Inquisitive Mind

Reserve Bank of India (RBI) has published the scheme for trading and settlement of Sovereign Green Bonds (SGrBs) in the International Financial Services Centre (IFSC) in India. Which are eligible securities under the Scheme? Sovereign Green Bonds (SGrBs) issued by the Government of India shall be eligible for investment under the Scheme. Who are eligible investors under the Scheme? The following persons will be eligible investors under the Scheme – Persons resident outside India as defined in Section 2(w) of the FEMA, 1999, that are eligible to invest in the IFSC, and are not incorporated in High-Risk Jurisdictions subject to a Call for Action as identified by FATF. An IFSC Banking Unit (IBU) of a foreign bank which does not have a branch or subsidiary licensed to undertake banking business in India. Persons resident outside India as treated under Foreign Exchange Management (International Financial Services Centre) Regulations, 2015, that are eligible to invest in the IFSC, and are no...

Reserve Bank of India (RBI) has reviewed the regulatory framework for Housing Finance Companies (HFCs) and harmonised the regulations applicable to HFCs and Non-Banking Financial Companies (NBFCs). What are the revised regulations on maintenance of minimum percentage of liquid assets by HFCs? In terms of Section 29B of the National Housing Bank (NHB) Act, 1987, all deposit taking HFCs shall maintain, on an ongoing basis, liquid assets as a percent of the public deposits held by them, as specified below – Timeline Unencumbered approved securities, to be held as a percent of public deposits Total liquid assets along with unencumbered approved securities to be held as a percent of public deposits Currently 6.5% 13% January 01, 2025 8% 14% July 01, 2025 10% 15% What are the revised regulations on deposits accepted by HFCs? Extant regulations Revised regulations ...

Reserve Bank of India (RBI) has issued directions on cyber resilience and digital payment security controls for non-bank Payment System Operators (PSOs). To whom are the directions applicable? The directions shall apply to all authorised non-bank Payment System Operators (PSOs). To effectively manage cyber and technology related risks arising out of linkages of PSOs with unregulated entities (like payment gateways, third party service providers, vendors, etc.), PSOs shall ensure adherence to the directions by such unregulated entities as well, subject to mutual agreement.  What are different categories of non-bank PSOs? Large non-bank PSOs – Clearing Corporation of India Limited (CCIL) National Payments Corporation of India (NPCI) NPCI Bharat Bill Pay Limited Card Payment Networks Non-bank ATM Networks White Label ATM Operators (WLAOs) Large Prepaid Payment Instrument (PPI) Issuers Trade Receivables Discounting System (TReDS) Operators Bharat Bill Payment Operating Units (BBPOUs) ...

Reserve Bank of India (RBI) has issued guidelines on prudential treatment of bad and doubtful debt reserve by Primary (Urban) Co-operative Banks (UCBs), State Co-operative Banks (StCBs) and Central Co-operative Banks (CCBs). What violations are observed in treatment of bad and doubtful debt reserve? Several co-operative banks have created Bad and Doubtful Debt Reserve (BDDR). While in some cases, BDDR is created by recognising an expense in the Profit and Loss (P&L) Account, in other cases it is created through appropriations from net profits. In terms of Accounting Standard (AS) 5, all expenses which are recognised in a period should be included in the determination of net profit or loss for the period. Not recognising the required provisions for Non-Performing Assets (NPAs) as an expense while arriving at the net profit in the P&L Account is not in consonance with extant Accounting Standards.  The treatment of BDDR for regulatory capital and reckoning of net NPAs varies a...

Reserve Bank of India (RBI) has issued directions on overseas investment. What is Overseas Direct Investment (ODI)? Overseas Direct Investment (ODI) means – Acquisition of any unlisted equity capital or subscription as a part of the Memorandum of Association of a foreign entity Investment in 10% or more of the paid-up equity capital of a listed foreign entity Investment with control where investment is less than 10% of the paid-up equity capital of a listed foreign entity An investment  in a foreign entity , once classified as ODI, shall continue to be treated as ODI even if such investment falls below 10% of the paid-up equity capital or the investor loses control in the foreign entity. What is Overseas Portfolio Investment (OPI)? Overseas Portfolio Investment (OPI) means investment, other than ODI, in foreign securities.  OPI shall not be made in – any unlisted debt instruments any security which is issued by a person resident in India who is not in an IFSC any derivatives u...

Reserve Bank of India (RBI) has issued guidelines on treatment of Dividend Equalisation Fund (DEF) maintained by Primary (Urban) Co-operative Banks (UCBs). What are the guidelines on declaration of dividend by Primary (Urban) Co-operative Banks (UCBs)? Primary (Urban) Co-operative Banks (UCBs) may declare dividend without prior permission of Reserve Bank of India (RBI) subject to compliance with the following parameters – Compliance with CRAR norms. Net NPA of less than 5% after making all necessary provisions (including provisions required as per assessment made by RBI in the last inspection report). There is no default in CRR / SLR during the year for which dividend is proposed. All required provisions have been made for NPAs, investments and other assets as per prudential norms. Dividend is paid out of the net profit and after making all statutory and other provisions and adjustment for accumulated losses in full. UCBs complying with all the above parameters except net NPA, and desi...