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.



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Latest News Today – Reserve Bank Of India (RBI) Eyes Phased Roll Out Of Its


RBI has voiced its concern over the use of cryptocurrencies which it sought to outlaw in 2018

The Reserve Bank of India is considering a phased introduction of its own central bank digital currency (CBDC), deputy governor T. Rabi Shankar said, and is examining various issues including the underlying technology and issuance method.

“CBDCs are likely to be in the arsenal of every central bank going forward. Setting this up will require careful calibration and a nuanced approach in implementation,” Shankar said according to a speech released late on Thursday. “As is said, every idea will have to wait for its time. Perhaps the time for CBDCs is nigh,” he added.

According to a 2021 survey by the Bank for International Settlements, 86 per cent central banks were actively researching the potential for CBDCs, 60 per cent were experimenting with the technology and 14 per cent were deploying pilot projects.

China leads the space and has already started trials of a digital currency in several cities while the U.S. Federal Reserve and Bank of England are looking into it for a future launch.

RBI has been working on the idea of CBDC for years. Virtual currencies (VCs) like bitcoin have gained popularity in India in recent years and unofficial estimates suggest the country has around 15 million investors holding over Rs 100 billion ($1.34 billion) in crypto assets.

The RBI has repeatedly voiced its concern over the spread and use of cryptocurrencies which it sought to outlaw in April 2018. It had to withdraw the ban in March 2020 when the country’s top court said the move was unconstitutional.

“CBDCs are desirable not just for the benefits they create in payments systems, but also might be necessary to protect the general public in an environment of volatile private VCs,” Shankar said with regards to the need for CBDCs for emerging economies.

Sameer Narang, chief economist at Bank of Baroda said investors would still look to private digital currencies, which have appreciated in value despite recent falls.

“Some users may want to use the private digital currencies as store of value and not only for payments,” he added.



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Latest News Today – Vaccination Push Has Brightened Near-Term Prospects Of


Aggressive vaccination push has brightened near term economic prospects, RBI has said

The near-term prospects for the Indian economy have brightened with the tapering of the second wave as well as aggressive vaccination push, is what the Reserve Bank of India (RBI) has observed in its monthly bulletin for July 2021, while commenting on the overall state of the economy.

At the same time though, it has noted that a substantial increase in aggregate demand has not happened, even though various high frequency indicators have shown a recovery.

On the other hand, the central bank’s bulletin said that agricultural conditions are favourable with monsoon’s revival, however the second wave has adversely impacted the revival of manufacturing and services sectors.

“A pick-up in inflation is driven largely by adverse supply shocks and sector-specific demand-supply mismatches caused by the pandemic,” the bulletin said.

These factors should ease over the year as supply side measures take effect, it noted.

Monetary policy transmission in the country is the second key area under focus in RBI’s bulletin, where it has said that transmission of policy repo rate changes to deposit and lending rates of scheduled commercial banks (SCBs) has improved substantially since the introduction of external benchmark linked lending rate (EBLR) regime in October 2019.

“Data collected from banks suggest that the share of outstanding loans linked to external benchmark in total floating rate loans has increased from as low as 2.4 per cent during September 2019 to 28.5 per cent by the end of 2020-21,” it said.

The third main focus of RBI bulletin is on the pharmaceutical exports, where it has observed that the Indian pharmaceutical industry is currently heavily dependent on its imports of active pharmaceutical ingredients (APIs), especially from China, despite having domestic research and development (R&D) potential through various channels such as joint ventures and domestic capacity improvements.

It has suggested that timely diversification of imports of raw materials and a long-term approach towards R&D is required for elevating the sector’s global position.



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Latest News Today – Reserve Bank Of India (RBI) Cancels Licence Of Dr


The bank with its current financial position would be unable to pay its depositors in full

The Reserve Bank of India (RBI) on Wednesday said it has cancelled the licence of Dr Shivajirao Patil Nilangekar Urban Co-operative Bank Ltd, Nilanga, Latur, as it does not have adequate capital and earning prospects.

Also, the Maharashtra-based bank with its current financial position would be unable to pay its depositors in full, the central bank said while announcing cancellation of its licence. The bank ceases to carry on banking business, with effect from the close of business on Wednesday.

Further, the Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra, has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank.

The RBI said Dr Shivajirao Patil Nilangekar Urban Co-operative Bank does not have adequate capital and earning prospects, and as such, it does not comply with the provisions of the Banking Regulation Act, 1949.

“The continuance of the bank is prejudicial to the interests of its depositors,” it said adding that public interest would be adversely affected if the bank is allowed to carry on its banking business any further.

With cancellation of its licence, the bank has been prohibited from conducting the business of ”banking” that includes acceptance of deposits and repayment of deposits with immediate effect.



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Latest News Today – Reserve Bank Of India (RBI) Imposes Penalty On These 14


Reserve Bank of India imposed monetary penalty on 14 banks for violation of rules

The Reserve Bank of India (RBI) imposed monetary penalties – ranging between Rs 50 lakh to Rs 2 crore, on 14 banks including the State Bank of India (SBI), Punjab and Sind Bank, and Bandhan Bank, among others, for contravention of various regulatory norms, including on lending to non-banking financial companies or NBFCs. These 14 banks include private banks, public sector banks, co-operative banks, foreign banks, and also a small finance bank. (Also Read: Reserve Bank Of India Imposes Penalty Of ₹ 10 Crore On HDFC Bank )

The violations include non-compliance with certain provisions of directions issued by RBI on ‘Lending to Non-Banking Financial Companies (NBFCs)’ ‘Bank Finance to Non-Banking Financial Companies (NBFCs)’ and ‘Loans and Advances – Statutory and Other Restrictions’, the central bank said in its statement. 

The action by the RBI is based on the deficiencies in regulatory compliance and will not affect the customer-related activities of any of these banks, such as the validity of any transaction. The RBI imposed a penalty of Rs 50 lakh on the State Bank of India – the country’s largest lender, and Rs 2 crore on Bank of Baroda.

A penalty of Rs 1 crore penalty has been imposed each on Bank of Maharashtra, Bandhan Bank, Credit Suisse AG, Central Bank of India, IndusInd Bank, Indian Bank, Karur Vysya Bank, Karnataka Bank, Punjab and Sind Bank, The Jammu & Kashmir Bank, South Indian Bank, and the Utkarsh Small Finance Bank.

Here’s the full list by RBI along with the amount of monetary penalty imposed on each of the banks:

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RBI imposes penalty on 14 banks
Photo Credit: Reserve Bank of India

The central bank said that the scrutiny in the accounts of the “companies of a group” was carried out and it was observed that the banks had failed to comply with certain provisions of the Banking Regulation Act, 1949. RBI then issued notices issued to the banks, advising them to show cause as to why a penalty should not be imposed for non-compliance with the directions of those provisions.

After notices were issued, the RBI received replies from the banks and examined the extent of the charges of non-compliance with the provisions of the Banking Regulation Act, before imposing the monetary penalty on the 14 banks.



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Latest News Today – RBI To Purchase Bonds Worth Rs 20,000 Crore On July 8


RBI will buy government securities worth Rs 1.2 lakh crore between July-September 2021

The Reserve Bank of India (RBI) will undertake an open market purchase of government securities or G-Secs worth Rs 1.2 lakh crore under the G-Sec acquisition programme during the July-September period.

According to a statement issued by the Central bank, it will procure G-Secs through a multi-security auction and under the multiple price method. Subsequently, the first purchase of G-Secs for Rs 20,000 crore will be held on July 8, 2021.

The Reserve Bank has stated that it reserves the right to decide on the quantum of purchase of individual securities and also to accept bids for less than the aggregate amount.

It also reserves the right to purchase marginally higher or lower than the aggregate amount due to rounding-off and to accept or reject any or all the bids either wholly or partially without assigning any reasons.

The Central bank will purchase government securities through a multi-security auction using the multiple price method. 

The eligible participants have been asked to submit their bids in electronic format on the RBI Core Banking Solution (E-Kuber) system between 10 am and 11 am on July 8, 2021.

Physical bids would be accepted only in case of a system failure and these physical bids are to be submitted to the Financial Markets Operations Department of the RBI.

The result of the auctions will be announced on the same day and successful participants should ensure the availability of securities in their SGL account by 12 noon on July 9, 2021.

The RBI said the next purchase under the programme will be conducted on July 22 for Rs 20,000 crore.

In April, RBI Governor Shaktikanta Das had said that the Central bank will conduct the open market purchase of government securities of Rs 1 lakh crore in the first quarter of the financial year 2021-22. The first auction of Rs 25,000 crore was held on April 15.



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Latest News Today – RBI Changes Bonds Auction Methodology


Reserve Bank of India has decided to auction bonds on the basis of uniform price method

The Reserve Bank of India (RBI) has altered its methodology for auction of bonds, under which bonds maturing between two to 14 years, will now be auctioned under the uniform price method.

Subsequently, the benchmark securities of tenures measuring two-years, three-years, five-years and 10-years and 14 years as well as floating rate bonds, will now be issued on the basis of uniform price method, the RBI said in a statement.

The change in methodology was notified by the central bank on July 2, which means that in place of the existing multiple price method, it will use the uniform pricing method.

The RBI said that the decision to change the methodology for bonds auction has been taken after monitoring the market conditions and the market borrowing schedule of the Centre.

The new bond auction methodology will continue till further notice, the statement added.



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Latest News Today – Non-Food Bank Credit Growth Slid In May 2021: RBI Data


Non-food bank credit growth in May 2021 fell compared to May 2020

Non-food bank credit growth decelerated and stood at 5.9 per cent in May 2021 as compared to 6.1 per cent in May 2020, according to data released by the Reserve Bank of India (RBI) on Wednesday.

Non-food credit consists of a major portion of bank credit. It comprises of credit to various sectors of the economy like agriculture, industry, personal loans and services among others.

Meanwhile, as per data released by the central bank, credit to agriculture and allied activities registered an accelerated growth of 10.3 per cent in May 2021 as compared to 5.2 per cent in May 2020.

At the same time though, credit growth to industry decelerated to 0.8 per cent in May 2021 from 1.7 per cent in May 2020.

Size-wise, credit to medium industries registered a robust growth of 45.8 per cent in May 2021 as compared to a contraction of 5.3 per cent a year ago.

Credit growth to micro and small industries accelerated to 5 per cent in May 2021 as compared to a contraction of 3.4 per cent during the year ago period while credit to large industries contracted by 1.7 per cent in May 2021 as compared to a growth of 2.8 per cent during the corresponding period last year.

Credit growth to the services sector decelerated to 1.9 per cent in May 2021 from 10.3 per cent in May 2020, mainly due to deceleration in credit growth to non banking financial companies, transport operators and commercial real estate. However, credit to trade segment continued to perform well, registering accelerated growth of 12.4 per cent in May 2021 as compared to 7.7 per cent during the corresponding last year.

Personal loans registered an accelerated growth of 12.4 per cent in May 2021 as compared to 10.6 per cent a year ago, primarily due to accelerated growth in vehicle loans and credit card outstanding.



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Latest News Today – Reserve Bank Of India (RBI) Extends Regulatory


In September 2019, RBI superseded the board of PMC Bank and placed it under restrictions

The Reserve Bank on Friday extended the regulatory restrictions on Punjab and Maharashtra Cooperative (PMC) Bank by another six months till December 2021 to enable the completion of its takeover by Centrum Financial Services. Paving the way for takeover of the crisis-ridden bank, the RBI had earlier in the month granted in-principle approval to Centrum Financial Services to set up a small finance bank (SFB).

“Taking into account the time required for completion of various activities involved in the process…the validity of the …Directive dated September 23, 2019, as modified from time to time, has been extended for a further period from July 1, 2021 to December 31, 2021, subject to review,” the RBI said in a notification.

In September 2019, the RBI had superseded the board of PMC Bank and placed it under regulatory restrictions, including cap on withdrawals by customers, after detection of certain financial irregularities, hiding and misreporting of loans given to real estate developer HDIL. The restrictions have been extended several times since then.

Initially, the RBI had allowed depositors to withdraw Rs 1,000, which was later raised to Rs 1 lakh per account to mitigate their difficulties. In June 2020, the RBI had extended the regulatory restrictions on the cooperative bank by six months till December 22, 2020. Later it was further extended till June 30, 2021.

In response to an Expression of Interest (EOI) floated by PMC Bank for its reconstruction in November 2020, certain proposals were received. After careful consideration, the RBI said, the proposal from Centrum Financial Services along with Resilient Innovation was found to be prima facie feasible.

Accordingly, the RBI on June 18, 2021 granted ”in-principle” approval to Centrum Financial Services to set up a small finance bank under the general guidelines for ”on tap” Licensing of Small Finance Banks in the Private Sector.

PMC Bank had invited EoI from eligible investors for investment/ equity participation for its reconstruction and had received four proposals. To launch the SFB, the Centrum Group has formed an equal joint venture with Resilient Innovations, an arm of Gurugram-based BharatPe. But Centrum Capital will be the promoter of SFB, under the prevailing laws.

The joint venture will infuse Rs 1,800 crore capital into PMC, Jaspal Bindra, executive chairman of Centrum Group had said.

As of March 31, 2020, PMC Bank’s total deposits stood at Rs 10,727.12 crore and total advances at Rs 4,472.78 crore. Gross NPAs were at Rs 3,518.89 crore at end-March, 2020.



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Latest News Today – Centrum-BharatPe Consortium Will Set Up Bank Within 120


Reserve Bank of India has approval to Centrum Financial Services Ltd to form a small finance bank

With the Reserve Bank of India (RBI) having given a period of 120 days to Centrum Financial Services Ltd (CFSL) to set up a small finance bank, which will eventually take over the troubled Punjab and Maharashtra Cooperative Bank (PMC), the consortium has said that the timeline is “workable” and it hopes to complete the process sooner than that.

Centrum Capital, the holding entity for CFSL, and its partner BharatPe, a payments system company, will infuse Rs 1,800 crore into the small finance bank.

Centrum Capital is the holding entity for CFSL and its partner is BharatPe, a payments system company. RBI last week, had given “in-principle” approval to CFSL to set up a small finance bank.

Talking to NDTV, BharatPe’s Group President Suhail Sameer said, “the timelines are workable and we hope to sort of complete the process sooner.”

Mr Sameer further informed that during the 120-day period while CFSL will set up a small finance bank, the RBI simultaneously will chart out a reconstruction plan for PMC Bank.

“Once we become operational, they (RBI) will take a decision to merge PMC with the small finance bank,” he informed.

Mr Sameer said that for them and the RBI, the interest of the small depositors, who had lost their lives’ savings in the PMC Bank scam, is paramount.

“They have waited for so long, I will ask the depositors to sit tight for some more time and a meaningful outcome will come out of it,” he said.

Elaborating on the process of setting up a small finance bank and meeting the RBI timeline, the BharatPe head said, “we have been communicating with RBI for some time and we are ready and hope to do it sooner. This includes approval from lenders of Centrum to convert its operations into a bank which may take time. Also it requires end audit from RBI for changing operations. However, timelines are workable and we hope to sort of complete the process sooner than later.”

On being asked how does it feel for a newbie digital payments startup like Bharatpe to be on the cusp of becoming half owner of a bank, Mr Sameer said, “It is a great victory for us and a great responsibility.”

He said that the RBI had been watching them and taking note of their performance for quite some time and what the company had achieved in terms of generating payments worth more than billions of dollars in a short span of time, does not happen by fluke.

In addition to this, Mr Sameer said, “in Centrum we have a credible partner and with our combination of conventional lending capabilities and digital capacities, we hope to set up India’s truly digital bank.”



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