Page 11 - Banking Finance February 2023

RBI CORNER

The RBI pointed out that in an earlier According to Rajan, while cash trans- functioning is critical for the uninter-
affidavit dated July 17, 2017, it had said actions are free, merchants do pay fees rupted availability of essential banking
that of the 23 recommendations of the to cash-management companies for services to the real economy.
Committee, it was in principle agree- handling of notes. He said several com-
Banks classified as D-SIBs are subjected
able to seven. panies have signed up for accepting
to additional common equity tier 1
payments in eRupees and these in-
It further said that recourse to the In- (CET1) capital requirements in addition
clude oil marketing companies, Reli-
solvency and Bankruptcy Code (IBC), to the capital conservation buffer. The
ance Retail and Natural Ice Cream.
2016, and the amended provisions of additional CET 1 requirement as a per-
the Banking Regulation Act, 1949, in- centage of Risk Weighted Assets for SBI
troduced through the Banking Regula- Reserve Bank floats paper stands at 0.6 per cent, and 0.20 per
tion (Amendment) Ordinance, 2017, cent each for ICICI and HDFC Bank, RBI
on credit-loss provisions
"enabled the Reserve Bank to effec- said.
The Reserve Bank of India (RBI) is
tively introduce measures to address
working on a set of guidelines for ex- The additional CET1 requirement for
the resolution of stressed assets".
pected credit-loss provisions for banks D-SIBs was phased-in from April 1,
2016 and became fully effective from
to align its rules with the global regu-
eRupee can't be turned
latory framework. April 1, 2019.
into cash directly, for now The RBI had issued the framework for
In a discussion paper released, the cen-
The central bank digital currency dealing with Domestic Systemically
tral bank said banks can have their own
(CBDC), or the eRupee, cannot be con- Important Banks in July 2014. It re-
models to measure expected credit-
verted currently into cash and vice quires to disclose the banks designated
loss provisions but must independently
versa. The RBIwill only issue eRupees as D-SIBs since 2015 and place them
verify them using sound reasoning and
against bank deposits and allow digital in buckets depending on Systemic Im-
relevant data available with the bank,
currency conversion into cash. portance Scores. The RBI had an-
besides carrying out a proper back-
According to the central bank, the testing to remove bias. nounced SBI and ICICI Bank as D-SIBs
in 2015 and 2016. As on March 31,
eRupee pilot project has progressed
However, RBI may still prescribe a
quite satisfactorily in a closed-user 2017, HDFC Bank was also classified as
threshold on the provisions on the ba-
a D-SIB. The current update is based
group and the number of users is
sis of comprehensive data analysis
gradually rising. Addressing an event at on bank data as on March 31, 2022,
even after a bank conducts an internal
the Indian Merchants' Chamber, Anuj the RBI said.
assessment. Currently, banks are man-
Ranjan, chief general manager at RBI's
dated to make loan loss provisions
fintech department, said the central based on incurred losses, which till re- RBI proposes expected
bank will bear costs relating to eRupee
cently, used to be the standard glo-
as it will be part of the RBI's liabilities loss-based approach for
bally. Under the system, banks would
just like currency.
provide for the losses incurred. provisioning by banks
Ajay Rajan, country head for transac- The Reserve Bank of India (RBI) pro-
tion banking at Yes Bank, said that the posed a framework for adoption of an
SBI, ICICI, HDFC Bank re-
bank has already made the digital 'expected loss-based' approach for pro-
wallet available for download on the main systemically impor- visioning by banks.
Apple App Store and Google Play
tant banks: RBI Presently, banks are required to make
Store. "The installation of the digital
The Reserve Bank of India (RBI) said loan loss provisions based on an 'in-
wallet can be done only by customers
State Bank of India, ICICI Bank and curred loss' approach, which used to
of the bank as we have restricted the
HDFC Bank continue to remain Domes- be the standard globally till recently.
app to SIM numbers that are regis-
tic Systemically Important Banks (D- "To further enhance the resilience of
tered with the bank. However, once it
SIBs). the banking system, Reserve Bank pro-
is installed, customers can add digital
rupees to the wallet from any bank," SIBs are perceived as ones that are poses to amend the prudential regula-
he said. 'Too Big To Fail' and their continued tions governing loan loss provisioning
10 | 2023 | FEBRUARY | BANKING FINANCE