Current Affairs Aug 2019 - Banking and Finance

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1 - RBI eased External Commercial Borrowing rules for corporate and non-banking lenders

Reserve Bank of India liberalised the end-use restrictions on External Commercial Borrowings taken for working capital purposes, general corporate purposes and repayment of Rupee loans. Eligible borrowers will now be permitted to raise ECBs with a minimum average maturity period of 10 years for working capital purposes and upto 7 years for repayment of Rupee loans.

Eligible corporate borrowers are permitted to avail ECB for repayment of Rupee loans for capital expenditure in manufacturing and infrastructure sector if classified as SMA-2 or NPA.

2 - Center approved proposal given by RBI on draft modalities of guarantee to operationalize the Budget announcement

The government gave nod to the draft modalities of the guarantee submitted by RBI, to make effective the Budget announcement of providing one-time 6 months partial credit guarantee to public sector banks for the "first loss of up to 10%".

This will help PSBs to purchase pooled assets of financially sound NBFCs amounting to ₹1 lakh crore. The government has provided this approval so as to ease the liquidity stress in the NBFC sector and increase the access of these NBFCs to bank finance.

3 - India Post Payments Bank to be converted into small finance bank

The Postal Department announced to convert the India Post Payments Bank (IPPB) into a small finance bank (SFB), enabling it to offer small loans to customers and open one crore accounts for IPPB in 100 days.

IPPB has united with Common Service Centre to expand citizen centric services such as banking, remittance, insurance and tax payments, etc., at post offices. IPPB aims to develop infrastructure to expand the reach of the e-commerce industry to rural areas.

4 - SBI, Shanghai becomes first Indian bank to link up with China National Advance Payment System

The State Bank of India's (SBI) Shanghai branch became the first Indian Bank to connect to China's National Advance Payment System (CNAPS). The CNAPS provides real-time settlement services for all payments cleared in China.

The CNAPS was launched in 2008 by People's Bank of China (PBOC). SBI is the only Indian bank to have obtained the license to do business in local currency. The SBI had obtained the PBOC approval in December 2016 for implementation of the CNAPS and it was made live on July 8, 2019.

5 - RBI allowed Bank of China to offer regular banking services in India

The Reserve Bank of India (RBI) allowed Bank of China to offer regular banking services in the country. It has been included in the Second Schedule to the Reserve Bank of India Act. In another notification, 'Jana Small Finance Bank Limited' too has been included in the Second Schedule.

Further, the name of 'The Royal Bank of Scotland plc' has been changed to 'NatWest Markets Plc' in the Second Schedule while 'National Australia Bank' has ceased to be a banking company within the meaning of the Banking Regulation Act.

6 - RBI announced NEFT facility availability 24*7

The Reserve Bank of India announced that the National Electronic Funds Transfer (NEFT) facility will be available on a 24x7 basis for the customers from December 2019. Currently, NEFT payment system is available for customers from 8 AM to 7 PM on all working days of the week except 2^nd and 4^th Saturdays of the month.

RBI also announced to create a central payments fraud information registry system to deal banking frauds and permit all categories of billers in Bharat Bill Payment System.

7 - Government issued credit-support plan for NBFCs

The Union Government has issued a scheme regarding partial credit guarantee that would enable the public sector banks (PSBs) to purchase high-rated pooled assets of financially sound non-banking financial companies (NBFCs) and housing finance companies (HFCs) amounting to Rs. one lakh crore.

The objective is to address temporary asset liability mismatches of otherwise solvent NBFCs/HFCs without having to resort to distress sale of their assets for meeting their commitments. It will be open for six months or till such date that assets worth ₹1-lakh crore are purchased by banks, whichever is earlier.

8 - Mastercard launched identity check express to secure online transactions

Mastercard launched Identity Check Express, a next-generation, mobile-first authentication solution that aims to redefine the e-commerce journey for Indian consumers.

With Identity Check Express, cardholders can make payment at leading merchants for an amount less than ₹2,000 on their trusted mobile devices by sharing a onetime merchant specific consent. For transactions greater than ₹ 2,000, cardholders will be able to authenticate themselves with a transaction PIN of their choice.

9 - AePS crossed 200 million transactions in July

National Payments Corporation of India announced that Aadhaar enabled Payment System (AePS) crossed 200 million transactions count during July 2019. 6.65 crore Indian citizens benefited banking services through AePS stage in July to perform fundamental banking transaction like money withdrawal, intrabank or interbank fund transfer and balance enquiry with the help of name of the client's bank, Aadhaar number and fingerprint captured during enrolment.

AePS is a bank driven model which permits financial transactions at point of sales or MicroATM through the business correspondent of any bank by utilizing Aadhaar authentication.

10 - EnKash launched India's first Corporate Credit Card for SME's

Fin-tech startup EnKash launched the India's first corporate credit card called 'Freedom Card' for small and medium enterprises (SMEs). The card allows short duration revolving credit limit for business payments considering SMEs & Startups short term credit requirements and financial liquidity. It has automated accounts payables or collection process for businesses. Freedom Card has unlimited acceptance with increased credit lines.

EnKash is a Cards Fin-tech driving Corporate Credit Card Innovations to provide innovative solutions to SMEs and Startups to help them with their Business Payments and Expenses.

11 - RBL Bank launched India's first health-focused credit card

RBL Bank and Practo have jointly launched a co-branded health focused credit card RBL Bank Practo Plus powered by Mastercard. It is India's first health-focused credit card. The benefits of RBL Bank Practo Plus credit card include unlimited 24*7 online consultations for 1 year, one free full body health check-up and for every Rs. 100 spent on this card, cardholder earns 1 Practo HealthCash. When RBL Bank Practo Plus credit card is issued, a Practo health plan account is created on the Practo app.

Practo is India’s leading digital healthcare platform with over 100,000 doctor profiles from across India and Singapore.

12 - Third Bi-monthly Monetary Policy Statement, 2019-20 released

Monetary Policy Committee reduced the policy repo rate under the liquidity adjustment facility (LAF) by 35 bps from 5.75% to 5.40%. Consequently, the reverse repo rate under the LAF stands revised to 5.15%, and the marginal standing facility rate and the Bank Rate to 5.65%.

The committee set the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4%. It was noted that CPI inflation excluding food and fuel fell by 50 bps to 4.1% in May from 4.6% in April, and remained unchanged in June.

13 - CVC constituted panel to examine bank fraud

The Central Vigilance Commission constituted Advisory Board for Banking Frauds (ABBF) to examine bank fraud of over 50 crore rupees and recommend action. Board's jurisdiction will be confined to those cases involving officers of General Manager level and above in the PSBs in respect of an allegation of a fraud.

The ABBF headed by former Vigilance Commissioner T M Bhasin has been formed in consultation with the RBI and will function as the first level of examination of all large fraud cases before recommendations or references are made to the investigative agencies by the respective Public Sector Banks.

14 - SEBI announced reward of Rs 1 crore to insider trading informants

The Securities and Exchange Board of India has announced a reward of upto one crore rupees for informants willing to provide credible information regarding insider trading cases. This will be a part of the detailed set of rules for the new 'Informant Mechanism' under Prohibition of Insider Trading Regulations that was approved by the SEBI board.

The norms also propose a possible settlement for minor wrongdoings in return for cooperation in the probe. SEBI will establish an Office of Informant Protection, which will be responsible for the receipt, registration and processing of the disclosure form and its authenticity.

15 - SEBI removed broad-based criteria for FPIs, eases KYC norms

Capital market regulator, SEBI, has simplified KYC requirements for foreign portfolio investors and permitted them to carry out the off-market transfer of securities. It will help to simplify and expedite the registration process for foreign portfolio investors. Under the new framework, foreign portfolio investors would be classified into two categories instead of three.

In another significant regulation, SEBI announced new norms to make it mandatory for companies to provide details of delayed loan payments and possible defaults to credit rating agencies.

16 - RBI allows e-mandate on cards from September 1

The Reserve Bank of India (RBI) has permitted the processing of e-mandate on credit and debit cards for recurring transactions (merchant payments) with a cap of ₹2,000 from September 1, 2019. There will be no charges for availing this facility.

While processing the first transaction in e-mandate-based recurring transaction series, additional factor authentication (AFA) validation should be performed. The direction is applicable for transactions performed using all types of cards – debit, credit and Prepaid Payment Instruments (PPIs), including wallets.

17 - Bandhan Bank launched three co-branded credit cards with Standard Chartered

Bandhan Bank launched three variants credit cards, in collaboration with Standard Chartered Bank named as One - for the mass market, Plus - for the affluent segment, and Xclusive - for the premium segment. Various offers are being provided to customers such as attractive reward points for spends on dining, movie tickets, waiver of fee against a minimum annual spend, fuel surcharge waiver etc.

Standard Chartered Bank will offer back office support and look into the credit filters of applicants to avoid credit failure. Bandhan bank has 40 lakh customer base across its 1,000 branches.

18 - Bimal Jalan panel recommended review of economic capital framework every five years

The Bimal Jalan panel of the Reserve Bank has recommended that the revised economic capital framework will be reviewed every five years. The RBI, under the revised framework, decided to transfer 52,637 crore rupees excess provisions to the government.

The panel's report also recommended that the RBI accounting year (July-June) may be brought in sync with the fiscal year (April to March) from the next financial year to reduce the need for interim dividend being paid by the RBI. The Central Board of the RBI has accepted all the recommendations of the committee.

19 - RBI to transfer Rs 1.76 lakh cr as dividend, surplus reserve to government

The Reserve Bank of India decided to transfer 1.76 lakh crore rupees as dividend and surplus reserve to the government. The amount includes over 1,23,000 crore rupees of surplus for the year 2018-19 and 52,637 crore rupees of excess provisions identified as per the revised Economic Capital Framework.

RBI’s Central Board has accepted the recommendations of a high-level panel headed by former RBI Governor Bimal Jalan on transfer of excess reserves to the government and has finalized RBI’s accounts for 2018-19 using the revised framework as suggested by the Jalan committee to determine risk provisioning and surplus transfer.

20 - SIDBI partnered with Incuspaze to open co-working space for MSMEs

Small Industries Development Bank of India has partnered with Incuspaze Solutions Private Limited to open a first-of-its-kind co-working space exclusively designed for Micro, Small and Medium Enterprises and startups in Delhi. It is named as @Workspaze that intends to a premium co-working space with state-of-the-art facilities. The fully furnished office space is equipped with training and conference room, fast-speed internet, refreshment etc. The idea of co-working space gives MSMEs and startups the benefit of a centrally located business.

Incuspaze aims to develop a trusted network of co-working spaces across 30 Indian and eight international locations by 2022.

21 - Indian Bank inaugurated MSME Centralised Processing Centre

Indian Bank inaugurated its first MSME CPC (centralised processing centre) in Chennai for speedy disposal of micro, small and medium enterprises’ loan, improve credit quality and lessen transaction processing time. The new CPC center of Chennai South zone will have tagging of all 72 branches in the zone under CPC’s fold.

CPC will look after the loans not exceeding 25 lakhs under micro category, 25 lakhs to 5 crore for small enterprises and 5 crore to 10 crore for medium enterprises.

22 - Gross NPA ratio of banks declined to 9.1%

The early recognition and resolution of stressed assets have helped banks contain their Gross Non-Performing Loans ratio down from 11.2% to 9.1%. The new NPA recognition and resolution norms issued in June 2019 provide incentives for early resolution. The recoveries have gradually improved and investment cycle is easing.

The Capital buffers have been strengthened by recapitalisation to Rs 2.7 lakh crore, including the budgetary allocations for FY20 and the abatement of stress has rekindled bank credit inflows.

23 - GeM and SIDBI sign MoU to enable growth of MSMEs, Start-ups and Women Entrepreneurs

Government e Marketplace (GeM), Department of Commerce, Ministry of Commerce and Industry has signed an MoU with Small Industries Development Bank of India [SIDBI] to benefit MSMEs, women entrepreneurs, Self Help Groups (SHGs), Women Self Help Groups and various loan beneficiaries under MUDRA and Stand-up India scheme.

The MoU will enable promotion of special initiatives of GeM like Womaniya and Start-up Runway with SIDBI stakeholders. GeM and SIDBI will take steps to ensure payments within a guaranteed timeframe to sellers, enhance working capital availability through bill discounting and control NPAs through control of end use.

24 - Government announced mega merger of public sector banks

The government has announced the merger of ten public sector banks into four banks.

• Oriental Bank of Commerce and United Bank of India merged with Punjab National Bank to create a business of ₹7.95 trillion, India’s second largest bank

• Canara Bank and Syndicate Bank with ₹15.2 trillion business, 4^th largest bank of India

• Union Bank merged with Andhra Bank and Corporation Bank with ₹14.59 trillion in business, 5^th largest bank of India

• Indian Bank and Allahabad Bank with a business of ₹8.08 trillion, 7^th largest bank in India