Amendments in the FEMA, 1999
RBI Updates February 2024
1. Action against Paytm Payments Bank Limited under Section 35A of the Banking Regulation Act, 1949
RBI vide Press Release dated March 11, 2022, directed Paytm Payments Bank Limited (PPBL) to stop onboarding new customers with immediate effect. The Comprehensive System Audit report and subsequent compliance validation report of the external auditors revealed persistent non-compliance and continued material supervisory concerns in PPBL.
Hence, RBI on January 31, 2024, issued directions for PPBL for compliance, which are summarized below:
- Deposits, credit transactions, or top-ups shall not be allowedin any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc. after February 29, 2024. However, interest, cashback, or refunds may be credited anytime.
- Withdrawal or utilization of balances by its customers from their accounts is to be permitted without any restrictions, up to their available balance.
- Except as stated above, other banking services like fund transfers, Bharat Bill Payment Operating Unit(BBPOU), and UPI facility will not be provided by PPBL after February 29, 2024.
- The Nodal Accounts of One97 Communications Limited and Paytm Payments Services Limited will be terminatedat the earliest, in any case not later than February 29, 2024.
- Settlement of all pipeline transactions and nodal accounts (in respect of all transactions initiated on or before February 29, 2024) shall be completed by March 15, 2024,and no further transactions shall be permitted thereafter. , dated March 11, 2022, directed Paytm Payments Bank Limited (PPBL) to immediately stop onboarding new customers
The link for the aforesaid Press Release is as follows:
https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/PR1774PPBLBEDADC47266E41F7A65307C63180E2B1.PDF
2. Streamlining of Internal Compliance monitoring function – leveraging the use of technology
RBI had recently assessed selected Supervised Entities (SEs) of the prevailing system in place for internal monitoring of compliance with regulatory instructions and the extent of usage of technological solutions to support this function. It is seen that SEs have adopted varying levels of automation to support this function, ranging from the use of macro-enabled spreadsheets to workflow-based software solutions. The review brought out that automation of the compliance monitoring process in SEs remains a work in progress with various aspects of this function being carried out with significant manual intervention. There is a need to implement comprehensive, integrated, enterprise-wide, and workflow-based solutions/ tools to enhance the effectiveness of this function.
Accordingly, RBI vide Notification dated January 31, 2024, advised the Regulated Entities to carry out a comprehensive review of their existing internal compliance tracking and monitoring processes and institute necessary changes to existing systems or implement new systems by June 30, 2024.
The link for the aforesaid Notification is as follows:
https://rbidocs.rbi.org.in/rdocs/notification/PDFs/COMPLIANCEMISCIRCULARB019FBA6000948078940E94837A11A10.PDF
3. Interim Budget Speech 2024-25
On February 01, 2024, the Honorable Finance Minister Ms. Nirmala Sitharaman presented the Interim Budget 2024-25 stating the development plan and approach of the Government for the country for the Financial Year 2024-25.
The link for the aforesaid Interim Budget Speech is as follows:
https://egazette.gov.in/(S(eo0rzjxycbsg2eqp2nj0hbuu))/ViewPDF.aspx
4. Participation of Indian Banks in India International Bullion Exchange IFSC Limited (IIBX)
RBI Vide Circular February 09, 2024, permitted;
- Branch/subsidiary/joint venture of an Indian bank in GIFT-IFSC to act as a Trading Member (TM)/Trading and Clearing Member (TCM) of IIBX, and
- Indian banks authorized to import gold/silver to act as Special Category Clients (SCC) of IIBX.
This circular applies to all Scheduled Commercial Banks (other than Regional Rural Banks) and shall be effective from February 09, 2024. Detailed instructions with respect to the above have been provided in the Annexure to the circular.
The link for the aforesaid Circular is as follows:
The Directions were introduced in the public interest and for the purpose of enabling the Reserve Bank to regulate the financial system to the advantage of the country and to prevent the affairs of any Non-Banking Financial Company (NBFC) from being conducted in a manner detrimental to the interest of investors and depositors or in any manner prejudicial to the interest of such NBFCs.
The Directions are specified in the above-mentioned notification.
The link for the aforesaid Notification is as follows:
https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12550&Mode=0
5. Action against Paytm Payments Bank Limited
RBI had put certain business restrictions on Paytm Payments Bank Ltd (PPBL), vide Press Releases dated March 11, 2022, and January 31, 2024.
Keeping in view the interest of customers (including merchants) of PPBL who may require more time to make alternative arrangements and the larger public interest, RBI vide Press Release dated February 16, 2024, made partial modifications to the earlier press releases, which are summarized as follows:
- Deposits or credit transactions or top-ups shall not be allowedin any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc. after March 15, 2024 (extended from the earlier stipulated timeline of February 29, 2024).
- Withdrawal or utilization of balances by its customers from their accounts is to be permitted without any restrictions, up to their available balance. (No Change).
- Except (ii) as stated above, other banking services like fund transfers, Bharat Bill Payment Operating Unit(BBPOU), and UPI facility should not be provided by the bank after March 15, 2024 (extended from the earlier stipulated timeline of February 29, 2024)
- The Nodal Accounts of One97 Communications Ltd and Paytm Payments Services Ltd. are to be terminatedat the earliest, in any case not later than February 29, 2024. (No Change).
- Settlement of all pipeline transactions and nodal accounts (in respect of all transactions initiated on or before February 29, 2024) shall be completed by March 15, 2024,and no further transactions shall be permitted thereafter.
It is also directed that withdrawals up to their available balance should be facilitated by the bank from all accounts and wallets, excluding the ones that are frozen or lien marked by Law Enforcement or judicial authorities.
Further, it is directed that the bank shall facilitate a seamless withdrawal of customer deposits that are parked with partner banks under the automatic ‘sweep-in sweep-out’ facility without causing any inconvenience to such customers.
The link for the aforesaid Press release is as follows:
https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/PR1895ACTIONAGAINSTPAYTMPAYMENTSBANK0F4E6B2C2EFB4907A705CB81013AA24D.PDF
6. Inclusion of Clearing Corporation of India Limited (CCIL) as a Financial Information Provider under the Account Aggregator Framework
RBI vide Notification dated February 22, 2024, stated that the RBI Retail Direct Scheme (‘Scheme’) was launched on November 12, 2021, to facilitate retail investors to invest in Government Securities. The Scheme enables individuals to open Retail Direct Gilt Accounts with the Bank and access the Government Securities market – both primary and secondary.
To enable aggregation of financial information on Government Securities held by retail investors in their Retail Direct Gilt accounts under the Scheme, Clearing Corporation of India Limited (CCIL) has been included as a Financial Information Provider.
The link for the aforesaid Notification is as follows:
https://rbidocs.rbi.org.in/rdocs/notification/PDFs/CIRCULARINCLUSIONCCIL9520A6BC53544F7C823581B782E5A2C6.PDF
7. Master Direction – RBI (Filing of Supervisory Returns) Directions – 2024
RBI vide Notification and Press release dated February 27, 2024, issued Master Direction concerning the filing of Supervisory Returns to bring clarity, brevity, and harmonization to the instructions issued to various supervised entities for submission of returns.
This is initiated by RBI to reduce the burden of compliance on the regulated entities based on the recommendations of the Regulations Review Authority (RRA 2.0) and an Internal Working Group of RBI.
The Master Direction provides a broader framework to understand the purpose of the returns and harmonize the timeline for their submission. This Direction removes certain instructions that have become obsolete and consolidates 20 existing instructions, including one Master Direction for Non-Banking Financial Companies. It creates a single document for ensuring compliance related to the submission of all supervisory data. A summary of all changes made is also included in the Master Direction for ease of reference.
The link for the aforesaid Notification is as follows:
https://rbidocs.rbi.org.in/rdocs/notification/PDFs/MD11024D1EF9CB39B44ABB23DF586173E0CDE.PDF
The link for the aforesaid Press release is as follows:
https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/PR1948426142052523477391A0BAD6F7EBBA96.PDF
8. Enabling Framework for Regulatory Sandbox
RBI vide Press release dated February 28, 2024, issued the Updated ‘Enabling Framework for Regulatory Sandbox’. The framework has been revised based on the experience gained in running four cohorts and feedback received from FinTechs, banking partners, and other stakeholders. The updated framework also requires sandbox entities to ensure compliance with provisions of the Digital Personal Data Protection Act, 2023.
Regulatory Sandbox (RS) refers to the live testing of new products or services in a controlled/test regulatory environment. The RS allows the regulator, the innovators, the financial service providers (as potential deployers of the technology), and the customers (as final users) to conduct field tests to collect evidence on the benefits and risks of new financial innovations, while carefully monitoring and containing their risks. The objective of the RS is to foster responsible innovation in financial services, promote efficiency, and bring benefits to consumers. The RS is, at its core, a formal regulatory program for market participants to test new products, services, or business models with customers in a live environment, subject to certain safeguards and oversight.
The link for the aforesaid Press release is as follows:
https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/PR19561D82B0DF2E1840CFA30529C94C925B4E.PDF