Banking Current Affairs 2015

World Bank Launches Global Infrastructure Facility (GIF)

The World Bank (WB) has launched the GIF to specifically cater to the infrastructure needs of the emerging economies and developing countries. The GIF will channel money towards bankable infrastructure project in such countries. GIF also places importance on sustainable development. Its key focus will be on climate friendly infrastructure investments and projects that will boost trade.

The GIF will collaborate with other international and multilateral agencies which provide loans and financial assistance to countries across the globe. It will also help these agencies with its expertise in financing, supervising and implementing projects. Another areas where GIF could provide assistance it ensuring that all regulatory, environmental and social safeguards are met with while investing in large scale infrastructure projects. GIF will also work with private entities like asset management companies, private equity firms, pensions and insurance funds and commercial banks to tap into multiple sources of funding.

India expected to retain top slot in inward remittances

In the World Bank’s latest ‘Migration and Development Brief’, India has remained the top country to receive inward remittance with a total of $71 bn just this year. This stable inflow of remittances is important in boosting India’s balance of payments

Future Trends

The report predicts a modest rise of 1.5% in the inwards remittances to India during 2014.

However, remittances to the developing countries are expected to increase by 5% to reach $435 bn in 2014, driven largely by remittances to Asia and Latin America. Remittances to the South Asia are expected to improve after a slower growth in 2013.

Global remittances are estimated to increase from $582 bn to $608 bn in 2014

Forced Migration

Though the rise in inward remittances is a positive development, the rise in forced migration has revealed the troubling circumstances that are prevalent across the world. Forced Migration due to conflict were at their highest level since World War II, affecting over 51 mn people.  An additional 22 mn people have been forced to move due to natural disasters.

RBI keeps all key rates intact in fourth bi-monthly monetary policy

The RBI announced its fourth bi-monthly monetary policy on September 30, 2014. This follows the third bi-monthly monetary policy which was announced in August 2014.

CRR

The CRR of scheduled was kept unchanged at 4% of the bank’s NDTL (net demand and time liabilities). CRR refers to the proportion of its deposits that a bank has to hold in the form of cash. The RBI uses CRR as a tool to control liquidity in the market (and thereby inflation) and to reduce the risk to investors’ deposits.

SLR (Statutory Liquidity Ratio)

The SLR remained unchanged at 22%. SLR refers to the proportion of its total NDTL that the bank has to maintain in form of liquid assets. These liquid assets can either be cash or gold or unencumbered government securities. This directly affects the proportion of funds that the bank can lend.

LAF (Liquidity Adjustment Facility)

The policy repo rate under the LAF was kept unchanged at 8%. The reverse repo rate also remained unchanged at 7%. LAF is the tool by which banks borrow to meet their short term day to day monetary requirements. Difference between LAF and Bank rate is the requirement of collateral. Repo rate is the interest that banks pay to borrow from the RBI. Reverse repo is the rate at which RBI borrows from banks after lending securities as collateral. LAF was introduced in India in accordance with the recommendation of the Narasimham Commttee on Banking Reforms.

 ECR Facility (Export Credit Finance)

The liquidity provided under the ECR Facility was reduced from 32% to 15% of eligible export credit outstanding. This change will be in effect from 10 of October, 2014.

 MSF (Marginal Standing Facility) and Bank Rate

MSF and Bank rate also saw no change at 9% for both. MSF is the rate at which only scheduled commercial banks are allowed to borrow from RBI. This is over and above the LAF. MSF acts as a last resort for bankers. Bank rate is the rate at which RBI lends to banks without any collateral such as government securities.

Liquidity under overnight repos

The RBI will continue to provide liquidity under overnight repos up to  0.25 %  of the specific bank’s NDTL will be given at the LAF repo rate.

Liquidity under 7 day and 14 day term repos

Liquidity for 7 day and 14 day term repos  up to 0.75% of NDTL of the banking system  will be provided through auctions

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