Regulatory Body Releases

RBI | SEBI | NABARD | PFRDA | IRDAI

October, 2022

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 RBI cuts FY23 GDP forecast cut to 7%
● Inflation target retained at 6.7%
● The six-member Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI)
on Friday decided to increase the policy repo rate by 50 basis points (bps) to 5.9 per
cent.
● The GDP grew by 13.5 per cent year-on-year in the first quarter.

Our household savings are moving towards normalcy

● The Reserve Bank of India (RBI) recently released data on Indian
household savings for 2021-22.
● At the end of March 2022, household gross financial savings stood at
10.8% of gross domestic product (GDP). A decline of over 5% points from
a year earlier, when that figure peaked at 16% of GDP.
● Pandemic spending reduction, partly forced by lockdowns and an increase
in precautionary savings, had led to an upsurge in 2020-21.
● Pre-pandemic trend of around 12% of GDP, expected this year.
Retirement Fund
● The contribution of retirement and pension funds has more than doubled
over the previous decade, as the economy formalized.
● Net addition to the count of employee provident fund (EPF) subscribers
was 13.8 million compared to around 9.5 million the previous two years.
● Households have also been saving more in post office schemes, including
national savings certificates, Kisan Vikas Patra and senior citizens’ saving
schemes. (higher interest than term deposits)
● Cash holdings by households was at 1.1% of GDP in 2021-22, declining
from 1.9% in 2020-21.
● Despite a surge in demat accounts since the pandemic, enabling people to
hold securities in digital form and trade shares in the share market, the
risky investments of households remain lower than their peak in 2016-17.
● Investments in MFs were less than one-fifth the stock of household bank
deposits, as of end-2021-22.

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 RBI Governor Das launches advanced supervisory monitoring system
DAKSH
● SupTech' initiative DAKSH - the bank's Advanced Supervisory
Monitoring System, which is expected to make the supervisory
processes more robust.
● DAKSH means 'efficient' and 'competent', reflecting the
underlying capabilities of the application
● leveraging technology for implementing more efficient and
automated work processes
● "DAKSH is a web-based end-to-end workflow application
through which RBI shall monitor compliance requirements in a
more focused manner with the objective of further improving the
compliance culture in Supervised Entities (SEs) like Banks,
NBFCs, etc,"
● enable seamless communication, inspection planning and
execution, cyber incident reporting and analysis

RBI charts plan for e-rupee’s pilot launch

● For Limited use
● RBI is considering implementing an account-based central bank digital
currency (CBDC) for the wholesale segment and token-based currency for
the retail sector.
● Ensuring transparency and low cost of operation
● Major central banks, including the US and China, are experimenting with
digital money
● Issued and backed by RBI
What is e-RUPI?
NPCI in association with Department of Financial Services (DFS), National
Health Authority (NHA), Ministry of Health and Family Welfare (MoHFW), and
partner banks
The users of this seamless one-time payment mechanism will be able to redeem
the voucher without a card, digital payments app or internet banking access, at
the merchants accepting e-RUPI. e-RUPI would be shared with the beneficiaries
for a specific purpose or activity by organizations or Government via SMS or QR
code.
Safe and secure as it keeps the details of the beneficiaries completely
confidential.

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 RBI data: No material impact of rate hike on home loan demand

● The home loan outstanding of banks almost doubled to Rs 16.85 lakh crore in the last
five years, shows Reserve Bank data.

● In the first five months of the current fiscal (April- Aug 2022), home loan outstanding of
banks has clocked double-digit growth (increase by 140 bps)

● People are becoming increasingly aware that interest rates would move up and down
during the life cycle of a loan, which is typically for around 15 years.

RBI cancels licence of Pune-based Seva Vikas Co-op

The lender does not have adequate capital and earning prospects. The bank ceases to carry
on banking business, with effect from the close of business on 10 October.

RBI regulates use of credit ratings

● Unless rating agencies disclose names of all lenders in their rating statements, banks
cannot use such ratings.
● The new mandatory loan rating disclosures will be effective from 31 March 2023.
● RBI had asked rating agencies to disclose the name of all the banks in the credit rating
statements after getting the consent from borrowers from 31 August 2021.
● A bank loan rating without the above disclosure by the rating agency shall not be
eligible for being reckoned for capital computation by banks. Therefore shall apply risk
weights of 100 percent or 150 percent as applicable.

RBI allows asset reconstruction companies to submit resolution plans

under IBC ~[UPDATED]
● To act as Resolution Applicants under the Insolvency and Bankruptcy Code (IBC).
● The existing companies need to have a minimum net owned fund of ₹1000 crore and
a board-approved policy.
● This permission shall be subject to the following conditions:
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 (i) The ARC has a minimum NOF of ₹1,000 crore.
(ii) The ARC shall have a Board-approved policy regarding taking up the role of RA.
(iii) A committee composed of a majority of independent directors shall be
constituted to take decisions on the proposals of submission of resolution plan under
IBC.
(iv)The ARC shall explore the possibility of preparing a panel of sector-specific
management firms/ individuals having expertise in running firms/ companies which
may be considered for managing the firms/ companies, if needed.
(v) In respect of a specific corporate insolvency resolution process (CIRP), the ARCs
shall not retain any significant influence or control over the corporate debtor after five
years from the date of approval of the resolution plan by the Adjudicating Authority
under IBC.
(vi)The ARC shall make additional disclosures in the financial statements with
respect to assets acquired under IBC in addition to the existing disclosure requirements.
(vii) The ARC shall disclose the implementation status of the resolution plans
approved by the Adjudicating Authority on a quarterly basis in their financial statements.

MDs, CEOs of ARCs can’t have more than three terms in office - RBI
~[UPDATED]

● Managing Directors (MDs) and

Chief Executive Officers (CEOs)
of Asset Reconstruction
Companies (ARCs) cannot
have more than three terms in
office, with each term not
exceeding five years.
● Cooling-off period of three years.
● the retirement age of CEOs has
been brought on a level pegging
with CEOs of private banks,
which is 70 years.
● ARCs have been allowed to become resolution applicants (RAs) in bankruptcy
proceedings under SARFAESI Act —
● Now they can bid for assets in Insolvency and Bankruptcy Code (IBC) cases.

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 RBI said-

● Chair of the ARC’s board should be an independent director.

● The quorum for board meetings shall be one third of the total strength of the board
or three directors, whichever is higher.
● At least half of the directors attending the meetings of the board shall be
independent directors.
● The board of ARCs should have an audit committee and a nomination remuneration
committee.

I. Audit Committee:
A. ARCs shall constitute an Audit Committee of the Board, which shall comprise of
non-executive directors only.
B. The Chair of the Board shall not be a member of the Audit Committee.
C. The Audit Committee shall meet at least once in a quarter with a quorum of
three members.
D. The meetings of the Audit Committee shall be chaired by an independent director
who shall not chair any other committee of the Board.
E. At least one member should have requisite professional expertise/ qualification in
financial accounting or financial management.
F. The Audit Committee shall have the same powers, functions and duties as laid
down in Section 177 of the Companies Act, 2013.
G. In addition, the Audit Committee shall periodically review and assess the
effectiveness of internal control systems, especially with respect to the asset
acquisition procedures and asset reconstruction measures followed by the ARC
and matters related thereto.
H. The Audit Committee shall also ensure that accounting of management fee/
incentives/ expenses is in compliance with the applicable regulations

II. Nomination and Remuneration Committee:

A. ARCs shall constitute a Nomination and Remuneration Committee of the Board,
which shall have the same powers, functions and duties as laid down in Section
178 of the Companies Act, 2013.

● Given six months to comply

● CEO appointments will need prior RBI approval.
● Requirement of net-owned funds (NOFs) for new ARCs has been increased to ~300
crore, from ~100 crore.

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 ● The minimum NOF ~200 crore by March 2024 and to ~300 crore by March 2026.

● Enhanced Disclosures In order to enable ARCs to garner investments from a broader

set of Qualified Buyers (QBs) and foster healthy competition among ARCs, the following
additional disclosures shall be made in the offer document:
(i) Summary of financial information of the ARC for last 5 years or since commencement
of business of the ARC, whichever is shorter.
(ii) Track record of returns generated for all Security Receipt (SR) investors on the schemes
floated in the last 8 years.
(iii) Track record of recovery rating migration and engagement with rating agencies of
schemes floated in the last 8 years.
● Engagement with Credit Rating Agencies (CRAs) and Rating of SRs
(i) ARCs shall mandatorily obtain recovery rating of the SRs from CRAs and disclose the
assumptions and rationale behind such rating to SR holders.
(ii) ARCs shall retain a CRA for at least 6 rating cycles (of half year each).
(iii) If a CRA is changed mid-way through these 6 rating cycles, the ARC shall disclose the
reason for such change.

RBI allows SPDs to offer foreign exchange market facilities

● RBI on Tuesday allowed standalone primary dealers (SPDs) such as NBFCs etc to
offer all foreign exchange market-making facilities to users, a move aimed at providing
broader facilities to customers for currency risk management.
● Currently, there are seven SPDs and 14 bank primary dealers in the country.
● At present, SPDs are permitted to undertake foreign currency business for limited
purposes.
● Also be permitted to take up trading and self-clearing membership with Sebi-approved
stock exchanges.

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 Inter-regulatory push for the sandbox initiative

● Domestic regulators Sebi, RBI, IRDAI, IFSCA and PFRDA have come together to allow
an inter-operable regulatory sandbox
● A regulatory sandbox is a framework that allows live experiments in a controlled
environment under a regulator's supervision.
● a Standard Operating Procedure (SOP) for IoRS has been prepared by the
Inter-Regulatory Technical Group on FinTech.
● The regulatory sandbox (RS) framework of the regulator, under whose remit the
'dominant feature' of the product falls, governs it as 'Principal Regulator (PR).
● Dominant feature will be determined on the basis of number of relaxations needed.
● The Fintech department of the RBI will act as a nodal point for receiving applications
under this initiative.

Sebi mandates tighter disclosure norms for IPOs Allows pre-filing of

IPO documents
● To bring transparency and rationality to issue pricing.
● Besides traditional metrics, companies will now have to disclose key
performance indicators (KPIs) that are normally not covered in their financial
statements
● issuers will have to disclose the details of pricing of shares for transactions
carried out ahead of the listing.
● Other reforms→
1. Bringing mutual fund (MF) units under the ambit of insider trading
2. Allowing companies to make confidential IPO filings, and
3. Relaxing the offer for sale (OFS) mechanism.

● Key managerial persons at MFs will be covered under the prohibition of insider
trading (PIT) regulations.
● Confidential or pre-filing of IPO documents. Under this, a company’s draft red
herring prospectus (DRHP), which has a lot of confidential information, will be
kept out of the bounds of the public until the company decides to launch an IPO.

● The Sebi board also introduced a new optional framework for the appointment
and removal of independent directors. Currently, a special resolution, which

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 requires 75 per cent of ‘yes’ votes, is needed to appoint or remove an
independent director.
● Sebi reduced the minimum holding requirement of REIT units by sponsors from
25 per cent to 15 per cent.
● Companies will now have to appoint a rating agency to monitor utilisation of
funds raised via the qualified institutional placement (QIP) route. The rule will
be applicable to companies raising more than Rs 100 crore.

Sebi cancels Brickwork’s licence, orders wind-up by Apr

● Toughest regulatory action against any credit rating firm.

● Bengaluru-based company promoted by Canara Bank.
● Brickwork claims on its website that it has rated over 102 issuers
including PSUs.
● Sebi and the Reserve Bank of India (RBI) conducted a joint audit of
the rating agency in January 2020
● successive lapses in the ratings of several issuers, including
Welspun, IDFC First, Adani Rail, Coffee Day Enterprises
● major lapse at the agency where some rating advisers promised
favourable ratings

BSE gets SEBI nod for social stock exchange as separate segment.
● For introducing SSE as a separate segment on BSE
● In July, the regulator notified rules for the Social Stock Exchange
(SSE) to provide social enterprises with an additional avenue to raise
funds.
● Social enterprises (SEs) eligible to participate in the SSE will be entities,
non-profit organisations (NPOs) and for-profit social enterprises.
● Idea of SSE was first floated by Finance Minister Nirmala Sitharaman in
her Budget speech for the financial year 2019-20.
● NPO needs to be registered as a charitable trust and should be registered
for at least three years, must have spent at least ₹50 lakh annually in the
past financial year and should have received a funding of at least ₹10 lakh
in the past financial year.

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 Ananth Gopalakrishnan assumes charge as Whole Time Member of SEBI

Former banker Ananth Narayan Gopalakrishnan took charge as the fourth whole time
member (WTM) of the Sebi on Monday

Increased number of Sebi orders face legal scrutiny

● Increase in the number of cases filed with Securities Appellate Tribunal (SAT) and the
Supreme Court in FY22.
● The top court said Sebi had the power to investigate if the trustees acted due to
extraneous and irrelevant reasons and consideration, in violation of the regulations
● According to Sebi, while the number of cases filed with the tribunal stood at
780 in FY22,
In FY21 545 cases were filed.

Standard Operating Procedure for Inter-operable Regulatory Sandbox -

SEBI
● An Inter-Regulatory Technical Group on FinTech (IRTG on FinTech) had been
constituted.
● The group, in addition to the members from Financial Sector Regulators, has
representation from
Department of Economic Affairs (DEA), Ministry of Finance and
Ministry of Electronics and Information Technology (MeitY).
● A fintech company not registered with the market will have to partner with SEBI.

Sebi issues framework for dealing with suspension of rating agencies

● Dealing with suspension, cancellation or surrendering of license of credit rating
agencies (CRAs).
● The regulator has directed CRAs to disclose prominently on their website Sebi’s order
on suspension or cancellation.
● Allow the clients to withdraw any assignment given to the CRA, without any additional
cost.
● Do not take any new clients or fresh mandates.

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 ● In case of cancellation of certificate of registration, the credit ratings assigned by the
CRA shall be valid till such time the client withdraws the assignment or migrates the
assignment to other CRA, whichever is earlier.
● In case of suspension of certificate, the credit ratings assigned by the CRA shall not be
valid during the period of suspension.

IRDAI approves HDFC Life’s acquisition of Exide Life Insurance Company.

(100%).
● About: The Insurance Regulatory and Development Authority of India (IRDAI) is an
independent statutory body that was set up under the IRDA Act,1999. It is under the
jurisdiction of Ministry of Finance.
● Mandate: It is tasked with regulating and licensing the insurance and re-insurance
industries in India.
● Aim: To protect the interests of the insurance policyholders and to develop and
regulates the insurance industry. It issues advisories regularly to insurance companies
regarding the changes in rules and regulations.
● HQ: The agency's headquarters are in Hyderabad, Telangana, where it moved from
Delhi in 2001.
● Composition: IRDAI is a 10-member body including the chairman, five full-time and four
part-time members appointed by the government of India.

RBI likely to cite supply issues for failure to meet inflation target

● The government, in consultation with RBI, sets the medium-term retail inflation target
once every five years.
● Failure to meet the current target of 2-6% for 3 consecutive quarters or 9
consecutive months requires RBI to write a letter to the government, explaining why it
missed the goal.
● The letter will have three parts:
1) Reasons for failure to achieve the inflation target;
2) Remedial actions proposed by the central bank; and
3) An estimate of the time within which the inflation target shall be achieved.
● RBI is likely to tell the government that it has raised interest rates to control demand in
the economy and that the rest depends on fiscal measures to rein in supply-side
problems.

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 RBI Bulletin - October 2022

I. State of the Economy

● Aggressive and synchronised monetary tightening has further weakened global
economic prospects as financial markets sold off, investors took fright and jettisoned
risky assets.
● In India, broader economic activity has remained resilient and poised to expand further
with domestic demand accelerating as the contact-intensive sectors are experiencing a
bounce-back.
● Robust credit growth and fortified corporate and bank balance sheets provide further
strength to the economy.
● Headline inflation is set to ease from its September high, on the back of easing
momentum and favourable base effects.
● These factors will entrench India’s prospects as one of the fastest growing economies of
the world.

II. Estimation of Green GDP for India

Using variables on sustainable development indicators and resource consumption
indicators of India for the period 1971-2019, this article provides an estimation of
Green GDP which adjusts for environmental deterioration and waning natural
resources.

Highlights:
i) The trajectory of Green GDP displays an upward movement with visible improvements
since the global financial crisis of 2008.
Resource depletion, CO2 emission and material footprint, show considerable signs of
improvement.
ii) During the period 2012-2019, India has seen an improvement in the Green GDP on
account of increased efforts of the government towards improving resource efficiency,
afforestation, carbon mitigation action plan and environment protection schemes.

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 III. ‘Big Techs’ in the Financial Domain: Balancing Competition and Stability

This article analyses the benefits and the challenges posed by the entry of bigtechs
in the financial domain drawing lessons from global experiences.
Highlights:
i) Big techs are foraying into the financial domain bringing with them benefits of greater
financial inclusion, more efficient operations and lower transaction costs.
However, they also pose the risk of stifling competition, endangering data privacy issues, and
constraining operational resilience for regulated entities, with ramifications for financial stability.

ii) Regulators across the globe are coming up with regulatory frameworks such as imposing a
holding company structure on financial-service subsidiaries of bigtechs, prescribing
requirements of activity-specific licences, data protection, security, equal treatment of
third-party applications, data portability, etc., to address the challenges posed by the entry of
big techs in finance.

iii) The regulators are calibrating their regulatory frameworks with a mix of both entity and
activity-based regulations to proactively contain the potential vulnerabilities likely to arise due
to the increasing complex interlinkages between financial institutions and tech-companies.

IV. Market Returns and Flows to Debt Mutual Funds

The article analyses the growth of debt mutual funds (MFs) in India, taking into account
changes over time in the size and portfolio of debt MFs, investor profile and
determinants of flows to debt MFs.

Highlights:
i) The study finds that past value of returns contains significant information about current flows
into debt MFs.

ii) Credit spreads are found to be inversely related to flows and CPI inflation is found to be
inversely associated with returns.

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 V. Financial Liabilities of Household Sector in India – An Assessment

This article examines the determinants of Indian household borrowings (measured as

credit to GDP ratio) and assesses the sustainability of these borrowings in different
episodes of shocks by constructing a set of vulnerability indices.

Highlights:
i) The household credit to GDP ratio has increased in the recent period.
It is negatively associated with trends in weighted average lending interest rates, working-age
population, inflation and banks’ NPAs relating to credit to households,
and positively associated with deposit to GDP ratio and household expenditure.

ii) Based on the estimated vulnerability scores these borrowings are assessed to be
sustainable during the last three decades despite the impact of multiple shocks including
the pandemic.

Bima Sugam portal

● Insurance Regulatory and Development Authority of India (IRDAI), recently

announced the launch of Bima Sugam—an online marketplace that will house all
companies selling life and non-life insurance on a single platform.
● The portal is scheduled to go live from 1 January 2023.
What is Bima Sugam?
● The online platform will provide you with a one-stop destination for all insurance needs,
● providing services like buying insurance policies, portability facilities, change of
insurance agents and settling of claims.
● It allows buyers to purchase life, motor or health insurance policies directly.
● Web aggregators (such as PolicyX, PolicyBazaar, etc.), brokers (such as Bajaj Capital,
Probus Insurance Broker, etc.), banks and insurance agents will act as facilitators in
selling insurance policies.
● The Bima Sugam platform will provide all these facilities to policyholders with an
e-insurance account (E-IA).
Who will own it?
Several insurance companies (both general and life insurers) would become major
shareholders of the Bima Sugam platform.

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 What are its benefits?
● The Bima Sugam will leverage the prospect of having a centralised database.
● It will assist the insured/buyers facing challenges with existing insurers/agents to port
their respective policies based on coverage and pricing.
● It will pave the way for speedy acceptance of new/sandbox products.
● The platform will also give buyers a wide choice to pick and choose policies. It will
offer a window to view all your policies (be it life or general), details and renewal dates.
How will it work?
● The platform will push for end-to-end digitisation of the insurance-selling ecosystem.
● The selected repositories can help maintain the insurance policies of the policyholder
and his family.
● Policyholders will have their E-Bima or E-insurance accounts wherein they can view
their policies and file a claim.
Will policyholders need to create a demat account?
● Policyholders don’t need demat accounts.
● They will have to give consent (through the Aadhaar verification process) to access
insurance policies.

PFRDA agencies become DigiLocker partner entities

As part of celebrations of 75 years of India’s independence and to commemorate Azadi Ka

Amrit Mahotsav, PFRDA is providing following additional features through Digi Locker.
● Central Record Keeping Agencies (CRAs) of the regulator have become DigiLocker
Partner Organisations to provide subscriber centric online services, the ministry added.
● The two additional features being offered by the PFRDA include:
1. Account opening using Driving License (DL) through DigiLocker
2. Updation of existing address using DL through DigiLocker
● The facility can be availed by prospective subscribers opening their accounts with
Protean CRA and existing subscribers of Protean CRA for updating their address.

Pension Fund Regulatory and Development Authority (PFRDA) is a statutory regulatory body
set up under PFRDA Act enacted on 01.02.2014 with an objective to promote old age
income security and protect the interests of NPS subscribers.

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 India Post Payments Bank, RBIH join hands for financial product, services
● To focus their efforts on enhancing the reach of financial solutions to large sections of
society across India.
● Under the arrangement India Post Payments Bank (IPPB) and Reserve Bank
Innovation Hub (RBIH) will plan, design and execute innovative products and offerings
● To bridge the existing gap by bringing digitised services at the customer's doorstep.

RBI gives approval to Cygnet to operate as NBFC account aggregator

● Account Aggregator is one of the largest open financing data-sharing protocols

regulated by the RBI.
● It allows consumers to instantly share their financial data, securely and digitally with
various financial institutions.
● It facilitates financial institutions to quickly and conveniently access consumers'
consent-based financial data.
● RBI, SEBI, IRDAI, PFRDA and now GSTIN also are in various stages of integration with
the account aggregator ecosystem as Financial Information Providers (FIP).

Exim Bank’s Short-Term Line of Credit (STLoC) of

EUR 100 million to the Banco Exterior de Cuba for purchase of rice from
India - RBI Notification
● The export of eligible goods including plant, machinery and equipment, and
● Services including consultancy services for the purpose of procurement of rice to be
exported from India.
● Out of the total credit by Exim Bank under the agreement,
○ Goods and services of the value of at least 75% of the contract price shall be
supplied by the seller from India, and
○ The remaining 25% of goods and services may be procured by the seller for the
purpose of the eligible contract from outside India.
● The Credit Agreement under the STLoC has become operational from September
09, 2022.
● Under the STLoC, the terminal utilisation period is 8 months from the date of
contract inclusion under the STLoC.

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 Governing Council for Social Stock Exchange (“SSE”) - SEBI

● Every Social Stock Exchange shall constitute a

Social Stock Exchange Governing Council (SGC).

1) Composition of SGC
● The SGC shall comprise of individuals with relevant expertise who can contribute to the
development of SSE. Various categories of stakeholders such as:-
i. Philanthropic and social sectors including public / private sector donors,
ii. Non-profit organizations
iii. Information Repositories
iv. Social Impact Investors
v. Social Audit Profession / self-regulatory organization for social auditors,
vi. Capacity Building Fund
vii. Stock Exchange.
● SGC will have a minimum of 7 members having representation from each category.
● SGC shall be supported by administrative staff from the SSE.
● SGC shall meet as frequently as required with minimum of four meetings in a financial
year.

2) Terms of Reference
● The SGC is expected to provide oversight and guidance to facilitate
the smooth functioning of the operations of the Social Stock Exchange.
● Accordingly, the terms of reference of the SGC shall include the following:
a) Provide expertise towards development of the SSE including growth of registration/
listing of social enterprises and number of investors.
b) Oversee the listing function of SSE and provide guidance in laying down procedures
for on-boarding and listing of Social Enterprises.
c) Facilitate effective oversight on the adequacy of disclosures made by Social
Enterprises and guide development of necessary systems and processes towards the
same.
d) Review the functioning of the SSE, including feedback received from stakeholders.
e) Any other matter related to governance and development of SSE.

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 Merchant bankers can’t take up non-securities market business - SEBI

● The clarification came after PNB Investment Services, which is registered as a

merchant banker asked whether it can act as a direct selling agent by starting a fresh
business vertical for marketing retail products such as home loans, car loans on
behalf of PNB or other banks.

● The regulation 13A of merchant banker clearly states that a merchant banker cannot
carry on any business other than in the securities market, Sebi said

Govt seeks waiver for IDBI Bank stake sale

● India invited bids for a 60.72% stake in IDBI Bank of which
45.48% owned by the government and
49.24% by state-owned Life Insurance Corp (LIC)
The Securities and Exchange Board of India (SEBI), India’s capital markets regulator,
mandates a minimum 25% of public shareholding for all listed entities, excluding
state-owned companies, within three years of listing.
● If SEBI allows both the government and LIC to be classified as public shareholders
(34% after sale), the minimum public shareholding criteria will be automatically met.

Sebi clears govt proposal to turn Vodafone Idea dues into equity

● The capital market regulator approved the government’s proposal to convert dues of
over $1.92 billion by telecom operator Vodafone Idea to equity.
● Last year, the government had approved a rescue package for debt-strapped telecom
companies that allowed them to convert interest on deferred adjusted gross revenue
owed to the government into equity.
● The government’s stake in Vodafone after the conversion could be more than
30%.
● Sebi has also approved the government’s request to classify its shareholding in
Vodafone Idea as public float.
● The market regulator’s guidelines state that only stakes up to 10% can be classified
as public shareholding.

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 RBI released updated guidelines for Priority Sector Lending

The targets and sub-targets set under priority sector lending, to be computed on the basis of
the ANBC/ CEOBE as applicable as on the corresponding date of the preceding year, are as
under:

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 The targets for lending to SMFs and for Weaker Sections shall be revised upwards from FY
2021-22 onwards as follows:

● All domestic banks (other than UCBs) and foreign banks with more than 20 branches
are directed to ensure that the overall lending to Non-Corporate Farmers (NCFs) does
not fall below the system-wide average of the last three years’ achievement which will
be separately notified every year.

● The applicable target for lending to the non-corporate farmers for FY 2022-23 will be
13.78% of ANBC or CEOBE whichever is higher. All efforts should be made by banks
to increase the Farm Credit higher than the Non Corporate Farmer (NCF) target.
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 PFRDA revises equity exposure permitted in NPS for Tier I and Tier II
accounts

(i) Allowing option to allocate 75% of subscriber’s contribution in Asset Class E (Equity) in
Tier-I under active choice without any conditions of tapering from the age of 51 years
under NPS Private Sector, and

(ii) allowing option to allocate 100% of subscriber’s contribution in Asset Class E (Equity) in
Tier-II (optional account) under active choice without any conditions of tapering from the age
of 51 years
2. Under NPS-All Citizen Model, subscribers have the option to select any one of the
registered Pension Funds and actively allocate their contributions across 04 Asset Classes, i.e.
Equity (E), Corporate Bonds (C), Government Securities (G) and Alternate Assets (A)
with ‘Active Choice’ as below:

Asset Class Max limit

Asset Class G (Government 100%

Securities)
Asset Class C (Corporate Bonds) 100%

Asset Class E (Equity) 75%

Asset Class A (Alternate Assets) 5%

● However, the limit of 75% on asset class E gets tapered off @ 2.5% every year and is
re-allocated to Government securities when subscriber attains 51 years of age. The
age-wise maximum equity limit is based on the following matrix:

Age 50 51 52 53 54 55 56 57 58 59 60 & above

Max Equity 75 72.5 70 67.5 65 62.5 60 57.5 55 52.5 50

3. In partial modification to the above-mentioned circular, it has been decided by the

Authority to allow the option to allocate 75% of subscriber’s contribution in Asset Class
E (Equity) in Tier-I underactive choice without any conditions of tapering from the age of
51 years.

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 4. Further, it has been decided to allow the option to allocate 100% of subscriber ‘s
contribution in Asset Class E (Equity) in Tier-II (optional account) underactive choice
without any conditions of tapering.

● The Asset class wise exposure limits that will now be applicable to private sector
subscribers under Tier I and to all subscribers in Tier II are tabulated below:

Tier -I

Asset Class Max limit

Asset Class G (Government Securities) 100%

Asset Class C (Corporate Bonds) 100%

Asset Class E (Equity) 75%
Asset Class A (Alternate Assets) 5%

Tier-II
Asset Class Max limit

Asset Class G (Government Securities) 100%

Asset Class C (Corporate Bonds) 100%

Asset Class E (Equity) 100%
Asset Class A (Alternate Assets) 5%

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 RBI for expected loss-based approach

I. Regulation and Supervision

1. Discussion Paper on Expected Loss Based Approach for Loan Loss Provisioning by
Banks
● The inadequacy of the incurred loss approach for provisioning by banks and its
procyclicality, which amplified the downturn following the financial crisis of 2007-09, has
been extensively documented.
● One of the major elements of the global response to these findings have been a shift to
expected credit loss (ECL) regime for provisioning.
2. Discussion Paper on Securitisation of Stressed Assets Framework (SSAF)
● The Reserve Bank had issued the revised framework for securitisation of standard
assets. As regards securitisation of non-performing assets, the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI)
Act, 2002 currently provides a framework via Asset Reconstruction Company (ARC).
● It has been decided to introduce a framework for securitisation of stressed assets in
addition to the ARC route.
3. Internet Banking Facility for Customers of Regional Rural Banks (RRBs)
The RRBs are currently allowed to provide Internet Banking facility to their customers with
prior approval of the Reserve Bank.

II. Payment and Settlement Systems

4. Regulating Offline Payment Aggregators
● Payment Aggregators (PAs) play an important role in the payments ecosystem and
hence were brought under regulations in March 2020 and designated as Payment
System Operators (PSOs).
● The current regulations are, however, applicable to PAs processing online or
e-commerce transactions but not for offline PAs.
● It is proposed to apply the current regulations to offline PAs as well.

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 RBI tweaks rules for banks on unhedged Forex exposure
● Asks lenders to set aside capital and provision for such exposures.
● Due to the weakness in the rupee vis-àvis the US dollar. (~10% in 2022)
● If not, banks can incur significant losses.
● Rules will come into force from January 1, 2023.
● Incremental provisioning requirement is in the range of 20 basis points (bps) to 80 bps.

1. Banks shall assess the Unhedged Foreign Currency Exposure (UFCE) of entities with
FCE by obtaining information on UFCE from the concerned entity.
a. Provided that the information on UFCE shall be obtained from entities on a
quarterly basis based on statutory audit, internal audit or self-declaration by
the concerned entity.
b. Provided further that UFCE information shall be audited and certified by the
statutory auditors of the entity, at least on an annual basis.

2. Provisioning and Capital Requirements

a. Banks shall determine the potential loss to an entity from UFCE using the largest
annual volatility in the USD-INR exchange rates during the last ten years.
Note: The Unhedged Foreign Currency Exposure (UFCE) in currencies other than USD shall
be converted into USD using the current market rates for determining the potential loss from
UFCE.
b. Banks shall determine the susceptibility of the entity to adverse exchange rate
movements by computing the ratio of the potential loss to entity from UFCE
and entity’s EBID over the last four quarters as per the latest quarterly
results certified by the statutory auditors.
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 3. Banks shall calculate the incremental provisioning and capital requirements at a
minimum on a quarterly basis.
4. For projects under implementation and the new entities, banks shall calculate the
incremental provisioning and capital requirements based on projected average annual
EBID for the three years from the date of commencement of commercial operations
5. In cases where the bank is not able to get sufficient data to assess UFCE the bank shall
take a conservative view and place the exposure to provisioning of 80bps and a 25 %
increase in risk weight.
(EBID - “Earnings before Interest and Depreciation”)

Foreign banks made more money in India than what Indian lenders earned
overseas

● Foreign Banks earned a better return on their assets in FY’22 compared to what
overseas businesses of Indian banks did in FY’22 a survey by the Reserve bank
showed.
● Return on assets for foreign banks in India at 5.8 per cent in 2021-22, was higher than
overseas branches of Indian banks at 1.6 per cent in 2021-22,
● By 2021-22 round of the survey on International Trade in Banking Services.

Reserve Bank of India (Financial Statements - Presentation and

Disclosures) Directions, 2021 - Disclosure of Divergence in Asset
Classification and Provisioning
1. Accordingly, for the financial statements for the year ending March 31, 2023, banks
shall make suitable disclosures in the manner specified if either or both of the following
conditions are satisfied:
a. The additional provisioning for non-performing assets (NPAs) assessed by the
RBI exceeds 10% of the reported profit before provisions and contingencies for
the reference period; and
b. The additional Gross NPAs identified by the RBI exceed 10 % of the reported
incremental Gross NPAs for the reference period.
c. Provided further that in the case of UCBs the threshold for reported incremental

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 Gross NPAs specified in paragraph 2(b) above shall be 15 per cent, which shall
be reduced progressively in a phased manner, after review.

2. These instructions are applicable to all commercial banks (excluding Regional Rural
Banks) and all Primary (Urban) Co-operative Banks.
3. These instructions shall come into effect for disclosures in the notes to the
annual financial statements of the year ending March 31, 2023, and onwards.

Appointment of Internal Ombudsman by the Credit

Information Companies
The decision to bring Credit Information Companies (CICs) under the Internal
Ombudsman (IO) Framework was announced with a view to strengthen and improve the
efficiency of the internal grievance redressal mechanisms of CICs

Appointment of Internal Ombudsman

(a) Every CIC shall appoint the Internal Ombudsman for a fixed term of not less than three
years, but not exceeding five years meeting the following prerequisites:
(i) The IO shall be either a retired or a serving officer, not below the rank of Deputy
General Manager or equivalent in any financial sector regulatory body, CIC, a Non-Banking
Financial Company (NBFC) or bank, with necessary skills and experience of at least seven
years in banking, non-banking finance, financial sector regulation or supervision, credit
information or consumer protection.
(ii) The IO shall previously not have been employed, nor presently be employed, by the
CIC or its related parties.
(iii) The IO shall not attain the age of 70 before completion of the proposed term.

(b) The IO shall not be eligible for re-appointment or extension of term in the same CIC

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 (c) The Board of the CIC shall determine the emoluments, facilities and benefits accorded to
the IO.
(d) The CIC may appoint more than one IO.
The Office of the IO shall function from the Head Office or Corporate Office of the CIC.

Scope of role
(a) The Internal Ombudsman shall not handle complaints received directly from the
complainants or members of the public and instead, deal only with the complaints that have
already been examined by the CIC but have been partly or wholly rejected by the CIC.
(b) The IO shall, on a quarterly basis, analyse the pattern of all complaints received against
the CIC, such as entity wise, product-wise, category-wise, consumer group-wise, geographical
location-wise, etc.
(c) The IO shall not represent the CIC in legal cases before any court or fora or authority.

Administrative Oversight
The Internal Ombudsman shall report to the Managing Director or Chief Executive Officer of
the CIC administratively, and to the Board functionally.

Board Oversight and participation

(a) The Internal Ombudsman shall furnish periodic reports to the Consumer Protection
Committee of the Board, preferably at quarterly intervals, but not less than bi-annually.
(b) The IO shall be designated as an ex-officio member or a permanent invitee to the meetings
of the Consumer Protection Committee of the Board.

Procedural guidelines
(a) The CIC shall formulate a Standard Operating Procedure approved by its Board of
Directors and establish a system of auto-escalation, within 21 days of receipt,
(b) The IO and the CIC shall ensure that the final decision is communicated to the
complainant within 30 days from the date of receipt of the complaint by the CIC.
(c) The decision of the IO shall be binding on the CIC except the CIC can disagree with the
decision of the IO only with the approval of its Managing Director/Chief Executive Officer

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 Reporting to RBI
(a) The CIC shall put in place a system of periodic reporting of information to the Consumer
Education and Protection Department, Reserve Bank of India, on a quarterly and annual basis.
These reports shall be submitted on or before the 10th day following the
quarter/year for which they are due.
(b) The CIC shall, within five working days of appointment of the Internal Ombudsman, furnish
the details of the individual so appointed to the Consumer Education and Protection
Department, Reserve Bank of India.

Foreign reinsurers can repatriate 20% of assigned capital: IRDAI

(Circular)
● The Committees on Reinsurance Regulations, Ease of Doing Business
and Developmental topics and the Committee on Finance and Tax
Recommendations for Reinsurance Industry gave their recommendations on the
matters pertaining to repatriation of excess assigned capital by Foreign Reinsurance
Branches (FRB) and Lloyd’s India.
.
● Accordingly, it is decided that FRBs and Lloyd’s India are permitted to repatriate excess
assigned capital with prior approval of the Authority subject to the following:

I. The request to repatriate the assigned capital shall be submitted by the Foreign
Reinsurer, who is engaged in reinsurance business through a branch established in
India.
II. A certificate from the Foreign Reinsurer stating that the Reinsurer has Net Owned
Funds of Rs. 5000 crores.
III. Minimum Assigned Capital of Rs. 100 Crore net of provisions as per regulations shall
always be ensured; (infuse a minimum assigned capital of ₹100 crore into the branch office.)
IV. Solvency ratio after the repatriation is at least 50 bps higher than
the control level of solvency i.e. 200% as specified by the Authority;
V. Such withdrawal shall not exceed 20% of assigned capital of such FRB/Lloyd’s India
as at the end of last financial year; O
VI. ne request in a Financial year can be made by the Foreign Reinsurer;
VII. A certificate from certifying Actuary to the effect that sufficient reserves are made to
meet the reinsurance liabilities;
VIII. A certificate from practicing Chartered Accountant/Company Secretary on compliance
with the FEMA requirements, RBI circulars, tax laws and applicable regulatory
framework.

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 IRDAI sets up health insurance consultative committee (Circular)
● A 15-member health insurance consultative committee with an aim to achieve the
goal of universalisation of health insurance in the country.
● The panel has been set up for two years.

Reduction in denomination for debt securities and

non-convertible redeemable preference shares- SEBI (circular)

● Earlier it was mandated that the face value of each debt security or non-convertible
redeemable preference share issued on private placement basis shall be Rs. 10 lakhs
and the trading lot shall be equal to the face value.

● SEBI has received representations from various market participants, including issuers,
requesting for review of the said denominations.
○ In particular, non-institutional investors consider the high ticket size as a
deterrent which restricts their ability to access the market for corporate bonds

● The following amendments are being made

○ The face value of each debt security or non-convertible redeemable preference
share issued on private placement basis shall be Rs. One lakh.
○ The face value of the listed debt security and non-convertible redeemable
preference share issued on private placement basis traded on a stock exchange
or OTC basis shall be Rs. One lakh.
○ The provisions of this circular shall be applicable to all issues on or after January
1, 2023.

Sebi suspends registration of RTA for three months over operational

lapses
● The Securities and Exchange Board of India (Sebi) on Friday suspended the
registration of Satellite Corporate Services (SCS), a registrar and transfer agent (RTA).
● An RTA is a Sebi-registered intermediary tasked with the responsibility of
recording-keeping of all the transactions. SCS acted as an RTA mainly for SME IPOs.
● SCS had less than 50 per cent of the specimen signatures with respect to client

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 companies available with it.
● Also, SCS allowed transfer of shares without making any attempts to verify the
genuineness of those transfer requests or without even sending seller notices to the
transferors.
● SCS’s certificate of registration will be restored after three months only if the auditor is
able to satisfy that the RTA has systems and procedures in place in compliance with
Sebi's regulations.

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