The Reserve Bank of India (RBI) on Tuesday imposed a penalty of Rs 2 lakh on Dhrangadhra People‘s Co-operative Bank, Surendranagar, Gujarat, for non-compliance with certain norms. The RBI said the penalty has been imposed for non-compliance with RBI directions on ‘Placement of Deposits with Other Banks by Primary (Urban) Co-operative Banks (UCBs)’ and ‘Depositor Education and Awareness Fund Scheme 2014’.
Giving details, the RBI said the statutory inspection of the bank conducted by it with reference to the bank’s financial position as on March 31, 2018, and the inspection report thereto, revealed, inter alia, non-compliance with the directions.
Subsequently, a notice was issued to the Dhrangadhra People’s Co-operative Bank.
“After considering the bank’s reply to the notice and oral submissions made during the personal hearing, the RBI came to the conclusion that the aforesaid charges were substantiated and warranted imposition of monetary penalty,” the RBI said.
The central bank added that the penalty 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.
There are two reasons behind it. The first is that economic recovery is gaining momentum and that implies a pick-up in credit growth.
The Reserve Bank of India (RBI) on Monday said it would carry out simultaneous purchase and sale of government securities (G-Secs) worth Rs 10,000 crore on February 25. These operations, often referred to as Operation Twist, follow the central bank’s OMO purchases on February 10.
“On a review of current liquidity and financial conditions, the RBI has decided to conduct simultaneous purchase and sale of government securities under open market operations (OMO) for an aggregate amount of ₹10,000 crore each on February 25, 2021,” the RBI said in a notification on Monday.
Over the past one week, the central bank has taken a series of measures to keep yields under control. In Friday’s Rs 26,000-crore auction, it had decided to devolve Rs 6,736 crore of the 6.22% government stock 2035 upon primary dealers as it was unwilling to let yields rise to the levels demanded by the market. On Thursday, it held a special auction of G-Secs to drive yields below 6%.
After this month’s monetary policy review, yields had surged in the absence of an OMO calendar. RBI governor Shaktikanta Das had sought to allay the market’s fears on the winding down of easy liquidity conditions. He had described last month’s hardening in money market rates and G-Sec yields as the outcome of perceived market misconceptions about the RBI reversing its accommodative policy stance.
At the same time, experts say the central bank may not have it as easy as last year when it comes to the smooth conduct of the government’s borrowing programme.
In a recent report, economists at Crisil observed that in pandemic-hit 2020, yields strayed from fundamentals and drooped to decadal lows despite a record rise in government borrowing. “The counter-intuitive happened because of extraordinary easing moves by both, the Reserve Bank of India (RBI) and global central banks. This year will be different, though,” the report said.
There are two reasons behind it. The first is that economic recovery is gaining momentum and that implies a pick-up in credit growth. Banks will now have more options than the government to lend to, which could put some pressure on G-Sec yields. Secondly, the RBI will have to keep an eye peeled for inflation amid an expansionary fisc and rising input costs, though in general, inflationary pressures are expected to remain under control.
After the implementation of the short-term strategy, the lender expected RBI to inspect its progress.
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The Reserve Bank of India (RBI) has appointed an external professional information technology (IT) firm to carry out a special audit of the entire IT infrastructure of HDFC Bank.
In a notification to the exchanges, the lender said the audit will be carried out under Section 30 (1-B) of the Banking Regulation Act, 1949, at the cost of HDFC Bank under Section 30 (1-C) of the Act. “The Bank shall accordingly extend its cooperation to the external professional IT firm so appointed by RBI for conducting the special IT audit as above,” the notification said.
On December 2, 2020, RBI had barred HDFC Bank from launching any new digital initiatives and issuing fresh credit cards. The penalty was issued in view of repeated outages at the bank’s data centres. In a recent post-results call, the bank management said it has envisaged two legs to its action plan for remedying its digital strategy. One is its cloud strategy, which involves a 12-18-month plan, and the other entails the implementation of other aspects of the plan over 10 to 12 weeks.
After the implementation of the short-term strategy, the lender expected RBI to inspect its progress. The bank said it opened two million new accounts during the December quarter and the RBI directive to stop issuing new credit cards has not affected its deposit accretion. More than two-thirds of its credit card accounts come from its existing liability base.
Srinivasan Vaidyanathan, chief financial officer, HDFC Bank, said, “We haven’t seen any kind of an impact on that sense on an immediate basis, but to the extent that these are all temporary, we should get back and we know that the life cycle of a card to become a little meaningful is actually a two-year journey.”
In the meantime, the bank has to run programmes for activation and engagement. “There is enough room for having various intervention programmes to accelerate,” Vaidyanathan told analysts, adding, “It depends on what sort of programmes we implement at what time period so that we can crunch this build-up life cycle to a shorter one as we go along.”
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