No more penal interest: How RBI decision will help home, personal, car and other loan borrowers

Feb 09, 2023 

In a move that will help customers, the Reserve Bank of India (RBI) has proposed to do away with the levy of “penal interest” on loan defaults by regulated entities and replace it with “penal charges”. The central bank will issue draft guidelines on the issue for comments from stakeholders soon.

In the bi-monthly ’Statement on Developmental and Regulatory Policies’ released today (February 8), the RBI said that “divergent practices” by regulated entities with regard to the levy of penal interest have led to customer grievances and disputes have been seen.

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Sebi allows all RBI-authorised payment systems for RFQ settlement

Jan 10, 2023 

The Securities and Exchange Board of India (Sebi), in a circular issued on Monday, clarified that all payment mechanisms provided by banks and payment aggregators authorised by the Reserve Bank of India (RBI) to be used for settlement of trades executed on the Request for Quote or RFQ platform.
This was in response to a clarification sought by stock exchanges and market participants as to whether payment mechanisms other than ‘Real-Time Gross Settlement’ or RTGS could be used for settlement.

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RBI to launch retail e? pilot on Dec 1

Dec 05, 2022 

The Reserve Bank of India has announced the launch of the pilot project for retail digital rupee on December 1, 2022, informed RBI in an official press release.

According to the release, users will be able to transact with e?-R through a digital wallet offered by the participating banks and stored on mobile phones and devices. The pilot would cover select locations in closed user groups (CUG) comprising participating customers and merchants. “The e?-R would be in the form of a digital token that represents legal tender. It would be issued in the same denominations that paper currency and coins are currently issued. It would be distributed through intermediaries, i.e., banks,” RBI noted.

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Despite imminent slowdown, rate hikes to continue

Dec 06, 2022 

While the fiscal second quarter growth may be just half of what it was in the first quarter, the central bank may not still put a brake on raising interest rates as price pressures continue.

Economists have factored a lower growth for the September quarter at 6.5 percent compared to 13.5 percent in the June quarter. Despite risks of a further slowdown, the Reserve Bank is still expected to deliver a 35 to 50 basis points ( one bps is 0.01 percent) rate hike to manage inflation within the mandated band of 2-6 percent.

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RBI raises minimum capital requirement for ARCs, widens scope of their activity

Dec 09, 2022

The Reserve Bank of India has raised the minimum capital requirement for asset reconstruction companies (ARC) and widened the scope of their activities by allowing them to act as resolution applicants under the bankruptcy law backpedaling from its previous defiance on the matter.

These are crucial parts in the revised set of rules for ARCs that the regulator unveiled Tuesday with an aim to improve their regulatory framework and strengthen their governance standard

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RBI issues consolidated guidelines on unhedged foreign currency exposure

Dec 09, 2022 

The Reserve Bank on Tuesday modified and consolidated guidelines for banks on unhedged foreign currency exposures of any entity to prevent losses due to heightened volatility in the forex market.The RBI has, from time to time, issued several guidelines, instructions and directives to the banks on Unhedged Foreign Currency Exposure (UFCE) of the entities, which have borrowed from banks.

In the wake of a bank seeking clarification on various aspects related to UFCE, the RBI said a comprehensive review of the extant guidelines has been undertaken and all the existing instructions on the subject have been consolidated.These instructions shall come into force from January 1, 2023, it said in a circular.

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Ratings devoid of lenders detail should be treated as unrated exposure: RBI

 Dec 14, 2022 

In a move that may put pressure on the capital adequacy of banks, the Reserve Bank of India (RBI) on Monday said loan ratings without information about lenders’ details should be treated as unrated exposure.
Capital should be set aside using risk weightings applicable for unrated exposure to companies and non-banking finance

companies.
The RBI said these instructions would be effective on March 31, 2023. Thus, any burden on account of higher capital charges will be in the current financial year (FY23).
The press releases (PRs) issued by external credit assessment institutions (ECAI) on ratings often do not have lenders’ details.

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India Inc expects another 35-50 basis points policy rate hike by RBI

Sep 23, 2022 

India Inc is bracing itself for yet another policy rate hike by the RBI Monetary Policy Committee in the range of 35-50 basis points as the move seems unavoidable in the wake of the global monetary tightening to limit the impact of inflation, ASSOCHAM has said. The chamber has sought a balanced and smooth transition to the new trajectory for borrowing costs.

Seeking several measures for ensuring that adequate liquidity is maintained within the system, the ASSOCHAM has said '' 35-50 bps rate hike seems imminent and inevitable while the MPC may leave the CRR and SLR rates unchanged''.

ASSOCHAM president Mr Sumant Sinha said while 35-50 bps increase in the benchmark rates seems unavoidable at this point of time given the continuous monetary tightening by the US Federal Reserve and other central banks. He however noted that economic activity is at robust levels. “India is in a sweet spot with growth coming from all quarters and inflation is relatively in control. Softening of crude prices will augur well for the economy and we should start the interest rate cut cycle from early part of FY24.”

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