NEW DELHI, (IANS): With the RBI’s 50 basis points cumulative reduction in policy rates
since February this year, transmission of the rate cut by banks is expected in the
coming quarters, according to an SBI report.
The report points out that following the RBI’s 25 basis
point cut in repo rate in February, public sector banks reduced deposit rates
by 6 basis points, and foreign banks reduced 15 basis points, while private
banks increased the rate by 2 basis points.. The analysis of the weighted
average lending rate (WALR) on fresh loans versus the repo rate reveals that
WALR for public sector banks and scheduled commercial banks (SCBs) closely
follow the adjustments in the policy rate, implying an effective and timely transmission
mechanism.
The report also points out that on the regulatory and
development policy front, the RBI has decided to widen the option for managing
stressed assets. It is proposed that a new market-based framework for
securitisation of stressed assets will be created, in addition to the existing
ARC route under the SARFAESI Act, 2002. This will give more flexibility in
managing NPA.
Current guidelines on co-lending are applicable only to
arrangements between banks and NBFCs for priority sector loans. Although
co-lending is a win-win situation for all parties, the current model is still
under examination. The expansion of co-lending to all regulated entities is a
welcome move, but exact details are needed to gauge the impact and the scope of
this new arrangement, the SBI report states.
That report also points out that with the recent spurt in
gold loan portfolio coupled with an increase in the gold prices and volatility,
regulatory intervention on account of fear of loan-to-value limit breaches is
natural. Different sets of lenders, regulated and unregulated, presently follow
different loan matrices on Loan to Value (LTV), interest rate, distribution
channels, etc. RBI will revisit and issue comprehensive regulations on
prudential norms and conduct-related aspects for gold loans.
The proposed review to harmonise and consolidate
guidelines covering non-fund based facilities across all REs includes review of
instructions on issuance of partial credit enhancement (PCE), with a view to,
inter alia, broadening funding sources for infrastructure financing is a
welcome move and could facilitate infrastructure financing, the report says.
This announcement follows the announcement on similar
lines in the Union Budget. Present regulations for issuance of partial credit
enhancement require capital for 100 per cent of the bond amount, even though
PCE can be provided to only 20 per cent of the bond.
The PCE providing institution also has to provide a
higher proportion of risk weightage for these instruments. RBI move could
potentially be to revisit the capital requirements and to increase the exposure
limits for PCE to make the instrument more market fit and also facilitate
deepening the bond market, the SBI report states.
RBI permitted NPCI to upwardly revise transaction limits
in UPI for person-to-merchant payments (P2M) based on evolving user needs.
However, P2P transactions on UPI will continue to be capped at Rs 1 lakh, as
hitherto. This will boost UPI payments in large value transactions like tax
payments, etc.
In all, the evolving situation globally warranted policy
agility to address the emerging challenges. Today's policy has scored on this
count, and accommodation at this stage does pave the way for a more aggressive
policy response if required during FY26. Development and regulatory policies
appear routine, but tied to the emerging situation will ensure financial
stability, the SBI report added.
