Banking and Financial Awareness – 97

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10 Aug, 2015

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1) Union Govt. has earmarked how much fund for country’s public sector banks (PSBs) over a period of four years as announced by the Finance Ministry on 1 August 2015? – Rs. 70,000 crore

Explanation: Public sector banks are undergoing a difficult phase due to burgeoning amount of bad debts. The basic purpose of capital infusion is to adequately capitalise all the banks to keep a safe buffer over and above the minimum norms of Basel III. Basel III is a set of guidelines for a more resilient banking system, focusing on four vital banking parameters – capital, leverage, funding, and liquidity. The first instalment of Rs. 25,000 crore has been marked for this fiscal. Having provided Rs. 7,940 crore in this year’s Budget, the Finance Ministry has sought Parliamentary nod for an additional capital infusion of Rs. 12,010 crore through a supplementary demand for grants. The remaining Rs. 5,000 crore will be provided in the second supplementary demand later this year. The second instalment of Rs. 25,000 crore will be in 2016-17, followed by Rs. 10,000 crore each in the third (2017-18), and fourth (2018-19) instalments.

Banking – PSU

2) India’s oldest mutual fund house – UTI Mutual Fund recently achieved what major milestone pertaining to its mutual fund assets? – Its asset base crossed the one lakh crore rupees mark recently

Explanation: The total assets under UTI Mutual Fund attained an asset base of over Rs. one lakh crore with about one crore investor accounts. It is worth mentioning that the total asset under the control of Indian mutual fund companies is around 4.5 lakh crore. UTI Mutual Fund is being run by the UTI Asset Management Company (UTI AMC). UTI AMC was carved out of the erstwhile Unit Trust of India as a mutual fund in February 2003 and is promoted by the four of the largest public sector financial institutions as sponsors – SBI, LIC, Bank of Baroda and Punjab National Bank. These four each hold 18.5% stake in UTI AMC, while US-based fund house T Rowe Price has acquired a 26% stake. UTI AMC is also looking to launch an Initial Public Offer (IPO) to become the country’s first asset management company to go public.

3) Union Govt. on 3 August 2015 stepped back from the controversy surrounding the draft Indian Financial Code (IFC) as it disowned the draft. It was disowned as the government felt that do not reflect the government’s views. What is the main controversy associated with this draft? – It seeks to dilute the RBI’s powers to regulate the foreign exchange and government bond markets and set monetary policy

Explanation: According to the draft Indian Financial Code (IFC), the Centre will appoint four out of seven members of this proposed Committee that will take decisions by majority vote. It proposes the setting up of a Monetary Policy Committee that will set interest rates. The draft also proposes to strip the RBI Governor’s veto over monetary policy decisions. It also proposes to take away from the RBI the role of regulation of the foreign exchange and the government securities markets, which in turn will reduce its leeway in managing the impact of capital flows. These proposals have received sharp criticism from a range of former RBI officials and financial sector experts.

Banking Awareness – Reserve Bank of India (RBI)

4) In view of the forthcoming festival of Raksha Bandhan, a special enrolment drive is being launched by participating banks and insurance companies in the months of August-September for enrolling bank account holders in Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY). What is the name given to this special drive? – “Suraksha Bandhan”

Explanation: The “Suraksha Bandhan” drive aims to take forward the Government’s objective of creating a universal social security system in the country. It is targeted especially at the poor and the under-privileged. Along with PMSBY and PMJJBY, the envisaged social security initiative also includes the Atal Pension Yojana (APY), launched along with the above two insurance schemes, which addresses the issue of old age income security. Participating banks supported by the participating insurance companies will work towards local outreach, awareness building and enrolment facilitation during this drive.

5) What is the name of the mobile banking app of Kotak Mahindra Bank (KMB), which was launched during July 2015 primarily for “un-banked” regions? – “Kotak Bharat”

Explanation:“Kotak Bharat” is the ‘inclusive digital banking’ app launched by KMB that is primarily targetted to benefit customers in the under-banked and un-banked regions, who can access its services in their preferred language. One major benefit of this app is that it requires no internet connectivity.The app is Android-based. It works on the existing SMS banking keyword process platform. The customers could download the app on their registered mobile number without any separate registration process. Besides, the app facilitates other value added propositions, including recharging mobile/DTH services, linking Aadhaar number to the account, finding Kotak ATMs & branches, applying for Pradhan Mantri Suraksha Bima Yojana, Pradhan Mantri JeevanJyoti Bima Yojana etc. It was first launched in Lucknow in July 2015 as it is the most prominent Hindi belt centre for KMB.

Banking Awareness – Kotak Mahindra Bank (KMB)

6) What watershed event in the 64-year old history of India’s biggest pension fund – the Employees Provident Fund Organisation (EPFO) took place during August 2015? – For the first time, EPFO started investing in equities as an asset class

Explanation: The Employees Provident Fund Organisation (EPFO) started investing in equities as an asset class for the first-ever-time from 6 August 2015. The EPFO manages a corpus of Rs 8.5 lakh crore, all of which was being invested in fixed-income securities until now. The state-run pension fund, which has thus far stuck to safer debt instruments, is looking to ensure that it can preserve returns to subscribers via this move. A notification to this effect had been issued by Labour Ministry based on a finance ministry directive, which called on EPFO to invest 5-15% of its incremental corpus in equities. EPFO’s central board has decided to stick to 5% this fiscal and decide on raising this based on how things pan out. For the last five years, EPFO has been giving its subscribers a return of 8.25-9.5%. With the EPFO expected to receive inflows of close to Rs. 1 lakh crore this year, investment in equities is pegged at Rs 5,000 crore. Some funds are also expected to come in from exempted trusts. This could take the EPFO investment during the year to Rs. 7,000-8,000 crore. The idea of EPFO getting into equities was first mooted in 2005 by U.K. Sinha, currently chairman of the capital markets regulator SEBI.

7) Through which mutual fund the newly initiated investment of EPFO has been done initially in equities? – SBI Mutual Fund

Explanation: EPFO’s investment in equities is being routed through exchange traded funds (ETFs) managed by SBI Mutual Fund. To start with, EPFO will invest 75% in SBI Nifty ETF and 25% in SBI Sensex ETF. It will also invest in CPSE (central public sector enterprise) ETFs as and when new fund offers (NFOs) are announced by the government. Transparency, liquidity, diversification, flexibility and cost effectiveness seen as the advantages of investing in ETFs.

SBI – Banking Awareness

8) The NITI Aayog has started an initiative to engage the states of the Indian Union on six important issues pertaining to governance and finance. This includes the initiative to prune their administrative structure to improve their efficiency and governance. What is the name given to this ambitious initiative? – NIYATAM

Explanation: NIYATAM stands for NITI Initiative to Yield Aspirational Targets and Actionable Means. It is a based on a word taken from the “Bhagwad Gita”. At present, states such as Uttar Pradesh have 56 government departments and an equal number of ministers, apart from the chief minister. Similarly Bihar and Jharkhand have 44 government departments each while Kerala has 46 government departments. According to the plan being worked out by the NITI Aayog under its NIYATAM initiative, each state should ideally have about 20 departments. The Aayog would work with states to this end, starting with Kerala, Rajasthan, Jharkhand and Uttar Pradesh. Meanwhile, as part of the NIYATAM initiative, the NITI Aayog will also work with states to rationalise the number of schemes at both the state level as well as those that are centrally funded.

Banking – Niti Aayog | Niyatam

9) Who was elected as the new Chairman of the Life Insurance Council, the apex industry body of insurers in India, on 1 August 2015? – S K Roy, Chairman LIC

Explanation: Roy will head the three-member Executive Committee (EC), a key body of the Council, for a period of three years. The election was held among the 24 members of the Council at Mumbai. The three members of the EC elected are – Tarun Chugh (PNB Met Life), Anup Rau (Reliance Life) and Sandeep Ghosh (Bharti AXA). Life Insurance Council is a forum that connects the various stakeholders of the sector. It develops and coordinates all discussions between the Government, regulatory body and the public. It has representatives from the 24 insurance companies currently operating in India.

10) Which multi-national bank is to acquire Indian retail brokerage firm Sharekhan Limited as announced on 30 July 2015? – BNP Paribas SA

Explanation: BNP Paribas SA is the leading French bank with worldwide presence. Currently, BNP Paribas has a presence in India through Geojit BNP Paribas in it holds a stake of about 33%.Sharekhan was set up in 2000 by Mumbai-based entrepreneur ShripalMorakhiawhose family has been in the equity broking business for decades. Till March 2007, the Morakhia family owned a 43.58% stake in the brokerage. Over the years, this holding was sold to PE investors. It is primarily engaged in retail brokerage operations in India with facilities like online trading for investors. BNP Paribas will acquire Sharekhan in entirety by paying Rs. 2,200 crore. The purchase will reinforce BNP Paribas’s retail broking operations in India where it offers corporate and retail banking, investment banking and wealth management.Existing shareholders in Sharekhan- the Rohatyn Group Llc., Baring Private Equity Asia, IDFC Ltd and Samara Capital, have been looking to exit their investment in Sharekhan for the past year.

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