Page 8 - Banking Finance January 2024

RBI CORNER

Reserve Bank

News

RBI and BoE sign agree- RBI to set up cloud services loan aggregators to ensure they act in
borrowers' interest by offering them
ment to resolve dispute for banks
correct choices.
over clearing house The RBI will set up a cloud facility as The proposed changes are part of RBI's
The MoU sets up a framework for digital public infrastructure dedicated ongoing review of prudential norms,
BoEto place reliance on RBI's regula- to the financial sector. which are typically tightened during
tory and supervisory activities while The facility's establishment and initial periods of high credit growth.
ensuring the stability of the UK finan- operation will be undertaken by a sub-
cial system and facilitates information sidiary of RBI, the Indian Financial Tech- In the preceding month, the central
exchange between the two central nology & Allied Services (IFTAS). Subse- bank had increased the risk weight for
banks. The agreement states that the consumer loans to curb their expan-
quently, the operational responsibility sion. RBI has said that these measures
UK regulator will rely on RBI's supervi-
will transition to an independent entity are yielding results.
sion to recognise the Clearing Corpo- owned by participants in the financial
ration of India as a legitimate The regulations on connected lending
sector.
counterparty for British banks. are in response to concerns that arise
RBI has said the facility will be in the when there is no arm's length relation-
The agreement, which was signed in
nature of IT infrastructure to improve ship with borrowers. Issues such as
London by Sarah Breeden, the deputy
governor for financial stability at the efficiency and it is not in pursuit of data moral hazards, which can compromise
Bank of England, and T Rabi Sankar, sovereignty. pricing and credit management, have
the deputy governor of the Reserve RBI had asked payment companies to prompted the regulator to review its
Bank of India, highlights the value of ensure data is stored in India. It said regulations.
cross-border collaboration in promot- that the facility would facilitate Although regulations are in place, they
ing global clearing operations. scalability particularly for smaller are limited in scope and need uniform
Because domestic banks could only use banks. applicability across all entities, RBI said.
recognised entities for clearing bond On the measures to curb personal
trades, the BoE and the European Se- New norms to curb loans loans, RBI said that it was a pre-
curities Market Authority (ESMA) emptive step to bring an end to exu-
threatened to de-recognize Indian to influential borrowers berance. Swaminathan Janakiraman,
clearing houses last year unless they In a bid to curb quid pro quo in lend- RBI deputy governor, said: "An effort
subjected themselves to foreign super- ing, the RBI will introduce new regula- was made to put adequate internal
vision. In order to receive recognition, tions that will prevent loans to entities measures to ensure that the build-up
the Clearing Corporation of India had that wield influence over lending insti- was avoided but the market was not
to do just that. tutions. RBI will also revamp rules for responding enough."

BANKING FINANCE | JANUARY | 2024 | 7