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RBI in News

1. IndusInd Bank has gone live as a Financial Information Provider (FIP) under the new Account
Aggregator (AA) Framework of the Reserve Bank of India (RBI). Thus, IndusInd Bank has
become the first bank in India to do so. The bank went live as FIP with DigiSahamati Foundation,
a self-organised Collective of the Account Aggregator ecosystem.

2. RBI has given approval to Maple II B.V., (affiliated to Baring Private Equity Asia) to acquire over
5% but up to 9.99% of the paid-up share capital of the RBL Bank Limited.

3. RBI has deferred implementation of provisions made under Basel III capital due to uncertainty
related to Covid crisis. In this regard, RBI will repel the final tranche of the capital conservation
buffer (CCB) and the implementation of net stable funding ratio (NSFR) by six months i.e. April
1, 2021.

4. The Reserve Bank of India (RBI), in consultation with the Government of India (GOI) has fixed
Rs. 1,25,000 Crore as the Ways and Means Advances (WMA) limit for the 2nd half of the
financial year(FY) 2020-21, i.e., October 2020 to March 2021. When Indian Government utilises
75% of the WMA limit, RBI may trigger fresh floatation of market loans.

5. RBI excluded six public sector banks (PSBs) from the Second Schedule of the RBI Act, 1934
following their merger with other banks with effect from April 01, 2020. The six banks are
Syndicate Bank, Oriental Bank of Commerce (OBC), United Bank of India, Andhra Bank,
Corporation Bank, and Allahabad Bank. OBC and United Bank of India merged into Punjab
National Bank; Syndicate Bank into Canara Bank; Andhra Bank and Corporation Bank into Union
Bank of India; and Allahabad Bank into Indian Bank.

6. RBI has approved a 3-member interim Committee of Directors (CoD) to exercise the powers of
Managing Director (MD) & Chief Executive Officer (CEO) of Dhanlaxmi Bank Ltd till a new MD &
CEO takes charge. G. Subramonia Iyer will head (Chairman) the Committee of Directors, G.
Rajagopalan Nair and P.K Vijayakumar will serve as its members.

7. Government of India has appointed M Rajeshwar Rao as the new 4th deputy governor of the
Reserve Bank of India (RBI). He will succeed NS Vishwanathan, the former 4th Deputy Governor
of RBI, who resigned in March 2020 before the completion of his term (June 2020). M Rajeshwar
Rao is currently serving as the executive director of RBI.

8. Monetary Policy Committee (MPC) MEMBERS: The Union government has recently appointed w
Ashima Goyal, Jayanth R Varma and Shashanka Bhide as the member of the Monetary Policy
Committee of the RBI.
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9. In a first-of-its-kind measure, the Reserve Bank of India will buy bonds issued by state
governments i.e. state development loans (SDL) in the current financial year (FY21) as a
special case via secondary market open market operations, to ensure they don’t face rising
interest costs amid high borrowings. The decision regarding this measure has been taken to
ensure that financial conditions don’t tighten and to improve liquidity and facilitate efficient pricing.
Notably, SDLs are eligible collateral for Liquidity Adjustment Facility (LAF) along with T-bills,
dated government securities and oil bonds.

10. The framework “co-origination model” that has been put in place by Reserve Bank in 2018 under
which there is co-origination of loans banks and a certain category of Non-Banking Financial
Companies (NBFCs) lends to the priority sector subject to certain conditions has now extended to
all the NBFCs. Means housing finance companies (HFCs) will also be able to partner with banks
for priority sector lending (PSL). From now, this framework will be known as “Co-Lending Model”
and the revised guidelines for the same will be issued by the end of October 2020. This decision
has been taken to make all priority sector loans eligible for the scheme and give greater
operational flexibility to the lending institutions.

11. In accordance with the latest data of Reserve Bank of India (RBI), between 2015-16 and 2019-20,
digital payments increased at a compounded annual growth rate of 55.1% from 593.61 Crore in
FY2015-16 to 3,434.56 Crore in FY19-20. In absolute terms, this value has grown from Rs.
920.38 lakh Crore to Rs 1,623.05 lakh Crore during this period at an annual compounded rate of
15.2%. As percent of card usage, they are being used increasingly for payments–from 20 per
cent in FY16 to 45 per cent in FY20, with debit card turnover outpacing credit card values.

12. Shaktikanta Das, Governor of RBI has chaired the 40th SAARCFINANCE Governors’ Group
meeting in a virtual format. He inaugurated the SAARCFINANCE Sync, a closed user group
secure communication network. The SAARFINANCE Governors meet twice a year concurrently
with the IMF (International Monetary Fund)/ WB (World Bank) Annual and Spring Meetings.
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13. According to a RBI’s recent report, Madhya Pradesh (MP) has been ranked the top which
provides employment under the Micro, Small and Medium Enterprises (MSMEs) during Covid-19
pandemic. Madhya Pradesh was followed by Gujarat, Tamil Nadu, Maharashtra, Uttar
Pradesh, Karnataka, Rajasthan, Delhi, Haryana, and Telangana in the list of top 10 states.

14. RBI has recently (October 27, 2020) asked all the lending institutions, including nonbanking
financial companies (NBFCs), to implement the waiver of interest on interest for loans up to Rs. 2
Crore for the 6 months moratorium period beginning March 1, 2020. The government has asked
the lending institutions to complete crediting the amount in the accounts of borrowers by 5th
November.

15. The Reserve Bank is all set to evaluate the impact of multi-media public awareness campaign
‘RBI Kehta Hai’. The campaign was launched in 14 languages to educate public about good
practices, regulations and initiatives in banking and financial sector. For this purpose, RBI has
invited Expression of Interest (EoI) from eligible companies and other entities which have
successfully completed at least five similar projects. ‘RBI Kehta Hai’ was the first even 360
degree campaign initiated by the central bank using all mass media, including media such as
television, radio, newspapers, hoardings, web banners, gifs, social media and SMS.

16. In accordance with the Reserve Bank of India’s (RBI) first ever estimation based on high-
frequency data namely “nowcast”, India’s Gross domestic product (GDP) has contracted 8.6% in
the quarter ended September 2020 i.e. Q2FY21. Nowcast is prepared by a team of economists
including Michael Debabrata Patra, RBI’s deputy governor. As per this, India also has entered a
technical recession in the first half of FY21 for the first time in its history as the economy had
slumped about 24% in Q1FY21 due to the COVID-19 pandemic. Also, the Consumer Price Index
(CPI) rises to 7.61% in October 2020 as compared to 7.27% in the previous month of September,
2020.

17. RBI has appointed Senapathy (Kris) Gopalakrishnan, co-founder and former co-chairman, Infosys
as the first chairperson of Reserve Bank Innovation Hub (RBIH). He is currently the Chief
Mentor of Start-up Village, an incubation hub for start-ups. RBIH will be guided and managed by
a Governing Council (GC) led by a Chairperson of RBI. RBIH has been set up to promote
innovation across the financial sector by leveraging the technology and creating an environment
that facilitates and fosters innovation.

18. RBI has proposed a draft scheme of amalgamation of the capital starved Lakshmi Vilas Bank Ltd.
(LVB) with DBS Bank India Ltd. (DBIL). This decision has been taken after the Central
Government has imposed a one-month moratorium on LVB on November 17, 2020 that
temporarily capped withdrawals at Rs. 25,000. RBI also appointed T.N. Manoharan, a former
Non-Executive Chairman of Canara Bank, as Administrator of LVB.

19. The Internal Working Group (IWG) of Reserve Bank of India (RBI) which was formulated to
review extant ownership guidelines and corporate structure for Indian private sector banks has
submitted its report on November 20, 2020. The report has recommended an increase in the
promoters’ stake to 26% from 15% of the paid-up voting equity share capital of the bank in 15
years. It has also recommended prescribing a uniform cap of 15% of the paid-up voting equity
share capital of the bank for all types of shareholders (non-promoter shareholding). Large non-
banking finance companies (NBFCs) with an asset size of Rs. 50,000 Crore and above, and
completed 10 years of operations can be considered for conversion into banks.
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20. The number of followers of the Reserve Bank of India (RBI) has increased from 9.66 lakh to one
million or 10 lakh on Twitter. With this, the central bank of India is now the first-ever such bank in
the world to reach these many followers in the micro-blogging site. The US Federal Reserve has
about 6.67 lakh Twitter followers and the Frankfurt-headquartered European Central Bank (ECB),
the second most powerful monetary authority in the world, has about 5.91 lakh followers.
Currently, the RBI handle is followed by over 1 million people.

21. RBI has rejected Muthoot Finance's proposal to acquire IDBI Asset Management Ltd and IDBI
MF Trustee Company Ltd from IDBI Bank Ltd and IDBI Capital Markets & Securities Ltd. The deal
was estimated at Rs. 215 Crore.

22. RBI has signed an agreement for extending a $400-million currency swap facility to Sri Lanka.

23. The Reserve Bank of India (RBI) on August 6, 2020 has brought start-ups (up to Rs 50 Crore),
loans to farmers for installation of solar power plants for solarisation of grid connected
agriculture pumps and loans for setting up Compressed Bio Gas (CBG) plants under the
purview of Priority Sector Lending (PSL). The Reserve Bank of India (RBI) last week doubled
the loan limit for the renewable energy sector under 'priority sector lending' to Rs. 30 Crore. For
improvement of health infrastructure, credit limit for health infrastructure (including those under
‘Ayushman Bharat’) has also been doubled.

24. RBI has come out with a five-pillared strategic approach 'GUARD' to deal with cybersecurity
threats being faced by urban cooperative banks (UCBs). The five-pillared strategic approach
'GUARD' comprises Governance Oversight, Utile Technology Investment, Appropriate Regulation
and Supervision, Robust Collaboration and Developing necessary IT and cybersecurity skills set.

25. The 6-member Monetary Policy Committee has decided to extend on-tap Targeted Long-Term
Repo Operations (TLTRO) by bringing 26 stressed sectors identified by the Kamath Committee
under the chairmanship of K. V. Kamath in order to provide more liquidity in the economy.

26. RBI has cancelled the licence of The Karad Janata Sahakari Bank Ltd., Karad, Maharashtra to
carry on banking business, which includes acceptance of deposits and repayment of deposits.

27. RBI has recently (December, 2020) released draft guidelines for distribution of dividend by non-
banking financial companies (NBFCs). In order to be able to declare dividend, deposit taking
NBFCs (NBFC-D) and systemically important non-deposit taking NBFCs (NBFC-ND-SI) should
have a capital to risk-weighted assets ratio (CRAR) of at least 15% for the last three years,
including the accounting year for which it proposes to declare dividend. Non-systemically
important non-deposit taking NBFCs (NBFC-ND) should have a leverage ratio of less than 7 for
the last three years, including the accounting year for which it proposes to declare dividend.

Core investment companies (CICs) should have an adjusted net worth (ANW) of at least 30% of
its aggregate risk weighted assets on balance sheet and risk adjusted value of off -balance sheet
items for the last three years, including the accounting year for which it proposes to declare
dividend.

The net NPA ratio should be less than 6% in each of the last three years, including the
accounting year for which the company proposes to declare dividend. The company must also
comply with provisions of Section 45 IC of the RBI Act, 1934 and with prevailing regulations and
guidelines issued by the RBI. The proposed dividend should be payable only out of the current
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year’s profit and the RBI should not have placed any explicit restrictions on the NBFC on
declaration of dividend.

28. Reserve Bank of India has decided to set up an Automated Banknote Processing Centre
(ABPC) in Jaipur, Rajasthan for automated receipt, storage of fresh banknotes received from the
printing presses, and then retrieval and dispatch of these banknotes to the identified issue offices
(IOs)/currency chests (CCs). The centre will also demolish destruction of soiled banknotes. This
all process will be done in an automated manner.

29. After the commencement of Test Phase of First Cohort under the Regulatory Sandbox (RS) by
Reserve Bank of India (RBI) on November 17, 2020, now the apex bank has announced the
opening of the Second Cohort on the theme of “Cross Border Payments”. The theme of the first
cohort was “Retail Payments” while for third Cohort, the theme will be “MSME Lending”. This
program allows the collaboration of banks, fintech and technology companies to conduct real-time
experimental projects under the supervision of the RBI team.

30. On December 18, 2020, RBI has further extended the restrictions of Punjab and Maharashtra
Cooperative (PMC) Bank Limited for a period of 3 months from December 23, 2020 to March 31,
2021. All other terms and conditions of the Directives under reference shall remain unchanged.

31. RBI has amended the Master Direction (MD) on “Know Your Customer (KYC)”, dated February
25, 2016, by extending the applicability of centralized KYC registry to legal entities (LEs), from
individual accounts w.e.f. April 1, 2021. Since 2017, banks, non-banks, and other entities
regulated by RBI have been uploading the KYC data of individual accounts opened on or after 1
January 2017 on to the centralized KYC registry (CKYCR).

32. RBI has approved the appointment of Sandeep Batra as Executive director of ICICI bank for a
period of three years. Batra is currently serving as the president of ICICI Bank at the corporate
centre of the bank.

33. Banking Licence of Subhadra Local Area Bank at Kolhapur, Maharashtra under Section 22 (4) of
the Banking Regulation Act, 1949 was cancelled by Reserve Bank of India (RBI) with immediate
effect from December 24, 2020. But the bank has enough liquidity funds to refund the deposit
amounts to its customers. RBI had cancelled the licence due to the bank’s activities lead to
affecting the interests of the Bank’s current and future depositors.

34. According to the paper authored by RBI Deputy Governor M D Patra and another official
Harendra Kumar Behera, maintaining an inflation rate of 4% is appropriate for India. A lower rate
could impart deflationary bias to the monetary policy while a higher trend renders monetary policy
too expansionary and prone to inflationary shocks. As per the paper, there is a steady decline in
trend inflation to 4.1-4.3% since 2014.

35. RBI also extended the enhanced borrowing facility provided to banks under the marginal standing
facility (MSF) scheme by six months till March 31, 2021. It was initially available up to June 30,
2020 and was later extended up to September 30, 2020 due to economic disruptions amid
COVID-19.

36. RBI has announced measures in order to ensure orderly market conditions and congenial
financial conditions. In this regard RBI will conduct additional special open market operations
(OMO) involving the simultaneous purchase and sale of Government securities (G-secs) for Rs.
20,000 Crore in two tranches of Rs. 10,000 Crore each on September 10, 2020 and September
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17, 2020. RBI also announced term repo operations of Rs. 100,000 Crore (1 trillion) to infuse
liquidity into the market. The Reserve Bank also increased the ‘Held to Maturity’ limit (HTM) or the
amount that banks invest in G-secs from 19.5% to 22%.

37. Amitabha Ghosh, former governor of RBI, passed away at the age of 90. He is the shortest
serving governor of RBI (21 days: January 15, 1985 to February 4, 1985). He served as the 16th
governor, while serving as a deputy governor of RBI until R N Malhotra (17th Governor) took
over.

38. RBI has introduced Positive Pay System for Cheque Truncation System (CTS) for banks in
order to check fraud. It will be implemented from January 01, 2021. To be developed by National
Payments Corporation of India (NPCI), this system will require reconfirmation of key details for
payments beyond Rs. 50,000. It should be noted that the usage of Positive Pay System is at the
choice of account holder; however, banks may make it mandatory in case of Cheques for
amounts of Rs. 5 lakh and above.

39. RBI has roped in ‘Amitabh Bachchan’ for the customer awareness campaign to prevent naive
account holders from being deceived by fraudsters. As part of the RBI’s public awareness
campaign, the regulator continues to inform customers about do’s and don’ts for safe and secure
transactions.

40. RBI has given in-principle approval to Vakrangee for setting up Bharat Bill Payment Operating
Unit (BBPOU). The approval has been granted as per the provisions contained in Payment and
Settlement Systems Act, 2007. Vakrangee can now handle payment and aggregation of payment
services relating to bills under BBPS.

41. Based on the recommendations of the Working Group (WG) constituted under the Chairmanship
of Shri Tapan Ray to Review the Regulatory and Supervisory Framework for Core Investment
Companies (CICs), and inputs received from stakeholders, RBI has decided to revise the
guidelines applicable for Core Investment Companies. . The report of the WG was placed in
public domain in November 2018.

42. The Reserve Bank has constituted the Expert Committee under the chairmanship of Shri K.V.
Kamath to make recommendations on the required financial parameters to be factored to
Implement Resolution Framework for Covid19-related Stress. The Committee shall submit its
recommendations on the financial parameters to the Reserve Bank which, in turn, shall notify the
same along with modifications, if any, in 30 days. The Indian Banks’ Association shall function as
the Secretariat to the Committee.

43. To mitigate the economic impact of the Covid19 pandemic on households, entrepreneurs and
small businesses, Reserve Bank has decided to increase the permissible loan to value ratio
(LTV) for loans against pledge of gold ornaments and jewellery for non-agricultural purposes from
75% to 90%.
This enhanced LTV ratio will be applicable up to March 31, 2021 to enable the borrowers to tide
over their temporary liquidity mismatches on account of COVID 19. Accordingly, fresh gold loans
sanctioned on and after April 1, 2021 shall attract LTV ratio of 75%.

44. To support to MSMEs’ meaningful restructuring, RBI has decided that, in respect of MSME
borrowers facing stress on account of the economic fallout of the pandemic, lending institutions
may restructure the debt under the Resolution Framework for COVID 19, provided the borrower’s
account was classified as Standard with the lender as on March 1, 2020. This restructuring shall
be implemented by March 31, 2021.
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45. To deal with increased number of disputes and grievances related to digital transaction in a timely
and effective manner, a technology-driven redressal mechanisms which is rule-based,
transparent and involve minimum (or no) manual intervention is necessary. Accordingly, the
Reserve Bank shall require Payment System Operators (PSOs) to introduce Online Dispute
Resolution (ODR) Systems in a phased manner.
To begin with, authorised PSOs shall be required to implement ODR systems for failed
transactions in their respective Payment Systems. Based on the experience gained, ODR
arrangements will be extended to other types of disputes and grievances.

46. In the 584th meeting of the Central Board of Reserve Bank of India, on August 14, 2020, under
the Chairmanship of Shri Shaktikanta Dash, the Board has approved the transfer of Rs. 57128
Crore as surplus to the Central Government for the accounting year 2019-20, while deciding to
maintain the Contingency Risk Buffer at 5.5%.

47. The Bimal Jalan Committee on ‘Review the Extant Economic Capital Framework of the Reserve
Bank of India’ recognized that the RBI’s Contingency Risk Buffer (CRB) is the country’s savings
for a ‘rainy day’ (a financial stability crisis) which has been consciously maintained with RBI in
view of its role as Lender of Last Resort. Financial stability risks are those rarest of the rare, fat
tail risks whose likelihood can never be ruled out, especially in light of the Global Financial Crisis
(GFC) and whose impact can be potentially devastating. The Committee recommended that the
same be maintained at a range of 5.5% to 6.5% of the RBI’s balance sheet.

48. In order to improve the efficiency, transparency and integrity of the asset classification process,
RBI has decided to implement system-based asset classification in urban co-operative banks
(UCBs). The relevant instructions in this regard are as under:

49. Key Highlights From RBI Annual Report 2019:

 The total cases of frauds (involving 1 lakh and above) reported by banks/FIs increased by 28
per cent by volume and 159% by value during 2019-20.
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 The balance sheet size of the Reserve Bank increased by 30.02% as on June 30, 2020. The
gross total income for the year 2019-20 amounted to 1,496.72 billion as compared to
1,930.36 billion in 2018-19.

 After reaching a peak of 11.5 per cent at end-March 2018, a decline in the gross non-
performing assets (GNPA) ratio of scheduled commercial banks (SCBs) set in, taking it down
to 8.5 per cent by end-March 2020.

 The expenditure of the Reserve Bank for the year 2019-20 is 925.40 billion which includes a
risk provision of 736.15 billion towards Contingency Fund as compared to an expenditure of
170.45 billion in 2018-19. The year ended with an overall surplus of 571.28 billion.

 As on June 30, 2020, the Reserve Bank holds 661.41 metric tonnes of gold as compared to
618.16 metric tonnes as on June 30, 2019. The increase is on account of addition of 43.25
metric tonnes of Gold during the year.

 A provision of 736.15 billion was made towards Contingency Fund (CF). Accordingly, the
balance in CF as on June 30, 2020 was 2,640.34 billion as compared to 1,963.44 billion as
on June 30, 2019.

50. National Strategy for Financial Education (NSFE) 2020-25:

 The Reserve Bank of India (RBI) has released a ‘National Strategy for Financial Education
(NSFE) 2020-25’ to be implemented in the next five years. The first edition of NSFE was for the
period 2013-2018.

 NSFE: 2020-2025 has been prepared by National Centre for Financial Education (NCFE) in
consultation with the four Financial Sector Regulators- RBI, SEBI, IRDAI and PFRDA and other
relevant stakeholders.

 It has been prepared under the aegis of the Technical Group on Financial Inclusion and Financial
Literacy under the Chairmanship of Shri M. K. Jain, Deputy Governor, Reserve Bank of India.

 The document has recommended to adopt a 5C- Content, Capacity, Community,

Communication and Collaboration – approach for creating a financially aware and empowered
India.

Source: RBI website and Various Newspapers and Websites.

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