Banking and Financial Awareness – 65

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19 Aug, 2014

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ATM Machine-in-India

1) The Reserve Bank of India on 14 August 2014 announced its decision to reduce the number of mandated free transactions for savings bank account holders at other bank ATMs located in six metro cities from five to three per month. This reduction would come into effect from which date? – 1 November 2014

Explanation : The six metro cities (Mumbai, New Delhi, Chennai, Kolkata, Bengaluru and Hyderabad) were chosen first for reducing the number of mandated free transactions as they are well-served in terms of payment infrastructure. This reduction in the number of mandated free transactions will, however, not apply to customers having no-frills/small/Basic Savings Bank Deposit Account (BSBDA) type of accounts as well as for transactions done by savings bank account holders at ATMs situated outside these six metro cities. Banks are also free to offer free transactions above this mandated limit.

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2) The Reserve Bank of India (RBI) on 6 August 2014 issued guidelines for asset reconstruction companies (ARCs) to increase their investments in security receipts (SRs) with the objective of strengthening the asset recovery sector. What is the minimum prescribed percentage of funds that ARCs would now have to invest in SRs as directed in this RBI guideline? – 15%

Explanation : This minimum investment requirement for ARCs was 5% at present. Public sector banks sell their bad loans or NPAs (non-performing assets) to these ARCs. Sale of bad loans to ARCs gained momentum in 2013-14 mainly because banks were able to obtain better prices for these sales. But this RBI directive is likely to dissuade ARCs from offering a better price, since they will now have to make a higher upfront payment.

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3) The Reserve Bank of India (RBI) presented its bi-monthly policy review on 5 August 2014. It kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.0%. It also left the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0% of net demand and time liabilities (NDTL). However, which was the only major rate to be changed in this policy review? – The Statutory Liquidity Ratio (SLR)

Explanation : The SLR of scheduled commercial banks was reduced by 50 basis points from 22.5% to 22.0% of their NDTL with effect from the fortnight beginning 9 August 2014.

The major rates after this policy review are as follows:

* Short-term lending (repo) rate unchanged at 8%

* Cash reserve ratio (CRR) unchanged at 4%

* SLR cut by 0.50% to 22% to unlock banking funds

* Lowers banks’ SLR holdings in held-to-maturity category by 0.5% to 24%

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4) Indian Parliament on 12 August 2014 passed the bill to empower SEBI to act against ponzi operators and market manipulators more effectively. What is the name of this bill? – The Securities Law (Amendment) Bill, 2014

Explanation : The bill was passed by the Lok Sabha on 6 August 2014 and the Rajya Sabha passed it on 12 August 2014. It empowers SEBI to act against ponzi operators and market manipulators more effectively through search and seizure, attachment orders and recovery proceedings and with access to call data records. This marks a dilution from the direct powers granted to SEBI Chairman through as many as three ordinances in the past one year to authorise search and seizure operations. Under the act constituted (with the passing of this bill), a special SEBI court would be set up in Mumbai to fast track prosecution proceedings launched by SEBI, as also to clear search and seizure operations proposed by SEBI.

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5) India’s capital market regulator SEBI cleared final guidelines for creation and listing of business trusts for key sectors of real estate and infrastructure on 10 August 2014. These guidelines have been cleared to help attract greater foreign and domestic investments into these sectors. What are the names of business trusts associated with real estate and infrastructure which would be created and listed with these SEBI guidelines? – Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs)

Explanation : Finance Minister Arun Jaitley had outlined the proposal for establishment of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) in the Union Budget 2014-15 presented on 10 July 2014. The new norms would enable listing and trading of REITs and InvITs as any other security on the stock exchange platforms and would also help create new platforms for raising of funds by real estate and infrastructure companies. Along with foreign investors, domestic institutions like insurers, pension funds and provident funds would also be allowed to invest in these trusts.

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6) In order to solve the ongoing tussle between India and the WTO (World Trade Organisation), India during August 2014 suggested fixing of the base year for food subsidies on the basis of average of last three years. What is the year proposed by the WTO to be taken as the base year? – 1986-87

Explanation : India is of the view that taking 1986-87 as a base year in 2014-15 is completely illogical and it has hence suggested a more scientific calculation for base year calculation. Indian Government had vetoed the adoption of a WTO treaty to simplify, standardise and streamline the rules for shipping goods across borders, having previously agreed to its terms at a ministerial conference in Bali (Indonesia) during December 2013. India wanted more attention paid to its concerns over WTO limits on stockpiling of food which will ultimately hit its subsidised food distribution programme, the world’s largest, targeted at nearly 850 million people.

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7) SEBI gave its approval to single registration for stock brokers during August 2014. What would be the main benefit for brokers with this approval? – Now the brokers would not need to obtain multiple certificates from SEBI for operating in the different segments of equity, equity derivatives, currency derivative and debt

Explanation : Under the proposed regime, initial certificate of registration as stock broker/clearing member will be granted by SEBI and subsequent permissions to act as stock brokers/clearing member of other stock exchanges/clearing corporations will be granted by respective stock exchange/clearing corporation after following the prescribed procedure. The latest SEBI move will also obviate the need for separate certificate for each category of operations – trading member, trading-cum-self clearing member and professional clearing member.

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8) Petroleum Ministry during August 2014 accorded its in-principle approval for stake-sale in ONGC which may fetch the government about Rs. 18,000 crore to meet disinvestment target for the current fiscal. For this how much stake-sale in the company is proposed? – 5%

Explanation : As per the Budget 2014-15, the disinvestment target is Rs. 58,425 crore including receipts from disinvestment of government stake in the non-government companies. The Department of Disinvestment (DoD) has kickstarted the process of stake sale in ONGC and has invited bids for appointing merchant bankers to manage the share sale.

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9) Indian Railways during August 2014 launched a contact-less smart card enabling passengers to pay for reserved as well as unreserved travelling train tickets as part of a pilot project. What is the name of this smart card with lifetime validity? – ‘Go-India’

Explanation : The ‘Go-India’ Card has been launched to be used at nominated UTS counters and Automatic Ticket Vending Machines (ATVMs) and nominated PRS counters for reserved tickets. The card will enable passengers to pay for tickets for long distance reserved, unreserved and suburban journeys. It is part of a pilot project to be implemented on two sectors – New Delhi – Howrah and New Delhi – Mumbai. On New Delhi – Howrah sector this card could be used at 6 railway stations – New Delhi, Kanpur, Allahabad, Dhanbad, Asansol and Howrah whereas on New Delhi – Mumbai sector the card could be used at New Delhi, Kota, Vadodara, Ratlam, Surat and Mumbai Central. The card would be of pre-paid nature and can be bought for Rs. 70 where passenger can get a value of Rs. 20 balance. After that the card can be recharged for Rs. 20 or in multiples of Rs. 50 up to Rs. 5,000. Maximum recharge value for ‘Go-India’ Card would be Rs. 10,000.

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10) What is the name of the proposed airline of Tata-SIA Airlines Limited (TSAL), a joint-venture between Tata Group and Singapore International Airlines (SIA)? – ‘Vistara’

Explanation : The much-anticipated name was announced on 11 August 2014 by TSAL amid the release of the aubergine and gold logo of ‘Vistara’. ‘Vistara’ is derived from the Sanskrit word, which means limitless expanse and draws inspiration from the brand’s domain – the limitless sky. It would be a full service airline service and may take to the skies in October 2014.

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