RBI To Issue Climate Risk Guidelines, Will Allow Foreign Travellers To Use UPI

The Reserve Bank of India will issue guidelines related to climate change risk and sustainable finance for entities regulated by the Indian central bank.

The guidelines will cover three broad areas:

• Acceptance of green deposits,

• Disclosures on climate-related financial risk

• Climate scenario analysis and stress testing

"These measures together will ensure that our financial system also starts developing and starts building in the forces of resilience to withstand any possible emergence of vulnerability to climate change," RBI Governor Shaktikanta Das said during his speech on Feb. 8, following the Monetary Policy Committee meeting.

Das highlighted that these are the first set of measures related to climate change risk and sustainable finance that the regulator has taken, and more will follow in due course.

RBI has also proposed to allow inbound international travellers to India to use the United Payments Interface (UPI) while they are in the country, Das said in his speech.

"To begin with, this facility will be extended to travellers from G-20 countries arriving at select international airports," he said. The facility will eventually be extended based on the RBI's experience, he added.

Das said the central bank will also launch a pilot for QR-code-based coin vending machines. The pilot will be launched in 12 cities, and the machines will issue coins against debits to customers' UPI-linked accounts as opposed to physical submission of notes.

While lenders regulated by the RBI are required to have policies for charging interest penalties on overdue loans, they currently follow divergent practices, Das said.

"In certain cases, these charges are founded to be excessive," he added. With the objective of enhancing transparency and consumer protection RBI will also issue draft guidelines on levy of penal charges to obtain comments from stakeholders, Das said in his speech.

RBI has also proposed to expand the scope of the Trade Receivables Discounting System or TReDS framework.

TReDS was launched to enable medium-sized, small, and micro-sized businesses to get access to invoice discounting. The proposal includes the following measures:

• Providing insurance facilities for invoice financing

• Permitting all entities/institutions undertaking factoring business to participate as financiers in TReDS

• Permitting the rediscounting of invoices (that is, developing a secondary market in TReDS

"These measures are expected to improve the cash flows of the MSMEs," Das said in his speech.