Tag: Reserve Bank of India

RBI fines Ahmedabad-based Bapunagar Mahila Co-op Bank ₹2 lakh for non-compliance

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank of India (RBI) on Thursday (May 16) said it has imposed a monetary penalty of ₹2 lakh on Bapunagar Mahila Co-operative Bank Ltd, Ahmedabad , Gujarat. The central bank has imposed a penalty for non-compliance with RBI directions on ‘Placement of Deposits with Other Banks by Primary (Urban) Co-operative Banks (UCBs)’ in an order dated May 8.

“This penalty has been imposed in exercise of powers vested in RBI, conferred under the provisions of section 47A(1)(c) read with sections 46(4)(i) and 56 of the Banking Regulation Act, 1949,” the RBI said.

The central bank conducted the statutory inspection of the bank with reference to its financial position as of March 31, 2023. Following this, it issued a notice as to why a penalty should not be imposed on it for its failure to comply with the said directions.

After receiving the bank’s reply to the notice and oral submissions made by it during the personal hearing, the RBI found that the charge of breaching the prudential inter-bank (counterparty) exposure limit was sustained, warranting the imposition of a monetary penalty, as per a release.

The RBI further said, “This 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 bank with its customers.”

ALSO READ: RBI cautions non-bank lenders against growing reliance on algo credit models

The Reserve Bank also imposed a monetary penalty of ₹5 lakh on Sutex Co-operative Bank Ltd, Surat, Gujarat, for non-compliance with its directions. It was found to be flouting the directions on ‘Comprehensive Cyber Security Framework for Primary (Urban) Cooperative Banks (UCBs) – A Graded Approach’ and ‘Levy of Penal Charges on NonMaintenance of Minimum Balances in Inoperative Accounts.’

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

This global market expert feels India’s RBI may cut interest rates in August before the US Fed

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank of India (RBI) may cut interest rates before the US Federal Reserve, potentially as early as August, according to Danielle DiMartino Booth, CEO and Chief Strategist at QI Research.

Booth has closely studied India’s economy and believes the RBI may act sooner, especially in response to actions by other central banks, such as the European Central Bank, which she notes may begin reducing rates earlier than the US.

A Fed rate cut is unlikely until September as it awaits further evidence that increases in the US unemployment rate will persist.

Booth also pointed to the unseasonal trend in job cuts that could signal a quicker increase in unemployment rates.

“We just had a large restaurant chain here in the United States abruptly close 80 restaurants affecting 6,500 employees today. We’ve had Walmart come out with an announcement that it’s going to be shedding executives, white collar workers at its headquarters, bringing everybody back into the office. These are not seasonally normal patterns that we’re seeing in United States, indicating that we’re going to see a faster increase in the unemployment rate.”

These changes are happening amidst an overall increase in unemployment, with 5.3 million Americans currently seeking full-time work.

Booth believes the Federal Reserve will likely cut rates at least two times in 2024. 

Her view aligns with Citi’s, which has revised its forecast to just one or two rate cuts in the US instead of three estimated earlier, following disappointing inflation figures in the first quarter.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

RBI’s stricter project finance rules may impact tariffs, says JSW Energy

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The stricter project finance rules proposed by the Reserve Bank of India (RBI) could have an impact on tariffs, according to Sharad Mahendra, Joint MD and CEO of JSW Energy.

According to the draft rules issued by the central bank, lenders will need to set aside 5% of the loan as general provisions for both existing and new loans in the under-construction phase.

“When we plan for any capex, we have a very robust mechanism of taking care of these kinds of risks. If this comes, ultimately, it is a cost which is going to impact the tariffs because the minimum desired returns are required for the business to be sustainable,” Mahendra said.

JSW Energy on May 7 reported a 23% year-on-year (YoY) jump in net profit to ₹345 crore for January-March period.

“We have been seeing a change in the demand dynamics and the environment especially in the renewable energy space. During the quarter the demand has been good, demand growth continues to be robust,” he said.

The company expects to add close to three gigawatt capacity during the financial year.

Unit one of Ind-Barath has started contributing to the financials. “Unit 2 will be commissioned in the current quarter. We have decided to be in the merchant market seeing the demand scenario. We expect our margins from this plant will be quite decent.”

Also Read | PSU Bank shares like SBI, Canara, PNB fall amid new RBI norms for infra project financing

The company has taken an enabling provision to raise up to ₹10,000 crore via private placement or preferential allotment or qualified institutional placement (QIP).

The company is also setting up a battery storage unit in Rajasthan, and plans to enter into the Wind Turbine Generator (WTG) space.

Its current market capitalisation is ₹93,898 crore.

For more, watch the accompanying video

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

RBI Governor discusses ways to scale up UPI ecosystem with stakeholders

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Reserve Bank Governor Shaktikanta Das on Wednesday discussed with banks and other stakeholders ways to scale up the UPI ecosystem, expand products and foster innovative payment solutions.

UPI (Unified Payments Interface) is an instant real-time payment system developed by the National Payments Corporation of India (NPCI) to facilitate inter-bank transactions through mobile phones.

Das held a meeting on Wednesday with major stakeholders in the UPI ecosystem — banks, NPCI, third-party application providers and technology service providers — to discuss potential strategies for further expanding the reach of UPI, RBI said in a statement.

“There were wide-ranging discussions on various aspects to widen and deepen the adoption and usage of UPI. The stakeholders shared their valuable inputs and suggestions,” it said.

The discussions broadly covered strategies for scaling up UPI infrastructure and expanding product portfolio, and challenges being encountered by the ecosystem and innovative solutions for addressing the same.

The deliberations focused on innovative ideas to integrate potential users into the digital payments ecosystem.

The various suggestions received will be examined and suitable action will be initiated in due course by the Reserve Bank, the central bank said.

The meeting was also attended by RBI Deputy Governor T Rabi Sankar and other senior officials of the central bank.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Indian banks to step up IT spends as regulatory scrutiny rises

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Indian banks’ plan to increase their technology spending to around 10% of their operating expenses to keep up with the surge in digital transactions as the central bank intensifies scrutiny on frequent outages, more than half a dozen bankers said.

Banks were earlier spending between 6%-8% of total operating expenditure on technology, sharply below the global average of 10%-12%.

However, increased scrutiny of banks’ IT systems by the Reserve Bank of India (RBI) over the past year and the recent sanctions imposed on Kotak Mahindra Bank due to technology-related deficiencies are forcing lenders to take the regulator’s concerns more seriously.

The RBI has frequently directed banks to reduce tech-related glitches that disrupt customers’ ability to transact, five bankers said, declining to be identified as they are not authorised to speak to the media.

As operating expenses have grown over the years, Kotak Mahindra Bank spent “significantly” more on technology, Ashok Vaswani, MD and CEO of Kotak Mahindra Bank, said in a post-earnings press conference.

However, “what is evident, is that our efforts have fallen short of what the regulator expects,” Vaswani said.

India’s banking and investment services firms were estimated to have spent $11.3 billion on technology in 2023, according to latest available data from Gartner.

“We believe in today’s world, systems cannot be down and you have to create online, real-time systems to match the capabilities,” said Sumant Kathpalia, CEO at private lender IndusInd Bank, which currently spends about 8%-10% of cost-to-income on IT-related expenses.

“We have invested and will continue to invest in these,” he said.

The increased investment will go towards upgrading core systems which form the backbone of all banking operations, and on better monitoring of digital frauds, protecting customer data and tech-driven processes for customer verification, the bankers said.

Other private lenders like ICICI Bank, Axis Bank, Yes Bank, and Kotak Mahindra Bank, at post-earnings events recently said they will increase IT spending to deal with rising digital activity, including transactions via India’s home-grown payments system Unified Payments Interface.

More than 40% of all payments done in India are now digital but outages have become more frequent.

In discussions with lenders, RBI has noted that the banking system is not adequately prepared to handle the growth in digital banking transactions, one of these bankers said.

The RBI did not immediately respond to email queries.

“Most banks’ core banking systems are quite dated now so they are now assessing whether the systems can handle the rise in digital activity,” said Rohan Lakhiyar, partner at consultancy firm Grant Thornton Bharat’s financial services risk division.

The other focus area, for both banks and the RBI, is cybersecurity since each new technology integration that banks complete also raises an operational risk, Lakhiyar added.

“Banks’ plans to increase their IT spends seem to be on the back of RBI’s more stringent approach to tech issues and the need to upgrade backend systems as banks increasingly source customers digitally,” Amit Khurana, head of equities at Dolat Capital said.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

IBA chief weighs in on RBI’s new stricter rules for project financing

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Sunil Mehta, Chief Executive of the Indian Banks’ Association (IBA) believes the tightening of project financing norms by the Reserve Bank of India (RBI) will bring in financial discipline not only in the banking system but also for infrastructure and construction companies.

RBI is incentivising the timely completion of projects with these guidelines, and Mehta thinks this will make project financing more prudent.

“This provision is providing the cushion to absorb the shocks in case they occur,” he said.

The draft rules issued by the central bank on May 3 include a classification of projects as per their phase and higher provisioning of up to 5% during the construction phase, even if the asset is standard from 0.4% now.

Banks will also have to assess the value of the project every year, even during the construction phase. If it so happens that there’s a change to the projected cash flows, the estimated life of the project (say, a flyover, for instance) or any other such factor, the lender has to make necessary provisions

Mehta pointed out that bankers have learnt infrastructure financing problems the hard way and that is why the Reserve Bank of India (RBI) has proposed to tighten the rules governing project financing.

“There was a time when they (financial institutions) were aggressively lending to the infrastructure sector. Some of the projects could not succeed because the land acquisition could not take place or necessary clearances from the government took longer than expected time,” he said.

Shares of REC, PFC and other state-owned lenders including State Bank of India (SBI), Punjab National Bank (PNB), Canara Bank, Union Bank of India, Maharashtra Bank and Bank of Baroda (BoB), tumbled in trade following the revised draft.

CNBC-TV18 learns that lenders are likely to push back on the proposal.

The central bank’s guidelines are proposed to be applicable on both banks as well as non-bank lenders.

For more, watch the accompanying video

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Explained: How India’s central bank plans to force governments to meet infra project deadlines

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank of India may be trying to fix a perennial problem in India: the delay in delivering essential infrastructure projects.

The RBI aims to achieve this by forcing banks to set aside extra money for projects whose deadlines are being deferred. The change in rule will apply to all lenders, including financing companies that aren’t banks.

“Now that will actually force the government to make sure that before a financial closure is achieved, the respective extraneous approvals that are required, are actually gone,” said Abizer Diwanji, Partner & National Leader Financial Services at EY-India.

So, before the loan is approved, the borrower must have approvals for the land, environmental, and other necessary regulatory clearances.

In private-public partnership projects, if half the land needed for the project is available, the loan can be approved.

Not only that, but the loan document for every project must clearly specify the desired date for the beginning of commercial operation before the money is disbursed.

Also Read | Why shares of REC, PFC, IREDA declined as much as 12% on Monday: Explained

The lender has to set aside 5% of the project cost when it is under construction and pass on the added cost of money to the borrower as higher interest rates.

If costs overrun, banks are allowed to give extra loans up to 10% of the original estimate.

“I think it makes sense to have a higher standard provision for deferrals because India is notorious in terms of delaying construction projects. And if you look at the comprehensive guidelines and not just focus on these initiatives, it gives a lot of leeway,” Diwanji said.

The money set aside as additional provision can be halved once the project is operational, and it can be further reduced to 1% once the project starts generating enough cash to meet its dues and the long-term debt is down by at least 20%.

The RBI has made it clear that there will be no moratoriums on payments once the project is delayed. In the rare event of a delay, any moratorium can’t be extended beyond six months after the first deadline. This regulation underscores the importance of timely project completion and its financial implications.

Also Read | REC, PFC will see no impact on profitability due to draft RBI guidelines, says CLSA

Banks will also have to assess the value of the project every year, even during the construction phase. If it so happens that there’s a change to the projected cash flows, the estimated life of the project (say, a flyover, for instance) or any other such factor, the lender has to make necessary provisions.

For more details, watch the accompanying video

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Five Star Business Finance forecasts 30% loan growth for FY25

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Chennai-based Five-Star Business Finance, based in Chennai expects its loan book to grow 30% in the current financial year (FY25).

Total disbursements for January-March period grew 20% to ₹1,336 crore from ₹1,110 crore last year.

Lakshmipathy Deenadayalan, Chairman and Managing Director of the non-bank finance company (NBFC) said, “I don’t see any kind of weakness, both in loan growth as well as from collections perspective. The outlook is very strong; especially post COVID we have been giving growth of above 30% and the same growth will continue,” he added.

Deendalayan expects the net interest margins (NIMs) to come down to a steady state of around 15-16% in 2-3 years. The NIM was at 17.19% in the latest quarter versus 18.47% last year.

He pointed out that the NBFC focuses on lending to specific niche segments where traditional financial services are not readily available to customers.

Also Read | Five Star Business Finance forecasts 31-32% asset base growth in FY25

The lender has raised the Capital to Risk (Weighted) Assets Ratio (CRAR for certain users in light of the Reserve Bank of India’s (RBI’s) recent circulars.

CRAR is a measure used by banks to ensure they have enough capital to cover their risks

On loans given out for personal needs, the lender has raised the CRAR to 125% from 100%.

Also Read | RBI issues revised guidance note on operational risk management, extends it to NBFCs

In the January-March quarter, the lender’s profit after tax (PAT) increased by 40% to ₹236 crore.

The market capitalisation of Five Star Business Finance is around ₹21,651.48 crore. Its shares have gained close to 42% in the past year.

For the entire interview, watch the accompanying video

Catch all the latest updates from the stock market here

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

RBI issues revised guidance note on operational risk management, extends it to NBFCs

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank on Tuesday updated its “guidance note” on operational risk management for the financial sector, and also extended it to the NBFCs, including housing finance companies.

The 2005 ‘Guidance Note on Management of Operational Risk’ covered only commercial banks.

The Reserve Bank of India (RBI) said an operational disruption can threaten the viability of a regulated entity (RE), impact its customers and other market participants, and ultimately have an impact on financial stability.

It can result from man-made causes, Information Technology (IT) threats, geopolitical conflicts, business disruptions, internal/external frauds, execution/delivery errors, third-party dependencies, or natural causes.

The latest ‘Guidance Note on Operational Risk Management and Operational Resilience’ aligns with the RBI’s regulatory guidance with the Basel Committee on Banking Supervision (BCBS) Principles, the central bank said.

The guidance note intends to promote and further improve the effectiveness of operational risk management of the REs, and enhance their operational resilience given the interconnections and interdependencies, within the financial system, that result from the complex and dynamic environment in which the REs operate.

One of the key changes carried out in the updated guidance note is that its applicability has been extended to all non-banking financial companies (NBFCs) — including housing finance companies — co-operative banks, and financial institutions, in addition to commercial banks.

The 2005 guidance note, which has now been repealed, was applicable to only scheduled commercial banks.

The new note explicates the “three lines of defence model” wherein business unit forms the first line of defence, organisational operational risk management function forms the second line, and audit function forms the third line of defence.

It has separate principles for mapping of internal and external interconnections and interdependencies, incident management, ICT, and disclosures.

The note also introduces separate principles on “lessons learned exercise” and continuous feedback mechanism.

Until recently, the predominant operational risks that REs faced emanated from vulnerabilities related to increasing dependence and rapid adoption of technology for provision of financial services and intermediation.

However, the financial sector’s growing reliance on third-party providers exacerbated by the Covid-19 pandemic with greater reliance on virtual working arrangements, has highlighted the increasing importance of operational risk management and operational resilience.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Groww Pay gets RBI licence to operate as online payments operator

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Groww Pay, the UPI platform of brokerage firm Groww, has secured an online payment aggregator (PA) licence from the Reserve Bank of India (RBI). This licence allows Groww Pay to facilitate online transactions through its platform using its UPI app, Groww Pay.

This move marks Groww’s expansion into financial services beyond its usual investment and broking offerings. Since last year, Groww has been offering UPI payment services through its Groww Pay Private Limited feature, in partnership with YES Bank.

The platform has been focusing on bill payments like electricity and water bills, DTH recharges, as well as loan and credit card repayments.

Backed by Tiger Global, Groww has been exploring opportunities in credit and payments to retain its existing customers and attract new ones. Before entering payments, it had introduced lending on its platform and secured an NBFC licence.

ALSO READ | Groww MF increases minimum investment requirements for Nifty Total Market Index Fund: What this means for investors

Several other online payment gateway companies have also received RBI approval to operate as payment aggregators, including DigiO, a Groww-backed identity verification startup.

This licence enables companies to provide payment services for online businesses, accepting payment instruments from customers.

The RBI’s recent decision to regulate offline payment aggregators as well will subject them to additional compliance measures. The draft guidelines are open for public feedback until May 31.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow