RBI allows net banking in RRBs; to regulate offline payments aggregators

Reserve Bank of India (RBI) governor Shaktikanta Das, during the monetary policy committee (MPC) meet announcement today, said the RBI has taken additional measures with regards to regulating offline payments aggregators, and has decided to allow net banking for all regional rural banks customers. It has also decided to bring in discussion papers on the securitisation of stressed assets framework and expected loss-based approach for loan loss provisioning by banks.

Net banking for RRBs customers

The regional rural banks (RRBs) are currently allowed to provide internet banking facilities to customers only with prior approval of the Reserve Bank, depending upon certain financial and non-financial criteria. The RBI says there is a need to promote the spread of digital banking in rural areas. For this, the RBI will soon issue guidelines. The central bank says the criteria for RRBs to be eligible to provide internet banking are being rationalised.

Regulating offline payment aggregators

To bring in synergy in the regulation of payments aggregators, apart from convergence on standards of data collection and storage, the RBI has said it'll issue detailed instructions to regulate offline payment aggregators. Payment aggregators were brought under regulations in March 2020 after they were designated as payment system operators. The current rules, however, only apply to payment aggregators that are processing online or e-commerce transactions. They don't cover offline aggregators who handle proximity or face-to-face transactions.

New approach to loan loss provisioning

The Reserve Bank has said it'll issue a discussion paper on the expected ‘loss-based approach’ for loan loss provisioning by banks. It has proposed to adopt the expected loss approach (ELA) for loss allowances required to be maintained by banks in exposures. The central bank says the inadequacy of the incurred loss approach for provisioning by banks and its procyclicality is extensively documented. One of the major elements of the global response to these findings is a shift to the expected credit loss (ECL) regime for provisioning, it adds.

Securitisation of stressed assets framework

The central bank has said it'll roll out a discussion paper on the securitisation of stressed assets framework, also inviting comments. In September 2021, the Reserve Bank issued the revised framework for the securitisation of standard assets. On securitisation of non-performing assets, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, provides a framework for such securitisations to be undertaken by Asset Reconstruction Companies (ARCs).

The MPC, meanwhile, has decided to hike the key policy rate for the fourth time in a row by 50 basis points to 5.9%. It also lowered the real gross domestic product (GDP) growth forecast for the financial year 2022-23 to 7% from the 7.2% expected earlier. On inflation, RBI governor Shaktikanta Das said the panel has retained the inflation forecast for FY23 at 6.7% amid upside risks to food prices.