(Current Affairs) Economy & Energy | June: 2015

Economy

BHEL & INTMA Ink MoU to set Up Power Plant in Kazakhstan

  • State-owned power equipment maker Bharat Heavy Electricals Limited (BHEL) has signed a Memorandum of Understanding (MoU) with a Russian company INTMA, to set up a gas-based power project in Kazakhstan.

  • The MoU aims set combined path to execute projects of mutual interest in Russia and Kazakhstan. In this regard, BHEL’s competence in design and manufacturing of power plants will play important role and INTMA’s strength in handling engineering procurement and construction contractors (EPC) contracts will implement the projects.

  • The MoU will further help BHEL in consolidating its presence in the Commonwealth Independent States countries.

  • INTMA is one of the leading general Engineering Procurement and Construction contractors (EPC) in Russia and Kazakhstan, with wide experience in industrial construction, renovation of facilities, automation and other energy related sectors.

Nokia to Acquire Alcate-Lucent

  • Finland based telecom equipment manufacturer Nokia has announced that they will acquire French based and Alcatel-Lucent with the intention to create an innovation leader in next generation technology and services for an IP connected world.

  • The two companies have entered into a memorandum of understanding under which Nokia will make an offer for all of the equity securities issued by Alcatel-Lucent, through a public exchange offer in France and in the United States, on the basis of 0.55 of a new Nokia share for every Alcatel-Lucent share.

  • This merger will create the world’s largest supplier of telecom equipment’s that powers mobilephone networks by surpassing Ericsson and Huawei.

MUDRA Bank Scheme

  • Prime Minister Narendra Modi launched Micro Units Development Refinance Agency (MUDRA) Bank with a corpus of Rs. 20,000 crore and credit guarantee of Rs. 3,000 crore. The Bank will provide credit of up to Rs 10 lakh to small entrepreneurs and act as a regulator for ‘Micro-Finance Institutions’ (MFIs).

  • The bank will be responsible for refinancing micro-finance institutions in the business of lending to small entities. MUDRA will be set up through a statutory enactment. The Pradhan Mantri MUDRA Yojana will be the main support system for the bank and will be the part of Small Industries Development Bank of India (SIDBI).

  • The MUDRA bank was proposed in Budget 2015-16 by Union Government with an initial corpus of 20,000 crore rupees. Apart from this, 3,000 crore rupees also has been earmarked as credit guarantee corpus.

The roles envisaged for MUDRA include:

  • Laying down policy guidelines for micro enterprise financing business
  • Registration of MFI entities
  • Accreditation /rating of MFI entities
  • Laying down responsible financing practices to ward off over indebtedness and ensure proper client protection principles and methods of recovery
  • Development of standardised set of covenants governing last mile lending to micro enterprises
  • Promoting right technology solutions for the last mile
  • Formulating and running  a Credit Guarantee scheme for providing guarantees to the loans/portfolios which are being extended to micro enterprises
  • Support development & promotional activities in the sector
  • Creating a good architecture of Last Mile Credit Delivery to micro  businesses under the scheme of Pradhan Mantri MUDRA Yojana

MUDRA Bank will provide financing on three stages- Shishu, Kishore and Tarun

  • Shishu: This will be the first step when the business is just starting up. The loan cover in this stage will be upto Rs 50,000.
  • Kishor: In this stage, the entreprenuer will be eligible for a loan ranging from Rs 50,000 to Rs 5 lakh.
  • Tarun: This last and final category will provide loans for upto Rs 10 lakh.

Dena Bank & LIC sign MoU to Provide Insurance Cover

  • State-run lender Dena Bank has signed an agreement with LIC to provide insurance cover to its savings account holders under the Prime Minister’s Pradhan Mantri Jeevan Jyoti Bima Yojana ( PMJBY) scheme.

Key Facts of MoU

  • Under the Memorandum of Understanding, LIC will give a life cover of Rs 2 lakh in case of death of the insured person at a nominal premium of Rs 330 per annum.
  • Account holders in the age group of 18 to 50 years can avail of the product.
  • People who join the scheme before completing 50 years can continue to have the risk of life cover up to the age of 55 years subject to payment of premium.

The scheme will come into effect from June 1, 2015. The bank customers can join the scheme from June 1, 2015 to May 31, 2016.

RBI Lowers Ceiling Rate

  • Concerned over the rising NPAs (non-performing assets) in the banking sector, the Reserve Bank of India (RBI) has proposed to lower the ceiling on how much a bank can lend to a single corporate group.
  • Under the proposal, banks can lend up to 25 per cent of their core capital to a single corporate group.
  • Currently, they have been given flexibility, with riders though, to lend up to 55 per cent of their core capital to a single corporate group.
  • The apex bank has proposed that the revised lower ceiling could come into effect from January 1, 2019.
  • The proposal is came with the announcement made by the RBI in its fourth bi-monthly Monetary Policy Statement 2014-15 on September 20 to come out with a discussion paper on the subject.

RBI Tightens Takeover Norms for Shadow Banking

  • The Reserve Bank of India (RBI) plans tougher rules for takeovers involving non-banking financial companies (NBFCs), according to draft guidelines published on Monday, outlining a demand that all substantial deals seek its prior approval.

  • In its latest effort to boost transparency and strengthen its grip on the alternative lenders that account for a large part of the domestic shadow-banking sector, the RBI said any purchase of a stake of 26 per cent or more in a company, or a change in more than 30 per cent of its directors, would need the central bank’s permission.

  • “The RBI has been continuously trying to strengthen this sector so that this should not be a back yard for people we don’t know,’’ said Sanjay Agarwal, Managing Director of Au Financiers (India), an NBFC from Rajasthan.

  • There are some 12,000 NBFCs registered with the RBI, and they largely offer loans. Some, like traditional banks, also take deposits.

  • The RBI also said in its circular that the source of funds behind new investors in any NBFC will have to be disclosed. It also asked for an undertaking that the new proposed investors are not associated with any existing but unregistered body that accepts public deposits.

  • NBFCs play a critical role in extending credit to areas where traditional finance cannot reach in a country where only just over half of the population has access to the mainstream banking system. However, controlling these NBFCs has been made a key priority for the RBI, given their size and reach.

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