NEW BANKING REPORTING NORMS TO ENHANCE POLICY ACCURACY

Why in the news?

Finance Minister Nirmala Sitharaman announced amendments to banking laws, emphasising new reporting norms to improve data accuracy for policy-making and introducing customer-friendly nomination provisions.

NEW BANKING REPORTING NORMS TO ENHANCE POLICY ACCURACY - UPSCsource:slideshare

About the new reporting norms and amendments:

  • Finance Minister Nirmala Sitharaman emphasized the importance of new reporting norms for banks as part of the amendments to the Banking Regulation (BR) Act.
  • The changes will allow for data used in policy-making to be more accurate and reflective of current realities, aiding informed decision-making.
  • A significant amendment includes shifting reporting dates for banks to the 15th and 30th of each month, enabling regular updates and reducing the need for major year-end adjustments.

Customer-Friendly Provisions:

  • The introduction of provisions for simultaneous and successive nominations by account holders and depositors in the BR Act is highlighted as a customer-friendly measure.
  • This change provides customers with more options in nominating beneficiaries, ensuring nominees can more easily claim what is rightfully theirs.
Section 42 of the Reserve Bank of India Act, 1934: Key Points

Mandatory Cash Reserves:

  • Scheduled banks listed in the Second Schedule must maintain an average daily balance with the Reserve Bank of India (RBI).
  • This balance must be a specified percentage of the bank’s total demand and time liabilities in India, as periodically notified by the RBI.

Calculation of Balance:

  • The “average daily balance” is calculated based on the average balances at the close of each business day over a fortnight.
  • A “fortnight” is defined as the period from Saturday to the second following Friday, inclusive of both days.

Exclusions from Liabilities:

  • Liabilities do not include paid-up capital, reserves, or credit balances in the profit and loss account.
  • Loans taken from RBI, Exim Bank, National Housing Bank, and other specified financial institutions are also excluded.

Specific Exclusions for State Cooperative Banks:

  • Loans from State Governments, National Cooperative Development Corporation, and certain deposits representing reserve funds are not included in liabilities.

Reductions in Aggregate Liabilities:

  • The aggregate liabilities of a scheduled bank to other specified banks and financial institutions must be reduced by the corresponding liabilities of those institutions to the scheduled bank.

Associated Article:

https://universalinstitutions.com/the-banking-system-in-india/