Page 12 - Banking Finance August 2021

RBI CORNER

The RBI has asked all cooperative The extension takes effect from July investment companies. The rules cap
banks where the CEO has been ap- 1, 2021, and ends on September 30, the maximum dividend payout ratio
pointed without its approval to review 2021, covering three months. at 50% of net profit for all NBFCs, but
the fit and proper status of the exist- Consequently, the extant operational allow a higher payout of 60% for core
ing MD in terms of present direc- investment companies and primary
instructions issued by the Reserve
tions. RBI guidelines require that the dealership firms.
Bank of India will continue to remain
MD should be a graduate and prefer-
in force up to September 30, 2021.
ably have additional qualifications Interest to be low on ma-
In November 2018, the interest sub-
such as a diploma in banking, char-
tered cost account, or post-gradua- sidy was increased to 5% from 3% to tured, unclaimed term de-
tion in any discipline. boost MSME sector exports. Later, the posits
government included other merchant
The minimum age for a CEO has been exporters too under the scheme and The Reserve Bank of India (RBI)
set at 35 years and maximum age at tweaked the norms for interest on the
allowed them interest equalisation at
70 with at least eight years' experi- the rate of 3% on credit for the ex- amount left unclaimed with the bank
ence in the middle or senior manage- after a term deposit matures.
port of certain products.
ment level in the banking sector. Also, Currently, if a term deposit matures
Commenting on the extension of the
the post of the MD and whole-time and the proceeds are unpaid, the
director cannot be held by the incum- scheme, the Federation of Indian Ex- amount left unclaimed with the bank
bent for more than 15 years. port Organisations (FIEO) President A attracts the rate of interest as appli-
Sakthivel said the timely extension will
PMC moratorium for 6 more months cable to savings deposits.
provide competitive rates for exports
The RBI extended the moratorium on and bring it near international bench- "On a review, it has been decided
PMC Bank by another six months.
marks particularly for MSMEs. that if a term deposit (TD) matures
RBL Bank inducts new di- FIEO also requested the government and proceeds are unpaid, the amount
to provide stability of the scheme by left unclaimed with the bank shall at-
rectors extending it for 3 years. tract rate of interest as applicable to
Private sector lender RBL Bank has in- India's merchandise exports in May savings account or the contracted
ducted two new directors on board rate of interest on the matured TD,
were $32.27 billion, as compared to
namely Chandan Sinha, a career cen- $19.05 billion in the year-ago period, whichever is lower," the RBI said in a
tral banker, and Manjeev Singh Puri, a exhibiting a growth of 69.35%. circular.
former senior Indian diplomat. With The new norms are applicable for de-
the new additions, the strenght of the posits in all commercial banks, small
bank's board has 11 members. RBI caps dividend payout finance banks, local area banks, and
by NBFCs cooperative banks.
Interest subsidy scheme In a move that will increase transpar- Term deposit refers to an interest
for exporters extended ency in respect of the financial health bearing deposit received by the bank

The Reserve Bank said a scheme pro- of finance companies, the RBI has for a fixed period.
viding interest subsidy for post and linked dividend payout to balance It also includes deposits such as recur-
pre-shipment export credit has been sheet parameters.
ring, cumulative, annuity, reinvest-
extended by three months till Septem- Boards of non-banking financial com-
ment deposits and cash certificates.
ber, a move that will provide relief to panies (NBFCs) have been asked to
exporters. factor in RBI's observation during su- Indian banks resilient to
Exporters get the subsidy under the pervision and the notes to accounts
'Interest Equalisation Scheme for pre before approving a dividend. withstand shocks
and post-shipment Rupee Export The new dividend distribution norms The impact of the second covid wave
Credit'. Earlier in April, the scheme prescribed by the regulator apply to on the balance sheet of banks has
was extended till June 30. all finance companies, including core been much less than what was pro-

12 | 2021 | AUGUST | BANKING FINANCE