Commercial Bank Management

Latest Developments in Indian Banking Industry

Submitted by,
PGP/23/286 R. Kathiravan
PGP/23/378 Aritra Nandy
 Important Developments in Indian Banking Sector in last 5 years

Date: November 2020

News: The Lakshmi Vilas Bank Ltd. branches to operate as DBS Bank India Ltd. Branches
Description: The Scheme for the amalgamation of the Lakshmi Vilas Bank Ltd. with DBS Bank
India Ltd was sanctioned. All the branches of the Lakshmi Vilas Bank Ltd. will function as
branches of DBS Bank India Ltd. with effect from November 27,2020. Customers, including
depositors of the Lakshmi Vilas Bank Ltd. will be able to operate their accounts as customers of
DBS Bank India Ltd. Consequently, the moratorium on the Lakshmi Vilas Bank Ltd. will cease
to be operative from that date.

Date: November 2020

News: Co-Lending by Banks and NBFCs to Priority Sector
Description: The primary focus of the revised scheme, rechristened as “Co-Lending Model”
(CLM), is to improve the flow of credit to the unserved and underserved sector of the economy
and make available funds to the ultimate beneficiary at an affordable cost, considering the lower
cost of funds from banks and greater reach of the NBFCs. In terms of the CLM, banks are
permitted to co-lend with all registered NBFCs (including HFCs) based on a prior agreement.
The co-lending banks will take their share of the individual loans on a back-to-back basis in their
books. However, NBFCs shall be required to retain a minimum of 20 per cent share of the
individual loans on their books; while requiring them to conform to the regulatory guidelines on
outsourcing, KYC, etc.

Date: September 2020

News: The Banking Regulation (Amendment) Bill, 2020
Description: Co-operative banks are exempted from several provisions of the Banking
Regulation Act, 1949. The Bill applies some of these provisions to them, making their regulation
under the Act similar to that of commercial banks. Co-operative banks may raise equity or
unsecured debt capital from the public subject to prior RBI approval. RBI can control the co-
operative banks registered under the State governments except those for agriculture and its
development. The Bill allows RBI to undertake reconstruction or amalgamation of a bank
without imposing a moratorium

Date: August 2020

News: RBI frames rules for starting NPCI rivals
Description: RBI has invited application for payment ecosystem on the lines of NPCI, subject to
minimum paid up capital of Rs 500 cr and strive for inter-operability with NPCI systems
amongst other requirements.

Date: May 2020

News: Monetary policy highlights: Repo rate cut by 40 bps to 4%
Description: In view of ensuing slowdown in economy, MPC decided to cut policy rate by 40
bps from 4.4 to 4%. Reverse Repo rate was also reduced by 40 bps to 3.35 %. Consequently, the
marginal standing facility was adjusted from 4.65% to 4.25%.
Date: Jan 2020
News: Investment by Foreign Portfolio Investors in Debt
Description: According to the previous regulations, short-term investments by an FPI shall not
exceed 20% of the total investment of that FPI in either Central Government Securities
(including Treasury Bills) or State Development Loans or corporate bonds. This short-term
investment limit is now increased from 20% to 30%..

Date: Sep 2019

News: RBI tightens norms for banks, up penalties
Description: RBI prescribed a turnaround time (TAT) for banks to settle failed transactions for
customers and also notified compensations payable for various types of customer complaints.
The compensation should be done suo motu by the bank, without waiting for a complaint or a
claim by a customer

Date: August 2019

News: Merger of 10 public sector banks
Description: Merger of 10 Public Sector banks into 4 big banks – PNB, OBC & UBI to be
merged; Canara and Syndicate bank to be merged; Union Bank, Andhra Bank and Cooperation
Bank to be merged; Indian Bank and Allahabad Bank to be merged.

Date: Aug 2019

News: RBI to transfer a record surplus of 1.76 l cr
Description: The Reserve Bank of India will transfer a record high surplus of a little over Rs 1.76
lakh crore to the government, the central bank said after a board meeting on Monday. “The
surplus transfer includes Rs 1,23,414 crore in surplus for the year 2018-19 and Rs 52,637 crore
of excess provisions identified as per the revised Economic Capital Framework.”

Date: Jul 2019

News: Reserve Bank relaxes end-use stipulations under External Commercial Borrowings
Framework for Corporates and NBFCs
Description: RBI relaxes ECB Norms; loosened the end-use restrictions with regard to working
capital, general corporate purpose and repayment of rupee loans. It was done Based on the
feedback from stakeholders and with a view to further liberalise the ECB framework.

Date: April 2019

News: Large Exposures Framework (LEF)
Description: The derivatives exposures that are cleared non-centrally would not be under the
purview of exposure limits till April 01, 2020 but banks must compute these separately and
report on quarterly basis to the Department of Banking Regulation. The interbank exposure limit
will be 20% of the Tier I capital in India of an Indian branch of foreign G-SIB with its Head
Office. The eligible capital base for the purpose of LEF will be the effective amount of Tier 1
capital.

Date: Aug, 2018

News: 99.3% of demonetised currency returned
Description: Over 99% of the higher denomination notes that were withdrawn from circulation in
November 2016 were returned, RBI said in its annual report.

Date: March 2018

News: Discontinuance of Letters of Undertaking (LoUs) and Letters of Comfort (LoCs) for
Trade Credits
Description: It was decided to discontinue the practice of issuance of LoUs/ LoCs for Trade
Credits for imports into India by AD Category –I banks with immediate effect. Letters of Credit
and Bank Guarantees for Trade Credits for imports into India may continue to be issued subject
to compliance with the provisions contained in Department of Banking Regulation Master
Circular No. DBR. No. Dir. BC.11/13.03.00/2015-16 dated July 1, 2015 on “Guarantees and Co-
acceptances”

Date: Feb, 2018

News: Ombudsman Scheme (for Non-Banking Financial Companies)
Description: - For enabling the resolution of complaints at no cost, relating to certain areas of
services rendered by particular categories of NBFCs registered with the Reserve Bank, facilitate
the satisfaction or settlement of such complaints, and matters connected

Date: May, 2017

News: Ordinance gives RBI power to directly intervene in bad loan cases
Description: The ordinance to amend Banking Regulation Act allows RBI to ask banks to sit
down with loan defaulters and reach a settlement as part of the bad loans’ resolution package
The stressed loans resolution package being prepared by the government will empower the
Reserve Bank of India (RBI) to directly intervene in settling bad loan cases, two people aware of
the matter said.

Date: April, 2017

News: RBI seeks to bridge infrastructure funding gap with new Wholesale banks
Description: After introducing small finance banks and payments banks to cater to retail
financial services customers, the Reserve Bank of India (RBI) has floated the idea of wholesale
and long-term finance banks (WLTF) that will primarily disburse large-ticket loans to
corporates. In a discussion paper released on Friday, the central bank proposed the creation of
these wholesale banks, partly as a way to help underfunded infrastructure sector.
Date: March, 2017
News: The specified Bank Notes (Cessation of Liabilities) Act,2017
Description: The Act repealed the Specified Banknotes (Cessation of liabilities) Ordinance 2016
providing for cessation of liabilities for the Specified Banknotes (SBNs) and for matters
connected therewith and incidental thereto, with effect from December 31, 2016. The SBNs
cease to be the liabilities of the Reserve Bank under Section 34 of the RBI Act and cease to have
the guarantee of the Central Government. From December 31, 2016 no person shall knowingly or
voluntarily hold, transfer or receive any specified banknotes. After the expiry of grace period,
holding of not more than 10 notes in total, irrespective of denomination or not more than 25
notes for the purpose of study/ research/ numismatics is permitted. It aimed to prohibit the
holding, transferring or receiving of scrapped old Rs.500 and Rs. 1000 currency notes from 31
December, 2016.

Date: November, 2016.

News: Withdrawal of Legal Tender Character of existing Rs 500/- and Rs 1000/- Bank
Notes
Description: Rs 500 and Rs 1000 denominations of Bank Notes of the existing series issued by
Reserve Bank of India (hereinafter referred to as Specified Bank Notes) shall cease to be legal
tender with effect from 9th November, 2016, to the extent specified in the Notification. A new
series of Bank Notes called Mahatma Gandhi (New) Series having different size and design,
highlighting the cultural heritage and scientific achievements of the country, will be issued.

Date: April, 2016

News: RBI’s liquidity push
Description: The long-drawn battle between the RBI and banks over liquidity has finally been
put to rest. Taking note of the banks’ plea to ease liquidity, the RBI has announced a slew of
measures that will make life easier for banks

Date: January, 2016

News: Government’s Cash balance with RBI high, puts stress on liquidity
Description: The government's cash balance with the Reserve Bank of India (RBI) was Rs 1.4
lakh crore on January 28, an amount unusually high for this time of the financial year and is
causing acute liquidity pressure in the banking system. The cash pile-up indicates the Centre may
be reluctant to spend in order to meet the fiscal deficit target of 3.9 per cent of the gross domestic
product (GDP) for 2015-16.