Banking, Financial and Economic Awareness of 24 January 2020

By PendulumEdu | Last Modified: 05 Mar 2020 13:44 PM IST

1. RBI revises directions for FPI investments in Debt Instruments

RBI has increased the limit for short-term investment by Foreign Portfolio Investor (FPI) from 20 % to 30 %.
As per the revised direction, short term investments (investments having maximum residual maturity period of one year) by FPI should not be more than 30% of the total money invested by that FPI in Central Government Securities (including Treasury Bills) or State Development Loans (SDLs).
RBI has also increased limits for short term investments (investments having maximum residual maturity period of one year) from 20 % to 30 % of the total money invested by that FPI in corporate bonds.
RBI has also exempted FPI investments in debt instruments provided by Asset Reconstruction Companies (ARCs) from short-term investment limit and issue limit.
As per revised guidelines, FPI investments in debt instruments provided by corporates going through the resolution process according to NCLT approved resolution plan under IBC, 2016, are also exempted from short-term investment limit and issue limit.
FPI investments in Security Receipts were already exempted from short-term investment limit and issue limit.
State Development Loans (SDLs) are dated securities of State Governments. They are similar to dated securities of the Central Government.
In India, Foreign Portfolio Investor (FPI) has three categories. They are Foreign Institutional Investor (FII), sub-accounts as defined in regulations in India and Qualified Foreign Investor (QFI).

2. Foreign Portfolio Investor (FPI) investment limit under VRR doubled

RBI has doubled Foreign Portfolio Investor (FPI) investment limit under Voluntary Retention Route (VRR).
The new limit for FPI investment under VRR is ₹ 1, 50,000 crores (₹1.5-lakh crore). It will be given on first-come, first-served basis.
RBI has now permitted FPIs for investing in Exchange Traded Funds (ETFs) that invest money only in debt instruments. RBI has fixed the minimum retention period for investment under the new limit at three years.
Though the new investment limit is ₹ 1, 50,000 crores, only ₹ 90,630 crores will be available for fresh allotment.
₹ 90,630 crores will be given under VRR–Combined category. VRR-Combined category means VRR for FPI investment in Government Securities (VRR-Govt) and VRR for FPI investment in Corporate Debt Instruments (VRR-Corp).
VRR scheme was started by RBI on March 01, 2019. Earlier, the investment limit was ₹75,000 crore and ₹54,300 crores were invested till December 31, 2019.
Under VRR scheme, FPIs voluntarily retain prescribed minimum percentage of their money invested in India for a period. VRR investments are exempted from macro-prudential and other regulatory norms that are applied to FPI investments in debt markets.

3. Home Credit India partners with HDFC Ergo General Insurance and Bajaj Allianz Life Insurance

Home Credit India partners with HDFC Ergo General Insurance and Bajaj Allianz Life Insurance to offer health and life insurance to its customers.
Home Credit India has also got a corporate agency license for offering health and life insurance to its customers.
Health insurance will be provided in partnership with HDFC Ergo General Insurance and include medical expenses for in-patient hospitalisation as well as pre- and post-hospitalization (before and after Hospitalization).
Domiciliary expenses, day-care procedures and insurance for newborn baby will also be part of health insurance. Domiciliary (Home) treatment expenses are expenses due to treatment at home under advice of Doctor.
Home Credit India will provide life insurance through a savings plan of Bajaj Allianz Life Insurance. The plan includes life insurance benefits and tax-free guaranteed returns.
Home Credit India is a consumer loan provider arm of Netherlands based Home Credit Group.

4. India to discuss expansion of India-MERCOSUR PTA with Brazil

During the Brazilian President Jair Bolsonaro's visit to India as chief guest at Republic Day Parade, India will discuss expansion of India-MERCOSUR Preferential Trade Agreement (PTA) with Brazil.
Cooperation in the field of oil and gas, including hydrocarbons, biofuel and minerals will also be discussed during this visit. Brazil occupies second place in the list of World's largest consumers and producers of bio-fuels.
Two countries will also discuss agreements in the field of agriculture. Currently, agriculture trade between India and Brazil stands at $1.04 billion. In 2018-19, bilateral trade between India and Brazil was $8.2 billion.
MERCOSUR is a South American trade bloc with headquarters in Montevideo, Uruguay. Argentina, Brazil, Paraguay and Uruguay are four full-time members of MERCOSUR.
India-MERCOSUR Preferential Trade Agreement (PTA) was signed on January 25, 2004.

Multiple Choice Questions (MCQs)

1. What is the current limit for short-term investment by Foreign Portfolio Investor (FPI)?

10 % of total investment by FPI in corporate bonds
20 % of total investment by FPI in corporate bonds
25 % of total investment by FPI in corporate bonds
30 % of total investment by FPI in corporate bonds
35 % of total investment by FPI in corporate bonds

2. Voluntary Retention Route (VRR) scheme for Foreign Portfolio Investor (FPI) investment was started by RBI on

December 31, 2019
September 31, 2019
March 01, 2019
November 1, 2019
January 15, 2020

3. Which of the following has partnered with HDFC Ergo General Insurance and Bajaj Allianz Life Insurance to offer health and life insurance to its customers?