The Reserve Bank of India (RBI) is looking to tighten scrutiny on the unsecured lending portfolios of banks amid the growing risk of potential defaults, four banking sources told Reuters. Unsecured loans - mostly personal loans and credit cards - do not carry any collateral and therefore pose a higher risk of default. These loans , however, are a big contributor to margins as they entail higher interest rates.

The ECL approach will require banks to increase provisions by 20-40%, largely on account of higher regulatory backstop compared with the IRAC norms, higher exposure consideration for undrawn facilities, cooling period for moving from stage 3 to 1, and lifetime provisioning considerations for stage 2 borrowers which are standard as per IRAC norms.

The RBI also announced a monetary penalty of Rs 6 lakh on Jowai Cooperative Urban Bank Limited, Meghalaya for deficiencies in regulatory compliance.

All regulated entities (REs) will be required to put in place board-approved policies for undertaking compromise settlements, with the borrowers as well as for technical write-offs laying down the process to be followed for all compromise settlements and technical write-offs, with specific guidance on the necessary conditions precedent, the RBI has said in a notification.

While the RBI has preferred Variable Rate Reverse Repo (VRRR) auctions to mop up excess liquidity, its toolkit includes options such as sales of government bonds, an increase in the Cash Reserve Ratio (CRR), the use of the Market Stabilisation Scheme (MSS) and foreign exchange swaps.

"FY 2023-24 will be a golden year for your bank, and with the right strategy, steady focus and clear vision, your bank will definitely scale up its performance and generate more value and returns to all its stakeholders," Atul Kumar Goel said.

During the year under review, there were 89.5 million digital transactions in the country. India accounted for 46 per cent of the global real-time payments in 2022, which was more than the combined digital payments the next four top countries.

V Anantharaman was a post-graduate diploma in business management from XLRI and a bachelor of engineering from Jadavpur University. Anantharaman was also a senior advisor to British International Investment (formerly CDC), UK’s Development Finance Institution.

"Pursuant to detailed discussions held by Union Home Minister and Minister of Cooperation Amit Shah, with Finance Minister Nirmala Sitharaman and Governor, Reserve Bank of India (RBI), the RBI has notified these vital measures to strengthen Urban Co-operative Banks," it said. The ministry has listed the four measures notified by the RBI.