Banking and Financial Awareness – 112

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25 Jul, 2016

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RBI-Licensing-20161) The Reserve Bank of India (RBI) on 5 May 2016 released draft guidelines for issuing ‘on-tap’ universal bank licences. What is meant by ‘on-tap’ banking licences? – Under the ‘on tap’ mechanism an application for banking licence can be made at any time subject to certain conditions

Explanation: The RBI has been opening the bank licence window only periodically. Under the ‘on tap’ mechanism, however, an application can be made at any time subject to certain conditions.

The proposed licensing policy is a change from the current stop-start policy where RBI opens the window for bank licences periodically but rarely. Under Raghuram Rajan, RBI has been trying to create a more diverse banking sector that can better serve the needs of the Indian economy.

By putting universal bank licences on-tap, it is taking the attempt to encourage a more diverse and competitive sector a step further.

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2) Which private-sector bank on 19 April 2016 became country’s first private sector bank to have an exclusive branch for start-ups? – RBL Bank

Explanation: RBL Bank established an exclusive bank branch for start-ups in Bengaluru, which is often called the unofficial start-up capital of India. Thus RBL Bank became country’s first to have a branch catering to the specific needs of the burgeoning start-up sector.

Through this branch, RBL will offer start-ups banking services around foreign exchange, remittances and cash management. It will also facilitate registration, legal and tax formalities through verified partners, brought together as part of its Start-up Club programme. The bank is also in the process of establishing such exclusive start-up branches in Delhi-NCR, Mumbai and Chennai.

RBL Bank Limited (formerly known as The Ratnakar Bank Limited) is a scheduled commercial bank headquartered in the Kolhapur region of Maharashtra.

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3) The RBI on 28 April 2016 proposed which measure for peer-to-peer (P2P) lending platforms? – It proposed that peer-to-peer (P2P) lending platforms should be registered as non-banking finance companies (NBFCs)

Explanation: The Reserve Bank of India (RBI) on 28 April proposed registering of peer-to-peer (P2P) lending platforms as non-banking finance companies (NBFCs) so that they can be brought under the regulatory purview of the central bank. This proposal was made in a consultation paper released on RBI’s website, feedbacks for which have been invited till 31 May 2016.

RBI suggested regulating the permitted activities of P2P lenders, along with capital requirements, governance and business continuity plans of such entities.

Peer-to-peer lending (P2P lending), is the practice of lending money to individuals or businesses through online services that match lenders directly with borrowers.

Close to 20 new online P2P lending companies have been launched in the last one year. At present, there are around 30 start-up P2P lending companies in India.

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4) The RBI came out with which important exclusion in its draft guidelines for universal bank licences that were released during May 2016? – Large industrial houses have been excluded from entering banking sector

Explanation: The guidelines draft for universal bank licences released by the Reserve Bank of India (RBI) on 5 May 2016 has categorically mentioned the prevention on the entry of large conglomerates into the banking sector.

Large industrial/business houses are excluded as eligible entities for universal banking licences but permitted to invest in the banks to the extent of less than 10%. The restriction is likely aimed at ensuring no unhealthy linkages between banks and their promoting industrial houses. Industrial houses can’t have a director on the board of a bank either.

The 10% shareholding cap would apply to individuals and all inter-connected companies belonging to the concerned large industrial houses on an aggregate basis.

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5) Which bank became the first banking entity from India to have a tie-up as a strategic partner of the New Development Bank (NDB), a multilateral development bank established by the BRICS? – ICICI Bank

Explanation: On 5 May 2016 the New Development Bank (NDB) and ICICI Bank signed a Memorandum of Understand (MoU) according to which they would consider each other as “preferred partners” to work in various areas.

This tie-up would help NDB in exploring bond issuance opportunities in the Indian and international bond markets, particularly in rupee-denominated bonds. The two entities will also be working together to fund development projects in the country.

Another area where the two banks will be collaborating will be around treasury risk management, account and cash management services and human resource development.

Prior to taking over the head of NDB Bank, Kamath was the non-executive chairman of ICICI Bank till 2015.

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6) What is the new name of the Department of Disinvestment as announced by the Union Government during April 2016? – Department of Investment and Public Asset Management (DIPAM)

Explanation: The Department of Disinvestment will now be known as the Department of Investment and Public Asset Management (or DIPAM). It will work under Finance Ministry and it will deal with all matters relating to management of central government investments in equity including disinvestment of equity in central public sector undertakings.

This change has been done primarily to efficiently manage Centre’s investments in equity including its disinvestment in central public sector undertakings.

DIPAM has been mandated to advise the government in the matters of financial restructuring of central public sector enterprises and for attracting investment through capital markets.

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7) Which Singapore-based bank on 26 April 2016 announced an interest of 7% on its savings bank (SB) accounts, which is highest in the industry? – DBS Bank India

Explanation: DBS Bank India, is the Indian subsidiary of Singapore’s DBS Bank, which was before 2003 known as The Development Bank of Singapore Limited.

DBS Bank India on 26 April announced that has swung back into the black (profits) with a small profit in 2015-16. Now to widen retail footprint the bank will offer an interest of 7% on its savings bank (SB) accounts, which is highest in the industry. The main feature of this 7% interest will be that it will be given on all savings banks accounts.

It is worth mentioning that Kotak Mahindra and Yes Bank also provide interest of 7. % but only on savings bank deposits over 1 lakh. On the other hand RBL pays 7.1 per cent but on deposits above Rs 10 lakh. Now DBS will pay 7 per cent even on Re 1 balance.

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8) The 49th Annual Meeting of the Asian Development Bank (ADB) was held at which place from 2 May 2016 where its 50th anniversary celebrations were also kicked-off? – Frankfurt (Germany)

Explanation: The Asian Development Bank (ADB) is a regional development bank that was established on 19 December 1966. It will thus complete 50 years of its establishment during December 2016.

The programmes associated with ADB’s 50th anniversary celebrations were kicked-off from Frankfurt (Germany), where this multilateral organization’s 49th Annual Meeting started from 2 May 2016.

Manila-based ADB is the only multilateral development institution that has been addressing the development needs of the region until the establishment of new institutions including the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB) over the past couple of years.

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9) On 24 April 2016, it was reported in sections of media that Reserve Bank of India (RBI) Governor Raghuram Rajan is not the top paid official of the RBI despite being its Governor. Who was reported as the highest paid official? – Gopalkrishna Sitaram Hegde

Explanation: As per the latest details published by the Reserve Bank of India (RBI) under the RTI Act, RBI Governor Raghuram Rajan total monthly emoluments stood at Rs. 1,98,700. This included a basic pay of Rs 90,000, a dearness allowance (DA) of Rs. 1,01,700 and ‘others’ of Rs 7,000.

He was thus not the highest paid RBI official despite being the most powerful person at the central bank.

Gopalkrishna Sitaram Hegde, who has served as the central bank’s Principal Legal Advisor in the past, was the highest paid RBI official with monthly salary of over Rs. 4 lakh. He was followed by Annamalai Arappuli Gounder (Rs 2,20,355) and V Kandasamy (Rs 2.1 lakh) in the list.

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10) Which was the first disinvestment of the 2016-17 fiscal for Union Govt. which was divested on 27 and 28 April 2016? – National Hydroelectric Power Corporation (NHPC) 

Explanation: PSU-based hydroelectricity generating entity National Hydroelectric Power Corporation (NHPC) became Indian Government’s first disinvestment for year 2016-17 as the govt. divested 11.36% of its stake in the entity on 27 and 28 April 2016.

The stake sale in NHPC was done through the offer for sale mechanism. The portion reserved for institutional investors was divested on 27 April and it was oversubscribed within three hours of the opening of trade. Over 100.61 crore shares were on offer for institutional investors while the remaining over 25.15 crore shares were sold to retail investors on 28 April 2016. Around Rs. 2,800 crore were garnered through this divestment.

NHPC thus became the first public sector undertaking (PSU) to go for stake sale in the current fiscal. Post the sale, the government stake in NHPC came down to 75%.

The government has set a target of collecting Rs. 56,500 crore from disinvestments in the current financial year.

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