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Key highlights of RBI’s Statement on Development and Regulatory Policies
Introduction
The Reserve Bank of India (RBI) vide Press Release No. 2024-2025/852, dated August 8, 2024, has proposed several innovative measures to enhance the digital and financial ecosystem. These initiatives aim to increase convenience, improve security, and promote inclusivity in digital transactions. Some of the key proposals include (a)an increase in transaction limit for tax payments via UPI from Rs 1 lakh to Rs 5 lakh, (b)introducing 'Delegated Payments' facility via UPI, (c)creating a public repository for digital lending apps to curb unauthorised players, and (d)speeding up cheque clearance to just a few hours. The key highlights of these proposals are discussed in detail below -
1. Increase in transaction limit for tax payments via UPIto Rs 5 lakh
Due to its seamless features, UPI has become the most preferred mode of payment. Presently, the transaction limit for UPI is capped at Rs 1 lakh. Based on various use cases, the RBI has periodically reviewed and enhanced the limits for a few categories, such as capital markets, IPO subscriptions, loan collections, insurance, medical, and educational services.
As direct and indirect tax payments are common, regular, and of high value, the RBI has decided to increase the limit for tax payments via UPI from Rs 1 lakh to Rs 5 lakh per transaction.
Comments: RBI's proposal to increase the limit for tax payments via UPI from Rs 1 lakh to Rs 5 lakh per transaction would significantly enhance convenience for taxpayers, allowing them to make high-value payments more effectively. This move is expected to streamline the tax payment process, reduce reliance on traditional banking methods, and promote the adoption of digital payments. Also, it will likely boost overall digital transaction volumes, contributing to an inclusive financial ecosystem.
2. 'Delegated Payments' facilityin UPIto set transaction limits
The Unified Payments Interface (UPI) has a very large user base of 424 million individuals. However, there is potential for further expansion of the user base. The RBI has proposed introducing a facility for 'Delegated Payments' via UPI. The "Delegated Payments" would allow an individual (primary user) to set a UPI transaction limit for another individual (secondary user) on the primary user's bank account. This feature is expected to enhance the reach and usage of digital payments across the country.
Comments: This move is expected to significantly expand the user base of UPI by enabling more people to engage in digital transactions conveniently. It will also promote financial inclusion by making digital payments accessible to individuals who may not have direct control over a bank account.
3. Public repository for digital lending apps to combat unauthorised players
On September 2, 2022, RBI issued guidelines on Digital Lending addressing the protection of customers' interests, data privacy, concerns on interest rates and recovery practices, mis-selling, etc. However, media reports have highlighted the continued presence of unauthorised players in digital lending who falsely claim their association with RBI-regulated entities (REs).
Accordingly, to aid the customers in verifying the claim of Digital Lending App's (DLAs) association with REs, RBI has proposed to create a public repository of DLAs deployed by REs, which will be available on the RBI's website.
Further, the repository will be based on data submitted by the REs directly to it (without any intervention by RBI). It will be updated when the REs report the details, i.e., adding new DLAs or deleting any existing DLA.
Comments: This move aims to enhance transparency and protect customers from fraudulent digital lending apps by allowing them to verify the legitimacy of these apps. It will also help curb the activities of unauthorised players who falsely claim association with RBI-regulated entities. It will ensure that customers have access to accurate and updated information about authorised digital lending apps.
4. Proposal to increase frequency of reporting credit information to CICs
Presently, credit institutions (CIs) are required to report the credit information of their borrowers to credit information companies (CICs) at monthly or shorter intervals as mutually agreed between the CI and CIC.
To provide a more up-to-date picture of a borrower's indebtedness, the RBI has decided to increase the frequency of reporting credit information to CICs from monthly intervals to a fortnightly basis or at shorter intervals as mutually agreed between the CI and CIC.
The fortnightly reporting frequency would ensure that credit information reports provided by CICs reflect more recent information. This will be beneficial to both borrowers and lenders (CIs).
Comments: This initiative marks a significant step towards enhancing the accuracy and timeliness of credit information, thereby improving risk assessment and decision-making for lenders. It also ensures that borrowers' credit histories are updated more frequently, leading to fairer access to credit.
5. RBI proposes to speed up the clearance of cheques toa few hours
Currently, the Cheque Truncation System (CTS) processes cheques with a clearing cycle of up to 2 working days. To improve the efficiency of cheque clearing, reduce settlement risk for participants, and enhance customer experience, the RBI has proposed transitioning CTS from the current approach of batch processing to continuous clearing with 'on-realisation-settlement'.
Cheques will be scanned, presented, and passed in a few hours and on a continuous basis during business hours. The clearing cycle will reduce from the present T+1 days to a few hours.
Comments: This move aims to improve the efficiency of cheque clearing by reducing the processing time from T+1 day to a few hours, thereby enhancing the overall customer experience. It will also mitigate settlement risks for participants, ensuring faster and more secure transactions. Also, continuous clearing with 'on-realisation settlement' will streamline banking operations and provide quicker access to funds for account holders.
RBI keeps Repo Rate unchanged at 6.50%
On the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC), in its meeting, has decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50 %. Consequently, the standing deposit facility (SDF) rate remains unchanged at 6.25 % and the marginal standing facility (MSF) rate and the Bank Rate remain at 6.75 %.
SEBI revises AIF norms; Tenure for large value close-ended AIFs for accredited investors can be extended up to 5 years
SEBI has notified an amendment to the SEBI (Alternative Investment Funds) Regulations, 2012. A proviso to regulation 13(5) has been substituted. As per the amended norms, a large value close-ended Alternative Investment Fund for accredited investors may now be permitted to extend its tenure up to five years subject to the approval of two-thirds of the unit holders by the value of their investment in the large value fund for accredited investors. Earlier, no such restriction was prescribed.
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