RBI to enable UPI for cash deposit facility, to allow foreign investors in IFSC to invest in Sovereign Green Bonds

The Governor said operational instructions on enabling UPI for cash deposit facility will be issued shortly

April 05, 2024 09:10 pm | Updated 09:19 pm IST - MUMBAI

Mumbai, Apr 05 (ANI): RBI Governor Shaktikanta Das addresses during a press conference regarding the monetary policy decisions, in Mumbai on Friday. (ANI Photo)

Mumbai, Apr 05 (ANI): RBI Governor Shaktikanta Das addresses during a press conference regarding the monetary policy decisions, in Mumbai on Friday. (ANI Photo) | Photo Credit: ANI

Considering the popularity and convenience of UPI, the Reserve Bank of India (RBI) has proposed to enable UPI for cash deposit facility. RBI Governor Shaktikanta Das, while making a statement on developmental and regulatory policies, said, “Given the popularity and acceptance of UPI, as also the benefits seen from the availability of UPI for card-less cash withdrawal at ATMs, it is now proposed to facilitate cash deposit facility through use of UPI.”

Cash Deposit Machines (CDMs) deployed by banks enhance customer convenience while reducing cash-handling load on bank branches. The facility of cash deposit is presently available only through the use of debit cards.

The Governor said operational instructions on enabling UPI for cash deposit facility will be issued shortly.

In another announcement to provide more flexibility to Prepaid Payment Instruments (PPIs) holders, the RBI has proposed to permit linking of PPIs through third-party UPI applications. “This will enable the PPI holders to make UPI payments like bank account holders. Instructions in this regard will be issued shortly,” Mr. Das said.

At present, UPI payments from bank accounts can be made by linking a bank account through the UPI App of the bank or using any third-party UPI application. However, the same facility is not available for PPIs. PPIs can currently be used to make UPI transactions only by using the application provided by the PPI issuer.

Meanwhile in another measure, the RBI to facilitating wider non-resident participation in Sovereign Green Bonds (SGrBs), decided to permit eligible foreign investors in the International Financial Services Centre (IFSC) to also invest in such bonds.

A scheme for investment and trading in SGrBs by eligible foreign investors in IFSC is being notified separately in consultation with the Government and the IFSC Authority.

Based on an announcement in the Union Budget for FY 2022-23, the Government of India had issued SGrBs in January 2023. The SGrBs were also issued as part of the Government borrowing calendar in FY 2023-24.

At present, foreign portfolio investors (FPIs) registered with SEBI are permitted to invest in SGrBs under the different routes available for investment by FPIs in government securities.

The RBI has also decided to introduce a Mobile App of its RBI Retail Direct scheme which was rolled out in November 2021, giving access to individual investors to maintain gilt accounts with RBI and invest in government securities. The Scheme enables investors to buy securities in primary auctions as well as buy/sell securities through the NDS-OM platform.

“To further improve ease of access, a mobile application of the Retail Direct portal is being developed. The app will enable investors to buy and sell instruments on the go, at their convenience. The app will be available for use shortly,” Mr. Das said.

The central bank on Friday also decided for the distribution of Central Bank Digital Currencies (CBDCs) through Non-bank Payment System Operators.

Currently CBDC pilots in the Retail and Wholesale segments are underway with more use-cases and more participating banks. Continuing with this approach, the RBI has proposed to make CBDC-Retail accessible to a broader segment of users in a sustained manner, by enabling non-bank payment system operators to offer CBDC wallets.

“This is expected to enhance access and expand choices available to users apart from testing the resiliency of the CBDC platform to handle multi-channel transactions. Necessary changes will be made to the system to facilitate this,” Mr Das said.

To expand the avenues available to the Small Finance Banks for hedging interest rate risk in their balance sheet and commercial operations more effectively as well as to provide them with greater flexibility, the RBI has decided to allow them to deal in permissible rupee interest derivative products in terms of Rupee Interest Rate Derivatives (Reserve Bank) Directions, 2019. A circular in this regard will be issued shortly. 

The current guidelines permit Small Finance Banks to use only Interest Rate Futures (IRFs) for the purpose of proprietary hedging.

The RBI also decided to review the Liquidity Coverage Ratio (LCR) framework.

“Banks covered under LCR framework are required to maintain a stock of high quality liquid assets (HQLA) to cover the expected net cash outflows in the next 30 calendar days. However, the recent episodes in some jurisdictions have demonstrated the increased ability of the depositors to quickly withdraw or transfer deposits during times of stress, using digital banking channels,” Mr. Das said.

“Such emerging risks may require a revisit of certain assumptions under LCR framework. Therefore, certain modifications to the LCR framework are being proposed towards facilitating better management of liquidity risk by the banks. A draft circular in this regard will be issued shortly for comments of all stakeholders,” he said.

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