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Statement on Developmental and Regulatory Policies by RBI
Statement on Developmental and Regulatory Policies by RBI

December 8, 2023

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December 8, 2023, Reserve Bank of India (RBI) published a statement indicating upcoming developments in policy measures as follows:

Financial Markets

1. Review of the regulatory framework for hedging of foreign exchange risks - 
The regulatory framework governing hedging of foreign exchange risks is being made more comprehensive by consolidating the directions in respect of all types of transactions – over-the-counter (OTC) and exchange traded - under a single Master Direction. The framework has also been refined to enhance operational efficiency and ease access to foreign exchange derivatives, especially for users with small exposures. The Master Direction will be issued soon.

Regulations

1. Framework for Connected Lending - 
Connected lending or lending to persons who are in a position to control or influence the decision of a lender can be of concern, if the lender does not maintain an arm’s length relationship with such borrowers. Such lending can involve moral hazard issues leading to compromise in pricing and credit management. Accordingly a unified regulatory framework on connected lending for all the regulated entities will be notified soon.

2. Regulatory Framework for Web-Aggregation of loan products
Web-aggregators of loan products (WALP) entails aggregation of loan offers from multiple lenders on an electronic platform which enables the borrowers to compare and choose the best available option to avail loan from one of the available lenders. Loan aggregation services offered by the Lending Service Providers (LSPs) will be brought under a comprehensive regulatory framework, focussing on enhancing the transparency in the operations of WALPs, increasing customer centricity and enabling the borrowers to make informed choices. The detailed guidelines will be issued soon.

 

Payment Systems and Fintech

1. Enhancing UPI transaction limit for Specified Categories - 
To encourage the use of UPI for medical and educational services, the limit for payments to hospitals and educational institutions is being proposed to be increased from ₹1 lakh to ₹5 lakh per transaction. Separate instructions will be issued shortly.

2. Enhancement of e-mandate limit for specified categories for recurring online transactions - 
Exempting the requirement of additional factor of authentication for transactions up to ₹1 lakh for the following categories is being proposed: subscription to mutual funds, payment of insurance premium and payments of credit card bills. The other existing requirements such as pre- and post-transaction notifications, opt-out facility for user, etc. will continue to apply to these transactions. The revised circular will be issued shortly.

3. Establishment of Cloud Facility for the Financial Sector in India - 
RBI is working on establishing a cloud facility for the financial sector in India. The proposed facility would enhance the security, integrity and privacy of financial sector data. It is also expected to facilitate scalability and business continuity. The cloud facility will be set up and initially operated by Indian Financial Technology & Allied Services (IFTAS), a wholly-owned subsidiary of RBI. Eventually, the cloud facility will be transferred to a separate entity owned by the financial sector participants. This cloud facility is intended to be rolled out in a calibrated fashion in the medium term.


4. Setting up of Fintech Repository - 

For better understanding the developments in the FinTech ecosystem with an objective of supporting the sector, a Repository for capturing essential information about FinTechs, encompassing their activities, products, technology stack, financial information etc. is being proposed. FinTechs would be encouraged to provide relevant information voluntarily to the Repository which will aid in designing appropriate policy approaches. The Repository will be operationalised by the Reserve Bank Innovation Hub in April 2024 or earlier. Necessary guidelines for this will be issued soon.

 

If any of the above topics are of interst to you, reach out to us by writing to garima@nasscom.in with a copy to policy@nasscom.in


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Garima Prakash
Manager, Public Policy and Government Affairs

Reach out to me for all things policy about e-commerce, international trade, export controls, start-ups and fintech

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