RBI Regulations

RBIs Statement on Developmental and Regulatory Policies

A statement on developmental and regulatory policies relevant to financial Markets, Regulation and supervision, Payment and Settlement Systems was released by the Reserve Bank of India on April 6, 2023. The objective of the plan is to encourage sustainability and stability in the financial ecosystem. Following is a detailed discussion of the main recommendations as stated in the Statement on Developmental and Regulatory Policies.

Financial Markets

The statement on the Development and Regulatory Policies regarding the financial market are discussed below:

Developing an Onshore Non-deliverable Derivatives Market

With effect from June 1 2020, banks in India that operate International Financial Services Centre (IFSC) Banking Units (IBUs) are allowed to conduct non-deliverable foreign currency derivative contracts (NDDCs) in INR with non-residents as well as each other. 

It has been approved to allow banks with Banking Units (IBUs) to sell INR NDDCs (Non-deliverable foreign exchange derivative contracts) to resident users in the onshore market in order to improve the onshore INR NDDC and give residents the flexibility to design their hedging programmes effectively. 

While transactions with residents must be handled in INR, these banks would be free to pay their NDDC transactions with non-residents and one another in foreign currency. Separate instructions are being given in this regard.

Regulation and Supervision

The Development and Regulatory Policies regarding the regulation and supervision, i.e. enhancing the efficiency of regulatory processes, development of a web portal which is centralised for the public to search unclaimed deposits and grievance redress mechanism relating to Credit Information Reporting are:

Enhancing the Efficiency of Regulatory Processes

To engage in activities that are governed by the RBI, various companies must get a licence or authorisation. Additionally, under numerous rules and regulations, regulated entities must request specific regulatory permissions from RBI on a regular basis. Nowadays, many offline and online channels are used for the application and approval processes for the same. 

The need to simplify, facilitate, and lower the cost of compliance by regulators of the financial sector within established time limits to decide applications under various rules was announced in the Union Budget for 2023–2024. So, it has been decided to create a secure, centralised web-based portal called “PRAVAAH” (Platform for Regulatory Application, Validation And Authorisation), which would progressively expand to all forms of applications made to RBI across all functions.

Development of a Centralised Web portal for the Public to Search Unclaimed Deposits

RBI has decided the creation of a centralised website where the public can look up unclaimed deposits:

• Deposits that stay unclaimed in a bank for about ten years are transferred to (RBI) the Reserve Bank of India’s (DEA) “Depositor Education and Awareness” Fund. 

• The depositor’s protection is a top priority for RBI. Hence, it has implemented several steps to ensure that older deposits are not unclaimed and that any current unclaimed deposits are returned to their proper beneficiaries or owners after following the correct procedures. On their websites, banks list all of the unclaimed deposits, which is the second aspect.

• The RBI has decided to create a website to enable searches across different banks for potential unclaimed deposits based on user inputs to enhance and expand the entry of depositors and beneficiaries to such data. The employment of specific AI tools will improve the search results.

Grievance Redress Mechanism relating to (CIR) Credit Information Reporting by Credit Institutions and Credit information provided by Credit Information Companies (CICs)

The Process for Redressing Complaints Concerning Credit Information Reported by Credit Institutions and Credit Information Provided by Credit Information Companies was released:

It has been decided to implement a comprehensive framework for strengthening and improving the effectiveness of the grievance redress mechanism and customer service offered by the credit institutions (CIs) and CICs in light of the rise in complaints from customers regarding credit information reporting and the operation of credit information companies (CICs). For this reason, the Reserve Bank Integrated Ombudsman System has been given authority over the CICs (RB-IOS). 

Additionally, it is suggested that the following policies be implemented: 

• A compensation mechanism for delayed updating/rectification of credit information.
• A provision for SMS/email alerts to customers when their credit information is accessed from CICs. 
• A timeframe for ingestion of data received by CICs from Credit Institutions and disclosures relating to the quantity and type of customer complaints received on CICs’ websites. 

In this regard, specific recommendations and regulated policies will be released soon.

Payment and Settlement Systems

The Developmental and Regulatory Policies in respect of payment and settlement systems are discussed below:

Operation of Pre-Sanctioned Credit Lines at Banks through the UPI

The unified payments interface (UPI), a powerful platform for processing payments, offers a number of capabilities. It currently manages 75% of India’s retail digital payment volume. The Unified Payment Interface (UPI^[1]) system has been used to create features and solutions that are in line with India’s ambitions for payments digitalisation. Credit cards from RuPay are now able to connect to UPI under the regulatory policies issued. Nowadays, UPI transactions between bank deposit accounts are occasionally mediated by prepaid instruments such as wallets.

In addition to deposit accounts, it is currently suggested to broaden UPI use by facilitating transfers to and from pre-sanctioned credit lines at banks. In other terms, the UPI network will enable bank-financed payments. It may reduce the price of such items and aid in the creation of unique products for Indian consumers.

A compensation mechanism for delayed updates, correction of credit information, a time frame for the ingestion of data received by Credit Information Companies from credit institutions, SMS/emails alerts to customers when their credit information is accessed by Credit Information Companies, and disclosures regarding the number and nature of customer complaints received on CICs’ websites are some additional measures that will be put into place. 

Conclusion

The RBI has also issued the Statement on Developmental and Regulatory Policies. The statement sets out various regulatory policies and developmental measures relating to the financial markets, regulation and supervision, and payment and settlement systems. In order to improve understanding for both citizens and banks, certain corrective measures and policies are issued from time to time. These regulations are designed to build and improve the financial infrastructure.

Also Read: What are the Regulatory Requirements of Non-Banking Financial Company in India?