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Economy Current Affairs
Economy Current Affairs August 1st Week 2017
Author : Admin
Category : Economy Current Affairs
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Economy Current Affairs August 1st Week 2017

 1. RBI cuts repo rate by 25 bps to 6%.

 
The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has reduced short-term lending rate, or repo rate, by 25 basis points to 6%.It was RBI’s third bimonthly policy review for the financial year 2017-18.

The decision of the MPC was consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target of 4% within a band of +/- 2%, while supporting growth. Policy Rates

Repo rate: It is the rate at which RBI lends to its clients generally against government securities. It was reduced by 25 basis points to 6%. The rate cut comes after a slump in food prices in consumer inflation to a record low of 1.54%. Reverse Repo Rate: It is the rate at which banks lend funds to the RBI. It was reduced by 25 bps to 5.75%.

Marginal Standing Facility (MSF) Rate: It is rate at which the scheduled banks can borrow funds overnight from RBI against government securities. It is a very short term borrowing scheme for scheduled banks. It adjusted to 6.25%.

Bank Rate: It is rate charged by the central bank for lending funds to commercial banks. It was set to 6.25%. It influences lending rates of commercial banks. Higher bank rate will translate to higher lending rates by the banks.

Cash Reserve Ratio (CRR): It is the amount of funds that the banks have to keep with the RBI. It was unchanged at 4%. The RBI uses the CRR to drain out excessive money from the system.

Statutory Liquidity Ratio (SLR): It was unchanged 20%. It is amount that banks have to maintain a stipulated proportion of their net demand and time liabilities (NDTL) in the form of liquid assets like cash, gold and unencumbered securities, treasury bills, dated securities etc.
 
2. Lok Sabha passes NABARD (Amendment) Bill, 2017.
 
Lok Sabha passes NABARD (Amendment) Bill, 2017
 
The Lok Sabha has passed the National Bank for Agriculture and Rural Development (Amendment) Bill, 2017 by voice vote. The Bill seeks to amend the NABARD Act, 1981. 

NABARD is responsible for providing and regulating facilities like credit for agricultural and industrial development in the rural rural areas. Key Features of the Bill 

Increase in capital of NABARD:  

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The Bill allows Union Government to increase capital of NABARD to Rs 30,000 crore from Rs. 5000 crore. Further, it allows Union Government to increase it to more than Rs 30,000 crore in consultation with the RBI, if necessary.

Transfer of the RBI’s share to Union government:  

The Bill provides that the Union Government alone must hold at least 51% capital share of NABARD. Further, it transfers share capital held by the RBI valued at Rs 20 crore to the 

Union Government. Currently RBI holds 0.4% of the paid-up capital of NABARD and the remaining 99.6% is held by the Union government and this causes conflict in the RBI’s role as banking regulator and shareholder in NABARD.

Adds Micro, small and medium enterprises (MSME) terms:  

The Bill replaces the terms ‘small-scale industry’ and ‘industry in the tiny and decentralised sector’ with the terms ‘micro enterprise’, ‘small enterprise’ and ‘medium enterprise’ as defined in MSME Development Act, 2006.  Further, it allows NABARD to provide financial assistance to banks if they provide loans to the MSMEs.

Consistency with the Companies Act, 2013: 

The Bill substitutes references to provisions of the Companies Act, 1956 with references to the Companies Act, 2013. It includes provisions dealing with definition of a government company and qualifications of auditors.
 
3. Lok Sabha passes Banking Regulation (Amendment) Bill, 2017.
 
Lok Sabha passes Banking Regulation (Amendment) Bill, 2017
 
The Lok Sabha has passed the Banking Regulation (Amendment) Bill, 2017 by voice vote. It will replace the Banking Regulation (Amendment) Ordinance, 2017. 

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The bill seeks to amend the Banking Regulation Act, 1949 to insert provisions for handling cases related to stressed assets or non-performing assets (NPAs) of banks. Stressed assets (NPAs) are loans defaulted by borrower in repayment or the loan which has been restructured by changing the repayment schedule.

Initiating insolvency proceedings: 

It will enable the Central government to authorize the Reserve Bank of India (RBI) to direct banking companies to resolve specific stressed assets by initiating insolvency resolution process. These proceedings will be under the Insolvency and Bankruptcy Code, 2016. 

Issuing directions on stressed assets:  

It empowers RBI to issue directions to banks for resolution of stressed assets from time to time.

Committee to advise banks: 

It enables RBI to specify committees or authorities to advise banks on resolution of stressed assets.  RBI will appoint or approve members on such committees.

Applicability to State Bank of India (SBI): 

It inserts provision to make above provisions applicable to the SBI and its subsidiaries and also Regional Rural Banks (RRBs).


 

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