Banking and Financial Awareness – 96

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04 Aug, 2015

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1) What is the official name of the so-called “BRICS Bank” that was formally launched on 21 July 2015 in Shanghai (China)? – New Development Bank (NDB)

Explanation: New Development Bank (NDB) is also known as the “BRICS Bank” in common parlance. It is headquartered in Shanghai and is headed by Kundapur Vaman Kamath (K.V. Kamath), the renowned banker from India. It will primarily fund infrastructure and development projects in five BRICS countries – Brazil, Russia, India, China and South Africa. NDB is the second of two new policy banks being pitched as alternatives to existing institutions such as the World Bank after the recently inaugurated Asian Investment Infrastructure Bank (AIIB). Both these banks are heavily backed by China. China has pledged to contribute $41 billion to the NDB, giving it the largest share of voting rights at 39.5%. Brazil, India and Russia will each contribute $18 billion, while South Africa will contribute $5 billion.

Banking Awareness – BRICS Bank

2) How much bad loans was accumulated with the public sector banks as on 31 March 2015 as disclosed by the Finance Ministry on 21 July 2015? – Rs. 2.67 lakh crore

Explanation: According to the information given by Minister of State for Finance Jayant Sinha in the Parliament on 21 July 2015, the total bad loans with public sector banks stood at Rs. 2.67 lakh crore as on 31 March 2015. This was 23.6% higher than the total bad loans one year ago on 31 March 2014, i.e., Rs. 2.16 lakh crore. On the other hand gross NPA ratio of the public sector banks (PSBs) increased to 5.43% at the end of March 2015 as compared to 4.72% a year ago. During 2014-15 the public sector banks have recovered Rs. 41,236 crore as compared to Rs. 33,698 crore in the previous fiscal.

3) What important proposal pertaining to RBI Governor’s role in country’s monetary policy was proposed in the revised draft of the Indian Financial Code (IFC) that was put out by the Union Finance Ministry for comments on 23 July 2015? – Proposal to strip the RBI Governor’s veto vote on country’s monetary policy

Explanation:The revised draft of the Indian Financial Code (IFC) proposes that the Reserve Bank “Chairperson” shall head the committee, with no reference to the RBI Governor. It is not clear from the draft if a re-designation is planned. An earlier draft had proposed to give the Governor the right to overrule the monetary policy committee decision. If the inflation target is not met, then the RBI will have to explain the reasons and propose remedial actions. Under the revised draft, the non-government members of the committee are to be drawn from the RBI. The move comes in the wake of a severe breakdown of talks between the Centre and the RBI over amendments to the RBI Act, which Finance Minister Arun Jaitley had announced in his Budget speech. Seeing the RBI’s opposition to them, the Finance Minister later dropped the proposed amendments from the Finance Bill.

Banking – RBI

4) IDFC Ltd. on 24 July 2015 announced that the Reserve Bank of India (RBI) had granted banking licence to it, making it the second lender to enter the banking sector after more than a decade. Before this, microfinance company Bandhan Financial Services had also announced to launch banking operations in August 2015. These two entities would be the latest banking entities in country’s banking sector. Which was the last commercial bank to be set in India? – Yes Bank

Explanation: Yes Bank was the last bank to be established in India in 2004. Bandhan Financial Services and Mumbai-based IDFC were the only two companies to be granted preliminary private bank permits last year. The move to grant new permits marked the start of a cautious experiment to create more competition in a sector dominated by public sector banks (PSU banks), many of which are reluctant to expand into rural areas or towns where banking penetration is low. Millions of people in the country still do not have access to formal banking services.

5) India’s capital market regulator SEBI cancelled the registration of which mutual fund operator on 28 July 2015 saying it was no longer ‘fit and proper’ to carry out this business? – Sahara Mutual Fund

Explanation: In the latest order, SEBI directed cancellation of Sahara Mutual Fund’s certificate of registration on expiry of a six-month period from 29 July 2015. It also directed Sahara Mutual Fund and Sahara Asset Management Company to stop accepting subscription from its existing or new investors with immediate effect. Sahara Mutual Fund was also asked to make efforts to transfer the activities of Sahara India Financial Corporation Limited (Sahara Sponsor) and Sahara Asset Management Company Private Limited (Sahara AMC) to a new sponsor and a SEBI-approved Asset Management Company at the earliest. SEBI felt that Sahara is no longer ‘fit and proper’ to carry out the business of Mutual Fund in view of numerous violations of the MF regulations by the group. The Sahara group has been engaged in a long-running regulatory and legal battle with SEBI ever since the regulator ordered refund of a massive amount of over Rs. 24,000 crore by two Sahara entities.

6) What is the name given to Union Finance Ministry’s flagship project which aims at widening the tax base by catching tax evaders using technology, for which the ministry recently floated a tender worth over Rs. 150 crore to buy data analytics software and related infrastructure? – “Project Insight”

Explanation: “Project Insight” is an ambitious project of the Union Finance Ministry to bring into net black money hoarders and tax evaders by using optimum technology. It will primarily track the Permanent Account Numbers (PAN) being quoted on financial transactions and tally them with income tax filings. It is expected to automate a number of processes that took a lot of time in the past and therefore speed up resolution of cases pertaining to tax evasion. The project is also expected to rank tax evaders based on the amount of tax that could be recovered, so that the authorities could go after the highest value targets first. The Finance Ministry recently floated a tender worth over Rs. 150 crore to buy data analytics software and the infrastructure that goes along with it. It has also attached a non-disclosure agreement to the tender to keep exact details on the project from getting leaked.

7) On 27 July 2015 the benchmark BSE Sensex plunged nearly 550 points while the NSE Nifty dropped below the 8,400-level. What was the main reason for this huge intra-day decline? – Market’s concerns over stricter norms for participatory notes (P-Notes)

Explanation: Markets plunged amid fears that the government may accept Supreme Court-appointed, Special Investigation Team (SIT) recommendations of stricter norms for participatory notes (P-notes) on markets. Participatory notes (or P-notes) are offshore derivative instruments used by foreign investors who are interested in betting on Indian securities but not keen on registering with the capital market regulator SEBI. P-notes are issued by foreign brokerages registered with SEBI or foreign arms of domestic brokerages to overseas investors. The broker buys Indian securities (shares, debt or derivatives) and issues P-notes to the client for a fee. The positions held through P-notes are worth Rs. 2,75,436 crore or 11.5% of the assets under custody of foreign portfolio investors, which is Rs. 23,86,457 crore. Thus a clamp down on transfer of P-notes could result in a fall in foreign portfolio inflows.

8) In an important development in the field of multi-lateral trade, the World Trade Organization (WTO) members on 24 July 2015 finalized a deal worth almost $1 trillion. This historic deal is associated with which category of products? – Information Technology products

Explanation: Under this deal WTO members updated organisation’s 18-year-old Information Technology Agreement (ITA) by adding more than 200 products to the list of goods covered by zero-tariff and duty-free trade. The deal primarily deals with cutting tariffs on $1 trillion worth of information technology products resulting in a huge boost for producers of goods ranging from video games to medical equipment. Additional duty-free products include computer software and software media, video game consoles, printer ink cartridges, GPS devices, medical devices such as MRI machines and next generation semiconductors. Technology manufacturers like General Electric Co, Intel Corporation, Texas Instruments Inc., Microsoft Corp and Nintendo Co are among companies expected to benefit from the deal.

9) Which Indian company on 21 July 2015 achieved the unique feat of overtaking its parent company in “Market Valuation” and thus becoming the first Indian company to achieve this feat? – Maruti Suzuki

Explanation: Maruti Suzuki, which is India’s no. 1 auto manufacturer, on 21 July 2015, achieved a feat no other Indian company with a foreign parent has ever done. It overtook its Japan-based parent company Suzuki Motor in market value on this day. On 21 July the market capitalization of Maruti Suzuki stood at $19.73 billion (Rs. 1.26 lakh crore) based on its closing stock price of Rs. 4,158.80 on the Bombay Stock Exchange (BSE). On the same day the market capitalization of its parent company stood at $19 billion. Barring Maruti, no other constituent of the CNX MNC – an index that captures the stock performance of top MNC subsidiaries – has a market cap close to that of the parent. The market value of Hindustan Unilever, for instance, is 22% of its Anglo Dutch parent Unilever, while that of Castrol India is just 3% of BP. Suzuki holds a 56% stake in Maruti. On a consolidated basis, as disclosed in Suzuki’s fiscal 2014 annual report, 40% of its sales volume comes from India. In a vision 2020 document, the Japanese company said it expected the proportion of cars sold in India to reach 60% in 2020 from 40% now.

10) Chartered Accountant (CA) Nischal Narayanam came to limelight recently. Why? – He is the youngest CA in the country

Explanation: Nischal Narayanam, who is hailed as a mathematical genius, has cleared the CA exam recently and is said to be the youngest in the country to have successfully cleared one of the toughest exams in the country. However, he will have to wait for two more years to sign on the balance sheets of the company as the Institute of Chartered Accountants of India (ICAI) doesn’t enroll members less than 21 years. Nischal was also the youngest graduate in the history of Osmania University (Hyderabad) from where he completed his B.Com and M.Com.

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