• AK & Partners

AKP Banking & Finance Digest- October 3, 2022

1. INDIA


1.1 RBI releases Statement on Developmental and Regulatory Policies

The Reserve Bank of India (RBI) has released the Statement on Developmental and Regulatory Policies. Under the policy measures for Payment and Settlement Systems, the central bank has suggested regulation of offline payment aggregators. Further, the statement has also listed various policy measures relating to regulation and supervision including a discussion paper on the expected loss-based approach for loan loss provisioning by banks, and the securitisation of stressed assets framework. The statement also mentioned plans to expand internet banking facilities for customers through Regional Rural Banks (RRBs).[1]

1.2 RBI changes policy repo rate

RBI has released the Monetary Policy Statement wherein it was announced to increase the policy repo rate under the Liquidity Adjustment Facility by 50 basis points from 5.40% to 5.90%. Further, the standing deposit facility (SDF) rate and marginal standing facility (MSF) rate has been adjusted to 5.65% and 6.15% respectively. The revised rates shall be applicable with immediate effect.[2]

1.3 RBI announces repo rate under Standing Liquidity Facility

RBI has notified that the revised repo rate of 5.90% shall be applicable to primary dealers under Standing Liquidity Facility. This shall be applicable from immediate effect.[3]

1.4. RBI revises Bank rate

RBI has notified the revision of the Bank rate from 5.65% to 6.15%. This shall come into immediate effect. All penal interest rates linked to the Bank rate have been annexed in the notification dated September 30, 2022.[4]

1.5. RBI releases Statement of the Governor

The Governor of the Reserve Bank of India, Shri Shaktikanta Das has released a statement providing details regarding the enduring effects of the pandemic, inflationary pressures, decisions and deliberations of the Monetary Policy Committee (MPC). He further stated that the challenging global economy and recession fears are the reasons behind changes in repo rate, bank rate etc. The governor has also suggested certain measures for the improvement of the economy.[5]

1.6. RBI releases Statement and Resolution of Monetary Policy Committee

Reserve Bank of India has released the statement and resolution of the monetary policy committee (MPC) held from September 28, 2022, to September 30, 2022. The statement noted that the RBI has revised the policy repo rate, SDF rate, MSF rate and Bank Rate. Further, the statement stated that the changes are concurrent with the medium objective of the targeted rate of 4% (within a band of +/- 2 per cent) for consumer price index (CPI) inflation. It also stated that the next MPC meeting shall be conducted on December 5, 2022, to December 7, 2022.[6]

1.7. RBI revised the late submission fee for reporting delays under Foreign Exchange Management Act, 1999 (FEMA)

RBI has introduced the concept of Late Submission Fee (“LSF”) for reporting delays in Foreign Investment (FI), External Commercial Borrowings (ECBs) and Overseas Investment related transactions with effect from November 07, 2017, January 16, 2019, and August 22, 2022, respectively. It has now been decided to bring uniformity in the imposition of LSF across functions in accordance with the following matrix[7] –



S. No.

Type of Reporting Delays

LSF Amount (INR)

1

​Form ODI Part-II/ APR, FCGPR (B), FLA Returns, Form OPI, evidence of investment or any other return which does not capture flows or any other periodical reporting

7500

2

FC-GPR, FCTRS, Form ESOP, Form LLP(I), Form LLP(II), Form CN, Form DI, Form InVi, Form ODI-Part I, Form ODI-Part III, Form FC, Form ECB, Form ECB-2, Revised Form ECB or any other return which captures flows or returns which capture reporting of non-fund transactions or any other transactional reporting

​[7500 + (0.025% * A * n)]

Notes: a) “n” is the number of years of delay in submission rounded-upwards to the nearest month and expressed up to 2 decimal points. b) “A is the amount involved in the delayed reporting.

c) LSF amount is per return. However, for any number of Form ECB-2 returns, delayed submission for each LRN will be treated as one instance for the fixed component. Further, ‘A’ for any ECB-2 return will be the gross inflow or outflow (including interest and other charges), whichever is more.

d) Maximum LSF amount will be limited to 100 per cent of ‘A’ and will be rounded upwards to the nearest hundred.

e) Where advice has been issued for payment of LSF and such LSF is not paid within 30 days, such advice shall be considered as null and void and any LSF received beyond this period shall not be accepted. If the applicant subsequently approaches for payment of LSF for the same delayed reporting, the date of receipt of such application shall be treated as the reference date for the purpose of calculation of “n”.

f) The facility for opting for LSF shall be available up to three years from the due date of reporting/ submission. The option of LSF shall also be available for delayed reporting/submissions under the Notification No. FEMA 120/2004-RB and earlier corresponding regulations, up to three years from the date of notification of Foreign Exchange Management (Overseas Investment) Regulations, 2022.

g)In case a person responsible for any submission or filing under the provisions of FEMA, neither makes such submission/filing within the specified time nor makes such submission/filing along with LSF, such person shall be liable for penal action under the provisions of FEMA, 1999.

1.8. RBI releases a list of NBFCs in the Upper Layer under Scale Based Regulation for NBFCs

RBI announced the list of NBFCs in the Upper Layer (“UL”) under Scale Based Regulation for NBFCs in accordance with RBI’s framework titled “Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs” dated October 22, 2021. Accordingly, the following NBFCs have been identified for categorization as NBFC-UL[8]:



S. No.

Name of the NBFC

Category of the NBFC

1

LIC Housing Finance Limited

Deposit taking HFC

2

Bajaj Finance Limited


Deposit taking NBFC-ICC

3

Shriram Transport Finance Company Limited

Deposit taking NBFC-ICC

4

Tata Sons Private Limited

CIC

5


L & T Finance Limited

Non-deposit taking NBFC-ICC

6

Indiabulls Housing Finance Limited

Non-deposit taking HFC

7

Piramal Capital & Housing Finance Limited

​Non-deposit taking HFC

8

​Cholamandalam Investment and Finance Company Limited

Non-deposit taking NBFC-ICC

9

Shanghvi Finance Private Limited

Non-deposit taking NBFC-ICC

10

Mahindra & Mahindra Financial Services Limited

Deposit taking NBFC-ICC

11

PNB Housing Finance Limited

Deposit taking HFC


12

Tata Capital Financial Services Limited

Non-deposit taking NBFC-ICC

13

Aditya Birla Finance Limited

Non-deposit taking NBFC-ICC

14

HDB Financial Services Limited

Non-deposit taking NBFC-ICC

15

Muthoot Finance Limited

Non-deposit taking NBFC-ICC

16

Bajaj Housing Finance Limited

​Non-deposit taking HFC


1.9. RBI imposes monetary penalty on Hissar Urban Cooperative Bank Ltd., Hisar

RBI has imposed a monetary penalty of INR 3,00,000 (Indian Rupees Three Lakh only) on Hissar Urban Cooperative Bank Ltd., Hisar. The bank had failed to adhere to RBI directions issued under the Supervisory Action Framework when it offered interest rates on saving deposits not in line with the directions.[9]

1.10. RBI imposes monetary penalty on Urban Co-operative Bank Ltd., Cuttack, Odisha

RBI has imposed a monetary penalty of INR 10,000 (Indian Rupees Ten Thousand only) on Urban Co-operative Bank Ltd., Cuttack, Odisha for contravention of the directions issued by RBI on the Depositor Education and Awareness Fund.

The bank had failed to transfer all eligible balances to the Depositor Education and Awareness Fund but had submitted an incorrect certificate in this regard.[10]

1.11. RBI imposes monetary penalty on Budge Budge Nangi Cooperative Bank Ltd., Budge Budge, West Bengal

RBI has imposed a monetary penalty of INR 10,000 (Indian Rupees Ten Thousand only) on Budge Budge Nangi Cooperative Bank Ltd., Budge Budge, West Bengal (“the bank”) for contravention of the directions issued by RBI to Urban Cooperative Banks on “Exposure Norms and Statutory / Other Restrictions – UCBs”.

The bank had not complied with the directions on prudential inter-bank exposure limit, both at the gross as well as counterparty level.[11]

1.12. RBI imposes monetary penalty on Bhatpara-Naihati Cooperative Bank Ltd., North 24 Parganas, West Bengal

RBI has imposed a monetary penalty of INR 4,00,000 (Indian Rupees Four Lakhs only) on Bhatpara-Naihati Cooperative Bank Ltd., North 24 Parganas, West Bengal for contravention of the directions issued by RBI to Urban Cooperative Bank on (i) “Exposure Norms and Statutory / Other Restrictions – UCBs” and (ii) “Management of Advances – UCBs”.

The bank had not complied with the directions on (i) prudential inter-bank exposure both at the gross and counterparty level and (ii) sanction of gold loans.[12]

1.13. RBI imposes monetary penalty on Andaman & Nicobar State Co-operative Bank Ltd.

RBI has imposed a monetary penalty of INR 5,00,000 (Indian Rupees Five Lakh only) on Andaman & Nicobar State Co-operative Bank Ltd. for contravention of the provisions of Section 20 read with Section 56 of Banking Regulation Act, 1949 as the bank sanctioned unsecured loans to its directors.[13]

1.14. RBI imposes monetary penalty on Jalgaon People’s Co-operative Bank Ltd., Jalgaon

RBI has imposed a monetary penalty of INR 50,00,000 (Indian Rupees Fifty Lakh only) on Jalgaon People’s Co-operative Bank Ltd., Jalgaon, Maharashtra for non-compliance with the directions issued by RBI on ‘Income Recognition, Asset Classification, Provisioning and Other Related Matters’ (IRACP norms), ‘Maintenance of Deposit Accounts’ and ‘Interest Rate on Deposits’.

The bank (i) did not classify certain accounts as non-performing assets in accordance with the IRAC norms, (ii) levied penal charges for non-maintenance of minimum balances in SB accounts without notifying the customers and without providing one month time for restoration of minimum balances in the accounts, and (iii) did not pay interest on balance amounts lying in current accounts of deceased individual depositors/ sole proprietorship concerns while making payments to the claimants.[14]

1.15. RBI imposes monetary penalty on Balitikuri Cooperative Bank Ltd., Balitikuri, West Bengal

RBI has imposed a monetary penalty of INR 1,00,000 (Indian Rupees One Lakh only) on Balitikuri Cooperative Bank Ltd., Balitikuri, West Bengal for contravention of the directions issued by RBI on Know Your Customer (KYC).

The bank had not undertaken a periodic review of the risk categorisation of its customers.[15]

1.16. RBI imposes monetary penalties on certain banks based out of Gujarat.

RBI has imposed a monetary penalty of INR 25,000 (Indian Rupees Twenty-Five Thousand only) on Shree Botad Mercantile Co-operative Bank Ltd., Botad (Gujarat)[16], Shree Parswanath Co-operative Bank Ltd., Rajkot (Gujarat)[17] and Talod Nagrik Sahkari Bank Ltd., Sabarkantha (Gujarat)[18] for contravention of directions issued by RBI on ‘Loans and advances to directors etc- directors as surety/guarantors- Clarification’.

Further, a penalty of INR 100, 000 (Indian Rupees One Lakh only) was also imposed on Varachha Co-operative Bank Ltd., Surat (Gujarat) for the above-mentioned contravention.[19]

The banks had sanctioned credit facilities to individuals where relatives of the bank’s directors stood as guarantors, resulting in contravention of aforesaid directions issued by RBI.



2. Bangladesh


2.1. BB increases the repo interest rate

The Bangladesh Bank in its monetary policy committee meeting held on September 29, 2022, has increased the overnight repo interest rate by 25 basis points from 5.50% to 5.75%, which will be effective from October 2, 2o22. The reverse repo interest rate has not been changed and is still at 4% p.a.[20]






[1] Press Release: 2022-2023/968, Reserve Bank of India, September 30, 2022.

[2]RBI/2022-2023/120 FMOD.MAOG.No.147/01.01.001/2022-23, Reserve Bank of India, September 30, 2022.

[3]RBI/2022-23/121 REF.No.MPD.BC.395/07.01.279/2022-23, Reserve Bank of India, September 30, 2022.

[4]RBI/2022-23/123 DOR.RET.REC.70/12.01.001/2022-23, Reserve Bank of India, September 30, 2022.

[5] Press Release: 2022-2023/966, Reserve Bank of India, September 30, 2022.

[6] Press Release: 2022-2023/967, Reserve Bank of India, September 30, 2022.

[7] RBI/2022-23/122A.P. (DIR Series) Circular No. 16, Reserve Bank of India, September 30, 2022.

[8] Press Release: 2022-2023/975, Reserve Bank of India, September 30, 2022.

[9] Press Release: 2022-2023/930, Reserve Bank Of India, September 26, 2022.

[10] Press Release: 2022-2023/940, Reserve Bank Of India, September 26, 2022.

[11] Press Release: 2022-2023/939, Reserve Bank Of India, September 26, 2022.

[12] Press Release: 2022-2023/938, Reserve Bank Of India, September 26, 2022.

[13] Press Release: 2022-2023/937, Reserve Bank Of India, September 26, 2022.

[14] Press Release: 2022-2023/941, Reserve Bank Of India, September 26, 2022.

[15] Press Release: 2022-2023/936, Reserve Bank of India, September 26, 2022.

[16] Press Release: 2022-2023/944, Reserve Bank of India, September 26, 2022.

[17] Press Release: 2022-2023/943, Reserve Bank of India, September 26, 2022.

[18] Press Release: 2022-2023/945, Reserve Bank of India, September 26, 2022.

[19] Press Release: 2022-2023/942, Reserve Bank of India, September 26, 2022.

[20]MPD Circular No. 3, issued by the Monetary Policy Department, Bangladesh Bank, September 29, 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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