Inquisitive Mind

Reserve Bank of India (RBI) has migrated the payments fraud reporting module to DAKSH. What is DAKSH? “दक्ष (DAKSH) - Reserve Bank’s Advanced Supervisory Monitoring System” is a SupTech initiative which is expected to make the Supervisory processes more robust.  DAKSH means ‘efficient’ & ‘competent’, reflecting the underlying capabilities of the application.  What are the features of DAKSH? DAKSH is a web-based end-to-end workflow application through which Reserve Bank of India (RBI) will monitor compliance requirements in a more focused manner with the objective of further improving the compliance culture in Supervised Entities (SEs) like Banks, NBFCs, etc.  The application will also enable seamless communication, inspection planning and execution, cyber incident reporting and analysis, provision of various MIS reports etc., through a Platform which enables anytime-anywhere secure access. What is the payments fraud reporting platform for banks? Earlier, banks were re...

Some banks are identified as systematically important and are subjected to higher capital requirements. When are banks termed as systematically important? What are the additional capital requirements for such banks? And which are the systematically important banks in India? What are Systematically Important Banks (SIBs)? Systematically Important Banks (SIBs) are perceived as banks that are ‘Too Big To Fail (TBTF)’.  Why additional policy measures are required for SIBs? The perception of TBTF creates an expectation of government support for these banks at the time of distress. Due to this perception, these banks enjoy certain advantages in the funding markets. However, the perceived expectation of government support amplifies risk-taking, reduces market discipline, creates competitive distortions, and increases the probability of distress in the future. These considerations require that SIBs should be subjected to additional policy measures to deal with the systemic risks and moral ...

Reserve Bank of India (RBI) has issued consolidated guidelines on Opening of Current Accounts and CC / OD Accounts by Banks. Which entities are covered by the guidelines? The guidelines apply to Current accounts and Cash Credit (CC) / Overdraft (OD) accounts opened / maintained with – All Scheduled Commercial Banks All Payments Banks Opening of Current Accounts for borrowers availing CC / OD facilities from the banking system Aggregate exposure of banking system to the borrower Opening current account Conditions Less than ₹5 crore Banks can open current accounts Banks shall obtain an undertaking from the customers that they shall inform the banks, when the credit facilities availed by them from the banking system becomes ₹5 crore or more. ₹5 crore or more Current accounts with any one of the banks with which it has CC / OD facility Current account by bank having least 10% of the aggregate exposure of the bank...

Reserve Bank of India (RBI) administers the Lead Bank Scheme (LBS). What is Lead Bank Scheme (LBS)? The Lead Bank Scheme (LBS) aims at coordinating the activities of banks and other developmental agencies through various fora in order to achieve the objective of enhancing the flow of bank finance to the priority sector and other sectors and to promote banks' role in the overall development of the rural sector.  The LBS has been extended to the districts in the metropolitan areas, thus bringing the entire country under the fold of the LBS. The LBS is administered by Reserve Bank of India (RBI). Who is Lead Bank? The designated banks in every district are assigned the ‘Lead Bank’ responsibility of the district by RBI.  The Lead Bank is expected to assume a leadership role for coordinating the efforts of the credit institutions and the Government. As on March 31, 2022, 12 public sector banks and one private sector bank have been assigned Lead Bank responsibility in 734 districts ...

Banks are required to maintain Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) at the rates prescribed by Reserve Bank of India (RBI). Which banks are required to maintain CRR and SLR? The following banks are required to maintain CRR and SLR at the rates prescribed by RBI. All Scheduled Commercial Banks (SCBs) (including Regional Rural Banks) Small Finance Banks (SFBs) Payments Banks Local Area Banks (LABs) Primary (Urban) Co-operative Banks (UCBs) State Co-operative Banks (StCBs)  District Central Co-operative Banks (DCCBs) What is Cash Reserve Ratio (CRR)? Every bank is required to maintain in India by way of cash reserve, a certain percent of its Net Demand and Time Liabilities (NDTL) in India, as RBI in terms of Section 42(1) of Reserve Bank of India (RBI) Act, 1934 and Section 18(1) of Banking Regulation Act, 1949 [including provisions of Section 18(1) of BR Act as applicable to cooperative banks], may specify. What is incremental CRR? In terms of Section 42(1A) o...

Voluntary Retention Route (VRR) is a channel for Foreign Portfolio Investors (FPIs) to invest in debt markets in India. What is Voluntary Retention Route (VRR)? Reserve Bank of India (RBI), in consultation with the Government of India and Securities and Exchange Board of India (SEBI), introduced on March 01, 2019, a separate channel called the ‘Voluntary Retention Route’ (VRR), to enable Foreign Portfolio Investors (FPIs) to invest in debt markets in India.  Who are eligible investors under VRR? Any FPI registered with SEBI is eligible to participate through VRR. Participation through this Route is voluntary. What are the categories of investment under VRR? Category Voluntary Retention Route for FPI investment in ‘VRR-Corp’ Corporate Debt Instruments ‘VRR-Govt’ Government Securities ‘VRR-Combined’ Instruments eligible under both VRR-Govt and VRR-Corp Which instruments are eligible under VRR? Under VRR...

An active internet connection is necessary for carrying out any digital payments. However, Reserve Bank of India (RBI) has introduced a framework for carrying out small value digital payments in offline mode. What is offline payment? An offline payment means a transaction which does not require internet or telecom connectivity to take effect.  What is the basis of framework for small value digital payments in offline mode? Reserve Bank of India (RBI) had, vide circular dated August 06, 2020, permitted a pilot scheme to encourage technological innovations that enable small value digital transactions in offline mode. It was stated therein that the decision on formalising such a system would be based on the experience gained. With encouraging feedback from the pilots, a framework for carrying out small value digital payments in offline mode across the country has been introduced. What are the instructions for Payment System Operators (PSOs) and Payment System Participants (PSPs)? Auth...