Page 11 - Banking Finance November 2025

RBI CORNER

the RBI ombudsman. Aimed at making RBI consolidates 9,000 regulatory circulars into 238
dispute resolution more inclusive and
customer-centric, the scheme removes master directions
the financial cap on disputes and intro- The Reserve Bank of India has initiated a major regulatory consolidation
duces higher compensation ceilings. exercise by merging around 9,000 existing circulars and master circulars into
Under the draft, the ombudsman can 238 comprehensive master directions. The consolidation covers 11 catego-
now address complaints involving any ries of regulated entities, including commercial banks, small finance banks,
deficiency in service by RBI-regulated payments banks, regional rural banks, co-operative banks, NBFCs, asset re-
entities, regardless of the dispute's construction companies, and credit information companies.
monetary value. Compensation, how- According to the RBI, "The consolidation involves all the regulatory instruc-
ever, is capped at Rs. 30 lakh for con- tions administered by the Department of Regulation. Thus, the universe of
sequential financial loss and Rs. 3 lakh consolidation includes instructions issued by the Department of Regulation
for harassment, time loss, or mental (DoR) as well as the erstwhile departments which have since been merged
anguish. into DoR either partly or fully."

This marks a shift from the current In- This move aims to simplify regulatory compliance, enhance transparency,
tegrated Ombudsman Scheme, which and improve consistency across financial institutions. The master directions
limits dispute amounts to Rs. 50 lakh. will serve as single-point references for regulated entities, ensuring ease of
The revised draft transforms the access and uniform interpretation of regulatory norms.
ombudsman's role from an advisory
and facilitative function into one with assign risk weights based on loan cat- months in Foreign Currency Accounts
stronger adjudicatory authority. egory-corporate, retail, or credit card- maintained with banks located in Inter-
The scheme aims to provide a non- and loan repayment history. Transac- national Financial Services Centres
adversarial, cost-effective redressal tor credit card users may now be clas- (IFSCs). For accounts held in any other
system for consumers and improve ser- sified under the lower-risk retail cat- jurisdiction, the utilisation or repatria-
vice accountability across banks, egory. tion period will remain one month.
NBFCs, and other financial institutions. The ECL framework requires banks to The amendment to the Foreign Ex-
Stakeholders have been invited to classify loans into stages based on risk change Management (Foreign Cur-
share feedback before the framework and make advance provisions for po- rency Accounts by a Person Resident in
is finalised. tential defaults, replacing the current India) Regulations, 2015, is expected to
incurred-loss model. While this may particularly benefit high-value export
RBI proposes new risk- cause a one-time increase in provision- industries such as gems and jewellery.
ing, the RBI noted it would have mini- The RBI notification stated, "Funds in
weight and credit loss
mal capital impact due to a five-year this account may be utilised by the
norms for banks transition period. exporter for paying for its imports into
India or repatriated into India within
The Reserve Bank of India has pro- The implementation of ECL norms is a period not exceeding the end of
posed sweeping changes in credit risk set for April 1, 2027, and the RBI has three months in case of accounts main-
assessment and provisioning norms for invited public feedback on both draft
tained with banks in an International
banks by aligning regulations with glo- proposals until November 30, 2025.
Financial Services Centre; or next
bal best practices. The key reforms in- month for all other jurisdictions."
volve differentiated risk weights for RBI allows exporters to
loans and a shift to the Expected Credit Moksh Kalyanram Abhiramula, Manag-
Loss (ECL) framework for provisioning. hold forex for 3 months in ing Partner, La Mintage Legal LLP, said
the change enhances operational flex-
The new guidelines propose lower capi- IFSC accounts ibility and competitiveness for export-
tal requirements for MSME and real The Reserve Bank of India has permit- ers, while calling for stronger monitor-
estate loans, potentially spurring credit ted exporters to retain foreign ex- ing mechanisms and greater aware-
growth in these sectors. Banks will now change proceeds for up to three ness among businesses.

10 | 2025 | NOVEMBER | BANKING FINANCE