Page 9 - Banking Finance June 2022

RBI CORNER

accounts. These guidelines are meant every legal entity in any jurisdiction growth momentum to compensate for
to further harmonize regulations be- that is party to a financial transaction. the lost output.
tween banks and non-banks.
Those with exposure above Rs 25 crore "Taking the actual growth rate of -6.6%
In October last year, RBI had an- from banks and financial institutions for FY21, 8.9% for FY22 and assuming a
nounced scale-based regulations for will have to get LEI code on or before growth rate of 7.2% for FY23 and 7.5%
non-banking financial companies April 30, 2023. beyond that, India is expected to over-
(NBFCs), with effect from October this come Covid losses in FY35," the RBI said
For those with exposure between Rs
year. The regulatory structure for in its forecast. Here, FY34 refers to the
10 to 25 crore will get more year (till
NBFCs will be divided into four layers year the economy will be in the same
April 30, 2024) and those with Rs five
based on their size, activity, and per- position it would have been had there
and upto Rs 10 crore have to get LEI
ceived riskiness. The lowest layer is been no Covid.
code on or before April 30, 2025.
base layer, followed by middle, upper
RBI said borrowers who fail to obtain
and top layers. RBI okays trade transac-
LEI codes from an authorized Local
RBI said that aggregate exposure of tions settlement with
Operating Unit (LOU) will not get sanc-
an upper layer NBFC to any entity must
tions for any new exposure. They will Lanka in INR
not be higher than 20% of its capital
not be granted renewal/enhancement In view of difficulties being faced by
base, although the board can approve
of any existing exposure.
exporters in getting payments from
an additional 5% to take it to 25%.
However, departments and agencies of crisis-hit Sri Lanka, the RBI allowed
However, for infrastructure finance
Central and State Governments shall settlement of trade transactions in In-
companies, the aggregate limit will be
be exempted from this provision. The dian rupee outside the Asian Clearing
30% to a single entity. To a group of
RBI has decided to extend guidelines Union (ACU) mechanism.
connected entities, aggregate expo-
for LEI to Urban Cooperative Banks
sure will be limited to 25% of the capi- In March, the government had guar-
and non-banking finance companies.
tal base (unless on account of an infra anteed a term loan of USD 1 billion
loan) for all upper layer NBFCs apart extended by the State Bank of India
12 yrs to recover from
from infrastructure finance companies (SBI) to Sri Lanka for financing pur-
where it will be 35%. pandemic losses: RBI chase of essential goods by the island
RBI expects the Indian economy to nation from India.
RBI sets 3-year time table overcome losses arising out of the pan- "In view of the difficulties being expe-
demic only by 2034-35. The output rienced by exporters in receipt of ex-
for non-individual borrow-
losses on account of the pandemic are port proceeds from Sri Lanka and SBI's
ers to get legal entity iden- estimated to be over Rs 52 lakh crore credit facility...it has been decided that
over the last three years. such trade transactions with Sri Lanka,
tifier codes
falling under the said arrangement,
In its first detailed analysis of the im-
The Reserve Bank of India set a three-
may be settled in INR outside the ACU
pact of the pandemic, the RBI pub-
year timetable for non-individual bor-
mechanism," the RBI said in a circular.
lished a report 'Scars of the pandemic'
rowers with aggregate exposures of Rs
in its annual publication on currency Under the arrangement, financing of
5 crore or more to obtain Legal Entity
and finance. According to the report, export of eligible goods and services
Identifier (LEI) codes.
the capital expenditure push in the from India would be allowed subject
The LEI is a 20-character alpha-nu-
FY23 Budget can help achieve sustain- conditions and whose purchase may be
meric code used to uniquely identify
able high growth by enhancing produc- agreed to be financed by SBI under the
parties to financial transactions world-
tive capacity, crowding in private in- agreement.
wide. It is being implemented to im-
vestment and strengthening aggre-
prove the quality and accuracy of finan-
gate demand. While private consump- RBI may now be more
cial data reporting systems for better
tion expenditure and investment mar-
risk management. open for credit card li-
ginally surpassed their respective pre-
It is used to create a global reference pandemic levels in FY22, the RBI said cences to NBFCs: Report
data system that uniquely identifies there is a need to strengthen the RBI might be more open to granting
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