Banking and Financial Awareness – 113

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11 Aug, 2016

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Minimum-Balance-2016

1) The RBI issued which directive pertaining to non-maintenance of minimum balance in saving accounts on 10 May 2016? – It asked banks to stop imposing charges for non-maintenance of minimum balance once the balance in a savings account touches zero

Explanation: The Reserve Bank of India (RBI) had in 2014 revised its guidelines for banks imposing penal charges for non-maintenance of minimum balance in a savings bank account.

Subsequently, with effect from 1 April 2015, it had asked banks not to take undue advantage of customer difficulty or inattention and to give an advance notice to the customer before deducting charges from their bank balance.

But some banks were continuing with the practice of creating negative balances in savings accounts until recently. This RBI directive was given to address the same problem.

According to the RBI, if any bank continues to debit charges on a savings account creating a negative balance, customers can approach the banking ombudsman.

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2) Which public-sector bank reported a loss of Rs. 5,367 crore for quarter ended March 2016, which is the largest quarterly loss in the history of Indian banking? – Punjab National Bank (PNB)

Explanation: PNB’s staggering Rs. 5,367 crore loss, as reported on 18 May 2016, came against the backdrop of a surge in bad loans. The bank reported gross bad loans of Rs. 55,818 crore compared to Rs. 34,338 crore in the previous quarter.

To cover for these bad loans, provisions have been increased, which has led to the bank reporting the worst loss in the history of the Indian banking sector.

Till now the worst quarterly loss reported by a bank in India was in the name of Bank of Baroda (BOB), whose net loss for quarter-ended December 2015 stood at Rs. 3,342 crore. The third highest quarterly loss is also in the name of BOB, Rs. 3,230 crore in the March 2016 quarter.

In the December 2015 quarter, IDBI Bank reported a loss of Rs. 2,183 crore. This is the fourth highest loss reported by any bank.

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SBI-Associates-2016

3) In an important development in country’s banking industry, the 5 associate banks of State Bank of India (SBI) on 17 May 2016 proposed their merger with it. Which are the 5 associate banks of SBI? – a) State Bank of Bikaner and Jaipur, a) State Bank of Hyderabad, c) State Bank of Mysore, d) State Bank of Patiala and e) State Bank of Travancore

Explanation: The respective boards of these 5 associate banks proposed their merger with the State Bank of India (SBI), the parent, in a meeting held on 17 May 2016.

Banking industry observers and experts maintained that there is a case for merging some of the public sector banks, which are very small when compared to their global peers.

SBI, India’s largest commercial bank, is still not among the top 50 banks in the world. It is ranked only 67th among the global banks. For an economy such as India , the fastest growing large economy in the world, the domestic banking industry is fragmented.

During the United Progressive Alliance (UPA) regime, two associate banks, State Bank of Indore (2010) and State Bank of Saurashtra (2008), were merged with the SBI.

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RBS-2016

4) Which multinational bank on 16 May 2016 announced to wind up all its banking operations in India in a phased manner? – Royal Bank of Scotland Plc.

Explanation: According to the announcement made by the management of Royal Bank of Scotland Plc. (RBS), the bank will wind up its corporate, retail and institutional operations in India and shut its 10 retail branches in a phased manner.

The move to shut its Indian operations is part of a global plan to reduce international operations to 13 countries from 38-spelt out last year by CEO Ross McEwan.

RBS globally spent nearly eight years cutting down costs and reorganizing following a bailout by the UK government in the aftermath of the 2008 global financial crisis. In India, it has already sold the offshore loan book and private banking business.

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5) What is the name of SBI’s newly launched card-less payment solution for offline transactions? – mVisa

Explanation: State Bank of India, the country’s largest public sector bank, during May 2016 launched a mobile payment solution that will enable customers to make digital payments at offline stores by scanning a QR (quick response) code on their smartphones.

Dubbed ‘mVisa’, the solution is a card-less way for customers to pay for goods at offline stores, and will be available to all SBI credit card, debit card and net banking users. The solution which is bank agnostic will be accessible to customers through the company’s SBI Anywhere app.

Merchants too will be able to initiate transactions through the SBI mVisa merchant app which will display a dynamic QR code that a customer will be able to scan to authenticate the transaction. The payment process is completely cashless and enhances security as users don’t have to share their card or details with the merchant.

The service has been initially launched in Bengaluru with a sizable number of merchants and will soon expand into other cities.

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6) The Rajya Sabha on 11 May 2016 passed the Insolvency and Bankruptcy Code 2016, a move that is expected to make it much easier to do business in India. What will be the primary benefits of new proposed bankruptcy laws? – It will ensure time-bound settlement of insolvency, enable faster turnaround of businesses and create a database of serial defaulters

Explanation: The Insolvency and Bankruptcy Bill, 2016 which received the Rajya Sabha’s nod on 11 May 2016, was passed by the Lok Sabha some days back. Now the President has to sign the bill to make it legislation.

On the parameter of resolving insolvency, India is ranked 136 among 189 countries. At present, it takes more than four years to resolve a case of bankruptcy in India, according to the World Bank. The Insolvency and Bankruptcy Code 2016 seeks to reduce this time to less than a year.

The bill proposes the creation of a new class of insolvency professionals that will specialize in helping sick companies. It also proposes to set up the Insolvency and Bankruptcy Board of India to act as a regulator of these utilities and professionals.

The new code will replace existing bankruptcy laws and cover individuals, companies, limited liability partnerships and partnership firms. It will amend laws including the Companies Act to become the overarching legislation to deal with corporate insolvency.

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7) During May 2016 which noted industrialist announced withdrawing his plan to launch a payments bank? – Dilip Shanghvi

Explanation: Dilip Shanghvi, the promoter of Sun Pharmaceutical Industries Ltd., was given in-principle approval by the Reserve Bank of India (RBI) to start a payments bank in his personal capacity. He had announced a tie-up with Telenor Financial Services and IDFC Bank Ltd to pursue the venture.

On 20 May 2016 he announced that he has dropped the idea to launch a payments bank. The proposed partners in the venture Telenor Financial Services and IDFC Bank also jointly announced this development.

Shanghvi thus became the second to give up on plans to launch a payments bank. In March 2016, Cholamandalam Investment and Finance Co. said it would not pursue a payments banking venture even though it had received in-principle approval from RBI last year.

In 2015 the RBI had allowed 11 entities and individuals to open payment banks, subject to final approvals. This list is now down to nine.

Payments banks will provide basic savings, deposit, payment and remittance services to people without access to the formal banking system.

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8) Saudi Arabia-based Islamic Development Bank (IDB) will open its first branch in India in which state, as announced during June 2016? – Gujarat

Explanation: Islamic Development Bank (IDB) is in the final stages of setting up its first branch in India in Gujarat, Prime Minister Narendra Modi’s home state.

IDB’s operations in India is expected to usher Islamic finance for homegrown startups and fund Indian exports to many African and central Asian Muslim nations.

Islamic Banking is a finance system based on the principle of not charging interest, prohibited under Islam.

IDB’s India operations will be led by Zafar Sareshwala, a prominent Muslim businessman from Gujarat, who is also a supporter of Narendra Modi.

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9) Which bank launched India’s first certified green bond at the London Stock Exchange (LSE) to raise $500 million on 6 June 2016? – Axis Bank

Explanation: Axis Bank on 6 June 2016 raised $500 million at the London Stock Exchange (LSE) after it launched India’s first internationally-listed certified green bond to finance climate change solutions around the world.

The green bond has been certified by the Climate Bonds Standards Board (CBSB).

The proceeds of the bond will be invested in green energy, transportation and infrastructure projects, reinforcing India’s commitment to produce 175,000 MW of renewable power by 2022.

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10) How many years of the infamous massive devaluation of Indian rupee, by a huge 57%, were completed on 6 June 2016? – 50 years

Explanation: Fifty years ago, on 6 June 1966, the rupee was devalued dramatically in response to the first significant balance of payments crisis faced by independent India. After independence in 1947, the 1950s and the early 1960s were the years when India ran up high trade deficits. Foreign aid from rich nations was what came to India’s rescue.

Things got tough in 1965 as India and Pakistan went to war. Military spending skyrocketed, putting further pressure on the Indian government’s finances.

With limited options, the Indira Gandhi-led government that followed in 1966 resorted to a steep devaluation of the rupee, in a decision that was widely criticized.

The devaluation meant that the effective value of the rupee went from Rs.4.76 against the dollar to Rs.7.50 per dollar. That worked out to be a devaluation of 57%.

The Reserve Bank of India (RBI) documents 1966 as the second episode of rupee devaluation, the first being a consequence of a devaluation in the pound (on 18 September 1949), to which the rupee was pegged earlier.

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