Banking and Financial Awareness – 106

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11 Feb, 2016

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RBI-New-2015

1) The RBI committee on pushing Financial Inclusion submitted its report on 28 December 2015. The committee recommended a slew of measures, including a special deposit scheme for the girl child, government-to-person social cash transfer, and opening interest-free windows (Islamic banking) by banks. Who headed this committee? – Deepak Mohanty (Executive Director, RBI)

Explanation: The committee (titled ‘Medium-Term path on Financial Inclusion’) was constituted in July 2015 with the objective of working out a medium-term (five-year) measurable action plan for financial inclusion. It was chaired by Deepak Mohanty, RBI executive director.

Important Recommendations of the Deepak Mohanty Committee:

– Banks have to step up account opening for women

– Union Govt. should consider a welfare scheme (Sukanya Shiksha) for promoting financial inclusion of women that can be jointly funded by the Central and State governments

– Need for better use of the mobile banking facility for Government-to-Person (G2P) payments, and this would push government in its financial inclusion drive

– A unique biometric identifier such as Aadhaar be linked to each individual credit account and the information should be shared with credit information companies

– Commercial banks in India must be enabled to open specialised interest-free windows (primarily for Islamic banking) with simple products

– The committee pressed for digitisation of land records to increase formal credit to all agrarian segments

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2) On 17 December 2015, the Reserve Bank of India (RBI) asked banks to review their lending rates frequently, and reflect changes in their cost of borrowing in view of the new lending rate regime to be implemented next year. This regime will come into effect from which date? – 1 April 2016

Explanation: The new lending rate regime is called ‘Marginal Cost of Funds-based Lending Rate’ and it will come into effect from 1 April 2016. Under this new regime, the lending rates will be computed based on banks’ marginal cost of borrowing, or incremental cost of funds, rather than the average cost of funds that banks have used so far.

– The reason for introducing this system is to force banks to pass on rate benefits to customers. Since January 2015, the central bank has lowered its policy rate by 125 basis points, but banks lowered their lending rates by only about 60 basis points.

– On the other hand, deposit rates have been slashed by more than 100 basis points, indicating that the incremental cost of funds has actually fallen more than what banks have passed on to their customers.

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Currency-Notes-2015

3) What is the new deadline for exchanging pre-2005 currency notes as announced by the Reserve Bank of India (RBI) on 23 December 2015? – 30 June 2016

Explanation: The RBI on 23 December once again extended the date for exchanging pre-2005 currency notes with new ones to 30 June 2016 from 31 December 2015. This is the fifth time RBI extended the deadline that started in January 2014. The old notes, of Mahatma Gandhi series, will continue to remain legal tenders.

– Earlier, the exchange was facilitated through any bank branches, but from 1 January 2016, only a few designated branches will accept the old notes for exchange.

– The pre-2005 currency notes are being exchanged as new notes have better security features and it is a standard international practice not to have currency notes from multiple series in simultaneous circulation.

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4) Which entity during December 2015 became the first in the country to tie up with e-Mudhra, the government licensed certifying authority to introduce ‘eSign’? – Axis Bank

Explanation: Axis Bank, India’s third-largest private sector lender, has partnered with digital security company eMudhra for the eSign service. Under the eSign Service, individuals with Aadhaar numbers will be able to digitally sign documents to submit to the bank online. Axis Bank thus became the first organization in the country to sign up for this service.

– The service rides on Aadhaar authentication and generates the digital signature automatically. The generated signature is legally valid and secure.

– At present, a customer has to submit a hard copy of the application form signed along with copies of relevant documents to apply and avail of any product or service of a bank. The Reserve Bank of India (RBI) mandates banks to acquire basic information of the customer along with proofs for identity, domicile, etc., under know-your-customer (KYC) norms.

– e-Mudhra, a leading digital security company, had launched the eSign service earlier in July 2015.

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IRCTC-2016

5) Indian Railways on 23 December 2015 tied up with which private sector bank to sell rail tickets through its applications? – ICICI Bank

Explanation: ICICI Bank, India’s largest private sector bank, will soon introduce the facility to book rail tickets on its mobile banking application and prepaid digital wallet. On 23 December the bank tied up with Railways’ e-ticketing platform Indian Railway Catering and Tourism Corporation (IRCTC) to sell rail tickets through its applications.

– It is the first time that IRCTC has tied up with a banking entity to sell tickets through the various applications of the bank.

– Users will have to first register on the website of IRCTC, where it primarily sells rail tickets, and then do a one-time registration on the bank’s website to avail of the facility.

– The facility is not limited to ICICI customers as any other bank’s customer can also use the facility. The payments for the purchases can be made using the online banking facility, debit or credit card of any bank.

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Mobo-Money-2015

6) Which IT entity launched its mobile wallet called ‘MoboMoney’ during December 2015? – Tech Mahindra Ltd

Explanation: Software services company Tech Mahindra Ltd, which is among the 11 firms to get a payments bank licence, on 23 December 2015 launched a mobile wallet called ‘MoboMoney’.

– ‘MoboMoney’ will allow consumers to complete online as well as offline transactions, including payments at grocery stores, tea vendors and restaurants that accept only cash. The company claims the platform allows transactions as low as Rs.1.

– ‘MoboMoney’ is run with the help of near-field communication (NFC) technology, where merchants and customers are issued NFC tags. While the merchants would need a point of sale (POS) device or a NFC-enabled smartphone for the transaction, the customer would just need the NFC tag at the time of purchase.

– Tech Mahindra claimed that it is India’s first commercial rollout of a contact-less payment wallet.

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7) What was India’s rank in World Bank’s Ease of Doing Business global list 2016 of 189 countries that was released during December 2015? – 130th

Explanation: India jumped four places from 2014 to occupy 130th place in the list. It was the steepest rise seen by the country in recent years. The rise in the 2016 ranking was primarily on account of improvement in two areas – ease of starting a business and securing an electricity connection.

– However, India still lags behind Nepal (99) and Sri Lanka (107) with Bhutan (71) claiming the highest spot in South Asia.

– Singapore retained the top spot in the rankings, followed by New Zealand, Denmark and South Korea. While China’s ranking improved from 90th to 84th, Pakistan fell 10 positions to 138th from 128th last year.

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8) Union Government took a big step towards putting in place an effective legal framework for insolvency resolution in a time-bound manner. This was done with introduction of the Insolvency and Bankruptcy Code 2015 in the Rajya Sabha on 21 December 2015. What is the main objective of this Code? – It fixes a time limit of 180 days (extendable by a further 90 days) for completion of the corporate insolvency-resolution process

Explanation: The current insolvency-resolution process in India is tedious and delay-ridden and it takes anywhere between five and 15 years for lenders to recover money in the event of corporate default. As on date, there is no single law in India that deals with insolvency and bankruptcy.

– For making insolvency resolution swifter, the government introduced the Insolvency and Bankruptcy Code 2015 which seeks to amend as many as 12 existing laws, including the Companies Act 2013, the Income-Tax Act, and the Payment and Settlement Systems Act 2007. Insolvency professionals will assist in the resolution, liquidation and bankruptcy proceedings envisaged in the code.

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WTO-2-2015

9) The 10th Ministerial Conference of the World Trade Organization (WTO) concluded on 19 December 2015 with some landmark agreements on a series of trade initiatives. This WTO Conference was held at – Nairobi (Kenya)

Explanation: The WTO’s Tenth Ministerial Conference was held in Nairobi, Kenya, from 15 to 19 December 2015, the first such meeting hosted by an African nation. The Conference was chaired by Kenya’s Cabinet Secretary for Foreign Affairs and International Trade, Amina Mohamed.

– Before conclusion of the Conference, six ministerial decisions on agriculture, cotton and issues related to least-developed countries were released. These included a commitment to abolish export subsidies for farm exports, which Director-General Roberto Azevêdo hailed as the “most significant outcome on agriculture” in the organization’s 20-year history.

– However, the talks ended without any commitment on rich countries being asked to check their domestic subsidies. India expressed its disappointment over non-reaffirmation to conclude 14-year-old Doha Round pacts.

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10) What is the name of the ambitious and huge trade bloc launched by the 10 nation ASEAN on 31 December 2015? – ASEAN Economic Community (AEC)

Explanation: The US-backed ASEAN Economic Community (AEC) was formally launched on 31 December primarily to forge a prominent regional bloc to rival China and Japan. AEC aims to boost economic ties by further lowering tariffs and allowing a freer flow of labor, services and capital across the 10 member countries of ASEAN.

– ASEAN which includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, is a fast-expanding region to a rising middle class, but also to widespread poverty and income inequality.

– Economic integration within the region is also at the center of US President Obama’s rebalance of foreign policy toward Asia, in part to address China’s increased military and economic assertiveness in the region.

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