External debt rises $15.4 billion to $558.5 billion in March

U.S. dollar-denominated debt remains largest component of the external debt

India’s external debt stood at $558.5 billion in March, an increase of $15.4 billion compared with the year-ago period, according to RBI data.

Commercial borrowings remained the largest component of the external debt, with a share of 39.4%, followed by non-resident deposits at 23.4% and short-term trade credit at 18.2%.

The data showed valuation gains due to the appreciation of the U.S. dollar against the Indian rupee and other major currencies were at $16.6 billion. “Excluding the valuation effect, the increase in external debt would have been $32 billion instead of $15.4 billion at end-March 2020 over end-March 2019,” it said.

At the end of March, long-term debt, with original maturity of above one year, was placed at $451.7 billion, a rise of $17 billion over the level recorded in March 2019.

Short-term debt on residual maturity basis constituted 42.4% of the total external debt and 49.5% of foreign exchange reserves at the end of March.

“U.S. dollar-denominated debt continued to be the largest component of India’s external debt, with a share of 53.7% at end-March 2020, followed by the Indian rupee (31.9%), yen (5.6%), SDR (4.5%) and the euro (3.5%),” the RBI said.

The RBI also said debt service (principal repayments plus interest payments) increased marginally to 6.5% of current receipts at the end of March compared to 6.4% in the same period a year ago. This reflects higher interest payments on commercial borrowings and lower current receipts, it added.

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RBI slams banks, NBFCs as digital loan agents flout code

Regulator says onus of compliance rests with lenders

The Reserve Bank of India (RBI) has come down heavily on banks and non-banks as it found violation of fair practices code by digital platforms that act as an agency of these lenders to sell loans.

The banking regulator has now prescribed norms such as loan sanction letter to be issued to the borrower on the letter head of the lender concerned.

The RBI said it found the platforms tend to portray themselves as lenders without disclosing the name of the bank/ NBFC at the back end as a result of which customers were not able to access grievance redressal avenues available under the regulatory framework.

“Of late, there are several complaints against the lending platforms which primarily relate to exorbitant interest rates, non-transparent methods to calculate interest, harsh recovery measures, unauthorised use of personal data and bad behavior,” the regulator said.

The RBI said it was concerned due to non-transparency of transactions and violation of guidelines on outsourcing of financial services and Fair Practices Code.

“Outsourcing of any activity by banks/ NBFCs does not diminish their obligations, as the onus of compliance with regulatory instructions rests solely with them,” the RBI said. As a result, the lenders were now told to disclose the names of all digital lending platforms, engaged as agents, on the websites of banks/ NBFCs.

“Immediately after sanction but before execution of the loan agreement, the sanction letter shall be issued to the borrower on the letter head of the bank/ NBFC concerned,” the central bank instructed.

Upfront disclosure

Digital lending platforms, engaged as agents, should be asked by the banks to disclose upfront to the customer, the name of the bank/ NBFC on whose behalf they are interacting with him.

A copy of the loan agreement along with a copy each of all enclosures quoted in the loan agreement shall be furnished to all borrowers at the time of sanction/ disbursement of loans, the banking regulator said.

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