Banking News

1.    Yes Bank first to hike rates

Yes Bank became the first lender to hike lending and deposit rates. Yes Bank said it would hike its deposit rates by 0.25 percent to 0.5 percent in select tenors effective from 1August 2013.

NOTE: Yes Bank took this step following the RBI’s decision to keep key policy rates unchanged and cut growth forecast.

2.     RBI keeps key interest rates unchanged

i. The Reserve Bank of India has decided to keep all the key rates unchanged in its first quarter monetary policy review for 2013-2014.

ii. RBI chose to keep all key interest rates unchanged and asked the government to take urgent steps to reign in the high current account deficit.

Interest Rates are as Follows:

1. The repo rate was kept unchanged at 7.25 percent.

2. Reverse repo remains at 6.25 percent.

3. Cash reserve ratio unchanged at 4.00 percent

4. Keeps Marginal Standing Facility rate at 10.25 percent.

5. Bank rate stands at 10.25 percent.

6. SLR - 23%

3.    RBI lowers GDP growth projection for current fiscal to 5.5 pc

The Reserve Bank has lowered the growth projection for the current fiscal to 5.5 percent from its earlier estimate of 5.7 percent. 

NOTE: Earlier this month, the Asian Development Bank lowered its growth projection for India to 5.8 percent in calendar 2013 from 6 percent estimated earlier, citing the slow progress of economic reforms.

4.    RBI decreases realization Period for exporters from 12 to 9 months:

Responding further to the increasing pressure on Current Account Deficit (CAD) due reduced exports and depreciation of rupee against dollar, the Reserve Bank of India has brought down the period of realization and repatriation for exporters of goods and software from 12 to 9 months with a view to increase foreign exchange inflows.

5.    India Emerges as the second largest investor in London

i. India has come up as the 2nd largest investor in the city of London with Indian companies led by software major Infosys with the investment eagerness generated by the 2012 Olympic Games in the British capital.

ii. Infosys leads the inward Foreign Direct Investment (FDI) made by a total of 28 Indian companies, which generated 429 additional jobs for the British economy in 2012.

6.    RBI opens special liquidity window for mutual funds

i. A special window of Rs 25,000 crore was opened by the RBI to help mutual funds industry over liquidity problems. This facility will be made available for a brief period only.

ii. A special 3-day REPO auction was decided to be conducted by RBI under which banks can raise funds upto to Rs 25,000 crore at 10.25 per cent for on lending to the mutual funds.

iii. In 2012-13 the mutual fund industry lost more than 36 lakh investors. During the last 3 financial years, the mutual fund industry had lost over 15 lakh new investor accounts.

iv. In April-June 2013-14 as per the latest SEBI data, Mutual Funds lost 10 lakh investors in terms of individual accounts or folios.

7.     100 percent FDI in Telecom Sector

i. The Union Government of India on 16 July 2013 raised the FDI limit in Telecom Sector from 74 percent to 100 percent. 

ii. Government also cleared that the FDI in the Insurance and Telecom sectors will be up to 49 per cent through automatic route. 

iii. The Union Government also mentioned that FDI the single brand retail would be up to 49 percent through automatic route and remaining investments would be directed through Foreign Investment Promotion Board (FIPB) route.

8.    Poverty in India decreases to 21.9% in 2011-12: Planning Commission

As per Planning Commission, poverty ratio in the country has dropped to 21.9% in 2011-12 from 37.2% in 2004-05 on account of increase in per capita consumption.

Planning Commission on Poverty

i. Using the Tendulkar methodology for determining the poverty line, the national poverty line in rural areas has been estimated at Rs 816 per capita per month in villages and Rs 1,000 per capita per month in urban areas in 2011-12.

ii. It implies that persons whose consumption of goods and services exceed Rs 33.33 in cities and Rs 27.20 per capita per day in villages are not poor.

iii. In 2011-12, the percentage of BPL (Below Poverty Line) people is estimated at 25.7% in rural areas, 13.7% in urban areas and 21.9% for the country as a whole.

Note: A separate committee under Prime Minister’s Economic Advisory Council (PMEAC) chairman C. Rangarajan will revisit the Tendulkar Committee methodology for estimating poverty. The Committee is expected to submit its report by mid 2014.

9.    RBI hikes short term interest rates to support rupee

i. The Reserve Bank of India hiked short term rates in the first strong measure to support the Indian rupee.

ii. The RBI has increased banks' cost of borrowing short term money through the Marginal Standing Facility (MSF) rate and Bank Rate each by 200 basis points (2 per cent) to 10.25 per cent.

iii. The measure will make it unattractive for banks to borrow rupee (at cheap rates) and buy dollars (in the forward markets). This will reduce the pressure on the rupee.

iv. As per RBI, the overall allocation of funds under the LAF would be limited to 1% of the net demand and time liabilities of the banking system. This is estimated to be around Rs.75,000 crore.

10.  Kumar Manglam Birla steps down from RBI Board

i. Kumar Mangalam Birla who was nominated as a member of the directors of the Central Board of the RBI in 2006 stepped down from RBI Board.

ii. Reason to step down,  to avoid any conflict of interest as few weeks back his group firm applied for a bank license.

iii. Among the 26 entities his group firm “Aditya Birla Nuvo” is one of the entities which have applied for a bank license.

iv. The RBI is expected to grant new licenses by March 2014 as the last date for applying for a bank license expired on July 1, 2013.