Banking Awareness of 26, 27 and 28 January 2023

Topic: Regulatory Bodies/Financial Institutions

1. The Food Safety and Standards Authority of India (FSSAI) has notified the FSSAI (Finance) Regulations, 2023.

• As per the regulations, FSSAI will maintain a Food Safety and Standards Authority of India Fund.
• This fund will be audited by the Comptroller and Auditor General annually.
• The fund will include sums realised by way of fees, penalties and statutory charges.
• It will also include grants made to the FSSAI by the Central government.
• Other parts of the fund will be income earned in the form of testing charges, consultancy, grants and donations among other sources.
• As per the notification, there will be a Finance Committee. Executive Director-Finance of FSSAI will be the chairman of the committee.
• The committee will provide inputs on financial matters of the Food Authority. It will have a representative from the Ministry of Health and Family Welfare.
• The committee will also have two members nominated by the FSSAI and other members.

Topic: Reports and Indices

2. Bengaluru, Delhi and Mumbai ranked among the top global cities for women entrepreneurs.

• Dell Technologies’ new study has ranked them. Bengaluru is for the first time ranked fifth in the top 10 operating environments list.
• It is ranked ahead of Paris, Washington DC and other cities.
• Dell said Bengaluru, Delhi and Mumbai were featured among the top 50 in the list.
• The report ranked 55 global cities on the basis of their ability to attract high-potential women entrepreneurs who are willing to start and scale a business.
• Dell Technologies is an American multinational technology company headquartered in Texas.

Topic: Banking System

3. Transition to ECL-based regime will have a one-time impact on capital of the banks, as per ICRA Ratings.

• The expected credit loss (ECL)-based regime for loan provisioning is proposed to be implemented from April 2025.
• On 16 January, RBI has issued a discussion paper. It proposed a change in provisioning requirements of banks from an ‘incurred loss’ approach to the ECL approach.
• ICRA said a higher impact will be seen in case of banks with a higher share of restructured loans, 60-plus days past due (dpd) loans and off-balance sheet exposures.
• It said banks with lower capital will need to raise capital to manage the transition.
• The loan advances will be classified as Stage 1, 2, or 3 under ECL framework. The loan classification will be based on credit risk profile of loans.
• Stage 2 and 3 loans will have higher provisions based on historical credit loss patterns.
• Under the existing mechanism of incurred loss provisioning, loan provisioning is based on the duration for which the account has remained in the NPA category.
• The RBI has suggested rolling out the additional provisions over a maximum of five years.
• ICRA expects some banks to increase external capital earlier to manage the impact of the transition.
• The implementation of the Indian Accounting Standards (Ind-AS) framework had been notified by RBI in February 2016.
• Its implementation was to be effective from April 2018. But implementation was deferred many times.

Topic: Corporates/Companies

4. Hindenburg Research has accused the Adani Group of Fraud.

• It has alleged stock manipulation and accounting fraud in its recent investigative report.
• On 25 January, Hindenburg Research disclosed short positions in Adani Group.
• Short selling (Shorting) is a trading strategy. It is based on the idea that the price of the security will fall.
• In short selling, the sequence of transaction is reversed. The sequence in short selling is to sell high first and buy low later.
• In short selling, the trader usually does not own securities he sells. He merely borrows them.
• The traditional investment strategy is “Buy low, sell high”. In this, trader buys a stock or security at a particular price.
• He then sells stock or security when the price is higher. This traditional strategy is referred to as a “long position”.
• It is based on the idea that the price of the stock or security will appreciate with time.
• In the stock market, traders usually short stocks by selling shares that they have borrowed from others through brokerages.
• When the shares price declines to the expected levels, trader would buy the share at lower price. He would return them to owner, making the profit in the process.
• However, in case share prices appreciate rather than declining, the trader will have to purchase shares at a higher price to return them to the owner, incurring loss.
• Short sellers are categorized into two types. Some of them short stock due to the belief that a stock is overvalued or some short stock as part of hedging or market neutral portfolio strategy.
• Second category of short sellers attempt to do a detailed forensic research on a company. They spend months or years investigating about the company, take positions and then try to persuade the public of their point of view.
• Hindenburg comes in the second category. Muddy Waters, Citron Research and Kynikos Associates are other famous short sellers in the second category.
• Hindenburg Research:
  • It is an investment research firm. It is based in New York City.
  • Nikola, Clover Health, Kandi, Lordstown Motors, and Tecnoglass are other companies that have been subject of its reports.

Topic: Miscellaneous

5. EPFO has launched a massive outreach program in all districts across the country.

• Employees' Provident Fund Organization has launched a massive outreach program in all districts through 'Nidhi Aapke Nikat' program to expand its presence across the country.
• The objective of this program is to reach out to all the districts on 27th of every month and strengthen the relationship between the organization and its stakeholders.
• If the 27th of the month is a holiday, program will be conducted on the following working day.
• For this purpose, the organization organized camps in 685 districts on 27 January.
• Labor and Employment Secretary Aarti Ahuja e-launched the program from the EPFO Headquarters.
• More than 850 participants, including Members of Parliament, Members of Legislative Assemblies, CBT Members, Regional Committee Members, District Collectors and others, participated online in the event.

Topic: Indian Economy/Financial Market

6. Markets has shifted to T+1 settlement system from January 27.

• On January 27, India became the first major economy to move to a T+1 market settlement cycle.
• This move will help to complete all stock settlements the next day, resulting in faster financial transactions in the stock market. 
• The current market follows T+2 settlement cycle, meaning that investors receive shares, dividends, and bonus shares in their accounts two days following the transaction.
• T refers to the trading day. Starting January 27, all large-cap and blue-chip companies switched to the T+1 system.
• Both NSE and BSE, the domestic stock markets, were currently following the T+2 settlement cycle.
• In September 2021, the SEBI allowed stock exchanges to introduce T+1 settlement cycle from January 1, 2022.
• In February 2022, SEBI introduced the changes in a phased manner, which eventually ended in January 2023.
• In July 2001, SEBI introduced a rolling settlement cycle.
• Earlier, all settlements were done on a fixed day - Friday on BSE and Tuesday on NSE.
• The system was riddled with several problems, such as poor delivery, excessive liquidity and frequent defaults, etc.
• In 1996, after demat accounts became operational, SEBI introduced the rolling settlement cycle.
• Initially, the T+5 settlement cycle was being followed, which meant settlement within 5 days from the trading day.
• In 2002, the market regulator shortened it to a T+3 cycle, and then, from April 2003, it was reduced to a T+2 cycle, which was followed until now.

Topic: Reports and Indices

7. UN cut down India’s economic growth forecast by 20 bps to 5.8% for 2023.

• The United Nations slashed India’s growth forecast to 5.8% for 2023 from earlier 6%.
• The main reason for the cut down is higher interest rates and the risk of recession in the developed world.
• UN’s World Economic Situation and Prospects report has projected that global trade will contract by 0.4% and the world economy will grow by 1.9 % in 2023.
• UN has kept the rates unchanged for the fiscal year 2023-24 for India at 6%.
• The report projected that India’s retail inflation would reduce to 5.5 % in 2023, from 7.1 % in 2022.
• The higher interest rates increase debt-servicing costs for developing countries.
• As per the report, the unemployment rate dropped to 6.4 % in India. Youth employment remained below pre-pandemic levels.
• As per the report, China's economic growth will be 4.8 % in 2023, from 3% in 2022.

Topic: Committees/Commissions/Taskforces

8. Government formed G20 task force on digital public infrastructure.

• India’s G20 Task Force on Digital Public Infrastructure for Economic Transformation, Financial Inclusion and Development has been set up by the government.
• The task force will be co-chaired by India’s G20 sherpa Amitabh Kant and Infosys chairman Nandan Nilekani.
• The Ministry of Finance has issued an order regarding the setting of the task force on 21 January, 2023.
• The task force will help India in achieving its G20 Presidency agenda related to digital public infrastructure, financial inclusion, digital identity, and innovative technology based services.
• The task force will create a detailed map of India’s digital infrastructure across different sectors like finance, health, education, skilling, data, taxation, digital commerce, mobility, and beyond.
• Secretaries of the department of economic affairs, department of financial services, ministry of electronics and information technology and external affairs ministry will be the other members of this task force.
• In the Sherpa track, the task force’s work will also facilitate the Global Partnership for Financial Inclusion (GPFI) working group in G20’s finance track and the Digital Working Group (DEWG).
• The government of India is committed to transforming India into a digitally empowered society.

Read Banking Awareness PDF - 26, 27 and 28 January 2023