Page 14 - Banking Finance July 2023

RBI CORNER

measures to reduce hassles for custom- Rao emphasised the importance of ration (DICGC) cover can be extended
ers, secure their interests and ensure bank boards holding management ac- to bank PPIs and later to non-bank PPIs
they are treated fairly. The measures countable and taking suitable action based on experience gained," the com-
include: extending deposit insurance to ensure effective governance within mittee said in its report.
cover for balances maintained in pre- financial institutions.
paid instruments (wallets), having au-
Rao said that boards should appraise RBI opens TReDS for all
ditors check on mis-selling, measures
management performance objectively.
that will make it easier to release players in factoring, insur-
"Boards should ensure that they are
pledged assets, complete KYC updates ers
held accountable for their actions. If
without service disruption and a facil-
management is not meeting expecta- The Reserve Bank of India has allowed
ity for pensioners to submit their life
tions, boards should take suitable ac- more participants on the Trade Receiv-
certificate at any branch.
tion, including replacing the manage- ables Discounting System (TReDS) plat-
The committee report has focused on form to improve access to funds for
ment, to improve the bank's gover-
pain points that customers repeatedly micro, small and medium enterprises
nance and risk management," said
face. Several of these measures are (MSMEs).
Rao.
related to the implementation of KYC The central bank permitted all institu-
Rao highlighted that addressing the
(know your customer) norms, which tions that undertake factoring business
erosion of public trust in financial insti-
have turned out to be an irritant to to participate as financiers in TReDS.
tutions requires more than regulatory
customers in the way they are imple-
measures and supervisory efforts. He "This would augment the availability of
mented.
stressed that the standards expected financiers on the TReDS platform," RBI
The RBI had constituted a seven-mem- said.
of banks in terms of governance are
ber committee headed by former
always higher than those of other en- The regulator also allowed taking in-
deputy governor B P Kanungo in May
tities to mitigate the risk of failure aris- surance cover for invoicing facilities on
2022 after an announcement by the the TReDS platform which would aid
ing from governance issues.
governor in the April 2022 monetary financiers to hedge default risks.
policy. The government's decision to
RBI panel proposes ex- Accordingly, insurance companies are
hike deposit insurance to Rs 5 lakh from
permitted as the "fourth participant"
Rs 1 lakh followed recommendations tending deposit insurance
in TReDS, besides MSME sellers, buy-
made by the last committee on cus-
to prepaid instruments ers and financiers. The insurance facil-
tomer service recommendations
Reserve Bank of India (RBI)'s Commit- ity is likely to encourage discounting of
headed by former Sebi chief M
tee for Review of Customer Service payables of buyers irrespective of their
Damodaran. credit ratings.
Standards has proposed a slew of ini-
tiatives including a centralised data-
RBI to bank boards: Re- base of KYC documents and a common RBI may tighten norms for
place management if re- portal for lodging and tracking com- banks' unsecured lending
plaints
quired to ensure gover- RBI is looking to tighten scrutiny on the
The committee has also suggested ex- unsecured lending portfolios of banks
nance tending the Deposit Insurance and amid the growing risk of potential de-
Reserve Bank of India (RBI) deputy Credit Guarantee Scheme to PPIs (pre- faults, four banking sources told
governor M Rajeshwar Rao has asked paid payment instruments), as money Reuters.
boards of banks to sack and replace in PPI wallets is in the nature of depos-
Unsecured loans - mostly personal
the management, if required, to en- its and PPI issuers are also regulated
loans and credit cards - do not carry
sure governance and risk management. by the RBI.
any collateral and therefore pose a
Speaking at conference of directors of "The RBI may examine whether Deposit higher risk of default. These loans,
banks organised by the RBI recently, Insurance and Credit Guarantee Corpo- however, are a big contributor to mar-

BANKING FINANCE | JULY | 2023 | 13