Banking and Financial Awareness – 125

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05 Feb, 2017

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1) India Post Payments Bank (IPPB) kicked off its operations by rolling out pilot services in which two cities on 31 January 2017? – Raipur and Ranchi

Explanation: India Post Payments Bank is the third entity to receive payments bank permit after Airtel and Paytm. On 31 January 2017 it rolled out its pilot services in two cities Raipur (Chhattisgarh) and Ranchi (Jharkhand)

The bank will offer an interest rate of 4.5% on deposits up to Rs. 25,000; 5% on deposits of Rs. 25,000-50,000 and 5.5% on Rs. 50,000-1,00,000. Also 1,000 ATMs of India Post will be transferred to IPPB.

The paid up equity of IPPB is Rs. 800 crore, of which the government has already infused Rs. 275 crore. It plans to have 650 branches across the country by September 2017.

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2) The Union Government on 24 January 2017 approved how much interest subsidy on loans of up to Rs. 2 lakh for all households which are not covered under Pradhan Mantri Aawas Yojana (Grameen)? – 3%

Explanation: In a bid to ease EMI burden by ensuring cheap home loans in rural areas, The Union Government on 24 January 2017 approved 3% interest subsidy on loans of up to Rs 2 lakh for all households which are not covered under Pradhan Mantri Aawas Yojana (Grameen).

Interest subsidy would be available to every rural household which is not covered under the PMAY(G), under which the government aims to construct about 44 lakh houses. The scheme would also enable people in rural areas to construct new houses or add to their existing pucca houses to improve their dwelling units.

National Housing Bank (NHB) would implement the scheme and the government would provide the net present value of the interest subsidy of 3% to it.

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3) What is the guaranteed interest rate under the Varishtha Pension Bima Yojana (VPBY) 2017, the new senior citizen pension plan that was approved by the Union Cabinet on 24 January 2017? – 8%

Explanation: The Varishtha Pension Bima Yojana (VPBY) 2017, a scheme unannounced by the Prime Minster Narendra Modi on new-year eve, was approved by the cabinet on 24 January 2017.

One important feature of the scheme will be that it comes with a guaranteed interest of 8% for 10 years of the senior citizens (above 60 years of age).

VPBY is expected to be launched on 1 April 2017 by Life Insurance Corporation of India (LIC). It will remain open for subscription for one year from the date of launch. The subscriber will have the option to opt for a pension on a monthly, quarterly, half yearly and annual basis.

If there is a shortfall between LIC generated return and the guaranteed 8% return, it would be borne by the government.

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4) The Economic Survey 2016-17, that was presented on 31 January 2017, has recommended which tool as an alternative to the various subsidy focused social welfare schemes? – Universal Basic Income (UBI)

Explanation: Universal Basic Income (UBI) is a form of social security in which all citizens or residents of a country regularly receive an unconditional sum of money, either from a government or some other public institution, in addition to any income received from elsewhere.

The Economic Survey 2016-17 has stated that has recommended Universal Basic Income (UBI) as an alternative to the various subsidy focused social welfare schemes that aim to reduce poverty. However, the Survey also stated that the time is still not ripe for implementation of UBI in India.

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5) The Employees’ Provident Fund Organisation (EPFO) on 16 January announced that it would invest at least Rs. 2,800 crore in the Central Public Sector Enterprises exchange-traded fund (CPSE-ETF)’s follow-on sale. What is the significance of this move by the EPFO? – The move marks the first time that EPFO is participating in the government’s divestment plans

Explanation: The EPFO announced its decision to invest at least Rs. 2,800 crore or over 62% of the original issue size in the Central Public Sector Enterprises exchange-traded fund (CPSE-ETF)’s follow-on sale or further-fund offer (FFO). It thus became the first time that EPFO is participating in the government’s divestment plans.

As a part of its divestment programme, the government had announced second tranche sale of the CPSE-ETF, aiming to raise Rs. 4,500 crore. The ETF offer opened for subscription on 17 January 2017.

The CPSE ETF was launched by Goldman Sachs Asset Management India in March 2014, and comprises stocks of 10 PSU firms – Oil and Natural Gas Corp. Ltd, Coal India Ltd, Indian Oil Corp. Ltd, GAIL (India) Ltd, Rural Electrification Corp. Ltd, Oil India Ltd, Power Finance Corp. Ltd, Container Corp. of India Ltd, Bharat Electronics Ltd and Engineers India Ltd.

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6) The Union Government during January 2017 transferred the role of advising the government on how to utilise the proceeds from disinvestment from the Department of Investment and Public Asset Management (DIPAM) to which department in its ongoing efforts to streamline the disinvestment process? – Department of Economic Affairs

Explanation: According to a notification issued by the Cabinet Secretariat, the Department of Economic Affairs in the Finance Ministry will now be in charge of “financial policy in regard to the utilisation of the proceeds of disinvestment channelised into the National Investment Fund.” Till now this responsibility rested with the Department of Investment and Public Asset Management (DIPAM).

The move came days after the Union Cabinet approved an alternative mechanism to decide the modalities to do with stake sales in public sector undertakings (PSUs), so as to speed up the process.

During his Budget speech 2016-17, Finance Minister Arun Jaitley had announced renaming the previously known Department of Investment as DIPAM.

The Centre had created a National Investment Fund in 2005 in which the proceeds from the disinvestment of Central Public Sector Enterprises (CPSEs) were to be channelised.

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7) The rollout date for the ambitious Goods and Services Tax (GST) was deferred to which new date, as announced by Union Finance Minister Arun Jaitley on 16 January 2017? – 1 July 2017

Explanation: Union Finance Minister Arun Jaitley on 16 January 2017 declared that the rollout date of the Goods and Services Tax (GST) has been deferred to 1 July 2017. The Union Govt. had earlier announced 1 April 2017 as the GST rollout date.

In another important development, the GST Council also reached a consensus on the crucial issue of dual control. Under this, 90% of the GST taxpayers with up to Rs. 1.5 crore turnover would be assessed by the States and those above Rs. 1.5 crore would be assessed by both the States and the Centre on a 50:50 basis.

The GST will subsume a host of indirect taxes levied by the Centre and the States, including excise duty, VAT, service tax, entry, luxury and entertainment levies.

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8) In an important development the Cabinet Committee on Economic Affairs (CCEA) on 18 January 2017 gave its go-ahead for the listing of five public sector general insurance companies in the stock market. The government will bring down its holdings in these companies from 100% to – 75%

Explanation: The listing of these PSU-based general insurance companies is expected to help them raise resources from the capital market to meet fund requirements. These companies are – New India Assurance, United India Insurance, Oriental Insurance, National Insurance, and General Insurance Corporation of India.

After listing, the government’s holdings in these companies will be brought down to 75% from 100% through the offer of shares in one or more tranches.

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9) All but four states were exempted from mandatory investment norms for the National Small Savings Fund (NSSF) as announced by the Union Govt. on 18 January 2017. The move is expected to allow states to borrow from the market at more competitive rates. Which 4 states are still under NSSF’s mandatory investment norms? – Arunachal Pradesh, Delhi, Kerala and Madhya Pradesh

Explanation: It is worth mentioning that the 14th Finance Commission had recommended that the state governments should be excluded from mandatory investment norms for the National Small Savings Fund (NSSF). The main reason given was that NSSF loans come at an extra cost to the State Governments compared to the market rates which are considerably lower.

In tune with this, the Cabinet meeting chaired by Prime Minister on 18 January 2017 announced to exempt all but four States from mandatory investment norms for the NSSF with effect from 1 April 2016. It was announced that Arunachal Pradesh will be given loans to the tune of 100% of NSSF collections within its territory, while Kerala, Madhya Pradesh and Delhi (UT) will be provided with 50% of collections.

National Small Savings Fund (NSSF) was established in 1999 with the primary objective of bring all the monetary transactions under small savings schemes of the Union Government under one umbrella.

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10) By launching its initial public offering (IPO) on 23 January 2017 which entity became India’s first stock exchange to hit the capital market? – BSE

Explanation: BSE hit the capital markets by launching its first IPO on 23 January 2017. With this IPO, the stock exchange aims to raise up to Rs. 1,243 crore from the IPO, which is priced at Rs. 805-806 per share.

BSE thus became the first domestic stock exchange to come up with its IPO. Multi Commodity Exchange of India is the only listed bourse in the country but it deals in commodities.

BSE is the world’s largest exchange by number of listed companies. It is India’s largest and the world’s 10th largest exchange by market capitalisation. BSE shares will be listed on NSE as SEBI rules do not allow self-listing for an exchange.

Meanwhile, NSE too had filed draft papers with the SEBI during December 2016 for an estimated Rs. 10,000-crore IPO.

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