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Annual Return on Foreign Liabilities and Assets (FLA) under FEMA 1999

Eligible entities and requirements to submit the FLA return

Q12. Whether FLA return is required to be submitted by Registered Partnership Firms (Registered under Partnership Registration Act) or branches or trustees, who have made Overseas Direct Investment or it is mandatory only for Companies (Registered under Companies Act, 1956)? +

Ans: If the Partnership firms, Branches or Trustees have any outward FDI outstanding as on end-March of the latest FY, then they are required to file the FLA return.

Domestic Deposits

I. Domestic Deposits

12. Whether banks are permitted to offer differential rate of interest on other deposits? +

Banks can formulate special fixed deposit schemes specifically for senior citizens offering higher and fixed rates of interest as compared to normal deposits on any size.

Coordinated Portfolio Investment Survey – India

What to report under CPIS?

Q12. At what value should the portfolio investment assets be reported? +

Ans: The portfolio investment assets are required to be reported on marked to market basis as at the end of the reference period, with the breakups into type of securities viz., equity securities, short-term debt securities (with and original maturity of up to one year) and long-term debt securities (with an original maturity of more than a year) and country of residence of issuer.

FAQs on Master Directions on Priority Sector Lending Guidelines

L. Co-lending by Banks & NBFCs

Query 47: Are direct assignment of assets applicable only where bank can exercise its discretion ? +

Clarification: Only if the bank can exercise its discretion regarding taking into its books the loans originated by NBFC as per the Agreement, the arrangement will be akin to a direct assignment transaction. If the Agreement entails a prior, irrevocable commitment on the part of the bank to take into its books its share of the individual loans as originated by the NBFC, it shall not be akin to direct assignment transaction.

Query 48: Does the term "Mandatorily" in CLM guidelines means that the bank must take all the loans originated by NBFC or a cap can be affixed on the number and amount in the Master Agreement. +

Clarification: Both entities, the bank & the NBFC shall be guided by the bilateral Master Agreement entered by them for implementing the Co-lending Model (CLM). The agreement may state any cap on the number and amount of loans that can be originated by the NBFC under the Co-lending model.

Query 49: What will be the fate of loans originated by NBFC, which do not qualify under due diligence checks to comply with RBI regulations on KYC and Outsourcing of activities. +

Clarification: If the Agreement entails a prior, irrevocable commitment on the part of the bank, it has been advised that the partner bank and NBFC shall have to put in place suitable mechanisms for ex-ante due diligence by the bank. Such due diligence should ensure compliance with RBI regulations on KYC and outsourcing of activities before disbursal of the loans by the NBFC.

Query 50: Does the term back-to-back mean loan accounts will first be opened by NBFC and thereafter bank will open loan accounts in its books or both will open loan accounts and fund them simultaneously based on the loan agreement signed by the borrower with the NBFC. +

Clarification: Back-to-back basis implies that the loans will be first opened by NBFC and then bank will open loan accounts subsequently.

Query 51: Based on the loan documents executed, will the NBFC sanction and disburse the whole amount and thereafter approach the bank for reimbursement or will it sanction/ disburse its part of the loan and then approach the bank to sanction/ disburse its part. +

Clarification: The bank and the NBFC can decide on this aspect as per the Master agreement between them.

Foreign Investment in India

Q.13: Whether the percentage of foreign investment should be calculated at the time of issuance of Employee Stock Options (ESOP) or vesting stage or exercising stage ? +

Answer: Foreign investment percentage has to be calculated on a fully diluted basis i.e. at the time of issuance of Employee Stock Options.

Indian Currency

B) Banknotes

5. What is currency paper made up of? +

The paper currently being used for printing of banknotes in India is made by using 100% cotton.

Housing Loans

13. Can you repay your loan ahead of schedule? Is pre-payment of loan allowed? +

Yes, most banks allow you to repay the loan ahead of schedule by making lump sum payments. However, many banks charge early repayment penalties up to 2-3% of the principal amount outstanding. Prepayment penalty may vary according to the reasons and source of funds - if you obtain a loan from another bank for pre-payment the charges are usually higher than when you pay from your own sources. However, you may credit more than your EMI amount into your loan account on a periodic basis and bring down your interest burden as and when funds are available with you. Most banks do not charge a pre-payment penalty if you deposit more than your EMI payable on a periodic basis. Please check such stipulations while availing the loan.

Targeted Long Term Repo Operations (TLTROs)

FAQs pertaining to TLTRO 2.0

Q13: Will the specified securities acquired from TLTRO funds and kept in HTM category be included in computation of Adjusted Net Bank Credit (ANBC) for the purpose of determining priority sector targets/sub-targets? +

Ans: In terms of the press release 2237/2019-2020 dated April 17, 2020 notifying the TLTRO 2.0 scheme, at least 50 per cent of the total funds availed under the scheme has to be deployed in specified securities issued by small NBFCs of asset size of ₹ 500 crores and below, mid-sized NBFCs of asset size between ₹ 500 crores and ₹ 5000 crores and MFIs. The objective is to ease any liquidity stress and/or impediments to market access that these small and mid-sized entities might be facing. In order to incentivise banks’ investment in the specified securities of these entities, it has been decided that a bank can exclude the face value of such securities kept in the HTM category from computation of adjusted non-food bank credit (ANBC) for the purpose of determining priority sector targets/sub-targets. This exemption is only applicable to the funds availed under TLTRO 2.0.

Remittances (Money Transfer Service Scheme (MTSS) and Rupee Drawing Arrangement (RDA))

Money Transfer Service Scheme (MTSS)

13. Is there any limit on the amount of money which can be sent under MTSS ? +

A cap of USD 2,500 has been placed on individual remittances under the scheme. In addition, thirty remittances can be received by a single individual beneficiary under the scheme during a calendar year.

Core Investment Companies

Core Investment Companies (CICs)

13. Would CICs-ND-SI require NOC in terms of Regulation 7 of FEMA (Transfer or Issue of Any Foreign Security) Amendment Regulations Act 2004 in case they want to invest abroad? +

Ans: Yes, as they are regulated by RBI, they would require NOC from Department of Non-Banking Supervision (DNBS) for making investments in the financial sector. However, a registered CIC making investments in the non-financial sector need not obtain prior approval from the Department of Non-Banking Supervision (DNBS), RBI. It will only need to report such investments to the Department within 30 days of such investment.

FAQs on Non-Banking Financial Companies

Net owned fund

13. The NBFCs have been advised that the definition of Net Owned Fund (NOF) has been modified to include preference shares. Whether the entire preference share capital would be included in the NOF ? It may also be clarified whether the new definition of NOF would be applicable to minimum entry point norm of Rs. 25.00 lakh for Registration . +

The definition of NOF has been provided in Section 45IA of the Reserve Bank of India Act, 1934. This definition would be applicable to the computation of minimum capital fund for the purpose of Statutory Registration of an NBFC with the Reserve Bank of India. For the purpose of acceptance of public deposit and compliance of the prudential norms, the definition of NOF has been modified and it would include the paid up amount of preference shares which are compulsorily convertible into equity. However, the redeemable preference share capital would not be included in the definition of NOF or the Owned Fund.

Annual Return on Foreign Liabilities and Assets (FLA) under FEMA 1999

Eligible entities and requirements to submit the FLA return

Q13. Is it required to submit Annual Performance Report for ODI if we have submitted FLA Return? +

Ans: FLA return and Annual Performance Report (APR) for ODI are two different returns and monitored by two different departments of RBI. So, you are required to submit both the returns if these are applicable for your entity. For more information on APR, please refer to the Master Direction – Reporting under Foreign Exchange Management Act, 1999 on RBI’s website.

Government Securities Market in India – A Primer

13. Why does the price of G-Sec change? +

The price of a G-Sec, like other financial instruments, keeps fluctuating in the secondary market. The price is determined by demand and supply of the securities. Specifically, the prices of G-Secs are influenced by the level and changes in interest rates in the economy and other macro-economic factors, such as, expected rate of inflation, liquidity in the market, etc. Developments in other markets like money, foreign exchange, credit, commodity and capital markets also affect the price of the G-Secs. Further, developments in international bond markets, specifically the US Treasuries affect prices of G-Secs in India. Policy actions by RBI (e.g., announcements regarding changes in policy interest rates like Repo Rate, Cash Reserve Ratio, Open Market Operations, etc.) also affect the prices of G-Secs.

Domestic Deposits

I. Domestic Deposits

13. Whether banks can open savings bank accounts in the name of Government Departments/ Government Scheme? +

Savings bank account cannot be opened in the name of the Government Department/ Government Scheme, except in respect of deposits of Government organizations/ agencies listed below:

Primary Co-operative Credit Society which is being financed by the bank.
Khadi and Village Industries Boards.
Agriculture Produce Market Committees.
Societies registered under Societies Registration Act, 1860 or any other corresponding law in force in State or a Union Territory.
Companies governed by the Companies Act, 1956 which have been licensed by the Central Government under Section 25 of the said Act, or under the corresponding provision in the Indian Companies Act, 1913 and permitted, not to add to their names the word “Limited” or the words “Private Limited”.
Institutions other than those mentioned in clause (i) above and whose entire income is exempt from payment of income tax under Income-Tax Act, 1961.
Government departments/ bodies/ agencies in respect of grants/ subsidies released for implementation of various programmes/ Schemes sponsored by Central Government/ State Governments subject to production of an authorisation from the respective Government departments to open savings bank accounts.
Development of Women and Children in Rural Areas (DWCRA).
Self-help Groups (SHGs), registered or unregistered, which are engaged in promoting savings habits among their members.
Farmers’ Clubs – Vikas Volunteer Vahini (VVV).

Coordinated Portfolio Investment Survey – India

What to report under CPIS?

Q13. What is the unit of reporting the data in CPIS? +

Ans: Reporting entities should report the data in the unit mentioned in the survey schedule (for eg., INR Lakh or INR Thousand).

Indian Currency

B) Banknotes

6. How many languages appear in the language panel of Indian banknotes? +

Fifteen languages are appearing in the language panel of banknotes in addition to Hindi prominently displayed in the centre of the note and English on the reverse of the banknote.