Inquisitive Mind

The Banking Regulation Act, 1949 (BR Act, 1949) governs the working of banks in India. In a series of articles, we will briefly go through some of the important provisions of the BR Act, 1949. This is the first article in the series. Part 1 – Preliminary Section 3 – Act not to apply to certain cooperative societies The Act shall not apply to –  A primary agricultural credit society, or A co-operative society whose primary object and principal business is providing of long-term finance for agricultural development, if such society does not use as part of its name, or in connection with its business, the words “bank”, “banker” or “banking” and does not act as drawee of cheques. Part 2 - Business of Banking Companies Section 6 – Forms of business in which banking companies may engage  In addition to the business of banking, a banking company may engage in any one or more forms of business specified in this section. Banking company shall not engage in any form of business other th...

Reserve Bank of India (RBI) has released omnibus framework for recognising Self-Regulatory Organisations for its regulated entities. What is the need of Self-Regulatory Organisations for Regulated Entities? With the growth of Regulated Entities (REs) in terms of number as well as scale of operations, increase in adoption of innovative technologies and enhanced customer outreach, a need is felt to develop better industry standards for self-regulation. Self-Regulatory Organisations (SROs) enhance the effectiveness of regulations by drawing upon the technical expertise of practitioners and also aid in framing / fine-tuning regulatory policies by providing inputs on technical and practical aspects, nuances and trade-offs involved. In deliverance of this role, the SRO shall frame necessary best practices / standards / codes within the regulatory framework prescribed by Reserve Bank of India (RBI) for voluntary adoption by its members and these shall not be a substitute to the prescribed reg...

Reserve Bank of India (RBI) has released draft disclosure framework on climate-related financial risks. What are climate-related financial risks? Climate-related financial risks means the potential risks that may arise from climate change or from efforts to mitigate climate change, their related impacts and economic and financial consequences. What is the need for climate-related financial risk management? Given the increasing threat of climate change and the associated physical damage, changes in market perception and the transition towards more environment-friendly products and services, the impact of climate change on regulated entities (REs) is inevitable. The REs also play an important role in financing the transition towards an environmentally sustainable economy. Climate-related risks are expected to have implications on financial stability as well. It is therefore imperative for the REs to implement a robust climate-related financial risk management policies and processes to ef...

Government of India has allowed extension of Interest Equalization Scheme (IES) on pre and post shipment rupee export credit. From when is Interest Equalization Scheme (IES) applicable? Government of India had announced the Interest Equalisation Scheme (IES) on pre and post shipment rupee export credit effective from April 01, 2015. IES was initially valid for 5 years up to March 31, 2020 and has been continued thereafter with further extensions and fund allocations.   Government of India has now allowed for extension of IES up to June 30, 2024. How is IES implemented? IES is implemented by Reserve Bank of India (RBI) through various banks who provide pre and post shipment credit to the exporters. IES is jointly monitored by Director General of Foreign Trade (DGFT) and RBI through a consultative mechanism.  What are the benefits of IES? IES helps eligible exporters to avail pre and post shipment rupee export credit at competitive rates. This enables them to compete intern...

Reserve Bank of India (RBI) has issued guidelines on arrangements with card networks for issue of credit cards. What is Credit Card? Credit Card is a physical / virtual payment instrument issued with a pre-approved revolving credit limit that can be used to purchase goods and services or draw cash advances. What is a card network? A card network is an organization that facilitates payment of card transactions between issuing banks and merchants. Which are the authorised card networks in India? The following are the authorised card networks in India – Authorised Card Network Network branded as American Express Banking Corp., USA American Express Diners Club International Ltd., USA Diners Club International MasterCard Asia / Pacific Pte. Ltd., Singapore Mastercard National Payments Corporation of India RuPay Visa Worldwide Pte. Limited, Singapore Visa What are the exis...

Reserve Bank of India (RBI) has revised the regulatory framework for Bharat Bill Payment System (BBPS). What is Bharat Bill Payment System (BBPS)? Bharat Bill Payment System (BBPS) is an integrated bill payment platform which enables payment / collection of bills through multiple channels (mobile apps, mobile banking, physical agents, bank branches, etc.) using various payment modes (UPI, internet banking, cards, cash, prepaid payment instruments, etc.).  Who are the participants in BBPS? The BBPS has the following participants – Bharat Bill Payment Central Unit (BBPCU) – BBPCU is the entity which operates BBPS; sets operational, technical and business standards, and also undertakes clearing and settlement functions.  Bharat Bill Payment Operating Units (BBPOUs) – BBPOUs are the system participants in BBPS. A BBPOU may function either as a Biller Operating Units (BOUs) or a Customer Operating Units (COUs) or both. BOU is an entity which on-boards billers, either directly or th...