FAQs on Reset of Floating Interest Rate on Equated Monthly Instalments (EMI) based Personal Loans

/1 Comment/in , /by

– Team Finserv | finserv@vinodkothari.com

On August 18, 2023, the RBI came up with a circular on Reset of Floating Interest Rate on Equated Monthly Instalments (EMI) based Personal Loans (‘Circular) casting certain obligations and disclosure requirements on Regulated Entities (REs) at the time of reset of floating interest rate on EMI based Personal loans. Accordingly, this Circular shall be adhered to by all applicable entities at the time of reset of floating interest rate on such loans.

We have developed a set of FAQs on the Circular, where we intend to answer some of the critical questions relating to the actionables by the REs at the time of reset of floating rate. 

Further, our detailed article on this topic can be read here – RBI streamlines floating rate reset for EMI-based personal loans

Read more →

RBI streamlines floating rate reset for EMI-based personal loans

/0 Comments/in , /by

Major exercise for home lenders to reflect changes in existing home loans by year-end

– Team Finserv | finserv@vinodkothari.com

As indicated in the last Monetary Policy review, the RBI introduced new regulations for rate-based variations in floating rate loans, requiring lenders to mandatorily provide as many as 6 options to borrowers. The new regulations, vide the August 18, 2023[1] circular, will require all long-term consumer credit lenders, mainly home lenders, to incorporate changes in their policies and agreements by the end of the calendar year. We are of the view that this will also necessitate lenders to provide a meaningful fixed rate borrowing option, both at the start of the loan as also at the time of interest rate variations.

Read more →

Penal Charges get regulated; cannot accrue interest

/0 Comments/in , /by

– Aanchal Kaur Nagpal | Senior Manager | aanchal@vinodkothari.com

Loader Loading…
EAD Logo Taking too long?

Reload Reload document
| Open Open in new tab

Download as PDF [129.22 KB]

Our Resources on the topic are:

  1. Penal charges not a cash-cow for lenders
  2. The Dos and Don’ts of Penal Charges

KYC/AML risk categorisation of customers

/0 Comments/in , , /by

Key Points as per the RBI’s Directions on Risk Management under the KYC and PML Regime

-Anita Baid | Vice President | anita@vinodkothari.com

In line with the Reserve Bank of India’s (RBI) directions on risk management under the Know Your Customer (KYC) norms and Anti-Money Laundering (AML) standards, Non-Banking Financial Companies (NBFCs) are required to categorize their customers into low, medium, and high-risk categories. This risk categorization plays a crucial role in determining the level of due diligence to be undertaken by the NBFC while establishing and maintaining relationships with customers. Here are some key points to consider regarding the risk categorization process for legal entities (corporate borrowers, LLPs, trust, etc.) as well for individual borrowers:

Read more →

Risk-based Internal Audit for NBFCs – Applicability & Implementation

/0 Comments/in , /by

– Subhojit Shome, Assistant Manager | subhojit@vinodkothari.com

Loader Loading…
EAD Logo Taking too long?

Reload Reload document
| Open Open in new tab

Download as PDF [1.00 MB]

Read our other resources on RBIA here:

  1. Risk-based Internal Prescription for Audit Function

Rise, Fall & Subsequent Legitimisation of Default Loss Guarantees

/0 Comments/in , , /by

Anita Baid & Subhojit Shome | finserv@vinodkothari.com

Loader Loading…
EAD Logo Taking too long?

Reload Reload document
| Open Open in new tab

Download as PDF [368.75 KB]

Read our FAQs on Default Loss Guarantee in Digital Lending

YouTube live: RBI Guidelines on Default Loss Guarantee

/0 Comments/in , , , , , /by

Anita Baid in conversation with Vinod Kothari

Live on YouTube – 20th June, 2023 | 5:00 P.M. – https://www.youtube.com/@vinodkotharicompany3966/videos

Loader Loading…
EAD Logo Taking too long?

Reload Reload document
| Open Open in new tab

Download as PDF [229.46 KB]

A comprehensive framework for compromise settlement and technical write offs

/0 Comments/in , /by

Dayita Kanodia | Executive finserv@vinodkothari.com

The first bad bank loan was, no doubt, made around the time as the opening of the first bank.

James Grant[1]

Background

RBI  released the Framework for Compromise Settlements and Technical Write-offs[2] (Framework) on June 8 2023. This framework, issued exactly four years after the release of the Prudential Framework for Resolution of Stressed Assets[3] (PFRSA), aims to rationalize and harmonize the instructions earlier issued. Additionally, while PFRSA was applicable only to banks and systemically important NBFCs (among others), the present Framework is applicable across all REs, including base layer NBFCs.

Subsequently, to clear the ambiguities that may have arisen after the issuance of the Framework, the RBI also released a set of Frequently Asked Questions[4] on the topic: of these, these FAQs were largely intended to respond to certain questions of intent that were being thrown at the regulator in releasing the Framework.

This article discusses the Framework along with its applicability, as also it intends to help REs to make a calculated decision on choosing between compromise settlements, writedowns, restructuring, or doing nothing at all. For either of the options, the article also discusses  the other requirements which need to be ensured while pursuing the option. 

Read more →

FAQs on Default Loss Guarantee in Digital Lending

/5 Comments/in , , , /by

An understanding of the Guidelines issued by RBI

Team Finserv | finserv@vinodkothari.com

On September 02, 2022, the RBI issued the “Guidelines on Digital Lending” (“DL Guidelines”), which had essentially put a bar on “Loss sharing/ structured default guarantee arrangements” such as First Loss Default Guarantees, likening their nature to that of “synthetic securitisation” as defined under the Master Direction – Reserve Bank of India (Securitisation of Standard Assets) Directions, 2021 (“SSA Directions”). This caused a disruption in the digital lending industry as most of the arrangements ran on some form of loss-sharing arrangement. (Refer to our FAQs on the Digital Lending Guidelines here)

In its Statement on Developmental and Regulatory Policies dated June 8, 2023, the RBI announced its intention to issue a regulatory framework for permitting Default Loss Guarantee arrangements in Digital Lending[1]. The same day, the Guidelines on Default Loss Guarantee (DLG) in Digital Lending have been issued by the regulator (‘DLG Guidelines’).

We have developed a set of FAQs on the DLG Guidelines, where we intend to answer some of the critical questions relating to the default guarantee arrangements.

Read more →

RBI to release guidelines to permit default guarantees

/0 Comments/in , , , , /by

The evolution of a concept, from its inception to being prohibited, and ultimately establishing a regulatory framework to allow its practice

– Anita Baid (finserv@vinodkothari.com)

The concept of First Loss Default Guarantees (FLDGs) in the financial industry has experienced a remarkable journey, marked by its inception, subsequent prohibition, and eventually being on the verge of a resurgence with the introduction of a regulatory framework. It had gained significant attention in the realm of fintech industry, whose remarkable expansion in India is largely responsible for propelling FLDGs. Nevertheless, it is essential to note that guarantees are not a novel concept; they have been widely employed in the financial sector for a considerable period of time. (Our article on ‘Lending without risk and risk without lending’ can be read here)

In its Statement on Developmental and Regulatory Policies dated June 8, 2023, the RBI has announced its intention to issue a regulatory framework for permitting Default Loss Guarantee arrangements in Digital Lending. This article delves into the intriguing evolution of Structured Default Guarantees, examining their rise, fall, and subsequent rebirth, shedding light on the regulatory landscape that has shaped their existence.

Read more →