Banking, Financial and Economic Awareness

Topic: Banking System

1. Government provides ₹5,500-crore support to Punjab & Sind Bank.

  • Government has provided ₹5,500-crore support to Punjab & Sind Bank.
  • Government will subscribe to equities worth ₹5,500-crore. The bank will issue these on preferential allotment basis.
  • The bank will subscribe to non-interest bearing and non-transferable Special Government of India securities.
  • They will mature from 2030 to 2035, with the aggregate maturity amount being ₹5,500 crore. 
  • The bank will not earn interest income during the tenure of these special securities. Such securities are called zero coupon bonds. They provide profit at maturity.
  • The bank will keep these securities in Held to Maturity portfolio/category without any limit. These would not be considered as Statutory Liquidity Ratio eligible papers/bonds/securities.
  • Punjab & Sind Bank:
    • It was founded in 1908. It is headquartered in Delhi. Its tagline is where service is a way of life.
    • S Krishnan is its MD & CEO. Presently, Government’s shareholding in Punjab & Sind Bank is 83.06%.

Topic: Corporates/Companies

2. SBI Life Insurance acquires stake in Paisalo Digital.

  • SBI Life Insurance has acquired 8.99% stake in Paisalo Digital, a category “B” – Non Deposit taking NBFC.
  • SBI Life Insurance purchased 38 lakh equity shares of Paisalo Digital for consideration of ₹186.20 crore.
  • SBI Life Insurance is a joint venture between SBI and BNP Paribas Cardif, a French multinational bank. Its CEO is Mahesh Kumar Sharma.
  • Paisalo Digital is a category “B” – Non Deposit taking NBFC. RBI has categorized NBFCs into Deposit taking NBFCs and Non-Deposit taking NBFCs.

Topic: Regulatory Bodies/Financial Institutions

3. Health insurance industry related orders passed by IRDAI in 2020.

  • On 2nd January, IRDAI issued guidelines for all health insurers (both general and specialized) to launch standard health product (Arogya Sanjeevani Policy) from 1st April 2020.
  • Covid-19 treatment was included under health and life insurance policies. Generally, treatments for pandemic are not included in health insurance policies.
  • IRDAI ordered that all insurers should issue health insurance policies through tele medical wherever possible.
  • It also allowed the use of e-KYC for the renewal of existing policies and the issuing of new policies to customers.
  • In July, specific health insurance policies, Corona Kavach and Corona Rakshak, were launched by insurers based on IRDAI’s advice.
  • In September, IRDAI allowed the inclusion of treatment through telemedicine under a health insurance policy.
  • From 1st October onwards, many new illnesses such as mental illness, age-related degeneration, internal congenital diseases and artificial life maintenance were included under health insurance policies.    
  • Definition of Pre-existing Diseases (PED) was changed to include any disease diagnosed by a physician 48 months before the issuance of the health cover under PED.
  • Insurers cannot reject a claim, which the policyholder has requested after the insured has paid a premium for policy for 8 consecutive years. IRDAI allowed customers to pay their health insurance premiums in installments.

Topic: Regulatory Bodies/Financial Institutions

4. CARO Order, 2020 to become effective from financial year starting on or after April 1, 2021.

  • Companies (Auditor’s Report) Order 2020 will become effective from the financial year starting on or after April 1, 2021.
  • Ministry of Corporate Affairs (MCA) has deferred the implementation of CARO Order by one year.
  • Earlier, it was to become effective from the financial year starting on or after April 1, 2020.
  • Under CARO Order 2020, Companies will be required to comply with stricter disclosure requirements on whistleblower complaints, default in repayment of borrowings and other issues.
  • CARO order 2020 was notified by the Ministry of Corporate Affairs in February 2020 to replace Companies (Auditor’s Report) Order, 2016.
  • CARO order 2020 was made by the Ministry in consultation with the National Financial Reporting Authority (NFRA). NFRA was formed in October 2018 under section 132 of the Companies Act, 2013. CARO order 2020 has 21 clauses against 16 clauses in CARO order 2016.
  • CARO order 2020 will apply to all companies such as a banking company, an insurance company, a One Person Company and a private limited company.
  • It will also apply to foreign companies defined under clause (42) of section 2 of the Companies Act, 2013.

Topic: World Economy

5. Russia will support 500,000 barrels per day (bpd) increase in oil production by OPEC+.

  • Russia will support 500,000 barrels per day (bpd) increase in oil production by OPEC+ from February.
  • Russia will support an increase in oil production at the summit of the most important global oil producers to be held on 4 January 2021.
  • In April, OPEC countries, Russia and other most important oil producers agreed to reduce oil output due to less oil demand caused by the Covid-19 pandemic.
  • OPEC plus refers to 13 members of the Organization of the Petroleum Exporting Countries (OPEC) and 10 other non-OPEC oil exporting countries.
  • OPEC:
    • It is an intergovernmental organization of petroleum exporting countries.
    • It was founded on 14 September 1960 in Baghdad.
    • It is headquartered in Vienna, Austria.
    • It now has 13 members after Qatar renounced its membership on 1 January 2019.

Topic: Indian Economy/Financial Market

6. RBI data shows recovery of manufacturing companies in second quarter of FY21.

  • RBI’s data on the performance of the private corporate sector has shown recovery of manufacturing companies in the second quarter of FY21.
  • Iron and steel, food products, cement, automobile and pharmaceuticals companies have specifically shown recovery.
  • In second quarter of FY21, contraction in sales remained at 4.3% on a year-on-year (y-o-y) basis. In the first quarter, the sales shrank (contracted) by 41.1%.
  • RBI has released data based on quarterly financial results of 2,637 listed non-government non-financial (NGNF) companies.
  • The contraction in nominal sales of non-IT services has also been lower at 14.5%, resulting from the expansion in sales of telecommunication and real estate companies.
  • As per the data, there was no change in sales growth of IT sector companies. It remained steady at 3.6% in second quarter of FY21.
  • The data shows an improvement in the interest coverage ratio (ICR) of manufacturing companies from 2.4 in first quarter to 4.6 in second quarter of FY21. ICR of non-IT services companies remained below one.
  • Interest coverage ratio (ICR) is the ratio of earnings before interest and tax to interest expenses. It measures debt servicing capacity of a company. Its minimum value is 1. Both present and emerging risks of a firm can be evaluated and understood with the help of ICR.

 

 

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