Weekly Round-up | Updates
1. Regulatory Updates
1.1. India
1.1.1. Reserve Bank of India (RBI) seeks comments on cyber resilience and digital payment security controls for payment system operators
RBI has placed the draft Master Directions on Cyber Resilience and Digital Payment Security Controls for Payment System Operators on its website for feedback from stakeholders. The draft master directions are open for comments until June 30th, 2023, and cover governance mechanisms for identification, assessment, monitoring and management of cybersecurity risks including information security risks and vulnerabilities, and specify baseline security measures for ensuring safe and secure digital payment transactions. RBI
1.1.2. RBI mandates to implement Section 51A of the UAPA, 1967
RBI has mandated Regulatory Entities (“REs”) to not hold any account in the name of any suspected individuals/entities having terrorist links in accordance with the list disseminated by the United Nations Security Council (UNSC). The directions issued are to adhere to Section 51 A of the Unlawful Activities (Prevention) Act, 1967. RBI
1.1.3. RBI issues guidelines on default loss guarantee (DLG) in digital lending
RBI has released the guidelines on Default Loss Guarantee (“DLG”) arrangements in digital lending. The release of guidelines is aimed at ensuring the orderly development of the credit delivery system. As per the guidelines, REs shall be allowed to enter into DLG arrangements only with an LSP or other RE with which it has entered into an outsourcing (LSP) arrangement. The guidelines have further stated that DLG arrangements must be backed by an explicit legally enforceable contract between the RE and the DLG provider. The guidelines have also made mandatory for REs to ensure that the total amount of DLG cover on any outstanding portfolio, which is specified upfront should not exceed 5 (five) per cent of the amount of that loan portfolio. REs shall have to put in place a board-approved policy before entering into a DLG arrangement. RBI
1.2. Monetary Penalties
1.2.1. RBI imposed monetary penalties on the following banks-
| Name of the entity | Penalty Imposed | Reason |
| Indian Overseas Bank | INR 2.20 crore (Rupees Two crore and twenty lakhs only) | Contravention of the provisions of Section 17(1) of the Banking Regulation Act, 1949 and non-compliance with RBI Directions on ‘Prudential Norms on Income Recognition, Asset Classification and Provisioning Pertaining to Advances – Divergence in NPA Accounts’, ‘Reserve Bank of India (Interest Rate on Deposits) Directions, 2016’ and Advisory on ‘Man in the Middle (miTM) Attacks in ATMs’. |
| Shri Laxmi Sahakari Bank Ltd. | INR 1 lakh (Rupees One lakh only) | Non-compliance with the directions issued by RBI on ‘Know Your Customers’ (“KYC Master Directions”). It was revealed in the investigation that the bank had not put in place a system of periodic review of risk categorization of account. |
| Bajirao Appa Sahakari Bank Ltd. | INR 2 lakh (Rupees Two lakh only) | Non-compliance with the directions issued by RBI on ‘Investments by Primary (Urban) Co-operative Banks’ and ‘Know Your Customers’ (KYC). |
| Kokan Mercantile Co-operative Bank Limited | INR 1 lakh (Rupees One lakh only) | Contravention of directions issued by RBI as the bank was collecting fixed penal charges for shortfall in maintenance of minimum balance in saving bank accounts, instead of proportionate to the extent of shortfall and without giving notice to the effect that in the event of minimum balance not being restored in the account within a month from the date of notice, penal charges will be applicable. |
| Sawantwadi Urban Co-operative Bank Ltd. | INR 3 lakh (Rupees Three lakh only) | Contravention of directions contained in the Supervisory Action Framework (SAF) issued by RBI under Section 36 (1) read with Section 56 of the Banking Regulation Act, 1949 (the Act). |
1.3. Bangladesh
1.3.1. Bangladesh Bank issues ‘Guidelines on the Secondary Trading of Government Securities, 2023’
Bangladesh Bank has issued “Guidelines on the Secondary Trading of Government Securities, 2023” to ensure the smooth functioning of the government securities on its Market Infrastructure (MI) and Financial Market Infrastructure (FMI) as well as on stock exchange platforms with a view to expand and further activate the secondary market of government securities. Arrangements have been made for the smooth execution of government securities transactions through the platform. “Guidelines on the Secondary” contains the guidelines for participants/ parties regarding the rules, policies and fund settlement process and procedures related to the transactions on the said platforms. Central Bank of Bangladesh
2. Trends
2.1. GAME, SIDBI join hands to design NBFC growth accelerator program
Global Alliance for Mass Entrepreneurship (“GAME”) has received in-principle approval from the Small Industries Development Bank of India (“SIDBI”) for designing and structuring a sustainable and scalable NBFC growth accelerator program (“NGAP”). The goal of NGAP is to have a structured model on the lines of global accelerators, which will help small NBFCs that cater to micro-small enterprises (“MSEs”) in Tier 3 and 4 cities or to the urban MSEs that serve as the lowest ring of suppliers in a long value chain, in order to build their capability and make them eligible for institutional funding from banks or larger NBFCs. CNBC TV18
2.2. NBFCs lending grew 2% in quarter 4 powered by rural areas
Lending by non-banking financial institutions (“NBFCs”) is losing momentum in the fourth quarter of the financial year (“FY”) 23, with overall sanctions growing only 2% (two per cent) year on year. Also, loans in the rural areas have been holding up NBFC lending, with both semi-urban and urban sectors showing lower growth in the fourth quarter. The slowdown in the fourth quarter was due to de-growth in home loans and unsecured personal loans, despite strong in gold loans and loans against property. BFSI.com, Economic Times
2.3. Deposit insurance cover for PPIs: How will customers benefit
Prepaid Payment Instrument (PPI) holders may soon get protection for their money against any fraud or unauthorised payment transactions. A committee set up to review the customer service standards for REs regulated by RBI has recommended that the central bank should examine the extension of deposit insurance and credit guarantee corporation (DICGC) cover to PPIs, which, at present, is available only to banks deposits. If the committee’s recommendation is accepted, it will come as a big relief for PPI holders. Indian Express
3. Sector Overview
3.1. After online payments, digital loans, now P2P lending under RBI lens
3.2. RBI’s Draft Cybersecurity Norms For Payment System Operators (PSOs) And Digital Payments
4. Business Updates
4.1. RBI keeps key lending rate unchanged at 6.5% as inflation softens
RBI Governor Shaktikanta Das said during RBI’s bi-monthly monetary policy, that the monetary policy actions are delivering results and has unanimously decided to keep the policy repo rate unchanged at 6.5 (six points five) per cent. NDTV Profit
4.2. More purpose-specific prepaid e-RUPI vouchers can now be issued for individuals by PPIs
RBI has allowed non-bank PPI issuers to issue e-RUPI vouchers. Further, the central bank has also permitted the issuance of e-RUPI vouchers on behalf of individuals. The cap on the amount for e-RUPI vouchers issued by the government has been set at Rs 1,00,000 per voucher. The central bank has also allowed the use of the e-RUPI voucher multiple times (until the amount of the voucher is completely redeemed). Economic Times
4.3. Paytm shares rise 5% in early trade: Key factors behind the rally
Shares of One97 Communications, which operates Paytm, rallied 5 per cent on Friday to touch a high of Rs 809.9 in early morning deals on the bourses. Bank of America Global Research said in its report, “We find Paytm well positioned to continue to dominate the SME merchant landscape where the subscription model via Soundbox is improving merchant stickiness. We expect Paytm’s momentum in BNPL and merchant lending to continue, albeit at a slower pace, leading to a 34% revenue CAGR from FY23–26.” ZEE Business
