The Reserve Bank of India (RBI) has decided to do away with the charges levied by the central bank for transactions processed in the Real Time Gross Settlement System (RTGS) and the National Electronic Funds Transfer (NEFT) System money transfer systems. “Banks will be required, in turn, to pass these benefits to their customers. Instructions to banks in this regard will be issued within a week,” the RBI said on Thursday.
The new measure is to provide an impetus to digital funds movement, the RBI said. The RBI now levies minimum charges on banks for transactions routed through its RTGS meant for large-value instantaneous fund transfers and NEFT for other fund transfers. Banks, in turn, levy charges on their customers.
ATM Charges Review
The RBI has decided to set up a committee involving all stakeholders, under the chairmanship of the CEO of Indian Banks’ Association (IBA), to examine the entire gamut of ATM charges and fees. “There have been persistent demands to change the ATM charges and fees. The committee is expected to submit its recommendations within two months of its first meeting,” the RBI said.
More Small Banks Soon
In a significant move, the RBI has decided to allow more small finance banks as “there is a case for more players to be included to enhance access to banking facilities to the small borrowers and encourage competition”. It has proposed to issue the draft guidelines for ‘on tap’ licensing of small finance banks by the end of August 2019.
However, the RBI said more time is needed to review the performance of payments banks before considering the licensing of this category of banks to be put ‘on tap’.
In November 2014, the RBI had notified in the guidelines for licensing of payments banks and small finance banks in the private sector that after gaining experience in dealing with these banks, the RBI will consider ‘on tap’ licensing of these banks. In the case of small finance banks, license was issued to ten such banks. Further, eight of the ten small finance banks have also been included in the second schedule of the RBI Act, 1934.
“A review of the performance of small finance banks reveals that they have achieved their priority sector targets and thus attained their mandate for furthering financial inclusion,” the RBI said.
NPA Resolution Norms
The Reserve Bank will issue a revised circular on bad loan recognition within the next three-four days, replacing the February 12 circular that was struck down by the Supreme Court. On April 2, the Supreme Court had declared as “ultra vires” the February 12 circular that mandated banks to label even a day’s default as NPA.
Money Market Norms
The RBI has proposed to rationalise existing regulations covering different money market products with the objective of bringing consistency across products in terms of issuers, investors and other participants. The central bank has issued regulations over time covering different money market products — call money, repo, commercial paper, certificates of deposit and other debt instruments with original maturity less than one year etc.
Forex Trading Platform
The Reserve Bank has announced that a foreign exchange trading platform for retail participants will be available to users for transactions from early August 2019. This would provide customers with access to an electronic trading platform through an internet-based application on which they can purchase or sell foreign currency at market clearing prices.
This would ensure fair and transparent pricing for users of foreign exchange such as small and medium enterprise (SME), exporters and importers and individuals. The trading platform has been developed by the Clearing Corporation of India (CCIL) and is being tested by users.
The central bank has decided to set up a Working Group to review the regulatory guidelines and supervisory framework applicable to Core Investment Companies (CICs). in the light of recent developments in the financial sector, there is a need to strengthen the corporate governance framework of CICs, the RBI said.
Over the years, corporate group structures have become more complex involving multiple layering and leveraging, which has led to greater inter-connectedness to the financial system through their access to public funds, it said.