Economy & Banking Current Affairs

Business, Economy and Banking in Current Affairs 2019 with latest news and current affairs in Agriculture, Industry, Banking, Capital Markets, Import and Export and Government schemes in commercial sector.

RBI approves Mega Bank Consolidation Plan

The Reserve Bank of India is to implement a merger plan of 10 state-run banks into 4 larger banks from April 1, 2020. The Amalgamation of the banks had been notified by the GoI earlier of March 2020.

Amalgamation Plan

According to the plan, the United Bank of India and Oriental Bank of Commerce are to be merged with Punjab National Bank. The Syndicate Bank is to be amalgamated with Canara Bank. The Allahabad Bank is to be amalgamated with Indian Bank. Also, Andhra Bank and Corporation Bank are to be amalgamated with Union Bank of India.

RBI’s approval

The amalgamation plan has been initiated by the GoI. However, the plan is to be implemented by RBI. This is because the Reserve Bank plays the role of the apex in banking sector.

Section 7 of RBI act

The Section 7 of the RBI act empowers the GoI to make rulings on the functioning of RBI in matters of public interest. With this power, the Finance Minister has initiated the amalgamation plan and the plan has been approved by RBI.

RBI: Cuts repo rate to 4.4%; CRR to 3%; 3-month moratorium allowed on all loans

On March 27, 2020, the Reserve Bank of India announced series of measures to counter economic slowdown caused due to COVID-19. The Central bank advanced its Monetary Policy Committee meet due to COVID-19 pandemic. This was the 7th Bi-Monthly Monetary Policy Statement of the RBI for the financial year 2019-20.

The RBI measures introduced is to inject Rs 3.74 lakh core into the Indian Economy according to the RBI Governor.

Highlights

While India has locked down its economic activity, the main objective of RBI is to keep finance flowing.

The repo rate was cut by 75 basis points (bps) to 4.4%, reverse repo rate was cut by 90 bps to 4%. RBI rules banks and other institutions to provide a three-month moratorium on all loans.

Other Key Decisions

The Cash Reserve Ratio was cut by 100 bps to 3% of NTDL (Net Time and Demand Liabilities). The Cash Reserve Ratio is the minimum fraction of the customer deposit that a bank can hold.

The investments are to be classified as Held To Maturity. RBI is to introduce Net Stable Funding Ratio between April and October, 2020. It is the ratio between amount of  stable funding available to the amount of stable funding required.