Page 12 - Banking Finance February 2023

RBI CORNER

by banks to incorporate the more for- ward, can be an area for greater co- Crediwatch Information Analytics solu-
ward looking expected credit losses operation in future. In his speech, the tion 'Crediwatch EWS' is an early warn-
approach as against the extant 'in- governor highlighted the risks of high ing system for credit monitoring and
curred loss' approach," the RBI said in inflation and debt in the region. The fraud identification that looks at data
the discussion paper on expected loss IMF conference was on the current across public and private data sources
(EL)-based approach for loan loss pro- macroeconomic challenges faced by to uncover early signs of trouble for
visioning by banks. South Asia. commercial borrowers, per a central
bank statement.
The impact of adopting the forward "The other initiative, together with the
looking expected credit loss approach government, is the rupee settlement The product of enStage Software
to estimating loss provisions, is likely to of international trade. We are already (Wibmo)'s product 'Trident FRM' is a
result in excess provisions as compared in discussion with some of the countries risk-based authentication solution
to shortfall in provisions. in this region and to facilitate rupee aimed at providing frictionless (without
settlement of cross-border trade in the OTP) transaction experience for low
The key requirement under the pro-
South Asian region," Das said. value transactions based on risk assess-
posed framework shall be for the banks
ment of users, RBI said.
to classify financial assets (primarily "Multiple external shocks in the form
loans, including irrevocable loan com- of Covid-related global supply chain
mitments, and investments classified as disruptions, food and energy crisis fol- RBI to audit 9,500 NBFCs
held-to-maturity or available-for-sale) lowing the war in Ukraine, and finan-
to check on levels of com-
into one of the three categories - Stage cial market volatility arising from the
pliance
1, Stage 2, and Stage 3, depending upon aggressive monetary policy tightening
the assessed credit losses on them, at have exerted sustained price pressures The Reserve Bank of India (RBI) is likely
the time of initial recognition as well as in the South Asian economies," said to engage the services of external au-
on each subsequent reporting date and Das. He added that in the first three ditors to audit majority of the 9,500-
make necessary provisions. quarters of 2022, food price inflation odd non-banking finance companies
in South Asia averaged more than 20%. (NBFCs) to delve into their operations
As per the norms, banks will be allowed
and check whether their registered
to design and implement their own
models for measuring expected credit RBI opens sandbox to 6 office is at the place mentioned in
their application for registration,
losses for the purpose of estimating
firms to test anti-fraud so- among others.
loss provisions in line with the proposed
lutions
principles. Failure of certain NBFCs due to idiosyn-
The Reserve Bank of India has selected cratic factors and several digital lend-
India, neighbors in talks six entities, including Bahwan ers violating extant regulations and
Cybertek, Crediwatch Information guidelines on outsourcing and Fair
for cross-border Rs trade:
Analytics and HSBC, for the 'Test Practices Code may be the trigger the
RBI guv Phase' under regulatory sandbox for aforementioned audit, according to
the theme 'Prevention and Mitigation industry sources.
RBI governor Shaktikanta Das has said
of Financial Frauds'.
the central bank is in talks with South The RBI cancelled the certificate of
Asian countries for cross-border trade The selected entities will commence registration (CoR) of 3,110 NBFCs be-
in rupees. The RBI is also looking to testing of their products from February tween FY15 and FY22, with the larg-
reduce the cost of cross-border remit- 2023. est number of cancellations (1,851)
tances by linking them with the Unified being in FY19. As on October 1, 2022,
RBI said Bahwan Cybertek's solution
Payments Interface (UPI). the CoRs of 5,451 NBFCs were can-
'rt360 Real Time Monitoring System'
celled by the central bank.
Delivering the keynote address at the provides a comprehensive surveillance
IMF conference in Delhi, Das said that mechanism for monitoring transactions The proposed audit exercise could lead
the central bank digital currency and events from loan accounts on a to cancellation of CoRs of more NBFCs
(CBDC), where the RBI has moved for- continuous and real time basis. in FY24.

BANKING FINANCE | FEBRUARY | 2023 | 11