Inquisitive Mind

Reserve Bank of India (RBI) has announced withdrawal of ₹2000 denomination banknotes from circulation. When and why was banknote of ₹2000 introduced? The ₹2000 denomination banknote was introduced in November 2016 under Section 24(1) of Reserve Bank of India (RBI) Act, 1934 . It was introduced primarily to meet the currency requirement of the economy in an expeditious manner after the withdrawal of legal tender status of all ₹500 and ₹1000 banknotes in circulation at that time.  Why and when was printing of ₹2000 banknote stopped? The objective of introducing ₹2000 banknotes was met once banknotes in other denominations became available in adequate quantities.  Therefore, printing of ₹2000 banknotes was stopped in 2018-19. What is the status of ₹2000 banknotes in circulation? The total value of ₹2000 banknotes in circulation has declined from ₹6.73 lakh crore at its peak as on March 31, 2018 (37.3% of Notes in Circulation) to ₹3.62 lakh crore constituting only 10.8% of Notes i...

Regional Rural Banks (RRBs) can be placed under Prompt Corrective Action (PCA) framework by National Bank for Agriculture and Rural Development (NABARD). What is PCA and what does it mean for RRBs placed under PCA?  What is Prompt Corrective Action (PCA) framework? The primary focus of Prompt Corrective Action (PCA) framework is to ensure early rectification of the irregularities / deficiencies by self-corrective action of Regional Rural Banks (RRBs) and supervisory action by National Bank for Agriculture and Rural Development (NABARD).  To which banks is PCA framework applicable? The PCA framework applies to all RRBs operating in India. What parameters are considered under PCA framework? For the purpose of PCA framework, the financial health of a RRBs is evaluated in terms of following 3 parameters – Capital – indicated by Capital to Risk-Weighted Asset Ratio (CRAR) – the percentage of Capital to total risk-weighted assets. Asset Quality – indicated by Non-Performing Assets (...

We sometimes come across news headlines about some Primary (Urban) Co-operative Banks (UCBs) being placed under all-inclusive directions by Reserve Bank of India (RBI). When can all-inclusive directions be imposed under Supervisory Action Framework (SAF)? What is SAF and what does it mean for UCBs placed under SAF? What is Supervisory Action Framework (SAF)? Supervisory Action Framework (SAF) envisages initiation of corrective action by the Primary (Urban) Co-operative Banks (UCBs) and / or supervisory action by Reserve Bank of India (RBI) on breach of the specified thresholds (triggers) in respect of the specified financial parameters / indicators.  To which banks is SAF applicable? The SAF applies to all UCBs operating in India. What parameters are considered under SAF? For the purpose of SAF, the following 3 financial parameters / indicators are considered – Asset Quality – indicated by Net NPA Ratio Profitability – indicated by profit / loss Capital – indicated by CRAR  Ho...

We may sometimes wonder, why doesn’t RBI print and distribute plenty of money so that no one has to worry about poverty or inflation. Here, we will learn about what are the constraints or implications of printing unlimited money? What are banknotes? The notes of ₹2, 5, 10, 20, 50, 100, 200, 500 and 2,000 denominations are printed and issued by the Reserve Bank of India (RBI). These notes are called the bank notes. The notes of ₹1 denomination are printed by the Government of India and put into circulation by the RBI. These notes are called the currency notes. Who can issue bank notes and currency notes? As per Section 22 of Reserve Bank of India (RBI) Act, 1934, RBI has the sole right to issue bank notes in India and currency note of Government of India. As per Section 34 of RBI Act, 1934, the bank notes in circulation are the liabilities of the Issue Department of RBI.  Which assets can be held as backing for the notes? As per Section 33 of RBI Act, 1934, the bank notes in circula...

Reserve Bank of India (RBI) has issued directions on outsourcing of information technology services by the regulated entities. What is the objective of the directions? Regulated Entities (REs) have been extensively leveraging Information Technology (IT) and IT enabled Services (ITeS) to support their business models, products and services offered to their customers. REs also outsource substantial portion of their IT activities to third parties, which expose them to various risks. The underlying principle of the directions on outsourcing of information technology services is to ensure that outsourcing arrangements neither diminish REs ability to fulfil its obligations to customers nor impede effective supervision by the Reserve Bank of India (RBI). From when are the directions effective? The directions on outsourcing of information technology services will come into effect from October 01, 2023. With respect to existing outsourcing arrangements that are already in force as on the date o...