PPT and PDF 1. India Resilient for Strong Economic Growth What Recently, RBI's Deputy Governor Michael Debabrata Patra gave speech at Nomura's 40th Central Bankers Seminar that was in Tokyo, Japan. + He stated that India's growth trajectory is poised for a significant upswing following the pandemic, with early indicators hinting at a return to the robust growth rates exceeding 7 per cent seen in the 2000s. Tell me more Some of the key points of the Speech: 1. As per the recent survey, there is a rise in private investment interest. a. Patra stated that private consumption continues to be a key driver but investments and exports are expected to fuel the growth. b. Although global headwinds had slow down the export growth, government expenditure on infrastructure is emerging as a main force in driving the growth momentum forward, 2. India’s economic performance has surpassed expectations, leading to upward revisions in growth forecasts by institutions like IME (International Monetary Fund): a. Predictions suggest that India will become one of the world's largest economies by both market exchange rates and purchasing power parity. This strength is also reflected in the expected growth of the Indian rupee. b. Projections indicate India will exceed Germany and Japan in market exchange rates in the next decade, becoming the second-largesteconomy by PPP terms. This strength is mirrored in the projected growth of the Indian rupee. 3. The deputy governor said that India is emerging from the pandemic with resilience, ready to pursue its development goals amidst challenges. a. To fully utilise its demographic dividend, efforts are needed to enhance workforce contribution to GDP growth, including upskilling through initiatives like ‘Skill India’. b. Encouraging entrepreneurship, digital transformation, and promoting women’s participation in the workforce are crucial. Moreover, investing in high-quality infrastructure is also essential, requiring increased spending and efficient regulations, he said. 4. Formalizing jobs, particularly in manufacturing, is key to India’s future economic expansion, he said. a. Efforts are underway to boost the share of manufacturing in GDP through adaptation to the fourth industrial revolution and expanding exports. b. As India strengthens its manufacturing base and internationalizes its currency, it faces the challenge of greening its economy for sustainable development, aligning with commitments made at COP26. 5. Meeting these challenges will require significant investment, technological advancement, and policy support, positioning India for continued growth and global leadership. Relatable Chapter: Regulatory bodies, Function of RBI Relevance of the fact: This news is regarding the speech pf the RBI's governor. Questions from speeches are not expected in the examination. Though these are important for you interview. You should prepare for your interview along with your examination. This will add value to your descriptive writing also. 2. RBI switch to multiple price auction for governments BondsWhat Recently, RBI stated that will conduct all auctions of government securities under the market borrowing programme of the Government of India using the multiple price auction method. + RBI have changed to this methodology after 3 years. Why There are many reason behind this change: + RBl expect that there would be robust demand of government bonds due to inclusion in JP Morgan's Emerging Market Bond Index and rate cut expectations. + Other reason is that multiple price auctions helps in better price discovery, encourages more trading after auctions, and makes bidding more thoughtful. Tell me more Background: Since July 2021, the RBI has been conducting auctions for bonds, under uniform pricing, except for ultra-long duration bonds maturing in 30 years and beyond. What is Auction? ‘An Auction is a process of accepting bids through which a right, commodity or security is sold to the highest bidder. Auctions are held to sell everything ranging from antiques to financial securities. There are 2 types of auction that is: Uniform Price Auction or Multiple Price Auction, + Uniform price auction: In a uniform price auction, all investors receive bonds at the same price(that is at cut off price), regardless of where they placed bids. Normally uniform price is deployed when the market is well- supplied and there is inadequate demand.+ Multiple price auction: In a multiple price auction, however, buyers are allotted bonds at specific price points on which they bid. Bids below the cut-off price are rejected. When the demand-supply equation seems to be in favour of demand, this method id used for auction and is beneficial also. The major difference between the two is that a uniform price auction doesn't have a winner's curse. Say if someone bids aggressively, they won't lose out, but in multiple price auction the bidder will lose if they have bid higher than the market demand. What is cut off price? Cut off price is the minimum price for acceptance of bids as determined in an auction. Thus, all bids received below the cut -off price is rejected. Related Chapter: Functions of RBI, Monetary Policy Tool Relevance of the fact: This is an important observation regarding RBI's new auction method. This shows how RBI changes its way of auctioning considering the market supply and demand. A direct question related to the static partis possible. 3. SFBs seeks RBI's Approval for universal bank What Recently, Chief executives of various Small Finance Banks (SFBs), met the RBI and urged for a glide path to become universal banks, as most of them are eligible for such a conversion having completed 5 years of operations. © Why Despite already offering a wide range of products, these banks want to shed the "small bank" label to improve their perception among stakeholders and attract more depositors.Per Tell me more What SFB demand? SFBs, after completing 5 years of operation, are seeking a transition into universal banks to expand their operations and services. 1. Importance: As per Trends and Progress report for 2022-23 shows that the consolidated balance sheet of SFBs grew at a pace faster than SCBs during 2022-23. a. As per RBI, In 2022-23, Small Finance Banks (SFBs) earned more interest compared to what they spent, boosting their net interest income. Their Gross NPA ratio, which had risen sharply in 2020-21 due to Covid-19, has been decreasing since then. As their asset quality improved, the amount set aside for provisions and contingencies also decreased during 2022- 23. 2. These entities requested that banks that have attained a certain scale may be allowed some relaxations in norms like maintaining 75% of advances in the priority sector, 3. Why?: This will help us in reducing the cost of funds which, in turn, will reduce the cost of lending to the borrowers. 4. SFBs are differentiated or niche banks with a minimum net worth of Rs 200 crore, lower than other SCBs. Considering their focus on financial inclusion: + SFBs are required to lend at least 75% of their adjusted net bank credit (ANBC) to priority sectors, compared with 40% in the case of other scheduled commercial banks (SCBs). What is universal bank? What are their benefits? Universal banking is a form of banking where the bank provides a whole lot of financial services such as investment banking, commercial banking, development banking, insurance products, mutual funds, factoring services, housing finance, etc. + The consumer can get benefit of all the financial services under one roof only. Por+ Thus, all those Commercial Banks that provide a wide variety of banking products and services across all geographies in India and abroad, to retail, corporate and government sector can be referred to as the “Universal Banks". For example- ICICI Bank, HDFC Bank. These are different from niche segments: + Niche banks (or differentiated banks) typically target a specific market and tailor the bank's operations to this target market's preference. The differentiation could be on account of capital requirement, the scope of activities or area of operations. As such, they offer a limited range of services /products and function under a different regulatory dispensation. + Urban Co-Operative Banks (UCBs), the Primary Agricultural Credit, Societies (PACS), the Regional Rural Banks (RRBs) and Local Area Banks (LABs) could be considered as differentiated banks as they operate in localized areas. Other types of niche banks in India are Payment Banks and Small Finance Banks (SFBs). Criteria of Universal bank: (|) Eligible Promoters: * Existing non-banking financial companies (NBFCs) owned by residents with a successful 10-year track record. + Individuals/professionals residing in the country with 10 years of banking and finance experience. * Private sector entities/groups owned and controlled by residents with a successful 10-year track record, provided their non-financial business doesn't exceed 40% of total assets/income if assets are 50 billion or more. (il) ‘Fit and Proper’ Criteria: + Promoters or promoting entities must have a sound financial history, integrity, and at least 10 years of successful track record. (Ill) Corporate Structure: + Non-Operative Financial Holding Company (NOFHC) isn't mandatory for individual promoters without other group entities. PPT and PDF+ NOFHG, if required, must be owned by promoters to at least 51% and may conduct specialized activities subject to RBI approval. (IV) Minimum Capital Requirement: + Initial minimum paid-up equity capital: @5 billion. + Minimum net worth: 5 billion always. + Promoter/NOFHC to hold minimum 40% of paid-up equity capital for 5 years, reducing to 15% within 12 years. (V) Foreign Shareholding: + Foreign investment subject to existing FDI policy, maintaining minimum promoter shareholding. (VI) Corporate Governance and Prudential Norms: + Compliance with Banking Regulations Act, 1949 and prudential norms. + No exposure to promoters, major shareholders (210%), their relatives, or entities they control. (VI) Business Plan: + Realistic and viable plan focusing on financial inclusion. (Vill) Other Conditions: + Stock exchange listing within 6 years. + Atleast 25% branches in rural areas. + Compliance with priority sector lending targets. + Majority independent directors on the board. Relatable chapter: Indian banking system Relevance of the fact: The news is not important but you must know what is the difference between the universal bank and the niche bank. What are the criteria of being an universal bank? What are the advantages of being an universal bank. All of these must be clear to you as an aspirant. A direct objective based question from this static part is expected. You must also prepare for the descriptive writingPer for this part. The content provided is enough for you to write the descriptive answer on this. Por