Banking and Finance Current Affairs | February 2021

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Banking and Finance Current Affairs | February 2021

Banking and Finance - February 2021

28th February, 2021

RBI extends the banking license of Rupee Co-operative Bank Ltd for 3 months

Reserve Bank of India (RBI) has extended the banking license of Rupee Co-operative Bank, Maharshtra for the next 3 months. Rupee Co-operative Bank has been allowed to make the business of banking till 31st May, 2021. The bank has been already put under restriction by RBI since 22nd February, 2013.  The Pune-based bank has been able to generate operating profit for the last 5 years. As per the restrictions imposed by RBI on the bank in 2013, the depositors would not be allowed to withdraw more than Rs. 1000.

26th February, 2021

EXIM Bank lends an LOC of US $ 7.35 million to Republic of Nicaragua

Export Import Bank of India (EXIM) has extended a Line of Credit (LOC) worth US $ 7.35 million to Republic of Nicaragua on behalf of the Government of India. The LOC will be used to replace the supplier equipments of High Technology Centre of Hospital Antonio Lenin Fonseca of Managua, Nicaragua. The proposed equipments will now be supplied by the Indian manufacturers. The agreement was signed between Mr. Nimit Ved, Genral Manager of Exim Bank and Mr. Jose Adrian Chavarria Montenegro, Vice-Minister General of Ministry of Finance and Public Credit of Nicaragua.  

EXIM Bank to support construction of social housing units in Maldives

Export-Import Bank of India (EXIM) will support the construction of social housing units in Maldives with the help of the US $ 130 million loan credited to Fahi Dhiriulhan Corporation Limited. The funds will be provided through the credit programme under the National Export Insurance Account (NEIA) Scheme. A Letter of Intent (LoI) was signed between EXIM Bank and Fahi Dhiriulhan Corporation Ltd. on 20th February, 2021. The proposed social housing units will be constructed in Hulhumale, Maldives.  

25th February, 2021

IRDAI issues guidelines of ‘Saral Suraksha Bima’

Insurance Regulatory and Development Authority (IRDAI) has issued guidelines of Saral Suraksha Bima under the provisions of Section 34 (1) (a) of the Insurance Act, 1938. IRDAI’s Standard Personal Accident Insurance Product has been named as ‘Saral Suraksha Bima’ which will be offered by all the health insurance providers from 1st April, 2021. The policy will be valid for a period of one year and the sum insured will range from Rs. 2.5 lakhs to Rs. 1 crore. 

IRDAI forms Review Committee to revise its Information & Cyber Security Guidelines

Insurance Regulatory and Development Authority of India (IRDAI) has formed a 14-member Review Committee headed by Chairman of Institute for Development and Research in Banking Technology (IDRBT), Prof. Janakiram for reviewing IRDAI’s Information and Cyber Security Guidelines. The aim of the formation of Review Committee is to address the cyber attacks in the financial sector and to analyze the same issue in the industrial sector. The committee has been directed to submit its report within 2 months.

22nd February, 2021

RBI declares Fino Bank as a Scheduled Commercial Bank

Reserve Bank of India (RBI) has included Fino Small Payments Bank Limited in the Second Schedule of the RBI Act, 1934 which gives Fino Bank a status of Scheduled Commercial Bank. This will enable Fino Bank to improve its banking position in the treasury and participation in Liquidity Adjustment Facility (LAF) window. This will allow the bank to extend loans at the bank rates from the RBI and will receive rediscount from RBI for 1st Class Exchange Bills. Fino Bank has now received the membership of clearing house.

RBI brings State Bank of Sikkim under its Regulatory Purview

Reserve Bank of India (RBI) has brought State Bank of Sikkim under its Regulatory Purview and will now be regulated by the RBI like the other banks of India. Previously, the State Bank of Sikkim was governed by the Government of Sikkim and the bank operated within Sikkim only. The bank’s ownership structure will remain the same the regulatory body will change. The bank was established in 1968 and Dal Bahadur Gurung is the present Chairman.  

19th February, 2021

RBI signs Punjabi Rapper, Viruss for its Public Awareness Campaigns on Cyber Frauds

Reserve Bank of India (RBI) has roped in Punjabi Rapper and Singer, Viruss for its Public Awareness Campaigns on cyber frauds. The campaign was launched on its official twitter handle. It is a part of its awareness campaign ‘RBI Kehta Hai: Jaankar Baniye, Satark Rahiye!’. Viruss has also been featured in a peppy video for RBI. He became popular after the success of his rap Bam Bhole in 2017 which has been recreated for the recently released Laxmii starring Akshay Kumar and Kiara Advani.

18th February, 2021

RBI imposes withdrawal limits on Deccan Urban Co-operative Bank Ltd. for 6 months

Reserve Bank of India (RBI) has imposed a withdrawal limit of Rs. 1000 for 6 months on the Karnataka-based Deccan Urban Co-operative Bank Ltd. because of the unstable liquidity situation of the bank. This means that the depositors of the Deccan Urban Co-operative Bank Ltd won’t be able to withdraw more than Rs. 1000 for the next six months. However, the depositors will be allowed to set off loans against their respective bank deposits. Around 99.58 % of depositors are fully covered by the Deposit Insurance and Credit Guarantee Corporation (DICGC) Scheme.

17th February, 2021

RBI approves the acquisition of DHFL by Piramal Group

Reserve Bank of India (RBI) has approved the acquisition of Dewan Housing Finance Corporation Ltd (DHFL) by Priamal Group’s subsidiary, Piramal Capital and Housing Finance Ltd (PCHFL). The resolution plan was approved by the Committee of Creditors (CoC) at the 18th Meeting that ended on 15th January, 2021. The resolution plan intends to revive DHFL from an excessive debt of Rs. 89,000 crores. Piramal Group will now seek approval from National Company Law Tribunal (DHFL) for the official acquisition of DHFL. As per the resolution plan, DHFL will be merged with PCHFL.

RBI releases Master Directions for HFCs and NBFCs

Reserve Bank of India (RBI) has released Master Direction-Non Banking Financial Company-Housing Finance Company (Reserve Bank) Directions, 2021. The Master Directions have been enforced on all the Housing Finance Companies (HFCs) and Non Banking Financial Companies (NBFCs) with immediate effect. The Master Direction include guidelines on Liquidity Risk Management Framework, maintenance of Liquidity Coverage Ratio (LCR), maintenance of Loan-To-Value (LTV), Housing loans, Minimum Capital Ratio, exposure in group companies etc. As per the Master Direction, HFCs won’t be allowed to lend against their own share.

EXIM Bank lends a Line of Credit of US $ 15 Million to the Republic of Sierra Leone

The Export-Import (EXIM) Bank of India has extended a Line of Credit (LOC) of US $ 15 Million to the Republic of Sierra Leone for the expansion of rehabilitation projects of potable water facilities in 4 communities of the nation. The projects for which the LOC is being extended will be implemented by the companies of India and will benefit around 1 lakh residents of Sierra Leone. The funds will also be utilized for the development of power and agriculture sector of the country.

16th February, 2021

RBI releases Draft Reserve Bank of India (Credit Derivatives) Directions, 2021

Reserve Bank of India (RBI) has issued draft guidelines on Credit Default Swaps (CDS) by releasing Draft Reserve Bank of India (Credit Derivatives) Directions, 2021. The guidelines will allow derivatives trading in the Credit Default Swap (CDS) in Over-the-Counter (OTC) markets and on recognized stock exchanges in India. RBI has invited comments on the Draft Directions by 15th March, 2021. RBI exercised the powers conferred by Section 45W of the RBI Act 1934 for drafting the guidelines.

RBI allows residents to remittances to IFSCs under Liberalized Remittance Scheme

Reserve Bank of India (RBI) has granted permission to resident individuals for making remittances to the International Financial Service Centers (IFSCs) under the Liberalized Remittance Scheme (LRS). Residents can make remittances to only those IFSCs which have been established in India under the Special Economic Zone Act, 2005. As per the instructions of RBI, the remittances will be made only for making investments in the IFSCs in securities and any funds lying idle in the account for more than 15 days will be repatriated back to the domestic account of the investor.

RBI formulates Expert Committee for boosting the Urban Co-operative Banks

Reserve Bank of India (RBI) has formed an Expert Committee of 8 members for strengthening and consolidating the Urban Cooperative Banks (UCBs). The Expert Committee will be chaired by the former Deputy Governor, N S Vishwanathan. The Expert Committee has been made on the lines of ‘Statement on Developmental and Regulatory Policies’ released on 5th February, 2021. The committee will analyze the issues encountered by the UCBs and will prepare a road map for their improvement. The report will be submitted by the Expert Committee after three months.

15th February, 2021

RBI makes stricter norms for investments in NBFCs from 17 FATF flagged countries

Reserve Bank of India (RBI) has made tighter norms for making investments in Non-Banking Financial Companies (NBFCs) from the 17 countries which have been flagged by Financial Action Task Force (FATF) published in ‘High-risk Jurisdictions Subject to a Call for Action’ and ‘Jurisdictions under Increased Monitoring’. The ‘High-risk Jurisdictions Subject to a Call for Action’ includes Albania, Barbados, Zimbabwe, Yemen, Uganda, Syria, Panama, Pakistan, Nicaragua, Myanmar, Mauritius, Jamaica, Ghana, Cambodia and Botswana. ‘Jurisdictions under Increased Monitoring’ include Iran and Democratic People’s Republic of Korea. RBI has imposed some restrictions on fresh investments from these 17 listed countries.

12th February, 2021

EXIM Bank to lend $ 400 million for the Maldives Project

The Export Import Bank of India (EXIM) will provide $ 400 million to the Government of Maldives for ‘The Greater Male Connectivity Project’ (GMCP). It was officially announced by the Reserve Bank of India that the agreement for the lending of $ 400 million will be effective from 28th January, 2021. The 6.7 km long GMCP is the largest civilian infrastructure project of Maldives which will connect Male with the other 3 neighboring islands- Thilafushi, Gulhifahu and Villingili.   

11th February, 2021

IRDAI’s Working Group Committee recommends re-introduction of Index-Linked Insurance Policies

The Working Group Committee of the Insurance Regulatory and Development Authority of India (IRDAI) has submitted its recommendations for the re-introduction and launch of Index-linked Insurance Policies (ILIPs) in India and the report is open for comments till 8th March, 2021. The committee was formed under Dinesh Pant in August, 2020. ILIPs were banned by IRDAI in 2013. ILIPs are the insurance policies that change with the returns that are linked to the benchmark indices viz. Sensex, Nifty etc with lock-in period of 5 years. The ILIPs will be considered as a life insurance.

10th February, 2021

RBI announces Rs. 20,000 crores of Open Market Operations for boosting the economy

Reserve Bank of India has announced Open Market Operations (OMOs) worth Rs. 20,000 crores of government securities for improving the liquidity of the economy of India. This will boost government’s borrowing programme worth Rs. 12.06 lakh crores. The decision has been taken by RBI because of increasing yields on government securities. RBI makes use of its Core Banking Solution (e-Kuber) for accepting the bids in digital format on such purchases. The main motive of the OMOs is to bring down the yields in the longer run.

RBI imposes restrictions on withdrawals from Independence Cooperation Bank

Reserve Bank of India (RBI) has imposed restrictions on the withdrawals from Independence Cooperative Bank, Nasik in Maharashtra because of the unstable condition of the bank’s liquidity. The restrictions have been imposed on the bank for a period of six months w.e.f 10th February, 2021.The account holders of the bank (current and savings account) will not be able to withdraw any amount from the bank except for paying loans. No loans will be granted or renewed without prior approval of RBI in written.

4th February, 2021

Central Bank of Sri Lanka repays $ 400 million Currency Swap Facility to RBI

Central Bank of Sri Lanka (CBSL) has repaid $ 400 million Currency Swap Facility to the Reserve Bank of India (RBI). Sri Lanka and RBI signed the facility in July, 2020 under the currency framework of South Asian Association for Regional Cooperation (SAARC). Sri Lanka borrowed the amount for coping up from the impact of COVID-19 pandemic for a period of 3 months which was extended for another 3 months on the request of CBSL until 1st February, 2021. SAARC Currency Swap Framework has been made to provide short term foreign exchange liquidity requirements to the member countries of SAARC.           

3rd February, 2021

HDFC Bank’s IT Infrastructure to be audited by external IT firm appointed by RBI

Reserve Bank of India (RBI) has appointed an external IT firm for carrying out special audit of HDFC Bank’s IT infrastructure. The special audit will be carried out for evaluating the improvements made by the HDFC Bank’s management in its digital infrastructure after the recent issues in its database. In the past 2 years HDFC Bank has faced multiple outages in the internet banking segment due to which RBI temporarily stopped the Digital 2.0 initiative and the issuing of new cards to the customers.

RBI issues guidelines of Risk Based Internal Audit for selected UCBs and NBFCs

Reserve Bank of India (RBI) has issued the guidelines of Risk Based Internal Audit (RBIA) for selected Urban Cooperative Banks (UCBs) and Non Banking Financial Companies (NBFCs). All the selected UCBs and NBFCs have been mandated by RBI to implement the proposed guidelines by 31st March 2022. The RBIA guidelines will improve the quality and effectiveness of the Internal Audit System of the financial entities.  RBIA is a methodology that links the internal audit to the risk management framework of an organization.