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TIRELESSSOUL
GauravGarg888
 Government to bear MDR charges on digital transactions up to Rs
2,000

The government will bear the MDR charges on transactions up to Rs 2,000

made through debit cards, BHIM UPI or Aadhaar-enabled payment systems to
promote digital transactions.

MDR is charged on payments made to merchants through BHIM UPI platform

and AePS (Aadhaar enabled Payment System).

The merchant discount rate (MDR) will be borne by the government for two
years with effect from January 1, 2018 by reimbursing the same to the banks.

The move will have an impact of Rs 2,512 crore on the exchequer.

 Such transactions account for sizable percentage of transaction volume, the
decision will help move towards less-cash economy.

Digital transactions during April -September 2017 were valued at 2.18 lakh crore.

1. MDR is a fee charged from a merchant by a bank for accepting payments from
customers through credit and debit cards in their establishments.

2. MDR compensates the card issuing bank, the lender which puts the PoS terminal
and payment gateways such as Mastercard or Visa for their services.

3. MDR charges are usually shared in pre-agreed proportion between the bank and
a merchant and is expressed in percentage of transaction amount.
4. Since 1 January, small merchants pay a maximum MDR of 0.4% of
bill value and larger merchants pay 0.9%.

5. To promote digital transactions, the government will bear MDR

charges on transactions up to Rs 2,000 made through debit cards,
BHIM UPI or Aadhaar-enabled payment systems.

As per the RBI's notification, MDR charges for small merchants with
an annual turnover of up to Rs 20 lakh has been fixed at 0.40 per
cent with a cap of Rs 200 per transaction by debit cards through
Point of Sale (PoS) machines or online transactions.
 In case the annual turnover of a merchant is over Rs 20
lakh, the MDR charges would be 0.90 per cent with a cap of
Rs 1,000 per transaction.

If transaction is through QR code, the charges will be 0.80

per cent with a similar cap.
 Bank of India gets capital infusion worth Rs 2,257 crore from
government

The bank has on December 29 received infusion of Rs 2,257 crore from the
Government of India, in form of Common Equity Tier-1 Capital, which is being kept
as Share Application money and would be allotted after due procedure/conditions
for allotment.

The Bank of India has outlined a turnaround plan to come out of the sanctions
imposed by the Reserve Bank of India under the Prompt Corrective Action (PCA)
framework.

The PSB bank can no longer issue fresh loans as well as distribution of dividends.

Under this plan, the bank has decided to shut down some of its ATMs to cut
operation costs.
The government had on October 24 unveiled a Rs 2.11 lakh crore two-year roadmap
for strengthening NPA-hit public sector banks. The plans includes re-capitalisation
bonds worth Rs 1.35 lakh crore, budgetary support and equity dilution over the
course of two years.

Besides recapitalisation bonds, the finance minister had announced that banks
would get about Rs 18,000 crore under the Indradhanush plan over the next two
years.
remaining Rs 58,000 crore will be raised through sale of share of banks.

Under the Indradhanush road map announced in 2015, the government had
announced infusion of Rs 70,000 crore in state- owned banks over four years while
they will have to raise a further Rs 1.1 lakh crore from the market to meet their
capital requirement in line with global risk norms, known as Basel-III
Under the Indradhanush
Rs 70,000 crore

Rs 25,000 crore in 2015-16

Rs 25,000 crore in 2016-17
Rs 10,000 crore in 2017-18
Rs 10,000 crore in 2018-19
 Prompt Corrective Action

RBI has initiated PCA against IDBI Bank, Indian Overseas Bank, Central Bank of India, Bank
of Maharashtra, Dena Bank, United Bank of India, Corporation Bank, Oriental Bank of
Commerce, Bank of India, UCO Bank, and Allahabad Bank.

PCA norms allow the RBI to place certain restrictions like

ü halting branch expansion
ü limiting the bank's lending limit to a particular entity or sector
ü stopping dividend payment
ü restructuring operations
ü and superseding the bank’s board
 Prompt Corrective Action

The All India Bank Officers’ Confederation (AIBOC) has questioned the imposition of
the norms of Prompt Corrective Action (PCA) by Reserve Bank of India (RBI) on a few
public sector banks.

RBI had issued a new set of enabling provisions under the revised PCA framework
during April last year with a clause that if the banks do not show improvement then
these could be either merged or taken over by other banks.

In their circular on 13th April 2017 RBI notified that all banks whose
Capital Adequacy Ratio will be less than 10.25%
and
Net NPA level more than 6% of advances, they will be under their close supervision.

There will be restrictions on big ticket advances and opening of branches.

 RBI Puts United Bank of India Under PCA

Bank of India (BoI) to come under the Reserve Bank of India’s (RBI) prompt corrective
action (PCA), as bad loans soared and return on assets turned negative at the state-
owned lender.

The regulator also placed additional restrictions on United Bank of India, which was the
first to go under PCA three years ago.

RBI has placed the Bank under Prompt Corrective Action Framework, consequent to the
onsite inspection under the risk based supervision model carried out for year ended
March 2017

This is in view of high net NPA, insufficient CET1 capital (common equity tier 1) and
negative RoA (Return on Assets) for two consecutive years.
Gross non-performing assets at Bank of India more than doubled in the past two years,
touching Rs52,045 crore on March.

As a percentage of total bad loans, gross NPA stood at 12.62% and return on assets at -
0.24% at the end of March. The bank had reported a net loss of Rs1,558 crore for the
year ended March against a loss of Rs6,089 crore a year ago.

Under RBI’s new PCA framework, breaching a net NPA ratio of 6% invites action.

Under the old rules, net NPA ratio had to breach 10% for taking action. BoI’s net NPA
ratio breached 6% in the March 2016 quarter and stood at 6.90% at the end of March
2017.
 Capital Adequacy Ratio

Also known as capital-to-risk weighted assets ratio (CRAR), it is used to protect

depositors and promote the stability and efficiency of financial system around the world.
Two types of capital are measured: tier one capital, which can absorb losses without a
bank being required to cease trading, and tier two capital, which can absorb losses in
the event of a winding-up and so provides a lesser degree of protection to depositors.
Tier 1 Capital

Tier 1 capital consists of shareholders' equity and retained earnings. Tier 1 capital is
intended to measure a bank's financial health and is used when a bank must absorb losses
without ceasing business operations. Under Basel III, the minimum tier 1 capital ratio is
10.5%, which is calculated by dividing the bank's tier 1 capital by its total risk-based assets.

Tier 2 Capital
Tier 2 capital includes revaluation reserves, hybrid capital instruments and subordinated
term debt, general loan-loss reserves, and undisclosed reserves. Tier 2 capital is
supplementary capital because it is less reliable than tier 1 capital. In 2017, under Basel
III, the minimum total capital ratio is 12.5%, which indicates the minimum tier 2 capital
ratio is 2%, as opposed to 10.5% for the tier 1 capital ratio.
What is a domestic systemically important bank
If a domestic systemically important bank fails, there
would be significant disruption to the banking system and
the overall economy

TOO BIG TO FAIL

Banks whose assets exceed 2% of GDP are considered

part of this group
As per the framework, from 2015, every August,

the central bank has to disclose names of banks designated as D-SIB.

It classifies the banks under five buckets depending on order of importance.

ICICI Bank and HDFC Bank are in bucket one while SBI falls in bucket three.

Based on the bucket in which a D-SIB is, an additional common equity

requirement applies. Banks in bucket one need to maintain a 0.15% incremental
tier-I capital from April 2018. Banks in bucket three have to maintain an additional
0.45%. With bucket three being higher than bucket one, SBI has a higher
additional requirement than ICICI Bank and HDFC Bank. All the banks under D-
SIB are required to maintain higher share of risk-weighted assets as tier-I equity
 Prompt Corrective Action

Invoking of PCA is nothing but an initiative towards privatization or merger of

public sector banks

Most of the loans that have become NPAs are large advances sanctioned at
the board-level consisting of RBI representatives and members nominated by
the Central Government.
Employees and officers of these banks had little to do in this regard

Instead of looking at the miserable plight of the NPA position of these banks,
the government would do better by bringing in a specific and stringent law
that empowers the banks to initiate legal action against wilful defaulters
 Counter argument, not in every sector
HOUSING

Among all slabs, housing loans in the up to ₹2 lakh slab had the
highest level of non-performing assets (NPAs), (RBI study)

Further, public sector banks (PSBs) reported higher NPAs than

housing finance companies (HFCs) in the last two fiscal years

In the up to ₹2 lakh housing loans slab, NPAs of PSBs and HFCs collectively
stood higher at 10.4 per cent in FY17 against 9.8 per cent in FY16.
INPAs were the lowest in the above ₹25 lakh slab for PSBs and HFCs put
together at 0.9 per cent (0.6 per cent in FY16).
 Counter argument, not in every sector
HOUSING

fastest growing since fiscal year 2016 (FY16) – Affordable

Housing
Under Pradhan Mantri Awas Yojana, the government offers interest
subsidy of 6.5% to economically weaker sections on their home
loans. These are individuals with income of up to Rs 3 lakh and
also the biggest beneficiaries of the interest subsidy.
 Indradhanush plan a success or not?

In the first tranche of capital infusion during 2016-17, the government had
allocated Rs 22,915 crore in 13 public sector banks, of which Rs 16,414 crore or
75 per cent was given upfront. The list of beneficiaries included State Bank of
India, Punjab National Bank, Canara Bank and Bank of India.
In January 2018 the finance ministry had also said that the allocation of the
remaining amount [Rs 6,500 crore] will be linked to performance with particular
reference to greater efficiency, growth of both credit and deposits and reduction
in the cost of operations.

Need for Rs 2.11 lakh crore two-year re-capitalisation plan ?

 IDBI Bank gets ₹2,729 crore from government

The government has on December 29, 2017

infused share application money of ₹2,729 crore
towards preferential issue of equity infusion of
IDBI bank during the fiscal year 2017-18 under
the plan as government’s investment.

Managing Director & CEO : Mahesh Kumar Jain

HQ Mumbai
 KKR Gets RBI Nod to Start India’s 1st Foreign-Owned ARC

US buyout giant KKR & Co has become the first foreign investor to fully own an
asset reconstruction company (ARC) in India as it received approval from the
Reserve Bank of India at a time when lenders are fighting with a pile of bad
loans that have crippled their businesses.

In May 2016, the government has allowed foreign institutions to have 100%
ownership in asset reconstruction companies in a move aimed at resolving
mounting problems of bad debt.
Bank of Baroda Enters into MoU with POORTI Agri Services Pvt.
Ltd
Bank of Baroda has entered into MoU with POORTI Agri Services Pvt. Ltd to enable the
farmers to purchase agricultural inputs such as fertilizers, pesticides, seeds etc.
provided by POORTI.

This is a Platform for Online Ordering & Rural Transformation of India known as
“POORTI”

Poorti is a well-established company providing multi-party mobile commerce platform

for easy ordering of fertilizers, pesticides, seeds by farmers with loans given by banks.

Ravi Venkatesan (Chairman)

P. S. Jayakumar (Managing Director & CEO)

 SBI gets board nod to raise ₹8,000 crore

The country’s largest lender SBI said its board had approved raising ₹8,000 crore through
various sources, including masala bonds, to meet Basel III capital norms.

accorded approval to raise additional tier 1 (AT 1) capital by way of issuance of Basel III
compliant debt instruments in USD and/or INR to the tune of ₹8,000 crore from
domestic/international markets including masala bonds.

Masala bonds are rupee- denominated specialised debt instruments that can be floated
in overseas markets only to raise capital.

State Bank of India (SBI) said it had time till March 2018 to raise the funds.

Banks in India have to comply with the global capital norms under Basel III by March
2019
 SLCM Ties up with HDFC, IndusInd bank for Post Harvest Credit
Agri service solutions provider Sohan Lal Commodity Management (SLCM) having operations across
India and Myanmar has tied up with HDFC Bank and IndusInd Bank to provide collateral
management services.

Collateral management is the method of granting, verifying, and giving advice

oncollateral transactions in order to reduce credit risk in unsecured financial
transactions.

SLCM will leverage its proprietary (patent pending) technology 'Agri Reach' and support both
these banks towards offering more efficient post-harvest credit and storage service to farmers,
millers and other stakeholders in the agriculture sector.

This tie-up will not only help improve the farmers' access to post-harvest credits at affordable
interest rates, it will also provide easy access to scientific storage facilities leading to a fair price
discovery of their produce in the market.
 Agri Reach with its scientific technology and standard operating procedures
has been able to demonstrate its capability to reduce post-harvest losses
from the current 10 percent to a mere 0.5 percent irrespective of
infrastructure, crop or geographical location. This has been duly validated in a
study by the industry body FICCI as well.

With a presence across 17 states in India, SLCM has a network of 2100

warehouses backed by a reliable scientific management system for over 725
commodities, including cotton, pulses, maize, spices, mentha oil, among
others .

SLCM Group CEO- Sandeep Sabharwal.

 State-run banks' NPAs touched Rs 7.34 lakh cr by Q2-end

Non-performing assets (NPAs), or bad loans, of state-run banks amounted to a

staggering Rs 7.34 lakh crore by the end of second quarter of the current fiscal
ended September, most on account of corporate defaulters, according to data
furnished by the RBI and the government.

However, NPAs of private sector banks stood at a much lower level of around
Rs 1.03 lakh crore by the end of the July-September quarter.

The gross non-performing assets of public sector and private sector banks as on
September 30, 2017 were Rs 7,33,974 crore and Rs 1,02,808 crore, respectively
It said leading corporate entities and companies accounted for around 77 per cent of
the total gross NPAs of banks from domestic operations.

Among the major government-owned banks, State Bank of India had the highest
level of NPAs at over Rs 1.86 lakh crore, followed by Punjab National Bank (Rs
57,630 crore), Bank of India (Rs 49,307 crore), Bank of Baroda (Rs 46,307
crore), Canara Bank (Rs 39,164 crore) and the Union Bank of India (Rs 38,286 crore).

Up to end-September, among private banks, ICICI Bank had the most amount of
NPAs at Rs 44,237 crore, followed by Axis Bank (Rs 22,136 crore), HDFC Bank (Rs
7,644 crore) and Jammu and Kashmir Bank (Rs 5,983 crore).

The Ministry also said that the network of Debt Recovery Tribunals (DRTs) have
been expanded to 39 at present, as compared to 33 in 2016-17, which would help in
reducing the pendency of cases and expedite their timely disposal.
 SBI Card and Bharat Petroleum Launch BPCL SBI Card

SBI Card, the credit card issuer and Bharat Petroleum, the leading petroleum
company in India announced the launch of the BPCL SBI Card – the most
rewarding fuel co-branded credit card in the country.

Launched on the Visa platform, the card offers 2,000 bonus points worth ₹500
on payment of joining fee.

The annual membership fee is ₹499, which will be reversed on annual spends of
₹50,000 or more Apart from savings of up to five per cent on fuel purchases, the
BPCL SBI Card will offer up to 70 litres of free fuel per year to cardholders
 Cardholders can earn rewards and save on fuel at 14,000 Bharat
Petroleum fuel stations across the country.

There will be no minimum transaction threshold for fuel spends,

enabling customers to save with every swipe of their card.

It offers 5X reward Points on every ₹100 spent at departmental

stores & grocery, movies & dining and utility bills payment through
standing instruction.

Chairman & MD : D Rajkumar

 FDI
Speaking broadly, If any foreign firms wants to invest in India, and it chooses to do so by setting up a
company/branch/office etc in India..(If 100% FDI is not allowed in the sector , the foreign firms usually
tie-up with their Indian counterpart and start the company. ex ICICI-Lombard , Bharti-AXA , PNB-Metlife,
etc), Investment in a company

FPI
FPI/FII both are used interchangeably, it refers to the investment of foreign investors in India through
capital market route i.e. buying shares of firms. Investment in capital market

Few years, there was alot of confusion amoung the investor regarding FPI and FDI (suppose some FPI
buys more than 50% of the share of an Indian company, technically it now holds the company, which is
same as opening a new company in India.)
So, govt created Arvind Mayaram panel, which suggested that any investment from a FPI investor or a
firm into Indian company, if is more than 10% of company’s total share, then it will come under the head
of FDI otherwise FPI.
This is the ongoing criteria, very soon the govt will unify these both and it will be just Foreign Investment.
This is done to ease doing business in India and boost investors confidence in Indian economy.
Foreign Direct Investment is private investment in India by foreign agents to setup a
business in India, mostly through acquisition of controlling stakes in Indian
companies or setting up a business themselves. Typically they are for long term
strategy and stable in nature

Foreign Portfolio Investments are private investments but they are for a smaller
stake typically 20-30% and they are more volatile than FDI.

Foreign Institutional Investments are generally funds flowing to India to get a piece
of action in Sensex or Nifty. They are more for diversification of risk and invests for
higher return in emerging markets. These are the most volatile of the three types
and are called 'hot money'. Many of the foreign exchange rate fluctuations are
because of FIIs taking their money out or pouring into India
 Sebi hikes FPI investment limit for government debt

To boost inflows of foreign funds into Indian capital markets, regulator Sebi raised
the investment limit for FPI in central government securities to over Rs 1.91 lakh
crore from January.

Currently, investment limit for foreign portfolio investors (FPIs) is Rs 1,89,700

crore.

The move is part of an effort by Securities and Exchange Board of India (Sebi) to
push inflow from overseas investors in the countrys capital markets.

It has been decided to revise the limit for investment by FPIs in government
securities for the January-March 2018 quarter
 Further, limit for long-term FPIs (sovereign wealth
funds multilateral agencies, insurance funds, pension
funds and foreign central banks) in central government
bonds would increase to Rs 65,100 crore from the
existing Rs 60,300 crore.

Besides, the new limit for investment by all FPIs in

state development loans (SDL) will be Rs 31,500 crore,
and that of long-term FPIs will be Rs 13,600 crore
 CCI Clears IndusInd Bank-Bharat Financial Merger

Fair trade regulator CCI has approved the scheme of amalgamation between IndusInd
Bank and Bharat Financial Inclusion.

The scheme remains subject to the receipt of approval from the RBI and regulatory
approval including approvals of the stock exchanges, Sebi, the National Company Law
Tribunal and respective shareholders,

IndusInd Bank in October decided to acquire country's leading microfinance player

Bharat Financial Inclusion Ltd (BFIL).

The merger will be effected through an all-stock transaction of BFIL into IndusInd
through a Composite Scheme of Arrangement.
Post merger, the new entity will have 4,000 branches and outlets
and 16 million customers

The appointed date for the composite scheme is January 1, 2018.

BFIL, formerly SKS Microfinance had a customer base of 68 lakh

and loan portfolio of Rs 7,709 crore as of June 30.

Following the Rs15,486 crore all-stock deal, for every 1,000 BFIL
shares held, an investor in IndusInd will get 639 shares of the
bank.
 AU Small Finance Bank signs MoU with Sahaj

Banking services provider AU Small Finance Bank signed a memorandum of

understanding with Sahaj e-Village for extending its banking services in
remote areas through business correspondent (BC) model, a company official
said.

With this MoU, the bank will be able to further foster its mission of financial
inclusion and greater customer outreach, Sanjay Agarwal, the MD & CEO of AU
Small Finance Bank.

The tie-up with Sahaj, the bank will be able to expand its banking at over 90
new locations that did not have banking access hitherto and expand customer
outreach to over 500 locations by March 2018
YES Bank, EIB to co-finance $400 million for clean power projects
YES Bank and the European Investment Bank will co-finance $400-million
funding for renewable power generation in the country.

Of the $400-million, the EIB will fund $200 million, while the rest will be supported by
YES Bank, the project promoters and other financial institutions.

Under this renewable power generation initiative, several solar projects in

Rajasthan, Maharashtra and Karnataka have been identified. Additional wind
and solar projects are also being examined.

The EIB loan of $200 million has a tenor of 15 years.

EIB President - Werner Hoyer

Headquarters in Luxembourg
YES Bank MD and Chief Executive Rana Kapoor
Government ropes in ICICI Bank to enable cashless payments on e-NAM

The government has engaged private lender ICICI Bank to enable

online payments at 470 mandis integrated with national portal of
electronic National Agriculture Market (e-NAM).

At present, e-NAM participants are doing payments through

traditional ways via bank branches, debit cards and net banking.

Farmers have started trading online within mandi.

 ICICI Bank will enable BHIM (Bharat Interface for Money)
and Unified Payments Interface (UPI) on the e-NAM portal
for making cashless payments

The effort is to provide seamless experience for making

online payment of trade and services undertaken on the e-
NAM platform.

At present, 470 mandis across 14 states are live and 90

commodities are being traded on e-NAM platform, which
was launched in April 2016. The target is to connect 585
mandis with e-NAM by March 2018.
In the first phase, farmers are trading agri-produce via
e-NAM portal within a mandi though the governments
aim is to allow e-trading between mandis within the
state and later between mandis of two states.

The e-NAM model aims at revolutionizing

agri markets by ensuring better price discovery, bringing
in transparency and competition to enable farmers to
get improved remuneration for their produce moving
towards One Nation, One Market.
 RBI imposes Rs 5 crore penalty on Syndicate Bank

The Reserve Bank of India (RBI) has imposed a penalty of Rs 5 crore

on Syndicate Bank for non-compliance with its directions on "Cheque Purchase or
Discounting, Bill Discounting, and Know Your Customer (KYC)" norms.

According to the RBI, the penalty was imposed on December 12, 2017 after
"considering the bank's reply and oral submissions made in the personal hearing".

"This action is based on deficiencies in regulatory compliance and is not intended to

pronounce upon the validity of any transaction or agreement entered into by
the bank with its customers
 J&K Bank launches finance scheme for journalists

Jammu and Kashmir Bank launched a finance scheme tailored

for media fraternity in the state

Under the scheme, the journalists, media personnel and

employees of media houses and newspapers can avail a loan of
up to Rs three lakh for purchase of equipment like camera,
laptop, tablet or mobile phone.

The scheme has two components term loan which comprises 75

per cent of the total values of Rs three lakh and cash credit
which is the rest 25 per cent.
The loan, which can be availed at an interest rate of Marginal Cost
of Funds Based Lending Rate(MCLR) plus 3.4 per cent, has to be
repaid in 60 monthly instalments and there are no pre-payment
charges.

J & K BANK (Chairman & CEO) : Parvez Ahmad

 To boost digital banking, SBI rolls out Rewardz scheme

The country’s largest bank, State Bank of India, will now reward you for
timely repayment of loans.

An SBI customer can not only earn reward points for paying the loan
installment on time but also for opening an account or transferring funds
through internet or mobile banking.

To encourage customers to use alternative banking channels, SBI launched

the State Bank Rewardz, an enterprise-wise loyalty programme as the
bank celebrated its 60th anniversary.
Customers will be enrolled automatically into this programme once they start using
at least one of the services that offer points.

These include debit cards, personal banking, and alternate channels, such as
internet and mobile banking, home loans, rural banking, small and medium
enterprises (SME) and demat accounts.

The points earned can be redeemed by downloading the State Bank

Rewardz mobile app.

For now, the app is available in Google Play for Android phones. Downloading the
app itself will earn 100 points.
For every ₹200 spent on an SBI debit card, you can earn one point. Registering
for internet banking and carrying out the first transaction of a minimum of
₹75 within a month will earn 125 points. It is 200 points in the case of
registering for mobile banking.

Opening a savings bank account online with ₹1,000 minimum balance can
fetch you 100 points. If you don’t request for cheque books in a year you can
earn 20 points and updating contact details once a year can fetch 20 points.
 RBI imposes Rs 3 crore penalty on IndusInd Bank

The Reserve Bank of India (RBI) has imposed Rs 3 crore penalty on IndusInd Bank for
breaching rules on income classification norms.

A statement issued by RBI said that the penalty was imposed after the regulator observed
violation of various regulations issued by the RBI on non-performing loans and extension of
non-fund based limits

RBI said that the fine was imposed for non-compliance with the directions issued by RBI on
Income Recognition and Asset Classification (IRAC) norms and contravention of regulatory
restrictions pertaining to non-fund based (NFB) facilities.

This development comes after RBI set up enforcement department which started operations
from April 1, 2017 with the aim to follow up and maintain a record on banks performance.
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