CBM Assignment 1

Submitted by:

Megha Bepari (PGP/20/330)

Neelansh Khurana (PGP/20/334)

Most significant announcements by RBI in the past 5 years

RBI Introduces 200 denomination banknote (August 24, 2017)

The Reserve Bank of India will issue on August 25, 2017 200 denomination banknotes in the Mahatma
Gandhi (New) Series, bearing signature of Dr. Urjit R. Patel, Governor, Reserve Bank of India from select
RBI offices, and some banks. The new denomination has Motif of Sanchi Stupa on the reverse, depicting
the countrys cultural heritage. The base colour of the note is Bright Yellow. The note has other designs,
geometric patterns aligning with the overall colour scheme, both at the obverse and reverse.

Reason: Introduction of a new currency denomination and design is done keeping in

consideration various factors like ease of transactions for the common man, replacement of
soiled banknotes, inflation and the need for combating counterfeiting. Introduction of this
denomination is expected to facilitate exchange transactions for the common man and
provide complete series of denomination for transactions at the lower end.

RBI advisory on E-wallets (March 30, 2017)

The Reserve Bank of India has today advised the users of Pre-paid Payment Instruments (PPIs), including
mobile and electronic wallets, that only non-bank entities authorised by RBI under the Payment and
Settlement Systems Act, 2007 (the Act) can issue PPI wallets for purchase of goods and services from
third parties and money transfer within India. Only permitted banks can issue PPI wallets which in
addition to purchase of goods and services from third parties and money transfer within India, can also
be used for withdrawing cash. An updated list of entities is available on the Reserve Banks website.
Public should access the RBI website for the list of such bank and non-bank entities issuing e-wallets and
pre-paid cards.

Reason: The growing usage of PPIs for purchase of goods and services as well as funds
transfer has led to the requests from stakeholders and other entities for relaxations in
certain areas while strengthening the norms for safety and security, risk mitigation and
customer protection aspects related to usage of PPIs. By enforcing this rule, RBI is all set to
weed out those numbers and bring out actual figures around how many wallets are there in
the system

Withdrawal of Legal Tender Character of existing 500/- and 1000/- Bank Notes (9-Nov
2016)

500 and 1000 denominations of Bank Notes of the existing series issued by Reserve Bank of India
(hereinafter referred to as Specified Bank Notes) shall cease to be legal tender with effect from
November 09, 2016, to the extent specified in the Notification. A new series of Bank Notes called
Mahatma Gandhi (New) Series having different size and design, highlighting the cultural heritage and
scientific achievements of the country, will be issued. Bank branches will be the primary agencies
through which the members of public and other entities will be exchanging the Specified Bank Notes for
Bank Notes in other valid denominations or depositing the Specified Bank Notes for crediting to their
accounts, upto and including the December 30, 2016.

Reason: This change was a significant change introduced by RBI because this move ensured
incorporating better security features in the Rs 500 and Rs 1000 notes to deter
counterfeiting in future. It was also a significant move in curbing the flow of black money
within the nation.

Liquidity Adjustment Facility Repo and Reverse Repo Rates, Marginal Standing facility (6-
Apr 2017)

It has been decided to keep the Repo rate under the Liquidity Adjustment Facility (LAF) unchanged at 6.25
per cent.

However, consequent upon the narrowing of the LAF corridor, the Reverse Repo rate under the LAF now
stands adjusted at 6.0 per cent from 5.75 per cent.

The Marginal Standing Facility (MSF) rate now stands adjusted at 6.50 per cent.

Reason: RBI increased reverse repo as the central bank wants to move rates in a narrow
range. It is trying to anchor money market rate within a narrow range. Secondly, RBI has
increased the reverse repo rate not to signal a rate hike but to control the liquidity surplus in
the system. MSF rate is the rate at which banks borrow funds overnight from the Reserve
Bank of India (RBI) against approved government securities. With the decreased MSF banks
can borrow from RBI overnight cheaper rate.

Aadhaar-based Authentication for Card Present Transactions ( 2- Dec 2016)

Banks were advised to ensure that all new card present acceptance infrastructure deployed with effect
from January 1, 2017 are enabled for processing payment transactions using Aadhaar-based biometric
authentication also.

Reason: Added level of security in the card based transactions

RBI releases Guidelines for Licensing of Payments Banks ( 27-Nov 2014)

In the Union Budget 2014-2015 presented on July 10, 2014, the Honble Finance Minister announced that:
After making suitable changes to current framework, a structure will be put in place for continuous
authorization of universal banks in the private sector in the current financial year. RBI will create a
framework for licensing small banks and other differentiated banks. Differentiated banks serving niche
interests, local area banks, payment banks etc. are contemplated to meet credit and remittance needs of
small businesses, unorganized sector, low income households, farmers and migrant work force.
Accordingly, the Reserve Bank formulated and released for public comments draft guidelines for licensing
of payments banks in the private sector on July 17, 2014.

Reason: The reason of setting up of payments banks will be to further financial inclusion by
providing (i) small savings accounts and (ii) payments/remittance services to migrant labour
workforce, low income households, small businesses, other unorganised sector entities and
other users.

RBI issues Know Your Customer (KYC) norms / Anti-Money Laundering (AML)
standards/Combating of Financing of Terrorism (CFT)/Obligation of banks under PMLA (1-July,
2013)

Reason: The reason of KYC/AML/CFT guidelines is to prevent banks from being used,
intentionally or unintentionally, by criminal elements for money laundering or terrorist
financing activities. KYC procedures also enable banks to know/understand their customers
and their financial dealings better which in turn help them manage their risks prudently.