The Reserve Bank of India (RBI) has revised the eligibility norms for the inclusion of Urban Co-operative Banks (UCBs) in the Second Schedule to the Reserve Bank of India (RBI) Act, 1934. These instructions are issued under clause (a) of sub-section (6) of section 42 of the RBI Act, 1934.
- This move followed the release of the revised regulatory framework for UCBs in July 2022, aiming to improve their financial stability, governance, and strengthen the regulatory framework for UCBs.
- This revision will repeal the circular on UCBs for their inclusion in the 2nd Schedule to the RBI Act, 1934 issued in 2013.
Key Revised Norms:
i.UCBs must maintain a Capital to Risk-Weighted Assets Ratio (CRAR) of at least 3% higher than the minimum requirement for their tier to enhance capital strength and resilience to risks.
ii.To be included, there shouldn’t be any major issues flagged by the RBI in terms of regulations and supervision.
iii.Licensed Tier 3 and Tier 4 UCBs must meet RBI’s Financially Sound and Well Managed (FSWM) criteria.
- This further requires maintaining the minimum deposits needed for Tier 3 classification for two consecutive years.
Reason behind Revision:
Previously, eligibility for inclusion in the Second Schedule was determined by a 2013 circular. However, the 2022 Revised Regulatory Framework for UCBs updated criteria for categorizing UCBs as FSWM. However, challenges emerged like Tier 3 and 4 UCBs financial thresholds struggles and inadequate consideration of governance and risk management. Consequently, the RBI revised norms for UCBs.
RBI asks regulated entities to leverage technology to enhance effectiveness of internal Compliance monitoring
Recently, the RBI assessed internal compliance monitoring in Supervised Entities (SEs). SEs use varying levels of automation, but the process remains a work in progress with significant manual intervention. In this regard, RBI advised Regulated Entities (REs) to use technology to enhance effectiveness of internal Compliance monitoring.
Key Points:
i.The RBI suggests implementing comprehensive, workflow-based solutions to enhance effectiveness. These solutions should enable communication and collaboration, have processes for compliance management, and offer a unified dashboard for Senior Management.
ii.REs are mandated to review and update internal compliance tracking processes by June 30, 2024.
Note:
The REs include Scheduled Commercial Banks/SCBs (excluding Regional Rural Banks/RRBs), Small Finance Banks (SFBs); Payments Banks; Primary UCBs (Tier III and IV); Upper- and Middle-Layer Non-Banking Financial Companies/NBFCs (including Housing Finance Companies/HFCs); Credit Information Companies (CICs) and All India Financial Institutions (AIFIs).
RBI allows TRQ holders to make advance payment for gold import via IIBX
RBI has issued Guidelines on import of gold by Tariff Rate Quota (TRQ) holders under the India-United Arab Emirates (UAE) Comprehensive Economic Partnership Agreement (CEPA) as notified by the International Financial Services Centres Authority (IFSCA).
- Under this, Authorized Dealer (AD) Category-I banks can allow valid TRQ holders under the India-UAE CEPA to remit advance payment for eleven days for import of gold through India International Bullion Exchange IFSC Ltd (IIBX) against the TRQ.
Key Points:
i.This information by RBI is issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.
ii.In November 2023, the government allowed jewelers with valid license to import gold under specific ITC(HS) codes at concessional customs duty from the UAE, under the free trade agreement, through IIBX.
iii.The India-UAE free trade agreement, effective since May 2022, grants a 1% duty concession to domestic importers on a specified quantity of gold under the TRQ provisions.
- Companies receive TRQ certificates from Directorate General of Foreign Trade (DGFT), Ministry of Commerce and Industry (MoCI) for imports.
About India International Bullion Exchange (IIBX):
It is India’s first International Bullion Exchange at International Financial Services Centre (IFSC), GIFT (Gujarat International Finance Tec-City) City, Gandhinagar in Gujarat.
Managing Director & CEO– Ashok Kumar Gautam
Establishment– July 2022
Regulated by– International Financial Services Centres Authority (IFSCA)
RBI bars Paytm Payments Bank from Offering Services
RBI in exercise of its powers under section 35A of the Banking Regulation (BR) Act, 1949, directed Paytm Payments Bank Ltd (PPBL or the bank) to stop onboarding of new customers with immediate effect.
- This decision has been taken amid persistent non-compliances and continued material supervisory concerns in the bank. This also resulted in further supervisory action.
Direction given to PPBL by RBI:
i.No additional deposits or credit transactions are allowed, except for interest, cashbacks, or refunds after February 29, 2024.
ii.Withdrawals from customer accounts, including savings, current, prepaid instruments, FASTags, National Common Mobility Cards (NCMC), etc., are permitted without restrictions.
iii.Banking services, excluding withdrawals and fund transfers by its customers, are discontinued after February 29, 2024.
iv.The Nodal Accounts of One97 Communications Ltd and Paytm Payments Services Ltd. must be terminated by February 29, 2024.
v.Settlement of pipeline transactions and nodal accounts (initiated on or before February 29, 2024) should be completed by March 15, 2024, with no further transactions allowed.
The new restrictions mean banking operations will cease unless the entity redirects its payment services through another bank.
Recent Related News:
i.RBI issued guidelines on Responsible Lending Conduct which directs Regulated Entities (REs) to release all original movable or immovable property documents, and remove charges registered with any registry within 30 days of full repayment or settlement of personal loans by borrowers.
ii.RBI also revised its guidelines on categorizing the investments by banks, to align them with global standards by issuing RBI (Classification, Valuation and Operation of Investment Portfolio of Commercial Banks) Directions, 2023 which will be effective from April 1, 2024.
About Reserve Bank of India (RBI):
Governor – Shaktikanta Das
Deputy Governors – Swaminathan Janakiraman, Michael Debabrata Patra, M. Rajeshwar Rao, T. Rabi Sankar
Establishment– 1st April 1935
Headquarters– Mumbai, Maharashtra
