The Finance Bill, , has sought to clarify the tax position by stating that a securitisation SPV is not liable to pay income tax. However, the Bill also states that trustees of such SPVs must pay tax on distributed income calling into doubt the pass-through status of these vehicles.
Restoring the pass-through status of securitisation SPVs will help to develop this market and therefore, create pathways for Wholesale Banks to provide liquidity to other Banks and Financial Institutions directly originating assets in priority sectors Addressing the loan-bond arbitrage in terms of opacity of the former by allowing banks to classify and reclassify bonds into a held-to-maturity HTM or available-for-sale AFS bucket based on their declared intention rather than automatically based on legal documentation.
The professional capabilities of these apex organisations need to be built so that they can transition to these roles. This transition would considerably enhance the impact that these institutions have with their limited refinance resources and simultaneously serve to strengthen both originators as well as investors. This is also in line with the recommendations of the Rajan Committee This strategy seems particularly well-suited to those Public Sector Banks that are unable to develop low-cost, low-risk, and effective direct origination strategies.
This is a design in which there are several Regional Banks, each relatively small in size, that are full-service Banks offering credit, deposits, and payments services. These are supervised directly by the national regulator and depending upon their specific structure and licence also by a State Regulator and governed on a day-to-day basis by their local boards. While these banks may borrow some amounts in wholesale markets their principal source of funds is their local deposit base.
A Regional Bank does not use Capital Markets extensively for its resource raising nor does it use Agents in any form to reach its customers — its only means of serving customers is typically through its branches. A country where this model of banking continues to be very important, though less so each year, is the United States.
It has 8, commercial banks, 1, Savings and Loans Associations, and 12, credit unions cooperative banks. Its top ten banks have only 60 per cent of total assets compared to Canada or UK where 4 or 5 banks dominate the industry and have close to 90 per cent of the assets However, despite its resilience, the model is in retreat in the USA because National Banks and Non-Bank Financial Institutions have been able to bring both a wider range of products as well as lower cost of funds into the home markets of the Regional Banks.
And, as Petersen and Rajan suggest, technology of information gathering, aggregation, and reporting has improved dramatically and allows firms to address the traditional problems of adverse selection and moral hazard in a completely different manner even when the distances between the bank-branch and the firm are larger.
The imposition of Basel III requirements on all these banks is likely to compound the problems of survival faced by the local banks. Amongst the few countries where this model of banking continues to thrive are Germany and Switzerland and important lessons can be learnt from their experiences. Developing countries that mandated community banks with low minimum capital requirements produced hundreds of institutions that have had solvency problems while not solving the inclusion problem Nigeria, Tanzania or have required intensive, subsidised upgrading programs Philippines, Ghana.
The jury is still out on Mexico, but risks are apparent. Supervisory capacity has been overwhelmed by many small institutions, leaving weaknesses uncorrected. This is not a new idea even in India. These organisations have enjoyed a great deal of support from the financial system and from the government and have achieved considerable outreach.
However, with very few notable exceptions, they have performed very poorly in terms of financial performance and will need a great deal of on-going support to reach their full potential In the private sector as well, while once again there are indeed notable exceptions such as the highly profitable year old City Union Bank which is focussed on the Thanjavur-Kumbakonam region of Tamil Nadu or the Jammu and Kashmir Bank, over the years many Regional Banks such as the Bank of Rajasthan, Bank of Madura, United Western Bank, and Ratnakar Bank have either failed and have had to be merged with stronger banks and substantially recapitalised, or have sought to change their character to that of a National Bank.
A design that seeks to significantly grow this category of institutions will place significantly higher regulatory and supervision demands. There is clearly one benefit from a development and financial inclusion perspective that Regional Banks have that neither the large National Banks nor the non-bank financial institutions demonstrate — their ability to collect local deposits ends up permanently anchoring them to the local community in a way that the other institutions are not able to match.
This anchoring gives them both the desire and the requirement to stay connected to the local community during both good times and bad ones.
A National Bank could allow a local branch to simply stay dormant because it is experiencing some difficulties and an NBFI can simply pull-out but neither option is available to the Regional Bank and it is forced to adapt itself to the local environment. Permitting strong National Banks to float such subsidiaries with a different ownership structure may allow them to overcome some of these difficulties and benefit from the inherent strengths of these institutions.
A study on best practices followed by community banks in the USA that were able to maintain the highest rating from their supervisors from to highlighted the following :. Commitment to conservative lending practices with emphasis on detailed underwriting and credit policies even if this meant losing business to some competitors who were increasing LTV ratios to gain more business.
Presence of experienced senior management, coupled with a supportive, engaged board of directors. Emphasis on relationship banking based on detailed knowledge of their markets and customers and avoiding market or products that they did not understand. Board and management oversight is the fundamental element of ensuring a safe and sound bank and director oversight is the primary driver that keeps a bank moving in a positive direction, and is a critical component of a bank's success Therefore there is a strong need to strengthen the board governance at the Regional Banks by ensuring that there are high standards for board composition and operations as well as by proactively grooming competent board members.
Board governance for Regional Banks can be strengthened by taking the following steps :. A few operational items could be mandated existence of audit committee and risk committee; reporting of internal auditor directly to the board; conflict of interest standards; rotation of members.
The German approach of a dual board structure: a supervisory board and an executive board that runs the bank could also be explored. Grooming competent board members. Governance training could be required of all board members, or at least Chairs. While improving the regulation and supervision of these institutions will address some of the problems that they face there will be an active need to actually strengthen the capabilities of these institutions so that they are able to overcome some of the structural challenges that they face.
Some of the steps, such as the adoption of Core Banking Systems by these banks is on-going and will increase the capacity to do off-site supervision but there are several more that will need to be taken, particularly with regard to their capabilities to manage the variety of risks that they face:. Systematic Risk : Given their regional focus it is inevitable that in the process of originating both larger and smaller loans they will end up building portfolio concentrations that are unhealthy and attract a higher level of capital-penalty in their Stress Tests than they have comfort with.
Rainfall Risk : In rural and agricultural lending, rainfall is the most important source of exogenous risks which can have a region-wide impact. Unfortunately however, the entire rural book is exposed to this risk, even in the non-farm portion of it, and the most efficient way for banks to hedge this risk is to seek to protect the entire book against these shocks.
Such a strategy also allows the bank to carry out large scale waivers in case of a region-wide or a nation-wide shock to rainfall without having to request for government funded bail-outs which have created such a massive distortion in the farm level credit culture.
Commodity Price : Commodity price risk is the other big risk that needs to be hedged using either insurance or commodity put options that the bank purchases on a wholesale basis in global options markets.
These are not options that are permitted to be traded locally and in any case, from a national point of view there is value in laying off the risks overseas. There are differences on this count even in the global experience.
While the Swiss and the German Regional Banks have explicitly tried to address this issue of risk management, the US design has not done so and this perhaps is the main reason why the model is thriving in these two countries while it is shrinking in the US.
They are non-profit associations of lenders that historically provided sureties worth 80 per cent of the loan value. Each guarantee bank would take on up to 35 per cent of the risk, while the federal government took 40 per cent and the Land 25 per cent.
The borrower pays a fee of Historically borrowers were at risk for 20 per cent of the loan value, but as a result of the recent financial crash the German Government has encouraged guarantee banks to cover 90 per cent of the risk and to take up to 50 per cent themselves Similarly, the Swiss cantonal banks benefit from being part of the Association of Cantonal Banks.
The Association facilitates cooperation between the banks, this allows the banks to benefit from economies of scale in providing products such as pensions, investment advice and asset management. This local provision of services allows cantonal banks to create support schemes or products specifically tailored for firms in their local market. A broader set of similar partnerships would encourage the stronger institutions to grow faster and build more product depth relative to the poorer performing ones thus incentivising the weaker institutions to also improve their performance.
A review of these experiences suggests some directions for improving performance of Regional Banks in India. Currently, there is considerable opacity about the true health of Regional Banks. Cooperative institutions, given their unique structure, have very little interaction with debt and equity markets — both public and private. This suggests that integrating Regional Banks into the more mainstream financial markets may offer one way out in which refinance by NABARD or Credit Guarantee support by CGTMSE is offered not on automatic basis but as a fairly priced second-loss deficiency guarantee allowing the Regional Bank to sell its originated loans either directly to other institutional investors, including National Wholesale Banks.
All of this will serve to reveal more information about the financial health of these institutions and enable the stronger ones to forge more partnerships and grow. While the Risk Based Supervision process has been designed for the larger and more complex institutions, a similar effort could be conceived of for the Regional Banks allowing supervisors to direct scarce on-site supervision resources to higher-risk institutions.
The help of commercial ratings agencies such as CRISIL could also be taken to formally rate these Regional Banks and provide the ratings to the depositors on a regular basis — thus including them more directly into the risk-containment process.
Since DICGC offers deposit insurance to these banks, the Agreement between DICGC and the bank provides an additional opportunity to both ensure that the bank is run well on an on-going basis and resolved quickly in the event that it turns insolvent. Such an Agreement would provide for risk-based pricing of deposit insurance; the right to carry out both on-site and off-site inspections; and to take possession of the bank in the event that it goes into liquidation.
Given the sheer size of the country and each state, it is clear that there will be a need to build much stronger regulatory capacity at the state level. There is a considerable amount of financial regulation that happens at the state level even today in India. For instance, the Registrar of Chits regulates the chit fund industry and the Registrar of Cooperatives regulates cooperatives in each state. There is also value in bringing regulatory function close to the enforcement function under the Economic Offences Wing EOW , so as to ensure that they are working closely together.
The RBI must be closely involved over a longer time frame in training the commissioners and licensing and accrediting the Commission itself. The District Magistrates would also play an important role in their respective districts. In the US which has the most varied and deep financial system relative to any other country, each state has a similar commission This is the process through which, jointly with the FDIC, the US ends up effectively regulating the variety of institutions that make up the financial services landscape in that country The help of commercial ratings agencies could also be taken to formally rate these Regional Banks and provide the ratings to the depositors on a regular basis — thus including them more directly into the risk-containment process.
There is also value in bringing the regulatory function close to the enforcement function under the Economic Offences Wing EOW , so as to ensure that they are working closely together. The ratio of the deposits of all NBFCs relative to the liabilities of the banking system is less than 1 per cent Retail NBFCs have better origination and collection capabilities and are able to reach out to the customer to perform door-step services.
These institutions have anywhere between 10 to 20 per cent of capital adequacy. One of the most important concerns expressed about the NBFCs is that they are shadow banks since they operate outside the regular banking sector but perform many of the same functions.
The European Commission in its most recent paper lists entities and activities that it considers as a part of Shadow Banking Based on the above definition, NBFCs fall in the category of finance companies that provide credit. Therefore in accordance with the European Commission definition, with some changes, they could be considered as an integral part of the larger banking system and not as Shadow Banks. It is not clear however, if full convergence is immediately possible and in some cases even desirable.
For example, while it is clear that SLR as a prudential tool has outlived its utility for both Banks and NBFCs and eventually needs to be removed, it is not as obvious that even niche NBFCs which are engaged in promoter funding or specialised infrastructure lenders should be required to adhere to Priority Sector Lending norms or be given access to the Lender of Last Resort LOLR facilities. While NBFCs in their current format play a useful role and will continue to do so, and every effort needs to be made to ensure that they are able to perform that role effectively, they will, of necessity, have limits to how large they can become.
This will be the case on account of differentiated capital adequacy requirements, absence of access to payment systems, constraints imposed by dual regulation, and other restrictions on the nature of business they are allowed to undertake and the nature of risks they are allowed to take. The differentiated banking design offers multiple end points towards which NBFCs could head, particularly if issues such as SLR requirements, uniform applicability of CRR requirements, and the current definition of PSL which is rooted in historical perspectives, are satisfactorily dealt with.
It needs to be borne in mind that other than a small number of entities, the bulk of the NBFC sector remains very small, does not have the ability to garner public deposits, and in aggregate has performed at a very high level of quality. Case for convergence. Risk-based approaches to be followed for both types of institutions. For agricultural advances, this would imply at least 0. Risk Weights : While it is true that an NBFC may have assets on its books that have a lower expected loss rate and therefore should see the benefit in terms of Standard Asset Provisioning, it is also the presumption that an NBFC is likely to have a sectorally or regionally concentrated asset profile relative to a bank and therefore the aggregate portfolio level risk of default would not benefit from the kind of diversification that a bank would have.
It would therefore be prudent to not give a lower risk weight to an asset on the books of an NBFC to compensate for the higher correlation risk between assets. Capital Adequacy : The NBFC is presumed to be a niche participant getting into harder to reach categories, and therefore, relative to a full service National Bank which in contrast is presumed to operate in less risky categories, while permitted to enter with lower thresholds so that it can serve even very small niches, it will need to maintain a higher level of capital adequacy.
Priority Sector : While several NBFCs are deeply present in priority sectors already, for others, given their relatively small size and niche role, they may not be in a position to fulfill priority sector obligations and it may be desirable to have them focus on other sectors.
Entry Capital Requirement : Given the non-deposit taking nature of these entities, a high barrier in terms of entry capital does not seem necessary. As noted above, several of them have assets under management of less than Rs.
The Committee believes that a proliferation of categories is unwieldy, creates room for regulatory arbitrage, and hinders the evolution of NBFCs which have the ability to provide the broad range of credit products envisaged in the vision statement. Benefits that were previously available to specific NBFC types, such as tax benefits, bank limits, and priority sector status may continue to be available even after consolidation on a pro-rata asset basis.
As discussed previously, the supervision strategy is recommended to be risk-based. The Rajan Committee , in its report also notes that balkanisation forced by regulation even between areas of the financial sector that naturally belong together can result in financial institutions not being able to realise economies of scope in these areas, leading to inefficiency and slower growth. The asset class differences in behaviour can be accommodated through differential provisioning on the basis of asset class rather than by creating new NBFC categories.
Given that the large majority of NBFCs are not deposit-taking, they rely on wholesale funding and this has a direct bearing on their ability to grow. Other than equity, wholesale funding includes the following sources: borrowings from banks, refinance from apex institutions, borrowings through External Commercial Borrowing ECB , sale of securitised assets, and issuance of bonds to capital markets investors.
There are constraints within each of these. These constraints need to be addressed in a systematic manner instead of creating new deposit-taking NBFCs or following an accelerated process of full-service bank licensing. Banks have been an important source of funding for NBFCs and will continue to be so. While NBFCs have historically not been a source of systemic risks for the banks, it has indeed been the case that shocks to the banking system as witnessed in have had a significant negative impact on the NBFCs Therefore, from the perspective of diversifying the liabilities of NBFCs and minimising liquidity risks, it is important to deepen capital markets access for NBFCs.
Investors such as mutual funds, insurance companies, provident and pension funds and private accredited investors could complement bank funding to this sector. NBFCs have been important issuers in the securitisation market, particularly in the context of priority sector assets. As discussed previously, this is a promising alternative to forcing all Banks to originate assets directly.
RBI guidelines on securitisation have been very enabling. However, the tax-exempt status of pass-through securitisation vehicles needs to be restored. It is recommended that there be more flexibility within this category. Specifically, ECB in Rupees needs to be permitted for all institutions. Access to various refinance schemes is restricted by institution type rather than activity, thus violating the Neutrality principle as far as NBFCs are concerned.
As far as equity funding is concerned, the minimum capitalisation norms are provided for NBFCs based on foreign ownership. The capitalisation slabs are USD 0. These limits are quite steep and, in the context of scarce domestic equity capital, make it far too difficult to access foreign sources of equity, including patient capital from DFIs and this may have a link to higher pricing of loans from NBFCs, in particular NBFC-MFIs. While it is indeed the case that the non-bank character of NBFCs makes them less of a systemic risk concern on a national basis, on a regional or a product market basis, failure of an NBFC can have severe consequences for clients and local economies where they may have been the sole or dominant formal provider.
It can therefore be concluded that failures in the NBFC sector can have negative consequences for the real sector. It is important therefore to ensure that while NBFCs may continue to enjoy some exemptions, such as that on minimum entry capital, adequate attention is paid to the manner in which they manage their risks. Liquidity risk : Due to the added significance of the underserved populations to the politics of both State and Central governments, as well as the existence of more than one regulatory authority for certain types of credit institutions and the delays in attaining regulatory clarity wherever loopholes exist, extending financial services to underserved segments is fraught with risk.
This in turn has real consequences for credit delivery. It drives investors in such institutions to demand a higher risk premium to mitigate this perceived risk, which translates to higher prices of offering credit to the end customer. This risk is best exemplified by the Andhra Pradesh Micro Finance crisis of , where an ordinance passed by the State Government resulted in large losses to portfolios of several MFIs; impairment in the credit behaviour of borrowers and a withdrawal of credit facilities by all banks to all MFIs, even those outside Andhra Pradesh There is a need to adequately protect the sector against correlated behaviour by commercial banks and regulators.
If this risk can be mitigated through catastrophic insurance or a guarantee fund, it can benefit lenders and improve ratings of these entities. Provisioning : Different customer asset sub-groups behave very differently from each other and it is recommended that the regulator specify NPA recognition and provisioning rules, including for standard assets, at the level of each asset-class and require that all NBFCs conform to these mandates.
These include disclosure of their stress test results both at an overall balance sheet level as well as at a segmental level on an annual basis. All NBFCs must adopt core banking systems so that they are able to do the sophisticated reporting required for effective off-site supervision. An NCAER study found that most MFI borrowers belonged to the years group, in their productive years, who needed credit most in the absence of employment opportunities and a vast majority of the borrowers were either illiterate or had studied only up to primary level These loans are used for a variety of purposes including repayment of informal debt, house repair and renovation, purchase of livestock, agriculture, education and household consumption including health expenditures.
The NBFC-MFI guidelines of , subsequently amended in , laid down specific requirements in terms of: minimum net owned funds requirement which at Rs. Many of the criteria that determine whether an NBFC can be an NBFC-MFI, such as the borrower income criteria , loan size and tenure , number of borrowings , purpose of loan , have the potential to create undesirable consequences, both for the end borrowers and the lending institution. There has been a lot of concern about the rates of interest charged by MFIs and is the reason why the NBFC-MFI regulations included a price cap, in what was viewed as a significant reversal of policy stance on interest rate deregulation being followed by RBI.
This was also in contrast to recommendations of the Rajan Committee , which advocated for liberalising the interest rate charged, but putting in place requirements of transparency as well as eligibility for accessing priority sector funding MFI interest rates are currently around 26 per cent with cost of funds accounting for about per cent of this.
Competitive forces have not produced price competition in this sector and most MFIs have similar levels of pricing. There is a concern that the current NBFC-MFI guidelines that restrict the number of MFIs serving a client are effectively acting as a barrier to entry thus limiting the competitive forces operating in the sector.
Another reason why sharp reductions in interest rate, proportionate to costs are not being witnessed is that many MFIs finance growth through revenues rather than equity capital. Increasing the sources of equity funding is therefore an important aspect of bringing down interest rates in the MFI sector even as it continues to expand its outreach.
There are wide variations in the cost structures of MFIs and the price cap has indeed created conditions in which the low cost players are no longer required to offer the benefit of these costs to their customers.
Some of the ways to address this issue include the following:. Total borrowing limit for the small borrower segment may be increased immediately to Rs. If total indebtedness is being tracked adequately, the stipulation of a maximum number of lenders appears redundant and can be gradually removed as this would also help in creating intensified price competition.
This is consistent with focus on total indebtedness of the small borrower in relation to their debt-servicing capacity and not just indebtedness per se or merely from NBFC-MFIs. This constrains their diversification into categories such as home loans and small business loans. Regulation such as restricting the proportion of consumption finance by NBFC-MFI has constrained lending for consumption purposes for low-income households and has overwhelmingly laid policy emphasis on credit for income-generation.
A mechanical emphasis on income-generating loans also produces new risks linked to success of the project and may trigger a shift to more expensive informal loans for the purpose of consumption smoothing. There is also no empirical evidence that at the current levels increases in the quantum of formal credit has led to unsustainable levels of consumption producing higher levels of credit risk.
All policy biases against consumption finance need to be removed, particularly since total formal sector indebtedness can now be tracked through credit bureaus. Additionally, meeting the complete financial services needs through household assessments is a more promising approach to serving low-income households than narrowly assessing product requirements of individuals. Currently there are specific barriers that prevent several of those entities that already have the character of Banks from becoming one.
Current definitions of PSL are restricted only to a few sectors. Specialised NBFCs operating in sectors such as infrastructure are not able to include their loans as PSL and will have to originate in sectors where they have no expertise, for example, agriculture. Absence of markets to trade in PSL assets. This forces every player to create their own origination capability and this is challenging for players who may have the liquidity to purchase PSL assets but not the expertise to build origination engines.
SLR is applied on all banks despite no prudential reason to do so in the presence of capital adequacy guidelines. The Committee recommends that these barriers be expeditiously addressed because they will both enhance the effectiveness of existing Banks as well as allow strong NBFCs to enter as Differentiated Banks or National Banks, without abandoning their core capabilities.
As noted previously, this has the potential to significantly strengthen financial deepening in India. Being accorded the status of a bank, even if only a Wholesale Bank, will give them access to the payments system and protection under LOLR facilities. However, even without these changes, for a group of NBFCs, such as those that are already engaged substantially in originating loans that qualify under current PSL guidelines, may benefit from a transition even under the current regime.
Accordingly, the Committee recommends that under the Banking Regulation Act, a set of banks may be licensed which may be referred to as Wholesale Banks with the following characteristics:. Given that their primary role is lending and not the provision of retail deposit services, they will only be permitted to accept deposits larger than Rs.
Since they could expect to borrow large amounts from other banks, net liabilities from the banking system will be permitted to be deducted from their NDTL computation for the purposes of ascertaining their SLR obligations on par with the treatment currently given for CRR. Since other banks are expected to lend large amounts to Wholesale Banks, those other banks will be permitted to deduct their net assets to the banking system from the computation of their ANBC the amounts on which PSL requirements are to be applied.
In view of the fact that they will not take retail deposits, the minimum entry capital requirement for them will be Rs. If the institution has fewer than twenty branches through which it operates, it will not be required to meet the 25 per cent branching requirement. Institutions with twenty or fewer branches could be referred to as Wholesale Investment Banks while those with a larger branch network could be referred to as Wholesale Consumer Banks.
They will be required to comply with all other RBI guidelines relevant for SCBs and will be granted all the other rights and privileges that come with that licence. It recommends the following:. Benefits that were previously available to specific NBFC types, such as tax benefits, bank limits, and priority sector benefits should continue to be available even after consolidation, on a pro-rata asset basis.
The following are the specific recommendations in this regard:. These include disclosure of their stress test results both at an overall balance sheet level as well as at a segmental level at least annually. All NBFCs must adopt core banking systems so that this can enable better off-site supervision. Keeping this in mind, the total borrowing limit for the small borrower segment may be increased immediately to Rs.
In order to implement this, all lenders to this segment will need to be mandated to report to the credit bureau as has been the case with NBFC-MFIs. Directed lending through efforts such as the Priority Sector Lending PSL program of the RBI have had a well-established history across many countries at different points in their development and have served a different purpose in each country In India while priority sector focus has existed from the s in some form or the other, the Priority sector Lending PSL program in its current form has been implemented by the RBI since , when banks were advised to raise credit to specified priority sectors of the economy to the level of Currently this number stands at 40 per cent with the sectoral allocation specified in Table 4.
Includes segments such as distressed farmers, scheduled castes and tribes, women up to Rs. Starting with this sectoral allocation the two important questions that need to be answered are: how best to achieve PSL targets? This chapter discusses both of these questions and makes some recommendations on how the current approaches may be improved upon.
While a later section in this chapter discusses whether the current sectoral approach towards setting PSL obligations is the best one and whether, over time, there would be a case to move to an entirely different approach, there are aspects of the current PSL guidelines that need to be reaffirmed and certain anomalies that need to be addressed. There have been several suggestions made to relax the eligibility criteria within current sectors of PSL.
However, given the vast unmet need for credit for sectors under even current definitions, this does not appear desirable. For example, while exact data is not available, both national level and field level data indicate that agriculture continues to be heavily under-banked.
At the national level, from Table 2. The Special Investor's Resident Visa SIRV entitles the holder to reside in the Philippines for an indefinite period as long as the required qualifications and investments are maintained. Any alien, except for restricted nationals, at least twenty-one 21 years of age, who meets the qualifications and follows the implementing rules provided for in the issuance of an SIRV. The applicant's spouse and unmarried children under twenty-one 21 years of age may also be issued the same visa.
The applicant must not have been convicted of a crime involving moral turpitude, been afflicted with any loathsome, dangerous or contagious disease; has not been institutionalized for any mental disorder or disability; and is willing and able to invest the amount of at least USD75, in the Philippines.
Biometric vetting often refers to voiceprints, iris scans, palm prints and facial photos. State Department spokesman Ned Price also said Monday, "When it comes to SIVs, again, all of those who have received instructions to come to the airport have already completed certain stages of the security vetting process. In many cases, they're then taken to a third country, where they will undergo more rigorous vetting if it hasn't yet been completed," Price said.
We do a lot of vetting to make sure that our military, our ground troops' eyes and ears can be trusted," he said. SIV applicants, he added, "are people who work side-by-side with Americans, and often who had to already be vetted just to get that job and serve.
Congress passed bipartisan legislation as part of the supplemental security spending bill that is meant to improve and expedite the SIV program, and President Joe Biden signed it into law in late July. The changes included lowering the eligibility requirement for applicants from two years to one year of service and waiving the medical evaluation, removing the requirement that those who were employed by the International Security Assistance Force and Resolute Support performed "sensitive and trusted" activities and changes to the process of appealing denials.
How long does the SIV application process take? The SIV program has faced massive backlog and processing can take months, if not years for some. A State Department spokesperson said in mid-July that 20, applicants are in various stages of the SIV application process.
The administration has acknowledged these delays, but also said it inherited a massive backlog when Biden took office. The administration has taken some steps to address them, including a surge in State Department personnel to process visas, the Department of Homeland Security working overtime on security checks, and assistance from the Department of Defense as the situation on the ground in Afghanistan deteriorated.
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