Highlights of RBI Annual Report 2022-23– Chapter 7 to 12

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 fifth and last article in the series. 

Chapter 7 – Public Debt Management

• The maturity profile of outstanding dated securities was elongated to contain the rollover risk. 
• RBI in consultation with the central government issued Sovereign Green Bonds (SGrBs) for ₹16,000 crore during 2022-23 (two tranches of ₹8,000 crore each, comprising 5-year and 10-year SGrBs for ₹4,000 crore in each tranche). The proceeds of SGrBs will be deployed in public sector projects, which will help in reducing the carbon intensity of the economy. 
• Government of India (GoI) notified the framework for SGrBs and this was rated as ‘Medium Green’ with a ‘Good’ Governance’ score by CICERO. 
• Inputs on Medium-Term Debt Management Strategy (MTDS) for the GoI were provided to Public Debt Management Cell, GoI. The MTDS has been articulated for the medium term for a period of 3 years (i.e., 2022-23 to 2024-25), which is generally reviewed annually with a roll-over period of next 3 years. Two states, viz., Maharashtra and Telangana agreed for preparation of pilot MTDS.
• India announced to achieve net zero emission by 2070.
• The weighted average yield (WAY) of G-sec issuances during the year increased by104 bps as compared to the previous year.
• Ways and Means Advances (WMA) limits and timelines for Overdraft (OD) for state governments / union territories (UTs) were fixed as per the recommendation of the advisory committee on ‘WMA to State Governments’ (Chairman: Shri Sudhir Shrivastava), effective April 1, 2022. Accordingly, the WMA limit for state governments / UTs was fixed at ₹47,010 crore. State governments / UTs can avail overdraft on 14 consecutive days and can be in OD for a maximum number of 36 days in a quarter.
• On a request received from the Government of Odisha, a Budget Stabilisation Fund has been established which would cater to the needs of the state in mitigating the risk of revenue shocks on the state budget. 

Chapter 8 – Currency Management

• Currency in circulation (CiC) includes banknotes, coins and e₹. 
• The definition of ‘bank note’ was inserted in Section 2 of RBI Act, 1934 to pave the way for introduction of digital currency in the country.
• In terms of Section 22A of RBI Act, 1934, denominations as set out in Section 24 of the Act shall not apply to banknotes in digital form. Accordingly, the live-pilot of e₹-Retail has been launched in denominations of 50 paise, ₹1, ₹2, ₹5, ₹10, ₹20, ₹50, ₹100, ₹200, ₹500 and ₹2000, while e₹-Wholesale does not envisage any denomination.
• The value of e₹-Wholesale (e₹-W) and e₹-Retail (e₹-R) in circulation stood at ₹10.69 crore and ₹5.70 crore, respectively, as on March 31, 2023.
• During 2022-23, out of the total Fake Indian Currency Notes (FICNs) detected in the banking sector, 4.6% were detected at RBI and 95.4% at other banks.
• Mobile Aided Note Identifier (MANI) App can now identify banknote denominations through audio notification in 11 new languages (Assamese, Bengali, Gujarati, Kannada, Malayalam, Marathi, Odia, Punjabi, Tamil, Telugu and Urdu), in addition to Hindi and English that were available earlier. The App has also been enabled for use by ‘partially-sighted’ persons.
• Mobile Coin Vans (MCVs) for distribution of coins are being operated from October 1, 2022 by some banks in select states on a pilot basis with a special focus on sub-urban, rural and remote areas. Based on the experience gained, the initiative is being extended to more states.
• The new microsite on Indian currency will showcase information on design and security features through an interactive 360-degree view of the banknotes and various multimedia options.
• RBI has conceptualised a pilot project on a dynamic Quick Response (QR) code-based coin vending machine (QCVM), which is a cashless coin dispensation system using the Unified Payments Interface (UPI). The pilot project is being rolled out at 19 locations in 12 cities across the country. QCVM eliminates the need for physical tendering of banknotes and their subsequent authentication. Further, in QCVMs, the customers will have the option to withdraw coins in required quantity and denominations.

Chapter 9 – Payment and Settlement Systems and Information Technology

• Interoperable Card-less Cash Withdrawal (ICCW) permitted at Automated Teller Machines (ATMs) with customer authentication using UPI.
• Minimum net-worth requirement for non-bank Bharat Bill Payment Operating Units (BBPOUs) was reduced from ₹100 crore to ₹25 crore.
• The scope of Bharat Bill Payment System (BBPS) was expanded to include all categories of payments and collections, both recurring and non-recurring in nature. 
• The scope of BBPS was extended to permit cross-border inward payments [under Rupee Drawing Arrangement (RDA)] by providing non-resident Indians (NRIs) additional options to undertake utility, education, and other bill payments on behalf of their families in India.
• RBI permitted small value transactions in offline mode using UPI through an on-device wallet in UPI App where users can transfer a maximum of ₹2,000 to UPI Lite with the wallet subsequently debited for transaction of up to ₹200, provided sufficient balance is available, without the necessity of entering UPI PIN.
• RBI permitted linking of RuPay credit cards to UPI.
• The scope of UPI enhanced to facilitate payments from pre sanctioned credit lines at banks. 
• UPI has the feature for processing mandated recurring transactions and single-block-and-single debit. RBI permitted the introduction of single-block-and-multiple debits functionality in UPI to enhance the capabilities for merchant payments. 
• RBI permitted access to UPI by NRIs and foreign nationals (from G20 countries) for their merchant payments [peer-to-merchant (P2M)] in India.
• The linking of UPI with PayNow of Singapore helped facilitate low-cost fund transfers and remittances between the two countries. 
• Acceptance of UPI through QR codes has been enabled in Bhutan, Singapore, and the UAE. Indian tourists travelling to these countries can use their UPI Apps to make payment at merchant sites.
• Arrangements have been made with Bhutan, Singapore, Nepal, and the UAE to accept RuPay cards without co-branding with other international card schemes.
• RBI enhanced the per transaction limit for subsequent transactions (without Additional Factor of Authentication) undertaken under the e-mandate framework for processing of recurring transactions done using cards, Prepaid Payment Instruments (PPIs) and UPI from ₹5,000/- to ₹15,000/- per transaction.
• Payments Vision 2025 was released with the theme of e-Payments for Everyone, Everywhere and Everytime. It builds on the Payments Vision 2019-21 and outlines the roadmap for payment ecosystem in India over the period till December 2025. It is built upon the 5 pillars of integrity, inclusion, innovation, institutionalisation and internationalisation. It aims to provide every user with safe, secure, fast, convenient, accessible, and affordable e-payment options.
• Payments Vision Document 2025 has outlined expanding the global outreach of UPI and RuPay cards as one of the key objectives under the internationalisation pillar.
• Prior approval is mandatory in case of takeover / acquisition of control of non-bank payment system operators (PSOs) and sale / transfer of payment system activity of non-bank PSOs.
• Existing online non-bank Payment Aggregators (PAs) (existing as on March 17, 2020) had to seek authorisation under Payment and Settlement Systems Act, 2007. Another window was permitted (up to September 30, 2022) to such PAs to apply to RBI for seeking authorisation.
• After September 30, 2022, entities other than card networks and card issuers cannot store customer card data.
• For transactions wherein the cardholder would manually enter card details, merchants or their PAs were permitted to store card data till settlement or T+4 days (whichever is earlier) and acquiring banks were permitted to store card data till January 31, 2023.
• The current regulations applicable to online PAs extended to cover offline PAs.
• RBI exchanged letter of co-operation in the field of Central Counterparties (CCPs) with Financial Services Agency, Japan.
• AMC Repo Clearing Limited was granted Certificate of Authorisation to act as a CCP for repo transactions in corporate debt securities.
• Payment fraud reporting was migrated to DAKSH platform from January 1, 2023.
• Enhancements in the scope of activities pertaining to Trade Receivables Discounting System (TReDS), viz., insurance facility, secondary market operations, etc.
• Member banks advised to provide the necessary donor details while routing donations received from outside jurisdictions through National Electronic Fund Transfer (NEFT) and Real Time Gross Settlement (RTGS) systems to the designated FCRA account at State Bank of India.
• ‘Har Payment Digital’ mission launched on the occasion of Digital Payments Awareness Week (DPAW) 2023, observed during March 6 - 12, 2023, with theme “Digital Payment Apnao, Auron Ko Bhi Sikhao” (Adopt digital payments and also teach others). As part of the initiative, PSOs have pledged to adopt 75 villages across the country under the ‘75 Digital Villages’ programme with a vision to convert them into digital payment enabled villages.
• A composite Digital Payments Index (DPI) captures the extent of digitisation of payments across the country. It is computed semi-annually. The index constructed with March 2018 as base (score 100), measured 377.46 in September 2022.
• Clearing Corporation of India Limited (CCIL) extended the facility of settling cross-currency transactions through Continuous Linked Settlement (CLS) to overseas branches of Indian banks. This initiative is on the similar lines of CCIL-CLS services of International Financial Services Centre (IFSC) Banking Units (IBU) entities in Gujarat International Finance Tech-City (GIFT City).
• The month of October 2022 was observed as ‘National Cyber Security Awareness’ month across RBI with a theme of ‘See Yourself in Cyber’.
• RBI currently has 3 data centres – 1 greenfield data centre and 2 brownfield data centres, out of which one is identified as Disaster Recovery Data Centre (DR Site). RBI has initiated the project to construct a new state-of-the-art greenfield data centre to address the capacity expansion constraints, meet ever-increasing IT landscape needs and avoid region specific risks. The new data centre complex will also host an advanced, new age training institute with experience centre, i.e., ‘Enterprise Computing and Cyber Security Institute’.
• The existing payment systems like RTGS, NEFT and UPI are designed to handle large volumes and dependent on complex wired networks. However, catastrophic events like natural calamities and war have the potential to render these payment systems temporarily unavailable. RBI has conceptualised a light weight and portable payment system that can be operated from anywhere by a minimum number of staff, particularly in challenging times. It would process transactions that are critical to ensure stability of the economy such as government and market related transactions.
• The cheque truncation system (CTS) is planned to be migrated from the existing 3 regional grids to ‘One Nation One Grid’.

Chapter 10 – Communication, International Relations, Research and Statistics

• A mascot ‘Money Kumar’ is used in all public awareness campaigns (PACs). From January 2023, Ms. Money as a mascot is also being used.
• RBI has launched an account on the ‘Public App’ (@RBIsays) in January 2023.
• Report on Currency and Finance 2022-23, carrying the theme ‘Towards a Greener Cleaner India’ was released on May 3, 2023.
• Basic Statistical Returns (BSR) system successfully completed 50 years of operation in 2022. On this occasion, a commemorative volume ‘BSR@50’, containing 50-year history of BSR and the Central Information System for Banking Infrastructure (CISBI: erstwhile Master Office File) as well as select research work based on BSR data, was released.

Chapter 11 – Governance, Human Resources and Organisational Management

• Employee Assistance Programme (EAP) was unveiled to address the emotional and psychological needs of the employees and their eligible family members.
• RBI’s framework to foster the risk culture is envisaged to be dependent on the following pillars: (a) Risk Leadership (Tone from the Top); (b) Risk Governance (Responsibility and Accountability); (c) Risk Communication (Transparency and Risk Informed Decisions); (d) Risk Competency (Performance and Incentives).
• A feedback loop between Risk Management Department (RMD) and Inspection Department has been created enabling a convergent view on the various risks facing RBI.
• As recommended by the “Internal Working Group (IWG) to revisit the current processes of Risk-Based Internal Audit (RBIA) and related issues”, the zonal inspectorates (ZIs) have been set up in 5 centres (viz., Ahmedabad, Bhubaneswar, Chennai, Mumbai, and New Delhi) for close monitoring of the quality of compliance to RBIA, control self-assessment audit (CSAA), concurrent audit (CA) and other types of audits, as also the adequacy of coverage of various audits. ZIs are envisaged to be the extended arm of Inspection Department.
• Compliance Audit is conducted for those auditee offices which were classified as ‘High Risk’ during the previous cycle of RBIA.
• RBI had launched Utkarsh 2022, the medium-term strategy framework, in July 2019. As the term of Utkarsh 2022 ended in December 2022, a new strategy framework, viz., Utkarsh 2.0 was launched on December 30, 2022 for the period 2023-25. Utkarsh 2.0 harnesses the strengths of Utkarsh 2022 by retaining the 6 vision statements as well as core purposes, values, and the mission, which collectively create a strategic guiding path. The milestones devised under Utkarsh 2.0 are framed through a bottom-up approach.

Chapter 12 – The Reserve Bank’s Accounts For 2022-23

• The size of the balance sheet increased by 2.50%. 
• While income for the year increased by 47.06%, the expenditure increased by 14.05%. 
• Surplus of ₹87,416.22 crore was transferred to the Government as against ₹30,307.45 crore in the previous year.
• The increase on the asset side was due to rise in foreign investments, gold, and loans and advances. 
• On the liability side, the expansion was due to increase in notes issued, revaluation accounts and other liabilities.
• Economic Capital Framework (ECF) requires the Contingent Risk Buffer (CRB) to be maintained in the range of 5.50% to 6.50% of the size of the balance sheet. The Central Board approved that CRB may be maintained at 6% of the size of the balance sheet of RBI for the year 2022-23. Accordingly, a provision of ₹1,30,875.75 crore was made and transferred to Contingency Fund (CF) during the year. No provision was made towards Asset Development Fund (ADF). 

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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