Banking Current Affairs -2 (April 2-4, 2012)

FM warns Irda for ‘suicidal competition’ among Insurance Companies

  • Recently, Irda (Insurance Regulatory and Development Authority) was asked by the Government to take steps to curb the menace of “suicidal competition” among insurance companies, which are undercutting one another by offering policies at low premium to grab a bigger market share.
  • FM said that the unhealthy competition among the insurance companies is impacting their account books.
  • Its worth note that Insurance companies in India are free to fix premium (it is called de-tariffing), and it has resulted in significant lowering of premiums for the consumers. The result is an adverse impact on the insurance company’s balance sheet.

Knowledge Bytes

  • Investments by the insurance industry in infrastructure as on March 31, 2011, were Rs 1.98 lakh crore, of which 78 per cent has come from public sector insurers.
  • The insurance sector’s penetration has improved over the years — to 5.1 per cent in 2010, from 2.71 per cent in 2001.

Bankers Ask the RBI to cut CRR

  • RBI’s annual monetary policy review is scheduled on April 17, 2012. The Bankers have asked the Central Bank to go for a steep reduction in the cash reserve ratio (CRR) and the repo rate.
  • The Public Sector Banks have requested RBI to cut repo rate by 50 basis points and also demanded reduction in the cash reserve ratio to the extent of 75 basis points.

ICRA downgrades the UCO Bank Bonds

  • Rating agency ICRA has cut the rating for UCO Bank’s lower Tier-II bonds from “AA+” to “AA”. The reasons cited by the agency include deterioration in asset quality and weak solvency profile.
  • It’s worth note that ICRA has already lowered the rating for Oriental Bank of Commerce’s bonds for increase in non-performing assets. Global rating agency Moody’s has also downgraded the rating for some instruments of Union Bank of India and Bank of India.

ICRA downgrades bonds of OBC

  • ICRA has also downgraded Oriental Bank of Commerce’s bonds. The reasons cited are worsening asset quality and sustained pressure on profitability.
  • The rating agency has revised ratings outstanding on the Rs 1,000-crore lower Tier-II bond programmes of the lender from AAA (stable) to AA+ (stable).

NABARD’s Gujarat support touches Rs 4340 crore

  • During the financial year 2011-12, Gujarat has received ` 4340 crore financial assistance from NABARD for supporting agriculture, rural development and rural infrastructure development. This is a 50% rise from Rs 2894 crore assistance in 2010-11.
  • The financial assistance included Rs 3270 crore refinance support to banks for expanding farm and non-farm sector loans, Rs 780 crore loan to Government of Gujarat under the Rural Infrastructure Development Fund [RIDF], Rs 205 crore direct finance to District Co-operative banks, Rs 69 crore support for developing warehouse/cold storages and Rs 16 crore loan for setting up two innovative solar power projects.

NABARD sanctions Rs 144.49 crore to Punjab under RIDF

  • Nabard has sanctioned Rs 144.49 crore to the Punjab government under Rural Infrastructure Development Fund for two projects.
  • The first project for “Construction of seven Rural Roads in six districts” of the state and the second project for “Eradication of Water-logging problem in Muktsar district” of the state.