Financial Awareness for RBI Grade B-4 July 2017

  1. Central Bank of India gets shareholders nod for raising Rs6,500 crore (Source: MINT)

  • Public Sector lender Central Bank of India has received shareholders nod for raising up to Rs6,500 crore by follow-on public offer, rights issue and Qualified Institutional Placement (QIP).

2. Over 90% Indian customers still prefer branch over online banking: Report (Source: ET)

  • While the government has been pushing people to go online when it comes to banking, the branch still continues to dominate banking channels in India, with 94 percent of retail banking customers having visited the branch/store at least once in the past 12 months, a new study revealed.
  • Most banking relationships still begin and continue at the branch. However, there is great potential for banks to move more into the digital space. Only 51 percent of retail banking customers has a reliable online banking experience with their main financial institution.

3. Digital payments surge 55% in 2016-17, says Niti Aayog’s Ratan Watal (Source: MINT)

  • Digital payments grew 55% by volume and 24.2% by value in 2016-17 over the previous year, Ratan Watal, principal advisor of government think-tank Niti Aayog and former finance secretary claimed.
  • Data from the Reserve Bank of India (RBI) seems to suggest that the rate of adoption of digital payments that accelerated following demonetisation (the invalidation of old high-value currency notes on 8 November) had slowed in recent months.
  • April saw total digital transactions of Rs109.58 trillion, down 26.78% from Rs149.58 trillion in March, according to data from RBI. The number of digital transactions fell too, declining 4.56% from 893.9 million in March to 853.1 million in April. The highest volume was recorded in December, 957.5 million, according to RBI.
  • Watal also mentioned that the outstanding stock of currency in circulation, which hovered around 12% of GDP between 2011- 12 to 2015-16, declined to 8.8% during 2016-17, reflecting the impact of demonetization partially offset by the ongoing remonetisation process.

4. RBI restricts G-sec debt portfolio flows (Source: BS)

  • In a major move in the bond market this week, the Reserve Bank of India (RBI) tweaked the government bond investment limit for foreign portfolio investors (FPI), stating that 75 percent of the investment amount should go to long-term investors, and what is unutilised would not be freed up for the general category.
  • The plan is to allow foreign investors access to 5 per cent of the government bonds and 2 percent of the state development loans by March 31 next year, in phases.
  • As part of that measure, the RBI increased the limit for FPI play in government bonds, applicable from July 4.

5. Yields shoot up on RBI’s open market sale plan (Source: BS)

  • Yields on 10-year government bonds jumped 11 basis points on July 3rd after the Reserve Bank of India (RBI) announced late on June 30th its bond purchase plans from the secondary market. It shows the RBI is keen on maintaining interest rate parity between the US yields and local yields so that inflows remain unaffected.
  • The sharp rise in yields in the US led to a prompt response from the RBI, which announced open market operation (OMO) for sale of government bonds up to Rs 10,000 crore

6. Fresh investments plummet in June quarter despite govt steps (Source: BS)

  • Investments fell sharply in the June quarter of FY18 despite the government taking several steps to attract capital. Indian firms announced only 448 new projects, of an aggregate investment of Rs 1.35 lakh crore, in the June quarter. This was far lower than the average quarterly announcements of Rs 2.2 lakh crore seen in the past three years.
  • In the quarter ended March, fresh investments worth Rs 2.92 lakh crore were announced. In the June quarter of FY17, Indian companies announced investments worth Rs1.4 lakh crore.
  • Analysts said investments were slowing down despite the government announcing Make In India, Digital India and Smart Cities initiatives to attract manufacturing and create jobs. Chief executive officers said capacity utilisation in their manufacturing plants was still hovering at an average 75 percent. They said they want utilisation to peak before making fresh investments.
  • Besides, banks are focusing on resolving stressed assets in the steel, power and telecom sectors, instead of lending to new projects.

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