Reserve Bank of India's Regulatory Amendments
The Reserve Bank of India (RBI) has announced several regulatory changes to improve financial stability and borrower benefits. Out of seven changes, three will be effective from October 1, while the rest are draft proposals open for public feedback.
Key Amendments Effective October 1
- Interest Rate on Advances:
- Banks can now reduce spread components on floating rate loans before the current three-year lock-in period.
- This aims to benefit borrowers by enabling faster transmission of rate cuts, lowering EMIs or interest costs.
- Borrowers have the option to switch to fixed-rate loans at interest rate resets, which is no longer mandatory.
- Lending Against Gold and Silver:
- Banks and urban co-operative banks (tier-3 and -4) can offer working capital loans using gold as collateral, not limited to jewellers.
- Basel III Capital Regulations:
- Increases the eligible limit for perpetual debt instruments (PDIs), allowing banks to raise tier-1 capital in offshore markets.
Draft Proposals Open for Feedback
- Gold Metal Loans (GML):
- Proposes extending the repayment tenor to 270 days from the current 180 days.
- Suggests allowing non-manufacturing jewellers to avail GML for outsourced production.
- Large Exposures Framework (LEF) & Intragroup Transactions:
- Aligns LEF and ITE norms for foreign bank branches in India.
- Exposures to head offices will be considered only under LEF with expanded credit risk mitigation benefits.
- Credit Data Reporting:
- Proposes weekly submission of credit information to bureaus, replacing the current fortnightly requirement.
- Mandates faster error rectification and inclusion of CKYC numbers in reports.
Public comments on the draft circulars are invited until October 20.
