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Long-term Repo Operations (LTRO)

Syllabus subtopic: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.   Prelims and Mains focus: about LTRO: features and significance   News: The Reserve Bank of India had received Rs.1.71 lakh crore in the third long-term repo operation (LTRO) conducted for an amount of Rs.25,000 crore. The central bank received 66 bids in the three-year tenor LTRO, which has reversal date on March 1, 2023.   Backgroun

03 March, 2020 Banking

RRB and COVID-19

RRB and COVID-19 Part of: GS Prelims and GS-III- Economics Recently, the Centre has approved a ?1,340-crore recapitalisation plan for Regional Rural Banks (RRBs). The move is crucial to ensure liquidity in rural areas during the lockdown due to the COVID-19  crisis. Key Points This recapitalisation (a strategy of enhancing the financial base of an entity to overcome a rough financial situation) would improve their capital-to-risk weighted assets ratio (CRAR)&nbs

26 March, 2020 Banking

Impact of Lockdown on Banks

Impact of Lockdown on Banks Part of: GS Prelims and GS-III- Economy -Bank Banks are concerned about the build up of Non-performing Assets (NPAs) as the disruption caused to business operations and supply chains during the 21-day lockdown period will take time to repair. This is despite the fact that the Reserve Bank of India (RBI) has injected fresh liquidity into the banking system and given banks leeway to deal with potential stress in loan accounts. What is NPA?

03 April, 2020 Banking

RBI relaxed the norms of State/UT to avail overdraft

RBI relaxed the norms of State/UT to avail overdraft On April 7, 2020 The Reserve Bank of India (RBI) has decided to increase the number of days that a State/UT can continue to overdraft to 21 working days from the current stipulation of 14 working days as they are facing cash flow mismatches due to coronavirus. Key Points i.In addition, the number of days that a State/UT can overdraft in a quarter has also been increased to 50 working days from the

08 April, 2020 Banking

Bank Board Bureau

Centre approves extension of Bank Board Bureau members’ According to the Department of Financial Services, the Appointments Committee of the Cabinet (ACC) has approved the extension of tenure of all members and the current part-time chairman of the Bank Board Bureau(BBB) by 2 years, which is coming to an end on April 11,2020. Key Points: i.Bhanu Pratap Sharma,the former Secretary in the Department of Personnel and Training, will continue to hold the post of part-time me

10 April, 2020 Banking


NBFCs Face Moratorium Issue with Banks Part of: GS Prelims and GS-III- Economy-Bank (PT-MAINS-PERSONALITY TEST) Non-Banking Financial Companies (NBFCs) may face a tough time following the Reserve Bank of India’s recent directive on providing a moratorium on repayment. This is because though these entities are providing moratoriums to their customers, they still have to continue repaying banks and other borrowers. Important Banks are not willing to offe

12 April, 2020 Banking

RBI to infuse Rs 1 lakh crore – LTRO – RBI Reforms

RBI to infuse Rs 1 lakh crore – LTRO – RBI Rreforms Part of: GS-III- RBI reforms (PT-MAINS-PERSONALITY TEST) Context RBI Governor Shaktikanta Das announced new measures to maintain adequate liquidity in system, facilitate bank credit flow and ease financial stress. RBI announced ?50,000 crore worth of targetted LTRO and a cut in reverse repo rate. As India entered into the second phase of a nationwide lockdown to combat coronavirus, Reserve Bank of India (RBI) Govern

18 April, 2020 Banking

Ways and Means Advances (WMA)

Ways and Means Advances (WMA) The WMA are short-term loan facilities which allow the Centre and states to borrow funds from the RBI to bridge their temporary mismatch between expenditure and receipts. The interest rate on WMA is the RBI’s repo rate. Repo rate is basically the rate at which RBI lends short-term money to banks. The WMA loans have a three-month tenure. States are allowed an overdraft facility (to borrow in excess of WMA limit) of 21 days.

18 April, 2020 Banking


RBI REPORT ON FOREX RESERVES According to the latest data from the Reserve Bank of India, in the reporting week ended April 17, foreign currency assets (FCA), a major component of the overall reserves, rose USD 1.55 billion to USD 441.88 billion. The RBI data showed that gold reserves increased USD 1.54 billion to USD 32.68 billion in the reporting week. While, special drawing rights with the International Monetary Fund,IMF were up by USD 3 million to USD 1.43 billion. The country's re

26 April, 2020 Banking

RBI Cancels Licence of CKP-Cooperative Bank

RBI Cancels Licence of CKP Part of: GS-III- Bank (PT-MAINS-PERSONALITY TEST) Recently, the Reserve Bank of India (RBI) has cancelled the licence of Mumbai-based CKP Co-operative Bank. RBI has cancelled the licence of the bank as the financial position of the bank was highly adverse and unsustainable. The bank is not in a position to pay its present and future depositors. The bank failed to meet the regulatory requirement of maintaining a minimum capital adequacy ratio of

07 May, 2020 Banking


NABARD The Parliament has recently passed the National Bank for Agriculture and Rural Development (Amendment) Bill, 2017. The Bill seeks to amend the NABARD Act, 1981 which establishes NABARD by transferring the agricultural credit functions of RBI and refinance functions of the then Agricultural Refinance and Development Corporation (ARDC). The amendment bill seeks to increase the authorised capital of the Bank to 30,000 crore rupees from 5,000 crore rupees. Currently the Central gov

20 May, 2020 Banking

The Negotiable Instruments (Amendment) Bill, 2017

The Negotiable Instruments (Amendment) Bill, 2017 It seeks to amend the Negotiable Instruments Act, 1881.  A negotiable instrument is a document that promises payment to a specified person. E.g Cheque The Act defines promissory notes, bills of exchange, and cheques.  It also specifies penalties for bouncing of cheques, and other violations with respect to such negotiable instruments.

21 May, 2020 Banking

Time after time: On RBI repo rate cut

Time after time: On RBI repo rate cut The RBI has once again reduced the repo rate that will reduce the cost of capital and ease the financial burden on businesses due to the extended lockdown. With Friday’s repo rate cut of 40 basis points, the RBI has shaved off 1.15 percentage points from the rate chart in the 58 days since the lockdown began, bringing the repo rate down to 4% and the reverse repo rate to 3.35%. Will it increase the liquidity in the market? In fact, the

23 May, 2020 Banking

RBI announces 9 measures for strengthening the Economy

RBI announces nine additional measures for strengthening the Economy Essay lines :"It is when the horizon is the darkest and human reason is beaten down to the ground that faith shines brightest and comes to our rescue." RBI Governor Shaktikanta Das drew hope and inspiration from the 1929 statement of the Father of the Nation, as he announced yet another set of nine measures to smoothen the flow of finance and preserve financial stability in the turbulent and uncertain times ushe

23 May, 2020 Banking

Give loan to eligible borrowers without fear of CBI, CVC and CAG

Give loan to eligible borrowers without fear of CBI, CVC and CAG Part of: GS-III- financial assistance  (PT-MAINS-PERSONALITY TEST) Banks should not be scared to extend loans as 100% guarantee is being given by govt, Nirmala Sitharaman told CEOs and MDs of public sector banks. Finance Minister said banks have been asked to extend loans automatically to eligible borrowers without fear of 3Cs -- CBI, CVC and CAG. Important Points She said clear instructions have been given in a

24 May, 2020 Banking

Credit scores

Credit scores A credit score determines how creditworthy a person is and helps banks and financial institutions decide on loans. In India, the scores are issued by credit reporting agencies such as CIBIL, Equifax, Experian, Etc. These agencies are regulated by the RBI and collect data from banks on their loans and come up with credit scores through use of algorithms. The data is updated frequently. Credit scores in India range from 300-900. A credit report may be obtained for free once a y

29 May, 2020 Banking

Banks Board Bureau

Banks Board Bureau Part of: GS-III- Bank  (PT-MAINS-PERSONALITY TEST) The Banks Board Bureau (BBB) has selected SN Rajeswari as the Chairman and Managing Director (CMD) of the Delhi-based Oriental Insurance Company (OIC). The Ministry of Finance will now start the process of appointing Rajeswari as the CMD of OIC. This will be followed by the Finance Ministry's nod and a further approval from the Appointments Committee of the Cabinet and the Prime Minis

30 May, 2020 Banking

Prompt Corrective action (PCA)

Prompt Corrective action (PCA) Union Finance Ministry as a part of reforming process about to initiate a performance review for public sector banks. These reforms will be under the RBI’s Prompt Corrective Action (PCA). The PCA is invoked when certain risk thresholds are breached, there are three risk thresholds which are based on Asset quality. Profitability. Capital and the like. The third threshold is the maximum tolerance limit, which has set NPA at over 12% and negati

31 May, 2020 Banking

Pradhan Mantri Street Vendor’s AtmaNirbhar Nidhi Scheme

Pradhan Mantri Street Vendor’s AtmaNirbhar Nidhi Scheme The Ministry of Housing and Urban Affairs launched a micro-credit scheme for street vendors, which was announced by Finance Minister Nirmala Sitharaman on May 14 as a part of the economic package for those affected by the COVID-19 pandemic and lockdown. The Pradhan Mantri Street Vendor’s AtmaNirbhar Nidhi Scheme is aimed at benefiting over 50 lakh vendors who had their businesses operational on or before March 24. The

02 June, 2020 Banking


MLCR The Marginal Cost of Funds-based Lending Rate (MCLR) refers to the minimum interest rate of a bank below which it cannot lend. The MCLR was introduced in April 2016, replacing the existing base rate system. Reserve Bank of India will link the base rate with the Marginal Cost of Funds based Lending Rates (MCLR). RBI decided to shift from base rate to MCLR because the rates based on marginal cost of funds are more sensitive to changes in the policy rates.

16 June, 2020 Banking

Standing Deposit Facility Scheme

Standing Deposit Facility Scheme RBI uses array of instruments such as Cash Reserve Ratio, Open Market Operation, Market Stabilisation Scheme to absorb excess liquidity in the economy. These measures are considered as Liquidity Adjustment Facility (LAF) to bring the liquidity gap under control. However, these tools were not proven to be useful when the money market liquidity is in excess to deal with. Eg. Post demonetization scenario. During post demonetization, RBI ran out of government s

17 June, 2020 Banking

Panel on Crypto currency

Panel on Crypto currency The panel on cryptocurreny, headed by Economic Affairs Secretary Subhash Garg, is expected to submit its report. The panel was set up in 2017 to study the impact of crypto currencies and come up with recommendations to regulate them. In his budget speech Finance minister said that crypto currencies are not legal tender. However, the Centre will explore the uses of block chain technology, the encrypted data structure on which crypto currencies are built.

17 June, 2020 Banking

Committee to oversee Ownership of Private Banks

Committee to oversee Ownership of Private Banks Reserve Bank of India (RBI) has constituted an internal working group to review the existing guidelines on ownership and corporate structure of private sector banks. The group will be headed by RBI executive director P.K. Mohanty. The bank licensing rules mandated that a private bank’s promoter will need to pare holding to 40% within three years, 20% in 10 years and to 15% in 15 years. The rules on promoter holding have changed ove

18 June, 2020 Banking

Mobile Payments Market Report

Mobile Payments Market Report S&P Global Market Intelligence’s has launched 2020 India Mobile Payments Market Report. According to the report mobile payments and card transactions exceeded cash withdrawals from automated teller machines (ATMs) for the first time in 2019, indicating that the country’s push towards digital payments was bearing fruit. The highlights of the report are as follows Mobile payments, initiated by payment apps comprising account-to-account tran

18 June, 2020 Banking

Co-operative Banks under RBI

Co-operative Banks under RBI Recently, the Central government approved an ordinance to bring all urban and multi-state co-operative banks under the direct supervision of the RBI (PT). The decision comes after several instances of fraud and serious financial irregularities, including the major scam at the Punjab and Maharashtra Co-operative (PMC) Bank in 2019. Till now, all the co-operative banks came under dual regulation of the RBI and the Registrar of Co-operative Societies. Previousl

27 June, 2020 Banking

Credit guarantee extended to larger firms, self-employed

Credit guarantee extended to larger firms, self-employed Context: The Centre has expanded its credit guarantee scheme for micro, small and medium enterprises (MSMEs) to cover loans given to larger firms, as well as to self-employed people and professionals who have taken loans for business purposes. News The Emergency Credit Line Guarantee Scheme was rolled out as part of the Centre’s Aatmanirbhar package in response to the COVID-19 crisis. It has a corpus of ?41,600

02 August, 2020 Banking

Institute of Banking Personnel Selection

Institute of Banking Personnel Selection IBPS is an autonomous body formed in 1984. It is registered under the Societies Registration Act, 1860 and also a Public Trust under the Bombay Public Trust Act, 1950. It was created to render assistance to organisations in the areas of personnel such as recruitment, selection, placement, etc. It has its headquarters in Mumbai, Maharashtra.  

20 August, 2020 Banking

Potholes on the digital payment superhighway

Potholes on the digital payment superhighway By, R.B. Barman is Former Executive Director, Reserve Bank of India Context With such versatility and ease of settling financial transactions, the growth of digital payments is going to be phenomenal, supported by banks and Fin-Tech, or financial technology, companies. Digital payments have found strong ground, especially in India, increasingly relegating all other modes of payments to the background. Digital payments ensures faster m

22 October, 2020 Banking

Compound Interest Waiver on Moratorium Loans

Compound Interest Waiver on Moratorium Loans What is Compound Interest Waiver Scheme? Under this, the government will grant eligible borrowers ex-gratia payment of the difference between the compound interest and simple interest for the six-month moratorium period. Ex-gratia payment is the money which is paid due to moral obligation and not due to legal obligation. Simple interest is levied only on the principal amount of a loan or deposit. In contrast, compound interest is levied o

26 October, 2020 Banking

What is a bank moratorium, and when does it come into play?

What is a bank moratorium, and when does it come into play? Context On November 17, the Centre, acting on the recommendation of the Reserve Bank of India (RBI), imposed a moratorium on Lakshmi Vilas Bank (LVB) for a period of 30 days. The 94-year-old bank, based in Karur, Tamil Nadu, has been struggling with losses for three years. As its financial position deteriorated, the regulator placed it under the Prompt Corrective Action (PCA) framework, which restricts certain operations d

22 November, 2020 Banking

Beware of Digital lending apps

RBI warns illegal digital lending apps Individuals and small businesses are falling prey to a growing number of unauthorised digital lending platforms/mobile.  Reserve Bank of India has advised public to be wary of unauthorised digital lending platforms and mobile apps. RBI urged them to verify antecedents of the company loans online or through mobile apps. 

24 December, 2020 Banking

Analysis of Banking sector and COVID-19

Analysis of Banking sector and COVID-19 Context: Banking sector is one of the most important topics of UPSC Prelims and UPSC Mains Examinations. It is a part of GS III Economic Issues. After losses in two consecutive years, India’s scheduled commercial banks turned profitable in 2019-20. State-run banks continued to bleed for the fifth year in a row, but their losses were much more stifled. The Reserve Bank of India (RBI) reckons that the first half of 2020-21 saw even grea

03 January, 2021 Banking

Recapitalization plan for RRBs

25 March, 2020 Banking

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