Page 10 - Banking Finance October 2019

RBI CORNER

RBI revises concurrent RBI examining lending rate process of NBFCs, HFCs
audit norms The RBI presently examining how non-banking lenders and home financiers price
their loans, close on the heels of directing
commercial banks to link their loan rates to
external benchmarks.

The RBI elaborated on the matter during its
discussion on external benchmarks, which
are binding on all banks starting October 1,
a source said.
The central bank is keen on greater transparency and order in the rate-setting
The RBI has recently revised the process at non-banking financial companies (NBFCs) and housing finance com-
regulations for concurrent audit sys- panies (HFCs), which are not bound by RBI regulations, the person said on con-
tem of banks. Concurrent audit in- dition of anonymity.
tends at shortening the interval be-
“When we were looking at external benchmarks, there was this issue as to what
tween a transaction and its indepen- to do with the NBFC and HFC sector. We decided that since they are not even
dent examination.
on the marginal cost of funds-based lending rate (MCLR) regime, we must first
Some of the revised regulations in- graduate them to some level and then think of external benchmarks," the per-
cluded the option to consider son said.
whether concurrent audit should be
done by the bank's own staff or ex- RBI increases Classification Of Export Credit limit
ternal auditors continue to be left to
the discretion of individual banks. In accordance with a latest update from the Reserve Bank Of India, in order to
boost credit to the export sector, it has been decided
The revised regulations state head to effect following changes in para 8 of the "Master
of internal audit in the bank should Direction on Priority Sector Lending (PSL)-targets
participate in selection of concurrent and Classification" dated July 7, 2016 (updated as on
auditors where such function is
December 4, 2018) pertaining to export credit.
outsourced and should be responsible
for the quality review of the work of The RBI had stated that it has been decided to en-
hance the sanctioned limit, for classification of export credit under PSL, from Rs
the concurrent auditors reporting to
25 crore per borrower to Rs 40 crore per borrower. The bank has also decided
her/him.
to remove the existing criteria of 'units having turnover of up to Rs 100 crore.
The regulations further underscored
that the bank should set up a policy The existing guidelines for domestic scheduled commercial banks to classify 'In-
cremental export credit over the corresponding date of the preceding year, up
for fixing accountability in cases of
serious acts of omission or commis- to 2% of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure,
sion noticed in the working of bank's whichever is higher' under PSL will continue to be applicable subject to the cri-
own staff or retired staff, working as teria mentioned above.
concurrent auditors.
RBI dismisses social media rumours regarding closure
A quarterly review containing impor-
tant features brought out during of 9 commercial banks
concurrent audits should be placed In a recent statement, the RBI stated that social media rumours in relation to
before the Audit Committee of the the closure of some commercial banks are false. A stated that says RBI is plan-
Board of Directors (ACB)/Local Man- ning to close nine banks permanently, went viral on social media. The social
agement Committee (LMC). The media message resulted in panic among public in the backdrop of the top bank's
zone-wise findings of concurrent au- actions against Punjab and Maharashtra Cooperative (PMC) Bank. However, RBI
dit may be reported to ACB/LMC on in a statement rejected rumours about closure of nine banks-Corporation Bank,
a quarterly basis. UCO Bank, IDBI, Bank of Maharashtra, Andhra Bank and Indian Overseas Bank.

10 | 2019 | OCTOBER | BANKING FINANCE