Dheeraj Tiwari

State-run banks in India are planning to launch a new credit assessment model for micro and small enterprises by December, which will base lending decisions on digital transactions and cash flow metrics like electricity bills and employee provident fund contributions, rather than traditional parameters such as tax returns.

The Indian government asks banks to identify and overcome hurdles in implementing international trade settlements in Indian rupees through special rupee vostro accounts (SRVA). A crucial meeting is scheduled to address these challenges and boost rupee trade with surplus trade countries amid global financial shifts and sanctions concerns.

The Indian finance ministry has directed public sector banks to organize annual hackathons with academic institutions like IITs to bolster cybersecurity and fintech innovation. These hackathons will focus on critical areas such as fraud detection and user authentication. This initiative complements ongoing efforts by individual banks and the RBI to combat financial fraud, particularly involving mule accounts.

The government is launching a new housing loan scheme. This scheme will help low and middle-income groups buy homes. Loans up to Rs 20 lakh will be available. Borrowers will not need collateral. The government will guarantee a portion of the loan. Digital transactions will be considered for loan approval. This will make homeownership easier for many.

Amendments to the Credit Risk Guarantee Fund Scheme for Low-Income Housing (CRGFTLIH) are being examined to pave the way for the scheme, they said, adding that the loan could have a tenure of 30 years.

The regulator has asked banks to implement the integration through straight-through processing (STP), and to facilitate this, the deadline for regulated entities to streamline their compliance functions has been extended to April 2025. "Lenders had requested the RBI to extend the deadline for review and implementation of new internal compliance tracking and monitoring processes, which has been accepted, but now the regulator wants such systems to be integrated with Daksh," a senior bank executive said.

Lenders have argued that such investments are highly liquid, comparable to lower-quality assets and that their inclusion in liquidity calculations could reduce the share of deposits banks must allocate for liquidity ratios, thereby freeing up capital for lending, they said.

The government will review the financial and operational performance of state-run insurers. This will help decide about capital infusion. Oriental Insurance, National Insurance, and United India Insurance have solvency ratios below the required 1.50. The Insurance Amendment Bill is expected to increase competition in the sector by allowing 100% foreign direct investment.

The government has urged public sector banks to improve their debt recovery strategies. Banks are examining the legal feasibility of consolidating cases to streamline recovery efforts. A review will be held by the end of the fiscal year to assess progress. The aim is to reduce case pendency and optimize recovery processes.

The government has formed a crisis management group to handle nationwide strikes by public sector bank employees, including the planned February 24-25 strike. The group will work on strengthening SOPs to ensure business continuity, such as ATM replenishment and branch services. The AIBOC demands a five-day work week and withdrawal of recent performance review directives.