Inquisitive Mind

Reserve Bank of India (RBI), with the concurrence of the Government of India (GoI), has put in place a revised framework on currency swap arrangement for SAARC countries. What is Currency Swap? 'Currency swap' means an OTC foreign exchange derivative contract which commits two counterparties to exchange streams of interest payments and / or principal amounts in different currencies on specified dates over the duration of the swap at a pre-agreed exchange rate. What is South Asian Association for Regional Cooperation (SAARC)? The South Asian Association for Regional Cooperation (SAARC) was established with the signing of the SAARC Charter in Dhaka on December 08, 1985. The Secretariat of the Association was set up in Kathmandu on January 17, 1987. The objectives of SAARC are to promote the welfare of the peoples of South Asia and to improve their quality of life; to accelerate economic growth, social progress and cultural development in the region and to provide all individuals ...

Reserve Bank of India (RBI) has invited applications for recognition of Self-Regulatory Organisations (SROs) for Non-Banking Financial Companies (NBFCs). What is the basis of Self-Regulatory Organisations (SROs) for Non-Banking Financial Companies (NBFCs)? Reserve Bank of India (RBI) had issued ‘ Omnibus Framework for recognition of Self-Regulatory Organisations for Regulated Entities of the Reserve Bank ’ dated March 21, 2024, wherein broad parameters, viz., objectives, responsibilities, eligibility criteria, governance standards, application process, etc., were specified. It was also stated that other sector-specific guidelines like number of SROs, membership, etc., shall be issued separately whenever a sectoral SRO is intended to be set up. RBI has now invited applications for recognition of SROs for the NBFC sector under the aegis of the aforesaid omnibus framework.  What is the membership criteria for the SRO for NBFCs? The SRO for NBFC sector is primarily envisaged for NBFCs ...

Reserve Bank of India (RBI) has released the framework for self-regulatory organisations in the FinTech sector. What are FinTechs? For the purpose of membership of an Self-Regulatory Organisations for FinTech Sector (SRO-FT), FinTechs may be defined as entities that provide technological solutions for delivery of financial products and services to businesses and consumers or encompass regulatory and supervisory compliance in partnership with traditional financial institutions or otherwise.  What is the need of Self-Regulatory Organisations for FinTech Sector? FinTechs play a pivotal role in redefining financial services by saving time, enhancing access, and lowering costs. While the FinTechs bring various innovations, the FinTech sector also raises concerns relating to customer protection, data privacy, cyber security, grievance handling, internal governance, financial system integrity, etc. A judicious balance between maximising the creative potential of FinTechs, while minimising...

Reserve Bank of India (RBI) has published its annual report for the financial year 2023-24. 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 Ways And Means Advances (WMA) limit for the Government of India (GoI) for H1:2023-24 (April to September 2023) was fixed at ₹1,50,000 crore and for H2:2023-24 (October 2023 to March 2024) was fixed at ₹50,000 crore. RBI issued an ultra-long security of 50-year tenor aggregating ₹30,000 crore to cater to the growing needs of long-term institutional players. Issuance of Sovereign Green Bonds (SGrBs) for an aggregate amount of ₹20,000 crore included maiden issuance of 30-year (₹10,000 crore) SGrB in addition to 5-year (₹5,000 crore) and 10-year (₹5,000 crore) SGrBs. A new 3-year benchmark security was introduced as part of government market borrowing programme during H1:2023-24.  The basket of products offered through the ‘Retail ...

Reserve Bank of India (RBI) has published its annual report for the financial year 2023-24. 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) District Central Co-Operative Banks (DCCBs) may shift their branches / offices / extension counters located in the rural or semi-urban or urban / metropolitan areas, within the same village or town or locality / municipal ward, respectively, without prior permission of RBI.  DCCBs are allowed to close their un-remunerative branches without prior permission of RBI, subject to fulfilment of certain conditions. Higher risk weights were prescribed for ‘consumer credit’ and ‘bank credit to Non-Banking Financial Companies (NBFCs)’ .  Certain instances of regulatory arbitrage through investments in Alternate Investment Funds (AIFs) by the Regulated Entities (REs) were observed. To address these concern...

Reserve Bank of India (RBI) has published its annual report for the financial year 2023-24. In a series of articles, we will go through the highlights of the report. This is the third article in the series.  Chapter 6 – Regulation, Supervision and Financial Stability (Part I) A framework for acceptance of green deposits was issued to encourage Regulated Entities (REs) to offer green deposits to customers, protect depositors' interest, address greenwashing risks and help augment the flow of credit to green activities / projects. Green deposits are issued as cumulative / non-cumulative deposits and in Indian Rupees only.  A draft disclosure framework on climate-related financial risks, 2024 includes guidelines to the REs for climate-related financial disclosures under 4 thematic pillars – governance, strategy, risk management, and metrics and targets.  A dedicated section was created on RBI's website, containing RBI's communication on climate risk and sustainable finance....

Reserve Bank of India (RBI) has published its annual report for the financial year 2023-24. In a series of articles, we will go through the highlights of the report. This is the second article in the series.  Chapter 4 – Credit Delivery and Financial Inclusion As per revised guidelines, General Credit Card (GCC) may be issued to individuals / entities who are sanctioned working capital facilities for non-farm entrepreneurial activities which are eligible for classification under the priority sector guidelines. The revolving fund support provided to women self-help groups (SHGs) under Deendayal Antyodaya Yojana - National Rural Livelihoods Mission (DAY-NRLM) has been revised to ₹20,000 - ₹30,000 per SHG from the earlier sum of ₹10,000 - ₹15,000 per SHG. In terms of extant regulatory guidelines, lenders are required to obtain ‘Udyam Registration Certificate (URC)’ for classification of entities as Micro, Small and Medium Enterprises (MSMEs). To facilitate formalisation of informal mi...