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AKP Banking & Finance Digest- December 26, 2022

1. INDIA


1.1. Reserve Bank of India (“RBI”) updated Master Direction – Opening and Maintenance of Rupee/Foreign Currency Vostro Accounts of Non-resident Exchange Houses


Reserve Bank of India (RBI) on December 22, 2022, updates Master Direction – Opening and Maintenance of Rupee/Foreign Currency Vostro Accounts of Non-resident Exchange Houses. As per the Master Direction, Rupee Drawing Arrangement (RDA) is a channel to receive cross-border remittances from overseas jurisdictions. Under this arrangement, the Authorised Category I banks enter into tie-ups with the non-resident Exchange Houses to open and maintain their Vostro Accounts. The purpose of the amendment is to lay out directions relating to the Opening and Maintenance of Rupee/ Foreign Currency Vostro Accounts of Non-resident Exchange Houses in India in a consolidated form through the Master Direction[1].


1.2. Reserve Bank of India releases minutes of monetary Policy Committee Meeting, December 5-7, 2022

RBI released minutes Minutes of the Monetary Policy Committee Meeting, December 5-7, 2022. The Minutes of the meeting are as follows –


The Monetary Policy Committee (MPC), established under Section 45ZB of the Reserve Bank of India Act, 1934, held its forty-first meeting on December 5-7, 2022. Based on an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) decided today (December 7, 2022) to raise the policy repo rate under the liquidity adjustment facility (LAF) by 35 basis points to 6.25 per cent with immediate effect. As a result, the standing deposit facility (SDF) rate has been reduced to 6%, while the marginal standing facility (MSF) rate and the Bank Rate have been reduced to 6.50%. The MPC also decided to maintain its focus on withdrawing accommodation in order to keep inflation within target while supporting growth in the future[2].

1.3. RBI penalises two cooperative banks for violation of fraud reporting guidelines.


RBI has imposed a monetary penalty of INR 26, 91, 330 (Indian Rupees Twenty Six Lakhs Ninety One Thousand Three Hundred and Thirty only) on Andhra Pradesh State Co-operative Bank Limited, Vijayawada for violation of directions on Fraud- Guidelines for Classification, Reporting and Monitoring,[3] and INR 30,85,000 (Indian Rupees Thirty Lakhs and Eighty-Five Thousand only) on Delhi State Cooperative Bank Ltd., New Delhi for violation of RBI Know Your Customer (KYC) Directions, 2016 as well as for violation of directions issued under Fraud- Guidelines for Classification, Reporting and Monitoring[4]. Both cooperative banks had failed to put into robust software as a part of effective identification and reporting of suspicious transactions.


1.4. RBI penalises Bassein Catholic Co-operative Bank, Vasai

RBI has penalized Bassein VCatholic Co-operative Bank Ltd., Vasia, Maharashtra with a monetary penalty of INR 50,00,000 (Indian Rupee Fifty Lakhs only) for violation of directions issued by RBI on Income Recognition, Asset Classification, Provisioning and Other Related Matters (IRAC norms). It was revealed in the investigation that the bank did not classify certain loan accounts as non-performing assets in accordance with IRAC norms.[5]


1.5. RBI imposes monetary penalty on Bank of Bahrain and Kuwait BSC, India Operations


RBI has imposed a monetary penalty of INR 2.66 crores (Indian Rupee Two Crores Sixty-Six Lakhs only) on Bank of Bahrain and Kuwait BSC, India Operations for non-compliance with directions issued by RBI on Cyber Security Framework in Banks. It was found in the investigation by RBI that bank had failed to (i) implement systems to detect unusual and unauthorized, internal or external activities in its database; (ii) implement security operations centre for obtaining real-time / near-real time information and insight into the security posture of the bank; (iii) enable audit logs for database and operating system of servers; (iv) disallow administrative rights on end-points; (v) implement multi factor authentication for accessing the critical servers; (vi) implement appropriate systems and controls to allow, manage and monitor access to critical servers; (vii) have a cyber crisis management plan ; (viii) implement a system to generate alerts on real time basis, integrate logs with centralized monitoring solution & review alerts/logs; and (ix) put in place a mechanism to ensure the integrity of critical files of applications, databases and operating systems, all of which resulted in an unauthorized intrusion going undetected and the cyber security incident later.[6]


1.6. Directorate of Enforcement carries out operations under PMLA,2002 with respect to investigating misuse of the Matrix Partners Fund App and other related Apps.


Enforcement Directorate (“ED”) has frozen funds worth INR 51.11 crore (Indian Rupee Fifty-One Crores Eleven Lakhs only) under the anti-money laundering law. This comes as a consequence of raiding premises associated with a mobile app company accused of defrauding investors by promising them "very high" returns. The searches were carried out in Noida, Pune and Bengaluru in the case of “misuse” of the Matrix Partners Fund app and some other related apps. [7]


1.7. ED files chargesheet against bank official, others in PMLA case


ED has filed a chargesheet against a bank official and others at Calcutta High Court in connection with a money laundering case. It was alleged that the accused person in connivance with unknown bank officials had conspired to defraud and cheat the Andhra Bank to the tune of INR 17.41 Crore (Indian Rupees Seventy Crores Forty-One Lakhs only). ED initiated a money laundering investigation on the basis of a case registered by the CBI for the commission of offences punishable under various sections of the Indian Penal Code and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act.[8]


2. BANGLADESH


2.1. Letters of credit for lubricant import now require a minimum advance

Bangladesh Bank asked banks to take a minimum cash advance from importers when opening Letters of Credit (LCs) for lubricant and engine oil in order to keep industries running smoothly. The advance payment, also known as the cash LC margin, should be kept to a minimum for the products depending on the bank-client relationship, according to a notice issued by the central bank. Now the importers of the raw materials of lubricant and engine oil will also enjoy the facility.


2.2. Bangladesh Bank allows banks to show loan interest receivables as income


Banks can record interest receivables for this year as income on term loans with a relaxed repayment up to December, according to Bangladesh Bank. The amount of interest receivable is the amount of interest earned but not yet received in cash. As per the circular The move has been taken to keep the foundation of banks solid and raise their shock-absorbing capacity.


3. SRI LANKA


3.1. Sri Lanka cabinet approves draft of new central bank law


The Sri Lankan government backed a new draft of the statute governing the Central Bank of Sri Lanka (CBSL) on December 19. A draft of a new monetary law act has been circulating since late 2019 but it was halted due to an ongoing economic crisis.


[1] FED Master Direction No.2/2015-16, January 1, 2016, Reserve Bank of India [2] Press Release: 2022-2023/1420, December 21, 2022, Reserve Bank of India [3] Press Release: 2022-2023/1410, December 19, 2022, Reserve Bank of India. [4] Press Release: 2022-2023/1411, December 19, 2022, Reserve Bank of India. [5] Press Release: 2022-2023/1407, December 19, 2022, Reserve Bank of India. [6] Press Release: 2022-2023/1408, December 19, 2022, Reserve Bank of India. [7] Enforcement Directorate, Press Release, December 14, 2022. [8] Enforcement Directorate, Press Release, December 16, 2022.


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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