Inquisitive Mind

Reserve Bank of India (RBI) has updated the guidelines on conduct of government business by agency banks and payment of agency commission. Why agency banks are paid commission? RBI carries out the general banking business of the Central and State Governments through its own offices and through the offices of the agency banks appointed under Section 45 of the RBI Act, 1934, by mutual agreement.  RBI pays agency commission to the agency banks for the government business handled by them.  Which government transactions are eligible for agency commission? Transactions relating to the following government business undertaken by agency banks are eligible for agency commission paid by RBI – Revenue receipts and payments on behalf of the Central / State Governments. Pension payments in respect of Central / State Governments. Which government transactions are not eligible for agency commission? The following transactions are not eligible for agency commission – Short term / long term bo...

Reserve Bank of India (RBI) has recently issued guidelines on stripping / reconstitution in State Government Securities. This is in addition to stripping / reconstitution already permitted in eligible Central Government dated securities. What is Separate Trading of Registered Interest and Principal of Securities (STRIPS)? Separate Trading of Registered Interest and Principal of Securities (STRIPS) are created by way of separating the cash flows associated with a regular Government Security i.e. each semi-annual coupon payment and the final principal payment to be received from the issuer, into separate securities. For example, when ₹100 of the 8.60% GS 2028 is stripped, each cash flow of coupon (₹4.30 each half year) will become a coupon STRIP (maturing on the respective coupon dates) and the principal payment (₹100 at maturity) will become a principal STRIP (maturing on the redemption date of the security). These cash flows are traded separately as independent securities in the second...

Reserve Bank of India (RBI) has issued directions on lending against the collateral of gold and silver. To whom are the directions applicable? The directions are applicable to the following regulated entities (REs) – Commercial Banks (including Small Finance Banks, Local Area Banks and Regional Rural Banks, but excluding Payments Banks). Primary (Urban) Co-operative Banks (UCBs) & Rural Co-operative Banks (RCBs), i.e., State Co-operative Banks (StCBs) and Central Co-operative Banks (CCBs). Non-Banking Financial Companies (NBFCs), including Housing Finance Companies (HFCs). Which loans are covered under the directions? The directions shall apply to all loans offered by an RE for the purpose of consumption or income generation (including farm credit) where eligible gold or silver collateral is accepted as a collateral security. What is eligible collateral? Eligible collateral means the collateral of jewellery, ornaments or coins made of gold or silver. A lender shall not grant any ad...

The bi-monthly monetary policy of Reserve Bank of India (RBI) was announced on June 06, 2025. Here are some of the highlights of the monetary policy announcement. Rates   Change Rate Policy repo rate Reduced by 0.50% 5.50% Standing deposit facility (SDF) rate 5.25% Marginal standing facility (MSF) rate 5.75% Bank rate 5.75% Monetary policy stance Monetary policy stance was changed from ‘accommodative’ to ‘neutral’. Domestic Economy  The Indian economy presents a picture of strength, stability, and opportunity. The 5x3x3 matrix of fundamentals provides the necessary core strength to cushion the Indian economy against global spillovers and propel it to grow at a faster pace.  First, strength comes from the strong balance sheets of the 5 major sectors - corporates, banks, households, government, and the external sector.  Second, there is stability on all 3 fronts – price, financial, and political – providing policy and economic certainty.  Third, the Indian ec...

Non-Banking Financial Companies (NBFCs) are required to obtain prior approvals from Reserve Bank of India (RBI) or intimate / report to RBI various events. This article lists out some of such important events where prior approvals or intimations / reporting is required for Base Layer NBFCs (NBFC-BL). Events requiring prior approval from RBI  Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023 dated October 19, 2023 Para 30 – NBFCs shall prepare its balance sheet and profit and loss account as on March 31 every year. Whenever an NBFC intends to extend the date of its balance sheet as per provisions of the Companies Act, 2013, it shall take prior approval of RBI before approaching the Registrar of Companies for this purpose. Even in cases where RBI and the Registrar of Companies grant extension of time, the NBFC shall furnish to RBI a proforma balance sheet (unaudited) as on March 31 of the year and the statutory returns ...

Non-Banking Financial Companies (NBFCs) are required to make various appointments for efficient operations. This article lists out some of the important appointments to be made by the Base Layer NBFCs (NBFC-BL). Principal Nodal Officer / Grievance Redressal Officer Reserve Bank - Integrated Ombudsman Scheme, 2021 dated November 12, 2021 Para 18(2) – Regulated Entity (RE) shall appoint a Principal Nodal Officer at their head office who shall not be a rank less than a General Manager or an officer of equivalent rank and shall be responsible for representing the RE and furnishing information on behalf of the RE in respect of complaints filed against the RE. The RE may appoint such other Nodal Officers to assist the Principal Nodal Officer as it may deem fit for operational efficiency. Reserve Bank of India (Digital Lending) Directions, 2025 dated May 08, 2025 Para 11(i) and 11(ii) – RE, and the Lending Service Provider (LSP) which has an interface with the borrower, shall designate nodal ...

Reserve Bank of India (RBI) has issued directions on digital lending. What is digital lending? Digital lending is a remote and automated lending process, largely by use of seamless digital technologies for customer acquisition, credit assessment, loan approval, disbursement, recovery, and associated customer service. Who is Lending Service Provider (LSP)? Lending Service Provider (LSP) is an agent of a Regulated Entity (RE) (including another RE) who carries out one or more of RE’s digital lending functions, or part thereof, in customer acquisition, services incidental to underwriting and pricing, servicing, monitoring, recovery of specific loan or loan portfolio on behalf of RE. What are Digital Lending Apps / Platforms (DLAs)? Digital Lending Apps / Platforms (DLAs) are mobile and / or web-based applications, on a standalone basis or as a part of suite of functions of an application with user interface that facilitate digital lending services. DLAs shall include applications of the R...