RBI grade b study material

Arth Vol 30 (1-10 November 2020)

Reserve Bank to evaluate impact of ‘RBI Kehta Hai’ awareness campaign –

  • RBI’s multi-media public awareness campaign RBI Kehta Hai was launched in 14 languages to educate public about safe banking and financial practices.
  • ‘RBI Kehta Hai’ was the first even 360-degree campaign initiated by the central bank using all mass media, including media such as television, radio, newspapers, hoardings, web banners, gifs, social media and SMS.
  • The RBI had launched the multi-media campaign with a view to create awareness among common man about good practices, regulations and initiatives in banking and financial sector.
  • In order to evaluate the impact of the public awareness campaign, the RBI has invited Expression of Interest (EoI) from eligible companies and other entities which have successfully completed at least five similar projects.
    • Companies, NGOs, voluntary agencies or public trusts participating in the EoI should have a turnover of at least Rs 2 crore from “Impact Evaluation/Surveys Business” in each of the last three financial years — 2017-18, 2018-19 and 2019-20.
    • The agencies involved in the public awareness campaigns of RBI cannot participate in the EoI.

Govt provides Rs 670-crore support to RRBs to meet regulatory capital

  • The union government has provided Rs 670 crore to Regional Rural Banks (RRBs) to strengthen their capital base.
  • The capital support is provided to these banks by the Centre, concerned state governments and the sponsor banks in the ratio of 50:15:35, respectively to enable them to meet the regulatory requirement of capital to risk weighted assets ratio (CRAR) of 9 per cent.
  • The RRB’s were formed under the RRB Act, 1976 with an objective to provide credit and other facilities to small farmers, agricultural labourers, and artisans in rural areas. As per RBI guidelines, the RRBs have to provide 75 per cent of their total credit under priority sector lending. 
  • CRAR – Capital Adequacy Ratio (CAR) is the ratio of a bank’s capital in relation to its risk weighted assets and current liabilities.
    • It is decided by central banks and bank regulators to prevent commercial banks from taking excess leverage and becoming insolvent in the process.
    • It is measured as Capital Adequacy Ratio = (Tier I + Tier II + Tier III (Capital funds)) /Risk weighted assets.
      • The risk weighted assets take into account credit risk, market risk and operational risk.
    • The Basel III norms stipulated a capital to risk weighted assets of 8%. However, as per RBI norms, Indian scheduled commercial banks are required to maintain a CAR of 9% while Indian public sector banks are emphasized to maintain a CAR of 12%.

UPI breaches 2 billion transactions mark in October –

  • Unified Payments Interface (UPI) has crossed 2 billion transactions in October, the first time.
  • The digital payment channel operated by the National Payments Corporation of India (NPCI), processed a total of 2.07 billion transactions worth Rs 3.86 lakh crore in October.
  • A sudden surge in adoption of digital payments among first-time users because of the Covid-19 pandemic has, to a large extent, contributed to the milestone.
  • UPI first went live in April 2016, a few months before demonetization. It took the channel over three years to clock its first billion transactions per month in November 2019.
  • UPI is an instant real-time payment system facilitating inter-bank transactions. There are over 174 banks that are using this facility.
  • Payments are facilitated by third-party applications and payment services providers such as Google Pay, PhonePe and Paytm, among others, providing front-end interface for users.
  • The National Electronic Toll Collection (NETC), which powers Fastag payments at highway toll booths, reported a record 122 million transactions worth Rs 2,137 crore in October.
  • The IMPS facility, used for high-value bank-to-bank transfers, clocked 319 million transactions worth Rs 2.74 lakh crore in October, up from 279 million transaction.
  • Aadhaar-enabled Payments System – which powers a chunk of digital transactions originating from rural India – processed Rs 18,603 crore worth payments and withdrawals, with about 150 million transactions in October.
  • About UPI – Unified Payments Interface is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood.
    • It also caters to the “Peer to Peer” collect request which can be scheduled and paid as per requirement and convenience.
    • Launched in 2016 as Mobile First digital payments platform and is based on the IMPS platform and is completely interoperable.
    • Participants in UPI – Payer PSP (Payment Service Provider); Payee PSP; Remitter Bank; Beneficiary Bank; NPCI; Bank account holder; Merchants.

RBI extends bond, currency market hours to 3:30 pm from 9 Nov –

  • The trading hours for various markets regulated by the central bank were amended from 7 April in view of the operational dislocations and elevated levels of health risks posed by covid-19.
  • The RBI would restore the trading hours in bond and currency market in a phased manner starting November 9th.
  • Currently markets regulated by RBI open at 10 am and close at 2 pm. Starting November 9th markets will open at 10 am and close at 3 30pm.
  • Pre-covid markets used to operate between 9 am and 5 pm.

Manufacturing in Oct grows fastest in 13 years –

  • Manufacturing activity in October 2020 rose to the highest level in 13 years.
  • The IHS Markit India purchasing managers’ index (PMI) for manufacturing increased to 58.9 in October from 56.8 in the previous month.
  • The IHS Markit index is compiled from responses in the second half of the month from around 400 manufacturers. The report states that growth was led by intermediated goods category, but there was also robust expansion in the consumer and investment good sub-sector.
  • Generation of e-way bills (electronic permits for goods movement) in October was 21% higher than what was generated in October 2019 and 11% higher than what was generated in September this year. A strong jump in e-way bills for October indicated more goods were shipped within and across the states.

RBI considering to diversify investment options for forex reserves –

  • The Reserve Bank of India is looking at diversifying its foreign exchange reserve investments amid the fall in global interest rates caused by the Covid-19 pandemic. The RBI’s foreign exchange reserves stand at a record $560.63 billion.
  • The central bank, which mostly invests in gold, sovereign debt and other risk-free deposits, has seen returns fall as monetary policy loosened globally. U.S. two-year government bonds ended at 0.16% on Nov. 2.
  • As a result, the RBI is likely to increase its gold investments, as well buying dollars and exploring investing in AAA-rated corporate bonds for the first time.
  • Gold reserves stand at $36.86 billion as on Oct. 23 compared with $30.89 billion at the end of the last fiscal year in March, though a large part of this increase can also be attributed to valuation changes.

15th Finance Commission submits report to President Ram Nath Kovind –

  • Three years after it was constituted, the 15th Finance Commission has submitted its report for fund devolution from the Centre to States for the five years from 2021-22 to 2025-26. 
  • The report is titled as ‘Finance Commission in Covid Times’.
  • The Fifteenth Finance Commission was constituted on November 27, 2017.
  • The FC is established by the President of India in 1951 under Article 280 of the Indian Constitution.
    • It was formed to define the financial relations between the central government of India and the individual state governments.
    • As per the Constitution, the FC is appointed every five years and consists of a chairman and four other members.
  • The current members of the 15th Finance Commission are –
    • N.K.Singh (Chairman)
    • Ajay Narayan Jha
    • Anoop Singh
    • Ashok Lahiri
    • Ramesh Chand

RBI announces co-lending scheme for banks, NBFCs for priority sector

  • To improve the flow of credit to the undeserved sections of the economy RBI issued guidelines under co-originating model so that NBFC and banks can lend jointly.
  •  The model envisages a joint lending process such that risks and rewards are shared.
  • As per the guidelines, NBFCs need to retain a minimum of 20% share of the loans on their books. RBI has also prohibited banks from entering into co-lending arrangement with NBFC belonging to their promoter group.
  • With regard to grievance redressal, suitable arrangement must be put in place by the co-lenders to resolve any complaint registered by a borrower with the NBFC within 30 days.
  • After the deadline, the borrower would have the option to escalate the same with the concerned banking ombudsman or ombudsman for NBFCs. The borrower can also reach out to the customer education and protection cell (CEPC) in RBI, after the deadline.

WhatsApp goes ‘live’ with UPI payment facility in India –

  • NPCI gave approval for WhatsApp Pay to operate its payment service on Unified Payment Interface.
  • WhatsApp Pay will be available in 10 regional languages and has partnered with 5 banks – ICICI Bank, HDFC Bank, Axis Bank, SBI and Jio payment bank to launch its services.
  • NPCI has also decided to cap 30% of total transaction volume on the UPI Network of all third-party providers from January 1, 2021. This decision is meant to protect the payment channel from risks as UPI grows in scale.
  • Recently UPI transactions in India crossed 2 billion transactions in October 2020 and establishing itself as the primary retail payment channel in India.
  • UPI was introduced in 2014.

Public Affairs Index – Kerala, Goa and Chandigarh top the Index –

  • Kerala with a score of 1.388 PA Index points was adjudged the best governed state in the country while Uttar Pradesh with a score of -1.461 ended at the bottom in the large states category. 
    • Kerala, Tamil Nadu, Andhra Pradesh and Karnataka stood in the first four ranks in large states category.
  • Goa with 1.745 PA Index points ranked first in in small state category followed by Meghalaya.
  • Chandigarh with 1.05 PA index points emerged as the best UT followed by Puducherry.
  • The governance performance is analysed in the context of sustainable development defined by three pillars of equity, growth and sustainability.
  • Public Affairs Centre is a city-based NGO headed by former ISRO chairman K Kasturirangan.

Centre extends Emergency Credit Line Guarantee Scheme till the end of November –

  • The government extended the Emergency Credit Line Guarantee Scheme by one month till 30 November 2020 or till the amount of Rs 3 lakh crore is sanctioned under the scheme, whichever is earlier.
  • An amount of Rs 2.03 lakh crore has already been sanctioned under the Scheme to 60.67 lakh borrowers so far, while an amount of Rs 1.48 lakh crore has been disbursed.
  •  The ECLGS scheme was announced as part of the Aatma Nirbhar Bharat Package to provide fully guaranteed and collateral-free additional credit to MSMEs, business enterprises, individual loans for business purposes, and MUDRA borrowers. 
  • Borrowers with credit outstanding up to Rs 50 crore as of the specified date, and with an annual turnover of up to Rs 250 crore are eligible under the scheme.
  • The interest rates under the scheme are capped at 9.25 per cent for banks and FIs, and 14 per cent for NBFCs, the tenor of loans is four years, including a moratorium of one year on principal repayment.

30 Indian cities to face increasing ‘water risks’ by 2050: WWF report –

  • About 30 Indian cities will face increasing “water risks” in the next few decades according to WWF Water Risk Filter report released by World Wide Fund for Nature (WWF).
  • Globally 100 cities will witness massive water shortage crisis by 2050.
  • Almost half of these cities are in China, with other hotspots in South Asia, Middle East, South America and Africa.
  • The list of Indian cities was topped by Jaipur followed by Indore and Thane.
  • The report suggests that the Smart Cities initiative in India could aid an integrated urban water management framework. 
  •  It further suggests that a multi-stakeholder engagement and ownership involving local communities will play a key role in creating and conserving a sustainable water infrastructure and rejuvenating urban freshwater systems.
  • The analysis scores the cities out of 5 in 2030 and 2050. A score above 3 is considered high risk and a score above 4 is considered very high risk.

SEBI raises MFs’ foreign investment limit –

  • The Securities and Exchange Board of India (Sebi) enhanced the overseas investment limit for mutual funds. The circular read as mutual funds can make overseas investments, subject to a maximum of $600 million per mutual fund, within the overall industry limit of $7 billion.
  • Mutual funds can even make investments in overseas Exchange Traded Fund (ETFs) subject to a maximum of $200 million per MF, within the overall industry limit of $1 billion.
  • Currently, mutual funds can make overseas investments subject to a maximum of $300 million per mutual fund with an aggregate ceiling of $7 billion.
  • Sebi in its circular said $50 million would be reserved for each MF individually, within the overall industry limit of $7 billion. Fund Houses launching new scheme which intend to invest in overseas securities or ETF’s should disclose the amount that the fund house plans to invest and use the limit specified within 6 months.
  • For existing schemes, a headroom of 20% of the asset under management (AMU) in the previous 3 months in overseas securities or ETF to overall limit of $600 million.

SEBI introduces flexi cap category in mutual funds –

  • Securities and Exchange Board of India (Sebi) has given a green signal to the introduction of a flexi cap category in mutual funds.
  • Schemes in this category are required to invest at least 65% of their corpus in equity and there is no restriction in terms of allocation to any market cap.
  • The new flexi cap was introduced when SEBI made changes to the multi cap funds wherein, multi cap funds would have to invest at least 25% of their corpus in large, mid and small cap stocks. Many Fund houses raised concerns about the risk in investing 25% in mid and small cap stocks and demanded for a flexi cap category.
  • Mutual Funds have the option to convert an existing scheme into a Flexi Cap Fund subject to compliance with the requirement for change in fundamental attributes of the scheme in terms of Regulation 18(15A) of SEBI (Mutual Funds) Regulations, 1996,” Sebi said in the circular.

TransUnion CIBIL, MoSPI launch MSME Credit Health Index –

  • In order to provide a measure of the growth and strength of the MSME sector in India, TransUnion CIBIL in partnership with Ministry of Statistics & Programme Implementation (MoSPI) has launched MSME Credit Health Index.
  • The MSME Credit Health Index will provide government, policy makers, lenders and MSME market participants, a numeric indicator for benchmarking the health of the MSME sector.
  • This measurement model will facilitate better MSME credit risk management, formulation of strategies and policies to support the revival and resurgence of the MSME sector and the economy.
  • The index measures the credit health of India’s MSME industry on two parameters: growth and strength.
    • Growth is measured by plotting increase in exposure value (outstanding balances) over time
    • Strength is measured by decrease/increase in credit risk in terms of non-performing assets
  • Both the growth and strength indices follow the principle of higher the better – i.e. an increasing Growth Index indicates improvement in credit growth; and an increasing Strength Index implies better asset quality and therefore denotes an improvement in the structural strength of the sector.
  • The MSME sector comprises of over six crore enterprises, contributes nearly 29% of India’s Gross Domestic Product (GDP) and provides employment to over 11 crore workers.