Page 11 - Banking Finance June 2021

RBI CORNER

Reserve Bank

News

RBI proposes removing companies, the regulatory focus has pending at various courts, you are
largely been on those registered as advised to preserve the CCTV
regulatory caps on interest NBFC-MFIs. recordings of operations at bank

for microlenders branches and currency chests for the
Microfinance institutions (MFIs) may get RBI asks banksto preserve period from November 08, 2016 to

freedom to set interest rates guided by CCTV footage from December 30, 2016 in a proper way,
a board-approved policy, under a Reserve till further orders," the RBI said in a
Bank of India (RBI) proposal to review demonetisation period notification to banks.
the regulatory framework governing The Reserve Bank of India directed
them. The proposal, if implemented, will banks to preserve the CCTV recordings Govt can consider Covid
end the existing regulatory cap on MFI of operations at bank branches and bonds for borrowings
interest rates. currency chests for the period from 8
The central bank can directly print
November to 30 December.
"Non-banking financial company money and finance the government,
(NBFC)-MFIs, like any other NBFC, shall The government had demonetised high but it should avoid doing so unless
be guided by a board-approved policy value currency notes of ?500 and there is absolutely no alternative,
and the fair practices code, whereby ?1000 on 8 November, 2016, with an former RBI governor D Subbarao said
disclosure and transparency would be aim to check black money. In the while pointing out that India is
ensured. There would be no ceiling process, the government had asked 'nowhere' near such a scenario. In an
prescribed for the interest rate. people to exchange or deposit the old interview , Subbarao suggested that
However, while doing so, they should notes with banks. Instead new note of to deal with the second wave of
ensure usurious interest rates are not Rs. 500 and Rs. 2000 were issued after COVID-19 induced slowdown in the
charged," RBI said in its Consultative the withdrawal of the old notes. economy, the government can
Document on Regulation of On the basis of various inputs, the consider Covid bonds as an option to
Microfinance. The idea is to harmonize investigative agencies started probing raise borrowing, not in addition to
regulations across categories of matters relating to illegal budgeted borrowing, but as a part of
microlenders. accumulation of new currency notes. In that.
RBI had on 5 February signalled the order to facilitate such investigations, "It (RBI) can (print money) but, it
need for a framework that is uniformly the RBI has asked the banks not to should avoid doing so unless there is
applicable to all regulated lenders in destroy the CCTV recordings of the absolutely no alternative. For sure,
the microfinance space. While the period of demonetisation till further there are times when monetisation -
microlending space has scheduled orders. "...keeping in view the despite its costs - becomes inevitable
commercial banks, small finance banks investigations pending with law such as when the government cannot
and NBFCs, investment and credit enforcement agencies, proceedings finance its deficit at reasonable rates.

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