Banking Awareness of 6, 7 and 8 December 2022

Topic: Banking/ Financial Schemes

1. Centre has decided to expand the scope of Remission of Duties and Taxes on Exported Products (RoDTEP) scheme.  

• The scheme will include the chemicals, pharmaceuticals and iron & steel sectors from 15 December 2022.
• These three sectors were not initially covered under the scheme when it was implemented from January 1, 2021.
• The extension of RoDTEP to three sectors is likely to enhance their export competitiveness.
• The decision will be applicable till September 30, 2023. This means the three sectors will get benefits till September 30, 2023 only.
• The extension to these sectors beyond September 30, 2023 will depend on availability of funds from the Finance Ministry.
• Under RoDTEP scheme exporters get refunds for the embedded duties or taxes that are not rebated under other schemes.
• These duties or taxes are VAT on fuel used in transportation, mandi tax, etc.

Topic: RBI

2. RBI has given extension to the dispensation of increased HTM limit of 23% of deposits in respect of SLR securities up to March 31, 2024.

• RBI has given this extension up to March 31, 2024 to enable banks to better manage their investment portfolios.
• As a result, Banks can include statutory liquidity ratio (SLR) securities (Government Securities and State Development Loans) acquired between September 1, 2020 and March 31, 2024 in increased HTM limit.
• RBI said that the held to maturity (HTM) limits would be gradually restored from 23% to 19.5% from the quarter ending June 30, 2024.

Topic: Taxation

3. Sumitomo Mitsui Financial Group (SMFG) has been ordered by the Finance Ministry to pay a capital gains tax of $670 million.

• This has come a year after the Japanese financial service company (SMFG) completed the purchase of 74.9% stake in Fullerton India.
• In July 2021, SMFG signed an agreement to purchase a 74.9% stake in Fullerton India Credit for about $2 billion.
• In 2012, Supreme Court had given a verdict that gains arising from the indirect transfer of Indian assets are not taxable under the extant provisions of act.
• But, Finance Act 2012 amended the provisions of Income Tax Act 1961, with retrospective effect.
• Using this, tax demands were imposed on companies such as Cairn Energy and Vodafone.
• Last year, government brought a bill to withdraw all tax demands. However, this has not relaxed the need to pay capital gains tax for deals done after 2012.
• Capital gains tax is the tax levied on capital gains. It is levied when assets are transferred between owners. Capital gain is the profit received on the sale of a capital asset.

Topic: Reports and Indices

4. Bengaluru achieved the top spot in digital payments transactions as per Worldline India report.

• It recorded the maximum number of digital payment transactions from January to October 2022.
• It saw highest digital payment transactions in terms of volume (₹14.82 million) and value (₹36.2 billion) from January to October 2022.
• The volume of the digital transaction across top three cities after Bengaluru was- Hyderabad- ₹10.36 million, Chennai- ₹9.76 mn and Mumbai- ₹9.24 mn.
• As per the 'India Digital Payments Report’ for the third quarter of 2022, UPI recorded over 19.65 billion transactions worth ₹32.5 trillion.
• Unique Payment Interface (UPI) based transactions dominated digital payment transactions segment both in terms of value and volume.
• The top five states recording the highest number of digital transactions are Mumbai, Karnataka, Kerala, Tamil Nadu and Andhra Pradesh.

Topic: Banking System

5. AU Small Finance Bank and ICICI Lombard General Insurance has entered into a bancassurance partnership.

• Under the partnership, the bank’s customers will get access to ICICI Lombard General Insurance’s portfolio.
• The products will be offered across 980+ banking touchpoints spread over 20 States and 2 Union Territories.
• Bancassurance is an insurance distribution model in which an insurance company partners with bank to sell policies.
• Bank gets a commission from the insurance company, the insurer gains from the bank’s distribution network.
• AU Small Finance Bank (SFB):
  • It was founded in 1996 as AU Financiers (India) Ltd.
  • In 2017, AU Financiers (India) Ltd became a small finance bank.
  • It is headquartered in Jaipur. Its chairman is Raj Vikash Verma.

Topic: RBI

6. RBI hiked the repo rate by 35 basis points.

• RBI has increased the policy interest rate repo rate by 0.35 percent for the fifth consecutive time.
• With this, the repo rate has increased from 5.90 to 6.25 percent.
• On 7 December, Governor Shaktikanta Das made announcement after the bi-monthly review of the Monetary Policy Committee.
• Earlier, RBI has increased the repo rate by 0.40 percent in May, 0.50 percent in June and 0.50 percent in August, 0.50 percent in September.
• So far, the MPC has hiked the repo rate by 225 basis points in 2022.
• He said that the inflation rate is expected to be above 4% in the next 12 months.
• Inflation based on the Consumer Price Index for October-December 2022 has been forecasted to rise to 6.6% from 6.5%.
• The gross domestic product (GDP) growth rate for the financial year 2023 has been estimated at 6.8%.
• He also said that the GDP growth forecast has been reduced to 4.4% for October-December and 4.2% for January to March 2023.
• He said that the foreign exchange reserves have increased by $36.7 billion.
• RBI has left retail inflation projection for FY23 unchanged at 6.7%.
• MPC has voted to remain focused on the withdrawal of accommodative stance.
• Accommodative stance refers to central banks’ strategy of keeping interest rates low to increase cash in economy to support growth.

Topic: Indian Economy/Financial Market

7. World Bank raised India’s GDP growth forecast from 6.5% to 6.9% for FY 2022-23.

• It said that despite the challenging external environment, India has shown resilience and is expected to achieve strong GDP growth.
• India will remain one of the fastest growing major economies due to strong domestic demand.
• World Bank said that Indian economy is relatively less affected from global spillovers (global slowdown) as it has a large domestic market and is comparatively less exposed to international trade flows. 
• It expects inflation at 7.1% in current fiscal year.
• In its latest India development update titled ‘Navigating the Storm’, World Bank said that Indian economy is relatively well positioned to weather global spillovers.
• In its December edition of the Global Economic Outlook, Fitch has retained India’s growth forecast at 7% for this fiscal.
• It has cut projections for next 2 years. Fitch projected India's GDP would slow to 6.2% in 2023-24 and 6.9% in 2024-25.

Topic: RBI

8. Credit to agriculture and allied activities increased by 13.6% (y-o-y) in October 2022 as per RBI’s data on sectoral deployment of bank credit for October 2022.

• Credit to agriculture and allied activities stood at 10.8% a year ago.
• A growth of 18.3% was recorded in non-food bank credit in October 2022 as compared with 6.9% a year ago.
• Credit growth to industry rose to 13.6% on a year-on-year (y-o-y) basis in October 2022. It stood at 3.3% in October 2021.
• Credit growth to large industry rose by 10.9% against a contraction of 0.4% a year ago.
• Medium industries registered credit growth of 31.0% in October 2022 as compared with 35.1% last year.
• Credit to micro and small industries increased by 20.4% from 14.6% a year ago.
• Credit to services sector rose to 22.5% (y-o-y) in October 2022 from 2.8% a year ago.
• This was mainly because of improved credit offtake to ‘NBFCs’, ‘commercial real estate’ and ‘trade’ sectors.
• Personal loans grew by 20.2% (y-o-y) in October 2022 (12.6% a year ago). This growth was mainly driven by ‘housing’ and ‘vehicle loans’.
• Data on sectoral deployment of bank credit is collected from 40 select scheduled commercial banks (SCBs), accounting for about 93% of the total non-food credit delivered by all SCBs.

Topic: RBI

9. RBI and Financial Services Agency of Japan exchanged letters of cooperation.

• Both have exchanged letters of cooperation in the area of central counterparties (CCPs) with the aim of improving mutual cooperation.
• Earlier, UK and European regulators have derecognized various Indian clearing houses, including the Clearing Corporation of India (CCIL).
• In late October, European Securities and Markets Authority (ESMA) derecognized six Indian clearing houses, including CCIL, which is supervised by RBI.
• ESMA’s decision will be effective from May 1, 2023. Bank of England took a similar step.
• Clearing Corporation of India Ltd. (CCIL):
  • It was set up in April 2001. It is a Central Counterparty (CCP). It also acts as a trade repository for OTC interest rate and forex derivative transactions.
  • It was set up to provide clearing and settlement for transactions in Government securities, foreign exchange and money markets in the country.

Topic: Miscellaneous

10. India’s first gold ATM launched in Hyderabad.

• It is also the world’s first real-time gold ATM.
• The Goldsikka ATM can be used to withdraw gold coins unlike usual ATMs where one can withdraw money.
• Through the gold ATM, people can insert their debit or credit cards and buy gold coins.
• The ATM has been launched by Goldsikka Pvt Ltd with technology support from Hyderabad-based startup OpenCube Technologies Pvt Ltd.
• One of the important features of this ATM is that the gold prices are updated live.
• The ATM has a capacity of storing 5kgs of gold. People can buy gold from 0.5 grams to 100 grams.

Read Banking Awareness PDF - 6, 7 and 8 December 2022