RBI Current Affairs - 2019

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Panel to review regulations of cooperative banks

The Union Finance Minister on 10th October, 2019 announced that a high level committee will be formed to look into the regulations that govern multi state cooperative banks. RBI imposed banking restrictions on PMC bank in September. This has left 1000s of investors and account holders worried. The amended framework is to be submitted in the winter session of the parliament.

Cooperative Banking in India

  • The rural cooperative credit system in India ensures flow of credit to the agriculture sector. The short-term cooperative structures operate under a three-tire system namely
    • Primary Agricultural credit societies (PACS). They operate at village levels
    • Central Cooperative Banks (CCB) – they operate at district level.
    • State Cooperative Banks (SCB) – they operate at state level
  • The PACS are outside the purview of Banking Regulation act, 1949 and hence is not regulated by RBI
  • The inspection of CCB And SCB are conducted by NABARD – National Bank for Agricultural and Rural Development. This is being done according to Section 35 of the Banking Regulation act, 1949. RBI can conduct inspection once a year if in need.
  • The needs of customers in urban and semi – urban areas are catered by Primary Cooperative bank (PCB) and Urban Cooperative Bank (UCB) respectively.

Multi – State Cooperative Banks

  • RBI constitutes state level task forces for cooperative urban banks (TAFCUB). This is done to bring all the decision makers on one table under the central TASFCUB.
  • The viable and non – viable UCBs in the state are identified by the TAFCUB. It suggests a revival path as well.
  • The exit of non – viable banks are done
    • Through mergers
    • Amalgamation with stronger banks
    • Conversion of these banks into societies
    • Liquidation, which is the last option.
  • Section 22 and Section 23 of Banking Regulation act, 1949 regulates the banking functions of UCB, SCB and DCCB.

 

5% additional Dearness Allowance approved

Additional installment of Dearness Allowance and Dearness Relief was approved by the Union Cabinet on October 9, 2019. According to the approval, the central government employees are provided with a increase of 5%. Currently it is 12% of the basic pay. Similarly, the Dearness Relief to the pensioners was increased to 5% while its current rate is 12% of the pension.

The increase is being done to compensate the price rise. The increase is based on the recommendations 7th Pay commission

Analysis

The RBI recently has been cutting off the repo rate. It now stands at 5.15% in the last bi – monthly policy review. With this, the inflation is predicted to increase. The increase of the allowances by the cabinet is a precautionary step. The current inflation is around 3% which lies within the boundaries of target inflation set by RBI.

The DA and DR paid to the Central Government employees and pensioners are to adjust the cost of living and to protect their basic pay. Generally, it is revised twice a year.