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RBI will issue revised guidelines for RRBs to promote digital banking

Regulations will be extended to offline Payment Aggregators

RBI will issue revised guidelines for RRBs to promote digital banking

RBI Governor Shaktikanta Das said on Friday that Regional Rural Banks (RRBs) are currently allowed to provide internet banking facilities to their customers, subject to fulfilment of certain criteria. Keeping in view the need to promote the spread of digital banking in rural areas, these criteria are being rationalised. The revised guidelines will be issued separately.

While announcing the outcome of the 3-day deliberations of the Monetary Policy Committee (MPC), Das said that online payment aggregators (PAs) have been brought under the purview of RBI regulations since March 2020. It is now proposed to extend these regulations to offline PAs, who handle proximity/ face-to-face transactions. This measure is expected to bring in synergy in regulation covering activities and operations of PAs apart from convergence on standards of data collection and storage. Detailed instructions will be issued separately.

Additional Measures

Banks currently follow the incurred loss approach for provisioning on their loan assets, whereby provisions on loan assets are made after the stress has materialised. A more prudent and forward-looking approach is the expected loss-based approach, which requires banks to make provisions based on an assessment of probable losses. As a step towards converging with globally accepted prudential norms, the RBI will issue a discussion paper on the proposed transition for stakeholder comments, Das said.

Surplus Liquidity

Bank credit grew at an accelerated pace of 16.2% y/y as on September 9, 2022, as against 6.7% a year ago. The total flow of financial resources from banks and non-banks to the commercial sector has improved significantly to Rs 9.3 trillion in this financial year so far (up to September 9) from Rs 1.7 trillion in the corresponding period of last year. Surplus liquidity in the banking system, as reflected in average daily absorptions under the liquidity adjustment facility (LAF) (both SDF and variable rate reverse repo (VRRR) auctions), moderated to Rs 2.3 trillion during August – September 2022 (up to September 28) from Rs 3.8 trillion during June-July.

In view of the moderation in surplus liquidity, it has now been decided to merge the 28-day VRRR with the fortnightly 14-day main auction. Consequently, from now on, only 14-day VRRR auctions will be conducted.

The quantum of total market borrowings by the state governments/UTs for the quarter October-December 2022, is expected to be Rs 2.53 trillion. The limit for ways and means advances (WMA) for the second half of the financial year 2022-23 (October 2022 to March 2023) will be Rs 500 billion.

PR Newswire