Page 10 - Banking Finance September 2019

RBI CORNER

RBI Board nods for Rs RBI allows domestic banks to sell NPAs overseas as
1.76 lakh crore transfer one-time settlement
The RBI has given permission to domestic banks to directly sell their bad loans
to govt
in manufacturing and infrastructure sectors to investors
The RBI has accepted the recom- abroad as part of one-time settlement (OTS) exercises.
menda- The move will allow overseas investors to take direct
tions loan exposure to Indian corporates.
made by In accordance with the OTS scheme, the defaulters or
Bimal
stressed borrowers can sell their assets to raise exter-
Jalan com- nal commercial borrowing (ECB) from abroad to repay
mittee on domestic loans, the RBI said in a statement.
handing over surplus reserves to the
Centre. The RBI board has given ap- Meanwhile, Indian corporates can raise long-term loans for working capital,
proval to the transfer of Rs 1.76 lakh ‘general corporate purposes’ and repaying domestic rupee loans, the statement
stated. The RBI’s move can allow companies to raise cheap, long-term loans
crore to the Government of India.
This sum will comprise of Rs 1.23 lakh easily now. Part or all of that can be used to retire domestic loans.
crore of surplus for the year 2018-19 The RBI notification also underscored that corporate borrowers can avail of ECB
and Rs 52,637 crore of excess provi- “for repayment of rupee loans availed domestically for capital expenditure in
sions identified as per the revised manufacturing and infrastructure sector and classified as SMA-2 or NPA, under
Economic Capital Framework (ECF) any one-time settlement arrangement with lenders”. SMA is special mention
adopted at the meeting. account, in which SMA-2 is the loan not serviced between 60 days and 90 days.
With RBI’s surplus funds, government In case the loan is not serviced on the 91st day, it becomes NPA. “Lender banks
will be enabled to achieve its fiscal are also permitted to sell, through assignment, such loans to eligible ECB lend-
ers, except foreign branches/overseas subsidiaries of Indian banks, provided, the
deficit target for the current fiscal.
resultant external commercial borrowing complies with all-in-cost, minimum av-
The government has set a fiscal defi-
erage maturity period and other relevant norms of the ECB framework,” the
cit target of 3.3% of the GDP in the
current fiscal, revised downwards notification said.
from the goal of 3.4% mentioned in
the Interim Budget in February. RBI gives clarification to banks on free ATM transaction
The RBI has recently directed banks not to treat failed transactions at ATMs or
In order to review the extant eco-
nomic capital framework, RBI had non-cash transactions such as balance enquiries or
chequebook requests as part of five free transactions
constituted an expert committee available to customers every month.
under former RBI Governor Bimal
Jalan. The panel had submitted its “It has come to our notice that transactions that have
report to RBI Governor Shaktikanta failed due to technical reasons, nonavailability of cur-
Das rency in ATMs, etc., are also included in the number of
free ATM transactions,” RBI said in a circular to all scheduled commercial, co-
"The Committee's recommendations operative and rural banks.
were based on the consideration of
the role of central banks' financial “It is hereby clarified that transactions which fail on account of technical rea-
sons like hardware, software, communication issues; nonavailability of currency
resilience, cross-country practices,
notes in the ATM; and other declines ascribable directly/ wholly to the bank /
statutory provisions and the impact service provider; invalid PIN / validations; etc., shall not be counted as valid ATM
of the RBI's public policy mandate
transactions for the customer,” it noted. The central bank also said that non-
and operating environment on its
cash withdrawal transactions such as balance enquiry, cheque book request,
balance sheet and the risks in-
payment of taxes, funds transfer which constitute ‘on-us’ transactions shall also
volved," RBI said in a statement.
not be part of the of free ATM transactions given to customers.
10 | 2019 | SEPTEMBER | BANKING FINANCE