Banking and Financial Awareness – 122

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05 Dec, 2016

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1) Union Government on 28 November 2016 announced a new scheme on declaration of black money which envisages tax rate of 50% and provision for locking up a quarter of the declared income for four years. What is the name given to this scheme that will be in effect till 30 December 2016? – Pradhan Mantri Garib Kalyan Yojana, 2016

Explanation: Pradhan Mantri Garib Kalyan Yojana, 2016 is the name given to the newly launched scheme associated with declaration of black money that was launched on 28 November 2016.

This scheme is quite similar to the Income Declaration Scheme (IDS), which offered a four-month window to make declaration till 30 September 2016, except that the tax rate is higher at 50% and 25% of the declared income will be locked in for four years. On the other hand higher taxes and stiffer penalty of up to 85% await those who don’t disclose but are caught.

With Pradhan Mantri Garib Kalyan Yojana 2016, the government has tried to link black money declaration with poor welfare. The 25% locked-up funds will be deposited in a anti-poverty scheme without interest. This scheme will be notified by the government in consultation with the Reserve Bank of India (RBI).

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2) Which entity became India’s first operational payments bank on 23 November 2016 as it offered its services in Rajasthan? – Airtel Payments Bank Ltd.

Explanation: Airtel Payments Bank Ltd. (APBL) On 23 November 2016 became the first payments bank to start operations in India by offering services in Rajasthan in a limited scale on pilot basis.

The pilot will run at 10,000 Airtel retail outlets where basic banking services will be provided. Airtel Payments Bank is planning to expand its merchant network in Rajasthan to 100,000 by the end of the year.

Bank accounts can be opened by customers without documents using Aadhaar based e-KYC. The subscriber’s mobile number would function as a bank account number and transfer from Airtel to Airtel phone numbers would be free.

Customers will be offered an interest rate of 7.25% on deposits in savings account, higher than the 4-6% commercial banks are offering.

It is worth mentioning that APBL was the first applicant to receive the final payments bank licence from the Reserve Bank of India (RBI) in April 2016. Kotak Mahindra Bank holds 19.9% in it.

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3) The Union Government during November 2016 constituted a committee to form a strategy to expedite the process of transforming India into a cashless economy. Who is heading this committee? – Amitabh Kant (CEO, NITI Aayog)

Explanation: Niti Aayog CEO Amitabh Kant was appointed the head of the newly formed committee that was tasked with identifying various bottlenecks affecting access of digital payments. The committee was set up following a directive from the Prime Minister’s Office to back up the ongoing demonetization drive.

Other members of the committee include the Financial Services Secretary; IT Secretary, DIPP Secretary; NPCI MD & CEO; Rural Development Secretary and Chairman NHAI.

The committee will identify and operationalise in the earliest possible time frame user-friendly digital payment options in all sectors of the economy.

It will engage regularly with Central ministries, regulators, state governments, district administration, local bodies, trade and industry associations to promote adoption of digital payment systems.

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4) Which Code associated with quicker resolution of insolvency cases came into effect from 1 December 2016? – Insolvency and Bankruptcy Code

Explanation: The Insolvency and Bankruptcy Code became operational from 1 December 2016. It will help quicker resolution of cases pertaining to insolvency and liquidation and unlock the value of assets.

The Code primarily seeks to consolidate and amend laws relating to reorganisation as well as insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner. The Insolvency and Bankruptcy Board of India (IBBI) has been set up under the Code and is headed by M.S. Sahoo.

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5) Two high level committees were formed by the newly constituted Insolvency and Bankruptcy Board of India (IBBI) during November 2016. One committee is associated with service providers while the other committee pertains to corporate insolvency and liquidation. Who are heading these committees? – Mohandas Pai and Uday Kotak

Explanation: Putting in place the operational framework for insolvency and bankruptcy law, the Insolvency and Bankruptcy Board of India (IBBI) during November 2016 formed two committees on service providers and corporate liquidation.

The nine-member advisory committee on service providers is headed by educationist Mohandas Pai. Members of the panel on service providers include National Institute of Public Finance and Policy’s Professor Ajay N Shah, National Stock Exchange Vice-Chairman Ravi Narain, Sebi’s Executive Director J Ranganayakulu and senior lawyer Amarjit Singh Chandiok.

On the other hand the panel on corporate insolvency and liquidation is chaired by noted banker Uday Kotak. Other members of this committee include BSE CEO Ashish kumar Chauhan, Credit Information Bureau Chairman M V Nair and Corporate and Economic Research Group Advisory’s Chairperson Omkar Goswami.

It is worth mentioning that the IBBI has been set up under the Insolvency and Bankruptcy Code that seeks to consolidate and amend laws relating to reorganisation as well as insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner.

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6) Who resigned from the post of the MD and CEO of NSE, on 2 December 2016? – Chitra Ramkrishna

Explanation: Chitra Ramkrishna resigned as Managing Director and Chief Executive Officer (CEO) of the National Stock Exchange of India (NSE), India’s largest stock exchange. Her tenure was supposed to end in March 2018. Her resignation came just days before NSE’s IPO. According to media reports she had differences with the NSE board on key issues of listing of the exchange.

A chartered accountant by training, Ramkrishna began her career with IDBI in 1983. She was one of the five people hand-picked by legendary S S Nadkarni, then chairman of IDBI, to set up NSE in 1992. She was appointed as the joint managing director of the exchange in September 2009 and was elevated to the post of MD & CEO in April 2013.

Ramkrishna was the third woman to head an exchange in the Asia-Pacific region after Sri Lanka’s Colombo Stock Exchange and China’s Shenzhen Stock Exchange.

Ramkrishna was the second-highest paid executive in the financial services industry, second only to Aditya Puri, MD of HDFC Bank, who took home Rs 9.7 crore in FY16.

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7) What is the new limit for Prepaid Payment Instruments (PPIs) to facilitate digital transactions after the Reserve Bank of India (RBI) raised it on 22 November 2016? – Rs. 20,000

Explanation:  In view of the ongoing cash crunch the RBI on 22 November 2016 doubled the limit of semi-closed Prepaid Payment Instruments (PPIs) to Rs 20,000 to facilitate digital transactions.

While balance in such PPIs cannot exceed Rs 20,000 at any point of time, the merchants can transfer funds from such PPIs to their own linked bank accounts up to Rs 50,000 per month, without any limit per transaction.

Full KYC PPIs with balance up to Rs 1,00,000 can continue to be made available by authorised PPI issuers. The measures will be effective from 21 November to 30 December 2016.

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8) India and Switzerland on 22 November 2016 signed a historic agreement for automatic sharing of information of Swiss bank accounts of Indians in a big move towards fighting black money stashed overseas. Under the agreement India will get the first such information from which month onwards? – September 2018

Explanation: Under the agreement, Switzerland will share information with India on Swiss bank accounts of Indians as of September 2018 and onwards. Swiss authorities will not share details about accounts held prior to that period, while the first such exchange will happen in September 2019.

For this the ‘Joint Declaration’ for implementation of Automatic Exchange of Information (AEOI) signed was signed on 22 November 2016. The AEOI was signed by CBDT Chairman Sushil Chandra and Deputy Chief of Mission of Swiss Embassy Gilles Roduit in New Delhi.

Switzerland, which has always been at the centre of the debate on black money allegedly stashed by Indians abroad, used to be known for very strong secrecy walls till a few years ago around its banking practices. A huge global pressure has resulted in Switzerland relenting on the tough secrecy clauses its local laws gave to the banks.

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9) In view of the problems faced due to demonetization drive, the Reserve Bank of India (RBI) on 21 November 2016 provided how many additional days for the repayment of small loans? – 60 days

Explanation: In view of the cash crunch being faced by borrowers due to demonetization, the RBI on 21 November 2016 provided an additional 60 days for the repayment of housing, car, farm and other loans worth up to Rs. 1 crore. It applies to loans payable between 1 November and 31 December 2016.

The relaxation is available to entities running working capital accounts with any bank with the sanctioned limit of Rs. 1 crore or less. Term loans, both business or personal, secured or otherwise, on the books of any bank or any NBFC, including NBFC-MFI, would get the benefit of this relaxation.

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10) According to the latest data on global wealth from Credit Suisse, the richest 1% Indians own how much share in country’s wealth? – 58.4%

Explanation: The richest 1% of Indians now own 58.4% of the country’s wealth. This was revealed in the latest data on global wealth from Credit Suisse Group AG, the financial services company based in Zurich (Switzerland).

The share of the top 1% is up from 53% last year. In the last two years, the share of the top 1% has increased at a cracking pace, from 49% in 2014 to 58.4% in 2016.

It is worth mentioning that the share of the top 1% in the country’s total wealth improved from 40.3% in 2010 to 49% in 2014. In sharp contrast, the bottom half of the Indian people own a mere 2.1% of the country’s wealth.

This proves that India is one of the most unequal societies in the world. But the highest un-equality was reported in Russia where top 1% own 74.5% of the nation’s wealth. On the other had the top 1% in China own 43.8%, in Indonesia they own 49.3%, in Brazil 47.9%, in South Africa 41.9%.

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