Page 13 - Banking Finance May 2021

RBI CORNER

industry was never examined or unutilised External Commercial the applications thereafter and that
considered for a fresh look. "The major Borrowing (ECB) proceeds drawn down the constitution of the SEAC will be
issue is that what is the future, and before March 1, 2020, can be parked announced by RBI.
business model for ARCs? Initially, it in term deposits with banks in India
was a fee-based business model, slowly prospectively up to March 1, 2022, in RBI reveals names of
it is becoming fund-based business a relief to borrowers who could not
model," Bansal added. utilise the proceeds due to lockdown. applicants for universal
Under the extant ECB framework, bank & SFB licences
Market participants are also expecting
more clarity on ARC regulations from borrowers are allowed to place ECB RBI has recently announced the names
RBI. proceeds in term deposits with banks of applicants under its on-tap licensing
in India for a maximum period of 12 window for universal banks and Small
months.
RBI amends its inflation- Finance Banks (SFBs).
RBI, in its statement on developmental
forecasting model and regulatory policies, said, "In view Applicants under guidelines for on-tap
RBI has recently said that it has of the difficulty faced by borrowers in licensing of universal banks are
Repatriates Cooperative Finance and
revised its inflation-forecasting model utilising already drawn down ECBs due Development Bank (Repco Bank), UAE
to better capture how fiscal and to COVID-19 pandemic induced Exchange and Financial Services,
monetary policy interact with real- lockdown and restrictions, it has been Chaitanya India Fin Credit, and Pankaj
economy elements. decided to relax the above stipulation Vaish and others. Applicants seeking
RBI, in its latest bi-annual monetary as a one-time measure, with a view to licences for SFBs are Calicut City
policy report, stated that the provide relief." Service Co-operative Bank, VSoft
adjustments incorporate fiscal- Technologies, Akhil Kumar Gupta, and
monetary dynamics, India's unique and RBI sets up external Dvara Kshetriya Gramin Financial
often chaotic fuel pricing regime, and advisory team to screen Services.
exchange-rate fluctuations and their on tap bank licenses The universal bank licensing guidelines
impact on balance of payments.
RBI has recently announced the state that resident individuals and
Dubbed as the Quarterly Projection setting up of a Standing External professionals having 10 years of
Model 2.0, the economists of RBI experience in banking and finance at
Advisory Committee (SEAC) to evaluate
describe the framework as a forward- a senior level are eligible to promote
applications for universal banks and
looking, open economy, calibrated, small finance banks. universal banks. Large industrial
new-Keynesian gap model. houses are excluded as eligible entities
The SEAC which will have a tenure of
The amendments came just days after but are permitted to invest in the
three years, and will screen
the RBI won approval from the banks up to 10%. Non-Operative
applications for universal and small
government to retain its 2%-6% finance banks after the regulator first Financial Holding Company (NOFHC)
inflation target range for the next 5 vets the proposal. The five-member has been made non-mandatory in case
years. It didn't offer a comparison of promoters being individuals or
committee will be headed by former
between inflation rates predicted standalone promoting/converting
deputy governor Shyamala Gopinath. entities who/which do not have other
under the previous model and the new
RBI said, "The applications for group entities.
one, but stated its tools helped it keep
inflation anchored around the 4% Universal Banks and Small Finance For SFBs, the minimum paid-up voting
midpoint on average in the past 5 Banks will be initially screened by the equity capital / net worth requirement
years. Reserve Bank to ensure prima facie shall be Rs. 200 crore. For primary
eligibility of the applicants."
(urban) co-operative banks (UCBs)
RBI provides relief to ECB It was also stated that a SEAC desirous of voluntarily transiting into
comprising eminent persons with SFBs, the initial net worth requirement
borrowers experience in banking, financial sector shall be at Rs. 100 crore, which will
RBI has recently stated that the and other relevant areas, will evaluate have to be increased to Rs. 200 crore

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