Saturday 8 June 2013

BANKING AWARENESS PRACTICE MCQs

1. Indian Commercial Banks are categorized into: 
a) Public sector Banks 
b)Foreign Banks 
c) Private Sector Banks 
d) All of the above 

e) None 

2. Regional Rural Banks have been set up with the basic objectives of:
a) Providing credit to semi - urban & urban population 
b) Providing deposits facilities to farmers 
c) Providing credit & deposit facilities to rural areas 
d) providing credit, deposit and other banking facilities to people in rural areas 
e) None

3. _____ is raised in capital markets 
a) Funds through long term securities
b) Long term loans through Govt. securities 
c) medium term loans 
d) Short - term instruments
e) None

4. Interest on Government secu-rities on fixed basis is known as: 
a) Bank rate 

b) Coupon 
c) Prime Lending Rate 
d) Bench mark PLR 

e) None

5. __ was not nationalized in 1969: 
a) Punjab National Bank
b) Oriental Bank of commerce 
c) Bank of Baroda 
d) Union Bank of India 

e) None

6. In the first round 14 major banks with a liability base of ____ were nationalized: 
a) 10 crore or more 
b) 20 crore or more 
c) 50 crore or more 
d) 100 crore or more 
e) None

7. _____ do not attract TDS: 
a) Fixed deposits 
b) Reinvestment deposits
c) NRO SB 
d) NRO FDR 
e) Recurring deposits 

8. SLR is maintained as a percentage of:
a) Time liabilities 
b) Demand liabilities
c) Time and Demand liabilities 
d) Gross time and demand liabilities 
e) Net demand and time Liabilities 

9. The maximum Statutory Liquidity Ratio to be maintained by banks is_____: 
a) 25% 

b) 30% 
c) 35% 
d) 40% 

e) None

10. CRR funds are kept by the Banks in ____: 
a) Cash in hand at branches 
b) Balance with other banks 
c) Balance in a special Account with RBI 
d) Funds in the currency chest 
e) None

11. An increase in CRR by RBI leads to: 
a) Decrease in deposit 
b) increase in deposit 
c) Increase in lendable resources 
d) Decrease in lendable resources 
e) None

12. When RBI reduce the CRR it results into: 
a) Decrease in deposit 
b) increase in deposit 
c) Increase in lendable resources 
d) Decrease in lendable resources 
e) None

13. What is meant by development Oriented banking? 
a) Infrastructure financing 
b) Extending loans to States, which are undevelopment 
c) Taking up the task of develo-pment of the economy by providing support to under privileged sections of the society 
d) All the above 

e) None

14. Principal functions of SIDBI: 
a) Promotion of SSI 
b) Finance of SSI 
c) Development of SSI
d) All the above 

e) None 

15. ____ heads and conducts the affairs of RBI: 
a) Central Board 
b) local board 

c) Regional board 
d) All of the above 

e) None

16. RBI Provides ____ for meeting day - to - day receipt and expenditure mismatch to both Central and State Governments. 
a) treasury bills 
b) Ways and Means advance 
c) date and securities 
d) All the above 

e) None

17. RBI known as lender of last resort because: 
a) It has to meet the credit need of citizens to whom no one else is willing to lend 
b) Banks lend to go to RBI as a last resort 
c) It comes to help banks in times of crisis 
d) All of the above 

e) None 

18. These days RBI uses Selective credit control measures rather infrequently because of: 
a) Deregulation of functions 
b) Autonomy given to banks 
c) Comfortable liquidity 
d) Reasonable inflation level 
e) All the above 

19. Which is incorrect with regard to powers of RBI: 
a) Holds cash reserve banks
b) Controls banking system through licensing 
c) Supervises Banking system through inspection 
d) None of the above 

e) All

20.Intervenes in markets to maintain the external value of the Indian rupee: 
a) Exporters 

b) Importers 
c) RBI 

d) IMF 
e) None

21. In India, forex rates are determined by: 
a) Importers b) Exporters 
c) RBI d) Ministry of commerce 
e) Demand and supply forces 

22. Regional Rural Banks were set up on the recommendations of:
a) Nariman committee 
b) Narasimham committee 
c) Gadgil committee 
d) Puri committee 

e) None

23. committee, launched the process of reforms of financial system in India: 
a) Gadgil committee 
b) Nariman committee 
c) Narasimham committee 
d) khanna Committee 

e) None

24. Which of the following can be categories as a Merchant Banking service? 
a) Consultancy on finance to a company 
b) Advance in capital structure 
c) Managing mergers 
d) Helping in finalizing take over 

e) All the above 

25. The instrument which provides proprietary interest in company and which entitles a person to dividend on profits, is called? 
a) Bond 

b) Share
c) Debenture 

d) Warrant
e) Any of the above 

26. Which of the following provides proper definition of a Mutual Funds? 
a) It is an association of members of public 
b) These members want to invest in financial instrument 
c) They want to invest in financial instrument assts of business sector 
d) All the above 

e) None 

27. Which of the following organisations/agencies works solely to monitor and arrange flow of agriculture credit in India?
a)NABARD

 b) SIDBI 
c) RBI 

d)SEBI 
e) None of these

28. The currency notes of which of the following denominations are not printed in India ?
a) Rs. 5 

b) Rs. 10 
c) Rs. 50
d) Rs. 2500

e) Rs. 1000

29. Which of the following is not the name of a bank functioning in India?
a) Central Bank of India
b) UCO Bank

c) Aegon Religare 
d) Dena Bank

 e) ICICI Bank

30. When banks accept a fixed sum of money from an individual for a definite term and pay on maturity with interest, the deposit is known as : 
a) Term Deposit 
b) Demand Deposit

c) Bond
 d) Mortgage
e) Advance. 

31. Which of the following terms NOT used in banking/finance related matters ?
a) Discount Rate
b) Letter of credit
c) Policy Rate

d) Exchange rate
 e) Base rate

32. Who amongst the following is the chief of SEBI?
a) Milind Bhave 

b) UK Sinha 
c) Shashikath Verma
d) Shyamala Gopinath
e) None of these

33. Which of the following is a leading electronic-payment tec-hnology firm?
a) Visa 

b) Max
c) BSE
d) Sensex

e) SWAP

34. Global Market means market of :
a) USA 

b) China
c) OPEC members
d) European union countries 
e) All major countries and their alliances

Answers:
1) d; 2) d; 3) a; 4) b; 5) b; 6) c; 7) e; 8) e; 9) d; 10) c; 

11) d; 12) c; 13) c; 14) d; 15) a; 16) b; 17) c; 18) e; 19) d; 20) c;
21) e; 22) b; 23) c; 24) e; 25) b; 26) d; 27) a; 28) d; 29) c; 30) a;
31) e; 32) b; 33) a; 34) e; 

Monday 8 April 2013

BANKING AWARENESS TERMS

Nationalisation of Banks in India in Two stages: 

On 19th July 1969, 14 Private Sector Banks Nationalised In first Phase by Late Indira Gandhi, the then Prime Minister of India.
1) Allahabad Bank
2) Bank of Baroda
3) Bank of India
4) Bank of Maharashtra
5) Canara Bank
6) Dena Bank
7) Central Bank of India
8) Indian Bank
9) Indian Overseas Bank
10) Punjab National Bank
11) Syndicate Bank
12) Union Bank of India
13) United Bank of India
14) United Commercial Bank

On 15th April 1980, 6 Private Sector Banks Nation-alised in second phase.
1) Andhra Bank
2) Corporation Bank
3) New Bank of India - Merged With PNB in 1993
4) Oreintal Bank of Commerce - Global Trust Bank Merged with OBC.
5) Punjab and Sind Bank
6) Vijaya Bank

Important Bits:

1. Present RBI Governor is 
D. Subba Rao, I.A.S.
2. RBI Central Office Located at Mumbai.
3. Authority to Issue of Currency Notes into Circulation by 
Reserve Bank
4.Signature on Currency Notes by Governor of RBI.

5. Prouducts of Electronic Banking Innovation are -
A) Internet Banking
B) Electronic Funds Transfer
C) Offshore Banking
D) Mobile Banking
E) Smart Cards

6. Country's Largest Commercial Bank - State Bank of India.
7. NPA - Non-Performing Asset-
A loss to Bank or a bad debt.

8. Stale Cheque - A Cheque becomes Invalid from the date of Issue of 3 Months.

9. Negotiable Instruments are:- As per Negotiable Instrument Act, 1881, Promissory Note, Bill of Exchange and a Cheque.

10. State Bank of India Nationalised on - July 1st, 1955

11.State Bank Previously Know as - Imperial Bank of India.

12. RBI Functioning From: 
01-04-1935

13. Repo Rate - The Interest Rate Charged by RBI to Banks on Loans.

14. Reverse Repo Rate: The Interest Rate at which RBI borrows from other Banks.

15. BPLR - Bench Mark Prime Lending Rate Charged by a Bank to borrowers of Funds. 

Saturday 16 March 2013

Urban Cooperative Banks


The number of Urban Cooperative Banks (UCBs) whose license was cancelled in the last three yearsare, 31 in 2009-10, 12 in 2010-11 and 14 in 2011-12.

                 Reserve Bank of India (RBI), the licensing authority for UCBs announced in the Annual Policy Statement (2004-05) that no fresh proposals for new UCBs would be considered till a comprehensive policy including an appropriate legal and regulatory framework for the sector is put in place. There has been no change in the policy of RBI since then. An Expert Committee on the subject was constituted in April, 2010 which submitted its report to RBI in September, 2011.

                 RBI has, from time to time, taken a number of steps to strengthen the financial position of UCBs, which, inter aliainclude ;-

·        Allowing merger of UCBs to encourage merger/amalgamation and to provide an avenue for non-disruptive exit route for weak UCBs;
·        Allowing UCBs to raise share capital;
·        Allowing financial restructuring of weak UCBs by conversion of deposits into equity;
·        Entering into MOU with State Governments/UTs and Central Government (for multi-State UCBs) to address the problem of dual control of UCBs by RBI and Registrar of Cooperative Societies; and
·        Setting up a Task Force on Urban Cooperative Banks in each State/UT with an objective to have a consultative arrangement for identifying weak and potentially viable entities and turning them around and also to provide a non disruptive exit path to unviable entities so as to ensure continuous process of monitoring of such UCBs

Friday 15 February 2013

RBI directs Co-op banks to not grant loans for gold purchase


The RBI has directed State and Central co-operative banks not to give loans for purchase of gold in any form to curb the considerable increase in its import in recent years.
Currently, these banks are allowed to grant loans against pledge of gold ornaments, but not permitted to grant any advance for purchase of gold in any form. They offer loans for various purposes against the security of gold/gold ornaments as part of their lending policy.

Sunday 10 February 2013

Corporation Bank launches new variants of savings bank accounts


Corporation Bank has rolled out two new types of savings accounts namely SB Super and SB Signature.
A customer should maintain a minimum Quarterly Average Balance (QAB) of Rs 15,000 for SB Super and Rs 1 lakh for SB Signature.
Customers having any of the two accounts will be offered preferential loan processing. Both accounts offer bundled demat and trading account including a waiver of annual maintenance charges for the first year. They also bring concessions and offers like free NEFT, SMS banking, and 25 % concession in bank charges for gold coins.

Thirty Software companies detach from NASSCOM to form “iSpirt”


30 Indian software product companies have decided to form a new association called the Indian Software Product Industry Round Table, or “iSpirt”.
Why this separation:
Software companies involved in forming the new group have felt the need to create a new body which would be a group of Software Products companies rather than IT services companies like TCS, Infosys, and Wipro etc. which dominate NASSCOM. The objective is to bring all the software product companies (large and small) to share expertise and experiences, and create a larger awareness in society and government about the critical role the industry can play and something they believe they cannot effectively do under the larger NASSCOM umbrella. They have named the new body as Indian Software Product Industry Round Table, or iSpirt. Founding companies include Tally Solutions, QuickHeal, InMobi, Nucleus software, and industry stalwarts. The idea is to create and promote mass-solution software that can be bought off the shelf, like MS Windows or Office. The new association’s members want to offer education software for all schools rather than just IITs/IIMs.
The thirty founding members are led by Bharat Goenka, co-founder of Tally Solutions, Sharad Sharma, former head of Yahoo India R&D, startup mentor and founder of Brand Sigma, Naveen Tewari, founder of In-Mobi , and Vishnu Dusad, founder of Nucleus Software.
Why they are emphasizing on software products over software services?
Software services which are offered by IT service providers like TCS, Infosys cater to the needs of small number of people whereas the scalability of Software Product like Microsoft office, Tally is very high and many of its operations can be performed by the user itself.

Aircel offers ‘Mobile Money’


The Telecom operator Aircel has launched a new service called ‘Mobile Money’ in collaboration with ICICI Bank and Visa to enable its customers transfer money, pay bills and withdraw cash by using only their mobile phones—without having to make a trip to the bank or an ATM.  It is similar to Vodafone’s M-Pesa service which first pioneered to great success in Africa.
The service will be initially rolled out in Tamil Nadu, specifically for the Chennai – Tirunelveli corridor – to help migrant labourers send back money to their villages.
How does it work:
A person who wishes to transfer money from A location to B destination will have to deposit the money with a correspondent in the A area, after which an SMS is sent to the recipient confirming the transaction details. The recipient has to merely go to a banking correspondent in their respective area (B) to retrieve the cash.
This plan will work even if both parties have no ICICI bank account, with the minimum amount needed to start an account being Rs. 100. The company will make money by charging commission ranging from 1.5 to 3% on each transaction.

Thursday 7 February 2013

Amendments to the National Bank for Agriculture and Rural Development (NABARD) Act, 1981


The Union Cabinet  gave its approval to the amendments to the National Bank for Agriculture and Rural Development (NABARD) Act 1981.

The following amendments to the NABARD Act 1981 are proposed:

1.      Raising the authorized capital of NABARD to Rs. 20,000 crore from Rs. 5,000 crore.

2.      The meaning of cooperative society is proposed to be enlarged to include multistate cooperative societies registered under any Central law or any other Central or State law relating to cooperative societies.

3.      Change of ownership to facilitate the transfer of the remaining share capital of NABARD from the Reserve Bank to the Central Government.

4.      Increasing the scope of operations of NABARD under short term funding purposes and other changes.

The following benefits are projected by this amendment:-

1.  By increasing the authorized capital of NABARD to Rs 20,000 crore from Rs 5,000 crore, the ability of NABARD to mobilize resources from the market will be enhanced thereby new credit products, new credit linkages and new clients will be developed.

2.  The amendments allow NABARD to lend to new institutions, mainly Societies covered under multistate cooperative societies act and other central laws, producer organizations or such class of financial institutions which are approved by the Central Government. This is likely to benefit a larger segment of the financially excluded farmers in the country.

3.  The amendments allow combination of credit, creation of short term operations fund and swapping of debt of farmers.

4.  The decision of the Government to transfer the balance one percent shares to the Govt. of India from Reserve Bank of India (RBI) in NABARD shall be carried out, which will provide for increased public accountability, as the Government will acquire the equity held by RBI.

5.  NABARD will combine the post of Chairman and the post of Managing Director, into one, therefore Chairman and Managing Director, under the provisions of the NABARD Act relating to these two posts. This shall ensure a distinct line of command.


Background

        NABARD was established on 12 July 1982 to provide sharp focus to agriculture credit and rural development. NABARD adopted, as its mission, the promotion of sustainable and equitable development of agriculture and rural prosperity through effective credit support, related services, institution development and other innovative initiatives.

Friday 1 February 2013

RBI cuts policy rates by 0.25 percent


After a long gap of nine months, the Reserve Bank (RBI) has reduced the short-term lending rate by 0.25 per cent to 7.75 per cent and Cash Reserve Ratio (CRR) by similar margin to 4 per cent thus released Rs 18,000 crores primary liquidity into the system. While repo rate cut will reduce the cost of borrowing for individuals and corporates, the reduction in CRR, which is the portion of deposits that banks have to park with RBI, would improve the availability of funds.

Following the repo rate revision, the other policy rates like reverse repo, bank rate, and Marginal Standing Facility Rate too will come down by 0.25 per cent.
These initiatives are aimed at encouraging investments, supporting growth and anchoring inflationary expectations.

Inflation has been the prime inhibiting factor that has prevented the RBI from cutting repo rate in the last nine months. The RBI, however, has reduced the growth projections for the current financial year to 5.5 per cent from its earlier estimate of 5.8 per cent.  On inflation, it moderated the rate to 6.8 per cent for March-end from earlier projection of 7.5 per cent.
What is CRR?

Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with RBI. If RBI decides to increase the per cent of this, the available amount with the banks comes down. RBI is using this method (increase of CRR rate), to drain out the excessive money from the banks.

What is SLR?

Statutory Liquidity Ratio is the amount of liquid assets, such as cash, precious metals or other approved securities, that a financial institution must maintain as reserves other than the Cash with the Central Bank

What is Repo and Reverse Repo rate?

A repurchase agreement is the sale of securities together with an agreement for the seller to buy back the securities at a later date. The repurchase price should be greater than the original sale price, the difference effectively representing interest, called the repo rate. The party that originally buys the securities effectively acts as a lender. The original seller is effectively acting as a borrower, using their security as collateral for a secured cash loan at a fixed rate of interest.

A reverse repo is simply the same repurchase agreement from the buyer's viewpoint, not the seller's. Hence, the seller executing the transaction would describe it as a "repo", while the buyer in the same transaction would describe it a "reverse repo". So "repo" and "reverse repo" are exactly the same kind of transaction, just described from opposite viewpoints. The term "reverse repo and sale" is commonly used to describe the creation of a short position in a debt instrument where the buyer in the repo transaction immediately sells the security provided by the seller on the open market.

Central Bank unveils limited period deposit scheme


Central Bank of India has launched a new limited period deposit scheme – Cent 101, to mobilise up to Rs 3,000 crore, for a short-term requirement of the bank.
Announcing the launch here, B. Akbaraly, Zonal Manager (South Zone), Central Bank of India, said in the last couple of days of soft launch, the bank managed to mobilise Rs 58 crore. “Our target is to collect at least Rs 560 crore before the end of March 31, from the Tamil Nadu and Kerala markets alone,” he said.
Elaborating on the scheme, R. Thiagarajan, Deputy General Manager of the bank, said the bank will pay 8.55 per cent interest, which is the highest in the industry. For senior citizens, it offers 9.05 per cent.
Minimum amount that can be deposited is Rs 1,000, thereafter in multiples of Rs 1,000 and the maximum limit is Rs 10 crore.
Earlier, the bank came out with a similar plan for 555 days – Cent 555, which was a great success, said Akbaraly.

HYBRID CARD:

The bank is also proposing to come out with a hybrid card, which will work as an usual debit card as long as the individual has balance in his bank account. Once the credit balance is exhausted by the individual, the card will automatically turn to be a credit card, he explained.
As on December 31, 2012, the bank has crossed 3.5 million debit card base. It has plans to launch co-branded debit, credit and pre-paid cards with several corporates.
The bank, being a late entrant to the ATM system segment, had only around 1,000 ATMs across the country by the end of 2011-12. In the current financial year, so far, it crossed the 2,000-mark. “In the next two months, we are planning to install another 500 ATMs across cities, to take the total to 2,500 by the end of the current financial year.

Vijaya Bank’s new credit cards target high net-worth individuals

Vijaya Bank has launched two credit cards ‘V-Platinum’ and ‘V-Privilege’ targeted at high net worth individuals (HNIs) and term deposit holders.

Launching the credit cards, H.S. Upendra Kamath, Chairman and Managing Director, said “We have set a target to issue 10,000 ‘V-Platinum’ cards and 5000 ‘V-Privilege’ by the end of this calendar year”
“The bank has issued around one lakh ordinary credit cards and has exposure of Rs 29 crore. But due to debit card, credit cards were not popular, hence today we have launched a variant of credit card targeted at HNIs and term deposit holders,” he added.
Vijaya Bank has drawn up a plan to issue both the credit cards by utilising the services of its 12,000 employee based and through its 1333 branches.

Amendments to Regional Rural Banks (RRBs) Act, 1976


The Union Cabinet today gave its approval to the proposed amendments in the Regional Rural Banks (RRBs) Act, 1976 to enhance authorized and issued capital to strengthen their capital base. The term of the non official directors appointed by the Central Government is proposed to be fixed not exceeding two years. 

The proposed amendments will ensure financial stability of RRBs which will enable them to play a greater role in financial inclusion and meet the credit requirements of rural areas and the Boards of RRBs will be strengthened. 

Background 

Regional Rural Banks (RRBs) were established under Regional Rural Banks Act, 1976 (the RRB Act) to create an alternative channel to the `cooperative credit structure and to ensure sufficient institutional credit for the rural and agriculture sector. RRBs are jointly owned by the Government of India, the concerned State government and sponsor banks, with the issued capital shared in the proportion of 50 percent, 15 percent and 35 percent, respectively. As per provisions of the Regional Rural Banks Act, 1976 the authorized capital of each RRB is Rs. 5 crore and the issued capital is a maximum Rs. 1 crore. 

Cheque Truncation System (CTS)

It is one of the major innovations in cheque clearing after the Magnetic Ink Character Recognition (MICR) cheques introduced in the 80s. Cheque truncation is a system between clearing and settlement of cheques based on electronic images.
This form of clearing does not involve any physical exchange of instrument. Bank customers would get their cheques realised faster as local cheques are cleared almost the same day as the cheque is presented to the clearing house, while intercity clearing happens the next day. Besides speedy clearing of cheques, banks also have additional advantage of reduced reconciliation and clearing frauds. It is also possible for banks to offer innovative products and services based on CTS.

Why is it needed:
Though MICR technology helped improve efficiency in cheque handling, clearing is not very speedy as cheques have to be physically transported all the way from the collecting branch of a bank to the drawee bank branch. The CTS is more advanced and more secure. Many countries have sought to address this issue with cheque truncation, in which the movement of the physical instruments is curtailed at a point in the clearing cycle, beyond which the process is completed, purely based only on the electronic data and images of the cheques.
What has been the international experience in this regard:
Denmark and Belgium are pioneers in CTS. They adopted complete cheque truncation system more than two decades ago. Sweden is the typical example for having achieved complete truncation where all the cheques can be presented and encashed at any branch; irrespective of the bank on which they are drawn. CTS also takes care of the needs of future electronic transactions.

What has RBI and banks done:
RBI has already enabled CTS to be fully functional in New Delhi. Soon even cheque clearing in Chennai will be settled through CTS. Banks have also taken steps to introduce appropriate technology to facilitate this system.
What are the salient features of CTS?
The physical cheque is truncated within the presenting bank itself. Settlement is generated on the basis of current MICR code line data. These images will be archived electronically and be preserved for eight years. A centralised agency per clearing location will act as an image warehouse for the banks.

Sunday 27 January 2013

Inter-Bank Mobile Payment Service

Inter-Bank Mobile Payment Service (IMPS) offers an instant, 24X7, interbank electronic fund transfer service through mobile phones. There are two types of IMPS services: A personto-person (P2P) service and a person-to-merchant (P2M) service. While the P2P service was launched some 18 months ago, P2M service was made available only recently.
HOW TO START A P2P OR P2M SERVICE:
Register your mobile number with your bank. Get a seven-digit Mobile Money Identifier, or MMID, number. This number is used to identify your bank and is linked to your account number. The combination of mobile number and MMID is unique for particular account, and the customer can link the same mobile number with multiple accounts in the same bank, and get separate MMID for each account. After this, get a Mobile Banking PIN, or M-PIN, which is a password to be used during transactions for authentication and security. Download mobile banking application or use the SMS facility provided by the bank to make a payment.
HOW TO SEND OR RECEIVE FUNDS FOR P2P TRANSACTIONS:
To send money, initiate an IMPS transaction using the mobile app or SMS. You need to enter the beneficiary's mobile number and MMID, amount and M-PIN for initiating a transaction. You will then receive a confirmation SMS for the transaction. To receive money, share your mobile number and MMID with the sender. The sender then initiates the above-mentioned steps. And you get an SMS confirmation for the money received.
HOW DOES THE P2M SERVICE WORK:
There are two ways in which P2M transactions can be performed: customerinitiated transactions (P2M PUSH) and merchantinitiated transactions (P2M PULL). P2M push transactions can be used for paying insurance premium, mobile /DTH recharge, credit card fee, utility bills, over-the-counter payments, and face-to-face payments such as pizza delivery, couriers and cabs. For P2M PUSH, a customer initiates transaction through the mobile banking app or SMS facility provided by the bank. For P2M PULL, the transaction is initiated through the website of the merchant. Plus you need to get a one-time password (OTP) from your bank.
IS THERE A CASH LIMIT:
Yes. Most banks cap the daily limit via IMPS app at Rs 50,000 per day. SBI limits transfers to Rs 1,000 per day through the SMS mode.

Friday 25 January 2013

SBI ties up with Shriram Automall


State Bank of India (SBI) has entered into a pan-India tie-up with Shriram Automall India Ltd, a subsidiary of Shriram Transport Finance Company, for assisting in post-seizure, warehousing and sale of seized tractors through organised public sale.
SBI, in a statement said, the tie-up would help the company in better price recovery of impaired assets in the form of tractor loans, as Shriram Automall will offer end-to-end solution through more than 65 auto malls.
The auto mall offers a common meeting platform for potential buyers and sellers where the valuation of the vehicle is determined through a transparent process.
“It is expected that a large number of non-performing tractor loan accounts would be addressed through this tie-up in the coming months. Apart from ensuring optimum recovery from the sale of old tractors, this tie-up is expected to create a market for pre-used tractors also where SBI may explore lending opportunities,’’ the bank said.

42% workers are now ‘middle-class’: ILO report


The middle class is rising in a big way, especially in developing countries. About 42 per cent of workers, or nearly 1.1 billion, are now ‘middle-class’, living with families on over Rs 225 ($4-13) per person per day, says a new ILO report.
By 2017, the developing world could see the addition of 390 million more workers in the middle class, the International Labour Organisation (ILO) report says.
“Over time, this emerging middle-class could give a much needed push to more balanced global growth by boosting consumption, particularly in poorer parts of the developing world,” said Steven Kapsos, one of the authors of the Global Employment Trends 2013.
Employment growth
However, the report raises a red flag for employment growth in 2013-14, even if there is a moderate pick-up in output growth.
It estimates that the number of unemployed worldwide may rise by 5.1 million to more than 202 million in 2013 and by another 3 million in 2014, half-a-million of which will be youth.
“The indecision of policy-makers in several countries has led to uncertainty about future conditions and reinforced corporate tendencies to increase cash holdings or pay dividends rather than expand capacity and hire new workers,” says the report.
GDP growth
The ILO report noted that in India, growth in investment contributed 1.5 percentage points to the overall GDP growth over the past year, down from 1.8 percentage points in 2011, while the contribution from consumption declined to 2.8 per cent versus 3.2 per cent the previous year.
Job creation, labour productivity
For countries such as India, the report called for focus on both employment creation and labour productivity.
It noted that in India, even where jobs were created, a large number of workers remained in agriculture (51.1 per cent), in the urban informal sector or in unprotected jobs (contract) in the formal sector.
The share of workers in manufacturing was just 11 per cent in 2009-10, no higher than a decade earlier.
Like many regions, growth has failed to deliver a significant number of better jobs in the formal economy.
Formal employment
Most notably in India, the share of formal employment has declined from around 9 per cent in 1999-2000 to 7 per cent in 2009-10, in spite of record growth rates, it said quoting a study.
Using a comparable definition for the latest year available, the report said the share of workers in informal employment in the non-agricultural sector stood at 83.6 per cent in India (2009-10), 78.4 per cent in Pakistan (2009-10) and 62.1 per cent in Sri Lanka (2009).
Significantly, the report noted that unemployment rates increased rapidly for high-skilled workers, especially women.
“Indians with a diploma suffer particularly, with unemployment rates reaching 34.5 per cent for women and 18.9 per cent for men during 2009-2010,” it added.

RBI hikes FII limit in Govt securities, corporate bonds by $5 billion


The Reserve Bank today hiked FII investment limits in Government securities and corporate bonds by $5 billion each, taking the total cap in domestic debt to $75 billion, with a view to bridging the current account deficit.
Further liberalising the norms, the three-year lock-in period for foreign institutional investors (FIIs) purchasing Government securities (G-Secs) for the first time has been done away with, RBI said.
The sub-limit of $10 billion for investment by FIIs and long-term investors in G-Secs stands enhanced by $5 billion, it said.
The limit in corporate debt, other than infrastructure sector, stands enhanced from $20 billion to $25 billion, RBI said.
With an increase of $5 billion in each of the two categories, FIIs and long-term investors can now invest $25 billion in G-Secs and $50 billion in corporate debt instruments, taking the total to $75 billion.
The earlier FII investment limit in G-Secs was $20 billion and for corporate debt it was $45 billion, including a sub-limit of $25 billion for infra bonds.
RBI further said: “Residual maturity condition shall not be applicable for the entire sub-limit (in G-Secs) of $15 billion but such investments will not be allowed in short-term paper like Treasury Bills, as hitherto”.
The overall FII limit of domestic debt is distributed through a host of categories across Government, corporate and infrastructure debt.
Long-term investors include sovereign wealth funds, multilateral agencies, pension funds and foreign central banks.
Government, which is battling a high current account deficit (CAD) — the gap between inflows and outflows of foreign funds — is trying to attract more foreign funds into the country.
The CAD touched a record high of 5.4 per cent in the July-September quarter of the current fiscal.
In order to check the outflow of foreign currency, the Government recently hiked the import duty on gold and also took steps to encourage mutual funds to park their gold in deposit schemes offered by banks.
As a measure of further relaxation, the RBI added that it had dispensed with the one-year lock-in period on holding infrastructure bonds.

Developing nations top global FDI index for first time in 2012: UN


Developing countries overtook their traditionally wealthier counterparts in attracting foreign direct investment for the first time last year, as industrialised nations bore the brunt of an 18 per cent plunge in FDI flows, the UN’s trade and investment think tank Unctad has said.
Last year, global foreign direct investments — when a company in one country invests for instance in production facilities or buys a business in another country — came in at $1.3 trillion, down from $1.6 trillion in 2011, Unctad’s Global Investment Trend Monitor showed.
In a dramatic shift on the global investment scale, developing countries reaped $680 billion of that, or 52 per cent of the total.
“For the first time in history, developing countries have attracted more investment than developed countries,” James Zhan, who heads UNCTAD’s investment and enterprise division, told reporters in Geneva.
The shift was largely prompted by evaporating investments in crisis-hit developed economies like the United States, European nations and Japan, which accounted for 90 per cent of the $300 billion-decline in global FDI last year, Zahn said.
“We thought we were on the way to a steady recovery, (but) the recovery has derailed,” added Zahn, who pointed out that global investment figures had turned upwards in 2010 and 2011. But amid growing market uncertainty, they fell last year to near the historic low of $1.2 trillion which came during the worst of the global financial crisis in 2009.
The US, which remains the world’s largest recipient of foreign direct investment, saw its FDI inflows slip more than 35 per cent to $147 billion, while Germany saw its net investment level plunge from $40 billion in 2011 to just $1.3 billion last year, mainly due to large divestments there.
“Developing countries also suffered from the global decline,” Zhan said, “but the decline was much more moderate.”
Asia, which raked in 59 per cent of all FDI to developing countries, saw its inflows dip 9.5 per cent, with China, the world’s second-largest recipient of such investments, registering a 3.4-per cent drop in 2012 to $120 billion.
South America and Africa meanwhile registered positive growth in FDI flows last year.
Last year’s overall drop in investments came despite the fact that the global economy grew 2.3 per cent in 2012, while worldwide trade was up 3.2 per cent.
Going forward, Unctad expects FDI flows to rise to just $1.4 trillion this year and to $1.6 trillion in 2014 — still far below the 2007 pre-crisis level of some $2.0 trillion in investments.

IMF: World Economic Growth Rate would be 3.5 percent in 2013

nternational Monetary Fund (IMF) in at update to World Economic Outlook (WEO) on 23 January 2013, projected that the global economic growth rate would be 3.5 percent in 2013. The update mentioned that the global economic growth would strengthen gradually as the limitations of the economic activities have seen a positive note with the start of the year.

Some of the major projections of IMF are

•    Global growth would reach 3.5 percent in 2013, from 3.2 percent in 2012
•    Crisis risks would narrow down but the downside risks will remain crucial
•    Main sources of growth would be the emerging markets, developing countries and the United States

Reasons that may be beneficial in betterment of the economic growth

•    The actions taken in policy making have been responsible in reducing the risk of the acute crisis situation faced in the area and the United States.
•    Actions in terms of plans taken by Japan would also be beneficial in pulling it out from a short-lived recession kind of condition.
•    The policies made by the emerging economies of the world in terms of policy making is has also shown positive outcomes with a good start in the year

The report also described that if the risks of crisis doesn’t materialize, then the expected targets of growth may be crossed and can be stronger then that is projected.

Thing that can show an impact, the growth or result into the downfall


•    Fiscal tightening, if crosses an excessive limit in United States it may have an adverse impact on the economic growth
•    Long-term stagnation of the euro-area would also have an adverse impact

Situations that hinted towards improvement in economic conditions

The economic conditions of the world had shown a positive movement in the third quarter of the 2012 and this was change brought by the performance displayed on the economic front by the emerging economies of the world as well as United States. The borrowing cost of the countries in Euro Zone was marginally better than expected but it also identified some of the weaknesses in the core Euro area. Japan was under the effect of recession in the second half of 2012, which had shown positive signs of improvement in the running year.

Forecasts and the Expected Changes

•    In terms of Euro Zone, IMF managed to downgrade its forecast as this economic situation of the region may contract a bit n 2013.
•    The report also observed slight improvement in the financial conditions of the banks and governments of the Periphery economies, occurred due to the policy actions undertaken by them but these economies has yet not improved in terms of the borrowing conditions in private sector.
•    In terms of United States, the forecast remained broadly unchanged to that of the of October 2012 WEO to 2 percent, but predicted that the support offered to the financial market would support the growth in consumption in the country
•    In terms of Japan, the near-term outlook has also remained unchanged regardless of the recession witnessed by the country in recent past and it’s expected that the monetary easing and incentive package would boost the growth in the country
•    The report projected that the developing economies and the emerging market of the world would grow by 5.5 percent in 2013 and it will remain almost same as it was predicted in October 2012 WEO.
•    In case of China, the IMF has forecasted a growth rate of 7.8 percent, 8.2 percent and 8.5 percent in 2012, 2013 and 2014 respectively. In 2011, it witnessed a growth rate of 9.3 percent.

Findings of the report and threats


•    Following the findings of the report in detail, it’s projected that the Euro Area is one of the biggest threat to the Global Economic Outlook as it poses a downside risk to the economy. If the momentum of reforms is not maintained in the Euro Area than the risk of prolonged stagnation would increase
•   To move ahead of the risk factor, adjustment programs from the periphery countries should continue and be supported by the firewall developments for prevention of the contagion and take steps towards banking union and fiscal integration, the report stated.
•   In case of United States, excessive fiscal consolidation in short term should be avoided and it should raise the debt ceiling and should move ahead to identify a credible medium-term fiscal consolidation plan, that focuses towards entitlement and tax reform.
•    In context of Japan, the report identified that it should find out a medium-term fiscal strategy as lack of such an strategy can bring risks to the stimulus package to it
•  The developing nations and emerging economies need to make fine policies to tackle the of rising domestic imbalances

The overall decrease in the forecast for the global economic growth rate is the result of the economic slowdown witnessed by the world due to the Euro Zone Crisis in existence. The Euro Zone crisis had an adverse impact on the export and import of the world, leading to great set-backs to the emerging economies of the world as well as the developed economies. Before, Euro Crisis the world also suffered from the recession that hit the United States of America in 2009. Japan also witnessed an economic slowdown after the Tsunami that hit the country in 2011 and affected the Fukushima nuclear Plant.

IMF forecasted Indian Economic Growth Rate to be 5.9 percent in 2013


The International Monetary Fund (IMF) on 23 January 2013 projected that the economic growth rate of India in 2013 would be 5.9 percent. The IMF also projected an increased growth rate of 6.4 percent for 2014 looking forward towards the gradual strengthening of the global expansion in India’s context.

In its update at the World Economic Forum (WEO), the IMF also forecasted that the global economic growth rate would be 3.5 percent, little higher than the 3.2 percent estimated earlier. As per the report of IMF, uncertainty in policy making and supply bottlenecks were one of the most visible causes that hampered the growth aspects of the economies like India and Brazil. It also stated that the scopes of easing the policy to any further extent have also gone down in these countries.

About International Monetary Fund (IMF):  
The International Monetary Fund (IMF) is an organization of 188 countries that works for fostering the global monetary cooperation, promote high employment and sustainable economic growth, facilitate international trade, secure financial stability and reduce poverty around the world. Since the end of World War II, the IMF had been playing a major role in shaping the global economy. The IMF has played a part in shaping the global economy.

Tuesday 15 January 2013

Allow us to raise ECBs, asset financing NBFCs tell RBI

Asset financing non-banking finance companies (AFCs) have urged the RBI to permit them to raise external commercial borrowings.
Allowing these companies to raise ECBs would help them diversify their source of borrowings and raise funds at cheaper rates, they have submitted.
Also, such long-term borrowings would lend stability to the asset-liability profile of the AFCs, the Finance Industry Development Council (FIDC) has said.
This suggestion forms part of the representation made by the FIDC to the RBI on the draft guidelines of the Usha Thorat Committee report on issues and concerns of NBFC sector.
FIDC is a self-regulatory organisation representing the Asset Financing NBFCs.
This industry body has also said that Tier-I capital requirement for AFCs be maintained at the existing level of 7.5 per cent.
If it is enhanced to 10 per cent, then the risk weight assigned to productive and real assets such as commercial vehicles, construction equipment, tractors, multi-utility vehicles and cars be reduced to 50 per cent levels, FIDC has said.
The draft guidelines of the Usha Thorat committee stipulate that Tier-I capital for capital adequacy ratio purposes be enhanced to 10 per cent (12 per cent for captive NBFCs and those lending to sensitive sectors).
Existing NBFCs have to conform to this norm within three years from the date of notification, the committee has proposed.

Urjit Patel takes over as RBI Deputy Governor

Urjit Patel took over as the Deputy Governor of the Reserve Bank of India on January 14. The Government has appointed him for a period of three years from January 11, 2013. 
49-year-old Patel is the fourth Deputy Governor, the other three being K. C. Chakrabarty, Anand Sinha and Harun R. Khan. He comes in place of Subir Gokarn, whose term ended on December 31, 2012.  
Patel, who is a Ph.D. (Economics) from Yale University, and M. Phil. from Oxford, has been assigned the abovementioned portfolios. Prior to his appointment as Deputy Governor, Patel was Advisor (Energy & Infrastructure), The Boston Consulting Group.
The new Deputy Governor has been a non-resident Senior Fellow, The Brookings Institution, since 2009. Patel was with International Monetary Fund (IMF) between 1990 and 1995.
Patel was on deputation (1996-1997) from the IMF to the RBI and provided advice on development of the debt market, banking sector reforms, pension fund reforms, real exchange rate targeting and evolution of the foreign exchange market.
He was a Consultant (1998-2001) to the Ministry of Finance, Department of Economic Affairs, New Delhi.
Some of Patel’s previous assignments include, President (Business Development), Reliance Industries Ltd; Executive Director and Member of the Management Committee, Infrastructure Development Finance Company Ltd (IDFC) (1997-2006); Member of the Integrated Energy Policy Committee of the Government of India (2004-2006); and Member of the Board, Gujarat State Petroleum Corporation Ltd.

Sunday 13 January 2013

RBI floats draft norms on capital needs for counterparty risk


In order to enhance risk management system of banks, the Reserve Bank of India (RBI) has proposed tweaking norms for capital adequacy with regard to their exposure in derivative instruments.
Under the new framework, banks’ exposure to central counterparty (CCP), a clearing house, arising from OTC derivatives, exchange traded derivatives and Securities Financing Transactions (SFTs) will be subjected to capital requirements for counterparty credit risk, the RBI said in a draft guidelines.
The central bank has invited feedback from the banks on the draft guidelines on ‘Capital requirements for bank exposures to central counterparties’ by end of this month.
A CCP is a clearing house that interposes itself between counterparties to contracts traded in one or more financial markets, becoming the buyer to every seller and the seller to every buyer and thereby ensuring the future performance of open contracts.
For the purpose of regulatory capital calculation, CCPs will be considered as a financial institution.
The draft norms noted that one of the lessons learnt from the recent crisis has been that OTC derivatives market may be one of the channels for contagion during the crisis.
It was, therefore, decided by the G20 leaders that standardised OTC derivative contracts should be settled through CCPs.
Central clearing will reduce systemic risk by reducing the contagion risk as problems at one institution will not be transmitted to other institutions through OTC derivatives market.
However, requirement of central clearing also concentrates too much risk within the CCPs and any failure of a CCP may be catastrophic for the entire financial system, it said.
The draft norms propose amendments in the Guidelines on Implementation of Basel III Capital Regulations issued in May last year.
The effective date of implementation of Basel III guidelines has been deferred to April 1, 2013

Allahabad Bank, small-businesses body sign pact

Allahabad Bank has signed a memorandum of understanding with the Chamber of Indian Micro, Small and Medium Enterprises to shore up its priority-sector lending. The Chamber will get proposals from its members for consideration of the bank. Once a loan is sanctioned, the organisation will support the bank in follow-up and recovery and provide early warning signals.

Bank of Bahrain appoints new CEO for India operations


Bank of Bahrain and Kuwait has appointed Mallikarjun Kota as its Chief Executive Officer and Country Head-India Operations with effect from January 1, 2013.
Prior to this appointment, Kota was Country Head of Business and Corporate Banking and Branch Head in Hyderabad.

Vijaya Bank deposit scheme


Vijaya Bank has launched a deposit scheme, ‘V-Abhivriddhi’.
The scheme offers higher returns to depositors and is for a three-month period from 2013 January 1 to March 31.
The minimum amount of deposit is Rs 10 lakh and the maximum amount Rs 100 crore with a maturity period ranging from seven days to 180 days. The scheme does not attract any pre-closure penalty charges.

ItzCash ties up with HDFC Bank, Visa

ItzCash Card, a multi-service prepaid card company of the Essel Group, has tied up with HDFC Bank and Visa to launch corporate gift cards. The HDFC Bank ItzCash Visa Gift Card offers a wide range of products and can be used at over a million outlets where Visa cards are accepted. Employers can use the card to reward staff members, customers or pay commissions. The card can be purchased for any value. It comes with a range of security features designed to protect cardholders from unauthorised purchases if their card is stolen. The gift card, which is valid for one year, cannot be reloaded by paying at bank branches and cannot be used in ATMs for withdrawal of cash. The card can be used for purchases at shops and online transactions over the Internet. 

RBI set up Working Group to review Banking Ombudsman Scheme

The Reserve Bank of India in the month of January 2013 had set up a working group to evaluate and make improvements in the grievance redressal mechanism for bank customers. 

The working group constituted in the Reserve Bank of India is going to review, update, and revise the Banking Ombudsman Scheme, 2006. 

As per the RBI annual report of the Banking Ombudsman Scheme 2011-12, In Financial Year 2011-12, the banking ombudsman’s office of the RBI received around 72889 complaints. It disposed off 94 per cent of the customer complaints, About one-fourth of the total customer complaints were about banks’ failure to meet commitments and non-observance of fair practices code. 

Also, it was seen that the Banking Ombudsman received 14492 card-related complaints in the reporting year. Unsolicited cards and charging of annual fee in spite of being offered ‘free’ card formed the basis of some of the complaints against the banks. 

Presently, we have 15 Banking Ombudsmen with unambiguous jurisdiction covering the 29 States and seven Union Territories in India.

Allahabad Bank Signed MoU with Chamber of Indian Micro, Small and Medium Enterprises

Allahabad bank signed a Memorandum of Understanding (MoU) with Chamber of Indian Micro, Small and Medium Enterprises (CIMSME) in Kolkata on 4 January 2013. The MoU was signed to support the priority sector lending. 

CIMSME is basically a body that represents interest of the companies in the Micro, Small and Medium Enterprises (MSME) sector, with the financial institutions, banks, concerned ministries as well as other organisations. 

According to the agreement, CIMSME would help in activating the proposals from the members for the due consideration of the bank. Once the bank sanctions the loan, CIMSME would help the bank in following-up as well as recovering the dues. CIMSME would also help in providing the early signs of warning, if they exist. 

MoU signed between the two will basically help in accelerating the process of faster clearance of loan proposals which lie under MSME. It would additionally, also enable the bank in acquiring quality proposals as well as boosting up the credit flow to this sector. 

MoU signed between CIMSME and Allahabad Bank was executed by General Manager (SME & Retail Credit) as well as the President of CIMSME in the presence of CMD of Allahabad Bank.

R.K. Dubey is Canara Bank CMD

R.K. Dubey, 59, has been appointed the Chairman and Managing Director of Canara Bank. Dubey’s was areas of expertise include planning and budgeting, resource mobilisation, credit, risk management, human resources (HR), IT and marketing. A post-graduate in English, Dubey also has a degree in law and management in HR practices. He is also a certified associate of the Indian Institute of Bankers. Dubey joined Punjab National Bank in 1977 as a management trainee and moved up the ranks to become a general manager in 2008 and was appointed as executive director of Central Bank of India in 2010.

Saturday 12 January 2013

Cabinet approves capital infusion in PSU banks

The Union Cabinet has approved a capital infusion package of Rs 12,517 crore for about 10 public sector banks.

According to the Cabinet Committee on Economic Affairs (CCEA), the move will enable the banks to maintain a minimum tier-1 CRAR (capital to risk weighted assets ratio) at comfortable level under international bank capital adequacy standard norm BASEL-III. This will ensure compliance to the regulatory norms on capital adequacy and will cater to the credit needs of productive sectors of the economy, as well as, to withstand the impact of stress in the economy.

This additional availability of credit will cater to the credit needs of our economy and will also benefit employment oriented sectors, especially agriculture, micro and small enterprises, export, entrepreneurs."

Earlier the government has infused about Rs 20,117 crore in public sector banks during 2010-11, and Rs 12,000 crore in 2011-12.

According to the Economic Survey for 2011-12, the capital infusion had enabled PSBs to "maintain a minimum tier 1 CRAR at eight percent on 31st March, 2012, and also increased shareholding of the government in PSBs to 58 percent".