Regulatory Body Releases

RBI | SEBI | NABARD | PFRDA | IRDAI

November 01-25, 2022

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RBI digital rupee
● The Reserve Bank will soon commence pilot launches of Digital Rupee (e₹) for specific use
cases. Accordingly, the first pilot in the Digital Rupee - Wholesale segment (e₹-W) shall
commence on November 1, 2022.
● The use case for this pilot is settlement of secondary market transactions in government
securities.
● Settlement in central bank money would reduce transaction costs by pre-empting the need for
settlement guarantee infrastructure or for collateral to mitigate settlement risk.
● Nine banks, viz 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 have been identified for
participation in the pilot.

Day 1 of CBDC pilot clocks ₹275 cr G-Sec trades

● CBDC wholesale transactions are free as they are settled with RBI, unlike regular transactions
where banks pay transaction charges to CCIL.
● A total of 48 trades were settled using CBDC, data published by the Clearing Corp. of India
(CCIL)
● RBI opened a new platform called ‘Negotiated Dealing System-Order Matching (NDS-OM)
CBDC’ for these banks to conduct the transactions, which they used to buy and sell government
securities among themselves.
● Before the transaction is executed, banks send a request to RBI to convert the cash lying in the
cash reserve ratio (CRR) account into digital rupee.
○ This then gets stored in the CBDC digital rupee account opened by each bank with RBI
● CBDC wholesale transactions are free as it is settled with the RBI directly, unlike regular
transactions where banks pay transaction charges to CCIL.

Eligibility Criteria for offering Internet Banking Facility by Regional Rural

Banks, 2022 - RBI (Circular)

The revised eligibility criteria to seek approval for providing Internet Banking
with transactional facility by RRBs to their customers are as under:

a) Full implementation of Core Banking Solutions (CBS) and migration to IPv6.

b) Compliance with minimum prescribed CRAR requirement as applicable from time to time.
c) Net worth of ₹50 crore or more as on March 31 of the previous financial year.
d) Net NPA of not more than 5% as on March 31 of the previous financial year.
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e) Net profit in the two immediately preceding financial years.
f) No instance of default in maintenance of CRR/SLR during the immediately preceding financial year.
g) The bank shall have a satisfactory track record of regulatory compliance and there shall be no
instances of monetary penalty imposed for violation of RBI directives/guidelines during the two
preceding financial years.
Regional Rural Banks (RRBs)

● Regional Rural Banks Act, 1976:

● Regional Rural Banks (RRBs) were set up as government-sponsored,
rural lending institutions under the Regional Rural Banks Act, 1976.
● The RRBs were established as per the recommendations of the Narasimham
Committee.
● The Prathama Grameen Bank was the first bank to be established on 02nd October
1975.
● The Syndicate Bank became the first commercial bank to sponsor the Prathama
Grameen Bank RRB
● Ownership
● The equity of the Regional Rural Banks is held by the stakeholders in a fixed proportion.
This proportion is 50:35:15, distributed as:
● Central Government – 50%
● Sponsor Bank – 35%
● State Government – 15%
● A total of 43 RRBs in India

39th Half Yearly Report on Management of Foreign Exchange Reserves:

RBI

● April-September, 2022 The Reserve Bank of India has today released the
39th half-yearly report on management of foreign exchange reserves with reference to
end-September 2022.
● From February 2004, the Reserve Bank had started a process of compiling half yearly reports
and placing them in the public domain for bringing about more transparency and enhancing the
level of disclosure in relation to management of the country’s foreign exchange reserves

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Municipal corps should explore land-based models to raise funds: RBI
(Release)
Highlights:
a) The rapid growth of urbanisation in India has not been accompanied by a
corresponding increase in urban infrastructure, which is reflected in the
performance of the urban local bodies, especially MCs.

1. While the size of the municipal budgets in India are much smaller than peers in other countries,
revenues are dominated by property tax collections and devolution of taxes and grants from
upper tiers of government, resulting in lack of financial autonomy.
2. MCs’ committed expenditure in the form of establishment expenses, administrative costs and
interest and finance charges is rising, but capital expenditure is minimal.
3. MCs mostly rely on borrowings from banks and financial institutions and loans from Centre/State
governments to finance their resource gaps in the absence of a well-developed market for
municipal bonds.

b) MCs need to adopt sound and transparent accounting practices with proper monitoring and
documentation of various receipt and expenditure items, and explore different innovative bond
and land based financing mechanisms to augment their resources.

Alternate sources of Finances

● Bond Financing

○ Bengaluru MC floated municipal bonds for the first time in India in 1997, followed by
Ahmedabad MC in 1998.
○ Municipal bond issuances came to a sudden halt after 2005 with the launch of Jawaharlal
Nehru National Urban Renewal Mission(JNNURM), envisaging total investment of about
`1 lakh crore available to municipal corporations in the form of grants from the Centre.
○ The Government of India has also provided financial incentives in the form of a lump-sum
grant-in-aid for municipal bond issuances at the rate of `13 crore per `100 crore of bonds
issued under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT,
2015) Programme
○ The Indore MC became the first municipal corporation to list on the NSE in 2018, while
○ Ghaziabad MC became the first municipal corporation to issue green bonds in India in
2021.

● Pooled Financing
○ Pooled financing essentially involves creation of a State Pooled Finance Entity (SPFE)
○ Creating a SPFE lowers the cost of bond issuance for individual local bodies and
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 enhances the creditworthiness of the bond issued,
○ The pooled financing mechanism has precedence in India, with Andhra Pradesh,
Maharashtra, Karnataka and Tamil Nadu issuing bonds serviced from the pooled
revenues of multiple ULBs/MCs.
○ The Tamil Nadu Urban Development Fund (TNUDF) issued bonds on behalf of 14
municipalities through a Water and Sanitation Pooled Fund in 2003.
○ Karnataka created a debt fund – Karnataka Water and Sanitation Pooled Fund (KWSPF)
- to raise money for the Greater Bangalore Water and Sanitation Project (GBWASP) in
2005.
○ Both the funds were rated AA.

Economy resilient, on track to grow at about 7% in FY23: RBI Bulletin

State of the economy

● Q2 GDP growth seen at 6.1- 6.3%

● CPI inflation easing across BRICS, emerging market economies
● Liquidity normalising but is still in surplus mode, with the Reserve Bank absorbing about 1.5
lakh crore on a daily basis on average.
● Bank credit growth surging, led by services, personal loans, agriculture and industry
● Net NPAs sliding towards 1% of total assets
● Volatility in G7 currencies has surpassed that in Emerging Markets currencies for the first time
since March 2020.

States’ fiscal deficit jumped by 78% after lockdown: RBI

● The Reserve Bank of India released the seventh edition of its statistical publication titled
“Handbook of Statistics on Indian States 2021-22”.
● Through this publication, the Reserve Bank has been disseminating wide-ranging data on the
regional economies of India.
● This publication covers sub-national statistics on socio-demographics, state domestic product,
agriculture, price and wages, industry, infrastructure, banking and fiscal indicators across Indian
states over various time periods ranging from 1951 to 2021-22.
● In the current edition of the Handbook, two new sections viz., Health and Environment are
introduced.
● In addition to the updation of the existing data series, 9 new tables have been included
○ Social and Demographic Indicators
■ State-wise Maternal Mortality Ratio, 1999-01 to 2017-19; and
■ State-wise Total Fertility Rate, 2003 to 2020.

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 ○ Health
■ State-wise Children Aged 6-59 Months Who are Anaemic, 2005-06 to
2019-21; and
■ State-wise Pregnant Women Aged 15-49 Years Who are Anaemic, 1998-99 to
2019-21.

○ Agriculture
■ State-wise Cold Storage Capacity, 2015- 2021.

○ Environment
■ State-wise Forest Cover, 1987 to 2021; and
■ State-wise Tree Cover, 2001 to 2021.

○ Infrastructure
■ State-wise Total Installed Capacity of Grid Interactive Renewable Power, 2007 to
2021.

○ Fiscal
■ State-wise Outstanding Guarantees of State Governments, 2008 to 2022.

● State governments’ fiscal deficit widened in absolute terms by a massive

78% to ₹9.3 trillion in FY21
● Barring Arunachal Pradesh, Haryana, Sikkim and Odisha,
○ all states saw their fiscal deficit shoot up in FY21 in absolute terms.
● For the 11 major states, the total projected capex was ₹3.74 trillion which was revised downwards
to ₹3.19 trillion.
○ Capex for all states combined was cut by 15% in 2020-21.
● States’ own tax revenue had slipped quite sharply from budgeted ₹9.31 trillion to ₹7.82 trillion in
the revised estimate.
○ The fall in own tax revenue by 15.9% amounted to ₹1.49 trillion.
● Of the total of ₹9.31 trillion,
○ 42% was to come from GST,
○ 19% from VAT, 13% from excise and
○ 11% from stamp duty.
● The highest fall in own tax revenue was seen in Kerala.

Fiscal Deficit (GSDP)

1. Gujarat had the lowest revised fiscal deficit of 3.1%, followed by

2. Jharkhand with 3.22%,
3. Karnataka with 3.23%,
4. Maharashtra with 3.29%, and
5. Odisha with 3.49%.

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 The widest revised fiscal deficit was recorded by

1. Bihar at 6.8%, followed by

2. Rajasthan at 6.1% and
3. Chhattisgarh 6.5%.
4. UP 4.2% while
5. Kerala reported 4.25%

In 30 months, RBI fines Rs 73 cr in 48 cases, but no details on bank

violations
● Involving banks, including public, private and foreign banks, for violation of provisions or
contravention of certain directions through orders that are brief and without details.
● In almost all these orders, the RBI said the action was taken against the bank for
‘non-compliance with certain provisions of directions issued by the RBI’.
● Unlike in the case of other financial regulators, RBI provides details only to the entity
being penalised for violation.

RBI Bulletin November 2022

I. State of the Economy

● The outlook in the global economy remains clouded with downside risks.
● Global financial conditions have been tightening and deteriorating market liquidity is amplifying
financial price movements.
● Markets are now pricing in moderate increases in policy rates and risk-on appetite has returned.
● In India, supply responses in the economy are gaining strength. With headline inflation beginning
to show signs of easing, the domestic macroeconomic outlook can best be characterised as
resilient but sensitive to formidable global headwinds.
● Urban demand appears robust, rural demand is muted but more recently picking up traction.

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II. When a News Story is More Than Just Text: Evidence from Indian Economy
Exploring news as a potentially rich source of information and leveraging upon
Big Data techniques, this article constructs sentiment indices on a range
of macroeconomic variables and examines their utility for economic
analysis in the Indian context.
Highlights:

1. The news-based sentiment indices capture the changing patterns in various sectors of economy.
The predictive ability of sentiment in a forecasting framework, examined using statistical and
machine learning methods, can enhance the value sentiment derived from news.
2. The COVID-19 pandemic depressed sentiment. With gradual resumption of economic activities
and return towards normalcy, sentiments recovered.
3. A high-frequency sentiment index can be a useful complementary indicator to provide early
signals on economic conditions.

III. Green Data Centres: Pathway to Sustainable Digitalisation

This article discusses the importance of data centres for banks and
financial institutions, their impact on the environment and the benefits
of green data centres.
Highlights:

1. With growing emphasis on digitalisation, the need for data centres in the country has increased
manifold. Data centres, as part of their operations, consume a lot of power thereby contributing to
greenhouse gas emissions.
2. As a result of a favourable geographical location and conducive government policies, India’s data
centre industry is in a high growth phase and better placed to adopt green technologies for both
the existing and upcoming data centres.
3. The article offers suggestions which can help banks and financial institutions in greening their
data centres such as acquiring industry recognised accreditation like Indian Green Building
Council (IGBC) and Leadership in Energy and Environmental Design (LEED) certification;
replacing outdated or inefficient information technology equipment; integrating green measures in
data centre operations, including in their design, materials, construction, energy consumption and
waste management.

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IV. Payment Flows as Economic Indicators: Nowcasting Using a
Hybrid Machine Learning Framework
The payments process is a vital aspect of financial intermediation.
An efficient payments and settlement system can act as a propellant
for economic momentum. In this context, the study examines the
use of payments data to nowcast growth in gross value added (GVA).
Highlights:

1. A hybrid machine learning framework for nowcasting based on mixed frequency data has been
applied. The study focuses on using a combination of Mixed Data Sampling (MIDAS) and
Support Vector Machine (SVM) models.
2. A disaggregated approach is employed to exploit the information available from individual
payment indicators. Further, both volume and value channels are explored.
3. Predictive accuracy improves substantially for the nowcasts generated using the hybrid
approach.

V. Transmission of Financial Conditions to Fixed Investment in India: An Empirical

Investigation
In this article, dynamic factor model (DFM) and vector auto regression (VAR) approaches are used to
construct financial condition indices. Further, the impact of financial conditions on investment growth in
India, and asymmetry in the relationship is empirically examined to gauge the risks to investment.
Highlights:

1. Financial conditions impact investment with a lag and expectations about future demand play a
significant role in driving investment growth.
2. The impact is found to be asymmetric with tighter financial conditions having a significant impact
on investment growth when the investment cycle is depressed.

Rural daily wages: Gujarat, Madhya Pradesh farmers lowest paid;

Kerala, J&K at the top - RBI Data
● According to data compiled by the Reserve Bank of India (RBI).
● If a rural farm worker gets work for 25 days in a month in
○ Gujarat, his monthly earning will be around Rs 5,500 per month
○ However, a rural farm worker in Kerala, which pays the highest wage among states, gets
an average of Rs 18,170 for 25 days work in a month.

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 ● According to the RBI data, in the case of male non-agricultural workers,
○ The lowest wage was in
■ MP with an average wage of Rs 230.3 while
■ Gujarat workers got a daily wage of Rs 252.5 and
■ Tripura Rs 250 — all below the national average of Rs 326.6.
○ Kerala again leads in non-agricultural workers’ wages with Rs 681.8 wage per person.
■ Kerala was followed by J&K with Rs 500.8, Tamil Nadu Rs 462.3 and Haryana Rs
409.3 for the year ended March 2022.
● The national average of Rs 373.3 in the case of rural male construction workers.
○ Gujarat rural construction workers got an average wage of Rs 295.9,
○ MP Rs 266.7 and Tripura Rs 250.
● Daily wage for rural construction workers was Rs 837.7 in Kerala, Rs 519.8 in J&K, Rs 478.6 in
Tamil Nadu as per the RBI data.

Interest subvention on KCC crop loan to continue in FY23, FY24: RBI Circular
● Modified Interest Subvention Scheme for Short Term Loans for Agriculture and Allied
Activities availed through Kisan Credit Card (KCC) during the financial years 2022-23 and
2023-24.
● Government of India has approved the continuation of the Interest Subvention Scheme (ISS) with
modification for the financial years 2022-23 and 2023-24 with the following stipulations:
○ The interest rate for short-term loans upto Rs 300,000 through Kisan Credit cards
(KCC) will be seven per cent and interest subsidy will be 1.5 per cent for the current
financial year (FY23) and next financial year (FY24).
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 ● The farmers who repay loans promptly will get an additional 3% subsidy.
○ Thus, the interest rate charged to these farmers will be 4%.
● These loans will be short-term crop loans and short-term loans for allied activities
including animal husbandry, dairy, fisheries, beekeeping etc.
● Interest subvention and prompt repayment incentive benefits on short term crop loans and short
term loans for allied activities will be available on an overall limit of ₹3 lakh per annum subject to
a maximum sub-limit of ₹2 lakh per farmer in respect of those farmers involved only in activities
related to animal husbandry, dairy, fisheries, beekeeping etc.
● The subvention will be provided to lenders including Public Sector Banks (PSBs) and Private
Sector Banks (rural and semi-urban branches), Small Finance Banks (SFBs) and computerised
Primary Agriculture Cooperative Societies (PACS) on use of their own resources.

Inclusion of Goods and Service Tax Network (GSTN) as a Financial

Information Provider under Account Aggregator Framework - RBI Circular
● In a major development, the Goods and Services Tax network (GSTN) has been included to the
account aggregator (AA) network as a financial information provider (FIP) to facilitate cash flow
lending to the micro, small, and medium enterprises (MSMEs).
● The Department of revenue shall be the regulator of GSTN for this specific purpose and GST
returns, viz. Form GSTR-1 and Form GSTR-3B, shall be the financial information
● Recently, the Insurance Regulatory and Development Authority of India (Irdai) has asked the
FIPs in the insurance sector to enter into a contractual framework with AAs.
● Launched in September 2021, account aggregators are licensed NBFCs that enable instant
exchange of financial data between FIP and FIUs. They are responsible for providing services
that include the transfer — but not storing — of a customer’s data.
● So far, there are six AAs in India with operating licenses.

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Standardisation of Rating Scales Used by Credit Rating Agencies
(CRAs) - SEBI (Circular)
Issuer Rating / Corporate Credit Rating indicates the degree of safety of the issuer or the rated entity
with regard to timely servicing of all its debt obligations.

A ‘rating outlook’ indicates CRA’s view on the expected direction of the rating movement in the near to
medium term, whereas a ‘rating watch’ indicates a CRA’s view on the expected direction of the rating
movement in the short term.

1. Standard descriptors to be used for when an issuer / security is placed on “Rating Watch”:
a. “Rating Watch with Positive Implications”
b. “Rating Watch with Developing Implications”
c. “Rating Watch with Negative Implications”
2. Standard descriptors to be used for when an issuer / security is placed on “Rating Outlook”:
a. Stable
b. Positive
c. Negative

Applicability:

● The circular shall be applicable with effect from January 1, 2023, and
● CRAs shall report on their compliance with the same to SEBI within one quarter from the
specified date of applicability.

Monitoring:

● Monitoring of this circular shall be done in terms of the half-yearly internal audit for CRAs,
mandated under Regulation 22 of the SEBI (Credit Rating Agencies) Regulations, 1999.

● Rating Symbols and Definitions for Issuer Rating Rating symbols should have CRA’s first name
as prefix .
○ AAA being the highest rating and D being the lowest.

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Sebi gets fewer complaints on average so far this year: SCORES
data
SCORES (SEBI Complaints Redress System)

● SEBI launched a centralized web based complaints redress system ‘SCORES’ in June
2011.
○ The purpose of SCORES is to provide an administrative platform for aggrieved investors,
whose grievances, pertaining to the securities market, remain unresolved by the
concerned listed company, registered intermediary or recognized market infrastructure
institutions (MIIs).
● The complainant may use SCORES to submit the complaint or grievance directly to the listed
companies / intermediaries / MIIs for resolution.
○ Such a complaint is called a “Direct Complaint” and shall be redressed by the entity within
30 days without any intervention of SEBI,
■ failing which the complaint shall be registered on SCORES. Thereafter, SEBI shall
take it up with the entity concerned.
● The majority of investor complaints are against stock brokers,
according to yearly data from the Sebi annual report
● The Securities and Exchange Board of India (Sebi) received an average of 3,011 complaints
every month so far in the financial year 2022-23 (FY23),
○ This is a 15.4 per cent decline over the 3,558 average monthly complaints in FY22.
○ The average monthly figure was higher in
■ FY21 (4,906),
■ FY20 (4,627) and
■ the pre-pandemic year of FY19 (3,517).
● There are now over 100 million investor accounts compared to 40 million in FY19.
● The number of days it takes to resolve a complaint has dropped from 36.8 days in October 2021
to 29 days as of September 2022.
■ The lowest average resolution time was in April 2022 when it hit 24 days
● There were 11,261 complaints filed against stock brokers in FY22.
● The next biggest source of complaints were issues related to refund,
allotment, dividend, transfer, bonus, rights, interest and redemption matters
which accounted for 6,789 complaints.
● Registrars to an issue and share transfer agents were the source of 3,877 complaints;
● Mutual funds were next with 3,866 complaints; followed by
● Depository participants with 3,794 complaints.
● Of the 42,694 new complaints received during 2021-22,
○ 37,425 complaints (or 87.2 % of the total complaints) were e-complaints, while
○ 5,460 complaints (or 12.8 % complaints) were physical complaints

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 ● The largest number of complaints were received at the head-office and accounted for nearly half
the investor complaints received.
○ The northern region (which includes Delhi and others) was second and accounted for
nearly a fifth of complaints.
○ This was followed by the western region (14 per cent) excluding Daman and Diu as well as
Maharashtra and including states like Gujarat and Rajasthan.
○ The remaining complaints came from the southern and the eastern regions.

Committee on “Strengthening Governance of Market Infrastructure

Institutions” submits report

1. SEBI had constituted a Committee, in April 2022, under the chairmanship of Shri G.
Mahalingam, ex-Whole Time Member,
a. to review the existing governance framework and
b. make recommendations for further strengthening of governance norms at MIIs.
2. The Committee consulted various stakeholders, including Public Interest Directors, Chief
Regulatory Officers, representatives of MIIs and other relevant persons.
3. It also took into consideration the past committee reports on governance of MIIs.

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 The report of the Committee sets out various recommendations on
measures for

a. strengthening the role played by the governing board and committees of MIIs;
b. reviewing the requirements related to appointment and role & responsibility of directors on
the board and key managerial persons (KMPs);
c. developing effective metrics for monitoring various aspects of the functioning of the MIIs
and its KMPs;
d. enhancing accountability and transparency;
e. reviewing the policy on safekeeping and sharing of information held by MIIs;
f. revisiting the code of conduct and code of ethics for directors of the governing board and
KMPs;
g. activities and governance of investee companies of MIIs, etc

● Market infrastructure institutions are

considered to be the pillars of the stock market
ecosystem. These include stock exchanges,
clearing corporations, and depositories.
● The move came in the wake of alleged
governance lapses at NSE over the
appointment and promotion of over
appointment and promotion of Anand
Subramanian as group operating officer of
NSE.
● The committee has felt that a rule-based
approach for the regulation of MIIs should be balanced with a principle-based approach.
● The committee has put a lot of onus on roles and responsibilities on public interest directors (PID)
to ensure greater independence of the board. The Mahalingam panel has suggested at least
two-third members of the board of the MII shall comprise of PIDs.
○ Further, their roles and responsibilities of all directors should be clearly outlined, especially
their responsibilities towards regulatory, compliance and risk management functions.

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Sebi floats paper to protect equity shareholders under IBC - SEBI
● The Securities and Exchange Board of India (Sebi) on Thursday floated a
consultation paper seeking public comments on protection of public equity shareholders in
case listed entities undergo the corporate insolvency resolution process.
● This follows numerous complaints with regard to companies that have been delisted following the
approval of the resolution plan.
● The paper proposes that non-promoter public shareholders shall be provided an opportunity to
acquire equity of the fully diluted capital structure of the new entity up to the minimum
public shareholding percentage, which is 25% at present, on the terms agreed upon by the
resolution applicant.
● The new entity shall endeavour to achieve at least 5% public shareholding through such
mode of offer made to the non-promoter public shareholders.
● The offer to acquire shares would be made in an equitable manner to such public equity
shareholders, according to the consultation paper floated by Sebi.
● Sebi has also contended in the consultation paper that it is necessary to give the right value to
the business of the debtor company and all stakeholders should get appropriate value of their
shareholding.
● Moreover, associate companies and subsidiaries, family members of promoter group companies,
trusts managed by promoters, key managerial personnel, and directors will not be identified as
public shareholders.
● As subscription from public equity shareholders under such offer to acquire equity of the fully
diluted capital structure of the new entity will not be in the hand of the successful bidder or
resolution applicant, it may not be possible for the latter to upfront allot certain percentage of
equity to public equity shareholders and get this incorporated as part of resolution plan.
● However, to ensure adequate float and liquidity in the new entity after its restructuring, the
entity may be permitted to continue as a listed entity only if 5% of the fully diluted capital structure
of the new entity is with the public shareholders.

New norms for online bond market - SEBI

● The Sebi issued a circular pertaining to registration and framework for
the online bond platform providers (OBPs).
● According to the circular, Sebi said that
○ In order to streamline the operations of these OBPs and to facilitate the participation of
investors in the bond market, there was a need to provide a regulatory framework for the
working of such OBPs.

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 ● With the bond market offering tremendous scope for development, particularly in the
non-institutional space, there is a need to place checks and balances in the form of
■ Transparency in operations and
■ Disclosures to the investors dealing with such OBPs, measures for mitigation of
payment, the regulator clarified.
● The OBPs, the market regulator said,
■ Should be companies that are incorporated in India and
■ They should register themselves as stock brokers in the debt segment of the stock
exchange.

Market regulator Sebi plans to streamline disclosure framework

● Sebi has also proposed a specific provision to mandate confirmation or
denial by top 250 listed entities on material information reported by media
● The Securities and Exchange Board of India (SEBI) has plans to give a fillip to disclosure
requirements to encourage better information symmetry at listed firms.
● Under the current regulations, Companies need to disclose any event such as
■ acquisition, merger, demerger, restructuring, or sale of any unit which will have an
impact on the business.
● In its consultation paper Sebi has proposed new thresholds for ‘material disclosures’.
● Under this, if an event is expected to impact
○ at least 2% of a company’s turnover,
○ 2% of net worth, or
○ 5% of the three-year-average profit or loss after tax will be seen as ‘material disclosure’.
● The capital markets regulator is also considering halving the time provided to companies for
disclosure from 24 hours to 12 hours.
● Furthermore, in the case of decisions taken in a board meeting, it has been proposed to disclose
the information within 30 minutes.
● Sebi has also proposed a specific provision to mandate confirmation or denial by the top 250
listed entities on material information reported by the media.
● For confidential information, the regulator may later come up with a guidance for such
disclosures.
● The regulator also plans to make disclosure of cybersecurity incidents or breaches or loss of data
and documents arising from any such cases in the quarterly corporate governance report by the
listed company as immediate disclosures may lead to vulnerability.
○ However, disclosure of such events is necessary for investors to understand the
associated risks and impact.

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 ● While the regulator has already specified dissemination of information under the SEBI (Listing
Obligations and Disclosure Requirements, or LODR) Regulations, there have been frequent
non-compliances, inviting fines and penalties.
● In certain instances, it was observed that the disclosure of an event by the listed entity was made
at the last hour, by which time the information about the said event had already been circulated
publicly in the media.
● At times, the information had to be disclosed by listed entities only after queries were raised by
stock exchanges based on media reports, noted Sebi in its consultation paper.
● Comments from the public on the consultation paper can be submitted by November 27,
following which, Sebi might amend the LODR Regulations to effect some of the proposed
changes.

SEBI tweaks norms on directors

● The Securities and Exchange Board of India (Sebi) has introduced an additional option for
appointment and removal of independent directors from company boards, a move that will
provide flexibility to such a process.
● At present, the appointment, reappointment or removal of independent directors is made through
a special resolution, which requires 75% of “yes” votes from a board to be passed.
● Under the amended LODR rules, according to a notification made public by the regulator, an
alternative mechanism has been introduced.
○ Under the new system if the special resolution for appointment of an independent director
does not get the requisite majority, then two other thresholds—
■ for ordinary resolution and
■ for majority of minority shareholders—would be tested.
○ If the resolution crosses the thresholds in the same voting process then the resolution for
appointment of the independent director would be deemed to be approved by
shareholders.

Sebi puts AIF norms in place

● Guidelines for alternative investment funds (AIFs) for declaring the
first close of a scheme.
● The markets regulator has also specified the manner of calculating the tenure of a close-ended
scheme of an AIF and prescribed a fee for change in control of the manager or sponsor.
● The guidelines would come into force with immediate effect.
● The first close of a scheme is required to be declared not later than 12 months from the date of
the SEBI’s communication for taking the private placement memorandum of the scheme on
record.

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 ● Sebi said the tenure of close-ended schemes of AIFs would be calculated from the date of
declaration of the first close.
● In the case of open-ended schemes of Category III AIFs,
○ The first close would refer to the close of their initial offer period.
○ “Corpus of the scheme at the time of declaring its first close shall not be less than the
minimum corpus prescribed in AIF regulations for the respective category/sub-category of
the AIF,” Sebi said.
● In case the first close of a scheme is not declared within the timeline prescribed, the AIF would
have to file a fresh application for the launch of the scheme.
● AIF may modify the tenure of a scheme at any time before declaration of its first close.
○ Prior to declaration of such close, the investor may withdraw or reduce commitment for
such a scheme of an AIF.
● Sebi said a fee equivalent to the registration fee applicable to the respective category of the AIF
would be levied in case of change in control of manager or sponsor and in case of change in
manager or sponsor.
○ The fee would be paid within 15 days of effecting the change.

Sebi guidelines for social media finfluencers on the anvil

● The Securities and Exchange Board of India (Sebi) said
it is working on a set of guidelines for financial influencers, or finfluencers, giving unsolicited
financial advice on social media platforms.
● “We are working on guidelines for financial influencers,” Sebi whole-time member S.K. Mohanty
● The markets regulator has witnessed an exponential rise in the number of unregistered financial
advisors,
○ offering stock tips on platforms such as Telegram, Instagram, WhatsApp, Facebook, and
YouTube.
○ Besides, there have been many reports of companies approaching these influencers, with
considerable following on Instagram, Twitter and Facebook, to endorse their stocks.

Sebi curbs AIF schemes with priority distribution model - Circular

● “Alternative Investment Fund” is a privately pooled investment vehicle, which collects funds from
investors, for investing it in accordance with a defined investment policy for the benefit of its
investors.
● A priority distribution model allows some investors to exit a scheme ahead of others,
which is currently not explicitly restricted in AIF Regulations mandated by the regulator.

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 ● Some AIFs offer select limited partners, or investors, in AIFs a priority payout, whereby they get
their principal investment back before other investors. This may especially happen in the case of
distressed funds, where there may be greater investment risks.
● Sebi noted that some schemes of AIFs have been allowing distribution in such a way that a set of
investors “share loss more than pro rata to their holding”.
■ Regulator believes it is unfair and unethical
● It has been decided that schemes of AIFs which have adopted aforesaid priority distribution
model, shall not accept any fresh commitment or make investments

T+1 settlement for Futures and Options from January 2023 - SEBI
● To bring in operational efficiency and ease for market participants, stock exchanges have decided
that all stocks on which derivatives contracts are available will be transitioned to T+1 settlement
in a single batch from January 2023 instead of two separate batches.
○ As per the earlier schedule, stocks on which futures and options (derivatives) are available
are to be transitioned to T+1 settlement in two batches — December 2022 and January
2023.

IRDAI draft norms do away with specific caps on commissions to agents

● In the earlier version of the draft, the Insurance Regulatory and Development Authority of India
(Irdai) had proposed that the maximum commission payable under general insurance products,
including health insurance products offered
■ by general insurers, should not exceed 20 per cent of the gross premium
written in that financial year. The same limit was proposed for health products.
● However, in the revised draft, the regulator has said the commission payable under general
insurance products, including health insurance products offered by general insurers and health
insurance products by standalone health insurers, should not exceed the expense of
management (EoM) limits specified by the regulator.
● Under the revised EoM guidelines, which will come into effect from April 1 2023, the regulator has
proposed a limit of 30 percent of gross written premium written in that financial year as EoM
limit for general insurers and 35 percent in case of standalone health insurers.

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PFRDA simplifies digital on-boarding
● Easing the paperless on-boarding process further, pension fund regulator Pension Fund
Regulatory and Development Authority (PFRDA) said that documentation for joining its
scheme can be furnished through the government’s Central KYC (CKYC).
● CKYC is the government’s initiative which allows users to complete their KYC (know your
customer) only once for interacting with multiple service providers across the financial sector
falling under various regulators.
● The PFRDA already facilitates digital onboarding for its pension schemes under National Pension
System (NPS) through documents issued via Digilocker, Aadhaar eKYC, PAN or bank account
details.
● CKYC is managed by the Central Registry of Securitization Asset Reconstruction and Security
Interest of India (CERSAI).

PFRDA appoints Suraj Bhan as chairman of

NPS Trust
● Suraj Bhan has been a Trustee on the Board of NPS
Trust since 2018.

Basel III Framework on Liquidity Standards – Standing Deposit Facility - RBI

Circular
● RBI has been permitting banks to use a progressively larger proportion of SLR bonds to be
used for Liquidity Coverage Ratio computation
● Overnight balances held by banks with the Reserve Bank of India under the Standing Deposit
Facility (SDF) will be eligible as level-1 high quality liquid assets for the computation of Liquidity
Coverage Ratio
● RBI made the announcement after banks sought clarity on the treatment of SDF under the
Liquidity Risk Management Framework.
● RBI’s circular, which comes into effect immediately, applies to all commercial banks, but leaves
out local area banks, regional rural banks and payments banks.
● SDF was institutionalised this April and replaced the reverse repo rate as the lower bound of the
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 Liquidity Adjustment Corridor.

● The repo rate represents the middle of the corridor while the Marginal Standing Facility
represents the higher end.
● The SDF rate, which is 25 basis points below the repo rate, is currently at 5.65 %
● Over the past few years, banks have largely parked excess funds with the RBI as liquidity in the
banking system has been maintained at a large surplus.
● As a part of the reforms carried out after the global financial crisis, the Basel Committee on
Banking Supervision had launched the LCR, which calls for banks to maintain high-quality liquid
assets to meet 30 days of net outgo under stressed conditions.
● In India, banks were already required to put aside a portion of their deposits in liquid assets under
the Statutory Liquidity Ratio (SLR), which primarily consists of government bonds.
● Given that the liquid assets under the SLR requirement and those needed for LCR are largely the
same, RBI has been permitting banks to use a progressively larger proportion of SLR bonds to
be used for LCR computation.

Sebi brings mutual fund managers, directors under insider trading rules
● Fund managers of some fund houses had indulged in front running, making a huge money in the
manipulation.
○ Front-running, which is illegal in India, involves purchasing a stock based on advance
exclusive information regarding an expected large transaction that will affect its price.
○ Sebi has categorised front-running as a form of market manipulation and insider trading,
and penalised several fund houses and fund managers in the past over this activity.
● The Securities and Exchange Board of India (SEBI) has finally brought fund managers, directors
of fund houses, trustees and other connected entities under the ambit of insider trading rules.
● It has also brought an official or an employee of fund accountant providing services to a mutual
fund, an official or an employee of a self-regulatory organization, an official of a stock exchange
for dissemination of information, directors or employees of auditor, legal advisor or consultants of
the mutual fund or asset management company, a banker of the mutual fund or AMC and a
concern, firm, trust, HUF, company or association of persons wherein a director of an AMC and
Trustees or his immediate relative or banker of the company, has more than 10 percent of the
holding or interest under the rules.
● Sebi said no insider should trade in the units of a scheme of a mutual fund, when in possession
of unpublished price sensitive information, which may have a material impact on the net asset
value of a scheme or may have a material impact on the interest of the unit holders of the
scheme.
Off-market trades
● Off-market trades should be reported by the insiders to the asset management company within
two working days.

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 ● Every asset management company should notify the particulars of such trades to the stock
exchange as may be specified by the Board within two trading days from receipt of the disclosure
or from becoming aware of such information.
● An AMC should, on such date as may be specified by the Board and on a quarterly basis,
disclose the details of holdings in the units of its mutual fund schemes, on an aggregated
basis, held by the designated persons of asset management company, trustees and their
immediate relatives

Sebi issues rules for managing technical glitches, cyber security threats
● Under the new framework, any malfunction that causes a slowdown in or variance from
normal operations for five minutes or more will have to be reported within an hour of
occurrence.
● Stock brokers have been directed to submit a preliminary incident report within a day
following the incident, mentioning the details and immediate action taken to rectify it,
○ while a root cause analysis report will have to be submitted within 14 days to the
stock exchanges.
● These malfunctions could be on account of inadequate infrastructure, cyber attacks, procedural
errors or process failures
● SEBI has directed stock brokers with a minimum client base to follow business continuity
planning (BCP) and disaster recovery site (DRS) in the event of any disaster.
● The minimum client base for stock brokers will be specified by the exchanges from time to time.
● Specified stock brokers will have to conduct drills or live trading from DRS for at least one full
trading day. However, the frequency of this drill will be declared later.
● Stock exchanges will also, after consultation with brokers, declare the maximum time taken to
restore operations and the maximum tolerable period for which data might be lost due to a major
incident.
● Primary Data Centre (PDC) and DRS shall be separated from each other by a distance of at
least 250 kilometers to ensure that both of them do not get affected by the same natural disaster
● Stock exchanges have been directed to put a structure of financial disincentives applicable to
stock brokers for technical glitches and non-compliance of the provisions.
● Root cause analysis reports and such incidents will have to be mentioned on the exchanges’
website.
● The market regulator has asked the exchanges to maintain a dedicated cell for monitoring such
incidents and to inform brokers about breach of any key parameter.
● The logs of the key parameters will have to be preserved for 30 days in normal course, while
○ in the event of a technical glitch the data will have to be maintained for two years.
● To remain abreast with technological developments, stock brokers have been asked to
periodically update their systems, servers and firewalls along with following regular testing of the
softwares.

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 ● With a rising investor base, stock brokers have also been asked to do capacity planning for the
entire trading infrastructure including server capacities, network availability, and the serving
capacity of trading applications. The capacity for stock brokers will have to be 1.5 times the
highest peak load during a quarter.

IRDAI approves amendments, simplifies rules to set up insurance firms

● Private equity (PE) funds can now directly put in money in insurance companies, and
investment by them through special purpose vehicles (SPVs) has been made optional, thus
providing flexibility.
○ Under the current guidelines, to invest in insurance companies as “promoter”, a PE fund
can do so only through an SPV.
○ But if the PE fund is investing in an insurance company as “investor”, it can do so directly
or through an SPV.
● Further, the regulator has said a single investor taking 25 per cent in an insurance
company will be classified as “investor” and any investment more than that will make it a
“promoter”.
○ Under the current guidelines, the threshold for being “promoter” as a single investor is
more than 10 per cent.
● Irdai has introduced provisions by which promoters will be
allowed to dilute their stake down to 26 per cent on condition that
the insurer has a satisfactory solvency record for the preceding five
years and is a listed entity.
○ The earlier norms required promoters to hold on to a 50 per
cent stake if it was more than that.
● The regulator has said the lock-in period of investment for
investors and promoters will be stipulated on the basis of the
age of the insurer.
○ Like any other promoter, PE funds will be subject to lock-in
period norms based on age of the insurer
● The regulator has increased the number of tie-ups corporate
agents and insurance-marketing firms can have.
○ Corporate agents can now tie up with nine insurers each
in the general, life, and health insurance sectors.
■ Currently, it is three.
● Insurance-marketing firms can tie up with six insurers in each line of business of life,
general and health for distributing their insurance products.
● The area of operation of Insurance-marketing firms has been expanded to cover the entire
state in which they are registered.

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 RBI's Housing Price index up 4.5% in Q2, Kochi tops chart with
11.5% rise
● Reflecting buoyancy in demand for dwellings, the Reserve Bank's All-India
House Price Index (HPI) grew by 4.5 per cent year on year during the second quarter ended
September 2022.
● The HPI had grown by 3.5 per cent in the previous quarter and by 2.4 per cent a year ago.
● RBI’s HPI is based on transaction-level data received from the registration authorities in ten
major cities in the country.
○ These cities are: Ahmedabad, Bengaluru, Chennai, Delhi, Jaipur, Kanpur, Kochi, Kolkata,
Lucknow and Mumbai.
● The YoY movements in HPI varied widely across the cities,
○ ranging from a growth of 11.1 per cent (Kochi) to a contraction of 4.1 per cent (Jaipur).
● While Ahmedabad, Kolkata, Chennai and Jaipur recorded sequential contraction in the index, the
other six cities recorded expansion.
● Bank credit for housing, including priority sector lending, rose by 16 per cent YoY this
September.
● Outstanding housing loans stood at Rs 18.05 trillion in September 2022.

RBI permits banks to open 12 special vostro accounts for trade in rupees
● The Reserve Bank of India (RBI) has permitted banks to open 12 special "vostro accounts", to
facilitate import-export trade in the rupee.
● The RBI had earlier allowed two Indian lenders — UCO and IndusInd Bank — to open nine
special vostro accounts for facilitating overseas trade in rupee.
● The mechanism will also enhance India’s bargaining power in trade and spur investments

Bank credit grows at 17.2% from 7% in September quarter- RBI data

● Bank credit growth improved further to 17.2 % (year-on-year) in September 2022 from 7% a
year ago
● "Credit growth remained broad-based: all population groups and bank groups recorded double
digit annual growth," the Reserve Bank said while releasing 'Quarterly Statistics on Deposits
and Credit of SCBs: September 2022'.
● Aggregate deposits growth (y-o-y), stood at 9.8 per cent in September 2022.
○ Since December 2020, bank branches in metropolitan centres have been recording higher
annual growth than those in rural, semi-urban and urban areas.
● Private sector bank group has been outpacing public sector banks, foreign banks and
regional rural banks in deposit mobilisation.
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● As per the data, year-on-year growth in term deposits rose to 10.2 % in September 2022 from 6.4
per cent a year ago.
● Current and savings deposits growth moderated to 8.8% and 9.4 % from 17.5 per cent and 14.5
per cent, respectively, a year ago.
● The share of savings deposit in total deposits, from a peak of 35.2 in June 2022, moderated
marginally to 34.7 in the latest quarter.
● All-India credit-deposit (C-D) ratio increased further to 74.8 % in September 2022 from 73.5
per cent a quarter ago and 70 per cent a year ago.
○ The C-D ratio for metropolitan bank branches, which have a dominant share in the
banking business, stood much higher at 87.6 per cent in September 2022 (82.8 per cent a
year ago).

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