10. banking today nov 15 (1)

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BANKING TODAY [For the months of November 2015]

Information updated up to October 22, 2015

A bi-monthly e- magazine from Bank House, Bhubaneswar

Edited by S.K.Dash and team

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Index

Section Subject Page No

Section A Banking policy and structural changes 1

Section B General Banking / Branch Banking 6

Section C General Advances 7

Section D Foreign Exchange 8

Section E Financial Inclusion and PS advances 12

Section F Capital market, Insurance Market ,Pension 16

Section G Markets regulated by RBI 18

Section G Current Developments relating to banking 16

Section H Books published by Bank House 22

SECTION A: BANKING POLICY AND STRUCTURAL CHANGES

1) Policy Rates and CRR and SLR

Repo rate with effect from Sept 29 , 2015 : 6.75%.

Reverse repo rate- is 5.75%. Bank Rate is 7.75% MSF rate is 7.75%]

Cash reserve ratio (CRR) is 4.% of NDTL.

Statutory Liquidity Ratio (SLR) from February 7, 2015 is 21.5% of the NDTL.

2) Extent of the liquidity support by RBI to banks

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RBI provides both over night and term liquidity support to scheduled commercial

banks through its Liquidity Adjustment Facility [LAF]. Under LAF a bank can go for

overnight borrowing maximum boup to 0.25 % of its NDTL.

Term liquidity support is provided up to a period of 14 days. The total amount of such

support to the banking system is limited to 0.75% of NDTL of all banks.

RBI has stopped proving refinance to commercial banks against their export credits.

3) Formation of the IDFC Bank Ltd

IDFC Bank Ltd, the 9th new generation private sector bank came into existence on

Oct.1, 2015 with its head quarters in Mumbai.

The bank has been formed by demerger of IDFC to form a Non Operating Financial

Holding Company [NOHFC]; i.e. IDFC Financial Holding Company, of which the

IDFC Bank is a subsidiary.

The capital of the bank is held by the IDFC Financial Holding Company Ltd (53%)

and the existing share holders of IDFC (47%).

The tag line of this bank is “hatke bank”- i.e. a bank with a different approach.

The special features of this bank are (a) Bharat Banking (b) No ATM (d) Service at

door step by use of PoS through by relationship mangers (e) High end technology..

Under “Bharat Banking” the bank has planned opening branches first in few

districts and then covering in stages the other districts.

Out of the first lot of 23 branches opened by the bank16 branches are located tier-IV

centres (population of less than 10,000) in 4 districts of Madhya Pradesh: Indore,

Khandwa, Harda and Hosangabad and rest 7, in metros like Chennai, Kolkata, Delhi,

Bengaluru, Pune, Hyderabad and Ahmedabad.

The bank is headed by the Managing Director Shri Rajiv Lall.

4. Indian Financial Code

The GoI will introduce soon the Indian Financial Code – now in its draft form.

As per this code, the Credit and Monetary Policy will be formed as per the

recommendation of a Monetary Policy Committee [MPC]. Presently it is being done

by the Governor of RBI.

The formation of a Monetary Policy Committee was recommended by Urjeet Patel

committee.

The MPC will consist of seven members: four appointed by the GoI and three from

RBI (the Governor, one of the Deputy Governors, one officer of the bank).

5. Calculation of Base Rate

Base Rate is the minimum rate of interest that can be charged by a bank for any credit

facility. The base rate is computed by the bank itself as per the guidelines provided by

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RBI. At present the Base Rate is computed based on the average cost of funds to the

bank. RBI wants to change this method of computation to from average cost of fund

to marginal cost of fund to the bank.

This will enable to banks to change their base rate in sync with changes in the policy

rates by RBI. And this in turn will bring the desired change in money supply and

inflation.

6. Committee on Financial Inclusion

While a lot of work has been done on financial inclusion a lot more need be done in

systematic manner.

Towards this objective, RBI has appointed a committee headed by Deepak Mohanty,

ED of RBI with the task to come out with a medium term (five years) measurable

action plan for financial inclusion.

8. Advance by a bank to its Directors

Section 20 of Banking Regulation Act, 1949 prohibits banks from granting any loan

or advance to any of its Directors except very small amounts.

However, RBI has now permitted banks to provide the following types of advances to

their directors without any reference to RBI. (a) Purchase of car, personal computer,

furniture; (b) Constructing / acquiring a house for personal use (c) Festival advance,

Credit limit under credit card facility.

For sanction of any other advance banks need prior approval of the RBI.

9. Advance by a bank to its CEO/ whole time Director.

Commercial banks can provide to their Chief Executive Officer / Whole Time

Directors, all types of credit facilities, which form a part of their compensation /

remuneration policy approved by the Board of Directors or any committee of the

Board. They need not obtain prior permission of RBI for such sanction.

The interest rate to be charged cannot be less than that charged by the bank to its own

employees. It will not be linked to the Base Rate.

11. Features of the new series of bank notes

The numbering of bank notes in both the number panels is done in ascending order.

The features enabling the visually challenged persons to identify the notes have been

changed viz: 100 rupee notes carry 4 angular bleed lines 500 rupee notes 5 such

lines and Rs 1000 notes 6 such lines.

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13. Partial Credit enhancement facility for corporate bonds

At present there are few takers of long term bonds issued by companies and SPVs.

The insurance companies, pension funds, provident funds having large sum of long

term funds are not able to invest in such bonds due to low Credit Rating of such

instruments.

In order to improve the credit rating of these bonds, RBI has allowed banks to provide

partial credit enhancement (PCE).

Banks are permitted to provide PCE only by way of sanctioning a non-funded

irrevocable contingent line of credit i.e. irrevocable undertaking to provide credit in

case the company fails to honour the interest and principal when due.

The credit line will be utilised by the company in case of shortfall in cash flows for

servicing the interest of principal of the bonds.

Section B : General Banking / Branch Banking

14. Opening of Current Accounts

In order to curb the unhealthy practice of companies opening current accounts in

banks other than the banks providing credit facility to them, RBI has asked banks to

adhere to the following guidelines before opening current account in the name of a

company.

Obtain a declaration from the borrower on the credit limits availed by the company

from any other bank and get no objection certificate from the bank where the

company is having such facility.

Get no objection certificate from the drawee bank of the cheque where the account is

opened by deposit of a self cheque.

Get information available with CRILC of RBI.

Have due diligence in cases where the customer might have credit facilities with other

banks.

15. Payment of Commission to NSC/KVP agents

Banks are selling many types of Govt saving schemes like PPF, KVP, Sukanya

Samridhi Yojana, Senior Citizen Deposit Scheme etc. These deposits can be

canvassed by small saving agents appointed by the Small Saving Officials and such

agents earn commission on the amount mobilised by them.

RBI has now advised banks to pay commission to these agents appointed by the

Postal Department. For this the agent has to present the Authority letter in original for

verification. The payment will be done by way of credit to SB account of the agent.

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Sec C: General Advances

16. Change in risk weight in housing loans

GoI has started the mission for “Housing for all by 2022” which now renamed as the

Prime Minister’s Awas Yojana [PMAY].

The purpose of this scheme is to provide assistance / bank credit to people in EWS

[Income p.a not exceeding Rs 3 lakh] and LIG [income pa not exceeding Rs 6 lakh]

category for low cost housing.

In order to encourage banks to provide more credit for low cost housing, RBI has

changed the risk weight for the purpose of the calculation of CRAR.

So there will be three slabs for the purpose of risk weight.Slat1:Loans up to Rs 30

lakh, Slab2: Loans more than Rs 30 lakh and up to Rs 75 lakh, and Slab3: Loans

above 75 lakh.

Slab 1: Loans not exceeding Rs 30 lakh.

The maximum LTV ratio of 90% has been extended for loans up to Rs 30 lakh in

staed of Rs 20 lakh for the present.

The risk weight applicable for loans up to Rs 30 lakh is 35% if the LTV is up to 80%

or less and it is 50% if the LTV is more than 80% and up to 90%.

Slab 2: Loans exceeding Rs 30 lakh and up to Rs 75 lakh .

The risk weight applicable for loans up to Rs 75 lakh is 35% if the LTV is up to 75%

or less and or 50% if the LTV is more than 75 % and upto 80%.

Slab 3: Loans exceeding Rs 75 lakh .

In this case the LTV can be maximum 75% and risk weight irrespective of LTV is

75%.

The table given below summarises the same.

17. Formation of JLF-EG

In case an account has been categorised under SMA-02 category, banks are required

to form a Joint Lenders Forum, prepare a Corrective Action Plan [CAP] and

implement the same in time.

To make the system more effective RBI has asked banks to form Joint Lenders’

Forum Empowered Group (JLF – EG) which will consist of six members for

taking decisions at a faster speed. This is meant to expedite the decision making

process.

18. Change in the owner ship of a company and change asset Classification

Under the Strategic Debt Restructuring [SDR] banks are permitted to convert their

credit outstanding to equity and take over the company and sell it new promoters.

After this the exposure to the company will be classified as standard asset.

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Now RBI has permitted banks that in cases other than SDRs, where banks are able to

bring in a change in ownership of a borrowing entity they can upgrade such credit

asset to ‘Standard’ category” subject to fulfilment of certain conditions. Some of

these are:

The new promoter/owner should not be from the existing promoter group.

The promoter must acquire at least 51 % of the paid up equity capital.

Banks can provide need based finance to the new promoter.

Though the asset will be classified as standard asset the amount of provisions already

held for the asset will not be reversed.

Section D: Foreign exchange and foreign trade

19. Online Payment Gateway Service Providers (OPGSPs):

Exporters can sell online (through e-commerce sites) to overseas buyers who make

online payment by way of credit card, debit card and net banking. As per RBI

guideline, the export value of such transaction should not exceed USD 10 000.

Similarly importers in India buy online from overseas sellers through e-commerce

sites. As per RBI guideline the value of such import cannot exceed USD 2,000.

The “Online Payment Gateway Service Providers” [OPGSP] are required to open in

case of export from India, an account with an AD bank called Nostro Collection

Account to be maintained overseas. All receipts out of such export are automatically

swept and pooled into such account.

20. Booking of forward contracts without documentary proof

All resident individuals, firms and companies, who have actual or anticipated foreign

exchange exposures, can book foreign exchange forward contracts and also FCY-INR

options contracts up to USD 1,000,000 (USD one million) without any requirement of

documentation rather based on a simple declaration.

Cancellation and rebooking of such contracts are permitted.

21. Trade credit for import of capital and non-capital goods

Credits availed by an importer for purchasing the goods is called trade credit.

Trade credit can be (a) Supplier’s Credit which means, the credit is provided by the

supplier of the capital asset (b) Buyers Credit which means the credit is arranged and

availed by the buyer from a foreign bank..

These credits used to be denominated in foreign currency. Now RBI has permitted

importers to denominate such credit in rupee terms.

The rupee denominated credit will have same terms and conditions as applicable to

foreign currency denominated credits. Some of such conditions are:

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Trade credit period : For import of non-capital goods can be up to one year from

the date of shipment or up to the operating cycle whichever is lower

Trade credit period for import of capital goods can be up to five years from the date

of shipment.

No roll-over / extension can be permitted by the AD Category - I bank beyond the

permissible period.

AD Category - I banks can permit trade credit up to USD 20 mn or equivalent per

import transaction without any reference to RBI.

AD Category - I banks are permitted to issue Letter of guarantee, Letter of

Undertaking or Letter of Comfort in respect of trade credit for a maximum period of

three years from the date of shipment

The all-in-cost of such Rupee (INR) denominated trade credit should be

commensurate with prevailing market conditions

Section E : Financial Inclusion and Priority sector credit

22. Financial Inclusion Fund

The two funds namely (a) The Financial Inclusion Technology Fund and (b) The

Financial Inclusion Fund [FIF] formed in 2005 and maintained with NABARD have

been merged in 2015 to form The Financial Inclusion Fund and it will be maintained

with NABARD.

The FIF will be used for providing assistance to NGOs, SHGs, Farmer's Clubs,

Functional Cooperatives, I.T. enabled rural outlets of corporate entities, Well-

functioning Panchayats, Rural Multipurpose kiosks / Village Knowledge Centers,

Common Services Centres (CSCs) established by Service Centre Agencies (SCAs)

under the National e-Governance Plan ( NeGP ) and Primary Agricultural Societies

(PACs) for addressing the key concerns of financial inclusion.

These organisations will be assisted for purposes like

(a) Setting up of and operation of Financial Inclusion & Literacy Centres [FILCs]

and, Financial Literacy Centres [FLCs] which in turn will impart; financial literacy

training, counselling services for financial inclusion, training of BCs in use of

technological devices / financial products to be offered to poor etc.

(b)Setting up of Standard Interactive Financial Literacy Kiosks [IFLK] for

financial education.

(c) Running Business & Skill Development Centres including R-SETIs to impart

skill for undertaking income generating activities and for providing forward linkages

for marketing activities.

23. MUDRA BANK

Stands for the Micro Units Development Refinance Agency Bank.

Prime Minister launched MUDRA Bank on April 8, 2105.

It is a registered company registered under the Companies Act 2013.

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Wholly owned a subsidiary of SIDBI and is registered with RBI as an NBFC.

Provides refinance to MFIs (micro-finance institutions) NBFCs and banks at cheaper

interest rates so as to enable them to provide fiancé at a low rate of interest.

Does not provide direct finance.

The GoI has declared to provide the bank a corpus of Rs.20,000 crore and credit

guarantee corpus of Rs. 3,000 crore.

The bank has formulated the MCC [ Mudra Credit Card] scheme.

24. MCC- Mudra Credit Card

Banks have been asked to issue Mudra Credit Cards [MCC] under the Prime

Minister’s Mudra Yojana [PMMY] to provide hassle free credit at cheaper interest..

The card is either a preloaded card, [like Prepaid instrument] or pre-sanctioned

card. The loan amount is loaded in the card by the sanctioned amount and the

borrower can use the amount as and when wanted.

***The maximum limit for MCC is Rs 10 lakh.

25. Prime Minister’s Mudra Yojana [PMMY]

Under PMMY, banks provide loans under three categories - Shishu (covering loans

up to Rs. 50,000); Kishor (loans above Rs. 50,000 and up to Rs. 5 lakh); and

Tarun (loans above Rs. 5 lakh and up to Rs. 10 lakh).

They have to ensure that at least 60 per cent of the credit flows to Shishu category

units and the balance to Kishor and Tarun categories.

Banks can avail refinance from MUDRA Bank for providing such finance.

The micro units financed under this scheme fall into category Non-corporate Small

Business Sector[NCSBS] .

26. PMJDY- Prime Minister Jana Dhana Yojana [ PMJDY]

Aims at opening bank accounts to bring poor to the banking system.

Tagline: “Mera Khata – Bhagya Vidhaata”.

Accounts are opened with NIL balance.

***Very simplified KYC. [i.e. the account holder to sign on his photograph in

presence of bank official.]

***An ATM card / Debit Card i.e Rupay card is issued to the account holder.

***Insurance Cover of Rs. 1 Lakh against death due to accident is available. Also

available a life insurance cover of Rs. 30,000.

***Account holder can avail overdraft in the account up to maximum of Rs 5,000..

The banks which have opened highest number of accounts are (a) SBI, (b) United

Bank of India and (c) Oriental Bank of Commerce..

As on October 7, the deposits collected stood at Rs. 25,146.97 crore.

Zero-balance accounts are now less than 40 % of the total accounts.

27. BSBD-Basic Saving Bank Deposit Account

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Introduced by RBI. Replaced No-frill accounts.

Can be opened by any persons not necessarily by poor people only.

***Can be opened with NIL balance.

No minimum balance requirement.

***Debit card / ATM card to be issued free of charge but no cheque book

Any number of credits including electronic credits are allowed.

***Only four debits are allowed during a month.

Any person having BSBDA account cannot have a regular account.

Other SB account if any must be closed within one month of opening of the

BSBDA.

28. Small Account

In terms of Govt. of India notification dated December 16, 2010, Small Accounts

means a SB account which satisfies the following three conditions:

***(a) Total credits in such accounts should not exceed Rs 100 000/- in a year. (b)

Maximum balance in the account should not exceed Rs 50 000/- at any time. (c) The

total of debits by way of cash withdrawals and transfers will not exceed Rs 10 000/-

in a month.

The BSBD accounts and accounts opened under the PMJDY satisfying the above

conditions can be classified as small accounts

29. JAM trinity:

As announce in the Budget for FY 16, Govt. has adopted the strategy to secure more

financial inclusion by use of: Jana Dhana, Aadhaar and Mobile banking [JAM

trinity.]

30. Mobile Banking and Mobile Wallets

a. Mobile Wallets

Mobile wallets are e-wallets operated by using a mobile app. One can open a wallet,

deposit e-money and transfer money to another bank account or wallet.

It helps in making remittances from one to another by using the IMPS service

introduced by NPCI and provided by many banks.

Apart from remittances it helps in: payments of utility bills, commerce sites, to buy

goods online/e-commerce sites or Over the Counter, pay for cab services provided

by taxi aggregators like Uber and Ola, charge mobile through free recharge etc.

Wallets provided by banks are called open wallets and are different from wallets

provided by others on the following counts.(a) No limit of outstanding (b) Cash can

be withdrawn (c) Balance can be credited to bank account (d) Amount can be drawn

at ATMs (e) Balance earns interest. So for all practical purposes it provides many

facilities which a SB account with a bank provides.

Wallets provided by organisations other than banks are called semi-closed wallets

and are different from wallets provided by banks on the following counts.(a) The

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total outstanding balance is restricted to Rs 1 lakh (b) Cash can’t be withdrawn

(c) Balance left cannot be redeemed (d) Amount cannot be drawn through ATMs

b. Mobile Wallets provided by banks:

Now many banks have come up with mobile wallets. Some of the well known are:

SBI- SBI buddy, HDFC Bank - Payzaap, ICICI Bank --- Pocket, Axis bank -----

LIME

c. Mobile Wallets provided by organisation other than banks

Vodaphone’s ------- m-pesa (is very favourite in Kenya).

Airtel ------ Airtel money.

Freecharge (by Snap Deal.com ), Mobikwik, Novopay. PayUMoney, Ezetap (by

Amazon.in) and Paytm, etc.

d. Internationally well known wallets

Apple Pay, Goggle Wallet, PayPal and Square.

Apple Pay can be used only by i-phones, a mobile exclusively produced by Apples.

Apple pay is now provided by SBI to its customers.

HDFC bank provides an app called Apple Watch which allows its customers to view

their account summaries, block cards and recharge their mobile phones and DTH

connections. The Apple Watch app will work on iPhone 5 and above versions.

PayPal is the world’s largest wallet with revenue of $8bn.

e. Unified Payment Interface [UPI]

It is a technology standard which will enable different wallets to connect with each

other and hence money can be transferred from wallet provided by one company to

that of another company.

f. Wallets with a difference

mVisa

Provided by ICICI bank, developed by Visa.

It is payment through a device (smart phone) and not through the use of credit / debit

cards. maintain the POS, it has to only retain a printed QR Code.

It does not require POS.

Payment is made by scaning / taking photograph of a static QR code [Quick Response code].

So it is a cardless and device based payment mechanism.

The mVisa application is built into the mobile wallet i.e Pocket of ICICI Bank.

ICICI Bank, India's largest private bank, is the first bank globally to launch it..

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QR Code

QR code stands for Quick Response Code.

As opposed to Bar Code which is uni-dimensional, it is a two dimensional bar code i.e. a

machine-readable optical label that contains information about the item to which it is attached.

[can be seen in labels used in e-commerce operators like Flip kart etc.

A QR code consists of black modules (square dots) arranged in a square grid on a white

background, which can be read by an imaging device (such as a camera, scanner, smart mobile

phome etc.)

The required data are then extracted from patterns that are present in both horizontal and vertical

components of the image.

g. Ping Pay

Introduced by Axis Bank, Ping Pay is a payment app. which helps to send or ask for money and mobile recharge across social sites like Facebook, Whatsapp, Twitter, Linked in etc.

The person-to-person fund transfers through Ping Pay is done by the bank using the IMPS, Immediate Payment Service (IMPS).

The Axis bank has presently put the transaction limit at Rs. 50,000 for payment through Ping Pay.

Section F:

Capital Market, Insurance Market, Pension Market

31. Important terms used in Mutual Fund Industry [for examination purpose]

Trusts: All mutual funds are formed as Trusts.

Sponsor of mutual funds: Only companies including banks engaged in providing

financial services can form a trust to start mutual fund. Such a trust is called Mutual

Fund. A mutual fund or / trust is managed by a Board of Trustees which appoints an

Asset Management Companies to manage the mutual fund and its assets.

AMC: Asset Management Company which is appointed by the trust is manages the

assets of the mutual fund and in turn gets fee called asset management fee.

AUM: Assets Under Management means the total amount of assets (investments

made by the MF.) under each of its schemes and under a particular scheme.

NAV: Net Asset Value means the net of total assets of a particular scheme of the MF

less the liabilities (borrowings) the mutual fund divided by the number of units issued

under the scheme.

SEBI: It is the regulator of MFs.

Equity fund means the scheme which invests in shares/equity only.

Balance Fund means investment both shares/equity and debts,

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Close ended fund means no fresh unit will be issued under the scheme while in open

ended funds units can be issued at any point of time.

ETF: Exchange Traded Fund are schemes whose units are listed and traded like

shares in stock exchanges.

SIP: Systematic Investment Plan: Like monthly instalment in RD in banks, here the

investor invests certain amount in MF at regular intervals.

KRA: KYC Registration Agency means an entity approved by SEBI to do KYC

verification of an investor and issue a KYC verification acknowledgement letter

which the investor can use for KYC purposes for all types investments in Mutual fund

and other capital market instruments.

AMFI

Association of Mutual Funds in India – a Self Regulatory Organisation of MFs.

There are now 44 Asset Management Companies/ MF managing agencies for Mutual

Funds in India and all are the members of AMFI.

Recently Yes bank has been permitted by RBI to form a mutual fund.

[Note: Banks wishing to start MF activity, have to get registration from SEBI and

also clearance from RBI.

32. Important terms used in Capital Market [for examination purpose]

SEBI [Securities and Exchange Board of India] is the regulator of capital market.]

is the regulator for equity market(share market), corporate bond market/ debt

market(long term borrowing instruments also called debentures), Derivative

market, Mutual funds and all institutions connected to these markets.

FMC (Forward Market Commission):

FMC which was the regulator of commodities future market merged on Sept, 28,

2015 with SEBI. With this SEBI becomes the regulator of the commodities future

market and regulates the four national commodities exchanges like National

Commodities and Derivative Exchange [NCDEX], Multi Commodities Exchange

of India Ltd [MCX], etc.

Forward Contracts Regulation Act (FCRA), 1952

This Act which provided for future contracts and on the basis of which the FMC

was formed is repealed. Now future contracts will be based on guidelines of the

SEBI.

Derivatives

Derivative is a financial instrument which represents financial contracts to deliver

in future any item like shares or commodities or foreign exchange etc on future

date at the price fixed at the time of the contract.

Examples of derivative instruments are; Futures, Options, Swaps etc.

Derivatives are bought and sold in the derivative segment of the stock exchanges

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Metropolitan Stock Exchange of India Limited (MSEI) :

Formerly known as MCX Stock Exchange Limited (MCX-SX), it is India’s youngest and

one of the three stock exchanges recognized by (SEBI), the other two being NSE and

BSE.

ASBA[ Application for Shares against Blocked Amount]

It is a mechanism by which an investor can apply to purchase shared by blocking his SB/

CA with the bank for the amount of money to be paid for applying for the shares.

OFS: [Offer for Sale]

Depositories

Open and maintain Demat accounts in the name of investors in shares, MFs.There are tow

depositories in India.

NSDL : National Securities Depository Ltd.

CSDL: Central Depository Services Ltd.

Banks and other institutions act as DPs (Depository Participants), i.e. agents of

depositories to open Demat accounts.

Book Building

Mechanism to fix issue price of shares by asking for bids in case of public issue of shares.

Credit Rating Agencies

Provides ratings for bonds, shares, bank loans.

Six Rating agencies approved by SEBI: CRISIL, CARE, ICRA, India Rating and

Research Pvt. Ltd, SMERA Rating Ltd, Brick Work Rating India Pvt Ltd.

CRISIL - Credit Rating Information Services India Ltd.

CARE- Credit Analysis and Research Ltd.

ICRA- Investment Information and Credit Rating Agency of India.

33. Important terms used in Insurance Market [for examination]

IRDAI: [Insurance Regulatory and Development Authority of India]- the regulator of the

insurance market. A statutory body. HQ- Hyderabad.

FDI [Foreign Direct Investment] in insurance companies]: Allowed maximum up to

49%. [Up to 26% under automatic route and beyond with approval of the FIPB].

PMSBY [ Pradhan Mantri Surskhya Bima Yojana]

It is a group accident insurance scheme which provides insurance cover of Rs. 2

lakh. Such insurance are provided by General Insurance companies and not life

insurance companies.

Premium of merely Rs. 12 a year which can be paid by Auto debit by giving

standing instruction to bank.

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Instead of Rs12 per year one can pay Rs201 to get life time cover.

PM JJ BY - Prime Minister’s Jeevan Jyoti Bima Yojana

Jeevan means life. It provides a life insurance cover of Rs.2 lakh for an annual

premium of Rs. 330. This is the lowest premium available in the market.

Only persons of age group of 18-55 years are eligible for cover.

Rastriya Swasthya Bima Yojana [ RSBY]

Under this scheme mediclaim policy is provided to poor people for an amount of Rs

30 000 p.a. under a floater policy which covers the head of the family, spouse and

three children.

Premium: Rs 30 per annum which is paid by the GoI / State Govt on 50:50 basis,

34. Important terms in Pension / PF market

PFRDA

Provident Fund Regulatory and Development Authority of India

A statutory body, the regulator of the provident fund and pension funds in India.

APY [Atal Pension Yojana}

A provident fund cum pension scheme, introduced as a social security measure.

APY replaces Swavalamban, the earlier scheme.

Age of entry: Minimum 18 years and Maximum 40 years

Matures on completion of 60 years of age. 40% of the corpus is paid in lump sum and

the balance is used to pay pension / annuity for life time.

The amount of pension depends upon the age of entry and amount of contribution. As

per APY the pension amount will be minimum of Rs 1000 to maximum Rs 5000..

For encouraging persons to join this scheme the GOI provides subsidy @ Rs. 120- to

150 in the first year and then Rs. 100 every year as long as the account continues.

The subscriber can pre-close the account [before 60 years of age] in which case he

will receive only the amount contributed by him

Amount deposited in this scheme is eligible for tax benefit up to of Rs 2 00 000.

Sec G : Markets regulated by RBI

Money Market, Govt Debt Market, Foreign Exchange Market.

35. Important Terms relating to Money Market [ for examination purpose]

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MIBOR (Mumbai Interbank Offer Rate): The indicative rate of interest at which short

term money is available in the interbank market of Mumbai.

MIBID (Mumbai Interbank Bid Rate): The indicative rate of interest at which banks

are prepared to borrow in the interbank market of Mumbai.

FBIL (Financial Benchmarks India Pvt Ltd (FBIL): Is the Benchmark setting organisation

which calculates MIBOR-overnight.

CCIL ( Clearing Corporation of India):

Formed by RBI.

Provides platform [NDS-Call] for online borrowing of call money.

Provides NDS [National Dealing System] platform for online sell and purchase of

Govt bonds.

Acts as the settlement agency for such trades.

Acts as the Counter party for both the the seller and buyer for performance of the

contract (i.e both legs of trade.) which eliminates counter party risk in such trades.

Money Market:

The market which deals with borrowing and lending is made for periods ranging from

one day to one year. Money market instruments include: Call Money, Repo, CP, CD,

TB,CBLO, PCs. The money markets borrowing and lending is generally done by

banks and other financial institutions

Call Money

Inter-bank overnight / borrowing for one day without any security at rate of interest

which is determined by market supply and demand.

Repo from RBI under LAF

Borrowing by banks from RBI for period from 1 day to maximum 14 days by selling

securities to RBI under arrangement to buy back the same after the period.

CBLO:

Collaterised Borrowing and lending Obligation

Provided by CCIL .acts is money market instruments to borrow money for any period

from 1 day to 1 year against security of Govt bonds.

CP: Commercial Paper:

Issued by well rated companies [having net worth of minimum Rs 4 crore]. Period of

the instrument minimum 7 days to maximum 1 year. Minimum amount/ denomintain

Rs 5 lakh. Issued in demat format and also physical format. CPs are usance

promissory notes, issued at a discount, are transferable by endorsement and delivery

(negotiable instruments).

CDs: Certificate of Deposits; Issued by scheduled commercial banks. Other points

same as given above.

TBs: Treasury Bills. Issued by GoI. Minimum period 14 days. Minimum amount Rs

25 000. Maximum tenor- 364 days.

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36. Important developments in Banking System

a. Domestic Systemically Important Banks (D-SIBs).

RBI has classified two banks namely SBI, ICICI Bank systemically important banks

As per BASLE guideline on D-SIB framework, RBI is required to disclose every year the

names of banks designated as D-SIBs.

These banks will be well regulated to prevent their failure as their failure will being failure of

many other banks and financial institutions.

b. Bandhan Bank Ltd:

Came into existence on August 23, 2015.

It is formed by converting the Bandhan micro finance institution (MFI).

HQ: Kolkata. Three other commercial banks namely UCO, United, and Allhabad Bank have head quarters in Kolkata.

Tagline: Aap ka bhala subka Bhallai.

c. IDFC Bank Ltd:

Formed on Oct1, 2015. HQ- Mumbai. Formed by demerger of Infrastructure

Development Finance Corporation - an infrastructure financing company. Is a

company registered under the Companies Act and not a statutory body. Tagline:

hatke bank. Speciality: Bharat Banking i.e opening branches first in some districts

of a state and then go step by step to cover the entire country. Out of first lot of 23

branches opened 10 are located in four districts in Madhya Pradesh.

d. Payment Banks:

Formed as per Nachiket Mor Committee. Minimum Capital requirement is Rs 100

cr. Will provide payment/remittances services, accepts demand deposits namely SB

and CA maximum with maximum balance of Rs 1 lakh. Can not lend.

11 entities given in principle approval letter by RBI which includes a local Area bank

[These are(i) Aditya Birla Nuvo Limited; (ii) Airtel M Commerce Services

Limited;(iii) Cholamandalam Distribution Services Limited(iv) Department of

Posts; (v) Fino Pay Tech Limited; (vi) National Securities Depository Limited; (vii)

Reliance Industries Limited; (viii) Shri Dilip Shantilal Shanghvi; (ix) Shri Vijay

Shekhar Sharma; (x) Tech Mahindra Limited; and (xi) Vodafone m-pesa Limited.]

e. Small Financial Banks:

Formed as per Nachiket Mor Committee for more financial inclusion.

Can take deposits, lend, payment activities.

A small bank can do many activities like a commercial bank but at least 50 % of its loan

portfolio should constitute loans and advances of less than Rs. 25 lakh.

10 entities given in principle approval: These include one Local Area Bank namely

Capital Local Area Bank Ltd., Jalandhar,

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[and 9 NBFC-MFIs (1) ESAF Microfinance and Investments Private Ltd., Chennai, (2)

RGVN (North East), Microfinance Limited, Guwahati, (4) Suryoday Micro Finance

Private Ltd., Navi Mumbai(5) Janalakshmi Financial Services Private Limited,

Bengaluru (6) Disha Microfin Private Ltd., Ahmedabad (7) Au Financiers (India) Ltd.,

(8) Jaipur Equitas Holdings P Limited, Chennai (9) Ujjivan Financial Services Private

Ltd., Bengaluru.]

37. TReDs: [Trade Receivables Discounting System]

RBI has received 7 applications for opening TReDs.

38. CICs: Credit Information Companies

Repository of credit history of borrowers.

Provides credit history of persons to banks/ lenders.

Four Companies are: CIBIL, EXPERIAN, EQUIFAX and HIGH MARK.

CIBIL: Credit Investigation Bureau of India Ltd.

39. ARCs : Asset Reconstruction Companies

Formed as per the SARFAESI Act.

Regulated by RBI.

Purchase NPA from banks.

Maximum FDI allowed -100%

Go for Securitisation of credit assets purchased from banks.

40. Important Development is Payment and Settlement System

a. BBPS [ Bharat Bill Payment System].

RBI has asked for application from entities interested to act as BBPOUs.

BBPOUs: [Bharatiya Bill Payment Operating Units] i.e units which will act as a

single point for accepting the payment of all types of utility bills.

b. WLAOs :

White Level ATM Operators will be allowed 100% FDI (Foreign Direct Investment).

c. NPCI :

National payment Corporation of India. Owned by banks.

Have introduced Rupay, a Card Settlement Agency like Visa, Master.

Introduced Rupay Card, a debit card with inbuilt feature of accident insurance cover

of Rs 1 lakh,

Introduced IMPS (Immediate Payment System), a mechanism to transfer money from

any bank branch account to any other bank branch account, through mobile or ATM

or net banking. IMPS requires MMID (Mobile Money Identifier).

Maintains NFS [National Financial Switch] which connects ATMs of all banks.

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Introduced the APB (Aadhaar Payment Bridge) a link for r Direct Benefit Transfer [

DBT] from Govt depts. On one end banks maintaining accounts of beneficiaries in

another end.

d. Pre-paid Cards

PPI-MTS (Pre-paid Card-Mass Transit System) will be issued by metro and transport

companies. Maximum amount that can be loaded Rs 2000. These are contact less

cards.

e. Contact less card

Alco called: tap and go card / Near Field Technolgy Cards.

Maximum amount of balance Rs2000.

ICICI Bank launched the country’s first contactless debit and credit cards that use

the near-field communication technology [also called NFT Card].

f. Point of Sale

Maximum Cash payment in semi urban and rural centres in POS - Rs 2000.

g. Simply CLICK Card:

Introduced by SBI Cards in association with BI Card, a leading credit card issuer.

For this new credit card, SBI Card has partnered Amazon India, Book MyShow,

Cleartrip, Fab Furnish, Food Panda, Lens Kart and Ola Cabs — all frontrunners in

their respective e-commerce market.

Sec H : Current Developments relating to banking

41. Inflation Targeting

Recommended by the Urjit Patel committee, appointed by RBI.

RBI and GoI have signed Monetary Policy Framework Agreement [MPFA].

CPI measured inflation targeted is at 6 % by January 2016 and at 4 % by the end

of 2017-18.

The credit and monetary policy will be framed by the Monetary Policy Committee

not by the RBI Governor alone.

42. Appointment of CMDs from private sector

On September 11, 2015, the GoI for the first time appointed Managing Directors in

public sector banks from outside. The two banks in which such appointments are

made are Bank of Baroda and Canara Bank.

Bank of Baroda is now headed by Mr , Jayakumar who was the Co-founder and CEO

of VBHC (Value Budget Housing Corporation).

Canara Bank is headed by Shri Ramesh Sharma, .

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43. Fortune’s most powerful women list

Chanda Kochhar and Arundhati Bhattacharya have been ranked as top two in a list of

most powerful women in Asia-Pacific prepared by the global magazine Fortune.

44. Justice AP Shah panel

Presently private sector banks can recruit employees can draw talents from different

sources like campus interview but PSBs are not permitted to do so.

GoI has appointed a high-level panel headed by Justice AP Shah, former chairman

of the Law Commission, to examine the situation and recommend the action

enabling public sector banks to draw talents at the level of officers.

45. BBB[Banking Board Bureau]

Will be operational from April 1, 2016.

Will select MDs and CEOs of public se Banks.

Will be converted to a holding company to hold capital in all PSBs.

46. Vidya lakshmi

‘Vidya Lakshmi’, is the name of the web site the GoI has started for online sanction

of education loans by banks to students seeking educational loans

47. Jeevan Praman

For pensioners, the GoI has launched “Jeevan Pramaan”, a digital life certificate based

on Aadhaar Biometric Authentication, by logging into the [jeevanpramaan.gov.in.]

48. Sukanya Samrudhi Yojana:

Can be opened only in the name of girl child with age not exceeding 10 years.

Amount of deposit Minimum of Rs 1000 and maximum of Rs 1.5 lakh during a year.

Period of deposit: 14 years.[ Can be closed when the child attains 21years of age or

after her marriage after becoming a major]

Just like PPF the deposits will qualify for 80 C benefits for Income Tax purpose.

49. IFRS

International Financial Reporting Standards.

50. CERSAI CERSAI [Central Registry of Securitisation Asset Reconstruction and Security

Interest of India] formed as per the SARFAESI Act.]

Banks /other lenders have to inform the particulars of immovable property taken as

security while sanctioning loans.

51. e-KYC

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e-KYC is means obtaining the Aadhar Details by logging into the UIDAI after taking

biometric authentication from the person wanting to open accounts with a bank.

E-KYC is an Officially Valid Document for identity proof for KYC for opening

accounts.

52. Smart Vault

ICICI Bank has launched a new digital safe deposit locker service called ; Smart

Vault.

Smart Vault is India’s first automated locker facility with robotic technology.

A customer can gain access to this locker room by swiping his debit card and

validating identity through biometric authentication.

53. Assistance from DEAF

DEAF (Depositors’ Education and Awareness Fund) is held by RBI, representing the

proceeds of unclaimed accounts of banks transferred to this account by banks on a

monthly basis.

RBI has selected 20 entities for providing grant of financial assistance from this fund

to 20 entities which among others include Consumer Education and Research Society

(Ahmedabad), Consumer Unity & Trust Society (Jaipur), Xavier Labour Relations

Institute (Jamshedpur), and Indian School of Microfinance for Women (Ahmedabad)

etc.

54. E-commerce sites

These are also called e-tailers / Online retailers.

Some of these are Amazon, Paytm, Jabong, Shop Clues, Snapdeal, Flipkart and Quikr

are well known in the market.

Paytm, is held by Alibaba.com which is an e-commerce giant of China.

The online marketplace, which sells products at wholesale prices, is offering loyalty

points worth up to Rs. 1 lakh to its customers.

These points, called “cluesbucks”, can be used at the platform any time to buy more

products.

55. Supreme Court’s verdict of use of Aadhaar card :

Supreme Court bench headed by Justice J Chelameswar has refused States and

statutory bodies like RBI, SEBI to use of Aadhaar card for welfare schemes other than

PDS and LPG schemes. SC has referred the matter to l be heard by a larger

constitution bench of SC.

56. Gold Monetization Schemes (GMS)

Objective: Reduce purchase of physical gold by public and thus reduce gold import.

(a) Gold Deposit Scheme in banks

(b) Sovereign Gold Bonds Scheme

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Investment into Demat (Dematerialised) Govt issued gold bonds expressed in terms

of gold and interest will be paid in terms of gold and not in rupees.

Bonds denominations of 2, 5 and 10 grams of gold.

Maximum Investment per person/ entity per year: 500 grams .

57. National Common Mobility Card (NCMC)

NCMC will be pre-paid card, to be used for all types of mass transit system.

It will be EMV Open Loop Card with stored value. [ EMV- Europay, Master Card

and Visa] .

58. Bill Discounting fraud in BOB

Rs. 350-crore fraud is committed by one of Bank of Baroda’s clients in Ahmedabad.

The customer has got the bills representing export of gems and jewelleries discounted

by the bank and the bills remain unpaid due to non payment.

.

59. Import Fraud in BOB

The bank which is involved in Rs 6100 crore foreign exchange fraudulent remittance

for import is Bank of Baroda.(Branch: Ashok Vihar).

SECTION I

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