Banking Awareness of 20 and 21 December 2023

Topic: Indian Economy/Financial Market

1. RBI’s Dynamic Stochastic General Equilibrium (DSGE) model has projected retail inflation at 4.8% in FY25.

• This projection is above monetary policy committee’s 4% target.
• CPI inflation is projected to moderate after Q3 FY24. Annual CPI inflation is projected to average out at 5.3% in FY24.
• This is projected to moderate further to 4.8% in FY25, as per the model.
• Based on the retail inflation forecast of the DSGE model, the repo rate is expected to stay at 6.5% for the majority of FY25.
• This is because the monetary policy committee (MPC) has decided to focus on withdrawal of accommodation to achieve the 4% target.
• According to the DSGE model, real GDP growth for 2023-24 is projected at 7.1%.
• Dynamic Stochastic General Equilibrium (DSGE) model for the Indian economy captures the dynamic interactions between various agents in the economy as well as their response to shocks.
• For arriving at FY24 and FY25 real GDP growth projections, the DSGE model has made following assumptions:
  • Global GDP growth of 2.6% and 2.1% for 2023-24 and 2024- 25, respectively
  • Global CPI inflation of 5.5% and 4.0% for FY24 and FY25 respectively
  • Unchanged policy repo rate and US Fed funds rate at 6.5% and 5.5% for the current and next financial year, respectively

Topic: Indian Economy/Financial Market

2. India’s de facto exchange rate regime has been reclassified by IMF from “floating” to “stabilised arrangement” for the period December 2022 to October 2023.

• However, IMF has retained the de jure classification as “floating” after an article IV review.
• A team from the IMF staff visits the nation as part of the Article IV review process.
• The team gathers financial and economic data and discusses with officials the economic development and policies of the nation. The team prepares a report based on these.
• The staff saw that the rupee-dollar had fluctuated dramatically during the previous two years, losing almost 15% of its value between December 2019 and November 2022.
• India has a far higher potential growth rate, according to the IMF, if reform efforts are advanced.
• IMF said real GDP is projected to grow at 6.3% in FY2023/24 and FY2024/25.
• Headline inflation is expected to gradually decline to the target.
• The current account deficit is expected to improve to 1.8% of GDP in FY2023/24.

Topic: Indian Economy/Financial Market

3. In November 2023, India's imports of thermal coal from the US reached a two-year high.

• Inbound shipments of thermal coal from the US increased to 1.40 million tonnes (MT), highest in over a year.
• According to Kpler (an energy intelligence firm), India imported a total of 17.51 MT of thermal coal in November 2023.
• This was lower than 15-month high of 18.66 MT recorded in October 2023.
• India imported 23.27 MT of seaborne coal in November 2023. This was lower than a five-month high of 24.37 MT in October 2023.
• US supplied total (Thermal and Metallurgical) 12.03 MT of coal to India in FY18. This increased to 14.18 MT in FY19.
• The imports declined to 12.16 MT and 12.20 MT, respectively in FY20 and FY21.
• In FY22, India imported 14.37 MT coal from the US. This declined to 13.69 MT in FY23.
• In 2022, Indonesia was India’s largest supplier of thermal coal.
• As of October 2023, US is India’s second biggest supplier of coking coal after Australia. Russia is the third biggest supplier.
• During April–October 2023, Australia remained the largest supplier of coking coal with 20.17 MT.

Topic: Taxation

4. HPAAAR has ruled that a company offering food to its employees will be ineligible for Input Tax Credit (ITC) under GST.

• Himachal Pradesh’s Appellate Authority for Advance Ruling (HPAAAR) has ruled that company offering food to its employees will be treated as a restaurant service.
• Earlier, AAR (Advance Rulings Authority) ruled that GST will be paid on the subsidised food and ITC will not be available.
• Federal-Mogul Anand Bearings India Ltd moved the HPAAAR after AAR ruling.
• AAAR noted that services provided by the employer to the employee, in the course of employment, do not come under the purview of GST.
• Benefits offered by an employer to staff members as payment for services completed, therefore, are connected to or related to the employer-employee relationship rather than being an independent supply.
• In a circular, CBIC mandated that any perk provided to the employee, in terms of contractual agreement are not supply under GST.

Topic: Corporates/Companies

5. U Gro Capital has raised ₹250 crore from Dutch development bank.

• MSME lender U Gro Capital has raised this through rupee-denominated non-convertible debentures (NCDs).
• Earlier, it has raised ₹240 crore from Denmark’s Investment Fund for Developing Countries (IFU) in May 2023.
• U Gro Capital is the MSME-lending-focused NBFC. It has provided credit to more than 80,000 small businesses.
• Out of U Gro Capital’s total borrowings, about 20% are from development financial institution and impact funds like ResponsAbility, Calvert Impact Capital, Enabling Qapital, SIDBI, and others.

Topic: Awards and Prizes

6. Sahitya Akademi Award 2023 has been announced by Sahitya Akademi in 24 languages.

• 9 books of poetry, 6 novels, 5 short story collections, 3 essays and 1 literary study have won the Sahitya Akademi Awards 2023.
• Tamil author Rajasekaran has won the award for his novel Neervazhi Padooum.
• Telugu writer Patanjali Sastry has won the award for his short story collection.
• Malayalam litterateur EV Ramakrishnan has won award for his literary study Malayala Novelinte Deshakalangal.
• Vijay Verma in Dogri, Vinod Joshi in Gujarati, and Ashutosh Parida in Odia won the award for their poetry collections.
• Pranavjyoti Deka in Assamese, Nandeswar Daimary in Bodo, and Taraceen Baskey in Santali are the authors chosen for their short stories.
• Sanjeev has won the Sahitya Akademi Award for his Hindi novel Mujhe Pahachaano.
• Neelam Saran Gour has won the award for her English Novel Requiem in Raga Janki.
• The award presentation function will be held on 12th March, 2024.
• The award will be presented in the form of a casket containing an engraved copper-plaque, a shawl, and one lakh rupees.
• Sahitya Akademi Award:
  • It was established in 1954. It is given by Sahitya Akademi.
  • It is awarded for outstanding literary works published in 24 languages (22 official languages mentioned in the eighth schedule and Rajasthani and English).

Topic: Banking/Financial/Govt Schemes

7. Government allowed additional borrowing of Rs 60,000 crore to 22 states for the National Pension Scheme.

• The Department of Expenditure approved an extra borrowing of Rs 60,876.8 crore to 22 States in 2023-24 for the National Pension Scheme.
• 3 per cent of the Gross State Domestic Product (GSDP) or Rs 8,59,988 crore in absolute terms was fixed as the normal net borrowing ceiling for states in FY24.
• States have been also allowed extra borrowing ceilings equivalent to employer and employee share of contribution of its employees to the NPS.
• The central government has earlier approved additional financial incentives worth Rs 66,413 crore to 12 states for reforms in the power sector.
• Additional borrowing of Rs 39,175 crore was allowed to 12 states in 2021-22 and Rs 27,238 crore to 6 States in 2022-23.
• States have the facility of tapping Rs 1.3 lakh crore 50-year interest-free capex loans facility for FY24.
• Capital expenditure of Rs 91,471.43 crore has been approved for 25 states.

Topic: RBI

8. RBI directed banks and NBFCs to not invest in any scheme of alternative investment funds (AIFs).

• RBI tightened norms for banks, non-banking financial companies (NBFCs) and other lenders for investing in AIFs.
• This decision has been taken to curb the evergreening of stressed loans.
• The Reserve Bank has said that new steps have been taken to stop the arrangement of new loans to repay the old loans through AIF.
• The notification adds that in case the bank is unable to liquidate its investment within the specified time frame, then it must make 100 per cent provision on such investments.
• As per RBI circular, banks and NBFCs are required to assess & liquidate AIF investments within 30 days to prevent evergreening of loan exposures.
• Alternative investment funds (AIFs) are established or incorporated in India to collect funds from sophisticated investors. It is a privately pooled investment vehicle.
• Venture capital funds, angel funds, infrastructure funds, private equity funds and hedge funds are examples of Alternative investment funds.
• The Securities and Exchange Board of India (Sebi) had informed RBI about instances of non-bank financier’s evergreening loans through the AIF route.
• Regulated entities (REs) invest in units of AIFs as part of their regular investment operations.
• Around 1220 AIFs are registered with the Securities and Exchange Board of India (SEBI). As of June 30, 2023, the total investment raised by AIFs stood at Rs 8.44 lakh crore.
• In evergreening of loans, the bank tries to revive a loan that is on the verge of default by giving further loans to the same borrower.

Read Banking Awareness PDF - 20 and 21 December 2023