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Banking & Financial Awareness GK Digest : January 2024

Published on Tuesday, February 13, 2024

Banking & Financial Awareness GK Digest : January 2024

RBI Extends Payments Infrastructure Development Fund Scheme Till 2025

Current Context: The Reserve Bank of India (RBI) has extended the Payments Infrastructure Development Fund (PIDF) scheme until December 31, 2025.

About

  • It is designed to offer financial aid to banks and non-bank financial companies (NBFCs) for the deployment of point-of-sale terminals and other payment acceptance infrastructure.
  • The scheme aims to encourage the deployment of digital payment infrastructure in North Eastern states, Jammu & Kashmir, Ladakh, and tier-III to VI centres.
  • This extension aims to continue fostering financial inclusion and supporting the country’s payment infrastructure.

“RBI Cancels Licences of Botad Peoples Co-operative Bank and Adarsh Mahila Nagari Sahakari Bank”

Current Context: On December 29, 2023, the Reserve Bank of India (RBI) cancelled the licences of two cooperative banks, one in Gujarat and one in Maharashtra.

Key Points

  • The RBI cancelled its licence due to inadequate capital and earning prospects. The bank had a negative net worth of ₹16.6 crore as of September 30, 2023.
  • The RBI cancelled its licence due to the same reasons as the Botad Peoples Co-operative Bank.
  • The bank had a negative net worth of ₹63.2 crore as of September 30, 2023. It had also been classified as a "weak" bank by the RBI since April 2022.

CBI & Kisetsu Saison Finance Partners for MSME Loan

 Current Context: The Central Bank of India (CBI) and Kisetsu Saison Finance have entered into a strategic co-lending partnership to offer loans to Micro, Small, and Medium Enterprises (MSMEs) on 28th December 2023.

 Key Points

  • This co-lending arrangement is expected to result in a greater expansion of the portfolio by both entities.
  • Co-lending or co-origination is a setup where banks and non-banks jointly contribute credit for priority sector lending.
  • In this arrangement, both banks and Non-Banking Financial Companies (NBFCs) share the risk in a ratio of 80:20, with 80% of the loan with the bank and a minimum of 20% with the non-banks.

RBI proposes new dividend payment rule for banks, lenders with lower NPAs may offer higher dividends

Current Context: The Reserve Bank of India (RBI) recently proposed a new dividend payment rule for banks, aiming to reward lenders with lower non-performing assets (NPAs) with higher dividend payouts. This move is expected to incentivize banks to improve their asset quality and strengthen their financial stability.

Key Highlights

  • Here are the key takeaways of the proposed rule:
    • Lower NPA threshold for dividend eligibility: Previously, banks needed to have a net NPA ratio of up to 7% to be eligible for dividend declaration. The new rule proposes lowering this threshold to 6%. This means banks with better asset quality will have greater flexibility in distributing profits to shareholders.
    • Graded dividend payout based on NPA: The proposal introduces a graded dividend payout system. Banks with the lowest NPA ratios (0%) would be allowed to pay out up to 50% of their profits as dividends, while those with higher NPA ratios would face restrictions. This incentivizes banks to actively manage their bad loans and maintain a healthy financial position.
    • Maintaining capital adequacy: The new rule reiterates the importance of banks meeting the applicable regulatory capital requirements for the past three years before declaring dividends. This ensures that banks prioritize maintaining sufficient capital buffers to absorb potential losses.

HDFC Securities Launches Mobile Trading App HDFC SKY On AWS Cloud

Current Context: HDFC Securities, one of India’s leading investment service providers, has launched its new mobile trading app, HDFC SKY, on Amazon Web Services (AWS) cloud on November 27, 2023.

Key Facts

  • With AWS as its preferred cloud provider, HDFC Securities is providing a secure, stable, and low-latency trading service for the growing number of tech-savvy retail investors who prefer mobile trading.
  • The app, HDFC SKY, which is built on AWS, gives investors access to the stock market at a scale of thousands of transactions per second.
  • HDFC SKY serves 75 million customers and all HDFC Group companies, investors, and traders globally on trading of shares, commodities, futures, currencies, Initial Public Offerings (IPOs), mutual funds, and Exchange-Traded Funds (ETFs).

This digest is not complete. Read the complete digest on the Financial Awareness Course.

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