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New Delhi, Apr 7 () The Reserve Bank on Tuesday relaxed norms for state governments to avail overdraft facilities for a longer period until September 30 as they are facing cashflow mismatches amid coronavirus outbreak leading to countrywide lockdown. In a circular, the central bank said it has permitted "greater space" to state governments/ Union Territories for availing overdraft facilities. In order to provide greater flexibility to the state governments to tide over their cashflow mismatches, the RBI has increased the number of days for which a state can be in overdraft. The number of days for which a State/ UT can be in overdraft continuously has been increased to 21 working days from the current stipulation of 14 working days. Similarly, the number of days for which a State/ UT can be in overdraft in a quarter has been increased to 50 working days from the current 36 working days. All other stipulations remain unchanged. The new arrangement will come into force with immediate effect and will remain valid till September 30, 2020, the circular added. With an aim to check the spread of coronavirus both the central as well as the state governments have taken a slew of measures, including enforcing social distancing among the public. A nationwide lockdown has been implemented till April 14 which has adversely impacted economic activities and governments have started diverting their resources to deal with the pandemic. NKD SHW MRMR

RBI relaxes overdraft facility norms for states, UTs

Bankers welcomed Finance Minister <keyword id="129243" type="General" weightage="80" keywordseo="nirmala-sitharaman" source="Orion">Nirmala Sitharaman</keyword>'s budget proposals as being growth accretive, and hailed the focus on capital expenditure while continuing with fiscal consolidation. On the critical question of revival in private capital expenditure, which has been lagging for several years now, private sector lender <keyword id="13918428" type="DOMAIN" weightage="20" keywordseo="kotak-mahindra-bank" botkeyword="" source="ET" sourcekeytype="COMPANY" meta.keywordsubtype="EQ" meta.aliasname="kotak mahindra bank" meta.entityname="Kotak Mahindra Bank Ltd." meta.entityid="12161" meta.seoname="kotak-mahindra-bank-ltd">Kotak Mahindra Bank</keyword>'s whole time director <keyword id="818755" type="General" weightage="80" keywordseo="kvs-manian" source="Orion">KVS Manian</keyword> opined that it will take another 12 months to revive even though corporates have been investing off and on lately. “No bad news is good news. It is a fairly decent budget. The FM has maintained a fair balance on fiscal prudence, sustainability and ease of doing business,” Manian told PTI after the presentation of the budget. <keyword id="13222" type="DOMAIN" weightage="20" keywordseo="sbi" botkeyword="" source="ET" sourcekeytype="COMPANY" meta.keywordsubtype="EQ" meta.aliasname="sbi" meta.entityname="State Bank of India" meta.entityid="11984" meta.seoname="state-bank-of-india">SBI</keyword> chairman <keyword id="2003868" type="General" weightage="80" keywordseo="dinesh-khara" source="Orion">Dinesh Khara</keyword> said the budget is growth accretive, fiscally prudent and consumption supportive. “The huge emphasis on capital expenditure could be the perfect recipe for a private investment cycle that is already visible. Support for MSME and Agriculture will broad base credit growth,” Khara added. He also said that the “reasonable Government borrowing numbers” will support lower interest rates and the move towards a clutter free new tax regime will significantly spur consumption. Banking industry's lobby grouping Indian Banks Association's chairman A K Goel said the increased capital expenditure could help in further increasing the demand for bank funds and the Agriculture Accelerator Fund woill also be helpful. <keyword id="686923" type="General" weightage="80" keywordseo="umesh-revankar" source="Orion">Umesh Revankar</keyword>, the executive vice chairman of <keyword id="12730794" type="DOMAIN" weightage="20" keywordseo="shriram-finance" botkeyword="" source="ET" sourcekeytype="COMPANY" meta.keywordsubtype="EQ" meta.aliasname="shriram finance" meta.entityname="Shriram Finance Ltd." meta.entityid="13106" meta.seoname="shriram-finance-ltd">Shriram Finance</keyword> said the income tax benefits announced will boost purchasing power for middle-class consumers. "I believe the announcements made will trigger a pick-up in credit off take for small enterprises, the consumption-driven two-wheeler business and lending to transportation," he added. Non-bank lender Tata Capital's managing director and chief executive <keyword id="128186" type="General" weightage="80" keywordseo="rajiv-sabharwal" source="Orion">Rajiv Sabharwal</keyword> said the strong agricultural credit outlay, support measures, ease of doing business, and digitization drive across various sectors will improve multiple clusters within the economy. American lender Bank of America's country head Kaku Nakhate said allowing foreign banks to conduct acquisition financing from GIFT City is a welcome step and also hailed the dual budget proposal for a single window clearance for IFSCA, SEZ, <keyword id="30067" type="General" weightage="80" keywordseo="rbi" source="Orion">RBI</keyword>, SEBI and GSTN at GIFT City. KPMG's national head of tax, <keyword id="309284" type="General" weightage="80" keywordseo="rajeev-dimri" source="Orion">Rajeev Dimri</keyword>, also welcomed Finance Minister Nirmala Sitharaman's measures for ensuring that the relaxations given to common taxpayers have not derailed fiscal math, and the government has stayed on the path of fiscal consolidation. Pointing out to the Goods and Services Tax revenue accretion over the last few months, he said the taxpayers should be credited for the performance. The budget rightly “rewards” the taxpayers for their commitment, Dimri said. LuLu Financial Holdings Managing Director Adeeb Ahamed said the budget is focussed with equal focus on traditional and emerging sectors. Adeeb, who has significant investments in India's financial services sector through LuLu Forex and LuLu Finserv, said the move to ramp up the credit guarantee scheme for MSMEs will give a fillip to enabling faster access to financial services. SEE ALSO: <a href="https://www.businessinsider.in/tech/news/first-impressions-samsung-galaxy-s23-s23-plus-and-s23-ultra-go-heavy-on-photography-and-gaming/articleshow/97532856.cms?utm_source=social_sticky_amp&amp;utm_medium=social_sharing&amp;utm_campaign=Click_through_social_share">First Impressions: Samsung Galaxy S23, S23 Plus, and S23 Ultra bet big on photography and gaming</a> <a href="https://www.businessinsider.in/tech/mobile/news/new-patent-suggests-that-apple-could-bring-a-foldable-iphone-with-a-self-healing-display-in-the-future/articleshow/97302738.cms">New patent suggests that Apple could bring a foldable iPhone with a self-healing display in the future</a>

Bankers say private capex will take one more year to revive

New Delhi, Apr 17 () The Reserve Bank needs to further relax the income recognition and asset classification (IRAC) norms to protect the economy and the financial sector currently facing the heat of the coronavirus outbreak, said an SBI report.The deadly coronavirus or COVID-19 has infected more than 20 lakh persons around the globe and so far taken lives of over 1.47 lakh people. The decision of various countries to opt for lockdown to prevent the spread of deadly virus has severely impacted the economy.Amid such a situation, an IRAC will take a heavy toll not only on the economy but also on requirement of core capital by the banking system, said the SBI Ecowrap.Although the decision of the RBI to exclude the accounts availing moratorium from the 90-day NPA norm will provide a breather to banks as well as customers, given the working capital challenges it is advisable for the RBI now to relook at the 90-day norm, the report said.Observing that once an account is classified as NPA, the borrower won't be able to raise funds from any other lender, the report said. In the current circumstances the only way to save the economy and the financial system seems to be a relaxation of the IRAC norms i.e. extending the 90-day schedule to 180 days.This relaxation, it added, should be given along with a well laid out calendar of returning to the current norm of 90 days in the next two years by which time, hopefully, the current pandemic crisis would have subsided completely.Commenting on the Reserve Bank's decision to reduced the reverse repo rate by 25 bps to 3.75 per cent while keeping the repo rate unchanged, the SBI Ecowrap said, the move has widened the LAF corridor to 90 bps."The widening of the LAF corridor and a surplus liquidity regime effectively implies reverse repo rate could be the effective policy rate," the report said.Meanwhile, Avinash Bagdi, Head of Finance, Covestro India, said "the bold" steps taken by the RBI to ensure smooth functioning of banks and financial institutions will help the country to prevent the economic slowdown curve from steepening."The announcement of excluding moratorium period from 90-day NPA period will prove to be a relaxation of asset classification norms. In view of tightening the financial conditions, the decision to provide special refinance facilities of Rs 50,000 crore to NHB, SIDBI and NABARD is commendable," he added.While thanking RBI for announcing slew of measures including liquidity injection of Rs 50,000 crore to tackle Covid-19 crisis, the Apparel Export Promotion Council (AEPC) also requested the central bank to protect the exporters from penalty on forward covers due to exchange rate fluctuations."It is requested that the charges for exchange rate fluctuations and cancellations are waived for the period for which export orders have been cancelled due to COVID-19," AEPC Chairman A Sakthivel said in a letter to the RBI Governor.Earlier in the day, the Reserve Bank of India on cut the reverse repo rate and announced a slew of measures including re-finance window of Rs 50,000 crore and targetted long term repo auction of similar amount to deal with the impact of the Covid-19 pandemic.Governor Shaktikanta Das also assured that RBI will use all instruments at its disposal to deal with the challenges posed by the outbreak of the novel coronavirus, depending on evolving situations. NKD CS MKJ

RBI needs to further relax IRAC norms to protect financial system

<ul><li>Billionaire Uday Kotak is all set to get wealthier after he ended a long-pending issue with the country’s banking regulator RBI. </li><li>The latter finally allowed them to keep 26% stake in <keyword id="46013" type="COMPANY" weightage="20" keywordseo="Kotak-Mahindra-Bank">Kotak Mahindra Bank</keyword>, though it curtailed the voting rights of the founding family. </li><li>As of today, the shares of Kotak Mahindra Bank were already trading 4% higher in the morning and the business is valued at <a href="https://www.bseindia.com/stock-share-price/kotak-mahindra-bank-ltd/kotakbank/500247/">₹3.23 lakh crore. </a> </li></ul>Billionaire Uday Kotak is all set to get wealthier after he ended a long-pending issue with the country’s banking regulator RBI. The latter finally allowed them to keep 26% stake in Kotak Mahindra Bank, though it curtailed the voting rights of the founding family. Voting rights however will not have an effect on his stake in the bank which has been one of the best performing stocks in the <a href="https://economictimes.indiatimes.com/markets/stocks/news/icici-kotak-among-top-bank-bets-itc-in-play-too/articleshow/70237611.cms?from=mdr">last few years</a>. As of today, the shares of Kotak Mahindra Bank were already trading 4% higher in the morning and the business is valued at <a href="https://www.bseindia.com/stock-share-price/kotak-mahindra-bank-ltd/kotakbank/500247/">₹3,2 lakh crore. </a> The family also has six months time to offload some of its stake to meet RBI guidelines, as they now hold 29.9%. “Promoters’ shareholding in the Bank to be reduced to 26% of PUVESC of the Bank within six months from the date of final approval of the RBI,” <a href="https://www.bseindia.com/corporates/anndet_new.aspx?newsid=43988164-1451-4051-a947-10be65e1f28c">said a company statement on BSE. </a> According to Forbes, Kotak now has a networth of $15 billion as of <a href="https://www.forbes.com/profile/uday-kotak/#40bf3bbd74c2">January 31,2020. </a> Kotak has fewer legal problems at hand too as he withdrew a case concerning dilution of his stake, in Bombay High Court. The legal troubles started over a decade back in 2008. Then, Kotak was given a six month deadline to take action against his shareholding in the bank as per <a href="https://economictimes.indiatimes.com/industry/banking/finance/banking/rbi-agrees-kotak-mahindra-banks-proposal-on-dilution-of-promoter-equity-bank-to-withdraw-case/articleshow/73766930.cms">changed regulations. </a> Kotak tried to do so by issuing preference shares worth $7million and retaining his stake. The RBI was unhappy with it, and the case landed in courts. Kotak has been gaining in spite of the war with the regulator. His net worth has been zooming ahead<a href="https://www.businessinsider.in/thelife/personalities/news/uday-kotak-richest-asia-banker-4x-growth-in-wealth-in-10-years/articleshow/71516598.cms"> after the bank acquired ING Vysya Bank for $2.4 billion</a>. Not only did it boost the bank’s market value, it also left him with a lion’s share of a larger pie. His <a href="https://www.businessinsider.in/thelife/personalities/news/uday-kotak-richest-asia-banker-4x-growth-in-wealth-in-10-years/articleshow/71516598.cms">net worth grew by a whopping 268%</a> from $3 billion in 2010 to $11.8 billion in 2019. Most of this came from his shareholding in Kotak Mahindra Bank. And now, it looks like that is secure. See also: <a href="https://www.businessinsider.in/business/corporates/article/escorts-share-price-and-inside-story-of-how-market-value-nearly-doubled-in-a-new-book/articleshow/73763872.cms">The inside story of how Escorts turned around to become a nearly ₹10,000-crore company</a> <a href="https://www.businessinsider.in/thelife/personalities/news/uday-kotak-richest-asia-banker-4x-growth-in-wealth-in-10-years/articleshow/71516598.cms">Uday Kotak, Asia's richest banker, multiplied his wealth four times in a decade</a>

Billionaire Uday Kotak all set to get richer after RBI relaxes stock holding rules

The <keyword id="6354731" type="General" weightage="50" keywordseo="state-bank-of-india" source="Orion">State Bank of India</keyword> (<keyword id="13222" type="General" weightage="100" keywordseo="sbi" source="Orion">SBI</keyword>) on Thursday said 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="80" keywordseo="rbi" source="Orion">RBI</keyword>) should internationalise the Indian rupee. In a research report, the SBI said that the central bank should make a conscious effort to internationalise the rupee. "The Russia-Ukraine war and the disruptions to payments caused by it, is a good opportunity to insist on export settlement in rupee, beginning with some of the smaller export partners," the SBI said. The banking major also welcomed the RBI's measures relaxing the external commercial borrowing (ECB) and foreign portfolio investors (FPI) norms in the debt segment. According to the SBI, the global economy is volatile and on an average, energy, base metals, precious metals, and agricultural prices are now down 25 per cent from 52 week highs with markets anticipating a global slowdown morphing into a full-blown global recession. However, it is not clear whether such decline is the result of synchronised global rate actions or genuine fears of a recession looming large, the SBI report noted. In <keyword id="3658" type="General" weightage="50" keywordseo="india" source="Orion">India</keyword>, such global developments could have a direct bearing on the inflation trajectory in the second half of the current fiscal. "The RBI has been on course in normalising liquidity and net LAF (liquidity adjustment facility) is now close to the 1.5 per cent threshold non-inflationary level of liquidity. However, the problem is unspent Government cash balances that has now jumped to Rs 3.1 trillion," the report said. This effectively implies that core liquidity is still at Rs. 6.2 trillion as against Rs 8.3 trillion in the beginning of April. Additionally, the RBI has also announced a slew of measures to augment capital inflows by making <keyword id="11904949" type="General" weightage="50" keywordseo="nri" source="Orion">NRI</keyword> deposits more attractive. The SBI said the cumulative impact of all these measures will be beneficial for the external sector given the fact that total Non-Resident Indian (NRI) deposits exhibited an inflow of $3.2 billion in FY22 as against the inflows of $7.4 billion in FY21. On credit growth, the SBI said it expanded at Rs 2.6 lakh crores far outstripping bank deposit growth at Rs 1.04 lakh crore in the current year. The continued growth in bank credit is a matter of comfort and indicates that the Indian economy is still navigating through the turmoil rather well. SEE ALSO : <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/cryptocurrency/news/taiwanese-crypto-exchange-suspends-trading-in-rupees-after-tds-laws-kick-in/articleshow/92727555.cms">Taiwanese crypto exchange suspends trading in Rupees after TDS laws kick in</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/stock-market/news/indian-metal-shares-surge-as-demand-hopes-build-after-chinas-220-billion-stimulus-plan/articleshow/92726640.cms">Indian metal shares surge as demand hopes build after China’s $220 billion stimulus plan</a>

It's the right time on export settlements in Rupee, SBI tells RBI

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 Wednesday announced a series of measures to boost foreign exchange inflows. The central bank said that it has taken the steps in order to further diversify and expand the sources of <keyword id="6358355" type="General" weightage="20" keywordseo="forex" source="Orion">forex</keyword> funding so as to mitigate volatility and dampen global spillovers. India's foreign exchange reserves stood at $593.3 billion as on June 24, 2022, supplemented by a substantial stock of net forward assets, it said. The RBI has exempted incremental Foreign Currency Non-Resident Bank (FCNR-B) and Non-Resident (External) Rupee (NRE) deposit <keyword id="127684" type="General" weightage="20" keywordseo="Liabilities" source="Orion">liabilities</keyword> for computation of Net Demand and Time Liabilities (NDTL) for maintenance of cash reserve ratio (<keyword id="35038" type="General" weightage="20" keywordseo="crr" source="Orion">CRR</keyword>) and statutory liquidity ratio (<keyword id="46197" type="General" weightage="20" keywordseo="SLR" source="Orion">SLR</keyword>) by the banks. This will be effective from the reporting fortnight beginning July 30, 2022 with reference base date of July 1. "This relaxation will be available for deposits mobilised up to November 4, 2022. Transfers from Non-Resident (Ordinary) (NRO) accounts to NRE accounts shall not qualify for the relaxation," the RBI said. It also decided to temporarily permit banks to raise fresh FCNR(B) and NRE deposits without reference to the extant regulations on interest rates, with effect from July 7, 2022. This relaxation will be available for the period up to October 31, 2022. The RBI also relaxed rules relating to foreign portfolio investment in debt by allowing all new issuances of government securities (G-Secs) of 7-year and 14-year tenors, including the current issuances of 7.10 per cent GS 2029 and 7.54 per cent GS 2036, under the Fully Accessible Route (FAR). It also decided that <keyword id="6362476" type="General" weightage="20" keywordseo="investments" source="Orion">investments</keyword> by FPIs in government securities and corporate debt made till October 31, 2022 will be exempted from the macroprudential short term limit - not more than 30 per cent of investments each in government securities and corporate bonds can have a residual maturity of less than one year. These investments will not be reckoned for the short term limit till maturity or sale of such investments. As part of the macroprudential framework under the medium term framework (MTF), foreign portfolio investors (FPI) can invest only in corporate debt instruments with a residual maturity of at least one year. The central bank has decided that FPIs will be provided with a limited window till October 31, 2022 during which they can invest in corporate money market instruments viz., commercial paper and non-convertible debentures with an original maturity of up to one year. The FPIs can continue to stay invested in these instruments till their maturity/sale. These investments will not be included for reckoning the short term limit for investments in corporate securities. According to the RBI, Authorised Dealer Category-1 (AD Cat-I) banks can utilise overseas foreign currency borrowings (OFCB) for lending in foreign currency to entities for a wider set of end-use purposes, subject to the negative list set out for external commercial borrowings (ECBs). The measure is expected to facilitate foreign currency borrowing by a larger set of borrowers who may find it difficult to directly access overseas markets. This dispensation for raising such borrowings is available till October 31, 2022. As regards the external commercial borrowings (ECB) the RBI has temporarily increased the limit under the automatic route from $750 million or its equivalent per financial year to $1.5 billion. The all-in cost ceiling under the ECB framework is also being raised by 100 basis points, subject to the borrower being of investment grade rating. The above dispensations are available up to December 31, 2022. SEE ALSO : <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/science/environment/news/monsoon-rain-wreaks-havoc-in-himachal-and-karnataka-orange-alert-in-gujarat/articleshow/92704563.cms">Monsoon rain wreaks havoc in Himachal and Karnataka, orange alert in Gujarat</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/tech/news/macbook-air-with-m2-chip-will-go-on-sale-from-july-15/articleshow/92704253.cms">Apple’s MacBook Air with M2 chip will go on sale from July 15, pre-orders starting July 8</a>

RBI tries to boost forex reserves by easing NRI deposit norms

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>) move to relax regulations to boost foreign exchange inflows will not have any material change in receipts, but certainly helpful in directional forex signalling to speculators, said <keyword id="141615" type="General" weightage="80" keywordseo="emkay-global" source="Orion">Emkay Global</keyword> Financial Services Ltd. Reacting to RBI's moves on Wednesday, Emkay Global in a report said: "While these measures to boost capital account are helpful, they may not have a material impact on flows. Nonetheless, they will still ease the pressure of the RBI to intervene to some extent." According to Emkay Global, with low forward premia, this mobilisation may still make some sense for banking entities. The timing of RBI's move coincides with the typically strong remittance/deposit season that comes with the beginning of the festive season. This can take the pressure off banks to raise domestic deposits amidst accelerating credit growth, and also somewhat cool-off domestic borrowing rates, Emkay Global said. The easing of all the available channels of foreign portfolio investors (<keyword id="725142" type="General" weightage="50" keywordseo="fpi" source="Orion">FPI</keyword>) investments in debt may not lead to material change in FPI flows given the free limits that are already available. However, the new tenors added in Fully Accessible Route (FAR) securities are fairly active. "Thirdly, the all-in cost ceiling under the <keyword id="60971" type="General" weightage="50" keywordseo="ecb" source="Orion">ECB</keyword> (external commercial borrowings) framework is also being raised by 100 bps, subject to the borrower being of investment grade rating, however we seek more clarity on this front as to whether it leads to any change in caps (from existing 450bps), and if it makes sense for domestic good investment-grade borrowers to borrow in foreign currency, except when they are facing a credit crunch back home," the report said. While it is debatable if these steps can lead to significant flows, they could be effective in preventing speculative attacks on the currency and giving directional policy signals to the markets, Emkay Global added. The key measures announced by RBI on Wednesday were: 1. Cash Reserve Ratio + Statutory Liquidity Ratio (CRR+ SLR) exemptions: Incremental FCNR Bank and Non-Resident External (NRE) deposit liabilities now exempt from <keyword id="626944" type="General" weightage="50" keywordseo="net-demand-and-time-liabilities" source="Orion">Net Demand and Time Liabilities</keyword> (NDTL) computation for maintenance of CRR and SLR. Transfers from Non-Resident Ordinary (NRO) accounts will not qualify for this relaxation. This relaxation is available till November 4, 2022. 2. Interest rates on FCNR and NRE deposits: Banks are temporarily allowed to raise fresh FCNR(B) and NRE deposits without having to adhere to the regulations on interest rates on these deposits. 3. FPI debt investment: Easing all the available channels of FPI investments: (i) All new issuances of 7-year and 14-year G-secs (including fairly active current issuances of 7.10 per cent GS 2029 and 7.54 per cent GS 2036 <keyword id="1351125" type="General" weightage="50" keywordseo="ato" source="Orion">Ato</keyword> be now covered under Fully Accessible Route (FAR). At present, 5-year, 10-year and 30-year tenors are covered. (ii) FPI investments in G-secs and corporate debt will not be subject to the short-term limit, i.e., not more than 30 per cent of investments in G-secs and corporate debt can have a residual maturity less than one year. (iii) FPIs can invest in commercial papers and non-convertible debentures with an original maturity of up to one year as against earlier mandate of at least one year. These investments will not be included as part of the short term limit on investments in corporate securities. 4. Foreign currency lending by banks: Banks can utilise overseas foreign currency borrowings (OFCBs) for lending for a wider set of purposes, not just export finance. The measure is expected to facilitate foreign currency borrowing by a larger set of borrowers who may find it difficult to directly access overseas markets. 5. ECB limits: The limit for ECBs under the automatic route has been raised from $750 million to $1.5 billion per financial year. The all-in cost ceiling has also been raised by 100bps. The measures 2-5 above are valid till 31st October 2022, Emkay Global said. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/news/stopped-russian-imports-in-april-says-essar-oil/articleshow/92714422.cms">Stopped Russian imports in April says Essar Oil</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/science/space/news/elon-musk-is-confident-that-humanity-will-reach-mars-in-our-lifetime/articleshow/92714414.cms">Elon Musk is confident that humanity will reach Mars in our lifetime</a>

RBI's moves to boost forex inflows could have an impact on domestic borrowing rates

Mumbai, May 22 () In a bid to provide more resources to states, the Reserve Bank of India (RBI) on Friday eased the rules governing withdrawal from the Consolidated Sinking Fund resulting in release of additional Rs 13,300 crore to them. State governments maintain a Consolidated Sinking Fund (CSF) with RBI as a buffer for repayment of their liabilities. "In the light of the COVID-19 pandemic and the consequent stress on state government finances, the RBI has reviewed the scheme and has decided to relax the rules governing withdrawal from CSF, while at the same time ensuring that depletion of the Fund balance is done prudently" RBI Governor Shaktikanta Das said. This will enable states to meet a larger proportion of their redemption of market borrowings due in the current financial year from CSF and these relaxations to states will release an additional amount of about Rs 13,300 crore, he said. "Together with the normally permissible withdrawal, this measure will enable states to meet about 45 per cent of their redemptions due in 2020-21 through withdrawal from CSF. This change in withdrawal norms will come into force with immediate effect and will remain valid till March 31, 2021," he said. In response to COVID-19, the Governor said, the requirement of fiscal resources has increased with likely implications for market conditions going forward. "The RBI shall remain watchful and support the smooth completion of the borrowing programme of the Centre and states in the least disruptive manner," he noted. Last month, the RBI increased Ways and Means Advance (WMA) limit of states by 60 per cent. This was estimated to create a space for Rs 12,000 crore for state governments looking to raise money. "It has now been decided to increase the WMA limit of states by 60 per cent over and above the level as on March 31, 2020 to provide greater comfort to the states for undertaking COVID-19 containment and mitigation efforts, and to plan their market borrowing programmes better," RBI had said. The central bank had also increased the number of days states can be in continuous overdraft to 21 days from 14, and the number of days states can be in overdraft in a quarter was raised from 32 to 50 days. DP ANU ANU

RBI relaxes rules for withdrawal from CSF; States may get extra Rs 13,300 cr

The <keyword id="50847" type="General" weightage="20" keywordseo="Reserve-Bank" source="Orion">Reserve Bank</keyword> of India (<keyword id="30067" type="General" weightage="20" keywordseo="RBI" source="Orion">RBI</keyword>) has extended the last date for periodic KYC update till March 31, amid Omicron uncertainties and has advised banks and other regulated entities not to take restrictive action against customers till the fiscal end. Earlier in May, the RBI had extended the last date for updation of KYC by regulated entities till December-end because of the second wave of the coronavirus pandemic. "In view of the prevalent uncertainty due to new variant of COVID-19, the relaxation provided in the ... circular (relating to Periodic Updation of KYC - Restrictions on Account Operations for Non-compliance issued in May) is hereby extended till March 31, 2022," the RBI said on Thursday. In May, the RBI had advised the regulated entities not to impose punitive restriction on operations of accounts of customers for their failure to comply with the KYC updation norms till December-end. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/stock-market/news/list-of-nse-and-bse-stock-market-holidays-in-2022/articleshow/88585352.cms">NSE and BSE in 2022 — List of stock market holidays in the new year</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/finance/banks/news/rbl-banks-stock-slumped-nearly-10-even-as-rbi-approves-interim-head-for-the-bank/articleshow/88584214.cms">RBL Bank slides back to its lowest in a year despite a new chief and RBI's assurances</a>

RBI extends deadline for periodic KYC update by three months till March 31, 2022

<ul><li>On 27 September, India’s central bank eased a liquidity coverage requirement imposed on banks and said it would provide all necessary funding support to the banking sector. </li><li>The <keyword id="30067" type="ORGANIZATION" weightage="20" keywordseo="RBI">RBI</keyword> has raised the facility to avail funds for liquidity coverage ratio (LCR), which measures the amount of liquid assets held by banks against short-term <keyword id="44647" type="ORGANIZATION" weightage="20" keywordseo="debt">debt</keyword>, from 11% to 13%. </li><li>This will allow banks to increase the weightage given to government securities when calculating their <keyword id="6493444" type="DEFINITION" weightage="20" keywordseo="Statutory-Liquidity-Ratio">statutory liquidity ratio</keyword> and free up deposits for their short-term funding needs. </li></ul>Following <a href="https://www.businessinsider.in/indias-main-financial-regulators-and-its-largest-bank-are-trying-to-calm-investors-amid-fears-of-a-liquidity-crisis/articleshow/65929921.cms">a promise </a>to investors that it would step in to prevent a liquidity crisis amongst Indian lenders as well as a subsequent <a href="https://in.reuters.com/article/india-shadowlenders/finance-ministry-urges-rbi-to-take-steps-to-ease-liquidity-tackle-credit-crunch-idINKCN1M609Y">push</a> from India’s finance ministry, the Reserve Bank of India (RBI) looks like its making good on its word, albeit at the cost of its mandate to manage risk. On 27 September, India’s central bank eased a requirement imposed on banks related to liquidity coverage and said it would provide all necessary funding support to the banking sector. The RBI raised the facility to avail funds for liquidity coverage ratio (LCR), which measures the amount of liquid assets held by banks against short-term debt, from 11% to 13%. This will allow banks to increase the weightage given to government securities, which is a liquid asset, when calculating their statutory liquidity ratio, which measures the amount of deposits invested in liquid assets. Hence, this will free up banks’ deposits so they can meet their funding needs in the short-term. And their funding needs are dire. Earlier this week, the liquidity deficit was estimated to be ₹1.4 trillion. However, In doing so, the RBI is effectively trading short-term benefits for longer-term pain. The current liquidity crisis stems from the aversion of institutional investors to buy the debt instruments of non-banking financial companies like IL&amp;FS, which is on the brink of default. By relaxing liquidity coverage requirements for banks, the RBI is allowing banks greater freedom in how they use their deposits and also letting them take on riskier short-term debt so a lot more money will enter the system, which will have an inflationary effect. In essence, domestic lenders are being allowed to use a greater percentage of their deposit-holders’ money to pay down their short-term debt obligations and extend credit to borrowers. In the event of a market downturn or a loss of faith in these banks, they could face a run on their deposits, which will be fatal given their lower risk buffer. The finance ministry has insisted that the RBI also relax reserve requirements for banks, under which banks set aside a certain portion of funds with the central bank. Earlier this week, the RBI took a page out of the European Central Bank’s playbook on <a href="https://www.ecb.europa.eu/explainers/show-me/html/app_infographic.en.html">“quantitative easing”</a> and said it would buy around <a href="https://www.thehindubusinessline.com/money-and-banking/rbi-to-conduct-omo-to-infuse-liquidity/article25029705.ece">₹100 billion</a> worth of <keyword id="6370709" type="UNKNOWN" weightage="20" keywordseo="Government-bonds">government bonds</keyword> from the open market to inject funds into the economy.

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