Banking Awareness -RBI, SBI, PO, IBPS Exam - August Set 1 2019

Table of Contents

RBI reduces repo rate by 25 basis points in 4th Bi-monthly Monetary Policy
In its 4th Bi-monthly Monetary Policy Committee meeting, the Reserve Bank of India has reduced the policy repo rate by 25 basis points (bps).
The MPC has also decided to maintain the accommodative stance of monetary policy. The main decisions taken in the 4th Bi-monthly Monetary Policy Committee meeting are:
The repo rate under the liquidity adjustment facility (LAF) was reduced from 5.40% to 5.15%.
The reverse repo rate under the LAF stands revised to 4.90%.
The marginal standing facility (MSF) rate and the Bank Rate is revised to 5.40%.
RBI has also reduced the real GDP growth for 2019-20 from 6.9% to 6.1%.
The GDP growth was just 5 per cent in the first quarter (April to June 2019) of the current financial year
If growth is so weak, why not cut rates more aggressively?
For answering this, one has to consider the roots of India’s economic slowdown. If the slowdown was essentially because of the high cost of money holding back investment, then cutting interest rates makes a lot of sense. But that is not the case. The main problem with the economy is the collapse in consumption, which in turn has been due to a collapse
in incomes and jobs. Yet, given the stage of India’s economy and the fact that the government has just cut corporate tax rates, it makes sense to cut interest rates and incentivise new investments.
But there are two more hurdles here. One is the issue of transmission of rate cuts. Of the 110 basis points of the repo rate cut, only 29 basis points were transmitted by the banking system to the final borrower. This weak transmission begs the question: whether it is wise to cut rates without first fixing the transmission.
Two, and very importantly, is the issue of inflation. At present, most inflation indicators are well within RBI’s comfort zone. But they are trending up. RBI must not cut rates to such a level that it unleashes another monster – that of high inflation

Q) Who has been appointed as the new finance secretary?
A.Subhash Chandra Garg
B.Rajiv Kumar
C.Anshu Prakash
D.Atanu Chakraborty

Q) Who has been nominated as a Director on the Central Board of Directors of Reserve Bank of India?
A. Subhash Chandra Garg
B. H R Khan
C. Rajiv Bhalla
D. Atanu Chakraborty

Q) Which Payment bank has decided to convert itself into Small Finance Bank in order to offer small loans to customers?
A.Fino Payment Bank
B. India Post Payment Bank
C. Jio Payment Bank
D.Airtel Payment Bank

Payment Banks can accept deposits of up to INR 1 lakh, offer remittance services, mobile payments or transfers or purchases and other banking services like ATM/debit cards, net banking and third party fund transfers but cannot advance loans or issue credit cards.

Essay Question for RBI Grade B Mains

Why five out of the 11 payments banks have shut shop?
When the RBI doled out as many as 11 payments bank licenses four years ago, it intended to widen financial inclusion and ride on low-cost digital payment systems to chip away at
the physical cash transactions. But with only 6 out of the originally 11 intended players operational currently — few had dropped off within months of being granted licenses — the initial hype around RBI’s payments bank licenses has quickly fizzled out.
Airtel Payments Bank, Aditya Birla Idea Payments Bank, Fino Payments Bank, India Post Payments Bank, Jio Payments Bank, NSDL Payments Bank and Paytm Payments Bank —
were the seven players operational until recently. With Aditya Birla Payments Bank, announcing its decision to shut operations in July, the tally is down to six.
Airtel Payments Bank, Aditya Birla Idea Payments Bank, Fino Payments Bank, India Post Payments Bank, Jio Payments Bank, NSDL Payments Bank and Paytm Payments Bank — were the seven players operational until recently.With Aditya Birla Payments Bank, announcing its decision to shut operations in July, the tally is down to six.
Why have the Indian payments banks failed to live up to the initial expectations? limited revenue streams, challenging business model and small margins have made it difficult for payments banks to carry on viable operations.
Inherent challenge
According to the RBI’s report on ‘Trend and progress of banking in India 2017-18’, payments banks continued to incur losses in 2017-18 (after a weak performance in 2016-17). From a net loss of ₹242 crore in FY17, losses climbed to ₹516 crore in FY18.
High operating expenses and weak revenues led to the losses. Also, other liabilities (such as unspent balances in prepaid payment instruments) of the payments banks in operation then accounted for more than half of their balance sheets.
Payments banks are challenged by their underlying business model. Unlike traditional banks that lend money raised from deposits, payments banks have little scope to earn good margins.
For starters, payments banks cannot engage in any lending activity. Their income comprises mostly of interest from investments in safe government securities and fee income, that they can earn by distributing simple financial products such as mutual funds and insurance. Such niche banks can provide payment and remittance services through various channels and can issue debit cards. But these banks cannot lend money.
As per the RBI guidelines, payments banks are allowed to take deposits only up to ₹1 lakh per account. They also need to invest 75 per cent of their deposits in government securities with maturity up to one year and the balance 25 per cent can be parked with commercial banks.
In the recent 3-4 years, the yield on one-year G-Sec has been in the 7-8 per cent range. But in the past few months, the yield on one-year G Sec has fallen sharply, and is at 5.6 per cent currently. This will only squeeze payments banks’ wafer-thin margins further.
To compete with traditional banks, payments banks will have to offer attractive interest rates on deposits. Most banks offer 3.5 per cent for their low-value savings deposits (for deposits up to ₹25-50 lakh). But, few private banks such as YES Bank, Kotak and IndusInd Bank offer 4-5 per cent for deposits up to ₹1 lakh and a higher 5.5-6 per cent for higher value deposits (up to ₹1 crore).
Some of the small finance banks also vying for the deposits pie have been offering higher rates of 5-6 per cent. Hence payments banks have to offer aggressive rates to woo customers. But given the yield on GSec, offering higher rates on deposits may lead to margin erosion. Many players have thus not been able to offer more than 4 per cent interest on deposits.
About three years ago, Airtel Payments set the rate on its savings deposits at 7.25 per cent. This had meant the bank incurring a loss on each deposit, which it could not absorb for long. The interest rate the bank offers now is 4 per cent. Paytm Payments Bank also offers 4 per cent. To address the issue of cap on the amount of deposits, Fino Payments has tied up with Suryoday Small Finance Bank, offering a sweep facility. The excess over ₹1 lakh deposit is transferred into Suryoday account.
Here, Fino Payments also offers a higher rate on deposits, 6.25 per cent up to ₹1 lakh and 7.25 per cent above that. Coming up with such innovative offers and tie-ups can help these banks. Pushing third-party products — such as offering credit, insurance and investment products — can also become alternate sources of revenue.
However, with traditional banks investing heavily on digital initiatives and offering mobile banking services and technology such as unified payments system enabling cheaper transactions, customer acquisition will remain a big challenge for payments banks.
The underlying weak business model only makes it more challenging for these players to compete with traditional banks.

Q) Name the first Indian bank which has been linked up with China National Advance Payment System?
A.Bank of Baroda
B. State Bank of India
C. Axis Bank
D.Yes bank

SBI (Shanghai) becomes 1st Indian bank to link up with China payment system
The State Bank of India’s (SBI) Shanghai branch is now connected to China’s National Advance Payment System (CNAPS), becoming the first Indian Bank to operationalise it.
The CNAPS, launched in 2008 by People’s Bank of China (PBOC) provides real-time settlement services for all payments cleared in mainland China, as well as in all clearing banks in offshore yuan centers, such as Hong Kong.

Q) Who has took over as the Controller General of Accounts (CGA)?
A. Anthony Lianzuala
B. Giriraj Prasad Gupta
C.Vikas Malhotra
D.Ranveer Bhatia

Girraj Prasad Gupta appointed as new CGA
Girraj Prasad Gupta, Indian Civil Accounts Service (ICAS) officer, took over as the Controller General of Accounts
(CGA). Gupta succeeds Anthony Lianzuala as the new Controller General of Accounts (CGA) under the Finance Ministry

Q) Which Bulgarian will lead the International Monetary Fund (IMF)?
A.Kristalina Georgieva
B. David Richardson
C. Christine LaGarde
D.David Malpass

Sovereign Gold Bond Scheme 2019-20 Series-III Opens for Subscription
The finance ministry issued an order to open Series III of the Sovereign Gold Bond Scheme
2019-20 for subscription from August 5 to August 9 at an issue price of Rs 3,499 per gram.
Sovereign gold bonds are government securities denominated in multiples of gram(s) of gold. They are a substitute for investment in physical gold.
The investors in the gold bond scheme are compensated at a fixed rate of 2.5% interest per annum payable semiannually on the nominal value.
The tenor of the Bond will be for a period of 8 years with an exit option after the fifth year to be exercised on the interest payment dates.
Along with the 2.5% interest, investors will earn returns linked to gold prices.
These bonds carry sovereign guarantee both on redemption amount and on the interest.
Minimum investment in these gold bond schemes is 1 gram, while maximum investment has been set at 4 kg for individuals, 4 kg for HUF and 20 kg for trust and similar entities per fiscal year.
Gold bonds are sold through commercial banks, Stock Holding Corporation of India Ltd (SHCIL), designated post offices (as may be notified) and recognised stock exchanges like National Stock Exchange of India and BSE, either directly or through agents.
Sovereign Gold bonds are available in both DEMAT and paper form.
These bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by RBI

Q) Apple in partnership with which company has started the issue of its Credit Card that is named “Apple Card”?
A. MasterCard
B. Citibank
C. Goldman Sachs
D. VISA

Q) The US treasury department has labeled which country as a “currency manipulator”?
A.Russia
B. China
C. Spain
D.Poland

US Treasury officially labels China a “currency manipulator”
The US Treasury has officially labeled China a “currency manipulator”. Currency manipulation is a situation when a country intentionally influences the exchange rate between its currency and the US dollar to gain “unfair competitive advantage in international trade”.
This comes after the People’s Bank of China (Chinese central bank) allowed the renminbi to fall below a key threshold, marking a dramatic escalation in the trade war between the two economic powers.

Q) Which insurance company has launched Jeevan Amar Plan and withdrawn Amulya Jeevan Term?
A.Bharti AXA
B. LIC
C.Bajaj Allianz
D.Max

Q) National Council of Applied Economic Research (NCAER) has predicted India’s GDP growth rate for FY20 at what per cent?
A. 6.8%
B. 6.5%
C. 6.7%
D. 6.2%

NCAER predicts India’s GDP growth rate for FY20 at 6.2%

Economic think tank National Council of Applied Economic Research(NCAER) has predicted India’s GDP growth rate for FY20 at 6.2%.
The Wholesale Price Index (WPI) inflation is projected at 2.6 percent. NCAER pegged the Centre’s fiscal deficit at 3.5 per cent of GDP for FY20, higher than Budget projection of 3.3 per cent.

Q) Which Small Finance Bank has received the Scheduled Bank status from RBI?
A. Ujjivan Small Finance Bank
B. Jana Small Finance Bank
C.Equitas Small Finance Bank
D.Capital Small Finance Bank

Jana Small Finance Bank receives Scheduled Bank status from RBI
Jana Small Finance Bank Ltd has announced to get the status of a Scheduled Bank from RBI.
The Bengaluru-headquartered bank, established as a financial services company in 2009. MD & CEO Jana Small Finance Bank : Ajay Kanwal
Commercial Banks = Scheduled and non-scheduled commercial banks which are regulated under Banking Regulation Act, 1949.

(a) Scheduled Commercial Banks (listed under the second schedule of the RBI Act, 1934) are grouped under following categories:
1. State Bank of India and its Associates
2. Nationalised Banks
3. Foreign Banks
4. Regional Rural Banks
5. Other Scheduled Commercial Banks.

Banks in the groups (1) & (2) are known as public sector banks whereas, other scheduled commercial banks mentioned at group
(5) are known as private sector banks.
(b) Non-Scheduled Commercial Banks

Q) Asian Development Bank (ADB) has approved a USD 200 million loan for improving road infrastructure in which state?
A. Madhya Pradesh
B. Arunachal Pradesh
C. Chhattisgarh
D. Maharashtra