IST,
Content Type:
Withdrawal of Legal Tender Character of the old Bank Notes in the denominations of ₹ 500/- and ₹ 1000/- (Updated as on December 27, 2016)
Core Investment Companies
FOREWORD
The Reserve Bank of India is entrusted with the responsibility of regulating and supervising the Non-Banking Financial Companies by virtue of powers vested in Chapter III B of the Reserve Bank of India Act, 1934. The regulatory and supervisory objective, is to:
a) ensure healthy growth of the financial companies;
b) ensure that these companies function as a part of the financial system within the policy framework, in such a manner that their existence and functioning do not lead to systemic aberrations; and that
c) the quality of surveillance and supervision exercised by the Bank over the NBFCs is sustained by keeping pace with the developments that take place in this sector of the financial system.
Over last some years, RBI has carved out some specialized NBFCs like Core Investment Companies (CICs), NBFC- Infrastructure Finance Companies (IFCs), Infrastructure Debt Fund- NBFCs, NBFC-MFIs and NBFC-Factors being the most recent one.
It has been felt necessary to explain the rationale underlying the regulatory changes and provide clarification on certain operational matters for the benefit of the NBFCs, members of public, rating agencies, Chartered Accountants etc. To meet this need, the clarifications in the form of questions and answers, is being brought out by the Reserve Bank of India (Department of Non-Banking Supervision) on Specialized NBFCs with the hope that it will provide better understanding of the regulatory framework.
The information given in the FAQ on Systemically Important Core Investment Companies (CICs-ND-SI) is of general nature for the benefit of the public and the clarifications given do not substitute the extant regulatory directions/instructions issued by the Bank to the specialized NBFCs.
Core Investment Companies (CICs)
Core Investment Companies (CICs)
Ans. A CIC-ND-SI is a Non-Banking Financial Company
(i) with asset size of Rs 100 crore and above
(ii) carrying on the business of acquisition of shares and securities and which satisfies the following conditions as on the date of the last audited balance sheet :-
(iii) it holds not less than 90% of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies;
(iv) its investments in the equity shares (including instruments compulsorily convertible into equity shares within a period not exceeding 10 years from the date of issue) in group companies constitutes not less than 60% of its net assets as mentioned in clause (iii) above;
(v) it does not trade in its investments in shares, bonds, debentures, debt or loans in group companies except through block sale for the purpose of dilution or disinvestment;
(vi) it does not carry on any other financial activity referred to in Section 45I(c) and 45I(f) of the RBI act, 1934 except investment in bank deposits, money market instruments, government securities, loans to and investments in debt issuances of group companies or guarantees issued on behalf of group companies.
(vii) it accepts public funds
Foreign Investment in India
These FAQs attempt to put in place the common queries that users have on the subject in an easy to understand language. However, for conducting a transaction, the Foreign Exchange Management Act, 1999 (FEMA) and the Regulations made or directions issued thereunder may be referred to. The relevant principal regulations are the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017 dated November 7, 2017 as amended from time to time (hereinafter referred to as FEMA 20 (R)). The modalities as to how the foreign exchange business has to be conducted by the Authorised Persons with their customers/ constituents with a view to implementing the regulations framed is laid down in Master Direction on Foreign investment in India.
Answer: The routes under which foreign investment can be made is as under:
- Automatic Route: Foreign Investment is allowed under the automatic route without prior approval of the Government or the Reserve Bank of India, in all activities/ sectors as specified in the Regulation 16 of FEMA 20 (R).
- Government Route: Foreign investment in activities not covered under the automatic route requires prior approval of the Government. Procedure for applying for Government approval is given at http://fifp.gov.in/Forms/SOP.pdf
Careers FAQ
Remittances are an important source of family and national income and also are one of the largest sources of external financing. Beneficiaries in India can receive cross-border inward remittances through banking and postal channels. Banks have general permission to enter into a partnership with other banks for conducting remittance business. The International Financial System (IFS) platform of Universal Post Union (UPU) is generally used for the postal channel. Besides, there are two more channels for receiving inward remittances, viz. Rupee Drawing Arrangement (RDA) and Money Transfer Service Scheme (MTSS) which are the most common arrangements under which the remittances are received into the country. These FAQs are mainly relating to the common queries relating to RDA and MTSS and may be referred to for general guidance. The Authorised Persons and their constituents may refer to respective circulars/ notifications for detailed information, if so needed.
Rupee Drawing Arrangement (RDA)
Targeted Long Term Repo Operations (TLTROs)
updated: ਮਈ 28, 2021
Ans: Yes. The banks will have to maintain amount of specified securities for the amount received in TLTRO in its HTM book at all times till maturity of TLTRO.
Indian Currency
A) Basics of Indian Currency/Currency Management
The Indian currency is called the Indian Rupee (INR). One Rupee consists of 100 Paise. The symbol of the Indian Rupee is ₹. The design resembles both the Devanagari letter "₹" (ra) and the Latin capital letter "R", with a double horizontal line at the top.
Housing Loans
FAQs on Non-Banking Financial Companies
FOREWORD
FAQs on Non-Banking Financial Companies
FOREWORD
The Reserve Bank of India is entrusted with the responsibility of regulating and supervising the Non-Banking Financial Companies by virtue of powers vested in Chapter III B of the Reserve Bank of India Act, 1934. The regulatory and supervisory objective, is to:
- ensure healthy growth of the financial companies;
- ensure that these companies function as a part of the financial system within the policy framework, in such a manner that their existence and functioning do not lead to systemic aberrations; and that
- the quality of surveillance and supervision exercised by the Bank over the NBFCs is sustained by keeping pace with the developments that take place in this sector of the financial system.
In view of the significant growth registered by the NBFC segment during the last decade, the powers of the Bank were enhanced by amending the provisions of the Act during 1997 to facilitate regulation and supervision by RBI covering several aspects of the activities of the NBFCs. Following the amendments to Chapter IIIB of the Act, the Bank has since introduced a new regulatory framework effective January 31, 1998 which directs the focus of the regulatory-cum-supervisory attention primarily on the NBFCs which accept deposits from the public.
The changes introduced in the regulatory framework are comprehensive and broadbased and it has been felt necessary to explain the rationale underlying these changes and provide clarification on certain operational matters for the benefit of the NBFCs, members of public, rating agencies, audit profession, the different Associations of the NBFCs etc. To meet this need, this booklet in the form of questions and answers, is being brought out by the RBI (Department of Non-Banking Supervision) with the hope that it will provide better understanding of the new regulatory framework.
(V.S.N. Murty)
Chief General Manager
RESERVE BANK OF INDIA,
DEPARTMENT OF NON-BANKING SUPERVISION,
CENTRAL OFFICE,
MUMBAI
FEBRUARY 16, 1998
CONTENTS
CONTENTS
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Extent of Regulations over NBFCs accepting public deposits and not accepting public deposits |
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Registration
Annual Return on Foreign Liabilities and Assets (FLA) under FEMA 1999
General Instructions
Annual return on Foreign Liabilities and Assets (FLA) has been notified under FEMA 1999 (A.P. (DIR Series) Circular No. 45 dated March 15, 2011) and it is required to be submitted by all the India-resident companies/ LLPs / Others [(include SEBI registered Alternative Investment Funds (AIFs), Partnership Firms, Public Private Partnerships (PPP)] (hereafter referred as ‘entities’) which have received FDI and/ or made overseas investment in any of the previous year(s), including the current year.
The Reserve Bank participates in the Co-ordinated Direct Investment Survey (CDIS) and Co-ordinated Portfolio Investment Survey (CPIS) conducted by the International Monetary Fund (IMF). Here, consolidated information collected from FLA return related to foreign financial liabilities and assets position as at end-March of the previous financial year (FY) and end-March of the latest FY of these entities are reported. This information is also used in the compilation of India’s Balance of Payments (BoP) and International Investment Position (IIP).
Confidentiality Clause
Eligible entities and requirements to submit the FLA return
Ans: The annual return on Foreign Liabilities and Assets (FLA) is required to be submitted by the following entities which have received FDI (foreign direct investment) and/or made FDI abroad (i.e. overseas investment) in the previous year(s) including the current year i.e., who holds foreign assets or/and liabilities in their balance sheets;
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A Company within the meaning of section 1(4) of the Companies Act, 2013.
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A Limited Liability Partnership (LLP) registered under the Limited Liability Partnership Act, 2008
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Others [include SEBI registered Alternative Investment Funds (AIFs), Partnership Firms, Public Private Partnerships (PPP) etc.]
Domestic Deposits
I. Domestic Deposits
Remittances (Money Transfer Service Scheme (MTSS) and Rupee Drawing Arrangement (RDA))
Remittances are an important source of family and national income and also are one of the largest sources of external financing. Beneficiaries in India can receive cross-border inward remittances through banking and postal channels. Banks have general permission to enter into a partnership with other banks for conducting remittance business. The International Financial System (IFS) platform of Universal Post Union (UPU) is generally used for the postal channel. Besides, there are two more channels for receiving inward remittances, viz. Rupee Drawing Arrangement (RDA) and Money Transfer Service Scheme (MTSS) which are the most common arrangements under which the remittances are received into the country.
These FAQs are mainly relating to the common queries relating to RDA and MTSS and may be referred to for general guidance. The Authorised Persons and their constituents may refer to respective circulars/ notifications for detailed information, if so needed.
Rupee Drawing Arrangement (RDA)
Framework for Compromise Settlements and Technical Write-offs
Circular dated June 8, 2023 on ‘Framework for Compromise Settlements and Technical Write-offs’
A. COMPROMISE SETTLEMENT IN WILFUL DEFAULT AND FRAUD CASES
No. The said provision enabling banks to enter into compromise settlement in respect of borrowers categorised as fraud or wilful defaulter is not a new regulatory instruction and has been the settled regulatory stance for more than 15 years. This enabler is already available to banks as per the extant instructions, as given under:
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RBI had advised IBA vide letter dated May 10, 2007 that, “(i) banks may enter into compromise settlement with wilful defaulters/ fraudulent borrowers without prejudice to the criminal proceeding underway against such borrowers; (ii) All such cases of compromise settlements should be vetted by Management Committee/ Board of banks.”
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Master Circular on Wilful Defaulters dated July 1, 2015 envisages lenders agreeing to compromise settlement with borrowers classified as wilful defaulters and states that such cases need not be reported to Credit Information Companies provided inter alia that, “the borrower has fully paid the compromised amount.”
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Master Directions on Frauds dated July 1, 2016 provides for compromise settlement with borrowers classified as fraud, subject to the condition that, “No compromise settlement involving a fraudulent borrower is allowed unless the conditions stipulate that the criminal complaint will be continued.”
Coordinated Portfolio Investment Survey – India
General Instructions
The Coordinated Portfolio Investment Survey (CPIS) is a voluntary data collection exercise conducted under the auspices of the International Monetary Fund (IMF). The purpose of the CPIS is to improve the quality of portfolio investment statistics in the international investment position (IIP)—that is, holdings of portfolio investment assets in the form of equity and investment fund shares, long-term debt securities, and short-term debt securities — and the availability of these statistics by counterpart economies. Therefore, the CPIS supports the objective of developing from-whom-to-whom cross-border data and contributes to a better understanding of financial interconnectedness.
India began participating in annual CPIS of the IMF since 2004. Thereafter, as per IMF’s recommendation under G-20 Data Gaps Initiative (DGI), India moved to semi-annual reporting of CPIS in 2014, as per India’s commitment under Special Data Dissemination Standards (SDDS). The Reserve Bank of India submits the CPIS data to IMF on behalf of India.
Confidentiality Clause
The entity-wise information collected under the CPIS are kept confidential and only consolidated aggregates are submitted by the Reserve Bank of India to IMF.
Eligible entities and requirements to report under CPIS
Ans: Presently the banks, mutual fund companies, non-financial companies, non-banking financial companies and insurance companies are surveyed under the CPIS.
FAQs on Master Directions on Priority Sector Lending Guidelines
A. Computation of Adjusted Net Bank Credit (ANBC)
Clarification: The net PSLC outstanding (PSLC Buy minus(-) PSLC Sell) is added to the Net Bank Credit, as mentioned in para 6 of the Master Directions on PSL, 2020 (updated from time to time). Further, a PSLC remains outstanding until its expiry (s. no. ix of Notification on Priority Sector Lending certificates dated April 07, 2016, All PSLCs will expire by March 31st and will not be valid beyond the reporting date (i.e. March 31st), irrespective of the date it was first bought/sold. Accordingly, the effect of PSLC buy is increase in ANBC and conversely the effect of PSLC sell is decrease in ANBC and the net of PSLC buy/sell is adjusted to the ANBC for every quarter. Thus, a PSLC bought or sold in any quarter will have to be taken into account in all subsequent quarters till the end of the FY to which it pertains.
Clarification: The Master Directions on Priority Sector Lending, 2020 under para 6 provides for computation of Adjusted Net Bank Credit. The face value of securities availed under TLTRO 2.0 and SLF-MF (including the Extended Regulatory Benefits) are to be reduced (as given in ‘IX’ of para 6.1 of the Master Directions on PSL). Since these securities are considered as HTM investments, the banks have to add them as Bonds/debentures in Non-SLR categories under HTM category (as given in ‘X’ of para 6.1 of the Master Directions on PSL). It is envisaged that the Priority Sector Lending target/sub-targets should not increase on account of securities acquired under TLTRO 2.0 and SLF-MF (including the Extended Regulatory Benefits). By adding the face value of securities (X) and reducing the face value of securities (IX) there will be no increase in ANBC due to investments in TLTRO 2.0 and SLF-MF (including the Extended Regulatory Benefits.)
Clarification: The bills purchased/ discounted/ negotiated (payment to beneficiary not under reserve) under LC is allowed to be treated as Interbank exposure only for the limited purpose of computing exposure and capital requirements. It should not be excluded from the computation of ‘bank credit in India’ [As prescribed in item No.VI of Form 'A’ under Section 42(2) of the RBI Act, 1934] which allows for exclusion of interbank advance. While exposure may be to the LC issuing bank, the bills purchased/discounted amounts to bank credit to its borrower constituent. If this advance is eligible for priority sector classification, then bank can claim it as PSL. Banks have to take note of the above aspect while reporting Net Bank Credit in India as well as computing the Adjusted Net Bank Credit for PSL targets and achievement
Foreign Investment in India
Core Investment Companies
Core Investment Companies (CICs)
Ans: Existing CICs which were exempted from registration in the past and have an asset size of less than Rs 100 crore are exempted from registration in terms of section 45NC of the RBI Act 1934, as stated in Notification No. DNBS.(PD) 220/CGM(US)-2011 dated January 5, 2011, and as such are not required to submit any application for exemption.
Annual Return on Foreign Liabilities and Assets (FLA) under FEMA 1999
Eligible entities and requirements to submit the FLA return
Ans: Entities who comply with the criterion mentioned in Q1 are mandatorily required to submit the FLA return under FEMA 1999 based on audited/ unaudited accounts of the entity by July 15 every year.
Indian Currency
A) Basics of Indian Currency/Currency Management
Legal Tender is a coin or a banknote that is legally tenderable for discharge of debt or obligation.
The coins issued by Government of India under Section 6 of The Coinage Act, 2011, shall be legal tender in payment or on account provided that a coin has not been defaced and has not lost weight so as to be less than such weight as may be prescribed in its case. Coin of any denomination not lower than one rupee shall be legal tender for any sum not exceeding one thousand rupees. Fifty paise (half rupee) coin shall be legal tender for any sum not exceeding ten rupees. While anyone cannot be forced to accept coins beyond the limits mentioned above, voluntarily accepting coins for amounts exceeding the limits mentioned above is not prohibited.
Every banknote issued by Reserve Bank of India (₹2, ₹5, ₹10, ₹20, ₹50, ₹100, ₹200, ₹500 and ₹2000), unless withdrawn from circulation, shall be legal tender at any place in India in payment or on account for the amount expressed therein, and shall be guaranteed by the Central Government, subject to provisions of sub-section (2) Section 26 of RBI Act, 1934. ₹1 notes issued by Government of India are also Legal Tender. ₹500 and ₹1000 banknotes of Mahatma Gandhi series issued up to November 08, 2016 have ceased to be Legal Tender with effect from the midnight of November 8, 2016.
Housing Loans
Your bank will assess your repayment capacity while deciding the home loan eligibility. Repayment capacity is based on your monthly disposable / surplus income, (which in turn is based on factors such as total monthly income / surplus less monthly expenses) and other factors like spouse's income, assets, liabilities, stability of income etc. The main concern of the bank is to make sure that you comfortably repay the loan on time and ensure end use. The higher the monthly disposable income, higher will be the amount you will be eligible for loan. Typically a bank assumes that about 55-60 % of your monthly disposable / surplus income is available for repayment of loan. However, some banks calculate the income available for EMI payments based on an individual’s gross income and not on his disposable income.
The amount of the loan depends on the tenure of the loan and the rate of interest also as these variables determine your monthly outgo / outflow which in turn depends on your disposable income. Banks generally fix an upper age limit for home loan applicants.
Targeted Long Term Repo Operations (TLTROs)
Ans: Under TLTRO scheme, banks will have to invest the amount borrowed under TLTROs in fresh acquisition of securities (i.e., over and above their outstanding statement in specified securities it was holding as on March 26, 2020) from primary/secondary market. However, participation in TLTRO scheme will not impinge on the existing investment of the bank and the bank may continue to operate their AFS/HFT portfolio, as hitherto, in terms of extant regulatory/internal guidelines.
Government Securities Market in India – A Primer
2.1 Holding of cash in excess of the day-to-day needs (idle funds) does not give any return. Investment in gold has attendant problems in regard to appraising its purity, valuation, warehousing and safe custody, etc. In comparison, investing in G-Secs has the following advantages:
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Besides providing a return in the form of coupons (interest), G-Secs offer the maximum safety as they carry the Sovereign’s commitment for payment of interest and repayment of principal.
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They can be held in book entry, i.e., dematerialized/ scripless form, thus, obviating the need for safekeeping. They can also be held in physical form.
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G-Secs are available in a wide range of maturities from 91 days to as long as 40 years to suit the duration of varied liability structure of various institutions.
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G-Secs can be sold easily in the secondary market to meet cash requirements.
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G-Secs can also be used as collateral to borrow funds in the repo market.
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Securities such as State Development Loans (SDLs) and Special Securities (Oil bonds, UDAY bonds etc) provide attractive yields.
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The settlement system for trading in G-Secs, which is based on Delivery versus Payment (DvP), is a very simple, safe and efficient system of settlement. The DvP mechanism ensures transfer of securities by the seller of securities simultaneously with transfer of funds from the buyer of the securities, thereby mitigating the settlement risk.
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G-Sec prices are readily available due to a liquid and active secondary market and a transparent price dissemination mechanism.
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Besides banks, insurance companies and other large investors, smaller investors like Co-operative banks, Regional Rural Banks, Provident Funds are also required to statutory hold G-Secs as indicated below:
A. Primary (Urban) Co-operative Banks (UCBs)
2.2 Section 24 (2A) of the Banking Regulation Act 1949, (as applicable to co-operative societies) provides that every primary (urban) cooperative bank shall maintain liquid assets, the value of which shall not be less than such percentage as may be specified by Reserve Bank in the Official Gazette from time to time and not exceeding 40% of its DTL in India as on the last Friday of the second preceding fortnight (in addition to the minimum cash reserve ratio (CRR) requirement). Such liquid assets shall be in the form of cash, gold or unencumbered investment in approved securities. This is referred to as the Statutory Liquidity Ratio (SLR) requirement. It may be noted that balances kept with State Co-operative Banks / District Central Co-operative Banks as also term deposits with public sector banks are now not eligible for being reckoned for SLR purpose w.e.f April 1, 2015.
B. Rural Co-operative Banks
2.3 As per Section 24 of the Banking Regulation Act 1949, the State Co-operative Banks (SCBs) and the District Central Co-operative Banks (DCCBs) are required to maintain assets as part of the SLR requirement in cash, gold or unencumbered investment in approved securities the value of which shall not, at the close of business on any day, be less than such per cent, as prescribed by RBI, of its total net demand and time liabilities. DCCBs are allowed to meet their SLR requirement by maintaining cash balances with their respective State Co-operative Bank.
C. Regional Rural Banks (RRBs)
2.4 Since April 2002, all the RRBs are required to maintain their entire Statutory Liquidity Ratio (SLR) holdings in Government and other approved securities.
D. Provident funds and other entities
2.5 The non- Government provident funds, superannuation funds and gratuity funds are required by the Central Government, effective from January 24, 2005, to invest 40% of their incremental accretions in Central and State G-Secs, and/or units of gilt funds regulated by the Securities and Exchange Board of India (SEBI) and any other negotiable security fully and unconditionally guaranteed by the Central/State Governments. The exposure of a trust to any individual gilt fund, however, should not exceed five per cent of its total portfolio at any point of time. The investment guidelines for non- Government PFs have been recently revised in terms of which minimum 45% and up to 50% of investments are permitted in a basket of instruments consisting of (a) G-Secs, (b) Other securities (not in excess of 10% of total portfolio) the principal whereof and interest whereon is fully and unconditionally guaranteed by the Central Government or any State Government SDLs and (c) units of mutual funds set up as dedicated funds for investment in G-Secs (not more than 5% of the total portfolio at any point of time and fresh investments made in them shall not exceed 5% of the fresh accretions in the year), effective from April 2015.
FAQs on Non-Banking Financial Companies
Registration
Remittances (Money Transfer Service Scheme (MTSS) and Rupee Drawing Arrangement (RDA))
Rupee Drawing Arrangement (RDA)
Framework for Compromise Settlements and Technical Write-offs
A. COMPROMISE SETTLEMENT IN WILFUL DEFAULT AND FRAUD CASES
No. The penal measures currently applicable to borrowers classified as fraud or wilful defaulter in terms of the Master Directions on Frauds dated July 1, 2016 and the Master Circular on Wilful Defaulters dated July 1, 2015, respectively, remain unchanged and shall continue to be applicable in cases where the banks enter into compromise settlement with such borrowers.
Such penal measures entail inter alia that no additional facilities should be granted by any bank/ FI to borrowers listed as wilful defaulters, and that such companies (including their entrepreneurs/ promoters) get debarred from institutional finance for floating new ventures for a period of five years from the date of removal of their name from the list of wilful defaulters. In addition, borrowers classified as fraud are debarred from availing bank finance for a period of five years from the date of full payment of the defrauded amount.
Domestic Deposits
I. Domestic Deposits
Coordinated Portfolio Investment Survey – India
Eligible entities and requirements to report under CPIS
Ans: Presently, the survey is conducted half-yearly in India for capturing the end-March and end-September position of the latest financial year (FY).
FAQs on Master Directions on Priority Sector Lending Guidelines
B. Adjustment for Weights in PSL Achievement
Clarification: As detailed in Para 7 of the Master Directions on Priority Sector lending, 2020 on “Adjustments for weights in PSL Achievement”, differential weightage in the incremental credit to the priority sector areas shall be reckoned from FY 2021-22 onwards. There will be 125% weightage on incremental credit to select 184 districts with low per capita PSL credit and 90% weightage on incremental credit to select 205 districts with high per capita PSL credit. The incremental weights will be calculated on targets/ sub-targets. Accordingly, the allocation to RIDF and other funds shall be done on the basis of total shortfall, including the shortfall calculated on incremental credit as per prescribed differential weights.
Clarification: If there is a decline in credit, the weighted incremental credit will be zero (0). The methodology as given below will be considered for all the districts for which data is reported in ADEPT. The banks are requested to get in touch with our Statistics Division (fiddstats@rbi.org.in) regarding the format for submission of returns under ADEPT, in case the same have not been submitted till date by the bank. Further, based on the methodology detailed above, banks are expected monitor their own PSL achievement during the year taking into account the prescription of differential weights for credit disbursed in identified districts, for the purpose of trading in PSLCs.
* Avg. achievement will be the average of four quarters of a year, as on reporting dates of QPSA. Similar calculations will be done for other PSL targets.
Clarification: While calculating district-wise incremental credit for assigning weights, the organic credit i.e. only the credit directly disbursed by banks and for which the actual borrower/beneficiary wise details are maintained in the books of the bank will be considered. Credit disbursed through the following inorganic routes shall not be considered for incremental weights.
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Investments by banks in securitised assets
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Transfer of Assets through Direct Assignment /Outright purchase
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Inter Bank Participation Certificates (IBPCs)
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Priority Sector Lending Certificates (PSLCs)
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Bank loans to MFIs (NBFC-MFIs, Societies, Trusts, etc.) for on-lending
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Bank loans to NBFCs for on-lending
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Bank loans to HFCs for on-lending
Foreign Investment in India
Indian Currency
A) Basics of Indian Currency/Currency Management
Bank notes are printed at four currency presses, two of which are owned by the Government of India through its Corporation, Security Printing and Minting Corporation of India Ltd. (SPMCIL) and two are owned by the Reserve Bank, through its wholly owned subsidiary, Bharatiya Reserve Bank Note Mudran Private Ltd. (BRBNMPL). The currency presses of SPMCIL are at Nasik (Western India) and Dewas (Central India). The two presses of BRBNMPL are at Mysuru (Southern India) and Salboni (Eastern India).
Coins are minted in four mints owned by SPMCIL. The mints are located at Mumbai, Hyderabad, Kolkata and NOIDA. The coins are issued for circulation only through the Reserve Bank in terms of Section 38 of the RBI Act.
Housing Loans
Targeted Long Term Repo Operations (TLTROs)
Ans: There is no maturity restriction on the specified securities to be acquired under TLTRO scheme. However, the outstanding amount of specified securities in bank’s HTM portfolio should not fall below the level of amount availed under TLTRO scheme.
Core Investment Companies
Core Investment Companies (CICs)
Ans: No, Existing CICs which have been exempted from registration in the past and have an asset size of less than Rs 100 crore are exempted from registration as stated in Notification No. DNBS.(PD) 220/CGM(US)-2011 dated January 5, 2011. As such they are not required to submit any auditor’s certificate that they comply with the requirements of the Notification.
Government Securities Market in India – A Primer
3.1 G-Secs are issued through auctions conducted by RBI. Auctions are conducted on the electronic platform called the E-Kuber, the Core Banking Solution (CBS) platform of RBI. Commercial banks, scheduled UCBs, Primary Dealers (a list of Primary Dealers with their contact details is given in Annex 2), insurance companies and provident funds, who maintain funds account (current account) and securities accounts (Subsidiary General Ledger (SGL) account) with RBI, are members of this electronic platform. All members of E-Kuber can place their bids in the auction through this electronic platform. The results of the auction are published by RBI at stipulated time (For Treasury bills at 1:30 PM and for GoI dated securities at 2:00 PM or at half hourly intervals thereafter in case of delay). All non-E-Kuber members including non-scheduled UCBs can participate in the primary auction through scheduled commercial banks or PDs (called as Primary Members-PMs). For this purpose, the UCBs need to open a securities account with a bank / PD – such an account is called a Gilt Account. A Gilt Account is a dematerialized account maintained with a scheduled commercial bank or PD. The proprietary transactions in G-Secs undertaken by PMs are settled through SGL account maintained by them with RBI at PDO. The transactions in G-Secs undertaken by Gilt Account Holders (GAHs) through their PMs are settled through Constituent Subsidiary General Ledger (CSGL) account maintained by PMs with RBI at PDO for its constituent (e.g., a non-scheduled UCB).
3.2 The RBI, in consultation with the Government of India, issues an indicative half-yearly auction calendar which contains information about the amount of borrowing, the range of the tenor of securities and the period during which auctions will be held. A Notification and a Press Communique giving exact particulars of the securities, viz., name, amount, type of issue and procedure of auction are issued by the Government of India about a week prior to the actual date of auction. RBI places the notification and a Press Release on its website (www.rbi.org.in) and also issues advertisements in leading English and Hindi newspapers. Auction for dated securities is conducted on Friday for settlement on T+1 basis (i.e. securities are issued on next working day i.e. Monday). The investors are thus given adequate time to plan for the purchase of G-Secs through such auctions. A specimen of a dated security in physical form is given at Annex 1. The details of all the outstanding dated securities issued by the Government of India are available on the RBI website at http://www.rbi.org.in/Scripts/financialmarketswatch.aspx. A sample of the auction calendar and the auction notification are given in Annex 3 and 4, respectively.
3.3 The Reserve Bank of India conducts auctions usually every Wednesday to issue T-bills of 91day, 182 day and 364 day tenors. Settlement for the T-bills auctioned is made on T+1 day i.e. on the working day following the trade day. The Reserve Bank releases a quarterly calendar of T-bill issuances for the upcoming quarter in the last week of the preceding quarter. e.g. calendar for April-June period is notified in the last week of March. The Reserve Bank of India announces the issue details of T-bills through a press release on its website every week.
3.4 Like T-bills, Cash Management Bills (CMBs) are also issued at a discount and redeemed at face value on maturity. The tenor, notified amount and date of issue of the CMBs depend upon the temporary cash requirement of the Government. The tenors of CMBs is generally less than 91 days. The announcement of their auction is made by Reserve Bank of India through a Press Release on its website. The non-competitive bidding scheme (referred to in paragraph number 4.3 and 4.4 under question No. 4) has not been extended to CMBs. However, these instruments are tradable and qualify for ready forward facility. Investment in CMBs is also reckoned as an eligible investment in G-Secs by banks for SLR purpose under Section 24 of the Banking Regulation Act, 1949. First set of CMB was issued on May 12, 2010.
3.5 Floatation of State Government Loans (State Development Loans)
In terms of Sec. 21A (1) (b) of the Reserve Bank of India Act, 1934, the RBI may, by agreement with any State Government undertake the management of the public debt of that State. Accordingly, the RBI has entered into agreements with 29 State Governments and one Union Territory (UT of Puducherry) for management of their public debt. Under Article 293(3) of the Constitution of India (Under section 48A of Union territories Act, in case of Union Territory), a State Government has to obtain the permission of the Central Government for any borrowing as long as there is any outstanding loan that the State Government may have from the Centre.
Market borrowings are raised by the RBI on behalf of the State Governments to the extent of the allocations under the Market Borrowing Program as approved by the Ministry of Finance in consultation with the Planning Commission.
RBI, in consultation with State Governments announces, the indicative quantum of borrowing on a quarterly basis. All State Governments have issued General notifications which specify the terms and conditions for issue of SDL. Before every auction, respective state governments issue specific notifications indicating details of the securities being issued in the particular auction. RBI places a press release on its website and also issues advertisements in leading English and vernacular newspapers of the respective states.
Currently, SDL auctions are held generally on Tuesdays every week. As in case of Central Government securities, auction is held on the E-Kuber Platform. 10% of the notified amount is reserved for the retail investors under the non-competitive bidding.
Remittances (Money Transfer Service Scheme (MTSS) and Rupee Drawing Arrangement (RDA))
Rupee Drawing Arrangement (RDA)
FAQs on Non-Banking Financial Companies
Registration
Annual Return on Foreign Liabilities and Assets (FLA) under FEMA 1999
Eligible entities and requirements to submit the FLA return
Ans: Non-filing of the return on or before due date (July 15 of every year) will be treated as a violation of FEMA and penalty clause may be invoked for violation of FEMA. For further details on penalty clause, please see the below links:
Domestic Deposits
I. Domestic Deposits
Framework for Compromise Settlements and Technical Write-offs
A. COMPROMISE SETTLEMENT IN WILFUL DEFAULT AND FRAUD CASES
No. The cooling period has been introduced as a general prescription for normal cases of compromise settlements, without prejudice to the penal measures applicable in respect of borrowers classified as fraud or wilful defaulter as per the Master Directions on Frauds dated July 1, 2016 and the Master Circular on Wilful Defaulters dated July 1, 2015, respectively, as mentioned at (2) above.
Coordinated Portfolio Investment Survey – India
Eligible entities and requirements to report under CPIS
Ans: Yes, since AIFs are considered under non-banking financial institutions.
FAQs on Master Directions on Priority Sector Lending Guidelines
C. Agriculture
Clarification: The PSL guidelines are activity and beneficiary specific and are not based on type of collateral. Therefore, bank loans given to individuals/ businesses for undertaking agriculture activities do not automatically become ineligible for priority sector classification, only on account of the fact that underlying asset is gold jewellery/ornament etc. It may, however, be noted that as per FIDD Circular dated February 7, 2019 and updated from time to time, it has been advised that banks may waive margin requirements for agricultural loans upto ₹1.6 lakh. Therefore, bank should have extended the loan based on scale of finance and assessment of credit requirement for undertaking the agriculture activity and not solely based on available collateral in the form of gold. Further, as applicable to all loans under PSL, banks should put in place proper internal controls and systems to ensure that the loans extended under priority sector are for approved purposes and the end use is continuously monitored.
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