Page 9 - Banking Finance June 2025

RBI CORNER

1.73 crore for lapses in adhering to (OMO) bond purchase auction of FY26, RBI Approves Record Rs.
guidelines related to loans and ad- the Reserve Bank of India accepted
vances, customer protection in elec- bids worth Rs 19,203 crore, falling 2.69 Lakh Crore Dividend
tronic banking transactions, and cur- short of the notified Rs 25,000 crore, to Government for FY25
rent account management. Jana Small despite receiving offers of Rs 50,369 The Reserve Bank of India (RBI) has
Finance Bank faced a penalty of Rs 1 crore. approved a record surplus transfer of
crore for contravening provisions of Rs. 2.69 lakh crore to the Centre for
The central bank's decision signals
the Banking Regulation Act, 1949. FY25, marking a 27% increase from last
comfort with current liquidity levels.
The central bank clarified that these year's Rs. 2.11 lakh crore. The robust
The auction included government se-
monetary penalties were imposed due curities maturing in 2029, 2032, 2033, dividend is attributed to forex gains,
to deficiencies in compliance and are improved earnings from liquidity opera-
2034, and 2036. Market experts be- tions, and higher interest on foreign
not intended to affect the validity of
any existing customer transactions or lieve the cut-off prices aligned closely assets. Despite increasing the Contin-
agreements. The RBI routinely con- with expectations for semi-liquid bonds. gent Risk Buffer (CRB) to 7.5% from
"Since 2025, banks have offloaded Rs 6.5% under the revised Economic Capi-
ducts such enforcement actions to en-
sure strict adherence to its supervisory 5 lakh crore of bonds. tal Framework (ECF), the payout sur-
passed the government's Budget esti-
framework and financial sector norms. Following this liquidation, their willing-
mate of Rs. 2.56 lakh crore.
These penalties underscore the need ness to sell has diminished," said VRC
for stronger internal controls and com- Reddy, Head of Treasury at Karur Experts estimate the dividend could
pliance mechanisms among Indian Vysya Bank. The 10-year benchmark have touched Rs. 3.5 lakh crore with-
out the higher provisioning. The re-
banks, particularly those with signifi- bond yield ended the session at 6.24%. vised ECF now allows a flexible CRB
cant customer-facing operations. This auction marks a shift from earlier range of 4.5-7.5% of the balance sheet.
instances when RBI absorbed higher Economists believe the surplus can
RBI Accepts Lower-than- amounts, suggesting a more calibrated cushion against fiscal shocks such as
Expected Amount in First approach going forward in managing reduced customs revenue or higher
system liquidity and bond supply defence expenditure. The surplus was
OMO Auction of FY26 dynamics amid evolving market approved in the RBI Central Board
In its first open market operation conditions. meeting chaired by Governor Sanjay
Malhotra.
RBI to Issue New Rs 20 Notes Bearing Signature of
RBI Proposes Softer Norms
Governor Sanjay Malhotra
for AIF Investment by
The Reserve Bank of India has announced the issuance of Rs 20 denomina-
tion banknotes in the Mahatma Gandhi (New) Series, which will feature the Banks, NBFCs
signature of newly appointed Governor Sanjay Malhotra. The design and The Reserve Bank of India (RBI) has
security features of the banknote will remain unchanged. Malhotra assumed proposed relaxed norms for regulated
office on December 11, 2024, and will serve a three-year term. entities (REs), including banks and

The RBI clarified that all previously issued Rs 20 banknotes will continue to NBFCs, investing in Alternate Invest-
ment Funds (AIFs). As per the draft
be valid legal tender. Legal tender refers to any coin or currency note that
can be used to settle financial obligations or debts. guidelines, a single RE's investment will
be capped at 10% of any AIF's corpus,
As per the RBI Act, 1934, all banknotes issued by the Reserve Bank are guar- while total RE exposure to a scheme
anteed by the Central Government and are acceptable across India, unless cannot exceed 15%.
withdrawn from circulation. The Rs 1 note, issued by the Government of
The move partially rolls back Decem-
India, also retains its status as legal tender. The new issue reinforces conti-
nuity in currency usage and legal status. ber 2023 norms that prohibited REs
from investing in AIFs exposed to their

8 | 2025 | JUNE | BANKING FINANCE