Context:
Reserve Bank of India (RBI) Governor Sanjay Malhotra signaled readiness to take policy measures if the 50% U.S. tariff, set to take effect this week, negatively impacts India’s economic growth. He also outlined upcoming regulatory reforms for banks.
Key Highlights:
- US Tariff Impact & RBI Response:
- 50% U.S. tariff on select imports effective Wednesday.
- RBI assures ample liquidity to support growth and sector-specific support if required.
- Regulatory Initiatives:
- Basel-III Implementation:
- Basel III is an international regulatory framework developed by the Basel Committee on Banking Supervision (BCBS) to strengthen the regulation, supervision, and risk management of banks. For commercial banks covering market, credit, and operational risks.
- Draft Guidelines on Credit Risk & Expected Credit Loss (ECL):
- To be released shortly.
- Aims to strengthen banks’ risk management framework.
- Basel-III Implementation:
- Corporate Financing Trends (SBI View):
- India Inc holding â‚ą13.5 trillion in cash reserves.
- Capex funded largely through internal accruals, reducing demand for bank loans.
- Banks seek RBI nod to finance M&A deals to boost credit offtake.
- Internationalisation of the Rupee:
- RBI working to promote trade in local currency to reduce forex volatility.
- Existing agreements: Maldives, Mauritius, Indonesia, UAE.
- Process considered gradual, expected to evolve over decades.
- Banking Sector Priorities:
- Strengthening Banking Correspondents (BCs): Key to financial inclusion.
- Technology Adoption:
- Now central to decision-making and customer service, beyond just efficiency.
- Regulated entities urged to accelerate adoption to improve credit flow and reduce costs.
