Banking Current Affairs 2017

Welcome to Banking Current Affairs 2017 Section of GKToday. This section has current affairs on banking industry for IBPS Banking Recruitment, RBI Grade B, SBI PO, RRB and other banking examinations. An E-book compilation of 250 Banking Current Updates from June 2014 to December 2016 can be downloaded from This Link

RBI to regulate peer-to-peer lending firms as NBFCs: Government

The Union Government has issued gazette notification, notifying that Peer-to-peer lending (P2P) platforms will be treated as non-banking financial companies (NBFCs) and thus regulated by Reserve Bank of India (RBI).

The notification will help P2P lenders to gain official recognition and opens new avenues for fund-raising and business expansion. It also ends the regulatory vacuum in which P2P lending firms were operating.

Background

The RBI had floated a consultation paper in April 2016 on developing regulatory norms for P2P lending. It had proposed 6 key areas to frame regulatory framework encompassing permitted activity, regulations on capital, governance, business continuity plan and customer interface and regulatory reporting of P2P lending.

Peer-To-Peer Lending (P2P)

P2P lending is a form of crowd-funding used to raise loans which are paid back with interest. It enables individuals to borrow and lend money – without use of an official financial institution as an intermediary. It can use an online platform that matches lenders with borrowers in order to provide unsecured loans. P2P lending gives access to credit to borrowers who are unable to get it through traditional financial institution. It boosts returns for individuals who supply capital and reduces interest rates for those who use it.

Need

P2P lending is one of the crowd-funding business model that has gathered momentum globally and is taking root in India. It promotes alternative forms of finance, where formal finance is unable to reach. It has potential to soften lending rates as result of lower operational costs and enhanced competition with traditional lending channels. If properly regulated, P2P lending platforms can do this more effectively. Though it is in nascent stage but it is not significant in value yet, but it promises potential benefits to various stakeholders (borrowers, lenders, agencies etc).

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India’s Forex reserves cross $400 billion for first time

According to Reserve Bank of India (RBI), India’s foreign exchange (Forex) reserves have crossed $400 billion mark for the first time. The increase was due sharp rise in foreign currency assets.

India is now at sixth position in forex reserves ranking behind China (3,053 billion reserves), Japan ($1,188 billion), Switzerland ($743 billion), Saudi Arabia ($489 billion) and Taiwan ($441 billion).

Components

The Foreign exchange reserves act as buffer to be used in challenging times. The components of India’s FOREX Reserves include: Foreign currency assets (FCAs), Gold, Special Drawing Rights (SDRs) and RBI’s Reserve position with International Monetary Fund (IMF). FCAs constitute largest component of the Forex Reserves.

Key Facts

According to RBI, foreign currency assets were $376.20 billion, gold reserves at $20.69 billion, SDRs of $ 1.52 billion and $2.30 billion reserves in IMF.

The main reasons for rise in Forex Reserves are sharp increase in foreign currency assets, mainly huge inflows through foreign direct investments (FDI) in projects and portfolio investments. Foreign investors have pumped in Rs. around $ 6.7 billion in stocks and $20.55 billion in debt instruments in 2017.

It has resulted in strengthening of rupee 6% this year, making it best performer currency among major emerging economies. The rupee had slumped to 68.86 in November 2016 before recovering but now it is 64.09 to the dollar.

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