Former RBI deputy governor R Gandhi on Tuesday said the Supreme Court order prohibiting use of Aadhaar has caused great uncertainty, confusion and reluctance on the part of banks and financial institutions to use biometrics as the basis for conducting KYC for customers. According to him, the cost of operations of fintech companies has gone up significantly, affecting their profitability and also threatening their continued existence.
The RBI has issued guidelines for tokenizations of debit/credit card transactions for enhancing the safety and security of payments. Tokenization will generate a unique 16-digit code, called a “token,” which will replace the actual card details. Instead of the card’s details, the token will facilitate payments at point of sale (POS) terminals, In-app purchases, e-wallets and quick response (QR) code payment systems. These payment platforms will not be able to read or save the original card details. The service would initially be used through only smartphones and tablets, though it may be expanded to other devices later.
A recent RBI guideline on delivery of bank credit can potentially increase the bad loan stress upto Rs 5.24 trillion. The RBI had last month issued guidelines stipulating that from April 2019, minimum 40% of fund- based limits of a borrower is required to be structured in the form of a 'loan component' with a fixed maturity. The implementation will require a rollover of Rs 4.10 trillion of working capital loans in FY20. Of this, loans worth Rs 1.90 trillion are likely to face high rollover risks due to weak operating cash flows and a high proportion of rollover requirement.
Industry lobby group Confederation of Indian Industry (CII) on Thursday met the RBI governor to address the liquidity issues faced by the housing finance companies (HFCs) and NBFCs. It requested the RBI to reduce the repo rate and cash reserve ratio (CRR) by 50 basis points each to ease credit flows to borrowers. The delegation led by Uday Kotak and Adi Godrej suggested measures such as refinance facility for mutual funds, removal of personal guarantees where sufficient collateral exists and issuing letters of undertaking (LoUs) for buyers’ credit for MSMEs.
The RBI on Wednesday announced a new framework for external commercial borrowings (ECB) and rupee denominated bonds. Indian borrowers can now raise funds from offshore markets for at least three years without any ceiling on the amount. All eligible borrowers can now raise ECBs up to $750 million or equivalent per financial year under the automatic route. Previously, the RBI had only allowed companies to borrow up to $50 million for three years. For funds beyond $50 million companies had to borrow for at least five years. The new norms have replaced the previous sector-wise limit.
The RBI on Wednesday allowed entities that are eligible to receive foreign direct investment (FDI) to raise external commercial borrowings (ECBs) through automatic route up to $750 million per year. The minimum maturity tenure of the ECB should be three years, except in certain cases. Companies raise funds through ECB under automatic route and approval route. Under automatic route, a company doesn’t need to take permission of the RBI, whereas, for the latter, prior approval has to be taken. The funds will have to be parked overseas, pending utilization for permissible end-uses, the RBI said.
The country's largest lender, SBI has started sending SMS alerts to its account holders asking them to update their KYC in line with the RBI's norms. Failure to comply with KYC requirements could lead to the bank account getting partially frozen and subsequently completely deactivated. Not adhering to KYC norms can also lead to heavy penalties being slapped on the offending banks. For instance, last November, the RBI had imposed a penalty of over Rs 3 crore each on Deutsche Bank and Jammu and Kashmir Bank for non-compliance of various norms, including asset classification and KYC.
The Reserve Bank of India (RBI) Tuesday said it would inject Rs 10,000 crore into the system through purchase of government securities on January 17 to increase liquidity. The purchase will be made through open market operations (OMOs). The RBI has so far injected Rs 20,000 through OMOs in January 2019 against the targeted Rs 50,000 crore.
The Reserve Bank of India (RBI) on Monday said it has imposed a penalty of Rs 1 crore on Bajaj Finance Ltd for violating "fair practices code" and deficiencies in regulatory compliances. Bajaj Finance is a non-banking finance company (NBFC) engaged the businesses such as consumer finance, SME finance, and commercial lending.
The Reserve Bank of India (RBI) has raised concerns over the rising non-performing assets (NPAs) under the government's flagship scheme to support micro-enterprises in the country -- the Pradhan Mantri Mudra Yojana (PMMY). The central bank has pegged the estimated NPAs under PMMY at Rs 11,000 crore. As per the annual report of PMMY for FY18, total disbursements under the scheme stood at Rs 2.46 trillion. The PMMY was launched on April 8, 2015, which offered bank finance facility to micro and small entrepreneurs up to Rs 10 lakh.
The finance ministry and the RBI are expected to relax the prompt corrective action (PCA) framework for few stressed public sector banks (PSBs). The relaxation will be offered to banks who have shown considerable improvement in addressing bad loans. As of now, 11 PSBs and one private lender are under the PCA framework. The PCA norms apply curbs on lending and branch expansion, among others. Last month the government infused Rs 41,000 crore in state banks, hiking the total recapitalization in the current financial year to Rs 1.06 lakh crore from Rs 65,000 crore.
Industry lobby Assocham on Friday met RBI governor Shaktikanta Das and discussed the liquidity issues being faced by NBFCs and housing finance companies (HFC) and suggested some steps to ease the current crisis. The industry body said that the NBFCs want RBI to play the role of facilitator and requested the governor to maintain the existing asset-liability mismatch (ALM) norms till the normalcy is restored. The players have demanded that sectoral cap on mutual funds investing in NBFCs be enhanced to 35%, and an additional 15% in case of HFCs.
The Cabinet on Thursday approved a $75-billion bilateral swap arrangement (BSA) between India and Japan. The move will enhance RBI's ability to manage exchange rate volatility. "The swap arrangement is an agreement between India and Japan to essentially exchange and re-exchange a maximum amount of USD 75 billion for domestic currency, for the purpose of maintaining an appropriate level of balance of payments for meeting short-term deficiency in foreign exchange," the release said. The arrangement will also improve the prospects of Indian companies to raise foreign capital as there would be greater confidence in the country's exchange rate stability.
The Reserve Bank of India (RBI) on Thursday deferred the implementation of the last tranche of Capital Conservation Buffer (CCB) of 0.625% by a year from March 31, 2019 to March 31, 2020. The move will leave the banks richer by about an estimated Rs 37,000 crore capital. This would help banks increase lending by over Rs 3.5 lakh crore by leveraging ten times of the capital. Accordingly, minimum capital conservation ratio of 2.5% would be applicable from on March 31, 2020. The RBI Board, however, decided to retain the capital adequacy ratio or CRAR at 9%.
11 public sector banks (PSBs) which are currently placed under the RBI’s prompt corrective action (PCA) will have to wait for about a month before knowing which of them will have lending curbs eased. The RBI's Board for Financial Supervision (BFS), chaired by the central bank's new Governor Shaktikanta Das, will review the third quarter financial performance of these banks before taking a final call. The government has been pursuing the central bank to ease the lending restrictions on at least some of the banks in an attempt to boost credit growth.