The Reserve Bank of India (“RBI”) has issued a Statement on Developmental and Regulatory Policies relating to-
(i) Financial Markets;
(ii) Regulations; and
(iii) Payment Systems and FinTech.
Key Takeaways:
1. Financial Markets
Trading of Sovereign Green Bonds in IFSC:
With a view to facilitating wider non-resident participation in Sovereign Green Bonds (SGrBs), it has been decided to permit eligible foreign investors in the International Financial Services Centre (IFSC) to also invest in such bonds. A scheme for investment and trading in SGrBs by eligible foreign investors in IFSC is being notified separately in consultation with the Government and the IFSC Authority.
RBI Retail Direct Scheme – Introduction of Mobile App:
RBI Retail Direct Scheme, launched in November 2021, gives access to individual investors to maintain gilt accounts with RBI and invest in government securities. The Scheme enables investors to buy securities in primary auctions as well as buy/sell securities through the NDS-OM platform. To further improve ease of access, a mobile application of the Retail Direct portal is being developed. The app will enable investors to buy and sell instruments on the go, at their convenience. The app will be available for use shortly.
2. Regulations
Review of LCR Framework:
Banks covered under Liquidity Coverage Ratio (LCR) framework are required to maintain a stock of high quality liquid assets (HQLA) to cover the expected net cash outflows in the next 30 calendar days. Recently some jurisdictions have demonstrated the increased ability of the depositors to quickly withdraw or transfer deposits during times of stress, using digital banking channels. In view of such emerging risks a revisit of certain assumptions under LCR framework is required and therefore, certain modifications to the LCR framework are being proposed towards facilitating better management of liquidity risk by the banks. A draft circular in this regard shall be issued shortly seeking comments of all stakeholders.
Dealing in Rupee Interest Rate Derivative products – Small Finance Banks:
To expand the avenues available to the Small Finance Banks (SFBs) for hedging interest rate risk in their balance sheet and commercial operations more effectively and for providing them with greater flexibility, it has been decided to allow them to deal in permissible rupee interest derivative products in terms of Rupee Interest Rate Derivatives (Reserve Bank) Directions, 2019. A circular in this regard shall be issued shortly.
3. Payment Systems and Fintech
Enabling UPI for Cash Deposit Facility:
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. Operational instructions will be issued shortly.
UPI access for Prepaid Payment Instruments (PPIs) through third-party applications:
To provide more flexibility to PPI holders, it is now proposed to permit linking of PPIs through third-party UPI applications for enabling the PPI holders to make UPI payments like bank account holders. Instructions in this regard will be issued shortly.
Distribution of Central Bank Digital Currency (CBDC) through Non-bank Payment System Operators:
It is proposed to make CBDC-Retail accessible to a broader segment of users in a sustained manner, by enabling non-bank payment system operators to offer CBDC wallets. This is expected to enhance access and expand choices available to users apart from testing the resiliency of the CBDC platform to handle multi-channel transactions. Necessary changes will be made to the system to facilitate this.
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Source: Reserve Bank of India
