Banking, Financial and Economic Awareness of 23, 24 and 25 May 2020

1. RBI announces more measures to prevent difficulties caused by financial stress

• RBI has announced more measures to prevent difficulties due to financial stress as a result of Covid-19.
• RBI has allowed banks and other lending institutions to increase postponement of payments on term loan instalments from June 1 to August 31.
• RBI has also allowed increasing the deferment with respect to working capital facilities approved as cash credit/overdraft from June 1 to August 31.
• The permitted increase is applicable to all term loans and working capital facilities that are outstanding as of March.
• The moratorium allowed by RBI will not lead to asset classification downgrade of the borrowers.
• RBI has also increased the exposure limit of banks to group of connected counterparties from 25% to 30% of its eligible capital base. This limit will continue till June 30, 2021.
• RBI has also provided more flexibility to importers in controlling their operating cycles by increasing the time for remittances completion against normal imports to India from 6 months to one year.

2. RBI announces policy rate cuts

• RBI has announced cut in repo rate from 4.40% to 4% and reverse repo rate from 3.75% to 3.35%.
• The latest rate cut was announced after the Monetary Policy Committee (MPC) meeting was preponed. Originally the meeting was scheduled on June 3-5.
• Due to Covid-19 lockdown since March 25 and slowdown starting from Q1 of 2018-19, the banks were not willing to lend. After the rate cuts, the banks will lend more money rather than keeping their funds with RBI.
• RBI had estimated that GDP growth may be negative in 2020-21. It had estimated that growth may improve from second half of 2020-21.
• The MPC also found that inflation outlook will be highly uncertain. Earlier, food inflation has increased to 8.6% in April.
• As per MPC, headline inflation may not change in H1 of 2020-21.

3. P-note investments till April increase to Rs 57,100 crore

• As per SEBI data, participatory note (P-note) investments in domestic capital market have increased from Rs 48,006 crore till March to Rs 57,100 crore till April.
• Earlier, P-note investments in domestic capital market have declined to more than 15-year low at March end. In October 2004, P-note investments stood at Rs 44,586 crore.
• Out of the Rs 57,100 crore investments, maximum money was invested in equities.
• Second maximum investment was in debt. Derivatives and hybrid securities came at third and fourth place.
• P-notes allow overseas investors participation in Indian stock market without any registration. Only registered FPIs can issue P-notes.  

4. Stock markets in Southeast Asia decline

• Stock markets in Southeast Asia have declined due to increased tension between US and China.
• The tensions between US and China have increased as China took action to force new national-security laws on the Hong Kong.
• Hang Seng Index, the stock market in Hong Kong, closed down at its worst since July 2015.
• Stock markets all over the world also declined. They are named in the following table.

5. A MoU for Joint Venture Company signed between NTPC and ONGC

• A Memorandum of Understanding (MoU) for Joint Venture Company in renewable energy sector has been signed between NTPC and ONGC.
• National Thermal Power Corporation (NTPC) was formed in 1975. It is headquartered in New Delhi.
• NTPC deals in energy generation, sale, gas exploration and coal mining. Gurdeep Singh is its chairman and MD.
• NTPC comes under Ministry of Power.
• Oil and Natural Gas Corporation Limited (ONGC) was formed in 1956. It is also headquartered in New Delhi.
• ONGC mainly deals in oil and gas exploration. Shashi Shanker is its chairman, MD and CEO.
• ONGC comes under Ministry of Petroleum and Natural Gas. Hindustan Petroleum Corporation is a subsidiary of ONGC.

Read Banking Awareness PDF - 23, 24 and 25 May 2020