Reserve Bank of India Current Affairs - 2020

RBI penalises UCO Bank for Non-Compliance

The Reserve Bank of India (RBI) has imposed Rs 2 crore penalty on UCO Bank for non-compliance of instructions issued by RBI on the collection of account payee instruments and those on frauds-classification and reporting.

RBI directions on Fraud Classification and Reporting

The Reserve Bank of India (RBI) advises banks from time to time about the major fraud-prone areas and the safeguards necessary for the prevention of frauds. RBI also forwards the details of frauds of an ingenious nature not reported earlier so that banks could introduce necessary safeguards by way of appropriate procedures and internal checks. It is continuous process banks report to the Reserve Bank full information about frauds and the follow-up action taken thereon.

Since the delays in reporting of frauds and the consequent delay in alerting other banks about the modus operandi and issue of caution advice against unscrupulous borrowers could result in similar frauds being perpetrated elsewhere, Banks are strictly required to adhere to the timeframe fixed in this circular for reporting fraud cases to RBI failing which banks would be liable for penal action as prescribed under Section 47(A) of the Banking Regulation Act, 1949.

To ensure uniformity in reporting, frauds have been classified as under, based on the provisions of the Indian Penal Code:

  • Misappropriation and criminal breach of trust.
  • Fraudulent encashment through forged instruments, manipulation of books of account or through fictitious accounts and conversion of property.
  • Unauthorised credit facilities extended for reward or for illegal gratification.
  • Negligence and cash shortages.
  • Cheating and forgery.
  • Irregularities in foreign exchange transactions.
  • Any other type of fraud not coming under the specific heads as above.

The UCO Bank which is under the prompt corrective action (PCA) framework of RBI has reported a net loss of Rs 633.88 crore for the first quarter of this financial year.

Revenue Mobilisation: Interim Budget 2019

The interim budget has announced a slew of welfare measures for farm and rural economy, middle class, realty and housing and the unorganised sector. The burden on the exchequer due to the farm income support scheme PM-KISAN itself comes around Rs 75000 crores. This necessitates the government to explore the avenues to find the corpus to pay for these schemes.

Revenue Mobilisation

The government is exploring the following avenues to fund welfare schemes:

  • Large dividend transfers by the Reserve Bank of India and PSUs to balance the Budget deficit after funding the welfare schemes.
  • The government is expecting Rs 82,911 crore through dividend from banks, financial institutions and the RBI in 2019-20.
  • In 2018-19 the government estimates receipts of Rs 74,140 crore from banks, financial institutions and the RBI, much higher than the budget estimate of Rs 54,817 crore.
  • The government is estimating Rs 53,200 crore as PSU dividend in 2019-20.
  • The government is expecting to raise anywhere between Rs 12,000 crore and Rs 20,000 crore through the CPSE buyback route.

Challenges in Revenue Mobilisation

The revenue from the Goods and Service Tax (GST) for the most part of the year has lagged behind the Rs 1 lakh crore monthly target. The government’s efforts at disinvestments are also not yielding desired results. The government’s planned stake sales in state-run firms are still short of the target.

As a result, the government is heavily dependent on the dividends from state-run firms, financial institutions and the RBI to fund its additional expenditure. The government has pegged dividends at Rs 1.36 lakh crore in 2019-20 which is a 14 per cent rise from an already elevated dividend collection of Rs 1.19 lakh crore in 2018-19.