LatestLaws.com's Yearly Digest of the Important Notifications by Reserve Bank of India in 2023
LatestLaws.com's Yearly Digest of the Important Notifications by Reserve Bank of India in 2023, compiled exclusively for you, contains important notices, directions and notifications passed by the Reserve Bank of India (RBI) in one place. Stay updated, Good People, with LatestLaws.com!
1. Reserve Bank of India (Government Securities Lending) Directions, 2023
Based on the comments received from banks, market participants and other interested parties, the Reserve Bank of India (Government Securities Lending) Directions, 2023 have been issued. The Directions are applicable to all Government securities lending transactions undertaken in Over-the-Counter markets.
The directions come into effect immediately.
2. Investments in Alternative Investment Funds (AIFs)
Due to regulatory concerns raised in relation to transactions of REs involving AIFs, such as the substitution of direct loan exposure of REs to borrowers with indirect exposure through investments in units of AIFs, RBI has issued an advisory to avoid evergreening through this route.
(i) REs shall not make investments in any scheme of AIFs which has downstream investments either directly or indirectly in a debtor company of the RE.
(ii) If an AIF scheme, in which RE is already an investor, makes a downstream investment in any such debtor company, then the RE shall liquidate its investment in the scheme within 30 days from the date of such downstream investment by the AIF. If REs have already invested into such schemes having downstream investment in their debtor companies as on date, the 30-day period for liquidation shall be counted from date of issuance of this circular. REs shall forthwith arrange to advise the AIFs suitably in the matter.
(iii) In case REs are not able to liquidate their investments within the above-prescribed time limit, they shall make a 100 percent provision on such investments.
It has also been advised that investment by REs in the subordinated units of any AIF scheme with a ‘priority distribution model’ shall be subject to full deduction from RE’s capital funds.
The instructions come into effect immediately.
3. Statement on Developmental and Regulatory Policies
The RBI through Press Release came out with a statement on various developmental and regulatory policy measures relating to:
a. Financial Markets
The regulatory framework for hedging of foreign exchange risks has been more refined to enhance operational efficiency and ease access to foreign exchange derivatives, especially for users with small exposures. This will also ensure that a broader set of customers with the necessary risk management expertise are given the flexibility to manage their exposures efficiently.
The Master Direction will be issued separately.
b. Regulations
It has been decided to come out with a unified regulatory framework on connected lending for all the regulated entities of the Reserve Bank. A draft circular in this regard will be issued for public comments.
c. Payment Systems and Fintech
It is proposed to enhance the limit for payments to hospitals and educational institutions from ₹1 lakh to ₹5 lakh per transaction. Separate instructions will be issued shortly.
It is further proposed to exempt the requirement of AFA for transactions up to ₹1 lakh for the following categories, viz., subscription to mutual funds, payment of insurance premium and payments of credit card bills. The other existing requirements such as pre- and post-transaction notifications, opt-out facility for user, etc. shall continue to apply to these transactions. The revised circular will be issued shortly.
Another proposal is to set-up a Repository for capturing essential information about FinTechs, encompassing their activities, products, technology stack, financial information etc. FinTechs would be encouraged to provide relevant information voluntarily to the Repository which will aid in designing appropriate policy approaches. The Repository will be operationalised by the Reserve Bank Innovation Hub in April 2024 or earlier. Necessary guidelines for this will be issued separately.
4. Processing of e-mandates for recurring transactions
RBI has decided to increase the limit from ₹15,000/- to ₹1,00,000/- per transaction for the following categories:
(a) subscription to mutual funds,
(b) payment of insurance premiums, and
(c) credit card bill payments.
The circular shall come into effect immediately.
The International Monetary Fund (IMF) - Financial Stability Board (FSB) Synthesis Paper
including a Roadmap was welcomed by the New Delhi Leaders' Declaration.
The paper was also presented during the Leaders’ Summit and provides valuable guidance, to the G-20 but also the non-G20 jurisdictions, in moving forward with clearer policies on crypto assets.
Accordingly, all jurisdictions, including India, are expected to evaluate the country specific characteristics and risks in order to reach an appropriate consideration of any necessary measures on crypto assets.
6. Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023
Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023 have been issued.
They shall come into force on the date of their publication in the Official Gazette.
Amongst other things, manner of receipt and payment, trade transactions, transactions other than trade transactions have been set out in the regulations.
7. Reverse Repo transactions - Reporting in Form ‘A’ Return
RBI has decided to revise the instructions contained in Para B of circular DoR.RET.REC.43/12.01.001/2023-24 dated October 16, 2023.
Accordingly, the Reverse Repo transactions of a bank with non-banks (other institutions) should be reported as under:
(i) For original tenors up to and inclusive of 14 days - Not required to be reported in Form A.
(ii) For original tenors more than 14 days - Item VI(a) of Form A [i.e. Loans, cash credits and overdrafts under Bank Credit in India (excluding inter-bank advances)]
8. Reserve Bank of India (Financial Benchmark Administrators) Directions, 2023
A review of the Reserve Bank of India (Financial Benchmark Administrators) Directions, 2023 was conducted to put in place a holistic risk-based framework covering all benchmark administrators in financial markets regulated by the Reserve Bank. The directions have been revised and issued accordingly.
9. Master Direction on Information Technology Governance, Risk, Controls and Assurance Practices
Based on the public comments received, the Reserve Bank of India has issued the final Reserve Bank of India (Information Technology Governance, Risk, Controls and Assurance Practices) Directions, 2023.
It has been decided t designate all Sovereign Green Bonds issued by the Government in the fiscal year 2023-24 as ‘specified securities’ under the ‘Fully Accessible Route’.
These directions will become applicable with immediate effect.
It has been decided that AD Category-I banks may allow Qualified Jewellers to remit advance payment for eleven days for import of silver through IIBX. This will be subject to the conditions mentioned in the A.P. (DIR Series) Circular No. 04 dated May 25, 2022.
Section 51 of the Master Directions on Know Your customer dated February 25, 2016 provides “Regulated Entities (REs) shall ensure that in terms of Section 51A of the Unlawful Activities (Prevention) (UAPA) Act, 1967 and amendments thereto, they do not have any account in the name of individuals/entities appearing in the lists of individuals and entities, suspected of having terrorist links, which are approved by and periodically circulated by the United Nations Security Council (UNSC).”
Thereafter, the Security Council Committee enacted the amendments to list entries and narrative summaries specified below with underline and strikethrough, in connection with individuals and entities subject to the assets freeze, travel ban and arms embargo set out in paragraph 1 of Security Council resolution 2610 (2021), and adopted under Chapter VII of the Charter of the United Nations.
In view of the above, the Res are advised to take appropriate actions as per Section 51 and stringently follow the procedure. Further any request for delisting received by any RE is to be forwarded electronically to Joint Secretary (CTCR), MHA for consideration. Individuals, groups, undertakings or entities seeking to be removed from the Security Council’s ISIL (Da'esh) and Al-Qaida Sanctions List can submit their request for delisting to an independent and impartial Ombudsperson who has been appointed by the United Nations Secretary-General.
13. Regulatory measures towards consumer credit and bank credit to NBFCs
Due to the high growth seen in consumer credit and the increasing dependency of NBFCs on bank borrowings, the following has been decided:
a. Consumer credit exposure of commercial banks
It has been decided to increase the risk weights in respect of consumer credit exposure of commercial banks (outstanding as well as new), including personal loans, but excluding housing loans, education loans, vehicle loans and loans secured by gold and gold jewellery, by 25 percentage points from 100% to 125%.
b. Bank Credit to NBFCs
It has been decided to increase the risk weights on such exposures of SCBs by 25 percentage points (over and above the risk weight associated with the given external rating) in all cases where the extant risk weight as per external rating of NBFCs is below 100%. For this purpose, loans to HFCs, and loans to NBFCs which are eligible for classification as priority sector in terms of the extant instructions shall be excluded.
c. Strengthening credit standards
Board approved limits in respect of various sub-segments under consumer credit as may be considered necessary by the Boards as part of prudent risk management. All top-up loans extended by REs against movable assets which are inherently depreciating in nature, such as vehicles, shall be treated as unsecured loans for credit appraisal, prudential limits and exposure purposes.
The circular will become applicable with immediate effect.
To prevent the affairs of any NBFC being conducted in a manner prejudicial to the investors and to further regulate the financial system, RBI has issued the Reserve Bank of India (Non-Banking Financial Company– Scale Based Regulation) Directions, 2023 which now replaces the prior guidelines Non-Banking Financial Company–Non-Systemically Important Non-Deposit taking (Reserve Bank) Directions, 2016 and Non-Banking Financial Company–Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016.
To ensure consistence in the financial statements, it has been directed that all the co-operative banks should present all unclaimed liabilities (where the amount due has been transferred to DEA Fund) under “Contingent Liabilities – Others”.
The same is applicable for the financial statements for Financial Year ending March 31, 2024 and onwards.
RBI has issued directions titled as Reserve Bank of India (Prudential Regulations on Basel III Capital Framework, Exposure Norms, Significant Investments, Classification, Valuation and Operation of Investment Portfolio Norms and Resource Raising Norms for All India Financial Institutions) Directions, 2023.
The directions will be applicable from April 01, 2024.
The directions will apply to AIFs , EXIM Bank, NABARD, NaBFID, NHB and SIDBI.
17. Section 42 (1A)- Requirement for maintaining additional CRR
RBI has decided to issue a directive that all scheduled commercial Banks/Regional Rural Banks and all scheduled Primary Urban Co-operatives Banks have to maintain with RBI an incremental CRR of 10% on the increase in NDTL.
The I-CRR will be reviewed on September 08, 2023 or earlier.
18. Reserve Bank of India (Call, Notice and Term Money Markets) Directions, 2021- review
It has been decided that the Schedules Commercial Banks (excluding small finance banks and payment banks) may set their own limit for borrowing in call and notice money markets.
This shall be applicable with immediate effect.
19. Guidelines on Default Loss Guarantee (DLG) in digital lending
RBI has issued guidelines on Default Loss Guarantee (DLG) in digital lending which shall come into effect immediately. The guidelines are applicable to DLG arrangements entered in ‘Digital Lending’ operations undertaken by:
- Commercial Banks (including small finance banks)
- Primary (Urban) Co-operative Banks, State Co-operative Banks, Central Co-operative Banks and
- Non-Banking Financial Companies (including Housing Finance Companies)
RBI has consolidated all the guidelines/ instructions/circulars issued till date regarding Prudential norms for Classification, Valuation and Operation of Investment Portfolio of Primary (Urban) Co-Operative Banks.
21. Guidelines on Acquisition and Holding of Shares or Voting Rights in Banking Companies
These are the guidelines that have to be read with the direction issued by the RBI i.e., Reserve Bank of India (Acquisition and Holding of Shares or Voting Rights in Banking Companies) Directions, 2023.
The guidelines provide for prior approval for acquisition of shares or voting rights in a banking company along with limits on shareholding, lock-in requirement and calling on voting rights.
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