AK & Partners
AKP Banking & Finance Digest- January 2, 2023
1.1 RBI launches Utkarsh 2.0 – Medium Term Strategy Framework
Reserve Bank of India launched Utkarsh 2.0 which is RBI’s Medium-Term Strategy Framework for the period 2023-2025. The first strategy framework (Utkarsh 2022) covering the period 2019-2022 was launched in July. It became a medium-term strategy document guiding the Bank’s progress towards the realisation of the identified milestones.
Utkarsh 2.0 harnesses the strengths of Utkarsh 2022 by retaining the six vision statements as well as the core purpose, values, and mission statement. Collectively, they create a strategic guiding path.
The vision in Utkarsh 2.0 that will guide the Reserve Bank of India over the period 2023-25 includes, 'Excellence in the performance of its functions'; Strengthened trust of citizens and institutions in RBI; and enhanced relevance and significance in national and global roles.
1.2 RBI notifies revised lending and deposit rates for scheduled commercial banks
Reserve Bank of India (RBI) on December 30, 2022, issued a notification on lending and deposit rates of scheduled commercial banks. The following revised rates have been introduced:
Weighted Average Lending Rate (WALR) on fresh rupee loans of SCBs increased by 17 basis points (bps) from 8.69 per cent in October 2022 to 8.86 per cent in November 2022.
WALR on outstanding rupee loans of SCBs increased by 8 bps from 9.35 per cent in October 2022 to 9.43 per cent in November 2022.
1-Year Median Marginal Cost of Fund-based Lending Rate (MCLR) of SCBs increased from 8.05 per cent in November 2022 to 8.21 per cent in December 2022.
The share of External Benchmark based Lending Rate (EBLR) linked loans in total outstanding floating rate rupee loans of SCBs was 47.6 per cent in end-September 2022 while that of MCLR-linked loans was 46.5 per cent.
Weighted Average Domestic Term Deposit Rate (WADTDR) on outstanding rupee term deposits of SCBs increased by 13 bps from 5.49 per cent in October 2022 to 5.62 per cent in November 2022.
1.3 RBI launches the January 2023 round of the Inflation Expectations Survey of Households
Reserve Bank of India has launched the Inflation Expectations Survey of Households (IESH) which will provide useful inputs for monetary policy. In January 2023 round, the survey will be conducted across 19 cities. It aims to capture subjective assessments of price movements and inflation, based on individual consumption baskets.
A statement released by RBI said the survey seeks qualitative responses from households on price changes (general prices as well as prices of specific product groups) three months ahead as well as in the one-year ahead period and quantitative responses on current, three months ahead and one year ahead inflation rates.
1.4 RBI imposes Monetary Penalty on Mynd Solutions Private Limited
Reserve Bank of India (RBI) has penalised Mynd Solutions Private Limited Rs 13.9 lakh for not complying with its guidelines on Trade Receivables Discounting System (TReDS).
The central bank said that the non-promoter shareholding in the company exceeded the ceiling of 10 per cent prescribed for TReDS operators. A notice was issued to the firm, asking it to show cause as to why a penalty should not be imposed.
RBI, after considering Mynd’s responses and oral submissions made during a personal hearing, concluded that the charge of not complying with its directions was substantiated and warranted the imposition of a monetary penalty.
The penalty has been imposed in the exercise of powers vested in RBI under Section 30 of the Payment and Settlement Systems Act, 2007 (PSS Act).
1.5 RBI releases Statistical Tables relating to Banks in India: 2021-22
Reserve Bank of India on December 27 released its web publication entitled ‘Statistical Tables relating to Banks in India: 2021-22’ covering the activities of the Indian banking sector.
The publication presents entity-wise information on major items of liabilities and assets along with their maturity profile; income and expenses; select financial ratios, number of employees, and details of priority sector advances for scheduled commercial banks excluding regional rural banks. In addition, capital-to-risk-weighted asset ratios, non-performing assets, exposure to sensitive sectors, contingent liabilities, and unclaimed deposits are included. State-wise distribution of consolidated balance sheets of rural cooperative banks is also presented.
1.6 RBI imposes monetary penalty on Shri Mahila Sewa Sahakari Bank Ltd., Ahmedabad (Gujarat)
Reserve Bank of India has imposed a monetary penalty of Rs 5.00 lakh on Shri Mahila Sewa Sahakari Bank Ltd., Ahmedabad for contravention of directions issued by RBI.
These included flouting directions on ‘Maintenance of Statutory Reserves –Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) by Primary (Urban) Co-operative Banks Loans and advances to directors etc. – directors as surety/guarantors – clarification Loans and advances to directors, relatives, and firms/concerns in which they are interested ‘Declaration of dividend by UCBs’ and ‘Depositor Education and Awareness Fund Scheme, 2014’.
This penalty has been imposed in the exercise of powers vested in the RBI and after considering the failure of the bank to adhere to the directions issued by RBI.
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, clarifies RBI.
1.7 RBI notifies limits on retail home loans issued by urban co-op banks
Reserve Bank of India on December 30 notified limits for housing loans extended by urban cooperative banks to individual borrowers under the revised four-tiered regulatory framework implemented by the central bank earlier this month.
On Dec 1, the RBI adopted a four-tiered regulatory framework, as against the earlier two-tiered framework, for the categorisation of urban cooperative banks. The categorisation was done for regulatory purposes based on their deposit size.
Earlier ceilings on housing loans to individuals are prescribed as ₹60 lahks for Tier-I UCBs and ₹140 lahks for Tier-II UCBs. Consequent upon a classification of UCBs into four tiers under the revised regulatory framework, it has been decided to specify the limits on housing loans sanctioned by UCBs to an individual borrower as ₹60 lahks for Tier-1 UCBs and ₹140 lahks for UCBs categorised in Tier-2 to 4. Other terms and conditions of the circular ibid, remain unchanged.
However, existing housing loans sanctioned prior to today, which may be in breach of the ceiling, will be allowed to run off till maturity, RBI said.
2.1. Bangladesh Bank launched Tk 10,000cr export facilitation pre-finance fund
Bangladesh Bank (BB) has launched another Tk 10,000 crore fund for export-oriented industries to help them with the procurement of raw materials from local and foreign sources, in addition to the $7 billion Export Development Fund (EDF). The new fund can be used by exporters to import raw materials to manufacture products and export them. Borrowers can take loans from this fund, called Export Facilitation Pre-finance Fund (EFPF), against up to 4 per cent interest for six months. However, loan tenure can be extended for three more months on a case-to-case basis.
2.2. Bangladesh Bank relaxed the policies of its Agricultural & Rural Credit Policy and Programme
Bangladesh Bank (BB) In a statement Sunday (1 January), the Bangladesh Bank directed all commercial banks to allocate farm loans among new cultivators on a priority basis instead of limiting the facility to specific farmers only. On 28 July last year, the government introduced the Agricultural & Rural Credit Policy and Programme for FY22-23 in a bid to ensure finance in building a sustainable agricultural system which would be farmer friendly and helpful in alleviating poverty. The central bank issued the latest instructions to make the programme more effective
3. SRI LANKA
3.1. Sri Lanka’s central bank to reduce interest rates in 2023
Nandalal Weerasinghe, Governor of the Central Bank of Sri Lanka, stated that steps will be taken in 2023 to reduce key interest rates in Sri Lanka. On Sunday, Weerasinghe told the media that inflation is also expected to fall in 2023. According to Xinhua, he stated that Sri Lanka's inflation rate fell to 57.2 per cent in December from 61 per cent in November, indicating that the policies implemented beginning in April 2022 were successful. High-interest rates have kept inflation at bay, but they will be reduced as the economy recovers.
 Press Release: 2022-2023/1472, December 30 2022, Reserve Bank of India  Press Release: 2022-2023/1469, December 30 2022, Reserve Bank of India  Press Release: 2022-2023/1467, December 30 2022, Reserve Bank of India  Press Release: 2022-2023/1455, December 29 2022, Reserve Bank of India  Press Release: 2022-2023/1445, December 27, 2022, Reserve Bank of India  Press Release: 2022-2023/1438, December 26 2022, Reserve Bank of India  RBI/2022-23/159 DOR.CRE.REC.92/07.10.002/2022-23, December 30, 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
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