Inquisitive Mind

Reserve Bank of India (RBI) had issued instructions on certain aspects of corporate governance in banks. To whom are the instructions applicable? The instructions are applicable to – Private Sector Banks including Small Finance Banks (SFBs) and Payment Banks (PBs) Wholly owned subsidiaries of Foreign Banks In respect of State Bank of India and Nationalised Banks, the guidelines are applicable to the extent they are not inconsistent with provisions of specific statutes applicable to these banks or instructions issued under the statutes.  The instructions are not applicable to foreign banks operating as branches in India.  What are the instructions on Chair and meetings of the Board? The Chair of the board shall be an independent director.  In the absence of the Chair of the board, the meetings of the board shall be chaired by an independent director.  The quorum for the board meetings shall be 1/3rd of the total strength of the board or 3 directors, whichever is highe...

Reserve Bank of India (RBI) had issued draft directions on managing risks and code of conduct in outsourcing of financial services. What is the objective of the directions? The purpose of the directions on 'managing risks and code of conduct in outsourcing of financial services' is to ensure that outsourcing arrangements neither diminish the ability of the regulated entity (RE) to fulfil its obligations to customers nor impede effective supervision by the supervisory authority.  What is outsourcing? “Outsourcing” refers to an RE’s use of a third party (either an affiliated entity within a group or an external entity) to perform activities that would normally be undertaken by the RE itself on a continuing basis, now or in the future. ‘Continuing basis’ would include agreements for a limited period. This means REs shall not enter into perpetual agreements. What is material outsourcing? “Material outsourcing arrangement” means an outsourcing arrangement which – In the event of fa...

Reserve Bank of India (RBI) has updated the guidelines on acceptance of bulk deposits by banks. What are bulk deposits?  “Bulk Deposit” means single Rupee term deposits of  – Deposit Banks ₹3 crore (earlier ₹2 crore) and above Scheduled Commercial Banks [excluding Regional Rural Banks (RRBs)] Small Finance Banks ₹1 crore (earlier ₹15 lakh) and above Regional Rural Banks (RRBs) Local Area Banks Scheduled Primary (Urban) Co-operative Banks (UCBs) in Tier 3 & 4 ₹15 lakh and above Other UCBs What are the revised guidelines on pre-mature withdrawal option? Commercial Banks shall have the freedom to offer term deposits without premature withdrawal option, provided that all term deposits accepted from individuals (held singly or jointly) for amount of ₹1 crore (earlier ₹15 lakh) and below shall have premature-withdrawal-facility. Co-operative Banks shall have the freedom to offer term deposits without prem...