RBI - General awareness questions on current affairs

1)   Which office has seen the appointment of an RBI ombudsman?

a. Jammu
b. Delhi
c. Both of the above
d. Punjab
Answer  Explanation 

ANSWER: Both of the above

Explanation:
The Reserve Bank has opened a new ombudsman office in Jammu as part of its efforts to expand banking grievances complaint cells across the country. E

Earlier, the banking services related complaints from entire Jammu & Kashmir used to fall under the jurisdiction of New Delhi-I banking ombudsman office.

There are two banking ombudsman offices in New Delhi.

There has been a significant increase in banking network during the recent past and the New Delhi office covers a large jurisdiction.


2)   EBI has come out with a PCA for banks. What does PCA stand for?

a. Performance corrective action
b. Prompt corrective action
c. Personnel corrective action
d. None of the above
Answer  Explanation 

ANSWER: Prompt corrective action

Explanation:
The Reserve Bank of India (RBI) has come out with a revised prompt corrective action (PCA) framework for banks, spelling out certain thresholds, the breach of which could invite resolutions such as a merger with another bank or even shutting down of the bank.

The revised norms have set out three thresholds.

The breach of the third one on capital would identify a bank as a likely candidate for resolution through tools like amalgamation, reconstruction, winding up etc.

The provisions of the revised PCA framework will be effective from April 1, 2017 based on the financials of the banks for the year ended March 31, 2017.

The framework would be reviewed after three years, the RBI said.

The thresholds are based on capital, net non-performing assets, profitability and leverage ratio.

The breach of the first threshold will invite restriction on dividend distribution or require parents of foreign banks to bring in more capital.

This will get triggered if capital adequacy ratio (including capital conservation buffer) falls below 10.25% or common equity tier-I (CET1) capital ratio falls below 6.75%.

Breach of either CAR or CET1 would trigger corrective action, the RBI said. The trigger for net NPA is 6% and 4% for leverage ratio.

Two consecutive years of negative return on assets (RoA) will also be classified in threshold one.

The breach of the second threshold will occur when the capital adequacy ratio falls below 7.75% or CET1 goes below 5.125%.

The net NPA threshold is breach of 12% and leverage ratio below 3.5%.

Three consecutive years of negative ROA will also trigger threshold two. Breach of threshold two will result in restrictions on expansion of branches and higher provisions.

The breach of the last threshold happens when CET1 falls below 3.625% and net NPA goes above 12%. Negative ROA for four consecutive years will also be considered as a breach of the third threshold vis-a-vis the profitability parameter.

Restrictions, in addition to that of threshold one and two, will be put on management compensation and directors’ fees if the third level is breached.

Corrective action that can be imposed on banks includes special audit, restructuring operations and activation of recovery plan.

The RBI has said that promoters of banks can be asked to bring in new management, or even can supersede the bank’s board, as a part of corrective action.

RBI: Know More

  • Established: 1 April 1935; 82 years ago
  • Governor: Urjit Patel
  • Central bank of Republic of India
  • Currency: Indian Rupee (₹)
  • Reserves: US$ 363.00 billion
  • Bank rate: 6.75%
  • Interest on reserves: 4.00%(market determined
  • Website: rbi.org.in


3)   What is the value of the reverse repo rate, as per the first RBI bimonthly policy review of 2017-2018?

a. 5.75%
b. 5.25%
c. 6%
d. 6.25%
Answer  Explanation 

ANSWER: 6%

Explanation:
The Reserve Bank of India (RBI) kept the key policy rate, or the repo rate, unchanged in the first bimonthly policy review of 2017-18 but narrowed the policy corridor by 25 bps by raising the reverse repo rate to 6%, from 5.75%.

All six members of the monetary policy committee (MPC) - which decides interest rates - voted in favour of the decision.

The central bank said the policy decision was consistent with the neutral policy stance with the objective of achieving the medium-term target for retail inflation, which is 4%.

The MPC saw the path of inflation in 2017-18 challenged by upside risks and unfavourable base effects towards the second half of the year.

Accordingly, inflation developments have to be closely monitored with food price pressures can be checked so that inflation expectations can be anchored.

The central bank indicated the future course of monetary policy would largely depend on incoming data on how macroeconomic conditions are evolving.

While the repo rate action was in line with market expectations, the governor’s hawkish tone disappointed bond traders who were expecting a softer tone.

Yield on the 10-year benchmark bond hardened to 6.77% as compared with its previous close of 6.65%.

The central bank has set its inflation projection to an average of 4.5% in the first half of 2017-18 and 5% in the second half, while keeping its GVA growth projection unchanged at 7.4% for FY18 as compared with 6.7% in FY17.

Surplus liquidity in the banking system had fallen from close to ?8 lakh crore in January to ₹4.8 lakh crore in March.

A standing deposit facility to the government in November 2015, was proposed approval for which was still awaited.

SDF is a mechanism to drain surplus cash at a rate lower than the repo rate without the need for any collateral.

Key Takeaways from RBI Monetary Policy review:

  • RBI is optimistic about growth in FY18 and has projected Gross Value Added (GVA) growth to be 7.4 percent as against 6.7 percent last year.
  • Inflation has been projected to be between 4.5-5 percent for the year with some caution being posted on the monsoon progress.
  • RBI has lowered the corridor around the repo rate.
  • RBI has not quite said anything specific about Non-performing assets (NPAs) but will be coming out with another paper on prompt corrective action which addresses some of the issues.
  • RBI has put forward a proposal to set up a standing deposit facility to the government whereby banks can park their surplus funds with the RBI without bonds as securities.
  • The Reserve Bank of India, in its first monetary policy review of financial year 2017-18, kept the repurchase (repo) rate unchanged at 6.25%, citing upward risks to inflation and global uncertainty.
  • The Monetary Policy Committee, however, raised the reverse repo rate by 0.25 basis points to 6%, and cut the marginal standing facility (MSF) rate to 6.5%.


4)   Who has been appointed RBI ED w.e.f April 3, 2017?

a. Malvika Sanghvi
b. Malvika Sinha
c. Malvika Sen
d. None of the above
Answer  Explanation 

ANSWER: Malvika Sinha

Explanation:
The Reserve Bank has appointed Malvika Sinha as Executive Director following the appointment of B P Kanungo as Deputy Governor.

Sinha took charge on April 3.

As Executive Director, she will look after foreign exchange department, department of government and bank accounts and internal debt management wing.

Kanungo was Executive Director of the Reserve Bank before being elevated to the post of Deputy Governor.

Sinha had joined the Reserve Bank in 1982 and as a career central banker served in the areas of regulation and supervision, foreign exchange and government and bank accounts.

Prior to being promoted as ED, she was Principal Chief General Manager, Department of Cooperative Banking Supervision in the Reserve Bank.

Sinha holds a Masters Degree from University of Bombay and has done her Masters in Public Administration. She is also a Certificated Associate of Indian Institute of Bankers.


5)   Which department will RBI open from April 3 to oversee breaches of rules and their violation?

a. Enforcement department
b. Grievances Redressal department
c. Social welfare department
d. Financial laws department
Answer  Explanation 

ANSWER: Enforcement department

Explanation:
RBI will open a separate enforcement department from April 3 to oversee possible breaches of rules and take punitive actions against those who violate them.

The Enforcement Department shall, inter alia, develop a broad policy for enforcement and initiate enforcement action against the regulated entities for violation consistent with such policy.

The department proposed to be opened on April 3 would serve as a centralised wing to deal with banks only for enforcement action.

Reserve Bank of India (RBI) has reported that the net profit/loss, profit after tax (PAT) of Public Sector Banks (PSBs) declined to INR (-)17,993 crore during 2015-16 from INR 37,823 crore in 2014-15 and INR 37,019 crore in 2013-14.

At the same time PAT of private banks increased from INR 33,661 crore during 2013-14 to INR 38,735 crore in 2014-15 and further to INR 41,314 crore during 2015-16.

PAT of PSBs stood at Rs (-)1,678 crore for the period April- December, 2016 while it was INR 31,262 crore for the same period for private sector.

RBI has informed that as part of the package of measures announced on August 25, 2016 for development of fixed income and currency markets, in connection with developing the market for rupee denominated bonds overseas, it has been decided to permit banks to issue Perpetual Debt Instruments (PDI) qualifying for inclusion as Additional Tier 1 capital and debt capital instruments.

It was also decided to allow banks to issue rupee denominated bonds overseas under the extant framework of incentivising issuance of long term bonds by banks for financing infrastructure and affordable housing.

The RBI has also taken various measures to deepen the corporate bond market.


6)   Who has been appointed part time chairman of Catholic Syrian Bank?

a. TS Anantharaman
b. TS Subramaniam
c. TS Anantdev
d. None of the above
Answer  Explanation 

ANSWER: TS Anantharaman

Explanation:
RBI has accorded approval for the appointment of TS Anatharaman as part time chairman of Catholic Syrian Bank.

He has been holding the position of non executive director of the bank since Aug 28, 2009.

Anatharaman is a senior CA with wide experience in practice, service, consulting, industry and teaching.

He has served with the UN for 7 years.

Anantharaman was President of Chamber of Commerce, Thrissur, Thrissur Management Association and numerous other institutions.

Currently, he is investment consultant and director of numerous companies and institutions


7)   RBI will create polymer based currency notes of which denomination?

a. INR 5
b. INR 10
c. INR 20
d. INR 25
Answer  Explanation 

ANSWER: INR 10

Explanation:
The Union Finance Ministry has given permission to the Reserve Bank of India to conduct field trials of plastic currency notes of INR 10 denomination.

These notes will be introduced in 5 cities across the country with diverse climatic and geographical conditions.

The procurement of the requisite plastic substrate material has been approved. Plastic INR 10 notes will now be printed.

Benefits of Plastic Currency Notes

  • Plastic currency notes were first used by Australia in 1988
  • Plastic notes are cleaner than paper and will last longer (around 5 years); these are difficult to counterfeit.
  • These notes are now used in more than 20 countries.
  • Notes were smaller and stronger than cotton based paper notes.
  • They have more security features making them harder to copy.


8)   Who replaced R. Gandhi as Deputy Governor of RBI?

a. BP Kanungo
b. SS Mundra
c. Viral V Acharya
d. None of the above
Answer  Explanation 

ANSWER: BP Kanungo

Explanation:
BP Kanungo on 10th March 2017 was appointed Deputy Governor in RBI for three years.

The ACC approved the appointment to the post with effect from the date of taking charge on or after April 3.

He has been appointed as deputy governor in place of R. Gandhi.

Kanungo was in March 2016 appointed ED of the Central Bank.

The ACC has named Dilip S. Shanghvi as the Member of RBI's Western Local Board.

The appointment of Shanghvi who is the promoter of Sun Pharma, is for a period of 4 years.

RBI: Know More

  • Headquarters: Mumbai, Maharashtra
  • Established: 1 April 1935
  • Governor: Urjit Patel
  • Central bank of India
  • Currency : Indian Rupee (₹)
  • Reserves: US$ 363.00 billion
  • Bank rate: 6.75%
  • Interest on reserves: 4.00%(market determined)
  • Website: rbi.org.in


9)   Who has been appointed as director on the RBI central board?

a. Ashok Gulati
b. Rajiv Kumar
c. Manish Sabharwal
d. All of the above
Answer  Explanation 

ANSWER: All of the above

Explanation:
GoI has appointed three directors on the all-powerful central board of RBI, which include two noted economists Ashok Gulati and Rajiv Kumar, for four years.

Besides Gulati and Kumar, the Appointments Committee of the Cabinet (ACC) has appointed Manish Sabharwal as a director.

Further, the ACC has also approved the proposal of the Department of Financial Services for appointment of three members on the local board of RBI.

Prasanna Kumar Mohanty (Southern Local Board), Vallabh Roopchand Bhanshali (Western) and Sunil Mitra (Eastern) have been appointed for four years.

The last board-level appointment by the government was made when it elevated N S Vishwanathan to the post of deputy governor in June.

Prior to that, in March, the government had nominated three non-official directors - Natarajan Chandrasekaran, Bharat Narotam Doshi and Sudhir Mankad - on the central board of the bank.

Manish Sabharwal is a businessman and entrepreneur, who is currently the chairman of Teamlease, which he co-founded.

Prior to this, he also co-founded India Life, a human resource outsourcing company.

Mr. Kumar is a senior fellow at the Centre for Policy Research and has authored several books on India’s economy.

He is also currently chancellor of the Gokhale Institute of Economics and Politics in Pune.

He is also the founding director of Pahle India Foundation, a non-profit research organisation.

Mr. Gulati is currently the Infosys Chair Professor for Agriculture at the Indian Council for Research on International Economic Relations (ICRIER).

Prior to that, he was the chairman of the Commission for Agricultural Costs and Prices (CACP), the body responsible for recommending Minimum Support Prices (MSPs) of agri-commodities to the government.

In addition to this, the Cabinet also approved the proposal by the Department of Financial Services for appointment of three members on the local board of the RBI.

RBI Board of Directors: Know More

  • The RBI's affairs are governed by the central board of directors.
  • The board is appointed by the government.
  • The central board comprises the governor, deputy governors, 10 directors from various fields, two government officials and one each from the four local boards.
  • As per the RBI website, besides the governor and deputy governors, there are six directors on the central board.
  • These are Nachiket Mor, Natarajan Chandrasekaran, Bharat Narotam Doshi, Sudhir Mankad, Shaktikanta Das and Anjuly Chib Duggal.


10)   In Monetary Review on 8th Feb 2017, RBI has kept repo rate _________

a. Unchanged
b. Changed to 7.25%
c. Changed to 8.25%
d. None of the above
Answer  Explanation 

ANSWER: Unchanged

Explanation:
The Reserve Bank of India (RBI) has kept the repo rate unchanged at 6.25% in its monetary policy review on 8th Feb 2017.

It was citing inflation concerns after the first quarter of the next financial year, once the base effect vanishes.

The RBI said all the six members of the monetary policy committee voted in favour of the decision.

“ Favourable base effects and lagged effects of demand compression may mute headline inflation in Q1 of 2017-18,” the central bank said in a statement.

“Thereafter, it is expected to pick up momentum, especially as growth picks up and the output gap narrows. Moreover, base effects will reverse and turn adverse during Q3 and Q4 of 2017-18,” the RBI added.

Now, the RBI has projected inflation in the range of 4.0 to 4.5% in the first half of the financial year and in the range of 4.5 to 5.0% in the second half.

The central bank cited ‘three significant upside risks’ that impart some uncertainty to the baseline inflation path -

  • The hardening profile of international crude prices;
  • Volatility in the exchange rate on account of global financial market developments, and the
  • Fuller effects of the house rent allowances under the 7th Central Pay Commission (CPC) award.
At the same time, the RBI lauded the Central government for its effort in maintaining fiscal discipline that could have a favourable impact on inflation.

Monetary Policy Review
  • Repo rate under the liquidity adjustment facility (LAF): Unchanged at 6.25 percent.
  • Reverse repo rate under the LAF: Unchanged at 5.75 per cent.
  • Marginal standing facility (MSF): Unchanged at 6.75 per cent.
  • Bank Rate: Unchanged at 6.75 per cent.
  • Reserve Ratios Cash Reserve Ratio (CRR) of scheduled banks: Unchanged at 4.0 per cent of net demand and time liability (NDTL).
  • Statutory Liquidity Ratio (SLR): Unchanged 20.75 per cent.


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