Page 11 - Banking Finance August 2025

RBI CORNER

RBI Suggests Unique Bor-
Finance Ministry Orders Third-Party Evaluation of
rower ID, Eyes Digital PSB Boards
Lending Reforms Amid concerns over governance lapses at certain public sector banks (PSBs),
To minimize credit score errors and the Ministry of Finance has directed all PSBs to conduct third-party evalua-
improve access to finance, RBI Deputy tions of their board performance. The initiative aims to assess board effec-
Governor M Rajeshwar Rao proposed tiveness, oversight, committee functionality, ethics, compliance, risk man-
the introduction of a unique, verifiable agement, and alignment with institutional strategy. The directive follows
borrower identifier at the TransUnion isolated governance failures that raised red flags about the scrutiny exer-
CIBIL 25th anniversary event. He em- cised by bank boards.
phasized that such a secure ID could State Bank of India, Bank of Baroda, Punjab National Bank, Union Bank of
reduce duplication and misreporting in India, and Central Bank of India have already commenced the evaluation
credit bureaus, enhancing lending ac- process. Others, including UCO Bank, Indian Overseas Bank, and Bank of
curacy and transparency. Rao also high- Maharashtra, are expected to follow suit.
lighted RBI's ongoing push for a Unified Top consultancy firms like Deloitte and KPMG are leading these assessments.
Lending Interface (ULI), a digital plat- According to former Punjab & Sind Bank MD S. Krishnan, this is a positive
form enabling multiple lenders to ac- move aligned with global standards. However, he stressed that evaluations
cess verified borrower data, similar to must maintain confidentiality, given the sensitive and systemic nature of the
UPI in payments. banking sector.
In a notable pilot, the RBI is exploring
programmable digital rupees for lend- Retail inflation, based on Consumer Also, collective contribution by all REs
ing to tenant farmers under the Kisan Price Index (CPI), has remained below in any AIF Scheme should not be more
Credit Card scheme, which could later 4 per cent since February and dipped than 20 per cent of the corpus of that
benefit street vendors and artisans by further to more than six-year-low of scheme, said the Reserve Bank of In-
creating digital credit histories. He also 2.82 per cent in May. dia (Investment in AIF) Directions,
discussed initiatives like the Data Qual- "Core inflation remains subdued, and 2025.
ity Index, redressal frameworks, and overall inflation is comfortably below The RBI had issued guidelines in De-
internal ombudsmen for improved the RBI's 4 per cent target, affording cember 2023 and later in March 2024
transparency. Stressing responsible in- room for the easing cycle to be sus- prescribing the regulatory guidelines in
novation, Rao highlighted AI, machine tained," said the finance ministry's respect of investment by the REs of the
learning, and the upcoming Grameen monthly review report. Reserve Bank in AIFs.
Credit Score as vital for inclusive credit
The central has cumulatively reduced The guidelines have been reviewed, in-
access, while cautioning about data the short-term benchmark lending
accuracy, security, and model risks. ter alia, taking into account industry
rate (repo) by 100 basis points since feedback as well as the regulations is-
February. sued by the Securities and Exchange
Finance ministry sees
Board of India (Sebi) relating to specific
room for more rate cuts as RBI caps investment by a due diligence of investors and invest-
inflation remains below bank in AIF scheme at 10 ments of AIFs, the RBI said in a circular.

RBI's target per cent "No RE shall individually contribute
more than 10 per cent of the corpus
The finance ministry on Monday said The Reserve Bank on Tuesday
there is room for further easing of in- capped contributions by a single regu- of an AIF Scheme," the circular said.
terest rate by the Reserve Bank of In- lated entity (RE), including banks and Collective contribution by all REs in
dia (RBI) as the inflation is comfortably NBFCs, at 10 per cent of the corpus of any AIF Scheme shall not be more than
below the central bank's median tar- an Alternative Investment Fund (AIF) 20 per cent of the corpus of that
get of 4 per cent. scheme. scheme.

10 | 2025 | AUGUST | BANKING FINANCE