Reserve Bank of India (RBI) had released its annual report for the financial year 2022-23. In a series of articles, we will go through the highlights of the report. This is the fourth article in the series.
Chapter 6 – Regulation, Supervision and Financial Stability (Part II)
- To commemorate 75 years of independence (Azadi Ka Amrit Mahotsav), 75 Digital Banking Units (DBUs) were set up in 75 districts of the country to catalyse the adoption of digital modes of doing banking transactions in the country. As on March 31, 2023, there were 84 DBUs functioning across the country.
- A pilot project for end-to-end digitalisation of Kisan Credit Card (KCC) lending, conceptualised and developed by Reserve Bank Innovation Hub (RBIH) in consultation with RBI, was operationalised in Madhya Pradesh, Karnataka and Tamil Nadu. The pilot project of lending based on milk pouring data to dairy farmers has also commenced in Gujarat in association with HDFC Bank. All the learnings from the pilots are being used towards development of an Integrated Public Tech Platform for Finance (IPTPF), which would be an enabler for delivery of the frictionless credit by facilitating seamless flow of required digital information to lenders.
- RBIH conducted a Swanari TechSprint, that aimed to encourage the financial services ecosystem partners to create and produce smart, creative, and sustainable solutions for the underserved, low-and middle-income (LMI) women and women-owned enterprises.
- ‘On Tap’ application facility under Regulatory Sandbox (RS) is currently open for themes ‘Retail Payments’ and ‘Cross-border Payments’.
- In order to facilitate testing of hybrid products / services falling within the regulatory ambit of more than one financial regulator, viz., RBI, Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI), International Financial Services Centres Authority (IFSCA) and Pension Fund Regulatory and Development Authority (PFRDA), a Standard Operating Procedure (SOP) for Interoperable Regulatory Sandbox (IoRS) has been prepared and operationalised by Inter-Regulatory Technical Group on FinTech (IRTG on FinTech) constituted under the aegis of Financial Stability Development Council-Standing Committee (FSDC-SC).
- RBI launched its first global hackathon HARBINGER 2021 with the theme ‘Smarter Digital Payments’. The second edition of RBI’s global hackathon – ‘HARBINGER 2023’ has been launched with the theme ‘Inclusive Digital Services’ wherein innovative ideas have been invited for the 4 problem statements, viz., innovative, easy-to use, digital banking services for differently abled (Divyaang), RegTech solutions to facilitate more efficient compliance for Regulated Entities (REs), exploring use cases / solutions for Central Bank Digital Currency (CBDC)-retail transactions; including transactions in offline mode and increasing transactions per second (TPS) / throughput and scalability of blockchains.
- An assessment of bank group-wise fraud cases over the last 3 years indicates that while private sector banks reported maximum number of frauds, public sector banks continued to contribute maximum to the fraud amount during 2022-23.
- Frauds have occurred predominantly in the category of digital payments (card / internet), in terms of number. However, in terms of value, frauds have been reported primarily in the loan portfolio (advances category).
- While small value card / internet frauds contributed maximum to the number of frauds reported by the private sector banks, the frauds in public sector banks were mainly in loan portfolio.
- Key Risk Indicators (KRIs) were rolled out during the year for all Level IV Urban Co-operative Banks (UCBs) and the Level III UCBs with asset size greater than ₹5,000 crore.
- The online fraud reporting system for Non-Banking Financial Companies (NBFCs) has commenced from July 1, 2022. As part of online reporting system, a separate quarterly return (FMR 4) has been introduced for reporting security incidences, i.e., theft, burglary, dacoity and robbery.
- A risk-based approach (RBA) to Know Your Customer (KYC) / Anti Money Laundering (AML) supervision of scheduled commercial banks (SCBs) was designed and implemented in the supervisory cycle 2020-21. The same has also been extended to select UCBs and select NBFCs.
- While in case of UCBs, the guidelines on appointment of Chief Compliance Officer (CCOs) would be applicable to tier-3 and tier-4 UCBs, in case of NBFCs these would be applicable to NBFCs in the Upper and Middle Layer (NBFC-UL and NBFC-ML).
- Unified Fraud Reporting system for all Supervised Entities (SEs) is being implemented as part of the augmented reporting system under Centralised Information Management System (CIMS) project.
- A mechanism of structured meetings of senior supervisory managers (SSMs) with statutory auditors (SAs) of select UCBs and NBFCs was introduced by RBI. A similar mechanism is already in place for SSMs and SAs of commercial banks since 2019.
- RBI has revised the business coverage norms under statutory branch audit process of public sector banks (PSBs) and has prescribed a minimum of 70% of funded and non-funded credit exposures to be covered for 2022-23, while giving discretion to determine business coverage for 2023-24 onwards as per their Board approved policy.
- Advanced Supervisory Analytics Group (ASAG) has been set up. ASAG has identified use cases such as social media analytics, KYC compliances and governance effectiveness that are being developed using machine learning models.
- A new SupTech initiative - DAKSH - Reserve Bank’s Advanced Supervisory Monitoring System - was launched by RBI. This is a web-based end to-end workflow application workflow solution to streamline and strengthen its various supervisory processes.
- Contact Centre (toll-free number – 14448) timings for interaction with executives in Hindi and English was extended from 9:30 A.M. to 5:15 P.M. (7 hours and 45 minutes) to 8.00 A.M. to 10.00 P.M. (14 hours) on all weekdays except national holidays. Information on Interactive Voice Response System (IVRS) is available on 24×7×365 basis. 2 additional languages, Assamese and Punjabi, have been added to 8 regional languages, viz., Bengali, Gujarati, Kannada, Malayalam, Marathi, Odia, Tamil and Telugu, available at the time of its launch on November 12, 2021.
- The project for development of the state-of-the-art Contact Centre at 3 locations namely Bhubaneswar, Chandigarh and Kochi with Business Continuity (BC) and Disaster Recovery (DR) capabilities is underway. The connectivity and network requirements for the Contact Centre would be provided by Indian Financial Technology and Allied Services (IFTAS).
- Nationwide Intensive Awareness Programme (NIAP) was launched on November 1, 2022 and spread over the month of November, with an objective to increase the awareness among the public on their rights, Alternate Grievance Redress (AGR) / Internal Grievance Redress (IGR) mechanisms and overall financial awareness.
- Committee (Chairman: Shri B. P. Kanungo) for Review of Customer Service Standards in RBI Regulated Entities (REs) constituted for examining and reviewing the customer service standards in the REs and adequacy of customer service regulations and suggest measures to improve customer protection, has submitted its report.
- Credit Information Companies (CICs) were brought under Reserve Bank Integrated Ombudsman Scheme (RB-IOS), 2021.
- Internal Ombudsman (IO) mechanism was previously made applicable to (a) banks; (b) non-bank payment system participants; and (c) deposit-taking NBFCs (NBFCs-D) with 10 or more branches and non-deposit taking NBFCs (NBFCs-ND) with asset size of ₹5,000 crore and above, having public customer interface. IO mechanism has now been extended to CICs.
- As per International Association of Deposit Insurers (IADI), the mandate of deposit insurers can be classified into 4 categories based on the overall functions. (a) “Pay box”, where the deposit insurer is only responsible for the reimbursement of insured deposits; (b) “Pay box plus”, where the deposit insurer has additional responsibilities, such as certain resolution functions (e.g., financial support); (c) “Loss minimiser”, where the insurer actively engages in a selection from a range of least-cost resolution strategies; and (d) “Risk minimiser”, where the insurer has comprehensive risk minimisation functions that include risk assessment / management, a full suite of early intervention and resolution powers, and in some cases prudential oversight responsibilities.
- Deposit Insurance and Credit Guarantee Corporation (DICGC) largely comes under the category of ‘pay-box plus’ whereby DICGC, in addition to making payout to depositors of liquidated banks and banks placed under All Inclusive Directions (AID) by RBI (with restriction on withdrawal of deposits), provides financial assistance in the case of merger of a weak bank with a strong bank after the approval of the merger scheme by the competent authority.
- The deadline for banks to complete the process of renewal of existing agreements for the safe deposit lockers was extended by a year to December 31, 2023, with intermediate milestones of 50% by June 30, 2023, and 75% by September 30, 2023.
References
Reserve Bank of India. (2023, May 30). 'RBI Annual Report 2022-23'. Retrieved from https://www.rbi.org.in/Scripts/AnnualReportPublications.aspx?year=2023
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