Page 10 - Banking Finance June 2022

RBI CORNER

licenses to various large players and result, the standing deposit facility for the government with an aim to
non-banks like Bajaj Finance thereby (SDF) rate is now at 4.15 per cent and make government borrowings efficient
increasing competition in the segment, the marginal standing facility (MSF) at low over medium to long term with
said Macquarie Research in a note. rate at 4.65 per cent.
the right risk balance.
In its master direction, the RBI said,
The central bank will review Medium-
"The co-branding partner shall not Sharp rise in expenses, re-
Term Debt Management Strategy
have access to information relating to
verse repo hit RBI surplus (MTDS) for management of public debt
transactions undertaken through the
of the government with an objective
co-branded card". in FY22
“to mobilise market borrowings at low
"The role of the co-branding partner The Reserve Bank of India's (RBI) sur-
cost over medium to long-term, with
entity under the tie-up arrangement plus to be transferred to the govern-
prudent levels of risk and a stable debt
shall be limited to marketing/distribu- ment in the fiscal year ended March
structure, while also developing a liq-
tion of the cards and providing access 2022 fell primarily due to a sharp rise
uid and wellfunctioning domestic debt
to the cardholder for the goods/ser-
in expenditure, the central bank's an-
market.”
vices that are offered," the RBI further
nual report showed.
said. The weighted average maturity of pri-
While income for the year increased by
RBI also made it clear that NBFCs will mary issuances increased to 16.99
20%, expenditure increased by 280%
have to take prior approval from the years from 14.49 years in the previous
which resulted in the overall surplus
RBI for issuing credit cards to their year.
transferred to the government decreas-
customers. Going forward, the key areas of focus
ing 69% to Rs 30,307.45 crore from Rs
Banks tie up with various entities, in- of the Reserve Bank for the year 2022-
99,122 crore in the previous year.
cluding non-banks, e-commerce com- 23 will be smooth completion of the
Total expenditure increased to Rs 1.29
panies, food delivery apps, airline com- government borrowing programme in
panies, and others, to issue co-branded lakh crore from Rs 34,147 crore a year
line with the guiding principles of debt
credit cards. ago. Expenditure included agency
management, while ensuring a stable
commissions to banks for processing
debt structure and proactively taking
RBI raises repo rate by 40 government receipts and payments
appropriate policy actions, if necessary.
which increased 48% to Rs 3859 crore
bps The weighted average yield (WAY) of
from Rs 2,611.05 crore in 2020-21.
Monetary Policy Committee (MPC) of G-sec issuances during the year in-
Expenditure incurred on printing of
the RBI unanimously decided to in- creased by 49 basis points from a year
bank notes increased 24% to Rs 4985
crease the repo rate by 40 basis points
ago. A basis point is 0.01 percentage
crore from Rs 4,012.09 crore in 2020-
(bps) in an off-cycle meeting, citing in-
point.
21.
flation concern.
Around one-third of general govern-
This was followed by a 50 bps hike in Besides the higher operational expen-
ment debt pertains to sub-national
the cash reserve ratio to 4.5 per cent, diture, RBI also had to pay interest on
governments. However, a document
which will drain out Rs 87,000 crore the excess funds kept by banks with it
outlining the strategy of debt manage-
liquidity from the banking system. through the reverse repo window. This
ment for efficient and effective man-
interest outgo nearly doubled to Rs
This was the first repo rate hike in 45
agement at sub-national government
months -- since August 2018. The in- 35,601 crore at the end of March 2022
is lacking.
crease in the repo rate will lead to from Rs 17,958 crore in March 2021.
lending rates getting pushed up be- “A pilot MTDS for a few states is pro-
cause 40 per cent of the loans of com- posed to be drafted reflecting the state
RBI to review medium
mercial banks are linked to it. governments’ plan for financing their
term debt strategy for GoI
The 10-year government bond shot up activities, while taking due account of
26 bps, with the street expecting an- The Reserve Bank of India is set to re- constraints and potential risks,” RBI
other rate hike in the June policy. As a view the Medium Term Debt Strategy said in the annual report.
10 | 2022 | JUNE | BANKING FINANCE