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Tag: reserve bank of india RBI

  • RBI slaps penalties on American Express Banking Corp, HDB Financial Services

    The Reserve Bank of India (RBI) on Friday said it has imposed a penalty of Rs 31.80 lakh on American Express Banking Corp for non-compliance with certain directions on ‘Credit Card and Debit Card – Issuance and Conduct’.

    The central bank has also imposed a penalty of Rs 4.2 lakh on HDB Financial Services for non-compliance with certain provisions of the ‘Reserve Bank of India (Know Your Customer (KYC) Directions, 2016’.

    In a statement, the RBI said it conducted a statutory inspection for supervisory evaluation (ISE 2024) of American Express Banking Corp with reference to its financial position as on March 31, 2024.

    Based on the supervisory findings of non-compliance with RBI directions and related correspondence, a show cause notice was issued.

    Also Read: Indian states to raise Rs 2.82 lakh crore through debt in current quarter, RBI says


    After considering the bank’s reply to the notice, additional submissions made by it and oral submissions made during the personal hearing, RBI found that the charge warranted imposition of monetary penalty. The American Express Banking Corp did not make any efforts to reverse credit balances of certain credit cardholders, arising out of refund / failed / reversed transactions, to their bank accounts. RBI also said that the penalty 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 bank with its customers.

    In another statement, RBI said based on supervisory findings of non-compliance with directions and related correspondence in that regard, a show cause notice was issued to HDB Financial Services.

    After considering the company’s reply to the notice, RBI said it found that the charge was sustained, warranting imposition of monetary penalty.

    The company failed to obtain Permanent Account Number (PAN) or equivalent e-document thereof or Form No. 60 in certain loan accounts disbursed during FY 2023-24, RBI said.

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    In this case also, the central bank said the penalty is based on deficiencies in regulatory compliance and not intended to pronounce upon the validity of any transaction or agreement entered into by the company.

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  • RBI likely to hold repo rate at 6.50%

    RBI likely to hold repo rate at 6.50%

    With the Reserve Bank of India (RBI) fixated on aligning retail inflation with the four per cent target, majority of the members of its rate setting panel are expected to vote to hold the repo rate at 6.50 per cent at their first meeting in the new financial year, scheduled from April 3 to 5.

    The repo rate, which is the interest rate at which banks draw funds from RBI to overcome short-term liquidity mismatches, was left unchanged in all six bi-monthly monetary policy reviews in FY24 as retail inflation stayed above the monetary policy committee’s four per cent target.

    This rate was last increased from 6.25 per cent to 6.50 per cent in February 2023.

    While a majority of the economists expect the ‘withdrawal of accommodation’ stance to continue to ensure transmission of the 250 basis points repo rate hike effected between May 2022 and February 2023, some see the possibility of a surprise change in stance to ‘neutral’ to prepare the runway for rate cuts towards the middle of the new financial year.

    In his last monetary policy statement, RBI Governor Shaktikanta Das observed that the job (of bringing down inflation) is not yet finished, and the central bank needs to be vigilant about new supply shocks that may undo the progress made so far.

    He emphasised that monetary policy has to remain vigilant to ensure that the central bank successfully navigates the last mile of disinflation.

    “With the policy repo rate remaining on hold at 6.50 per cent for more than a year, the main focus has been on liquidity management and the evolution of “effective interest rate” in money markets.

    “Both repo rate and stance are likely to remain unchanged under base case scenario; but can’t rule out the possibility of a change of stance to neutral, given past evidence of the central bank surprising with its decision, particularly in April,” said Kaushik Das, chief economist, India & South Asia, Deutsche Bank.

    CARE Rating Economists said the RBI is expected to maintain status quo on both rates and stance in its upcoming policy meeting. They see the RBI opting for a shallow rate cut cycle of 50 basis points starting Q3 (October-December) FY25.

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  • Bank loans to NBFCs under RBI scanner

    Bank loans to NBFCs under RBI scanner

    Annual inspections by the Reserve Bank of India (RBI) has commenced for banks. With FY23 financials under the scanner, what’s grabbing the regulator’s attention is the loans handed out by banks to non-banking finance companies (NBFCs).

    With the share of bank loans to NBFCs as a percentage of loan book increasing to 13-16 per cent for the top 20 players — a jump of 200-250 basis points — the RBI is ascertaining the implication of these loans to the balance sheets of banks from an asset quality perspective.

    Higher provisioning

    To put things into context, loans to NBFCs are categories as ‘secured’ by banks as they are often backed by liquid collaterals, including receivables.

    However, with the growing proportion of NBFCs, particularly those operating in the non-housing segment such as business loans and personal loans which are often unsecured, there is a debate between banks and the regulator on how these loans should be treated.

    If unconvinced by the merits put forth by banks, the regulator may insist that banks take contingent provisioning against loans lent to NBFC borrowers. “The question is whether such a provisioning would be insisted on FY23 financials or banks will get some breather to implement higher provisioning in the ongoing FY24 fiscal,” said a person aware of the matter.

    Secured or not?

    Are loans to NBFCs really secured — that’s the debate doing the rounds, according to highly placed sources.

    “For banks, these could be secured loans, but the end-use of these loans goes into building unsecured books. In that case, even if loans to NBFCs are backed by hard collateral, they may not be recoverable in practice. This is the concern for RBI,” said a person aware of the matter.

    Bankers say this debate has been ongoing for a while, but the magnitude it has taken in FY23 annual inspection has taken them by surprise. “It’s in early stages of talks and in a quarter or so, the outcome will be known,” said the person.

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