\n
Monetary policies<\/span><\/h2>\n
\nStanding Deposit Facility(SDF)<\/span><\/h3>\nNews<\/h5>\n
The Reserve Bank of India(RBI) has introduced the Standing Deposit Facility(SDF), an additional tool for absorbing liquidity, at an interest rate of 3.75%.<\/p>\n
About the Standing Deposit Facility(SDF)<\/h5>\n
Introduced in:<\/strong> 2018 by the Reserve Bank of India by amending Section 17 of the RBI Act.<\/p>\nPurpose:\u00a0<\/strong>It is an additional tool for absorbing liquidity without any collateral.By removing the binding collateral constraint on the RBI, the SDF strengthens the operating framework of monetary policy.<\/p>\nCommittee:<\/strong>\u00a0The SDF\u00a0was suggested in 2014 by a committee headed by Urjit Patel.<\/p>\nReason for the introduction of SDF<\/h5>\n
The extraordinary liquidity measures undertaken in the wake of the pandemic combined with the liquidity injected through various other operations of the RBI have left a liquidity overhang of the order of Rs 8.5 lakh crore in the system. This has pushed up the retail inflation level in the system.<\/p>\n
Hence, that\u2019s why SDF has been introduced. It will help reduce the excess liquidity in the system and also control inflation.<\/p>\n
Operation of SDF<\/h5>\n
The SDF would replace the\u00a0Fixed Rate Reverse Repo(FRRR)<\/strong>\u00a0as the floor of the Liquidity Adjustment Facility(LAF) corridor.<\/p>\nAt present, SDF rate will be 25 basis points (bps) below the policy repo rate. Eligible participants can place deposits with the RBI on an overnight basis at a fixed rate. However, the RBI retains the flexibility to absorb liquidity for longer tenors under the SDF with appropriate pricing, as and when the need arises.<\/p>\n
About the Reserve Repo Rate and SDR<\/h5>\n
The fixed-rate reverse repo (FRRR) rate will remain part of the RBI\u2019s toolkit and its operation will be at the discretion of the RBI for purposes specified from time to time.<\/p>\n
This means that FRRR along with the SDF will impart flexibility to the RBI\u2019s liquidity management framework.<\/p>\n
\nMoney and Banking<\/span><\/h2>\n
\nNidhi Companies<\/span><\/h3>\nNews<\/h5>\n
The government of India has released the Nidhi (amendment) Rules, 2022. This amendment brings changes to the Nidhi Rules,2014 to safeguard the interest of the general public.<\/p>\n
About Nidhi Companies<\/h5>\n
Nidhi companies are a type of non-bank lenders that raise funds exclusively from their members and give loans to them to improve their governance and protect the public interest.<\/p>\n
They are regulated by the Reserve Bank of India(RBI) for deposit-taking and by the Department of Company Affairs(DCA) for operational matters and deployment of funds.<\/p>\n
To become a Nidhi company, the entity has to first register as a public limited company which has more disclosure requirements than a private limited company.<\/p>\n
Only individual members are allowed in Nidhi companies, and it cannot give loans to companies.<\/p>\n
About the need for\u00a0Nidhi (amendment) Rules, 2022<\/h5>\n
Under the Companies Act, 1956, Nidhi meant a company that the Central Government declared as Nidhi or Mutual Bene\ufb01t Society by noti\ufb01cation in the o\ufb03cial gazette.<\/p>\n
After that, the Companies Act, 2013 was brought. It initially provided that there was no need for a company to get a declaration from the Central Government to function as a Nidhi Company. Such companies were required to only incorporate as a Nidhi and meet certain requirements.<\/p>\n
However, the\u00a0Government brought back the requirement of government certification to operate as a Nidhi company in 2019 by amending the Companies Act of 2013.<\/p>\n
But still, the Government found that Nidhi companies have\u00a0not been complying with the norms. Hence, the\u00a0Nidhi (amendment) Rules, 2022 was brought.<\/p>\n
Key provisions of the Nidhi (amendment) Rules, 2022<\/h5>\n
Firstly<\/strong>, a public company set up as a Nidhi with a share capital of Rs 10 Lakh needs to first get itself declared as a Nidhi by the Union government. This can be done by submitting an application showing a minimum membership of 200 and net owned funds of \u20b92 million within 120 days of its incorporation.<\/p>\nSecondly,<\/strong>\u00a0promoters and directors of the Nidhi company have to meet the criteria of fit and proper person as laid down in the rules.<\/p>\nThirdly,<\/strong>\u00a0the rules introduced the concept of deemed approval. This means that if no decision is taken on the application for certification as Nidhi companies within 45 days of filing the application, approval would be deemed as granted.<\/p>\n
\nDigital Banking Units (DBUs)<\/span><\/h3>\nNews<\/h5>\n
In the Union Budget 2022, the Finance Minister\u00a0has proposed setting up 75 digital banking units (DBUs) in 75 districts across India through scheduled commercial banks.<\/p>\n
About the Digital Banking Units (DBUs)<\/h5>\n
DBU\u00a0is a specialized business unit of a bank that houses certain minimum digital banking products and services.<\/p>\n
A bank can offer specialized digital products at any time all year from these units and also provide existing financial services products.<\/p>\n
Establishment of DBUs<\/h5>\n
Commercial banks (other than regional rural banks, payment banks and local area banks) with past digital banking experience are permitted to open DBUs in tier 1 to tier 6 centres without having the need to take permission from the RBI in each case.<\/p>\n
Services provided by DBUs<\/h5>\n
As per the RBI, each DBU must offer certain minimum digital banking products and services. Such products should be on both liabilities and assets side of the balance sheet of the digital banking segment.<\/p>\n
The services include savings bank accounts under various schemes, current accounts, fixed deposits and recurring deposit accounts, digital kit for customers, mobile banking, Internet banking, debit cards, credit cards UPI QR code and point of sale (PoS).<\/p>\n
Other services include making applications for and onboarding of customers for identified retail, MSME or schematic loans.<\/p>\n
Simply put, digital banking involves taking all traditional banking activity online \u2014 doing away with paperwork like cheques, pay-in slips, demand drafts, and so on.<\/p>\n
Difference between DBUs and Neo banks<\/h5>\n
Currently, fintechs operating as\u00a0Neo Banks<\/a>\u00a0offer digital banking services but they do so in partnership with non-banking financial companies (NBFCs). Some of the non-banks offering services in India are Jupiter, Fi Money, Niyo, Razorpay X.<\/p>\nAbout the benefits of Digital Banking Units(DBUs)<\/h5>\n
News<\/h5>\n
The Reserve Bank of India(RBI) has introduced the Standing Deposit Facility(SDF), an additional tool for absorbing liquidity, at an interest rate of 3.75%.<\/p>\n
About the Standing Deposit Facility(SDF)<\/h5>\n
Introduced in:<\/strong> 2018 by the Reserve Bank of India by amending Section 17 of the RBI Act.<\/p>\n Purpose:\u00a0<\/strong>It is an additional tool for absorbing liquidity without any collateral.By removing the binding collateral constraint on the RBI, the SDF strengthens the operating framework of monetary policy.<\/p>\n Committee:<\/strong>\u00a0The SDF\u00a0was suggested in 2014 by a committee headed by Urjit Patel.<\/p>\n The extraordinary liquidity measures undertaken in the wake of the pandemic combined with the liquidity injected through various other operations of the RBI have left a liquidity overhang of the order of Rs 8.5 lakh crore in the system. This has pushed up the retail inflation level in the system.<\/p>\n Hence, that\u2019s why SDF has been introduced. It will help reduce the excess liquidity in the system and also control inflation.<\/p>\n The SDF would replace the\u00a0Fixed Rate Reverse Repo(FRRR)<\/strong>\u00a0as the floor of the Liquidity Adjustment Facility(LAF) corridor.<\/p>\n At present, SDF rate will be 25 basis points (bps) below the policy repo rate. Eligible participants can place deposits with the RBI on an overnight basis at a fixed rate. However, the RBI retains the flexibility to absorb liquidity for longer tenors under the SDF with appropriate pricing, as and when the need arises.<\/p>\n The fixed-rate reverse repo (FRRR) rate will remain part of the RBI\u2019s toolkit and its operation will be at the discretion of the RBI for purposes specified from time to time.<\/p>\n This means that FRRR along with the SDF will impart flexibility to the RBI\u2019s liquidity management framework.<\/p>\n The government of India has released the Nidhi (amendment) Rules, 2022. This amendment brings changes to the Nidhi Rules,2014 to safeguard the interest of the general public.<\/p>\n Nidhi companies are a type of non-bank lenders that raise funds exclusively from their members and give loans to them to improve their governance and protect the public interest.<\/p>\n They are regulated by the Reserve Bank of India(RBI) for deposit-taking and by the Department of Company Affairs(DCA) for operational matters and deployment of funds.<\/p>\n To become a Nidhi company, the entity has to first register as a public limited company which has more disclosure requirements than a private limited company.<\/p>\n Only individual members are allowed in Nidhi companies, and it cannot give loans to companies.<\/p>\n Under the Companies Act, 1956, Nidhi meant a company that the Central Government declared as Nidhi or Mutual Bene\ufb01t Society by noti\ufb01cation in the o\ufb03cial gazette.<\/p>\n After that, the Companies Act, 2013 was brought. It initially provided that there was no need for a company to get a declaration from the Central Government to function as a Nidhi Company. Such companies were required to only incorporate as a Nidhi and meet certain requirements.<\/p>\n However, the\u00a0Government brought back the requirement of government certification to operate as a Nidhi company in 2019 by amending the Companies Act of 2013.<\/p>\n But still, the Government found that Nidhi companies have\u00a0not been complying with the norms. Hence, the\u00a0Nidhi (amendment) Rules, 2022 was brought.<\/p>\n Firstly<\/strong>, a public company set up as a Nidhi with a share capital of Rs 10 Lakh needs to first get itself declared as a Nidhi by the Union government. This can be done by submitting an application showing a minimum membership of 200 and net owned funds of \u20b92 million within 120 days of its incorporation.<\/p>\n Secondly,<\/strong>\u00a0promoters and directors of the Nidhi company have to meet the criteria of fit and proper person as laid down in the rules.<\/p>\n Thirdly,<\/strong>\u00a0the rules introduced the concept of deemed approval. This means that if no decision is taken on the application for certification as Nidhi companies within 45 days of filing the application, approval would be deemed as granted.<\/p>\n In the Union Budget 2022, the Finance Minister\u00a0has proposed setting up 75 digital banking units (DBUs) in 75 districts across India through scheduled commercial banks.<\/p>\n DBU\u00a0is a specialized business unit of a bank that houses certain minimum digital banking products and services.<\/p>\n A bank can offer specialized digital products at any time all year from these units and also provide existing financial services products.<\/p>\n Commercial banks (other than regional rural banks, payment banks and local area banks) with past digital banking experience are permitted to open DBUs in tier 1 to tier 6 centres without having the need to take permission from the RBI in each case.<\/p>\n As per the RBI, each DBU must offer certain minimum digital banking products and services. Such products should be on both liabilities and assets side of the balance sheet of the digital banking segment.<\/p>\n The services include savings bank accounts under various schemes, current accounts, fixed deposits and recurring deposit accounts, digital kit for customers, mobile banking, Internet banking, debit cards, credit cards UPI QR code and point of sale (PoS).<\/p>\n Other services include making applications for and onboarding of customers for identified retail, MSME or schematic loans.<\/p>\n Simply put, digital banking involves taking all traditional banking activity online \u2014 doing away with paperwork like cheques, pay-in slips, demand drafts, and so on.<\/p>\n Currently, fintechs operating as\u00a0Neo Banks<\/a>\u00a0offer digital banking services but they do so in partnership with non-banking financial companies (NBFCs). Some of the non-banks offering services in India are Jupiter, Fi Money, Niyo, Razorpay X.<\/p>\nReason for the introduction of SDF<\/h5>\n
Operation of SDF<\/h5>\n
About the Reserve Repo Rate and SDR<\/h5>\n
\nMoney and Banking<\/span><\/h2>\n
\nNidhi Companies<\/span><\/h3>\n
News<\/h5>\n
About Nidhi Companies<\/h5>\n
About the need for\u00a0Nidhi (amendment) Rules, 2022<\/h5>\n
Key provisions of the Nidhi (amendment) Rules, 2022<\/h5>\n
\nDigital Banking Units (DBUs)<\/span><\/h3>\n
News<\/h5>\n
About the Digital Banking Units (DBUs)<\/h5>\n
Establishment of DBUs<\/h5>\n
Services provided by DBUs<\/h5>\n
Difference between DBUs and Neo banks<\/h5>\n
About the benefits of Digital Banking Units(DBUs)<\/h5>\n
![\"MLM](\"https:\/\/i0.wp.com\/blog.forumias.com\/wp-content\/uploads\/2022\/04\/box.jpeg?resize=578%2C451&ssl=1\")