Guidelines On Area Of Operation Of UCBs Are Being Reviewed
FinTech BizNews Service
Mumbai, May 31, 2024: RBI released its ANNUAL REPORT 2023-24 on 30 May, 2024. The report contains Part I: The Economy: Review and Prospects and Part II: The Working and Operations of The Reserve Bank of India.
During 2023-24, the Reserve Bank continued with initiatives to build a resilient and sound financial system. Several regulatory and supervisory measures were implemented in line with global best practices towards further strengthening of governance, risk management practices and capital buffers. The Reserve Bank persisted with its efforts to leverage on technology for an effective and efficient supervision along with a focus on enhancing cyber security. Sustained efforts were made for further improving customer services as well as strengthening fraud detection mechanisms, according to RBI’s ANNUAL REPORT 2023-24, released on 30 May, 2024.
The domestic financial system remained robust and resilient during the year. The Reserve Bank continued with concerted endeavours to fortify the financial system and promote responsible innovations amidst emerging challenges from technological disruptions, cyber risks and climate change.
The Department of Regulation (DoR) issued several guidelines which, inter alia, included default loss guarantee in digital lending; framework for compromise settlements and technical write-offs; investment in alternative investment funds; prudential norms for classification, valuation, operations of investment portfolios of commercial banks; and minimum capital requirements for operational risk.
The FinTech Department expanded the scope and coverage of central bank digital currency (CBDC)-Wholesale (CBDC-W) and CBDC-Retail (CBDC-R) pilots; and launched a pilot project for public tech platform for frictionless credit. VI.4 The Department of Supervision (DoS) initiated a host of measures to further strengthen both onsite and offsite supervision, including streamlining onsite assessments of supervised entities (SEs) related to know your customer (KYC)/anti-money laundering (AML) and cyber/ information technology (IT) risks; revamping stress testing model; strengthening of early warning signal (EWS) and fraud risk management system (FRMS); and strengthening supervisory engagements with SEs.
A draft of the omnibus framework was released on December 21, 2023 for comments from stakeholders, following which, the final framework was issued on March 21, 2024. Applications for recognition of SROs for NBFCs would be invited henceforth.
The extant instructions on liquidity management framework of UCBs are being reviewed, and a draft Master Direction on the subject is under examination.
Based on the recommendations from the internal working group report and inputs received from other stakeholders, a circular consolidating instructions on conduct of activities by banks is currently under preparation. Also, the regulations on agency business and referral service by banks and NBFCs for third party products are under review.
Based on the inputs received from the stakeholders, the work related to the harmonisation of prudential norms on ‘Income Recognition, Asset Classification and Provisioning pertaining to Advances’ is currently underway. A review of the various non-fund based facilities extended by the REs is also underway with a view to strengthen the regulatory framework governing such facilities.
The Department reviewed and issued guidelines in the following regulatory areas of UCBs: (a) revised criteria regarding inclusion of UCBs in the second schedule of the RBI Act, 1934; (b) introduction of an automatic route for branch expansion in the approved area of operation for financially sound and well managed (FSWM) UCBs in all tiers (except salary earners’ banks); and (c) guidelines on change in the name of cooperative banks and amendment of their bye laws. The review of guidelines on area of operation of UCBs is currently under examination.
