Page 9 - Banking Finance July 2024

RBI CORNER

the Retail Direct portal, through which RBI's record dividend of norms. Yes Bank violated RBI norms by
individuals can transact in government imposing charges on bank accounts
securities. Rs.2.1 lakh crore to govt where the balance had run down to
can help reduce its deficit zero. It had also opened and operated
Banks must have robust RBI declared a record dividend of internal accounts in customers' names
for unauthorised purposes such as park-
policies, processes: RBI Rs.2.1 lakh crore to govt, more than ing funds and routing transactions.
double what was expected by the
The Reserve Bank of India said it is money markets. The dividend is more RBI norms prescribe that customers
imperative that banks have robust gov-
than the Rs.1.02 lakh crore that govt can be charged for banking services
ernance policies and processes com-
had budgeted as dividends from all fi- only if they have a balance in their
mensurate with their risk profile and
nancial institutions and will reduce its accounts. If the balance in an account
systemic importance.
need to borrow from the market. falls to zero, the bank is required to
The governance policies and processes suspend its services. The 2014 guide-
This is the second year in a row that
should encompass strategic direction, lines say that banks must ensure that
group and organisational structure, the central bank has paid a dividend the balance in the savings account
which is sharply higher than the
control environment, responsibilities of does not turn negative solely on ac-
the Boards and Senior Management. amount that govt had budgeted. count of levy of charges for non-main-
The likelihood of a lower govt borrow-
The Boards have the responsibility of tenance of minimum balance.
ing pushed down yields on the 10-year
approving and overseeing implementa- The penalty on ICICI Bank is for irregu-
tion of the bank's strategic plan; risk govt bonds to below 7%. Experts said larities in sanction of a project loan.
the surplus transfer to govt will help it
appetite and related policies; establish- Both banks' violations were detected
reduce the fiscal deficit and make funds
ing and communicating corporate cul- following a statutory inspection of
available for capital spending.
ture and values; and laying down policy their books during RBI's supervisory
related to conflict of interest and a RBI's decision to pay govt record Rs 2.1 evaluation for FY22.
strong control environment, the central lakh crore dividend - which will infuse
bank said in its latest annual report. substantial liquidity in to the banking RBI found that ICICI Bank sanctioned
term loans to entities to replace bud-
"During the supervisory assessment, system - led to a smart rally in the getary resources for certain projects.
the above aspects and implementation bond market. As a result, the bench- The bank had approved the loans with-
of policies are examined. These cover mark yield on the 10-year paper fell out due diligence on the projects' vi-
availability of adequate number of below the psychologically important ability and bankability. It also allowed
Board members with appropriate skills 7% mark after about a year. repayment/servicing of loans from
and expertise and effective conduct of At close of trade, the 10-year bonds budgetary resources. The loans were
Board meetings in accordance with laid maturing in 2034 closed at a yield of
approved without ensuring they were
down policies, among other aspects. 6.99% while the one maturing in 2033
for specific, monitorable projects.
"Sound governance practices in PSBs (the outgoing 10-year benchmark
bonds) closed at 7.04%. Both the
(public sector banks) and PVBs (private Join
sector banks) help in providing confi- bonds saw yields fall by 6 basis points
dence to various stakeholders, particu- (100 basis points = 1 percentage point), Online Certificate
larly the depositors who do not have a RBI data showed.
say in the banks' business decisions," Course on
per the report. RBI fines Yes Bank over
The central bank emphasised that this 'zero a/c balance' charges Reinsurance
requires deeper involvement of the RBI has imposed penalties on ICICI
boards of banks in strategic issues and Bank and Yes Bank of Rs 1 crore and For details please visit
risk oversight. Rs.91 lakh, respectively, for violation of www.smartonlinecourse.co.in

BANKING FINANCE | JULY | 2024 | 9