Page 8 - Banking Finance December 2022

RBI CORNER

dent and issuances to banks will keep pleted the KYC (know-your-customer) persist around 6 percent. Headline in-
evolving dynamically, sources said. The process on C-KYC portal. flation is expected to remain above or
central bank will be creating more digi- close to the upper threshold in the
Bank customers who've completed
tal rupee as demand from banks comes third and fourth quarters of 2022-23,
their KYC verifications online can do
in over the next few days. the MPC said in a statement.
the annual updates as well as changes
if any in their personal details online. "GDP growth in India remains resilient
RBI approves 12 vostro a/ and inflation is expected to moderate;
A bank should not be demanding from
but the battle against inflation is not
cs for rupee trade a customer to walk into the branch for
over. Pressure points from high and
The Reserve Bank of India (RBI) has verification/updates. There is no such
sticky core inflation and exposure of
permitted banks to open 12 special rule from the Reserve Bank on this,
food inflation to international factors
"vostro accounts", to facilitate import- governor Shaktikanta Das told.
and weather-related events do re-
export trade in the rupee, the apex
main," Das in the monetary policy
bank's executive director Deepak RBI cautions banks in
statement.
Kumar said.
lending to companies with
The RBI had earlier allowed two Indian RBI official cautions banks
exposure to West
lenders - UCO and IndusInd Bank - to
against outsourcing core
RBI has asked banks to exercise cau-
open nine special vostro accounts for
tion in their business plans going for- activities
facilitating overseas trade in rupee.
ward, specifically on lending to compa- Banks have to ensure that none of their
"We are not saying that dollar promi-
nies with a significant exposure to Eu- core banking activities are outsourced
nence should come down, but rupee
rope and the Americas. The concerns at any point in time, according to Ajay
prominence should go up. We are aim-
have been flagged in the wake of the Kumar Choudhary, Executive Director,
ing for rupee acceptance. The rupee
Russian invasion of Ukraine, following Reserve Bank of India. This will ensure
related and currency-paired rupee
which the government has been nudg- stability of the banking system.
market should develop liquidity and
ing state-owned banks to open special
depth," he added. "As the technology and systems are
rupee vostro accounts to facilitate
evolving, we are observing an increase
Vostro accounts are held by a bank on trade with Russia and other countries,
in the outsourcing of services in the
behalf of another (often foreign) bank. as also the worries regarding an im-
banking and financial sector. With the
Such an arrangement forms a key part pending slowdown in the European
advent of fintech coupled with easier
of correspondent banking. So far, not a and American markets.
access to mobile phones, internet,
single overseas trade transaction directly
higher speed, higher bandwidth, re-
involving the rupee has taken place.
Inflation war far from duced cost of tech products, the indus-
In July, the RBI had unveiled a mecha-
over: RBI try is witnessing immense growth in
nism to settle international transactions terms of expansion as well as customer
The RBI had in November written to
in rupees, in order to promote global acquisition," Choudhary said at the IBA
the government explaining the reasons
trade with emphasis on exports from Banking Technology Conference.
for its failure to bring down inflation
India, and to push the Indian unit as an
below the upper tolerance band of 6 He observed that fintech is transform-
international currency. The mechanism
percent for three quarters in a row. ing the way financial services are de-
is also expected to enable trade with
livered (how credit is extended, how
sanction-hit nations such as Russia. The retail inflation based on the con-
payments are made or the way wealth
sumer price index (CPI) eased to a
management/ investment advice is
No need to visit bank for three-month low of 6.77 percent in provided, insurance is priced, etc).
October from 7.41 percent in Septem-
confirming KYC, says Das
ber, aiding the central bank to go for "Many of the industry participants are
The Reserve Bank said banks should a smaller rate hike of 35 bps. Inflation focusing on collaborating with fintechs,
not ask for verifications/updates at the has ruled at or above the upper toler- partnering with them for efficient de-
branch level in case a customer has ance band of 6 percent since January livery of financial services," the RBI ED
done e-KYC or those who have com- 2022 and core inflation continues to said.
8 | 2023 | JANUARY | BANKING FINANCE