Page 36 - Banking Finance May 2023

ARTICLE

Reconstruction and Security Interest of India (CERSAI), Enabling framework for Regulatory Sandbox: The
whichever is later. Reserve Bank issued standard operating procedure (SOP) for
Interoperable Regulatory Sandbox (IoRS) to facilitate testing
Identification of NBFCs in the Upper Layer: The of innovative products/ services whose business models/
blow-up of IL&FS four years back was one of the biggest activities/ features fall within the regulatory ambit of more
financial crises involving a big conglomerate that seized the than one financial sector regulator. The SOP for IoRS has
financial system and sapped liquidity. The debt involved was been prepared by the Inter-Regulatory Technical Group on
about Rs.1 lakh crore, of which only Rs 55,000 crore have FinTech (IRTG on FinTech). The regulatory sandbox
been resolved and about 62% of it is unresolved. Considering framework of the regulator under whose remit the
the evolution of NBFCs in terms of size, complexity, and 'dominant feature' of the product falls, shall govern it as
interconnectedness within the financial sector, the Reserve 'Principal Regulator (PR)'. The regulator/s under whose
Bank had issued 'Scale Based Regulation (SBR): A Revised remit the other features apart from the dominant feature
Regulatory Framework for NBFCs' on October 22, 2021, to of the product fall shall be the 'Associate Regulator (AR)'.
align the regulations for NBFCs with their changing risk The test design shall be finalised by the PR in consultation
profile. The framework categorised NBFCs in Base Layer with the AR.
(NBFC-BL), Middle Layer (NBFC-ML), Upper Layer (NBFC-UL)
and Top Layer (NBFC-TL) and stated that the Upper Layer REITs and InvITs - Fund Raising and Future
shall comprise those NBFCs which are specifically identified
Outlook: Real Estate Investment Trusts (REITs) comprise
by the Reserve Bank, based on a set of parameters and
of portfolios of commercial real estate assets, a major
scoring methodology as provided in the framework. The top
portion of which is already leased out. While Infrastructure
ten NBFCs in terms of their asset size shall always reside in
Investment Trusts (InvITs) comprise of portfolios of
the Upper Layer. Accordingly, a list of sixteen NBFCs
infrastructure assets such as highways and power
categorised as NBFC-UL was released on September 30,
transmission assets etc. REITs and InvITs facilitate real estate
2022.
and infrastructure financing and investment in the country.
There are five registered REITs and 19 registered InvITs with
`
Digital Rupee (e` `` `) - Wholesale and Retail: Digital the SEBI as on November 30, 2022. Till November 30, 2022,
Rupee (e`), the CBDC in India, is similar to the physical InvITs raised Rs.79,483 crore, while REITs raised Rs.15,250
currency in terms of being a legal tender, accepted as a crore. The Union Budget of 2022-23 has allocated Rs.7.5
medium of payment and a safe store of value. The e` will lakh crore for infrastructure, which is 35.4 per cent more
provide an additional form of money to be used by the than the allocation in the previous year. The Government
public. A pilot for e` in the wholesale segment (e`-W) for of India has also laid an added thrust on infrastructure
settlement of secondary market transactions in government development, with its focus on initiatives like PM GatiShakti,
securities, was launched on November 1, 2022with the National Infrastructure Pipeline, inclusive development and
participation of nine banks. It is expected to make the inter- financing of investments.
bank market more efficient and reduce transaction costs by
pre-empting the need for settlement guarantee
infrastructure or for collateral to mitigate settlement risk.
Based on the learnings from this pilot, other wholesale
transactions and cross-border payments will be the focus of
future pilots. The first pilot e` in the retail segment (e`-R)
was launched on December 1, 2022 in select locations in a
closed user group comprising customers and merchants
across the country. The first phase has begun with four
banks, and more banks will join this pilot subsequently. The
e`-R pilot will provide the public with a risk-free medium of
exchange as it represents a direct liability of the central
bank, with features of physical cash like trust, safety and
immediate settlement finality in digital transactions.

34 | 2023 | MAY | BANKING FINANCE