1. RBI Approves Interoperable Internet Banking Payment System
On March 4, 2024, the Reserve Bank of India (RBI) approved NPCI Bharat BillPay Ltd (NBBL) to introduce an interoperable payment system for internet banking, aimed to be implemented within Calendar Year 2024. This initiative, announced during the Digital Payments Awareness Week (DPAW) in Mumbai, is set to expedite the settlement process for merchants significantly.
Key Enhancements:
- User Confidence: This measure is expected to boost consumer confidence in digital payments significantly.
- Promotion of Digital Payments: The RBI has called on all stakeholders, including industry bodies, payment system operators, and the media, to promote the initiative ‘Har Payment Digital’.
- Growth in Digital Payments: Digital transactions have seen a substantial rise from 162 crore in FY 2012-13 to over 14,726 crore transactions till February 2024, demonstrating a roughly 90-fold increase in 12 years.
- UPI’s Dominance: The Unified Payment Interface (UPI) now commands nearly 80% of digital payment share, with transaction volume ballooning from 43 crore in CY 2017 to 11,761 crore in CY 2023.
2. RBI Sanctions First Ever All-Stock Amalgamation of SFBs
The RBI has approved a USD 530 million all-stock amalgamation of Fincare Small Finance Bank Ltd. with AU Small Finance Bank Ltd., effective from April 1, 2024. This merger marks the first of its kind between two small finance banks (SFBs) in India.
Merger Details:
- Shareholder Benefits: For every 2,000 shares held in Fincare SFB, shareholders will receive 579 shares of AU SFB.
- Post-Merger Equity: Post-amalgamation, Fincare SFB’s shareholders will own 9.9% of AU Small Finance Bank.
- Capital Infusion: Post-merger, Fincare SFB’s promoters will inject Rs 700 crore of fresh capital.
- Regulatory Approval: The merger was pre-approved by the Competition Commission of India (CCI) in January 2024.
3. Directive to IIFL Finance Regarding Gold Loan Operations
The RBI has ordered IIFL Finance Ltd. to halt the sanctioning, disbursing, or selling of gold loans effective from March 4, 2024, citing serious concerns over their gold loan operations discovered during a financial review as of March 31, 2023.
Concerns and Measures:
- Operational Issues: Inaccuracies in gold assessment and breaches in Loan-to-Value ratios were significant issues found.
- Transparency Problems: There was a noted lack of transparency in the charges levied on customers.
- Immediate Restrictions: IIFL Finance is restricted from new gold loan activities but can continue servicing its existing portfolio.
- Future Compliance: The continuation of these restrictions is pending a special audit and satisfactory resolution of the issues identified.
These strategic directives from the RBI not only aim to streamline and secure financial operations but also promote the broader adoption of digital payment systems across India, enhancing efficiency and consumer protection in the financial sector. The integration efforts and regulatory oversight exemplify the RBI’s commitment to fostering a stable and progressive financial environment.
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