Tag: RBI

RBI announces additional Covid regulatory measures

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The Reserve Bank of India (RBI) on Wednesday announced a host of measures, including a special ₹50,000 crore term liquidity facility for banks for on-lending to entities such as vaccine manufacturers involved in the fight against Covid-19, a special ₹10,000 crore long-term repo operation to support small finance banks to on-lend to MSEs, and a resolution framework 2.0 for individuals, small businesses and MSMEs.

The special ₹50,000 crore term liquidity facility for banks to create a Covid loan book will be three years tenor and available at the repo rate. This facility will be available to Banks up to March 31, 2022.

Banks’ creating Covid loan book by lending to entities such as vaccine manufacturers, importers of life-saving equipment, hospitals and clinics will be incentivised by giving such lending the priority sector lending (PSL) tag.

Further, they will also be allowed to park an amount equivalent to the amount deployed in the aforementioned activities in the reverse repo window and earn 40 basis points higher interest rate than the current reverse repo rate of 3.35 per cent.

Small Finance Banks can tap a special ₹10,000 crore long-term repo operation of three years tenor to on-lend to MSE up to ₹10 lakh per MSE. This facility will be available up to October 31, 2021.

Further, SFBs loans to micro-finance institutions (with asset size of up to ₹500 crroe) will be recognised as priority sector lending. This move is aimed at enhancing the flow of credit to MFIs.

RBI has brought in a resolution framework 2.0 for vulnerable borrowers — individuals, small businesses and MSMEs.

In order to incentivise new credit flow to the micro, small, and medium enterprise (MSME) borrowers, Banks will be allowed to deduct credit disbursed to ‘New MSME borrowers’ from their net demand and time liabilities (NDTL) for calculation of cash reserve ratio (CRR) up to December 31, 2021. This exemption will be available for exposures up to ₹25 lakh per borrower.

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RBI Governor Shaktikanta Das to make unscheduled speech today, BFSI News, ET BFSI

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By Jeanette Rodrigues

Reserve Bank of India said Governor Shaktikanta Das will make a speech Wednesday, an unscheduled appearance as ferocious new coronavirus wave devastates the country.

The address will be broadcast at 10 a.m. local time, the RBI said on Twitter, without providing further details.

The Covid-19 wave that has slammed India in recent weeks will probably worsen before it starts to taper off sometime later this month, forecasters warn. Pressure from industry groups has begun mounting on Prime Minister Narendra Modi to impose lockdowns to stem its spread, a move he has so far resisted to avoid the economic damage suffered last year.

RBI Governor @DasShaktikanta at 10:00 am today, May 05, 2021.YouTube: … https://t.co/mK8nIUhfjW” data-createdat=”1620178540000″ data-id=”1389755643620298754″>

The RBI has augmented fiscal support measures from Modi’s government with loan holidays and cash injections, as well as by cutting interest rates. It has pledged to keep monetary policy loose though its room to act has been constrained by inflation concerns.

Read: RBI steps up fight against Covid-19 second wave

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RBI imposes ₹25.50 lakh penalty on Jaipur-based Jumbo Finvest (India) Ltd

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The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹25.50 lakh on Jumbo Finvest (India) Ltd, Jaipur, for non-compliance with provisions of two of its directions.

RBI, in a statement, said the monetary penalty has been imposed for non-compliance with certain provisions of its directions contained in ‘Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016’ and ‘Reserve Bank of India, Know Your Customer (KYC) Directions, 2016’.

“This penalty has been imposed in exercise of powers vested in RBI under the provisions of…the Reserve Bank of India Act, 1934, taking into account the failure of the company to adhere to the aforesaid directions issued by RBI,” the statement said.

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 company with its customers, it added.

The central bank observed that the statutory inspection of Jumbo Finvest (India) with reference to its financial position as on March 31, 2019, revealed, inter alia, non-compliance with above mentioned directions issued by RBI.

In furtherance to the same, RBI said a notice was issued to the company advising it to show cause as to why penalty should not be imposed for failure to comply with the directions issued by RBI.

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

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Banks demand deadline extension for Covid packages

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Our Bureau

Banks have petitioned the Reserve Bank of India (RBI) that the 180-day timeline for implementing resolution plans for borrower accounts under the August 6, 2020 circular on “Resolution Framework for Covid-19-related Stress” should be extended as few of them are facing headwinds due to second pandemic wave.

As per the circular, resolution of exposures (other than personal loans) must be implemented within 180 days from the date of invocation (not later than December 31, 2020). So, the resolution plan has to be implemented by June-end 2021. But in view of the adverse impact of Covid-19, banks want leeway of 90 more days in implementing the resolution plan.

Loan moratorium

Banks also want RBI to consider a three month loan moratorium for retail and micro, small and medium enterprise (MSME) borrowers so that they can weather the Covid challenge without worrying about servicing loans.

Banks have also requested the Government to extend the emergency credit line guarantee scheme (ECLGS) for Business Enterprises/ MSMEs beyond the June 30, 2021 deadline. This scheme is aimed at helping Business Enterprises/ MSMEs meet their working capital needs. A banker observed that RBI is examining lenders’ pleas and is likely take a call by May-end.

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Uday Kotak wants RBI to expand balance-sheet as Covid intensifies, BFSI News, ET BFSI

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Veteran banker Uday Kotak has called on the RBI to expand its balance sheet to mitigate the economic impact of the Covid wave.

Such an expansion is a serious option when the country is trying to save lives and livelihoods, said Kotak, the promoter and chief executive officer of Kotak Mahindra Bank.

“We have come to a time when we will have to be much more open to expand the balance sheet of the central bank and I think the RBI has given the signal through the G-SAP programme,” Kotak said,

The RBI had already lent its balance sheet by announcing a buy-back programme for government securities, however, more could be done given the circumstances.

He also asked companies to bear the cost of not sending employees out and said that there was a need to plan for a third wave.

“In spite of all efforts, the overall numbers continue to rise. The healthcare system and medical personnel are stretched to the limit and exhausted. Measures to break the chain of transmission are of paramount importance to mitigate human tragedy and loss of lives, alongside augmenting health infrastructure and medical supplies”, said Kotak.

The GSAP programme

Along with the OMOs and direct intervention in the secondary market, the government has announced G-SAP, a definite calendar for open market purchases of bonds. Under G-SAP, the RBI has committed to Rs 1 lakh crore bond buys this quarter and said it will buy more.

The RBI programme is a variant of the Quantitative Easing (QE) policy followed by central banks in advanced economies to tide over the global financial crisis of 2008.

Under QE, central banks conduct large-scale purchases of assets, including treasury bills and private sector bonds, to directly influence rates and risk premiums on private debt.

However, the RBI is committing to buy only government securities.

G-SAP provides certainty to bond investors that the RBI will step in to buy bonds, infuse liquidity and bring down yields.

Galvanising India Inc

Uday Kotak called on the industry to take voluntary measures to break the chain of transmission of the virus.

Reiterating ‘safeguarding lives’ as the highest collective national priority amidst the second wave of Covid that is ravaging India, Kotak urged the industry “to curtail all non-essential economic activity requiring physical presence of employees at the workplace, for the next two week.”

The industry should review operations and minimise the use of in-person manpower, limiting it to only critical operations or activities required by law, Kotak said.



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Banks gear up for asset quality deterioration as stricter lockdowns loom, BFSI News, ET BFSI

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As India stares at lockdowns and curbs for the entire May, banks and NBFCs are Lenders are bracing for a further deterioration in asset quality metrics, cheque-bounce rates and collection ratios.

Collection levels had already dropped to 10% for lenders and cheque-bounce rates had increased in segments like small and medium enterprises, commercial vehicles and microfinance.

Analysts see cheque bounce levels rise by another 3-4% while collection ratios dropping by nearly 5% in May alone

Cheque bounces are back to January 2021 levels after improving in March with Maharashtra, Madhya Pradesh, Punjab, and Telangana are seeing higher check bounce rates, HDFC Bank said in its Q4 results.

Dishonoured cheques in April (half-way through the month) have risen slightly, possibly due to some panic caused by worsening medical conditions,” HDFC said after its Q4 results.

Till the first week of April, the worst affected state was Maharashtra but now many states have been severely impacted by the fresh pandemic surge. NBFCs and small finance banks face a bigger hit.

Axis Bank too has said collections are likely to get impacted in the coming weeks and it was watching the situation closely.

No cover this time

Banks, which got protection and support by a swift moratorium on loans when the pandemic first struck, have no such cover this time.

As the second wave intensifies, most of the relief measures and schemes announced by the government and Reserve Bank of India have expired. On top of it, the central bank is non-committal on moratoriums.

In today’s conditions, there is no need for a moratorium,” RBI governor Shaktikanta Das said after the central bank’s monetary policy review. However, that statement was before the second Covid wave worsened.

RBI stress test

Bank NPAs may rise to 13.5% under the baseline stress test scenario by September, the highest in more than 22 years, according to the RBI’ financial stability report in January this year.

The gross bad loan ratio of banks which stood at 7.5% as of 30 September, could almost double to 14.8% under a severe stress scenario, RBI warned. Under the severe stress scenario, RBI has assumed a 7.6% economic contraction in the six months to 31 March and a tepid 3.8% growth in the first half of the next fiscal. However, uncertainty over vaccines and the severity of the Covid wave hobbles the 3.8% growth projection.

The last time banks saw such stress was in 1996-97 when the bad loan ratio rose to 15.7%.



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RBI imposes Rs 3 crore penalty on ICICI Bank, BFSI News, ET BFSI

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A penalty of Rs 3 crore has been imposed on ICICI Bank Ltd for contravention of certain directions, the Reserve Bank of India said on Monday.

The RBI has imposed a monetary penalty of Rs 3 crore on ICICI Bank for “contravention of certain directions issued by the RBI contained in Master Circular on ‘Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by Banks’ dated July 1, 2015”, the central bank said in a statement.

It, however, added the action is based on the 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.

Giving details, the RBI said an examination of correspondence in the matter of shifting of securities from one category to another revealed, inter alia, contravention of the directions.

A notice was issued to ICICI Bank advising it to show-cause as to why penalty should not be imposed on it for failure to comply with the directions issued by the RBI.

After considering the bank’s reply to the notice, oral submissions made in the personal hearing and examination of additional submissions made by it, the RBI said it came to the conclusion that the charge of non-compliance with RBI directions was substantiated and warranted imposition of monetary penalty.



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RBI top brass meets NBFC-MFI chiefs to take stock of credit flows to borrowers

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The Reserve Bank of India (RBI) Governor on Monday discussed the outlook on potential stress on balance sheets of non-banking financial company-micro finance institutions (NBFC-MFIs) in the backdrop of the second wave of the Covid-19 pandemic.

The meeting also took stock of credit flows to borrowers of NBFC-MFIs. These entities give credit to economically dis-advantaged groups.

In a video-conference with the chiefs of select NBFC-MFIs, RBI Governor Shaktikanta Das discussed issues including assessment of current economic situation, and liquidity scenario.

The Governor emphasised the supervisory expectations in terms of maintaining their business resilience and managing risks prudently.

Das advised the NBFC-MFIs to pay focussed attention on strict adherence to fair practices code, improve customer grievance redress mechanism and strengthen their IT systems in the interest of the institutions and their customers.

The meeting was also attended by Deputy Governors M. K. Jain, M.D. Patra and a few other senior officials of RBI.

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New Deputy Governor Rabi Sankar to oversee functioning of 8 departments at RBI

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Newly appointed Reserve Bank of India (RBI) Deputy Governor T Rabi Sankar will oversee the functioning of eight departments, including Currency Management, External Investments & Operations, and Payment and Settlement Systems.

The central bank, in a statement, said he will also manage departments such as Government and Bank Accounts, Information Technology, Foreign Exchange, Internal Debt Management, and the Right to Information (RIA) Division.

Rabi Sankar was Executive Director of RBI before being elevated to the post of Deputy Governor (DG). His appointment as DG is for a period of three years or until further orders, whichever is earlier, RBI said.

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RBI imposes ₹3 crore penalty on ICICI Bank

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The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹3 crore on ICICI Bank for non-compliance with its directions in the matter of shifting of securities from one category to another.

The central bank, in a statement, said the monetary penalty has been imposed on the Bank for contravention of certain directions contained in its Master Circular on ‘Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by Banks.’

“This penalty has been imposed in exercise of powers vested in RBI under the provisions of…the Banking Regulation Act, 1949 (the Act),” RBI said in a statement.

This action is based on the 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, the statement added.

RBI observed that an examination of correspondence in the matter of shifting of securities from one category to another revealed, inter alia, contravention of the aforesaid directions issued by it.

“In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for failure to comply with the directions issued by RBI,” the statement said.

After considering the bank’s reply to the notice, oral submissions made in the personal hearing and examination of additional submissions made by it, RBI came to the conclusion that the aforesaid charge of non-compliance with RBI directions was substantiated and warranted imposition of monetary penalty, the central bank said.

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