MSME, RBI - Current Affairs Questions and Answers

ANSWER: Sanchet.rbi.org.in

Explanation:
To prevent illegal and unauthorised pooling of funds by firms, RBI launched a website called sachet.rbi.org.in which alerts people regarding entities allowed to collect deposits.

• Portal will facilitate filing, tracking of complaints besides providing information about whether any particular entity is permitted to accept deposits and registered with the regulatory authority for the same.
• Sachet means the Hindi word for later and will help regulators to assist members of the public.

ANSWER: 25%

Explanation:
Last year, the apex bank had transferred 52,679 crore rupees of its surplus profit to the Government.

ANSWER: MSME Sambandh

Explanation:
The Ministry of Micro, Small and Medium Enterprises (MSME) launched Public Procurement Portal 'MSME Sambandh' for Public Procurement Portal for MSMEs.

The objective of the portal is to monitor the implementation of the Public Procurement from MSEs by Central Public Sector Enterprises (CPSEs).

It will help MSMEs in participating in the procurement process. Besides, it will help Ministries and the CPSEs can assess their performance in procurement process as stipulated in Procurement Policy, 2012.

The Procurement Policy launched in 2012 mandates the Central Government Departments, CPSEs to procure necessarily from MSEs.

It means that every Central Ministry, Department, PSU shall set an annual goal for procurement from MSE sector at beginning of year.

Its objective is to achieve overall procurement goal of minimum of 20% of the total annual purchases of the products or services produced or rendered by MSEs.

ANSWER: Both a and b

Explanation:
The Reserve Bank today relaxed norms for issuance of rupee-denominated overseas bonds, popularly known as masala bonds.

They will be treated as external commercial borrowings from October 3, thereby freeing up more investments by FPIs.

Currently, the limit for investment by foreign portfolio investors (FPIs) in corporate bonds is INR 2,44,323 crore.

This covers issuance of masala bonds by resident entities of INR 44,001 crore, including the ones in pipeline.

After a review, the RBI said that from October 3, masala bonds will no longer form part of the limit for FPI investments in corporate bonds.

They will form part of the ECBs and will be monitored accordingly.

As a result, INR 44,001 crore arising out of shifting of masala bonds will be released for foreign portfolio investor (FPI) investment in corporate bonds over the next two quarters.

Now, FPI investment limit for corporate bonds will increase to INR 2,44,323 crore from January 1.

Further, an amount of INR 9,500 crore in each quarter will be available only for investment in the infrastructure sector by long-term FPIs - sovereign wealth funds, multilateral agencies, endowment, insurance and pension funds and foreign central banks.

With surge in inflows in Indian debt markets, the cumulative utilisation of FPI limit in corporate bonds stood at 99.07 per cent as on September 21, 2017, reflecting limited scope of further FPI investments.

The Reserve Bank of India (RBI) changed the rules pertaining to the calculation of the foreign investment limit in so-called masala bonds, potentially opening up space for Indian companies to sell more such securities.

“Such a shift will allow companies to issue masala bonds as they are currently barred by Sebi (Securities and Exchange Board of India).

This will also lead to better monitoring of issuances by RBI as the external commercial borrowings framework is restrictive in terms of end-use of funds.

In a 20 July circular, market regulator Sebi had said that issuance of masala bonds would be temporarily stopped until the total foreign holding of corporate bonds falls below 92% of the limit.

As of 21st Sept 2017, foreign investors had exhausted over 99% of the available cap.

In June, the Reserve Bank of India had tightened the rules on the issuance of masala bonds.

The central bank mandated a minimum maturity of three years for sales of up to $50 million. Issuances above $50 million must be of five years or above maturity.

ANSWER: National SC ST Hub

Explanation:
The Vice President, Shri Venkaiah Naidu was the Chief Guest of National SC ST Hub (NSSH) Confluence organized by Ministry of Micro, Small and Medium Enterprises (MSME) and also released first ever radio jingle for National SC ST Hub.

A collective, coordinated action is needed to strengthen the eco-system for promoting SC & ST Entrepreneurs in the country.

Capacity building is important; credit availability is important, technology up-gradation is also important, he added.

Micro, Small and Medium Enterprise Sector (MSME) is the bulwark of the Indian economy and one of the largest employers after agriculture. He further said that it is also one of the major contributors to the country’s GDP.

With Make in India envisaging to push contribution of the manufacturing sector to 25 per cent of the GDP by 2022, the MSME sector will be required to play a critical role in achieving the goal, he added.

Skill up gradation is one area that requires top attention for the overall development of SC/ST entrepreneurs.

National SC/ST Hub was lauded for signing MoUs with Sector Skill Councils to skill over 2,000 entrepreneurs, as these associations and incubators have a huge role to play in supporting the objectives of National SC/ST Hub.

Each association must extend support in building capacities and mentoring entrepreneurs in its respective sector.

National SC ST Confluence: Know More

• The confluence brought various insights from Industry Association and Incubators to understand the gaps in realizing the mandate of Public Procurement Policy.
• It put forth innovative strategies for holistic development of MSEs owned by SC/ST Entrepreneurs.
  The discussion held was extremely fruitful and intend to go a long way in meeting the objectives of the National SC ST Hub.
• Interactive session was held with over 150 industry associations and incubators with representation of over 400 participants, focussing on collaboration with NSSH, to augment the capabilities of existing SC/ST entrepreneurs.
• Several excellent suggestions were made with respect to market access; capacity building, tender challenges, technology upgradation, etc. were made.
• The session also focused on future action plan along with role to be played by each stakeholder to achieve the objectives of the hub.
• In addition, MOUs were signed with 3 Sector Skill Councils to provide skill development trainings of SC-ST Entrepreneurs under capacity building initiatives of NSSH.

Background:

• The Government of India formulated the Public Procurement Policy, 2012 which states that 20% of total procurement of goods and services by Central Ministries, Departments and CPSEs shall be made from MSEs and 20% of such procurement (4% of total) shall be from SC & ST owned MSEs.
• NSSH is a unique initiative launched by Prime Minister Shri Narendra Modi on 18th October 2016. This initiative is aimed empowering SC ST owned MSEs in order to achieve the 4% mandate of the Public Procurement Policy.
• In view of the above, the NSSH initiative has the potential to work on ground and have an impact till the last mile. Due to the social and economic bearing the programme can have, it requires a strategy that delivers sustained and measurable impact, on the entire MSME ecosystem.
• Therefore, there have been continual efforts to include all relevant stakeholders including state, industry associations, incubators, CPSEs to identify synergies and work collaboratively and cohesively towards a shared goal.

Milestones in the Hub

Some of the milestones achieved by the hub are as follows -

1. Data analysis completed for 5 lakh SC/ST units to identify suppliers to CPSEs

2. Physical verification of over 4,900 SC/ST entrepreneurs completed that had potential to supply to CPSEs

3. Telephonic interaction with over 2,590 SC/ST MSMEs completed to understand challenges in securing PSUs’ tenders

4. Information of 1,003 SC/ST enterprises mapped with 42 CPSEs for vendor empanelment and procurement

5. Appointment of nodal officers in 67 CPSEs. Discussion with over 60 CPSEs conducted

6. Special Marketing Assistance Scheme - 950 units participated in domestic and international fairs/exhibition

7. 2,107 units facilitated with CPSE linkages under Special Vendor Development Programme

8. 512 SC/ST units benefitted under Special Performance & Credit Rating Scheme

9. Training programme conducted in IIM Noida (Satellite institute of IIM Lucknow), IIM Lucknow, IIM Raipur, IIM Kolkata and XLRI Jamshedpur (on pilot basis) for SC/ST entrepreneurs for over 100 SC/ST entrepreneurs.

ANSWER: 6 percent

Explanation:
The RBI has cut the repo rate by 25 bps to 6%. This was on expected lines as market consensus predicted a 25 bps cut.

Reverse repo rate has also been cut by 0.25 per cent to 5.75 per cent.

The six member monetary policy committee voted on the basis of a majority for a cut. Dr. Chetan Ghate, Dr. Pami Dua, Dr. Viral V. Acharya and Dr. Urjit R. Patel were in favour of the monetary policy decision.

Dr. Ravindra H. Dholakia voted for a policy rate reduction of 50 basis points and Dr. Michael Debabrata Patra voted for status quo.

The cut in rates comes against the backdrop of slowing credit growth, very low inflation and low economic growth.

Retail inflation has fallen to a five year low of 1.5 per cent in June and expected to remain soft for a while longer. Bank credit is growing at just a little over 6 per cent year on year.

The economy has slowed down through the past five quarters from a high of 9.1% registered in the fourth quarter of fiscal 2016 to a level of 6.1% in the fourth quarter of fiscal 2017.

Factory activity contracted to an 8-year low with the purchasing managers’ index at just 47.9 points in July.

The RBI noted in its statement that actual headline inflation for Q1 has tracked projections of being in the range of 2 to3.5 per cent in the first half of the year.

Looking ahead, as base effects fade, the evolving momentum of inflation would be determined by

(a) the impact on the CPI of the implementation of house rent allowances (HRA) under the 7th central pay commission (CPC);

(b) the impact of the price revisions withheld ahead of the GST; and

(c) the disentangling of the structural and transitory factors shaping food inflation.

It noted that there are several factors contributing to uncertainty around this baseline inflation trajectory.

It flagged its concern that implementation of farm loan waivers by States may result in possible fiscal slippages and undermine the quality of public spending, entailing inflationary spillovers.

It said that the timing of the States’ implementation of the salary and allowances award is critical–it is not factored into the baseline projection in view of lack of information on their plans.

If States choose to implement salary and allowance increases similar to the Centre in the current financial year, headline inflation could rise by an additional estimated 100 basis points above the baseline over 18-24 months, the statement noted.

Some moderating forces are also at work, the RBI indicated.

First, the second successive normal monsoon coupled with effective supply management measures may keep food inflation under check.

Second, if the general moderation of price increases in CPI excluding food and fuel continues, it will contain upside pressures on headline inflation.

Third, the international commodity price outlook is fairly stable at the current juncture.

RBI Retains GVA outlook

• The RBI noted that high levels of stress in twin balance sheets - banks and corporations - are likely to deter new investment.
• The real estate sector also may see delayed project launches as a new regulatory framework comes into play.
• The states’ finances could come under pressure with farm loan waivers and limit fresh capacity expansion.
• It said however there were upsides to the baseline projections emanating from good monsoon progress, a good kharif harvest, boost to rural demand, step up in rural allocations, and the positive impact of GST.
• The rising probability of another good kharif harvest, the boost to rural demand from the higher budgetary allocation to housing in rural areas, the significant step-up in the budgetary allocation for roads and bridges, and the growth-enhancing effects of the GST spur investment.
• External demand conditions are gradually improving and should support the domestic economy, although global political risks remain significant.
• Keeping in view these factors, the projection of real GVA growth for 2017-18 is retained at 7.3%."

Inflation outlook

The RBI's Monetary Policy committee was cautious in expressing its view that while inflation has been soft, it still remained to be seen whether it was transient or whether the 'a more durable disinflation was underway'.

The MPC noted that some of the upside risks to inflation have either reduced or not materialised-

(i) the baseline path of headline inflation excluding the HRA impact has fallen below the projection made in June to a little above 4 per cent by Q4;

(ii) inflation excluding food and fuel has fallen significantly over the past three months; and,
(iii) the roll-out of the GST has been smooth and the monsoon normal.

• It said, that consequently, some space has opened up for monetary policy accommodation, given the dynamics of the output gap and accordingly decided to reduce the policy repo rate by 25 basis points.
• Noting, however, that the trajectory of inflation in the baseline projection is expected to rise from current lows, the MPC decided to keep the policy stance neutral and to watch incoming data.
• The MPC remains focused on its commitment to keeping headline inflation close to 4 per cent on a durable basis, the statement said.

ANSWER: Zero Defect Zero Effect

Explanation:
The Government has launched a new scheme namely “Financial Support to MSMEs in ZED Certification Scheme”.

The objective of the scheme for promotion of Zero Defect and Zero Effect (ZED) manufacturing amongst micro, small and medium enterprises (MSMEs).

It also involves ZED Assessment for their certification so as to:

• Develop an Ecosystem for Zero Defect Manufacturing in MSMEs.
• Promote adaptation of Quality tools/systems and Energy Efficient manufacturing.
• Enable MSMEs for manufacturing of quality products.
• Encourage MSMEs to constantly upgrade their quality standards in products and processes.
• Drive manufacturing with adoption of Zero Defect production processes and without impacting the environment.
• Support ‘Make in India’ campaign.
• Develop professionals in the area of ZED manufacturing and certification.

There are 50 parameters for ZED rating and additional 25 parameters for ZED Defence rating under ZED Maturity Assessment Model.

The MSMEs are provided financial assistance for the activities to be carried out for ZED certification i.e., Assessment / Rating, Additional rating for Defence angle, Gap Analysis, Handholding, Consultancy for improving the rating of MSMEs by Consultants and Re-Assessment / Re-Rating.

Under the scheme 22,222 MSMEs will be rated & certified under ZED Maturity Assessment Model, 5,000 MSMEs will be rated & certified under the ZED Defence Model, 7368 MSMEs will be supported for Gap Analysis, Handholding, Consultancy for improving their rating, etc.

The total cost of the project is INR 491.00 crores (Government contribution Rs 365.00 crores, beneficiary MSMEs contribution Rs 126.00 crores).

Quality Council of India (QCI) has been appointed as the National Monitoring & Implementing Unit (NMIU) for implementation of ZED.

QCI has reported that 3217 MSMEs has been registered as on25.07.2017 for ZED Certification.

The MSME-wise details are Micro: 1332, Small: 1522 & Medium: 363 and financial assistance to MSMEs is yet to commence.

MSME Schemes

• The Ministry of MSME is implementing a number of schemes to promote MSMEs namely:
• (i) Credit Guarantee Fund Scheme for Micro and Small Enterprises to facilitate collateral free credit to new and existing micro and small enterprises (MSEs);
• (ii) Scheme for Raw Material Assistance implemented by National Small Industries Corporation Limited under the Ministry;
• (iii) National Manufacturing Competitiveness Programme (NMCP) and Credit Linked Capital Subsidy Scheme implemented to facilitate upgradation of technology, improve processes and design;
• (iv) Management Development Training Programmes (MDPs) for enhancing managerial skills;
• (v) Micro and Small Enterprises-Cluster Development Programme to facilitate infrastructure upgradation and setting up of Common Facility Centres; and
• (vi) Marketing Development Assistance Support to MSME;
  
• (vii) Ministry of MSME has introduced online MSME Data Bank on 29.07.2016 for creating comprehensive database of MSMEs and
  
• (viii) Ministry of MSME has introduced simplified online registration “Udyog Aadhar Memorandum (UAM) for MSMEs”. 33,25,159 MSMEs registered with UAM from September, 2015 till 25.07.2017.

ANSWER: Insolvency and Bankruptcy Code 2016

Explanation:
Reserve Bank of India (RBI) has constituted an Internal Advisory Committee (IAC), which arrived at an objective, non-discretionary criterion for referring accounts for resolution under Insolvency and Bankruptcy Code, 2016 (IBC).

In particular, the IAC recommended for IBC reference all accounts with fund and non-fund based outstanding amount greater than INR 5000 crore, with 60% or more classified as non-performing by banks as of March 31, 2016.

Accordingly, Reserve Bank of India has issued directions to certain banks for referring 12 accounts, qualifying under the aforesaid criteria, to initiate insolvency process under the Insolvency and Bankruptcy Code, 2016.

As regards the other non-performing accounts which do not qualify under the above criteria, the IAC recommended that banks should finalize a resolution plan within six months.

In cases where a viable resolution plan is not agreed upon within six months, banks should be required to file for insolvency proceedings under the IBC.

However, the names and details of borrowers are not disclosed as prescribed under section 45E of the Reserve Bank of India (RBI) Act, 1934 and Banking Laws.

These laws provide for the obligation of a bank or financial institution to maintain secrecy about the affairs of its constituents.

In respect of the above-mentioned 12 accounts, Reserve Bank of India has advised the banks to make provisions as under:

(a) 50 per cent for secured portion of the outstanding balance plus 100 percent for the unsecured portion.

(b) Provisions required to be maintained as per the extant Asset classification norms.

The additional provisions, as required in each case, should be proportionately spread over the remaining quarters of the current financial year, starting Q2.

This is so that the required provisions are fully in place by March, 2018.

The effect of the provisioning requirement prescribed in respect of the said 12 accounts would vary for each account and for the respective banks depending upon the current asset classification, current provisions held, security coverage etc.

ANSWER: Banking ombudsman scheme

Explanation:
The Reserve Bank of India (RBI) has allowed consumers to lodge complaints against banks for non-adherence to norms related to electronic banking services, including those provided on mobile phones, under the banking ombudsman scheme, its cost-free dispute resolution mechanism.

The central bank has also allowed customers to file complaints against banks for deficiencies arising out of sale of third party products such as insurance policies and mutual fund schemes sold by banks.

The scope of the scheme, introduced in 1995, has been expanded.
The banking ombudsman has now been powered to pass an award of INR 20 lakh, as against the earlier threshold of INR 10 lakh.

The ombudsman can also give a consumer up to INR 1 lakh as compensation for loss of time, expenses incurred and mental anguish suffered during fighting the case.

According to the annual report on the banking ombudsman scheme for 2015-16 (July-June), 15 offices of banking ombudsman received 102,894 cases, a jump of 21% over the 2016-17 fiscal year.

Currently, there are 20 offices of banking ombudsman, according to the information available on central bank’s website.

ANSWER: Unchanged

Explanation:
The Reserve Bank of India has kept repo rate unchanged at 6.25% in its second bi-monthly monetary policy review.

Reverse Repo rate has been kept unchanged at 6%.

The RBI has cut the Statutory Liquidity Ratio (SLR) by 50 basis points to 20%. RBI has projected the headline inflation in the range of 2.0-3.5% in the first half of 2017-18 and 3.5-4.5% in the second half.

According to the central bank, the implementation of GST is not expected to have material impact on overall inflation. It has observed that the 7th Pay Commission allowances, geo political, financial risk pose upside risk to inflation.

RBI has reduced the growth projection for the current fiscal to 7.3% from 7.4%. The monetary policy decision has been taken by the six-member monetary policy committee (MPC).

The RBI has also revised its target for gross value added (GVA) by 10 basis points to 7.3%.

Statutory Liquidity Ratio/SLR: Know More

• SLR is the portion of bank deposits that have to be invested in government bonds.
• Components of SLR include cash in hand, gold owned by the bank, balance with RBI, Net balance in current account & Investment in Government securities.
• SLR has to be maintained at the close of business on every day.