Category Archives: RBI

The movie plays on: a lens for viewing the global economy

This presentation suggests an alternative lens through which to view the global economy’s struggle to achieve sustainable and balanced growth, reflecting a failure to prevent the build-up and collapse of hugely damaging financial booms and busts. A symptom of the current malaise can be seen in interest rates that have been exceptionally low for an exceptionally long time, with a record high amount of global sovereign debt trading at negative yields. To break out of this trap, there is a need to take a longer-term view and rebalance policies towards structural measures, abandoning the debt-fuelled growth model that has brought us to the current predicament.

Speech by Mr Claudio Borio, Head of the Monetary and Economic Department of the BIS, at the FT Debt Capital Markets Outlook, London, 10 February 2016.

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INDIA: The specter of credit starvation

Source: Live Mint

“Do Indian banks have enough capital to lend in case the elusive economic recovery materializes later this year? The answer seems to be no, especially since minimum total capital requirements are set to rise this financial year. According to the Reserve Bank of India (RBI)’s timeline for implementing Basel III norms, banks have to provide for a capital conservation buffer of 0.625% of risk-weighted assets by the end of this financial year.

Including this, the minimum total capital requirement will increase to 9.625%. In the next financial year, this increases to 10.25%. While the big state-owned banks such as State Bank of India, Bank of Baroda and Punjab National Bank have relatively comfortable capital positions, the situation is dire for mid-cap public sector banks, which account for around one-third of bank credit.”

Full article: http://www.livemint.com/Money/bC1dVaOmTBDDPnJ2ChbLRP/The-spectre-of-credit-starvation.html

RBI : Basel III implementation assessments of India published by Basel Committee

The Basel Committee on Banking Supervision (BCBS) under the aegis of the Bank for International Settlements has published, on its website, assessment reports on the implementation of the Basel risk-based capital framework and the Liquidity Coverage Ratio (LCR) for India as part of the ongoing Regulatory Consistency Assessment Program (RCAP) for its member jurisdictions. BCBS has thus far published assessment on 13 jurisdictions (including India).

The assessment has rated the standards adopted by the Reserve Bank (RBI) with regard to risk-based capital requirements as ‘Compliant’ with the minimum Basel capital standards. Each of the 14 components of the Basel capital framework included in the assessment has been assessed as compliant.

The Liquidity Coverage Ratio (LCR) requirements have been assessed as ‘Largely Compliant’ with the minimum Basel liquidity standards. The two components of the LCR framework, viz. the LCR standard and the LCR disclosure requirements, are assessed as ‘largely compliant’ and ‘compliant’ with the Basel standard, respectively.

The Reserve Bank believes that the RCAP reports bring in transparency about the national adoption and implementation of Basel standards and promote an international level playing field.

Did you know CCRA Curriculum has content from BIS reproduced with permissions to keep you up to date on Basel norms.

Composition and Ownership Pattern of Deposits with Scheduled Commercial Banks: March 2013 – Data Release

The Reserve Bank of India today released on its website the data related to composition and ownership pattern of deposits with scheduled commercial banks as on March 31, 2013. An article analysing broad trends across type of deposit accounts, institutional sectors, population groups and bank groups over the period is being published in the April 2014 issue of the RBI Bulletin. The major highlights of the data are as follows:

Highlights:

  • Current, savings and term deposits comprised 9.9 per cent, 25.7 per cent and 64.5 per cent, respectively in the total deposits in March 2013.
  • Household sector with 59.6 per cent share in total deposits was the largest contributor in total deposits in March 2013 followed by government and private corporate sector contributing 13.9 and 12.4 per cent, respectively.
  • Metropolitan branches followed by urban and semi-urban branches continued to lead deposit generation by SCBs mainly in the form of term deposits. Whereas, savings deposits dominated in rural branches followed by term deposits.
  • Bank group-wise, public sector banks accounted for the largest share (74.3 per cent) in total deposits in March 2013 followed by private sector banks (18.8 per cent).
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Regulation of Indian Debt & Derivatives Markets: Some perspectives on post-crisis paradigm

Shri. N. S. Venkatesh, Chairman, Fixed Income Money Market Derivatives Association (FIMMDA), Shri B. Prasanna, Chairman, Primary Dealers Association of India (PDAI), Sri. C.E.S. Azariah, outgoing Chief Executive Officer and Shri Prasad, incoming CEO of the FIMMDA, distinguished speakers and panellists and delegates to the conference. It gives me immense pleasure to be amidst you all for the 15th annual meeting of the FIMMDA and the PDAI in this beautiful, historic city of Jaipur. After holding meeting overseas for some years, holding the meeting here is like home coming. Jaipur with its majestic forts and palaces, archaeological monuments and beautiful gardens provides appropriate ambience for the bond and derivatives dealers to reflect on the very topical subject of the conference: Risk, Regulation & Opportunities in Globalised Markets. I would like to compliment the organizers for very thoughtfully choosing the session themes covering dynamics of Impossible Trinity in the context of the EMEs, liquidity risk and capital requirements under the Basel framework, regulations relating to Financial Market Infrastructures (FMIs) and current issues and challenges in the financial market development and the eminent panellists. By way of background to some of the issues that would be discussed in these sessions, I would like to share some perspectives on regulations of Indian debt and derivatives markets in the recent times in the context of post-crisis paradigm.

Read full key note here

RBI : RBI seeks Public Comments on Report on Data Format for Furnishing of Credit Information to CICs

RBI seeks Public Comments on Report on Data Format for Furnishing of Credit Information to CICs
The Reserve Bank of India today released on its website for public comments, the Report of the Committee to recommend Data Format for Furnishing of Credit Information to Credit Information Companies (CICs). Comments may please be emailed or sent by post to Chief General Manager, Department of Banking Operations and Development, Reserve Bank of India, Shahid Bhagat Singh Marg, Mumbai 400 001 on or before April 30, 2014.

The committee has made wide ranging recommendations on issues relating to credit information, such as, increasing its coverage, format of reports and best practices to be followed by credit institutions, credit information companies (CICs) and the Reserve Bank.

Making credit information more useful

The committee has stated that low usage of credit information by member institutions and other specified users needs to be addressed by requiring CICs to populate their databases with requisite credit information so that enquiries by specified users yield desired information. It has recommended that this can be done by increasing the coverage of credit information in terms of membership (all credit institutions should be members of all CICs) and products (also covering defaults in CPs and such other products) and by creating awareness about Credit Information Reports (CIRs).

Credit Information Report

The committee’s recommendations relating to CIR are:

  1. CICs should have a common classification of Credit Scores so that it would be easier to understand and interpret them. The Committee has recommended that the CIBIL method of calibrating scores from 300 to 900 could be adopted by other CICs.
  2. CICs should report details of co-borrowers and guarantors.
  3. CICs may provide a single CIR for a borrower even if there are multiple addresses, using a unique identification number (PAN/Aadhaar No.).
  4. CICs may have link with the database of Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) which has data on mortgages so that CIRs can also provide information on property mortgages.
  5. An online data correction mechanism may be put in place by CICs to enable members to confirm/upload correction requests.
  6. CIRs should disclose details of disputes relating to information in CIRs and customer comments thereon, if any.
  7. Customer grievance redressal, especially in respect of complaints relating to updation/alteration of credit information, should be given top priority. This may be integrated with existing redressal systems, such as, Banking Ombudsman Scheme.
  8. Banks/financial institutions (FIs) may report cases of wilful default, even in non-suit filed cases, directly to the CICs of which they are members and the system of banks/FIs reporting information on non-suit filed cases of defaulters to the Reserve Bank of India may be dispensed with.
  9. CICs may make available the data in respect of suit-filed cases on their websites in a more user-friendly manner that would facilitate search across periods and banks.

The Committee has further suggested that providing customers with a free copy of their CIRs would help create awareness about the need to have credit discipline, enable customers to correct their behaviour and improve their score well before they plan to avail fresh credit of any kind, help detect identity theft at an early stage, help CICs correct and validate their database and increase their business in the long run. Use of common data formats, including additional information in the formats, such as, dispute codes, consumer comments on dispute, details of collateral, etc., and institutionalising a continuing mechanism for making changes to data formats could help improve data quality, the committee has pointed out. The committee has recommended a common Data Quality Index that could assist credit institutions in determining the gaps in their data and also help move towards improving their performance over a period of time.

Background

The Second Quarter Review of Monetary Policy 2012-13, (October 2012) of the Reserve Bank of India had stated that credit institutions should furnish timely and accurate credit information on their borrowers and make extensive use of available credit information as a part of their credit appraisal process. The post-policy meeting of the Reserve Bank with bankers in October 2012 had emphasised on the need for standardisation of data collection format as well as harmonisation/convergence among CICs to minimise duplication. The Reserve Bank later also met the heads of CICs and it was suggested that a committee comprising a few banks, CICs and the Indian Banks’ Association be set up to finalise an updated data format. The committee was then set up with the heads of the CICs, a representative each from Private Sector Bank, Nationalised Bank, Foreign Bank, Urban Cooperative Bank, Non-Banking Financial Company (NBFC), Micro-Finance Institution (MFI), Indian Banks Association (IBA) and the Legal Department of the Reserve Bank as members. Shri Aditya Puri, Managing Director, HDFC Bank Ltd. acted as the Chairman of the Committee while Shri Rajesh Verma, CGM, DBOD was its member secretary. The committee recently submitted its report to the Reserve Bank.

Alpana Killawala
Principal Chief General Manager

Press Release : 2013-2014/1869

RBI Seeks Feedback on Concept Paper on Trade Receivables and Credit Exchange for Financing MSMEs

The Reserve Bank of India has today sought feedback on the Concept Paper on Trade Receivables and Credit Exchange for Financing Micro, Small and Medium Enterprises (MSMEs). Comments may be emailed or sent by post to the Chief General Manager, Department of Payment and Settlement Systems, Reserve Bank of India, Central Office, 14th Floor, Shahid Bhagat Singh Marg, Mumbai-400001 on or before April 20, 2014. The concept paper is available on RBI website (www.rbi.org.in).

Background:

Given the potential of MSMEs in unlocking growth, employment and inclusion in the economy and society, there is a pressing need to address concerns related to financing of this segment.

Despite efforts on multiple fronts as well as enabling legal and regulatory provisions, the MSME segment continues to be belabored with the problem of delayed payments and dependency on their corporate buyer/s.

The matter has been addressed in the reports of the Committee on Financial Sector Reforms (2008) as well as the Working Group on Securitisation of Trade Receivables (2009). The reports had recommended having an institutional infrastructure for creating necessary liquidity for trade receivables through a mechanism of efficient and cost effective factoring / reverse factoring process. The statement made by the Governor on September 04, 2013 regarding facilitation of Electronic Bill Factoring Exchanges in the country, has drawn the attention of many stakeholders in the country in offering their expertise and experience in this area to facilitate building of suitable infrastructure for MSME financing.

This concept paper has been prepared taking into account the interest expressed by few entities and in consultation with a few stakeholders. The model outlined in the paper envisages both, primary market segment (in which invoices first undergo a reverse factoring process to enable the first level of financing to the MSMEs) as well as a secondary market segment (where the financiers of the primary segment get an opportunity to trade these invoices).

It is also imperative to understand and address the many issues and challenges outlined through wider consultation process.  To this end, the Reserve Bank has sought views on the concept paper on Trade Receivables and Credit Exchange in the country. Specific and actionable feedback would be highly valued.

Alpana Killawala
Principal Chief  General Manager

Press Release : 2013-2014/1844

RBI : Sectoral Deployment of Bank Credit – December 2013

Data for the month of December 2013 on sectoral deployment of credit collected from select 47 scheduled commercial banks accounting for about 95 per cent of the total non-food credit deployed by all scheduled commercial banks are set out inStatements I and II. These data are also available in the Real-Time Handbook of Statistics on the Indian Economy (http://dbie.rbi.org.in).

Highlights of the data are given below:

  • On a year-on-year (y-o-y) basis, non-food bank credit increased by 14.8 per cent in December 2013 as compared with the increase of 14.3 per cent in December 2012.
  • Credit to agriculture and allied activities increased by 11.5 per cent in December 2013 as compared with the increase of 18.3 per cent in December 2012.
  • Credit to industry increased by 14.1 per cent in December 2013 as compared with the increase of 15.2 per cent December 2012. Deceleration in credit growth was observed in cement and cement products, infrastructure, metals and metal products, gems and jewellery, mining and quarrying, and petroleum, coal products and nuclear fuels.
  • Credit to the services sector increased by 17.4 per cent in December 2013 as compared with the increase of 10.9 per cent in December 2012.
  • Credit to Non Banking Financial Companies (NBFCs) increased by 15.1 per cent in December 2013 as compared with the increase of 16.5 per cent in December 2012.
  • Personal loans increased by 15.8 per cent in December 2013 dominated by housing loans as compared with the increase of 13.8 per cent in December 2012.

Financial Stability Report (FSR) 2013

The Financial Stability Report (FSR) for Dec 2013 is being released once again in uncertain times. The US Federal Reserve (Fed) having announced tapering of its QE-3 has finally laid to rest uncertainties on the timing of the initiation of exit, but the pace of exit and the market reaction and adjustment to the withdrawal of liquidity will have to be watched carefully. The commencement of taper should signal a calibrated return to normal liquidity and credit conditions in the global markets and also better pricing of risk. This will mean a repricing of certain assets with consequent volatility. In India, a potential additional source of uncertainty is the coming general election. A stable new government would be positive for the economy. With confidence in the financial system still fragile, six years into the crisis, policy certainty is something investors look for in the current environment.

Download report at http://rbi.org.in/scripts/PublicationReportDetails.aspx?UrlPage=&ID=725

RBI Systemic Risk Survey – Dec 2013

Perceptions of market experts have not changed significantly since the previous survey conducted in April 2013. Global and domestic macro-economic risks are perceived as the major risks threatening the financial system. However, the intensity of the global risks within the major risk groups remained unchanged. Market risks and Institutional risks were perceived to have medium impact in these surveys (Figure 1).

The current survey indicates that among the global risks, risk on account of global slowdown has receded slightly and sovereign risks have moved to medium risk from high risk category as perceived in the previous survey, while global funding risks have scaled up from medium to high risk category. On the domestic macro-economic front, deterioration in domestic economic outlook is considered to be most critical, up from medium risk category in previous survey to high risk. Risk from domestic inflation, corporate leverage and household savings have also increased marginally. On the other hand, risks arising from CAD, fiscal, sovereign downgrade and infrastructure were perceived to have receded in the current survey. The foreign exchange risk, asset quality deterioration and additional capital requirements of banks have also been mentioned as other risks (Figure 2). The perception about confidence in the Indian financial system has deteriorated during the past six months (Chart 1).

Read full survey findings at http://rbi.org.in/scripts/PublicationReportDetails.aspx?UrlPage=&ID=723

 

CARE Research Webinar on Power Transmission & Distribution Sector, Thu, Nov 28, 2013 4:00 PM – 5:00 PM IST

Amazing learning opportunity from the experts.

Please register at https://attendee.gotowebinar.com/register/892188069899921665