Reserve Bank of India

Certain issues regarding the scale-based regulation framework for non-banking financial companies laid out by the Reserve Bank of India are scrutinised. These pertain to divergence with globally adopted definition of systemically important and differences in the usage of two literally identical terms, namely systemically important and systemically significant, by the RBI, coupled with irregularities in the measurement of perceived riskiness, the adoption of the binary concept rather than the continuum concept of systemically important NBFCs with regard to top 10 asset size-based inclusion in the upper layer, inclusion of systemically significant NBFCs for a minimum period of five years, supervision on calibrated increment of business, and the relevance of the top layer.

Vol VIII, No 29 JuLY 21, 1973

Analysing the contents of the Reserve Bank of India’s biannual FSRs and the methodology of the RBI’s supervisory stress tests reveals that there is scope for improvement, specifically regarding the continuity in the tracking of certain risk drivers, the extent of commentary on the information, and aspects of stress tests. Improving on these, along with disclosing results of individual banks’ stress tests, would aid in enhancing transparency and inspiring confidence in the financial system.

Debt, Trust, and Reputation: Extra-legal Finance in Northern India by Sebastian Schwecke, Cambridge: Cambridge University Press, 2022; pp 372, price not stated (hardcover).

The extent and nature of intergovernmental transfers to our cities from the higher levels of governments have not been paid adequate attention in the report. International experience from both developed and emerging economies suggests a much higher level of IGT to local governments. The transfers are especially critical in view of the goods and services tax regime, which has left out any provision for the third tier of governments.