Page 11 - BANKING FINANCE NOVEMBER 2023

RBI CORNER

on the webpage of the e-commerce has been decided to permit NBFCs in latory Organisations ) for regulated
website. the middle and base layers also to use entities (REs), RBI Governor
CRM instruments to reduce their Shaktikanta Das said on October 6 an-
The central bank had introduced CoFT
in September 2021 and began its counterparty exposure under the nouncing the monetary policy decision.
implementation from October 1, 2022. credit concentration norms," said Gov- "Self-Regulatory Organisations (SROs)
ernor Shaktikanta Das in his statement. can play an important role in strength-

RBI leaves repo rate un- ening compliance culture among their
Financial savings up 14% members and also provide a consulta-
changed at 6.5% tive platform with the Reserve Bank for
in absolute terms, says
The Reserve Bank of India's Monetary policy making," said Das.
Policy Committee (MPC), as expected, Patra Das further added that it has been de-
left the repo rate, the rate at which the Financial savings in absolute terms in- cided to issue a draft omnibus frame-
central bank lends short-term funds to creased by 14 per cent in 2023, the work for recognising SROs for various
banks, unchanged at 6.5 percent. Reserve Bank of India Deputy Governor categories of Regulated Entities (REs)

"MPC voted unanimously to leave the Michael Patra said in the post-policy of the central bank for stakeholder
repo rate unchanged at 6.5 percent," press conference. Patra also mentioned comments.
Das said while announcing MPC's deci- that households are shifting from finan- "Additional sector-specific conditions
sion. The central bank also announced cial savings to physical savings. may also be prescribed at the time of
that it was withdrawing its incremen- "The absolute level of savings rose by calling for applications," he added.
tal cash reserve ratio (ICRR), which 14 per cent in 2023. There has been
was introduced in August to withdraw an increase in financial liabilities of An SRO is a non-governmental
surplus liquidity from the system in a households. If you observe where these organisation that sets and enforces
phased manner. liabilities are being directed, they are rules and standards relating to the con-
mostly towards housing. Households duct of member entities in the industry,
Further, the MPC also decided that are shifting from financial saving to with the aim of protecting the customer
Standing Deposit Facility (SDF) and physical savings. When they make this and promoting ethical and professional
Marginal Standing Facility (MSF) rates
shift, they contribute to investment; standards. The SRO is expected to re-
are also left unchanged at 6.25 per- the physical part of savings goes di- solve disputes among its members inter-
cent and 6.75 percent, respectively.
rectly into investment. So, in the next nally through mutually accepted pro-
year, you will observe an uptick in in- cesses to ensure that members operate
RBI permits middle and vestment," Patra said. in a disciplined environment and even
base layer NBFCs to use Net financial savings of households fell accept penal actions by the SRO.
to a 50-year low, reaching 5.1 per cent An ideal SRO would function beyond
credit risk mitigation tools
of gross domestic product (GDP) in fi- the narrow self-interests of the indus-
RBI has allowed NBFCs classified as nancial year 2023 (FY23) compared to try and address larger concerns, such
middle and base layer entities, to 7.2 per cent in FY22, according to data as protecting customers, furthering
utilise credit risk mitigation tools to from the Reserve Bank of India (RBI). training and education and strive for
offset their exposure with eligible development of members, the industry
credit risk transfer instruments. Furthermore, annual financial liabilities
of households rose to 5.8 per cent of and the ecosystem as a whole.
The step has been taken to harmonise GDP in FY23 compared with 3.8 per
norms across NBFCs; currently, upper cent in FY22. RBI asks BoB to suspend
layer NBFCS under the Large Exposures
Framework, are permitted to use RBI to issue framework for new customer onboarding
Credit Risk Mitigation (CRM) instru- on app
ments to reduce their exposure to a SRO recognition for regu- RBI has asked Bank of Baroda (BoB) to
counterparty. lated entities suspend further onboarding of custom-
"With a view to harmonising credit RBI is planning to issue a framework ers onto the 'bob World', the lender's
concentration norms among NBFCs, it for the recognition of SROs (Self-Regu- mobile banking application.

10 | 2023 | NOVEMBER | BANKING FINANCE