Banking, Financial and Economic Awareness

Half Yearly (Jan - June 2021)
2021 Book

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Topic: Corporate/Companies

1. World’s largest satellite-based Narrow Band-Internet of things (NB-IoT) network for fishermen, farmers, construction, and mining and logistics enterprises launched

  • World’s largest satellite-based Narrow Band-Internet of things (NB-IoT) network has been launched for fishermen, farmers, construction, and mining and logistics enterprises by Bharat Sanchar Nigam (BSNL).
  • Skylotech India (Skylo) developed NB-IoT indigenously. It will be linked satellite ground infrastructure of BSNL.
  • Skylotech India (Skylo) offers an IoT network in India. It was in the news in January 2020 for raising $103 million in the second round of funding led by SoftBank Group of Japan. 
  • Narrow Band-Internet of things (NB-IoT) is an LPWAN radio technology. The full form of LPWAN is Low Power Wide Area Network. It is developed for connecting IoT devices.
  • Bharat Sanchar Nigam (BSNL):
    • It was founded in 2000. It is a Public Sector Undertaking wholly owned by Government of India.
    • Pravin Kumar Purwar is its chairman & MD.  It is headquartered in New Delhi.
    • It provides telecom services all over India except Delhi and Mumbai.

Topic: Regulatory Bodies/Financial Institutions

2. RBI fines HDFC Bank with ₹10 lakh

  • RBI has fined HDFC Bank with ₹10 lakh due to bouncing of SGL (Subsidiary General Ledger).
  • The bouncing of SGL caused a shortage of balance in certain securities in the CSGL account of HDFC bank.
  • CSGL account stands for Constituents' Subsidiary General Ledger (CSGL) account. SGL (Subsidiary General Ledger) Account is kept with RBI.
  • It holds G-Secs (Government Securities) in paperless form and is known as Demat account for Government Securities.
  • RBI permits SGL account holders to have a second account known as CSGL account. It is kept with Public Debt Office (PDO)
  • HDFC Bank Limited is headquartered in Mumbai. HDFC Bank is India‘s largest private sector bank. It was founded in 1994. CEO of HDFC is Aditya Puri.

Topic: Regulatory Bodies/Financial Institutions

3. Draft Circular on Declaration of Dividend by NBFCs released by RBI

  • Draft Circular on Declaration of Dividend by NBFCs has been released by RBI.
  • In Draft Circular, RBI has provided guidelines on the distribution of dividends by NBFCs. The guidelines will be applicable from April 1, 2020 (FY21) onwards.
  • RBI has also developed a matrix of criteria for maximum permissible range Dividend Payout Ratio (DPR).
  • In order to be eligible for declaration of dividend, NBFCs should comply with minimum prudential requirements of capital adequacy, NPAs and others.
  • The guidelines provide capital to risk-weighted assets ratio (CRAR) of at least 15% in case of deposit taking NBFC (NBFC-D) and systemically important non-deposit taking NBFC (NBFC-ND-SI) to declare dividend.
  • However, non-systemically important non-deposit taking NBFC (NBFC-ND) should have a leverage ratio (debt-to-equity) of less than 7 for the last 3 years to declare dividend as per the guidelines.
  • The guidelines allow NBFCs having a net NPA ratio of less than 6% in each of the last three years to declare dividend.
  • The guidelines provide DPR up to 50% in the case of NBFC-D, NBFC-ND-SI and Core Investment Company (CIC). In the case of NBFC-D and NBFC-ND-SI, DPR would depend on CRAR and net NPA level.
  • In the case of CIC, DPR would depend on CIC’s ANW to risk-weighted assets position and net NPA ratio.
 

Topic: Banking/ Financial Schemes

4. EXIM Bank and SIDBI plan to set up an Alternative Investment Fund (AIF)

  • EXIM Bank and SIDBI plan to set up an Alternative Investment Fund (AIF) in partnership.
  • The fund will be to set up support small and medium enterprises (SMEs) by providing equity and loans.
  • In Budget for Financial Year 2020-21, the government announced that a fund would be set up by SIDBI and EXIM Bank to support SMEs in pharmaceuticals, auto components and other sectors.
  • The aim of the scheme (Ubharte Sitaare) is to find Indian enterprises currently underperforming but having the potential to grow.
  • David Rasquinha, Managing Director, Exim Bank, said that they are looking to support MSMEs through loans, grants, equity, and consultancy services under the Ubharte Sitaare programme. He mentioned about Hidden Champion programme of Germany.

Topic: Indian Economy

5. RBI’s Report on Management of Foreign Exchange Reserves shows that RBI bought three times more gold in first half (H1) of FY21

  • RBI’s Report on Management of Foreign Exchange Reserves shows that RBI bought three times more gold in the first half (H1) of FY21 in comparison with the gold it bought a year ago.
  • AS per the RBI’s Report on Management of Foreign Exchange Reserves, RBI bought 15.24 tonnes of gold in H1 (April-September 2020). It bought 5.61 tonnes in the year-ago period.
  • RBI had 668.25 tonnes of gold at the end of September 2020. At the end of March 2020, RBI had 653.01 tonnes. At the end of September 2019, gold with RBI was 618.17 tonnes.
  • Share of gold in total foreign exchange reserves increased from 6.40% at the end of March 2020 to 6.69% at the end of September 2020. 
  • Forex reserves are external assets in the form of gold, SDRs and foreign currency assets held by the nation’s central bank.
  • India’s Forex Reserve include:
    • Foreign Currency Assets
    • Gold reserves
    • Special Drawing Rights

Topic: Regulatory Bodies and Financial Institutions

6. Licence of The Karad Janata Sahakari Bank Ltd cancelled

  • The licence of The Karad Janata Sahakari Bank Ltd, Maharashtra, has been cancelled by RBI due to inadequate capital and earning prospects.
  • RBI has announced that Deposit Insurance and Credit Guarantee Corporation (DICGC) will make full payment to over 99% of depositors of the bank.
  • The bank will no longer accept deposits and make repayment of deposits. RBI has kept the bank under all-inclusive directions since November 07, 2017.
  • RBI has also requested the Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra, to issue an order for closing of bank and appoint a liquidator.

Topic: Indian Economy

7. ADB lowers its forecast of India’s GDP contraction for FY21 from earlier 9% to 8%.

  • Asian Development Bank (ADB) has lowered its forecast of India’s GDP contraction for FY21 from earlier 9% to 8% by citing faster-than-expected recovery.
  • ADB released a supplement to its Asian Development Outlook (ADO) 2020 and said that India’s GDP contraction for the second quarter at 7.5% was faster-than-expected.
  • ADB also lowered its South Asia forecast from earlier 6.8% contraction to (-) 6.1%. ADB projected that inflation would ease and remain 4% for 2021-22.
  • In the first 7 months of 2020-21, food inflation increased to an average of 9.1% due to a disrupted supply chain. The increase in food inflation caused an increase in headline inflation to 6.9%.

 

 

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