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Top Five Banking News in Last Week of November: IBPS Clerk Mains, IPPB & IBPS SO Exam

Nov 29, 2016 12:40 IST

    General Awareness (with special reference to banking industry) section is one of the most important section for every bank recruitment exam. It is considered one of the scoring sections in bank exams. To crack this section, candidates need to update their current affairs of the national and international importance along with the banking industry.
    It is often recommended that you should read a good newspaper every day in order to get through any government exam or banking exam. It helps you in knowing the current affairs in detail along with the fact that it helps you in grasping and strengthening your English language skills as well.

    In order to help in your preparation, here the banking team of jagranjosh is providing top five banking news of last ten days. Candidates who are appearing for bank exams must go through the below notes.

    1. IBBI notifies three sets of regulations under Insolvency and Bankruptcy Code, 2016


    The Insolvency and Bankruptcy Board (IBBI) of India on 23 November 2016 notified three sets of regulations- (Insolvency Professional) Regulations, 2016; Regulations inter alia provide for registration, Regulation and oversight of insolvency professionals.

    These regulations were notified under the Insolvency and Bankruptcy Code, 2016 and will come into effect from 29 November 2016.

    All these regulations provide for registration, regulation and oversight of insolvency professionals under the Code.

    Individuals eligible for registration as an insolvency professional

    Advocates, Chartered Accountants, Company Secretaries and Cost Accountants with 10 years’ of practice or employment.
    A Graduate with 15 years of post-qualification managerial experience on passing the Limited Insolvency Examination.
    Any individual who has passed the National Insolvency Examination. However, Advocates, Chartered Accountants, Company Secretaries and Cost Accountants with more than 15 years of practice experience can register without any examination till 31 December 2016 and such registration shall be valid for a limited period of six months.
    There will be National Insolvency Examination and Limited Insolvency Examination. The syllabus and format of these examinations will be published on the website of the Board at least one month before the examination.
    Meanwhile, a firm registered under Section 8 of the Companies Act, 2013 -- having minimum net worth of Rs 10 crore -- will be eligible to be an insolvency professional agency.  

    IBBI, chaired by M S Sahoo, will have 10 members.

    2. RBI relaxes prudential norms on Income Recognition, Asset Classification

    The Reserve Bank of India (RBI) on 21 November 2016 relaxed the prudential norms on income recognition, asset classification and provisions pertaining to advances. The decision came following the withdrawal of the legal tender of 500 and 1000 rupees notes.

    Key Highlights


    Taking into consideration the problems being faced by small borrowers in repaying their loan dues, RBI decided to provide an additional 60 days time, provided that the value of the loan or crop loan is less than 1 crore rupees.
    Term loans, housing loans and agriculture loans, whether business or personal, with sanctioned amount of up to 1 crore rupees on the books of any bank or any NBFC, will be eligible for relaxation.
    Loans sanctioned by banks to NBFC (MFI), NBFCs, Housing Finance Companies and PACs and by State Cooperative Banks to DCCBs are also eligible for the same.
    It also applies to dues payable between 1 November 2016 and 31 December 2016.
    Dues payable before 1 November and after 31 December 2016 will be covered by the extant instruction for the respective regulated entity with regard to recognition of NPAs.
    The additional time given shall only apply to defer the classification of an existing standard asset as substandard and not for restructuring of loans.

    3. Islamic Window to be considered in conventional banks

    The Reserve Bank of India (RBI) in a letter to the finance ministry has put forward a proposal to open an ‘Islamic window’ in conventional banks. The move is a stepping stone to its consideration of introducing Islamic banking in the country.

    The RBI and the Union Government have been exploring the possibility of  introducing the Sharia-based foundation since quite long in order to include even those sections of the society that remain outside the banking circuit due to religious reasons.

    Response of RBI to the RTI query

    Islamic banking may be introduced in the country in a gradual manner, considering the inexperience of Indian banks in the sphere and complexities of Islamic finance.
    At first, only products similar to those of conventional banking will be considered for introduction through an Islamic window at the conventional banks.

    Islamic Banking

    It is a financial institution that is based on the principles of the Islamic law (Sharia). It is also known as Sharia compliant finance.
      All its dealings, transactions, investment focus and business approaches are derived from the Sharia law.
      Its governing principles are as follows:

    √ Absence of interest–based transactions.
    √ Introduction of Islamic tax, zakat.
    √ Avoidance of economic activities involving oppression and speculation.
    √ Discouragement of production of goods and service that go against the Islamic value.

    In order to introduce Islamic banking, RBI still has to put a lot of things into place. For instance:

    √ Operationalisation of Sharia boards and committees.
    √ Exploring feasibility of extending deposit insurance to Islamic banking deposits.
    √ Identifying the financial risks in such a framework.
    √ Formulating appropriate criteria for Islamic products.

    The plan, however, of introducing the Sharia-based banking structure has found stiff opposition from certain political and non-political groups.

    4. SBI writes off debts owed by 63 willful defaulters

    The State Bank of India (SBI), has decided to write off loans worth almost 7016 Crore Rupees, owed to it by 63 willful defaulters including Vijay Mallya’s Kingfisher Airlines.

    The move is a part of a cleanup process of the bank’s balance sheets. While the loans of the 63 willful defaulters have been written off completely, 31 have been partially written off and remaining 6 of the bank’s top 100 defaulter’s list have been shown as non-performing assets (NPAs).

    In other words, SBI has categorized these loans as toxic and put them into Advance Under Collection Account (AUCA).

    The Top Five Defaulters

    Vijay Mallya’s Kingfisher Airlines tops the list with dues amounting to almost 1201 Crore Rupees.
    KS Oil, edible oil maker is the second in the list with dues amounting to 596 Crore Rupees. The company had invested a large amount of money on plantations in Indonesia and Malaysia, which failed to deliver the expected returns.  It was declared NPA from 30 September 2013.
    The third top defaulter, Surya Pharmaceuticals, was added to the list of willful defaulters in 2013. The company allegedly committed fraud and misused its funds. An audit by Ernst & Young declared its account as a fraud one.
    Get Power is the fourth defaulter with debts of around 400 Crore Rupees.
    Sai Info, the fifth defaulter has debts amounting to 375 Crore Rupees. Sunit Kakkad, the main promoter of the company ran away in June 2013. He was arrested and brought back to India and is out on bail now.

    About write-offs

    The exercise is adopted by banks to clear off all the bad debts showing on their balance sheets.
    It is a strategy employed to reduce the number of their non-performing assets.
    It is applied after the Bank exhausts all its methods of recovering the loan amount.
      By writing off these debts, banks are able to reduce its earnings and thus reduce its taxable income and overall tax liability.
    However, writing off a debt does not take away bank’s right to follow up on it. It cannot be considered as a waiver, as the bank will still chase the defaulters. In many cases, bad debt accounts are handed over to a collection agency. The agency then gets in touch with the defaulter.
    The move of writing off these willful defaulters came right after PM’s announcement of demonetization of 500 and 1000 rupee notes.

    5. India and ADB sign 500 million US dollar loan to build country's longest river bridge across Ganges River

    The Asian Development Bank (ADB) and the Government of India in November 2016 signed a 500 million US dollar loan to build a 9.8 km long road bridge across the Ganges River. This will be India’s longest river bridge.

    Along with ADB’s loan and 900000 US dollar in technical assistance to improve bridge operation and management, the Bihar Government will provide support equivalent to 215 million US dollar.

    The project is expected to be completed by the end of December 2020.

    Key highlights of the proposed river bridge

    The proposed bridge will improve transport connectivity between North and South Bihar. It will also improve the link between Patna and the surrounding areas.
    It will cover both channels of the Ganges River and will also serve as an alternate route to the existing Ganga Bridge.
    It is expected that the bridge will benefit over 9 million people.
    The bridge will use state-of-the-art engineering techniques and will be the first of its kind in India.

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