SBI hikes interest rates on long-term FDs by upto 15 bps - Business Guardian
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Industry & Regulation

SBI hikes interest rates on long-term FDs by upto 15 bps



The country’s largest lender State Bank of India (SBI) has increased interest rates on fixed deposits (FDs) by up to 15 basis points or 0.15 per cent with effect from February 15, 2022.

The interest rate on FD for tenure from three years to less than five years has been increased to 5.45 per cent from 5.30 per cent. For senior citizens, the rate has been increased to 5.95 per cent from 5.80 per cent, according to the information put on the SBI website.
The interest rate on FD for tenure two years to less than three years has been increased by 10 basis points to 5.20 per cent from the earlier 5.10 per cent. For the senior citizens, the rate has been increased to 5.70 per cent from the earlier 5.60 per cent.

For five years to 10 years tenure, the interest rate has been increased to 5.50 per cent from the earlier 5.40 per cent. For senior citizens, the rate has been increased to 6.30 per cent from 6.20 per cent.

These rates are applicable for FDs worth less than Rs 2 crore. SBI has left the interest rates on FDs for tenure up to two years unchanged. (ANI)


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Industry & Regulation

Media industry cries foul, national broadcasting policy too restrictive



The Indian government’s National Broadcasting Policy has encountered significant criticism from television broadcasters, film and TV producers, and other industry bodies who argue that the proposed regulations could severely restrict freedom of expression. The policy aims to encompass all forms of media, including streaming video and audio platforms, under a unified regulatory framework.

Critics argue that the draft guidelines fail to address longstanding concerns raised by industry stakeholders. These concerns have been formally submitted to the Telecom Regulatory Authority of India (Trai) following its call for feedback on the broadcast policy in a recent consultation paper.

The Indian Broadcasting and Digital Foundation (IBDF) expressed reservations, noting that Trai’s consultation paper extends beyond its scope and power, particularly in regulating content, an area traditionally beyond Trai’s remit. IBDF emphasized the fundamental importance of freedom of speech and expression in a democracy and cautioned against any measures that might curtail these freedoms.

One contentious aspect of the policy is its attempt to bring streaming-video platforms within the purview of broadcasting regulations. IBDF contends that this move contradicts Trai’s previous stance and could lead to what it terms “reverse discrimination” by equating linear television with online curated content providers.

A key provision of the draft Broadcast Services (Regulation) Bill requires content platforms to establish a content evaluation committee to pre-certify content before release, effectively serving as an internal censor board. IBDF strongly opposes any governmental interference in the self-regulatory structure, arguing that adding an executive-led third-tier appellate body would violate the doctrine of separation of powers.

Similarly, the News Broadcasters and Digital Association (NBDA) argued that the National Broadcasting Policy should not encompass aspects that extend beyond the broadcasting sector. Issues related to film, music, online gaming, animation, and post-production, NBDA contends, fall outside Trai’s remit and should not be regulated under broadcasting regulations.

The Internet and Mobile Association of India (IAMAI) advocated for content regulation to remain under the purview of the Ministry of Information and Broadcasting (MIB). IAMAI stressed the importance of maintaining an orderly separation of content and carriage, proposing that content regulation across all mediums should fall within the jurisdiction of the MIB to avoid inconsistencies and regulatory compliance costs.

Culver Max Entertainment Pvt Ltd (formerly Sony Pictures Networks India Pvt Ltd) cautioned against including streaming platforms in the policy, warning that it could lead to confusion and disrupt the digital-media ecosystem. Additionally, Culver Max highlighted disparities in treatment between public and private broadcasters and called for more transparency in the auction process through which Prasar Bharati carries channels of private broadcasters.

Furthermore, Culver Max urged for a streamlined process for selecting events of national importance shared with Prasar Bharati and suggested that private distribution platform operators should not be mandated to carry Prasar Bharati channels in their base packs.

In summary, the proposed National Broadcasting Policy faces significant opposition from industry stakeholders who argue that it could stifle freedom of expression and impose undue regulatory burdens. Stakeholders are calling for a reconsideration of the policy’s scope and provisions to ensure a fair and conducive regulatory environment for the media and entertainment sector in India.

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Banking & Finance

RBI bans BOB from onboarding new customers



The Reserve Bank of India on Tuesday barred state-owned Bank of Baroda from onboarding new customers on its mobile app ‘bob World’ following material supervisory concerns. The state-owned lender said it has already taken corrective action to address the central bank’s concerns and has started additional actions to close any holes that may still exist in response to the RBI’s directives.

“The Reserve Bank of India has, in exercise of its power, under Section 35A of the Banking Regulation Act, 1949, directed Bank of Baroda to suspend, with immediate effect, any further onboarding of their customers onto the ‘bob World’ mobile application,” the central bank said in a statement. The action, the RBI said is based on certain material supervisory concerns observed in the manner of on boarding of their customers onto this mobile application.

“Any further on boarding of customers of the bank on the ‘bob World’ application will be subject to rectification of the deficiencies observed and strengthening of the related processes by the bank to the satisfaction of RBI,” it added. Bank of Baroda has been further directed to ensure that already on boarded ‘bob World’ customers do not face any disruption on account of this suspension. In a filing to stock exchanges, the bank said, “We will work closely with the RBI to address their concerns at the earliest to their satisfaction”.

The lender also assured its customers that they will not face any disruption and continue to experience uninterrupted services on the mobile app. “Further, this order does not impact any of the bank’s other digital banking channels such as net banking, WhatsApp banking, debit cards, ATMs, etc, for servicing its existing customers as well as for on boarding of new customers,” the lender added. The bank does not expect the RBI’s action to have a material impact on its overall business and growth plans.

In December 2020, the RBI had barred HDFC Bank from issuing new cards and launching new digital initiatives after repeated instances of technical outages, which is the market leader in the credit cards segment. Following several occurrences of breakdowns in online banking, mobile banking, and payment utilities over the previous two years, the RBI took action.

In August 2021, the RBI partially restored the prohibition on card issuances after HDFC Bank took corrective action. The prohibition against starting new technological ventures persisted, though, and it was repealed in 2022.

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Banking & Finance

RBI action may curb credit growth, says S&P, Nomura sees limited effect on biz



Regulatory action preventing Kotak Mahindra Bank from onboarding new customers online or issuing new credit cards could give a setback to credit growth and profitability. Credit cards are a higher-yielding target growth segment for Kotak Mahindra Bank with the portfolio growing at 52 per cent year-on-year as of 31 December, 2023 compared with total loan growth of 19 per cent.

Action by the Reserve Bank of India (RBI) this week could push the bank to rely more on physical branch network expansion to supplement growth thus entailing higher operating costs, says S&P Global Ratings. In a similar case in 2020 related to HDFC Bank’s suspension on sourcing new credit card customers, it took the bank more than a year to meet the RBI’s requirements and have restrictions lifted. The RBI announced on 24 April, 2024 that Kotak Mahindra Bank will not be allowed to onboard new customers through online and mobile banking channels or issue new credit cards.

This follows several outages of the bank’s core banking systems as well as online and digital banking channels and deficiencies identified through the RBI’s IT examinations in 2022 and 2023. The RBI’s order will not, however, materially affect S&P’s ratings on Kotak Mahindra Bank, the report assures, because credit cards make up a small 4 per cent of total loans as of end December 2023.

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RBI’s new master direction on ARCs effective April 24



The central bank said that the regulation would be effective from April 24, 2024.

The Reserve Bank of India (RBI) has issued a consolidated master directive, which includes several key regulations impacting asset reconstruction companies (ARCs). One notable change is the increase in the minimum capital requirement for ARCs to initiate securitization, which has been raised from Rs 100 crore to Rs 300 crore as of October 11, 2022. The central bank announced that this regulation would come into effect on April 24, 2024.

ARCs were given a transitional period to meet the minimum required Net Owned Fund (NOF) of Rs 300 crore. By March 31, 2024, ARCs must have Rs 200 crore, and by March 31, 2026, they must achieve the full Rs 300 crore in NOF.

The RBI stated that in case of non-compliance at any of these stages, the non-complying ARC would be subject to supervisory action, including a prohibition on undertaking incremental business until it reaches the required minimum NOF applicable at that time.

ARCs with a minimum NOF of Rs 1,000 crore are eligible to act as resolution applicants.

Additionally, the directive specifies that ARCs may deploy funds for restructuring acquired loan accounts with the sole purpose of realizing dues in government securities and deposits with scheduled commercial banks, Small Industries Development Bank of India (SIDBI), National Bank for Agriculture and Rural Development (NABARD), or other specified entities.

Furthermore, ARCs are permitted to invest in short-term instruments such as money market mutual funds, certificates of deposit, and corporate bonds/commercial papers with a short-term rating equivalent to the long-term rating of AA or above by an eligible credit rating agency (CRA). Such investments are subject to a cap of 10% of the NOF of the ARC on the maximum investment in such short-term instruments.

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Industry & Regulation

RBI blocks Kotak Bank’s online onboarding & credit card issuance



In a significant regulatory development, the Reserve Bank of India (RBI) imposed restrictions on Kotak Mahindra Bank (KMB) on April 24, prohibiting the bank from onboarding new customers through its online and mobile banking channels and issuing fresh credit cards. The central bank cited supervisory concerns over KMB’s technology platforms as the rationale behind this action.

According to the RBI, these measures were initiated following an examination of the bank’s IT systems over the past two years, during which KMB reportedly failed to adequately address identified concerns. While the ban does not affect existing customers, it is expected to impact the bank’s new customer acquisition efforts significantly, given that a substantial portion of account openings occur through online and mobile banking channels.

Moreover, the prohibition on issuing new credit cards is likely to impact KMB’s credit card business, including its co-branded credit card deals, as per industry experts. The RBI’s decision was motivated by observed deficiencies and non-compliance in various aspects of KMB’s IT infrastructure and risk management practices, including IT inventory management, patch and change management, user access management, and data security protocols.

Notably, the RBI highlighted KMB’s repeated IT system outages, including a service disruption on April 15, 2024, as evidence of inadequate operational resilience and failure to address underlying technology issues. Despite continuous engagement with the bank over the past two years to address these concerns, the RBI deemed the outcomes unsatisfactory, prompting regulatory intervention.

The central bank emphasized that its actions were aimed at safeguarding customer interests and ensuring the stability of the financial ecosystem. However, the imposed restrictions are subject to review upon completion of a comprehensive external audit commissioned by KMB, with remediation of identified deficiencies.

This is not the first instance of the RBI taking regulatory action against a major Indian bank over technology-related concerns. In 2020, HDFC Bank faced similar restrictions following recurring outages in its online platforms. While the ban on new digital launches was partially lifted in subsequent years, it underscores the RBI’s proactive approach to enforcing compliance and ensuring robust IT infrastructure across the banking sector.

Following the announcement, shares of KMB closed at Rs 1842.95 apiece on the BSE, registering a modest increase of 1.65 per cent from the previous close, while the benchmark Sensex ended nearly flat. The RBI’s intervention underscores the critical importance of maintaining resilient technology platforms in the banking industry and reinforces the need for banks to prioritize IT infrastructure investments and compliance with regulatory requirements to mitigate operational risks and safeguard customer interests.

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OpenAI Establishes India Presence with Government Relations Head



OpenAI, backed by Microsoft Corp., has appointed Pragya Misra as its first employee in India, naming her as the head of government relations. The move comes as India votes in a new administration, a crucial time for shaping artificial intelligence regulations in the country. Misra, 39, previously worked at Truecaller AB and Meta Platforms Inc. She is set to start at OpenAI toward the end of the month. Her appointment signals OpenAI’s efforts to advocate for favorable regulations as governments worldwide grapple with how to regulate AI technology.

India, with its vast population and rapidly growing economy, presents significant growth opportunities for global tech companies like OpenAI. However, navigating India’s regulatory landscape can be challenging due to local lawmakers and regulators prioritizing the protection of domestic firms. OpenAI representatives and Misra did not respond to requests for comment outside regular US office hours. Misra’s experience in leading public affairs at Truecaller and Meta Platforms Inc., where she spearheaded WhatsApp’s campaign against misinformation in 2018, positions her well for her new role at OpenAI.

In India, OpenAI faces competition from tech giants like Alphabet Inc.’s Google, which is developing AI models tailored for the country, aiming to cater to diverse linguistic needs and widen internet access. OpenAI CEO Sam Altman emphasized the importance of integrating AI technologies into government services, particularly in sectors like healthcare. Altman, who has previously met with Prime Minister Narendra Modi, underscored India’s role as an early adopter of OpenAI’s generative-AI service, ChatGPT.

While Altman has advocated for more regulations in the AI space, he has also expressed concerns about the potential harm caused by the technology. He believes that while significant regulatory changes may not be necessary for current AI versions, they may become essential in the near future. OpenAI’s decision to appoint its first employee in India reflects the company’s recognition of the country’s importance in the global AI landscape.

With a population of 1.4 billion and a rapidly growing economy, India presents a vast market and innovation hub for AI technologies. By establishing a presence in India, OpenAI aims to leverage local talent and resources to drive its growth and influence in the region. Pragya Misra’s appointment as head of government relations underscores OpenAI’s commitment to engaging with policymakers and stakeholders in India.

Her experience in navigating regulatory environments and building partnerships will be instrumental in advancing OpenAI’s interests and objectives in the country. India’s government has shown increasing interest in AI regulation and adoption, recognizing its potential to transform various sectors, including healthcare, education, and governance.

As AI technologies continue to evolve, policymakers are grappling with issues related to privacy, security, and ethical use, making effective government relations crucial for companies like OpenAI. Moreover, OpenAI’s competition with tech giants like Google highlights the importance of strategic positioning and advocacy efforts in India’s competitive market.

By proactively engaging with regulators and policymakers, OpenAI seeks to shape the regulatory landscape in its favor while also fostering collaboration and innovation within the AI ecosystem. Overall, OpenAI’s decision to establish a presence in India and appoint a government relations head underscores its commitment to driving responsible AI development and adoption globally.

As the company expands its footprint in India, it is poised to play a significant role in shaping the future of AI in the region and beyond.

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