Month: March 2021

Reserve Bank of India – Notifications

Notifications

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RBI/2020-21/118
CO.DPSS.POLC.No.S34/02-14-003/2020-2021

March 31, 2021

The Chairman / Managing Director / Chief Executive Officer
All Scheduled Commercial Banks, including Regional Rural Banks /
Urban Co-operative Banks / State Co-operative Banks /
District Central Co-operative Banks / Payments Banks /
Small Finance Banks / Local Area Banks / Card Payment Networks /
Non-bank Prepaid Payment Instrument Issuers /
National Payments Corporation of India

Madam / Dear Sir,

Framework for processing of e-mandates for recurring online transactions

A reference is invited to our circulars DPSS.CO.PD.No.447/02.14.003/2019-20 dated August 21, 2019, DPSS.CO.PD.No.1324/02.23.001/2019-20 dated January 10, 2020 and DPSS.CO.PD.No.754/02.14.003/2020-21 dated December 4, 2020, wherein the framework for registering e-mandates for recurring online transactions using cards / wallets / Unified Payments Interface was put in place. The framework had ensured that changing payment needs of customers were accommodated by adequately balancing safety, security and convenience of such transactions. Stakeholders were given sufficient time to complete the process of migration to the framework by March 31, 2021.

2. It is, however, noted that the progress of onboarding existing as well as new mandates of customers as per the framework is not satisfactory. Keeping in view the requests of some stakeholders and to prevent any inconvenience to customers, it has been decided, as a one-time measure, to extend the timeline for ensuring full compliance to the framework till September 30, 2021. During the extended timeline, no new mandate for recurring online transactions shall be registered by stakeholders, unless such mandates are compliant with the framework.

3. Any further delay in ensuring complete adherence to the framework beyond the extended timeline will attract stringent supervisory action.

4. This directive is issued under Section 10(2) read with Section 18 of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007).

Yours faithfully,

(P. Vasudevan)
Chief General Manager

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Cancellation of Tender – Providing Fire Staff Services (06 Firemen and 03 Fire Supervisors) at RBI Office Premises in Bhopal

Tenders

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(e-Tender Event No.- RBI/Bhopal/HRMD/40/20-21/ET/454)

A reference is invited to the captioned e-tender No. RBI/Bhopal/HRMD/40/20-21/ET/454) which was floated on January 21, 2021 for “Providing Fire Staff Services (06 Firemen and 03 Fire Supervisor) at RBI office premises in Bhopal”.

2. This is to inform that the captioned tender stands cancelled, and a fresh tender shall be floated soon.

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As FY21 concludes, rupee loses some of its sheen

Banking & Finance

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Driven by a rising greenback and possible dollar-purchases by nationalised banks, the rupee suddenly turned weak on Tuesday, slipping to an intra-day low of 73.46 against the dollar. On Wednesday, the rupee pared some of its losses from the previous day but continued trading below the 73 level, ending FY21 with gain of 3.3 per cent against the dollar.

Two days ago, the rupee was the best performer among its emerging markets peers and had been the only currency reflecting a positive return on a year-to-date (YTD) basis. The up-move was supported by strong foreign portfolio investor (FPI) inflows into equity markets as well as a possible pause in the Reserve Bank of India’s dollar-buying spree in the quarter.

A report by IFA Global said the nationalised banks were persistently on the bid, likely on behalf of the Reserve Bank of India. ‘Correcting recent rupee over-valuation, especially against the yuan, and securing a higher USD/INR rate as on financial year-end could possibly have been the twin motives of the central bank. The up-move further triggered the unwinding of short USD/INR carry positions.’ the report said.

RBI dollar-buying spree

The central bank continued to shore up its forex reserves till early 2021 following which India’s forex reserves touched a record high of $590.185 billion by the end of January, according to Bloomberg data. Later, however, the forex reserves figure stagnated close to the $580-billion levels.

Experts pointed out that the RBI is likely to have stopped buying dollars in the spot market over the last two months and this could have provided a boost to the currency, especially at a time when foreign investors were buying into equities.

Anindya Banerjee, Vice-President at Kotak Securities, confirms that the central bank may have intervened and purchased close to $160 billion between June 2020 and February 2021, via spot, futures, and forwards which he believes could be a record level of intervention. “As long as the intervention was via the spot market, it was effective. However, once the RBI switched to forwards, it caused the forward premium to rise, thereby incentivising carry trade in a huge way,” he added.

Strong inflows from FPIs have also contributed to the rise in rupee over the last few months. Since January, FPIs have infused over $7 billion on a net basis into Indian equity markets although they have been net sellers in the bond market to the tune of over $2 billion.

The way forward

The significant fund flows into Indian equities over the last two months may not continue for long and that could have an impact on the currency.

MS Gopikrishnan, independent market expert, said usually the last quarter of the fiscal year is the best one for rupee from a trade deficit point of view. “We are just crossing that period and also entering a period of uncertainties in FPI flows on the back of higher US rates; these factors can put pressure on the rupee against the dollar. I expect the pair to move towards 74 in the coming weeks,” Gopikrishnan said.

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Investment by Foreign Portfolio Investors (FPI): Investment limits

Notifications

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RBI/2020-21/116
A.P. (DIR Series) Circular No. 14

March 31, 2021

To,

All Authorized Persons

Madam / Sir

Investment by Foreign Portfolio Investors (FPI): Investment limits

Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to Schedule 1 to the Foreign Exchange Management (Debt Instruments) Regulations, 2019 notified vide Notification No. FEMA.396/2019-RB dated October 17, 2019, as amended from time to time and the relevant Directions issued thereunder. A reference is also invited to A.P. (DIR Series) Circular No. 30 dated April 15, 2020 on the captioned subject.

2. Investment Limits for FY 2021-22

a. The limits for FPI investment in Corporate bonds shall remain unchanged at 15% of outstanding stock of securities for FY 2021-22. Accordingly, the revised limits for FPI investment in corporate bonds, after rounding off, shall be as under (Table – 1)

Table – 1: Limits for FPI investment in Corporate bonds for FY 2021-22
(₹ Crore)
Current FPI limit 5,41,488
Revised limit for HY Apr 2021-Sep 2021 5,74,263
Revised limit for HY Oct 2021-Mar 2022 6,07,039

b. The revised limits for FPI investment in Central Government securities (G-secs) and State Development Loans (SDLs) for FY 2021-22 will be advised separately. Till such announcement, the current limits (as in Table – 2), shall continue to be applicable.

Table – 2: Limits for FPI investments in G-Sec and SDL
(₹ Crore)
  G-Sec General G-Sec Long Term SDL General SDL Long Term
FPI investment limits 2,34,531 1,03,531 67,630 7,100

3. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

4. The Directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approval, if any, required under any other law.

Yours faithfully

(Dimple Bhandia)
Chief General Manager

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Retail payments: Half-a-dozen consortiums set to apply for NUE licence

Banking & Finance

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Leading banks, fintechs and India Inc companies are joining hands to apply for licences for the umbrella entity for retail payments. According to industry sources, about six such consortiums are set to apply for the licence. The Reserve Bank of India had extended the deadline to March 31.

Tech giants

Some of the consortiums are likely to include tech giants, including Google and Facebook, while corporates, including Reliance Industries through Reliance Jio and Tata Sons, are also understood to be in the race.

According to persons in the know, most applications are likely to be submitted to the RBI by Wednesday evening.

As was previously announced, Tata Sons promoted Ferbine Private Ltd in which HDFC Bank and Kotak Mahindra Bank have picked up stake, is set to apply for the licence. Mastercard is also understood to be a part of this.

Another consortium is being led by Axis Bank and ICICI Bank, along with Amazon, BillDesk, Pine Labs and Visa.

A third consortium includes So Hum Bharat Digital Payments, along with other fintech and payment players.

A fourth consortium is being led by Paytm and is likely to include IndusInd Bank, along with Suryoday Small Finance Bank, Ola and Centrum Finance and PolicyBazaar.

India Posts Payments Bank is also understood to be partnering with some players, including Razorpay, for a licence for the umbrella entity.

Deadline extension

The RBI had, on February 26 this year, extended the deadline for applications after receiving requests from stakeholders who had pointed to the Covid-19-related disruptions and inconveniences.

It had originally released the framework for the umbreall entity for retail payments on Augsut 18, 2020. It aims to help entities to set-up, manage and operate new payment systems in the retail space through means such as ATMs, White Label PoS; Aadhaar-based payments and remittance services; newer payment methods, standards and technologies; and also operate clearing and settlement systems for participating banks and non-banks.

The guidelines also said the umbrella entity shall have a minimum paid-up capital of ₹500 crore, and no single promoter or promoter group shall have more than 40 per cent investment in the capital of the umbrella entity.

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India to inject $2 billion capital in four weakened state banks, BFSI News, ET BFSI

Banking & Finance

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By Suvashree Ghosh

India will infuse 145 billion rupees ($2 billion) into four state-run banks to help strengthen capital buffers and potentially free some of the lenders from regulatory curbs.

Central Bank of India, Indian Overseas Bank, Bank of India and UCO Bank will receive the funds through zero-coupon bonds, according to a government notification dated Tuesday. All these lenders, except Bank of India, are under the Reserve Bank of India’s sanctions as their bad loans rose.

Prime Minister Narendra Modi’s government needs a healthier banking sector to boost lending and revive an economy set for a steep contraction. It is also looking to sell its stakes in certain lenders to earn cash and improve competitiveness. The industry’s bad-loan ratio is forecast to double in the year through September, with most of the soured assets held by state-run banks.

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E-mandate processing: RBI gives banks 6-month breather to comply with framework

Banking & Finance

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The Reserve Bank of India (RBI) on Wednesday gave Banks and payment aggregators a six-month breather by extending the timeline to comply with the “framework for processing e-mandates on recurring online transactions” till September 30, 2021.

Without this breather, millions of e-mandates set up by customers could have failed from April 1, 2021 as many banks have not upgraded capacities to comply with RBI’s requirements for enabling registering, tracking, modification, and withdrawal of e-mandates.

In fact, Banks had sent out a communication to their customers asking them to make alternative arrangements for recurring transactions for utilities and bill payments, such as registering the biller on the internet or mobile banking.

On non-compliance

While extending the timeline for processing recurring online transactions, the central bank underscored that non-compliance is noted with grave concern and dealt with separately.

“The delay in implementation by some stakeholders has given rise to a situation of possible large-scale customer inconvenience and default. To prevent any inconvenience to the customers, Reserve Bank has decided to extend the timeline.

“Any further delay in ensuring complete adherence to the framework beyond the extended timeline will attract stringent supervisory action,” RBI warned.

The Internet And Mobile Association of India (IAMAI), in a recent letter to the Niti Aayog, observed that the users should bear the cost of non-adherence to the RBI’s e-mandate circulars by the issuer banks, merchants and the non-bank entities, for no fault of theirs, resulting in huge business losses and significant disruptions to services to the consumers.

In August 2019, RBI had issued the framework for processing of e-mandates on recurring online transactions. Initially applicable to cards and wallets, the framework was extended in January 2020 to cover Unified Payments Interface (UPI) transactions.

In the interest of customer convenience and safety in the use of recurring online payments, the framework mandated use of Additional Factor of Authentication (AFA) during registration and first transaction (with relaxation for subsequent transactions up to a limit of ₹2,000, since enhanced to ₹5,000), as well as pre-transaction notification, facility to withdraw the mandate, etc.

Customer protection

The primary objective of the framework was to protect customers from fraudulent transactions and enhance customer convenience.

“Based on a request from Indian Banks’ Association (IBA) for an extension of time till March 31, 2021, to enable the banks to complete the migration, Reserve Bank had advised the stakeholders in December 2020 to migrate to the framework by March 31, 2021.

“Thus, adequate time was given to the stakeholders to comply with the framework,” RBI said in a statement.

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Reserve Bank of India – Press Releases

Press Releases

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Today, the Reserve Bank released its web publication entitled ‘Quarterly Basic Statistical Returns (BSR)-1: Outstanding Credit of Scheduled Commercial Banks (SCBs), December 2020’ on its Database on Indian Economy (DBIE) portal (web-link: https://dbie.rbi.org.in/DBIE/dbie.rbi?site=publications#!12). It captures various characteristics of bank credit such as occupation/activity and organisational sector of the borrower, type of account, and interest rates. Data covering 1,26,862 branches of 88 SCBs (excluding Regional Rural Banks) are presented for bank groups, population groups and states1.

Highlights:

  • Personal loans, which accounted for one fourth of total bank credit, continued to record double-digit growth; industrial loans remained in contraction zone.

  • Among the institutional sectors, growth in credit to the household sector2 was sustained and its share in total credit increased to 52.3 per cent in December 2020 (50.3 per cent in December 2019).

  • Private corporate sector recorded negative growth in bank credit (y-o-y) for the fifth successive quarter, reflecting tepid demand conditions; the share of private corporate sector in total credit declined to 28.5 per cent in December 2020 as compared with 31.4 per cent a year ago and 34.5 per cent two years ago.

  • Weighted average lending rate (WALR) for outstanding credit declined by 87 basis points over the last one year, including 23 basis points easing during the latest quarter.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2020-2021/1327

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SBI signs $1-b loan deal with JBIC

Banking & Finance

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State Bank of India (SBI) has signed a loan agreement amounting to up to $ 1 billion with Japan Bank for International Cooperation (JBIC). SBI had signed a similar deal with JBIC in October last year.

The loan is intended to promote smooth flow of funds for the whole range of business operations of Japanese automobile manufacturers in India.

JBIC is a policy-based financial institution, wholly-owned by the Japanese government.

Dinesh Khara, Chairman, SBI, said: “The Covid-19 crisis has delivered a significant shock to global trade, disrupted production lines, and depressed global demand. At a time when people are preferring personal mode of transport, this collaboration between SBI and JBIC will help the bank in extending loan facility to entire supply chain of Japanese automobile industry, including suppliers, dealers and ultimately to the end users.”

Ayukawa, MD and CEO, Maruti Suzuki, said: “Maruti Suzuki is making efforts to balance between the environmental friendliness of our vehicles and our customer’s need. The special support for our environment friendly vehicles will accelerate Suzuki group’s initiative towards environmental care.”

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IFSC Codes Of These PSU Banks To Change From April 1

Personal Finance

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Personal Finance

oi-Roshni Agarwal

|

Beginning the new fiscal year 2022 i.e. from April 1, 2021 the IFSC code of Oriental Bank of Commerce, Syndicate Bank, United Bank of India, Andhra Bank, Corporation Bank and Allahabad Bank will change. And so the account holders of these banks for any transaction need to specify the new IFSC codes such that their transactions get processed smoothly without any failure.

IFSC Codes Of These PSU Banks To Change From April 1

IFSC Codes Of These PSU Banks To Change From April 1

In 2019, the FM Sitharaman announced consolidation of 10 PSBs into 4 mega PSBs. The merger came into force from April 1, 2020 and now from the new FY, the IFSC codes and MICR of the merging banks will become inoperative and instead the codes of the anchor bank (AB) will replace them.

And now here’s the timeline by when the new IFSC and MICR codes shall apply for the different banks:

Anchor Bank Amalgamating Banks Timeline when IFSC will get discontinued
PNB OBC April 1, 2021
United Bank of India
Union Bank of India Andhra Bank April 1, 2021
Corporation Bank
Indian Bank Allahabad Bank May 1, 2021
Canara Bank Syndicate Bank July 1, 2021
Bank of Baroda Vijaya Bank, Dena Bank March 1, 2021

The data with respect to changes in IFSC code has been made available on the individual bank’s website. Say for instance BOB on its site stated that the IFSC codes of the earlier Vijaya Bank and Dena Bank ceased on March 1, 2021. And customers have been asked to apply for cheque books bearing new MICR code by March 31, 2021.

Importance of IFSC code and MICR code:

IFSC stands for Indian Financial System Code and facilitates transfer of money as well as tradable financial assets from one bank to another via different modes of transfer including NEFT, RTGS etc. And MICR or Magnetic Ink Character Recognition i.e. a nine digit code helps in the faster clearance of cheques.

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