Page 11 - Banking Finance June 2024

RBI CORNER

that to facilitate unauthorised forex the cheque was handed over to the SFBs should be worth Rs.
trading, these entities have taken re- customer several days later, the RBI
course to engaging local agents who said. 1,000 crore to become
open accounts at different bank In the case of disbursal or repayment universal banks, says RBI
branches for collecting money towards of loans during the course of the The Reserve Bank of India (RBI) has
margin, investment, charges, etc," it month, some banks were charging in- said small finance banks (SFBS) should
said, asking banks to report such ille-
terest for the entire month, rather have a minimum net worth of Rs 1,000
gal trading activities to the Enforce- than charging interest only for the crore to become universal banks in
ment Directorate (ED).
period for which the loan was out- accordance with the on-tap licensing
"These accounts are opened in the standing. It was also observed that norms.
name of individuals, proprietary con- banks were collecting one or more According to the central bank, SFBS
cerns, trading firms etc. and the trans- instalments in advance but reckoning aspiring to become a universal bank
actions in such accounts are not found the full loan amount for charging need to have scheduled status with a
to be commensurate with the stated interest. satisfactory track record of perfor-
purpose for opening the account in mance for a minimum period of five
several cases," the circular said. The Industry's share in bank years. Also, the shares of the bank
RBI had issued warning against illegal should have been listed on a
forex trading several times in the past. credit shrinks to 23%: RBI recognised stock exchange, the RBI
Bank loans to the services and agricul- said in a circular.
Charging of interest rates: ture sectors were the main drivers of Further, these SFBS also need to have
the 20% credit growth in FY24, with
RBI detects overcharging both sectors growing at over 20%, ac- a net profit in the last two financial
years besides having gross non-per-
by banks, asks them to re- cording to data released by RBI. While forming assets (GNPA) and net non-
the pace of credit growth to large in-
fund borrowers dustries more than doubled in FY24 performing assets (NNPA) of less than
or equal to three per cent and one per
The Reserve Bank of India (RBI) has (7%) from the year before (3.1%), it cent, respectively in the last two finan-
come across instances of lenders re- remained sluggish, resulting in a fur- cial years, the RBI said.
sorting to certain unfair practices in ther decline in market share.
On April 12, the RBI rejected applica-
charging of excess interest from bor- As of March 22, 2024, the share of in-
rowers. The RBI, through its supervi- dustry in bank credit shrunk to 23.1% tions received from Dvara Kshetriya
sory teams, has advised banks to re- from 24.8% in March 2023 and 27.1% Gramin Financial Services Pvt Ltd and
Tally Solutions Pvt Ltd to start SFBS in
fund such excess interest and other in March 2022. the private sector. The two entities
charges to customers.
The share of the services sector has had applied to the RBI for setting up a
During the course of the onsite exami- increased marginally to 28.3%. Per- SFB in 2021 under the guidelines for
nation of banks and Non-Banking Fi- sonal loans now account for 31% of on-tap licensing.
nancial Corporations (NBFCs) for the bank credit, up from 30.6% in March The RBI circular said there is no man-
period ending March 31, 2023, the RBI 2023 and 29% in March 2022. datory requirement for an eligible SFB
found that banks were charging of in-
Banks added Rs 27.6 lakh crore to non- to have an identified promoter. How-
terest from the date of sanction of food credit in FY24, expanding their ever, the existing promoters of the eli-
loan or date of execution of loan agree- book by 20% to Rs 164.1 lakh crore. gible SFB, if any, should continue as the
ment, and not from the date of actual
The exceptional growth was due to the promoters on transition to a universal
disbursement of the funds to the cus- merger of HDFC with HDFC Bank, bank. "Addition of new promoters or
tomer.
which added Rs 5.3 lakh crore to bank change in promoters will not be per-
Similarly, in the case of loans being dis- loans or nearly 400 basis points to mitted for an eligible SFB while
bursed by cheque, instances were ob- credit growth. Without the merger, transitioning to the universal bank," it
served where interest was charged the credit growth would have been said. There should be no new manda-
from the date of the cheque whereas 16.3%. tory lock-in requirement of minimum

10 | 2024 | JUNE | BANKING FINANCE