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The guidelines said that lenders must put in place a comprehensive board-approved policy for transfer and acquisition of all loan exposures.

The Reserve Bank of India (RBI) on Friday allowed banks to sell fraud loan exposures to asset reconstruction companies (ARCs). Banks will now be able to transfer to ARCs loan exposures classified as fraud as on the date of transfer, provided that the responsibilities of the bank with respect to continuous reporting, monitoring, filing of complaints with law enforcement agencies and proceedings related to such complaints shall also be transferred to the ARC.

“The transfer of such loan exposures to an ARC, however, does not absolve the transferor from fixing the staff accountability as required under the extant instructions on frauds,” the RBI said in its master direction on transfer of loan exposures.

The guidelines said that lenders must put in place a comprehensive board-approved policy for transfer and acquisition of all loan exposures. These guidelines must lay down the minimum quantitative and qualitative standards relating to due diligence, valuation, requisite IT systems for capture, storage and management of data, risk management and periodic board-level oversight.

The board-approved policies of every lender on transfer or acquisition of stressed loans shall cover the norms and procedure for transfer, the valuation methodology to be followed, delegation of powers to various functionaries for taking decisions on the transfer of loans, stated objectives for acquiring stressed assets and the risk premium to be applied.

When negotiated on a bilateral basis, the negotiations must necessarily be followed by an auction through the Swiss challenge method if the aggregate exposure of lenders to the relevant borrower is `100 crore or more. In all other cases, the bilateral negotiations shall be subject to the price discovery and value maximisation approaches adopted by the transferor as part of the board-approved policy, the RBI said.

The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹79 lakh on Apna Sahakari Bank, Mumbai, for non-compliance with its directions on non-performing asset (NPA) classification, interest rate on deposits, and maintenance of deposit accounts.

The central bank, in a statement, said this penalty has been imposed in exercise of powers vested in the RBI by the Banking Regulation Act, 1949, taking into account failure of the bank to adhere to the aforesaid directions.

This action is based on deficiency 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, it added.

Referring to the statutory inspection of Apna Sahakari Bank, conducted by the RBI with reference to the bank’s financial position as on March 31, 2019, the statement said the Inspection Report pertaining thereto, and examination of all related correspondence revealed, inter alia, that the bank had not complied with the directions issued by the RBI on NPA classification.

Further, the bank had not complied with the RBI directions on payment of interest on deposits lying in current accounts of deceased individual depositors or sole proprietorship concerns while settling the claims and levying of penal charges in savings bank accounts for non-maintenance of minimum balances, the statement added.

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 for contravention of aforesaid directions, the RBI said.

“After considering the bank’s reply to the notice, additional submissions and oral submissions made during the personal hearing, the RBI came to the conclusion that the charge of non-compliance with the aforesaid RBI directions were substantiated and warranted imposition of monetary penalty, to the extent of non-compliance with the aforesaid directions,” the central bank said.

Pension regulator PFRDA has now paved the way for more players to offer custodial services in the domestic pension market. It has now amended its existing 2015 ‘Custodian of Securities’ regulations, relaxing the entry norms specified earlier.

The relaxation has altered an earlier stipulation requiring a pension fund or its sponsor, trustee bank or a Central record-keeping agency, to hold directly or indirectly not more than 50 per cent shareholding in the custodian.

With the latest change, PFRDA will entertain applications for custodial services licences even in cases where the sponsor, associates or holding company of the applicant, has more than 50 per cent holding in the aspiring custodian entity.

Conditions to be met

However, the conditions that need to be met for this include the net worth of the sponsor, associates or holding company remaining at least ₹50,000 crore at all time.

The other conditions specified for the new regime include 50 per cent or more of the directors of the custodian should be those who do not represent the interests of the sponsor or its associates; neither the custodian nor the pension fund company shall be a subsidiary of each other; and no person should be the director of both the custodian and pension fund company. Some of these conditions are aimed at preventing conflict of interest situations, sources added.

The PFRDA will soon come out with a Request for Proposal (RFP) with new relaxed norms, said sources. Currently, StockHolding Corporation of India is the sole custodian of securities for pension assets.

The pension regulator is keen that more players enter the custodial services space, given the huge increase in pension assets in recent years. Pension assets under management (AUM) are recording compounded growth of over 30 per cent, and are expected to touch ₹7.5-lakh crore by end March this fiscal. Pension AUM has already crossed ₹6.5-lakh crore.

Meanwhile, the PFRDA has also done away with the stipulation that required applicants (for licence of custodian) holding of assets under custody on the date of application to be at least equal to the total AUM of NPS as on March 31 of the preceding financial year.

Now, the PFRDA has said that the applicant’s minimum holding of assets under custody on the date of application would be defined under the selection process. These changes are expected to help players such as State Bank of India, HDFC Bank , ICICI Bank and Axis Bank, throw their hat in the custodial services ring, said a pension industry observer.