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RBI To Launch Digital Rupee Pilot In Call Money Market By October; Check Full List Of Banks Selected

The pilot project for the wholesale CBDC, known as the Digital Rupee-Wholesale (e-W), was launched on November 1, 2022.

The new pilot project will expand the use case of the CBDC to include transactions in the call money market. (Image: Zee Business)

The Reserve Bank of India (RBI) is planning to launch a pilot project for its Central Bank Digital Currency (CBDC) in the call money market by October. The call money market is a short-term interbank lending market where banks lend and borrow money from each other. The CBDC will be used as a token for settlement in this market, as per a rerport in the news agency PTI.

What Is Digital Rupee-Wholesale (e-W)?
The pilot project for the wholesale CBDC, known as the Digital Rupee-Wholesale (e-W), was launched on November 1, 2022. The use case for this pilot was limited to the settlement of secondary market transactions in government securities. The new pilot project will expand the use case of the CBDC to include transactions in the call money market.

RBI Testing Feasibility and Efficiency of CBDC
The RBI is conducting these pilot projects to test the feasibility and efficiency of the CBDC. The central bank is also looking to gather feedback from the participants in these markets to improve the design of the CBDC.

“The RBI will introduce the wholesale CBDC in the call market either this month or next month,” Choudhary said on the sidelines of the G20 Leaders’ Summit here. The introduction of CBDC was announced in the Union Budget 2022-23 by Finance Minister Nirmala Sitharaman and necessary amendments to the relevant section of the RBI Act, 1934, were made with the passage of the Finance Bill 2022.

RBI Selects 9 Banks: Check Full List Here
The RBI picked nine banks — State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, YES Bank, IDFC First Bank and HSBC — for its pilot project for wholesale CBDC.
Besides, the central bank has already rolled out a pilot in the retail version of the CBDC (e-R) on December 1, 2022. The e-R is in the form of a digital token that represents legal tender. It is being issued in the same denominations as the paper currency and coins. It is being distributed through financial intermediaries like banks. Users can transact with e-R through a digital wallet offered by the participating banks.

Source: https://www.india.com/business/rbi-to-launch-digital-rupee-pilot-call-money-market-by-october-full-list-banks-selected-sbi-kotak-mahindra-yes-bank-6308430/

Banks must allow retail borrowers to switch between fixed and floating rates: RBI

Reserve Bank of India on Friday said regulated entities (REs) have the freedom and they must offer all categories of retail loans either on a fixed or floating interest rates basis.

At the time of sanction of EMI-based floating rate personal loans, RBI said regulated entities are required to take into account the repayment capacity of borrowers to ensure that adequate headroom or margin is available for elongation of tenor and or increase in EMI, in the scenario of a possible increase in the external benchmark rate during the tenor of the loan.
In the wake of rising interest rates, RBI said it had received several grievances from consumers related to the elongation of loan tenor and or increase in EMI amount, without proper communication with and or consent of the borrowers.
“In order to address these concerns, the REs are advised to put in place an appropriate policy framework meeting the following requirements for implementation and compliance,” RBI said.
As a part of the new rules, the central bank said:
At the time of sanction, regulated entities shall clearly communicate to the borrowers about the possible impact of change in benchmark interest rate on the loan leading to changes in EMI and/or tenor or both. Subsequently, any increase in the EMI or tenor or both on account of the above shall be communicated to the borrower immediately through appropriate channels.At the time of reset of interest rates, regulated entities shall provide the option to the borrowers to switch over to a fixed rate as per their Board approved policy. The policy, inter alia, may also specify the number of times a borrower will be allowed to switch during the tenor of the loan.

Source: https://www.businessinsider.in/personal-finance/news/banks-must-allow-retail-borrowers-to-switch-between-fixed-and-floating-rates-rbi/articleshow/102832754.cms

Banks are increasing Home Loan EMI tenors without even asking borrowers. RBI decides to stop them

RBI Home Loan EMI rule: RBI to create a framework to stop banks from increasing home loan EMI tenures.

Know what RBI has decided to do to stop banks from increasing home loan EMI arbitrarily. Representational image

Has your lender increased the home loan EMI tenure even without asking you? It is no more a surprise as banks have been increasing the repo rate-linked home loan EMI terms in the wake of rising key policy rates. In many cases, it has been reported earlier this year, that home loan EMI tenures are running beyond the retirement age for many borrowers.

When the interest rate goes up, borrowers have two options – either they can increase their EMI amount or they can ask the bank to increase their EMI tenure to keep their monthly outgo for loan repayment unchanged.

However, the problem starts when banks increase the EMI tenure of floating rate loans even without taking the consent of the borrower as it leads to a big increase in the home loan interest that the borrower pays during the term of the loan.

Now, the Reserve Bank of India has decided to put an end to this practice by lender banks.

In its bi-monthly ‘Statement on Developmental and Regulatory Policies’ released today, the RBI said, “The supervisory reviews undertaken by the Reserve Bank and the feedback and references from members of public have revealed several instances of unreasonable elongation of tenor of floating rate loans by lenders without proper consent and communication to the borrowers.”

The central bank has decided to address this issue by putting in place a proper conduct framework to be implemented by all regulated entities (REs).

“To address the issue, it is proposed to put in place a proper conduct framework to be implemented by all REs to address the issues faced by the borrowers,” the RBI said.

What options borrowers will get

According to RBI, the framework envisages that lenders should clearly communicate with the borrowers for resetting the tenor and/or EMI, provide options of switching to fixed rate loans or foreclosure of loans, transparent disclosure of various charges incidental to the exercise of these options, and proper communication of key information to the borrowers.

The RBI will issue detailed guidelines in this regard soon.

Source: https://www.financialexpress.com/money/banks-are-increasing-emis-tenors-without-even-asking-borrowers-rbi-decides-to-stop-them/3205943/