Banking, Financial and Economic Awareness of 31 December 2019

1. RBI proposes revision of exposure norms and priority sector lending targets for UCBs

• As per its drafts circular, RBI will increase target for priority sector lending for UCBs and lower limit on prudential exposure limits to single and group borrowers.
• The target for priority sector lending (loans and advances to priority sector) for UCBs will be increased from the current 40% to 75% of ANBC or credit equivalent of off-balance sheet exposure, whichever is higher.
• RBI said that UCBs should increase priority sector lending to 50% by March 31, 2021, and 60 % by March 31, 2022. Finally, priority sector lending should reach 75 % by March 31, 2023.
• The prudential exposure limit for UCBs for a single borrower/party will be lowered from current 15% to 10% of Tier-I capital and for group borrowers/parties will be lowered from current 40 % to 25% of Tier-I capital.
• Banks having large exposure to single borrower/party or group borrowers/parties face more solvency/ liquidity risks if such exposures become non-performing. In banking terminology, exposure means the assets that have been given as loans.
• As per the RBI's draft circular, the revised norms have to be followed by March 31, 2023.
• Revised norms will bring equality in prudential norms for governing UCBs and SFBs. They will also lower the credit concentration risk of UCBs and increase financial inclusion.
• Off-balance sheet exposure:
  • The term off-balance sheet exposure means transactions that do not appear on the balance sheet. 
  • Letters of undertaking (LoU), leasing assets, and letters of credit are examples of off-balance sheet exposure.
• Adjusted Net Bank Credit (ANBC):
  • It is a total of Net Bank Credit and Investments of banks in Non-SLR bonds.
  • RBI defines priority sector lending targets in terms of percentage of ANBC.
  • Currently, RBI has fixed priority sector lending target for banks at 40% of their ANBC.
• Small Finance Banks (SFBs):
  • They offer basic banking services (deposits and lending) only.
  • The aim of SFBs is financial inclusion.
  • Unlike dual control of UCBs, SFBs are governed by RBI only.
  • SFBs need minimum paid-up equity capital of Rs. 100 crore.

2. Improvement in India's position in SDG India index

• In the latest SDG India index released by NITI Aayog, India has improved its rank from 57 in 2018 to 60 in 2019.
• In the index, Kerala and Himachal Pradesh achieved the 1^st and 2^nd ranks. Andhra Pradesh, Tamil Nadu and Telangana achieved 3^rd rank.
• Bihar, Jharkhand, Arunachal Pradesh, Meghalaya and Uttar Pradesh are bottom-most states.
• In terms of poverty, India's rank has come down from 54 points last year to 50 this year.
• India's rank in terms of zero hunger decreased by 13 points.
• In terms of malnutrition, most of the Indian states excluding some North-Eastern states, Kerala and Goa, scored below 50.
• India's rank in terms of economic growth came down from 65 to 64.
• Sustainable Development Goals (SDG) India Index
  • It is launched by NITI Aayog.
  • Ministry of Statistics and Programme Implementation (MoSPI), United Nations in India, and the Global Green Growth Institute have jointly developed it.
  • SDG India Index 2018 covered only 13 SDGs.
  • The 2019 edition covers 16 out of 17 SDGs and ranks all states and UTs on 100 indicators.

3. SBI to lower its external benchmark based lending rate

• From January 1, 2020, SBI will lower its external benchmark based lending rate by 25 basis points from 8.05% per annum to 7.80 % per annum.
• After January 1, 2020, interest rate for existing home loan customers and MSME borrowers who have taken external benchmark based lending rate linked loans will drop down by 25 basis points. New interest rates for these borrowers will start from 7.90 % per annum.
• RBI norms require banks to change their external benchmark based lending rate at least once in three months.
• The external benchmark based lending rate is fixed on the basis of external rate like the repo rate.

4. Deadline for linking PAN and Aadhaar extended

• Central Board of Direct Taxes (CBDT) has changed the December 31 deadline for linking of PAN and Aadhaar to March 31, 2020.
• The deadline has been extended for the eighth time.
• In September 2018, the Supreme Court ruled that Aadhaar will be mandatory for filing I-T returns and allotment of PAN.