A policy of intent: Action awaited...

The RBI governor has set tight deadlines to bring out a slew of proposals on gold, real estate and other areas. Expect a lot of action the next few months

The Annual Credit Policy did little in terms of improving investors’ or borrowers’ mood. A 25-basis-point cut in the repo rate –- the rate at which the Reserve Bank of India lends to banks -– will not bring down rates, especially since the liquidity situation is quite tight.

But there are a slew of proposals, which, when they come into force, will make things more transparent, and pricing of residential properties could become better as well. Interestingly, the RBI governor has set tight deadlines to bring out these guidelines. Expect a lot of action in the next few months.

In May itself, some measures are going to be put in place to tackle the gold issue. The RBI proposes to issue guidelines for restricting the import of gold by banks. They will only be allowed to import to meet genuine need of exporters of gold jewellery. Also, there will be restrictions on the facility of advances against the security of gold coins per customer to gold coins weighing up to 50 grams. Guidelines to non-banking financial institutions who are dealing with gold loans will also be issued.

In June there could be some good news for potential home buyers: commercial real estate will have a new segment: CRE: Residential Housing. This sub-section will have a different risk weight and provisioning.

Going by the language of the policy -– residential housing sector under the CRE poses lower risk than other components -– the risk weight and provisioning norms are likely to be eased. This could help banks and housing finance companies cut rates for residential properties as the cost of provisioning goes down. The guidelines are expected in June.  

After the Cobrapost expose, several leading banks came under the scrutiny for mis-selling products and for their willingness to launder black money.  The apex bank proposes to come out with guidelines in June for wealth management businesses of banks. Also, in order to curb mis-selling of products, norms will be issued so as to ensure that bank employees do not receive cash or non-cash incentives directly from insurance companies, mutual funds and other product providers. Every bank will need to have a board-approved policy to avoid mis-selling. Know-your-Customer and anti-money laundering guidelines will also be issued.

Several bankers have raised concerns about the dollarisation of the balance sheet of Indian companies due to the unhedged portion. The apex bank proposes to increase the risk weight and provisioning requirements. All in all, get ready for an action-packaged next quarter.