Financial Awareness for RBI Grade B-4 August 2017

Financial Awareness for RBI Grade B- 4 August 2017

  1. Retail banking may lose 55% of business to Fintech: report (Source: MINT)

  • The retail banking sector could lose up to 55% of its business to fin-tech firms if it does not up to the ante in terms of investment in digital transformation, according to a study titled ‘Enterprise Digital Transformation: Evaluating Indian Enterprises’, by research firm Frost & Sullivan and software lobby body, Nasscom.
  • The report, released this month, has compared Indian companies across sectors with their global peers in terms of digital maturity, noting that much more needs to be done and challenges such as non-uniform connectivity and scarcity of skilled personnel need to be tackled.

2. Banks may need 20% incremental provisioning for 50 large NPAs: report (Source: MINT)

  • “Banks may require an incremental provisioning of 20% against cumulative debt of 50 large stressed assets worth over Rs 4.3 lakh crore,” says a joint report by Assocham and rating agency Crisil. While banks may have already provisioned for a part of these exposures, they need to adequately capitalise to absorb such losses which could fuel credit growth and support the next leg of economic growth, it said.
  • These 50 large accounts are from the sectors such as construction, power and metals, among others and constitute about half of the gross non-performing assets of the banking sector.

3. Govt will soon bring in law to check chit fund schemes: Arun Jaitley (Source: MINT)

  • Finance minister Arun Jaitley said that a new law to regulate chit fund schemes to protect investors will be brought in soon, and state-run banks will refer more stressed assets for bankruptcy resolution.
  • The idea of the new pan-India law on chit funds is to ensure that those who are lured into these schemes by the marginally higher interest rates that they offer as compared to banks are not taken for a ride.

4. Cost of credit, NPA positioning restricting banks to cut MCLR: SBI (Source: ET)

  • SBI said that though the Marginal Cost of Funds-based Lending Rate (MCLR) is expected to be in tandem with the policy rates, banks are hesitant to reduce it due to the cost of credit and deposits and NPAs positioning.

5. SBI plans to raise Rs 2,000 crore via Basel-III bonds (Source: BS)

  • India’s largest lender State Bank of India plans to raise Rs 2,000 crore by allotting Basel-III compliant bonds to various investors.
  • SBI said the bonds will carry a coupon rate of 8.15% per annum with a call option after 5 years or the anniversary date thereafter.

6. Rural demand to pick-up post-October: Report (Source: FE)

  • American brokerage BofAML said it expects a pick-up in the note ban affected rural demand from October this year. The second consecutive bumper crop on good monsoons, farm loan waivers, and lower agriculture input costs will help revive the rural demand, the Bank of America Merill Lynch note said.
  • “We see a strong pick up in rural demand as the autumn Kharif harvest comes in October. We had turned bullish on rural demand in July 2016 after being bearish since early 2012. While 2016 Kharif farm income jumped 23.3%, rural demand was hurt by the demonetization shock,” it said.

7. GST impact: Services PMI plunges to 45.9 in July (Source: BL)

  • Service sector activity in July fell to its lowest level in nearly four years, evidently under the impact of the introduction of the Goods and Services Tax (GST), according to a private monthly survey.
  • The Nikkei India Services PMI Business Activity Index plunged to 45.9 in July, its lowest level since September 2013. In June, it was at an eight-month high of 53.1. An index reading above 50 indicates expansion, while an imprint below the benchmark denotes contraction.

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