AK & Partners
AKP Banking & Finance Digest- February 13, 2023
Weekly Round-Up | Updates
1.1 Revised rate of standing liquidity facility for primary dealers
The Monetary Policy Committee (MPC) decided to increase the policy repo rate under the Liquidity Adjustment Facility (LAF) by 25 basis points from 6.25 per cent to 6.50 per cent on February 08, 2023. Accordingly, the Standing Liquidity Facility provided to Primary Dealers (PDs) (collateralised liquidity support) from RBI would be available at the revised repo rate of 6.50 per cent with immediate effect.
1.2 Liquidity Adjustment Facility (LAF) - Change in repo rate
The monetary policy committee (MPC) decided to increase the policy repo rate under the Liquidity Adjustment Facility (LAF) by 25 basis points from 6.25 per cent to 6.50 per cent with immediate effect. Consequently, the standing deposit facility (SDF) rate and marginal standing facility (MSF) rate stand adjusted to 6.25 per cent and 6.75 per cent respectively.
1.3 RBI imposes monetary penalty on the Utkal Cooperative Bank Ltd
RBI by an order dated January 31, 2023, imposed a monetary penalty of INR 15 lakh (Rupees Fifteen lakh only) on the Utkal Cooperative Bank Ltd. for contravention of/ non-compliance with the directions issued by RBI on (i) exposure norms and statutory/other restrictions-UCBs and (ii) specific directions issued under supervisory action framework (SAF). This penalty has been imposed in the exercise of powers vested in RBI by the Banking Regulation Act, 1949, taking into account the failure of the bank to adhere to the aforesaid directions issued by RBI. The action by RBI 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.
1.4 RBI releases statement on the development of regulatory policies for financial markets, currency management, payment and settlement systems
Reserve Bank of India (“RBI”) has released a statement dated February 08, 2023, setting out various developmental and regulatory policy measures relating to I) Financial Market II) Regulation III) Payment and Settlement Systems and IV) Currency Management. The statement proposed that any penalty for delay/default in servicing of a loan or any other non-compliance of material terms and conditions of the loan contract by the borrower shall be in the form of ‘penal charges’ in a reasonable and transparent manner and shall not be levied in the form of ‘penal interest’ that is added to the rate of interest being charged on the advances by regulated entities. Further, the statement also permitted all inbound travellers to India access to UPI for their merchant payments while they are in the country. The statement said initially, this facility will be extended to travellers from the Group of 20 (“G-20”) countries, arriving at select international airports.
1.5 RBI extends market trading hours to pre-pandemic levels
RBI has revised the trading hours in various markets which were earlier amended with effect from April 7, 2020, in view of the COVID-19 pandemic. Restoration of market hours in a phased manner was commenced with effect from November 09, 2020, and market hours in respect of call/notice/term money, market repo and tri-party repo in government securities, commercial papers, certificates of deposit and rupee interest rate derivatives traded outside the recognized stock exchanges have since been restored to pre-pandemic level. Further, it has now been decided to restore market hours in respect of government securities from 9:00 AM to 3:30 PM to 9:00 AM to 5:00 PM, effective from Monday, February 13, 2023.
1.6 9 NBFCs surrender their Certificate of Registration (CoR) to RBI
9 Non-Banking Financial Companies (NBFC) have surrendered the Certificate of Registration (CoR) granted to them by the Reserve Bank of India (RBI) due to reasons such as (i) exit from non-banking financial institution (NBFI) business, (ii) meeting the criteria prescribed for unregistered Core Investment Company (CIC) that do not require registration, and (iii) NBFC ceasing to be a legal entity due to amalgamation/merger/dissolution/voluntary strike-off. RBI, in the exercise of powers conferred to it under Section 45-I-A (6) of the Reserve Bank of India Act, 1934, has therefore cancelled its CoR.
1.7 RBI issues an updated alert list of entities which are neither authorized to deal in forex nor authorized to operate electronic trading platforms (ETPs) for forex transactions
RBI had earlier cautioned the members of the public against unauthorised forex trading platforms and vide press release dated 7th September 2022 issued an alert list of entities which are neither authorised to deal in forex under FEMA, nor authorised to operate electronic trading platforms (ETPs) for forex transactions. The alert list has been updated and includes names of entities/platforms/ websites which appear to be promoting unauthorised entities/ETPs, including through advertisements of such unauthorised entities or claiming to be providing training/advisory services. The alert list is not exhaustive. The authorisation status of any person/ETP can be ascertained from the list of authorised persons and authorised ETPs available on the RBI’s website.
2.1 Inclusion of passing the banking diploma examination in the promotion policy of officers as a mandatory requirement
To increase the skill, capacity and ability of the bankers, the Bangladesh Bank has made it mandatory for bankers to pass both the Junior Associate of the Institute of Bankers, Bangladesh (JAIBB) and Diploma Associate of the Institute of Bankers, Bangladesh (DAIBB) examinations to get a promotion for the post of a senior officer and above. This rule will not be applicable to those not directly involved in banking such as doctors, engineers, and people in marketing and publishing positions. The mandate shall be effective from January 1, 2024.
3. SRI LANKA
3.1. Central Bank of Sri Lanka issues regulations on financial consumer protection
The financial consumer relations department of the Central Bank of Sri Lanka (CBSL) has developed a comprehensive set of new regulations aiming to introduce; an integrated financial consumer protection framework for entities regulated by CBSL. These regulations are expected to define specific regulatory powers for the supervisors to facilitate market conduct supervision while providing clarity to both the service providers and recipients on the areas to be considered in delivering/obtaining financial services aiming at minimizing the need for financial consumers to make subsequent complaints. In order to have wider stakeholder consultation, FCRD has invited the relevant industry associations and the general public to submit their observations/ comments/ suggestions on the draft regulations.
3.2. Issuance of Treasury Bills
Further to the treasury bill auction held on 08 February 2023, Rs. 71,404 million being the maximum aggregate amount offered in Phase II was raised from the treasury bills bearing the International Securities Identification Numbers (ISINs) LKA09123E126, LKA18223H118 and LKA36424B097 at the weighted average yield rates of 29.88%, 28.72% and 27.72% determined at the auction, out of the total market subscription of Rs. 78,600 million. The date of settlement was 10th February 2023.
 Notifications: RBI/2022-23/173, February 08, 2023, Reserve Bank of India  Notifications: RBI/2022-23/175, February 08, 2023, Reserve Bank of India  Press Release: 2022-2023/1673, February 06, 2023, Reserve Bank of India  Press Release:2022-2023/1681, February 08, 2023, Reserve Bank of India  Press Release: 2022-2023/1682, February 08, 2023, Reserve Bank of India  Press Release: 2022-2023/1694, February 09, 2023, Reserve Bank of India  Press Release: 2022-2023/1703, February 10, 2023, Reserve Bank of India  Circulars: BRPD Circular No. 03, February 08, 2023, Bangladesh Bank
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.
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