturing and research in the technical textiles sector.

• ‘Technotex 2023: Envisioning Indian Technical Textiles@ 2047’ will be a three-day exhibition and meet.
• It will begin on February 22. Over 150 technical textiles exhibitors and more than 250 buyers from 30 countries are likely to take part.
• Technotex 2023 would help in exemplifying the potential for trade and investment between India and foreign countries in technical textiles sector.
• Presently, Indian technical textiles market is the fifth largest in the world.

Topic: RBI

3. RBI has released draft guidelines on minimum capital requirements for market risk.

• RBI has released these guidelines as part of convergence of its regulations for banks with Basel III standards.
• These guidelines will apply to all Commercial Banks (excluding Local Area Banks, Payments Banks, Regional Rural Banks and Small Finance Banks).
• These guidelines will come into effect from April 1, 2024. They will not apply to Co-operative Banks (i.e., Urban Co-operative Banks, State Co-operative Banks and Central Co-operative Banks).
• In the draft guidelines, separate classification is proposed of the securities that are included in banks’ trading book and of those included in the banking book.
• Securities that are included in banks’ trading book are subject to market risk capital requirements.
• Securities that are included in the banking book are subject to credit risk capital requirements.
• Market risk is defined as the risk of losses in on and off-balance-sheet positions arising from movements in market prices.
• RBI said the risks subject to market risk capital requirements include interest rate and equity risk for trading book instruments.
• RBI said the risks subject to market risk capital requirements also include foreign exchange risk (including gold and precious metals) for trading and banking book instruments.
• RBI has specified which instruments need to be considered a part of the trading and banking book.
• The draft norms say that the banks shall classify any instrument held for at least one year as a trading book instrument.
• As per draft norms, shifting of instruments between two kinds of books should be rare. This will be allowed only in extraordinary circumstances.
• The shifting will require the approval of RBI and the bank’s board. Any capital gains resulting from this shifting are not permitted as per RBI.

Topic: RBI

4. RBI has released final guidelines on Interest Rate Risk in Banking Book (IRRBB).

• As per RBI, banks should have a clearly defined Board approved risk appetite statements.
• This statement lays down policies and procedures for limiting and controlling IRRBB.
• Banks have to measure, monitor, and disclose their exposure to IRRBB. This should be done in terms of potential change in the economic value of equity and net interest income.
• According to the guidelines, IRRBB is the current or prospective risk to banks’ capital and earnings arising from adverse movements in interest rates that affect its banking book positions.
• RBI said the board will be responsible for ensuring that the banks take steps to identify, measure, monitor and control IRRBB.
• The board can delegate the monitoring and management of IRRBB to ALCO (asset-liability committee).
• Under the guidelines, the board/ALCO is responsible for setting appropriate limits on IRRBB.
• All IRRBB policies should be reviewed periodically (at least annually) and revised as needed.   
• The capital adequacy for IRRBB should be considered with regard to the risks to economic value.
• RBI will communicate the date of implementation in due course.

Topic: Appointments

5. V S Khichi has been appointed by RBI as a member of the Advisory Committee on Reliance Capital.

• Vikramaditya Singh Khichi is a former executive director of Bank of Baroda.
• Khichi has been appointed after resignation of Srinivasan Varadarajan.
• On 7 December 2021, RBI constituted an Advisory Committee to advise Reliance Capital’s administrator.
• Other members of the committee are former State Bank of India Deputy MD Sanjeev Nautiyal, and former Tata Capital MD and CEO Praveen P Kadle.

Topic: Taxation

6. CESTAT (Customs, Excise & Service Tax Appellate Tribunal) has ruled that takeaway food will not attract service tax.

• CESTAT has given this ruling in the matter of Haldiram and the ruling relates to pre-GST regime issue.
• It could also have an impact on GST. Presently, 5% GST is applicable on restaurant services, both in the case of dine-in in the premises or takeaway.
• GST on dining in a restaurant inside hotels having the daily room tariff of Rs 7,500 or more, is 18%. 5% rate is without input tax credit, 18% is with input tax credit.
• In its ruling, CESTAT held that takeaway of food items would amount to sale and would not involve any element of service. So, no service tax can be levied on takeaway.
• CESTAT was formerly known as Customs, Excise & Gold (Control) Appellate Tribunal.
• It was constituted on 11th October 1982. Its headquarter is at New Delhi.

Topic: RBI

7. RBI has recently updated rules for foreign donations via payment systems.

• Real Time Gross Settlement System (RTGS) and National Electronic Funds Transfer (NEFT) are payment systems.
• RBI has asked member banks taking part in payment systems to make small changes to their core banking/middleware solutions to capture certain details while forwarding foreign donations through NEFT and RTGS systems to SBI.
• Originating banks should select two mandatory fields of NEFT/RTGS systems while remitting foreign donations to the Foreign Contribution (Regulation) Act (FCRA) account at SBI.
• Originating banks shall also pass on donor details relating to “transaction without Legal Entity Identifier (LEI) details” as part of ‘Sender to remitter information’ in NEFT and RTGS.
• RBI said these instructions will be effective from March 15, 2023.
• Under the FCRA 2010, foreign contributions must be received only in the “FCRA account” of SBI, New Delhi Main Branch.
• Direct payments to the FCRA account are made by overseas banks using the SWIFT system, and by Indian intermediary banks using the NEFT and RTGS systems.
• The donor information, including name, address, country of origin, amount, currency, and purpose of remittance, must be recorded in such transactions in accordance with the Ministry of Home Affairs' (MHA) current regulations, and SBI is required to report the same to MHA on a daily basis.

Topic: Taxation

8. GoM's recommendation to set up the Appellate Tribunal for dispute redressal accepted by GST Council.

• On 18 February, the GST Council adopted the report of the Group of Ministers on setting up of the GST Appellate Tribunal with some modifications.
• Finance Minister Nirmala Sitharaman chaired the 49th meeting of the GST Council.
• Sitharaman said this amendment will first be sent for the opinion of the members. The Speaker has been authorized to finalize it.
• The GoM on the Goods and Services Tax Appellate Tribunal (GSTAT) was set up in July last year under the chairmanship of Haryana Deputy Chief Minister Dushyant Chautala.
• The panel suggested that the tribunal should consist of a retired Supreme Court justice as its chairman, apart from two judicial members and one technical member each from the Center and the states.
• The setting up of GSTAT is expected to bring relief to businesses that have been waiting for a speedy process to resolve GST disputes for a long time.
• This decision will speed up disposal of long pending cases and reduce the burden of judiciary.
• GST Council has also decided to clear the pending balance amount of GST compensation to the States.
• Sitharaman said that the pending arrears of GST compensation of Rs 16 thousand 982 crore for June 2022 will be cleared.
• The finance minister also announced a reduction of GST rates on loose Raab or liquid jaggery from 18% to nil and 5% GST if it is pre-packaged and labelled.
• The GST rate on pencil sharpeners has been reduced from existing 18% to 12% while that on tag tracking devices or data loggers affixed on durable containers has been reduced from 18% to nil, subject to certain conditions.
• GST exemptions for services by the National Testing Agency for conducting entrance examinations for admission to educational institutions.
• The Council has decided to rationalize late fee on late filing of annual return or GSTR9 for 2022-23 for small taxpayers with annual turnover up to Rs 20 crore.
• The GST Council decided to tax services supplied by courts and tribunals under the reverse charge mechanism.

Topic: RBI

9. RBI issued norms for lending and borrowing of government securities.

• The Reserve Bank of India issued draft norms for lending and borrowing of government securities.
• As per the draft Reserve Bank of India (Government Securities Lending) Directions, 2023, Government Securities Lending (GSL) transactions will be completed in a minimum one day and a maximum of 90 days.
• Banks, market participants and other interested parties can submit their comments by 17 March 2023.
• According to the draft, the government securities except Treasury Bills would be eligible for lending/borrowing under a GSL transaction.
• The central government (including Treasury Bills) and the state governments issued Government securities would be eligible for placing as collateral under a GSL transaction.
• Earlier, RBI proposed the introduction of securities lending and borrowing in government securities (G-secs). Its main aim is to facilitate participation in the securities lending market.
• Any entity undertook repo transactions in government securities and RBI approved entity would be eligible to participate in GSL transactions as a lender of securities.

Read Banking Awareness PDF - 18, 19 and 20 February 2023