Inquisitive Mind

Reserve Bank of India (RBI) has issued directions on pre-payment charges on loans. What issues were observed by RBI during supervisory reviews? Divergent practices were observed amongst Regulated Entities (REs) with regard to levy of pre-payment charges in case of loans sanctioned to Micro and Small Enterprises (MSEs) which lead to customer grievances and disputes.  Certain REs were found to include restrictive clauses in loan contracts / agreements to deter borrowers from switching over to another lender, either for availing lower rates of interest or better terms of service. To whom shall the directions be applicable? The directions shall apply to all commercial banks (excluding payments banks), co-operative banks, Non-Banking Financial Companies (NBFCs) and All India Financial Institutions (AIFIs). To which loans shall the direction be applicable? The directions shall be applicable to all floating rate loans and advances sanctioned or renewed on or after January 01, 2026. Which ...

Reserve Bank of India (RBI) has issued directions on due diligence of Aadhaar Enabled Payment System (AePS) touchpoint operators. What is Aadhaar Enabled Payment System (AePS)? Aadhaar Enabled Payment System (AePS) is a payment system in which transactions are enabled through Aadhaar number and biometrics / OTP authentication providing financial services such as cash withdrawal, cash deposit, fund transfer, and non-financial services such as mini statement and balance enquiry, etc. AePS is a payment system operated by National Payment Corporation of India (NPCI) that facilitates interoperable transactions using Aadhaar enabled authentication.  What is AePS touchpoint? AePS touchpoint is the terminal deployed by acquirer banks to facilitate AePS transactions, which shall include both mobile and fixed points. Who is AePS Touchpoint Operator (ATO)? AePS Touchpoint Operator (ATO) is the individual onboarded by the acquiring bank who operates the AePS touchpoint. What is the rationale b...

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...

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). Key Managerial Personnel (KMP) Companies Act, 2013 Section 203(1) – Every company belonging to such classes of companies as may be prescribed shall have the following whole-time KMP – Managing director, or Chief Executive Officer or manager and in their absence, a whole-time director Company secretary Chief Financial Officer Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 Rule 8 – Every listed company and every other public company having a paid-up share capital of ₹10 crore or more shall have whole-time KMP. Rule 8A – Every private company with a paid up share capital of ₹10 crore or more shall have a whole-time company secretary. Principal Nodal Officer / Grievance Redressal Officer Reserve Bank - Integrated Ombudsman Scheme, 2021 dated November 1...

Non-Banking Financial Companies (NBFCs) are required to make various disclosures. This article lists out some of the important disclosures to be made by Base Layer NBFCs (NBFC-BL) in its financial statements, on its website and in its branches. Disclosures to be made in financial statements / annual reports Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023 dated October 19, 2023 Para 37.4.4 – In case of gold loans, NBFCs shall disclose in their annual reports the details of the auctions conducted during the financial year including the number of loan accounts, outstanding amounts, value fetched and whether any of its sister concerns participated in the auction. Para 40 – NBFCs shall disclose in their annual financial statement, aggregate amount of loans and advances sanctioned to directors, senior officers and relatives of directors and to entities where directors or their relatives have major shareholding (as per templat...