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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

<a href="http://www.businessinsider.in/DoYou-Need-Aadhaar-Card-Govt-Says-Yes-Supreme-Court-Says-No/articleshow/22981267.cms">Controversy</a> is still raging over the mandatory use of <keyword id="144117" type="ORGANIZATION" weightage="100" keywordseo="AADHAAR">Aadhaar</keyword>, but an expert <keyword id="2006823" type="UNKNOWN" weightage="100" keywordseo="Committee-on-financial-inclusion">committee on financial inclusion</keyword> has already recommended that the <keyword id="6354335" type="CITY" weightage="100" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> should leverage the <keyword id="2006820" type="UNKNOWN" weightage="100" keywordseo="Aadhaar-network">Aadhaar network</keyword> to ensure that every Indian has a <keyword id="2006817" type="UNKNOWN" weightage="100" keywordseo="Free-bank-account">free bank account</keyword> by January 2016. The recommendation has come from the Committee on Comprehensive <keyword id="2006821" type="UNKNOWN" weightage="100" keywordseo="Financial-Services-for-Small-Business">Financial Services for Small Business</keyword> and Low-Income Households, which is headed by <keyword id="311391" type="PERSON" weightage="100" keywordseo="Nachiket-Mor">Nachiket Mor</keyword>, an <keyword id="2006825" type="UNKNOWN" weightage="100" keywordseo="RBI-board-member">RBI board member</keyword> and former <keyword id="6653" type="CITY" weightage="100" keywordseo="ICICI-bank">ICICI Bank</keyword> executive. 
 <keyword id="30067" type="ORGANIZATION" weightage="100" keywordseo="RBI">RBI</keyword> set up the committee last September and it has now sought comments from the public on the <keyword id="1180163" type="UNKNOWN" weightage="100" keywordseo="draft-recommendations">draft recommendations</keyword> on or before January 24, 2014. Other key members of the panel include former <keyword id="44473" type="CITY" weightage="80" keywordseo="Citigroup">Citigroup</keyword> CEO <keyword id="25396" type="PERSON" weightage="100" keywordseo="Vikram-Pandit">Vikram Pandit</keyword> and <keyword id="2006826" type="UNKNOWN" weightage="100" keywordseo="Axis-Bank-CMD">Axis Bank CMD</keyword> <keyword id="6356453" type="PERSON" weightage="100" keywordseo="Shikha-Sharma">Shikha Sharma</keyword>. 
 According to the report, every Indian resident over 18 years of age should be automatically issued a “universal <keyword id="2006829" type="UNKNOWN" weightage="100" keywordseo="Electronic-bank-account">electronic bank account</keyword> at the time of receiving his/her <keyword id="485058" type="UNKNOWN" weightage="100" keywordseo="Aadhaar-number">Aadhaar number</keyword>.” One can choose his/her <keyword id="2006832" type="COMPANY" weightage="100" keywordseo="Preferred-bank">preferred bank</keyword> from the empanelled ones and need not pay any fee for opening an account. However, the bank can levy <keyword id="162862" type="UNKNOWN" weightage="100" keywordseo="transaction-charges">transaction charges</keyword>, the committee says. It also recommends setting up of a ‘unified’ redressal agency under the <keyword id="47209" type="ORGANIZATION" weightage="100" keywordseo="Finance-Ministry">finance ministry</keyword> to deal with <keyword id="786199" type="UNKNOWN" weightage="100" keywordseo="customer-complaints">customer complaints</keyword>. 
 About 90% of small businesses have no links to a <keyword id="154831" type="ORGANIZATION" weightage="100" keywordseo="financial-institution">financial institution</keyword> and 60% of Indians do not have bank accounts, the report states. “Aadhaar is the key piece of infrastructure to enable a customer to be identified and authenticated so that repudiation and fraud risks are minimised and therefore, should become the universal basis for authentication,” it adds. 
 The panel has also suggested that a special type of <keyword id="6368751" type="PERSON" weightage="100" keywordseo="Banks">banks</keyword> should be introduced to provide payment services and deposit products to small businesses and low-income households. Such banks could be categorised as <keyword id="2006841" type="UNKNOWN" weightage="100" keywordseo="Payments-banks">payments banks</keyword> and “they will be restricted to holding a <keyword id="2006842" type="UNKNOWN" weightage="100" keywordseo="Maximum-balance">maximum balance</keyword> of Rs 50,000 per customer,” the report says. Even <keyword id="2006844" type="UNKNOWN" weightage="100" keywordseo="Existing-lenders">existing lenders</keyword> can set up these payments banks as <keyword id="4128451" type="UNKNOWN" weightage="100" keywordseo="subsidiaries">subsidiaries</keyword>. The report also recommends setting up another category of wholesale banks that will provide funds to other banks and financial institutions that directly lend to low-income households. 
 On the face of it, the recommendations to introduce a multi-layered <keyword id="6354778" type="ORGANIZATION" weightage="100" keywordseo="Banking">banking</keyword> system make sound sense as these ‘proposed’ entities will be serving the <keyword id="2006855" type="UNKNOWN" weightage="100" keywordseo="Financially-weak">financially weak</keyword> segment of the country and overall, the inclusion plan for 2013-2016 looks good. 
 
Except for the Aadhaar part. 
 But before we go ahead, let us have a look at Aadhaar and what all it offers. Launched by the <keyword id="86474" type="ORGANIZATION" weightage="100" keywordseo="Unique-Identification-Authority-of-India">Unique Identification Authority of India</keyword> (<keyword id="6355252" type="CITY" weightage="100" keywordseo="UIDAI">UIDAI</keyword>), the <keyword id="804646" type="UNKNOWN" weightage="100" keywordseo="Aadhaar-scheme">Aadhaar scheme</keyword> was initially introduced to ‘promote inclusion and benefits of the <keyword id="1389586" type="UNKNOWN" weightage="100" keywordseo="marginalised-sections">marginalised sections</keyword> of the society that has no <keyword id="2006861" type="UNKNOWN" weightage="100" keywordseo="Formal-identity-proof">formal identity proof</keyword>.’ Even today, Aadhaar-enabled services are essentially linked to various <keyword id="580043" type="UNKNOWN" weightage="100" keywordseo="government-welfare-schemes">government welfare schemes</keyword> – so that its beneficiaries can access the same in a hassle-free manner. 
 However, the ‘<keyword id="2006816" type="UNKNOWN" weightage="100" keywordseo="Banking-for-all">banking for all</keyword>’ initiative in its ‘suggested’ format cannot be a marginalised movement, aimed to serve only the under-banked/unbanked regions or the weaker section or those below the <keyword id="141042" type="ORGANIZATION" weightage="100" keywordseo="poverty-line">poverty line</keyword>. It has to have a <keyword id="2006866" type="UNKNOWN" weightage="100" keywordseo="Unified-structure">unified structure</keyword> across the country – involving every Indian citizen. In other words, it will be much like the ‘<keyword id="49358" type="UNKNOWN" weightage="100" keywordseo="voter-card">voter card</keyword>’ mechanism we have in place right now. At the age of 18, an Indian is entitled to get a voter card irrespective of the <keyword id="2006868" type="UNKNOWN" weightage="100" keywordseo="Financial-divides">financial divides</keyword>. Going forward, if the central bank intends to follow the same principle and wants to bring the entire population of the country under its <keyword id="2006870" type="UNKNOWN" weightage="100" keywordseo="Inclusion-umbrella">inclusion umbrella</keyword> (after all, one cannot leave one section of the citizens out of a <keyword id="2006871" type="UNKNOWN" weightage="100" keywordseo="Mass-initiative">mass initiative</keyword> just because they are financially more stable), opening an account at the stipulated age should become mandatory and that means a mandatory <keyword id="1953676" type="UNKNOWN" weightage="100" keywordseo="Aadhaar-validation">Aadhaar validation</keyword>. 
 And that brings us back to the basic question – what is the legal status of Aadhaar in India? Is it just a <keyword id="107911" type="ORGANIZATION" weightage="100" keywordseo="Financial-inclusion">financial inclusion</keyword> tool for the economically weak or do the government agencies intend to turn it into an ‘all-inclusive’ tool required for every social and <keyword id="672932" type="ORGANIZATION" weightage="100" keywordseo="economic-activity">economic activity</keyword> – right from <keyword id="427269" type="UNKNOWN" weightage="100" keywordseo="Marriage-registration">marriage registration</keyword> to <keyword id="854003" type="UNKNOWN" weightage="100" keywordseo="land-registration">land registration</keyword>, from banking to <keyword id="6368952" type="ORGANIZATION" weightage="100" keywordseo="shopping">shopping</keyword> and more? 
 The RBI has already asked banks to ensure <keyword id="1953683" type="UNKNOWN" weightage="100" keywordseo="Aadhaar-authentication">Aadhaar authentication</keyword> for <a href="http://www.businessinsider.in/Now-RBI-Wants-Aadhaar-Validation-For-Card-based-Transactions/articleshow/26473660.cms">card transactions</a> at merchant locations. “All new card present infrastructure has to be enabled for both <keyword id="1953693" type="UNKNOWN" weightage="100" keywordseo="EMV-chip-and-PIN">EMV chip and PIN</keyword> and Aadhaar (<keyword id="1953679" type="UNKNOWN" weightage="100" keywordseo="Biometric-validation">biometric validation</keyword>) acceptance,” the central bank stated in a notification on November 26 last year. 
 Although the <keyword id="6354977" type="ORGANIZATION" weightage="80" keywordseo="Supreme-Court">Supreme Court</keyword> has ruled that the <keyword id="6356006" type="UNKNOWN" weightage="100" keywordseo="Aadhaar-card">Aadhaar Card</keyword> is not mandatory to get <keyword id="1739662" type="UNKNOWN" weightage="100" keywordseo="government-benefits">government benefits</keyword> and services, and the <keyword id="1878758" type="UNKNOWN" weightage="100" keywordseo="National-Identity-Authority-of-India-Bill">National Identity Authority of India Bill</keyword> is yet to get Parliamentary nod, Aadhaar seems to be enjoying a more hallowed status and getting its teeth deep into every key financial transaction one can think of. That might not be quite desirable at this stage as divulging <keyword id="441301" type="UNKNOWN" weightage="100" keywordseo="biometric-data">biometric data</keyword> (required for Aadhaar Card) is still considered voluntary and <keyword id="2006881" type="UNKNOWN" weightage="100" keywordseo="Secure-storage">secure storage</keyword> of the same cannot be guaranteed even now. 
 The rest of the recommendations by the committee dwell on the structure and requirements of the <keyword id="2006882" type="UNKNOWN" weightage="100" keywordseo="Proposed-banks">proposed banks</keyword>, <keyword id="6597293" type="UNKNOWN" weightage="100" keywordseo="priority-sector-lending">priority sector lending</keyword> and deposits, and classification of non-banking financial companies (NBFCs). 
 Interestingly, the payment banks will be required to meet the standard <keyword id="35038" type="ORGANIZATION" weightage="80" keywordseo="crr">CRR</keyword> terms and must also deposit the balance proceeds in approved <keyword id="838337" type="UNKNOWN" weightage="100" keywordseo="SLR-securities">SLR securities</keyword> with duration of no more than three months. As they won’t be permitted to assume any kind of <keyword id="854662" type="UNKNOWN" weightage="100" keywordseo="Credit-risk">credit risk</keyword>, which literally rules out any risk of default, the <keyword id="2006891" type="UNKNOWN" weightage="100" keywordseo="Minimum-entry-capital">minimum entry capital</keyword> for them will be Rs 50 crore instead of the Rs 500 crore required for full-service commercial banks in the country. Also, the wholesale banks cannot accept deposits bigger than Rs 5 crore from a single depositor. 
 The RBI had launched a three-year financial <keyword id="2006853" type="UNKNOWN" weightage="100" keywordseo="Inclusion-programme">inclusion programme</keyword> in April 2010, which prompted banks to open outlets in 200,000 villages. The current recommendations seek to deepen such access and experts even feel that the new banking licences, to be announced soon, can be categorised accordingly. But both the government and the RBI should ensure that the programme becomes ‘inclusive’ in the true sense of the term and validation issues should not throw a spanner in the works.

Aadhaar Gaining More
Teeth, To Play Key Role In ‘Banking For All’

The Reserve Bank of India (<keyword id="30067" type="ORGANIZATION" weightage="100" keywordseo="RBI">RBI</keyword>), in its third bi-monthly monetary policy statement for FY2014-15, kept the <keyword id="43352" type="UNKNOWN" weightage="100" keywordseo="Repo-rate">repo rate</keyword> unchanged at 8%. The <keyword id="6403556" type="UNKNOWN" weightage="100" keywordseo="reverse-repo-rate">reverse repo rate</keyword>, too, remained the same at 7%. 
 
The statutory liquidity ratio (<keyword id="46197" type="ORGANIZATION" weightage="100" keywordseo="SLR">SLR</keyword>) was slashed by 50 bps to 22%. "The moderation in CPI headline inflation for two consecutive months, despite the seasonal firming up of prices of fruits and vegetables since March, is due to both base effects and the steady deceleration in CPI inflation excluding food and fuel," RBI Governor Raghuram Rajan said. 
 
"The recent fall in international crude prices, the benign outlook on global non-oil commodity prices and still-subdued corporate pricing power should all support continued disinflation, as should measures undertaken to improve food management. There are, however, upside risks also, in the form of the pass-through of administered price increases, continuing uncertainty over monsoon conditions and their impact on food production, possibly higher oil prices stemming from geo-political concerns and exchange rate movement, and strengthening growth in the face of continuing supply constraints," the RBI said. 
 
The central bank said it would continue to monitor inflation and it remained committed to bring CPI inflation to 8% by January 2015 and 6% by January 2016. 
 
“The Reserve Bank has taken a number of steps to enhance efficiency, increase entry, speed up resolution, and improve access to financial services, such as modified regulations on long term lending and borrowing, proposals for licensing payment banks and small banks, a framework to deal with stressed assets, actions to further the use of mobile phones in banking, and efforts to simplify know your customer (KYC) norms, among others,” the bank said in its press release.

RBI Keeps Repo Rate Unchanged, Slashes SLR By 50 bps

As expected, the <keyword id="6354335" type="CITY" weightage="100" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> (<keyword id="30067" type="ORGANIZATION" weightage="100" keywordseo="RBI">RBI</keyword>) kept key rates unchanged. While the repo rate was maintained at 8% and reverse repo rate at 7%, the <keyword id="6493444" type="ORGANIZATION" weightage="100" keywordseo="statutory-liquidity-ratio">statutory liquidity ratio</keyword> (SLR) was slashed by 50 basis points. 

	The cash reserve ratio was also kept unchanged at 4%. 
 "At this juncture, it is appropriate to leave the policy rate unchanged and to allow the disinflationary effects of rate increases undertaken during September 2013-January 2014 to mitigate inflationary pressures in the economy," said RBI governor <keyword id="6358908" type="PERSON" weightage="100" keywordseo="Raghuram-Rajan">Raghuram Rajan</keyword>. 

	"Lead indicators point to continuing sluggishness in domestic economic activity in the first quarter of 2014-15. The outlook for agriculture is clouded by the meteorological department's forecasts of a delay in the onset of the south-west monsoon with a 60% chance of the occurrence of El Nino," the RBI said.
 "CPI <keyword id="22195" type="COMPANY" weightage="100" keywordseo="Inflation">inflation</keyword> excluding food and fuel has moderated gradually since September 2013 although it is still elevated," the RBI emphasised. 

	"The risks to the central forecast of 8% CPI inflation by January 2015 remain broadly balanced. Upside risks in the form of a sub-normal/delayed monsoon on account of possible El Nino effects, geo-political tensions and their impact on fuel prices, and uncertainties surrounding the setting of administered prices appear at this stage to be balanced by the possibility of stronger government action on food supply and better fiscal consolidation, as well as the pass through of recent exchange rate appreciation.

RBI Keeps Repo Rate Unchanged; SLR Slashed By 50 BP

Mumbai, Jun 27 () Amid the ongoing economic woes created by the coronavirus pandemic, the Reserve Bank has decided to extend the enhanced borrowing facility provided to the banks to meet their liquidity shortages till September 30. The RBI, as a temporary measure, had increased the borrowing limit of scheduled banks under the marginal standing facility (MSF) scheme from 2 per cent to 3 per cent of their Net Demand and Time Liabilities (NDTL) with effect from March 27, 2020. Under the MSF, banks can borrow overnight funds at their discretion by dipping into the Statutory Liquidity Ratio (SLR). This relaxation, which was granted till June 30, 2020, has now been extended till September 30. "On a review, it has now been decided to extend this enhanced limit till September 30, 2020," the Reserve Bank of India (RBI) said in a circular. Banks may continue to access overnight funds under the MSF against their excess SLR holding, it added. The marginal standing facility rate currently stands at 4.25 per cent. The RBI has also extended the relaxation on the minimum daily maintenance of the Cash Reserve Ratio (CRR) at 80 per cent for a further period of three months till September 25, 2020. On March 27, the minimum daily maintenance of the CRR was reduced from 90 per cent of the prescribed CRR to 80 per cent till June 26, 2020. This was done in view of the continuing of hardships faced by banks in terms of social distancing of staff and consequent strains on reporting requirements. NKD ABM ABM

RBI extends enhanced borrowing limit under MSF till Sep 30

Mumbai, Feb 10 () The Reserve Bank on Monday said the special lending window with CRR exemption will be open from February 14 and incremental loans disbursed under this facility will have CRR exemption for the next five years. This means that banks will not be needed to make additional cash reserve ratio against any incremental loans disbursed to the targeted segments. The window opens on February 14 for six months ending July 31, 2020, but the net demand and time liabilities (NDTL) will be calculated as of January 31, 2020, the central bank circular said this evening. As an additional liquidity measure and also to nudge banks to lend more to the needy segments, the Reserve Bank at the last monetary policy announcement said banks, flushed with liquidity, could lend to these segments without making additional provisions without the requirement of parking additional cash reserve ratios (CRR), which is the money parked with the RBI without interest. The productive sectors identified by the regulator are auto and residential housing loans, and also loans to micro, small and medium enterprises (MSMEs). At the sixth bimonthly monetary policy on February 6, the RBI had said, "Banks can deduct the equivalent amount of incremental credit disbursed by them as retail loans to automobiles, residential housing, and loans to MSMEs (which have GST registration), over and above the outstanding level of credit to these segments as at the end of the fortnight ended January 31, 2020, from their net demand and time liabilities (NDTL) for maintenance of the CRR." Detailing the time-line and operational details in a detailed circular, the RBI on Monday said, "Banks can claim the first such deduction from the NDTL of February 14, 2020 for the amount equivalent to the incremental credit extended to the above identified sectors over the outstanding level of credit as at the end of the fortnight to January 31, 2020. "An amount equivalent to the incremental credit outstanding from the fortnight beginning January 31, 2020 and up to the fortnight ending July 31, 2020 will be eligible for deduction from NDTL for the purpose of computing the CRR for a period of five years from the date of origination of the loan or the tenure of the loan, whichever is earlier," the RBI said. The central bank feels revitalising credit flow to productive sectors like these can have multiplier effects to spur support growth. The circular asks banks to report the CRR exemption availed at the end of a fortnight under "exemptions/others" in the Section 42 return, under the provisions of the master circular on CRR and SLR issued on July 1, 2015. Proper fortnightly records of net incremental credit extended to these select sectors/NDTL exemption claimed, duly certified by the chief financial officer or an equivalent officer, must be maintained by banks for supervisory review, the circular said. The RBI expects this special window to enable improved credit flow to needy sectors, reinforces monetary transmission, strengthens regulation and supervision, broadens and deepens financial markets; and also improves payment and settlement systems. The RBI on June 6, 2019, set up an internal working group to review the liquidity management framework to simplify it and suggest steps to communicate the objectives and the toolkit for the same and the report was made public on September 26, 2019. Following this, RBI fine-tuned the existing liquidity management framework and the revised framework fixed the marginal standing facility rate as its upper ceiling and the fixed rate reverse repo rate as the floor rate, with the policy repo rate in the middle of the corridor. The special lending window however retains the width of the corridor is retained at 50 bps-the reverse repo rate being 25 bps below the repo and the MSF rate being 25 bps above the repo rate. This also had the RBI withdrawing the daily fixed rate repo and four 14-day term repos and included fixed and variable rate repo/reverse repo auctions, outright open market operations, forex swaps and other instruments as new instruments for liquidity management. A 14-day term repo/reverse repo operation at a variable rate and conducted to coincide with the CRR maintenance cycle would be the main liquidity management tool for managing frictional liquidity requirements. The main liquidity operation would be supported by fine-tuning operations, overnight and/or longer, to tide over any unanticipated liquidity changes during the reserve maintenance period, the RBI said, adding if needed, the RBI will conduct longer-term variable rate repo/reverse repo operations of over 14 days, and accordingly last week, it introduced long term repos with one and three years of tenor. BEN MRMR

Lending from CRR buffer to get 5-yr exemption: RBI

Mumbai, Apr 30 () The RBI on Thursday permitted banks to file regulatory returns with a delay of up to 30 days from the due date as several entities face difficulties in timely submission in view of the disruptions on account of the coronavirus outbreak. The central bank has listed 18 regulatory returns which banks and All India Financial Institutions can submit with a delay of a maximum 30 days. These include 'payment of dividend', 'statement of shareholding (Restrictions on holding shares)', 'PSU investment statement' and 'return on large exposure'. "In order to mitigate the difficulties in timely submission of various regulatory returns, in view of disruptions on account of COVID-19 pandemic, it has been decided to extend the timelines for their submission," the Reserve Bank of India said in a circular. Accordingly, all regulatory returns required to be submitted by such entities to the Department of Regulation can be submitted with a delay of up to 30 days from the due date. "The extension will be applicable to regulatory returns required to be submitted upto June 30, 2020," it said. However, the entities that are in a position to submit the returns earlier may continue to do so. The circular also said that all communication to the Department of Regulation should be through corporate e-mail to the extent possible (i.e., without involving physical movement of papers). RBI further said "no extension" in timeline is permitted for submission of statutory returns like returns related to CRR/SLR. The RBI has also extended the revised window timings of 'Fixed Rate Reverse Repo and MSF operations' till further notice in view of the continuing disruptions caused by COVID-19. The revised timing is 09:00 hrs to 23:59 hrs as against the usual 17:30 hrs to 23:59 hrs. The timings were earlier revised from March 31 till April 30. NKD CS RVK

COVID-19: RBI grants more time to banks to file regulatory returns

(Eds: Adding details) Mumbai, Mar 27 () The RBI on Friday put on hold EMI payments on all term loans for three months and cut interest rate by steepest in more than 11 years as it joined the government effort to rescue a slowing economy that has now got caught in coronavirus whirlwind.The Reserve Bank of India (RBI) cut repo to 4.4 per cent, the lowest in at least 15 years. Also, it reduced the cash reserve ratio maintained by the banks for the first time in over seven years. CRR for all banks was cut by 100 basis points to release Rs 1.37 lakh crore across banking system.The reverse repo rate was cut by 90 bps to 4 per cent, creating an asymmetrical corridor.RBI Governor Shaktikanta Das predicted a big global recession and said India will not be immune.It all depends how India responds to the situation, he said.Global slowdown could make things difficult for India too, despite some help from falling crude prices, Das said, adding food prices may soften even further on record crop production.Aggregate demand may weaken and ease core inflation further, he noted.The liquidity measures announced include auction of targeted long-term repo operation of 3 year tenor for total amount of Rs 1 lakh crore at floating rate and accommodation under Marginal Standing Facility to be increased from 2 per cent to 3 per cent of Statutory Liquidity Ratio (SLR) with immediate effect till June 30.Combined, these three measures will make available a total Rs 3,74,000 crore to the country's financial system.After cutting policy rates five times in 2019, the RBI had been on a pause since December in view of high inflation.The measures announced come a day after the government unveiled a Rs 1.7 lakh crore package of free foodgrains and cash doles to the poor to deal with the economic impact of the unprecedented 21-day nationwide lockdown.While the Monetary Policy Committee (MPC) of the RBI originally was slated to meet in the first week of April, it was advanced by a week to meet the challenge of coronavirus. DP ANZ BAL

EMIs put on hold, big-bang interest rate cut as RBI joins fight against coronavirus

Indian chief executive officers (CEOs) have expressed disappointment at the Reserve Bank of India’s (RBI) decision to maintain status quo on the interest rate during its review of the monetary policy. The RBI had today kept interest rate unchanged at 7.75%. 
According to CEOs, corporates will not be willing to take loans for new projects at such a high rate. 
 
"The Indian corporates were expecting a rate cut in view of sustained low CPI, WPI and food inflation coupled with benign oil prices in global market helping a positive CAD (current account deficit). In my opinion, this was possibly the best time to have a rate cut and give a real impetus to the growth, which is yet to take off in Indian economy as of today," said Prabal Banerjee, president (international finance) of Essar group. 
 
"The RBI has taken a very positive step towards liquidity infusion by reducing SLR by 50 BP, but that liquidity may be difficult to avail of by everyone and give a real push to growth and economy unless it is associated with moderate cost. We look forward to more positive surprises from RBI as it happened in January," he added. 
 
Dinesh Thakkar, chairman and managing director of Angel Broking, said, "The RBI has kept key policy rate unchanged, as it had recently cut rates by 25 basis points in Jan 2015 and indicated that it will wait for more economic data and the budget to come out for further policy action. In my view, the ongoing fall in inflation is structural and sustainable and if the government also delivers on fiscal consolidation as expected, there is likely to be further easing by the RBI post the budget.” 
 
When the RBI had cut the rates by 25 basis points last month, corporate leaders had welcomed the move, and had also demanded more rate cuts.

India Inc Expresses Disappointment At RBI’s Decision To Keep Repo Rate Unchanged

Mumbai, May 8 () With government borrowings likely to increase in the current fiscal, there is a need to increase the demand for bonds and conduct reverse repo as well as term reverse repo operations without placing any collateral with the Reserve Bank of India, says a report. For conducting such reverse repo operations, the Reserve Bank of India Act needs to be amended, the research report by State Bank of India (SBI) - Ecowrap noted. "Given that 2020 is going to be an exceptional year with government borrowings set to jump, we believe the time has now come for increasing the demand for bonds by having the necessary amendment in the RBI Act used effectively so that conduct of reverse repo and term reverse repo operations are completely non-collateralized," it said. Reverse repo is lending of funds against buying of securities with an agreement to resell the said securities on a mutually agreed future date at an agreed price which includes interest for the funds lent. Under reverse repo operations, banks deposit excess funds with the Reserve Bank of India (RBI) and earn interest on it. As lending to the central bank has no credit risk, there is no need to provide government securities as collateral when a market participant places its funds with the RBI, the report said. "Additionally, since securities obtained under reverse repo are eligible for statutory liquidity ratio (SLR), it will thus ensure an overall increase in the demand for bonds," the report said. With the continuous liquidity support by RBI, the system surplus liquidity position has increased significantly and banks have parked an average of Rs 6 lakh crore in May, compared to Rs 4.8 lakh crore in April and Rs 2.9 lakh crore in March under the reverse repo window of RBI. The report said in order to absorb surplus liquidity from the system without the need for providing collateral in exchange, RBI has been planning to introduce a (low) remunerated standing deposit facility (SDF). The Urjit Patel Monetary Policy Committee had recommended this instrument and indicated that this would be done with the discretion to set the interest rate without reference to the policy target rate. The committee recommended that the introduction of the standing deposit facility will require amendment to the RBI Act and may replace reverse repo in the long-run. "We believe that such uncollateralised absorption of liquidity by the central bank will pave the way for the government to suck out additional liquidity at lower cost through SDF," the report said. The report also recommended that there should not be any cap on the amount of funds placed at the RBI window for reverse repo, rather it should be abandoned and SDF should be introduced. "Capping the quantum of funds in reverse repo as was done in 2007 creates significant market distortions in the onshore rate pricing metric as well as the knock on impact on the FX pricing metric," it said. HV DRRDRR

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EMIs put on hold, big-bang interest rate cut as RBI joins fight against coronavirus

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India Inc Expresses Disappointment At RBI’s Decision To Keep Repo Rate Unchanged

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