RBI’s Credit and Consumer Protection Reforms:
The Reserve Bank of India (RBI) has introduced a series of measures aimed at stimulating key sectors of the economy, like MSMEs, and bolstering consumer protection in the digital age.
Measures Introduced by the RBI to Stimulate Key Sectors of the Economy:
- Doubling Collateral-Free Loans for MSMEs: The limit for collateral-free loans to Micro, Small and Medium Enterprises (MSMEs) has been proposed to be doubled from Rs 10 lakh to Rs 20 lakh. This aims to ease financing constraints for viable small businesses, reduce their dependence on informal credit, and support expansion.
- Permitting Bank Lending to REITs: Banks will now be allowed to extend finance to listed Real Estate Investment Trusts (REITs), a facility previously available for Infrastructure Investment Trusts (InvITs).
- It aligns with the market regulator SEBI’s move to treat REITs as equity, potentially attracting more institutional investment, e.g., mutual funds.
Proposed Customer Protection Frameworks:
- Compensation for Small-Value Fraudulent Transactions: A new framework to compensate customers up to Rs 25,000 for losses incurred in small-value fraudulent digital transactions will be introduced, limiting customer liability in unauthorised electronic banking transactions.
- Guidelines to Curb Mis-selling: Draft instructions will be issued to ensure that all third-party financial products (e.g., insurance, mutual funds) sold at bank counters are suitable for customers’ needs and aligned with their risk appetite.
- Harmonised Rules for Loan Recovery Agents: The RBI will review and harmonise existing instructions on the engagement of recovery agents and conduct related to loan recovery across different regulated entities to ensure fair practices.
- ‘Mission SAKSHAM’ for Urban Cooperative Banks: Mission SAKSHAM (Sahakari Bank Kshamta Nirman) is a sector-wide capacity-building and certification framework for Primary (Urban) Co-operative Banks (UCBs). The mission plans to cover about 1.40 lakh participants through training programs in regional languages.
