Inquisitive Mind

Reserve Bank of India (RBI) has issued revised framework on classification, valuation and operation of investment portfolio of banks. What is the basis of revised framework? The extant regulatory instructions on classification and valuation of investment portfolio by commercial banks are largely based on a framework introduced in October 2000. A need was felt to review and update these norms.  Accordingly, a discussion paper on ‘Prudential Norms for Classification, Valuation and Operations of Investment Portfolio of Commercial Banks’ was issued for public comments on January 14, 2022. Based on the inputs received, the revised regulatory framework for the investment portfolio has been issued. What are the major changes under the revised framework? The revised framework – Introduces a symmetric treatment of fair value gains and losses. Introduces a clearly identifiable trading book under Held for Trading (HFT). Removes the 90-day ceiling on holding period under HFT. Removes ceilings ...

Reserve Bank of India (RBI) has announced the results of second edition of its global hackathon – HARBINGER 2023. What is hackathon? A hackathon is an event organised to bring together people and entities for the development of innovative solutions for the existing challenges in specified area through problem statements. The problem statements are worked upon by the participants during the limited time-period of the hackathon. It is a competitive event where the participants submit ideas, create solutions, exhibit the prototypes, and the solutions are judged by a panel to arrive at the winners of the hackathon.  What is HARBINGER? “HARBINGER – Innovation for Transformation” is a global hackathon organised by Reserve Bank of India (RBI) which gives an opportunity to the participants to get mentored by industry experts and exhibit their innovative solutions before an eminent jury and win exciting prizes in each category. What are the prizes under HARBINGER? Winners in each category o...

Reserve Bank of India (RBI) has revised the guidelines on bullet repayment of gold loans sanctioned by Primary (Urban) Co-operative Banks (UCBs). What is bullet repayment? The loans with bullet repayment option are the once where the interest is charged to the account on monthly basis, however, the entire outstanding amount (i.e. principal + interest) is repaid in one lump sum at the end of the loan tenure.  What were the previous instructions on bullet repayment of gold loans? Reserve Bank of India (RBI) had, in November 2007, permitted bullet repayment of gold loans sanctioned by Primary (Urban) Co-operative Banks (UCBs) subject to the following guidelines – The amount of gold loan sanctioned should not exceed ₹1 lakh at any point of time. The period of the loan shall not exceed 12 months from the date of sanction. Interest shall be charged to the account at monthly rests but shall become due for payment along with principal only at the end of 12 months from the date of sanction....

The bi-monthly monetary policy of Reserve Bank of India (RBI) was announced on October 06, 2023. Here are some of the highlights of the monetary policy announcement. Rates   Change Rate Policy repo rate Unchanged 6.50% Standing deposit facility (SDF) rate 6.25% Marginal standing facility (MSF) rate 6.75% Bank rate 6.75% Monetary policy stance Withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth. Global economy The global economy is slowing under the impact of tight financial conditions, protracted geopolitical tensions and increasing geoeconomic fragmentation.  Global trade is contracting.  Headline inflation is easing but rules above the target in major economies.  While major central banks are signalling a peaking of their rate hike cycle, there are indications that the tight monetary policy stance could persist for longer than anticipated earlier.  Sovereign bond yields have firmed up, the US dolla...

Reserve Bank of India (RBI) has issued directions for release of movable / immovable property documents on repayment / settlement of personal loans. What is personal loan? Personal loan refers to a loan given to individual and consists of – Consumer credit Education loan Loan given for creation / enhancement of immovable assets (e.g., housing, etc.) Loan given for investment in financial assets (shares, debentures, etc.) What are the direction on release of movable / immovable property documents? The Regulated Entities (REs) shall release all the original movable / immovable property documents and remove charges registered with any registry within 30 days after full repayment / settlement of the loan account. The borrower shall be given the option of collecting the original movable / immovable property documents either from the banking outlet / branch where the loan account was serviced or any other office of the RE where the documents are available, as per her / his preference. The ti...

Reserve Bank of India (RBI) has issued guidelines on reset of floating interest rate on Equated Monthly Instalments (EMI) based personal loans. What are the types of interest rates on loans? The Regulated Entities (REs) can offer all categories of loans / advances either on fixed or floating interest rates basis. Fixed interest rate loans The interest rate remains fixed for the entire tenure of the loan. It is beneficial to the borrowers in rising interest rate scenario and is advantageous to the lenders in falling interest rate scenario. Floating interest rate loans The interest rate is reset (i.e. increased / decreased) at periodical intervals during the tenure of the loan. It is beneficial to the borrowers in falling interest rate scenario and is advantageous to the lenders in rising interest rate scenario. What is External Benchmark Lending Rate (EBLR) regime? Reserve Bank of India (RBI) had constituted an Internal Study Group (Chairman: Dr. Janak Raj) to study the various aspects ...