Banking, Financial and Economic Awareness of 4 and 5 December 2020

Topic: Banking System

1. RBI proposes an increase in limit for contactless card transactions

• RBI has proposed an increase in the limit for contactless card transactions from Rs 2,000 to Rs 5,000 from January 1, 2021.
• RBI has made this proposal in its statement on developmental and regulatory policies released on December 4, 2020.
• RBI has also proposed to make these changes for e-mandates for recurring transactions through cards (and UPI). However, RBI will issue instructions for these proposals later.
• Another proposal made in the document is to allow posting of settlement files of payment systems to the RBI on all days of the year. This will apply to the payment systems given below:
  • AePS (Aadhaar Enabled Payment System)
  • IMPS (Immediate Payment Service)
  • NETC (National Electronic Toll Collection)
  • NFS (National Financial Switch)
  • RuPay and UPI (Unified Payment Interface)
• Currently, the posting of settlement files of payment systems can be done only on RTGS days.
• eKuber is a core banking system of RBI. It is available on all days and all nights. RTGS will be soon available 24x7.  

Topic: Indian Economy

2. RBI kept both repo rate and reverse repo rate unchanged at 4% and 3.35%, respectively

• RBI has kept both repo rate and reverse repo rate unchanged at 4% and 3.35%, respectively.
• RBI has kept rates unchanged due to concerns of rising inflation. As per RBI forecast, inflation is likely to be at 6.8% in the third quarter and 5.8% in the fourth quarter of current fiscal year.
• The forecast of 6.8% and 5.8% is above the government’s inflation target of 4% within range of plus/minus 2%. 
• RBI earlier forecasted inflation at 5.4%-5.5% for the second half of current financial year. In October 2020, consumer price inflation reached a six-year high of 7.6%.
• RBI has said that economy in the current fiscal year may contract by 7.5%. In October, RBI had projected contraction of 9.5% during current fiscal year. In 1979-80, GDP contracted record 5.2%.
• Economy contracted by 23.9% in first (April-June) quarter of 2020-21 due to Covid-19. It contracted 7.5% in the second (July-September) quarter of 2020-21 due to Covid-19.
• As per RBI, the economy may show positive growth in second half of FY 2020-21. GDP may expand at 0.1% in third quarter of FY21 and at 0.7% in the last quarter of FY21.
• RBI’s decision to keep policy rates unchanged may continue to benefit borrowers.
• Fixed deposit rates have declined by 175-200 basis points since March 2020. Further, a cut in deposit rates by banks will be negative for depositors.
• Monetary Policy Committee (MPC) will continue with the accommodative stance till necessary. 
• RBI’s measures and their impact over last two years:
  • Since January 2019, RBI has lowered repo rate by 250 bps. This includes cumulative cut of 135 bps in 2019 and 115 in 2020.
  • In October 2019, RBI ordered linking of loans by banks with external benchmark rate like repo rate. This lowered lending rates. 
  • Weighted average lending rates on fresh loans have shown decline by 98 bps from January to October 2020. This happened after repo rate reduction of 115 bps in 2020.
  • In case of private banks, weighted average lending rates on fresh loans have however increased by 36 bps to 9.02% in October 2020 from 8.66% in September 2020. This is as per RBI’s latest data on banks.
  • The rise in lending rates of private banks could be because some of them are charging higher spread on certain loans. 
  • Final lending rate depends on benchmark rate and spread, which is charged and decided by banks as per their assessment of borrowers’ credit risk premium.

Topic: Infrastructure and Energy

3. Combined sovereign and non-sovereign loan of $190 million approved by Asian Development Bank (ADB)

• Combined sovereign and non-sovereign loan of $190 million has been approved by Asian Development Bank (ADB).
• The loan is for modernisation of the power distribution system in Bengaluru and Bengaluru Smart Energy Efficient Power Distribution Project.
• ADB has approved combined sovereign ($100 million) and non-sovereign ($90 million) loan on a pilot basis for the first time.
• The loan is approved to Bangalore Electricity Supply Company Limited (BESCOM), which is largest of all state-owned distribution utilities in Karnataka.
• Asian Development Bank (ADB):
  • It is a regional development bank. It was established on 19 December 1966.
  • Its headquarters are located in Mandaluyong, Philippines. Its President is Masatsugu Asakawa.

Topic: Corporates/Companies

4. Business Culture Awards 2020 won by UST Global

• Business Culture Awards 2020 has been won by UST Global, an American company providing digital technology and IT services.
• UST Global won the award for ‘Best International Initiative for Business Culture’.
• The company was recognized for ‘Great Place to Work’ on workplace culture in India, the UK and the US.
• It has earlier won Glassdoor Employees’ Choice Award. This award was for being one of the Top 100 Best Places to Work in 2020.

Topic: Reports and Indices

5. Smuggling in India Report 2019-20 released by Finance Minister

• Smuggling in India Report 2019-20 has been released by Finance Minister Nirmala Sitharaman.
• The report was released during 63^rd Founding Day Celebrations of the Directorate of Revenue Intelligence (DRI).
• The report is an analysis of trends of organised smuggling on Gold and Foreign Currency, Narcotic Drugs, Security, Environment and Commercial Frauds.
• The awards given during 63rd Founding Day Celebrations are Bravery awards DRI Utkrisht Seva Samman, 2020.
• The winners of Bravery awards are Najimudheen T S and Sumer Sen (an independent witness).
• B. Sankaran, an Indian Revenue Service (IRS) officer has won the DRI Utkrisht Seva Samman, 2020.
• Directorate of Revenue Intelligence:
  • It was constituted on 4 December 1957. It is an apex body for anti-smuggling intelligence and investigation.
  • It works under the Central Board of Indirect Taxes & Customs in the Ministry of Finance.
  • It solves the cases related to the smuggling of arms, ammunition and explosives, narcotic drugs and psychotropic substances, gold and diamonds, counterfeit currency notes and wildlife items.
  • It is headed by a Director-General rank Secretary of the Government of India.

Read Banking Awareness PDF - 4 and 5 December 2020