1. INDIA
1.1. RBI to operationalize Central Bank Digital Currency – Retail (e₹-R) Pilot from 1st December 2022
On December 1, 2022, RBI announced the launch of the first retail digital Rupee (e-R) pilot. The pilot would cover a small number of locations in a closed user group (CUG) of participating customers and merchants. The e-R would take the form of a digital token that would serve as legal tender. It would be issued in the same denominations as paper money and coins are now. It would be distributed via intermediaries, such as banks. Users will be able to transact with e-R using a digital wallet provided by participating banks and stored on their mobile phones or devices. Person to Person (P2P) and Person to Merchant (P2M) transactions are both possible (P2M)[1].
Eight banks have been identified for phase-wise participation in this pilot. The first phase will begin with four banks, viz., State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank in four cities across the country. Four more banks, viz., Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank will join this pilot subsequently. The pilot would initially cover four cities, viz., Mumbai, New Delhi, Bengaluru and Bhubaneswar and later extend to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla.
RBI on November 30, 2022, issued a notification on lending and deposit rates of scheduled commercial banks – November 2022. The following revised rates are introduced:
- Weighted average lending rate (WALR) on new rupee loans of SCBs increased by 09 basis points (bps) from 8.59 per cent in September 2022 to 8.68 per cent in October 2022.
- WALR on outstanding rupee loans of SCBs increased by 13 bps from 9.22 per cent in September 2022 to 9.35 per cent in October 2022.
- Year median Marginal Cost of Fund based Lending Rate (MCLR) of SCBs increased from 7.90 per cent in October 2022 to 8.05 per cent in November 2022.
- Weighted average domestic term deposit rate (WADTDR) on outstanding rupee term deposits of SCBs increased by 10 bps from 5.39 per cent in September 2022 to 5.49 per cent in October 2022[2].
RBI announced a four-tiered regulatory framework for the categorization of Urban Co-operative Banks (UCBs). RBI has categorized all unit UCBs and salary earners' UCBs (irrespective of deposit size), and all other UCBs having deposits up to ₹100 crores in Tier 1. In Tier 2, it has placed UCBs with deposits of more than ₹100 crores and up to ₹1,000 crores. Tier 3 will cover banks with deposits of more than ₹1,000 crores and up to ₹10,000 crores. UCBs with deposits of more than ₹10,000 crores have been categorized in Tier 4. Further, Tier 1 UCBs must maintain a minimum capital-to-risk weighted assets ratio of 9 per cent of Risk Weighted Assets (RWAs) on an ongoing basis. Tier 2 to 4 UCBs must maintain a minimum capital to risk-weighted assets of 12 per cent of RWAs on an ongoing basis.[3]
RBI has imposed a penalty of INR 3,00,000 (Indian Rupees Three Lakhs only) on Cumbum Co-operative Bank, Cumbum, Andhra Pradesh for non-compliance with the directions issued under Frauds- Classification and Reporting and Board of Directors– UCBs. The financial position of the cooperative bank revealed the instances of non-reporting of frauds to RBI and loans and advances sanctioned to its directors and firms owned by the director’s relatives[4].
RBI has imposed a penalty of INR 1,00,000 (Indian Rupees One Lakh only) on Tiruchirappalli District Central Cooperative Bank Ltd., Tiruchirappalli, Tamil Nadu[5], INR 20 lakhs (Indian Rupees Twenty Lakhs only) on Indian Mercantile Co-operative Bank, Lucknow[6] and INR 50 lakhs (Indian Rupees Fifty Lakhs only) on Bharat Co-operative Bank, Mumbai[7] for non-adherence of the directions issued under income recognition asset classification, provisioning and other related matters. The cooperative bank's financial position revealed the incorrect classification of loan accounts.
RBI imposed a monetary penalty of ₹42 lakh (Rupees Forty-two lakh only) on Arunachal Pradesh Rural Bank (the bank), for non-compliance with the directions issued by RBI on ‘Strengthening of Prudential Norms- Provisioning Asset Classification and Exposure Limit’ and ‘Regional Rural Banks- Income Recognition, Asset Classification and Provisioning Norms- Non-Performing Assets (NPAs)’. The investigation conducted by RBI concluded that the bank failed to comply with the aforesaid RBI directions to the extent it did not (i) adhere to exposure limits for single investment and (ii) classify certain term loans and credit facilities as non-performing assets in accordance with the IRAC norms[8].
2. Bangladesh
Bangladesh Bank extended reduced risk-weighted (interest) or Determining Risk Weighted Asset (RWA) to 100 per cent instead of 150 per cent till 30 September 2024. As a result, the low-cost fund has become available for start-ups, natural resources, and the real estate sector, to create new entrepreneurship opportunities.
2.2. Central bank of Bangladesh (“CBB”) asks banks and NBFIs Donate 5% of CSR to PM’s education trust
Central Bank of Bangladesh ("CBB") has directed scheduled banks and non-bank financial institutions (NBFI) to donate 5% of their Corporate Social Responsibility (CSR) funds to the Prime Minister's Educational Assistance Trust Fund. The circular also stated that 5% of the CSR budget, calculated on the basis of net profit as of December 31 of the previous year, will be deposited in the education assistance fund's bank account by May 30 of the following year[9].
CBB issued a circular to all authorized dealers (ADs) in foreign exchange and licensed mobile financial service providers in the country that said they are allowed to make drawing arrangements with exchange houses abroad without prior permission from Bangladesh Bank (BB). Further, the circular said to bring wider flexibility, licensed MFSPs will be allowed to repatriate wage earners' remittances in association with internationally recognized online payment gateway service providers and other licensed online gateways.
3. Sri Lanka
The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 23 November 2022, decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 14.50 per cent and 15.50 per cent, respectively, after considering the recent and expected developments in the domestic and global economy and macroeconomic projections. The Board noted that the maintenance of a tight monetary policy stance is necessary to contain any demand-driven inflationary pressures in the economy while helping to further strengthen disinflation expectations, thus enabling to steer headline inflation towards the targeted level of 4-6 per cent over the medium term.
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The note is prepared for knowledge dissemination and does not constitute legal, financial or commercial advice. AK & Partners or its associates are not responsible for any action taken based on its contents.
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[1] Press Release: 2022-2023/1275 Reserve Bank of India, November 29, 2022
[2] Press Release: 2022-2023/1280 Reserve Bank of India, November 30, 2022
[3] RBI/2022-23/146 Reserve Bank of India, December 1, 2022
[4] Press Release: 2022-2023/1266, November 28, 2022, Reserve Bank of India
[5] Press Release: 2022-2023/1265, November 28, 2022, Reserve Bank of India.
[6] Press Release: 2022-2023/1271, November 28, 2022, Reserve Bank of India.
[7] Press Release: 2022-2023/1270, November 28, 2022, Reserve Bank of India.
[8] Press Release: 2022-2023/1299 Reserve Bank of India, December 1, 2022