Banking and Financial Awareness June 2019: Week II & III

Banking and Financial Awareness June 2019: Week II & III

Interest Rates Reduced RBI by 25 basis Points to 5.75%

  • The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) reduced interest rates by 25 basis points to 5.75% with immediate effect amid slowing economic growth and rising global uncertainty, for the 3rd time in a row.
  • The reduction is expected to bring down the EMIs on home and auto loans and reduce the debt repayment burden on corporates.
  • It is the rate at which the central bank of a country, that is RBI, lends money to commercial banks in the event of any shortfall of funds.

RBI scraps NEFT and RTGS Transaction Charges

  • The RBI has removed transaction charges levied by it for Real Time Gross Settlement System (RTGS) and National Electronic Funds Transfer (NEFT) systems to boost digital transactions.
  • The Real Time Gross Settlement System (RTGS) is meant for large-value instantaneous fund transfers while the National Electronic Funds Transfer (NEFT) System is used for fund transfers up to Rs 2 lakh.
  • RBI expects the banks to pass on the benefits of this move to customers.
  • Also, the RBI has decided to set up a committee to review the charges levied on the use to ATMs as the usage by the public has been growing significantly.

RBI imposed Rs. 2 cr penalty on Kotak Mahindra Bank

  • The Reserve Bank of India (RBI) has imposed a penalty of Rs 2 crore on Kotak Mahindra Bank for not furnishing information about the dilution of promoter shareholding.
  • The penalty was imposed by the RBI in exercise of powers vested in it under the provisions of the Banking Regulation Act, 1949.
  • The bank failed to comply and a show cause notice was issued to the bank as to why penalty should not be imposed for non-compliance with the said directions.
  • Uday Kotak recently told the Bombay High Court, he was in full compliance of the RBI rules and the regulator had never communicated to the promoters on the matter of shareholding.
  • The current Governor of RBI is Shaktikanta Das.

Enhanced Disclosure Guidelines introduced by SEBI

  • Markets regulator Securities and Exchange Board of India (SEBI) introduced enhanced disclosure guidelines for credit rating agencies (CRA).
  • The recent Infrastructure Leasing and Financial Services Ltd's (IL&FS) liquidity crisis among non-bank lenders in India has focused attention again on credit rating agencies.
  • The rating companies must create an uniform probability of default benchmark for each rating category on their website, for one-year, two-year and three-year cumulative default rates, both for the short term and long term.
  • They should use marginal default methodology to arrive at default rates.
  • SEBI defined the terms that the companies should use to describe the liquidity position of issuer, that is, strong, adequate, stretched and poor.
  • Tracking the probability of default is a step towards aligning Indian rules with global standards.

RBI asks banks to grout their ATMs to a structure by September end

  • The Reserve Bank of India has asked the banks to ensure their ATMs are grouted to a wall, pillar, or floor by the end of September month, except those installed in high secured premises such as airports.
  • The ATMs shall be operated for cash replenishment only with digital One Time Combination (OTC) locks.
  • All banks can also roll out a comprehensive e-surveillance mechanism at the ATMs.
  • The RBI had set up a Committee on Currency Movement (CCM) in 2016.

J&K Bank to now comes under RTI Act, CVC guidelines

  • The decision is after the removal of Parvez Ahmed as the Chairman of the J&K Bank.
  • He was accused of alleged corruption, nepotism and favouritism.
  • It has been registered under the companies act as a government company.
  • The bank is expected to be brought under the RTI and CVC guidelines by the end of June.
  • A citizen of India can go for filing an RTI at any point in time whenever he wants to seek any information regarding any government organization, or its any ongoing program, any public authority, etc.

Rs.1 Crore Penalty Imposed on HDFC Bank by RBI

  • The Reserve Bank of India (RBI) imposed Rs.1 crore penalty on private sector lender HDFC Bank for violating Know Your Customer (KYC) and Anti-Money Laundering (AML) norms.
  • RBI had received a reference from customs' authorities regarding submission of forged bill of entries (BoEs) by certain importers to the bank for remittance of foreign currency.
  • RBI said that the penalties are based on deficiencies in regulatory compliance.
  • RBI said that a notice was issued to HDFC Bank on why monetary penalty should not be imposed for non-compliance with the directions.
  • RBI imposed the penalty in exercise of powers vested to it under the provisions of Section 47A(1)(c) with Section 46(4)(i) of the Banking Regulation Act, 1949.
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