RBI to tweak regulatory framework on non- banking business
The Reserve Bank of India is planning to tweak its regulatory framework governing non-banking businesses, including insurance and asset management, undertaken by banks and their group entities.
An internal panel, set up by the central bank for this purpose, has recommended a clearer and more explicit segregation of core and non-core businesses of banks and the group entities. The scope of the regulatory revamp could also cover issues like the need for further alignment of norms for both banks and non-banking financial companies, and consolidation of group entities of banks that undertake non-banking activities. It may also focus on any conflict of interests between an entity’s core and non-core businesses.
According to senior bankers, all major banks and their group entities are currently involved in non-core businesses, any regulatory overhaul assumes significance, as they will have to alter their strategy in sync with the revised norms. The proposed move is the latest in a series of efforts by the central bank to continue to bolster its regulatory architecture relating to financial institutions, in sync with the changing demands of time.
IRDAI to develop insurance cover for rural population
The Insurance Regulatory and Development Authority of India (IRDAI) has set up a 24-member committee to develop and suggest an affordable and comprehensive cover for the rural population.The proposed cover will be a benefit based / parametric structure, called Bima Vistaar, the IRDAI has also asked the panel to recommend a regulatory framework for the cover.
The insurance regulator has also asked the committee to develop and suggest constitution and operation of a preferably, women centric distribution channel to focus on reaching untapped/ rural areas – Bima Vahak – and recommend the regulatory framework.
According to IRDAI, in order to facilitate availability of an affordable, simple but comprehensive cover to the hitherto untapped areas and rural population, it is necessary to understand the needs and requirements in those areas and formulate suitable risk cover and customized distribution channels who appreciate the market dynamics in such areas. “Field forces in remote areas need to build trust of the local population, be more patient and persuasive to be able to explain the nuances of the need for risk cover.
The National Financial Reporting Authority has cautioned companies and auditors against non-accrual of interest on borrowings declared NPA by banks or for which the company is negotiating a one-time settlement.
“Mere classification of the company’s loans as NPAs by the lender banks does not relieve the borrowing firm from its liability towards payment of interest or the principal,” NFRA said. RBI guidelines still require the banks to maintain a memorandum record of accrued interest on the NPAs. This, NFRA said, reflects that the bank has not legally released the borrowers from their contractual liability to pay interest on their borrowings.
The directive comes against the backdrop of instances of firms discontinuing accrual/recognition of interest expense on bank borrowings.
