Page 9 - Banking Finance April 2022

RBI CORNER

creation of a separate web page delayed the government's proposed the report said, adding that most cen-
"Regulatory Reporting" on the RBI legislation on crypto assets. tral banks worldwide are now in vari-
website to consolidate information re- ous stages of their evaluation of
lating to regulatory reporting and re- Reserve Bank of India con- launching their national digital curren-
turn submission at a single source. cies.
ducts variable repo rate
The RRA has advisedthe elimination of "CBDCs due to its inherent potential of
paper-based returns and has identified auction of Rs.75,000 crore changing the way value transfer hap-
65 regulatory returns which would ei- RBI offered the banking system pens, provide a more resilient, innova-
ther be discontinued/ merged with Rs.75,000 crore of overnight liquidity tive, and competitive payment system
other returns or would be converted through variable rate repo (VRR) auc- for households, businesses and econo-
into online returns. This was based on tion, while simultaneously announcing mies," said Monish Shah, partner,
suggestions of an internal group dated liquidity mopping operations Deloitte India.
chaired by its executive director O P through variable rate reverse repo Currently, most security clearing and
Mall. auction (VRRR).
settlement processes have a multi-day
These steps are expected to ease regu- The central bank offered Rs.75,000 lag, he said, adding "with the introduc-
latory compliance for the regulated crore of liquidity to the banking system tion of Digital Rupee there would be a
entities while improving the accuracy, against which banks bid for up to significant increase in efficiencies and
speed, and quality of data submissions, Rs.1.38 trillion. At the same time, the reduction in associated reconciliation
RBI said in a statement. RBI said it would conduct a 28-day costs".
VRRR of Rs.50,000 crore and a Rs.2
Regulated entities would be notified of The report said CBDCs are likely to
the discontinuation/ merger and online trillion VRRR for three days. drive efficiencies and effectiveness of
filing of returns, separately. The notifi- The opposite nature of liquidity opera- a jurisdiction's payments system by
cation containing the list of specific tions is in line with the revised liquidity ensuring that its users access safe digi-
instructions recommended for with- framework of the RBI, which suggests tal money. CBDCs will provide users
drawal is also being issued separately, that the liquidity adjustment facility with a sovereign option as compared
RBI added. (LAF) will move more towards longer- to other less safe digital instruments,
dated instruments, and short-term li- which may lead to less reliable pay-
RBI to focus all energies on quidity operations can be done to ments, relatively volatile store of value
smoothen out any liquidity mismatch. and potentially erode monetary and
accelerating recovery financial stability.
RBI Deputy Governor Michael Patra Proposed digital currency
said the central bank will focus all its Loans can be upgraded
energies on reviving the country's eco- by RBI to reduce the cost
nomic growth given that inflation's of cash from NPA to standard cat-
momentum is declining. The proposed Central Bank Digital Cur- egory only after repay-
"Our sense is that headline inflation has rency (CBDC) to be issued by the Re- ment of arrears: RBI
peaked in January and from hereon it serve Bank will play a critical role in Loan accounts can be upgraded from
will ease down to the target of 4% by improving the speed of transactions non-performing asset (NPA) to stan-
the last quarter of 2022," he said at the and reducing the cost of cash, a dard asset category only upon repay-
Asia Economic Dialogue, adding, "This Deloitte report said. ment of entire arrears of interest and
has provided us the space to maintain The Reserve Bank of India is planning principal pertaining to all credit facili-
policy rates low and persevere with an to come out with a central bank- ties in the case of borrowers having
accommodative stance so that we can backed digital currency, using more than one credit facility from a
focus all energies on accelerating and blockchain technology in 2022-23. lending institution, according to the
broadening the recovery." As a financial services innovation, Reserve Bank of India (RBI).
Meanwhile, Patra said the RBI's views CBDCs are likely to play a pivotal role This is according to the RBI's clarification
about cryptocurrencies might have in shaping the 'future of value transfer', on its November 2021 circular on 'Pru-

BANKING FINANCE | APRIL | 2022 | 9