Banking Awareness of 25, 26 and 27 May 2024

Topic: Reports and Indices

1. For the Financial Year 2024–2025, the Cost Inflation Index (CII) has been kept at 363.

• In the Financial Year 2023–2024, it was set at 348. This indicates a 4.3% increase.
• This year, there should be less long-term capital gain obligation associated with the sale or transfer of any capital asset, including real estate, patents, trademarks, and land.
• The index has been notified by the Central Board of Direct Taxes (CBDT).
• This notification will be effective as of April 1st, 2025, according to the statement by CBDT.
• It stated that as a result, this notification would be applicable to the assessment year 2025–2026 as well as any future assessment years.
• When an assessee files income tax returns (ITR) next year, the CII number helps determine the long-term capital gains on which the assessee must pay taxes.
• In order to ensure that taxpayers pay taxes on the actual appreciation of their assets rather than gains resulting from inflation, the index is helpful in adjusting capital gains for inflation.
• With this, taxpayers can compute profits on long-term capital assets sold in FY 24–25 and adjust their tax obligations accordingly.
• A method for estimating inflation, or the projected rise in a good or service's price over time, is the Cost Inflation Index (CII).

Topic: Indian Economy/Financial Market

2. India recorded trade deficit with 9 out of top 10 trading partners in 2023-24.

• According to official data, India has recorded a trade deficit, the gap between imports and exports, with nine of its top 10 trading partners, including China, Russia, Singapore and Korea, in 2023-24.
• Additionally, compared to 2022–2023, the data showed that the trade deficit with the UAE, Saudi Arabia, Russia, Indonesia, and Iraq narrowed, while the deficit with China, Russia, Korea, and Hong Kong widened.
• Trade deficit with China increased to $85 billion, Russia to $57.2 billion and Korea to $14.71 billion in 2023-24, from $83.2 billion, $43 billion and $14.57 billion respectively in 2022-23.
• China has emerged as India's largest trading partner, surpassing the US, with two-way trade worth $118.4 billion in 2023-24.
• In 2023-24, the bilateral trade between India and the US stood at $118.28 billion.
• During 2021-22 and 2022-23, the USA was India’s top trading partner.
• India has signed a free trade agreement with four of its top trading partners – Singapore, UAE, Korea and Indonesia (as part of the Asian bloc).

Topic: Reports and Indices

3. The value of CRISIL’s Financial Conditions Index (FCI) declined to 0.5 in April 2024.

• The April value was lower than 0.9 in March 2024 but was higher than 0.3 in April 2023.
• Although the value of CRISIL’s FCI declined in April, it stayed within the comfort zone.
• During the April 2024, Indian markets were affected by two global factors.
• One was a rise in crude oil prices after an increase in global tensions.
• Second was the weak investor sentiment globally by factoring in a delay in rate decreases by the US Federal Reserve (Fed).
• Foreign portfolio investors (FPIs) became net sellers as a result.
• This negatively impacted the currency and local bond rates.
• Improving liquidity conditions on the domestic front offered relief.
• However, the effects of the Reserve Bank of India's (RBI) previous monetary tightening have been delayed.
• In April, banks also reported a decline in credit offtake for the second consecutive month.
• In areas where the RBI's rate rise transmission has been slower thus far in the cycle, lending rates are also catching up.
• CRISIL launched the Financial Conditions Index (FCI) in October 2020.
• It is a monthly index. It puts together 15 key parameters across equity, debt, money and forex markets.

Topic: Regulatory Bodies/Financial Institutions

4. The engagement period of statutory auditors with insurance companies has been lowered by IRDAI.

• The Master Circular on "Corporate Governance for Insurers 2024" has been released by IRDAI.
• Under the new guidelines, audit firms get a four-year term for joint statutory audits.
• This term is followed by a mandatory three-year cooling-off period.
• Outgoing auditors and their affiliates cannot undertake investment risk management or concurrent audits of the insurer during this cooling-off period.
• No affiliates of the outgoing auditor may be included in the group of incoming auditors.
• Audit companies earlier used to have a ten-year term.
• New regulations guarantee a fresh review of financial statements every four years.
• This is to improve audit quality and lower auditee complacency.
• The modifications on audit firm tenure increases accountability and transparency by adding new auditors on a regular basis of four years.
• IRDAI guidelines already require a mandatory joint audit for all insurance companies.
• Joint audits are currently required in India for banks, insurance companies, and public sector undertakings.
• The IRDAI master circular also says that current audit firm assignments, which are valid for five years, must be continued.  
• IRDAI has mandated that an audit firm should be allowed to conduct Statutory Audits of no more than three insurers at a time under the latest master circular.
• An audit firm cannot have more than two insurers' audit assignments at a time in one line of business (life, general, health, and reinsurance insurance, for example).

Topic: RBI

5. RBI has imposed a penalty of Rs 3.1 lakh on Hero FinCorp Limited.

• RBI has imposed this penalty for non-compliance with certain provisions relating to fair practices code.
• The penalty is based on deficiencies in regulatory compliance.
• The penalty isn't meant to call into question the legality of any agreements or transactions the company has with its clients.
• RBI carried out statutory inspection of the company with reference to its financial position as on March 31, 2023.
• According to RBI, Hero FinCorp failed to provide borrowers with written loan terms and conditions in a vernacular language that they could understand.

Topic: Banking System

6. HSBC has acquired 6.125% stake in CCIL IFSC Limited (CCIL IFSC) by investing ₹6.125 crore.

• Clearing Corporation of India Ltd (CCIL) is promoter of CCIL IFSC Limited. CCIL will hold 57.125% stake in this subsidiary.
• CCIL IFSC is being incorporated with a paid-up and authorised capital of ₹100 crore and ₹200 crore, respectively.
• It will be responsible to build and operate the Foreign Currency Settlement System (FCSS) at Gujarat International Finance Tec (Gift) City.
• Gift City is India’s sole international financial services centre (IFSC). 
• CCIL will act as a clearing house and system operator at the Gift City.
• State Bank of India (SBI) has also acquired 6.125 per cent stake in CCIL IFSC for ₹6.125 crore.

Topic: Banking System

7. Liminal Custody has now registered in India as FIU-IND reporting entity.

• Liminal Custody declared that First Answer India Technologies Private Limited, its Indian firm, had been registered with the Financial Intelligence Unit (FIU) of India.
• Liminal Custody's ability to function effectively within India's established regulatory framework to tackle money laundering and terrorism funding is facilitated by the FIU registration.
• Liminal Custody is a digital asset custody and wallet infrastructure platform based in Singapore.
• It also actively manages the Central Bureau of Investigation's seizure of digital assets.
• Financial Intelligence Unit - India (FIU-IND) is the central, national agency.
• It is in charge of gathering, processing, analyzing, and providing enforcement authorities and foreign FIUs with information on suspected financial transactions.

Topic: Indian Economy/Financial Market

8. India’s net FDI declined by 62% in FY24: RBI data.

• Net foreign direct investment (FDI) flows into India have declined to $10.58 billion in 2023–24 (FY24) from $27.98 billion in 2023.
• It is the lowest net foreign direct investment since 2007.
• As per the RBI data, $44.4 billion of the $70.9 billion in gross FDI flows came through dividends, share sale or disinvestment.
• $15.96 billion has been invested overseas by Indians.
• More than 60 per cent of the FDI equity flows came into manufacturing, electricity and other energy, computer services, financial services, and retail and wholesale trade.
• 80 per cent of the FDI flows came from Singapore, Mauritius, the US, the Netherlands, Japan and the UAE.
• India is to be among the top 10 economies to see a high FDI flow in 2024.
• Indian companies announced over 550 Greenfield FDI projects abroad.
• The share of FDI capital expenditure from G-20 emerging markets has increased to 14.9 per cent in 2023 from 8.2 per cent in 2003.

Topic: Miscellaneous

9. Klaus Schwab, a founder of the World Economic Forum, decided to step down from executive role.

• By January next year, Klaus Schwab, Founder and Executive Chairman of the World Economic Forum (WEF) will step down and take up the role of Chairman of the Board of Trustees.
• Klaus Schwab is stepping away from day-to-day management of the organization after more than 50 years at the helm.
• The leadership transition will be completed before the next Davos gathering in January 2025.
• The forum is best known for its annual gathering of political and business leaders in Davos, Switzerland.
• The Forum, which Mr. Schwab founded in 1971, was then known as the European Management Forum.
• It was initially designed as a place for European business leaders and government officials to gather and discuss increasing their competitiveness with the US.
• Borge Brende is the current president of the World Economic Forum.

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