Current Affairs – Banking and Finance

The Reserve Bank of India (RBI) has allowed start-ups with an overseas subsidiary to open foreign currency accounts with a bank outside India. The accounts will help the start-ups to credit foreign exchange earnings from exports and sales. The balance in such accounts, to the extent they represent exports, will have to be returned to India.

The Union Cabinet has approved the establishment of ₹10,000 crore “Fund of Funds for Start-ups”, as a part of ‘Start-up India Action Plan’ unveiled by Prime Minister Narendra Modi in January 2016. The fund is expected to provide a stable and predictable source of funding for start-up enterprises and facilitate large-scale job creation.

The gross non-performing assets (NPAs) ratio of public-sector banks rose to 7.6%, from 5.1%, between September 2015 and March 2016, according to the Reserve Bank of India’s bi-annual Financial Stability Report.

Chennai-based Equitas Holdings has received Reserve Bank of India’s final approval to launch a Small Finance Bank (SFB). Equitas is the first bank after independence from Tamil Nadu and first private bank from Chennai.  Small Finance Banks help provide banking products to the unserved and undeserved sections of India, which includes small and marginal farmers, micro and small industries, and other organized sector entities, at an affordable cost.

Housing finance major HDFC has raised ₹3,000 crore in the first ever issue of ‘masala bonds’. The bonds will be listed on the London Stock Exchange and cannot be traded in the local Indian market. ‘Masala bonds’ are rupee-denominated bonds through which Indian entities can raise funds by accessing overseas capital markets.

Large industrial houses, whose income from non-banking sources are over 40 per cent of total will not be eligible to set up a bank in the country, according to the Reserve Bank of India (RBI) guidelines on on-tap licencing. However, they are allowed to pick up 10 per cent stake in banks. RBI has allowed individuals with 10 years of experience to promote banks, as well as business groups with ₹5,000 crore of total assets and provided, the non-financial business of the group does not account for 40 per cent or more in terms of total assets/in terms of gross income. The existing non-banking financial companies (NBFCs) that are controlled by residents and have a successful track record for at least 10 years will also be eligible.

In a push to a cash-less economy, National Payments Corporation of India has launched Unified Payments Interface. UPI, which works on single click two-factor authentication, will allow a customer to have multiple virtual addresses for accounts in various banks. The new payments interface will also provide an option for scheduling push and pull transactions, such as sharing bills among peers. One can use the UPI app instead of paying cash on receiving a product from an online shopping website and also for making miscellaneous payments such as utility bills, school fees and over-the-counter/barcode-based payments. To ensure privacy of customer data, there is no account number mapper anywhere other than the customer’s own bank. This means customers can freely share their financial address.

In August 2016, RBL Bank became the first private bank to hit the capital market since 2005. RBL Bank Limited is a scheduled commercial bank headquartered in the Kolhapur region of Maharashtra. Founded in August 1943, RBL is one of the oldest private sector banks in India.