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ಪ್ರಿಪೇಯ್ಡ್ ಪೇಮೆಂಟ್ ಇನ್ಸ್ಟ್ರುಮೆಂಟ್ಗಳು [ಪಿಪಿಐಗಳು]

65. From when will be the number of days mentioned above be counted ? +

Ans. The number of days mentioned above shall be counted after excluding the date of receiving the communication from the non-bank PPI issuer.

Q.65. It is currently unclear as to whether any unregulated financial services business e.g. investment advisory services (not covered within the scope of the extant SEBI guidelines) are permitted to be undertaken and whether they need to fall within the NOFHC umbrella or outside the same and directly held by the Promoter Group entities, or would the Promoter Group mandatorily be required to divest its holdings? +

A. The bank as well as the other financial services entities in which the Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) and that are regulated by RBI or other financial sector regulators will have to be necessarily held under the NOFHC. If any financial service is not regulated by RBI or any of the other financial sector regulators, any entity in the Promoter Group providing such service, cannot come under the NOFHC. The Promoter Group will not be required to divest its holdings in such entities. [para 2 (C) (iii) of the guidelines]

66. In cases where the loss is due to negligence by the customer, such as where he / she has shared the payment credentials, who will bear the loss and to what extent ? +

Ans. In cases where the loss is due to negligence by the customer, such as where he / she has shared the payment credentials, the customer will bear the entire loss until he / she reports the unauthorised transaction to the non-bank PPI issuer.

Q.66. Where a financial services company (Company A) under its current corporate structure has subsidiaries/ associates whose sole business is to undertake outsource activities which are wholly consumed by Company A (for example, a company carrying on back office/ sales operations for a insurance company or a mutual fund), then whether such outsource company would be regarded as a financial services company and be permitted to be held under the NOFHC? Will the answer change if the outsource company also undertakes some activities for other Group entities including non-financial services entities? +

A. If a Promoter Group entity rendering outsourced services is regulated by any of the financial sector regulators, it would come under the NOFHC. If the said entity is not regulated by any of the financial sector regulators, it cannot come under the NOFHC. The position remains the same irrespective of whether the outsourced services are provided to the regulated financial services entities of the group or to other group entities, including non financial services entities or to non-group entities. [para 2 (C) (vii) of the guidelines]

67. Who will bear the loss on the unauthorised transactions carried after reporting of same to the issuer ? +

Ans. Any loss occurring after reporting of the unauthorised transaction shall be borne by the non-bank PPI issuer.

Q.67. Companies within the Promoter Group that are registered with RBI as an NBFCs- Investment Companies are sought to be brought under the NOFHC pursuant to the requirement in the Guidelines to bring all regulated financial entities of the Promoter/ Promoter Group under the NOFHC. Since the activities undertaken by the aforementioned NBFC-Investment Companies are not permitted to be done departmentally by a bank, and no entity under the NOFHC can have equity/ debt exposure to a Promoter Group Company, they will need to liquidate entire investment holding (equity and / or debt) in the Promoter Group Companies. Post Liquidation of the investment holdings, these entities will retain cash or become a non–operative shell company which obviates the very need to bring such companies under the NOFHC in the first place. We would therefore suggest that listed/ unlisted investment companies and /or unlisted investment companies owned by listed companies of the Promoter / Promoter Group (insofar as they are not engaged in the financial services), where a significant portion of the assets are deployed in promoter group entities, be kept outside of the purview of consolidation under the NOFHC as these entities are already regulated by and under the direct supervision of RBI. +

Para 2(C)(iii) of the guidelines provide that only non-financial services companies/entities and non-operative financial holding company in the Group and individuals belonging to Promoter Group will be allowed to hold shares in the NOFHC. Accordingly, a non-operative financial holding company though regulated by RBI will remain outside NOFHC. NBFC (Investment Companies) which hold/deal in equity shares of Promoter Group Companies cannot be under the NOFHC because, in terms of para 2 (I) (IV) (a) of the Guidelines, the financial entities held by NOFHC shall not have any credit and investment (including investments in the equity/debt capital instruments) exposure to the Promoters/Promoter Group entities or individuals associated with the Promoter Group or the NOFHC. Therefore, NBFC (Investment Companies), which would include CICs and other non-operative holding companies, would remain outside NOFHC. However, if there are investments in voting equity shares of regulated financial sector entities in which the Group has significant influence or control, such entities will have to be brought under the NOFHC. ‘Investment Company’ as defined under para 2(I)(vi) of the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Direction, 1998, means any company which is a financial institution carrying on, as its principal business, the acquisition of securities.

68. After how many days will the eligible amount be credited to the customer’s account ? +

Ans. The non-bank PPI issuer shall credit (notional reversal / shadow reversal) the amount involved in the unauthorised electronic payment transaction to the customer’s PPI within 10 days from the date of such notification by the customer. Such reversal has to be effected even if it breaches the maximum permissible limit applicable to that type / category of PPI. The credit shall be value-dated to be as of the date of the unauthorised transaction.

Q.68. There could be instances where a particular Group has non-operative NBFC/CICs (in addition to the NOFHC), which act solely as a holding companies for companies carrying on non-financial services businesses of the Group. In such situations, would it be correct to read the regulations in a manner that such NBFCs/ CICs would not be considered as companies engaged in financial services business? If yes, then would such NBFCs/CICs be permitted to be held outside of the purview of the NOFHC (since they hold non-financial services businesses of the Group)? +

69. When can one use the notional credit so received ? +

Ans. The notional credit so received can be used on resolution of complaint and establishing the liability of the customer by the non-bank PPI issuer. However, in any circumstances, this period cannot exceed 90 days from the date of receipt of the complaint.

Q.69. Where it is not contemplated that the NOFHC be held by the non-financial services operating companies/ entities, does the NOFHC necessarily need to be held by a non-operating financial holding company i.e. a company that undertakes no other activity other than holding the shares in the NOFHC? We understand that the NOFHC may be held by a CIC that also undertakes certain non-financial business. +

It is not necessary that a NOFHC should be held only by non-financial services companies/ entities. It can be held by a CIC or a non-operating holding company. The regulated financial business / entities of the holding company, if any, cannot remain with the holding company. It has to come under the NOFHC. [para 2 (C) (iii) & (vii) of the guidelines]

70. Who is responsible to prove that the transaction is not an unauthorised transaction ? +

Ans. The burden of proving the customer liability in case of unauthorised electronic payment transactions lies on the non-bank PPI issuer.

Q.70. Promoters/Promoter Group will be permitted to set up a bank only through a wholly-owned NOFHC. Whether a Core Investment Company with an asset size of more than `100 crore (which would be registered and regulated by RBI can wholly own the NOFHC as per 2(c)(iii) of the guidelines states that non financial companies and non operative financial holding company belonging to the promoter group will be allowed to hold shares in the NOFHC but at the same time stipulates that the NOFHC shall hold the bank as well as all the other financial services entities of the Group regulated by RBI or other financial sector regulators. +

ಈ ಎಫ್ಏಕ್ಯೂಗಳನ್ನು ಮಾಹಿತಿ ಹಾಗೂ ಸಾಮಾನ್ಯ ಮಾರ್ಗದರ್ಶನದ ಉದ್ದೇಶಗಳಿಗಾಗಿ ಮಾತ್ರ ರಿಸರ್ವ್ ಬ್ಯಾಂಕ್ ಆಫ್ ಇಂಡಿಯಾ ಹೊರಡಿಸಿದೆ. ಇದೇ ಆಧಾರದ ಮೇಲೆ ತೆಗೆದುಕೊಂಡ ಕ್ರಮಗಳು ಹಾಗೂ ಅಥವಾ ನಿರ್ಧಾರಗಳಿಗೆ ಬ್ಯಾಂಕ್ ಜವಾಬ್ದಾರವಾಗಿರುವುದಿಲ್ಲ. ಸ್ಪಷ್ಟೀಕರಣಗಳು ಅಥವಾ ವ್ಯಾಖ್ಯಾನಗಳಿಗಾಗಿ, ಯಾವುದಾದರೂ ಇದ್ದರೆ, ಬ್ಯಾಂಕ್ ಕಾಲ ಕಾಲಕ್ಕೆ ನೀಡುವ ಸಂಬಂಧಪಟ್ಟ ಸುತ್ತೋಲೆಗಳು ಹಾಗೂ ಅಧಿಸೂಚನೆಗಳಿಂದ ಒಬ್ಬರಿಗೆ ಮಾರ್ಗದರ್ಶನ ನೀಡಬಹುದು.

Q.71. (a) If a NBFC is desirous of setting up a bank/converting itself into a bank, the guidelines require setting up a NOFHC which will hold the bank (paragraph 2L). However, paragraph 2(C)(iii) does not allow financial services companies (e.g. NBFCs) to have a stake in NOFHC. Hence, by implication, NBFCs are prevented from directly setting up NOFHC and setting up the bank. RBI may clarify if there would be any relaxation for shareholding in NOFHC (promoted by NBFC) with regard to paragraph 2(C) (iii)? What about the applicants who are predominantly into the financial services, and whose parent company itself is finance company, and that too listed. b) As per our interpretation, a widely held and publically listed NBFC can go for banking license by adopting the following structure: a. Listed NBFC forms a NOFHC b. NOFHC forms a bank For a) above, the condition of paragraph 2(C)(ii)(b) would be met as more than 51 percent (in fact 100 percent) shares of NOFHC would be held by the listed NBFC (where public holds > 51 percent). Thereafter, listed NBFC will transfer all assets/ loan portfolio to a new company, thereby listed NBFC would become non-operative financial holding company. This will help meet the condition of paragraph 2(C) (iii). The NOFHC can then form a bank as per b) above. Can you please confirm that above ms with the condition of paragraph 2(C) (iii)? +

A. a (i) There would be no relaxation for the pattern of shareholding in the NOFHC with regard to the provisions at the para 2 (C) (iii) of the guidelines

(ii) For the purpose of these guidelines, NBFC (Investment Companies) (which would include CIC and a non-operative holding company) would be held outside the purview of the NOFHC. [para 2 (C) (iii) of the guidelines]. The regulated financial business/entities of the holding company, if any, cannot remain with the holding company. It has to come under the NOFHC. [para 2 (C) (iii) & (vii) of the guidelines]

(iii) In the case of other NBFCs in which public holds more than 51 percent of voting equity shares, wishes to set up a bank or convert itself into a bank, it must transfer all its regulated financial services business to a separate company/companies and transfer the shareholding in such companies to the NOFHC. After it has transferred the regulated financial services business, it can set up a NOFHC, provided it meets the requirements of para 2 (C) (ii) and (iii) of the guidelines.

(b) As stated above, before the listed NBFC holds shares in the NOFHC, it must transfer all regulated financial services business to a new company and shares in that new company must be held by the NOFHC. Conversion of the listed NBFC into a listed non operating holding company would enable meeting the requirement of para 2(C) (iii) of the guidelines provided the listed non operating holding company meets the requirement of para 2(C)(ii)(b) of the guidelines i.e. the public hold not less than 51 percent voting equity shares in the company.

Q.72. Whether an existing Non-operating listed Holding company, with more than 51 percent public shareholding, will be eligible to promote a Non-Operative Financial Holding Company (NOFHC)? +

A. Yes. An existing non-operating listed holding company, with more than 51 percent public shareholding, will be eligible to promote a Non-Operative Financial Holding Company (NOFHC). [para 2 (C) (ii) (b) and 2 (C) (iii) of the guidelines]

Q.73. Will a Non-operating holding company, being a promoter of NOFHC and holding investments in unregulated financial sector entities and non-financial sector entities, would be required to be registered as a Core Investment Company with the RBI? +

A. A non operating holding company being a promoter of NOFHC and holding investments in unregulated financial sector entities and non financial sector entities will be required to be registered as a CIC with RBI if it meets the criteria laid down in para 2 and 3 (h) of Notification No DNBS.PD. 219/CGM(US)-2011 dated January 05, 2011 regarding Regulatory Framework for Core Investment Companies.

Q.74. Can the NOFHC hold physical assets belonging to the Group and charge for them on an arm’s length basis? Similarly, since unregulated activities cannot be held by the NOFHC, we assume that the holding company above the NOFHC can, through a subsidiary, hold related businesses such as technology services or banking correspondent services or distribution services. Is this correct? +

A. NOFHC, being a non-operative financial holding company, cannot hold physical assets belonging to the Group and charge for them on an arm’s length basis. A holding company of the Promoter Group, which holds the NOFHC can undertake related businesses such as technology services or banking correspondent services or distribution services on its own, or through a subsidiary. If the non-operative holding company is a CIC or NBFC, the relevant regulations will be applicable.

Q.75. Can an existing non-operating listed holding company, in which the public shareholding exceeds 51 percent and which is proposed to be registered as a CIC, be allowed to operate as the NOFHC? +

A. No. An existing non-operating listed holding company, with more than 51 per cent public shareholding cannot operate as the NOFHC as the NOFHC has to be wholly-owned by the Promoter / Promoter Group. The above cited example does not meet this criteria as the non-operating listed holding company has equity shareholding from non-promoters/promoter group entities. However, this existing non-operative listed holding company in which public shareholding exceeds 51 per cent can promote a NOFHC.

A non operating holding company being a promoter of NOFHC will be required to be registered as a CIC with RBI if it meets the stipulated criteria.

If the non operating holding company does not meet the criteria for being defined as a Core Investment Company but is an NBFC (Investment Company) it will be required to be registered with RBI as NBFC(Investment Company).

Q.76. In many Industrial Groups, the Group investments in non financial Group companies are held through an investment company (SPV/CIC). Since NOFHC is not permitted to hold / invest in non financial entities belonging to the Group, we presume that the requirement of bringing such SPV/CIC below NOFHC would not be applicable. The presumption is made also because it is impractical / economically inefficient / strategically imprudent, for the Industrial Group to house all these Group investments in an Operating Company. +

A. For the purpose of these guidelines, the investment company (SPV/CIC) that holds shares only in non-financial companies of the Promoter Group would not be considered as a financial services company and would be held outside the purview of the NOFHC. [para 2 (C) (iii) of the guidelines]

Q.77. Paragraph 2(C)(iii) also states that only non-financial services companies / entities and non-operative financial holding company in the Group and individuals belonging to the Promoter Group will be allowed to hold shares in the NOFHC. Could you clarify how and the circumstances in which a non-operative financial holding company could be a shareholder of a NOFHC? +

A. A non-operative financial holding company is a company which has no operational activities and holds the non-financial sector companies of the Promoter Group and which has no subsidiaries, joint venture or associate or other controlled entities in the financial sector except investments in the NOFHC. Such company can hold voting equity shares in the NOFHC in accordance with Paragraph 2 (C) (ii) and (iii) of the guidelines. The said holding company can hold upto 100 per cent of the voting equity of the NOFHC, if it has public shareholding of not less than 51 per cent. [para 2 (C)(ii)(b) of the guidelines].