Inquisitive Mind

After failures of some banks in the United States, troubles amplified for Credit Suisse. Credit Suisse Group AG Credit Suisse Group AG was a global investment bank headquartered in Zürich, Switzerland. It was bought by UBS Group AG on March 19, 2023. The reasons for its failures are – Big scams and losses uncovered in Credit Suisse during recent years. |   Falling share prices of Credit Suisse, withdrawal of funds by the customers and rising Credit Default Swaps for Credit Suisse.   |   | |     Silicon Valley Bank (SVB) collapsed on March 10, 2023 after a run on the bank.   On March 14, 2023, Credit Suisse said in its 2022 annual report that the bank has identified "material weaknesses" in internal controls over financial reporting.   ...

Heard of recent bank failures in the United States? What led to the collapse of these banks? Silvergate Bank  Silvergate Bank was a commercial bank headquartered in San Diego, California, United States. It announced voluntary liquidation on March 08, 2023. The reasons for its closure are – Silvergate Bank adopted crypto-currency focused business model in 2014. The boom of crypto market led to rise in deposits from crypto-assets.   | The bank kept most of its deposits in cash or easy-to-sell securities.   | Crypto-assets took a hit after the collapse of FTX crypto exchange in November 2022 and an ensuing criminal investigation.   | There was a surge in withdrawal of deposits, requiring the bank to sell its securities at losses to meet the depositors’ demands.  ...

Clearing Corporation of India Limited (CCIL), Fixed Income Money Market and Derivatives Association of India (FIMMDA) and Financial Benchmarks India Limited (FBIL) play an important role in the Indian financial markets. Clearing Corporation of India Limited (CCIL) The Clearing Corporation of India Limited (CCIL) is the clearing agency for Government Securities (G-Secs). All outright trades undertaken in the Over-the-Counter (OTC) market and on the Negotiated Dealing System-Order Matching (NDS-OM) platform are cleared through the CCIL.  CCIL acts as a Central Counter Party (CCP) for all transactions in G-Secs by interposing itself between two counterparties through the process of novation, i.e. it becomes the seller to the buyer and buyer to the seller of the actual transaction.  CCIL also guarantees settlement of all trades in G-Secs. That means, during the settlement process, if any participant fails to provide funds / securities, CCIL will make the same available from its ow...

'When Issued’ market facilitate purchase / sale of securities even before they are issued and 'Short Sale' option allows sale of a security one does not own. What is ‘When Issued’ market? "When, as and if issued" security refers to a security that has been authorized for issuance but not yet actually issued.  ‘When Issued’ trading takes place between the time a Government Security is announced for issuance and the time it is actually issued. All 'When Issued' transactions are on an 'if' basis, to be settled if and when the actual security is issued.  Which securities are eligible for ‘When Issued’ market? Both new and reissued Government securities issued by the Central Government are eligible for ‘When Issued’ transactions. Eligibility of an issue for ‘When Issue’ trades is indicated in the respective specific auction notification.  Who can participate in ‘When Issued’ market? Participants eligible to undertake net long and short position in ‘When...

India and Singapore have launched UPI-PayNow linkage – a real-time payment systems linkage between the two countries. What is UPI-PayNow linkage? UPI-PayNow linkage is a cross-border linkage between India and Singapore using their respective Fast Payment Systems, viz. Unified Payments Interface (UPI) and PayNow. The UPI-PayNow linkage is the product of extensive collaboration between Reserve Bank of India (RBI), Monetary Authority of Singapore (MAS), and Payment System Operators of both countries viz. NPCI International Payments Limited (NIPL) and Banking Computer Services Pte Ltd. (BCS), and participating banks / non-bank financial institution. What are the benefits of UPI-PayNow linkage? UPI-PayNow linkage will enable users of the two fast payment systems in either country to make convenient, safe, instant, and cost-effective cross-border funds transfers using their respective mobile apps.  Funds held in bank accounts or e-wallets can be transferred to / from India using just the...

Government securities can be held by investors either as physical stock or in dematerialized (demat / electronic) form. What is Government Security (G-Sec)? Government Security (G-Sec) is a tradeable instrument issued by the Central Government or the State Governments.  G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments. Who is central depository for G-Secs? The Public Debt Office (PDO) of Reserve Bank of India (RBI) acts as the registry / depository of G-Secs and deals with the issue, interest payment and repayment of principal at maturity.  How and in what form can G-Secs be held? G-Sec may be held by investors in the following forms – Physical form Demat form   From May 20, 2002, it is mandatory for all the RBI regulated entities to hold and transact in G-Secs only in dematerialized form.  How can G-Sec be held in physical form? G-Secs may be held in the form of stock certificates.  A stock certificate is ...

Reserve Bank of India (RBI) has launched ‘Har Payment Digital’ mission on the occasion of the digital payments awareness week 2023. Digital Payments Awareness Week (DPAW) 2023 Reserve Bank of India (RBI) is observing Digital Payments Awareness Week (DPAW) 2023 from March 06 to 12, 2023.  The campaign theme is “Digital Payment Apnao, Auron ko bhi Sikhao” (Adopt digital payments and Also teach others). The message is in sync with the Payments Vision 2025 of  RBI. ‘Har Payment Digital’ mission RBI has launched the mission ‘Har Payment Digital’ on the occasion of the DPAW 2023. This is part of RBI’s endeavour to make every person in India a user of digital payments. Activities during DPAW 2023 During the DPAW 2023, RBI will be conducting awareness and outreach programmes which will also form part of ‘Jan Bhagidari’ events under the Indian G20 presidency. Similar initiatives will be undertaken by the bank and non-bank Payment System Operators (PSOs). RBI will also initiate a ‘...

An investor can subscribe to government securities by placing competitive or non-competitive bids in the auctions. What is Government Security (G-Sec)? Government Security (G-Sec) is a tradeable instrument issued by the Central Government or the State Governments.  G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments. What are the types of bidding for G-Secs? G-Secs are issued through auctions. An investor, depending upon his eligibility, may bid in an auction under either of the following categories – Competitive Bidding Non-Competitive Bidding What is Competitive Bidding? In a competitive bidding, an investor bids at a specific price / yield and is allotted securities if the price / yield quoted is within the cut-off price / yield.  Competitive bids are made by well-informed institutional investors such as banks, financial institutions, PDs, mutual funds, and insurance companies.  The minimum bid amount is ₹10,000 and in mu...

Government securities can be auctioned either through yield based auction or price based auction. What is Government Security (G-Sec)? Government Security (G-Sec) is a tradeable instrument issued by the Central Government or the State Governments.  G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments. What are the types of auctions for issue of G-Sec?  Following are the types of auctions for issue of G-Sec – Yield Based Auction Price Based Auction  Yield Based Auction Price Based Auction A yield-based auction is generally conducted when a new G-Sec is issued. A price based auction is conducted when Government of India re-issues securities which have already been issued earlier. Investors bid in yield terms up to 2 decimal places (e.g., 8.19%, 8.20%, etc.). Bidders quote in terms of price per ₹100 of face value of the security (e.g., ₹102.00, ₹99.00, etc., per ₹100/-). ...