Page 8 - Banking Finance July 2025

RBI CORNER

tial reduction in the fiscal deficit by 20 If cleared, the plan would initially tar- many untouched for over a decade. A
basis points to 4.2% of GDP or, alterna- get neighbouring countries such as June 12 circular mandates that banks
tively, additional spending headroom of Nepal, Bangladesh, Sri Lanka, and provide at least three advance KYC
Rs 70,000 crore. The dividend repre- Bhutan. The move is part of a broader update reminders-one via letter-before
sents a 27.4% rise from the Rs 2.11 lakh push to increase the global usage and freezing accounts.
crore transferred in FY24. This surge is acceptance of the Indian currency in Banks must now allow KYC updates at
attributed to a revision in the RBI's con- cross-border trade. Currently, trade
any branch, and offer Aadhaar OTP
tingency risk buffer range to 4.5%-7.5% settlements in rupees are limited, but
and video KYC options. Business
of its balance sheet, down from the this initiative could pave the way for
correspondents can assist with KYC, es-
previous 5.5%-6.5% band. enhanced rupee-denominated transac- pecially in rural areas. Customers with
The larger-than-expected surplus will tions across South Asia. unchanged information or just an
provide vital financial flexibility for in- RBI believes that lending in rupees to address change can now self-declare
frastructure and welfare spending, and non-residents could strengthen re- without additional documents. RBI
may also ease pressure on market bor- gional trade relationships, support eco- also directed banks to conduct KYC
rowings. nomic development in neighbouring update camps and focus outreach in
economies, and position the rupee as areas with high non-compliance.
RBI seeks government nod a viable international trade currency. These reforms aim to protect account
The finance ministry is reviewing the
to permit rupee lending to proposal, sent last month. holders' access, especially in govern-
neighbouring nations ment-linked and Jan Dhan accounts.
The Reserve Bank of India (RBI) is look- RBI eases KYC norms to Anand Bajaj of PayNearby welcomed
the changes, saying business
ing to internationalise the rupee by help reclaim dormant ac- correspondents using e-KYC can extend
allowing Indian banks to extend rupee-
denominated loans to overseas bor- counts and deposits services to underserved areas effec-

rowers for the first time. According to The Reserve Bank of India (RBI) has tively.
sources, the central bank has ap- relaxed Know Your Customer (KYC)
proached the finance ministry seeking rules to simplify access to dormant RBI Imposes Rs. 29.6 Lakh
approval for this proposal. bank accounts and unclaimed deposits, Fine on Fino Payments

Bank for Norm Breach
RBI Cuts Repo Rate by 50 bps, Lowers CRR by 100 The Reserve Bank of India (RBI) has
levied a penalty of Rs. 29.6 lakh on
bps to Spur Growth Fino Payments Bank for breaching
In a bold move to boost economic momentum, the Reserve Bank of India regulatory norms related to end-of-day
(RBI) reduced the repo rate by 50 basis points to 5.5% and slashed the cash balance limits in customer accounts.
reserve ratio (CRR) by 100 basis points. The decision, taken by a 5:1 major- The penalty follows a Statutory Inspec-
ity in the Monetary Policy Committee (MPC), also saw the policy stance shift tion for Supervisory Evaluation (ISE
from "accommodative" to "neutral." 2024), which reviewed the bank's op-

RBI Governor Sanjay Malhotra cited global uncertainties, weak domestic erations as of March 31, 2024.
demand, and benign inflation as reasons for frontloading policy easing. With The RBI found that the bank exceeded
India's FY25 growth at 6.5%, still below the 8% aspirational target, the move the permissible balance ceiling on sev-
is expected to spur credit growth and investments. The CRR cut is also aimed eral occasions, a violation of the guide-
at injecting liquidity and improving monetary transmission.
lines under the Licensing of Payments
Stock markets responded positively, with rate-sensitive sectors rallying. Banks framework. After issuing a show-
Malhotra stressed that price stability alone is insufficient for sustainable cause notice and reviewing the bank's
growth, calling for policy levers that stimulate private consumption and responses, the RBI concluded that
investment. regulatory breaches had occurred.

8 | 2025 | JULY | BANKING FINANCE