How RBI Plans To Revive The Economy?

In a bid to promote and develop, the corporate bond market and the derivatives markets in India, RBI on Friday announced a slew of measures.

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The Reserve Bank of India (RBI) Governor, Shaktikanta Das, on Friday, while keeping the key rates unchanged and revising the GDP forecast, announced a slew of measures to revive the economy. These measures aim to enhance liquidity support, deepen financial markets, conserving capital among banks and Non-Banking Financial Companies (NBFC), strengthening regulatory supervision, facilitating external trade, and upgrading payment system services. In a bid to promote and develop, the corporate bond market and the derivatives markets in India, RBI on Friday announced the following measures. -To encourage banks to extend credit support to stressed sectors at a lower cost, RBI plans to expand the On Tap Targeted Long Term Repo Operations announced in October to other stressed sectors in line with Credit Guarantee available under Emergency Credit Line Guarantee Scheme 2.0 of the Government. -RBI allowed the Regional Rural Banks (RRB) to access the Liquidity Adjustment Facility and Marginal Standing Facility of RBI and the call/notice money market. This move will expand the money market participation of RRBs and facilitate better liquidity management. To facilitate the development of the credit derivatives market and a vibrant market for corporate bonds, especially for lower-rated issuers, RBI has decided to review the existing Credit Default Swap guidelines. The central bank will issue draft guidelines for public comments soon. -For promoting efficient access to derivative markets and ensure high standards of conduct in Over-The-Counter (OTC) derivative business, RBI has reviewed the 2011 Comprehensive Guidelines on Derivatives, and draft directions are being issued for public comments. -The apex bank also released comprehensive draft directions on call, notice and term money markets, and certificate of deposits, commercial papers, and non-convertible debentures with an original maturity period of less than one year for public feedback. Other measures: -To help banks conserve capital while creating room for fresh lending, RBI allowed the commercial and cooperative banks to retain profits earned in 2019-20 and not make any dividend payouts from the profits of the financial year 2019-20. - To improve the resilience of NBFCs, RBI plans to issue draft guidelines on transparent criteria as per a matrix of parameters for declaration of dividends by different categories of NBFCs will be formulated. -RBI is soon likely to issue guidelines to be on the introduction of Risk-Based Internal Audit in large Urban Co-operative Banks (UCB) and NBFCs and harmonization of guidelines on the appointment of statutory auditors for commercial banks, UCBs, and NBFCs to improve the quality of financial reporting. - To improve the digital payment channel ecosystem with robust security and convenience for users, RBI Digital Payment Security Control Directions will be issued for regulated entities. Draft directions on this will be published soon. -To deepen financial inclusion and financial literacy across the country, the reach of RBI's Centers for Financial Literacy will be expanded from 100 blocks at present to every block in the country by March 2024. For enhanced disclosures on customer complaints and monetary disincentives for recovery of cost, RBI plans to put a Comprehensive Framework for Grievance Redressal Mechanism in banks to improve grievance efficacy redressal. - To facilitate external trade and enhance export competitiveness, additional powers will be delegated to Authorized Dealer banks, including regularizing the cases of direct dispatch of shipping documents & writing off unrealized export bills in some cases. - To make the payment ecosystem more efficient, the RTGS system will soon be made 24/7 in the next few days to reduce settlement and default risk in the system by facilitating Aadhar Enabled Payment System (AEPS), Immediate Payment Service (IMPS), National Electronic Toll Collection (NETC), and National Financial Switch (NFS), RuPay, Unified Payments Interface (UPI) transactions on all days of the week. - To expand the adoption of digital payments safely and securely, RBI plans to increase limits for contactless card transactions and e-mandates for recurring transactions through cards (and UPI) from Rs 2,000 to Rs 5,000 from January 1, 2021.