Page 10 - Banking Finance February 2022

RBI CORNER

variable rate reverse repo (VRRR) auc- monetary policy is a fait accompli given not, without its prior approval, grant
tions in order to remove excess liquid- that the overnight call rates have or renew any loans and advances, or
ity from the banking system. It was surged past the rate the RBI provides make any investment.
widely expected that the RBI would be banks for parking their excess funds. If "In particular, a sum not exceeding Rs
announcing a three-day reverse repo the budget deficit numbers are more
1 lakh of the total balance across all
auction of Rs 2 trillion. than 6.5 percent of the GDP, then even
savings bank or current accounts or
the repo rate hike may be on the any other account of a depositor, may
RBI approval not needed table. be allowed to be withdrawn...", sub-
for property deals by NRIs The Reserve Bank of India's monetary ject to certain conditions, it added.
policy committee (MPC) which is ex-
The Reserve Bank of India (RBI) has The central bank, however, added the
pected to give its verdict on the rates
said that non-resident Indians (NRIs) directions should not per se be con-
in less than a fortnight on February 09,
and Overseas Citizens of India (OCIs) do will hold its meeting amidst waning strued as a cancellation of the banking
not require prior approval from the concerns over the impact of the rise in licence by the RBI.
central bank for acquisition and trans- Omicron infections on India's revival "The bank will continue to undertake
fer of immovable property. The central banking business with restrictions till
story and rising worries on retail infla-
bank's clarification comes in the wake further notification from RBI. The Re-
of the February 2021 Supreme Court tion levels crossing the upper end of the serve Bank may consider modifications
order, which said that any sale or gift mandated band of 2-6 per cent. of these Directions depending upon
of property by a foreigner without Given this backdrop the MPC is most circumstances," it noted.
prior permission from the RBI would certain to raise the benchmark policy
be invalid. rates. " With the Indian economy sus- The restrictions would remain in force
taining a strong recovery, the RBI will for six months and are subject to re-
The order had quoted Section 31 of
be more amenable to raising interest view.
the Foreign Exchange Regulation Act,
rates in response to the persistence of
1973. The court was dealing with a high inflation" said Prasanjeet Basu, RBI sets up fintech dept to
property that was transferred by the
widow of a foreigner and owner with- chief economist at ICICI Securities. "" focus on the fast-growing
out obtaining prior permission of the We expect the policy rate to rise by segment in India
50bp over the course of 2022?. The
RBI. The apex court had set aside a
repo rate the rate which the central The Reserve Bank of India (RBI) has set
Karnataka high court order.
bank lends is unchanged at 4 percent up an internal fintech department to
"The concerned Supreme Court judg- and the reverse repo rate the rate at focus on the dynamically changing fi-
ment dated February 26, 2021 in Civil which it borrows from banks is un- nancial landscape in the country. As per
Appeal 9546 of 2010 was related to changed at 3.35 per cent since May a recent internal RBI circular, the
provisions of FERA, 1973, which has 2020. fintech department was created on
been repealed under Section 49 of January 4, 2022.
FEMA, 1999," said the RBI in a press RBI imposes restrictions "With a view to give further focus to
release. "At present, NRIs/OCIs are
governed by provisions of FEMA 1999 on Indian Mercantile Co- the area and innovation in the fintech
and do not require prior approval of operative Bank Ltd sector in keeping pace with the dy-
namically changing landscape, it was
the RBI for acquisition and transfer of The Reserve Bank said it has imposed decided to set up a fintech department
immovable property in India, other several restrictions on Indian Mercan- in the bank," states the circular.
than agricultural land/farm house/plan-
tile Cooperative Bank Ltd, Lucknow,
tation property," the central bank said. The circular further states that the
including a cap of Rs 1 lakh on with-
new department will not only promote
drawals.
RBI may raise reverse repo innovation in the sector but also iden-
The restrictions came into force re- tify the challenges and opportunities
rates cently. In a statement, RBI said the associated with it and address them in
A reverse repo rate hike in the coming Lucknow-based co-operative bank will a timely manner.

10 | 2022 | FEBRUARY | BANKING FINANCE