Page 7 - Banking Finance August 2019

RBI CORNER

RESERVE BANK

NEWS
NEWS
NEWS
NEWS
NEWS

RBI relaxes Leverage Ra- RBI chief asks PSBs to improve fraud risk management
tio for banks RBI Governor Shaktikanta Das has recently asked state owned banks to follow
the latest guidelines for resolution of stressed assets and
In order to help the banks expand
to accelerate the recovery process. He has also addressed
their lend-
several other issues in a pre-policy meeting.
ing activi-
ties, the In an official statement, the RBI said that the Shaktikanta
RBI has Das has given impetus to the resolution of stressed assets
relaxed facilitated by the revised framework for resolution in a
the lever- meeting with the CEOs of public sector banks and the Chief
age ratio (LR). The leverage ratio Executive of Indian Banks Association (IBA). As per the lat-
stands reduced to 4% for Domestic est guidelines declared by the RBI, lenders will have to enter into an Inter-credi-
Systemically Important Banks tor Agreement within a month of default. Following that, the consortium will
(DSIBs) and 3.5% for other banks. adhere to a deadline of 180 days in order to implement the resolution frame-
work.
“Keeping in mind financial stability
and with a view to moving further RBI said, "Governor acknowledged discernible improvements in the banking sec-
towards harmonization with Basel III tor while underscoring that several challenges still remain to be addressed, par-
standards, it has been decided that ticularly with regard to the stressed asset resolution and credit flows to needy
the minimum LR should be 4% for sectors."
Domestic Systemically Important "The Governor also pointed out that the level of transmission of monetary policy
Banks (DSIBs) and 3.5% for other rates was "less than desired", as quoted from the official statement released
banks," RBI said in the statement. by RBI. The governor also held discussion with state owned banks over differ-
The leverage ratio, as defined under ent ways to improve recovery efforts. Among the other key issues that were
Basel-III norms, is Tier-I capital as a issued, improving fraud risk management and deepening digital payments.
percentage of the bank’s exposures. The prompt to improve fraud risk management comes after yet another scam
The framework is designed to cap-
ture leverage associated with both surfaced after Punjab National Bank and Allahabad Bank reported fraud of
on- and off-balance sheet exposures. around Rs 5,000 crore by Bhushan Power and Steel. As far as deepening of digi-
In this case, a bank’s total exposure tal payments is concerned, Mr Das has asked banks to identify one district in
is defined as the sum of the follow- each state to make it completely digitally-enabled in a year in collaboration with
ing exposures: on-balance sheet ex- all stakeholders, including SLBCs, state governments, and regional offices of RBI.
posures; derivative exposures; secu- The customary pre-policy meet was attended by the top executives of around 20
rities financing transaction expo- lenders including State Bank of India, Bank of Baroda and Bank of India. The Mon-
sures; and off-balance sheet items. etary Policy Committee is scheduled to meet on August 5-7 to review interest rates.

BANKING FINANCE | AUGUST | 2019 | 7