Inquisitive Mind

Reserve Bank of India (RBI) has released the discussion paper on Securitisation of Stressed Assets Framework (SSAF). What is Securitisation? ‘Securitisation’ means a structure where a pool of assets are transferred by an originator to a special purpose entity (SPE) and the cash flow from this pool of assets is used to service securitisation exposures of different tranches reflecting different degrees of credit risk, where payments to the investors depend upon the performance of the specified underlying exposures, as opposed to being derived from an obligation of the originator. In simple words, securitisation means a structure where a pool of assets (loans) are transferred (sold) by an originator (lender) to a SPE, who converts this pool of assets into securitisation notes (investable instrument) of different tranches (risk). The return (income) for the investors of securitisation notes is based on the cash flow generated from the securitised pool of asset (loans).  A well-develope...

Reserve Bank of India (RBI) has extended the timeline for renewal of locker agreements. Instructions on Safe Deposit Locker / Safe Custody Article Facility Reserve Bank of India (RBI) had revised the instructions on Safe Deposit Locker / Safe Custody Article Facility provided by the banks. The revised instructions came into force with effect from January 01, 2022 and were made applicable to both new and existing safe deposit lockers and the safe custody of articles facility with the banks. What are the instruction on Locker Allotment? Banks shall maintain a branch wise list of vacant lockers as well as a wait-list.  The banks shall acknowledge the receipt of all applications for allotment of locker and provide a wait list number to the customers, if the lockers are not available for allotment. What are the instruction on Model Locker Agreement? Banks shall have a Board approved agreement for safe deposit lockers. For this purpose, banks may adopt the model locker agreement to be fr...

There are various options for online payments and fund transfers in India. In this article we will learn about two such options – Immediate Payment Service (IMPS) and Unified Payment Interface (UPI).   Immediate Payment Service (IMPS) Unified Payment Interface (UPI) Meaning IMPS is offered by National Payments Corporation of India (NPCI) which allows fund transfer through banks and Prepaid Payment Instrument (PPI) Issuers in India. UPI is developed by National Payments Corporation of India (NPCI) which facilitates linking of multiple bank accounts and Prepaid Payment Instrument (PPI) Wallets into a single mobile application. Nature IMPS is a credit-push service i.e. transactions can be originated by payer / remitter / sender only to pay / transfer / remit funds to beneficiary. UPI supports both ‘Pay Request’ (customer pushing funds to the intended beneficiary) and ‘Collect Request’ (customer pulling...

There are various options for online payments and fund transfers in India. In this article we will learn about two such options – National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement (RTGS).   National Electronic Funds Transfer (NEFT) Real Time Gross Settlement (RTGS) Meaning It is a nation-wide centralised payment system owned and operated by Reserve Bank of India (RBI). Nature of system It is credit-push systems i.e. transactions can be originated by payer / remitter / sender only to pay / transfer / remit funds to beneficiary. Availability With effect from December 16, 2019, NEFT is available 24*365. With effect from December 14, 2020, RTGS is available 24*365. Timeline for Settlement Transactions are settled in half-hourly batches (first batch at 00:30 and last batch at 00:00). Transactions are settled in real-time (i.e. immediately)....

Reserve Bank of India (RBI) has issued guidelines on shareholding in banking companies. What are the guidelines on major shareholding in banking companies? ‘Major shareholding’ means aggregate holding of 5% or more of the paid-up share capital or voting rights in a banking company by a person. In terms of Section 12B(1) of Banking Regulation Act, 1949 (BR Act, 1949), any person who intends to make an acquisition which is likely to result in major shareholding in a banking company, is required to seek previous approval of Reserve Bank of India (RBI). On receipt of the application, RBI may seek comments from the banking company on the proposed acquisition. On receipt of the reference from RBI, the concerned banking company shall furnish its comments along with a copy of the relevant board resolution and information to RBI within 30 days. RBI would undertake due diligence to assess the ‘fit and proper’ status of the applicant.  The decision of RBI to (a) accord or deny permission or (...

Reserve Bank of India (RBI) has revised the list of domestic credit rating agencies accredited for the purpose of risk weighting banks' claims for capital adequacy purposes. What is Credit Rating Agency (CRA)? A Credit Rating Agency (CRA) is a company that assigns credit ratings for a debtor's ability to pay back debt and the likelihood of default. What is the list of credit rating agencies eligible for risk weighting banks’ claims? Reserve Bank of India (RBI) has undertaken the detailed process of identifying the eligible credit rating agencies, whose ratings may be used by banks for assigning risk weights for credit risk. Where the facility provided by the bank possesses rating assigned by an eligible credit rating agency, the risk weight of the claim will be based on this rating.  Banks may use the ratings of the following domestic credit rating agencies for the purposes of risk weighting their claims for capital adequacy purposes – Acuite Ratings & Research Limited (Acu...

Reserve Bank of India (RBI) has received application from Annapurna Finance Private Limited, Bhubaneswar during the quarter ended December 31, 2022 under the Guidelines for ‘on tap’ licensing of Universal Banks in the Private Sector. What are the Guidelines for ‘on tap’ licensing of Universal Banks in the Private Sector? Reserve Bank of India (RBI) had issued guidelines for licensing of new banks in the private sector on February 22, 2013. Recognising the need for a ‘continuous authorisation’ policy, RBI had released the ‘Guidelines for ‘on tap’ Licensing of Universal Banks in the Private Sector’ on August 01, 2016, replacing the ‘Stop and Go’ licensing policy. Key features of the Guidelines for ‘on tap’ licensing of Universal Banks in the Private Sector are given below. Who are eligible promoters for setting up a universal bank in the private sector? Promoter Experience required Other conditions Individuals / professionals who are ‘residents’ ...

Reserve Bank of India (RBI) has released the issuance calendar for marketable Sovereign Green Bond (SGrB) for the financial year 2022-23. What are Sovereign Green Bonds (SGrBs)? Sovereign Green Bonds (SGrBs) will be issued by Government of India for mobilising resources for green infrastructure and the proceeds will be deployed in public sector projects which help in reducing the carbon intensity of the economy.  How much SGrB will be issued? As announced in the Union Budget 2022-23, Government of India will be issuing Sovereign Green Bonds (SGrBs) as part of its overall market borrowings. Accordingly, SGrBs for an aggregate amount of ₹16,000 crore would be issued during the second half of the fiscal year 2022-23.  What are the features of SGrB issuance? The features of the SGrB issuance will be as under – Issuance Method SGrBs will be issued through Uniform Price Auction. Non-competitive bidding facility 5% of the notified amount of sale wi...