Banking Awareness of 28, 29 and 30 May 2024

By Priyanka Chaudhary | Last Modified: 30 May 2024 18:21 PM IST
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Topic: Agriculture

1. In 2022–2023, farm input subsidies in India reached $48.13 billion.

  • India's farm input subsidies increased by 50% from $32.07 billion in 2021–2022 to $48.13 billion in 2022–2023.
  • These include subsidies for fertilizers, electricity and irrigation.
  • The data is according to notifications made by the India at the WTO.
  • During a recent WTO peer group review meeting, the EU, the UK, and the US voiced concerns and called for increased transparency.
  • WTO regulations exempt some agricultural input subsidies from domestic subsidy caps.
  • Farmers with limited resources and low incomes should be the focus of these subsidies.
  • According to the Agricultural Census for 2015–16, 99.43% of farm holdings in India are owned by low-income or resource-poor farmers.
  • India clarified that the input subsidies are mostly for irrigation, fertilizers and electricity.
  • The increase was because of inflation and rising costs of fertilizers.

Topic: Regulatory Bodies/Financial Institutions

2. The IRDAI has made major revisions to health insurance norms.

  • It repealed 55 circulars with the release of a comprehensive Master Circular on Health Insurance Products.
  • The Master Circular brings at a single location all of the policyholder entitlements in a health insurance policy.
  • One of the main norms provided by IRDAI is that insurers must give policyholders more options.
  • Every insurance document must be provided by the insurers with a Customer Information Sheet (CIS).
  • Additionally, customers must have the freedom to select riders, add-ons, and products based on their individual needs and medical conditions.
  • When a policyholder has various health insurance policies, they can select the one that allows them to receive the maximum amount of admissible claims.
  • A health insurance policy is renewable and cannot be refused based only on claims filed in years prior to the policy's expiration.
  • This won't apply if it is proven that the insured committed fraud, withheld information, or made false representations.
  • The insurers may provide policyholders the option to select a No Claim Bonus as a way of rewarding them if they file no claims during the duration of the policy.
  • This can be done either by increasing the sum insured or discounting the premium amount.
  • If the policyholder decides to cancel their insurance at any point throughout the policy term, they will receive a refund of the premium or the proportionate premium for the remaining policy duration.
  • Newly introduced measures include the processing of cashless authorisation requests within one hour.
  • They provide for final authorisation within 3 hours of intimation by the hospital.

Topic: Banking System

3. HDFC Bank will cease to send SMS alerts for UPI transactions up to ₹100 starting from June 25.

  • It will now send SMS notifications only for transactions over ₹100 (for money sent or paid) and ₹500 (for money received).
  • The bank notified its customers via email that they would still receive email alerts for any UPI transactions.
  • UPI is India's mobile-based fast payment system. It has become very popular in the country's retail digital payment market.
  • In 2023, the UPI’s share in digital payments in India has reached close to 80%.
  • According to figures from 2022, India now represents almost 46% of global digital transactions.
  • A financial penalty of 10 million rand (₹4.5 crore) has been imposed by the Prudential Authority of the South African Reserve Bank on the State Bank of India's South Africa branch.
  • The financial penalty involves an immediately payable part of 5.50 million rand. SBI branch in South Africa has already paid it.
  • The rest 4.50 million rand is suspended for three years, contingent on compliance within this period.
  • This penalty was imposed under the South Africa’’s Financial Intelligence Centre Act 38 of 2001 (FIC Act) for non-compliance with provisions of FIC Act or related directives.

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Topic: Committees/Commissions/Taskforces

4. A committee on co-lending is being established by the Department of Financial Services (DFS).

  • The committee's objectives are to improve MSME credit, address co-lending difficulties, and slow down some of the rapid expansion of consumer loans.
  • A group comprising three banks and three NBFCs has been established by the Finance Ministry to investigate ways to resolve co-lending difficulties.
  • One of the largest players in the co-lending market, SBI, will decide who will be on the committee.
  • NBFC UGro Capital, which focuses on MSME's, is anticipated to be one of the committee members.
  • The RBI and DFS will get a report from the committee along with discussion.
  • MSMEs are among the priority sector loans (PSLs) for whom co-lending was intended.
  • According to a recent analysis by CRISIL, in the more than five years since the model's launch, co-lending AUM is anticipated to have reached ₹1 lakh crore.
  • Personal loans make up 34% of the AUM of the co-lending book, with home loans coming in second at 20%.
  • Gold loans and unsecured MSME loans made up 13% of each.
  • The remaining 20% was made up of secured car and MSME loans each.

Topic: RBI

5. RBI imposed a penalty of ₹1 crore on ICICI Bank on May 21.

  • This penalty has been imposed for non-compliance with certain directions on ‘Loans and Advances – Statutory and Other Restrictions’.
  • RBI also fined YES Bank with ₹91 lakh on May 17.
  • This fine was imposed for violation of certain norms on ‘Customer Service in Banks’, and ‘Un-authorised Operation of lnternal/Office Accounts’.
  • ICICI Bank Limited is an Indian multinational bank. It is headquartered in Mumbai. It was founded in 1994. Sandeep Bakhshi is its CEO.
  • YES Bank was founded in 2004. It is headquartered in Mumbai. Prashant Kumar is its MD and CEO.
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Topic: Miscellaneous

6. Surety Insurance Bonds have been launched by TATA AIG General Insurance.

  • TATA AIG General Insurance launched these bonds to support infrastructure development.
  • Government has allocated 3.3 percent of the GDP in FY 2024 to infrastructure development.
  • TATA AIG General Insurance is a private general insurer.
  • Under a Surety Insurance Bond, project owner or beneficiary is covered against losses arising from non-performance, non-fulfillment, or breach of contractual obligations of the contractor.
  • TATA AIG’s Surety Insurance Bonds are available in conditional and unconditional formats.
  • A surety bond is a legally binding agreement between three parties given below.
    • The obligee (the entity requiring the bond)
    • The principal (the party required to fulfil a certain task or duty)
    • The surety (the party ensuring that the principal can perform the assignment)
  • The surety bond is typically used in construction and infrastructure projects.
  • It ensures that the principal will meet the commitments indicated in a contract.

Topic: RBI

7. RBI has placed restrictions on two Edelweiss group entities.

  • The restriction has been placed by RBI on these two entities for evergreening stressed loans.
  • Edelweiss Asset Reconstruction Company Ltd (EARCL) has been barred from acquiring financial assets.
  • ECL Finance has been barred from carrying out any structured transactions in wholesale exposures.
  • Incorrect valuation of security receipts (SRs) was also found in both ECL and EARCL.
  • ECL allowed itself to be used as a conduit to circumvent regulations.
  • RBI has directed both companies to strengthen their assurance functions to ensure regulatory compliance.

Topic: Indian Economy/Financial Market

8. S&P Global Ratings has kept the India's sovereign rating at "BBB-".

  • It has upgraded India’s sovereign rating outlook from "stable" to "positive."
  • India's strong economic growth was mentioned by the rating agency as having a positive effect on its credit measures.
  • India's strong economic development, notable improvement in the quality of government spending, and political commitment to fiscal consolidation are the main reasons for the positive outlook.
  • The benchmark 10-year bond yield decreased three basis points to 6.99% following the increase in outlook, while the Indian rupee appreciated.
  • S&P recognised that the country's weak fiscal settings have always been the most vulnerable aspect of its sovereign ratings profile.
  • But it pointed out that the government is giving priority to consolidation efforts.
  • According to the rating agency, by fiscal 2028, India's general government deficit is expected to have decreased to 6.8% of GDP from 7.9% in fiscal 2025.
  • For the following three years, it projects that the Indian economy would grow at a rate of almost 7% a year.
  • Despite significant fiscal deficits, this should have a moderating effect on the ratio of government debt to GDP.
  • The sustainable nature of government borrowing in India is maintained by the favourable GDP growth to interest rate difference, as observed by S&P.
  • It projects that by fiscal 2028, the nation's debt to GDP ratio will drop from the current 85% to 81%.
  • S&P anticipates that before the end of the fiscal year 2025, monetary policy will be somewhat easier.

Topic: RBI

9. RBI launched the Pravaah portal, Retail Direct mobile app and FinTech repository.

  • Reserve Bank of India (RBI) Governor Shaktikanta Das launched three major initiatives- the PRAVAAH portal, the RBI Retail Direct mobile application and the FinTech Repository.
  • PRAVAAH (Platform for Regulatory Application, VAlidation and Authorization) is a secure and centralised web-based portal for any individual or entity seeking authorisation, license or regulatory approval on any reference made by it to the RBI.
  • This portal will help in improving the efficiency of various processes related to granting regulatory approvals and clearances by the Reserve Bank.
  • Its main aim is to enhance regulatory processes, facilitate retail investment, and provide comprehensive data on the fintech sector.
  • The retail direct mobile app will provide ease of transacting in government securities (G-Secs).
  • Now, retail investors can transact in G-Securities using the mobile app on their smartphones.
  • The fintech repository will contain information on Indian fintech firms, which will provide a better understanding of the sector from a regulatory perspective.

Topic: Indian Economy/Financial Market

10. With a 42% rise to $15.6 billion in FY24, smartphones rank as India's fourth most popular export good.

  • India’s top export items are dominated by petroleum products.
  • Smartphones replaced motor gasoline to become the fourth-largest exported commodity in FY24.
  • The surge in smartphone exports was caused by a 158% increase in shipments to the US, totaling $5.6 billion, according to figures from the commerce department.
  • The United Arab Emirates ($2.6 billion), the Netherlands ($1.2 billion), and the United Kingdom ($1.1 billion) came next.
  • India began gathering smartphone data on a separate basis in April 2022.
  • Preliminary estimates by the Indian Cellular and Electronics Association (ICEA) indicate that the value of mobile devices manufactured in India for both export and domestic markets surged to Rs 4.1 trillion ($49.16 billion) in FY24.
  • Because of smartphones, India is now the world's second-largest producer of mobile phones, behind China.
  • According to ICEA data, exports were over 30% of the total output value in FY24, up from 25% in FY23 based on early estimates.

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