RBI announces steps to regulate financial markets, payment systems

The Reserve Bank of India on Thursday announced several measures to regulate and supervise financial markets and to improve payment and settlement systems in the country. Here are some key points:

1. Leverage ratio for banks: To reduce risks of excessive leverage, the RBI says banks now need to meet a minimum 3 per cent LR requirement, which is in accordance with Committee on Banking Supervision (BCBS) designed the Basel III Leverage Ratio. And their capital, as well as exposure measures, will be calculated on a quarter-end basis.
2. On 'tap licensing' of small finance banks: The RBI will issue draft guidelines for 'on tap' licensing of small finance banks by August. It said more time is needed to review the performance of payments banks before considering "the licensing of this category of banks to be put 'on tap'". Initially, the RBI had issued license to 10 such small banks.
3. Regulatory framework for CICs: There is a need to strengthen the corporate governance framework of core investment companies (CIC), says the RBI, adding that it'll set up a "Working Group" to review the regulatory guidelines and supervisory framework applicable to CICs.
4. Review of liquidity management framework: The RBI has decided to constitute an internal working group to review the existing liquidity management framework and suggest measures to simplify it and clearly communicate the objectives. The group will submit its report by mid-July 2019.
5. Foreign exchange trading platform: To create market infrastructure for fair pricing for foreign exchange users, the RBI has proposed to set up a foreign exchange trading platform for retail participants. "The platform will be available to users for transactions from early August 2019," said the RBI.
6. Money market directions review: To bring consistency across products in terms of issuers, investors and other participants, the RBI has proposed to rationalise existing regulations covering different money market products. This would improve transparency and safety of money markets. A draft on this will be in July.
7. Retail participation in security market: The RBI has decided to allow the specified stock exchanges to act as facilitators to aggregate the bids of their stockbrokers and submit a single consolidated bid under the non-competitive segment of the primary auctions of state development loans (SDLs). "The measure will be implemented in consultation with the respective state governments," said the RBI.
8. No RTGS, NEFT charges: The RBI has decided to do away with charges levied on Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) transactions. The Reserve Bank has also asked banks to pass on this benefit to their customers.
9. Review of ATM interchange fee: The RBI has decided to set up a committee to look into ATM charges and fees. The apex bank has set up the panel under the chairmanship of CEO of Indian Banks' Association (IBA) which will submit its recommendations within two months of its first meeting. The central bank took the decision to set up the committee in view of persistent demands to change the ATM charges and fees.

Edited by Manoj Sharma

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