New FAQ Page 2 - ਆਰਬੀਆਈ

RbiAnnouncementWeb

FAQ DetailPage Breadcrumb

Search Bar

Search Results

The Government Securities Act, 2006 and The Government Securities Regulations, 2007

43. Is there any TDS towards interest payment in respect of Relief/Savings Bonds? +

As explained at Question No. 31, with effect from June 1, 1997, there is no TDS upon interest payable on Government Security. However, as per Finance Act, 2007 and Government of India Notification No. F.4(10)-W&M/2003 dated May 31, 2007, tax has to be deducted at source on the interest exceeding Rupees ten thousand payable during a financial year on 8% Savings Bonds, 2003 (Taxable) with effect from June 1, 2007. Accordingly, there is no TDS upon interest payment in respect of Relief/Savings Bonds other than 8% Savings Bonds, 2003 (Taxable).

Q.43 What is the procedure to be followed for disinvestment of existing holding in a JV/WOS ? +

Disinvestment of holding in a JV/WOS abroad requires prior approval of the Reserve Bank of India for which the holder will have to submit an application furnishing the reasons /justifications for such disinvestment along with a Chartered Accountant’s valuation certificate, latest audited financial statements of the JV/WOS, Board Resolution approving the disinvestment and Chartered Accountant’s certificate regarding position of dues of the WOS and total amount to be received by parent company on disinvestment.

43.Can an individual investor sign-on with an international online brokerage and buy and sell stocks ( without exceeding the USD 25,000 limit)? +

The Scheme does not restrict such transactions, provided the transactions are within the limit of USD 25,000 per calendar year and is otherwise in order.

Q.44 What are the obligations of the Indian party, which has made direct investment outside India ? +

An Indian Party will have to comply with the following: -receive share certificates or any other documentary evidence of investment in the foreign entity to the satisfaction of the Reserve Bank within six months, failing which an application for extension of time citing reasons for non-receipt will have to be made to the Reserve Bank.repatriate to India, all dues receivable from the foreign entity, like dividend, royalty, technical fees etc., within 60 days of its falling due, or such further period as the Reserve Bank may permit.submit to the Reserve Bank every year within 60 days from the date of expiry of the statutory period as prescribed by the respective laws of the host country for finalisation of the audited accounts of the Joint Venture/Wholly Owned Subsidiary outside India an Annual Performance Report in form APR in respect of each Joint Venture or Wholly Owned Subsidiary outside India set up or acquired by the Indian party. This APR should inevitably be accompanied byCopies of FIRCs in support of inward remittances on account of dividend, royalty, etc.Audited Financial Statements of the overseas venture.CA’s certificate in support of realization of export proceeds.A note on the working of the JV/WOS during the previous year highlighting the ups and downs, reasons for non-performance, etc. in monetary terms. In case the promoter company is unable to submit APRs within the stipulated time, an application on the due date should be made to the Reserve Bank of India seeking extension, giving reasons for the same.

44. What is the grievance redressal mechanism prescribed for a PPI Issuer ?

Ans. PPI issuers shall put in place a formal, publicly disclosed customer grievance redressal framework, including designating a nodal officer to handle the customer complaints / grievances, the escalation matrix and turn-around-time for complaint resolution. The framework shall include, at the minimum, the following:

Dissemination of the information of customer protection and grievance redressal policy of the PPI issuer in simple language;
Clear indication of the customer care contact details of the PPI issuer, including details of nodal official for grievance redressal on website, mobile apps, and cards;
Display of proper signage by the agents of the PPI Issuer and the customer care contact details as at (b) above;
Providing specific complaint numbers for the complaints lodged along with the facility to track the status of the complaint by the customer;
Initiating action to resolve any customer complaint / grievance expeditiously, preferably within 48 hours and endeavour to resolve the same not later than 30 days from the date of receipt of such complaint / grievance;
Display the detailed list of the authorised / designated agents (name, agent ID, address, contact details, etc.) of the PPI issuer on the website / mobile app; and
Provide answers to Frequently Asked Questions (FAQs) on the website / mobile app related to the PPIs.

Q.44. Can a company as a single non- resident shareholder hold 49 per cent voting equity capital of the bank? If yes, will it be automatic or will the same be requiring approval from RBI. +

A. No. No non-resident shareholder, directly or indirectly, individually or in group through subsidiary, associate or joint venture will be permitted to hold 5 per cent or more in the paid up voting equity capital of the bank for a period of 5 years from the commencement of the business of the bank. [ para 2 (F) of the guidelines ]

44. Is the facility to create pledge, hypothecation or lien against Relief/Savings Bonds available to the investors for availing loan against the Relief/Savings Bonds as collateral? +

Yes. The facility to create pledge, hypothecation or lien against Relief/Savings Bonds is available as in case of other Government securities as explained at Question Nos. 33 & 34. The Government of India has amended the notifications relating to 7% Savings Bonds, 2002, 6.5% Savings Bonds, 2003 (Non-Taxable) and 8% Savings (Taxable) Bonds, 2003 schemes allowing for pledge or hypothecation or lien of these bonds as collateral for obtaining loans from the scheduled banks with effect from August 19, 2008. However, such collateral facility is available only for the loans to be availed by the holders of the bonds and not in respect of the loans availed by third parties.

44.Are intermediaries expected to seek specific approval for making overseas investments available to clients? +

Banks including those not having operational presence in India are required to obtain prior approval from Reserve Bank for soliciting deposits for their foreign/overseas branches or for acting as agents for overseas mutual funds or any other foreign financial services company.

44. Whether banks can indulge in short sales of shares? +

No. Banks are prohibited from making any short sales of share

Q.45 What are the penalties for non-submission of APRs ? +

Reserve Bank takes a serious view on non-submission of such reports and can take such measures against the delinquent company as it deems fit including reference to Enforcement Directorate.

45. Whether banks can invest in their subsidiaries? +

Banks can invest in their subsidiaries. However, such investments will be outside the purview of 5%of the outstanding advances of the previous year and subject to compliance of Section 19 of the Banking Regulation Act, 1949.

45. What is the procedure/documentation for recognition of title to Relief/Savings Bonds of deceased sole holder or joint holders? +

The title to Relief/Savings Bonds of a deceased sole holder or joint holder may be recognised as per the simplified procedure explained at Question No. 16.

45. Is there any requirement of providing account statement or transaction history of PPI transactions ? +

Ans. PPI issuers shall provide an option for the PPI holders to generate / receive account statements for at least past 6 months. The account statement shall, at the minimum, provide details such as date of transaction, debit / credit amount, net balance and description of transaction. Additionally, the PPI issuers shall provide transaction history for at least 10 transactions.

Q.45. In the case of an existing conglomerate, is it envisaged that all the “Promoter Group” companies have to set-up a wholly owned NOFHC? +

A. No.It is not envisaged that all the companies in the Promoter Group have to set up the wholly owned NOFHC. As provided in para 2(C)(iii) of the guidelines, only the non-financial services companies/entities and non-operative financial holding companies in the Promoter Group and individuals belonging to Promoter Group, conforming to the stipulation in para 2(C)(ii)(a) and (b), will be allowed to hold the shares of NOFHC. Further, para 2(C)(vii) requires that all the regulated financial services entities, in which the Promoter Group has ‘significant influence’ or ‘control’, (as defined in Accounting Standard 23) shall be held by the NOFHC, and that, such entities cannot hold shares in the NOFHC [para 2 (C) (iii) & (vii)].

45.What restrictions have been placed on the scope of activity of the intermediaries? +

It has been decided in public interest that all banks, both Indian and foreign, including those not having an operational presence in India, should seek prior approval from Reserve Bank for the schemes being marketed by them in India to Indian residents either for soliciting foreign currency deposits for their foreign/overseas branches or for acting as agents for overseas mutual funds or any other foreign financial services company.

Q.46 Can a resident individual in India acquire foreign securities without prior approval ? +

Resident individuals in India can acquire foreign securities without prior approval in the following cases: -by way of gift from a person outside India; orissued by a company incorporated outside India under Cashless Employees Stock Option Scheme which does not involve any remittance from India; orby way of inheritance from a person whether resident in or outside India; orpurchase of foreign securities out of funds held in the Resident Foreign Currency Account maintained in accordance with the Foreign Exchange Management (Foreign Currency Account) Regulations, 2000; orbonus shares on the foreign securities already held by them; orResident individuals are permitted to make overseas investments without any limit in listed overseas companies that have at least 10% share in an Indian company listed in a recognized stock exchange in India as on 1st January of the year of investment.

46. Which of the bills should not be discounted by the banks? +

The bills covering payment of electricity charges, customs duty, hire purchase/lease rental instalments, sale of securities and other types of financial accommodation should not be discounted by banks.

46. Whether Relief/Savings Bonds can be transferred? +

Yes. Relief/Savings Bonds, like other Government securities, can be transferred by execution of transfer forms as explained at Question No. 14. However, the specific Government loan notifications issued for the 7% Savings Bonds, 2002, 6.5% Savings Bonds, 2003 (Non taxable) and 8% Savings Bonds, 2003 (Taxable) have prescribed the specific conditions subject to which such transfers may take place. While all the three Savings Bonds are transferable to the nominee in case of death of the holder, the 7% Savings Bonds, 2002 and 6.5% Savings Bonds, 2003 (Non taxable) are also transferable by way of gift to a "relative" as defined in section 6 of the Indian Companies Act, 1956. Section 6 of the Indian Companies Act, 1956 defines "relative" as under:

A person shall be deemed to be a relative of another if and only if,

a) they are members of a Hindu undivided family; or
b) they are husband and wife; or
c) the one is related to the other in the manner indicated in Schedule 1A of the Indian Companies Act, 1956.

Apart from the above, the three Savings Bonds shall also be transferable in favour of the pledgee/creditor, if the pledgee/creditor invokes the pledge, hypothecation or lien as per Regulation 21 (3) of the G S Regulations.

46. Is the Reserve Bank - Integrated Ombudsman Scheme applicable for PPI transactions ? +

Ans. In case of PPIs issued by banks and non-banks, customers have recourse to the Reserve Bank - Integrated Ombudsman Scheme, 2021 for grievance redressal. This scheme is available on the RBI website at the link - https://cms.rbi.org.in.

Q.46. Could a bank be promoted by a sub-set of promoters group companies? +

A. The Promoters/Promoter Group cannot set up a bank directly. They have to first set up a wholly owned NOFHC, which will hold the bank and other regulated financial services entities/companies in which the Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard-23).NOFHC could be set-up with equity participation by a sub-set of non-financial services companies/entities/individuals and non-operative financial holding companies in the Promoter Group provided the equity participation is in conformity with the stipulation at para 2 (C) (ii) of the guidelines.

46. Are there any restrictions on the kind/quality of debt or equity instruments an individual can invest in? +

No ratings or guidelines have been prescribed under the Liberalised Remittance Scheme of USD 25,000 on the quality of the investment an individual can make. However, the individual investor is expected to exercise due diligence while taking a decision regarding the investments which he or she proposes to make.

47. Whether banks can invest in Fixed Deposits of non-banking non-financial companies? +

There is no prohibition on banks' placing of funds with non-banking non-financial companies under their Public Deposit Scheme. However, such investment in the Public Deposit Scheme should be classified by banks as loans/advances in their balance sheet and returns under the Banking Regulation Act, 1949 and fortnightly returns by scheduled commercial banks under Reserve Bank of India Act , 1934.

47. Whether an investor is entitled for any compensation for the late receipt/ delayed credit of interest warrants/maturity value of investments, etc.? +

The bank shall compensate the investors for the above mentioned financial loss at a fixed rate of 8% per annum (with effect from April 10, 2012).

47. Can a PPI issuer issue multiple PPIs to same customer ? +

Ans. A PPI issuer can issue any one of the following three types to a customer:

Small PPIs upto ₹10,000 (with cash loading facility);
Small PPIs upto ₹10,000 (with no cash loading facility); and
Full-KYC PPIs.

Q.47. If companies in the Promoter Group have significant interest /control in regulated and / or unregulated financial services activities, but do not wish to participate in the set-up of a new bank, is this permissible or do they need to necessarily exit from their interests in the company/group of companies wishing to promote a new bank. +

A. The Promoters/Promoter Group have to first set up a wholly owned NOFHC for holding the bank. They cannot set up a bank directly. In case, some entities/companies in the Promoter Group having ‘significant influence’ or ‘control’ (as defined in Accounting Standard-23) in regulated or unregulated financial services activities do not wish to participate in the voting equity of the NOFHC, they can do so. However, the regulated financial services entities, in which the companies in the Promoter Group have ‘significant influence’ or ‘control’ (as defined in Accounting Standard-23), have to come under the NOFHC. The unregulated financial services activities/entities of the Promoter Group cannot come under the NOFHC. [para 2 (C) (i), (ii), (iii) & (vii) of the guidelines]

47.Whether minor resident Individuals would be permitted to open, maintain and hold such foreign currency accounts if the same is permissible as per local law in the country of the overseas branch? +

Banks may take necessary steps in the matter based on the settled legal position regarding enforcement of the declaration in case the remittance is made on behalf of a minor.

Q.47 Are there any other provisions by which an individual can acquire shares of a foreign company ? +

Yes, a person resident in India, being an individual, who is an employee or a director of Indian office or branch of a foreign company or of a subsidiary in India of a foreign company or of an Indian company in which foreign equity holding is not less than 51 per cent, may purchase the equity shares offered by the said foreign company: -Provided that the shares are offered at a concessional price.

Q.48 Can one acquire shares of a foreign company in his capacity as director ? +

Yes, Reserve Bank has given general permission to a person resident of India to acquire foreign security to the extent of the minimum number of qualification shares required to be held for holding the post of Director and this amount shall not exceed 1% of the paid-up capital of the company subject to a limit of USD 20,000 in a calendar year.

48. Within the types mentioned above, in case a PPI issuer is issuing multiple PPIs to same customer due to reasons like multiple co-branding partners, various forms like wallet and card, etc. how will the limits be treated ? +

Ans. Within the types mentioned above, in case a PPI issuer is issuing multiple PPIs to same customer due to various reasons (e.g. multiple co-branding partners, issuance of PPI in different form factors like wallets / cards), then the PPI issuer shall monitor the limits through centralised database / management information system (MIS). For example, the limit of ₹2,00,000/- at any point of time shall be calculated after combining the value in all full-KYC PPIs issued to a customer by a particular PPI issuer under various arrangements / form factor. Similarly, the limit of ₹10,000 in paragraph 9.1(i) of MD-PPIs is across all Small PPIs (issued by the PPI issuer under various arrangements / form factor). A PPI issuer cannot issue both types of Small PPIs to same mobile number at the same time. However, the limits do not include the two categories (Gift PPIs and PPI-MTS) mentioned in paragraph 10 of the MD-PPIs.

Q.48. In the event the NOFHC/ bank being promoted by a sub-set of existing promoters (having regard to the definition of “Promoter/ Promoter Group”), would the regulated financial services entities of the remaining Promoter Group (not promoting the NOFHC/ bank), be required to become subsidiaries of the NOFHC? +

A. Yes. All the regulated financial services entities in which the Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) will have to be brought under the NOFHC as subsidiaries, or associates or joint ventures. [para 2 (C) (iii) & (vii) of the guidelines]

Electronic Clearing Service (Credit Clearing) Mandate Form

(Investor (s)’s option to receive redemption proceeds and
interest payments through Credit Clearing Mechanism)

Investor(s) Name and Address

Member ID No./BLA No.
PAN/GIR No.*
Telephone No./Mobile No./E-mail ID

:
:
:

Particulars of Bank account

Name of the Bank
Name of the branch
1. Address
2. Telephone No.
9-Digit MICR code number of the bank and branch appearing on the MICR cheque issued by the bank
Type of the account (Savings, Current or Cash Credit) with codes -10/11/13
Ledger and Ledger folio number
Account number (as appearing on the cheque book)

:
:
:
:
:

:
:

(In lieu of the bank certificate to be obtained as under, please attach a blank cancelled cheque or photocopy of a cheque or front page of your savings bank passbook issued by your bank for verification of the above particulars)

4. Date of effect :

I/We hereby declare that the particulars given above are correct and complete. If the transaction is delayed or not effected at all for reasons of incomplete or incorrect information, I/We would not hold the user institution responsible. I/We have read the option invitation letter and agree to discharge the responsibility expected of us as a participant under the scheme.

Date:

(.....................................)
Signature(s) of the Investor(s)

(In case of joint holdings, all the investors, whose signatures are registered with PDOs, should sign here)

Certified that the particulars furnished above are correct as per our records.

Bank’s Stamp:

Date:

(.................................)
Signature of the authorised official of the Bank

* Compulsory for investors due to receive maturity proceeds exceeding Rs. One lakh

These FAQs are issued by the Reserve Bank of India for information and general guidance purposes only. The Bank will not be held responsible for actions taken and/or decisions made on the basis of the same. For clarifications or interpretations, if any, investors are requested to be guided by the relevant circulars and notifications issued from time to time by the Bank and the Government as well as the relevant provisions of the Government Securities Act, 2006 and the Government Securities Regulations, 2007.

48.Whether credit facilities in Indian Rupees or foreign currency would be permissible against security of such deposits? +

No. The Scheme does not envisage extension of credit facility against the security of the deposits.

48. Whether banks can purchase letter of allotment in respect of PSU Bonds? +

Banks can purchase letter of allotment in respect of PSU bonds subject to following conditions. 1. The transaction (other than inter bank transaction) should be undertaken only through recognised Stock Exchanges and registered brokers. 2. While purchasing the security, the bank should ensure that it gets a clear title to the security and the security is traded in the secondary market. The bank should formulate their own internal guidelines with the approval of the Board for undertaking such transaction.

Q.49 Can a resident individual subscribe to the rights issue of shares held by him ? +

Yes, Reserve Bank on an application may permit a person resident in India to acquire foreign securities by way of rights shares issued by a company incorporated outside India up to an amount not exceeding US$ 20,000 in a block of five calendar years in case the existing shares were held in accordance with the provisions of the law.

49. What should be the method of valuation for advances against shares/debentures /bonds? +

Shares/debentures/bonds should be valued at prevailing market prices when they are lodged as security for advances.

49. What is meant by interoperability? Are PPIs interoperable? +

Ans. Interoperability is the technical compatibility that enables a payment system to be used in conjunction with other payment systems. Interoperability has been allowed in PPIs through circular dated October 16, 2018 and it has been made mandatory vide circular dated May 19, 2021.

Q.49. Will 10 years of successful track record be limited to only financial services sector or to overall business activities? Does every entity forming part of the Promoter Group need to have a 10 year track record? +

A. The overall track record of the Promoters/Promoter Group for at least 10 years will be seen in all its activities both financial and non-financial. If some, but not all, companies forming part of the Promoter Group have been in existence for less than 10

49.Can bankers open foreign currency accounts in India for residents under the Scheme? +

No. Banks in India can not open a foreign currency account in India for residents under the Scheme.

Q.50 Are there any relaxations for individual employees/directors of an Indian company engaged in the field of software for acquisition of shares in their JV/WOS abroad ? +

Yes, Reserve Bank on an application will permit the individual employees/directors of an Indian promoter company engaged in the field of software for acquisition of shares of a JV/WOS abroad provided -the consideration for purchase does not exceed US$ 10,000 or its equivalent per employee in a block of five calendar years,the shares so acquired do not exceed 5% of the paid-up capital of the Joint Venture or Wholly Owned Subsidiary outside India, andafter allotment of such shares, the percentage of shares held by the Indian promoter company, together with shares allotted to its employees is not less than the percentage of shares held by the Indian promoter company prior to such allotment.Further, Reserve Bank may also on an application made to it by an Indian company engaged in the field of software allow its resident employees (including working directors) to purchase foreign securities under the ADR/GDR linked stock option scheme provided the consideration for purchase does not exceed US$ 50,000 or its equivalent in a block of five calendar years.

50. Whether the banks can sanction bridge loans to companies? +

Yes. For a period not exceeding one year against the expected equity flows/issues as also against the expected proceeds of Non-convertible Debentures, External Commercial Borrowings, Global Depository Receipts and/or funds in the nature of Foreign Direct Investments, provided the bank is satisfied that the borrowing company has made firm arrangements for raising the aforesaid resources/funds. Such loans are required to be accommodated within the ceiling of 5% of outstanding advances of the previous year.

50. Who can provide the facility of PPI interoperability ? +

Ans. Any authorised bank or non-bank PPI issuer can provide the facility of PPI interoperability.

50.Can OBU in India be treated on par with a branch of the bank outside India for the purpose of opening of foreign currency accounts by residents under the Scheme? +

No. For the purpose of the Scheme, an OBU in India is not treated as an overseas branch of a bank in India.

Q.50. What could be some of the indicative criteria that the RBI would consider in determining if an entity/ group has/have “sound credentials and integrity”? +

A. The requirement that Promoters / Promoter Group should have a past record of sound credentials and integrity as a part of ‘Fit and Proper’ criteria is a matter of overall judgment and no indicative criteria can be spelt out. [para 2 (B) of the guidelines]

Q.51 Whether mutual funds are permitted to acquire shares of overseas companies ? +

Reserve Bank has given general permission to mutual funds approved by SEBI to purchase foreign securities, subject to such terms and conditions as may be stipulated.

51. What is the quantum of loans to individuals against security of shares, debentures and PSU bonds if held in physical form and in dematerialized form? +

The loans to individuals against the security of shares, debentures and PSU bonds if held in physical form should not exceed the limit of Rs.10 lakhs per borrower and Rs.20 lakhs if the securities are held in dematerialized form. The maximum amount of finance that can be granted to an individual for IPOs is Rs.10 lakh. The corporates should not be extended finance for investment in other companies’ IPOs and NBFCs should not be provided finance for further lending to individuals for IPOs. Finance extended by a bank for IPOs should be reckoned as an exposure to capital market.

General Information

For further details/guidance, please approach any bank authorised to deal in foreign exchange or contact Regional Offices of the Foreign Exchange Department of the Reserve Bank.

FAQ-as on July 1, 2004

51. Is it mandatory for a PPI issuer to allow interoperability ? +

Ans. Yes, it is mandatory for a PPI issuer to allow interoperability. It is mandatory for the PPI issuer to give the holders of full-KYC PPIs interoperability through authorised card networks and UPI. All modes of acceptance (including QR codes) and PPI issuance are required to be interoperable by March 31, 2022.

Q.51. Could NOFHC itself be a listed entity? +

A. No. NOFHC is to be wholly-owned by the Promoters/Promoter Group. Therefore, it cannot be a listed company. [para 2 (C) (i) of the guidelines]

52. What is the margin stipulated for advances against shares held in physical form and dematerialized form? +

A uniform margin of 40% has been stipulated for all advances against shares.

52. I am having a Small PPI (with cash loading or without cash loading), but my PPI issuer is not allowing interoperability. Why ? +

Ans. Interoperability is allowed only for full-KYC PPIs.

Q.52. Could a non-corporate entity such as an LLP or Trust (public, private or charitable) be permitted as being a part of the Promoter/ Promoter Group for setting up the NOFHC? +

The shares of NOFHC can be held by individuals, corporate entities and companies belonging to the Promoter Group. An LLP and trust do not fall under any of these categories. Therefore, an LLP or trust cannot hold voting equity shares directly in the NOFHC but can hold indirectly through a company in the Promoter Group which holds voting equity shares of the NOFHC.

53. Whether banks can make donations? +

Yes, the profit making banks can make donations during a financial year, aggregating upto one per cent of the published profit of the bank for previous year inclusive of donations made earlier under exempted category and donations to National funds and other funds. Banks should not make donations in excess of prescribed ceiling of one per cent as stated above. Unutilised amount of the permissible limit in a year should not be carried forward to the next year for the purpose of making donations.

53. What are the modes of interoperability ? +

Ans. If the PPI is issued in the form of wallet, interoperability across PPIs shall be enabled through UPI. If the PPI is issued in the form of card, the card shall be affiliated to the authorised card network for interoperability.

Q.53. Where shares of a NOFHC are held by public trusts, whose trustee are the promoters, whether the same could be considered under 2(C)(ii)(b) category for considering 51% holding in NOFHC? +

54. Whether loss-making banks can make donations? +

Yes, loss making banks can make donations totaling Rs.5 lakhs only in a financial year.

54. What is the protection available in case of unauthorised transactions involving PPIs issued by banks ?

Ans. Bank PPI issuers shall be guided by RBI circulars DBR.No.Leg.BC.78/09.07.005/2017-18 dated July 6, 2017 or DCBR.BPD.(PCB/RCB).Cir.No.06/12.05.001/2017-18 dated December 14, 2017, as applicable on Customer Protection – Limiting Liability of Customers in Unauthorised Electronic Banking Transactions.

Q.54. If a Core Investment Company (CIC), being the promoter, is newly incorporated for holding the NOFHC, would the track record of the Promoter/ Promoter Group in the CIC be considered? +

A. The overall track record of the Promoters/Promoter Group for at least 10 years will be seen. If the Promoters/Promoter Group incorporates a new CIC for the purpose of holding shares in the NOFHC, the track record of the Promoters/Promoter Group setting up the CIC will be seen. [para 2 (B) (b) of the guidelines]

55. Whether overseas branches of the banks can make donations abroad? +

Yes, the overseas branches of the banks can make donations abroad, provided the banks do not exceed the prescribed ceiling of one per cent of their published profit of the previous year.

55. What is the protection available in case of unauthorised transactions involving PPIs issued by non-banks ? +

Ans. The framework to limit the liability of customers (PPI holders) against unauthorised transactions in PPIs issued by non-bank issuers is given in paragraph 17 of the MD-PPIs and has come into effect from March 01, 2019. The FAQs given below relate to PPIs issued by non-bank PPI issuers.

Q.55. Where the CIC is a listed entity (and meets the owned and controlled by residents test as per the extant DIPP guidelines), would the stated Promoter Group of the CIC for listing purposes be also treated as the Promoter Group for the new bank? +

A. Promoter Group for the purpose of these guidelines will be as per the definition given in Annex I to the guidelines.

56. What are the norms and procedure laid down by RBI for acquisition of accommodation on lease/rental basis by commercial banks for their use i.e. for office and residence of staff? +

i) Boards of Directors of the banks should lay down policy and formulate detailed operational guidelines separately in respect of metropolitan, urban, semi-urban and rural areas covering all areas in respect of acquiring premises on lease/rental basis for the bank's use including delegation of powers at various levels. The decision of surrender or shifting of premises other than at rural centres is taken at central office level by a committee of senior executives. ii) Banks' Boards should lay down a separate policy in respect of loans granted to landlords who provide to them premises on lease/rental basis. The rate of interest to be charged on such loans should be fixed as per the lending rate directives issued by RBI with minimum PLR for the loans above Rs. 2 lakhs. The rate of interest may be simple rate or compound rate as per the usual practice of the bank as applicable to other term loans. iii) Banks should evolve a suitable machinery for dealing with genuine grievances of the landlord for expeditious disposal. iv) In case of negotiated contracts in respect of advances to landlords and rental (including taxes etc. and deposits of Rs.25 lakhs and above) in respect of premises taken on lease/rental basis by public sector banks, the cases will be reported to Central Bureau of Investigation as per the extant Government instructions. This requirement is not applicable to banks in the private sector.

56. Does the framework cover all the types of PPIs issued under the MD-PPIs ? +

Ans. Except for the PPIs issued under the arrangement of PPI-MTS as per paragraph 10.2 of MD-PPIs, the framework is applicable to all PPIs issued by authorised non-bank PPI issuers. Even in PPI-MTS, the cases of contributory fraud / negligence / deficiency on the part of the issuer are covered.

Q.56. Would any investor holding more than 10 per cent of the ‘free float’ in the listed CIC be also compulsorily viewed as being a Promoter by virtue of a more than 10 per cent ownership in the CIC even if such investor does not otherwise form part of the Promoter Group (the working assumption here being that the CIC will hold significant interests in non-financial services businesses as well as 100 per cent interest in an NOFHC). +

A. Merely holding 10 per cent of the free float in the listed CIC would not make the investor a Promoter. If the investor does not form a part of the Promoters/Promoter Group as per the definition given in Annex I to the guidelines, he would not be considered as a Promoter.

57. Are there any limit prescribed by the RBI on service charges to be levied by the banks? +

The banks have been given the freedom to determine the service charges to be levied from their customers and the RBI has not prescribed any ceilings in this regard.

57. What is meant by electronic payment transactions under this framework ? +

Ans. For the purpose of this MD, electronic payment transactions can be–

Remote / Online payment transactions: Transactions that do not require physical PPIs to be presented at the point of transactions e.g. wallets, card not present (CNP) transaction, etc.; and
Face-to-face / Proximity payment transactions: Transactions that require physical PPIs to be present at the point of transactions e.g. transactions at ATMs, PoS devices, etc.).

Q.57. In respect of the capital structure of the NOFHC, having regard to the use of the word “and” are sub-clauses (a) and (b) of clause 2 (C)(ii), to be read as conditions to be fulfilled cumulatively? +

A. It is essential that clause (b) of para 2(C)(ii) (i.e. not less than 51 per cent of the voting equity shares of the NOFHC to be held by companies in which the public hold not less than 51 per cent of the voting equity shares) is satisfied in all cases, whereas clause (a) of para 2(C) (ii) does not stipulate any minimum shareholding. Accordingly, it is not necessary that an individual, along with his relatives (as defined in Section 6 of the Companies Act, 1956) and along with entities in which he and/or his relatives hold not less than 50 per cent of the voting equity shares should hold shares in the NOFHC. [para 2 (C) (ii) of the guidelines]

58. Is it mandatory for the customer (PPI holder) to register for SMS alerts ? +

Ans. In order to get protection under this framework, it is mandatory for the customer (PPI holder) to register for SMS alerts.

Q.58. Having regard to clause 2 (C)(ii)(a), can a single individual investor hold 10 per cent directly in the NOFHC and also have significant holdings in other Promoter group companies in which the public holds not less than 51 per cent of voting equity shares? +

A. Yes. It would be possible for an individual belonging to the Promoter Group, along with his relatives (as defined in Section 6 of the Companies Act, 1956) and along with entities in which he and/or his relatives hold not less than 50 per cent of voting equity shares, to have significant holdings in other Promoter Group companies in which the public holds not less than 51 per cent of voting equity shares.

59. Is the customer supposed to get an alert of transaction in his / her PPI account ? +

Ans. It is mandatory for non-bank PPI issuers to send an SMS alert to the customer for any payment transaction in his / her account. In addition, an e-mail alert may also be sent, wherever registered. The transaction alert should have a contact number and / or e-mail id on which the customer can report unauthorised transactions or notify the objection.

Q.59. Does 51 per cent holding by public in clause 2 (C)(ii)(b) mean a company has to be necessarily a listed entity or could be an entity where 51 per cent is held by other than Promoters? +

A company in which public holds 51 per cent need not necessarily be listed. For the purpose of these guidelines, ‘public shareholding’ implies that no person along with his relatives (as defined in Section 6 of the Companies Act, 1956) and entities in which he and / or his relatives hold not less than 50 per cent of the voting equity shares, by virtue of his shareholding or otherwise, exercises ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) over the company.[para 2 (C) (ii) of the guidelines]

60. Where can the customer report an unauthorised transaction in his / her PPI account ? +

Ans. Non-bank PPI issuers shall provide customers with 24x7 access via website / SMS / e-mail / dedicated toll-free helpline for reporting unauthorised transactions and / or loss or theft of the PPI. Further, a direct link for lodging of complaints, with specific option to report unauthorised electronic payment transactions shall be provided by non-bank PPI issuers on the mobile app / home page of their website / any other evolving acceptance mode.

Q.60. In the context of at least 51% of the total voting equity of the NOFHC to be held by companies of the Promoter group having at least 51% of the voting equity held by the public, please clarify whether the concept of public includes “Non-Promoter” shareholders in an unlisted entity. Also, we presume that the definition of Public companies would be in consonance with SEBI Guidelines. Please confirm. +

61. Is the customer protected against any unauthorised transaction after he / she has reported to the issuer about such transactions or loss of instrument ? +

Ans. On reporting of an unauthorised payment transaction or loss of instrument, non-bank PPI issuers shall take immediate action to prevent further unauthorised payment transactions in the PPI account of the customer. Any further transactions debit on such an instrument will be the liability of the issuer.

Q.61. Subject to the Companies Act, 1956 / Companies Bill, 2012, could the NOFHC issue non-voting equity shares/ preference shares? +

Yes, to the extent permissible under the relevant laws. However, it will not be reckoned for the purpose of calculation of promoter shareholding in the NOFHC.

62. Is the customer protected against a contributory fraud / negligence / deficiency on the part of the non-bank PPI issuer ? +

Ans. The liability of a customer in cases of contributory fraud / negligence / deficiency on the part of the non-bank PPI issuer is zero. PPI-MTS issuers are also covered for such acts / events.

Q.62. The references in paragraph 2 (C) (ii) relate to holdings of voting equity capital. Would the NOFHC be permitted to issue non-voting equity capital or other classes of capital to persons other than promoter group entities ? +

Yes, to the extent permissible under the relevant laws. However, it will not be reckoned for the purpose of calculation of promoter shareholding in the NOFHC.

63. Does the customer need to report to the issuer in case there is a contributory fraud / negligence / deficiency on the part of the non-bank PPI issuer ? +

Ans. It is always advisable to report any unauthorised transaction in the account of the customer. However, an issuer cannot deny compensation against contributory fraud / negligence / deficiency on the part of the non-bank PPI issuer, on the ground that the customer has not reported any unauthorised transaction in his / her account.

Q.63. Should the percentage holding in the NOFHC/ bank be computed with reference to the last audited balance sheet or as on the date of the proposed investment? +

A. The percentage holding of the NOFHC/bank will be computed with reference to the date of the investment.

64. How will the liability of the customer be fixed in cases of third party breach where the deficiency lies neither with the non-bank PPI issuer nor with the customer but lies elsewhere in the system, and the customer notifies the non-bank PPI issuer regarding the unauthorised payment transaction ? +

Ans. The ‘per transaction customer liability’ in such cases will depend on the number of days lapsed between the receipt of transaction communication by the customer from the non-bank PPI issuer and the reporting of unauthorised transaction by the customer to the non-bank PPI issuer. If the issuer is reported within three days’ of receiving of communication, the customer liability will be zero. Similarly, for any such transaction reported between four and seven days of receiving of communication, the customer liability will be limited to a maximum of ₹ 10,000/. Reporting beyond seven days’ time will be dealt in accordance with the Board approved policy of the non-bank PPI issuer.

Q.64. We understand that the NOFHC does not need to wholly own the ‘other regulated financial services entities’ and that direct participation in such entities by non-Promoter group individuals/ companies is permitted. Additionally, we understand that FDI in such entities as per the extant DIPP guidelines is permitted. +

A. As per Para 2 C (vii) of the guidelines, only the regulated financial sector entities in which a Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) will be held under the NOFHC. Thus, the NOFHC does not need to wholly own the regulated financial services entities and direct participation in such entities by non-Promoter Group individuals/ companies is permitted. The pattern of shareholding and the capital requirements in the regulated financial services entities held by the NOFHC shall be as prescribed by the respective sectoral regulators. The FDI limits in such entities would be as per extant FDI policy of the Government of India/ Notifications issued under FEMA. As regards the bank, the foreign shareholding would be as per para 2 (F) of the guidelines.

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. +

These FAQs are issued by the Reserve Bank of India (hereinafter referred to as “Bank”) for information and general guidance purposes only. The Bank will not be held responsible for actions taken and / or decisions made on the basis of the same. For clarifications or interpretations, if any, one may be guided by the relevant circulars, guidelines and notifications issued from time to time by the Bank.

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].