Banking and Financial Awareness – 95

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19 Jul, 2015

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1) Leading mobile wallet service Paytm recently requested asked Reserve Bank of India (RBI) to hike the limit on money that can be kept in a mobile wallet to Rs. 25,000. What is the present RBI limited for mobile wallet services? – Rs. 10,000

Explanation: Under the existing RBI norms, only a minimum know your customer (KYC) of the mobile number and e-mail ID verification is sufficient to hold Rs. 10,000 in a mobile wallet. For anything higher, a full KYC, similar to what is required for opening of a bank account, is mandatory. This maximum cash limit of Rs. 10,000 was set by the RBI some years ago. But the recent trends have disclosed that in major metros and large cities, where cost of living and mobile penetration are high, customers are crossing the Rs. 10,000 limit set by the RBI. Over 85 million people now use Paytm mobile wallet for transactions worth Rs. 700 crore every month. In this respect Paytm has requested the RBI to raise the upper cash limit for mobile wallets. Indians, both with and without bank accounts, are finding mobile wallets a convenient way to pay for a number of goods and services such as online purchases, recharges, utility payments and online-to-offline services such as cabs or food ordering.

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2) The Reserve Bank of India (RBI) on 9 July 2015 allowed mass transit system (MTS) operators like Mumbai Metro, Delhi Metro, Indian Railways, etc. to issue pre-paid cards to their customer. This is expected to provide a huge relief to the commuters who face problems while purchasing tickets. According to the related RBI guidelines, what is the maximum limit of these proposed prepaid instruments? – Rs. 2,000

Explanation: MTS operators will now be able to issue pre-paid cards to their customers. The customers can easily transfer money to these cards that can be swiped on machines instead of standing in long queues to purchase travel tickets. RBI guidelines also say that the balance in the prepaid instrument issued by the MTS should not exceed Rs 2,000 at any point of time. Also, MTS would not be allowed to refunds cash that is stocked in the pre-paid instruments (PPI). These PPIs will have a minimum validity of six months from the date of issue. The PPI-MTS will enhance commuter convenience and will also facilitate the migration to electronic payments in line with the country’s vision of moving to a less-cash society.

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3) State Bank of India (SBI) on 17 July 2015 announced its proposal of sharing profits with its employees as part of an initiative for talent retention and motivation. The bank has offered up to how much of its profits under this proposal, which has been submitted to the Finance Ministry? – 3%

Explanation: SBI chairperson Arundhati Bhattacharya disclosed about this proposal on 17 July 2015. It is worth mentioning that the Union Govt. already allows SBI to share up to 1% of profits with its employees but the bank wants this limit to be hiked to 3%. SBI Chairperson claimed that employees incentivisation through sharing profits is necessary especially for people in senior management and mid-level management as the amount that they get in the private sector is much higher than they get in the public sector. So employees, who achieve higher levels of skills because of their merit and hard work, are easily picked up by private sector. For the fiscal ended March 2015, SBI’s net profit increased 20% to Rs 13,101.57 crore as compared to Rs 10,891.17 crore for the year ended March 2014. The bank has about 2.3 lakh employees.

Banking – State Bank of India (SBI)


Sriram-Kalyanaraman-NHB

4) In a first-of-its-kind initiative, Union Govt. on 8 July 2015 appointed an executive from the private sector to head a public sector financial institution. This appointment was done for the post of Managing Director and CEO of National Housing Bank (NHB). What is the name of the executive appointed to head NHB? – Sriram Kalyanaraman

Explanation: NHB is the regulator of India’s housing finance sector. Sriram Kalyanaraman became the first person from the private sector to head a public sector financial institution when he was appointed MD and CEO of NHB. His appointment is for five years from the date of taking over the charge. At present, Kalyanaraman is Director-Business Development, Equifax Credit Information Services.


Ashok-Lahiri-Bandhan

5) Who was named as the first Chairman of the soon to be opened Bandhan Bank, which announced its Board of Directors on 9 July 2015? – Ashok K. Lahiri

Explanation: Ashok K. Lahiri, a former Chief Economic Advisor (CEA), was named as the first Chairman of Bandhan Bank. Chandra Sekhar Ghosh will be the MD and CEO of the bank. The other directors on board include B Sambamurthy, former CMD of Corporation Bank; CM Dixit, Sr Partner at GD Apte & Co; Krishnamurthy Subramanian, Associate Prof. at Indian School of Business; Snehomoy Bhattacharya, former ED at Axis Bank; Pradip K. Saha, former CGM at SIDBI; Sisir Kr Chakrabarti, former Dy MD at Axis Bank; Bhaskar Sen, former CMD at UBI and PS Raji Gain, CGM NABARD. The bank will start its operations from 23 August 2015 and will be inaugurated by the President of India, Pranab Mukherjee.

 


6) Finance Minister Arun Jaitley on 16 July 2015 announced that the government has simplified rules for foreign investment in companies by clubbing together different categories. This will effectively give equal treatment to global capital entering India. What will be the major benefit of this move for Indian banks? – Now it will become easier for Indian banks to raise capital up to a foreign ownership limit of 74%

Explanation: One of the most important decisions in relation to the investment is the introduction of composite caps for simplification of foreign direct investments (FDI) in the country. Previously, foreign capital had been subject to varying restrictions – a legacy of India’s socialist past and its lingering reluctance to allow capital to move freely across its borders. For Indian banks, the shift will lead to an increase in their effective free float – or the number of shares that can be easily traded. That in turn would lead to an increase in their weighting in benchmark indexes tracked by many fund investors. Union Govt. has also allowed 100% investment in pharmaceuticals and railway infrastructure under a so-called automatic route that does not require official approvals.

 


AIIB-2-2015

7) Who was named as the first Chief of the Beijing-backed Asian Infrastructure Investment Bank (AIIB), which is being established as an alternative financial entity to the U.S. and Europe-dominated banking institutions? – Jin Liqun

Explanation: Jin Liqunis is a former Finance Minister of China and he was named by China as the first Chief of the AIIB on 6 July 2015. AIIB is a multilateral development bank proposed by the government of China to provide finance to infrastructure projects in the Asia region. The bank was proposed by China in 2013 and launched at a ceremony in Beijing in October 2014. The bank has 33 founding members from the Asian region and 17 founding members from outside the region. India is one of the founding members of AIIB and has second highest stake in it after China. AIIB is being seen as a rival to the U.S. and Europe-dominated banking institutions.

 


8) Union Government on 7 July 2015 raised the minimum daily wage for workers by Rs. 23. This increase was done after a gap of 2 years. What is the new minimum wage for workers after this increase? – Rs. 160 per day

Explanation: The decision to revise upwards the National Floor Level Minimum Wage (NFLMW) was taken in view of the increase in retail inflation for industrial workers. It has been revised from present level of Rs. 137 to Rs. 160 per day and became effective from 1 July 1995. While reviewing the movement of Consumer Price Index (Industrial Workers) during April 2014 to March 2015 over April 2012 to March 2013, it was observed that the average CPI-IW has risen from 215.17 to 250.83. The wage was last revised to Rs. 137 from Rs. 115 per day effective 1 July 2013.

 


9) Global economy and financial markets, including India on 8 July 2015 saw new reasons for worry as the market meltdown in China reached worrying levels. For the first time global markets were affected by continued decline in China. What is the main reason for declining markets in China? – Reduction in demand which has threatened a huge slowdown in Chinese economy

Explanation: China has been witnessing a decline in demand for almost all commodities for several quarters. This has resulted in low production across sectors. China’s stock market has lost over $3 trillion in value in less than a month, wiping close to 37% off the market’s valuation from the peak of 12 June 2015. The intensity of the loss can be judged from the fact that it is nearly twice the market capitalisation of all stocks traded in India and more than the Spanish, Russian, Italian, Swedish and Dutch stock markets combined. This decline was till now without a domino effect across the world, mainly due to absence of foreign institutional investors (FIIs) in China. However, as decline reaches new levels the global markets are now bracing for its impact. The worldwide markets for the first time were affected by Chinese decline on 8 July and global markets witnessed a huge decline. This was after Chinese markets tumbled again on 8 July as a range of government measures aimed at preventing a further decline in share prices had no impact. It is worth mentioning that the markets had, till now, fixed their attention towards Greek economy. But now it became clear that as market fall in China accelerates the economic slowdown, other countries that have not been affected by China’s market fall will be hit. This is mainly due to the fact that China is the largest consumer of a number of goods and commodities in the world.

 


10) In an important step, Union Government on 8 July 2015 allowed seven state-owned entities to raise Rs. 40,000 crore in the current fiscal through tax-free bonds. Which are the seven PSUs that have been given the permission? – National Highways Authority of India (NHAI), Indian Railways Finance Corporation (IRFC), Housing and Urban Development Corporation (HUDCO), Indian Renewable Energy Development Agency (IREDA), NTPC, Power Finance Corporation (PFC) and Rural Electrification Corporation (REC)

Explanation: The National Highways Authority of India has been given the permission to raise maximum amount of Rs. 24,000 among the 7 PSU entities. IRFC has been allowed to raise Rs. 6,000 crore. HUDCO has been allowed to raise Rs.5,000 crore and IREDA Rs.2,000 crore. NTPC, PFC and REC can issue tax-free bonds of Rs.1,000 crore each. Retail investors, which include HUFs and NRIs investing on repatriation basis, can invest up to Rs.10 lakh in such bonds. Those investing higher amount would be classified as HNIs. The bonds will have a tenure of 10, 15 or 20 years and the interest rates is to be decided with reference to the rates of Government Securities.

 


 

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