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AKP Banking & Finance Digest- January 9, 2023

1. INDIA


1.1 RBI rationalizes reporting of Foreign Investment in Single Master Form (SMF) on FIRMS Portal

Reserve Bank of India (RBI) on January 04, 2023, issued a notification regarding the Foreign Investment in India – Rationalization of reporting in Single Master Form (SMF) on FIRMS Portal. The following changes are being implemented:

  • The forms submitted on the portal will be auto-acknowledged. It will be verified by the AD banks within five working days based on the uploaded documents, as specified.

  • In cases of delayed reporting, the AD banks shall either advise the Late Submission Fee (LSF) to the applicants, which will be computed by the system or advise for compounding of contravention as the case may be.[1]


1.2 RBI releases Annual Report of Ombudsman Schemes, 2021-22


RBI has released the Annual Report of the Ombudsman Schemes for the period April 01, 2021 – March 31, 2022. The Annual Report covers the activities under the erstwhile Ombudsman Schemes i.e., Banking Ombudsman Scheme, 2006 (BOS), the Ombudsman Scheme for Non-Banking Financial Companies, 2018 (OSNBFC), and the Ombudsman Scheme for Digital Transactions, 2019 (OSDT) up to November 11, 2021, along with the activities under RB-IOS, 2021 since November 12, 2021.


The report highlighted major developments of the entire year like-

  • The ambit of RB-IOS, 2021 was extended to include non-scheduled Urban Cooperative Banks with deposits of ₹50 Crore and above.

  • A CRPC was established at RBI, Chandigarh under the RB-IOS, 2021 to receive complaints by email or physical manner, handle the first review and processing of these complaints, and then allocate the maintainable ones to ORBIOs for additional redress.

  • A Nationwide Intensive Awareness Programme was launched on World Consumer Rights Day on March 15, 2022

Apart from this, some action plans for the upcoming year were mentioned-

  • Extension of the RB-IOS, 2021 and Internal Ombudsman Scheme to more REs that are not covered presently;

  • Enhance the efficiency and ease of usage of CMS; and

  • Upgrade and expand the Contact Centre.[2]


1.3 RBI launches Quarterly Order Books, Inventories and Capacity Utilisation Survey: October - December 2022 (Round 60)


Reserve Bank of India has launched the 60th round of its Order Books, Inventories and Capacity Utilisation Survey (OBICUS). The survey is for the reference period October-December 2022 (Q3:2022-23).


The information collected in the survey includes quantitative data on new orders received during the reference quarter, backlog of orders at the beginning of the quarter, pending orders at the end of the quarter, total inventories with a breakup between finished goods (FG), work-in-progress (WiP) and raw material (RM) inventories at the end of the quarter, item-wise production in terms of quantity and value during the quarter vis-à-vis the installed capacity from the targeted group and the reasons for changes in production / installed capacity during the quarter.


RBI estimates the level of capacity utilisation through the response to this survey. It also provides valuable input for monetary policy formulation.[3]


1.4 Directions under Section 35 A read with Section 56 of the Banking Regulation Act, 1949 – Shushruti Souharda Sahakara Bank Niyamita, Bengaluru, Karnataka – Extension of period


Reserve Bank of India issued Directions to Shushruti Souharda Sahakara Bank Niyamita, Bengaluru under Section 35 A read with Section 56 of the Banking Regulation Act, 1949 vide Directive CO.DOS.DSD.No.S98/10-01-23/2022-23 dated April 07, 2022, which were extended from time to time, last being up to January 07, 2023, vide Directive DOR.MON/D-34/10.01.023/2022-23 dated October 06, 2022.


The aforesaid Directive shall continue to apply to the bank for a further period of three months from January 08, 2023, to April 07, 2023, subject to review while the other terms and conditions of the Directive remain unchanged.[4]


1.5 Directions under Section 35 A read with Section 56 of the Banking Regulation Act, 1949 – Sri Sharada Mahila Co-operative Bank Limited, Tumkur, Karnataka – Extension of period


Reserve Bank of India issued Directions to Sri Sharada Mahila Co-operative Bank Limited, Tumkur, Karnataka under Section 35 A read with Section 56 of the Banking Regulation Act, 1949 vide Directive BLR.DOS.SSMS.No. S530/13-04-179/2022-23 dated July 07, 2022.


The aforesaid Directive shall continue to apply to the bank for a further period of three months from January 09, 2023, to April 08, 2023, subject to review while the other terms and conditions of the Directive remain unchanged. This has been issued by RBI exercising its power under sub-section (1) of Section 35 A read with Section 56 of the Banking Regulation Act, 1949.[5]


1.6 RBI imposes monetary penalty on The Sahebrao Deshmukh Cooperative Bank Ltd., Mumbai


RBI imposed a monetary penalty of ₹1.00 lakh on the Sahebrao Deshmukh Cooperative Bank Ltd., Mumbai for non-compliance with the directions issued by RBI on ‘Frauds monitoring and reporting mechanism’. RBI had imposed this penalty exercising its power vested under section 47 A (1) (c) read with sections 46 (4) (i) and 56 of the Banking Regulation Act, 1949 (BR Act).


The bank had reported cases of fraud with delay. A notice was issued to the firm, asking it to show cause as to why a penalty should not be imposed. After considering the bank’s written reply to the notice, and other submissions, RBI concluded that the aforesaid charge of non-compliance with RBI directions was substantiated and warranted the imposition of a monetary penalty.[6]


1.7 RBI imposes monetary penalty on Sharad Sahakari Bank Ltd., Pune


RBI imposed a monetary penalty of ₹6.00 on Sharad Sahakari Bank Ltd., Pune for non-compliance with the directions issued by RBI on ‘Know Your Customers’ and ‘Interest Rate on Deposits’. There was no place for a system for periodic updation of KYC of accounts put by the bank and while making payments to the claimants, the banks failed to pay applicable interest on balance amounts lying in current accounts of deceased individual depositors or sole proprietorship concerns.


After considering the bank’s written reply to the show cause notice, RBI concluded that the aforesaid charge of non-compliance with RBI directions was substantiated and warranted the imposition of a monetary penalty to the extent of non-compliance.[7]


1.8 RBI imposes monetary penalty on Col. R.D.Nikam Sainik Sahakari Bank Ltd., Satara


RBI imposed a monetary penalty of ₹1.00 lakh (Rupees One lakh only) on Col. R.D.Nikam Sainik Sahakari Bank Ltd., Satara (the bank) for contravention of Section 26-A read with section 56 of the Banking Regulation Act, 1949 (the Act) and the Depositor Education and Awareness Fund Scheme, 2014.

The bank had failed to transfer balances, in certain accounts which were unclaimed for more than ten years to Depositor Education and Awareness Fund. After considering the bank’s written reply to the show cause notice, RBI concluded that the aforesaid charge of non-compliance with RBI directions was substantiated and a monetary penalty was imposed.[8]


1.9 RBI imposes monetary penalty on The Baghat Urban Co-operative Bank Limited, Solan, Himachal Pradesh


RBI imposed a monetary penalty of ₹8.00 lakh on the Baghat Urban Co-operative Bank Limited, Solan, Himachal Pradesh for contravention of Section 35A and Section 36 (1) (a) read with Section 56 of the Banking Regulation Act, 1949.


The bank did not comply with specific directions issued to it by RBI under Supervisory Action Framework (SAF). After considering the bank’s written reply to the show cause notice, and other submissions in a personal hearing RBI concluded that the aforesaid charge of non-compliance with RBI directions was substantiated and a monetary penalty was imposed.[9]


2. BANGLADESH

2.1. Banks can now wipe out bad debts and defaulted loans up to Tk5 lakh

Bangladesh Bank (BB) in its recent directive increased banks' loan write-off capability by up to Tk5 lakh, by 150%. Bangladesh bank in a recent circular said that the cost of fighting a legal battle after starting a case for petty defaulted loans is often high, in some cases more than Tk2 lakh, or even the total outstanding amount. However, the general public believes that these extended write-off facilities in actual default loan count will not send a good message as they will act as a camouflage to shelter wilful defaulters and hide the real picture in the banking sector of Bangladesh.

2.2.Forex borrowing through offshore banking to continue

Bangladesh Bank (BB) in its recent circular extended the time for fund transfer from OBOs to facilitate the settlement of import payments for capital machinery, industrial raw materials and imports by the government. Now the facility will remain valid till June 30, 2023.

3. SRI LANKA

3.1. Rs. 88,000 million Treasury bills are to be issued through an auction on 11th January 2023

3.1.

The Central Bank of Sri Lanka has invited bids from the primary dealers in Government securities to buy Rs. 88,000 million treasury bills. Treasury bills are short-term debt instruments issued by the government that pays no interest and are zero-coupon securities.

[1] RBI/2022-23/160 A.P. (DIR Series) Circular No. 22 January 04, 2023, Reserve Bank of India [2] Press Release: 2022-2023/1491, January 04 2023, Reserve Bank of India [3] Press Release: 2022-2023/1499, January 05 2023, Reserve Bank of India [4] Press Release: 2022-2023/1512, January 08 2023, Reserve Bank of India [5] Press Release: 2022-2023/1514, January 09 2023, Reserve Bank of India [6] Press Release: 2022-2023/1485, January 02 2023, Reserve Bank of India [7] Press Release: 2022-2023/1484, January 02 2023, Reserve Bank of India [8] Press Release: 2022-2023/1483, January 02 2023, Reserve Bank of India [9] Press Release: 2022-2023/1480, January 02 2023, 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

For further queries or details, you may contact:

Mr Anuroop Omkar,

Partner, AK & Partners

anuroop@akandpartners.in

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