Shaktikanta Das0:00
Comprehensive draft directions on call, notice, and term money markets, certificate of deposits, commercial papers, and non-convertible debentures with original maturity of less than one year are being released today for public feedback. The revised directions seek to bring consistency across products in terms of issuers, investors, and other participants. These announcements which I made may look a bit technical, but I can assure you that they will go a long way in promoting and developing the corporate bond market and the derivatives market in India. Time will tell how effective they are, but we are very optimistic that this will definitely give a flip to the corporate bond market segment and also to the money markets.
Let me now turn to regulation and I will highlight some measures relating to banks. In response to the COVID-19 pandemic, the Reserve Bank has focused on resolution of stress among borrowers and facilitating credit flow to the economy while ensuring financial stability. In continuation of this effort and to help banks conserve capital while creating room for fresh lending, which is very very important especially in the context of post-COVID revival, it has been decided after a review that commercial and cooperative banks will retain the profits earned in 2019-20 and not make any dividend payout from the profits pertaining to the financial year 2019-20.
The growing significance of NBFCs and their interlinkages with different segments in the financial system has made it imperative to enhance the resilience of the NBFC sector. Therefore, it has been decided to put in place transparent criteria as per a matrix of parameters for declaration of dividends by different categories of NBFCs. A draft circular containing the proposed criteria and parameters will be released soon for public comments. As you can see, in most of the cases we are releasing draft circulars, we are releasing discussion papers so that we get public feedback, we get stakeholders' feedback. And as I have always said, and this has been my consistent view, that such inputs received from stakeholders and the public definitely deepen the quality of our decisions, enrich the quality of our decisions, and we will continue to pursue that. That is why we have been, as I said, we are straight away not issuing the circulars but we are putting draft circulars in the public domain for comments.
Further, the current regulatory regime for the NBFC sector, built on the principle of proportionality, warrants a review. It is felt that a scale-based regulatory approach linked to systemic risk contribution of NBFCs could be the way forward. As part of the stakeholder consultation process, a discussion paper on this subject will be issued before January 15, 2021 for public comments.
Turning to supervision, our supervisory focus in improving the governance and assurance functions in supervised entities continues to engage the attention of the RBI. In this endeavor, the following measures are being announced today. These pertain to: number one, introduction of risk-based internal audit in large UCBs and NBFCs; and number two, harmonization of guidelines on the appointment of statutory auditors for commercial banks, urban cooperative banks, and NBFCs to improve the quality of financial reporting. Details on these measures are in Part B of the MPC statement. The MPC resolution and the guidelines on these will be issued shortly.
Turning to digital payments security, in order to significantly improve the ecosystem of digital payment channels with robust security and convenience for users, we propose to issue Reserve Bank of India Digital Payment Security Control Directions for the regulated entities. These directions will contain requirements for robust governance, implementation, and monitoring of certain minimum standards on common security controls for channels like internet and mobile banking, card payments, etc. Draft directions in this regard will be issued shortly for public comments.
With regard to financial literacy and education, I have one announcement to make. In order to deepen financial inclusion and financial literacy, a community-led participatory approach through Centers for Financial Literacy, I repeat, through Centers for Financial Literacy, CFL, was implemented by the RBI through select banks and non-governmental organizations as a pilot project in 2017. It is now proposed to expand the reach of CFLs from 100 blocks currently to every block in the country in a phased manner by March 2024. And I think this is a very important step which will promote financial literacy and financial inclusion across the country, even in the most underdeveloped and backward parts of the country.
With regard to grievance redressal mechanism in banks, I have the following announcement to say. With a view to enhancing the efficacy of grievance redressal mechanism in banks, it has been decided to put in place a comprehensive framework comprising, inter alia, enhanced disclosures on customer complaints, monetary disincentives in the form of recovery of cost of redress of complaints. That is, especially if there is no redress or if there is delayed redress, there will be a scheme or system of disincentives so far as the regulated entities are concerned. Then we will also undertake intense review of grievance redress mechanism and supervise and initiate supervisory action.
