[Karan Kamath is a 2020 B.A. LL.B. (Hons.) graduate from Symbiosis Law School, Pune] Since the 2008 financial crisis, regulators around the world have made regulations more stringent to prevent, inter alia,bank collapses and resultant bailouts. Governments maintain that bailouts are not something they wish to repeat. However, bailouts have been resorted to rather commonly. A 2016 economics...
How Banking Business Works: A Banking Lawyer’ Perspective
[Pramod Rao is Group General Counsel, ICICI Bank. He sets out a simplified explanation of a very complex system, broken down to basics. This post represents his personal views] Banks take deposits and pay interest on them. Banks lend money and receive interest on them. The difference between the two is margin. The margin pays for costs, such as employees’ salaries, branch rent and infrastructure...
RBI’s Discussion Paper on Bank Governance
Corporate governance in banks and financial institutions has captured a great deal of attention lately in India. One may attribute this to high profile episodes involving governance issues in banks such as ICICI Bank as well as Yes Bank, both involving the former chief executive officers (CEOs). There is generally a sense that universal corporate governance norms prescribed by the securities...
A Good “Bad Bank”: Analysis of an Alternative tool for Resolution
[Winy Daigavane and Pavan Belmannu are 4th year B.A.LLB. (Hons.) students at the National University of Advanced Legal Studies, Kochi] With the Insolvency & Bankruptcy Code (Amendment) Ordinance, 2020 coming into force, the operation of the Insolvency & Bankruptcy Code 2016 (IBC) has been suspended for a period of six months or a for a further period not exceeding one year. This...
Supreme Court on Applicability of SARFAESI to Co-operative Banks and the Banking (Amendment) Bill, 2020
[Karan Kamath is a B.A. LL.B. (Hons.) graduate from Symbiosis Law School, Pune. The author would like to thank Rohan Deshpande, counsel, Bombay High Court for his inputs and comments on a draft version] On 5 May 2020, a five-judge constitutional bench of the Supreme Court in Pandurang Ganpati Chaugule v. Vishwasrao Patil Murgud Sahakari Bank Limited ruled that co-operative banks could resort to...
RBI’s Guidelines on Regulation of Payment Aggregators and Payment Gateways
[Abhishek Tripathy is a fourth year law student at the Institute of Law, Nirma University] In March 2020, the Reserve Bank of India (“RBI”) issued the Guidelines on Regulation of Payment Gateways and Aggregators, which issued in furtherance of a discussion paper released by the RBI in September 2019. The guidelines have been made effective from 1 April 2020. The extensive use of electronic modes...
Banking on Force Majeure: Honouring Bank Guarantees in Times of a Pandemic
[Abhilash Agrawal is a legal officer at a private bank. In this post, he writes about the conflicting opinions given by the Bombay and Delhi High Courts on whether banks can be restrained from honouring bank guarantees and letters of credit by citing Covid-19 and subsequent disruptions caused due to it as force majeure. While the Bombay High Court has categorically denied such relief to...
The Dramatic Return of Virtual Currencies to India
[Meenal Maheshwari Shah is the lead transactional counsel of the Essar Group. The post was first published on In-House Community] A virtual currency (VC) is type of digital currency which is a representation of value, issued by private developers and denominated in their own unit of account. The concept of VC covers a wider array of “currencies,” ranging from simple IOUs of issuers (such as...
RBI Moratorium and NPAs: The Uncertainty Still Persists?
[Nikhil Purohit is a IV year student at the National Law School of India University, Bangalore] The outbreak of the Covid-19 pandemic and its responses such as the imposition of lockdowns have created significant financial disruption in economies globally. A recent interesting example could be seen in the crude oil prices touching negative territory for the first time. In order to ease the...
Bombay High Court on the Period of Moratorium During Lockdown: Opening the Floodgates?
[Vaibhav Parikh is a banking and finance lawyer] Due to the Covid-19 pandemic, several states, cities and countries have declared lockdowns for various durations and of varying degrees. Mindful of these exigencies, the Reserve Bank of India (“RBI”) has, by a press release dated 27 March 2020, said that there is to be a moratorium with regard to repayments and classifications as non-performing...
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