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AKP Banking & Finance Digest- December 19, 2022

1. INDIA

1.1. Foreign Exchange Management (Hedging of Commodity Price Risk and Freight Risk in Overseas Market) Directions, 2022

RBI through a notification dated December 12th, 2022 has made significant regulatory changes in the hedging of Commodity Price Risk and Freight Risks. These Directions lay down the modalities for the AD Cat-I banks for facilitating hedging of commodity price risk and freight risk in overseas markets by their customers/constituents. Further, eligible entities having exposure to the price risk of gold may hedge such exposure only on exchanges in the International Financial Services Centre (IFSC) recognised by the International Financial Services Centres Authority (IFSCA).[1]


1.2. Reserve Bank of India (Financial Statements - Presentation and Disclosures) Directions, 2021 - Disclosure of material items

RBI through its notification dated December 13th, 2022 has asked banks to make enhanced disclosures relating to material items in their notes to accounts wherever any item under the head “Other Liabilities and Provisions” and “Other Assets” exceeds one per cent of the total assets. This is aimed at enhancing transparency in banks’ financial statements through disclosures. RBI also asked payments banks to disclose particulars of all such items in the notes to accounts, wherever any item under “Other Income” - “Commission, Exchange and Brokerage” — exceeds one per cent of the total income[2].


1.3. Sovereign Gold Bond (SGB) Scheme 2022-23


Reserve Bank of India announced the issue price for the latest tranche of the SGB Scheme 2022-23. It announced Series III and IV of the Sovereign Gold Bond Scheme 2022-23 under the Scheme, there will be a distinct series (Series III and IV) for every tranche. The issuance price of the bond during the subscription period will be Rs 5,409 per gramme.[3]


1.4. 599th Meeting of Central Board of the Reserve Bank of India

The 599th meeting of the Central Board of Directors of Reserve Bank of India was held in Kolkata under the Chairmanship of Shri Shaktikanta Das, Governor. The Board discussed the state of the economy, and national and international issues, including geopolitical developments, finance, and commerce during its meeting. The draft report on the Trend and Progress of Banking in India, 2021–2022, and the operations of a few selected Central Office Departments were also discussed by the Board.[4]


1.5. RBI imposes monetary penalty on Patan Nagarik Sahakari Bank Ltd., Patan, Gujarat

RBI has imposed a penalty of INR 1,50,000 (Indian Rupees One Lakh fifty thousand only) on Patan Nagarik Sahakari Bank Ltd., Patan, Gujarat for failing to comply with RBI instructions on the 'Maintenance of Statutory Reserves - Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) by Primary (Urban) Co-operative Banks'. This penalty was imposed in the exercise of RBI's powers under Section 47 A (1) (c) read with Sections 46 (4) (i) and 56 of the Banking Regulation Act, 1949, taking into account the bank's failure to follow the aforementioned RBI directions.[5]


1.6. RBI imposes monetary penalty on The Tura Urban Cooperative Bank Ltd., Meghalaya

RBI has imposed a penalty of INR 1,50,000 (Indian Rupees One Lakh fifty thousand only) on The Tura Urban Cooperative Bank Ltd., Meghalaya for failure to comply with specific directions issued under the Supervisory Action Framework (SAF) and certain provisions of the 'Reserve Bank of India- (Know Your Customer) Direction, 2016'. This penalty was imposed in the exercise of RBI's powers under Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Banking Regulation Act, 1949, taking into account the bank's failure to follow the aforementioned RBI directions.[6]


1.7. RBI imposes monetary penalty on Eastern & North-East Frontier Railway Co-operative Bank Ltd., Kolkata, West Bengal

RBI has imposed a penalty of INR 1,00,000 (Indian Rupees One Lakh only) on Eastern & North-East Frontier Railway Co-operative Bank Ltd., Kolkata, West Bengal for failure to comply with specific directions issued under the Supervisory Action Framework (SAF) and certain provisions of the 'Reserve Bank of India- (Know Your Customer) Direction, 2016' This penalty was imposed in exercise of RBI's powers under Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Banking Regulation Act, 1949, taking into account the bank's failure to follow the aforementioned RBI directions.[7]


1.8. RBI imposes monetary penalty on Nagrik Sahakari Bank Maryadit, Raigarh, Chattisgarh

RBI has imposed a penalty of INR 75,000 (Indian Rupees Seventy-five thousand only) on Nagrik Sahakari Bank Maryadit, Raigarh, Chattisgarh for failure to comply with specific directions issued under the RBI to Urban Co-operative Banks on Exposure Norms & Statutory/Other Restrictions-UCBs and Know Your Customer (KYC). This penalty was imposed in the exercise of RBI's powers under Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Banking Regulation Act, 1949, taking into account the bank's failure to follow the aforementioned RBI directions.[8]


1.9. RBI imposes monetary penalty on Shri Kanyaka Nagari Sahakari Bank Ltd., Chandrapur, Maharashtra

RBI has imposed a penalty of INR 4,00,000 (Indian Rupees four lakhs only) on Shri Kanyaka Nagari Sahakari Bank Ltd., Chandrapur (Maharashtra)for failure to comply with specific directions issued under RBI to Urban Co-operative Banks on Know Your Customer (KYC). This penalty was imposed in the exercise of RBI's powers under Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Banking Regulation Act, 1949, taking into account the bank's failure to follow the aforementioned RBI directions.[9]


1.10. RBI imposes monetary penalty on Indore Premier Co-operative Bank Ltd., Indore, Madhya Pradesh

RBI has imposed a penalty of INR 2,00,000 (Indian Rupees two lakhs only) on Indore Premier Co-operative Bank Ltd., Indore, Madhya Pradesh for failure to comply with the provisions such as Section 19 read with Section 56 of the Banking Regulation Act, 1949 (the Act) and directions issued by RBI. This penalty has been imposed in the exercise of powers vested in RBI under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Act taking into account the failure of the bank to adhere to the aforesaid directions issued.[10]


1.11. RBI imposes monetary penalty on Nagrik Sahakari Bank Maryadit, Jagdalpur, Chattisgarh

RBI has imposed a penalty of INR 1,25,000 (Indian Rupees One lakh Twenty-Five Thousand only) on Nagrik Sahakari Bank Maryadit, Jagdalpur, Chattisgarh for failure to comply with Directions issued by RBI to Urban Co-operative Banks on Board of Directors, Exposure Norms & Statutory/Other Restrictions-UCBs and Know Your Customer (KYC). This penalty has been imposed in the exercise of powers vested in RBI under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Banking Regulation Act, 1949, taking into account the failure of the bank to adhere to the aforesaid directions issued by RBI.[11]


1.12. RBI imposes monetary penalty on Jijau Commercial Co-operative Bank Ltd., Amravati, Maharashtra

RBI has imposed a penalty of INR 1,25,000 (Indian Rupees One lakh Twenty-Five Thousand only) on Jijau Commercial Co-operative Bank Ltd., Amravati, Maharashtra for failure to comply with directions issued by RBI to Urban Co-operative Banks on Know Your Customer (KYC) and opening of on-site ATM. This penalty has been imposed in the exercise of powers vested in RBI under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Banking Regulation Act, 1949, taking into account the failure of the bank to adhere to the aforementioned directions issued by RBI.[12]


1.13. RBI imposes monetary penalty on Jila Sahakari Kendriya Bank Maryadit, Chhatarpur, Madhya Pradesh

RBI has imposed a penalty of INR 1,00,000 (Indian Rupees One lakh only) on Jila Sahakari Kendriya Bank Maryadit, Chhatarpur, Madhya Pradesh Maharashtra for failure to comply with provisions of the Banking Regulation Act, 1949 (the Act) and directions issued by the Reserve Bank of India (RBI) on Know Your Customer (KYC). This penalty has been imposed in the exercise of powers vested in RBI under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Banking Regulation Act, 1949, taking into account the failure of the bank to adhere to the aforesaid directions issued by RBI.[13]


1.14. RBI imposes monetary penalty on The Vaidyanath Urban Co-operative Bank Limited, Parli Vaijnath, Beed, Maharashtra

RBI has imposed a penalty of INR 2,25,000 (Indian Rupees Two lakh fifty thousand only) on the Vaidyanath Urban Co-operative Bank Limited, Parli Vaijnath, Beed, Maharashtra for failure to comply with the directions issued by RBI to Urban Cooperative Banks on Know Your Customer (KYC). This penalty has been imposed in the exercise of powers vested in RBI under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Banking Regulation Act, 1949, taking into account the failure of the bank to adhere to the aforesaid directions issued by RBI.[14]


1.15. RBI imposes monetary penalty on Jila Sahakari Kendriya Bank Maryadit, Bilaspur, Chattisgarh

RBI has imposed a penalty of INR 50,000 (Indian Rupees fifty thousand only) on Jila Sahakari Kendriya Bank Maryadit, Bilaspur, Chattisgarh for failure to comply with the directions issued by the Banking Regulation Act, 1949 (the Act) and directions issued by NABARD. This penalty has been imposed in the exercise of powers vested in RBI under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Act taking into account the failure of the bank to adhere to the aforesaid directions issued by NABARD.[15]


1.16. RBI imposes monetary penalty on Jila Sahakari Kendriya Bank Maryadit, Shahdol Madhya Pradesh

RBI has imposed a penalty of INR 50,000 (Indian Rupees fifty thousand only) on Jila Sahakari Kendriya Bank Maryadit, Shahdol, Madhya Pradesh for failure to comply with the directions issued by the Banking Regulation Act, 1949 (the Act) and directions issued by NABARD. This penalty has been imposed in the exercise of powers vested in RBI under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Act taking into account the failure of the bank to adhere to the aforesaid directions issued[16].


1.17. RBI imposes monetary penalty on Wai Urban Co-operative Bank Ltd., Satara

RBI has imposed a penalty of INR 2,00,000 (Indian Rupees two lakhs only) on Wai Urban Co-operative Bank Ltd., Satara for failure to comply with directions issued by RBI on ‘Income Recognition, Asset Classification, Provisioning and Other Related Matters’ (IRAC norms). This penalty has been imposed in the exercise of powers vested in RBI conferred under section 47 A (1) (c) read with sections 46 (4) (i) and 56 of the Banking Regulation Act, 1949 (BR Act).[17]


2. BANGLADESH


2.1. Deferred import payment facility for 8 commodities

Central Bank of Bangladesh allowed the import of edible oil, chickpea, pulse, pea, onions, spices, sugar and date on usance terms for up to 90 days under supplier's or buyer's credit. The move was taken to facilitate import transactions and the facility shall remain applicable for the initiation of imports till March 31, 2023.


2.2. Bangladesh Bank relaxes loan repayment policy


Bangladesh Bank relaxed its already flexible loan repayment policy, saying the real income of borrowers has fallen due to the severe impacts of the prolonged Russia-Ukraine war. Now, borrowers will be allowed to avoid being classified as a defaulter if they clear 50 per cent of their instalments payable in the final quarter of 2022 instead of 75 per cent previously. The relaxed policy will be applicable to borrowers who took term loans, whose repayment tenure is more than one year.


2.3. Airlines and shipping lines can now use RTGS


Bangladesh Bank through the circular allowed airlines, shipping lines, and their agents in Bangladesh will now be able to purchase fuel/oil in foreign exchange through the RTGS (Foreign Currency Real Time Gross Settlement) system using authorised dealer banks. The circular further added that the move will ease such transactions, and all other relevant instructions remain shall remain unchanged.


3. SRI LANKA


3.1. Sri Lanka to use Indian rupee for international trade


By availing of this scheme, Sri Lankan citizens can now hold $10,000 (INR 8,26,823) in physical form. This also means that Sri Lankans and Indians can use Indian rupees instead of US dollars for international transactions with each other. The Indian government since July this year, has been looking to bring countries that are short of dollars, into its rupee settlement mechanism.

[1] RBI/2022-23/152, A. P. (DIR Series) Circular No. 20, ‘Master Direction – Foreign Exchange Management (Hedging of Commodity Price Risk and Freight Risk in Overseas Markets) Directions, 2022’, December 12, 2022. [2] RBI Notification no. RBI/2022-23/155 dated December 13, 2022 [3] RBI/2022-23/156, IDMD.CDD.No.S2581/14.04.050/2022-23, ‘ Sovereign Gold Bond (SGM) Scheme 2022-23’, December 16, 2022, Reserve Bank of India. [4] Press Release: 2022-2023/1380, December 12, 2022, Reserve Bank of India. [5] Press Release: 2022-2023/1344, December 12, 2022, Reserve Bank of India. [6] Press Release: 2022-2023/1355, December 12, 2022, Reserve Bank of India. [7] Press Release: 2022-2023/1354, December 12, 2022, Reserve Bank of India. [8] Press Release: 2022-2023/1349, December 12, 2022, Reserve Bank of India. [9] Press Release: 2022-2023/1353, December 12, 2022, Reserve Bank of India. [10] Press Release: 2022-2023/1348, December 12, 2022, Reserve Bank of India. [11] Press Release: 2022-2023/1352, December 12, 2022, Reserve Bank of India. [12] Press Release: 2022-2023/1347, December 12, 2022, Reserve Bank of India. [13] Press Release: 2022-2023/1351, December 12, 2022, Reserve Bank of India. [14] Press Release: 2022-2023/1346, December 12, 2022, Reserve Bank of India. [15] Press Release: 2022-2023/1350, December 12, 2022, Reserve Bank of India. [16] Press Release: 2022-2023/1345, December 12, 2022, Reserve Bank of India. [17] Press Release: 2022-2023/1356, December 12, 2022, Reserve Bank of India.


Disclaimer 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. * Image credits: RBI

For further queries or details you may contact: Mr Anuroop Omkar, Partner, AK & Partners anuroop@akandpartners.in

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