Review of Prudential Guidelines on Restructuring of Advances by Banks and Financial Institutions – Draft Guidelines
Please refer to paragraphs 90 to 92 (extract enclosed) of the Second Quarter Review of Monetary Policy 2012-13 announced on October 30, 2012, wherein it was indicated that the draft guidelines on ‘Review of Prudential Guidelines on Restructuring of Advances by Banks and Financial Institutions’ in the light of the recommendations of the Working Group (WG) to Review the existing Prudential Guidelines on Restructuring of Advances (Chairman: Shri B. Mahapatra) will be issued by end-January 2013.
2. Accordingly, certain provisions of the existing guidelines contained in our circular DBOD.BP.BC.No.37/21.04.132/2008-09 dated August 27, 2008 and subsequent circulars issued on the subject have been revised and draft guidelines enumerating the existing instructions, recommendation(s) of the WG in that regard, and the proposed revised instruction(s) are given in theAnnex.
3. Comments on the draft guidelines may please be emailed or sent to the Chief General Manager-in-Charge, Department of Banking Operations and Development, Reserve Bank of India, Central Office, Mumbai 400 001 on or before February 28, 2013.>> Read More
Chief Executives Officers of All Scheduled Commercial Banks (Excluding Local Area Banks and Regional Rural Banks)
Draft Guidelines on Composition of Capital Disclosure Requirements
Please refer to the paragraph 87 (extract enclosed) of the Second Quarter Review of Monetary Policy Statement 2012-13 announced on October 30, 2012. It was indicated that the draft guidelines on composition of capital disclosure requirements, based on the proposals of the Basel Committee on Banking Supervision (BCBS), will be issued by end-December 2012.
2. In this context, a reference is also invited to the circular DBOD.No.BP.BC.98/21.06.201/2011-12 dated May 2, 2012 on implementation of Basel III capital regulations. The guidelines, inter alia, listed out certain disclosure requirements to improve transparency of regulatory capital and to enhance market discipline. Further, it also indicated that the Reserve Bank will issue appropriate Pillar 3 disclosure norms once the Basel Committee on Banking Supervision (BCBS) has finalised the same. The Basel Committee has since issued its rules text on ‘composition of capital disclosure requirements’.>> Read More
India remains an attractive investment destination even as taxation uncertainties pose a challenge, according to global consultancy Deloitte.
A survey of investors, spread across various segments, conducted by Deloitte also found that investors were looking for more clarity on certain tax issues.
“…while India continues to be an attractive investment destination, the dynamic Indian tax framework create some apprehensions in the investors’ perception about the approach on the tax issues related to transactions in India,” it said.
Deloitte said the Indian tax landscape has been in limelight globally due to the landmark ruling of Supreme Court in Vodafone case followed by the retrospective amendments along with the proposed General Anti-Avoidance Rules (GAAR).>> Read More
The Reserve Bank should give preference to the non-corporate sector for new bank licences, Prime Minister’s Economic Advisory Council ChairmanC Rangarajan said.
“It is possible for the Reserve Bank to start with initially non-corporate business and find out whether there are suitable applicants and thereafter proceed to look at the other applicants,” he said in an interview.
The RBI is in the process of finalising the guidelines for giving new bank licences after Parliament approved Banking Laws (Amendment) Bill last month.
The central bank, Rangarajan said, “should look at various types of financial institutions that are available currently and decide”.
“…. many of the strong private sector banks today have been at one time or other in the financial system. They can look at it first and look at the other later on,” he said. >> Read More
The market regulator Sebi on Wednesday said it has appointed a committee under ex-Cabinet secretary K M Chandrashekhar to frame a single set of guidelines for all types of foreign investors.
The committee will suggest ways to simplify the investment process for all overseas entities like foreign institutional investors, foreign venture capital investors (FVCIs), qualified financial/institutional investors (QFIs), and NRIs, among others, and also to strengthen surveillance over them.
“Why should we have various routes for foreign investment? Why should we have sub-accounts, ODIs, FIIs and QFIs and NRIs and all that? In consultation with government, we have decided to combine these various routes which are present today into one single route.>> Read More
IN a much-awaited big ticket announcement that hopes to boost the financial sector, the Reserve Bank of India is set to allow the opening of new banks and invite applications for licences this month.
A top government source said the central bank will issue the final guidelines for setting up new banks and invite applications before it releases its second quarter review of the monetary policy on October 30. It is expected to offer four slots for new banks. The move has been brought forward to give a sense of direction and purpose to the current phase of economic reform, the source added.
New banks are expected to make the sector more competitive and promote financial inclusion through greater access to banking services. The RBI had last issued guidelines for new banks in 2001 and given licences to Kotak Mahindra Bank and Yes Bank in 2003.>> Read More
The SBI and ICICI Bank are among those that would be affected if RBI implements its proposed guidelines on banks’ exposure to their group entities, global credit rating agency Moody’s said today.
Last week, the Reserve Bank released draft guidelines to limit banks’ exposure to their own group non-financial and financial entities.
As per Moody’s, the proposed rules would hurt companies that depend on parent banks for capital and brand support, particularly those with large international operations, or those that operate insurance, securities or asset management businesses that need capital and liquidity support to meet their business needs.
“If the RBI adopts them, the new guidelines would be credit positive for India’s banks, but credit negative for group companies that rely on parent banks for capital and brand support,” Moody’s Investors Service said in a report.
It said the “affected banks” include ICICI Bank, State Bank of India, Bank of India, Bank of Baroda and Kotak Mahindra Bank.>> Read More
Management of Intra-Group Transactions and Exposures – Draft Guidelines
As a prudential measure aimed at avoiding concentration of credit risk, the Reserve Bank of India has prescribed regulatory limits on banks’ exposure to individual and Group borrowers which are laid down in the Master Circular on Exposure Norms. The instructions in this guideline are exclusively meant for banks’ transactions and exposures to the entities belonging to the bank’s own Group (Group entities). The draft guidelines contain both quantitative limits for the financial Intra-Group Transactions and Exposures (ITEs)1 and prudential measures for the non-financial ITEs2 to ensure that the banks engage in the ITEs in safe and sound manner in order to contain the concentration and contagion risk arising out of ITEs. These measures are aimed at ensuring that banks, at all times, maintain arms length relationship in their dealings with the Group entities, meet minimum requirements with respect to Group risk management and group-wide oversight, and adhere to prudential limits on intra-group exposures.
2. The draft guidelines on Management of Intra-Group Transactions and Exposures for safe conduct of ITEs and management of risk concentrations have been prepared in the light of experience gained in monitoring of identified financial conglomerates during last few years. The same are furnished in Annex.>> Read More
The dreams of big industrial houses and non-banking finance companies (NBFCs) to set up commercial banks are unlikely to materialise as the Reserve Bank of India (RBI) is against giving banking licence to any of them for the time being.
“The RBI is against giving banking licences to the corporate sector. It will consider new licences only after Parliament approves the amendment to the Banking Regulation Act, which seeks to give more powers to the RBI including the power to supersede banks,” a person familiar with regulatory developments in the financial sector told The Indian Express.
This could mean that many business groups — from Anil Ambani group, the Mahindras, L&T to Religare — which had started queueing up for entry into the banking sector last year may have to bury their plans.
The RBI also does not have any convincing applications from NBFCs hoping to get a banking licence. “There are no credible applications from NBFCs either,” the source said.
The RBI’s draft guidelines have already banned three sectors from promoting a bank. It had indicated that entities having 10 per cent or more income, or assets, or both from real estate, construction and broking activities individually or taken together in the last three years will not be eligible to set up new banks.
Although the RBI has not officially said it is against corporates getting banking licence, a major factor that has come in the way could be the stipulation that RBI will give weightage to “sound credentials and integrity” of the applicants.>> Read More
Non-bank entities proposing to set up WLAs would have to make an application to the reserve Bank for seeking authorisation under the Payment and Settlement Systems (PSS) Act, 2007. Such entities should have a minimum net worth of Rs. 100 crore at the time of making the application and on a continuing basis after issue of the requisite authorisation. Other guidelines for applying to the Reserve Bank for authorisation under the PSS Act are available at http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/86707.pdf.
Roles and responsibilities of the stakeholders as indicated at Annex ‘B’ (WLA Operator, Sponsor Bank, ATM Network Operators) are identified in the draft circular keeping in view various aspects, that is, cash management, ATM network membership and customer grievance redressal.
The general criteria for the non-bank entities that would be authorised under the PSS Act to own and operate WLAs are indicated at Annex- A