Theme: Regulatory and Supervisory Frameworks

We presented detailed feedback on the Reserve Bank of India’s Discussion Paper on Review of Prudential Norms for Classification, Valuation and Operations of Investment Portfolio of Commercial Banks in the form of answers to the ten questions posed within the Discussion Paper.

In our response, we commend and highlight the more risk sensitive methodology and the corresponding disclosures outlined in the draft guidelines. However, we also point out that not including conduct risk under operational risk is a major lacuna.

Identifying the Market Failure and Mis-identifying the Intervention The discussion paper highlights a ‘market failure’ in the debt market for MSMEs wherein incumbent banks are unwilling to lend to MSMEs, who are otherwise creditworthy, due to lack of documentation and thereby leading to suboptimal outcomes for both banks and MSMEs[3]. Adding to these frictions is […]

In our response, we question the assumptions put forth by the discussion paper for the creation of DBs and the concomitant licensing and regulatory regime.

Complex financial instruments and products can help consumers to meet their precise financial needs even if they are opaque in their design details due to the underlying mathematical principles. Regulators need to understand that restricting complexity in design is not in the best interests of the consumer.

Offering affordable derivative products that will help them hedge against price and weather risks is vital

Bad Banks are typically Government sponsored Asset Reconstruction Companies (ARCs) setup with the primary objective of cleaning up bank balance sheets. Unlike private ARCs, the Bad Banks are setup as a one-time measure with the primary objective of reducing the build-up of Non-Performing Assets (NPAs) post a financial or economic crisis.

In this policy brief, we compare the design and historical experience of Bad Banks in other jurisdictions with the newly setup NARCL across dimensions relating to legal character, government control, objectives, funding sources, resolution process and level of haircuts.

In this blogpost, we present the key differences in financial disclosures reported by HDFC Bank Limited in India and in the United States (U.S.). As of March 31, 2021, HDFC Bank Limited (henceforth the bank) had 18.65% of its shareholding in the form of American Depository Shares (ADS) that are listed on the New York Stock Exchange (NYSE).

In this post, we discussed the formulation of the Public Credit Registries.