The policy proposes a governance mechanism for smooth implementation and effectiveness of the policy. The mechanism will be in the form of inter-ministerial and inter-departmental committees at the highest level to ensure due consideration of the interests of all stakeholders. The committees will be tasked with driving coordinated action and monitoring the progress and effectiveness of policy on an annual basis
Periodic Review of Policy
The capital goods sector operates in a dynamic local and global environment and it is imperative for the policy to undergo a periodic review and revision to maintain its relevance.
The National Capital Goods Policy will be reviewed every five years and revised appropriately to take account of progress in implementation and emerging trends in the national and international environment.
FIIs/RFPIs can now invest up to 74 percent in DEN Networks Limited: RBI
The Reserve Bank of India (RBI) on 26 October 2015 notified that the Foreign Institutional Investors (FIIs)/Registered Foreign Portfolios Investors (RFPIs) can now invest up to 74 percent of the paid up capital of DEN Networks Limited under the Portfolio Investment Scheme (PIS).
DEN Networks Limited has passed resolutions at its Board of Directors’ level and a special resolution by the shareholders, agreeing for enhancing the limit for the purchase of its equity shares and convertible debentures by FIIs/RFPIs.
The purchases could be made through primary market and stock exchanges. The purchases would be subject to Regulation 5(2) of FEMA Notification and other terms and conditions stipulated by the Reserve Bank.
The Reserve Bank notified this under Foreign Exchange Management Act (FEMA), 1999.
Regulation 5(2) of FEMA Notification
As per Regulation 5(2) of FEMA Notification, a registered Foreign Institutional Investor (FII) may purchase shares or convertible debentures of an Indian company under the Portfolio Investment Scheme, subject to the terms and conditions specified in Schedule 2 of FEMA 1999.
RBI issued direction on implementation of Gold Monetisation Scheme 2015
The Reserve Bank of India (RBI) on 22 October 2015 issued a Direction to all Scheduled Commercial Banks (excluding Regional Rural Banks) on implementation of the Gold Monetisation Scheme, 2015 notified by the Union Government.
The RBI issued the direction to banks in exercise of powers conferred on it under Section 35A of the Banking Regulation Act, 1949.
The GMS 2015 will replace the existing Gold Deposit Scheme, 1999.
Directions on implementation of GMS 2015
• The deposits outstanding under the Gold Deposit Scheme will be allowed to run till maturity unless the depositors prematurely withdraw them.
• Resident Indians (Individuals, HUF, Trusts including Mutual Funds/Exchange Traded Funds registered under SEBI (Mutual Fund) Regulations and Companies) can make deposits under the scheme.
• The minimum deposit at any one time shall be raw gold (bars, coins, jewellery excluding stones and other metals) equivalent to 30 grams of gold of 995 fineness.
• There is no maximum limit for deposit under the scheme.
• The gold will be accepted at the Collection and Purity Testing Centres (CPTC) certified by Bureau of Indian Standards (BIS) and notified by the Central Government under the Scheme.
• The deposit certificates will be issued by banks in equivalence of 995 fineness of gold.
• The principal and interest of the deposit under the scheme will be denominated in gold.
• The designated banks will accept gold deposits under the Short Term (1-3 years) Bank Deposit (STBD) as well as Medium (5-7 years) and Long (12-15 years) Term Government Deposit Schemes. While, STBD will be accepted by banks on their own account, but the latter will be on behalf of Union Government.
• There will be provision for premature withdrawal subject to a minimum lock-in period and penalty to be determined by individual banks.
• Interest on deposits will start accruing from the date of conversion of gold deposited into tradable gold bars after refinement or 30 days after the receipt of gold at the CPTC or the bank’s designated branch.
• During the period from the date of receipt of gold by the CPTC or the designated branch to the date on which interest starts accruing, the gold accepted shall be treated as an item in safe custody held by the designated bank.
• The short term bank deposits will attract applicable cash reserve ratio (CRR) and statutory liquidity ratio (SLR). However, the stock of gold held by the banks will count towards the general SLR requirement.
• The opening of gold deposit accounts will be subject to the same rules with regard to customer identification as are applicable to any other deposit account.
Utilisation of Gold mobilised under GMS
The designated banks may sell or lend the gold accepted under STBD to MMTC for minting India Gold Coins (IGC) and to jewellers, or sell it to other designated banks participating in GMS. The gold deposited will be auctioned by MMTC or any other agency authorised by the Central Government and the sale proceeds will be credited to the Union Government’s account with the Reserve Bank.
The entities participating in the auction may include the Reserve Bank, MMTC, banks and any other entities notified by the Union Government. Banks may utilise the gold purchased in the auction for purposes indicated above.
Risk Management under GMS
Designated banks should put in place a suitable risk management mechanism, including appropriate limits, to manage the risk arising from gold price movements in respect of their net exposure to gold.
For this purpose, banks have been allowed to access the international exchanges, London Bullion Market Association or make use of over-the-counter contracts to hedge exposures to bullion prices subject to the guidelines issued by the Reserve Bank.
Grievance Redress Process under GMS
Complaints against designated banks regarding any discrepancy in issuance of receipts and deposit certificates, redemption of deposits, payment of interest will be handled first by the bank’s grievance redress process and then by the Reserve Bank’s Banking Ombudsman.
PM Narendra Modi inaugurated IDFC Bank
Prime Minister Narendra Modi on 19 October 2015 inaugurated the IDFC Bank in New Delhi.
IDFC Bank Limited, which started its operations on 1 October 2015, is an Indian Banking company with headquarters in Mumbai that forms a part of IDFC, an integrated infrastructure finance company.
IDFC Bank was granted a universal banking license in July 2015 by the Reserve Bank of India (RBI).
IDFC was incorporated on 30 January 1997. It founded a non-operative financial holding company (NOFHC) in 2014 to manage its five subsidiaries IDFC Bank, IDFC MF, IDFC Alternatives, IDFC IDF & IDFC Securities to conform with RBI guidelines.
Moody's released a report on the Global Green Bonds Market
Moody’s Investors Service on 19 October 2015 released a report on the global green bonds market titled Third Quarter Issuance Lags, but COP21-Linked Increase Is Likely.
The report says that in the third quarter (Q3) of 2015, the global green bond issuance reached 7.5 billion dollar, compared to bond issuance of 27.2 billion dollar in Q3 2014. But the increase is down from Q2, Moody's expects issuance will pick up in the last quarter and exceed 40 billion dollar for the full year 2015.
Major highlights of the report
• Issuance continued to break new ground in the third quarter in terms of noteworthy and first-time transactions
• 7.6 billion dollar issued in Q3 lagged the 13.4 billion dollar that came to market during the second quarter of the year, but did outpace the first quarter's 6.3 billion dollar.
• Based on the 9-month average monthly volume of 3.02 billion dollar, green bonds would end the year at 36.3 billion dollar, or just shy of the 36.5 billion dollar issued in 2014.
• The organisation expects the volume will pick up towards the end of the year to coincide with the December 2015 United Nations Framework on Climate Change (UNFCC) Conference of the Parties (COP21) in Paris and is likely to exceed 40 billion dollar for the full year 2015.
• Moody's further notes that nearly half of the third quarter's issuance proceeds, or about 4 billion dollars, are being earmarked for renewable energy projects. This is followed by 18.8%, or about 1.7 billion dollar, earmarked for sustainable water management followed closely by 1.6 billion dollar allocated to energy efficiency projects.
• Investment-grade issuance continued to dominate in the third quarter, but high-yield green bonds gained as a share of all Moody's-rated green bond transactions.
• Nearly 18% of issuance in the third quarter was attributable to below-investment grade issuers, up from just 5% in the second quarter.
Highlights in case of India
• India has set a target of 175 GW of renewable energy capacity by 2022
• India that came up as an early leader in Asia’s incipient green bond is expected to be a prominent driver of regional issuance in coming years.
• India has established itself as an early leader in Asia’s nascent green bond market, with three India-based issuers came to market in third quarter (July to September 2015).
• It is expected that along with China, India will be a prominent driver of regional issuance in coming years, given ambitious targets on building out renewable energy capacity
What is a green bond?
A green bond, like any other bond, is a fixed-income financial instrument for raising capital through the debt capital market. In its simplest form, the bond issuer raises a fixed amount of capital from investors over a set period of time, repaying the capital when the bond matures and paying an agreed amount of interest (coupons) along the way.
RBI formed Financial Inclusion Fund with 2000 crore rupees corpus
The Reserve Bank of India (RBI) on 15 October 2015 formed a single Financial Inclusion Fund (FIF) with a corpus of 2000 crore rupees. The fund was formed by merging the Financial Inclusion Fund (FIF) and Financial Inclusion Technology Fund (FITF).
The RBI also finalised the new scope of activities and guidelines for utilisation of the new FIF in consultation with the Union Government. The new FIF will be administered by the reconstituted Advisory Board constituted by Union Government and will be maintained by NABARD.
Guidelines of Financial Inclusion Fund
• The overall corpus of the new FIF will be 2000 crore rupees.
• Contribution to FIF would be from the interest differential in excess of 0.5 percent on RIDF and STCRC deposits on account of shortfall in priority sector lending kept with NABARD by banks.
• All the assets and liabilities of the erstwhile FITF as well as prior commitments from FITF for projects already sanctioned will be transferred to/reimbursed from FIF.
• The Fund will be in operation for another three years or till such period as may be decided by RBI and Union Government in consultation with other stake holders.
Objective of Financial Inclusion Fund (FIF)
• To support developmental and promotional activities with a view to securing greater financial inclusion
• The development and promotional activities include creation of FI infrastructure across the country, capacity building of stakeholders, creation of awareness to address demand side issues, enhanced investment in Green Information and Communication Technology (ICT) solution and increased technological absorption capacity of financial service providers/users.
• The fund shall not be utilized for normal business/banking activities.
• To help create an eco-system that would support banks investment for future business expansion.
• To mobilise significant investment required for further facilitating investments from banks and other financial institutions in addition to ICT-BC (Information Communication Technology – Business Correspondent) model as a mode for expanding banking operations in the unbanked areas
• To address the key concerns which would help scaling the FI efforts like lack of proper connectivity, lack of training facilities for BCs, evolution of an appropriate business model, etc.
Purposes of Financial Inclusion Fund (FIF)
• Support for funding the setting up and operational cost for running Financial Inclusion & Literacy Centers in sync with the objective of Union Government for setting up Financial Literacy Centers up to the block level under the Pradhan Mantri Jan Dhan Yojana (PMJDY).
• Setting up of Standard Interactive Financial Literacy Kiosks in Gram Panchayats and any other financial literacy efforts under taken by banks in excluded areas
• Support to NABARD & Banks for running of Business & Skill Development Centers including R-SETIs (to the extent not provided by State Governments) to impart skill sets necessary for undertaking income generating activities and for providing forward linkages for marketing activities.
• Sharing the cost of Government projects in connection with laying of last mile fibre optic network, funding of other technological or infrastructure related projects involved in improving or creating network connectivity, etc; in excluded areas.
Eligible Institutions that can seek support from Financial Inclusion Fund (FIF)
Rural Multipurpose kiosks / Village Knowledge Centres
Common Services Centres (CSCs) established by Service Centre Agencies (SCAs) under the National e-Governance Plan (NeGP).
Primary Agricultural Societies (PACs)
The Financial Inclusion Fund (FIF) and Financial Inclusion Technology Fund (FITF) were constituted in the year 2007-08 for a period of five years with a corpus of 500 crore rupees each to be contributed by Government of India (GOI), RBI and NABARD in the ratio of 40:40:20.
The guidelines for these two funds were framed by the Union Government itself. In April 2012, RBI decided to fund FIF by transferring the interest differential in excess of 0.5 percent on RIDF and STCRC deposits on account of shortfall in priority sector lending.
CCEA approved World Bank assisted National Watershed Management project Neeranchal
The Cabinet Committee on Economic Affairs (CCEA) on 7 October 2015 approved implementation of the World Bank assisted National Watershed Management Project Neeranchal with a total outlay 2142.30 crore rupees.
The project will be implemented at the national level as well as in the nine states of Andhra Pradesh, Chattisgarh, Gujarat, Jharkhand, Madhya Pradesh, Maharashtra, Odisha, Rajasthan and Telangana.
The government’s share in the project is 50 percent and the rest cost will be borne by the World Bank.
The project aims at achieving the major objectives of the Watershed Component of the Pradhan Mantri Krishi Sinchayi Yojana (PMKSY) and for ensuring access to irrigation to every farm (Har Khet Ko Pani) and efficient use of water (Per Drop More Crop).
Concerns addressed by Neeranchal:
• To bring about institutional changes in watershed and rainfed agricultural management practices in the country.
• To build systems that ensure watershed programmes and rainfed irrigation management practices are better focussed, more coordinated and have quantifiable results.
• To devise strategies for the sustainability of improved watershed management practices in programme areas, even after the withdrawal of project support.
• To support improved equity, livelihoods and incomes through forward linkages on a platform of inclusiveness and local participation.
About Integrated Watershed Management Programme (IWMP)
The Integrated Watershed Management Programme (IWMP) was launched in 2009-2010 by the integration of various area development programmes of the Department of Land Resources (DoLR), including the Drought Prone Areas Programme (DPAP), the Desert Development Programme (DDP) and the Integrated Wastelands Development Programme (IWDP). However, the IWMP will be implemented as the Watershed Component of PMKSY from 2015-2016 onwards.
RBI relaxed norms of FPI investment in Government Securities
The Reserve Bank of India (RBI) on 6 October 2015 relaxed the norms of Foreign Portfolio Investors (FPIs) of government debt and also announced higher investment limits in rupee terms in government securities with a view to bring in an additional 1.2 lakh crore rupees by March 2018.
The RBI fixed the FPI investment limits in rupee terms and raised the limits in phases to reach 5 percent of the outstanding stock by March 2018.
RBI directions on FPI investment in Government Securities
• For the fiscal year 2015-16, RBI enhanced the limit for investment by FPIs in Government sectors in two tranches from 12 October 2015 and 1 January 2016.
• The limit will be increased from 1.53 lakh crore rupees to 1.7 lakh crore rupees from 12 October and it will be 1.86 lakh crore rupees from 1 January 2016.
• Those Central Government securities in which aggregate investment by FPIs exceeds the prescribed threshold of 20% will be put in a negative investment list.
• No fresh investments by FPIs in Central Government securities will be permitted till they are removed from the negative list.
• There will be no security-wise limit for SDLs for now. And the operational guidelines relating to allocation and monitoring of limits will be issued by the Securities and Exchange Board of India (SEBI).
All these directions were issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999.
The RBI issued these directions in perusal of the announcement made in the fourth Bi-monthly Monetary Policy Statement for the year 2015-16 issued on 29 September 2015, wherein a Medium Term Framework (MTF) for FPI limits in Government securities was announced to provide a more predictable regime. The features of the MTF were:
• The limits for FPI investment in debt securities will henceforth be announced in Rupee terms.
• The limits for FPI investment in the Central Government securities will be increased in phases to reach 5 percent of the outstanding stock by March 2018. This is expected to bring in additional investment of 1200 billion rupees in the limit for Central Government securities by March 2018.
• Additionally, there will be a separate limit for investment by all FPIs in the State Development Loans (SDLs), this limit will be increased in phases to reach 2 percent of the outstanding stock by March 2018.
• The effective increase in limits for the following two quarters will be announced every half year in March and September.
• The existing requirement of investments being made in Government sectors (including SDLs) with a minimum residual maturity of three years will continue to apply to all categories of FPIs.
• Aggregate FPI investments in any Central Government security would be capped at 20 percent of the outstanding stock of the security.
• Investments at existing levels in the securities over this limit may continue but not get replenished through fresh purchases by FPIs till these falls below 20 percent.
UCO Bank registered highest increase in gross Non-Performing Assets
UCO Bank on 4 October 2015 registered the highest increase in gross Non-Performing Assets (NPAs) in percentage terms against total loans in the 2014-15 fiscal year. With this, UCO Bank became the worst performer among the other public sector banks.
The Gross NPA to gross advances ratio of UCO Bank increased to 8.05 percent at the end of March 2015 from 4.47 percent, accretion of 3.58 on an annual basis.
The UCO Bank was followed by Indian Overseas Bank (IOB) and Bank of Maharashtra (BoM) with their gross NPA rising to 8.30 percent and 6.18 percent respectively at the end of March 2015. Besides, the gross NPA of Dena Bank increased from 3.33 percent to 5.29 percent at the end of 2014-15.
At the same time, Corporation Bank's gross NPA level rose from 3.42 percent to 4.80 per cent at the end of March 2015, showing an accretion of 1.38 over the previous fiscal.
Rising NPA has hit the bottom-line of banks and to strengthen their balance-sheet the government is providing 25000 rupees capital support in the current fiscal.
About Non Performing Assets
Banks usually classify any commercial loans as Non-Performing Assets which are overdue for more than 90 days and any consumer loans which are overdue for more than 180 days. More generally, NPA are those assets that are not producing any income.
Piyush Goyal Union Minister of State (IC) for Coal, Power and New and Renewable Energy, on 29 September 2015 launched ‘Access to Clean Cooking Energy and Electricity - Survey of States Report’.
The study was conducted by the Council on Energy, Environment & Water (CEEW) in collaboration with Columbia University with support from the Shakti Sustainable Energy Foundation.
The analysis in the report provides a first of a kind multi-dimensional evaluation of the state of energy access in India.
Highlights of the Report
• It highlights that about 300 million Indians rely on kerosene for lighting, and more than 800 million relying on traditional biomass.
• It says that the access to modern forms of energy is still a significant barrier to our development.
• It suggests that there is a need to focus beyond aggregate figures on electrification and LPG connections, and be sensitive to the numerous drivers which will determine how India will ensure true energy access for all.
Some of the key questions explored in the ACCESS study include:
• Is energy access just a binary measure?
• What are the right metrics for measuring energy access?
• Have existing energy access programs been effective?
• What policies to improve energy access are preferred by the rural population?
The ACCESS report is a result of India's largest energy access survey; covering over 8500 households across 714 villages and 51 districts in six of the most energy poor states (Bihar, Jharkand, Madhya Pradesh, Odisha, Uttar Pradesh, West Bengal).
Union Minister of Road Transport & Highways and Shipping Nitin Gadkari on 29 September 2015 launched Green Highways (Plantation, Transplantation, Beautification and Maintenance) Policy, 2015.
The policy that seeks to promote green covers along National Highway corridors was launched at the National Conference in New Delhi.
• The Green Highway Policy will make it compulsory for road developers to set aside 1 percent of the Total Project Cost (TPC) for Highway Plantation and Maintenance.
• The policy seeks participation from the various segments of community including farmers, private sectors, government institutions and NGOs.
• The scheme will supposedly spend 1000 crore rupees for trees plantation along National Highways in the fiscal year 2015-16.
• Once implemented, the scheme will help in creating huge employment opportunities and entrepreneurship development.
• Besides, the policy will also help in cutting down the carbon footprints and hugely benefit the environment.
Green Highway Fund
• The policy calls for creation of fund account called Green Highways Fund (GHF) for developing green covers along the NH corridors.
• The GHF will be created from the fund collected through 1 percent of the TPC contributed by the developers.
• NHAI will act only as a Fund Manager for maintaining the Account and releasing payments
The policy is the revised version of the Circular dated 20 May 1976 that called for maintenance of trees and plantation of new ones on existing roads to be done from funds allocated for maintenance and repair of National Highways.
The Circular was updated on 26 November 1996 thereby permitting public sector corporations/reputed private companies/voluntary organizations to develop & maintain tree plantation.