Menu

RBI

RBI

CBDC Can Play A Key Role In Cross-Border Payments: RBI’s Das

,

We are even more sure that, aside from domestic transactions, CBDC will prove to be the most effective and efficient option for cross-border payments in particular, he stated earlier this month

Reserve Bank of India Governor Shaktikanta Das has stated that the central bank’s digital currency, the Central Bank Digital Currency (CBDC), can play a key role in cross-border payments without much trouble.

He stated that the Reserve Bank India (RBI) has conducted trial operations to promote the CBDC, with ‘great’ outcomes. The CBDC was implemented as a pilot in the wholesale and retail divisions and will now be expanded to the overnight money markets.

We are even more sure that, aside from domestic transactions, CBDC will prove to be the most effective and efficient option for cross-border payments in particular, he stated earlier this month during an engagement at the IMF Governor Talks.He underlined that, while paper currency will continue to exist, the CBDC will be the world’s future currency. CBDC is going to be the future currency of the world and it is necessary that every central bank, every country works on CBDC, he went on to say.

He also stated that the world is going towards technology and CBDCs play an important role since they can truly promote efficient, cost-effective and speedier payments across jurisdictions for cross-border transactions.

The governor also stated that the RBI does intervene in the market, but that ‘our intervention is both ways’. Das stated that the RBI sometimes buys and sometimes sells dollars depending on the direction of the market.

npa

Go First’s Rs 2000 Cr Loans Are Now NPA: Central Bank

, ,

The public sector lender’s exposure to the struggling airline, including government-guaranteed emergency credit, is estimated to be over Rs 2,000 crore

The Central Bank of India classified Go First’s loans as non-performing assets in the second quarter of fiscal year 2023-24. The carrier has been insolvent since May 2023 and suspended operations on 3 May of this year.

The public sector lender’s exposure to the struggling airline, including government-guaranteed emergency credit, is estimated to be over Rs 2,000 crore. Aside from the Central Bank of India, Bank of Baroda is another state-owned lender with significant exposure to Go First.

During an analyst call for Q2, executives from the Central Bank of India indicated that the bank had previously taken provisions in the standard asset category for one large corporate account (Go First) owing to anticipated future issues (stress). Because the corporate account was now classed as NPA, the provision resulted in a write-back, resulting in a full provision on that account.

The bank paid tax on the provision (about Rs 600 crore) for this account in the April-June quarter of FY24, recognising it as a regular asset. With a provision of roughly Rs 2,000 crore as an NPA, the bank witnessed a write-back of Rs 43 crore, according to bank executives.

This account is classified as a sub-standard account per provisioning regulations, meaning that it has been nonperforming for less than or equal to 12 months. Although the provisioning obligation for sub-standard accounts might range between 5 per cent and 25 per cent of the exposure depending on the nature of the credit facility, the Central Bank of India elected to make a full provision for airline accounts.

Ashok Vaswani

RBI Approves Ashok Vaswani’s Appointment As MD & CEO Of Kotak Mahindra Bank

, ,

The decision is based on the bank’s request for RBI’s approval of the new Managing Director & CEO of the bank on 19 July 2023

The Reserve Bank of India (RBI) gave its approval on Saturday to Ashok Vaswani’s nomination as Kotak Mahindra Bank’s managing director and Chief Executive Officer (CEO) for a three-year term. The appointment will take effect as of the day of assuming charge, which cannot be later than 1 January 2024, the lender stated in a regulatory filing.

From 2016 to 2019, Vaswani served as the CEO of Barclays in the United Kingdom. He also served as the British bank’s worldwide CEO for consumer and payments between 2019 and 2021. He served as Barclays’ chief digital officer from November 2021 to July 2022 before leaving the company.

The decision is based on the bank’s request for RBI’s approval of the new Managing Director & CEO of the bank on 19 July 2023. He is a veteran banker with exceptional track record and brings with him significant expertise in both consumer and corporate business, particularly for digital drive. Ashok is basically ghar vapsi and fits into the overall broad theme of getting global talent back to India and running our companies,” said Dipak Gupta, interim MD & CEO of Kotak Mahindra Bank.

The news came on a day when it recorded a net profit of Rs 3,191 crore for the July to September FY24 quarter, beating market expectations of Rs 3,092 crore. This is a 23.66 per cent increase from the Rs 2,581 crore clocked in the year-ago period.

RBI

Interest Rate To Remain High For Now: Shaktikanta Das

, , ,

Since May 2022, the Reserve Bank has also increased the short-term benchmark lending rate (repo) by a total of 250 basis points however, it has stopped raising rates and has kept the repo rate at 6.5per cent since February of this year

Shaktikanta Das, governor of the Reserve Bank India (RBI), stated that only time will tell how long interest rates will continue to be high for the foreseeable future, on Friday.

Major central banks around the world have increased their key policy rates in response to the ongoing geopolitical crises in order to combat excessive inflation.

Since May 2022, the Reserve Bank has also increased the short-term benchmark lending rate (repo) by a total of 250 basis points. However, it has stopped raising rates and has kept the repo rate at 6.5per cent since February of this year.

Only time will tell how long interest rates will stay high, the governor remarked in response to a question at the Kautilya Economic Conclave 2023.

Das stressed that the monetary policy is always challenging and there is no room for complacency in his speech at the Conclave, saying that it must remain actively disinflationary to ensure that the decline in domestic inflation from its peak of 7.44 per cent in July continues smoothly.

m and a

Kotak Mahindra Receives RBI Approval To Acquire Sonata Finance For Rs 537 Cr

, ,

We want to inform you that the RBI has given the bank approval to purchase 100 per cent of the issued and paid-up capital in Sonata, as mentioned above and to transform Sonata into a business correspondent subsidiary of the bank, according to a letter the RBI sent to the bank on October 19, 2023 and received by the bank on that same date, the bank stated

On Friday, Kotak Mahindra Bank stated that the Reserve Bank has approved its Rs 537 crore acquisition of Sonata Finance. On 10 February of this year, the private sector lender with its headquarters in Mumbai declared its intention to purchase Sonata.

Kotak Mahindra Bank in its BSE filing on Friday stated that, “We want to inform you that the RBI has given the bank approval to purchase 100 per cent of the issued and paid-up capital in Sonata, as mentioned above and to transform Sonata into a business correspondent subsidiary of the bank, according to a letter the RBI sent to the bank on October 19, 2023 and received by the bank on that same date.”

The approval came before Kotak Mahindra released its September quarter results. On 21 October, the bank is expected to release its Q2 earnings.

Previously, in September 2016, Kotak Mahindra paid Rs139 crore for BSS Microfinance in an all-cash transaction. The corporation was able to establish a grip in the south thanks to the acquisition.

penalty

L&T Finance Receives Rs 2.5 Billion Fine From RBI For Non Compliance

,

The penalty has been levied by the RBI under the relevant sections of the Reserve Bank of India Act, 1934

The Reserve Bank of India (RBI) has taken regulatory action against L&T Finance by imposing a monetary penalty of Rs 2.50 crore (Rupees Two crore Fifty lakh only) on the company. This action was taken due to non-compliance with specific provisions of the Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016. The penalty has been levied by the RBI under the relevant sections of the Reserve Bank of India Act, 1934.

It’s important to note that this regulatory action is focused on addressing deficiencies in compliance and should not be construed as a judgment on the validity of any transactions or agreements between the company and its customers. The RBI’s decision came after a statutory inspection of L&T Finance, which covered its financial position as of 31 March 2021 and 31 March 2022.

This inspection included an examination of various reports and correspondence. During the inspection, several issues were identified, including the company’s failure to inform its retail borrowers about the risk gradation and the rationale behind different interest rates applied to different borrower categories in loan application forms or sanction letters.

Additionally, the company did not notify borrowers of changes in penal interest rates when rates were higher than initially communicated. It also failed to provide notice of changes in loan terms and conditions when charging an annualised interest rate higher than what was communicated at the time of sanction.

Subsequently, the RBI issued a notice to L&T Finance, requesting the company to provide reasons why a penalty should not be imposed for non-compliance with the RBI directions.

After evaluating the company’s response to the notice and additional submissions, along with oral statements made during a personal hearing, the RBI determined that there was a substantiated charge of non-compliance with the RBI directions. Therefore, the imposition of a monetary penalty was deemed appropriate to address this non-compliance.

 

 

CFO Template (4).pptx

RBI imposes penalty of Rs 8.50 lakh on Bajaj Finance

, ,

The company received a notice instructing it to provide justification as to why a penalty shouldn’t be levied for its failure to follow the instructions set forth in the notification, according to the central bank

Reserve Bank of India (RBI) imposed Rs 8.50 lakh penalty on Bajaj Finance. The fine was issued because the company did not follow RBI instructions to the extent of failing to report certain frauds to RBI or reporting them to RBI with undue delay.

The company received a notice instructing it to provide justification as to why a penalty shouldn’t be levied for its failure to follow the instructions set forth in the notification, according to the central bank.

The RBI continued by stating that it had concluded that the charge of non-compliance with the aforementioned RBI directions was substantiated and warranted imposition of a monetary penalty, to the extent of such non-compliance, after taking into account the company’s response to the notice, additional submissions made by it, and oral submissions made during the Personal Hearing.

In two different circulars, the RBI stated that it had fined Union Bank of India Rs 1 crore for failing to follow instructions regarding “Loans and Advances – Statutory and Other Restrictions.” As a result of failing to acquire an annual declaration in Form B from one of its main shareholders within a month of the end of the three fiscal years ending on 31 March 2018, 31 March 2019 and 31 March 2020, RBL Bank has also been fined Rs 64 lakh.

retail inflation

Retail Inflation Slides To 5.02% In Sept, Lowest In Three-Month

, , ,

Food inflation, which accounts for nearly half of the overall consumer price basket, rose 6.56 per cent in September as compared with 9.94 per cent in August

India’s retail inflation eased to 5.02 per cent from 6.83 per cent in September which is a three-month low banking on sliding vegetable prices but remained above 4 per cent, a target aimed by the Reserve Bank of India (RBI).

It is likely that RBI would like to get comfortable with inflation before easing rates. However, it came between the tolerance band of 2-6 per cent of the central bank.

Food inflation, which accounts for nearly half of the overall consumer price basket, rose 6.56 per cent in September as compared with 9.94 per cent in August.

RBI earlier this month kept its key lending rate steady for a fourth consecutive policy meeting and emphatically reiterated that it is targeting inflation of 4 per cent and a print of below 6 per cent may not suffice as a condition for easing rates.

Vegetable prices were the key driver in keeping inflation elevated in the previous two months, forcing the government to ban some exports of rice and raise duties for onions.

Vegetable inflation sharply eased to 3.39 per cent in September from 26.14 per cent in the previous month. Cereal inflation in September eased to 10.95 per cent from 11.85 per cent in August. India has also banned exports of wheat since last year.

Ranen Banerjee, Partner, Economic Advisory Services, PwC India expects that the policy rates to remain unchanged for quite some time – at least till Q1 of FY25 – given the inflation prints in coming months will face upward pressure risks from the possible lower farm outputs owing to uneven rain experienced during monsoons. 

Global crude prices remaining elevated owing to production cuts, Chinese impetus and geopolitical flare ups will put further pressure on the inflation front, Banejee added.

Economist at Acuité Ratings & Research, Suman Chowdhury also believes that due to El Nino phenomenon, the yield in the upcoming kharif crop may get impacted, the lower acreage and the expected decline in domestic pulses production.

It is given that the prices of pulses are on the rise with an inflation print of 16.38 per cent. Cereal inflation continues to be in double digits at 10.95 per cent YoY despite the steps taken by the government to cool down the market prices of wheat and rice.

For fintech sector, CEO and Co-founder of Biz2Credit and Biz2X, Rohit Arora said that it will to a more predictable environment for interest rates and lending conditions, setting the stage for continued growth and innovation.

 

 

RBI

RBI Directs Banks To Oversee Personal Loan Activity

, , ,

Banks and Non-Bank lenders intensify unsecured retail loan disbursements to boost margins

 

The Reserve Bank of India (RBI) is closely observing specific aspects of personal loans for early signs of potential strain, especially as the unsecured retail loan sector of lenders has experienced substantial expansion.

RBI Governor Shaktikanta Das emphasised the importance for banks and Non-Banking Financial Companies (NBFCs) to enhance their internal monitoring mechanisms. He urged them to address any accumulating risks and implement appropriate safeguards in their own interest. 

Given the surge in personal loans, Das stressed the need for lenders to uphold robust risk management and more stringent underwriting standards. Although there are no immediate red flags, the upswing in personal loans could amplify future risks. 

RBI Deputy Governor, J Swaminathan, added that on a year-on-year basis, retail credit growth has reached 30 per cent for most banks, with unsecured credit experiencing a 23 per cent surge, in contrast to other segments which are growing at a rate of 12-14 per cent. This exceptional growth in retail credit calls for vigilance.

Vivek Iyer, Partner in Financial Services – Risk at Grant Thornton Bharat, stated, “The RBI has expressed concerns about the utilisation of unsecured personal loans for activities like investments in capital markets, which have the potential to significantly heighten financial stability risks.” 

He noted that the emergence of low-cost or no-cost brokerage firms has made access to capital markets more accessible for retail investors than ever before. In recent months, both banks and non-bank lenders have escalated disbursements in the unsecured retail loan sector to bolster their profit margins.

Presently, retail loans constitute one-third of the overall loans in the banking sector. Unsecured retail loans comprise 10-15 per cent of the total loans in the banking industry. From the lender’s perspective, this loan category is viewed as riskier due to the absence of collateral. In compensation, lenders impose higher interest rates on these loans.

Karan Gupta, Director and Head of Financial Institutions at India Ratings & Research, remarked, “As of now, delinquencies do not appear to show a significant increase across the players. The growth of loans in this segment has been very rapid, and this comes with its own challenges. I believe RBI is concerned about this.” 

Aashay Choksey, ICRA Vice President and Sector Head, noted that while retail loans have contributed to overall credit growth in recent years, the asset quality has largely remained stable, and recoveries have been robust.

In its latest financial stability report, RBI stated that the gross non-performing asset ratio of scheduled commercial banks decreased to a 10-year low of 3.9 per cent as of March 31, down from 11.5 per cent in March 2018. 

The net non-performing asset ratio also fell to 1 per cent as of 31 March, compared to 6.1 per cent in March 2018. Nevertheless, some experts suggest that the delinquency ratios of non-bank lenders should be scrutinized more closely, as these entities continuously experiment with different customer cohorts to expand their sourcing opportunities, which may not always yield success. In such a scenario, the delinquencies of non-bank lenders could rise, warn experts.

Both banks and non-bank lenders tend to serve distinct borrower profiles. Banks typically lend to individuals with high creditworthiness, while non-bank lenders cater to the underbanked segment. Recently, non-bank lenders have introduced products like “buy now pay later,” which can carry inherent risks, caution experts.

Sanjay Kumar Agarwal, Senior Director at CareEdge, remarked, “We believe that there is some weakness in the ground-level data which is yet to be reflected in the headline delinquency data. At some point, delinquencies will increase. But, the situation is not alarming.”

michael patra

14% Surge In Financial Savings: RBI Dy Guv Patra

, , ,

Households transition from financial to physical savings, notes RBI Deputy Governor Patra

Reserve Bank of India(RBI) Deputy Governor Michael Patra disclosed the information that financial savings have seen a 14 per cent increase in absolute terms in 2023. Patra also pointed out a noteworthy shift in households’ preference from financial savings to physical savings.

He explained, “The absolute level of savings rose by 14 per cent in 2023. There has been an increase in financial liabilities of households. If you observe where these liabilities are being directed, they are mostly towards housing. Households are shifting from financial savings to physical savings. When they make this shift, they contribute to investment; the physical part of savings goes directly into investment. So, in the next year, you will observe an uptick in investment.”

However, there has been a notable decline in net financial savings of households, hitting a 50-year low, accounting for 5.1 per cent of gross domestic product (GDP) in the financial year 2023 (FY23), down from 7.2 per cent in FY22, as per data from the Reserve Bank of India (RBI). Additionally, the annual financial liabilities of households surged to 5.8 per cent of GDP in FY23, compared to 3.8 per cent in FY22.

The net assets held by households exhibited a decrease, standing at Rs 22.8 trillion in FY21, then dropping to Rs 16.96 trillion in FY22 and further declining to Rs 13.76 trillion in FY23. Household debt has been on the rise. Reports indicate that household debt, measured by the stock of financial liabilities, remained notably high at 37.6 per cent of GDP in FY23, compared to 36.9 per cent in FY22.

Load More