On 15th November 2023, the Reserve Bank of India (RBI) has granted approval for the appointment of Isha Ambani, Anshuman Thakur, and Hitesh Kumar Sethia as Directors of Jio Financial Services Limited, a Non-Banking Financial Company (NBFC) backed by Reliance Industries Limited(RIL).
- The approval is valid for only 6 months with effect from the 15th November 2023.
Note: If the company fails to implement the proposed changes within this timeframe, it will need to reapply with reasons for the delay.
About Isha Ambani:
Isha Ambani is a key member of the executive leadership team at Reliance Retail.
- She played a pivotal role in conceptualizing and launching Jio in India in 2016.
About Anshuman Thakur:
Anshuman Thakur has over 24 years of experience in corporate strategy and investment banking, currently serving as the Senior Vice President at Jio Platforms Limited.
- He joined the Reliance group in 2014. Before that, he had worked with Morgan Stanley, Arthur Andersen and Ernst & Young.
About Hitesh Sethia:
Hitesh Sethia, a chartered accountant, has been a financial services executive with over 2 decades of experience across Europe, Asia (India & Greater China) and North America.
- He worked with ICICI Bank Canada, ICICI Bank Germany, ICICI Bank’s operations in the UK and Hong Kong as well.
Note: Reliance Strategic Investments Ltd (RSIL) has also approved the appointment of Hitesh Kumar Sethia as MD and CEO of RSIL for a period of 3 years.
RBI Strengthens Regulations on Consumer Lending, Mandates Higher Capital Buffers for Banks and NBFCs
The RBI has introduced stricter rules for consumer lending, directing both banks and NBFCs to establish higher capital buffers and implement board-approved policies to monitor exposure limits in the consumer lending segment.
- This move follows concerns expressed by the RBI governor regarding the rapid growth of consumer loans, prompting a cautionary approach among lenders.
Key Points:
i.RBI increased the risk weights on credit card exposures by 25% points to 150% and 125% for banks and NBFCs, respectively.
- Credit card receivables from banks will now carry a risk weight of 150%, increased from the previous 125%, while NBFCs will face a risk weight of 125%, up from 100%.
- The new regulations, will not be applicable to housing loans, education loans, vehicle loans and loans secured by gold and gold jewellery.
ii.This higher risk weight applies to both existing and new credit exposure.
iii.Additionally, RBI has specified that all top-up loans against depreciating movable assets, such as vehicles, should be treated as unsecured loans for credit appraisal and exposure purposes.
iv.The RBI has also mandated higher capital requirements for personal loans, with banks now required to set aside Rs 10 for every Rs 100 lent, up from the previous Rs 8.
v.These measures are intended to be implemented with immediate effect, and all regulated entities (REs) must comply with the new rules by February 29, 2024
vi.Further, the RBI has asked banks to set aside additional capital against loans to NBFCs, where the risk weight is currently below 100%.
vii.Indian banks have seen a sharp rise in unsecured loans – mostly personal loans and credit cards – that has outpaced the overall bank credit growth of about 15% over the past year, catching the Reserve Bank of India’s (RBI) attention
- RBI was particularly concerned with the surge in tiny personal loans of up to Rs 10,000, taken for 3 to 4 months.
- Unsecured personal loans increased 23% from a year ago as of Sept. 22, 2023, while outstanding amounts on credit cards jumped nearly 30%, RBI data shows.
- Data released by credit bureau Transunion CIBIL earlier this month showed that delinquencies, defined as loans overdue by more than 90 days, were at 0.84% for all personal loans. However, for loans below Rs 50,000 (USD600.66) delinquencies were higher at 5.4%.
RBI Allows Banks to Open Current Accounts for Export Proceeds Alongside Special Rupee Vostro Accounts
The Reserve Bank of India (RBI) has granted authorization to Authorized Dealer Category – I (AD Category – I) banks to open additional current accounts for export proceeds, supplementing the existing special rupee vostro accounts.
- This account is exclusively meant for the settlement of export transactions.
Key Points:
i.The move comes as part of the RBI’s efforts, initiated in July 2022
- which introduced a mechanism for invoicing, payment, and settlement of exports/imports in Indian Rupees (INR) through Special Rupee Vostro Accounts held by correspondent banks of partner trading countries with AD Category-I banks in India.
ii.The RBI’s decision will allow banks to provide exporters with greater operational flexibility.
Note:
i.Nostro Account: Our account with them (foreign account), held in their foreign currency.
ii.Vostro Account: Their account with us (domestic account), held in our domestic currency.
iii.Loro Account: Their account with someone else, denominated in the currency of that third party.
iv.Escrow Account: A temporary account for secure funds holding during a transaction.
RBI Imposes Penalties on Axis Bank, Manappuram Finance, and Anand Rathi Global Finance for Regulatory Violations
RBI has levied monetary penalties on Axis Bank Ltd, Manappuram Finance Ltd, and Anand Rathi Global Finance Ltd for non-compliance with various regulatory directives.
i.Penalty on Axis Bank:
RBI imposed a monetary penalty of Rs 90.92 lakh for multiple infractions discovered during the ‘Statutory Inspection for Supervisory Evaluation (ISE 2022).’
- The penalty has been imposed in exercise of powers vested in RBI conferred under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) of the Banking Regulation Act, 1949.
Note:
The penalty was imposed for non-compliance with certain directions issued by RBI on “RBI (Know Your Customer (KYC)) Directions, 2016’, ‘Loans and Advances – Statutory and Other Restrictions’, ‘Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks’ and ‘Code of Conduct for Opening and Operating Current Accounts’.
ii.Penalty on Manappuram Finance:
RBI imposed a monetary penalty of Rs 42.78 lakh for non-compliance with certain provisions of the “Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016”.
- The penalty was imposed in the exercise of powers conferred on RBI under the provisions of clause (b) of sub-section (1) of Section 58 G read with clause (aa) of sub-section (5) of Section 58 B of the Reserve Bank of India Act, 1934.
iii.Penalty on Anand Rathi Global Finance:
RBI imposed a monetary penalty of Rs 20 lakh for non-compliance with certain provisions of the RBI (KYC) Directions, 2016.
- The penalty was imposed in the exercise of powers conferred on RBI under the provisions of clause (b) of sub-section (1) of section 58 G read with clause (aa) of sub-section (5) of section 58 B of the Reserve Bank of India Act, 1934.
About Jio Financial Services Limited:
i.Jio Financial Services (JFS) holds a prominent position as the 3rd-largest NBFC by market capitalization, with a clear ownership structure: 46.77% by the promoter and promoter group, and 53.23% by the public.
ii.JFS, a part of billionaire Mukesh Ambani-led conglomerate, was demerged from the parent on July 20, 2023.
President and CEO– Hitesh Kumar Sethia
Headquarters– Mumbai, Maharashtra.
About Reserve Bank of India (RBI):
Governor– Shaktikanta Das
Headquarters– Mumbai, Maharashtra,
Establishment – 1 April 1935 by the Reserve Bank of India Act, 1934
