Banking Awareness of 6 and 7 December 2024

Topic: Miscellaneous

1. TEPA can boost 99.6 % of Indian exports by providing market access to EFTA countries, according to the government.

• TEPA can drive $100 billion investment, according to the government.
• The Trade and Economic Partnership Agreement (TEPA) was signed in March 2024.
• India signed TEPA with four developed nations - Switzerland, Iceland, Norway and Liechtenstein.
• These form an important economic bloc in Europe.
• European Free Trade Association (EFTA) is providing 92.2% of its tariff lines which covers 99.6% of India’s exports.
• India is providing 82.7% of its tariff lines which covers 95.3% of EFTA exports.
• India has offered 105 sub-sectors to the EFTA.
• EFTA's market access offer covers 100 per cent of non-agri products. It covers tariff concession on processed agricultural products (PAP).

Topic: Corporates/Companies

2. In just five years, more than 2.33 lakh shell firms were shut down.

• Over the previous five years, 2.33 lakh dormant and possibly illegal entities have been shut down by the Ministry of Corporate Affairs (MCA).
• The Companies Act does not define "shell companies" in any way.
• Inactive businesses that have consistently failed to meet statutory compliance standards have been the focus of MCA's efforts to detect and eradicate them.
• Businesses that don't start operations within a year of being incorporated or that haven't submitted financial statements and returns for two years in a row are scrutinised.
• Shell corporations are frequently suspected of aiding financial crimes such as money laundering and tax evasion.
• The largest contributors to this list are Delhi and Maharashtra, with 36,856 and 35,637 entities, respectively, being struck off between 2019 and 2024.
• Following closely after were states like Uttar Pradesh (22,644), Karnataka (19,242) and Tamil Nadu (16,143).

Topic: Taxation

3. The compensation cess collection rate increased by 6.5% between April and November.

• During the April–November period, the GST mechanism's compensation cess collection rate increased by 6.5%.
• The BE (Budget Estimate) growth rate of 4.1% is lower than this.
• This is significantly less than the double-digit growth rate of the previous three fiscal years.
• The FY24–25 Budget Estimate aims to raise little over ₹1.51 lakh crore through compensation cess.
• According to data from the GST portal, almost ₹1.01 lakh crore was collected between April and November.
• This implies that around ₹50,000 crore must be collected over the next four months, or ₹12,500 crore per month on average.
• Since this is less than the average monthly collection of ₹12,600 crore, reaching the BE shouldn't pose any problem.
• In theory, the GST includes both the central and state cess and surcharges.
• However, a compensation cess through a separate statute was prescribed for the first five years (until 2022).
• This was done in order to make up for States' slower revenue growth following the adoption of the GST.
• The cess collection and levy have since been extended up to March 31, 2026.
• Following the repeal of the compensation cess, a group of ministers led by Pankaj Chaudhry, Minister of State in the Finance Ministry, would propose a tax to replace it. 

Topic: Regulatory Bodies/Financial Institutions

4. SEBI imposed penalty of ₹9 lakh on Reliance Securities.

• SEBI imposed this penalty because Reliance Securities flouted market norms and stock broker rules.
• Reliance Securities Ltd (RSL) is a SEBI-registered stock broker.
• SEBI, NSE and BSE carried out onsite inspection of the books of accounts, records, and other documents of authorised persons of Reliance Securities Ltd.
• The inspection was carried out from April 2022 to December 2023.
• SEBI issued a show-cause notice to Reliance Securities on August 23, 2024.

Topic: RBI

5. RBI has decided to keep policy repo rate unchanged at 6.50% for 11th time. 

• RBI has decided to keep it unchanged by a majority of 4:2.
• Standing deposit facility (SDF) rate is kept at 6.25 per cent.
• Marginal standing facility (MSF) rate and the Bank Rate are kept at 6.75 per cent.
• Since February 2023, the RBI has kept benchmark interest rates unchanged.
• The Monetary Policy Committee (MPC) also decided unanimously to continue with the ‘neutral’ outlook.
• Cash Reserve Ratio (CRR) has been reduced by 50 basis points to 4%.
• CRR is a percentage of a bank's deposits that they keep with the RBI as reserves.
• GDP growth projection for FY25 has been reduced to 6.6% from 7.2%
• Inflation projection for FY25 has been kept at 4.8%
• In September 2023, the UPI credit line was introduced. scheduled commercial banks were given access to it.
• The decision has finally been made to allow small finance banks to approve UPI credit lines.

Topic: Indian Economy/Financial Market

6. India's GDP growth projection for FY25 has been revised by Morgan Stanley from 6.7% to 6.3%.

• In the July-September quarter of 2024, India’s GDP growth slowed to 5.4% year-on-year. This was its lowest level since March 2023.
• This was a declined from 6.7% growth in previous quarter. This fell short of Morgan Stanley's forecast of 6.3%.
• Both private consumption and capital expenditure showed signs of slowing down. Private consumption grew at a faster rate.
• However, with a growth rate of 7.1%, the services sector showed resilience.
• Manufacturing and energy were the main drags on the industrial sector, which trailed at 3.9%.
• For a long-term recovery, Morgan Stanley suggests three crucial variables to keep an eye on.
• The first includes cash balances kept with the RBI and changes in government spending, especially in revenue and capital expenditure.
• The second is agricultural performance. Lastly, domestic liquidity and financial conditions continue to be crucial.

Topic: MoUs/Agreements

7. A 50 million dollar loan agreement has been signed by the Centre and the Asian Development Bank (ADB) for a climate-adaptative water harvesting project in Meghalaya.

• On December 5, 2024, the Climate-Adaptative Community-Based Water-Harvesting Project loan agreement was signed.
• Across 12 districts, the initiative will help build 532 small water storage facilities.
• In order to capture and control excessive rainfall and flash floods during the monsoon season, these facilities will be designed with climate resilience in mind.
• During the dry season, the stored water will increase water security.
• Three thousand hectares of command area will be created as part of the project to give farmers access to dependable irrigation sites.
• Additionally, it will set up 50 weather stations to collect and track climate data, as well as micro-irrigation systems in the Khasi, Jaintia, and Garo regions.
• The Meghalaya State Watershed and Wasteland Development Agency and the Soil and Water Conservation Department will receive assistance from the ADB to improve their water management capabilities.

Topic: RBI

8. Interest rate ceilings on FCNR (B) deposits have been increased by RBI.

• This will enable Non-Resident Indians (NRIs) to earn more on their savings.
• The move is aimed at attracting more foreign capital.
• Effective from December 6, 2024, banks are allowed to raise fresh FCNR (B) deposits of 1 year to less than 3 years maturity at rates not exceeding ARR plus 400 bps.
• They are allowed to raise deposits with maturity between 3 to 5 years at rates not exceeding Alternative Reference Rate (ARR) plus 500 bps.
• This relaxation will be available till March 31, 2025.
• Foreign Currency Non-Resident Bank deposits or FCNR (B) deposits are accounts where NRIs can keep their earnings in foreign currencies like USD or GBP.
• RBI has also decided to introduce the Secured Overnight Rupee Rate (SORR).
• SORR is a benchmark based on the secured money markets.
• Financial Benchmarks India Ltd (FBIL) will take this proposal forward.
• The proposal is in line with the recommendation of the RBI’s Committee on the MIBOR Benchmark.
• The Committee on the MIBOR Benchmark was headed by Ramanathan Subramanian.
• It was set up to review the rupee interest rate benchmarks in the country, especially the usage of Mumbai Interbank Outright Rate (MIBOR).

Read Banking Awareness PDF -6 and 7 December 2024