Amendments to Credit Card and Debit Card Master Direction: Enhancing Consumer Protection
-Archisman Bhattacharjee I finserv@vinodkothari.com
-Archisman Bhattacharjee I finserv@vinodkothari.com
– Vinod Kothari | finserv@vinodkothari.com
One of the most important, and often the most complicated issues in applying IndAS 109 to financial assets, particularly loan portfolios, is to the computation of expected credit losses (ECL). The following points need to be noted about ECL computation:
– Vinod Kothari, finserv@vinodkothari.com
Some of the RBI’s recent stringent actions, with stop-business directions, raise an alarm amongst financial sector entities. Are these concerns limited to a particular type of lending, or can they lead to any general observations on the quality of lending? One shouldn’t be tunnel-visioned and believe that these regulatory objections are limited to specific types of collateral – gold lending, IPO funding or loans against share trading. In fact, underlying these concerns is a general philosophy – lenders must do a close introspection of their lending practices.
Read more →– Archisman Bhattacharjee & Kaushal Shah | finserv@vinodkothari.com
In order to harmonise the procedure of filing of regulatory returns across Supervised Entities (SEs) and create a single reference point, the RBI has issued Master Directions RBI (Filing of Supervisory Returns) Directions, 2024 (‘Returns Master Directions’) on February 27, 2024. As stated in the Statement on Developmental and Regulatory Policies dated August 10, 2023, these directions consolidate and harmonize instructions for filing supervisory/ regulatory returns.
The Returns Master Directions cover the following entities, collectively referred to as Supervised Entities (‘SEs’):
These Master Directions are effective immediately as on the date of notification (i.e. February 27, 2024).
Read more →– Chirag Agarwal, finserv@vinodkothari.com
The RBI has vide its Statement on Developmental and Regulatory Policies dated February 08, 2024, announced its decision to mandate Regulated Entities (REs) to provide Key Fact Statement (KFS) for retail and Micro, Small & Medium Enterprise (MSME) loans.
Register here: https://forms.gle/cQ3RYWAwhqd3hqTs7 |
Our resources on KYC can be accessed here.
Our resources on SBR:
Vinod Kothari, finserv@vinodkothari.com
Not sure if any cake was cut[1], but NBFC regulation turned 60, on 1st Feb., 2024. It was on 1st Feb., 1964 that the insertion of Chapter IIIB in the RBI Act was made effective. This is the chapter that gave the RBI statutory powers to register and regulate NBFCs.
What was the background to insertion of this regulatory power? Chapter IIIB was inserted by the Banking Law (Miscellaneous Provisions) Act, 1963. The text of the relevant Bill, 1963 gives the object of the amendment: “The existing enactments relating to banks do not provide for any control over companies or institutions, which, although they are not treated as banks, accept deposits from the general public or carry other business which is allied to banking. For ensuring more effective supervision and management of the monetary and credit system by the Reserve Bank, it is desirable that the Reserve Bank should be enabled to regulate the conditions on which deposits may be accepted by these non-banking companies or institutions. The Reserve Bank should also be empowered to give to any financial institution or institutions directions in respect of matters, in which the Reserve Bank, as the central banking institution of the country, may be interested from the point of view of the control of credit policy.”
Therefore, there were 2 major objectives – regulation of deposit-taking companies, and giving credit-creation connected directions, as these entities were engaged in quasi-banking activities.
Read more →Analysis of the Draft Framework for Self Regulatory Organization(s) in the Fintech Sector
– Archisman Bhattacharjee, finserv@vinodkothari.com
On January 15, 2023, the Reserve Bank of India (RBI) published a draft Framework titled “Draft Framework for Self-Regulatory Organisation(s) in the Fintech Sector” (‘Framework’) with the objective of eliciting feedback and gauging stakeholder expectations. In this article we analyse the said Framework which in our view is targeted more towards the unregulated FinTech sector and recommend why an SRO should opt for a recognition from the RBI.
The FinTech sector is booming and is a market disruptor as well as facilitator, based on the report published by Inc42, the estimated market opportunity in India fintech is around $2.1 Tn+ and currently there are 23 FinTech “unicorns” with combined valuation of $74 Bn+ and 34 FinTech “soonicorns” with combined valuation of $12.7Bn+.
The main functions of the FinTech sector includes providing solutions to Regulated Entities (REs) both as outsourced information technology providers as well as acting as lending services (such as customer acquisition, KYC task, servicing, etc.). The sector, however, not being under the direct supervision of the RBI may pose significant risks toward customer protection, data privacy, cyber security, grievance handling, internal governance, financial system integrity. In this respect the introduction of the Framework of Self-Regulatory Organisation(s) in the FinTech Sector (SRO-Ft) remains a welcome move where the SRO-FT would act as an instrument of self-regulation for the market participants, which may include both regulated and unregulated entities, by coming out with its own policies, codes of conducts etc. which are aligned with the industry standards, best practices and expectations/ recommendations of the RBI and other sector regulators. However it should be noted that due to lack of legislation, the RBI does not have have any jurisdiction over the FinTech sector (Discussed in details in Section 2 of this Article) vis-a-vis their SRO, unless the SRO’s voluntarily submit to the jurisdiction of the RBI and the same has also been envisaged under Para 3 of the directions under the head “Introduction” of the draft Framework under discussion.
Read more →