Tag: RBI

RBI hikes incentives for distribution of coins

Banking & Finance

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The Reserve Bank of India (RBI) decided to up the incentive for banks for distribution of coins from ₹25 per bag to ₹65, with effect from September 1, even as it asked them to provide coins to bulk customers.

The RBI said an additional incentive of ₹10 per bag would be paid for coin distribution in rural and semi-urban areas on the submission of a chartered accountant or auditor certificate to this effect.

The aforementioned measures have been announced keeping in view the overall objectives of the Clean Note Policy, the RBI said in a circular to all banks.

These measures are also aimed at ensuring that all bank branches provide better customer service to members of the public with regard to the exchange of notes and distribution of coins.

Net withdrawals

The central bank emphasised that the revised incentive will be paid on the basis of net withdrawal from currency chests (CCs) without waiting for claims from banks. The currency chest branch will have to pass on the incentive to the linked bank/branches for coins distributed by them on a pro-rata basis within one week of receipt of incentives from the RBI.

The central bank said the distribution of coins will be verified by its regional offices during inspection of currency chest/ incognito visit to branches etc.

Coins to bulk customers

With a view to meet the coin requirements of bulk customers (requirement of more than one bag in a single transaction), banks have been advised to provide coins to such customers purely for business transactions.

Disbursement of coins to retail customers through counters of bank branches will continue as hitherto.

As per the earlier circular on the Currency Distribution & Exchange Scheme (CDES), banks had to put in place a system of checks and balances to ensure that coins are distributed to retail customers in small lots and not to bulk customers. According to the new circular, banks may also endeavour to provide coins distribution services as part of their Board-approved policy on ‘Door Step Banking’ services.

Also read: How RBI’s CBDC will change the payments ecosystem

Such customers should be KYC compliant constituents of the bank and the record of coins supplied should be maintained. Banks have been advised to exercise due diligence to ensure that such facility is not misused.

The RBI reiterated that banks should enhance the engagement of their Business Correspondents (BCs) for the distribution of coins to the public and may also incentivise such activities as per their Board-approved policy

All banks have been asked to ensure that each branch maintain a minimum one bag of coins in each denomination.

The central bank also reiterated that banks may engage Cash in Transit (CIT) entities to further enhance the distribution of coins to the public.

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Centre unveils series VI Sovereign Gold Bond Scheme; Rs 50 discount for investors who apply online, BFSI News, ET BFSI

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The Reserve Bank of India (RBI) has announced the Sovereign Gold Bond Scheme 2021-22 Series VI, which will be open for subscription for the period August 30-September 3, 2021.

The nominal value of the bond based on the simple average closing price for gold of 999 purity of the last three business days of the week preceding the subscription period works out to Rs 4,732 per gram of gold.

The Centre in consultation with the RBI has decided to offer a discount of ₹50/- per gram less than the nominal value to those investors applying online and the payment against the application is made through digital mode. For such investors, the issue price of Gold Bond will be Rs 4,682 per gram of gold.

Sovereign Gold Bonds are government securities denominated in grams of Gold and issued by the Reserve Bank of India on behalf of the government as a replacement for owning physical Gold. The bonds are sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices, and recognized stock exchanges like NSE and BSE.

A total of Rs 25,702 crore has been raised through the SGB Scheme since its inception till end-March, 2021. The Reserve Bank had issued 12 tranches of SGB for an aggregate amount of Rs 16,049 crore (32.35 tonnes) during 2020-21.



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RBI hikes per transaction cap to Rs 2 lakh from Rs 50,000, BFSI News, ET BFSI

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Reserve Bank on Friday hiked the ceiling on remittances per transaction from India to Nepal to Rs 2 lakh from Rs 50,000, a move that will help facilitate retirement and pension-related payments to ex-servicemen settled in the neighbouring country. Besides, the central bank has removed the cap of 12 remittances in a year per remitter.

“As hitherto, banks shall accept remittances by way of cash from walk-in customers or non-customers. The ceiling of Rs 50,000 per remittance with a maximum of 12 remittances in a year shall, however, continue to apply for such remittances,” Reserve Bank of India (RBI) said in a circular.

While increasing the ceiling, RBI has also advised banks to put in place suitable velocity checks and other risk mitigation procedures.

“The enhancements are also expected to facilitate payments relating to retirement, pension, etc., to our ex-servicemen who have settled/ relocated in Nepal,” it said.

The circular is addressed to Chairman/ Managing Director/ Chief Executive Officer of all banks participating in NEFT (National Electronic Funds Transfer).

The Indo-Nepal Remittance Facility Scheme was launched by RBI in May 2008 as an option for cross-border remittances from India to Nepal, with special focus on requirements of migrant workers of Nepali origin working in India.

The scheme leverages NEFT ecosystem available in the country for origination of such remittances and entails a ceiling of Rs 50,000 per remittance with a maximum of 12 remittances in a year.

The beneficiary receives funds in Nepalese Rupees through credit to her/ his bank account maintained with the subsidiary of State Bank of India in Nepal (Nepal SBI Bank Limited) or through an agency arrangement.

The enhancements to Indo-Nepal remittance facility scheme are expected to boost trade payments between the two countries, as also to facilitate person-to-person remittances electronically to Nepal.



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RBI discusses a host of issues with small finance banks, BFSI News, ET BFSI

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The Reserve Bank on Friday discussed with the heads of the small finance banks (SFBs) the stress build-up due to the COVID-19 pandemic and other related issues. The round-table discussion of RBI Deputy Governors M K jain and M Rajeshwar Rao with managing directors and chief exceutives of small finance banks was held through video conference.

The discussion, according to an RBI release, focused on a range of issues including evolution of the business models of SFBs; enhancing board oversight and professionalism; further improvements in assurance functions, compliance; internal control and risk management; and need to build up their IT infrastructure both for enhanced customer experience and for cyber security resilience.

“…the stress build-up due to COVID-19 and the mitigation measures for continued resilience of books of SFBs also formed part of the discussion,” it said.

Challenges and the way forward were also deliberated upon to enable the SFBs to play their role in the Indian financial intermediation space and contribute to financial inclusion, the RBI said.

The deputy governors recognised also the contribution of SFBs towards financial inclusion by extending credit and reaching out to the underserved sections of society.

“Fruitful discussion was held in which the MDs and CEOs shared their experiences and ideas on the need to work together so that stated objective is achieved for which differentiated licences were issued,” the release said.

Other senior RBI officials, including executive directors too participated in the meeting.



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Indo-Nepal Remittance Facility: RBI enhances transaction ceiling 4-fold to ₹2 lakh

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The Reserve Bank of India has made enhancements to the Indo-Nepal Remittance Facility Scheme, whereby the ceiling per transaction has been increased four-fold to ₹2 lakh and the cap of 12 remittances in a year per remitter has been removed.

Theenhancements, which come into effect from October 1, 2021, have been announced to boost trade payments between the two countries, as also to facilitate person-to-person remittances electronically to Nepal, RBI said in a circular to all banks participating in the National Electronic Funds Transfer facility.

Under the scheme, the beneficiary receives funds in Nepalese Rupees through credit to her / his bank account maintained with the subsidiary of State Bank of India (SBI) in Nepal, — Nepal SBI Bank Ltd (NSBL) or through an agency arrangement.

RBI said hitherto, banks shall accept remittances by way of cash from walk-in customers or non-customers. The ceiling of ₹50,000 per remittance with a maximum of 12 remittances in a year shall, however, continue to apply for such remittances.

The central bank asked banks to put in place suitable velocity checks and other risk mitigation procedures.

RBI emphasised that “the enhancements are also expected to facilitate payments relating to retirement, pension, etc., to our ex-servicemen who have settled / relocated in Nepal.”

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PSBs may have to provide for over Rs 21,000 crore annually for family pension revision, BFSI News, ET BFSI

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Public sector banks will have to make an additional provision of over Rs 21,300 crore annually on account of a hike in family pension and higher contribution toward the National Pension System (NPS), according to a report.

A special dispensation will be sought from the Reserve Bank of India (RBI) to allow provisions over the next five years, it said.

The plan

Acknowledging that family pension for bank employees is at a paltry level, the government this week had announced that it would raise the same to 30% of the last drawn salary.

Earlier, kin of a deceased PSB employee used to get a maximum of Rs 9,284 per month as a family pension, said Department of Financial Services Secretary Debasish Panda.

“The cap has been completely removed and a uniform slab of 30% at the last-drawn salary will be entitled as family pension,” Panda told reporters here, admitting that the earlier levels were “paltry”.

NPS hike

Similarly, the ministry has also decided to increase the employer’s contribution to the New Pension Scheme (NPS) to 14% of the salary from the current 10%, he said.

Finance Minister Nirmala Sitharaman expressed her satisfaction at public sector banks’ performance in the past few years and appreciated that many of them have come out of the RBI’s prompt corrective action framework.

Panda said a dozen PSBs have become leaner and started delivering profits which have upped the investor confidence in them and made them self-dependent for capital raising.

He said that since last year, the banks have collectively raised over Rs 69,000 crore, including Rs 10,000 crore in equity, and are in the process of raising another Rs 12,000 crore at present.

As on March 31, the total number of pensioners stood at around 5.66 lakh and family pensioners at over 1.55 lakh.



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Start credit outreach scheme from Oct, BFSI News, ET BFSI

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Start credit outreach scheme: FM to banks | page 1
FM Nirmala Sitharaman has asked bankers to begin a credit outreach programme from October, meet industry bodies, exporters and help to promote one product for export from each district.

FM to banks: Start credit outreach scheme from Oct | page 9
Mumbai: Finance minister Nirmala Sitharaman has asked bankers to begin a credit outreach programme from October. They have also been asked to meet industry associations and exporters, and help to promote one product for export from each district.

“To keep up the momentum of stimulus that we are periodically giving, we have also asked banks to go out and give credit,” she said, addressing a press conference after her review meetings with bank chiefs in Mumbai on Wednesday. The finance minister referred to the 2019 ‘loan melas’ undertaken by banks across 400 districts to promote credit in retail, agriculture & MSME (referred to as RAM).

“Approximately Rs 4.9 lakh crore was disbursed as part of this outreach between October and March 2019. This year, too, there will be a credit outreach in every district of the country,” said Sitharaman. She pointed out that it was too early to conclude that there is a lack of demand for credit and the festive season would see a natural pickup.

“In the context of fintechs, I have highlighted to banks two aspects — the advantages to banks of technology, and also meeting the needs of fintech as a sector,” she said. The public sector banks have also been asked to come up with a plan for credit flow to eastern states with high deposits and low credit offtake.

The finance minister was all praise for public sector banks, which she said have done well financially by recording profits and coming out of the Reserve Bank of India’s prompt corrective action framework. They have also managed to raise capital from the market even as they serviced government schemes during the pandemic without going off track in their amalgamation process. Before the pandemic, the government had announced the merger of 10 public sector banks into four, which has since been completed.

On the divestment of stake in public sector insurance companies, the finance minister said that the government has decided to have a minimal presence in the insurance sector.



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Barclays pumps Rs 3,000cr in India to expand biz, BFSI News, ET BFSI

Banking & Finance

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Mumbai: Barclays Bank has infused Rs 3,000-crore capital to expand its India operations. This is the single largest infusion made since inception — the last large investment was Rs 540 crore in 2009-10.

With this investment, the bank’s total capital deployed in the country increases to Rs 8,300 crore. “We have ambitious growth aspirations, and the investment will help accelerate that as we look to leverage the attractive opportunities that the present situation offers,” said Jaideep Khanna, head of Barclays Asia-Pacific and country CEO. “As economic activity gathers momentum, there is increased demand for capital from clients. We are well placed to support their objectives and remain committed to working closely with them,” added Khanna.

According to a spokesperson, the money is for the growth of the corporate investment bank and wealth management business. The British bank has four branches and a presence across six cities. As part of its expansion plans in the country, Barclays Bank Plc also inaugurated its international banking unit (IBU) branch at GIFT City in Gujarat in February this year.

The spokesperson added that the 55% jump in capital base will enable the lender to significantly expand its exposure to Indian clients.

RBI rules cap a bank’s exposure to a single borrower, a business group and capital markets at 20%, 25% and 40% of their capital respectively. In 2019, the RBI came out with a large exposure framework, which made it difficult for foreign banks to have back-to-back arrangements with their head office for exposures in India as these too came under the ceiling.



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Few takers for restructuring under RBI’s Resolution Framework 2.0: Crisil

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There are only a few takers for the debt restructuring facility offered by the Reserve Bank of India (RBI) under its Resolution Framework 2.0 amid demand recovery, according to a Crisil Ratings survey of about 4,700 companies rated by it.

Crisil Ratings’ investment grade rated corporates have shown resilience amid the pandemic and hardly anyone is planning to avail restructuring 2.0.

Sub-investment grade

In fact, the survey shows that as much as 95 per cent of those opting for, or are inclined to seek restructuring, belong to the sub-investment grade rating category.

Within the sub-investment grade companies, four out of five are rated in the ‘B’ or lower rating categories, clearly indicating that only companies with weak credit quality are exploring restructuring, the credit rating agency said.

Crisil cautioned that any weakening of sentiment around recovery, and a likely third wave leading to fresh curbs on economic activity, will influence more companies to seek restructuring 2.0.

“This could be especially true for the smaller ones that typically experience more stress. Greater clarity will emerge closer to the September 30, 2021, deadline set by the RBI for invoking the restructuring plan,” it said.

Crisil emphasised that these are preliminary readings from the survey, and may not be reflective of the inclination among those not rated by it.

In particular, most of the micro and small enterprises in India are unrated, it added.

Resolution Framework 2.0

The RBI had, on May 5, 2021, announced the Resolution Framework 2.0 for Covid related stressed assets of individuals, small businesses and micro, small and medium enterprises (MSMEs) with aggregate exposure of up to ₹25 crore.

This facility is available provided the aforementioned entities had not availed benefits under any of the earlier restructuring frameworks (including Resolution Framework 1.0 dated August 6, 2020), and were classified as standard accounts as on March 31, 2021.

Referring to the RBI raising the aggregate debt threshold under Resolution Framework 2.0 to ₹50 crore from ₹25 crore on June 4, 2021, the agency said, “This increase in threshold led to about two-thirds of the Crisil-rated mid-sized companies becoming eligible for the restructuring 2.0 scheme.”

Corporates give restructuring option a miss

Crisil opined that the fact that only a handful of companies are exploring the restructuring option could be reflective of a relatively improved business outlook accompanying a pick-up in economic activity in the aftermath of the pandemic’s second wave.

Subodh Rai, Chief Ratings Officer, Crisil Ratings, said, “The quick recovery in demand after moderation during the second Covid-19 wave, and sanguinity around economic growth have led corporates to give the restructuring option a miss.

“The more localised and less stringent nature of curbs/restrictions during the second wave has meant relatively lower disruption in business activities compared with the first wave. So the muted response is par for the course.”

Nitin Kansal, Director, Crisil Ratings, said, “Most of the companies that have opted for, or are contemplating restructuring 2.0 belong to the low-to-medium resilience sectors such as hospitality, educational services, textiles, construction and gems and jewellery.

“Demand recovery in some of these remains uncertain because of the continuing overhang of the pandemic.”

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