RBI to offer exposure norms for UCBs

Move to avoid PMC Bank-like situation; UCBs with over I500 cr assets to be part of CRILC

Published: 06th December 2019 12:00 PM  |   Last Updated: 06th December 2019 12:00 PM   |  A+A-

Reserve Bank of India Governor Shaktikanta Das (Centre) and his deputies arrive for the RBI’s bi-monthly monetary policy review meeting in Mumbai on Thursday | pti

By Express News Service

MUMBAI:  The Reserve Bank of India will soon issue draft circular proposing loan exposure norms for primary (urban) co-operative banks in a bid to reduce concentration risk. This comes in the wake of the huge scandal that hit the sector when the Punjab & Maharashtra Co-operative (PMC) Bank was found to have given over 70 per cent of its loans to a single entity.

The new guidelines would relate to exposure norms for single as well as group or interconnected borrowers, promotion of financial inclusion, priority sector, etc, RBI said on Thursday.

“These measures are expected to strengthen the resilience and sustainability of Urban Co-operative Banks (UCB) and protect the interest of depositors,” RBI said.

First, a draft circular would be issued, and later UCBs would be given an appropriate timeframe to comply with the revised norms. Further, UCBs with assets of over Rs 500 crore would become part of the Central Repository of Information on Large Credits (CRILC), a centralised database on customer’s credit exposure across banks created by RBI.

Scheduled commercial banks, financial institutions and certain non-banking finance companies at present share their data on CRILC. Large credits extended by UCBs would also come under this reporting framework, which is expected to strengthen offsite supervision and early recognition of financial stress.

RBI’s supervisory role in UCBs came under question when the PMC Bank fraud unfolded. Forensic audit report of PMC Bank is expected by the end of this month, and the value of assets are also being assessed independently, RBI governor Shaktikanta Das told reporters here. “Once we get the forensic audit report and get a final number on the realisable value, then a call will be taken on the further course of action,” Das said. Currently, the PMC Bank is kept under restrictions, and cash withdrawals capped at Rs 50,000 during the period.

RBI proposes new PPIs with Rs 10,000 cap

The RBI has proposed to introduce a new Prepaid Payment Instrument (PPI) that could be used only for transactions of goods and services worth up to Rs 10,000. Loading and reloading of such PPIs can be done only from a bank account and can be used for making bill payments and merchant payments. This can be done on the basis of essential minimum details sourced from the customer. Instructions in this regard are to be issued by December 31.

Too early to talk about digital currency: Das

It is too early to talk about digital currency, and the RBI would in no way allow private digital currency, governor Shaktikanta Das said on Thursday. “It is very early … technology is still evolving,” Das said about RBI issuing digital currency. However, he said they will in no way allow a currency issued by a private entity. “World over, the central banks and governments are against private digital currency because it is a sovereign function,” Das said.


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