Tag: RBI

Maintaining status quo on rates will help further revive economy: Bankers

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The Reserve Bank of India’s decision to maintain the status quo on rates would help in a full-fledged economic revival but bankers and market participants are awaiting clear signals on liquidity normalisation.

Signs of recovery

Raj Kiran Rai G, Chairman, Indian Banks’ Association, and Managing Director and CEO, Union Bank, said, “Today’s policy is announced against the back drop of nascent signals of recovery of the domestic economy and mixed cues from the global economy.”

Also see: In a bid to lower power costs, Govt to implement Phase 1 of market-based economic despatch from April next

Since the price situation is under control for the time being, the central bank has given more focus on growth momentum in this policy also, he added.

Tapering excess liquidity

While the RBI has given a roadmap for tapering of excess liquidity from the system in a calibrated manner without disrupting government borrowing programme and liquidity needs of the economy, Rai said clear signals to the market will help the participants manage their liquidity needs well.

Accommodative stance

“The commitment to accommodative stance reaffirms the RBI’s commitment to support economic revival,” said AK Das, Managing Director and CEO, Bank of India.

Zarin Daruwala, Cluster CEO – India and South Asia Markets, Standard Chartered Bank, also said the MPC has reinforced its commitment to growth by continuing with its accommodative stance and holding the repo rate.

“The RBI’s latest economic forecast also points to a robust recovery amidst lower inflation,” she added.

Delayed normalisation

An SBI Ecowrap report said it expects that the normalisation of reverse repo and repo corridor may be possibly delayed beyond December.

Also see: Watch | RBI maintains status quo on rates

HSBC Global Research in a note said, “While the RBI kept rates and stance unchanged as expected, we think it took important steps to prepare the market for future policy normalisation.”

It expects the policy corridor to be narrowed over December and February, but repo rate hikes will only follow in the second half of 2022.

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RBI hikes IMPS daily transaction limit to ₹5 lakh

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The Reserve Bank of India on Friday announced a proposal to increase the per-transaction limit for the Immediate Payment Service (IMPS) from ₹2 lakh to ₹5 lakh for channels other than SMS and IVRS.

“This will lead to further increase in digital payments and will provide an additional facility to customers for making digital payments beyond ₹2 lakh,” RBI Governor Shaktikanta Das said.

The per-transaction limit for SMS and IVRS (interactive voice response) channels is ₹5,000.

Experts said this will help corporates and MSMEs, and push use of digital payments.

Also see: UPI records 365 crore transactions worth ₹6.54-lakh cr in September

“It will help large corporates and MSMEs bring in greater flexibility and obvious cost efficiency by eliminating manual efforts and errors accompanying these processes. Add to it the real gains from this move that will be seen in increased working capital management, enhanced transactional speed across the supply chain, as well as improved cash flow,” said Narayan ‘Naru’ Ramamoorthy, Chief Revenue Officer, Global PayEX.

Geotagging of touchpoints

The RBI also unveiled a slew of other measures related to payment and settlement systems including geotagging of payment system touchpoints.

It has proposed to lay down a framework for geotagging (capturing geographical coordinates through latitude and longitude) of physical payment acceptance infrastructure, point of sale terminals and quick response (QR) codes used by merchants.

Improve acceptance infra

This would complement the Payment Infrastructure Development Fund framework through better deployment of acceptance infrastructure and wider access to digital payments.

“To ensure a balanced spread of acceptance infrastructure across the length and breadth of the country, it is essential to ascertain location information of existing payment acceptance infrastructure. In this regard, geotagging technology, by providing location information on an ongoing basis, can be useful in targeting areas with deficient infrastructure for focussed policy action,” the RBI said.

Also see: ‘We want to have more ‘buy now, pay later’ customers than any card company’

It has also proposed that the topic for the Fourth Cohort would be ‘Prevention and Mitigation of Financial Frauds’.

“The focus would be on using technology to reduce the lag between the occurrence and detection of frauds, strengthening the fraud governance structure and minimising response time to frauds,” the RBI said, adding that the application window for this cohort would be opened in due course.

In addition, based on the experience gained and the feedback received from stakeholders, it has proposed to facilitate ‘On Tap’ application for themes of cohorts earlier closed.

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RBI proposes framework for offline digital retail payments

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In a move that will further popularise the use of digital payments, the Reserve Bank of India has proposed to introduce a framework for carrying out retail digital payments in offline mode across the country.

The Statement on Developmental and Regulatory Policies on August 6, 2020 had announced a scheme to conduct pilot tests of innovative technology that enables retail digital payments even in situations where internet connectivity is low or not available (offline mode). “Three pilots were successfully conducted under the scheme in different parts of the country during the period from September 2020 to June 2021 involving small-value transactions covering a volume of 2.41 lakh for value ₹1.16 crore,” said RBI Governor Shaktikanta Das on Friday, adding that the learnings indicate that there is a scope to introduce such solutions, especially in remote areas.

Also read: UPI records 365 crore transactions worth ₹6.54-lakh cr in September

This would enable users who do not have internet connectivity at all times, to be be able to use digital payment modes.

The RBI has also proposed to increase the per-transaction limit for IMPS from ₹2 lakh to ₹5 lakh for channels other than SMS and IVRS. “This will lead to further increase in digital payments and will provide an additional facility to customers for making digital payments beyond ₹2 lakh,” Das said.

The limit for an IMPS transaction through SMS and IVRS channels is ₹ 5,000.

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RBI empanells Dhanlaxmi Bank as Agency Bank

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Thrissur-based Dhanlaxmi Bank has been empanelled as ‘Agency Bank’ by the Reserve Bank of India to undertake general banking businesses of Central and State governments on behalf of the RBI.

Dhanlaxmi Bank entered into agreement with the RBI at the Department of Government and Bank Accounts (DGBA), Reserve Bank of India, Mumbai.

It is now authorized to undertake transactions related to government businesses such as revenue receipts and payments on behalf of the Central and State governments, pension payments in respect of Central and State governments, works related to small savings schemes (SSS), collection of stamp duty through physical mode or e-mode, and any other item of work specifically devised by the RBI as eligible for agency commission.

Also see: Dhanlaxmi Bank shareholders reject appointment of auditors

Dhanlaxmi Bank has 245 branches spread across 15 States and Union Territories. The Bank has an excellent technology team in creating customised solutions for customers, thereby providing flexibility and ease of banking while leveraging in-depth understanding of customer needs.

Shivan J K, Managing Director and CEO, Dhanlaxmi Bank, said, “We are proud to be one among the private sector banks empanelled by the RBI to facilitate transactions related to government businesses.

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RBI says reviewing ATM outage circular after bank’s feedback, BFSI News, ET BFSI

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The Reserve Bank of India on Friday said that it was reviewing its recent scheme on ATM replenishment whereby the regulator put in place mechanisms to penalise lenders. The central bank deputy governor T Rabi Shankar said that they had received inputs from banks and were in the process of reviewing it.

“The idea behind the penalty on outages in ATMs was to ensure that these services are available as much as possible in areas where the attention to ATMs is less, which is largely rural and semi-urban areas,” Shankar said. “We have received various feedback, some positive while some raise concerns. There are issues specific to location (of ATMs). We are trying to take all the feedback and have a review and see how best it can be implemented.”

ET was the first to report in its September 9 edition that lenders had approached the RBI seeking relaxation in its scheme citing issues of replenishing ATMs in rural geographies that could significantly push up costs and make business unviable.

In August, the banking regulator directed banks and white label ATM operators to strengthen systems that will allow them to monitor the availability of cash in ATMs and ensure timely replenishment to avoid cash-out situations. As part of the circular, a penalty of Rs 10,000 per ATM will be levied in the event of a cash-out situation for more than 10 hours in a month.

Banks were of the view that cash availability will drop as they go deeper in rural geographies as the cost to set up and maintain ATMs is high.

“Cost of transportation for ATM fitted notes is very high in rural India because of the distance between ATMs and the sparse network,” a banker said on the condition of anonymity. “Generally cash management companies and ATM service providers visit once in a few days to replenish cash and fix other tech or hardware issues.”

Banks have been slowly reducing ATM presence as they operationalise overall costs. Recently, Small finance bank Suryoday decided to shut down all its 26 automated teller machines, giving customers the option to use their debit cards on other banks’ ATMs, becoming the first domestic lender to completely do away with such machines. The small finance bank is formulating a strategy where it would offer its customers 5-7 transactions free per month when they use the ATM network of other banks to withdraw cash.

At the end of August there were 2.13 lakh ATMs in the country up from 2.09 lakh same time last year, a meagre growth of 1.5%. On the flip side the micro-ATMs have grown to 4.94 lakh as against 3.07 lakh in August last year, a rise of over 60%.

In order to make the business more viable the RBI recently increased the interchange fee on ATM transactions from Rs 15 to Rs 17. ATM interchange is the charge paid by the bank that issues the card (issuer) to the bank where the card is used to withdraw cash (acquirer).

In addition to this, the cap on fee that can be charged to the customer, which is capped at Rs 20 per transaction, was also increased to Rs 21.



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RBI extends three-year SLTRO facility to SFBs

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The Reserve Bank of India has extended the three-year special long-term repo operations facility for Small Finance Banks by two months till December-end 2021.

This facility, which is available at the repo rate of 4 per cent, aggregating ₹10,000 crore was announced by the central bank in May 2021 to help SFBs provide last mile credit to individuals and small businesses.

Liquidity drawn from this facility has to be deployed by SFBs for fresh lending of up to ₹10 lakh per borrower.

“Recognising the persisting uneven impact of the pandemic on small business units, micro and small industries, and other unorganised sector entities, it has been decided to extend this facility till December 31, 2021.

“Further, this will now be available on tap to ensure extended support to these entities,” RBI Governor Shaktikanta Das said.

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Monetary Policy Committee revises FY22 retail inflation projection to 5.3%

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The Monetary Policy Committee (MPC) revised its retail inflation projection for FY22 downwards to 5.3 per cent against the earlier 5.7 per cent even as it retained its projection for real GDP growth at 9.5 per cent.

If the downward revision in retail inflation projection materialises “and growth gathers further momentum”, it could set the stage for a hike in the policy repo rate, say economists.

RBI Governor Shaktikanta Das observed that consumer price inflation softened during July-August, moving back into the tolerance band with an easing of food inflation, corroborating the MPC’s assessment of the spike in inflation in May as transitory.

“Improvement in monsoon in September, the expected higher Kharif production, an adequate buffer stock of foodgrains and lower seasonal pickup in vegetable prices are likely to keep food price pressures muted,” he said.

Also read: RBI Gov hints on ‘gradual’ unwinding of exceptional liquidity measures

The Governor noted, “Core inflation, however, remains sticky. Elevated global crude oil and other commodity prices, combined with an acute shortage of key industrial components and high logistics costs, are adding to input cost pressures. Pass-through to output prices has, however, been restrained by weak demand conditions. The evolving situation requires close vigilance.”

Das opined that overall, the aggregate demand is improving but slack still remains; output is still below the pre-pandemic level and the recovery remains uneven and dependent upon continued policy support. Contact intensive services, which contribute about 40 per cent of economic activity in India, are still lagging.

Supply-side and cost-push pressures are impinging upon inflation and these are expected to ameliorate with the ongoing normalisation of supply chains. Das felt that efforts to contain cost-push pressures through a calibrated reversal of the indirect taxes on fuel could contribute to a more sustained lowering of inflation and anchoring of inflation expectations.

GDP growth

The MPC retained its projection for real GDP growth at 9.5 per cent in 2021- 22. In this regard, the Governor said, “Recovery in aggregate demand gathered pace in August-September… The ebbing of infections, together with improving consumer confidence, has been supporting private consumption. The pent-up demand and the festival season should give further fillip to urban demand in the second half of the financial year.”

Also read: RBI proposes framework for offline digital retail payments

Das observed that rural demand is expected to get impetus from continued resilience of the agricultural sector and record production of kharif foodgrains in 2021-22 as per the first advance estimates. Further, the improved level in reservoirs and early announcement of the minimum support prices for rabi crops boost the prospects for rabi production.

The support to aggregate demand from government consumption is also gathering pace. “Improvement in government capex, together with congenial financial conditions, could bring about an upturn in the much-awaited virtuous investment cycle… Recovery in the services sector is also gaining traction,” the Governor said.

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Select NBFCs to now have internal ombudsman on lines of banks: Das

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With the objective of upping customer experience, the Reserve Bank on Friday announced an internal ombudsman scheme (IOS) to redress grievances at select non-banking finance companies (NBFCs).

The IOS will be on the lines of a similar system adopted at banks and will redress grievances related to deficiencies in service, Governor Shaktikanta Das said, announcing the new measure in the statement on regulatory policies along with the bi-monthly review of the monetary policy. “The increased significance, strength and reach of NBFCs across the country have necessitated having in place better customer experience including grievance redress practices,” he said.

Slew of measures

Das said over the last few years, the RBI has taken a slew of measures to improve consumer protection at NBFCs which include asking such lenders to appoint nodal officers to address grievances in 2013 and launch of the ombudsman scheme for NBFCs in 2018. “With a view to further strengthen the internal grievance redress mechanism of NBFCs, it has been decided to introduce the Internal Ombudsman Scheme (IOS) for certain categories of NBFCs which have higher customer interface,” he said.

There will be an internal ombudsman at the top of the NBFCs’ internal grievance redress mechanism to examine customer complaints which are in the nature of deficiency in service and are partly or wholly rejected by the NBFCs, he said, adding detailed instructions on the same will be issued separately.

Also read: FIDC seeks refinance mechanism for NBFCs

Meanwhile, Das also announced a six month extension in the facility which allows banks to on-lend through NBFCs and get the priority sector lending tag, till March 2022. He reminded that bank lending to registered NBFCs (other than micro-lenders) for on-lending to agriculture (investment credit), micro and small enterprises and housing (with an increased limit) was permitted to be classified as priority sector lending up to certain limits in August 2019.

Increased traction has been observed in delivering credit to the underserved/unserved segments of the economy through the scheme, which was last extended till September 30 in April, Das said.

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Srei firms found ever-greening NPAs, in payment default

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Concerns over ever-greening of loans, negative Capital-to-Risk (Weighted) Assets Ratio (CRAR) and default in payments of over ₹10,000 crore to lenders had prompted the Reserve Bank of India to supersede the boards of Srei Infrastructure Finance and Srei Equipment Finance.

Documents seen by BusinessLine reveal that the RBI had conducted a special audit in December 2020 and January 2021 that revealed that funds disbursed by Srei Infrastructure Finance to certain borrowers were received back from the borrowers and their group companies the same date or dates close to disbursement, indicating ever-greening of loans.

Bombay HC dismisses petition by Srei promoters

All norms flouted

The statutory inspection of Srei Equipment by the central bank revealed “serious deterioration in its financial position” as on March 31, 2020. It revealed a negative CRAR of 3.4 per cent against the regulatory requirement of 15 per cent and non-adherence to Income Recognition, Asset Classification and Provisioning norms, which revealed huge divergences. The RBI listed out several other reasons too for superseding the boards of the two firms. It said that Srei Equipment had remained non-compliant with RBI regulations despite continuous engagement and follow up and had failed to take corrective action on governance, systems, control and compliance.

Srei Infra and Equipment Finance have debt obligations of over ₹29,000 crore

Srei Equipment had defaulted in repayment of bank and market borrowings, raising serious concerns. Its borrowings totalled ₹20,411 crore as on June 30, 2021 and it had defaulted with 13 lenders for ₹10,457 crore.

“The supervisory concerns (example, negative CRAR, high net NPA ratio, violation of IRACP norms, ever-greening of NPA accounts, connected lending, weak corporate governance standards, inadequate systems and control, poor compliance standards) observed during past inspections by the RBI were communicated through supervisory letters, DO letters and also reiterated in the meetings the Reserve Bank had with the management of the company,” the RBI noted in its internal report.

The central bank said that the companies gave effect to the slump exchange despite not getting a NOC (no objection certificate) from the majority of the lending institutions. “The board of directors of SEFL and SIFL had on July 4, 2019 approved the transfer of assets of SIFL by way of slump sale to SEFL with effect from October 1, 2019,” it said.

No fund diversion: Kanoria

When contacted, Hemant Kanoria, promoter and former chairman of Srei Infrastructure, said, “From our side, we have been very clear that there has been no diversion of funds and all the money has gone into projects, and assets have been created out of that. It is sad that these kinds of charges were levelled.”

The NBFC reported a sharp decline in CRAR and this was mainly due to all the provisions “we made in the last two quarters,” he said. On the appeal in the Bombay High Court, Kanoria said it was only to see if the RBI would give it time to seal a deal with two investors — US-based Arena Investors LP and Singapore-based Makara Capital Partners Pte Ltd, which had earlier evinced interest to pick equity stake in Srei.

“But then it was not accepted (by the court). With full faith, we have built this organization and we have full faith in the regulator, the bankers and the government to take necessary steps to do what is appropriate for the company,” he told BusinessLine.

When asked if he would consider moving the Supreme Court, he said, “We have to see what is the stand of the regulator…..this is a financial institution so we have to work as per the blessing of the regulator only.”

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RBI maintains status quo on rates

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Amidst uneven growth recovery and concerns over a spike in inflation, the Monetary Policy Committee of the Reserve Bank of India chose to maintain a status quo on key rates. It also continued with its accommodative stance to support growth.

“The MPC voted unanimously to maintain status-quo about policy repo rate and by a majority of 5:1 to maintain the accommodative stance,” said RBI Governor Shaktikanta Das, who chairs the MPC, adding that the stance remains accommodative to revive and maintain growth.

The repo rate stands at 4 per cent and the reverse repo rate at 3.35 per cent. MSF rate and bank rate remain unchanged at 4.25 per cent.

The six-member MPC held its bi-monthly monetary policy meeting between October 6 and October 8.

This was Das’s 12th statement since the onset of the pandemic, of which two were made outside of the monetary policy cycle. On two occasions- March and May, the MPC had to take pre-emptive action.

“The RBI has taken over 100 measures to proactively and decisively respond to the unprecedented crisis. We have not been a prisoner of any rule book,” Das said in his opening comments.

The Reserve Bank had last cut the repo rate by 40 basis points in May 2020 but has maintained the status quo on rates since then.

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