Page 9 - Banking Finance December 2022

RBI CORNER

Reserve Bank

News

RBI: New microfinance RBI Deputy Governor to both the approvals are for trade with
Russia, banking industry sources said.
norms will bring down MFIs: Balance borrowers'
So far five Indian banks - UCO Bank,
credit risk interest Union Bank, and IndusInd Bank being
The RBI has said that its regulations on Reserve Bank of India deputy governor the other three - have received regu-
microfinance are aimed at improving Rajeshwar Rao warned microfinance latory clearance for such trade. This
the credit worthiness of borrowers and apart, two Russian banks - Sber Bank
lenders against irresponsible lending
enable them to raise loans at lower and VTB - have the RBI's approval.
and asked them to grow business while
interest rates. Both have branches in India.
balancing the interest of vulnerable
Under the new regulatory arrange- borrowers. According to sources, three banks have
ment, rule-based guidelines on pricing opened accounts so far though no deal
He said customer protection lies at the
of loans have been replaced with a has been done through this mecha-
RBI's regulation for the microfinance
principle-based framework based on nism. The move is aimed at
sector and the regulator has zero tol-
enhanced disclosures and transparency popularising trade in the domestic cur-
erance for misconduct towards the
requirements, deputy governor M rency.
borrowers.
Rajeshwar Rao said.
UCO Bank was the first Indian bank to
Speaking at an event, the deputy gov-
Speaking at an event, Rao elaborated
receive the RBI's approval to open a
ernor said that exclusive focus on busi-
the key elements of microfinance regu- special Vostro account with Russia's
ness growth and bottom lines without
lation aimed at bringing down the cost
Gazprombank, which was set up by
considering the vulnerabilities of the
of credit for the borrower. the world's largest gas producer and
borrowers by any entity is fraught with
According to Rao, the cap on repay- exporter, Gazprom.
pitfalls and irresponsible lending by a
ment obligations is expected to nudge
few lenders ends up putting the inter- IndusInd Bank has tied up with six Rus-
lenders to keep the interest rates low sian banks while the remaining four
ests of the entire industry at risk.
so that the repayment instalments do
Indian banks have done deals with one
not exceed the maximum prescribed Russian lender each.
HDFC Bank, Canara Bank
limit for repayment obligation. Second,
HDFC Bank's counterpart in Russia is
measures to check over-indebtedness get RBI approval for rupee
MTS Bank, the fintech unit of Russia's
would also result in improvement of
trade with Russia largest mobile operator, MTS. On July
creditworthiness of the borrowers,
HDFC Bank and Canara Bank have got 11, the RBI had issued a circular allow-
bringing down the credit-risk premium
which should translate into lower inter- approval from the RBI to open a special ing trade settlement between India
est rates. Vostro account for trade in rupees and and other countries in rupees. At the
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