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RBI appointed panel suggests 4-tier structure for Urban Co-operative Banks
In February, the RBI had the constitution of the Expert Committee on Primary (Urban) Co-operative Banks under the chairmanship of N S Vishwanathan, former RBI Deputy Governor.
The committee has suggested a four-tier structure for the urban cooperative banks (UCBs) depending upon the deposits and prescribed different capital adequacy and regulatory norms for them based on their sizes.
The RBI committee said that UCBs can be split into four categories
- Tier-1 with deposits up to Rs 100 crore
- Tier-2 with deposits between Rs 100-Rs 1,000 crore
- Tier-3 with deposits between Rs 1,000 crore to Rs 10,000 and
- Tier-4 with deposits of over Rs 10,000 crore
Important Suggestions:
CRAR: It has suggested that the minimum Capital to Risk-Weighted Assets Ratio (CRAR) for them could vary from 9 per cent to 15 per cent and for Tier-4 UCBs the Basel III prescribed norms.
The RBI panel has also prescribed separate ceilings for home loans, loan against gold ornaments and unsecured loans for different categories of UCBs.
The panel further said Supervisory Action Framework (SAF) should follow a twin-indicator approach, it should consider only asset quality and capital measured through NNPA and CRAR instead of triple indicators at present. The objective of the SAF should be to find a time-bound remedy to the financial stress of a bank.
On housing loans, the panel said the maximum limit on housing loans may be prescribed as a percentage of Tier 1 capital, subject to RBI-prescribed monetary ceiling for Tier 1 UCBs (but higher than the present ceiling) and respective board of directors-approved ceiling for Tier 2 UCBs.
- For Tier 2 UCBs, the risk weight on housing loans may be prescribed based on size of the loan and loan-to-value (LTV) ratio, in line with SCBs.
RBI Panel wants National Federation of Urban Co-operative Banks and Credit Societies Ltd (NAFCUB) to expedite setting up of umbrella organization to support urban co-operative banks
Umbrella Organization (UO)
- It also said that umbrella organization (UO) is expected to play a crucial role in the strengthening of the sector.
- For that, it must be a financially strong organization with adequate capital and a viable business plan. The minimum capital for the UO should be Rs 300 crore with CRAR and regulatory framework akin to the largest segment of NBFCs, the panel said.
- Also, in the long run, the UO may take up the role of a Self-Regulatory Organization (SRO) for smaller UCBs
About CRAR or Capital Adequacy Ratio (CAR)
It is the ratio of a bank's capital to its risk. CRAR is decided by central banks and bank regulators to prevent commercial banks from taking excess leverage and becoming insolvent in the process.
The Basel III norms stipulated a capital to risk-weighted assets of 8%. In India, scheduled commercial banks are required to maintain a CAR of 9% while Indian public sector banks are emphasized to maintain a CAR of 12% as per RBI norms
Tier-1 capital, or core capital, consists of equity capital, ordinary share capital, intangible assets and audited revenue reserves. Tier-1 capital is used to absorb losses and does not require a bank to cease operations.
- Tier-1 capital is the capital that is permanently and easily available to cushion losses suffered by a bank without it being required to stop operating.
Tier-2 capital comprises unaudited retained earnings, unaudited reserves and general loss reserves. This capital absorbs losses in the event of a company winding up or liquidating.
- Tier-2 capital is the one that cushions losses in case the bank is winding up, so it provides a lesser degree of protection to depositors and creditors. It is used to absorb losses if a bank loses all its Tier-1 capital.
RBI extends scope of tokenization
The Reserve Bank of India has decided to extend the scope of tokenization to include consumer devices – laptops, desktops, wearables (wrist watches and bands) and Internet of Things (IoT) devices.
- The facility was available only for mobile phones and tablets of interested card holders.
- Tokenization refers to replacement of actual card details with an alternate code called the “token”, which will be unique for a combination of card
- A tokenized card transaction is considered safer as the actual card details are not shared with the merchant during transaction processing.
India emerges as Second in Global Manufacturing Risk Index
India has overtaken the United States (US) to become the second-most sought-after manufacturing destination globally, driven mainly by cost competitiveness, according to real estate consultant Cushman & Wakefield.
- China remains at number one position, the consultant said in its 2021 Global Manufacturing Risk Index
- The US is at third position, followed by Canada, Czech Republic, Indonesia, Lithuania, Thailand, Malaysia and Poland.
About global Manufacturing Risk Index:
Based on the most favorable locations for international manufacturing, Cushman & Wakefield’s Manufacturing Risk Index report ranks countries based on a range of factors including:
– Risk and cost factors
– Political and economic risk
– Market conditions and labor costs
– Market Access
The index ranks 47 countries across Europe, the Americas, and the Asia Pacific.
Infosys hits $100 billion m-cap, fourth Indian firm to reach milestone
The shares of Information Technology major, Infosys hit a record high during intraday trading, which helped the company cross $100 billion in market capitalization. Infosys is the fourth Indian company to achieve this milestone.
- Reliance Industries (m-cap of $140 billion), Tata Consultancy Services (m-cap $115 billion) and HDFC Bank (m-cap $100.1 billion) are the other Indian firms in the club with Infosys.
- Infosys CEO: Salil Parekh (Was in News recently)
- Infosys Headquarters: Bengaluru
BharaPe enters P2P lending with '12% club'
BharatPe on Tuesday said it has entered peer-to-peer (P2P) lending with its product '12% club', which will allow consumers to not only earn 12 per cent interest on the funds they invest but also borrow at an interest rate of 12 per cent.
- The fintech company has partnered with central bank approved non-banking finance companies to offer this product to consumers and is aiming to achieve an investment asset under management (AUM) of $100 million and a lending AUM of $50 million by March 2022.
- Additionally, consumers can avail of collateral-free loans of upto Rs 10 lakhs on the '12% Club' app for a tenure of three months, as per their convenience.
Latest Update: Credit card payments platform, Cred, also launched a P2P lending product recently called “Cred Mint”, where it is offering its members to earn up to 9 per cent interest by lending to other members and borrow at 12-16 per cent.
Note: You can read about P2P Lending in Detail on Our www.ecolearn.in website.
India’s First Agri Sectoral Index GUAREX launched by NCDEX
National Commodity and Derivatives Exchange has launched futures contract on NCDEX Guarex, India’s first sectoral index in agriculture commodities basket.
- GUAREX is a price based sectoral index that tracks the movement in the futures contracts of guar gum refined splits and guar seed on a real-time basis
- India is the world’s largest guar producer accounting for 80-85 per cent of the output, while Rajasthan is the country’s top producer with 80 per cent market share.
PSBs to make additional provision of over ₹21,300 cr for higher family pension, NPS
Public sector banks will have to make an additional provision of over ₹21,300 crore annually on account of revision of norms to calculate family pension and higher contribution toward National Pension System (NPS).
On Wednesday, Financial Services Secretary Debashish Panda said the government has approved the Indian Banks’ Association’s (IBA) proposal to increase the family pension to 30 per cent of last salary drawn
National Pension System
- The system prescribes contributory pension system where originally it was decided that employees will contribute 10 per cent of their basic plus dearness allowance while a matching amount will be provided by the government employer.
- On December 10, 2018, it was decided that for a Central government employee, the mandatory contribution by the employer would be raised to 14 per cent from April 1, 2019. The same mechanism will now be valid for employees of public sector banks.
Karnataka Bank launches KBL FASTag
Karnataka Bank on Wednesday launched KBL FASTag, a pre-loaded payment instrument to facilitate seamless movement of vehicles at toll plazas across the country, in association with the National Payment Corporation of India and Worldline, FASTag processor.
- Karnataka Bank plans to raise up to Rs 6,000 crore debt capital during the current financial year
Canara Bank allots over 16.73 cr shares in ₹2,500 cr QIP
- The sub-committee of the board, capital planning process of the Board of Directors of the bank, at its meeting held on August 24, 2021, approved the allotment of 16,73,92,032 equity shares to eligible qualified institutional buyers at an issue price of ₹149.35 per equity share, aggregating up to ₹2,500 crore, Canara Bank said in a regulatory filing.
- With this, the paid-up equity share capital of the bank stands increased to ₹1,814.13 crore from ₹1,646.74 crore, it said.
Centrum Financial Services to set up SFB to take over PMC
Centrum Financial Services Ltd (CFSL) has initiated the process of establishing a small finance bank (SFB), which will eventually take over the scam-hit Punjab and Maharashtra Co-operative (PMC) Bank, by taking steps towards creating necessary infrastructure in this regard, according to the Reserve Bank of India (RBI).
- The RBI had accorded “in-principle” approval to CFSL on June 18, 2021, to set up an SFB.
- This approval was in specific pursuance to CFSL’s offer in response to PMC Bank’s Expression of Interest (EoI) notification.
- CFSL, which is a non-banking finance company, and Resilient Innovations Pvt Ltd (BharatPe), which is a fintech company, are equal partners in setting up the SFB.
NABFID brought under Dept of Financial Services purview
President Ram Nath Kovind approved placing the National Bank for Financing Infrastructure and Development (NABFID) under the purview of the Department of Financial Services (DFS) in the Finance Ministry for administration purposes.
- The National Bank for Financing Infrastructure and Development Act was enacted by Parliament in March. With this, a new development financial institution will come into existence.
- Among other things, this would include developing a deep and liquid bond market of international standards for long-term infrastructure financing in India, including through widening of the issuer and investor base.
Govt approves extension of tenure of MD-CEOs, EDs of public sector banks
The ACC extended the tenure for 3 managing directors and chief executive officers (MD & CEOs) and 10 executive directors of public sector banks
- The ACC has approved the extension of tenure of S S Mallikarjuna Rao, MD and CEO of Punjab National Bank, until January 31, 2022, when he is due for superannuation.
- The appointments panel has also approved a two-year extension for Atul Kumar Goel, MD and CEO of UCO Bank as well as A S Rajeev, MD and CEO of Bank of Maharashtra.
RBI appoints Ajay Kumar, AK Choudhary and Deepak Kumar as new Executive Director
- Currently, RBI as 12 executive directors and 30 chief general managers, who come under 4 deputy governors
Shanti Lal Jain appointed MD and CEO of Indian Bank
- Shanti Lal Jain has been appointed Managing Director and Chief Executive Officer of Indian Bank for three years. Jain is currently Executive Director (ED), Bank of Baroda
RBI approves re-appointment of Sandeep Bakhshi as ICICI Bank MD & CEO
- The Reserve Bank of India (RBI) has approved the re-appointment of Sandeep Bakhshi as the MD & CEO of ICICI Bank. This will be with effect from October 15, 2021, till October 3, 2023.
- ICICI Bank HQ - Mumbai, Maharashtra
- Tagline : Hum Hai Na, Khayal Apka
