Current affairs April '21

The Base rate of NBFC-MFIs borrowings for Q1 FY21 was 7.81%: RBI

Reserve Bank of India (RBI) has informed 7.81% as the applicable average base rate to be charged for the loans that are borrowed from Non-Banking Financial Company – Micro Finance Institutions (NBFC-MFIs) for the first quarter of Financial Year 2022 (Q1FY22).

• The base rate for the Q1FY22 was lower than that of Q4FY21 by 15 basis points (0. 15%).In Q1FY21 the base rate was about 8.76%.

RBI Fixed the WMA limit to Rs 1.2 lakh Crore for the 1st Half of FY22

The Reserve Bank of India (RBI), in consultation with the Government, decided the limits for Ways and Means Advances (WMA) for the centre to Rs 1.2 lakh crore for the first half of the financial year 2021-22(FY22) i.e. April 2021 to September 2021.

RBI Tightened the Security Norms for Payment companies

Following the rise in cyber-security breaches at Indian tech startups over the last few months, the Reserve Bank of India (RBI) has tightened its supervision norms over Payment companies that are storing customer data.

• As per RBI’s norms, from April 1, 2021, all licensed payment system operators (PSOs) have to submit detailed “compliance certificates” to the RBI twice a year.

• The certificate should be signed by their CEOs or managing directors, confirming adherence to all RBI regulations around security and storage of payment data.

RBI extended RTGS and NEFT money transfer facilities to Non-Bank Payment System Operators

On April 7, 2021, the Reserve Bank of India (RBI) extended the membership of Centralised Payment Systems (CPSs) facilities such as National Electronic Funds Transfer (NEFT) and Real-Time Gross Settlement (RTGS) to non-bank payment system operators.

• Until now, only banks were allowed to use RTGS and NEFT payments facilities.

• Now, Prepaid Payment Instrument (PPI) issuers, card networks, White label ATM operators and Trade Receivables Discounting System (TReDS) platforms which are regulated by RBI can use NEFT and RTGS modes.

RBI has extended PSL by Banks to NBFCs up to September 30, 2021

On April 7, 2021, the Reserve Bank of India(RBI) extended the classified lending of Banks to NBFCs for on-lending under the Priority Sector Lending (PSL) for 6 months i.e. up to September 30, 2021.

Background:

• To boost credit among small and needy borrowers, on August 13, 2019 RBI allowed banks to classify their lending to registered NBFCs (other than MFIs) as PSL which was about 5% of a bank’s total PSL (for on-lending to Agriculture/MSME/Housing) till March 31, 2020, and later the facility was extended up to March 31, 2021.

• Around ₹37,000 crore has been lent by banks to NBFCs for on-lending to the specified Priority Sector (PS) by December 2020.

RBI Amended India’s Inflation-Forecasting Model – QPM

RBI has revised the Quarterly Projection Model (QPM) to enrich the model’s analytics and to capture the interactions between the fiscal and monetary policy with real-economy elements.

• The revised model is termed QPM 2.0 and it incorporates, fiscal-monetary dynamics, disaggregated fuel pricing (oil price, exchange rate and fuel taxes), the balance of payments and exchange rate interactions.

RBI Set up a Committee Headed by Sudarshan Sen to Review Working of ARCs

In April 2021, The Reserve Bank of India set up a 6 member committee to evaluate the role of Asset Reconstruction Companies (ARCs) in stressed debt resolution and review their business model. The committee will be headed by Sudarshan Sen, former executive director, RBI.

RBI Allowed Commercial Banks to Pay up to 50% of pre-COVID-19 Dividends

In April 2021, RBI allowed banks for payment of dividends for FY21, with certain conditions and limits.

i.Commercial Banks: RBI allowed commercial banks to pay up to 50 per cent of what they paid before COVID-19 from the profits for the fiscal ended March 31, 2021.

RBI Restricted American Express, Diners Club from Enrolling New customers from May 1, 2021

On April 23, 2021, The Reserve Bank of India (RBI) has restricted American Express Banking Corp (Amex) and Diners Club International Ltd, the payment system operators from on-boarding new domestic customers onto their card networks from May 1, 2021, due to the non-compliance with the directions on Storage of Payment System Data.

• American Express and Diners Club are authorized to operate card networks in India under the Payment and Settlement Systems Act, 2007 (PSS Act). Thus the current restrictions will not impact the existing customers.

• The supervisory action has been taken in exercise of powers vested in RBI under Section 17 of the PSS (Payment and Settlement Systems) Act.

RBI Fixed the Bank’s MD&CEOs Tenure at 15 years; Upper age limit at 70 years

On April 26, 2021, the Reserve Bank of India (RBI) through its circular – “Corporate Governance in Banks – Appointment of Directors and Constitution of Committees of the Board”, has fixed 15 years as the tenure for the Managing Director and Chief executive officers (MD & CEOs) or whole-time directors(WTDs) to hold their post in a bank.

• RBI’s instructions are meant for private sector banks, small finance banks (SFBs) and wholly-owned subsidiaries of foreign banks.

• Note – The instructions are not applicable for foreign banks operating as branches in India.

S Ramann CEO of NeSL appointed as the CMD of SIDBI

S Ramann, the Chief Executive officer(CEO) of National e-Governance Services Ltd (NeSL), has been appointed as the Chairman and Managing Director (CMD)of Small Industries Development Bank of India (SIDBI).

• He will hold the post of CMD of SIDBI for a period of 3 years from the date of his assuming charge or until further orders.

World Bank Economist Poonam Gupta Appointed as 1st Woman DG of NCAER

On 5th April 2021, Poonam Gupta, economist of World Bank(WB) was appointed as the first woman Director General(DG) of the National Council of Applied Economic Research (NCAER). She will succeed Shekhar Shah, DG of NCAER since 2011, and assume office as the new DG of NCAER on 1st July 2021

Atanu Chakraborty to become Part-time Chairman of HDFC bank

On 23rd April 2021,As per the information received from HDFC bank , the Reserve Bank of India(RBI) has approved the appointment of Atanu Chakraborty as the part-time Chairman of the bank.

• He has been appointed for a period of 3 years with effect from May 5 ,2021 or the date of his taking charge ,whichever is later.

India recorded Current account deficit of $1.7 billion in Q3FY21: RBI report

As per the RBI’s report “Developments in India’s Balance of Payments during the Third Quarter (October-December) of 2020-21(Q3FY21)” on March 31, 2021, India has recorded a current account balance deficit of $1.7 billion(i.e. 0.2% of Gross Domestic Product(GDP)) in Q3FY21 due to the COVID-19’s impact on trade.

• The current account stood at a surplus of $15.1 billion and $19 billion in the first two quarters (Q1 & Q2) of FY21.

• India had a deficit in the current account of about $2.6 billion(i.e.0.4% of GDP) in the Q3FY20.

• RBI is expecting the size of the current account deficit to enlarge to $5-7 billion for Q4FY21 with an aggregate current account surplus of $25-27 billion for FY21.

Stand-Up India Scheme: About INR 25, 586 Crore Loans sanctioned by Banks since 2016

The Ministry of Finance has stated that Banks have sanctioned more than INR 25, 586 Crore (25,586.37 Crore) Loans to over 1.14 Lakh Accounts (Till March 23, 2021) under the Stand-Up India Scheme since its launch in 2016.Simultaneously, the government extended the validity of the Stand-Up India Scheme till 2025.

• Around 93, 094 loans worth ~INR 21,200.77 Crore have been sanctioned to women-led business enterprises under the scheme.

• INR ~3, 335.87 Crore have been sanctioned to over 16, 258 SC entrepreneurs & ~INR 1, 049.72 Crore has been approved for 4, 970 ST entrepreneurs.

• The main aim of the Stand-Up India scheme is to promote Entrepreneurship among Women, Scheduled Castes (SC) & Scheduled Tribes (ST) categories.

Government Promulgates Ordinance to amend Insolvency & Bankruptcy Code

The government of India has promulgated an Ordinance titled ‘The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021’ to allow ‘pre-packaged insolvency resolution process (PIRP)’ to Micro, Small & Medium Enterprises (MSME). It amends the Insolvency and Bankruptcy Code, 2016.

• The amendments are necessary to address the specific requirements of MSMEs relating to resolution of their insolvency due to the unique nature of their businesses and simpler corporate structures.

Applicability

• PIRP will be applicable for MSMEs with a maximum default value of INR 1 Crore only. It can be filed under a newly inserted Section 54C of the IBC.

Initiation/Trigger

• It is modelled on the debtor-in-possession approach.

• The debtors should have a base resolution plan in place before approaching creditors to initiate a PIRP.

• The Pre-pack resolution must be approved by financial creditors with a minimum 66 % voting share by value.

• If the Corporate debtor does not have financial creditors, the company may approve application filing through a special resolution with a 75% majority, and move court to initiate PIRP.

Timelines

90 days to submit a resolution plan & 120 days for the entire process.

Control of Company

During PIRP, the management of affairs of the corporate debits will continue to vest in the Board of Directors or partners of the corporate debtor.

Termination

• Can terminate process with minimum 66% CoC (Committee of Creditors) votes

Eligibility

• It should be eligible to submit a resolution plan under section 29A

Nirmala Sitharaman attends 2nd Virtual G20 Finance Ministers & Central Bank Governors Meeting (FMCBG) 2021

On April 7, 2021, Union Minister for Finance & Corporate Affairs Nirmala Sitharaman virtually participated in the 2nd G20 Finance Ministers & Central Bank Governors (FMCBG) meeting 2021 held under the Italian Presidency.

• The participants discussed policy responses to global challenges to restore strong, sustainable, balanced and inclusive growth.

SEBI Imposed Rs 25 Crore Fine On Ambanis For Violation Of Takeover Code Regulations In 2000

On 7th April 2021, the Securities and Exchange Board of India(SEBI) imposed a Rs.25 crores fine on the promoters of Reliance Industries Limited (RIL) (Mukesh Ambani, Anil Ambani, Nita Ambani, Tina Ambani) for the violation of the takeover code regulations in 2000.

• The imposed penalty will be jointly paid by the 34 individuals named in the SEBI order which includes the mother and children of Mukesh Ambani and Anil Ambani within 45 days.

• SEBI issued the Show cause notice(SCN) to Ambani Family in 2011.

ETMONEY launched India’s first Aadhaar-based SIP payment

ETMONEY launched India’s first Aadhaar-based Systematic Investment Plan(SIP) payments feature. This feature will enable anyone to start a SIP online and make automatic payments using a simple Aadhaar based One-Time Password (OTP) verification.