LATEST NEWS IN THE WORLD OF BANKS IN INDIA
UNIFIED LENDING INTERFACE :
Dated 26.08.2024 ; In an inaugural Address by Shri Shaktikanta Das, Governor, Reserve Bank of India at the Global Conference on “Digital Public Infrastructure and Emerging Technologies”, on August 26, 2024, Bengaluru , the launch of a new digital initiative of RBI was announced .
He said " Continuing on this journey of digitalisation of banking services, last year RBI had launched the pilot of a technology platform which enables frictionless credit. RBI proposes to call it the Unified Lending Interface (ULI). " This platform facilitates consent based flow of digital information, including even land records of various states, from multiple data service providers to lenders. This cuts down the time taken for credit appraisal, especially for smaller and rural borrowers. The ULI architecture will have common and standardised APIs, designed for a 'plug and play' approach to ensure digital access to information from diverse sources. It is expected that borrowers would get the benefit of seamless delivery of credit, quicker turnaround time without requiring extensive documentation.
ULI is expected to cater to large unmet demand for credit across various sectors, particularly for agricultural and MSME borrowers. Based on the experience from the pilot project, a nation-wide launch of the ULI will be done in due course. Just like UPI transformed the payments ecosystem, RBI expects that ULI will play a similar role in transforming the lending space in India.
To go through the entire speech , CLICK HERE
BANK DEPOSITS ARE GROWING : SBI RESEARCH
Dated 22.08.2024 : In a recent research paper published , State bank of India dismisses the fear of slowing down of deposit growth in Indian Banks . The research paper reveals
In FY23, ASCBs registered the highest amount of absolute growth in deposits and credit since 1951-52. Deposits grew by Rs 15.7 lakh crore and credit by Rs 17.8 lakh crore, which pushed the incremental CD Ratio to 113%. The story continued in FY24 (deposits grew by Rs 24.3 lakh crore and credit by Rs 27.5 lakh crore) .
PSBs are at the forefront of mobilizing low ticket deposits across the banking spectrum....The average ticket size of SB/Term deposits of Public Sector Banks comes to Rs 72,577... as against Rs 1.60 lakhs of Private Sector Banks and Rs 10.5 lakhs for Foreign Banks...PSBs are also more active in RUSU region...this has also helped deposits by women jump as a mass movement across the banking sector...the SHG linkage is becoming more pronounced .
47% of term deposits are now held by Senior Citizens, implying younger cohort is increasingly shying away from traditional avenues like bank deposits... in contrast, median age of all investors in capital markets is now 32 years with ~40% of investors being less than 30 years.. Clearly, in line with MF/equity markets, we are of the considered opinion that Government should tweak the ‘tax on interest on deposits and delink tax treatment at the highest income bucket....and tax treatment should be at redemption and not at accrual basis for bank depositors....
The share of RURAL & URBAN areas in deposits has almost remain flat at ~10% and ~21% respectively during FY14-FY24, while the share of SEMI-URBAN in total deposits has increased to 15.7% in FY24 from 14.3% in FY14...The trend clearly indicate a compositional shift of deposits from Metro to Semi-urban areas, which may be due to the migration of people to Metro from Semi-Urban areas
On a global comparison, Indian Banks are resilient with clear focus on stable retail deposits as opposed to wholesale deposits globally....this makes it imperative to have a fair and differential tax treatment of retail deposits as opposed to other geographies....Deciphering ITR returns data, the distribution is more evenly scattered for interest income implying bank deposits benefitting a larger cross section of society across tiers .
To read the research paper , CLICK HERE
For the latest Fixed Deposits rates of PRIVATE SECTOR banks in India , CLICK HERE
For the latest Fixed Deposits rates of PUBLIC SECTOR banks in India , CLICK HERE
RBI'S LATEST MOVES :
Dated 08.08.2024 : The Governor of Reserve Bank of India Mr Shri Shaktikanta Das announced following new moves of RBI today :
1. Public Repository of Digital Lending Apps :
The Reserve Bank has taken several measures for the orderly development of the digital lending ecosystem in India. As a further measure in this direction and to address the problems arising from unauthorised digital lending apps (DLAs), the Reserve Bank proposes to create a public repository of DLAs deployed by its regulated entities. The regulated entities (REs) will report and update information about their DLAs in this repository. This measure will help the consumers to identify the unauthorised lending apps. Frequency of Reporting of Credit Information to Credit Information Companies
The availability of accurate credit information is vital for both lenders and borrowers. At present, lenders are required to report credit information to credit information companies (CICs) on a monthly basis or at such shorter intervals as may be agreed between the lenders and the CICs. It is proposed to increase the frequency of reporting of credit information to a fortnightly basis or at shorter intervals. Consequently, borrowers will benefit from faster updation of their credit information, especially when they repay their loans. The lenders, on their part, will be able to make better risk assessment of borrowers.
2. Enhancing Transaction Limit for Tax Payments through UPI
Currently, the transaction limit for UPI is ₹1 lakh except for certain category of payments which have higher transaction limits. It has now been decided to enhance the limit for tax payments through UPI from ₹1 lakh to ₹5 lakh per transaction. This will further ease tax payments by consumers through UPI.
3 . Introduction of ‘Delegated Payments’ through UPI
It is proposed to introduce a facility of "Delegated Payments" in UPI. This would enable an individual (primary user) to allow another individual (secondary user) to make UPI transactions up to a limit from the primary user’s bank account without the need for the secondary user to have a separate bank account linked to UPI. This will further deepen the reach and usage of digital payments.
4. Continuous Clearing of Cheques
. At present, cheque clearing through Cheque Truncation System (CTS) operates in a batch processing mode and has a clearing cycle of up to two working days. It is proposed to reduce the clearing cycle by introducing continuous clearing with 'on-realisation-settlement’ in CTS. This means that cheques will be cleared within a few hours on the day of presentation. This will speed up cheque payments and benefit both the payer and the payee.
To read the Governor's statement with this regard , CLICK HERE
CHARGING OF INTEREST : RBI warns against unfair practices
Dated 01.05.2024 : RBI had issued Fair practices code in 2003 where they had advocated banks for fairness and transparency in charging of interest .
Now recently the Reserve Bank has come across instances of lenders resorting to various unfair practices in charging of interest. Some of the unfair practices observed by them are :
Charging of interest from the date of sanction of loan or date of execution of loan agreement and not from the date of actual disbursement of the funds to the customer. Similarly, in the case of loans being disbursed by cheque, instances were observed where interest was charged from the date of the cheque whereas the cheque was handed over to the customer several days later.
In the case of disbursal or repayment of loans during the course of the month, some lending banks / entities were charging interest for the entire month, rather than charging interest only for the period for which the loan was outstanding.
In some cases, it was observed that the lenders were collecting one or more instalments in advance but reckoning the full loan amount for charging interest.
RBI finds that such non-standard practices of charging interest are not fair to the bank customers. Therefore, in the interest of fairness and transparency, RBI has directed all banks to review their practices regarding mode of disbursal of loans, application of interest and other charges and take corrective action, including system level changes, as may be necessary, to address the issues highlighted above.
To read RBI Notification dated 26.04.2024 , CLICK HERE
Kotak Mahindra Bank barred from issuing credit cards , No new on-line customers
Dated 24.04.2024 : The Reserve Bank of India has today, in exercise of its powers under Section 35A of the Banking Regulation Act, 1949, directed Kotak Mahindra Bank Limited to cease and desist, with immediate effect, from (i) onboarding of new customers through its online and mobile banking channels and (ii) issuing fresh credit cards. The bank can continue to provide services to its existing customers, including its credit card customers.
RBI has given the following reasons for its actions :
" These actions are necessitated based on significant concerns arising out of Reserve Bank’s IT Examination of the bank for the years 2022 and 2023 and the continued failure on part of the bank to address these concerns in a comprehensive and timely manner. Serious deficiencies and non-compliances were observed in the areas of IT inventory management, patch and change management, user access management, vendor risk management, data security and data leak prevention strategy, business continuity and disaster recovery rigour and drill, etc. For two consecutive years, the bank was assessed to be deficient in its IT Risk and Information Security Governance, contrary to requirements under Regulatory guidelines. During the subsequent assessments, the bank was found to be significantly non-compliant with the Corrective Action Plans issued by the Reserve Bank for the years 2022 and 2023, as the compliances submitted by the bank were found to be either inadequate, incorrect or not sustained.
In the absence of a robust IT infrastructure and IT Risk Management framework, the bank’s Core Banking System (CBS) and its online and digital banking channels have suffered frequent and significant outages in the last two years, the recent one being a service disruption on April 15, 2024, resulting in serious customer inconveniences. The bank is found to be materially deficient in building necessary operational resilience on account of its failure to build IT systems and controls commensurate with its growth.
In the past two years, the Reserve Bank has been in continuous high-level engagement with the bank on all these concerns with a view to strengthening its IT resilience, but the outcomes have been far from satisfactory. It is also observed that, of late, there has been rapid growth in the volume of the bank’s digital transactions, including transactions pertaining to credit cards, which is building further load on the IT systems.
The Reserve Bank, therefore, has decided to place certain business restrictions on the bank as mentioned above, in the interest of customers and to prevent any possible prolonged outage which may seriously impact not only the bank’s ability to render efficient customer service but also the financial ecosystem of digital banking and payment systems.
The restrictions now being imposed will be reviewed upon completion of a comprehensive external audit to be commissioned by the bank with the prior approval of RBI, and remediation of all deficiencies that may be pointed out in the external audit as well as the observations contained in the RBI Inspections, to the satisfaction of the Reserve Bank. Further, these restrictions are without prejudice to any other regulatory, supervisory or enforcement action that may be initiated against the bank by the Reserve Bank. "
TNo read RBI Press release , CLICK HERE
CASH DEPOSITS THROUGH UPI APP :
Dated 06.04.2024 : RBI Governor announced yesterday that Reserve bank of India ( RBI ) would facilitate the use of UPI app for depositing cash in Cash Deposit Machines (CDMs) of the banks .
CDMs are deployed by banks enhance customer convenience while reducing cash-handling load on bank branches. The facility of cash deposit is presently available only through use of debit cards. Given the popularity and acceptance of UPI, as also the benefits seen from the availability of UPI for card-less cash withdrawal at ATMs, it is now proposed to facilitate cash deposit facility through use of UPI. .
The operational instructions to the banks will be issued shortly .
Penal Charges in Loan Accounts - Timeline extended :
Dated 03.01.2024 : In August 2023 , RBI had issued fresh guidelines on levying of charges and interest by the banks on loan accounts and te guidelines were to be implemented by the banks on 1st, January 2024 . Now RBI has extended the timeline and the guidelines are to be implemented from 1st , April 2024 .
The key guidelines are :
1. Penalty, if charged, for non-compliance of material terms and conditions of loan contract by the borrower shall be treated as ‘penal charges’ and shall not be levied in the form of ‘penal interest’ that is added to the rate of interest charged on the advances. There shall be no capitalisation of penal charges i.e., no further interest computed on such charges. However, this will not affect the normal procedures for compounding of interest in the loan account.
2. Banks shall not introduce any additional component to the rate of interest and ensure compliance to these guidelines in both letter and spirit.
3. The quantum of penal charges shall be reasonable and commensurate with the non-compliance of material terms and conditions of loan contract without being discriminatory within a particular loan / product category.
4. The penal charges in case of loans sanctioned to ‘individual borrowers, for purposes other than business’, shall not be higher than the penal charges applicable to non-individual borrowers for similar non-compliance of material terms and conditions.
5. The quantum and reason for penal charges shall be clearly disclosed by banks to the customers in the loan agreement and most important terms & conditions / Key Fact Statement (KFS) as applicable, in addition to being displayed on bank's website under Interest rates and Service Charges.
6. Whenever reminders for non-compliance of material terms and conditions of loan are sent to borrowers, the applicable penal charges shall be communicated. Further, any instance of levy of penal charges and the reason therefor shall also be communicated.
7. The above guidelines are not applicable to credit cards
Reference : RBI NOTIFICATION DATED 29.12.2023
Inoperative Accounts /Unclaimed Deposits in Banks- Revised Instructions
Dated 02.01.2024 : Presently the credit balance in any deposit account maintained with banks, which have not been operated upon for ten years or more, or any amount remaining unclaimed for ten years or more, are required to be transferred by banks to DEA Fund maintained by the Reserve Bank of India as per “Depositor Education and Awareness” (DEA) Fund Scheme, 2014"
Now RBI has reviewed the scheme and it has issued comprehensive guidelines on the measures to be put in place by the banks covering various aspects of classifying accounts and deposits as inoperative accounts and unclaimed deposits, as the case may be, periodic review of such accounts and deposits, measures to prevent fraud in such accounts/deposits, grievance redressal mechanism for expeditious resolution of complaints, steps to be taken for tracing the customers of inoperative accounts/ unclaimed deposits including their nominees/ legal heirs for re-activation of accounts, settlement of claims or closure and the process to be followed by them. These instructions (provided in the Annex) are expected to complement the ongoing efforts and initiatives taken by banks and the Reserve Bank, to reduce the quantum of unclaimed deposits in the banking system and return such deposits to their rightful owners/ claimants.
Some of the operational guidelines given to the banks by RBI are
For activation of accounts :
6.1 The banks shall make available the facility of updation of KYC for activation of inoperative accounts/ unclaimed deposits at all branches (including non-home branches) and through Video-Customer Identification Process (V-CIP) if requested by the account holder, subject to the facility of V-CIP being provided by the bank. The V-CIP related instructions under Master Direction - Know Your Customer (KYC) Direction, 2016 dated February 25, 2016 (as updated from time to time) shall be adhered to by the bank.
6.2 The banks shall activate the inoperative accounts/ unclaimed deposits, including those which are under freeze by orders of various agencies like Courts, Tribunals, Law Enforcement Agencies, only after adhering to the KYC guidelines provided in the Master Direction - Know Your Customer (KYC) Direction, 2016 dated February 25, 2016 (as updated from time to time) such as Customer Due Diligence (CDD), customer identification, risk categorisation, etc.
6.3 The banks shall ensure that activation of inoperative account/ unclaimed deposits in CBS necessarily requires second level of authorisation by another officer at the same or higher level (i.e., through maker and checker). System logs shall invariably be maintained in case of any activity in or activation of inoperative accounts/unclaimed deposits for concurrent audit purpose. The preservation period of such system logs shall be as per the internal guidelines of the bank.
6.4 The bank shall automatically intimate the inoperative account/ unclaimed deposit holders though SMS and registered email stating that on the basis of the KYC documents submitted by them, the inoperative status of the account has been removed. The intimation shall also mention the remedial measures available to them to report unauthorised access, if any. This would alert the account/ unclaimed deposit holder against any possible fraudulent activity in his/her inoperative account. The banks shall have in place adequate operational safeguards to ensure that the claimants in case of inoperative accounts/ unclaimed deposits are genuine. The banks shall process requests for activation of inoperative account/ unclaimed deposits within three working days from the receipt of the complete application.
7. Payment of Interest
Interest on savings accounts shall be credited on a regular basis irrespective of the fact that the account is in operation or not.
8. Levy of Charges
8.1 The banks are not permitted to levy penal charges for non-maintenance of minimum balances in any account that is classified as an inoperative account.
8.2 No charges shall be levied for activation of inoperative accounts.
9. Display of Unclaimed Deposits and Search Facility
Banks shall host the details of unclaimed deposits {only name, address (without pin code) and Unclaimed Deposit Reference Number (UDRN)}, which have been transferred to DEA Fund of RBI on their respective websites, which shall be updated regularly, at least on a monthly basis. The banks, which do not have their own websites shall make available the above list of unclaimed deposits in their respective branches. The database hosted on the website shall provide a search option to enable the public to search for their unclaimed deposits using name in combination with the address of the account holder/ entity. Upon a successful search, details of unclaimed deposits shall be displayed in a format comprising account holder’s name(s), his/her address (without pincode) and UDRN only. In case such accounts are not in the name of individuals, the search input and result should include names of individuals authorised to operate the accounts. However, the account number, its type, outstanding balance and the name of the branch shall not be disclosed on the bank’s website.
10. Fraud Risk Management in Inoperative Accounts
10.1 The banks shall not allow any debit transaction in an inoperative account unless there is a customer induced activation as per the procedure mentioned in paragraph 6 of these guidelines. Further, banks may also consider imposing a cooling-off period on reactivation, with restrictions on the number and amount of transactions, as may be applicable for newly opened accounts with the bank.
10.2 The banks shall ensure that there is no unauthorised access to customer data pertaining to the inoperative accounts. The banks shall also ensure that adequate steps are taken to prevent data theft and related misuse for fraudulent purposes.
NON-CALLABLE DEPOSIT - MINIMUM DEPOSIT AMOUNT RAISED
Dated 27.10.2023 : So far banks could take non-callable deposits from the public on a deposit amount of Rs 15 lakhs or more . Non-callable deposits fetch higher rate of interest while premature closure is not allowed .
Now , as per notification issued by Reserve Bank of India ( RBI ) . banks will not be able to receive such deposits for an amount less than Rupees one crore . The minimum amount for offering non-callable TDs is increased from Rupees fifteen lakh to Rupees one crore i.e., all domestic term deposits accepted from individuals for amount of Rupees one crore and below shall have premature-withdrawal-facility . The instruction is also applicable for Non-Resident (External) Rupee (NRE) Deposit / Ordinary Non-Resident (NRO) Deposits. .
To read RBI NOTIFICATION DATED 26.10.2023 , CLICK HERE