Page 7 - Banking Finance September 2020

RBI CORNER

RESERVE BANK

NEWS
NEWS
NEWS
NEWS
NEWS

RBI asks banks to upgrade 2020 due to health reasons. It has been But this is the first time in this fiscal
decided to appoint A.K. Dixit, ex-gen- year (April 2020-March 2021, or FY21)
system to auto identify eral manager, Union Bank of India as that the central bank has announced

NPAs the new administrator of the bank with an outright open market operation
The Reserve Bank of India, asked effect from 23 September," RBI said in (OMO) purchase. In OMOs, the RBI
banks to upgrade their systems by June a notification. buys or sells bonds from the secondary
30, 2021, for identification of non-per- Detailing the reasons behind the slug- markets.
forming assets (NPA) and calculation of gish turnaround of PMC Bank, the regu- The RBI had last done an outright
provisioning. lator said huge losses by the bank and OMO purchase operation on March
The central bank noted that many steep erosion in deposits pose chal- 26, of Rs 15,000 crore.
banks are still not yet fully automated lenges to revival. After that, all the OMOs were simul-
and are resorting to manual identifica- "While the administrator of PMC bank taneous buy and sell operations, in
tion of NPAs. All borrowal accounts, and the RBI have been exploring vari- which the central bank bought long-
including temporary overdrafts, irre- ous options for resolution of the bank, term securities and sold short-term
spective of size, sector or types of lim- several factors such as huge losses in- securities.
its, shall be covered in the automated curred by the bank resulting in its en- This exercise is also called 'Operation
IT-based system (system) for asset clas- tire net worth getting wiped out, steep Twist' in market parlance.
sification, upgradation, and provision- erosion in deposits, continue to pose
ing processes. serious challenges in finding a workable In the latest round of the outright
OMO purchase, the RBI would be buy-
plan for revival of the bank," it said. ing bonds maturing between 2026 and
RBI appoints A. K. Dixit to 2031. The central bank said it was do-
oversee PMC Bank opera- In outright OMO, RBI to ing so in view of the "current liquidity

tions buy Rs. 10,000 cr of bonds and financial conditions".
The Reserve Bank of India (RBI) ap- The Reserve Bank of India (RBI) an- Even though the liquidity surplus in the
pointed former Union Bank of India nounced it would go for an outright banking system has come down from
general manager A.K. Dixit as the new purchase of Rs 10,000 crore of bonds its recent highs of Rs 7 trillion to Rs
administrator of Punjab and from the secondary markets on Sep- 4.67 trillion, it is still at a huge surplus.
Maharashtra Cooperative (PMC) Bank tember 24.
as current one, J.B. Bhoria, stepped So far, the central bank has been simul- RBI to give staff option to
down citing health reasons. taneously buying and selling bonds of join pension scheme
"The present Administrator J.B. Bhoria equal amounts, with an intention to The Reserve Bank of India has agreed
is stepping down on 22 September keep the operational liquidity neutral. to offer its employees an option to

BANKING FINANCE | SEPTEMBER | 2020 | 7