Inquisitive Mind

Reserve Bank of India (RBI) has issued the directions on Trade Receivables Discounting System (TReDS). What is TReDS? TReDS is a technology platform on a digital or electronic network for facilitating factoring of trade receivables through multiple financiers. What is a Factoring Unit? Factoring unit refers to trade receivable in the form of invoice / bill uploaded either by the seller (in the case of factoring) or by the buyer (in case of reverse factoring), as the case may be. Who are the participants in TReDS? Seller – Micro, Small and Medium Enterprise (MSME) Buyer – any person liable to the seller, whether under a contract or otherwise, against an invoice or bill of exchange, to pay any trade receivable Financier – all entities / institutions permitted to undertake factoring business under the Factoring Regulation Act, 2011 Insurance companies  Credit Guarantee Fund Trust notified by the Government of India Who can operate TReDS platforms? An entity shall seek authorisation fr...

Reserve Bank of India (RBI) has issued directions on authorisation to operate a payment system. To whom shall the directions be applicable? The directions shall apply to – An entity applying for authorisation to operate a payment system under the Payment and Settlement Systems Act, 2007 (PSS Act). An entity authorised to operate a payment system under the PSS Act. What are the requirements for operating a payment system? No person can operate a payment system without an authorisation issued by the RBI. Authorisation shall be available on an on-tap basis. The capital requirement shall be in accordance with the guidelines / directions issued for the specific payment system.  What are the directions on investments from FATF non-compliant jurisdictions? The Financial Action Task Force (FATF) periodically identifies jurisdictions with weak measures to combat money laundering and terrorist financing (AML/CFT) in its following publications – (i) High-Risk Jurisdictions subject to a Call f...

Reserve Bank of India (RBI) has introduced US Dollar-Rupee swap facility for Foreign Currency Non-Resident (Bank) [FCNR (B)] deposits, External Commercial Borrowings (ECBs) and Overseas Foreign Currency Borrowings (OFCBs). Swap facility for FCNR (B) deposits Swap facility for ECBs and OFCBs The swap facility has been introduced for fresh FCNR (B) deposits, including deposits that are renewed upon maturity, for a minimum tenor of 3 years and a maximum tenor of 5 years. The swap facility has been introduced for – ECBs of average maturity of 3 years and above, drawn on after June 8, 2026 till December 31, 2026 by – (a) Public Sector Undertakings (PSUs) whose majority ownership is held by the central and / or state government (other than banks), or (b) PSUs which are incorporated, established or registered under a Central or State Act and controlled by the central / state government. The facility will also be available for the undrawn portion of any exist...

Reserve Bank of India (RBI) has issued directions on credit facilities offered by various regulated entities. This article summarises the directions applicable to lending to Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) and acquisition finance. To whom are the directions applicable? The directions are applicable to the following Regulated Entities (REs) – Commercial Banks  Small Finance Banks (SFBs) All India Financial Institutions (AIFIs) regulated by RBI – Export Import Bank of India (EXIM Bank) National Bank for Agriculture and Rural Development (NABARD) National Housing Bank (NHB) Small Industries Development Bank of India (SIDBI) National Bank for Financing Infrastructure and Development (NaBFID) What are the directions on lending to REITs and InvITs? Lending to REITs (by commercial banks) Lending to InvITs (by commercial banks, SFBs and AIFIs) Banks shall be permitted to lend to REITs which are registered with...

The surplus payable by the Reserve Bank of India (RBI) to the Central Government for the financial year 2025-26 amounted to ₹2,86,588.46 crore.  Why does the RBI transfer the surplus amount to the Central Government? As per section 47 of the RBI Act, 1934, after making provision for bad and doubtful debts, depreciation in assets, contributions to staff and superannuation funds and other provisions, the balance of the profits of the RBI is required to be paid to the Central Government. Also, the Central Government holds 100% of the share capital of the RBI. How much risk provision is required to be maintained by the RBI? The RBI developed the Economic Capital Framework (ECF) during 2014-15 and 2015-16 for determining the appropriate level of risk provisions to be made under the provisions of section 47 of the RBI Act, 1934.  In November 2018, the RBI, in consultation with the Government, constituted an Expert Committee to review the ECF of the RBI (Chairman: Dr. Bimal Jalan, fo...