Banking, Financial and Economic Awareness of 27 December 2019

1. RBI decides to establish college of supervision

• RBI will establish a college of supervision to improve the skills of its officials and risk assessment in banks, NBFCs.
• College of supervision will also train RBI inspectors in frauds and cyber-security risks in the financial sector.
• RBI will also form an internal research and analysis group under the Department of Supervision and Regulation.
• Earlier, RBI had combined its three separate departments for the supervision of banking, non-banking and co-operative banks into a single Department of Supervision.
• Similarly, RBI also combined its three separate departments for regulation of banking, non-banking and co-operative banks into a single Department of Regulation.

2. SEBI fines ICRA and CARE Ratings

• For continuously giving high ratings (AAA) to Non-Convertible Debentures (NCDs) of IL&FS, SEBI has fined ICRA and CARE Ratings with Rs 25 lakh each.
• SEBI said that despite the stressed balance sheet, asset-liability mismatch and negative debt to equity ratio of IL&FS, ICRA and CARE Ratings continued giving high ratings (AAA) to NCDs of IL&FS.
• Credit rating agencies in India:
  • Credit rating agencies in India are registered with SEBI.
  • As on Nov 06, 2019, there are seven registered credit rating agencies in India:
    1. SMERA ratings limited
    2. Brickwork Ratings India private limited
    3. CARE ratings limited
    4. CRISIL Ltd.
    5. ICRA limited
    6. India ratings and research Pvt. Ltd. (formerly Fitch Ratings India Pvt. Ltd.)
    7. Infomerics valuation and rating Pvt. Ltd.

3. SEBI fines Intercon Finance and four other entities

• SEBI has fined Intercon Finance and four other entities for violation of Substantial Acquisition of Shares and Takeovers (SAST) norms.
• The entities failed to publicly announce the acquisition of shares of AksharChem (India) Ltd and violated SAST norms on 5 different occasions.
• As per the SAST norms, entities are required to publicly announce the acquisition of shares of a company if their shareholding in the company goes beyond 15 %.

4. Manappuram Finance to raise Rs 350 crore

• The decision to raise Rs 350 crore was taken by the financial resources and management committee of the board of directors of Manappuram Finance.
• The amount will be raised through the issuance of non-convertible debentures that will be rated, secured and redeemable.
• Non-convertible debentures will have the face value of Rs 10 lakhs each.
• Manappuram Finance:
  • It is a non-banking financial company (NBFC).
  • Headquarters: Thrissur, Kerala
  • MD & CEO: V.P. Nandakumar
• Debentures:
  • They are medium- to long-term fund instruments. Large companies use them to borrow money.
  • Debentures are different from bonds as they are not backed by physical assets or collateral of the issuer.
  • They are based on the creditworthiness and reputation of the company. The interest rates of debentures are usually higher than bonds.
• Non-Convertible Debentures (NCDs):
  • They are financial instruments that are not convertible into shares or equities.
  • They are used for raising long-term funds.
  • In comparison to convertible debentures, NCDs provide higher returns.
  • In India, NCDs have a minimum maturity period of 90 days.