RBI announces slew of regulatory and developmental measures

SLR-HTM to be reduced 200 bps gradually to 22% by Sept 2015 

The Reserve Bank of India (RBI) in its Fourth Bi-Monthly Monetary Policy Review has announced slew of regulatory and development measurers: 

Financial Structure
  
* Final guidelines on licensing of on Small Banks and Payments Banks will be issued by end-November 2014. 

* Changes in the regulatory framework for NBFCs will be introduced by end-October 2014. 

* Revised NBFC regulatory framework covers prudential regulations on core capital, asset classification and provisioning norms, regulation on deposit acceptance, corporate governance and consumer protection measures. 

* With these changes coming into force, the Reserve Bank will recommence registering new NBFCs. 

Regulatory and supervisory initiatives
 
* Final guidelines for monitoring tools for intra-day liquidity management will be issued in October 2014. 

* Revised guidelines on a leverage ratio (LR) framework and attendant disclosure requirements, drawing on the BCBS's January 2014 paper, will also be issued by end-October 2014. 

Early Warning System (EWS) 
 
* Along with early detection mechanisms for frauds, a Central Fraud Registry is also proposed to be created simultaneously as a searchable centralized database for use by banks. 

* Guidelines for declaring borrowers as “non-co-operative” will be put out by end-October 2014. 

Financial Markets
 
* Scheduled urban co-operative banks (UCBs) allowed access to liquidity adjustment facility (LAF). Detailed guidelines by mid-October 2014. 

Government securities market
 
* Bring down the ceiling on SLR securities under the HTM category from 24% of NDTL to 22% in a graduated manner i.e. 23.5% by 10 January 2015, 23.0% by 04 April 2015, 22.5% by 11 July 2015 and 22.0% by 19 September 2015. 

* Permit re-repo of Government securities subject to appropriate control measures and development of IT infrastructure. Detailed guidelines by end- January 2015. 

Foreign portfolio investors and long-term foreign investors
 
* Provide extended reporting timings for trade in government securities. Detailed guidelines by end-November 2014. 

Hedging of foreign exchange risk
 
* Increased the eligible limit for importers under the past performance route to 100% from the existing 50%.