The Indian Panorama

Tag: RBI

  • Invest in crypto at your own risk, cautions RBI Governor

    Invest in crypto at your own risk, cautions RBI Governor

    New Delhi (TIP)- Reserve Bank of India (RBI) Governor Shaktikanta Das has cautioned investors on cryptocurrencies stating that they should invest in the same at their own risk.

    Das said it is his “duty” to caution investors, and told them to keep in mind that they are investing at their own risk.

    He also added that cryptos are a threat to macroeconomic and financial stability while comparing it with the historical ‘tulip mania’ which was widely considered to be the first financial bubble. He said that the cryptocurrencies do not even possess the value of the exotic flower

    “Private cryptocurrencies or whatever name you call it are a threat to our macroeconomic stability and financial stability. They will undermine RBI’s ability to deal with issues of financial stability and macroeconomic stability,” Das added.

    The ‘tulip mania’ of the 17th century is often cited as a classic example of a financial bubble where the price of something goes up, not due to its intrinsic value but because of speculators wanting to make a profit by selling a bulb of the exotic flower.

    In the Union Budget for 2022-23 presented in Parliament on February 1, the government proposed levying a 30 per cent tax on gains made on cryptocurrency trades by investors and the announcement was welcomed by cryptocurrency industry players, saying it legitimises their trades.

  • RBI keeps lending rate unchanged, to continue with accommodative monetary policy

    RBI keeps lending rate unchanged, to continue with accommodative monetary policy

    The Reserve Bank of India decided to keep the benchmark lending rate unchanged at 4 per cent for the ninth time in a row and maintain the accommodative policy stance in view of the lingering impact of the Covid.

    Announcing the decision of the RBI’s Monetary Policy Committee (MPC), apex bank chief Shaktikanta Das said there was unanimity on keeping the repo rate unchanged, and the decision to maintain an accommodative policy stance was approved by a majority of 5-1. Though several high domestic performance indicators had shown promise, the main risk was from the “accentuation of headwinds emanating from global developments,” said Das.

    The RBI chief especially mentioned rural demand as showing resilience by a strong start to the rabi sowing, continuing direct transfers under the PMKisan scheme and extension of the free foodgrains scheme till March 2022. Capital outlays will be bolstered by the Centre’s relaxation of additional market borrowings by states and the decision to front-load tax devolution.

    Considering all these factors, the MPC retain the projection for real GDP growth at 9.5 per cent in 2021-22 consisting of 6.6 per cent in Q3 and six per cent in Q4. Real GDP growth is projected at 17.2 per cent for Q1 of 2022-23 and at 7.8 per cent for Q2.

    Inflation, however, will trouble consumers though the RBI chief said it was within the projected upper limit. CPI inflation is projected at 5.3 per cent for 2021-22 but will be 5.7 per cent in the fourth quarter (January to March 2022).

    On the issue of excess liquidity, the RBI decided to provide one more option to banks to prepay some of the 1.12 lakh crore taken under the Targeted Long-Term Repo Operations (TLTRO 1.0 and 2.0). The Banks have already prepaid Rs 37,348 crore in November. But it decided to continue till March 31, the on-tap liquidity windows of Rs 50,000 crore for Covid-related health care infrastructure and Rs 15,000 crore for certain contact-intensive sectors.

    In a separate step, it gave operational flexibility to banks for infusing capital in their overseas branches. “The Indian economy is relatively well-positioned on the path of recovery, but it cannot be immune to global spillovers or to possible surges of infections from new mutations including the omicron variant.”

  • RBI initiates insolvency process against Rel Cap

    RBI initiates insolvency process against Rel Cap

    Mumbai (TIP): The RBI on Thursday, Dec 2,  filed an application for initiation of Corporate Insolvency Resolution Process (CIRP) against debt-ridden Reliance Capital at the Mumbai Bench of the National Company Law Tribunal (NCLT). The RBI had on November 29 superseded the Board of Anil Ambani-promoted Reliance Capital in view of payment defaults and serious governance issues.
    The central bank had also appointed Nageswar Rao Y (former executive director, Bank of Maharashtra) as the administrator of the company.
    In a statement on Thursday, the Reserve Bank said it has filed an application for initiation of CIRP against Reliance Capital Ltd under various sections of the Insolvency and Bankruptcy Code (IBC) before the Mumbai Bench of the National Company Law Tribunal (NCLT).
    As the RBI has moved NCLT, an interim moratorium would be applicable on Reliance Capital.
    The interim moratorium would also be on transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein.
    As per the Financial Service Providers Insolvency Rules, an interim moratorium commences on and from the date of filing of the application till its admission or rejection.
    This is the third large NBFC against which the central bank has initiated bankruptcy proceedings under the IBC recently. The other two were Srei Group NBFCs and Dewan Housing Finance Corporation (DHFL). Source: PTI

  • Economic recovery taking hold: RBI Governor Das

    Numerous macro indicators suggest that the economic recovery is now taking hold after the beating it has taken during the pandemic, but for growth to be sustainable and reach its potential, private capital investment has to resume, the Reserve Bank Governor said on Tuesday.

    RBI Governor Shaktikanta Das said the economy has the potential to grow at a reasonably high pace in the post-pandemic scenario, provided private capital investment resumes.

    Despite many economists revising down their growth forecasts between 8.5 and 10 per cent for the current fiscal, the central bank has not changed its forecast of 9.5 per cent for the year so far.

    Addressing a banking function—which he said is his first since the pandemic begin in March 2020, the governor asked banks to be investment-ready when the investment cycle picks up, which the RBI feels to begin from the next fiscal.

    It can be noted that since 2013, private capital has been missing from the economy and many are of the view that this should begin from mid-next fiscal.

  • RBI imposes penalty on Paytm Payments Bank, Western Union

    RBI imposes penalty on Paytm Payments Bank, Western Union

    New Delhi (TIP): The Reserve Bank of India (RBI) has imposed a monetary penalty on two payment system operators for deficiencies in regulatory compliance. A statement issued by the RBI today read, “The Reserve Bank of India (RBI) had, by an order dated October 01, 2021, imposed a monetary penalty of Rs1 crore (Rupees one crore only) on Paytm Payments Bank Limited (PPBL), for an offence committed of the nature referred to in Section 26 (2) of Payment and Settlement Systems Act, 2007 (PSS Act).”

    It further said, “A Compounding Order dated October 7, 2021, was also issued to Western Union Financial Services Inc (WUFSI), a Money Transfer Service – cross-border inbound service (customer to customer only) operator – imposing a penalty of ?27,78,750 for non-compliance with certain provisions of the directions contained in the Master Direction on Money Transfer Service Scheme (MTSS Directions) dated February 22, 2017.”

    The RBI further stated that the penalties have been imposed in the exercise of powers vested in RBI under the provisions of Section 30 and Section 31 of the PSS Act.

    This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the entities with their customers, it added.

    The RBI further informed that on examination of PPBL’s application for issue of final Certificate of Authorisation (CoA), it was observed that PPBL had submitted information that did not reflect the factual position.

    As this was an offence of the nature referred to in Section 26 (2) of the PSS Act, a notice was issued to PPBL. After reviewing the written responses and oral submissions made during the personal hearing, the RBI-determined that the aforementioned charge was substantiated and warranted the imposition of a monetary penalty.

    The RBI further stated that the Western Union Financial Services (WUFSI) had reported instances of breach of the ceiling of 30 remittances per beneficiary during the calendar years 2019 and 2020 and filed an application for compounding of the violation.

    The RBI-determined that the aforementioned non-compliance warranted the imposition of a monetary penalty after analysing the compounding application, and oral submissions made during the personal hearing, it added.

                    Source: ANI

  • Banks can now sell fraud loans to ARCs

    Banks can now sell fraud loans to ARCs

    Mumbai (TIP): The Reserve Bank of India (RBI) on Friday, Sept 24,  allowed banks to sell fraud loan exposures to asset reconstruction companies (ARCs). Banks will now be able to transfer to ARCs loan exposures classified as fraud as on the date of transfer, provided that the responsibilities of the bank with respect to continuous reporting, monitoring, filing of complaints with law enforcement agencies and proceedings related to such complaints shall also be transferred to the ARC. “The transfer of such loan exposures to an ARC, however, does not absolve the transferor from fixing the staff accountability as required under the extant instructions on frauds,” the RBI said in its master direction on transfer of loan exposures.

    The guidelines said lenders must put in place a comprehensive board-approved policy for transfer and acquisition of all loan exposures. The board-approved policies of every lender on transfer or acquisition of stressed loans shall cover the norms and procedure for transfer, the valuation methodology to be followed, delegation of powers to various functionaries for taking decisions on the transfer of loans, stated objectives for acquiring stressed assets and the risk premium to be applied.

    When negotiated on a bilateral basis, the negotiations must necessarily be followed by an auction through the Swiss challenge method if the aggregate exposure of lenders to the relevant borrower is Rs 100 crore or more. In all other cases, the bilateral negotiations shall be subject to the price discovery and value maximisation approaches adopted by the transferor as part of the board-approved policy, the RBI said.

  • Mastercard barred from adding new customers in India

    The RBI on Wednesday, July 14,  barred Mastercard from onboarding new credit, debit and prepaid card customers with effect from July 22. The action will not impact existing customers of Mastercard, the RBI said. Taking action against Mastercard, the RBI said, “notwithstanding lapse of considerable time and adequate opportunities being given, the entity has been found to be non-compliant with the directions on Storage of Payment System Data”.

  • Economy recovering, rising cyber attacks a risk: RBI

    The second wave of the pandemic took a “grievous toll” on India, but the dented economic activity has started recovering from late-May, RBI Governor Shaktikanta Das said on Thursday, July 1.

    In a first, Das flagged the rising data breaches and cyber attacks as a risk facing the economy, along with others like firming global commodity prices.

    “The recovery that had commenced in the second half of 2020-21 was dented in April-May 2021, but with the wave of infections abating as rapidly as it had set in, economic activity has started to look up in late May and early June,” Das wrote in his foreword to the bi-annual Financial Stability Report prepared by the RBI.

    The report said the gross non-performing assets of banks have been stable at 7.5% in March 2021 — the same level as six months ago — but are expected to go up to 9.8% in March 2022, as per its baseline scenario.

    Das said the dent on balance sheets and performance of financial institutions in India have been much less than what was projected earlier, but was quick to add that a clearer picture will emerge as the effects of regulatory reliefs fully work their way through.

  • After El Salvador, India may move to classify Bitcoin as an asset class

    After El Salvador, India may move to classify Bitcoin as an asset class

    BENGALURU (TIP):  After El Salvador’s historic move to adopt Bitcoin as legal tender (rendering it full currency status), things are looking brighter back home in India for crypto-enthusiasts.

    Top sources tracking the industry told this publication that the government has moved away from its earlier hostile stance towards virtual currencies and will most likely classify Bitcoin as an asset class in India soon.

    Market regulator Securities and Exchange Board of India (SEBI) will  oversee regulations for the cyptocurrency sector after Bitcoin’s classification as an asset class, sources added.

     India’s  crypto industry is also in talks with the finance ministry  regarding the formulation of a new set of regulations and industry sources point out that an expert panel at the ministry is studying the matter.  A Cryptocurrency Regulation bill is likely to be tabled in the Parliament during the Monsoon session, the added.

    The development comes days after the Reserve Bank of India (RBI), in a circular, directed banks to stop avoiding transactions involving virtual tokens citing its earlier 2018 circular, since it had been quashed by the Supreme Court.

    RBI Governor Shakthikanta Das, however, reiterated that there were still major concerns that have been communicated to the government on digital currencies. “We can definitely say that the new committee which is working on cryptocurrencies is very optimistic on cryptocurrency regulation and legislation… A new draft proposal will soon be in the Cabinet, which will look into the overall scenario and take the best step forward. We are very hopeful that the government will embrace cryptocurrencies and blockchain technologies,” Ketan Surana, Director and chief financial officer, Coinsbit, and Member, Internet and Mobile Association of India said. A white paper by Indiatech.org suggests that India’s adoption of Bitcoin as an alternative asset class is more realistic. Due to the volatile nature of digital currencies (prices fluctuate widely on a daily basis), it pointed, they cannot be regularly used as a payment instrument. The paper also recommended taxing investments in cryptocurrencies, making them subject to the capital gains tax under the Income Tax Act.

    Hitesh Malviya, blockchain and crypto investment expert, said, “In my opinion, the Indian government will explore a way to regularise Bitcoin. I don’t think India will consider accepting Bitcoin as a legal tender in the near future because it will affect the position of the Indian rupee. Accepting bitcoin as a legal tender is a good idea for those nations who don’t have their own currency or are dependent on the US dollar”.

                    Source: Express News Service

  • RBI allows commercial banks to pay up to 50% of pre-Covid dividends

    The Reserve Bank of India (RBI) on Thursday, April 22, relaxed the dividend payout norms of commercial banks and allowed them to pay up to 50 per cent of what they paid before Covid from the profits for the fiscal ended March 31, 2021. For FY20, the RBI had asked banks not to make any dividend payment on equity shares from the profits in view of the ongoing stress and heightened uncertainty on account of Covid-19. HDFC Bank had last week decided not to pay any dividend on the basis of the previous year’s RBI directive. “In partial modification of the instructions, banks may pay dividend on equity shares from the profits for the financial year ended March 31, 2021, subject to the quantum of dividend being not more than 50 per cent of the amount determined as per the dividend payout ratio prescribed in paragraph 4 of the May 4, 2005 circular. Other instructions in the circular shall remain unchanged,” the RBI said. Cooperative banks are permitted to pay dividend on equity shares from the profits of the financial year ended March 31, 2021, as per the extant instructions, the RBI said. However, all banks must continue to meet the applicable minimum regulatory capital requirements after dividend payment, it added.