RBI to allow 24/7 fund transfers through NEFT from December

As mentioned in the Payment System Vision 2021 document, RBI will make available the NEFT system on a 24x7 basis from December 2019, 

RBI said, adding that the decision “is expected to revolutionise the retail payments system of the country”.

Currently, the NEFT, operated by the RBI as a retail payment system, is available for customers from 8 am to 7 pm on all working days with the exception of second and fourth Saturdays of a month.

The Bharat Bill Payment System (BBPS), an interoperable platform for repetitive bill payments, currently covers five segments viz., direct-to-home (DTH), electricity, gas, telecom and water bills. In order to leverage the advantages of the BBPS and harness its full potential, RBI said, it has been decided to permit all categories of billers (except prepaid recharges) who provide for recurring bill payments to participate in BBPS on a voluntary basis. 

Apart from digitisation of cash-based bill payments, these segments would also benefit from the standardised bill payment experience for customers, centralised customer grievance redressal mechanism, prescribed customer convenience fee and the like. RBI will issue detailed instructions in this regard by the end of September 2019.

RBI has also expanded the scope of `on-tap’ authorisation for bill payment systems by including entities desirous to function/operate/provide platforms such as Bharat Bill Payment Operating Unit (BBPOU); Trade Receivables Discounting System (TReDS); and White Label ATMs (WLAs).

Customers will benefit from diversification of risk while also encouraging innovation and competition, RBI said, adding that instructions to this effect will be issued by the end of September 2019.

RBI had, on 21 January, published a consultation paper on minimising concentration risk in retail payment systems from a financial stability perspective. Comments/feedback received from a wide array of individuals, public and private entities, institutions and industry associations suggested the need to encourage more players to participate in and promote pan-India payment platforms. 

The Payment System Vision 2021 also envisages a framework for collecting data on frauds in the payment systems. In order to carry forward these efforts and ensure quick and systemic responses, RBI has proposed to facilitate the creation of a Central Payment Fraud Registry that will track these frauds. Payment system participants will be provided access to this registry for near-real time fraud monitoring. The aggregated fraud data will be published to educate customers on emerging risks. RBI said it will put in place a detailed framework in this regard by the end of October 2019.

At present, there is a mechanism in place for banks to report all banking frauds to the Central Fraud Monitoring Cell of the Reserve Bank. With the digital payment ecosystem making substantial progress in terms of growth of payment infrastructure as well as volume and value of digital payment transactions, fraud risk monitoring and management by the stakeholders have assumed importance

RBI also revised downward the risk weight for consumer credit, including personal loans, but excluding credit card receivables, to 100 per cent. Under the standardised approach for credit risk management, consumer credit, including personal loans and credit card receivables attract a higher risk weight of 125 per cent or higher, if warranted by the external rating of the counterparty. 

RBI will issue guidelines in this regard would be issued by the end of August 2019.

RBI, meanwhile, has taken several measures to enhance credit flow to well managed NBFCs/HFCs. The FALLCR (i.e. securities that can be reckoned, both for SLR and LCR), was increased on two occasions (27 September 2018 and 4 April 2019) by two per cent each, thereby enabling banks to raise additional liquidity by selling their excess SLR securities.

Besides, a special FALLCR of 0.5 per cent exclusively for lending to NBFCs was introduced in October 2018; the risk weights for banks’ exposure to NBFCs were harmonised with those of other corporates; the prudential limit on exposure of banks to NBFCs was also aligned with that of other sectors, thereby increasing it from 10 per cent of the banks’ capital to 15 per cent.

Further, the minimum holding period for assets to be securitised or assigned was reduced from one year to six months, thereby enabling the NBFCs and HFCs to raise funds by securitising their originations without having to wait for a longer period.

The durable liquidity in the system was increased through a series of OMOs and forex swaps.

On 5 July 2019, the FALLCR scheduled to increase by 0.50 per cent of NDTL each on August 1 and December 1, 2019 was allowed to be frontloaded by banks for computing LCR to the extent of incremental outstanding credit to NBFCs and Housing Finance Companies (HFCs) over and above the amount of credit to NBFCs/HFCs outstanding in their books as on July 5, 2019. Further, on the same day, pursuant to the announcement in the Union Budget of a partial credit enhancement to Public Sector Banks for acquiring highly rated pooled assets of financially sound NBFCs/HFCs, the Reserve Bank, through a press release, conveyed its readiness to provide required liquidity backstop to the banks against their excess G-sec holdings in order to enable them to implement the budget announcement.

To further enhance credit flow to the NBFC sector, RBI said, it has decided to allow harmonisation of single counterparty exposure limit for banks’ exposure to single NBFCs with general single counterparty exposure limit to 20 per cent of tier I capital of the bank

Under the revised guidelines on large exposure framework (LEF) that came into effect from 1 April 2019, a bank’s exposure to a single NBFC is restricted to 15 per cent of its Tier I capital, while for entities in the other sectors the exposure limit is, 20 per cent of Tier I capital of the bank, which can be extended to 25 per cent by banks’ boards under exceptional circumstances. 

With a view to further increasing the credit flow to certain priority sectors which contribute significantly to the economic growth in terms of export and employment, and recognizing the role played by NBFCs in providing credit to these sectors, RBI has decided to allow, subject to certain conditions, bank lending to registered NBFCs (other than MFIs) for on-lending to agriculture (investment credit) up to Rs10 lakh; micro and small enterprises up to Rs20 lakh and housing up to Rs20 lakh per borrower (up from Rs10 lakh at present) to be classified as priority sector lending.