RBI Prepares Scheme For PMC, Unity Small – Latest news headlines

RBI has prepared a draft plan for PMC Bank’s amalgamation with Unity Small Finance Bank

Reserve Bank of India (RBI) on Monday unveiled a draft scheme for amalgamation of the troubled Punjab and Maharashtra Cooperative Bank (PMC) and Unity Small Finance bank (USFB).

The draft plan proposes USFB taking over the assets and liabilities of PMC Bank including deposits, which would provide a greater degree of protection to depositors.

RBI has sought suggestions or objections, if any, from depositors, members and creditors of PMC Bank as well as of USFB on the scheme by December 10, 2021. After the expiry of the deadline, the central bank will take a final call on the matter.

The plan has been put up on the central bank’s website.

The RBI further said that “USFB is being set up with capital of about Rs 1,100 crore as against a regulatory requirement of Rs 200 crore for setting up of a small finance bank under the guidelines for on-tap licensing of small finance bank in private sector dated December 5, 2019, with provision for further infusion of capital at a future date after amalgamation”.

Maharashtra-based PMC Bank was placed under business restrictions with effect from September 23, 2019, on account of fraud, which led to steep deterioration in the net worth of the bank.

The directions were last extended through a June 25, 2021 directive up to December 31, 2021.

“Given the financial condition of the PMC Bank and in the absence of proposals for capital infusion, the bank was not viable on its own. In that event, the only course of action could have been cancellation of its licence and taking it for liquidation, wherein depositors would have received payment up to the insurance ceiling of Rs 5 lakh,” the RBI said.

Keeping in mind the interest of its depositors, the amalgamation scheme has been unveiled, which would provide them protection, the central bank said.

Source link

Tagged : / / / / / / / / / / / / / /

Latest News Today – Economic Activity Recovering Since Late-May, Rising

The gross non-performing assets of banks have been stable at 7.5 per cent in March 2021

The second wave of the pandemic took a “grievous toll” on India, but the dented economic activity has started recovering from late-May, Reserve Bank Governor Shaktikanta Das said on Thursday. In a first, Das flagged the rising data breaches and cyber attacks as a risk facing the economy, along with others like firming global commodity prices. “The recovery that had commenced in the second half of 2020-21 was dented in April-May 2021, but with the wave of infections abating as rapidly as it had set in, economic activity has started to look up in late May and early June,” Das wrote in his foreword to the bi-annual Financial Stability Report prepared by the RBI.

The report said the gross non-performing assets of banks have been stable at 7.5 per cent in March 2021 — the same level as six months ago — but are expected to go up to 9.8 per cent in March 2022, as per its baseline scenario. Das said the dent on balance sheets and performance of financial institutions in India have been much less than what was projected earlier, but was quick to add that a clearer picture will emerge as the effects of regulatory reliefs fully work their way through.

He also said capital and liquidity buffers at financial institutions are “reasonably resilient” to withstand any future shocks. The financial system is on the front foot to aid recovery, but the priority is to maintain and preserve financial stability, he said. Domestic financial markets are also boosted by the strengthening signs of the pandemic’s abatement, the growing pace and breadth of the vaccination drive and renewed hopes of the economy clawing back lost ground as it unlocks, he said.

“…while the recovery is underway, new risks have emerged on the horizon and these include the still nascent and mending state of the upturn, vulnerable as it is to shocks and future waves of the pandemic; international commodity prices and inflationary pressures; global spillovers amid high uncertainty; and rising incidence of data breaches and cyber attacks,” he said.

The governor emphasised that sustained policy support accompanied by further fortification of capital and liquidity buffers by financial entities remain vital to tackle the risks. The financial system can take the lead in creating the conditions for the economy to recover and thrive, he said, adding that stronger capital positions, good governance and efficiency in financial intermediation will be the touchstones of this endeavour. 

Source link

Tagged : / / / / / / / / / / / / / / /

Latest News Today – Reserve Bank Of India (RBI) Announces G-SAP 2.0 Of Rs

RBI Monetary Policy 2021: Central bank kept interest rates steady to maintain status quo

The Reserve Bank of India (RBI), in its bi-monthly Monetary Policy Committee (MPC) Statement, said that another round of the Government Securities Acquisition Programme (G-SAP 1.0) worth Rs 40,000 crore will be conducted on June 17. Out of this, Rs 10,000 crore will constitute the purchase of state development loans or SDLs. RBI Governor Shaktikanta Das said that the central bank does not expect the market to respond appropriately to the announcement of G-SAP 2.0. (Also Read: RBI Monetary Policy Highlights: Lending Rates Unchanged, Growth Projected At 9.5% )

The specific dates and securities under the G-SAP 2.0 operations will be announced separately. The Reserve Bank planned a G-SAP of Rs 1 lakh crore for the first quarter of the current fiscal.

In its first bi-monthly monetary policy committee for fiscal 2021-22 held in April, the Reserve Bank had announced the secondary market G-SAP 1.0 scheme. As part of the program, the central bank committed upfront to a specific amount of open market purchases of government securities to ensure a stable and orderly evolution of the yield curve amid comfortable liquidity conditions.

”The announcement of G-SAP 2.0 to the tune of Rs. 1.2 lakh crores will ensure adequate liquidity in the system. Upward revision of inflation rate will raise bond yields marginally in the short run,” said Dr. Rajeev Singh, Director General, Indian Chamber of Commerce (ICC).

Shaktikanta Das said in his statement that during the current year so far, the RBI has undertaken regular OMOs and injected additional liquidity to the tune of Rs 36,545 crore, up to May 31, which is in addition to Rs 60,000 crore under the G-SAP 1.0 scheme.

RBI Governor added that a purchase and sale auction under the operation twist was conducted on May 6, to facilitate the easy evolution of the yield curve. Meanwhile, the redemption of government securities worth around Rs 52,000 crore in the last week of May fully neutralised the cash reserve ratio (CRR) restoration.

”As part of its objective to ensure adequate liquidity, RBI has continued with its GSAP 1.0 programme for Q1FY22 with a scheduled Gsec purchase of Rs 40,000 crore in June and importantly, taking it forward with GSAP 2.0 with the planned acquisition of another Rs 1.2 lakh crore in Q2FY22,” said said Mr Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research.

Along with the use of other tools such as OMOs and Operation Twist, these announcements are a clear message to the market participants that RBI would like to provide necessary support and facilitate a slightly downward bias on the bond yields,” he added.

Source link

Tagged : / / / / / / / / / / / / / / / / / / /

Latest News Today – Reserve Bank Of India (RBI) Governor Shaktikanta Das

RBI Governor Shaktikanta Das (file photo)

Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday held a virtual meeting with managing directors and CEOs of small finance banks to gauge potential stress on their balance sheets in the backdrop of rising Covid-19 cases and consequent localised lockdowns. He discussed the current economic situation, credit flows to different segments of borrowers and the liquidity scenario, according to a statement released by the central bank.

Das recognised the important role of small finance banks in delivering credit and other financial services to individuals and small businesses. He emphasised supervisory expectations in terms of maintaining their business resilience and managing risks prudently.

The RBI governor advised banks to pay focussed attention on improving customer grievance redress process and strengthening IT systems in the interest of customers. The meeting was also attended by Deputy Governors M K Jain, M D Patra, M Rajeswar Rao and other senior officials of RBI.

Source link

Tagged : / / / / / / / / / / / /

Latest News Today – RBI Restricts American Express, Diners Club From

RBI restricted American Express and Diners Club from adding new customers from May 1

The Reserve Bank of India (RBI) has restricted American Express and Diners Club International Ltd. from adding new domestic customers from May 1 for not complying with data storage rules. The central bank order won’t impact existing customers. The two companies have been found guilty of not complying with RBI’s directions on ‘Storage of Payment System Data’, according to the RBI.

American Express Banking Corp. and Diners Club International Ltd. are Payment System Operators authorised to operate card networks in the country under the Payment and Settlement Systems Act, 2007 (PSS Act). The RBI has taken the action under Section 17 of the PSS Act, a statement issued by the central bank said.

According to the terms of RBI’s circular on ‘Storage of Payment System Data’ dated April 6, 2018, all payment system providers were directed to ensure that within a period of six months the entire data (including full end-to-end transaction details, information collected, carried, processed as part of the message and payment instruction) relating to payment systems operated by them is stored in a system only in India.

They were also required to report compliance to RBI and submit a Board-approved System Audit Report (SAR) conducted by a CERT-In empanelled auditor within the timelines specified therein.

Source link

Tagged : / / / / / / / / / / / /

Latest News Today – With RBI Keeping Interest Rates On Hold, Quantitative

Fitch revised its inflation rate forecast to an average of 5 per cent in fiscal 2021-22

Fitch Solutions has revised its forecast for the Reserve Bank of India (RBI) to keep its policy repurchase (repo) rate on hold at 4 per cent over the course of FY22 (April 2021 to March 2022) from its prior view for a 25 basis points cut to 3.75 per cent. This comes on the back of RBI pledging to buy up to Rs 1 lakh crore of bonds in Q1 of FY22 to cap borrowing costs and to support the economy’s recovery.

Meanwhile, Fitch revised its inflation rate forecast to an average of 5 per cent in FY22, up from 4.6 per cent previously, due to elevated inflationary pressures which underscores expectation for the RBI to keep its policy rate on hold.

The RBI held its policy repo rate at 4 per cent at its monetary policy meeting on April 7. Accordingly, the reverse repo rate was left at 3.35 per cent.

In addition, the RBI announced a secondary market government securities acquisition programme (G-SAP 1.0), committing to buy up to Rs 1 lakh crore worth of government bonds, taking another step towards formalising quantitative easing.

Fitch said it had initially expected another policy rate cut to arrest the rise in government bond yields since the Union Budget announcement in February.

“However, having an explicit bond purchase guidance from RBI following the announcement of G-SAP will also achieve a similar effect, if not even be more effective than a rate cut on capping the increase in bond yields.”

Government bond yields have trended higher since the Union Budget announcement in February, given the government’s substantial market borrowing plan of Rs 14.3 lakh crore. To be sure, the RBI had already been buying government bonds in the secondary market, and held Rs 3.1 lakh crore worth of bonds in FY21.

However, the announcement of G-SAP marked the first time the RBI had committed to an explicit quantity of bond purchase.

“We believe that this enhances the certainty of bond market on evolution path of bond yields over coming months. This will complement existing open market operations and ‘operation twist’ the central bank conducts to cap increases in bond yields.”

‘Operation twist’ refers to simultaneous purchase of long-end bonds and sale of short-end bonds to cap long-end yields. Following the announcement, government 10-year nominal bond yields fell 12 basis points from the day’s high, indicating that the G-SAP announcement had helped to soothe the nerves of bond market participants.

Fitch said India has entered a second wave of Covid-19 infections in April despite a broadening vaccination rollout with renewed lockdowns implemented in the hardest-hit state of Maharashtra and separately also Delhi to manage the rising numbers of cases.

Given that these two states account for a combined 17 per cent of GDP, with Maharashtra contributing about 13 per cent, renewed curbs on economic activity and movement will weigh on the pace of ongoing recovery.

“We expect the ongoing recovery to be driven by private consumption and gross fixed capital formation. However, we have pegged back our forecast for real GDP growth at 9.5 per cent in FY22, putting us below the IMF’s of 12.5 per cent,” said Fitch.

Source link

Tagged : / / / / / / / / / / / / / / / / / / / / /

Latest News Today – Reserve Bank Of India (RBI) Provides Relaxation In

ECBs are simply commercial loans that are raised by eligible resident entities

The Reserve Bank of India (RBI) in its Monetary Policy Committee review today, announced that the unutilised external commercial borrowing (ECB) proceeds drawn down before March 1, 2020, can be parked in term deposits with banks in the country, up to March 1, 2022. The measure was announced to provide relief to borrowers who could not utilise the proceeds due to the impact of COVID-19. External commercial borrowings are simply commercial loans that are raised by eligible resident entities from recognised non-resident entities according to the Reserve Bank. (Also Read: RBI Monetary Policy Highlights: Repo Rate Steady, Growth Projection Retained At 10.5% )

The entities must conform to parameters such as permitted and non-permitted end-uses, minimum maturity, etc. RBI Governor Shaktikanta Das announced that under the extant ECB framework, the borrowers are allowed to place proceeds in term deposits with banks in India for a maximum period of 12 months. According to the one-time measure to provide relief, the unutilised ECB proceeds drawn down on or before March 1, 2020, can now be parked in term deposits with AD category-I banks up to next year – March 1, 2022. 

Meanwhile, the central bank Governor also announced that the Financial Inclusion Index or FI Index will be published annually in July. The financial inclusion is mostly viewed as a key enabler for achieving sustainable and inclusive development across the world. It is a thrust area for the government, the Reserve Bank, and other regulators, said the RBI.

Source link

Tagged : / / / / / / / / / / / / / /

Latest News Today – All You Need To Know

RBI Monetary Policy 2021: Shaktikanta Das kept key interest rates steady to maintain status quo

The Reserve Bank of India (RBI) Governor Shaktikanta Das announced in the Monetary Policy Committee (MPC) review today that the authority has decided to set up a secondary market Government Security Acquisition Programme or G-SAP 1.0, for the orderly functioning of the G-sec market and evolution of yield curve in the financial year 2021-22. In this regard, the central bank announced a G-SAP amounting to Rs 1 lakh crore in the first quarter of the current fiscal, and the first purchase of Rs 25,000 crore will be done on April 15. (Also Read: RBI Monetary Policy Highlights: Repo Rate Steady, Growth Projection Retained At 10.5% )

”RBI has delivered a dovish pause and reaffirms its accommodative stance and impetus to support the economic recovery. The central bank announced a secondary market G-Sec acquisition programme (GSAP 1.0), which indicates an intention to calendarize its G-sec purchases and will help to manage the yield curve and may help to reduce the term premium as well,” said Sampath Reddy, Chief Investment Officer, Bajaj Allianz Life

”The RBI also intends to lengthen the tenor of variable repo rate auctions, thereby helping to manage the system liquidity depending on evolving conditions and keeping it stable (although the governor said it should not be read as liquidity tightening). Overall, the policy has been dovish as supported by fall in bond yields, and this should also benefit the equity markets by keeping borrowing costs in check for some time,” added Mr Reddy.

The RBI Governor said that the positive externalities of G-SAP 1.0 operations need to be reflected in those segments of the financial markets that rely on the G-sec yield curve as the main pricing benchmark. Additionally, the extension of Held-to-Maturity (HTM) dispensation opens up space for investments of more than Rs 4 lakh crore.

Mr Das explained that the central bank will continue to deploy the regular operations under the liquidity adjustment facility (LAF), the longer-term repo or reverse repo auctions, forex, as well as open market operations (OMOs). These operations will ensure that the liquidity conditions evolve in tandem with the accommodative policy and that the financial conditions are supportive for all stakeholders.

The objective of the Reserve bank is to erase volatility in the G-sec market, due to its central role in the pricing of the other financial market instruments across the term structure and issuers, both in the public and private sectors. 

Source link

Tagged : / / / / / / / / / / / /

Reserve Bank Of India Likely To Propose Stricter | Sidnaz Blog

The RBI could also suggest large NBFCs be required maintain a cash reserve ratio.

The Reserve Bank of India is likely to propose stricter regulatory norms for shadow banks in a bid to strengthen solvency and sustainability of a sector that has been showing signs of stress in recent years, two sources said. RBI began trying to move towards tighter norms for the sector after Infrastructure Leasing & Financial Services, the largest NBFC, went bankrupt in 2018, and Dewan Housing Finance Corp and Altico Capital defaulted on payments in 2019. The RBI is expected to set out its proposals in a discussion paper next week and recommend that bigger non-banking finance companies (NBFCs), or shadow banks, maintain a statutory liquidity ratio (SLR), the sources said. 

Neither officials wished to be named as the discussions on the proposals have not been made public. Currently, banks are mandated to maintain SLR or the minimum percentage of deposits that they must hold in the form of liquid cash, gold or government securities at 18 per cent. The RBI could also suggest large NBFCs be required maintain a cash reserve ratio. CRR currently stands at 3 per cent, below the usual 4 per cent level, after a temporary reduction by RBI due to the ongoing pandemic that will be reversed after March 31.

“As a security, to ensure sustainability and also to ensure liquidity for NBFCs, SLR and other steps, like CRR are being contemplated,” one of the officials said. The move could be a huge cash drain for the sector which is currently free from maintaining these reserve ratios, which allows them to give loans to sub prime lenders as well. 


The proposal, however, is expected to recommend a phased implementation of the reserve ratios, ensuring NBFCs are given time to adhere to the norms, the official said. “Cost of compliance to rules and regulations should be perceived as an investment as any inadequacy in this regard will prove to be detrimental,” RBI Governor Shaktikanta Das said in a speech on Saturday referring to increased regulation in recent years for banks and shadow banks.

Source link

Tagged : / / / / / / / / / / / /