IBPS CWE NOTE ON RBI AFFAIRS 2014 --------------------------------------------------------- 1. RBI relaxes KYC norms for opening bank accounts. i. RBI has asked banks to allow self-certified copy of the document by mail, or post for opening an account. ii. Banks have also been asked not to seek fresh documents, if a KYC compliant customer desires to open another account in the bank. iii. If the customers are unable to fulfill within a reasonable period of time, partial freezing may be introduced for KYC noncompliant customers. This means that only credits would be allowed in such accounts, but debits would not be allowed. The account holder would have the option to close the account and take back the money in the account. About KYC – Know Your Customer is a term used for Customer Identification Process. Objective: is to prevent banks being used, intentionally or unintentionally by criminal elements for money laundering. KYC has two components – Identify and Address. 2. RBI proposed to separate Chairman and Managing Director (CMD) post of PSU banks Note: i. The Reserve Bank of India (RBI) proposed to separate the post of Chairman and Managing Director (CMD) of Public Sector Undertaking (PSU) banks. ii. These proposals are a part of corporate governance reforms in PSU banks and are based on the recommendations of various committees including the PJ Nayak Committee. 3. The Reserve Bank of India decided to fix the maximum age for Managing Directors and Chief Executive Officers in private sector banks at 70. Note: The RBI Move aligns retirement with the Companies Act 2013 ii. Minimum age to become Manager is 21 years. iii. Maximum age for CEOs, whole-time directors is 70. iv.The P J Nayak committee recommended a maximum age of 65 for private bank CEOs. iii. The issue emerged when the board of Induslnd Bank cleared the extension of tenure of Romesh Sobti by another three years. Romesh Sobti is M.D. and CEO of Induslnd Bank. iv. However, the RBI allowed only a years extension. The move triggered speculation that the RBI wanted to fix the retirement age at 65. 4. RBI board approves essential changes, introduces COO post as proposed by Raghuram Rajan: Note: i. RBI governor create the post of Chief Operating Officer (COO), an executive who’s likely to be made responsible for executing the RBI’s reform agenda. ii. Rajan proposed to bring all aspects of RBI under 5 functional departments to be supervised by 4 Deputy Governors and a COO. iii. The position of COO is likely to be at the deputy governor level. iv. Nachiket Mor is seen as the most likely candidate for the post of COO. Mor is a former executive director of ICICI Bank and also chaired the RBI panel on financial inclusion. 5. CAD narrowed down to 1.7 per cent of GDP in Q1 of 2014- 15: RBI Note: Current Account Deficit (CAD) of India narrowed down sharply to 1.7 percent of Gross Domestic Product (GDP) in the Quarter 1 (Q1) of the fiscal year 2014-15 as compared to 4.8 percent in the Q1 of 2013-14. 6. RBI issues amendments to Basel 3 norms: Unveiling a slew of amendments in the implementation of the Basel 3 regulations, the RBI said that banks must have a provision of Point of Non-Viability (PONV) for every non-equity instrument which, when triggered, would lead to a conversion to common shares (of the bank) or a permanent write-off. iii. The regulator has reduced the minimum tenor after which call options are permissible in perpetual debt instruments from 10 to 5 years. iv. The minimum maturity of Tier 2 debt instruments has also been reduced from 10 to 5 years. Basel-III Norms: According to Basel Committee on Banking Supervision Basel III is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector. Note: Basel III raises the minimum required capital levels for both Tier 1 capital to 7.0 percent and Common Equity Tier 1 (CET1) capital to 5.5 percent. 7. Reserve Bank of India reduced free usage of other bank automated teller machines (ATMs) to 3 per month from 5: Frequent withdrawal of money from ATMs will become expensive from November, with the RBI imposing a limit of 3 transactions per month from ATMs of other banks and 5 from the same bank in six metropolitan cities. Note: A customer will be required to pay a fee of up to Rs 20 for using Automated Teller Machines (ATMs) beyond the permitted numbers of transactions in Delhi, Mumbai, Chennai, Bangalore, Kolkata and Hyderabad. 8. RBI issued two new categories of banks—Small and Payments which can improve financial inclusion. Important Points: i. The idea of small and payments banks was first proposed by the Nachiket Mor committee on financial inclusion. ii. The minimum paid-up capital requirement of both small banks and payments banks is Rs. 100 crore. iii. The payments bank will have to invest in government securities with a maturity of up to one year. iv. Small banks will offer both deposits as well as loan products. ii. Payments banks will be used only for transaction and deposits purposes. Unlike small banks, payments banks can’t lend money to people. iii. Payments Banks cannot set up subsidiaries to undertake NBFC business. iv. Hence, payments banks will offer only a limited range of products such as acceptance of demand deposits and remittance of funds. v. Those eligible to set up a small bank include resident individuals with 10 years of experience in banking and finance, companies and societies, NBFCs, microfinance institutions and local area banks. v. Of the minimum capital, the guidelines said, the promoters initial minimum contribution will be at least 40 per cent, to be locked in for a period of 5 years. 9. RBI issues guidelines for NBFCs on lending against shares. Note: According to the guidelines applicable to NBFCs with asset size of Rs. 100 crore and above, the NBFCs have to maintain a loan-to-value (of shares pledged) of 50 per cent and accept only Group 1 securities as collateral for loans of a value more than Rs. 5 lakh. 10. RBI notified the increase in deposit money under Public Provident Fund, PPF to 1.5 lakh rupees from 1 lakh rupees. 11. The Reserve Bank of India (RBI) issued draft guidelines for implementation of Bharat Bill Payment System (BPPS), an anytime anywhere bill payment system: The G. Padmanabhan Committee was formed by RBI to study the Feasibility of Implementation of GIRO-based Payment Systems anticipated that around 30800 million bills amounting to more than 600000 crore rupees are paid each year in 20 Indian cities. Note: i. Bharat Bill Payment System is intended for the implementation of a unified bill payment system across the country. This integrated bill payment system will comprise of two entities: i. Entity operating at Bharat Bill Payment System (BBPS) will be setting up the standards related to payments, clearance and settlement process ii. Second entity would be Bharat Bill Payment Operating Units (BBPOUs). It will be carrying out the operations in adherence to the standards fixed by BBPS. iii. Authorised entities such as agents, banks, service providers, payment gateways would be the participants at the Bharat Bill Payment System. 12. RBI tightened the Norms for asset reconstruction companies (ARC) to improve discipline and bring about transparency in the sale and purchase of bad loans. Note: Now, asset reconstruction companies (ARCs) will have to pay upfront 15 per cent of the bid value of nonperforming loans, against five per cent earlier. ii. RBI said ARCs would get up to six months to plan recoveries from the non-performing assets acquired. Currently, ARCs get about a year for this. 13. The Reserve Bank of India has inked a memorandum of understanding (MoU) with the Monetary Authority of Hong Kong for exchange of supervisory information. 14. RBI permits NBFCs to work as Business Correspondents of banks: With a view to achieve financial inclusion, the Reserve Bank of India has allowed Non-Banking Finance Companies to operate as Business Correspondents (BCs) of banks, permitting them to offer limited services. Banks will be allowed to work with non-deposit taking NBFCs as BCs. Note: The RBI took into account recommendations of Nachiket Mor Committee while reviewing the existing guidelines on the appointment of BCs 15. The Reserve Bank of India said banks should make all new ATMs installed from July 1, 2014 as “talking ATMs” with Braille keypads. 16. Raghuram Rajan, the Governor of the Reserve Bank of India (RBI) announced that plastic currency notes will be launched in 2015 after field trials. 17. 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. 18. Reserve Bank of India granted banking licences to infrastructure financing firm IDFC and microfinance institution Bandhan Note: The in-principle approval 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. 19. 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. 20. RBI extended the timeline for full implementation of Basel III norms 31 March 2019 instead of 31 March 2018. 21. RBI extends date of exchanging pre-2005 notes to Jan 1, 2015.
Posted on: Fri, 05 Dec 2014 08:14:45 +0000
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