MCIR September 2024 Monetary & Credit Information Review PDF

MONETARY & CREDIT MCIR INFORMATION REVIEW Volume XX Issue 6 September 2024...

MONETARY & CREDIT MCIR INFORMATION REVIEW Volume XX Issue 6 September 2024 I. Regulation Conference for the Directors on the Boards of Small Finance Banks (SFBs) held at Bengaluru The Reserve Bank on September 27, 2024 hosted a conference in Bengaluru for the Directors on the Boards of Small Finance Banks (SFBs). The event, inaugurated by Shri Swaminathan J, Deputy Govenror focused on the theme "Governance in SFBs - Driving Sustainable Growth and Stability" and is part of a series of supervisory engagements the RBI has been organising with the Boards of its supervised entities. Similar conferences for Public Sector Banks and Private Sector Banks were held in May 2023 and for Urban Cooperative Banks (UCBs) in August 2023 and June 2024. RBI Executive Directors Shri S C Murmu, Shri Rohit Jain and Shri R L K Rao, along with senior officials from the Supervision, Regulation and Enforcement Departments, participated in the event. In his keynote address, Deputy Governor emphasised the critical role of governance in steering SFBs toward sustainable growth and stability. He urged Directors to be proactive in Contents identifying and mitigating risks while reinforcing the importance of sustainable business models. He also highlighted the need to strengthen cybersecurity against digital threats and called for greater focus on financial inclusion, customer service and grievance redressal to expand banking Sections Page services. I. Regulation 1-2 The conference included technical sessions led by senior RBI officials on topics such as "Governance and Assurance Functions," "Business Risk – Regulatory & Supervisory Expectations," II. Supervision 2 and "IT Systems & Cybersecurity." An external expert delivered a talk on "Board Conduct in III. Foreign Exchange 2 Banks," followed by a panel discussion with Independent Directors of selected SFBs on "SFBs Prospects & Challenges." The event concluded with an open house interactive session between IV. Debt Manager to participants and RBI Executive Directors. To read more, please click here. Government 2-3 Certificate of Registration V. Issuer of Currency 3 13 Non-Banking Financial Companies (NBFCs) have surrendered the Certificate of VI. Publication 3-4 Registration (CoR) granted to them by the Reserve Bank of India (RBI). The RBI, in exercise of VII. Data Releases 4 powers conferred on it under section 45-IA (6) of the Reserve Bank of India Act, 1934, has therefore cancelled the CoR. To read more, please click here. The Reserve Bank on September 13, 2024 informed the cancellation of Certificate of Registration (CoR) of four Non-Banking Financial Companies (NBFCs). The RBI , in exercise of powers conferred on it under section 45-IA (6) of the Reserve Bank of India Act, 1934, has Note from the Editor therefore cancelled the CoR. To read more, please click here. Gold loans - Irregular practices observed in grant of loans Welcome to the September 2024 edition of the Monetary and against pledge of gold ornaments and jewellery Credit Information Review (MCIR). The Reserve Bank on September 30, 2024 after reviewing adherence to prudential This monthly periodical of Reserve guidelines for loans against gold ornaments and jewellery and conducting onsite examinations Bank of India helps keep abreast of select Supervised Entities (SEs), identified several irregular practices, including third-party with the latest developments and involvement in sourcing and appraising loans, improper gold valuation processes, inadequate important policy initiatives taken by due diligence, lack of transparency in auctions, poor monitoring of loan-to-value ratios and the Bank during this month in the incorrect risk-weight applications. SEs are advised to review and rectify these deficiencies areas of money and credit. Our promptly, strengthen controls over outsourced activities and closely monitor their gold loan endeavor to share information, portfolios. Non-compliance will result in supervisory action, with a report due to the RBI within impart knowledge and to stay in three months. touch, ensuring factual accuracy Deficiencies observed during review of gold loans in select SEs and consistency in disseminating The Reserve Bank observed several irregularities in gold loans granted through partnerships the information. MCIR can be with Fintech entities and business correspondents (BCs), including improper valuation practices, accessed at https://mcir.rbi.org.in inadequate LTV monitoring, non-compliance with KYC norms and insecure gold storage. Other as well as by scanning the QR issues included lack of end-use verification for non-agriculture loans, improper handling of top- code. up loans without fresh appraisal, low auction recovery values, high cash disbursement in We welcome your feedback at violation of statutory limits, weak governance, evergreening of loans and non-classification of [email protected] overdue loans as NPAs. Additionally, SEs showed inadequate oversight and controls over third- Puneet Pancholy party entities, raising concerns about transparency and compliance. To read more, please click Editor here. 1 Volume XX Issue 6 MCIR September 2024  610th Meeting of Central Board of the Reserve Bank of India The 610th meeting of the Central Board of Directors of the Reserve Bank of India was held on September 4, 2024 in Mumbai under the Chairmanship of Shri Shaktikanta Das, Governor. The Board reviewed the global and domestic economic scenario and outlook, including associated challenges. The Board also reviewed various areas of operations of the Reserve Bank of India including the functioning of Local Boards and activities of select Central Office Departments. Deputy Governors Dr. Michael Debabrata Patra, Shri M. Rajeshwar Rao, Shri T. Rabi Sankar and other Directors of the Central Board – Shri Satish K. Marathe, Smt. Revathy Iyer, Prof. Sachin Chaturvedi, Shri Venu Srinivasan, Shri Pankaj Ramanbhai Patel and Dr. Ravindra H. Dholakia – attended the meeting. Shri Ajay Seth, Secretary, Department of Economic Affairs and Shri Nagaraju Maddirala, Secretary, Department of Financial Services, also attended the meeting. Interest Equalization Scheme (IES) on ₹31.80 lakh BNP Paribas Pre and Post Shipment Rupee Export ₹23.10 lakh Credit SMFG India Credit Company Limited Muthoot Vehicle & Asset Finance ₹ 7.90 lakh The Reserve Bank on September 20, 2024 announced Limited that the Government of India, through Trade Notices Hewlett Packard Financial Services ₹10.40 lakh No.16/2024-2025 dated August 31, 2024 and (India) Private Limited No.17/2024-2025 dated September 17, 2024, has Lucknow University Primary Co- ₹3.00 lakh extended the Interest Equalization Scheme for Pre and Post operative Bank Ltd., Lucknow, Uttar Shipment Rupee Export Credit for MSME Manufacturer Pradesh exporters from September 1, 2024, to September 30, The Urban Co-operative Bank Limited, ₹ 5.00 lakh 2024. The extension applies exclusively to MSME Anantnag Manufacturer exporters, with a cap of ₹5 Crore per Importer-Exporter Code (IEC) for the financial year starting The Bihar Awami Co-operative Bank ₹1.50 lakh Limited, Patna April 1, 2024 and an overall annual limit of ₹10 Crore. For non-MSME Manufacturer and Merchant Exporters, the cap The Surat People’s Co-operative Bank ₹61.60 lakh remains ₹2.5 Crore per IEC until June 30, 2024. All other Limited, Surat provisions of the scheme remain unchanged as per previous instructions. To read more, please click here. III. Foreign Exchange II. Supervision LRS for Resident Individuals- Discontinuation of Reporting of Monetary Penalty monthly return The Reserve Bank imposed monetary penalty during The Reserve Bank on September 6, 2024 reviewed the month of September 2024 on the following entities the Liberalised Remittance Scheme (LRS) and decided to under various sections of Banking Regulation Act, 1949. discontinue the requirement for submission of LRS Name of the Entity Amount of monthly return by AD Category-I banks. Accordingly, Monetary from the reporting month of September 2024, AD Penalty Category-I banks shall not submit LRS monthly return (Return code : R089). AD Category-I banks, henceforth, Durgapur Mahila Co-operative Bank ₹ 1.00 lakh will be required to upload only transaction-wise Limited, Kolkata information under LRS daily return (CIMS return code: Housing and Urban Development ₹ 3.50 lakh R010) at the close of business of the next working day on Corporation Limited CIMS (URL: https://sankalan.rbi.org.in). In case no data Aadhar Housing Finance Limited ₹ 5.00 lakh is to be furnished, AD Category-I banks shall upload a ‘NIL’ report. To read more, please click here. Godrej Housing Finance Limited ₹ 5.00 lakh Jila Sahakari Kendriya Bank Maryadit, ₹ 1.00 lakh IV. Debt Manager to Government Vidisha, Madhya Pradesh Nagrik Sahakari Bank Maryadit, Raipur, ₹ 3.50 lakh Chhattisgarh Floating Rate Bond 2033 Jila Sahakari Kendriya Bank Maryadit, ₹1.50 lakh The Reserve Bank on September 20, 2024 Raipur, Chhattisgarh announced the rate of interest on Government of India Samarth Sahakari Bank Limited, ₹4.50 lakh Floating Rate Bond 2033 (GOI FRB 2033) applicable for Solapur, Maharashtra the half year September 22, 2024 to March 21, 2025. ₹ 1.00 crore As per the announcement, the rate of interest of GOI HDFC Bank Limited FRB 2033 shall be 7.03 per cent per annum. To read ₹ 1.91 crore Axis Bank Limited more, please click here. Volume XX Issue 6 2 MCIR September 2024  31st Meeting of the FSDC Sub-Committee A meeting of the Sub-Committee of the Financial Stability and Development Council (FSDC-SC) was held on September 5, 2024 at the Reserve Bank of India, Mumbai under the chairmanship of Shri Shaktikanta Das, Governor, Reserve Bank of India. The Sub-Committee reviewed major global and domestic macroeconomic and financial developments and issues relating to inter-regulatory coordination in the Indian financial sector. Members shared their assessments of potential risks to financial stability and discussed various issues that may have financial stability implications. The Sub-Committee also reviewed the activities of various technical groups under its purview and the functioning of State-level Coordination Committees (SLCCs) in States/Union Territories (UTs). The FSDC-SC resolved to continue its focus on improving financial sector resilience through inter-regulatory coordination, while remaining watchful of emerging challenges to the economy and the financial system, including those from global spillovers, cyber hazards and climate change. The meeting was attended by the members of the Sub-Committee, Ms. Madhabi Puri Buch, Chairperson, Securities and Exchange Board of India (SEBI); Shri Debasish Panda, Chairperson, Insurance Regulatory and Development Authority of India (IRDAI); Dr. Deepak Mohanty, Chairperson, Pension Fund Regulatory and Development Authority (PFRDA); Shri K. Rajaraman, Chairperson, International Financial Services Centres Authority (IFSCA); Shri S.Krishnan, Secretary, Ministry of Electronics and Information Technology; Shri Sanjay Malhotra, Secretary, Department of Revenue; Ms. Deepti Gaur Mukerjee, Secretary, Ministry of Corporate Affairs; Shri Nagaraju Maddirala, Secretary, Department of Financial Services; Dr. Shashank Saksena, Secretary, Financial Stability and Development Council; Deputy Governors of the Reserve Bank – Dr. Michael Debabrata Patra, Shri M. Rajeshwar Rao, Shri T. Rabi Shankar, Shri Swaminathan J.; and Dr. O. P. Mall, Executive Director of the Reserve Bank. WMA Limit subscription up to ₹2,000 crore against each of the The Reserve Bank on September 26, 2024 in securities indicated in the auction notifications. The total consultation with Government of India decided that the notified amount is ₹6,61,000 crore. To read more, limit for Ways and Means Advances (WMA) for the second please click here. half of the financial year 2024-25 (October 2024 to V. Issuer of Currency March 2025) will be ₹50,000 crore. The Bank may trigger fresh floatation of market loans Withdrawal of ₹2000 denomination when the Government of India utilises 75 per cent of the Banknotes WMA limit. Further, the Bank in consultation with the The Reserve Bank on October 1, 2024 released the Government of India, retains the flexibility to revise the status of withdrawal of ₹2000 denomination banknotes. limit at any time taking into consideration the prevailing As per the data, the total value of ₹2000 banknotes in circumstances. The interest rate on WMA and Overdraft circulation declined to ₹7117 crore at the close of will be Repo Rate and two percent above the Repo Rate, business on September 30, 2024. Thus, 98 percent of the respectively. To read more, please click here. ₹2000 banknotes in circulation as on May 19, 2023 has Calendar for Auction of GoI T-Bills since been returned. To read more, please click here. The Reserve Bank on September 26, 2024 in consultation with the Government of India (GoI) and after VI. Publication reviewing the cash position of the Central Government Handbook of Statistics of the Indian notified the calendar for issuance of Treasury Bills for the quarter ending December 2024. The total notified amount Economy The Reserve Bank on September 13, 2024 released its for the quarter is ₹2,47,000 crore. annual publication titled ‘Handbook of Statistics on the Further, the Bank in consultation with the GoI, will have Indian Economy, 2023-24’. This publication, the 26th in the flexibility to modify the notified amount and timing for the series, disseminates a wide range of data on auction of Treasury Bills depending upon the requirements macroeconomic and financial variables, such as national of the Government of India, evolving market conditions income, prices, money, banking, financial markets, public and other relevant factors, after giving due notice to the finances, foreign trade and balance of payments, along market. Thus, the calendar is subject to change, if with select socio-economic indicators. To read more, circumstances so warrant, including for reasons such as please click here. intervening holidays. To read more, please click here. RBI - Occasional Papers - Vol. 44, Calendar for Marketable Dated No.2, 2023 Securities The Reserve Bank on September 30, 2024 released The Reserve Bank on September 26, 2024 in the Volume 44, No.2, 2023 of its Occasional Papers, a consultation with the Government of India (GoI) notified research journal containing contributions from its staff. the indicative calendar for issuance of Government dated This issue contains three articles and three book reviews. securities, including Sovereign Green Bonds (SGrB), for Articles: i) Cross-border Capital Flows and Sudden Stops: the second half of the fiscal year 2024-25 (October 1, Lessons from Emerging Market Economies ii) 2024 to March 31, 2025). The Reserve Bank of India, in Procyclicality in Total Factor Productivity Measurement: consultation with the Government of India, reserves the An Analysis of the India KLEMS Data iii) Macroprudential right to exercise the greenshoe option to retain additional Policy and Tail Effects on Growth in India. The RBI Volume XX MCIR Issue 6 3 September 2024  Occasional Papers included three insightful book reviews grow faster in Q2 as headline inflation eases, with a by RBI officials. revival of rural demand already taking hold. Consumer i) How Economics Can Save the World by Erik Angner, price index (CPI) inflation came in below the Reserve which offers actionable, evidence-based solutions to Bank’s target for the second consecutive month in major global challenges, emphasizing the relevance of August, although in light of the recent experience, food economics in diverse aspects of life. price volatility remains a contingent risk. ii) Money in One Lesson by Gavin Jackson, which ii) Synchronisation of Indian States’ Business Cycle explores the concept of money, its historical evolution, Given the distinct economic characteristics of the Indian and the influence of governments and central banks on states, this paper explores the growth dynamics and economies and daily life. nature of co-movement of business cycles of the Indian iii) Handbook of Real Estate and Macroeconomics edited states. Synchronisation of national and sub-national by Charles Ka Yui Leung, highlighting its comprehensive cycles over the last four decades has been analysed using evaluation of the interaction between real estate and Baxter-King’s (B-K) band-pass filter and unobserved macroeconomic factors. To read more, please click here. component model (UCM). Furthermore, influence of Research Paper geographical proximity and economic structure of states on business cycle synchronisation has been examined The Reserve Bank on September 26, 2024 on its through a regression framework. website a research study titled “Status of Digital Financial iii) Priority Sector Lending: The Indian Experience Literacy in Lakshadweep Islands: Bottlenecks and Way Priority sector lending (PSL) in India has been used as a Forward” under the Project Research Study1. The study is policy intervention tool to direct credit to the needy based on the primary data collected from all the ten sectors of the economy. This article evaluates the inhabited islands in Lakshadweep - Agatti, Amini andrott, commercial viability of such loans and their impact on Bitra, Chetlat, Kadmat, Kalpeni, Kavaratti, Kiltan and the overall financial health of banks using quarterly bank- Minicoy - to analyse the present status of digital financial level data from March 2006 to March 2023. literacy and digital financial inclusion. While households iv) Peeling the Layers: A Review of the NBFC Sector in were the primary unit of enumeration of the survey, SHG Recent Times members, bank employees, school authorities, students This article assesses the performance of the NBFC sector and business-persons in the islands were also interviewed. against the backdrop of the recent Scale Based The major findings of the study are the following: Regulation (SBR) framework in 2023-24 (up to Q3) using All individual respondents in the surveyed islands supervisory data. It also provides an overview of the reported access to bank deposit accounts. global Non-Banking Financial Institution (NBFI) Though there was no gender gap in the access to bank landscape, with focus on India. Additionally, the article deposit accounts, there was a considerable difference details the evolution of regulatory framework pertaining between men and women with regard to banking habits to India's NBFC sector. To read more, please click here. in general, usage of deposit accounts in particular. Not just basic literacy but also digital literacy, assessed in terms of possession as well as competency to use VII. Data Release mobile phones and computers, was found to be high Important data released by the Reserve Bank during the among the survey respondents. month of September 2024 are as follows: Automated Teller Machines (ATMs) were the most popularly used means of digital banking in the islands. S/N Title About 90 per cent of the respondents in the islands had ATM cards, while 80 per cent reported an actual usage of 1 Scheduled Banks’ Statement of Position in India these cards. as on Friday, September 06, 2024 Despite a high degree of financial inclusion and digital literacy, a major barrier towards digital financial inclusion 2 Overseas Direct Investment for August 2024 in the islands was the poor Internet connectivity; respondents reported apprehensions about digital 3 Lending and Deposit Rates of Scheduled transaction failures. To read more, please click here. Commercial Banks – September 2024 RBI Bulletin 4 Sectoral Deployment of Bank Credit – August The Reserve Bank on September 20, 2024 released 2024 the September 2024 issue of its monthly Bulletin. The Bulletin includes eleven speeches, four articles and current 5 India’s International Investment Position (IIP), statistics. The four articles are: June 2024 i) State of the Economy 6 India’s International Trade in Services for the Global economic activity is slowing down while the pace Month of August 2024 of disinflation remains sluggish, provoking caution among monetary policy authorities. In India, domestic drivers – 7 India’s External Debt as at the end of June private consumption and gross fixed investment – were 2024 robust and net exports remained sequentially positive in their support to gross domestic product (GDP) growth in 8 Sources of Variation in India’s Foreign Q1:2024-25. The underperformance of agriculture was Exchange Reserves during April-June 2024 compensated for by a buoyant manufacturing sector and 9 Data on ECB / FCCB / RDB for July 2024 resilient services. Household consumption is poised to Edited and published by Puneet Pancholy for Reserve Bank of India, Department of Communication, Central Office, Shahid Bhagat Singh Marg, Mumbai - 400 001. MCIR can be also accessed at https://mcir.rbi.org.in.