Page 11 - Banking Finance December 2024

RBI CORNER

DBT: RBI pulls up banks the bank level in periodical updation of groups like senior citizens," said
KYC details of the customers; lack of a Swaminathan.
for freezing a/cs over KYC proactive approach in assisting and
RBI pulled up banks for freezing ac- obtaining the required customer docu- Deposit growth moderates
counts that receive direct benefit trans- ments; inadequate staff deployment in
fer (DBT) funds from govt due to incom- such critical functions resulting in over- to 11.8 % in October: RBI
plete KYC. Banks have also been found crowding or denial of service at The pace of bank deposit mobilisation
to be at fault for delaying KYC updates, branches; directing customers to ap- slowed down to 11.79 per cent year-on-
resulting in accounts getting frozen. proach their 'home branch' for availing year (Y-o-Y) as of October 4, 2024, from
Addressing directors of private sector such services rather than being 13.6 per cent a year ago, according to
banks, RBI deputy governor empathetic to customer needs by at- Reserve Bank of India (RBI) data.
Swaminathan J said that banks must tending to them at a branch of their In absolute terms, banks raised Rs
"ensure that KYC guidelines are fol- convenience; and failure to update the 23.12 trillion in the 12 months up to
lowed with both precision and empa- details in the system even after the October 4, 2024, lower than Rs 23.43
thy." He pointed out that in the past customers have provided the required trillion raised in the previous 12
RBI had given instructions to banks, documents," said Swaminathan. months. RBI released the Scheduled
asking them not to freeze accounts He said that the way in which the Banks' Statement of Position in India.
that receive government transfers for guidelines were being implemented These figures factor in the merger of
want of KYC. KYC or know your cus- seemed to be resulting in a number of HDFC with HDFC Bank.
tomer norms pertain to obtaining iden- accounts getting frozen, denying cus-
tity and address proof to prevent tomers access to their funds. "Boards The tempo of credit off take also slowed,
money laundering. must ensure that the banks' service with 12.77 per cent Y-o-Y growth, down
from 19.3 per cent a year ago. In abso-
"Our root cause analysis indicates a set delivery embodies empathy and fair- lute terms, banks disbursed loans worth
of issues, including high pendency at ness, particularly toward vulnerable Rs 19.59 trillion in the 12 months up to
October 4, 2024, much lower than Rs
RBI Governor urges bank boards to take proactive 24.93 trillion lent a year ago.
measures against risks
'Excessive pricing' RBI bars
Reserve Bank of India Governor Shaktikanta Das flagged concerns over mis-
selling of products by banks and said there is a need to structure incentives 4 NBFCs from giving loans
to avoid such practices. Financial Services Ltd, DMI Finance
and Navi Finserv from sanctioning and
"Unethical practices, such as mis-selling of products or the opening of ac-
counts without proper KYC verification need to be curbed. State incentives disbursing loans for violation of multiple
should be carefully structured to avoid encouraging mis-selling or unethical rules, including excessive pricing of
practices," Das said while speaking at the Conference of Directors of pri- loans. The ban on these non-bank fi-
vate sector banks in Mumbai. nance companies (NBFCs) will come
into effect from October 21.
He also urged boards of banks to be cognizant of build-up of concentrations
in their business model. Asirvad Micro Finance is promoted by
Manappuram Finance, a leading gold
"Excessive reliance on specific sectors, markets, or customer segments can loan company, and Navi Finserv is pro-
expose the bank to amplified risks, particularly in times of economic stress moted by former Flipkart co-founder
or industry shifts. For instance, as you would be aware, seeing a build-up of Sachin Bansal. Japan's Mitsubishi had
concentration across certain loan segments, the Reserve Bank took a few
recently invested $334 million in DMI
counter-cyclical measures last year.
Finance, founded by Shivashish
Similarly, Boards can play a proactive role by regularly monitoring the bank's Chatterjee and Yuvraja C Singh. Former
portfolios, identifying potential areas of overconcentration, and taking pre- DFS secretary D K Mittal is the chair-
emptive steps to maintain a balanced approach," he said. man of Arohan.

10 | 2024 | DECEMBER | BANKING FINANCE