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AKP Banking & Finance Digest- February 6, 2023

Updated: Feb 8, 2023

Weekly Round-Up | Updates


1. INDIA


Pursuant to the Government of India Notification F.No.4(19) - W&M/2014 dated January 14, 2016 (SGB 2016-I -issue date February 08, 2016), premature redemption of the sovereign gold bond may be allowed after the fifth year from the date of issuance of a such bond on the date on which interest is payable. Accordingly, the fifth due date of premature redemption of the above tranche shall be February 08, 2023.

The redemption price of the sovereign gold bond shall be determined based on the simple average of the closing price of gold of 999 purity, as published by the India Bullion and Jewelers Association Ltd (IBJA), for the week preceding the date of redemption. As such, the redemption price for the premature redemption due on February 08, 2023, shall be fixed at ₹5770/- (rupees five thousand seven hundred and seventy only) per unit of the sovereign gold bond, based on the simple average of the closing gold price for the week from January 30 to February 03, 2023.[1]


By an order dated February 1, 2023, the Reserve Bank of India (RBI) imposed a monetary penalty of ₹42.48 lakhs on Krazybee Services Private Limited, Bangalore (the company) for non-compliance with certain provisions of the directions issued by RBI on “Managing Risks and Code of Conduct in Outsourcing of Financial Services by NBFCs” and “Fair Practices Code for Applicable NBFCs”, contained in the “Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016”. This penalty has been imposed in the exercise of powers vested in RBI under the provisions of clause (b) of sub-section (1) of Section 58 G read with clause (aa) of sub-section (5) of Section 58 B of the Reserve Bank of India Act, 1934 and is a result of deficiencies in regulatory compliance. The action is not intended to affect the validity of the company's transactions with its customers.[2]


By an order dated January 30, 2023, RBI imposed a monetary penalty of ₹39.50 lakhs on North East Small Finance Bank Limited (the bank) for non-compliance with the directions issued by RBI on ‘Prudential Norms on Income Recognition, Asset Classification and Provisioning Pertaining to Advances - Divergence in NPA Accounts’ and ‘Prudential Guidelines on Capital Adequacy and Market Discipline-New Capital Adequacy Framework (NCAF)’. 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) of the Banking Regulation Act, 1949 and this action 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.[3]


By an order dated January 30, 2023, RBI imposed a monetary penalty of ₹30.00 lakh on Bank of Baroda (the bank) for non-compliance with certain provisions of the ‘Reserve Bank of India – (Know Your Customer (KYC)) Direction, 2016’ and Reserve Bank of India (Interest Rate on Deposits) Directions, 2016. 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 51(1) of the Banking Regulation Act, 1949 and this action is based on the 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.[4]


By an order dated January 23, 2023, RBI has imposed a monetary penalty of ₹1.00 lakh (Rupees One lakh only) on Ilkal Co-operative Bank Ltd., Ilkal, Karnataka (the bank) for non-adherence / violation of directions issued on Income Recognition, Asset Classification, Provisioning and Other Related Matters – UCBs. 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 (AACS), taking into account the failure of the bank to adhere to the aforesaid directions issued by RBI and this action 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.[5]


In accordance with a press release issued by the Reserve Bank of India on October 11, 2021, an advisory committee was established under Rule 5 (c) of the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019. The purpose of the advisory committee is to provide guidance to the administrator in the management of financial service providers during the corporate insolvency resolution process. Subsequently, upon the resignation of Shri R. Subramaniakumar, Shri Venkat Nageswar Chalasani was appointed as a member of the advisory committee, as per the press release dated June 23, 2022.

Furthermore, due to the resignation of Shri Farokh N Subedar, it has been decided to appoint Shri V Ramachandra as a member of the advisory committee, effective immediately. The advisory committee will now comprise of following members:

1. Shri Venkat Nageshwar Chalasani, former Deputy Managing Director, of State Bank of India

2. Shri T T Srinivasaraghavan, former Managing Director, Sundaram Finance Limited

3. Shri V Ramachandra, former Chief General Manager, Canara Bank.

The advisory committee shall advise the administrator in the management of the SIFL and SEFL during the corporate insolvency resolution process.[6]


Reserve Bank of India on January 23, 2023, had directed SBM bank (India) Ltd. to stop all transactions under the Liberalised Remittance Scheme with immediate effect till further notice. The bank has since initiated corrective actions and made submissions for relaxation of the restrictions. It has been decided by RBI to partially relax the restrictions by allowing ATM/POS transactions under LRS through KYC complaint internationally active debit cards issued by the bank. This relaxation is up to March 15, 2023, or until further orders, whichever is earlier.[7]


Regulated Entities (REs) are advised to follow the procedures outlined in the Master Direction on Know Your Customer and the Unlawful Activities (Prevention) (UAPA) Act, 1967 to ensure they do not have any accounts with individuals or entities appearing in the UNSC lists of individuals and entities with suspected terrorist links. REs must update their lists of individuals and entities linked to ISIL (Da'esh), Al-Qaida, and Taliban and strictly follow the procedure laid down in the UAPA Order. Requests for delisting received by REs must be forwarded to the Joint Secretary (CTCR) at the Ministry of Home Affairs and individuals, groups, undertakings, or entities seeking to be removed from the UNSC sanctions list can submit their request to an ombudsperson appointed by the UN Secretary-General. REs must ensure meticulous compliance with these instructions.[8]


To address the media reports concerning about exposure of Indian banks to a business conglomerate, RBI has released a statement stating that as the regulator and supervisor, RBI maintains a constant vigil on the banking sector and on individual banks with a view to maintaining financial stability. As per RBI’s current assessment, the banking sector remains resilient and stable and various parameters relating to capital adequacy, asset quality, liquidity, provision coverage and profitability are healthy. Banks are also in compliance with the Large Exposure Framework (LEF) guidelines issued by RBI.[9]


2. Bangladesh


Attention is drawn to the provisions regarding inward remittances against the export of software, ICT services, business services, professional/research and advisory services, etc. provided by resident Bangladeshis, as outlined in the Guidelines for Foreign Exchange Transactions-2018, Vol-1 (GFET) and its subsequent circulars. Authorized Dealers (ADs) are advised to provide facilities for the repatriation of inward remittances through traditional banking channels and through online payment gateways, payment service aggregators, payment facilitators, digital wallets, or other legitimate payment systems. Licensed Mobile Financial Service Providers (MFSPs) are also authorized to repatriate inward remittances against ICT services. ADs are advised to provide ERQ account services to exporters of these services, as well as to issue international credit/debit/prepaid cards against balances held in ERQ accounts. Non-ADs providing banking services to freelancers must make arrangements with ADs/CTPCs/head offices/principal offices for opening ERQ accounts and issuing international cards. ADs shall comply with regulatory instructions including reporting routines and tax regulations. All constituents are advised to bring the contents of this circular to their attention and ensure compliance.[10]


Pursuant to Section 45 of the Bank Company Act, 1991, Bangladesh Bank has issued a directive regarding the maintenance of general provisions for loans to brokerage houses, merchant banks, and stock dealers. Specifically, banks are now advised to maintain a general provision of 1% on unclassified amounts for such loans, as opposed to the previous advisory of 2% as per Section 4(a)(3) of BRPD Circular No.14 dated 23 September 2012. This directive will take effect from 30th March 2023.[11]


In reference to paragraph 2 of FE Circular No. 30, dated November 08, 2022, Bangladesh Bank has decided to adjust the interest rate on EDF loans to Authorized Dealers (ADs). Specifically, Bangladesh Bank will now charge an interest rate of 3.00% per annum on EDF loans to ADs, while ADs will charge an interest rate of 4.50% per annum on their USD loan disbursements to manufacturer-exporters. This change in interest rate applies until further instructions, and all other relevant instructions on EDF remain unchanged. It is imperative that the contents of this circular be brought to the attention of all relevant customers.[12]

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3. SRI LANKA


The central bank of Sri Lanka has invited bids from the primary dealers in government securities to buy Rs. 100,000 million treasury bills. Treasury bills are short-term debt instruments issued by the government that pays no interest and are zero-coupon securities.

[1] Press Release: 2022-2023/1669, February 03, 2023, Reserve Bank of India [2] Press Release: 2022-2023/1662, February 03, 2023, Reserve Bank of India [3] Press Release: 2022-2023/1663, February 03, 2023, Reserve Bank of India [4] Press Release: 2022-2023/1664, February 03, 2023, Reserve Bank of India [5] Press Release: 2022-2023/1634, January 30, 2023, Reserve Bank of India [6] Press Release: 2022-2023/1640, January 31, 2023, Reserve Bank of India [7] Press Release: 2022-2023/1643, January 31, 2023, Reserve Bank of India [8] RBI/2022-2023/172, February 03, 2023, Reserve Bank of India [9] Press Release: 2022-2023/1668, February 03, 2023, Reserve Bank of India [10] FE Circular Letter No. 02, February 05, 2023, Bangladesh Bank [11] BRPD Circular Letter No. 03, 02 February 2023, Bangladesh Bank [12] FE Circular No. 02, February 01, 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.


* Image credits: RBI


For further queries or details, you may contact:

Mr Anuroop Omkar,

Partner, AK & Partners

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