Banking Awareness of 20, 21 and 22 April 2022

Topic: RBI

1. RBI places limits on lending by non-banking finance companies (NBFCs) to bring them at par with Banks.

• RBI stated that exposure to a single entity of NBFC should not exceed 20% of its available capital base and subject to board approval, an additional 5% exposure will be allowed.
• However, NBFCs that are into infrastructure finance can have an exposure of 25%.
• The NBFCs have to report to the department of supervision of RBI in case of breach of the exposure limits.
• These norms will come into effect from October 1, 2022. The RBI has also directed NBFCs to disclose all instances of breach of the covenant of loan availed or debt securities issued by them.
• NBFCs are the companies registered under the Companies Act, 1956 and are involved in the business of loans, acquisition of shares/stocks/debentures, etc.

Topic: RBI

2. NBFCs registered with RBI must take prior approval from RBI to carry out credit card business.

• RBI has said that any company must take a Certificate of Registration and other permissions to enter into credit card business.
• This will also apply to non-deposit taking company. RBI’s directions will come into effect from July 1, 2022. 
• To enter into the credit card business, the company must have a minimum net-owned fund of ₹100 crore and must fulfil other conditions, which RBI will specify.
• RBI directed NBFCs to not issue debit cards, credit cards, charge cards or similar products, virtually or physically without taking prior approval of RBI.
• RBI has said that Urban Co-operative Bank (UCBs) are not allowed to create any honorary positions/ titles at Board level.
• It has also said that UCBs are not allowed to confer such honorary titles that are non-statutory in nature.
• RBI has asked UCBs to do away with any such existing position/titles (Chairman Emeritus, Group Chairman, etc) within a period of one year.
• RBI has said that NBFCs-UL will keep Common Equity Tier 1 (CET1) ratio of at least 9% of risk weighted assets.
• RBI has also said that NBFCs shall not give loans and advances of ₹5 crore and above to their directors, relatives of directors and others as specified by RBI.

Topic: RBI

3. RBI has provided timeline for non-individual borrowers to get Legal Entity Identifier (LEI) codes.

• The timeline is for non-individual borrowers having aggregate exposure of ₹5 crore and above from banks and financial institutions.

• RBI has also extended guidelines on LEI to primary (urban) co-operative banks (UCBs) and NBFCs.
• RBI has also advised that non-individual borrowers having aggregate exposure of ₹5 crore and more than ₹5 crore from banks and financial institutions need to get LEI codes.
• If borrowers did not get LEI codes from authorised Local Operating Unit (LOU), they will not be sanctioned any new exposure.
• Existing exposure of such borrowers will not be given renewal.
• Central and State governments departments/agencies will be exempted from these rules. PSUs will come under these rules.
• For the purpose of these rules, the banks include local area banks, small finance banks, scheduled commercial banks (excluding regional rural banks), and primary (urban) co-operative banks.
• The financial institutions included are Exim Bank, SIDBI, NHB, NABARD and NaBFID and NBFCs.
• Legal Entity Identifier (LEI) is a 20-digit unique code. It is used to identify parties to financial transactions worldwide.

Topic: Banking System

4. BHIM UPI is now available at NEOPAY terminals throughout the UAE.

• NPCI International Payments Ltd (NIPL) has recently made announcement about BHIM UPI going live at NEOPAY terminals in UAE.
• Last year, NIPL and NEOPAY have entered into partnership for this purpose. 
• NEOPAY is the payment subsidiary of Mashreq bank, oldest privately owned bank in UAE.
• NIPL is the International arm of the National Payment Corporation of India (NPCI).

Topic: Banking System

5. RBI has given approval to Fino Payments Bank for starting referral services of FD and RD on behalf of a partner bank.

• RBI has allowed Fino Payments Bank to carry out referral services of term deposit products as fixed deposit (FD) and recurring deposit (RD).
• RBI has allowed Fino Payments Bank to carry out services as a business correspondent of Suryoday Small Finance Bank.
• The service is likely to go live in the second quarter of FY23.
• Fino Payments Bank was launched in 2017 by Fino Paytech Limited. Fino Paytech Limited was set up as a payments technology company in 2006.

Topic: Miscellaneous 

6. International Plant Based Foods Working Group (IPBFWG) has been formed to support growth of the rising plant-based food sector.

• The working group has been formed by plant-based food associations from seven regions/countries. India is one of them.
• IPBFWG will further expand its membership. As of now, it has seven launch partners.
• IPBFWG members will align as well as coordinate on high-level strategies and initiatives to advance plant-based food sectors throughout the world.
• The members of IPBFWG’s current executive are given below.
  • Plant-Based Foods Canada (PBFC)
  • US-based Plant Based Foods Association (PBFA)
  • European Alliance for Plant Based Foods (EAPF)
  • European Plant Based Foods Association (ENSA)
  • Plant-Based Food Alliance UK
  • China Plant Based Foods Association
  • Plant Based Foods Industry Association (India)

Topic: Banking System

7. State Bank of India raised MCLR for the first time in the last three years.

• MCLR interest rate increase by ten basis points has become effective from 15th April 2022.
• SBI has raised overnight, one-month, three-month, and six-month MCLR rates to 6.75%, 6.75%, 6.75%, and 7.05%, respectively.
• Bank of Baroda and Axis Bank have also increased their MCLR by 5 bps across tenors.
• As a result of this increase, home, auto, and other loans will become more expensive.
• External Benchmark Lending Rate (EBLR) was introduced in 2019, to plug the gaps in MCLR. It is now used in home loans. 
• Marginal Cost of Funds based Lending Rate (MCLR):
  • It is the lowest interest rate that a bank or lender can give loans. It was started by RBI in 2016.
  • The MCLR system has replaced the base rate system.
  • MCLR depends on factors like CRR (Cash Reserve Ratio), marginal cost of funds, tenor premium, and operating cost.

Topic: Reports and Indices/Ranking

8. IMF slashed global growth forecast for calendar year 2022 from 4.4% to 3.6% in World Economic Outlook report.

• IMF also slashed its forecast for India’s FY23 GDP growth to 8.2% from 9%.
• International Monetary Fund (IMF) said that global economic prospects have worsened due to commodity price volatility and disruption in supply chains.
• Russia- Ukraine war will slow the growth and further increase inflation across the world.
• As per the report, higher oil prices will create a negative impact on domestic consumption and private investment.
• IMF recommended Central banks to adopt a tightening monetary policy to keep inflation under control.

Topic: Appointments

9. Procter & Gamble (P&G) has appointed LV Vaidyanathan as Chief Executive Officer of its India operations.

• His appointment has become effective from July 1, 2022. He will take place of Madhusudan Gopalan.
• Bimal Kothari has been appointed as new Chairman of the India Pulses and Grains Association (IPGA).
• IPGA is the apex body for India's pulses trade and industry. It was formed in 2011. It is headquartered in Mumbai.
• Procter & Gamble (P&G) is an American multinational consumer goods corporation. 

Read Banking Awareness PDF - 20, 21 and 22 April 2022