Page 10 - Banking Finance May 2025

RBI CORNER

points, bringing it down from 6.25% to Additionally, for gold and silver imports, Previously, minors were permitted to
6.0%, and changed the policy stance to no advance remittance will be allowed open only savings accounts with limited
'accommodative' from 'neutral.' by authorised dealers, according to the facilities. The RBI clarified that minors

"Our stance provides policy rate guid- 'Regulation of Foreign Trade under of any age may continue to open ac-
FEMA, 1999 - Draft Regulations and counts through natural or legal guard-
ance without any direct guidance on
Directions.' ians.
liquidity management," Malhotra
stated, signaling a shift towards sup- The revisions follow feedback from The circular stated, "Minors above
porting growth while ensuring liquidity stakeholders and aim to streamline such an age limit not less than 10 years
remains balanced. export-import transactions while safe- and up to such amount and such terms
guarding foreign exchange operations. as may be fixed by the banks keeping
RBI Floats Revised FEMA Comments on the draft have been in- in view their risk management policy,
vited before final implementation. may be allowed to open and operate
Draft Norms on Export-Im- savings/ term deposit accounts inde-
port Transactions Minors Aged 10 and Above pendently, if they so desire."
In a move to enhance ease of doing Can Now Operate Bank
business, the Reserve Bank of India RBI Proposes New Route
(RBI) has released revised draft regu- Accounts Independently: to Offload Bad Loans Be-
lations for managing export and import RBI yond ARCs
transactions under the Foreign Ex-
The Reserve Bank of India (RBI) has The Reserve Bank of India (RBI) has
change Management Act (FEMA), allowed minors above the age of 10
1999. proposed a new mechanism for banks
years to independently open and oper- and NBFCs to offload bad loans, en-
Under the new draft, if an exporter's ate savings and term deposit accounts. abling them to directly sell stressed
cumulative unrealized export proceeds In a circular issued to banks, the RBI assets to investors via special purpose
exceed Rs 25 crore for a period beyond said additional banking facilities such as vehicles (SPVs) established by regulated
two years from the due date, future internet banking, ATM/debit cards, and financial entities.
exports must be conducted only cheque book facilities may also be pro-
against full advance payment or an ir- vided to minors, depending on the Currently, asset reconstruction compa-
revocable letter of credit. banks' risk management policies. nies (ARCs) primarily manage dis-
tressed assets. The new route, an-
nounced alongside the April monetary
RBI Plans to Double Investment Limit for Foreign In- policy review, introduces resolution
managers - independent of originating
dividuals in Listed Firms lenders - to oversee recoveries.
The Reserve Bank of India (RBI) is preparing to double the cap on invest-
Lenders must provision for the
ment by individual foreign investors in listed companies to 10%, up from securitised notes over five years, and
the current 5%, in an effort to boost capital inflows. According to two se-
nior government officials and documents reviewed, the move is intended capital requirements will be based on
recovery ratings. Exposure still held
to counter recent outflows from foreign portfolio investors (FPIs), who have
withdrawn over $28 billion since the NSE Nifty 50 hit a record high in after five years must be marked down
to Re 1.
September.
The RBI also mandated ARCs to raise
The RBI has proposed that the combined limit for all overseas individual in- their net owned funds to Rs 300 crore
vestors in an Indian listed company be raised to 24%, compared to the cur- by FY26. With large cases handled by
rent 10%. The proposal is in its final stages of discussion between the RBI,
the government, and SEBI. the National Asset Reconstruction
Company Limited (NARCL), this
In a letter to the government last week, the RBI noted, "It is felt that these new framework allows lenders to by-
proposals may be implemented as early as possible," citing disruptions in pass ARCs for mid-sized and retail
capital inflows amid recent external developments. stressed loans.

BANKING FINANCE | MAY | 2025 | 9