Banking Awareness of 22 and 23 September 2023

Topic: Committees/Commissions/Taskforces

1. The tenure of Company Law Committee (CLC) has been extended by Ministry of Corporate Affairs (MCA) by one year.

• The tenure has now been extended up to September 16, 2024.
• Earlier, the tenure of CLC was extended in September 2020, September 2021, and September 2022.
• This Company Law Committee was set up in September 2019. It had 11 members under the chairmanship of the MCA Secretary.
• It was set up to promote ease of living by providing ease of doing business to law-abiding corporates.
• It was set up to promote ease of living by fostering improved corporate compliance for stakeholders at large.
• It was set up to give recommendations to government on provisions and issues of implementation of the Companies Act 2013 and the Limited Liability Partnership Act 2008.

Topic: Regulatory Bodies/Financial Institutions

2. Basel-III capital framework has been introduced by RBI for All India Financial Institutions (AIFIs).

• The RBI has introduced norms on the Basel III capital framework, fund raising, and exposure guidelines for AIFIs.
• It has also introduced norms on classification and valuation of investment portfolios for All India Financial Institutions (AIFIs).
• The norms will become effective from April 2024.
• All India Financial Institutions (AIFIs) shall maintain a minimum total capital of 9% by April 2024.
• Minimum tier-I capital shall be at 7% and common equity tier-I (CET-1) capital shall be at 5.5%.
• For National Housing Bank (NHB), the norms will be implemented by July 2024 as its accounting year is July-June.
• All financial subsidiaries will need to be fully consolidated for the purpose of capital adequacy. This excludes subsidiaries engaged in insurance and non-financial activities.
• RBI has limited AIFI’s investments in capital instruments of banking, financial, and insurance organizations at 10% of their capital funds.
• If the acquisition results in the AIFI holding more than 5% of the investee's equity capital, the AIFI will not be permitted to purchase a fresh stake in the equity shares of a bank or another AIFI.
• AIFIs’ equity investment in a single entity will not be allowed to exceed 49% of the equity of the investee.
• India has five AIFIs regulated by the RBI. Their names are given below.
  • Export-Import Bank of India (EXIM Bank)
  • National Bank for Agriculture and Rural Development (NABARD)
  • National Bank for Financing Infrastructure and Development (NaBFID)
  • National Housing Bank (NHB)
  • Small Industries Development Bank of India (SIDBI)

Topic: Indian Economy/Financial Market

3. Open Network for Digital Commerce (ONDC) has launched gift card for consumers.

• Open Network for Digital Commerce (ONDC) has launched “ONDC Network Gift Card.”
• This network-level gift card will empower companies for corporate gifting and employee engagement.
• With the help of this card, consumers can shop across thousands of sellers on the network, using any ONDC-enabled buyer applications.
• The ONDC Network Gift Card is different from traditional gift cards that are tied to a specific brand or platform.  
• The ONDC Network Gift Card gives the consumers to choose from many products and brands.
• It can be loaded with a maximum amount of ₹10,000.
• The ONDC Network Gift Cards are powered by Rupay Network.
• These gift cards will be offered by banks and fintech companies holding RBI-assigned pre-paid licences.
• Yes Bank and OmniCard have become the first two issuers.
• Open Network for Digital Commerce (ONDC):
  • It is the government’s initiative to democratise digital commerce by moving it from a platform-centric model to an open-network.
  • It is being implemented by Department for Promotion of Investments and Internal Trade.
  • It is a private non-profit Section 8 company. It was incorporated on 31 December 2022.

Topic: Indian Economy/Financial Market

4. India’s foreign exchange reserves declined to a four month low level of $593.04 billion as of September 15.

• Forex reserves declined for the second consecutive week as per the data released by RBI.
• Earlier, India’s foreign exchange reserves were lowest as of May 26, 2023 at $589.14 billion.
• Forex reserves were lower by $867 million for the week ended September 15.
• Forex reserves have declined after accelerated intervention by the RBI in the currency market in order to manage volatility in respect of negative global macro-economic developments.
• Foreign currency assets declined $511 million to $525.92 billion. Gold reserves declined $384 million to $44 billion.
• During FY23, reserves declined by a total of $28.53 billion.
• Forex reserves reached an all-time high of $645 billion in October 2021.

Topic: Regulatory Bodies/Financial Institutions

5. Insolvency and Bankruptcy Board of India (IBBI) has notified changes to Corporate Insolvency Resolution Process (CIRP) regulations.

• The changes have become effective from September 18, 2023.
• The timeline for filing claims has been extended until the issuance of the request for resolution plans or ninety days from the insolvency commencement date, whichever is later.
• The Resolution Professional (RP) has been given power to provide their opinion on the acceptance of claims submitted beyond this timeframe.
• Their inclusion in the list of claims within the resolution plan before Adjudicating Authority (AA's) adjudication can be recommended by the committee of creditors (CoC).
• According to the amendments, the committee members are allowed to conduct audits of the corporate debtor (CD) with the audit costs included as part of the CIRP cost.
• As per the amendments, creditors are required to provide details of debt assignments within 7 days to facilitate CoC meetings.
• Other changes introduced by the amendments are given below.
  • Aligning timelines for procedural aspects such as the issuance of information memoranda and requests for resolution plans
  • Providing more information in Form G to prospective resolution applicants
  • Including committee of creditors' minutes in the compliance certificate (Form H)

Topic: Indian Economy/Financial Market

6. JPMorgan Chase & Company (JPM) will add Indian government bonds to its benchmark emerging market bond index from June 28, 2024.

• This is an important step that will encourage more foreign investment in the domestic debt market.
• For this, 23 Indian Government Bonds (IGBs) with a combined notional value of $330 billion are eligible.
• India's weighting on the index will be a maximum of 10%.
• The Indian Government Bonds will be included in the indices over 10 months. 
• It will start from 28 June 2024 with 1% weight being added per month, and is expected to reach the maximum weight of 10% by 31 March 2025. 
• According to experts, this inclusion could bring a passive inflow of over $26 billion to the country.
• In terms of equities, India has been one of the top investment destinations among major emerging markets this year.
• Foreign portfolio investors (FPIs) have invested more than Rs 28 thousand crore in the country's debt market so far in 2023, while there has been an outflow of about Rs 9000 crore in the same period of 2022.
• India’s local bonds will be included in the Government Bond Index-Emerging Markets (GBI-EM) index.
• Index inclusion may lower borrowing cost but boost the rupee.
• JPMorgan Chase & Co.:
  • JPMorgan Chase & Co. is a leading international banking and finance company with operations in over 200 countries.
  • As the largest of the Big Four banks, the company is considered systemically important by the Financial Stability Board.
  • It was founded on December 1, 2000. It is headquartered in New York City, USA.

Topic: Indian Economy/Financial Market

7. As per RBI data, household savings fall to decades low.

• According to data from the Reserve Bank of India (RBI), net financial savings of households reached the lowest level in decades.
• Household savings reached 5.1% of gross domestic product (GDP) in Financial Year 2023 (FY23) while it was 7.2% in FY22.
• Annual financial liabilities of households rose by 5.8% of GDP in FY23, compared with 3.8% in FY22.
• In FY21, the net assets of households were Rs 22.8 trillion but it has declined to Rs 16.96 trillion in FY22 and further declined to Rs 13.76 trillion in FY23.
• As per the RBI data, the rate of increase in financial liabilities in FY22 was the second highest since Independence.
• The main cause of decreasing savings and increased borrowing is the combination of stagnant or declining household incomes and increasing inflation.
• However, the Finance Ministry declined reports of any distress regarding household savings & overall effect on the economy.
• The Finance Ministry said that overall household savings has grown at a Compound Annual Growth Rate of 9.2 per cent between 2013-14 and 2021-22.
• It also said that the households added net financial assets by a lesser magnitude in Financial Year (FY) 23 than in the previous years because they have now started taking loans to buy real assets including homes.
• Since April last year, vehicle loans have also grown at double digits.

Topic: RBI

8. RBI has issued 'Draft Master Direction on Treatment of Wilful Defaulters and Large Defaulters'.

• Comments have been invited on Master Direction till October 31.
• RBI proposed tighter norms for the treatment of wilful defaulters.
• Under these norms, all accounts with an outstanding balance of Rs. 25 lakh or more must be examined by banks and other lenders to see whether the borrower is deliberately not repaying the loan.
• The draft Master Direction broadens the definition of willful default.
• The draft Master Direction expands the scope for regulated entities that can classify borrowers as wilful defaulters.
• It also mandates finalization on willful default aspects within six months of an account being classified as a non-performing asset.
• As per the draft, the provisions regarding large defaulters would apply to all entities regulated by RBI. This would be irrespective of whether they fall within the definition of 'lender'.
• It is proposed new rules would be applicable to all regulated entities, including banks, non-bank lenders including housing finance companies, Co-operative Banks, Regional Rural Banks, Local Area Banks, and All India Financial Institution (AIFI).
• It also addresses the treatment of wilful default loans sold to Assets Reconstruction Companies. It also addresses their status under the Insolvency and Bankruptcy Code (IBC).

Topic: Miscellaneous

9. Parliament passed the Women's Reservation Bill.

• The Constitution (One Hundred and Twenty-Eighth Amendment) Bill, 2023 has been passed by both houses of Parliament.
• It seeks to reserve one-third of the total number of seats for women in Lok Sabha, State Legislative Assemblies and Delhi Assembly.
• The Women’s Reservation Bill known as the Nari Shakti Vandan Adhiniyam was passed by Rajya Sabha on 21st September 2023.
• A total of 132 members of both houses of Parliament took part in the discussion on the Women's Reservation Bill.
• Currently, Lok Sabha has a total of 542 members, out of which 78 (14.39 per cent) are female members.
• Reservation for women in Panchayats and Municipalities is provided under the articles 243D and 243T of the constitution.
• Features of the Bill:
  • It will reserve one-third of all seats for women in the Lok Sabha and the state legislative assemblies.
  • One-third of the total number of seats reserved for Scheduled Castes and Scheduled Tribes shall be reserved for women in Lok Sabha and state assemblies.
  • Seats reserved for women will be rotated after each delimitation exercise.
  • After the commencement of this Amendment Act, the reservation for women will be for 15 years. However, it shall continue till such date as determined by a law made by Parliament.
  • The reservation will come into effect only after the completion of the census and delimitation exercise. The freeze on delimitation is likely to be removed in 2026.

Topic: Awards and Prizes

10. Dr Swati Nayak wins Norman Borlaug Field Award 2023.

• Dr Swati Nayak has been selected for the Norman Borlaug Field Award 2023.
• She is an Indian scientist at the International Rice Research Institute (IRRI).
• She will be awarded for Field Research and Application.
• She will formally receive the Borlaug Field Award during a 2023 Norman E. Borlaug International Dialogue ceremony on October 24-26 in Des Moines, Iowa (US).
• She will be awarded for her innovative approach to engaging smallholder farmers in demand-driven rice seed systems.
• She has become 3rd Indian agriculture scientist to win the Norman E Borlaug award.
• Aditi Mukherji (2012) and Mahalingam Govindaraj (2022) are other two Indian recipients.
• She is called as “Bihana Didi” (Seed Lady) by local communities in Odisha.
• Norman Borlaug Field Award:
  • It is given to scientists under 40 for their exceptional work in the field of food and nutrition security and hunger eradication.
  • It is being given in the memory of Dr. Norman Borlaug. It consists of a cash prize of $10,000. It is given by the World Food Prize Foundation.

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