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 – Ban On Mastercard To Impact Banks’ Income, Card


RBI’s 2018 rules were adopted despite aggressive lobbying by U.S. firms seeking to dilute them.

India’s decision to ban Mastercard Inc for non-compliance with data storage rules has unsettled the country’s financial sector as it will disrupt banks’ card offerings and hit revenues, payments and banking industry executives told Reuters.

Wednesday’s central bank order followed similar action in April against American Express, but Mastercard is a much bigger player in the Indian market, where many lenders offer cards using the U.S. firm’s payments network.

A Reuters analysis of online card listings of 11 domestic and foreign banks in India showed Mastercard accounted for about a third of roughly 100 debit cards on offer, and more than 75 credit card variants used its network.

From July 22, the Reserve Bank of India (RBI) said, new issuance of such cards will stop as Mastercard did not comply with 2018 rules requiring foreign card networks to store Indian payments data locally for “unfettered supervisory access”.

Though existing customers will not be hit, business impact will be significant as banks need to sign new commercial deals with rival networks such as Visa, a process that can take months and involve weeks of back-end technology integration, five payment and banking executives said.

One banking executive said the switch to Visa could take as long as five months. And with American Express and Mastercard prohibited, Visa gets an unprecedented advantage in negotiations in a credit card market it already dominates.

“It will mean temporary disruption for banks, a lot of hectic negotiations and loss of business in the short term,” said one of the sources, a senior Indian banker.

The RBI’s 2018 rules were adopted despite aggressive lobbying by U.S. firms seeking to dilute them. Mastercard has said it is “disappointed” with the decision and will work to resolve the concerns.

“This is consistent with our considerable and continued investments in our customers and partners in India to advance the government’s Digital India vision,” Mastercard said in a statement on Thursday.

The decision is a major setback for Mastercard, which counts India as a key market. In 2019, Mastercard said it was “bullish on India”, announcing $1 billion in investment over the next five years, after investing $1 billion from 2014 to 2019.

Mastercard also has research and technology centres in India, where its workforce of 4,000 is the second largest after the United States, having grown from 29 in 2013.
 

High Card Usage, Income Impact

Indians’ use of credit and debit cards has risen as digital payments have spread. By May, RBI data shows, there were more than 62 million credit cards and about 902 million debit cards, which together accounted for transactions worth $40.4 billion.

The delays in transition to Visa are also seen hitting bank fees and other incomes they generate from their cards business, the sources said.

In a research note on RBI’s decision, Macquarie flagged as a “key concern” the risk that banks could suffer as credit cards were a profitable product with a so-called post-tax return on assets of around five per cent to six per cent.

Some banks, such as India’s RBL, lists 42 credit cards on its website, all using the Mastercard network, while Yes Bank lists seven using Mastercard, though none on Visa. The Citibank website offers four Mastercard credit cards.

RBL said in a statement on Thursday that it had reached a pact with Visa for its credit cards after the RBI order, but integration would take up to 10 weeks.

One of the sources said, however, that negotiations for the deal had taken six months.

RBL said it had a share of five per cent in the credit card market but its issuance of 100,000 new cards each month could potentially be affected. Its stock fell more than three per cent in early trade.

Yes Bank in a statement said it is “evaluating migration to other platforms for seamless transition” for issuing new credit cards. A Citibank spokesperson told Reuters it was working with its partner Mastercard “to evaluate any potential impact”.



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Latest News Today – How To Invest In Cryptocurrency, Traditional Currencies


Leading cryptocurrencies -bitcoin and ethereum suffered hefty losses in the past few months

When compared to fiat currencies, crypto assets have an almost inverse relationship with macro-economic factors such as inflation growth, Mr Sumit Gupta, CEO and Co-Founder of CoinDCX told NDTV. ”Considering the fact that crypto-assets like bitcoin (BTC) are digital tokens that can be exchanged between two parties directly with low transaction fees, their value is currently influenced by the increasing adoption rate and burgeoning transaction volumes,” said Mr Gupta, while discussing the factors that determine the movement of cryptocurrencies. 

The comments from the industry leader come at a time when leading cryptocurrencies such as bitcoin and ethereum have witnessed heavy volatility in the last few months, registering hefty losses after China announced a ban on its financial and payment institutions from providing cryptocurrency services.

As the digital currencies struggle to rebound, investors have again drawn concerns over the volatile nature of crypto assets, compared to the predictable nature of traditional currencies. 

Traditional currencies usually react to the macro-economic developments and foreign exchange interventions taken by central banks. However, Mr Gupta describes that crypto assets remain largely ”unperturbed” by the measures with no control exerted by central banks and continue to derive value based on their utility as a safe, secure, and de-regulated financial token.

”Unlike traditional currencies, their supply is predetermined and limited to a certain maximum threshold which is a huge driver for further price discovery due to the increasing demand,” added the CEO of the country’s largest and safest cryptocurrency exchange. 

Cryptocurrency’s future in India

In developed economies such as the United States, the recent losses suffered by leading cryptocurrencies prompted investors to book profits in stocks and other risk assets, which rallied massively on hopes of an economic recovery.

However, in a country like India, where many people are still not well-versed with investing in risky assets, the future of cryptocurrency in the country may be questioned. ”Indian investors are known to have a long-term approach towards investing and remain committed to promising sectors or asset classes,” claimed Mr Gupta. 

As the government is yet to legalise crypto investing in India, many have concerns over the legal ramifications of investing in cryptocurrencies. ”Concerns related to the taxation policies governing crypto assets once addressed will lead to more clarity and drive further participation from Indian investors in this promising space,” he added. 

Long-term Vs short-term investment approach: What is better for crypto markets? 

Given the volatile nature of crypto markets, first-time investors are often hesitant to play with cryptocurrencies. But the CoinDCX leader recommends new investors to take the plunge and research the crypto asset before taking any fresh positions. ”They should exercise due caution considering the recent volatility in prices and would benefit from adopting a long-term investment approach when it comes to crypto assets,” said Mr Gupta. 

He has a piece of special advice for all those taking a short-term investment approach in crypto markets. ”For traders looking to play short-term movements, it is crucial to enter at important support levels and maintain a strict stop loss in proportion to above levels and their risk appetite.”

”Lastly, when we look at the past performance of major crypto assets, it is evident that investors with a longer investment horizon have benefited from multifold returns,” explained Mr Gupta. 



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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 – 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. 



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Latest News Today – Banks’ Buffers Strong Enough To Withstand Future Shocks,


RBI said that banks have strong enough capital and liquidity buffers to withstand future shocks

Banks have strong enough capital and liquidity buffers to withstand future shocks as the impact of the pandemic on their balance sheets has not been as severe as projected earlier, a report from the Reserve Bank of India (RBI) said.

The Financial Stability Report is published bi-annually by the RBI on behalf of the Financial Stability and Development Council, an umbrella group of regulators which gives an overview of the health of India’s financial system.

The report said banks’ gross non-performing assets could rise to 9.8 per cent of total assets by March 2022 from around 7.48 per cent as of the end of March this year under a baseline scenario and to 11.22 per cent under a severe stress scenario.

The projections are much less pessimistic than the report released in January, in which the RBI had said that bad loans could double in a severely stressed scenario.

“Capital and liquidity buffers are reasonably resilient to withstand future shocks, as the stress tests presented in this report demonstrate,” RBI Governor Shaktikanta Das, wrote in the foreword to the report.

He also said there are new risks which have emerged on the horizon, including potential future waves of the coronavirus pandemic, international commodity prices and inflationary pressures and rising instances of data breaches and cyber attacks.

The report showed that Indian banks, which have been carrying a significant bad loan burden for several years, managed to bring down bad loans to 7.5 per cent in March 2021, compared with 8.5 per cent in March 2020 despite the pandemic-led challenges.

“Unprecedented policy support has contained the impairment of balance sheets of banks in India despite the dent in economic activity brought on by waves of the pandemic,” the report said. Lenders also have sufficient capital even under a stress scenario, it stated.

The RBI did also say that downside risks remained, especially from loans given to small and medium enterprises. Subdued loan growth can also adversely impact net interest income levels of banks, it added.



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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 – Real Gross Domestic Product (GDP) Growth Likely To Be


India GDP Data 2020-21: The country’s GDP grew by 1.6 per cent in the last quarter of fiscal 2021

The Indian economy is likely to grow by 8.7 per cent in the current fiscal year 2021-22, projects domestic brokerage firm Motilal Oswal. The firm trimmed its projection of the real gross domestic product (GDP) growth for the current fiscal from 11.1 per cent to 8.7 per cent. However, the economic growth forecast for the next fiscal year 2022-2023 was revised from four per cent to 5.4 per cent. (AlsoRead: Economy May Have Shrunk 12% In June Quarter Due To Covid Second Wave: Report )

The economy contracted by 7.3 per cent in the previous financial year 2021, recording its worst-ever performance in over four decades. In the first quarter of fiscal 2021, the economy contracted by a massive 23.9 per cent, and 7.5 in the second quarter resulting in a technical recession. The gradual easing of lockdown norms lead to recovery in the subsequent third and fourth quarters in the previous financial year.

However, the recent surge in industrial metals, as well as agricultural commodities, is likely to have a much larger impact on the wholesale price index or WPI over the consumer price index (CPI), according to Motilal Oswal.

The real GDP is a measure of a country’s output in terms of the value of indicators such as goods and services, government spending, investments, and exports. The real GDP takes the nominal GDP and adjusts for inflation or deflation accordingly, by comparing and converting prices to a base year’s prices.

The real GDP accurately represents a country’s economic activity as it adjusts for price changes. It is calculated by dividing the nominal GDP by the deflator. The policy instrument for the Reserve Bank of India (RBI) is the consumer price index, even though the GDP deflator is more closely linked with the wholesale price index.

The RBI, in its latest monetary policy statement unveiled on June 4, maintained the status quo on key interest rates for the sixth time in a row, continuing with its accommodative stance to revive the economy. However, the brokerage house expects the RBI to shift its accommodative stance to neutral by the year-end. According to Motilal Oswal, three notable trends in the current financial year 2022 are as follows:

  • RBI has announced higher dividends to the government by Rs 40,000 crore.
  • An additional fertiliser subsidy of Rs 14,008 crore announced by the government
  • Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) valued at Rs 90,00 crore is extended to seven months up to November 2021.

Meanwhile, the RBI, in its monthly bulletin for June 2021 said that the second COVID-19 wave may result in a loss of Rs 2 lakh crore in output in the current fiscal, as lockdown restrictions and the virus’ spread in smaller cities, villages hit the rural demand.

Additionally, in a report published recently, brokerage firm UBS Securities India, said that the economy may have contracted 12 per cent in the June quarter due to restrictions imposed by the states in April and May to contain the second wave of the pandemic.



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