GK Updates - 23 July | Banking Quiz

RBI issue norms on domestic systemically important banks

I.The Reserve Bank of India on Tuesday said Banks having size as a percentage of GDP equal to or more than 2 per cent will be designated as domestic systemically important banks (D-SIBs) and they will be subject to higher capital requirements.

II.Additionally, five largest foreign banks, based on their size, will also be added to the sample for identification of D-SIBs.

III.D-SIBs are perceived as banks that are ‘Too Big To Fail (TBTF)’. This perception of TBTF creates an expectation of government support for these banks at the time of distress, the RBI said in its framework for dealing with D-SIBs.

IV.Due to this perception, these banks enjoy certain advantages in the funding markets. However, the perceived expectation of government support amplifies risk-taking, reduces market discipline, creates competitive distortions, and increases the probability of distress in the future.

V.These considerations require that SIBs should be subjected to additional policy measures to deal with the systemic risks and moral hazard issues posed by them.

VI.Due to their size, cross-jurisdictional activities, complexity, lack of substitutability and interconnectedness, disorderly failure of these banks has the potential to cause significant disruption to the essential services they provide to the banking system, and in turn, to the overall economic activity.

VII.The RBI said banks having systemic importance above a threshold will be designated as D-SIBs. D-SIBs would be segregated into five different buckets based on their systemic importance scores, and subject to loss absorbency capital surcharge in a graded manner depending on the buckets, in which they are placed.

India to propose setting up of South Asian Development Bank

I.India plans to propose the setting up of a South Asian Development Bank for financing infrastructure development in the region at a meeting of trade ministers from SAARC countries in Bhutan this week.

II.“Unlike the BRICS Development Bank which will fund all developing countries, the proposed South Asian Development Bank will exclusively focus on South Asia,” a Government official told Business Line.

III.India has already discussed the contours of the development bank with a number of SAARC (South Asian Association of Regional Cooperation) members individually.

IV.SAARC includes India, Nepal, Sri Lanka, Pakistan, Bangladesh, Bhutan, Afghanistan, and Maldives.

V.Commerce Minister Nirmala Sitharaman is likely to discuss the proposal with all South Asian partners at the South Asia Free Trade Area (SAFTA) Ministerial meet starting in Thimpu on July 24, the official said.

VI.While SAARC members will contribute to the equity and get voting rights according to their contribution, funding will also be invited from third countries.

RBI unveils tighter regulatory norms for ‘too-big-to-fail’ banks

I.The RBI today set out a framework for identifying and dealing with large banks, termed domestic systemically important banks or D-SIBs.

II.A size beyond 2 per cent of GDP will be one of the criteria for designating a bank as a D-SIB and it will be subject to higher capital requirements, according to the Reserve Bank of India.

III.The other three criteria for designating a bank as a D-SIB are: interconnectedness; lack of readily available substitutes or financial institution infrastructure; and complexity.

IV.The RBI framework comes as a solution to the problems faced during the global financial crisis of 2008, when such large institutions hampered the functioning of the financial system, negatively impacting the real economy.

V.D-SIBs are perceived as banks that are ‘Too Big To Fail’. This perception creates an expectation of government support for these banks at the time of distress, the RBI said in its framework for dealing with D-SIBs.

VI.The expectation of government support leads to risk-taking, reduces market discipline, creates competitive distortions, and increases the probability of distress.

VII.These considerations require that SIBs be subjected to additional policy measures to deal with the systemic risks and moral hazard issues posed by them.

VIII.The RBI said banks having systemic importance above a threshold will be designated as D-SIBs.

RBI eases norms for loans against gold

I.The Reserve Bank of India has done away with the ₹1-lakh limit on the amount of non-agriculture loan sanctioned by banks at any point of time against the pledge of gold ornaments and jewellery. Henceforth, banks, according to their board-approved policy, can decide on the ceiling with regard to the quantum of loans that can be granted against the pledge of gold jewellery and ornaments for non-agricultural end-uses, the central bank said in a notification.

II.This liberalisation follows a representation RBI received from banks requesting an increase in the prescribed ceiling and to review other conditions applicable to such loans.

III.However, the RBI underscored that the loan-to-value (LTV) ratio of 75 per cent has to be maintained throughout the tenure of the loan for all such loans. LTV is the amount of loan given as a percentage of the appraised value of the pledged security.

IV.The RBI said the tenor of the loan against gold ornaments and jewellery for non-agricultural end-uses, where both interest and principal are due for payment at maturity of the loan, cannot exceed 12 months from the date of sanction.

Arijit Basu to assume charge as SBI Life MD & CEO

I.Arijit Basu, currently the Deputy Managing Director of State Bank of India, will take over as the Managing Director and Chief Executive Officer of SBI Life Insurance in August.

II.Basu will replace Atanu Sen who is due to retire on July 31.

III.Basu has been Deputy Managing Director of State Bank of India since May 2014 and serves as its Chief General Manager of Delhi. He has handled many important assignments over two-and-a-half decades in the bank.

IV.SBI Life is a joint venture between State Bank of India and BNP Paribas Cardif, in which SBI owns 74 per cent.

Ram Naik sworn in as 27th Governor of Uttar Pradesh

I.Ram Naik on 22 July 2014 was sworn in as 27th Governor of Uttar Pradesh in Lucknow. He is a former Union Minister and Bharatiya Janata Party (BJP) leader from Maharashtra.

II.The oath of secrecy was administered by the Chief Justice of Allahabad High Court Justice Dhananjaya Y Chandrachud.

III.Ram Naik succeeded B L Joshi who resigned from the post of Governor resigned in June 2014. Till the swearing in of Ram Naik, Governor of Uttarakhand Aziz Qureshi held the additional charge of Uttar Pradesh.

IV.He was appointed as Governor of UP by the President Pranab Mukherjee on 14 July 2014.

Bahrain introduces new visa policy for Indians

I.The Bahrain Economic Development Board has come out with a new visa policy that enables Indian residents to apply for electronic visas from October this year.

II.Further, from 2015, Indian residents can stay longer in Bahrain as the new visas will be valid for a month and can be renewed for up to three months, officials said in a statement. Additionally, multiple entry visas will also be available.

III.The new visa policy will further enable expatriates who do business in Bahrain, to easily travel in and out of the Kingdom more easily, as well as boosting the tourism industry. Indians make up the largest expatriate population in Bahrain with more than 300,000 residing in the Kingdom. India is also one of Bahrain’s most important trading partners. In 2011, total trade between India and Bahrain exceeded $1.7 billion.

TN industrial licences to go online

I.In a bid to simplify procedures involved in registering a new industry in Tamil Nadu, Chief Minister J Jayalalithaa today announced that the process of issuing licences for new industries would henceforth be done through a web portal, to be designed for this purpose.

II.Making a suo motu statement in the Assembly, she said that following difficulties faced in this regard, issuing of such licences would henceforth be issued through a web portal, which would have information on government services, among others.

III.This portal would help industrialists and the general public know the various government schemes, she said, adding the portal would be developed at a cost of Rs 2.24 crore.

New ED for TiE Hubli

The Indus Entrepreneurs (TiE) Hubli Chapter has appointed Vinay Pawar as its Executive Director. Pawar, an entrepreneur, has been an active member of TiE for the last three years and is currently a director of Cool Canopy Ltd. “He has excellent credentials to serve in an administrative capacity, and I appreciate his willingness to accept this responsibility,” said Vivek Pawar of Sankalp Semiconductor.

SEBI bars Sai Prasad Corp from raising money, launching schemes

I.In a crackdown on an unauthorised money pooling scheme promising high returns, SEBI has barred Sai Prasad Corporation and its directors from raising funds from the public and from launching any new investment plans.

II.The firm and its three directors were allegedly running ’collective investment scheme (CIS)’ in the name of its ‘joint venture participation business for the development of land’.

III.The Securities and Exchange Board of India (SEBI) said that Sai Prasad Corporation had raised Rs 137.12 crore from the public in 2012-2013, which increased to Rs 478.35 crore during 2013-2014.

IV.In an order dated July 22, SEBI said that Sai Prasad Corporation was "prima facie engaged in fund mobilising activity from the public" through a CIS "without obtaining a certificate of registration from SEBI".

V.Citing safety of investors, the regulator said steps were required to prevent the company and its directors — Balasaheb K Bhapkar, Shashank B Bhapkar and Vandana B Bhapkar — from further carrying on with the fund mobilising activity.

VI.As per the order, the firm and its directors have been asked "not to collect any money from investors from its existing JV Participation Structure/scheme" and "not to launch any new schemes or plans or float any new companies to raise fresh moneys"

TCS becomes first Indian company with market value of over Rs 5 lakh cr

I.Tata Consultancy Services has become the first Indian company with a market capitalisation of Rs 5 lakh crore.

II.Shares of TCS, which hit their 52-week high on the bourses today, closed 2.21 per cent higher at Rs 2,586.9. At the closing price, TCS’ market cap amounted to Rs 5,06,703 crore.

III.TCS is followed by ONGC (Rs 3.5 lakh crore) and Reliance Industries (Rs 3.3 lakh crore).

IV.Among IT companies, TCS' market cap is more than the combined market cap of the next four largest Indian companies -- Infosys (Rs 1.90 lakh crore), Wipro (Rs 1.39 lakh crore) and HCL Tech (Rs 1.07 lakh crore) and Tech Mahindra (Rs 45,000 crore), said Rakesh Tarway, VP and Head of Equity and Derivative Products, Motilal Oswal Securities.

V.TCS has reported a 45 per cent jump in net profit at Rs 5,568 crore and a 22.9 per cent rise in revenue at Rs 22,111 crore for the first quarter ended June 30, 2014.

Aircel ties up with Micromax for Canvas Beat

I.With an eye on growing its 3G data-enabled services business, Aircel has tied up with the mobile handset maker Micromax to launch the latter's new 3G smartphone – Canvas Beat.

II.Announcing the launch here today, K Sankara Narayananon, Strategic Business Unit Head, Aircel Ltd, said the intention is to promote the company’s data-enabled services by making available suitable handsets at a reasonable price point. “The upsurge in 3G data requires smartphones with big screen size and relevant content and applications. Canvas Beat is one such handset, which is developed especially for music lovers,” he said.

III.Bundled with free headset, free songs and 1GB data, the phone is priced at Rs. 9,990 and is made available at all mobile stores.

IV.According to Narayanan, Aircel has a subscriber base of 2.5 crore in Tamil Nadu, of which about 1.5 crore are using data-enabled services, while the rest are yet to upgrade to this service. “We hope this launch would result in conversion of at least 20 per cent of those who do not use data-enabled services to data-enabled services,” he said.