Banking Awareness of 29 and 30 December 2023

Topic: Banking/Financial/Govt Schemes

1. Two small savings schemes saw an increase in interest rates for January to March of 2024.

• For the months of January to March 2024, the interest rate on three-year time deposits has been raised by 10 basis points to 7.1%.
• For the January–March 2024 period, the interest rate on the Sukanya Samriddhi Account Scheme has been increased by 20 basis points to 8.2%.
• All other small savings plans, however, continue to offer the same interest rates.
• The Finance Ministry stated that they will keep offering the same interest rate as they did from October to December of 2022.
• The government of India determines the interest rates for small savings accounts.
• They have a spread of 0-100 basis points over the yield of similar-maturity government securities tied to market yields.
• After nine straight quarters of no change, the finance ministry began hiking small savings interest rates in October-December 2022.

Topic: RBI

2.  RBI said that customers should be informed of the final decision made by REs and their IOs within 30 days of the complaint being received.

• Along with raising customer service standards, this directive aims to improve consumer grievance resolution inside the regulated entities (REs).
• REs include banks, Non-Banking Financial Companies, Non-bank System Participants and Credit Information Companies.
• Furthermore, based on the amount of complaints they receive, REs may designate one or more IOs and Deputy Internal Ombudsman (DIO).
• The Internal Ombudsman (IO) often handles consumer complaints concerning service deficiencies.
• A RE should set up a completely automated complaints management system, according to RBI's Master Direction on "Internal Ombudsman for Regulated Entities."
• Under this system, all complaints that the RE's internal grievance resolution mechanism rejects in part or in full automatically get escalated to the IO for a final decision within 20 days of receipt.
• In accordance with the guidelines, the regulated entity must provide the Internal Ombudsman with all data and documentation requested.
• The Internal Ombudsman's decision will be legally obligatory on the regulated body, unless the latter has received permission to dispute with it.
• According to RBI, an IO/DIO appointed on a contractual basis in a RE shall not be older than 70 years of age when the tenure ends.
• The IO or DIO's term of employment with the regulated entity must be specified, lasting no more than five years but no less than three years.
• They are also ineligible for a term extension or reappointment in the same regulated entity.

Topic: RBI

3. The deadline for adopting the RBI's instructions on penal charges in loan accounts has been extended.

• The RBI has chosen to add three months to the deadline for lenders to follow the norms on punitive charges in loan accounts. 
• Regulated Entities will see to it that the guidelines are followed for all newly obtained loans starting on April 1, 2024.
• If a loan already exists, it must be ensured that it is transferred to the new punitive charges regime by the next review/renewal date, which must fall on or after April 1, 2024, but not later than June 30, 2024.
• Fresh guidelines for lenders on penal charges in loan accounts were issued by the RBI in August.
• This was done to make sure that penal charges are not used as a revenue enhancement tool by lenders.
• The guidelines were to become effective from January 1, 2024.
• Under the new rules, there should be no capitalisation of penal charges. No further interest computed on such charges.

Topic: Miscellaneous

4. India has become the second-largest steel producer globally.

• The government said that India emerged as the world’s second-largest producer of steel.
• According to the Ministry of Steel, domestic steel production was around 90 million tonnes this year.
• Domestic steel consumption was at 87 million tonnes this year according to the Ministry of Steel.
• Ministry of Steel said that the domestic crude steel production stood at over 94 million tonnes.
• Domestic crude steel production witnessed a growth of more than 14% against the production in the same period last year.
• According to the Ministry of Steel, the Production Linked Incentive Scheme boosted investments in the steel sector.
• This year, a Memorandum of Understanding involving 57 projects and totaling more than 29 crore rupees in investment was inked with 27 organisations.
• China is the largest producer of crude steel in the world.
• India has fixed a target of achieving a total crude steel capacity of 300 MTPA by 2030-31.
• India has also fixed a target of achieving the total crude steel demand/production of 255 MTPA by 2030-31.

Topic: Indian Economy/Financial Market

5. Core sector output growth slowed to 7.8% in November.

• The output of eight key infrastructure industries has slowed down to a six-month low of 7.8% in November.
• The growth of the core sector has declined due to a decline in the output of crude oil and cement sectors.
• The core sector's growth in October was 12 percent.
• The growth rate in the production of coal, fertilizer, steel, and electricity decreased during November.
• Refinery products grew at a 17-month high of 12.4% in November compared with 4.2% in October.
• Cement and crude contracted in November. Cement contracted 3.6% after 17.4% growth in October.
• Electricity growth slowed to 5.6% from 20.3% in October.
• Coal output increased 10.9%, whereas steel maintained 9.1% growth.

Topic: Banking System

6. On December 27, the Reserve Bank of India (RBI) issued its list of Domestic Systemically Important Banks (D-SIBs).

• The RBI has moved the State Bank of India (SBI) and HDFC Bank to higher buckets, while ICICI Bank remains in the same bucketing structure as last year.
• In its statement issued on December 28, RBI said, "SBI and HDFC Bank moved to higher buckets - SBI shifted from Bucket 3 to Bucket 4 and HDFC Bank shifted from Bucket 1 to Bucket 2."
• For SBI and HDFC Bank, the higher D-SIB buffer requirements on account of the bucket increase will be effective from April 1, 2025.
• Therefore, till March 31, 2025, the D-SIB surcharge applicable to SBI and HDFC Bank will be 0.60% and 0.20% respectively.
• Under the D-SIB framework, RBI is required to disclose the names of banks designated as D-SIBs since 2015 and place these banks in appropriate buckets based on their Systemic Importance Score (SIS).
• The central bank had declared SBI and ICICI Bank as D-SIBs in 2015 and 2016.
• Based on data collected from banks as of March 31, 2017, HDFC Bank was also classified as a D-SIB along with SBI and ICICI Bank.
• The current update is based on data collected from banks up to March 31, 2023, and the growing systemic importance of HDFC Bank following the merger of erstwhile HDFC Ltd into HDFC Bank on July 1, 2023.

Topic: Reports and Indices

7. Asset quality of Indian banks improved to a decadal high: Trend and Progress of Banking in India report.

• The Reserve Bank of India released a report titled ‘Trend and Progress of Banking in India’.
• As per the report, the Indian scheduled commercial banks (SCBs) Gross Non-Performing Assets (GNPA) ratio improved in the second quarter of this financial year.
• According to the report, the consolidated balance sheet of SCBs grew by 12.2% in 2022–23.
• The improvement in asset quality is measured by GNPA ratios. The GNPA ratio of SCBs reached a decadal low of 3.9% in March 2023.
• About a 45% reduction in the GNPAs of SCBs is due to recoveries and upgrades.
• The combined balance sheet of urban cooperative banks has increased by 2.3% in 2022–23.
• The consolidated balance sheet of non-banking financial companies increased by 14.8% in 2022–23.

Topic: Appointments

8. Reserve Bank of India approved the appointment of C S Rajan as chairman of Kotak Mahindra Bank.

• The RBI has approved C S Rajan's appointment as an Independent Director of the Kotak Mahindra Bank.
• His appointment will become effective from January 1, 2024, for two years.
• C S Rajan assumed the role of Independent Director on the Bank's Board on October 22, 2022.
• He has experience of more than 40 years across significant government portfolios.
• In October 2018, C S Rajan was appointed to the Board of Infrastructure Leasing and Financial Services Limited (IL & FS).
• Kotak Mahindra Bank:
  • It is India’s 3rd largest private sector bank by market capitalisation.
  • It is headquartered in Mumbai. Uday Kotak is its founder.
  • It was founded in 2003.

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