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AKP Banking & Finance Digest- February 20, 2023

Updated: Feb 21, 2023

Weekly Round-Up | Updates


RBI has issued instructions under Section 10 (2) read with Section 18 of Payment and

Settlement Systems Act, 2007 (Act 51 of 2007) that foreign contributions must be received only in the “FCRA account” of the State Bank of India (SBI), New Delhi Main Branch (NDMB). SBI is required to capture the donor details such as name, address, country of origin, amount, currency, and purpose of remittance and report the same to the Ministry of Home Affairs (MHA) on a daily basis. Keeping this in view, necessary changes have been introduced in NEFT and RTGS systems and further details are required to be captured. RBI has further advised the member banks to incorporate necessary changes in their core banking/middleware solutions to capture the requisite details while forwarding the foreign donations through NEFT and RTGS systems to SBI. The instructions will be effective from March 15, 2023.[1]

Interest Rate Risk in Banking Book (IRRBB) refers to the current or prospective risk to banks’ capital and earnings arising from adverse movements in interest rates that affect their banking positions. RBI has issued final guidelines on IRRBB in alignment with the revised framework issued by the Basel Committee on Banking Supervision (BCBS), which requires the banks to measure, monitor, and disclose their exposure to IRRBB. The date for implementation shall be communicated in due course and banks are advised to be in preparedness for measuring, monitoring, and disclosing their exposure to interest rate risk in the banking book.[2]

In exercise of the powers conferred under Section 45-IA (6) of the Reserve Bank of India Act, 1934, RBI has cancelled the Certificate of Registration (CoR) of two Non-Banking Financial Companies (NBFCs). The cancellation of the CoR has been made because of a violation of RBI Guidelines on Outsourcing and Fair Practices Code in their digital lending operations undertaken through third-party applications considered detrimental to the public interest. These companies were also not complying with the extant regulations pertaining to charging of excessive interest and had resorted to undue harassment of customers for loan recovery purposes.[3]

Reserve Bank of India (RBl) has imposed, by an order dated February 07, 2023, a monetary penalty of ₹1.50 lakh (Rupees One lakh fifty thousand only) on the Vaidyanath Urban Co-operative Bank Ltd., Beed (Maharashtra) (the bank) for nonadherence/violation of specific directions issued to the bank by RBI under Supervisory Action Framework (SAF) under Section 36 (1) read with Section 56 of the Banking Regulation Act, 1949 (the Act). This penalty has been imposed in the exercise of the 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 RBI.[4]

Reserve Bank is organising its second global hackathon – “HARBINGER 2023 – Innovation for Transformation” with the theme ‘Inclusive Digital Services’. The Hackathon invites participants to develop solutions that have the potential to make digital financial services accessible to the differently abled, facilitate efficient compliance, extend the reach of Central Bank Digital Currencies and enhance the scalability of blockchains. (Prize Money: Winner – INR 40 Lakh | Runner-up – INR 20 Lakh).[5]

As per the RBI Guidelines on Regulation of Payment Aggregators and Payment Gateways dated March 17, 2020, and March 31, 2021, online non-bank Payment Aggregators (PAs) – existing as on March 17, 2020 (referred to as existing PAs) – were required to apply to RBI by September 30, 2021, for seeking authorisation under the Payment and Settlement Systems Act, 2007 (the Act). Further, another extension was allowed for all such PAs to submit their application by September 30, 2022. The list of entities who have submitted an application to RBI seeking authorisation to act as online PAs under the Act along with the current status of their application as on February 15, 2023, is published, which will be updated on a fortnightly basis. Stakeholders may transact with new PAs only after these entities have received ‘authorisation’ under Section 7 of the Act from the Reserve Bank of India.[6]

RBI shared the “Competitiveness and Determinants of Agricultural Exports: Evidence from India” working paper under the Reserve Bank of India Working Paper Series. This paper is authored by D. Suganthi and talks in detail about the influence of domestic and global commodity price cycles and India’s export competitiveness of agricultural commodities. Against this backdrop, this paper also examines the relative export competitiveness (REC) of eight agricultural commodities from 1990 to 2020.[7]

RBI issued the Digital Lending Guidelines on 2nd September 2022 and has now issued FAQs on these guidelines. Amongst these, the FAQs shed light on the types of Lending Service Providers (LSPs) that need to appoint grievance redressal officers, the inclusion of insurance charges in the calculation of Annual Percentage Rate (APR) and the applicability of the Guidelines to all transactions meeting the definition of ‘Digital Lending’.[8]

RBI has released the draft Reserve Bank of India (Government Securities Lending) Directions, 2023 and has invited comments from banks, market participants and other interested parties on the draft directions by March 17, 2023.[9]

RBI had constituted an Advisory Committee under Rule 5 (c) of the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019, to advise the administrator in the operations of the financial service providers during the corporate insolvency resolution process. It has now been decided to appoint Shri Vikramaditya Singh Khichi as a member of the Advisory Committee with immediate effect consequent to the resignation of Shri Srinivasan Varadarajan.[10]

As part of the convergence of the Reserve Bank’s regulations for banks with Basel III standards, RBI has released ‘Draft Guidelines for Minimum Capital Requirements for Market Risk’ which is open for comments of stakeholders and members of the public. These guidelines shall be applicable to all Commercial Banks (excluding Local Area Banks, Payments Banks, Regional Rural Banks and Small Finance Banks) and shall come into effect from April 1, 2024. These guidelines are not applicable to Co-operative Banks (i.e., Urban Co-operative Banks, State Co-operative Banks and Central Co-operative Banks).[11]

2. Bangladesh

Bangladesh Bank (BB) has extended the deadline for banks to participate in a Tk1,000 crore refinancing scheme for restructuring, modernising and building new cinema halls by another year. Bangladesh Bank has decided to extend the deadline for interested banks to get involved in the scheme up to December 31 by the end of this year. [12]

Additional refinance fund for COVID-19 affected Cottage, Micro, Small and Medium Enterprises (CMSME) sector under “COVID-19 Emergency and Crisis Response Facility Project (CECRFP, L0415-A)” funded by Asian Infrastructure Investment Bank (AIIB). With a view to supporting the credit expansion and liquidity constraints of CMSMEs brought on by COVID-19, another refinance scheme titled “COVID-19 Emergency and Crisis Response Facility Project (CECRFP)” is being implemented by Bangladesh Bank with financial support from Asian Infrastructure Investment Bank (AIIB). Under this Project, the Participating Financial Institutions (PFIs) are availing additional refinance of up to 50 per cent of their lending against working capital loans/investment only.[13]


Further to the T-bill auction held on 15th February 2023, Rs. 7,133 million was raised in Phase II, from the Treasury bills bearing the International Securities Identification Numbers (ISINs) LKA09123E191, LKA18223H183 and LKA36424B162 at the Weighted Average Yield Rates of 29.83%, 28.67% and 27.71% respectively determined at the auction. The date of settlement is 17 February 2023.[14]

[1] Notification: RBI/2022-23/178, February 16, 2023, Reserve Bank of India [2] Notification: RBI/2022-23/180, February 17, 2023, Reserve Bank of India [3] Press Release: 2022-2023/1713, February 13, 2023, Reserve Bank of India [4] Press Release: 2022-2023/1715, February 13, 2023, Reserve Bank of India [5] Press Release: 2022-2023/1719, February 14, 2023, Reserve Bank of India [6] Press Release: 2022-2023/1726, February 15, 2023, Reserve Bank of India [7] Press Release: 2022-2023/1730, February 16, 2023, Reserve Bank of India [8] Frequently Asked Questions: Digital Lending Guidelines, Reserve Bank of India [9] Press Release: 2022-2023/1740, February 17, 2023, Reserve Bank of India [10] Press Release: 2022-2023/1744, February 17, 2023, Reserve Bank of India [11] Press Release: 2022-2023/1745, February 17, 2023, Reserve Bank of India [12] Circular Letter No. 05, February 15, 2023, Bangladesh Bank [13] SMESPD Circular Letter No. 03, February 16, 2023, Bangladesh Bank [14] Public Debt Department, February 17, 2023, Central Bank of Sri Lanka

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

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