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The <keyword id="6354335" type="General" weightage="20" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword> (RBI) has imposed <keyword id="512003" type="General" weightage="20" keywordseo="penalties" source="Orion">penalties</keyword> to the tune of Rs 40.39 crore on banks, non-banking financial companies (NBFCs) and other entities for breach of norms during 2022-23, Minister of State for Finance Bhagwat Karad said in a written reply to the Lok Sabha on Monday. As many as 176 of these cases involving fines of Rs 14.04 crore pertained to <keyword id="6554737" type="General" weightage="20" keywordseo="cooperative-banks" source="Orion">cooperative banks</keyword>. <keyword id="141219" type="General" weightage="20" keywordseo="private-sector-banks" source="Orion">Private sector banks</keyword> were fined Rs 12.17 crore while public sector banks (PSBs) were levied penalties of Rs 3.65 crore, foreign banks Rs 4.65 crore, and NBFCs ended paying up Rs 4.39 crore. "RBI has informed that it is mandated to take enforcement action as per Enforcement Policy and Framework approved by the Board for Financial Supervision of RBI, in the form of imposition of monetary penalty on regulated entities for contraventions of different statutes and directions," the Minister stated. The RBI issued guidelines on fair practices code to be adopted by banks, NBFCs, and HFCs and these covered various aspects of lending, he added.

RBI penalties on banks, NBFCs add up to Rs 40.39 crore for 2022-23

The <keyword id="6354335" type="General" weightage="50" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword> (<keyword id="30067" type="General" weightage="100" keywordseo="rbi" source="Orion">RBI</keyword>) on Thursday has directed all the credit information companies to appoint an internal ombudsman by April 1, 2023. The RBI, in its Statement of Developmental and Regulatory Policies, on August 5, 2022 had called for bringing credit information companies under the internal ombudsman framework to strengthen and improve the efficiency of the internal grievance redressal mechanisms. According to the central bank, the internal ombudsman shall be either a retired or a serving officer, not below the rank of deputy general manager or equivalent in any financial sector regulatory body, credit information companies, a non-banking financial company (<keyword id="6355260" type="General" weightage="20" keywordseo="nbfc" source="Orion">NBFC</keyword>) or bank, with necessary skills and experience of at least seven years in banking, non-banking finance, financial sector regulation or supervision, credit information, or consumer protection. The appointment will be for a fixed term of not less than three years, but not exceeding five years. The internal ombudsman cannot be removed before the completion of the contracted term without the RBI's explicit approval. In case the vacancy arises on account of reasons beyond control, the credit information company shall appoint a new internal ombudsman, within three months from the date of the vacancy arising. The RBI also said that the scope of the internal audit of credit information companies shall exclude any assessment of the correctness of decisions taken by the internal ombudsman. The internal ombudsman shall report to the Managing Director or Chief Executive Officer administratively, and to the Board functionally.

RBI directs credit information companies to appoint internal ombudsman

New Delhi, May 22 () Bank and NBFC stocks on Friday tumbled up to 8 per cent after the Reserve Bank of India (RBI) extended moratorium on loan repayments. "The markets have initially reacted negatively to the RBI announcement. The Street keeps expecting more and more reliefs without knowing as to how each of these will be helpful. Shareholders of banks are worried by the current economic conditions and the pain that is postponed due to the moratorium being extended," said HDFC Securities MD &amp; CEO Dhiraj Relli. Shares of Axis Bank plunged 6.78 per cent, ICICI Bank dropped 6.12 per cent, RBL Bank 5.71 per cent, IndusInd Bank 4.59 per cent, Federal Bank 4.32 per cent, Kotak Mahindra Bank 2.85 per cent, HDFC Bank 2.71 per cent and SBI 1.57 per cent on the BSE. The BSE BANKEX was trading lower by 2.64 per cent. Among non-banking financial companies (NBFCs), Ujjivan Financial Services tumbled 8.25 per cent, Shriram Transport Finance Company tanked 8 per cent, Mahindra &amp; Mahindra Financial Services 6.20 per cent and Bajaj Finance 5.66 per cent. The RBI has announced further extension in moratorium period to end-borrowers from May 31 till August 31. We read this as major negative for all NBFCs (including the ones with strong liability franchises) as this would further delay the overall collection and recovery procedure, and stretch the total liquidity cycle for all. In addition, this would further damage financial discipline, especially for small-ticket borrowers and MFIs (microfinance institutions)," Emkay Global Financial Services said in a note. Jimeet Modi, founder and CEO of SAMCO Securities &amp; StockNote said, "Extension of moratorium is good for the economy but in substance, it will negatively impact banks and NBFCs. As a whole, the RBI has taken a calibrated approach to save the economy rather than favouring banks." The RBI on Friday slashed interest rates, extended moratorium on loan repayments and allowed banks to lend more to corporates in an effort to support the economy which is likely to contract for the first time in over four decades. The benchmark repurchase (repo) rate was cut by 40 basis points to 4 per cent, RBI Governor Shaktikanta Das said announcing the decisions taken by the central bank's Monetary Policy Committee (MPC) that met ahead of its scheduled meeting in early June. The RBI supplemented the interest rate cut by extending by three months the permission given to all banks to give a three-month moratorium on payment of monthly instalments on all outstanding loans, providing relief to home and auto buyers as well as the real estate sector where construction activities are already at a standstill. The moratorium on interest on working capital was also extended by three months. SUM HRS

Bank, NBFC stocks tumble after RBI decision

<ul><li>RBI does not regulate housing finance companies but many banks have significant exposure to them. </li><li>RBI is closely monitoring activity and performance of NBFCs. </li><li>RBI governor Shaktikanta Das said there will also be no ‘delay’ when it comes to taking steps. </li></ul>The Reserve Bank of India (RBI) governor Shaktikanta Das today said that the central bank could step in to address the ongoing crisis of non-banking financial institutions. “We (RBI) will not hesitate to take steps to ensure the financial stability is not adversely affected. If some action is required, we will take it,” said Das after multiple reporters quizzed him at the press conference, following the bi-monthly policy announcement on Thursday. Yesterday, ratings agency ICRA downgraded Dewan Housing Finance (DHFL)’s rating on the ₹850-crore (₹ 8.5 billion) commercial paper to D. This latest development comes even as banks are still reeling after IL&amp;FS turned insolvent last year, defaulting on its payments to banks. In this regard, RBI has initiated a special audit, last September. ‘Closely monitoring’ Das however said that while RBI does not regulate housing finance companies but many Indian banks have significant exposure to them. “We are closely monitoring activity and performance of NBFCs. These entities are resorting to various measures to meet their liabilities and commitments,” he said. There will also be no ‘delay’ when it comes to taking steps, Das assured while pointing out that already the monitoring period for NBFCs has truncated from 18 months earlier to 12 months, currently. DHFL enters the default zone Das’s comments are significant as Dewan Housing Finance (DHFL) is entering the ‘default zone’. ICRA downgraded the rating its commercial paper to D, which is the rating given to either defaulted entities or those expected to default soon. It was also removed from watch with negative implications. “The rating revision factors in further deterioration in the company’s liquidity profile and delays in meeting scheduled debt obligation on June 04, 2019. While the mentioned debt is not rated by ICRA, given the stretched liquidity profile and limited visibility on fresh funding, company is unlikely to be able to service its debt obligation with regard to commercial paper programme in a timely manner,” the rating agency said. This will be the second large NBFC to get into crisis mode, in the last one year. The troubles in the sector came to the fore when Infrastructure Leasing and Financial Services (IL&amp;FS)<a href="https://www.businessinsider.in/lic-officials-under-investigation-by-sfio-for-role-in-ilfs-crisis/articleshow/69263029.cms"> turned insolvent and</a> defaulted on debt obligations, sinking many banks who are its lenders, deep into crisis. SEE ALSO <a href="https://www.businessinsider.in/anil-ambani-wants-the-government-to-help-nbfcs/articleshow/69531897.cms">Anil Ambani wants RBI to play Big Brother to ‘gasping’ NBFCs</a> <a href="https://www.businessinsider.in/indusind-bank-bad-loan-impact-from-ilfs-crisis/articleshow/69557477.cms">An Indian bank is still making the same mistake of hiding the worst and hoping for the best</a>

India’s central bank is on high alert amid fears of a ₹8.5 billion default by housing finance major

(Image source- Reuters) <ul><li>The Reserve Bank of India (<keyword id="30067" type="ORGANIZATION" weightage="20" keywordseo="RBI">RBI</keyword>) has moved a step closer to establishing the country’s first <keyword id="4735636" type="PERSON" weightage="20" keywordseo="Public-Credit-Registry">public credit registry</keyword> by zeroing in on six potential firms to set up the infrastructure for a digital <keyword id="140601" type="COMPANY" weightage="20" keywordseo="database">database</keyword>. </li><li>The public credit registry will contain all the relevant details and build a comprehensive profile on debtors and wilful defaulters. It is envisioned as a one-stop shop for all loan information and borrower history. </li><li>The RBI already has a credit database, the Central Repository of Information on Large Credits (CRILC), but this only pertains to loans worth ₹50 million and above. </li></ul>The Reserve Bank of India (RBI) has moved a step closer to establishing the country’s first public credit registry by zeroing in on six potential firms to set up the infrastructure for the digital database, according to the Press Trust of India. The <a href="https://rbidocs.rbi.org.in/rdocs/content/pdfs/EOI27102018_A1.pdf">expression of interest</a>, which was released at the end of October, specified that only entities with a turnover of ₹1 billion or above in the three preceding financial years would be eligible to bid. The companies that have been shortlisted include tech incumbents Tata Consultancy Services, WIPRO and the Indian subsidiary of IBM as well as Mindtree and Capgemini. The RBI’s next step is to seek proposals from all six vendors and decide on a specific one. The public credit registry will contain all the relevant details and build a comprehensive profile on debtors and wilful defaulters. It will do this by combining information sourced from a variety of repositories run by regulators such as the Securities and Exchange Board of India (SEBI), Insolvency and Bankruptcy Board, Goods and Services Tax Network, the Ministry of Corporate Affairs as well as private and public lenders. On 7 June, the RBI <a href="https://rbi.org.in/scripts/PublicationReportDetails.aspx?ID=895">announced plans</a> to set up India’s first credit scoring database following the submission of a report by a high-level committee tasked with a number of things, such as examining credit information gaps in the economy and assessing the best approach for setting up a registry. The RBI already has a credit database, the Central Repository of Information on Large Credits (CRILC), but this only pertains to loans worth ₹50 million and above. The public credit registry is envisioned as a one-stop shop for all loan information and borrower history. There are already four private credit information companies operating in India, but each have disparate data and objectives. Not only will the public credit registry make it easier for small businesses to access loans at cheaper rates, it will also prevent lenders from extending funds to borrowers with a questionable credit history. Hence, it could go a long way in preventing the further build-up of non-performing loans while increasing India’s ratio of private-credit to GDP. If a bank has the knowledge of spending and income flows of a borrower, it can structure a more customised repayment plan. The project is expected to be implemented in a phased manner. The first phase will involve the registration and compilation of information from of all non-banking financial lenders (NBFCs) and scheduled commercial banks. SEE ALSO: <a href="https://www.businessinsider.in/the-resignation-of-the-governor-of-indias-central-bank-sends-a-clear-indication-about-the-erosion-of-institutional-autonomy-under-the-modi-administration/articleshow/67040287.cms">The resignation of the governor of India’s central bank sends a clear indication about the erosion of institutional autonomy under the Modi administration</a> <a href="https://www.businessinsider.in/indias-central-bank-chooses-to-keep-interest-rates-on-hold-unveils-a-new-pricing-policy-for-retail-and-small-business-loans/articleshow/66968094.cms">India’s central bank chooses to keep interest rates on hold, unveils a new pricing policy for retail and small business loans</a> <a href="https://www.businessinsider.in/indias-central-bank-has-scrapped-the-licenses-of-nearly-400-nbfcs-so-far-this-year/articleshow/65698193.cms">India’s central bank has scrapped the licenses of nearly 400 NBFCs so far this year</a>

India’s central bank is moving ahead with plans to set up the country’s first public credit registry

<ul><li>The Reserve Bank of India has taken additional steps to bring India's shadow banks back on their feet.</li><li>In the process, some lending caps have been eased both for agriculture investment, small and medium businesses and home loans.</li><li>Home loans of up ₹20 lakhs will be considered 'priority' and these loans can be routed through non-banking financial companies (NBFCs).</li></ul>The Reserve Bank of India has cut interest rates by 35 basis points on August 7 to take advantage of the tepid inflation and revive economic growth. Aside from the broad move to reduce the policy rate, governor <keyword id="6359111" type="UNKNOWN" weightage="20" keywordseo="Shaktikanta-Das">Shaktikanta Das</keyword> also eased some lending caps to bring the country's shadow banks back on their feet. ""Rural demand in form two wheelers and tractors and the urban demand has slowed down as signalled by passenger vehicles. With measures undertaken by both the government and the RBI, we expect some recovery," Das said. The NBFCs -- firms that do not take deposits but make loans-- are an important part of the economy to ensure money flow reaches unbanked areas and to meet the demand from people who cannot avail loans from banks. Business for these NBFCs had recently come to a grinding halt after the crash of infrastructure lending giant IL&amp;FS. The spike in unpaid loans since then meant that the banks could not give the NBFCs more money to recover from the crisis. But the RBI has taken the following steps today to help them out. Overall, banks have allowed to lend 20% of their tier-1 capital to any one NBFC. The cap was so far at 15%. The regulator has also cut the risk weight for consumer loans except credit cards. This will allow banks to lend more to individual borrowers. Priority sectors A set portion of all loans by banks must be made to certain sections of the economy, at a cheaper rate, because they need the affordable loans more than others. These are called 'priority sector' loans and were routed through the banks. However, now the RBI has allowed the banks to route such loans via NBFCs too. The new limits for 'priority sector' loans are as follows: <ul><li>₹10 lakh for agricultural investments</li><li>₹20 lakh for loans to micro, small, and medium enterprises</li><li>₹20 lakh for home loans</li></ul>Simply put, if an NBFC borrows money from a bank and then lends it further to a home buyer within the ₹20 lakh threshold, it will be considered as a 'priority sector' loan. The central bank is hoping that these measure would revive demand for homes, cars and motorbikes, as well as for investment into small businesses. SEE ALSO: <a href="https://www.businessinsider.in/business/rbi-cut-interest-rates-by-35-basis-points-as-growth-sputters-and-inflation-cools/articleshow/70565859.cms" data-type="tilCustomLink" target="_blank">RBI cut interest rates by 35 basis points as growth sputters and inflation cools</a> <a href="https://www.businessinsider.in/sensex-and-nifty-react-little-to-rbi-decision-to-cut-interest-rate/articleshow/70566279.cms" data-type="tilCustomLink" target="_blank">Here's why Indian markets aren't excited by the RBI move to cut interest rates</a>

Home loans up to ₹20 lakh may get cheaper and easier

Even though <keyword id="3658" type="General" weightage="50" keywordseo="india" source="Orion">India</keyword>'s inflation has eased, it still remained above the <keyword id="6354335" type="General" weightage="50" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword>'s (<keyword id="30067" type="General" weightage="100" keywordseo="rbi" source="Orion">RBI</keyword>) tolerance band and hence it warrants appropriate policy responses to anchor expectations going forward. "Easing of supply chain pressures and the recent ebbing of commodity prices are providing some breather from record <keyword id="101998" type="General" weightage="20" keywordseo="high-inflation" source="Orion">high inflation</keyword>," the RBI said in its monthly bulletin. Incidence of unseasonal and excessive rainfall, if any, can impact food prices, especially vegetable prices. Greater transmission of input cost pressures to selling prices across manufacturing and services sectors may also create fresh price pressures. Moreover, persistently elevated cost of living conditions could translate to higher wages and further price increases, especially if pricing power of firms strengthen. Taking into account these factors, and on the assumption of a normal monsoon in 2022 and average crude oil price (Indian basket) of $105 per barrel, inflation is projected at 6.7 per cent in 2022-23, with Q2 at 7.1 per cent; Q3 at 6.4 per cent; and Q4 at 5.8 per cent, with risks evenly balanced. CPI inflation for Q1 2023-24 is projected at 5 per cent, the RBI said. In India supply conditions are improving, with the recent monsoon pick-up, strong momentum in manufacturing and a rebound in services. Going forward, the onset of festival season should boost consumer demand, including rural, also as sowing activity picks up. Robust central government capital outlays are supporting investment activity. India's retail inflation -- Consumer Price Index (CPI) -- eased to a five-month low of 6.71 per cent in July, down from 7.01 per cent in June. The CPI continued to remain above the RBI's upper tolerance band of 6 per cent for the seventh consecutive month. Meanwhile, the bulletin also stated that the consolidated balance sheet of the NBFC sector exhibited double digit growth in the quarter-ending December 2021. The profitability of the NBFC sector improved in Q3 2021-22 compared to the corresponding quarter in 2020-21. NBFCs continued to provide maximum credit to industrial sector followed by retail, services, and agriculture. The sectoral credit distribution remained largely unchanged in 2021-22 (up to end-December 2021) as compared to end-December 2020. All sectors witnessed high credit growth on account of base effect and resumption of economic activities. SEE ALSO : <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/news/rupee-expected-to-trade-at-around-79/-on-fii-inflows-easing-crude-prices-bob/articleshow/93651698.cms">Rupee expected to trade at around 79/$ on FII inflows, easing crude prices: BoB</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/tech/mobile/realme-9i-5g-review/articleshow/93641337.cms">Realme 9i 5G Review - 5G Upgrade With Cosmetic Changes</a>

There is a breather from record high inflation, but still above tolerance band: RBI

<ul><li>The near collapse of <keyword id="6357293" type="UNKNOWN" weightage="20" keywordseo="ILFS">IL&amp;FS</keyword> precipitated a domestic liquidity crisis as the balance sheets of other housing finance companies and non-banking financial companies (NBFCs) came under the scanner. </li><li>This revealed asset-liability mismatches and the companies were deemed too risky to qualify for loans from normal banks. To make matters worse, a number of NBFCs had invested in IL&amp;FS’s <keyword id="44647" type="ORGANIZATION" weightage="20" keywordseo="debt">debt</keyword> instruments. </li><li>The tough liquidity conditions for NBFCs are expected to persist this year and banks keep their purse-strings tight and funding costs increase as market borrowing declines. </li><li>Moving into 2019, the central <keyword id="26362" type="ORGANIZATION" weightage="20" keywordseo="Government">government</keyword> and RBI are determined to regulate the <keyword id="6355260" type="UNKNOWN" weightage="20" keywordseo="NBFC">NBFC</keyword> sector better by establishing a system to collect lending and borrowing <keyword id="6355729" type="ORGANIZATION" weightage="20" keywordseo="data">data</keyword> from these institutions on a regular basis. </li></ul> One of the big stories emanating from the Indian banking sector last year was the repeated defaults by IL&amp;FS, India’s largest infrastructure lender, and its subsequent downgrades. The near collapse of the lender precipitated a domestic liquidity crisis as the balance sheets of other housing finance companies and <keyword id="2542016" type="PERSON" weightage="20" keywordseo="Shadow-banks">shadow banks</keyword>, or non-banking financial companies (NBFCs), came under the scanner. This revealed asset-liability mismatches and the companies were deemed too risky to qualify for loans from normal banks. To make matters worse, a number of NBFCs had invested in IL&amp;FS’s debt instruments. Not only were commercial banks, insurance firms and mutual funds engulfed in the ensuing crisis engulfed banks, but the liquidity crisis also led to <a href="https://www.businessinsider.in/after-weeks-of-tension-the-reserve-bank-of-india-gives-in-to-some-of-the-central-governments-demands-while-retaining-its-independence/articleshow/66705908.cms">a showdown </a>between the central government and the Reserve Bank of India (RBI), with the former asking the latter to open a special refinancing window for NBFCs. Despite the fact that a compromise was reached and liquidity norms and lending restrictions on NBFCs <a href="https://www.businessinsider.in/the-reserve-bank-of-india-just-made-it-a-lot-easier-for-the-countrys-shadow-banks-to-sell-off-their-loans/articleshow/66879016.cms">were relaxed</a>, the spat <a href="https://www.businessinsider.in/the-resignation-of-the-governor-of-indias-central-bank-sends-a-clear-indication-about-the-erosion-of-institutional-autonomy-under-the-modi-administration/articleshow/67040287.cms">culminated in the resignation</a> of former RBI governor, Urjit Patel, in the second week of December. India’s shadow banks are of systemic importance because they provide a large portion of credit to the small-and-medium-enterprises (SME) sector. Hence, a drying up of funds at NBFCs leads to a lack of financing options for small businesses, which drags GDP growth downwards. The operations of NBFCs, especially that of a lender like IL&amp;FS, are especially vulnerable in a period of rising interest rates because they borrow short-term funds and lend on a long-term basis. Despite <a href="https://www.businessinsider.in/indias-central-bank-chooses-to-keep-interest-rates-on-hold-unveils-a-new-pricing-policy-for-retail-and-small-business-loans/articleshow/66968094.cms">a potential moderation</a> in RBI monetary policy, the tough liquidity conditions for NBFCs are expected to persist this year and banks keep their purse-strings tight and funding costs increase as market borrowing declines. Moving into 2019, the central government and RBI are determined to prevent a repeat of the crisis. Their solution? Regular data monitoring. At a conference this past weekend, Subhash Garg, the Secretary of Economic Affairs in the finance ministry, said that the government and the RBI were in the process of <a href="https://indianexpress.com/article/business/banking-and-finance/centre-reserve-bank-working-on-new-system-to-gather-data-on-nbfcs-5524971/">establishing a data collection system</a> for the NBFC sector. Garg explained that when the IL&amp;FS crisis came to light, there were no comprehensive sources of monthly lending and borrowing data on India’s shadow banks, let alone real-time data. This prevented the government and regulators from implementing remedial measures quickly. Once a data collection system is in place, it will be easier for the central bank to <a href="https://economictimes.indiatimes.com/industry/banking/finance/soon-bank-type-asset-liability-management-norms-for-nbfcs/articleshow/67295625.cms">enforce asset-liability management norms</a> for the sector. In addition, there is no organisation or industry group that represents NBFCs which makes the process of framing policies for the sector difficult since there are no groups to seek consultations with. Hence, establishing an industry organisation that represents the sector is expected to be an important priority in the immediate term. Besides a data collection system, the Indian government, acting through the Securities and Exchange Board of India (SEBI), has also ordered ratings agencies to <a href="https://www.businessinsider.in/indias-securities-regulator-is-forcing-rating-agencies-to-comply-with-stricter-assessment-norms-to-prevent-a-repeat-of-the-ilfs-crisis/articleshow/66616962.cms">follow stricter protocols </a>when it comes to assessing companies. Under the new requirements, credit ratings agencies will have to include a special section devoted to “liquidity” in their ratings actions announcements. They will also have to disclose discrepancies between the assets and liabilities of an issuer, historical ratings information as well as cash flow issues and existing short-term credit lines. SEE ALSO: <a href="https://www.businessinsider.in/indias-securities-regulator-is-forcing-rating-agencies-to-comply-with-stricter-assessment-norms-to-prevent-a-repeat-of-the-ilfs-crisis/articleshow/66616962.cms">India’s securities regulator is forcing rating agencies to comply with stricter assessment norms to prevent a repeat of the IL&amp;FS crisis</a> <a href="https://www.businessinsider.in/ilfs-has-no-option-but-to-sell-its-profitable-financial-services-unit-as-it-tries-to-avoid-bankruptcy/articleshow/65898283.cms">IL&amp;FS has no option but to sell its profitable financial services unit as it tries to avoid bankruptcy</a> <a href="https://www.businessinsider.in/the-reserve-bank-of-india-just-made-it-a-lot-easier-for-the-countrys-shadow-banks-to-sell-off-their-loans/articleshow/66879016.cms">The Reserve Bank of India just made it a lot easier for the country’s shadow banks to sell off their loans</a>

As India’s shadow banks brace for a tough 2019, the central bank and government will try and prevent a repeat of the IL&FS crisis by solving the data problem

Mumbai, May 22 () Bankers on Friday said the 40 basis points reduction in repo rate by the Reserve Bank of India will give a big support to the sagging economy. The RBI on Friday reduced the repo rate by 40 basis points to 4 per cent, the lowest since it came into being in 2000. The central bank also announced a slew of measures, including extension of moratorium on loan repayments by another three months and increasing bank exposure to corporates to 30 per cent of the group's net worth from the current limit of 25 per cent. "The RBI policy announcement in response to the fallout of COVID-19 pandemic is timely. The reduction in policy rate by 40 bps under the assumption that growth in FY21 will be negative is an appropriate move to support economic activity," State Bank of India (SBI) Chairman Rajnish Kumar said. RBI Governor Shaktikanta Das said given the uncertainties, GDP growth in 2020-21 is estimated to remain in the negative territory, with some pick-up from the second half of the current fiscal. "The RBI continued with its extraordinary commitment in its fight against COVID-19. The latest round of rate cuts, moratorium extension, deferment of interest on working capital facilities and relaxation in asset classification will provide the requisite balm to the economy," Standard Chartered Bank India CEO Zarin Daruwala said. RBI extended the three-month moratorium on loan repayments from June 1 to August 31, 2020. "It was a good decision. There was a requirement of extension of moratorium since the lockdown has not been lifted 100 per cent," Central Bank of India Managing Director and CEO Pallav Mohapatra said. RBI permitted to convert the accumulated interest on working capital facilities over the deferment period up to August 31 into a funded interest term loan which will be repayable not later than the end of the current financial year. "Conversion of interest on working capital loans for the moratorium period into funded interest term loan (FITL) will give a breather to the borrowers," Indian Bank's Managing Director and CEO Padmaja Chunduru said. The time period for repayment of that component could have been longer than just seven months, she added. According to Bank of Baroda's Chief Economist Sameer Narang, RBI has room for another 25 basis points reduction in policy rate as GDP is likely to contract by 4.7 per cent in FY21 with CPI inflation at 3.5 per cent. Yes Bank's Senior Economist Vivek Kumar said there could be further support from RBI in the form of another 50 basis points cut in the repo rate amid widening of negative output gap and assertion of disinflationary pressures. "We also expect RBI to come up with a large scale bond purchase program (via OMOs) covering both g-secs and SDLs to lower elevated term premium and credit spreads in the economy," he said. Harsh Shrivastava, chief executive officer of Microfinance Institutions Network, said, "MFIN and its members will be happy to extend moratorium to those customers who need it the most while welcoming clients who are able to pay if they have cash flow." Religare Finvest President and Head (Corporate Planning and Strategy) Pankaj Sharma said extension of loan moratorium and permission to convert accrued interest on the moratorium into a funded interest term loan to be paid during the tenure of the loan will ease the pressure on the lending entities, especially NBFCs. "The group exposure limit enhancement for banks will help channelize the credit flow to the NBFC sector. The 3 month extension of the moratorium relief was expected due to the extended lockdown of COVID-19," Tata Capital Managing Director and CEO Rajiv Sabharwal said. Clix Capital CEO Bhavesh Gupta said for banks and NBFCs, moratorium may lead to an increase in NPAs in the long term and it would have been better had RBI also announced directions on one-time restructuring of loans and other support measures. HV ABM ABM

RBI's rate cut to support economy, say bankers

Mumbai, Mar 13 () The Reserve Bank on Friday came out with regulatory guidelines for implementation of Indian Accounting Standards (Ind AS) by non-banking financial companies (NBFCs) and asset reconstruction companies (ARCs) while preparing their financial results. The guidelines, which are aimed at promoting high quality and consistent implementation of Ind AS as well as facilitate comparison and better supervision, will be applicable to NBFCs and ARCs for preparations of their financial results from FY20 onwards, RBI said in a notification. The guidelines mandate NBFCs/ARCs to put in place board-approved policies that clearly articulate and document their business models and portfolios. NBFCs/ARCs shall frame their policy for sales out of amortised cost business model portfolios and disclose the same in their notes to financial statements. "The RBI expects the board of directors to approve sound methodologies for computation of expected credit losses (ECL) that address policies, procedures and controls for assessing and measuring credit risk on all lending exposures, commensurate with the size, complexity and risk profile specific to the NBFC/ARC," the guidelines said. The audit committee of the board (ACB) will have to approve the classification of accounts that are due beyond 90 days but not treated as impaired, with the rationale for the same clearly documented. The number of such accounts and the total amount outstanding and the overdue amounts should be disclosed in the notes to the financial statements, it said. NBFCs/ ARCs shall hold impairment allowances as required by Ind AS, RBI said. NBFCs/ARCs shall also maintain the asset classification and compute provisions as per extant prudential norms on Income Recognition, Asset Classification and Provisioning (IRACP) including borrower/beneficiary wise classification, provisioning for standard as well as restructured assets and NPA ageing. "Where impairment allowance under Ind AS is lower than the provisioning required under IRACP, NBFCs/ARCs shall appropriate the difference from their net profit or loss after tax to a separate impairment reserve," the guidelines said. It said 12 month ECL allowances for financial instruments, that is where the credit risk has not increased significantly since initial recognition, will have to be included under general provisions and loss reserves in tier II capital within the limits specified by extant regulations. The guidelines also asked NBFCs/ARCs to educate their customers on the need to make payments in a timely manner. HV ABMABM

RBI issues guidelines for Ind AS implementation by NBFCs, ARCs

<ul><li>RBI has cut its lending rates by 35 basis points or 0.35%, making this the fourth consecutive cut in 2019.</li><li>Governor <keyword id="6359111" type="UNKNOWN" weightage="20" keywordseo="Shaktikanta-Das">Shaktikanta Das</keyword> has signalled that the regulator is keen on reviving economic growth.</li><li>Sensex and Nifty were changed little after the decision as the decision was largely on expected lines.</li></ul>The good news is that the <keyword id="6354335" type="ORGANIZATION" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> (RBI) has cut interest rates for the fourth time this year with a clear signal that it wants credit and economic growth to spike up again, thanks to inflation being less of a risk than it was earlier. Typically, share markets cheer interest rate cuts because it leads to lower lending rates for businesses and more cash in the system. However, the markets were nonchalant this time around because the RBI move was on expected lines and the rate cut was already priced in. There are other concerns too. "On the domestic front, the south-west monsoon gained intensity and spread with the cumulative rainfall 6 per cent below the long-period average (LPA) up to August 6, 2019," the RBI monetary policy review said. Deficient monsoon can be debilitating for the Indian economy, where more than half population depends on agriculture and much of the farm land is dependent on rains. Dampening the mood was the tardiness in the economy. For the current fiscal year ending March 2020, RBI has cut its forecast to 6.9% from 7% estimated earlier. However, the consensus among economists and market participants is that the dent in growth may be much bigger than what the central bank has estimated. India’s GDP growth slipped to 5.8% at the end of the March quarter, the <a href="https://www.livemint.com/news/india/core-sector-growth-flat-in-june-q1-fiscal-deficit-at-61-4-of-full-year-target-1564573772025.html">slowest quarter </a>in five years. 
 
 
 
 
 
 
 
 
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 Reflecting the sluggishness in the economy, the RBI cut the inflation target for the next one year to 3.6%, less than the 4% that is the central bank's target. Damage control A big decision was to make space for cash flow into the non-banking financial companies, firms that lend money but do not take deposits. Banks have allowed to lend 20% of their tier-1 capital to these firms, compared to 15% until now. Home loans below ₹20 lakh will be considered as priority sector loans, and these can be routed throw NBFCs too. Simply put, if an NBFC borrows money from a bank and then lends it further to a home buyer within the ₹20 lakh threshold, it will be considered as a 'priority sector' loan. A set portion of all loans by banks must be made to certain sections of the economy, at a cheaper rate, because they need the affordable loans more than others. These are called 'priority sector' loans. Banks, caught between a cash crunch and a mountain of bad loans, have not reduced lending rates despite many nudges and winks from the regulator as well as prodding from the <a href="https://www.hindustantimes.com/business-news/59-minute-loan-approval-among-steps-to-spur-growth/story-rhdDgZCulouEEoOY3PRkuM.html">Finance Minister Nirmala Sitharaman</a>. “The transmission of rate policy action has been less than satisfactory and the RBI may work on nudging banks to do so instead of lowering the rate once again,” said CARE. Non-banking financial companies or NBFCs, companies that aren’t banks but make loans, are facing liquidity crunch and the crisis is deepening. They, in turn, have stopped lending which has further slowed down the economy particularly in spaces like automobiles and real estate. Monthly auto sales, for instance, fell for the ninth straight month in July. RBI is hoping that lending rates will fall sharply, people particularly business owners will borrow more, and the growth engine will start revving up again. Markets want to see the evidence of that. SEE ALSO: <a href="https://www.businessinsider.in/business/rbi-cut-interest-rates-by-35-basis-points-as-growth-sputters-and-inflation-cools/articleshow/70565859.cms" data-type="tilCustomLink" target="_blank">RBI cut interest rates by 35 basis points as growth sputters and inflation cools</a>

You Searched For "rbi nbfc policy" and got 11 results

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Bank, NBFC stocks tumble after RBI decision

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India’s central bank is moving ahead with plans to set up the country’s first public credit registry

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Home loans up to ₹20 lakh may get cheaper and easier

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As India’s shadow banks brace for a tough 2019, the central bank and government will try and prevent a repeat of the IL&FS crisis by solving the data problem

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RBI's rate cut to support economy, say bankers

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RBI issues guidelines for Ind AS implementation by NBFCs, ARCs

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Here's why Indian markets aren't excited by the RBI move to cut interest rates

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