GK POWERCAP SULE FOR NICL AO & ASSISTANT EXAM 2015 This GK Capsule has been prepared by Career Power Institute Delhi (Formerly Known as Bank Power). This document consists of all important news and events of last few months which can come in IBPS CLERK Exam. Current RBI Policy & Reserve Rates: Repo Rate 7.5 % (Unchanged) Reverse Repo 6.5 % (Unchanged) CRR 4% (Unchanged) SLR 21.5 % (Unchanged) MSF 8.5 % (Unchanged) Bank Rate 8.5 % (Unchanged) Note : On 3, Feb, 2015 , RBI (Reserve Bank of India) in its fourth bimonthly monetary policy statement kept the key policy rate unchanged . News related to RBI 1. RBI extends range of collateral for interbank transactions i. The Reserve Ba nk of India extended the range of collateral that can be used for repo transactions on the country's interbank market to include bonds issued by multilateral financial institutions such as the World Bank and Asian Development Bank. ii. Currently, such coll ateral is limited to commercial papers, certificate of deposits, non -convertible debentures, and listed corporate debt securities of more than one year maturity and rated AA or above. iii. The move will help develop the corporate debt market. 2. RBI released Rs 42,000 crore to fund FY16 growth i. Banks will have headroom to lend an additional Rs 42,000 crore because of Reserve Bank of India's move to bring down by 50 basis points the statutory liquidity ratio — the portion of deposits that banks must invest in government bonds. ii. Rajan left the repo rate — the rate at which it lends overnight funds to banks — unchanged at 7.75%. RBI also retained the cash reserve ratio — the portion of deposits that banks have to maintain with RBI — at 4%. iii. The central b ank expects that economy growth will pick up to 6.5% in FY16 which will result in an increased demand for funds in the banking sector. The cut in SLR is expected to help banks prepare their cash reserves to fund this growth. 3. RBI directs banks to display all loan costs i. Reserve Bank of India (RBI) made it compulsory for banks to set out every possible cost in respect of the loan in a fact sheet at the processing stage. ii. Banks will also have to publish the 'annual percentage rate' representing the total cost of credit to an individual borrower. 4. Uniformity, innovation coming to credit data i. In its bid to better the credit information landscape, the Reserve Bank of India (RBI) has directed all credit institution s to become members of credit information companies (CICs). ii. Currently, there are four such companies in India —Credit Information Bureau (India) Ltd (Cibil), Equifax Credit Information Services Pvt. Ltd, Experian Credit Information Co. of India Pvt. Ltd and CRIF High Mark Credit Information Services Pvt. Ltd. iii. According to the RBI’s report on furnishing credit information, India is ranked 28 in “getting credit” and the coverage of CICs accounts for only 19.8% of adult population, as against 100% in several countries. 5. RBI signs an information sharing agreement with Brazil’s Central Bank i. This MoU was signed by Anthero de Moraes Meirelles, Deputy Governor for Supervision, BCB and S.S. Mundra, Deputy Governor, Reserve Bank of India. ii. In this regard, RBI in total has signed 23 such MoUs, one Letter for Supervisory Co-operation and one Statement of Co - operation (SoC), with different Central Banks of other countries and overseas regulators/supervisors. www.bankersadda.com | wwwww.careerpower.in | www.careeraddreeradda.co.in 1 6. RBI, Sri Lankan central bank agrees on $1.5 billion currency swap deal. 7. RBI Relaxes Overseas Loan Recast Rules i. The Reserve Bank of India (RBI) relaxed rules for companies and banks to restructure and reschedule existing overseas borrowings by permitting an increase in the total cost of borrowing offshore. ii. Indian firms have found it difficult to restructure existing borrowings after facing a sharp slowdown in the economy. iii. The banking regulator also allowed changes in the drawdown and repayment schedules of such overseas borrowings. 8. RBI cuts repo rate by 25 basis points to 7.5 per cent i. The Reserve Bank of India (RBI) has cut down repo rate by 25 basis points to 7.5 percent from 7.75 percent, with immediate effect citing that the fiscal consolidation was better than what numbers show and that the combined fiscal deficit is much lower due to the government transferring more funds to the states. ii. However, RBI has kept the cash reserve ratio (CRR) unchanged at 4 percent. iii. It is the second change in rates by 25 basis points since January 2015. With this change, RBI is signaling that it was convinced by the fiscal consolidation measures announced in the Budget. iv. This is the first time that the Reserve Bank of India has announced a monetary policy action ahead of markets opening. 9. RBI adopted Inflation Targeting as a policy tool for monetary regulation i. Inflation targeting was in news recently as Union Government and Reserve Bank of India (RBI) on 20 February 2015 signed an agreement on Monetary Policy Framework. As per the agreement, RBI accepted to focus on flexible inflation targeting. ii. Inflation targeting is defined as an economic policy in which a central bank estimates or decides for a medium-term target inflation rate. In Indian context, as per the agreement, inflation targeting means that the RBI will have to maintain iii. Consumer Price Index (CPI)-based inflation targets below six per cent by January 2016 and four per cent from 2016-17, with a band of plus/minus two per cent. iv. The transition from monetary targeting suggested by Chakravarty Committee (1988) to Inflation targeting suggested by Urijit Patel Committee is similar to the practice adopted by central banks in developed countries. What are the Benefits of Inflation Targeting ? i. The benefits of inflation targeting are many. Two of the prominent benefits of inflation targeting are enhancement of transparency and reduction of price variability. ii. The most important benefit of inflation targeting is that it helps the central banks to maintain low inflation and low inflation eventually promotes long term growth. iii. Other most important benefits of using inflation targeting include enhanced public understanding of monetary policy, increased central bank accountability, and an improved state for economic growth. 10. RBI eases norms for home loans for up to Rs 10 lakh i. Giving a boost to affordable housing, the RBI eased the norms for home loans for up to Rs 10 lakh by allowing banks to include stamp duty and registration charges to the cost of a unit. ii. These charges used to form around 15 per cent of the cost of the house and place a burden on borrowers. iii. As per the current practice, banks do not include stamp duty, registration and other documentation charges in the cost of housing property. iv. The RBI declared that in cases of projects sponsored by government, statutory authorities, banks may disburse the loans as per the payment stages prescribed by such authorities, even where payments sought from house buyers are not linked to the stages of construction. Banking topics in news – V NPA’s (Non Performing Assets): i. A mortgage in default would be considered non-performing, after a prolonged period of non-payment(90 days). www.bankersadda.com | www.careerpower.in | www.careeradda.co.in 2 ii. The lender will force the borrower to liquidate any assets that were pledged as part of the debt agreement. If no assets were pledged, the lenders might write-off the asset as a bad debt and then sell it at a discount to a collections agency. • Debt recovery tribunal (DRT- A court for such cases) – A person whose account is declared as NPA • SARFAESI ACT - In 2002 , Govt. gave bank’s a lifeline called as SARFAESI Act (Securitization and Reconstruction of Financial Assets and Enforcement of security interest Act) i. With this Act bank has the power to take possession of the owner’s mortgaged property or can transfer this to some other ownership. • What bank will do with the acquired property? i. Bank can use this for their own purpose like , opening a new branch on it, installing of ATM’s etc. ii. Bank can advertise in newspapers for the auction of the property acquired and could auction them on any pre decided day. iii. Bank can sell the property to ARC (Asset Reconstruction Company), these are registered companies under RBI, they buy such assets from banks and sell them at higher prices to gain profits. V Goods and Services Tax - i. It is an indirect tax that will lead to the abolition of all other taxes such as, central sales tax, state-level sales tax, excise duty, service tax, and value-added tax (VAT). Both the state and the central governments will impose GST on almost all goods and services produced in India or imported into the country. ii. Exports will not be subject to GST. Direct taxes, such as income tax, corporate tax and capital gains tax will not be affected. It will simplify India's tax structure, broaden the tax base, and create a common market across states. This will lead to increased compliance and increase India's tax-to-gross domestic product ratio. iii. The highest rate of taxation under GST will be around 15 per cent in the first year, and eventually come down to 12 per cent in the second year. By comparison, the current rate of the various indirect taxes levied in India amounts to roughly 20 per cent.