RBI Circular Notification Press Release and Instructions issued by Reserve bank of India. News and Article on provisions, Rate changes, Policy changes and FAQ
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The RBI today tightened the provisioning requirement for banks on certain types of bad and restructured loans as part of its prudential provisioning framework. Banks’ bad loans are classified into three categories — sub-standard, doubtful and loss. The advances classified as ‘sub-standard’ will now attract a provision of 15 per cent as against the existing 10 per cent, the apex bank said in its monetary policy statement for FY12 here.
The Reserve Bank has capped interest rates charged by micro finance institutions from small borrowers at 26 per cent, but opened for MFIs the bank credit line which was curtailed following the crisis faced by the sector in October, 2010.
Home, auto and corporate loans are likely to cost more, with the Reserve Bank raising key policy rates by half a percentage point, bankers said today. I think banks do not have any other option but to increase rates. It could be 25 basis points or 50 basis points, depending on individual banks, IDBI Bank Executive Director R K Bansal told PTI.
The Annual Policy for 2011-12 is set in conditions significantly different from those a year ago. Last year’s policy was made in an environment of incipient domestic recovery and uncertainty about the state of the global economy. While signs of inflation were visible, they were driven primarily by food items. Nonetheless, there was a clear risk of food price pressures spilling over into more generalised inflation, as the recovery consolidated and domestic resource utilisation rose to levels which stretched capacities. Throughout last year, the goal of monetary policy was to nurture the recovery in the face of persistent global uncertainty, while trying to contain the spill-over of supply side inflation.
The Annual Policy for 2011-12 is set in conditions significantly different than they were a year ago. Last year’s policy was made in an environment of incipient domestic recovery amidst uncertainty about the state of the global economy, a perception that was reinforced with the precipitation of the Greek sovereign debt crisis a few weeks later. While signs of inflation were visible, they were driven primarily by food. However, food price pressure spilling over into more generalised inflation was clearly a risk as the recovery consolidated and domestic resource utilisation rose to levels which stretched capacities. Throughout the year, the goal of monetary policy was to nurture the recovery in the face of persistent global uncertainty while trying to contain the spillover of supply-side inflation.
As announced today in the Annual Monetary Policy 2011-12, it has been decided to increase the repo rate under the Liquidity Adjustment Facility (LAF) by 50 basis points from 6.75 per cent to 7.25 per cent with immediate effect. Further, as announced in the Policy, the reverse repo rate under the LAF, determined with a spread of 100 basis points below the repo rate, will stand at 6.25 per cent with immediate effect.
In exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949 and in partial modification of its directive DBOD.No.Dir.BC.75/13.03.00/2002-03 dated February 28, 2003 as amended from time to time, the Reserve Bank of India, being satisfied that it is necessary and expedient in the public interest so to do, hereby directs that, the rate of interest on domestic and ordinary Non-Resident savings deposits as well as savings deposits under Non-Resident (External) Accounts Scheme shall be 4.0 per cent per annum with immediate effect.
Please refer to the Monetary Policy Statement 2011-12 dated May 3, 2011, in terms of which the repo rate under the Liquidity Adjustment Facility (LAF) has been increased by 50 basis points from 6.75 per cent to 7.25 per cent with immediate effect. Accordingly, the Standing Liquidity Facilities provided to banks (export credit refinance) and Primary Dealers (PDs) (collateralised liquidity support) from the Reserve Bank would be available at the revised repo rate, i.e., at 7.25 per cent with effect from May 3, 2011.
It has been decided to regulate microfinance sector by the Reserve Bank as a separate category. In this connection, we advise that bank credit to Micro Finance Institutions extended on, or after, April 1, 2011 for on-lending to individuals and also to members of SHGs / JLGs will be eligible for categorisation as priority sector advance under respective categoriesviz., agriculture, micro and small enterprise, and micro credit (for other purposes), as indirect finance, provided not less than 85% of total assets of MFI (other than cash, balances with banks and financial institutions, government securities and money market instruments) are in the nature of “qualifying assets”. In addition, aggregate amount of loan, extended for income generating activity, is not less than 75% of the total loans given by MFIs.
RBI has permitted AD Category – I banks and SEBI authorized Depository Participants to open and maintain, without prior approval of the Reserve Bank, non-interest bearing Escrow accounts in Indian Rupees in India on behalf of residents and/or non-residents, towards payment of share purchase consideration and / or provide Escrow facilities for keeping securities to facilitate FDI transactions subject to certain terms and conditions.
