Category: RBI News

The Reserve Bank of India (RBI) has imposed, by an order dated July 15, 2021, a monetary penalty of ₹ 1.00 lakh (Rupees One lakh only) on Sawantwadi Urban Cooperative Bank Limited, Sindhudurg (the bank) for contravention of/ non-compliance with directions contained in the Supervisory Action Framework (SAF) issued by RBI under sections 35A and section 36(1) read with section 56 of the Banking Regulation Act, 1949 (the Act).This penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47A(1)(c) read with Section 46(4)(i) and Section 56 of the Act, taking into account the failure of the bank to adhere to the aforesaid SAF instructions/directions issued by RBI.

The action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.

Background

The inspection report of the bank based on its financial position as on March 31, 2019, revealed, inter alia, that the bank by sanctioning fresh loans contravened one of the aforesaid SAF instructions. Based on the same, a Notice was issued to the bank advising it to show cause as to why penalty should not be imposed for non-compliance with the SAF instructions directions.

After considering the bank’s reply to the Notice, RBI came to the conclusion that the aforesaid charge of non-compliance with RBI directions was substantiated and warranted imposition of monetary penalty.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2021-2022/538

The Reserve Bank of India (RBI) has imposed, by an order dated July 15, 2021, a monetary penalty of ₹2.00 lakh (Rupees Two lakh only) on Udyam Vikas Sahakari Bank Limited, Pune (the bank) for contravention of the directions issued by RBI on Exposure Norms and Statutory / Other Restrictions – UCBs. This penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47A(1)(c) read with Section 46(4)(i) and Section 56 of the Banking Regulation Act, 1949, taking into account the failure of the bank to adhere to the aforesaid directions issued by RBI.

The action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.

Background

The inspection report of the bank based on its financial position as on March 31, 2019, revealed, inter alia, that the bank had not adhered to (i) prudential inter-bank gross exposure limit and (ii) prudential inter-bank single counter party limit. Based on the same, a Notice was issued to the bank advising it to show cause as to why penalty should not be imposed for non-compliance with the aforesaid direction.

After considering the bank’s reply to the Notice, RBI came to the conclusion that the aforesaid charges of non-compliance with the RBI directions were substantiated and warranted imposition of monetary penalty.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2021-2022/537

The Reserve Bank of India will conduct a Variable Rate Reverse Repo auction on July 16, 2021, Friday, as under:

2. The operational guidelines for the auction as given in the Reserve Bank’s Press Release 2019-2020/1947 dated February 13, 2020 will remain the same.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2021-2022/536

As announced in Press Release dated July 5, 2021, the next purchase under G-SAP 2.0 would be conducted on July 22, 2021 for ₹20,000 crore.

2. Accordingly, the Reserve Bank will purchase the following Government securities through a multi-security auction using the multiple price method:

3. The Reserve Bank reserves the right to:

• decide on the quantum of purchase of individual securities.

• accept bids for less than the aggregate amount.

• purchase marginally higher/lower than the aggregate amount due to rounding-off.

• accept or reject any or all the bids either wholly or partially without assigning any reasons.

4. Eligible participants should submit their bids in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system between 10:00 am and 11:00 am on July 22, 2021. Only in the event of system failure, physical bids would be accepted. Such physical bid should be submitted to Financial Markets Operations Department (email; Phone no: 022-22630982) in the prescribed form obtainable from RBI website (https://www.rbi.org.in/Scripts/BS_ViewForms.aspx) before 11:00 am.

5. The result of the auctions will be announced on the same day and successful participants should ensure availability of securities in their SGL account by 12 noon on July 23, 2021.

(Yogesh Dayal)    
Chief General Manager

Press Release: 2021-2022/535

The Reserve Bank of India today released the July 2021 issue of its monthly Bulletin. The Bulletin includes three Articles and Current Statistics.

The three articles are: I. State of the Economy; II. Monetary Policy Transmission in India: Recent Developments; and III. Drivers of Indian Pharmaceutical Exports.

I. State of the Economy

The tapering of the second wave, coupled with an aggressive vaccination push, has brightened near-term prospects for the Indian economy. While several high frequency indicators of activity are recovering, a solid increase in aggregate demand is yet to take shape. On the supply side, agricultural conditions are turning buoyant with the revival in the monsoon, but the recovery of manufacturing and services sectors has been interrupted by the second wave. A pick-up in inflation is driven largely by adverse supply shocks and sector-specific demand-supply mismatches caused by the pandemic. These factors should ease over the year as supply side measures take effect.

II. Monetary Policy Transmission in India: Recent Developments

The transmission of policy repo rate changes to deposit and lending rates of scheduled commercial banks (SCBs) has improved substantially since the introduction of external benchmark linked lending rate (EBLR) regime in October 2019. Data collected from banks suggest that the share of outstanding loans linked to external benchmark in total floating rate loans has increased from as low as 2.4 per cent during September 2019 to 28.5 per cent by the end of 2020-21. The adoption of external benchmark-based pricing of loans has strengthened market impulses for a quicker adjustment in deposit rates. Further, a combination of surplus liquidity conditions amidst weak credit demand conditions has enabled banks to lower their deposit rates. The lowering of deposit rates has resulted in the decline in cost of funds for SCBs, prompting them to reduce their MCLRs, and in turn their lending rates.

III. Drivers of Indian Pharmaceutical Exports

The article attempts to capture the dynamics of the Indian pharmaceutical industry as it evolved in the last two decades and looks specifically into the export markets with an aim to understand the determinants of exports that can help this sector leverage its export potential in future.

• The Indian pharmaceutical industry is currently heavily dependent on its imports of active pharmaceutical ingredients (APIs), especially from China, despite having domestic research and development (R&D) potential through various channels such as joint ventures and domestic capacity improvements.

• Empirical analysis using panel data of 42 Indian pharmaceutical firms over the 12-year period from 2007 to 2019 suggest that import intensity and Research and Development (R and D) expenditure are the two key determinants of export intensity.

• A timely diversification of imports of raw materials and a long-term approach towards R and D is emphasised for elevating the sector’s global position.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2021-2022/534

The expression ‘ Banking System ‘ or ‘ Banks ‘ means the banks and any other financial institution referred to in sub-clauses (i) to (vi) of clause (d) of the explanation below Section 42(1) of the Reserve Bank of India Act, 1934.

No. of Scheduled Commercial Banks as on Current Fortnight: July 02, 2021: 134

Ajit Prasad
Director   

Press Release : 2021-2022/533

The Government of India has announced the sale (re-issue) of Government Stock detailed below through auctions to be held on July 16, 2021.

As per the extant scheme of underwriting notified on November 14, 2007, the amounts of Minimum Underwriting Commitment (MUC) and the minimum bidding commitment under Additional Competitive Underwriting (ACU) for the underwriting auction, applicable to each Primary Dealer (PD), are as under:

The underwriting auction will be conducted through multiple price-based method on July 16, 2021 (Friday). PDs may submit their bids for ACU auction electronically through Core Banking Solution (E-Kuber) System between 09:00 A.M. and 09:30 A.M. on the date of underwriting auction.

The underwriting commission will be credited to the current account of the respective PDs with RBI on the date of issue of securities.

Ajit Prasad
Director   

Press Release: 2021-2022/532