Tag: regulations

RBI adds ‘displeasure’ notes to regulatory action against banks, BFSI News, ET BFSI

Banking & Finance

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Along with taking penal action against banks, the Reserve Bank is making its displeasure over their functioning known to them.

The central bank has been issuing ‘displeasure’ letters to expressing dissatisfaction over their functioning, according to a report. These letters are issued by the Department of Supervision, which does not take any enforcement action.

The intent of these letters is not to interfere in the functioning of the banks, but to suggest changes that are deemed necessary for course correction. The letters have had the desired effect and prod the boards to make necessary changes.

Regulatory action

The Reserve Bank of India (RBI) took enforcement action against 41 regulated entities by imposing an aggregate penalty of Rs 61.15 crore between July 1, 2019, and June 30, 2020, the bank said in its annual report.

The actions were taken against regulated entities for non-compliance of various regulations, the RBI said in its annual report. Enforcement actions were also undertaken against contravention of the directions pertaining to third-party account payee cheques; non-compliance with directions contained in risk mitigation plan (RMP); and failure to comply with the provisions of Section 10B of the Banking Regulation Act, 1949, among others.

The RBI undertook enforcement action and imposed fine for non-submission of compliance to risk assessment reports’ (RAR) findings; non-compliance with/ contravention of directions on fraud classification and reporting; not adhering to discipline while opening current accounts, etc.

As many as 26 penal actions were taken against public sector banks with an aggregate fine of Rs 38.35 crore, while eight were initiated against private sector banks with an aggregate fine of Rs 8.55 crore. With regard to cooperative banks, it said 13 penal actions were taken with imposition of Rs 9.18 crore, it said. During the period, it said, a total fine of Rs 5 crore were imposed on two foreign banks.



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IPs to face penalty for non-compliances

Banking & Finance

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Insolvency regulator IBBI has come up with a novel step to ensure Insolvency Professionals ( IPs) better discharge their duties and at the same time help distinguish the performers and non-performers amongst them. It has come up with a graduated system of levy of monetary penalty for minor non-compliances by the IPs.

For this purpose, the Insolvency & Bankruptcy Board of India (IBBI) has now directed the three Insolvency Professional Agencies (IPAs) to amend their bye-laws so as to provide maximum and minimum monetary penalty for certain non-compliances by IPs registered with such agencies.

Till date, there are three IPAs registered with the IBBI. These are ICSI Institute of Insolvency Professionals, Indian Institute of Insolvency Professionals of ICAI and Insolvency Professional Agency of Institute of Cost Accountants of India.

Monetary penalty

The IPAs have now been directed to provide for the maximum and minimum monetary penalty in the interest of objectivity and uniformity. The penalty will be imposed where the Disciplinary Committee of the IPAs decides to impose such penalty on its professional members.

As many as 14 contraventions have now been listed out by the IBBI in a circular along with the minimum and maximum penalty that can be imposed.

The contraventions include failure to submit disclosures, returns etc. to IPAs or incorrect disclosures, returns relating to any assignment as required under IBC (penalty of upto ₹1 lakh or 25 per cent of fee, whichever is higher, subject to a minimum of ₹50,000); accepting an assignment having conflict of interest with stakeholders (upto ₹ 2 lakh or 25 per cent of fee, whichever is higher, subject to a minimum of ₹1 lakh), etc.

Experts’ views

Ashok Haldia , Chairman of Indian Institute of Insolvency Professionals of ICAI, said “Prescription of a graduated system of monetary penalty for minor non compliances is welcome as it would bring in objectivity and uniformity in dealing with cases within an IPA and across all the IPA. It differentiates between non compliances and violations.”

Abhishek Saxena, Co-founding Partner, Phoenix Legal, said this marks a welcome step to ensure better diligence and integrity in the system.

Nakul Sachdeva, Partner, L&L Partners, said “The circular would lead consistency in the quantum of penalty imposed”.

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RBI sets up advisory group to assist Regulatory Review Authority

Banking & Finance

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The Reserve Bank of India’s Regulations Review Authority (RRA 2.0) has constituted a six-member Advisory Group headed by S Janakiraman, Managing Director, State Bank of India, to support it in reviewing the central bank’s regulations and compliance procedures with a view to streamlining/ rationalising them to make them more effective.

The Authority has been set up initially for a period of one year from May 1, 2021. M. Rajeshwar Rao, Deputy Governor, RBI was appointed as the Regulations Review Authority last month.

“The Group will assist the RRA by identifying areas/ regulations/ guidelines/ returns which can be rationalised and submit reports periodically to RRA containing the recommendations/ suggestions,” RBI said in a statement on Friday.

The other members of the Group are — TT Srinivasaraghavan, Former MD and Non-Executive Director, Sundaram Finance; Gautam Thakur, Chairman, Saraswat Co-operative Bank; Subir Saha, Group Chief Compliance Officer, ICICI Bank; Ravi Duvvuru, President and CCO, Jana Small Finance Bank; and Abadaan Viccaji, Chief Compliance Officer, HSBC India.

The Group has decided to invite feedback and suggestions from all regulated entities, industry bodies and other stakeholders. Suggestions and feedback can be e-mailed to the Group latest by June 15, 2021.

Terms of Reference

The terms of reference of RRA 2.0 include making regulatory and supervisory instructions more effective by removing redundancies and duplications, if any; and to obtain feedback from regulated entities on simplification of procedures and enhancement of ease of compliance. The authority will seek to reduce compliance burden on regulated entities by streamlining the reporting mechanism; revoking obsolete instructions if necessary and obviating paper-based submission of returns, wherever possible.

The RRA will examine and suggest the changes required in dissemination process of RBI circulars/ instructions.

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RBI sets up a six-member committee to review ARC regulations, BFSI News, ET BFSI

Banking & Finance

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The Reserve Bank of India announced formation of a committee to conduct a comprehensive review of the functioning of ARCs in the financial sector ecosystem and to recommend suitable measures for enabling such entities to meet the financial sector’s growing needs.

Committee will submit its report within three months from the date of its first meeting. The Reserve Bank of India’s Department of Regulation will provide the committee with the necessary secretarial support.

The committee is headed by Sudarshan Sen former RBI executive director and other members comprises Vishakha Mulye, executive director, ICICI Bank, P N Prasad, former deputy managing director of State Bank of India, Rohit Prasad, professor of economics, Management Development Institute, Gurugram, Abizer Diwanji, partner, Ernst and Young, and chartered accountant R Anand.

The committee will review business models of the ARCs, examine the current legal and regulatory system, and make recommendations on ways to enhance ARC efficacy. It will also examine their role in stressed asset resolution under the Insolvency and Bankruptcy Code (IBC) and make recommendations to enhance security receipt liquidity and trading.



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