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Interest on home, auto, MSE loans to be linked to new benchmarks from April 1

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Mumbai: In a bid to ensure greater transparency, the RBI proposed that floating interest rates on personal, home, auto and micro and small enterprises (MSEs) loans be linked to external benchmarks like repo rate or treasury yields, from April 1 next year.

Currently, banks follow system of internal benchmarks, including Prime Lending Rate (PLR), Benchmark Prime Lending Rate (BPLR), Base rate and Marginal Cost of Funds based Lending Rate (MCLR).

The final guidelines to link the interest rate to external benchmarks will be issued by the end of this month, said the RBI’s ‘Statement on Developmental and Regulatory Policies’.

 

The proposal to shift to external benchmarking of floating interest rate was suggested by an internal study group set up by the RBI to review the working of the MCLR System.

“…It is proposed that all new floating rate (for) personal or retail loans (housing, auto, etc) and floating rate loans to Micro and Small Enterprises extended by banks from April 1, 2019 shall be benchmarked” to repo rate, or 91/182 Treasury Bill yield or any other benchmark market interest rate produced by the Financial Benchmarks India Pvt Ltd (FBIL).

“The spread over the benchmark rate – to be decided wholly at banks’ discretion at the inception of the loan – should remain unchanged through the life of the loan, unless the borrower’s credit assessment undergoes a substantial change and as agreed upon in the loan contract,” the RBI said.

It further said that banks are free to offer such external benchmark-linked loans to other types of borrowers as well.

“In order to ensure transparency, standardisation and ease of understanding of loan products by borrowers, a bank must adopt a uniform external benchmark within a loan category; in other words, the adoption of multiple benchmarks by the same bank is not allowed within a loan category,” the RBI said.

In another decision, the RBI issued final guidelines regarding stipulating a mandatory loan component in working capital finance for borrowers.

With a view to promoting greater credit discipline among working capital borrowers, the RBI had earlier proposed to stipulate a minimum level of ‘loan component’ in fund-based working capital finance for larger borrowers.

It had also issued draft guidelines in this regard.

The RBI’s statement also said final guidelines regarding board of management in Primary (Urban) Co-operative Banks (UCBs) will be issued during the month.

An expert committee headed by Y H Malegam had recommended that a Board of Management (BoM) be constituted in every UCB, in addition to the Board of Directors (BoD) with a view to strengthening governance in the UCBs.


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RBI needs to ensure stability: Shaktikanta Das

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New Delhi: The head of the Reserve Bank of India (RBI) said he would take the steps necessary to maintain financial stability in the country and help create favourable conditions for growth.

India’s economy has grown because of measures such as the nationwide goods and services tax and the insolvency and bankruptcy code that prevents wilful defaulters from bidding for stressed assets, Shaktikanta Das said in his address to an investor roundtable.

The country’s growth story is backed by its strong domestic fundamentals, he said, citing lower inflation.

 

Annual retail inflation rate dropped to an 18-month low of 2.19 per cent in December, strengthening the views of some economists that the central bank could ease monetary policy next month.

India’s top business groups on Thursday urged the central bank to cut its benchmark interest rate by at least half a percentage point and lower the cash reserve ratio it imposes on banks.

The country also needs to watch out for any sudden turbulence in the gloal financial market, Das said.

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Centre removes two PNB executive directors for lapses in Rs 13,500-cr fraud

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Chennai:The Central government has removed two Punjab National Bank (PNB) Executive Directors — Sanjiv Sharan and K.Veera Brahmaji Rao — for the lapses in the Rs 13,500 crore fraud allegedly perpetrated by absconding diamantaire Nirav Modi.

The PNB has intimated the action to the stock exchanges.

“We welcome the Central government’s action to dismiss the two Executive Directors. The scam of such proportions could not have happened without the knowledge of the top management,” C.H. Venkatachalam, General Secretary, All India Bank Employees’ Association (AIBEA), told IANS.

 

“Perhaps for the first time, the Centra has removed the Executive Directors of a nationalised bank under the Nationalised Banks (Management and Miscellaneous Provision) Scheme, 1970. All these days it was said the top management of government-owned banks — Chairman, Managing Director, Executive Directors — are governed only by the contract of appointment.

“It is also good that the central government has followed the due process of giving the two PNB Executive Directors opportunity to put forth their views before dismissing them,” Venkatachalam added.

According to the Central government’s notification, on July 3, 2018, Sharan and Rao were issued a show cause notice as to why they could not be removed from office for having failed to exercise proper control over the functioning of PNB, thus enabling the fraud through the misuse of SWIFT at the bank’s Brady House branch in Mumbai.

After considering Sharan and Rao’s replies and the comments of the bank’s Board, the Centre removed them from office as it found it was expedient in the interests of PNB.

According to the notification, the dismissal of Rao is subject to the outcome of a plea in the Delhi High Court.

“We are happy to see some action being taken. Whether it is only the two Executive Directors and other officials are also involved in the scam has to be probed in full,” Venkatachalam said.

According to him, in the past, low-level officers would have been the scapegoats for such massive scams.

“With the action taken on the top management, people will be satisfied that public sector bank officials are answerable for their lapses,” Venkatachalam added.

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In this new world, data is the new wealth: Ambani

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Mumbai: Reliance Industries chairman and managing director Mukesh Ambani urged Prime Minister Narendra Modi to take steps against ‘data colonisation’, specially by global corporations, stating that Indian data must be owned by Indians.

Invoking Mahatma Gandhi’s movement against political colonisation, Ambani said India now needs a new movement against data colonisation.

“Gandhiji led India’s movement against political colonisation. Today, we have to collectively launch a new movement against data colonisation,” he said Gandhinagar at the Vibrant Gujarat Global Summit.

 

Stressing that, in this new world, data is the new wealth, Ambani said, “India’s data must be controlled and owned by Indian people and not by corporate, especially global corporations.”

He further said, “For India to succeed in this data driven revolution, we will have to migrate the control and ownership of Indian data back to India. In other words, give Indian wealth back to every Indian.”

Stating that the “entire world has come to recognise” Modi “as a man of action”, Ambani said, “Honorable Prime Minister, am sure you will make this one of the principal goals of your digital India mission.”

Later in the day, countering Ambani’s call, Governor – Commonwealth of Kentucky, Matthew Griswold, asked Modi “to think in the opposite” in order to realise the tremendous opportunity that lies in Indo-US partnership.

“Honorable prime minister you have been asked from this stage to think about limiting the amount of competition, limiting the exchange of ideas, information and goods. I would encourage you to think in the opposite,” he said.

While stating that it is important to put the people of India first, Griswold said, “It is also important to put their opportunity and our opportunity as citizens of the world to trade with one another and exchange ideas because iron sharpens iron.”

The greatest possibility comes from the exchange of these idea, he added.

“If we can cut the regulations, cut the bureaucracy, cut the red tape, the opportunity is enormous between our nations,” he added that India is now the 10th largest trading partner for the US and “climbing quickly”.

“The opportunity before us between India and the United States is incredible, but responsibility falls on each of one us, those of us in elected positions, those of you in the industry, those of you who represent various constituencies, we have much work to do…we must do this, ” Griswold said.

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