Banking and Financial Awareness – 115

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15 Sep, 2016

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SBI-InCube-2016

1) India’s largest commercial bank SBI during July 2016 signed an agreement with which global alternative asset manager to form a joint-venture to invest in SBI’s stressed assets? – Brookfield Asset Management Inc.

Explanation: In an effort to clean up its balance sheet, State Bank of India (SBI) during July 2016 signed an agreement with Brookfield Asset Management Inc. to form a joint venture, which will invest in stressed assets.

Under the proposed joint venture, Brookfield will commit about Rs. 7,000 crore and SBI up to 5% of total investments into stressed assets.

The joint venture will be in the nature of an alternative investment fund. Such funds are regulated by the capital market regulator SEBI.

Brookfield is a global alternative asset manager with $240 billion in assets under management. It has an over 100-year history of owning and operating assets with a focus on property, renewable power, infrastructure and private equity.

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lic-logo-2016

2) In the largest bancassurance partnership in the country, Life Insurance Corporation of India (LIC of India) during July 2016 signed an agreement with which banking entity to sell its life insurance policies? – Axis Bank

Explanation: During July 2016 Axis Bank signed an agreement with Life Insurance Corporation of India (LIC) to distribute policies through its banking channels. This is the largest bancassurance partnership after the insurance regulator IRDAI allowed banks to sell policies of more than one company.

It is worth mentioning that ‘bancassurance’ is the selling of life insurance and other insurance products and services by banking institutions. Banks in India have increased their role in Insurance distribution with ‘bancassurance’ being the biggest contributor.

Axis Bank already had a distribution arrangement with Max Life Insurance where it also holds a small stake.

LIC is also a promoter of Axis Bank is the second largest shareholder with a 12% stake.

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3) HDFC, India’s largest private sector mortgage lender, created history on 1 August 2016 as it issued world’s first rupee-denominated bond for overseas buyers at the London Stock Exchange (LSE). What is a popular name given to this first-of-its-kind bond? – Masala Bonds

Explanation: Housing Development Finance Corporation (HDFC) became the first entity to issue a bond of this type. This bond, listed on the LSE, raised Rs. 30 billion, equivalent to around US$ 450 million. It has a maturity of three years and an annual yield of 8.33% and was more than four times oversubscribed.

The listing of ‘Masala Bonds’ on the LSE was described as a landmark event that will boost economic ties between India and the UK post Brexit. This bond issue will help HDFC to diversify its borrowing profile and access global investors.

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idfc-bank-2015

4) IDFC Bank acquired which Tamil Nadu-based microfinance institution (MFI), as announced by it on 12 July 2016? – Grama Vidiyal

Explanation: Grama Vidiyal is the name of a Tamil Nadu based microfinance institution (MFI) that has a customer base of 1.2 million customers with an asset base of Rs.1,500 crore.

IDFC Bank has received approval from the Reserve Bank of India (RBI) for the transaction.

IDFC Bank started banking operations on 1 October 2015, converting itself from an infrastructure focused lender into a universal bank. IDFC was one of two entities that got a banking licence from the RBI in 2014 along with Bandhan Bank.

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economic-liberalization-2016

5) 25 years of which landmark event associated with the Indian economy were completed on 24 July 2016? – Economic Liberalization and Reforms

Explanation: 24 July 2016 marked 25 years of liberalization and reforms in the country. The process of economic reforms was unleashed officially on 24 July 1991 as the then Finance Minister Manmohan Singh presented his landmark budget on that day.

The Budget of 24 July 1991 brought about sea change in liberalizing the apparently protection-based Indian economy which had concepts like licence regime, state intervention in business regulation and Soviet-style planning. It did away with the so-called ‘Licence Raj’, reduced tariffs and interest rates and ended many public monopolies, allowing automatic approval of foreign direct investment (FDI) in many sectors.

The economic reforms kick-started in 1991 brought about expansion of the services sector helped largely by a liberalized investment and trade regime. They also increased consumer choices and reduced poverty significantly.

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6) Union Government allocated how much amount as capital infusion in 13 public sector banks for 2016-17 as announced on 19 July 2016? – Rs. 22,915 crore

Explanation: Rs. 22,915 crore will be given during 2016-17 fiscal to 13 PSU banks that are burdened with non-performing loans, to help improve their liquidity and support lending operations.

According to Finance Ministry, of the allocated amount for each bank, 75% has been released for now to provide liquidity support for lending operations and enable them to raise funds from the market. The balance amount is linked to performance and would be released later.

The country’s largest public sector bank State Bank of India has received the highest amount (Rs. 7,575 crore), followed by Indian Overseas Bank (Rs.3,101 crore) and Punjab National Bank (Rs.2,816 crore). Bank of India received Rs.1,784 crore and Central Bank of India Rs.1,729 crore, while Allahabad Bank received the least amount (Rs.44 crore).

It is worth mentioning that a part of its Indradhanush plan to revitalise state-owned lenders, the Finance Ministry plans to infuse Rs.70,000 crore in the four-year period between 2015-16 and 2018-19.

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7) The Union Cabinet on 27 July 2016 decided to raise the cap for individual foreign investors in Indian stock exchanges to 15%. What was this cap till now? – 5%

Explanation: Individual foreign investors can now hold up to 15% stake in Indian stock exchanges, up from the earlier 5%. This happened after a decision to this effect was taken by the Union Cabinet on 27 July 2016.

It is worth mentioning that currently foreign investors, in aggregate, can hold up to 49 per cent stake in any stock or commodity exchange.

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8) ‘Who Moved My Interest Rate?’ is the name of the book written by which former Governor of the Reserve Bank of India (RBI) that gets released on 15 July 2016? – D. Subbarao

Explanation: Duvvuri Subbarao, was Governor of the RBI between 2008 and 2013.

He has written about the experiences of his 5-year RBI tenure in the book titled “Who moved my interest rate? – Leading the Reserve Bank of India through Five Turbulent Years”.

The book is replete with stories of how finance ministers, during the time he was in charge of the central bank (P Chidambaram and Pranab Mukherjee), often made public their differences with the RBI on decisions on the interest rate.

The book is being released on 15 July 2016.

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9) Which entity will become the first to get debt relief under RBI’s Scheme for Sustainable Structuring of Stressed Assets (S4A), as announced during July 2016? – HCC

Explanation: Construction and infrastructure major HCC is poised to become the first entity to get debt under Reserve Bank of India (RBI’s) recently announced scheme for restructuring of stressed assets of companies.

The RBI’s Scheme for Sustainable Structuring of Stressed Assets (S4A) allows banks to separate the total debt of a stressed company into two. While the company will service the sustainable part of debt, the rest is converted into equity.

According to a statement released by HCC on 13 July 2016, the joint lenders’ forum has agreed to consider the recast of HCC’s Rs. 12,000-crore debt pile. Lenders get 90 days from the ‘reference date’ (12 July 2016) to formulate a resolution plan and implement it, along with necessary internal approvals.

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10) All the nine important unions of the banking industry under the umbrella organisation of the United Forum of Bank Unions (UFBU) observed one-day strike across almost all banks in the country on 29 July 2016. What is the primary reason for observing this strike? – To voice against the proposed merger of State Bank associate banks with SBI

Explanation: The United Forum of Banks Unions (UFBU), an umbrella organisation of nine bank employees and officers unions representing 8 lakh staffers, went ahead with the strike on 29 July 2016, thus affecting services like cheque clearances, cash deposit and withdrawal at branches and other facilities.

The bank unions are protesting against the proposed merger of State Bank associate banks with SBI, under which four associate banks of SBI will be merged with the parent group.

The bank employees are also protesting against privatisation of IDBI and other banking reforms that the government has initiated. The unions are opposing the move to privatise regional rural banks and co-operative banks, and consolidate and merge banks.

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The Swedish newspaper was recently asked it to delete the reference made by President Pranab Mukherjee to the Bofors scam in an interview to it, as a claim protested by the Indian Government on 27 May 2015. India has expressed disappointment over the disrespect shown to the President, the newspaper has defended its right to publish what was said during the interview.

Know, who is Vijay Kelkar and what is PPP !

Vijay Kelkar is a renowned economist and a former Finance Secretary. He was appointed head of newly constituted committee to give recommendations to recast the model of Public-Private-Partnership (PPP) model in India. India is one of the largest PPP market with over 900 projects. The Kelkar committee will review the PPP policy, suggest a better risk-sharing mechanism between private developers and the government after analysing such projects.

Know, who is Yaduveer Krishnadatta Chamaraja Wadiyar !

Yaduveer Krishnadatta Chamaraja Wadiyar was crowned as the new Maharaja of of Mysuru (Mysore) royal family. He is the 23-year old grandson of Princess Gayathri Devi, who was the eldest daughter of the last Maharaja of Mysore, Sri Jayachamarajendra Wadiyar. The coronation was held at Mysuru’s famous Amba Vilas Palace, which was decked up for the occasion.

Know about Sepp Blatter!

Swpp Blatter, was re-elected as FIFA president for a fifth term at the 65th Annual Congress of FIFA held at Zurich for four year term.

Prince Ali bin al-Hussein of Jordan stood against Blatter in this election. It is worth mentioning that FIFA is going through a major controversy regarding corruption in the organisation with two FIFA vice presidents and a recently elected FIFA executive committee member still in custody.

 


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