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Descriptive Banking related general awareness -- March 2012 ONE


Govt slashes onion export price
            The government on 11 January lowered the minimum export price (MEP) of onion by 100 USD a tonne to 150 USD per tonne to boost outbound shipments, which have declined.
            The MEP of all varieties of onions, except Bangalore Rose onions and Krishnapuram onions, will be 150 USD per tonne.
            Onion growers and traders have been demanding a slash in the export price to keep the commodity competitive in the international market.
            Onion exports from India declined by nearly 23 per cent in the first nine months of the current financial years as compared to last year’s mainly due to high price of shipment at 250 USD per tonne.
            China and Egypt are dominating the international market by selling bulb at less than USD 200 a tonne.
            Vaccine for haemorrhagic septicaenia
            Haemorrhagic septicaemia, a deadly bacterial disease that kills over five lakh cattle and buffalo in India, could soon be controlled. A consortium of global institutes, including Indian Immunologicals Ltd., has joined hands to develop a new vaccine over the next three years.
            Current vaccines have achieved limited success in affording long term protection. The new vaccine will be a genetically modified organism administered as vaccine. The consortia includes Inocul8 UK (the commercial interface of Moredun Research Institute, UK), Global Alliance for Veterinary Medicine (University of Glasgow, UK) and Indian Veterinary Research Institute.
            Maharashtra cotton growers need support
            With just three per cent of the area under cotton being irrigated, Maharashtra farmers need help through a different channel rather than raising the minimum support price (MSP) for the natural fibre to 6,000 a quintal.
            The Maharashtra Government had asked the Centre to raise the MSP to 4,285 a quintal but it was turned down.
            Cotton production costs across the country are the highest in Maharashtra, at 2,960 a quintal, due to poor irrigation infrastructure and lower yields. In contrast, the cost of production in Gujarat is 2,216 a quintal, as irrigation facilities cover more than 50 per cent of the total cotton acreage and productivity is almost double.
            World Bank - funded product a boon
            Jasmine growers near Coimbatore are now able to export them to the Gulf and the US, thanks to the packaging technology that has enhanced the shelf-life of the flowers.
            At Rajpipla village near Surat, a group of farmers have set up a unit to extract fibre from banana stem, considered a waste and pollutant. The unit generates about 3,000 man-days of employment annually, besides generating a modest profit and compost for the village.
            These fibre extraction and packaging technologies are a few of the 44-odd such ideas that were incubated and commercialised by the Network of Indian Agri-Business Incubators (NIABI), under the World Bank - funded National Agriculture Innovation Project (NAIP).
            Ten incubators or business development units (BDUs) operate under the NIABI across the country, facilitating commercialization of innovative agro-technologies.
            Air India woos foreign tourists
            Fly with Air India from abroad and then take two domestic flights for $200 or up to nine flights for $920.
            The Maharaja is going all out to woo more passengers on its domestic flights through its ‘Visit Incredible India Pass’ scheme. The scheme is being marketed only in the overseas market and allows a passenger flying with Air India from abroad to travel domestically to any online destination to which the carrier operates.
            The tickets will be valid for 180 days of in-bound international travel.
            International passengers not flying with Air India from abroad but wanting to avail themselves of the offer will have to pay $270 for two flights and $1,000 for nine flights.
            DGCA raps airlines on safety issues
            The Directorate General of Civil Aviation (DGCA) has rapped all the Indian air carriers over the issues of neglecting safety due to financial constraints and made it clear that no airline would be allowed to take a “short cut” on the safety front.
            Apart from cancellation of flying permits, the report also suggested steps like slashing of flights or asking the carriers to fly a lesser number of aircraft, which they can properly maintain.
            This was the first time that such a financial audit was carried out by DGCA.
            Agitating Air India Pilots call of stir
            The stir by a section of Air India pilots, which led to cancellation of 52 flights, was called off after the state - owned airline reportedly assured them that their pending salary and allowance would be cleared in phases before March.
            Protesting non-payment of their salary and allowances, a section of Air India pilots went on a “no-pay-no-work” agitation. A total of 52 flights, 44 from Delhi and eight from Mumbai, were cancelled causing inconvenience to hundreds of passengers.
Foreign airline to take stake in domestic carrier
            In a major relief to debt - laden airlines such as Kingfisher, the Civil Aviation Ministry has announced a ‘broad consensus’ in the Government on allowing foreign airlines to pick up equity of up to 49 per cent in domestic schedule airlines. The Cabinet will take a final call on the issue.
            Existing rules allow foreign airlines, to acquire up to 49 per cent equity in schedule domestic airlines. It is now proposed that this distinction be done away with.
            There will be no automatic approval for foreign airlines wanting to invest in a domestic carrier. The proposal will have to be cleared by the inter-ministerial Foreign Investment Promotion Board (FIPB).
            The FIPB will look at the sources of money, at whether there is any security issue that needs to be considered and also address any other worries that different departments of the Government may have about investment coming from a particular country or company.

            Uniform legislation for banks
            The Financial Sector Legislative Reforms Commission (FSLRC) is considering a single, harmonized and uniform legislation applicable to all banks and giving the central bank the power to sanction takeover of a co-operative bank by commercial banks.
            The fact that different banks are governed by different laws has resulted in an uneven playing field and this needs to be addressed. The Commission was set up by the Government to recommend a radical overhaul of laws governing the financial sector.
            A single, harmonized and uniform legislation applicable to all banks will provide transparency, comprehensiveness and clarity and provide ease of regulation and supervision to the RBI.
            RBI frees interest on savings accounts
            The Reserve Bank deregulated interest rate on saving accounts in all State and Central Co-operative Banks, a move that will fetch better returns for depositors.
            All State and Central Co-operative Banks are free to determine their savings bank deposit interest rate subject to two conditions.
            Under first condition, each bank will have to offer a uniform interest rate on savings bank deposits up to 1 lakh, irrespective of the amount in the account within this limit. The other condition states that for savings bank deposits over 1 lakh, a bank may provide differential rates of interest, if it so chooses.
            Financial inclusion to soon fetch tax benefits
            Banks and financial institutions may get tax benefits on profits made through activities leading to financial inclusion.
            Further, any losses these institutions incur, as a result, may also be allowed to be carried over for a longer period.
            At present, under Section 72 of the Income Tax Act, 1961, losses from any non-speculative business activity are allowed to be carried over for up to eight subsequent assessment years.
Target for financial inclusion
Bank branches within 5 km and Banking Correspondent within 2km in unbanked area
Swabhiman Scheme to provide banking services through banking correspondent/branches in 73,000 villages with population of 2,000 or more by March 2012.
All unbanked blocks, majority of which are in North-East, to have banking presence by March 2012.
In an under-banked district, banks will have to open a branch in habitations with population of 5,000 and above by September 2012.
In other districts, banks will try to open a branch in habitation with population of 10,000 or more by September 2012.
Unique Identity Number for opening a bank account. Also for distributing benefits under welfare schemes.
RBI to issue commemorative coins
The Reserve Bank of India will shortly issue coins of 5 denominations to commemorate hundred years of civil aviation. The coins will be circular in shape and have a diameter of 23 mm.
            On the obverse side, the face of the coin shall bear the Lion Capital of the Ashoka Pillar in the centre. It shall also bear the denominational value 5.
            On the reverse side, the coin shall bear the image of an aircraft and the figure ‘100’. The year 1911-2011’ shall be shown at the bottom.
            Hike in NRE deposit interest rates
            The country’s largest lender State Bank of India (SBI) and a few other banks, including Kotak Mahindra Bank, announced a sharp hike in interest rates offered on non-resident external (NRE) deposits.
            SBI raised the interest rates on fixed deposits by non-resident Indians of less than 1 crore with a maturity of one to two years to 9.25 per cent, as against 3.82 per cent earlier.
            Banks are offering such high rates because of the sharp depreciation of the rupee in the past few months.
            Term deposits between 2-3 years and 3-5 years’ tenure will also earn 9.25 per cent interest. The revised deposit rates will apply only to fresh deposits and on renewal of maturing deposits. No interest is payable if the deposit is withdrawn before one year. In other case of premature withdrawal, the interest paid shall be 0.5 per cent below the rate applicable for the period the deposit has remained with the bank.
            Bank of Maharashtra goes to doorsteps
            Bank of Maharashtra has launched a financial inclusion service as an alternative model to the Business Correspondents format. Under this model, bank staff will visit village and offer banking services at the homes of the villagers.
            The bank has launched six of these Mahabank Gram Seva Kendras (MGSKs) in villages in Raigad, Thane, Ahmednagar, Aurangabad, Pune and Satara districts on a pilot basis.
            The bank’s permanent staff member of the nearest parent branch, equipped with a laptop, will go to these villages to render banking services on specified days every month.
            Corp Bank hikes NRE deposit rates
            Corporation bank has increased the interest rates on Non-Resident External (NRE) Rupee term deposit with effect from December 30. The bank has increased the interest rates offered on NRE term deposits up to 9.50 percent in a bid to attract foreign currency inflows amid a depreciating rupee.
            The bank is now offering 9.50 per cent on NRE deposits with maturity ranging from one year to less than two years. Earlier, the bank was offering 3.51 per cent for two years to less than three years and 3.64 per cent for three years to less than 10 years.
            Number portability likely on bank accounts
            After mobile and health insurance policies number portability, it is now the turn of bank accounts. The savings bank account number portability will allow a customer to retain his account number while changing his bank.
            For implementing the savings bank account number portability, the banks would have to work on the identification code, Know Your Customer (KYC) norms and Core Banking Solution (CBS).
            RBI worried over rising bad loans
            Bad loans in banks’ priority sector lending portfolio have caught the Reserve Bank of India’s eye.
            Specifically, the RBI wants banks to reveal their bad loans position in respect of their direct advances to small and marginal farmers, micro and small enterprises (MSEs), education, housing and other priority sectors (manufacturing, services, micro-credit, export credit and weaker sections).
            Mali signs $100m line of credit with Exim Bank
            The West African nation of Mail signed a $100 million line of credit with the Exim Bank of India.
            This line of credit will be used for transmission of power from Cote d’Ivoire, Mali’s neighbour, to the capital city of Bamako. Mali is interested in giving concessions to Indian companies interested in the mining sector. The country is rich in iron ore, cement, limestone, bauxite’ and manganese and gold.
            Indian exports to Mail include electricity transmission, cotton fabrics, cycle parts, transport equipment, drugs and processed food items. Imports from Mail are limited to raw cotton and few agro products.
            RBI tightens variable pay rules
            The Reserve Bank of India has instructed that the private sector banks should subject the variable pay of the whole time directors and other key personnel to mechanisms that prevent using of all or part of deferred remuneration and return of previously paid remuneration.
            To rein in the practice of rewarding employees for increasing the short-term profit without adequate recognition of the risks and long term consequences that their activities pose to banks, the RBI has unveiled final guidelines on compensation for private sector and foreign banks. The guidelines have to be implemented from financial year 2012-13.
            In the case of private sector banks, guaranteed bonus should only be in the form of employee stock option plans (ESOPs) and banks should not grant severance pay other than accrued benefits (gratuity, pension, and so on) except in cases where it is mandatory by any statue.
            PNB identifies five countries for possible foray
            Banking major Punjab National Bank (PNB) is looking to further expand its overseas presence and has identified at least five countries for possible entry in the coming days.
            Maldives, Singapore, Brazil, South Africa and Bangladesh are the five countries that the bank has identified for overseas foray.
            PNB has already received regulatory approval from the Reserve Bank of India for opening a subsidiary in Canada. It is still awaiting the nod of Canadian regulatory authorities for opening a subsidiary in that country.
            The bank has subsidiaries in London and Bhutan, besides many branches in Dubai, Hong Kong and Kabul. It also has a joint venture in Nepal.
            SBI trims home loan processing fee
            The country’s largest lender, State Bank of India, has halved the home loan processing fee, a move which could be followed by other public sector lenders.
            The Bank has slashed processing fee on home loan above 75 lakh to 10,000 from 20,000, while for loans between 30 lakh and 75 lakh, the fee has been reduced to 6,500 from 10,000 earlier.
            The processing fee for loans below 30 lakh continues to be 0.25 per cent of the loan amount.
            SBI will get 6,000-8,000 cr capital Infusion
            The government has approved a capital infusion of 6,000-8,000 crore. The funds will come by March 31.
            The Government has already announced that it is committed to providing adequate capital to public sector banks so as to maintain their Tier-I capital at 8 per cent.
            As of September 2011, the capital adequacy ratio (CAR) of SBI stood at 7.47 per cent at the end of second quarter against the minimum 8 per cent level desired by the Government.
            In 2010-11, the Government provided capital support of 20,157 cr to public sector banks. SBI had submitted a proposal some months ago to raise 20,000 crore through a right issue. The bank requires 20,000 cr to fund its growth plans over the next two fiscal.






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