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 Direct’ portal has been expanded to include Floating Rate Savings Bond (FRSB), 2020 (Taxable).
- National Automated Clearing House (NACH) payment functionality has been enabled on the ‘Retail Direct’ portal, enabling the investors to register one-time mandate and use the same for funding bids placed under primary auction.
- Keeping in view the risks associated with contingent liabilities, a Working Group on State Government Guarantees was set up, comprising members drawn from the Ministry of Finance, GoI; Comptroller and Auditor General of India and state governments. The major recommendations of the Working Group are –
- There should not be any distinction between conditional / unconditional, financial / performance guarantees.
- The word ‘Guarantee’ should be used in a broader sense and may include instruments, by whatever name they were called, if these create obligation on the state government.
- Government guarantees should not be used to obtain finance through state owned entities, which substitutes budgetary resources of the state government.
- States should classify the projects / activities as high, medium and low-risk and assign appropriate risk weights before extending guarantee for them. States should conservatively keep the lowest slab of risk weight at 100%.
- There should be a ceiling for incremental guarantees issued during a year at 5% of revenue receipts or 0.5% of gross state domestic product (GSDP), whichever is less.
- A minimum of 0.25% per annum may be considered as the base or minimum guarantee fee and additional risk premium, based on risk assessment by the state government, may be charged to each risk category of issuances.
- States should build a buffer of 5% of their total outstanding guarantees over 5 years from the date of constitution of Guarantee Redemption Fund (GRF).
- RBI manages 2 reserve fund schemes on behalf of states – Consolidated Sinking Fund (CSF) and GRF.
Chapter 8 – Currency Management
- Currency in circulation (CiC) includes banknotes, coins and e₹.
- Small finance banks doing banking business for more than 2 years have been mandated to provide the services of exchange of soiled / mutilated / defective notes to the members of public, bringing them at par with branches of all other banks in the country, except for payments banks, for which the service remains optional.
- In pursuance of its “Clean Note Policy”, RBI announced the withdrawal of ₹2000 denomination banknotes from circulation while continuing their legal tender status. Time till October 07, 2023 was given to the public to deposit and / or exchange ₹2000 banknotes at bank branches and at the 19 issue offices of RBI. From October 09, 2023, the facility for exchange and / or deposit, including through India Post, was available at RBI’s issue offices.
- RBI is no longer printing banknotes of denominations of ₹2, ₹5 and ₹2000.
- During 2023-24, out of the total Fake Indian Currency Notes (FICNs) detected in the banking sector, 7.9% were detected at RBI.
- An adversarial analysis laboratory has been operationalised at the Mysuru campus of Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL) for conducting cutting edge research on banknotes. Adversarial analysis is conducted to assess counterfeiting risks through in-house simulation of banknote features by trained experts / technicians using commercially available materials and equipment.
- BRBNMPL is establishing a Currency Research and Development Centre (CRDC) at its Mysuru campus for conducting cutting-edge research in the domain of currency.
- In the evolving scenario of growth in retail digital payments coupled with continued increase in demand for cash, a survey was conducted in 2023 to understand the usage and preference for cash, coins, factors influencing demand and to assess the shortage / surfeit of cash and coins. Major findings of the survey were –
- The need for ₹5 coins was the highest, followed by ₹2 and ₹10.
- Respondents cited better availability of banknotes of ₹100 and above vis-à-vis banknotes of ₹50 and below.
- There was a preference for digital payments with increase in transaction value.
- Non-familiarity with digital payment modes and safety concerns were reported as impediments in the usage of digital payment options, especially in rural and semi-urban areas.
Chapter 9 – Payment and Settlement Systems and Information Technology
- The scope of Trade Receivables Discounting System (TReDS) was expanded by permitting insurance for transactions, expanding pool of financiers and enabling secondary market for Factoring Units (FUs).
- RBI expanded the scope of e-RUPI vouchers by permitting non-bank prepaid payment instrument (PPI) issuers to issue e-RUPI vouchers, enabling its issuance on behalf of individuals and modifying other aspects like reloading of vouchers, authentication process and issuance limits.
- RBI permitted the issuance of RuPay Prepaid Forex cards by banks in India for use at automated teller machines (ATMs), point of sale (PoS) machines and online merchants overseas.
- An innovative payment mode, viz., ‘Conversational Payments’ was enabled in Unified Payment Interface (UPI) to allow users to engage in conversation with an artificial intelligence (AI)-powered system to initiate and complete transactions. This channel is made available in both smartphones and feature phones-based UPI channels.
- To promote the use of UPI-Lite, offline transactions using Near Field Communication (NFC) technology were enabled.
- For small value digital payments in offline mode [including National Common Mobility Card (NCMC) and UPI Lite], per transaction limit was increased from ₹200 to ₹500.
- The scope of UPI was expanded by permitting linkage of credit lines to UPI as funding account and enabling transfer to / from pre-sanctioned credit lines at banks.
- RBI announced the enhancement in transaction limits in UPI from the existing ₹1 lakh to ₹5 lakh for making payments to hospitals and educational institutions.
- RBI issued guidelines on ‘Regulation of Payment Aggregators - Cross Border (PA-Cross Border)’ to bring all entities facilitating cross-border payment transactions for import and export of goods and services under its direct regulation.
- RBI revised the e-mandate framework for recurring transactions, enhancing the limit for subsequent transactions without Additional Factor of Authentication (AFA) from ₹15,000 to ₹1 lakh for (i) subscription to mutual funds, (ii) payment of insurance premium and (iii) payments of credit card bills.
- RBI permitted Card-on-File Token (CoFT) creation facilities directly through card issuing banks / institutions.
- RBI extended the Payments Infrastructure Development Fund (PIDF) scheme for 2 years, i.e., up to December 31, 2025.
- The beneficiaries identified as part of the Pradhan Mantri Vishwakarma scheme across the country were included as merchants for deployment under the PIDF scheme.
- Contemporary devices, viz., (i) soundbox devices and (ii) Aadhaar-enabled biometric devices, were also made eligible for subsidy under the PIDF scheme.
- The amount of subsidy under PIDF for devices deployed in special focus areas, viz., North-Eastern states, and Union Territories of Jammu & Kashmir and Ladakh, was increased from 75% to 90% of the total cost, irrespective of the type of device.
- RBI permitted authorised bank and non-bank PPI issuers to issue PPIs for Mass Transit Systems (PPI-MTS) for making payments across various public transport systems.
- RBI announced creation of an interoperable payment system for internet banking transactions, implementation of which will be done by NPCI Bharat BillPay Ltd. (NBBL).
- RBI asked card issuers (banks / non-banks), with 10 lakh or more active cards issued by them, not to enter into any arrangement or agreement with card networks that may limit their ability to tie-up with other card networks. They were also mandated to provide the customers the facility to choose among multiple card networks.
- RBI is working on the implementation of the ‘payee name look-up facility’ in compliance with newly enacted ‘Digital Personal Data Protection Act, 2023’.
- RBI had undertaken to migrate Cheque Truncation System (CTS) from an architecture of 3 regional grids to one national grid. The merged grid has been named as National Grid Clearing House (NGCH) and RBI, Chennai office, has been designated as the nodal office for management and oversight of the operations of the merged grid.
- RBI observed the Digital Payment Awareness Week (DPAW) during March 04-10, 2024 with the theme ‘Digital Payment, Surakshit Payment’ (‘Digital Payment, Safe Payment’) under the mission ‘Har Payment Digital’.
- RBI had constructed a composite Digital Payments Index (DPI) in 2021 to capture the extent of digitisation of payments across the country through parameters – Payment Enablers (25%), Payment Infrastructure – Demand-side factors (10%), Payment Infrastructure – Supply-side factors (15%), Payment Performance (45%) and Consumer Centricity (5%). The RBI-DPI is computed semi-annually. The DPI increased to 418.8 in September 2023 from 377.5 in September 2022. (DPI for March 2024 stands at 445.50 driven by significant growth in payment performance and payment infrastructure.)
- A secured web-based centralised portal named as PRAVAAH (Platform for Regulatory Application, Validation And AutHorisation) has been developed to simplify and streamline the process of submitting applications seeking licence / authorisation / regulatory approvals from RBI under various statutes / regulations.
- A cloud facility will be set up for the financial sector, initially to be operated by Indian Financial Technology and Allied Services (IFTAS) (a wholly owned subsidiary of RBI) and later, to be transferred to a separate entity.
- RBI and the Bank of England (BoE) signed a memorandum of understanding (MoU) on cooperation and exchange of information in relation to the Clearing Corporation of India Ltd. (CCIL).
- Acceptance of UPI through QR codes for merchant payments in France (e-commerce) was launched.
- RuPay cards and UPI connectivity between India and Mauritius, as well as UPI connectivity between India and Sri Lanka was launched.
- RBI and Nepal Rastra Bank signed and exchanged Terms of Reference for integration of fast payment systems of India and Nepal, viz., UPI of India and National Payments Interface of Nepal, respectively. Acceptance of UPI through QR codes for merchant payments in Nepal went live.
- RBI and the Central Bank of the UAE (CBUAE) signed a memorandum of understanding (MoU) for interlinking their payments infrastructure including linking their Fast Payment Systems [UPI of India with Instant Payment Platform (IPP) of UAE called Aani] and for linking their respective Card Switches (RuPay switch and UAESWITCH).
Chapter 10 – Communication, International Relations, Research and Statistics
- RBI has 3 museums –
- Monetary Museum at Mumbai – mainly exhibits collection of banknotes and coins from different eras.
- RBI Archives Museum at Pune – showcases rich collection of documents pertaining to RBI’s journey through the years.
- RBI Museum at Kolkata – RBI’s first full-fledged museum, which has artefacts on currency, exhibits of the evolution of central banking in India, RBI and its functions, financial literacy and public awareness messages.
- Single Nodal Agency - Samayochit Pranali Akikrut Sheeghra Hastantaran (SNA-SPARSH)
- SNA-SPARSH for release of centrally sponsored schemes (CSS) funds through an integrated framework of public financial management system (PFMS), state integrated financial management and information system (IFMIS) and e-Kuber system of RBI was implemented during the year.
- SNA-SPARSH is a real time system of integrated quick transfers.
- RBI functions as primary banker to the governments without involvement of agency bank.
- Funds will remain in respective consolidated funds and will be released to the beneficiaries / vendors ‘Just-in-Time’ to bring about more efficiency in government’s cash management system.
- 6 schemes and 10 states (Rajasthan, Karnataka, Odisha, Telangana, Jharkhand, Chhattisgarh, Gujarat, Andhra Pradesh, Bihar and Assam) have been identified by the Ministry of Finance, GoI as at end-December 2023 for pilot run of the project.
- As on March 31, 2024, 7 state governments have gone live on this integrated platform along with the central government.
- RBI signed a memorandum of understanding (MoU) with the Central Bank of UAE (CBUAE), for establishing a framework to promote the use of local currencies, viz., INR and UAE Dirham (AED) for cross-border transactions.
- RBI and Bank Indonesia signed a MoU for establishing a framework to promote the use of local currencies, viz., INR and Indonesian Rupiah (IDR) bilaterally, for cross-border transactions.
Chapter 11 – Governance, Human Resources and Organisational Management
- RBI has been awarded the ‘Risk Manager of the Year 2024’ by Central Banking, UK.
- Sub-offices of RBI were opened in Kohima (Nagaland) and Itanagar (Arunachal Pradesh) in June 2023 and October 2023, respectively.
Chapter 12 – The Reserve Bank’s Accounts For 2023-24
- The size of the RBI’s balance sheet increased by 11.08% for the year ended March 31, 2024.
- While income for the year increased by 17.04%, expenditure decreased by 56.30%.
- The year ended with an overall surplus of ₹2,10,873.99 crore as against ₹87,416.22 crore in the previous year, resulting in an increase of 141.23%. The surplus was transferred to the Central Government.
- 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, deposits and other liabilities.
- A provision of ₹42,819.91 crore was made and transferred to Contingency Fund (CF). No provision was made towards Asset Development Fund (ADF).
References
Reserve Bank of India. (2024, July 26). 'RBI – Digital Payments Index for March 2024'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=58371
Reserve Bank of India. (2024, May 30). 'RBI Annual Report 2023-24'. Retrieved from https://www.rbi.org.in/Scripts/AnnualReportPublications.aspx?year=2024
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