GK CAPSULE FOR SBI PO 2014 Exam

GK CAPSULE FOR SBI PO 2014 Exam

  

About Poliy Rates

1. Basis points: It is the increase in interest rates in percentage terms. For instance, if the interest rate increases by 50 basis points (bsp), then it means that interest rate has been increase by 50%. One percentage point is broken down into 100 basis points. Therefore, an increase from 2% to 3% is an increase of one percentage point or 100 basis points.  

2.   CRR: Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with RBI. If RBI decides to increase the percent of this, the available amount with the banks comes down. RBI is using this method (increase of CRR rate), to drain out the excessive money from the banks. The current rate is 4%, which means for a cash deposit of Rs. 100, the bank has to park 4 rupee with the central bank.

3. Repo rate: Repo rate is the policy rate and is part of RBI’s Liquidity Adjustment Facility (LAF). It is the rate at which commercial banks borrow from the RBI by selling their securities or financial assets to the RBI for a short‐period of time. It comes with an agreement that the sold securities will be repurchased by the commercial banks from the RBI at a future date at predetermined price. The repo rate is used by the central bank to increase liquidity in the system.

4. Reverse repo rate: Reverse Repo Rate is also a part of LAF. It is the rate of interest at which the central bank borrows
funds from other banks for a short duration. The banks deposit their short term excess funds with the central bank and earn interest on it. This rate is used by the central bank to absorb liquidity from the economy. Generally it is one percentage less than the Repo rate.

5. Bank rate: The only way the bank rate is different from the repo rate is that the bank rate is the rate at which banks borrow money from the central bank without any sale of securities. It is generally for a longer period of time

6. Marginal Standing Facility: The Reserve Bank of India in its monetary policy for 2011‐12 introduced the marginal standing  facility under which banks could borrow funds from RBI when there is a considerable shortfall of liquidity. This measure has been introduced by RBI to regulate short‐term asset liability mismatches more effectively. Under this facility, banks can borrow up to 1% of their net demand.  

7. Liquidity Adjustment Facility: Under this facility, banks borrow from the central bank by pledging government  securities.

8. Statutory Liquidity Ratio: This is the percentage of deposits that banks must mandatorily hold in the form of government bonds. SLR bonds are liquid assets that can be sold at a short notice to meet any unexpected demand from depositors.

News related to RBI: 

1.  RBI, has decided that Indian companies will not be permitted to raise External Commercial Borrowings from overseas branches or subsidiaries of Indian banks for refinance or repayment of the Rupee loans raised from domestic banking system.

2. Raghuram Rajan, the Governor of the Reserve Bank of India (RBI) announced that plastic currency notes will be launched in 2015 after field trials.

3. RBI panel headed by ex.Chairman of Axis Bank, P. J. Nayak recommend for diluting govt stake in public sector banks to  below

50 %. The government should cut its holding in public sector banks to under 50 per cent, a Reserve Bank of India (RBI) panel report on Tuesday said, criticising the way in which the lenders are now being governed.

4. Reserve Bank of India granted banking licences to infrastructure financing firm IDFC and microfinance institution Bandhan from among 25 applicants that included corporate heavyweights ADAG Group, Aditya Birla Group and Bajaj Group. 

    Note: The in‐principle approval granted (to the two entities) will be valid for a period of 18 months during which the applicants have to comply with the requirements under the guidelines and fulfil the other conditions as may be stipulated by the RBI. Chandra Shekhar Ghosh: CMD of Bandhan financial services  Dr. Rajiv B. Lall: Chairman of IDFC – Infrastructure Finance Company.

5. Reserve Bank of India (RBI) issued the guidelines to allow the minors of age above 10 years to independently open and operate savings bank accounts and use other facilities like ATM and cheque books.

6. RBI extended the timeline for full implementation of Basel III norms 31 March 2019 instead of 31 March 2018.  

7. RBI in consultation with Union Government on 1 April 2014 capped the Ways and Means Advances (WMA) limits for the first half of the new financial year 2014‐15 (April 2014‐Sep 2014) at 35000 crore rupees. 

    Note: The interest rate on WMA/overdraft will be based on: a) WMA: Repo Rate.  b) Overdraft: Two percent above the Repo Rate

8. RBI extends date of exchanging pre‐2005 notes to Jan 1, 2015

    Note: The Reserve Bank has further clarified that the public can continue to freely use these notes for any transaction. RBI has said that people can unhesitatingly receive these notes in payment, as all such notes continue to remain legal tender.   

9. Reserve Bank of India (RBI) hiked the trade related remittance limit from 2 lakh rupees to 5 lakh rupees per transaction with immediate effect. It also increased the number of transaction handled by exchange houses.

10.KC Chakrabarty, Deputy Governor, Reserve Bank of India, has quit three months ahead of completion of his term.

11.RBI pegged 2014‐15 GDP growth at a central estimate of 5.5 percent.

12.Economic growth for 2014‐15 expected at 5.5 pc. 

13. CAD expected to come down to 2 pc of GDP in 2014‐15.  

14. Retail inflation expected to be under 6 pc in 2014.  

15. RBI panel headed by RBI Deputy Governor Anand Sinha has recommended bringing a benchmark floating interest rate,

         especially for home loans. Panel also suggested Indian Banks Base Rate (IBBR).

16.The deadline for switching to new format bank cheques under the Cheque Truncation System (CTS) ended on 30 April  

 2014.

17.RBI scraps 26% cap on interest rate for MFIs: (RBI) removed 26 per cent cap on the interest rate that can be charged by a    microfinance company to its borrowers. MFI is allowed to charge interest rate equal to 2.75 times the average of the base rates of the top five commercial banks.

18.RBI permits 4 non-bank entities to set up white label ATMs: The Reserve Bank  has issued ‘certificate of authorisation’ to   four non‐bank entities: 

    (1) Tata Communications Payment Solutions   

    (2) Muthoot Finance, 

    (3) Prizm Payment Services and 

    (4) Vakrangee Ltd. , to set up White Label ATMs (WLAs) in the country.

Note: Most of the ATMs belong to banks, but the cash dispensing machines which are owned and operated by non‐banking

           companies are called White Label ATMs.

19.RBI permits Srei to roll out white label ATMs: Srei Infrastructure Finance is planning to start roll‐out of its while label ATMs (WLAs) between July and September starting with a pilot of 200 Tier‐III towns in Uttar Pradesh and Bihar.  

20.The expert committee headed by Urjit R. Patel, Deputy Governor of the Reserve Bank of India examine the current monetary policy framework of the Reserve Bank of India (RBI) has suggested that the apex bank should adopt the new CPI (consumer price index) as the measure of the nominal anchor for policy communication. The nominal anchor or the target for  inflation should be set at 4 per cent with a band of +/‐ 2 per cent around it.

21.Ex-Chairman of Axis Bank, P. J. Nayak is the head of the expert panel to review bank boards’ governance. The panel will review the RBI's regulatory guidelines on ownership of banks and representation in their boards, among other things.

22.The Reserve Bank of India has raised the Foreign Institutional Investors, FIIs investment limit in the Power Grid Corporation to 30 per cent of its paid up capital, under the Portfolio Investment Scheme.

23.The Reserve Bank of India (RBI) has doubled the sub‐limit for foreign investment in government securities, to USD 10 billion by long‐term investors. RBI's move is aimed to attract more foreign funds. Investors like sovereign wealth funds (SWFs), multilateral agencies, insurance funds, pension funds and foreign central banks are considered as long term investors.

24. RBI relaxes gold loan norms: The Reserve Bank of India has allowed Non‐Banking Financial Companies, NBFCs to lend up to  75 per cent of the value of gold. It was 60 per cent earlier.  

25. RBI panel (headed by banker Nachiket Mor) has suggested setting up of specialised banks to cater to low income households to ensure that all citizens have bank accounts by 2016.

26.The RBI appointed committee on financial inclusion has recommended that the central bank should set up specialised  banks called Payments Bank to provide payment services and deposit products to small businesses and low‐income households. The committee, headed by Nachiket Mor, said that since the new bank will be dealing with poor customers, such a bank must be allowed to accept a maximum deposit of not more than Rs 50,000.

27.The Reserve Bank of India (RBI) had set up a panel under executive director Deepak Mohanty to review the current system of data collection, dissemination and data management processes in the central bank and improve the existing mechanism.

28.RBI tightens norms for credit card holders: RBI advised banks to treat a credit card account as a non‐performing asset if the customer fails to pay the minimum due amount within a stipulated 90‐day period.