general awarness may 2010

8/7/2019 general awarness may 2010

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LATEST

BANKING & FINANCIAL AWARENESS

JOURNAL OF

A.K. GUPTASBANKERS TRAINING INSTITUTE (BTI)

VOLUME I MAY 2010 ISSUE -11

BANKERS TRAINING INSTITUTE75, BLOCK BG-I, PASCHIM VIHAR,NEW DELHI 110063

Ph: 011 65476949, 011 25274157Email: [email protected]

Website: www.bankerstraininginstitute.com

FOR SUBSCRIPTION: REFER PAGE 7

RBIS ANNUAL POLICY STATEMENT: 2

RBI NOTIFICATIONS: 5 TO 11

WAYS & MEANS ADVANCES: 5

ROAD MAP FOR FINANCIAL SECTOR: 6

BASE RATE GUIDELINES : 11

MANAGEMENT QUESTIONS : 12

FINANCIAL & GENERAL AWARENESS: 14

ECONOMICS: 17

GOVERNMENT SECURITIES: 19

RECALLED QUESTIONS: 20

HIGHLIGHTS


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Latest Banking & Financial Awareness: MAY 2010 2

ANNUAL POLICY STATEMENT : 2010-11

State of the Economy1. GDP growth: The final real GDP growth for 2009-10

may settle between 7.2 and 7.5 per cent.2. Industrial Production: The index of industrial

production (IIP) recorded a growth of 17.6% inDecember 2009, 16.7% in January 2010 and 15.1%

in February 2010. 14 out of 17 industry groupsrecorded accelerated growth during April 2009-February 2010.

3. Imports: After a continuous decline for elevenmonths, imports expanded by 2.6% in November2009, 32.4% in December 2009, 35.5% in January2010 and 66.4% in February 2010.

4. Exports: After contracting for twelve straight months,exports have turned around since October 2009reflecting revival of external demand.

5. Growth in demand side components of growth:private consumption (36%), govt. consumption(14%), fixed investments (26%), net exports (20%).

6. Inflation:(a) Headline inflation, as measured by year-on-yearvariation in Wholesale Price Index (WPI), 9.9% inMarch 2010.(b) Year-on-year WPI non-food manufacturedproducts (weight: 52.2%) inflation, which was (-)0.4% in Nov 2009, rose to 4.7% in March 2010.(c) WPI inflation is no longer driven by supply sidefactors alone. The contribution of non-food items tooverall WPI inflation, which was negative at (-)0.4% in November 2009 rose sharply to 53.3% byMarch 2010.(d) Consumer price index (CPI) based measures of

inflation were in the range of 14.9-16.9 per cent inJanuary/February 2010.

7. Credit Growth: Year on year Non-food credit growthwas recorded at 16.9 per cent by March 2010.

8. Fiscal Deficit for 2010-11: Budgeted at 5.5% of GDPin 2010-11 as compared with 6.7% in 2009-10.

9. Revenue deficit for 2010-11: Budgeted at 4% of GDPin 2010-11 as compared with 5.3% in 2009-10

10.Current account deficit: During April-December 2009it was US$ 30 billion as compared with US$ 28 billionfor the corresponding period of 2008.

11.Net capital inflows:at US$ 42 billion were alsosubstantially higher than US$ 7 billion in the

corresponding period last year.12.Forex Reserves: Foreign exchange reserves stood at

US$ 279 billion as on March 31, 2010.13.REER: The six-currency trade-based real effective

exchange rate (REER) (1993-94=100) appreciated by15.5 per cent during 2009-10 up to February asagainst 10.4 per cent depreciation in thecorresponding period of the previous year.

Outlook and Projections1. IMF has projected that global growth will recover

from (-) 0.8 per cent in 2009 to 3.9 per cent in 2010and further to 4.3 per cent in 2011. Three majorfactors that have contributed to the improved global

outlook are the massive monetary and fiscal support,improvement in confidence and a strong recovery inEmerging Market Economies (EMEs).

2. GDP growth for 2010-11: RBI projections for 2010-11is placed at 8.0 per cent with an upside bias Inflation

3. Inflation: The baseline projection for WPI inflation forMarch 2011 is placed at 5.5 per cent. This is basedon following factors. (i) Though there are some signsof seasonal moderation in food prices, overall foodinflation continues at an elevated level. (ii) Thefirming up of global commodity prices poses upside

risks to inflation. (iii) Corporates are increasinglyregaining their pricing power in many sectors. (iv)Household inflation expectations have remained at anelevated level.

4. M3 growth for 2010-11: is placed at 17.0 per cent.5. Aggregate deposits of SCBs: to grow by 18%.6. Non-food credit of SCBs: projected to grow by: 20%7. Exchange Rate policy: RBIs policy has been to retain

the flexibility to intervene in the market to manageexcessive volatility and disruptions to themacroeconomic situation.

8. The overall size of the government borrowingprogramme is still very large and can exert pressure

on interest rates. Fiscal consolidation has to shiftfrom one-off gains to structural improvements onboth tax and expenditure sides, and focusincreasingly on the quality of fiscal consolidation.

Policy StancePolicy stance for 2010-11 has been guided by thefollowing three major considerations:1. Recovery is consolidating. Growth in 2010-11 is

projected to be higher and more broad-based than in2009-10. In the emerging scenario, lower policy ratescan complicate the inflation outlook and impairinflationary expectations.

2. Inflationary pressures have accentuated in the recentperiod. Inflation, which was earlier driven entirely bysupply side factors, is now getting increasinglygeneralised. There is already some evidence that thepricing power of corporates has returned. Inflationexpectations also remain at an elevated level. Thereis, therefore, a need to ensure that demand sideinflation does not become entrenched.

3. Despite lower budgeted government borrowings in2010-11 than in the year before, fresh issuance ofsecurities will be 36.3 per cent higher than in theprevious year. RBI has to do a fine balancing act andensure that while absorbing excess liquidity, thegovernment borrowing programme is not hampered.

Therefore, the stance of monetary policy of RBI is to:1. Anchor inflation expectations2. Actively manage liquidity to ensure that the growth in

demand for credit by both the private and publicsectors is satisfied in a non-disruptive way.

3. Maintain an interest rate regime consistent withprice, output and financial stability.

Monetary Measures1. Bank Rate: retained at 6.0 per cent.2. Repo Rate: increased by 25 basis points from 5.0 per

cent to 5.25 per cent with immediate effect.3. Reverse Repo Rate: increased by 25 basis points

from 3.5 per cent to 3.75 per cent with immediateeffect.

4. Cash Reserve Ratio: increased by 25 basis pointsfrom 5.75 per cent to 6.0 per cent of net demand


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and time liabilities (NDTL) effective the fortnightbeginning April 24, 2010. As a result of the increasein the CRR, about Rs. 12,500 crore of excess liquiditywill be absorbed from the system.

Expected Outcomes1. Inflation will be contained and inflationary

expectations will be anchored.2. The recovery process will be sustained.

3. Government borrowing requirements and the privatecredit demand will be met.

4. Policy instruments will be further aligned in amanner consistent with the evolving state of theeconomy.

Development and Regulatory Policies1. The focus of the Reserve Banks regulation will

continue to be (i) to improve the efficiency of thebanking sector while maintaining financial stability.(ii) vigorously pursue the financial inclusion agendato make financial sector development more inclusive.

2. Financial Stability: The first Financial Stability Report(FSR) was released on March 25, 2010. The FinancialStability Reports will be published half-yearly.

3. Interest Rate Policy: Guidelines on the Base Ratesystem were issued on April 9, 2010. It is expectedthat the Base Rate system will facilitate better pricingof loans, enhance transparency in lending rates andimprove the assessment of transmission of monetarypolicy.

Financial Markets1. Interest Rate Futures: The Interest Rate Futures

contract on 10-year notional coupon bearingGovernment of India security was introduced onAugust 31, 2009. It is proposed to introduce Interest

Rate Futures on 5-year and 2-year notional couponbearing securities and 91-day Treasury Bills.

2. Introduction of Exchange-Traded Currency OptionContracts: Currently, residents in India are permittedto trade in futures contracts in four currency pairs ontwo recognised stock exchanges. In order to expandthe menu of tools for hedging currency risk, therecognised stock exchanges to be permitted tointroduce plain vanilla currency options on spot USDollar/Rupee exchange rate for residents.

Corporate Bond Market1. Non-SLR Bonds of companies engaged in

infrastructure: Valuation: At present, banksinvestments in non-SLR bonds are classified eitherunder held for trading (HFT) or available for sale(AFS) category and subjected to mark to marketrequirements. Considering that the long-term bondsissued by companies engaged in infrastructureactivities are generally held by banks for a longperiod and not traded and also with a view toincentivising banks to invest in such bonds, banks tobe allowed to classify their investments in non-SLRbonds issued by companies engaged in infrastructureactivities and having a minimum residual maturity ofseven years under the held to maturity (HTM)

category.2. Investment in Unlisted Non-SLR Securities: At

present, banks investments in unlisted non-SLRsecurities should not exceed 10 per cent of their total

investments in non-SLR securities as on March 31 ofthe previous year. Since there is a time lag betweenissuance and listing of security, banks may not beable to participate in primary issues of non-SLRsecurities, which are proposed to be listed but notlisted at the time of subscription. In view of theabove, investment in non-SLR debt securities (bothprimary and secondary market) by banks where the

security is proposed to be listed on the Exchange(s)may be considered as investment in listed security atthe time of making investment. If such security,however, is not listed within the period specified, thesame will be reckoned for the 10 per cent limitspecified for unlisted non-SLR securities.

Financial Market Infrastructure1. Reporting Platform for CD and CP: to be introduced

for all secondary market transactions in CDs and CPs.

Credit Delivery and Financial Inclusion1. Financing MSE: Banks to be asked not to insist on

collateral security in case of loans up to Rs.10 lakh

extended to all units of the micro and smallenterprises (MSEs) sector.

2. High Level Task Force on MSMEs headed by ShriT.K.A. Nair has recommended that: (i) all scheduledcommercial banks should achieve a 20 per cent year-on-year growth in credit to micro and smallenterprises (ii) any shortfall in the achievement ofsub-target of 60 per cent for lending to microenterprises of the total advances granted to themicro and small enterprises, would also be taken intoaccount for the purpose of allocating amounts forcontribution to rural infrastructure development fund(RIDF) or any other Fund. (iii) all scheduled

commercial banks should achieve a 15 per centannual growth in the number of micro enterpriseaccounts. Banks should take steps to increase theflow of credit to the MSE sector, particularly to microenterprises.

3. Business Correspondents: Relaxations: With a view toproviding more flexibility to banks, banks to bepermitted to engage any individual, including thoseoperating Common Service Centres (CSCs), as BC,subject to banks comfort level and their carrying outsuitable due diligence.

4. Priority Sector Lending Certificates: Working Group:Working Group on Introduction of Priority Sector

Lending Certificates (PSLCs) (Chairman: ShriV.K.Sharma) constituted by RBI to examine the prosand cons of the recommendation made by theCommittee on Financial Sector Reforms (Chairman:Dr. Raghuram G. Rajan) relating to PSLCs and makesuitable recommendations on its introduction andtheir trading in the open market.

Customer Service1. Committee to be set up to look into banking services

rendered to retail and small customers, includingpensioners.

2. Mechanism, for implementing the Reserve Banksguidelines on customer service, to be strengthenedthrough on-site and off-site inspections.

3. Banks to devote exclusive time in a Board meetingonce every six months on customer service.


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Regulatory and Supervisory Measures1. Convergence of Indian Accounting Standards with

International Financial Reporting Standards: Allscheduled commercial banks will convert theiropening balance sheet as at April 1, 2013 incompliance with the IFRS converged IASs.

2. Infrastructure Financing: In terms of extantinstructions, rights, licenses and authorisations of

borrowers, charged to banks as collateral in respectof project loans (including infrastructure projects) arenot eligible for being reckoned as tangible securityfor the purpose of classifying an advance as securedloan. As toll collection rights and annuities in the caseof road/highway projects confer certain materialbenefits to lenders, RBI has proposed to treatannuities under build-operate-transfer (BOT) modelin respect of road/highway projects and toll collectionrights, where there are provisions to compensate theproject sponsor if a certain level of traffic is notachieved, as tangible securities subject to thecondition that banks right to receive annuities and

toll collection rights is legally enforceable andirrevocable.

3. Provisioning of sub standard infrastructure loans:Banks are required to make provision of 20% onunsecured sub standard accounts. In view of certainsafeguards such as escrow accounts available inrespect of infrastructure lending, infrastructure loanaccounts classified as sub-standard will attract aprovisioning of 15 per cent instead of the currentprescription of 20 per cent.

4. Presence of Foreign Banks: to prepare a discussionpaper on the mode of presence of foreign banksthrough branch or Wholly owned subsidiary.

5. Licensing of New Banks: RBI has proposed toprepare a discussion paper marshalling theinternational practices, the Indian experience as alsothe extant ownership and governance (O&G)guidelines for granting license to new banks.

6. Conversion of Term Deposits, Daily Deposits orRecurring Deposits for Reinvestment in TermDeposits: As per extant guidelines, banks shouldallow conversion of term deposits, daily deposits orrecurring deposits to enable depositors toimmediately reinvest the amount lying in theaforesaid deposits with the same bank in anotherterm deposit. Banks are required to pay interest in

respect of such term deposits without reducing theinterest by way of penalty, provided that the depositremains with the bank after reinvestment for a periodlonger than the remaining period of the originalcontract. On a review of the extant regulatory normsand in order to facilitate better asset-liabilitymanagement (ALM), banks to be permitted to toformulate their own policies towards conversion ofdeposits.

7. Compensation Practices: RBI to issue comprehensiveguidelines based on Financial Stability Board (FSB)principles on sound compensation practices by end-June 2010. The guidelines will cover effective

governance of compensation, alignment ofcompensation with prudent risk-taking anddisclosures for whole time directors (WTDs)/chief

executive officers (CEOs) as well as risk takers ofbanks.

8. Implementation of Pillar 2 of Basel II: RBI toimplement the Supervisory Review and EvaluationProcess (SREP) framework for banks from theinspection cycle 2010-11 as an integral part of theAnnual Financial Inspection (AFI) of banks. One ofthe major objectives of SREP is to evaluate whether

the capital maintained by the bank is adequatekeeping in view its risk profile and to determine thesupervisory capital ratio (SCR).

9. Cross-border Supervision: The Working Groupheaded by Shri S. Karuppasamy examined the legalposition on cross-border supervision arrangements.With a view to ensuring effective cross-bordersupervision and supervisory co-operation, RBI hasproposed to enter into bilateral MoU with overseassupervisory authorities within the existing legalprovisions, consistent with the Basel Committee onBanking Supervision (BCBS) principles.

10.Information Technology and Related Issues: RBI to

set up a Working Group on information security,electronic banking, technology risk management, andtackling cyber frauds.

Institutional Developments1. Core Investment Companies (CICs): CICs having an

asset size of Rs.100 crore and above to be treated assystemically important core investment companies.Such companies will be required to register with theReserve Bank. The CICs fulfilling minimum capitaland leverage criteria will be given exemption frommaintenance of net owned fund and exposure normsapplicable to NBFCs-ND-SI.

2. Securitisation Companies/Reconstruction Companies:

(i) SCs/RCs can acquire the assets either in their ownbooks or directly in the books of the trusts set up bythem.(ii) The period for realisation of assets acquiredby SCs/RCs can be extended from five years to eightyears by their Boards of Directors. (iii) Asset/SecurityReceipts (SRs), which remain unresolved/notredeemed as at the end of five years or eight years,as the case may be, will henceforth be treated asloss assets. (iv) It will be mandatory for SCs/RCs toinvest an amount not less than 5 per cent of eachclass of SRs issued under a particular scheme andcontinue to hold the investments till the time all theSRs issued under that class are redeemed

completely. (v) With a view to bringing transparencyand market discipline in the functioning of SCs/RCs,additional disclosures relating to assets realisedduring the year, value of financial assets unresolvedas at the end of the year, value of SRs pendingredemption, among others, are being prescribed.

3. High Value Clearing: As a step towards encouragingmigration of paper-based high value payments tomore secure electronic modes, High value clearingdiscontinued w.e.f. March 31, 2010.

4. NEFT: As at end-March 2010, over 66,500 branchesof 95 banks had participated in NEFT and the volumeof transactions processed increased with a record

volume of 8.3 million transactions in March 2010.5. Mobile Banking in India: Currently, this channel is

used to settle on an average 1.9 lakh transactions ofaverage value 12 crore in a month.


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RBI NOTIFICATIONS : APRIL 2010

REPO AND REVERSE REPO R ATESRBI has increased the repo rate under the LiquidityAdjustment Facility (LAF) by 25 basis points from 5.00 percent to 5.25 per cent and the reverse repo rate by 25 basispoints from 3.50% to 3.75% with effect from 20.4.10.

INCREASE IN CRRRBI has increased the Cash Reserve Ratio (CRR) forScheduled Commercial Banks by 25 basis points from5.75% to 6% of their net demand and time liabilities witheffect from the fortnight beginning April 24, 2010.

CONVERSION OF TERM DEPOSITSPresent guidelines: Banks should allow conversion of termdeposits, daily deposits or recurring deposits to enabledepositors to immediately reinvest the amount lying in theaforesaid deposits with the same bank in another termdeposit. Banks are required to pay interest in respect ofsuch term deposits without reducing the interest by way ofpenalty, provided that the deposit remains with the bankafter reinvestment for a period longer than the remainingperiod of the original contract.

Revised guidelines: On a review of the extant regulatorynorms, and in order to facilitate better asset-liabilitymanagement (ALM), RBI has permitted banks to formulatetheir own policies towards conversion of deposits withimmediate effect.

EDUCATIONAL LOANS: COLLATERAL FREE LOANSPresent instructions:No security may be insisted upon foreducational loans upto Rs.4 lakh.Revised instructions: Banks must not, mandatorily, obtaincollateral security for educational loans upto Rs. 4 lakh.

EXPORT CREDIT FOR AGRICULTURERBI has clarified that loans granted by banks for agricultureand allied activities, are eligible for classification underpriority sector irrespective of whether the borrowing entityis engaged in export or otherwise. This will also includeworking capital limits granted to units engaged inagricultural and allied activities and to food and agro-basedprocessing units by way of export credit. The export creditgranted for agricultural and allied activities may be reportedseparately under heading "Export credit to agriculturesector".

USE OF BUSINESS CORRESPONDENTS (BCS)Current guidelines: Only certain select categories ofindividuals are permitted to be engaged as BCs. Bankshave been permitted to engage the following as BCs: (i)retired bank employees, (ii) ex-servicemen (iii) retired

government employees, (iv) Individual kirana/medical/fairprice shop owners (v) Individual Public Call Office(PCO)operators (vi) Agents of Small Savings Schemes ofGovernment of India/Insurance Companies (vii) Individualswho own Petrol Pumps (viii) Retired teachers and (ix)Authorised functionaries of well run Self Help Groups(SHGs)linked to banks.Revised guidelines: On a review and with a view toproviding more flexibility to banks, RBI has permitted banksto engage any individual, including those operatingCommon Service Centres (CSCs) as BC, subject to bankscomfort level and their carrying out suitable due diligenceas also instituting additional safeguards as may be

considered appropriate to minimise the agency risks.EXPORT CREDIT: INTEREST SUBVENTION

Period of Subvention: The Government of India has decidedto extend Interest Subvention of 2 percentage points w.e.f.

April 1, 2010 to March 31, 2011 on pre and post shipmentrupee credit.Sectors eligible for export: Employment oriented exportsectors as under: (i) Handicrafts (ii) Carpets (iii) Handlooms(iv) Small & Medium Enterprises (SME).Effective Interest Rate: As per the existing guidelines, bankscharge interest rate not exceeding BPLR minus 2.5percentage points on rupee pre-shipment credit up to 270days and post-shipment credit up to 180 days. Banks willnow charge interest rate not exceeding BPLR minus 4.5percentage points on pre-shipment credit up to 270 daysand post-shipment credit up to 180 days on the outstandingamount for the period April 1, 2010 to March 31, 2011 tothe above mentioned sectors. However, the totalsubvention will be subject to the condition that the interestrate, after subvention will not fall below 7 per cent which isthe rate applicable to the agriculture sector under prioritysector lending. The banks may ensure that the benefit ofthe 2 per cent interest subvention is passed on completelyto the eligible exporters.Procedure for claiming subvention:i) The amount of subvention would be reimbursed on the

basis of claim submitted as at the end of respectivequarters in the format enclosed.ii) The amount of subvention will be calculated on theamount of export credit from the date of disbursement (a)up to the date of repayment; or (b) up to the date beyondwhich the outstanding export credit becomes overdue; or(c) for pre-shipment credit up to 270 days and post-shipment credit up to 180 days, whichever is earlier.iii) The claims should be accompanied by an ExternalAuditor's Certificate certifying that the claims for subventionfor the respective quarter is true and correct.

INTEREST RATE CEILING ON R UPEE EXPORT CREDITPresent instructions: RBI has prescribed the ceilings on

interest rates on pre-shipment rupee export credit up to270 days and post-shipment rupee export credit up to 180days at BPLR minus 2.5 per cent, valid up to April 30, 2010.Revised instructions: RBI has extended the validity of theabove dispensation up to June 30, 2010. Further, as BPLRsystem is being replaced with a Base Rate System from July1, 2010, RBI has decided to deregulate the interest rates onpre-shipment rupee export credit up to 270 days and post-shipment rupee export credit up to 180 days. Banks shall befree to decide the lending rate on export credit at or abovethe Base Rate with effect from July 1, 2010

WAYS AND MEANS ADVANCES (WMA)Limit for Central Govt: The limit for Ways and MeansAdvances (WMA) to Central Government for the year 2010-11 will be as under: (i) Rs.30,000 crore for the first half ofthe year (April to September) and Rs.10,000 crore for thesecond half of the year (October to March). When 75 percent of the limit of WMA is utilised by the Government, theReserve Bank may trigger fresh floatation of market loans.Interest rate on WMA/overdraft will be as under:a) Ways and Means Advances: Repo Rateb) Overdraft: Two percent above the Repo RateMinimum balance required to be maintained by theGovernment of India with the Reserve Bank of India will notbe less than Rs.100 crore on Fridays, on the date of closureof Government of India's financial year and on June 30, i.e.,closure of the annual accounts of the Reserve Bank of India

and not less than Rs.10 crore on other days.Maximum period: As per the provisions of the Agreementdated March 26, 1997 between the Government of Indiaand the Reserve Bank of India, overdrafts beyond tenconsecutive working days will not be allowed.


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Limit for State Governments: The limit for Ways and MeansAdvances to State Governments for the Fiscal Year 2010-11will be same as was for 2009-10. The aggregate NormalWMA limit for the State Governments inclusive of theGovernment of Union Territory of Puducherry is placed atRs.9,925 crore for the year 2010-11.

ROAD MAP FOR THE FINANCI AL SECTORBackground: A Core Group constituted by the Ministry of

Corporate Affairs for convergence of Indian AccountingStandards with International Financial Reporting Standards(IFRS) from the year 2011 has deliberated and approvedthe roadmap in respect of insurance companies, bankingcompanies and non-banking finance companies.Salient features of the roadmap are as under:i) Insurance companies: All insurance companies willconvert their opening balance sheet as at 1st April, 2012 incompliance with the converged Indian AccountingStandards.

ii) Banking companies:(a) All scheduled commercial banks and those urban co-operative banks (UCBs) which have a net worth in excessof Rs. 300 crores will convert their opening balance sheet asat 1st April, 2013 in compliance with the first set ofAccounting Standards (i.e. the converged Indian AccountingStandards).(b) Urban co-operative banks which have a net worth inexcess of Rs. 200 crores but not exceeding Rs. 300 croreswill convert their opening balance sheets as at 1st April,2014 in compliance with the first set of AccountingStandards(i.e. the converged Indian Accounting Standards).(c) Urban co-operative banks which have a net worth notexceeding Rs. 200 crores and Regional Rural banks (RRBs)will not be required to apply the first set of AccountingStandards i.e. the converged Indian Accounting Standards(though they may voluntarily opt to do so) and need to

follow only the existing notified Indian AccountingStandards which are not converged with IFRSs.

iii) Non-Banking Financial companies(a) The following categories of non-banking financialcompanies (NBFCs) will convert their opening balance sheetas at 1st April, 2013 if the financial year commences on 1stApril (or if the financial year commences on any other date,then on the date immediately following 1st April, 2013) incompliance with the first set of Accounting Standards (i.ethe converged Indian Accounting Standards). These NBFCsare:-a. Companies which are part of NSE Nifty 50b. Companies which are part of BSE - Sensex 30c. Companies, whether listed or not, which have a networth in excess of Rs.1,000 crores.(b) All listed NBFCs and those unlisted NBFCs which do notfall in the above categories and which have a net worth inexcess of Rs. 500 crores will convert their opening balancesheet as at 1st April 2014 if the financial year commenceson 1st April (or if the financial year commences on anyother date, then on that date following 1st April 2014) incompliance with the first set of Accounting standards (i.econverged Indian Accounting Standards).(c) Unlisted NBFCs which have a net worth of Rs. 500crores or less will not be required to follow the first set ofaccounting standards (i.e the converged Indian accountingstandards), though they may voluntarily opt to do so, but

need to follow only the notified Indian accounting standardswhich are not converged with the IFRSs.

INVESTMENT IN UNLISTED NON-SLR SECURITIESExtant guidelines: (i) Banks investment in unlisted non-SLRsecurities should not exceed 10 per cent of its total

investment in non-SLR securities as on March 31, of theprevious year. (ii) Banks have been allowed to invest inunrated bonds of companies engaged in infrastructureactivities within the ceiling of 10 per cent of unlisted non-SLR securities.Revised guidelines: Since there is a time lag betweenissuance and listing of securities, which are proposed to belisted but not listed at the time of subscription, banks maynot be able to participate in primary issues of non-SLRsecurities. In view of the above, RBI has decided that: (i)investment in non-SLR debt securities (both primary andsecondary market) by banks where the security is proposedto be listed on the Exchange(s) may be considered asinvestment in listed security at the time of makinginvestment. (ii) However, if such security is not listed withinthe period specified, the same will be reckoned for the 10per cent limit specified for unlisted non-SLR securities. Incase such investments included under unlisted non-SLRsecurities lead to a breach of the 10 per cent limit, the bankwould not be allowed to make further investment in non-SLR securities (both primary and secondary market) as alsoin unrated bonds issued by companies engaged in

infrastructure activities till such time banks investment inunlisted non-SLR securities comes within the limit of 10%.

PRUDENTIAL NORMS ONADVANCES TO IN FRASTRUCTURE SECTOR

Extant instructions: (i) Rights, licenses and authorisations ofborrowers, charged to banks as collateral in respect ofproject loans (including infrastructure projects) are noteligible for being reckoned as tangible security for thepurpose of classifying an advance as secured loan. (ii) Theprovisioning requirement for unsecured sub-standardexposures, at present is 20% of the outstanding balance.Revised instructions:(i) As toll collection rights and annuities in the case of

road/highway projects confer certain material benefits tolenders, banks may treat annuities under build-operate-transfer (BOT) model in respect of road/highway projectsand toll collection rights, where there are provisions tocompensate the project sponsor if a certain level of traffic isnot achieved, as tangible securities subject to the conditionthat banks right to receive annuities and toll collectionrights is legally enforceable and irrevocable.

(ii) In view of certain safeguards such as escrow accountsavailable in respect of infrastructure lending, infrastructureloan accounts which are classified as sub-standard willattract a provisioning of 15 per cent instead of the currentprescription of 20 per cent. To avail of this benefit of lowerprovisioning, the banks should have in place an appropriate

mechanism to escrow the cash flows and also have a clearand legal first claim on these cash flows.

INVESTMENTS BY BANKS IN BONDS ISSUED BY COsENGAGED IN IN FRASTRUCTURE ACTIVITIES

Present instructions: Banks investments in non-SLR bondsare classified either under held for trading (HFT) oravailable for sale (AFS) category and subjected to mark tomarket requirements.Revised instructions: Considering that the long-term bondsissued by companies engaged in infrastructure activities aregenerally held by banks for a long period and not tradedand also with a view to incentivising banks to invest in suchbonds, RBI has decided that any investment by scheduled

commercial banks in the long-term bonds issued bycompanies engaged in executing infrastructure projects andhaving a minimum residual maturity of seven years may beclassified under HTM category. The modified composition ofHTM category is given below:


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Held to Maturity:i) The securities acquired by the banks with the intention tohold them up to maturity will be classified under 'Held toMaturity (HTM)'.ii) Banks are allowed to include investments included underHTM category up to 25 per cent of their total investments.The following investments are required to be classifiedunder HTM but are not accounted for the purpose of ceilingof 25 per cent specified for this category: (a) Re-capitalisation bonds received from the Government of Indiatowards their recapitalisation requirement and held in theirinvestment portfolio. This will not include re-capitalisationbonds of other banks acquired for investment purposes.(b) Investment in subsidiaries and joint ventures (A JointVenture would be one which the bank, along with itssubsidiaries, holds more than 25 percent of the equity).(c) Investment in the long-term bonds (with a minimumresidual maturity of seven years) issued by companiesengaged in infrastructure activities.iii) Banks are, however, allowed since September 2, 2004 toexceed the limit of 25 percent of total investment underHTM category provided: (a) the excess comprises only of

SLR securities, and (b) the total SLR securities held in theHTM is not more than 25 percent of their DTL as on the lastFriday of the second preceding fortnight.iv) The non-SLR securities, held as part of HTM as onSeptember 2, 2004 may remain in that category. No freshnon-SLR securities, are permitted to be included in HTM,except the following: (a) Fresh re-capitalisation bonds,received from the Government of India, towards their re-capitalisation requirement and held in their investmentportfolio. This will not include re-capitalisation bonds ofother banks acquired for investment purposes. (b) Freshinvestment in the equity of subsidiaries and joint ventures.(c) RIDF / SIDBI / RHDF deposits. (d) Investment in long-term bonds (with a minimum residual maturity of seven

years) issued by companies engaged in infrastructureactivities.(v) To sum up, banks may hold the following securitiesunder HTM:(a) SLR Securities up to 25 percent of their DTL as on thelast Friday of the second preceding fortnight.(b) Non-SLR securities included under HTM as onSeptember 2, 2004.(c) Fresh re-capitalisation bonds received from theGovernment of India towards their re-capitalisationrequirement and held in Investment portfolio.(d) Fresh investment in the equity of subsidiaries and jointventures.(e) RIDF / SIDBI / RHDF deposits.(f) Investment in long-term bonds (with a minimum residualmaturity of seven years) issued by companies engaged ininfrastructure activities.

CREDIT/DEBIT CARD TRANSACTIONS

Present guidelines: In February 2009, RBI issued a directivemaking it mandatory for banks to put in place additionalauthentication/validation based on information not visibleon the cards for all on-line card not present (CNP)transactions except IVR transactions. The system was to beeffective from 01.08.09.Revised guidelines: RBI has now decided to extend thisrequirement of additional authentication/validation to allCNP transactions including IVR transactions. Accordingly,

banks should implement these guidelines to all CNPtransactions with effect from January 01, 2011.

RBI has already advised for adoption a system of "OnlineAlerts" to the cardholder for all 'card not present'transactions of the value of Rs. 5,000/ and above.

ISSUE OF SHARES BY PRIVATE SECTOR BANK SPresent instructions: All banks in private sector are requiredto obtain approval of RBI for issue of shares through InitialPublic Offers (IPOs) and preferential issues.Revised instructions: SEBI had introduced an additional

capital raising route in May 2006 viz. Qualified InstitutionalPlacements (QIPs) that would enable listed companies toraise funds from the domestic market. Since in terms ofSEBI Guidelines, the allotments under QIP are on privateplacement basis, the QIP issues have been treated aspreferential issue of shares which requires RBI's priorapproval. Accordingly, the guidelines in respect of issue andpricing of shares by private sector banks have been revisedas given below:(A) Initial Public Offers (lPOs): All banks should obtain RBIapproval for IPOs. After listing on the stock exchanges,banks are free to price their subsequent issues. Issue priceshould be based on merchant banker's recommendation.(B) Rights issues: RBI approval is not required for rights

issues by both listed and unlisted banks.(C) Bonus issues: Private sector banks, both listed andunlisted, need not seek RBI's approval for bonus issues. Theissues would, however, be subject to SEBI's requirementson issue of bonus shares, viz. bonus issues (a) should bemade from free reserves built out of genuine profits orshare premium, (b) should not dilute the value or rights ofpartly or fully convertible debentures, (c) should not be inlieu of dividend and (d) should not be made unless all partlypaid-up shares are fully paid-up. Further, bonus issues maybe issued without linkage to rights issues.(D) Preferential issue: All preferential issues would requireprior approval of RBI. Pricing of preferential issues by listed

banks may be as per SEBI formula, while for unlisted banksthe fair value may be determined by a chartered accountantor a merchant banker.(E) Qualified Institutional Placement (QIP): Private SectorBanks need to approach RBI for prior 'in principle' approvalin case of Qualified Institutional Placements. Banks need toapproach RBI along with details of the issue once thebanks Board approves the proposal of raising capitalthrough this route. Further, allotment to the investors wouldbe subject to compliance with SEBI guidelines on QIPs andRBI guidelines on acknowledgement of allotment / transferof shares. Once the allotment process is complete, thebanks should furnish complete details of the issue to RBI forseeking post facto approval. This would be irrespective of

whether any acquisition results in shareholding of 5% ormore of the paid up capital of the bank.

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(F) In case of pricing of issues where RBI approval is notrequired, pricing of issues should be as per SEBI guidelines;in cases where prior approval of RBI is required, pricingshould take into account both SEBI and RBI guidelines.

READY FORWARD CONTRACTS INCORPORATE DEBT SECURITIES

Present guidelines: RBI had issued directions relating toRepo in Corporate Debt Securities on Jan 8, 2010 which

indicated that the following entities are eligible to enter intoready forward contracts in corporate debt securities:(i) Any scheduled commercial bank excluding RRBs andLABs; (ii) Any Primary Dealer authorized by the ReserveBank of India; (iii) Any non-banking financial companyregistered with RBI (iv) All-India Financial Institutions,namely, Exim Bank, NABARD, NHB and SIDBI; (v) Otherregulated entities, subject to the approval of the regulatorsconcerned, viz., Any mutual fund registered with theSecurities and Exchange Board of India; Any housingfinance company registered with the National HousingBank; and Any insurance company registered with theInsurance Regulatory and Development Authority

Revised guidelines: In addition to above entities, IndiaInfrastructure Finance Company Limited (IIFCL) has beenpermitted to undertake ready forward contracts in corporatedebt securities.

MAIN TENANCE OF COLLATERAL BY FIIS FORTRANSACTIONS IN THE CASH SEGMENT

Present guidelines: FIIs are permitted to offer cash andforeign sovereign securities with AAA rating as collateral tothe recognized Stock Exchanges in India for theirtransactions in the derivative segment. As per the extantSecurities and Exchange Board of India (SEBI) norms, theFIIs are required to post collaterals for their transactions inthe cash segment of the market.Revised guidelines: RBI, in consultation with the

Government of India and the SEBI, has decided to permitthe FIIs to offer domestic Government Securities (subject tothe overall limits specified by the SEBI from time to time;the current limit being USD 5 billion), and foreign sovereignsecurities with AAA rating, as collateral to the recognized

KNOW YOUR FACULTYSHRI A. K. GUPTA

1. Shri A.K. Gupta is a post graduate in commerce, LL.B,CAIIB, PG Dip in Personnel Management and IR, PG Dip inMarketing and Management, PG Diploma in Training andDevelopment, Cert in Industrial Finance;

2. Ex- Chief Manager, Punjab National Bank with anexperience of more than 28 years as a banker;

3. Experience of more than 12 years in training in the bankstraining college (Principal for 5 years); helped thousandsof bankers in their banking career;

4. Has been examiner with Indian Institute of Banking &Finance (IIBF, Mumbai) for about 5 years;

5. Remained associated with number of managementinstitutions at MBA level including Masters of Finance,University of Delhi, International Management Institute etcteaching Management of Banks, Financial Services,Financial Management, Merchant Banking.

6. Conducted programmes in the area of Asset LiabilityManagement and Credit risk management for topmanagement executives in the rank of Chief GeneralManager/General Manager/DGM/ AGMs of SIDBI, CentralBank of India, Dena Bank, Punjab & Sind Bank

7. Was a student of University of Manchester for 3 monthsfor an advanced programme in Development Banking.

8. Has been visiting faculty to training colleges of severalbanks like PNB, BOI, Canara, UCO etc.

Stock Exchanges in India, in addition to cash, for theirtransactions in the cash segment of the market. However,cross-margining of Government Securities (placed asmargins by the FIIs for their transactions in the cashsegment of the market) shall not be allowed between thecash and the derivative segments of the market.

INVESTMENT PORTFOLIO OF PRIM ARY DEALERSPresent guidelines: Standalone Primary Dealers (PDs) were

allowed in March 10, to categorize Government securitiesup to 100% of their paid up capital in the Held to Maturity(HTM) category.Revised guidelines: RBI has decided to permit the PDs tohold Government securities in the HTM category to theextent of their audited net owned funds (NOF) as at theend March of the preceding financial year.

Agricultural Debt Waiver and Debt Relief SchemeThe period for debt relief in respect of Other farmers wasextended by 6 months up to 30.6.10. In view of this sixmonth extension for the debt relief portion of the ADWDRS,2008, the last date of receipt of grievances by GrievanceRedressal Officers of the lending institutions may also be

accordingly extended upto 31.7.2010.The "Final" claims pertaining to "Debt Relief" arising tillDecember 31, 2009 (including the cases settled through theGrievances Redressal Mechanism operating till January 31,2010) may be submitted to RBI by June 30, 2010. As nointerest shall be paid by Government of India to the lendinginstitutions for the six month extension period of theScheme while reimbursing 25% amount to the lendinginstitutions, banks may forward a separate claim to RBI, inrespect of "Debt Relief" cases that may be settled duringthe period January 1, 2010 to June 30, 2010 (including thecases settled through the Grievances Redressal Mechanismoperating from February 1, 2010 to July 31, 2010).

CAPITAL ADEQUACY -INTERNAL MODELS APPROACHFOR MARKET RISK

Background: RBI, vide circular dated July 7, 2009, hadadvised that banks desirous of moving to advancedapproaches under Basel II can apply for migrating toInternal Models Approach for market risk from April 1, 2010onwards, provided they are adequately prepared.

Methods for calculation of capital for Market Risk:Basel II Framework offers a choice between two broadmethodologies in measuring market risks for the purpose ofcapital adequacy.(i) Standardised Measurement Method (SMM) which is beingused by banks in India since March 31, 2005.

(ii) Internal Models Approach (IMA) which allows banks touse risk measures derived from their own internal marketrisk management models. The permissible models underIMA are the ones which calculate a value-at-risk (VaR) -based measure of exposure to market risk.

VaR-based models could be used to calculate measures ofboth general market risk and specific risk. As compared tothe SMM, IMA is considered to be more risk sensitive andaligns the capital charge for market risk more closely to theactual losses likely to be faced by banks due to movementsin the market risk factors.

RBI has now issued guidelines governing use of internalmodels for measuring the capital charge for market risk. To

begin with banks in India may model general market riskand continue to use SMM for specific risk. However, banksshould endeavour to develop capabilities to model specificrisk including Incremental Risk.


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Banks interested in migrating to IMA for computing capitalcharge for market risk should assess their preparednesswith reference to RBI guidelines and may first give to RBI anotice of intention for the same. RBI will first make apreliminary assessment of the banks risk managementsystem and its modelling process. If the result of thispreliminary assessment is satisfactory, then RBI will allowthe bank to make a formal application for migrating to IMA.RBI will then perform a detailed analysis of its model with aview to approving the same.

Approaches for other risks: Banks would have the discretionto adopt IMA for market risk, while continuing with simplerapproaches for computation of capital charge for credit andoperational risks.

CAPITAL ADEQUACY AND MARKET DISCIPLIN E PARALLEL RUN AN D PRUDENTIAL FLOOR

Present guidelines: RBI, vide circular dated February 8,2010, had advised that the banks should have parallel runof the revised framework along with the then currentframework (Basel I). Banks were also advised that theminimum capital maintained by them shall be subject to

the prudential floors indicated in the circular.Revised guidelines: On a review of the implementation sofar, RBI has decided to continue with the prudential flooruntil further advice. Accordingly, the foreign banks in Indiaand Indian banks having operational presence outside Indiawould continue to have the parallel run beyond thespecified date (i.e., March 31, 2010) and ensure that theirBasel II minimum capital requirement continues to behigher than 80 % of the minimum capital requirementcomputed as per Basel I framework for credit and marketrisk. All other commercial banks (except LABs and RRBs)would also continue to ensure compliance with theprescribed prudential floor limits.

REMI TTANCE OF GOVERNMENT REVENUES

A committee had been constituted by CGA to review theexpeditious movement of all categories of Governmentrevenues to its exchequer and other related issues. Afterconsideration of the recommendations of the Committee, ithas been decided that a period of T+12 working days(excluding put through date, where T is the day whenmoney is available to the branch), is allowed with effectfrom 01.01.2010 to Public Sector Banks for manualremittance of Government receipts to CAS, RBI, Nagpur inrespect of branches located in Jammu & Kashmir, Leh,Uttarakhand, Himachal Pradesh, Sikkim, North EasternRegion (Arunachal Pradesh, Assam, Manipur, Meghalaya,Mizoram, Nagaland and Tripura), Jharkhand and

Chhattisgarh. The above norms for remote, difficult andhilly areas will not be applicable to remittance of fundsunder the deposit schemes viz. PPF / SCSS etc. of Ministryof Finance.

RELAXATION TO TRADE AND INDUSTRY IN THE STATEOF JAMMU & KASHMIR

RBI has decided that the concessions/credit relaxations toborrowers/customers in the State of Jammu & Kashmir, aslaid down in RBI circular dated April 21, 2004, will continueto be operative up to March 31, 2011.

OVERSEAS INVESTMENTS LIBERALISATIONPresent instructions: Indian entities are permitted to investin overseas unincorporated entities in the oil sector, up to400 per cent of the net worth of the Indian company, under

the automatic route.Revised guidelines: As a measure of further liberalisation,Indian companies have been allowed to participate in aconsortium with other international operators to construct

and maintain submarine cable systems on co-ownershipbasis under the automatic route.

Accordingly, AD Category - I banks may allow remittancesby Indian companies for overseas direct investment, afterensuring that the Indian company has obtained necessarylicence from the Department of Telecommunication,Ministry of Telecommunication & Information Technology,Government of India to establish, install, operate and

maintain International Long Distance Services and also byobtaining a certified copy of the Board Resolution approvingsuch investment.

PRUDENTIAL ACCOUNTING NORMSPROJECTS UNDER IMPLEMEN TATION

Present instructions: For the purpose of retaining thestandard asset classification, a grace period of two years forInfrastructure Projects, and six months for Industrialprojects, is available for commencement of commercialoperations after the original date of completion of theproject, provided the account is serviced regularly.Revised instructions: There are occasions when thecompletion of projects is delayed for legal and otherextraneous reasons like delays in Government approvalsetc. All these factors, which are beyond the control of thepromoters, may lead to delay in project implementation andinvolve restructuring / reschedulement of loans by banks.Accordingly, RBI has decided to modify the assetclassification norms for project loans before commencementof commercial operations as per the guidelines given below.These guidelines will, however, not be applicable torestructuring of advances classified as Commercial RealEstate exposures; Advances classified as Capital Marketexposure; and Consumer and Personal Advances.

Revised Guidelines on Asset Classification of Projects underImplementation1. Project Loan would mean any term loan which has

been extended for the purpose of setting up of an economicventure. Banks must fix a Date of Commencement ofCommercial Operations (DCCO) for all project loans at thetime of sanction of the loan/financial closure (in the case ofmultiple banking or consortium arrangements). For thispurpose, all project loans have been divided into thefollowing two categories: (i) Project Loans for infrastructuresector (ii) Project Loans for non-infrastructure sector2. Project Loans for Infrastructure Sector(a) A loan for an infrastructure project will be classified asNPA during any time before commencement of commercialoperations (DCCO) as per record of recovery (90 daysoverdue), unless it is restructured and becomes eligible for

classification as standard asset.(b) A loan for an infrastructure project will be classified asNPA if it fails to commence commercial operations withintwo years from the original DCCO, even if it is regular asper record of recovery, unless it is restructured andbecomes eligible for classification as standard asset.(c) If a project loan classified as standard asset isrestructured any time during the period up to two yearsfrom the original date of commencement of commercialoperations (DCCO), it can be retained as a standard asset ifthe fresh DCCO is fixed within the following limits, andfurther provided the account continues to be serviced asper the restructured terms.(i) Infrastructure Projects involving court cases: Up to

another 2 years (beyond the existing extended period of 2years i.e total extension of 4 years), in case the reason forextension of date of commencement of production isarbitration proceedings or a court case.


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(ii) Infrastructure Projects delayed for other reasonsbeyond the control of promoters: Up to another 1 year(beyond the existing extended period of 2 years i.e. totalextension of 3 years), in other than court cases.

The aforesaid provisions are applicable if the application forrestructuring is received before the expiry of period of twoyears from the original DCCO and when the account is stillstandard as per record of recovery. The other conditions

applicable would be: (a) In cases where there ismoratorium for payment of interest, banks should not bookincome on accrual basis beyond two years from the originalDCCO, considering the high risk involved in suchrestructured accounts. (b) Banks should maintain provisionson such accounts as long as these are classified as standardassets as under: Until two years from the original DCCO:0.40% ; During the third and the fourth years after theoriginal DCCO: 1.00% . For the purpose of theseguidelines, mere extension of DCCO will also be treated asrestructuring even if all other terms and conditions remainthe same.3. Project Loans for Non-Infrastructure Sector(a) A loan for a non-infrastructure project will be classifiedas NPA during any time before commencement ofcommercial operations as per record of recovery (90 daysoverdue), unless it is restructured and becomes eligible forclassification as standard asset.(b) A loan for a non-infrastructure project will be classifiedas NPA if it fails to commence commercial operations withinsix months from the original DCCO, even if is regular as perrecord of recovery, unless it is restructured and becomeseligible for classification as standard asset.(c) In case of non-infrastructure projects, if the delay incommencement of commercial operations extends beyondthe period of six months from the date of completion asdetermined at the time of financial closure, banks can

prescribe a fresh DCCO, and retain the standardclassification by undertaking restructuring of accountsprovided the fresh DCCO does not extend beyond a periodof twelve months from the original DCCO. This also implythat the restructuring application is received before theexpiry of six months from the original DCCO, and when theaccount is still standard as per the record of recovery. Theother conditions applicable would be: (a) In cases wherethere is moratorium for payment of interest, banks shouldnot book income on accrual basis beyond six months fromthe original DCCO, considering the high risk involved in suchrestructured accounts. (b) Banks should maintain provisionson such accounts as long as these are classified as standardassets as under: Until the first six months from the original

DCCO: 0.40%; During the next six months: 1.00%. For thispurpose, mere extension of DCCO will also be treated asrestructuring even if all other terms and conditions remainthe same.

4. Other IssuesAny change in the repayment schedule of a project loancaused due to an increase in the project outlay on accountof increase in scope and size of the project, would not betreated as restructuring if:(a) The increase in scope and size of the project takesplace before commencement of commercial operations ofthe existing project. (b)The rise in cost excluding any cost-overrun in respect of the original project is 25% or more of

the original outlay. (c) The bank re-assesses the viability ofthe project before approving the enhancement of scope andfixing a fresh DCCP.(d) On re-rating, (if already rated) the new rating is notbelow the previous rating by more than one notch.

CORRESPONDENCE

COURSE

PROMOTION EXAMThe course material is updated, very simple, lucid &

concise. Prepared by highly qualified faculty with more than12 years teaching experience in banks training college andmore than 3 years experience of teaching at topmanagement institutions. Number of Bankers have beenbenefited from this material. If you want to study at yourrespective place instead of attending classes, it will beextremely useful.

Course kit includes Training kits covering select questions on

Banking Law & Practice, Advances, RatioAnalysis, Forex, Priority Sector, IT, NPA,

Mock Tests

Recalled Questions including latest exams. Latest Financial Awareness based on RBI

Notifications & other Material & GK

The best part of the course is theRecalled Questions collected from ourparticipants which are updated

Comments by some participants of Corresp Course Recalled Questions are very useful. Most of the

questions were from Recalled Questions. Thank youvery much for my promotion. (Shakuntala, SyndicateBank, Bangalore)

Sir most of the questions asked in our exam were fromquestions supplied by you near the exam (P.K. Sharma,Syndicate Bank Kurukshetra)

Most of the questions were from important questionson your website. ( An officer of PNB)

The fees for the complete set of study material is Rs 1500which may be sent by DD for Rs 1500 (Rs One ThousandFive Hundred only) favouring AKG INSTITUTE FORDISTANCE LEARNING payable at NEW DELHI or bycrediting to account no. 150100 2100149730 with PNB,Punjabi Bagh, New Delhi (NEFT code PUNB0150100). Forenrolment, pl send following particulars in Block Letters.

1. Name 2. Bank 3. Branch (complete address)4. Address for correspondence 5. Mobile No. if any6. Phone No. (Resi & Office with STD code)7. DD No dated drawn on 8. Present Grade(If amount credited to a/c, pl advise date of credit andtransaction ID No on Phone No. given below)

FLAT No. 75, BLOCK BG-1, PASCHIM VIHAR,NEW DELHI 110063;

TELE: 011 65476949, 011 25274157,email: [email protected]

CORRESPONDENCE COURSE ALSO AVAILABLE

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BASE RATE GUIDELINESRBI has decided that banks should switch over to the system ofBase Rate with effect from July1, 2010.Weaknesses of BPLR:(i) The BPLR system, introduced in 2003, fell short of its originalobjective of bringing transparency to lending rates. This was mainlybecause under the BPLR system, banks could lend below BPLR.(ii) It was also difficult to assess the transmission of policy rates ofthe Reserve Bank to lending rates of banks.Objective of Base Rate:(i) Enhancing transparency in lending rates of banks(ii) Enabling better assessment of transmission of monetary policy.RBI guidelines for implementation:1. The Base Rate system will replace the BPLR system with effect

from July 1, 2010.2. Base Rate shall include all those elements of the lending rates

that are common across all categories of borrowers. (Some ofthe criteria that could go into the determination of the BaseRate are: (i) cost of deposits; (ii) adjustment for the negativecarry in respect of CRR and SLR; (iii) unallocatable overheadcost for banks such as aggregate employee compensationrelating to administrative functions in corporate office,directors and auditors fees, legal and premises expenses,depreciation, cost of printing and stationery, expenses incurredon communication and advertising, IT spending, and cost

incurred towards deposit insurance;and (iv) profit margin). Anillustration for computing the Base Rate is set out below.

3. Banks may choose any benchmark to arrive at the Base Ratefor a specific tenor that may be disclosed transparently.

4. Banks may determine their actual lending rates on loans andadvances with reference to the Base Rate and by includingsuch other customer specific charges as consideredappropriate. (For example product-specific operating costs,credit risk premium and tenor premium etc).

5. In order to give banks some time to stabilize the system ofBase Rate calculation, banks are permitted to change thebenchmark and methodology any time during the initial sixmonth period i.e. end-December 2010.

6. The actual lending rates charged may be transparent andconsistent and be made available for supervisory

review/scrutiny, as and when required.7. Applicability of Base Rate: All categories of loans shouldhenceforth be priced only with reference to the Base Rate.However, the following categories of loans could be pricedwithout reference to the Base Rate: (a) DRI advances (b) loansto banks own employees (c) loans to banks depositors againsttheir own deposits.

8. The Base Rate could also serve as the reference benchmarkrate for floating rate loan products, apart from external marketbenchmark rates. The floating interest rate based on externalbenchmarks should, however, be equal to or above the BaseRate at the time of sanction or renewal.

9. Changes in the Base Rate shall be applicable in respect of allexisting loans linked to the Base Rate, in a transparent andnon-discriminatory manner.

10.Since the Base Rate will be the minimum rate for all loans,

banks are not permitted to resort to any lending below theBase Rate.

11.The current stipulation of BPLR as the ceiling rate for loans upto Rs. 2 lakh stands withdrawn. It is expected that the abovederegulation of lending rate will increase the credit flow tosmall borrowers at reasonable rate and direct bank finance willprovide effective competition to other forms of high cost credit.

12.Reserve Bank of India will separately announce the stipulationfor export credit.

13.The Base Rate system would be applicable for all new loansand for those old loans that come up for renewal. Existingloans based on the BPLR system may run till their maturity. Incase existing borrowers want to switch to the new system,before expiry of the existing contracts, an option may be givento them, on mutually agreed terms. Banks, however, should

not charge any fee for such switch-over.14.Banks may announce their Base Rates after seeking approval

from their respective ALCOs/ Boards.15.Review of Base Rate: Banks are required to review the Base

Rate at least once in a quarter with the approval of the Board

or the Asset Liability Management Committees (ALCOs) as perthe banks practice.

16.Display of Base Rate: Since transparency in the pricing oflending products has been a key objective, banks are requiredto exhibit the information on their Base Rate at all branchesand also on their websites. Changes in the Base Rate shouldalso be conveyed to the general public from time to timethrough appropriate channels.

17. Information to RBI: Banks are required to provide informationon the actual minimum and maximum lending rates to theReserve Bank on a quarterly basis.

18.Effective date: The above guidelines on the Base Rate systemwill become effective on July 1, 2010.

19.Methodology for calculation of Base Rate: An illustration forcomputing the Base Rate is given below. Banks are free to useany other methodology, as considered appropriate, provided itis consistent and is made available for supervisoryreview/scrutiny, as and when required.

Illustrative M ethod for the Computation of the Base Rate

Base Rate= a + b + c + d

Where

a = Cost of Deposits or funds = Dcost

(benchmark)

b = Negative Carry on CRR and SLR =

[[{Dcost (SLR* Tr)}/{1-(CRR+SLR)}]*100] - Dcost

c = Unallocatable Overhead Cost = Uc / Dply *100

d = Average Return on Net Worth = (NP/NW) X (NW/ Dply) X100

Where:

Dcost = Cost of Deposits or funds

D = Total Deposits =

Time Deposits + Current Deposits + Saving Deposits

Dply = Deployable Deposits = Total deposits less share of deposits

locked as CRR and SLR balances = D X [ 1- (CRR + SLR) ]

CRR : Cash Reserve Ratio

SLR : Statutory Liquidity Ratio

Tr : 364 T-Bill Rate

Uc : Unallocatable Overhead CostNP : Net Profit

NW : Net Worth = Capital + Free Reserves

Explanation:1. Negative Carry on CRR and SLR: Negative carry on CRR and

SLR balances arises because the return on CRR balances isnil,while the return on SLR balances (proxied using the 364-dayTreasury Bill rate) is lower than the cost of deposits. Negativecarry on CRR and SLR is arrived at in three steps. In the firststep, return on SLR investment was calculated using 364-dayTreasury Bills. In the second step, effective cost was calculatedby taking the ratio (expressed as a percentage) of cost ofdeposits (adjusted for return on SLR investment) anddeployable deposits (total deposits less the deposits locked as

CRR and SLR balances). In the third step, negative carry coston SLR and CRR was arrived at by taking the differencebetween the effective cost and the cost of deposits.

2. Unallocatable Overhead Cost: is calculated by taking the ratio(expressed as a percentage) of unallocated overhead cost anddeployable deposits.

3. Average Return on Net Worth: Average Return on Net Worth iscomputed as the product of net profit to net worth ratio andnet worth to deployable deposits ratio expressed as apercentage.

VARIOUS RATES AT GLANCE

Bank Rate 06.00% 29.04.2003

CRR 6.00% 24.04.2010SLR 25.00% 07.11.2009

Repo Rate 5.25% 20.04.2010

ReverseRepo Rate 3.75% 20.04.2010


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MANAGEMENT QUESTIONS1 . Which of the fol lowing is not correct about

Human relat ions theory?a) I t v iews organizat ion as a psychological and

socia l system.b) I t takes the soc ia l v iew of manc) I t emphasizes the phys iological and

mechanical aspects of organizat ion

d) Assumes that people are homogenouse) Both (c) & (d)2 . The behavioural approach is cons idered to

be:a) A human approachb) Based on Hawthorne f indingsc) Largely concerned with dec is ion-makingd) Both (a) & (b) e) None3 . Which one of the fol lowing is not correct

with regard to the systems theory oforganizat ion?

a) A system is character ized by parts and sub-parts .

b) A change in one part af fects changes in

other partsc) A system is character ized by dynamic

disequi l ibr iumd) A system is open and interact ive4 . Which one of the fol lowing pr inc ip les of

Henr i Fayol is in contrast to F.W. Taylor sconcept of funct ional author i ty?

a) Disc ip l ine b) Hierarchyc) Departmental izat iond) Unity of Command5 . Which one of the fol lowing is not

propounded by F.W. Taylor?a) Di f ferent ia l p iece rate systemb) Time and motion study

c) Unit of commandd) Shop management6 . According to Henr i Fayol , decentral izat ion is

greater when:a) Pol icy dec is ions are made at lower levels .b) Important dec is io ns are made at lower

levels .c) More funct ions are affected by dec is ions at

lower levels .d) Both (b) & (c) e) Al l these7 . Which of the fol lowing are not propounded

by the Theory Y of Douglas Mc-Gregor?A person in an organizat ion:

a) Exerc ises sel f -d i rect ion in the service ofobject ives that he seeks to real izeb) Has commitment to object ives as a funct ion

of rewardsc) Inherent ly l ikes workd) Has a capaci ty for imaginat ion, ingenuity

and creat iv i ty e) None8 . Which one of the fol lowing leadership sty les

was ident i f ied by the Michigan Univers i tyLeadership Studies as the most ef fect iveleadership sty le?

a) Democrat ic sty le leadershipb) Employee-centred leadershipc) Part ic ipat ive group leadership

d) Team leadership9 . Who among the fol lowing has observed that

instead of hierarchy of needs, mot ivat ionshould be understood in terms of ser ies of needs?

a) Chester Barnard b) David McClel landc) Abraham Maslow d) Warren Bennis1 0 . According to Fredr ick Herzberg, the

determinants of job dissat is fact ion inc lude1. Working condit ions 2. Supervis ion3. Salary 4. Respons ib i l i ty 5. Recognit ionWhich of the above are correct?a) 4 and 5 on ly b) 1, 2 and 3 on lyc) 1, 2, 3, 4 and 5 d) 1, 2,3 and 5 on ly

1 1 . Which one of the fol lowing shows thecorrect sequence of the four bas ic steps inthe pos i t ion c lass i f icat ion job?

a) Job analys is Grouping of pos i t ions Standardizat ion Pos i t ion al locat ion

b) Standardizat io n Job analys is Grouping ofpos i t ions Pos i t ion al locat ion

c) Grouping of pos i t ion Job anal ys is Pos i t ion al locat ion Standardizat ion

d) Job analys is Grouping of po s i t ions Pos i t ion al locat ion Standardizat ion

1 2 . Given below are di f ferent stages in problemsolving:

1. Col lect ion of re levant informat ion2. Ident i f icat ion of the problem3. Analys is of the informat ion4. Development of a l ternat ives5. Evaluat ion of choices

Select the correct sequences of the abovefrom the codes given below a) 1, 2,3, 4 and 5 b) 2, 1, 3, 4 and 5c) 4, 5, 2, 3 and 1 d) 4, 1, 5, 3 and 2

1 3 . Formal Communicat ion usual ly f lows in:a) s ix d i rect ions b) four d i rect ionsc) three di rect ions d) nine di rect ions

1 4 . Which one of the fol lowing is not correctamong the assumptions made by a Theory

Y leader?a) Expenditure of energy is undes irableb) Sel f-d i rect ion and sel f -control is des i rablec) Sel f-actual izat i on is a mot ivat ing forced) Working condit ions conducive for acceptance

of respons ib i l i t ies are des i rable1 5 . The four bases of organizat ion as ident i f ie d

by Luther Gul l ick are :a) P lanning, Organis ing, Coordinat ing,

Contro l l ingb) Object ive, People, P lan, Act ionc) P lead, Persuade, Order, Punishd) Purpose, Process, Persons, P lace1 6 . Span of Control depends upon which of the

fol lowing?(1)central ized system of author i ty(2) type of work to be supervised(3)competence of the supervisor(4)techniques of supervis ion

a) 1 and 2 b) 1, 2 and 3c) 2, 3 and 4 d) A l l the four1 7 . A formal organizat ion:a) is a structure of author i tyb) is a d iv is ion of funct ionsc) cons ists of indiv idualsd) ref lects soc ia l and psychological

re lat ionships

e) Both (a) & (b)1 8 . Decentral izat ion :a) improves administrat ive eff ic iencyb) reduces stress o f respons ib i l i t ies at the

headquar ter


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c) provides for in volvement of ins iders inorganizat ional funct ioning

d) is respons ib le for cost-escalat ione) Both (a) & (b)1 9 . Which of the fol lowing statements about

Delegat ion of author i ty are not correct?a) I t should be made to an indiv idualb) I t should be proper ly p lannedc) I t should be backed by adequate resourcesd) I t can be condit ional e) None2 0 . Which one of the fol lowing is not an

intr ins ic factor of job sat is fact ion as per theHygiene Theory of Mot ivat ion?a) Achievement b) Advancementc) Opportuni t ies for growthd) Job secur i ty

2 1 . Fredr ick Herzbgergs Theory of Mot ivat ionhas l is ted some elements which are relatedto job content. Their number is:a) 5 b) 6 c ) 8 d) 10

2 2 . A communicat ion that cannot beunderstood can have no author i ty. The

above statement is attr ibuted to:a) Ordway Tead b) C.I . Bernardc) Mi l let d) Peter Drucker

2 3 . The aspects of organizat ion alcommunicat ion does not inc lude:

a) Internal communicat ionb) external communicat ionc) inter-personal communicat iond) intra-personal communicat ion e) None2 4 . Which o ne of the fo l lowing a s qual i t ies of

leadership, a ment ioned by Barnard iscorrect?

a) Vi ta l i ty and Enduranceb) Decis iveness

c) Persuas iveness and Respons ib i l i tyd) Al l of these2 5 . Which one of the fol lowing stat ements abou t

Decis ion-making is not correct?a) Every dec is ion is based upon two premisesb) A factual premise cannot be disprovedc) A value premise can be testedd) Ends and means have their importance2 6 . Theory Y is connected with:a) Democrat ic leadership sty leb) Autocrat ic leadership sty lec) Laissez-fa i re leadership sty led) None2 7 . Control fu nct ion of management impl ies a) To br ing harmony in var ious act iv i t iesb) To keep the workforce sat is f iedc) To take correct ive course of act iond) To dictate the subordinates2 8 . Coordinat ion funct ion of management aims

at a) Provid ing suff ic ient personnelb) Br inging harmony in var ious act iv i t iesc) Taking up correct ive course of act iond) Al l these2 9 . Author i ty f lows dow nwards fro m top to the

bottom whereas accountabi l i ty f lowsupwards from bottom to top. I t is found in

a) Scalar chainb) Funct ional organizat ionc) Committee structured) Mult ivar iate Approach3 0 . Mas lows n eeds hierarchy theory re lates to-

a) Mot ivat ion b) Leadershipc) Communicat ion d) Direct ing

3 1 . MBO is a techn ique of a) P lanning only b) Control l ing onlyc) Nei ther p lanning nor control l ingd) Both planning and control l ing3 2 . Henry Fayol is known for a) Sc ient i f ic Management b) Rat ional isat ionc) Industr ies Psychologyd) Pr inc ip les of Management3 3 . Uni ty of comman d impl ies having not more

than one a) Subord inate b) Fr iendc) Boss d) Unit

3 4 . x and y theory of Mot ivat ion has beenpropounded by a) McGregor b) Maslowc) Ouchi d) Herzberg

3 5 . Coordinat ion has the fol lowing features a) Cont inuousb) Vert ical organizat ionc) Hor izontal re lat ionship d) Al l these

3 6 Which of the fol lowing is not a barr ier incommunicat ion?a) Noise b) Affect ionc) Fear and distrust d) Percept ion

3 7 . Delegat ion of author i ty s igni f ies thedelegat ion of:a) Author i ty b) Respons ib i l i tyc) Both of these d) None

3 8 . Management by except ion impl ies focus ingattent ion on a) Al l var iat ions b) Normal var iat ionsc) Abnormal var iat ionsd) Randomly selected var iat ions

3 9 . Decentral isat ion

a) Increases the importance of supervis ionb) Decreases the importance of supervisorsc) Increases the importance of subordinatesd) Decreases the importance of subordinates4 0 . Appl icat ion of Theory X impl ies pract ic ing

of a) Free leadershipb) Democrat ic leadershipc) Autocrat ic leadership d) None4 1 . An assoc ia t ion of banks is a n example of a) Diagonal combinat ionb) Vert ical combinat ionc) Hor izontal combinat iond) Lateral Combinat ion4 2 . The te chnique o f Carrot and St ick is used

in bus iness organizat ion for a) Reducing absenteeism b) Mot ivat ionc) Effect ive leadershipd) Rewarding workers

1 E 11 A 21 A 31 B 41 C2 D 12 B 22 C 32 D 42 B3 C 13 C 23 D 33 C4 D 14 A 24 D 34 A5 C 15 D 25 C 35 A6 D 16 C 26 A 36 B7 E 17 E 27 C 37 A8 B 18 E 28 B 38 C9 B 19 A 29 A 39 C10 B 20 D 30 A 40 C


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F I N A N C I A L & G E N E R A L A W A R E N E S S 1. Barclays lays off 250 employees in India: as it has

decided to refocus its operations from mass retailbanking to mass affluent banking.The bank currentlyhas over 5,000 employees in India.

2. RBI says Yes to Nokia mobile money transfer: RBIhas permitted YES Bank to provide mobile moneyservices in association with Nokia.

3. Food inflation inches down on base effect (29.4):The annual food price inflation, based on the wholesaleprice index (WPI), rose 16.61 per cent during the weekended April 17, slower than an annual rise of 17.65 percent in the previous week. The monthly WPI had risenan annual 9.90 per cent in March, its fastest pace in 17months, driven by high food and fuel prices.

4. SEBI seeks to move all ULIP cases to SupremeCourt: though IRDA wanted to file a joint applicationunder Section 90 of the Civil Procedure Code.

5. NSE defers gold ETF futures on regulatorywrangle: NSE has deferred its decision to introducefutures and options (F&O) trading in Gold ETF after thecommodity market regulator Forward Markets

Commission (FMC) raised an objection over regulatorypurview.

6. Govt bans import of Chinese telecom equipment:including Huawei and ZTE. The Government had earlierbanned import of Chinese handsets without IMEInumber. The biggest gainers from the move could beEuropean and American vendors that have been losingmarket share to aggressive Chinese equipment-makers.

7. Life insurers told to disclose agents' comm ission:IRDA has asked life insurance companies to spell out thecommission paid to agents and the various charges tobe collected from policyholders. The circular will takeeffect for sales that take place from July 1.

8. New bank wage agreement will give staff Rs

4,816 cr : Following this, banks' total wage bill will goup by 17.5 per cent. Besides hike in salary, employees(existing and retired) who had opted for Provident Fund,have been given the option to get pension benefit. Thepension option was given subject to the condition thatnon-pension optees will bear the burden of pension costto the extent of 2.8 times of their basic pay as ofNovember 2007.

9. India open to using Tobin-type tax to curb capitalinflows: Choice of instrument will be determined bycontext, says RBI Governor.

10.Lok Sabha approves demands for grants,appropriation Bills: The Lok Sabha on 27th April

approved the demands for grants of various CentralMinistries and departments after applying the guillotine.11.Now , Portugal threatens to plunge EU into a new

crisis: After Greece's debt problems over the past fewmonths plunging the European Union into crisis,alongside the currency, now it is Portugal that poses anew threat to the 16-member euro zone. Though bothnations do have budget deficits well above the EU'starget of 3 per cent of GDP, Portugal's had 9.4 per centin 2009 compared to 13.6 per cent recorded by Greecein 2009.

12.Refiners lose Rs 70 ,000 cr on fuel subsidies since2004-05: Since 2004-05, IndianOil, HindustanPetroleum Corporation and Bharat Petroleum have

cumulatively lost over Rs 70,000 crore on sale of petrol,diesel, kerosene and cooking gas. This is because,barring 2008-09, their losses have never been squaredup in full.

13.Rangarajan to head panel on public expenditure:to suggest measures for efficient management of publicexpenditure. The committee has been set up by thePlanning Commission.

14.Tax fil ing made easy with Saral-II: The FinanceMinistry has come out with a format of income-taxreturn (ITR-I) for salaried taxpayers. An assessee withincome from house property and/or having exemptedcapital gains can also file returns with Saral-II.

15.Govt working to reduce transaction costs forexporters: Mr Jyotiraditya Scindia.

16.Chirayu Amin made interim chief of IPL: The Boardof Control for Cricket in India (BCCI) has appointed MrChirayu Amin as the interim Chairman of theIndian Premier League.He takes over from Mr LalitModi.

17.Govt issues 1.44 crore health insurance cards forBPL families: The Government has provided smartcards to 1.44 crore Below Poverty Line (BPL) familiesunder the Rashtriya Swasthya Bima Yojana (RSBY). TheGovernment has enacted the Unorganised Workers'Social Security Act in May 2009. The Act provides for

registration of the unorganised workers to help informulating social security schemes for particularoccupations.

18.Punjab & Sind Bank plans IPO to raise Rs 400-500 cr: PSB is the smallest public sector bank.

19.High minimum wages in Delhi push smallindustries out: Delhi Government has increasedminimum wages by up to 49 per cent effective fromFebruary this year and are the highest in the country.

20.SEBI tightens norms to check misuse of power ofattorney' : The power of attorney executed in favour ofstockbrokers will not permit them to transfer securitiesof clients for off market trades. It will also not permitbrokers to transfer funds from the bank accounts of the

client for trades executed by another stock broker.21.Cane remunerative price for 2010-11 hiked

7.15% to Rs 139.12/quintal: The Centre has fixedthe fair and remunerative price' (FRP) of sugarcane forthe ensuing 2010-11 sugar season (October-September)at Rs 139.12 a quintal. This marks a 7.15 per centincrease over the Rs 129.84 a quintal level for thecurrent season.

22.SBI goes green, installs windmill for captive use:The windmill was inaugurated at Panapatti village,Pollachi Taluk, Tamil Nadu. SBI has installed 10windmills with an aggregate capacity of 15 MW in TamilNadu, Maharashtra and Gujarat.

23.IIMK to create C.K. Prahalad endowment fund:The Indian Institute of Management, Kozhikode , iscreating an endowment fund in the name Prof C.K.Prahalad, renowned management guru, who passedaway recently.

24.Cabinet gives nod for capital infusion into PSBs:Union Cabinet has given nod to infuse Rs 15,000 crorein public sector banks (PSBs) during 2010-11.Indications are that Bank of Maharashtra, Central Bankof India, Dena Bank, and United Bank of India, amongothers, would benefit from this.

25.Gujarat golden jubilee celebrations : Gujarat willcelebrate culmination of its year-long Swarnim Gujarat(Golden Gujarat) programmes on May 1 to mark the

50th year of its coming in to existence.26.Life insurance sector posts 25% growth in new

premium income: 50-60% of new biz premium willcome from ULIPs.


15/21


27.IndiaFirst Life launches group insurancebusiness: IndiaFirst Life Insurance Company Ltd, ajoint venture between Bank of Baroda, Andhra Bank andUK's Legal & General, has launched group insurancebusiness.

28.NPAs of public sector banks rise in March-Dec'09: Net non-performing assets (NPAs) of public sectorbanks grew 23 per cent between March and Decemberlast year, as global economic downturn and droughtconditions in the country affected asset quality.

29.Pvt sector banks must get RB I nod to raise fundsvia QIP: as allotments under QIP are on privateplacement basis.

30.RBI sounds caution on rising realty, stock prices:Property prices have run up by 20-30 per cent in thelast few months. The domestic equity market registeredan increase of 81% in prices.

31.Credit growth in 2009-10 surpasses RBI estimateof 16% : PSBs' lending grows 19.5%, private sectorbanks' by 11.7%.

32.Nathu La border trade to begin on May 3 : The fifthseason of the Nathu La border trade between Sikkim

and Tibet Autonomous Region (TAR) is scheduled tocommence on May 3. It will go on till November 30.

33.Solar Mission to award projects based on tariffdiscounts: The Jawaharlal Nehru National Solar Missionplans to add 1,300 MW of solar power in next threeyears, out of which 1,100 MW will be grid connectedand 200 MW off-grid. By 2022, the aim is to install 20million sq metres solar thermal collectors in the countryand save about 7,500 MW power generation capacity.

34.MCX-SX steals a march on NSE in currencytrades: Registers 30% rise in daily turnover since Feb.MCX-SX's market share in the currency futures segmentaveraged 56 per cent since February, up from the 50per cent share prior to that.

35.NIIT varsity to offer MBA: The not-for-profit NIITUniversity has launched an MBA program.

36.Management guru C. K. Prahalad passes away:His Competing for the Future (1994), co-authored withGary Hamel and printed in 14 languages, was amongthe best-selling business books that year. The Future ofCompetition (co-authored with Venkat Ramaswamy),was translated into 12 languages.

37.UCO Bank w ill take service to vil lages on 35 vans:To offer banking services in the unbanked villages ofthe country, UCO Bank plans to launch 35 mobilebanking vans. The first such mobile branch wasinaugurated in Deuli village in Murshidabad district ofWest Bengal by the Union Finance Minister, Mr PranabMukherjee.

38.Eco-rural tourism could boost vil lage economy':According to a study by FICCI and YES Bank touristspending on eco-rural tourism in India could capture asmuch as 5-8 per cent of total tourist expenditure.

39.Framework for mobile banking servicesapproved: The Government has approved theframework for providing basic financial services throughmobile phones. Individual banks may startimplementation by July 31, 2010 and banks maycomplete the rollout by December 2011.The NationalSample Survey data reveal that 51.4 per cent of nearly89.3 million farmer households do not have access to

any credit from institutional or non-institutional sources.Only 27 per cent of farm households are indebted toformal sources. Only 13 per cent are availing loans fromthe banks in the income bracket of less than Rs 50,000.

40.3G spectrum price crosses Rs 5,000-cr mark: Thisis 45.5 per cent higher than the initial base price of Rs3,500 crore fixed at the start of the auction. TheGovernment is expecting to get over Rs 35,000 crorefrom the auction of both 3G and broadband spectrum.

41.Inflation has peaked: Basu: The Indian economy islikely to have grown by 8.6 per cent in the fourthquarter of 2009-10 as per Dr Kaushik Basu, ChiefEconomic Advisor to the Finance Ministry.

42.M&M to buy out Renault stake, make Logan on itsown: Mahindra & Mahindra will buy out Renault's 49per cent stake in the five-year-old joint venture whichproduces the Logan at Nashik. In the process, MahindraRenault will now become a wholly-owned arm of M&M.

43.Reliance Ind picks stake in logistics firm Deccan360:

44.India-made cryogenic engine fails to lift GSLV-D3 : The launch of the GSLV-D3 rocket, which featuredfor the first time an indigenously built cryogenic engine,failed. The GSLV-D3 rocket cost about Rs 180 crore andthe satellite, Rs 150 crore.

45.Inflation rate edges towards the double-digit: The

year-on-year wholesale price inflation edged up to 9.9per cent in March from the previous month's annual riseof 9.89 per cent.

46.1,793 visas-on-arrival in Jan-March: During thefirst three months of the calendar year, 1,793 visa-on-arrival were granted to tourists from five countries. TheGovernment launched the visa-on-arrival scheme forcitizens of Singapore, New Zealand, Japan, Luxembourgand Finland in January this year on a pilot basis.

47.Dumping duty on Chinese vehicle parts: Thedefinitive anti-dumping duty is for five years andimposed with effect from June 15, 2009.

48.President inaugurates tourist vil lage in Gangtok:The village is Khangchendzonga tourist village.

49.India poised for double-digit growth in 4 years:According to Mr Basu, growth is likely to witness 8.5 percent growth this fiscal. Savings pattern in India, whichstood at 13 per cent of its national income up to 1968-69, now stands at 32.5 per cent.

50.Govt objective is to achieve inclusive growth :Pranab: The Finance Minister, Mr Pranab Mukherjee,inaugurated the 5,000th branch of Punjab National Bankat Chittaranjan Park in the Capital. He also declared thecompletion of the implementation of 100 per cent corebanking solutions in all the six sponsored regional ruralbanks with 1,408 branches.

51.Clean' hydel project work to begin on April 17: inVadakara Taluk of Kozhikode district. The project isenvisaged under the Clean Development Mechanism(CDM) scheme of United Nations Framework Conventionon Climate Change (UNFCCC).

52.L

Documents

general awarness may 2010