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AKP Banking & Finance Digest- October 24, 2022

Updated: Oct 26

  1. INDIA

1.1. RBI updates master directions on Priority Sector Lending (PSL).

Reserve Bank of India on 20th October 2022, updated the Master Directions on Priority Sector Lending (PSL) – Targets and Classification.

RBI has updated para 17 on bank investments in securitisation notes (not applicable to RRBs and UCBs), and the following has been notified:

Bank investments in 'securitisation notes' representing loans to various priority sector categories, except 'others,' are eligible for classification under respective priority sector categories depending on the underlying assets provided:

Banks' investments in securitisation notes with loans against gold jewellery originated by NBFCs as the underlying do not qualify for priority sector status.

Furthermore, under para 21, banks other than SFBs are permitted to extend credit to registered NBFC-MFIs and other MFIs (Societies, Trusts, etc.) that are members of an RBI-recognized SRO for the sector for on-lending to individuals and members of SHGs / JLGs.[1]

1.2. RBI notifies draft master Direction on Information Technology Governance, Risk, Controls and Assurance Practices.

Reserve Bank of India notified a draft master direction on Information Technology Governance, Risk, Controls, and Assurance Practices on October 20, 2022, to be implemented by Regulated Entities (REs).

According to the notification, regulated entities ("REs") must implement a strong IT Governance Framework that includes the governance structure and processes required to meet the RE's business/ strategic objectives. The role (including authority) and responsibilities of the Board of Directors (Board) / Board level Committee / Local Management Committee (in the case of foreign banks operating as branches in India) and Senior Management shall be specified in the governance framework. The Framework must, among other things, include adequate oversight mechanisms to ensure accountability and risk mitigation. These Directions will take effect six months after the final Master Direction is posted on the Reserve Bank of India's official website.[2]

1.3. RBI cancels Certificate of Registration of four NBFCs

Reserve Bank of India (“RBI”) has cancelled the certificates of registration of S.R.M. Properties and Finance Company Pvt. Ltd, North-East Region Finservices Limited, Sowjenvee Finance Limited, and Opel Finance Limited in the exercise of the powers conferred on it by Section 45-IA (6) of the Reserve Bank of India Act, 1934. The companies listed above shall not conduct the business of a Non-Banking Financial Institution in India.

1.4. RBI penalizes Gandhidham Co-operative Bank and Meghraj Nagarik Sahakari Bank from Gujrat

RBI has imposed a monetary policy of INR 50,000 (Indian Rupees Fifty Thousand only) on Gandhidham Mercantile Co-operative Bank Ltd., for contravention of directions issued by RBI on loans and advances to directors, relatives and firms/ concerns in which they are interested and ‘loans and advances to directors etc- directors as surety/ guarantors- Clarification’. During the investigation[3], it was revealed that the bank had issued a loan, in which the director’s relative was the surety, and had interest, therefore, was in contravention of the aforesaid RBI directions.


A penalty of INR 25,000 (Indian Rupees Twenty-Five Thousand only) was imposed on Meghraj Co-operative Bank for contravention of loans and advances to directors etc- directors as surety/ guarantors- Clarification’. [4]

1.5. RBI revoke of Certificate of Authorisation of GI Technology Private Limited

RBI has revoked the Certificate of Authorisation (CoA), in the exercise of the powers conferred on it under Section 8 of the Payment and Settlement Systems Act, 2007 of GI Technology Private Limited. Now the company cannot transact the business of issuance and operation of Prepaid Payment Instruments.[5]

2. Bangladesh


2.1. Central bank of Bangladesh (“CBB”) provides for transactional procedures for import trade on phase-out of the Letter of Credit Authorization Form (“LCAF”)

The Central Bank issued a circular to all authorised dealers requiring them to follow a new procedure for relevant import transactions. The circular followed the Import Policy Order 2021-2024 issued by the Ministry of Commerce via SRO No. 92-Law/2022 dated April 20, 2022, which phased out the requirement of Letter of Credit Authorization Form (LCA via IPO 2021-2024. The circular will go into effect on November 20, 2022.[6]


[1] Master Directions FIDD.CO.Plan.BC.5/04.09.01/2020-21

[2] Press Release: 2022-2023/1072 Reserve Bank of India, October 20, 2022

[3] Press Release: 2022-2023/1053, Reserve Bank of India, October 17, 2022.

[4] Press Release: 2022-2023/1052, Reserve Bank of India, October 17, 2022.

[5] Press Release: 2022-2023/1075, Reserve Bank of India, October 20, 2022.

[6] FE Circular No. 29 dated 20th October 2022


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.


For further queries or details you may contact:

Mr Anuroop Omkar,

Partner, AK & Partners

anuroop@akandpartners.in

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