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Foreign Investment in India

Q.15: Whether cash is a permissible mode of payment for making foreign direct investment in Indian company. +

Answer: No, refer to Para 7.13 of Master Direction-Foreign Investment in India.

Indian Currency

B) Banknotes

7. Is it possible to have two or more banknotes with the same serial number? +

Yes, it is possible to have two or more banknotes with the same serial number, but they would either have a different Inset Letter or year of printing or signature of a different Governor of RBI. An Inset Letter is an alphabet printed on the Number Panel of the banknote. There can be notes without any inset letter also.

Targeted Long Term Repo Operations (TLTROs)

FAQs pertaining to On Tap TLTRO/ reversal of TLTRO/ TLTRO 2.0 transactions

Q15: If a bank opts for repayment of funds availed under TLTRO/ TLTRO 2.0, whether the investments made by the bank by utilizing these funds will continue to be allowed for classification under held to maturity (HTM) even in excess of 25 percent of total investment permitted to be included in the HTM portfolio? +

Ans: Banks can submit their request for exercising the repayment option till October 28, 2020. On repayment of funds availed under TLTRO/ TLTRO 2.0, the associated securities shall be shifted out of the HTM category. The shifting of the TLTRO/ TLTRO 2.0 investments out of HTM shall be in addition to the shifting of investments permitted at the beginning of the accounting year and subject to adherence to the guidelines contained in the Master Circular – Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by Banks dated July 1, 2015. These investments under TLTRO/ TLTRO 2.0 against which funds are being repaid will not be exempted from reckoning under the large exposure framework (LEF) and computation of adjusted non-food bank credit (ANBC) for the purpose of determining priority sector targets/sub-targets.

Housing Loans

15. Do you get a tax benefit on the loan? +

Yes. Resident Indians are eligible for certain tax benefits on both principal and interest components of a loan under the Income Tax Act, 1961. Under the current laws, you are entitled to an income tax rebate for interest repayment up to Rs. 1,50,000 /- per annum. Moreover, you can get added tax benefits under Section 80 C on repayment of principal amount up to Rs. 1,00,000 /- per annum.

Government Securities Market in India – A Primer

15. How are the G-Secs transactions reported? +

15.1 Transactions undertaken between market participants in the OTC / telephone market are expected to be reported on the NDS-OM platform within 15 minutes after the deal is put through over telephone. All OTC trades are required to be mandatorily reported on the NDS-OM reported segment for settlement. Reporting on NDS-OM is a two stage process wherein both the seller and buyer of the security have to report their leg of the trade. System validates all the parameters like reporting time, price, security etc. and when all the criterias of both the reporting parties match, the deals get matched and trade details are sent by NDS-OM system to CCIL for settlement.

15.2 Reporting on behalf of entities maintaining gilt accounts with the custodians is done by the respective custodians in the same manner as they do in case of their own trades i.e., proprietary trades. The securities leg of these trades settles in the CSGL account of the custodian. Funds leg settle in the current account of the PM with RBI.

15.3 In the case of NDS-OM, participants place orders (amount and price) in the desired security on the system. Participants can modify / cancel their orders. Order could be a ‘bid’ (for purchase) or ‘offer’ (for sale) or a two way quote (both buy and sell) of securities. The system, in turn, will match the orders based on price and time priority. That is, it matches bids and offers of the same prices with time priority. It may be noted that bid and offer of the same entity do not match i.e. only inter-entity orders are matched by NDS-OM and not intra-entity. The NDS-OM system has separate screen for trading of the Central Government papers, State Government securities (SDLs) and Treasury bills (including Cash Management Bills). In addition, there is a screen for odd lot trading also essentially for facilitating trading by small participants in smaller lots of less than ₹ 5 crore. The minimum amount that can be traded in odd lot is ₹ 10,000 in dated securities, T-Bills and CMBs. The NDS-OM platform is an anonymous platform wherein the participants will not know the counterparty to the trade. Once an order is matched, the deal ticket gets generated automatically and the trade details flow to the CCIL. Due to anonymity offered by the system, the pricing is not influenced by the participants’ size and standing.

Core Investment Companies

Core Investment Companies (CICs)

15. Whether NBFCs already registered with the Bank as category “B” company whose asset size is below Rs. 100 crore, but fulfilling the CIC criteria, can seek voluntary deregistration (as such companies are not otherwise required to get registered with the Bank under the new norms)? If so, which source should be relied upon viz certificate from Statutory auditor or audited balance sheet for one year or more? +

Ans: Yes, CICs presently registered with the Bank but fulfilling the criteria for exemption under Notification No 220 dated January 05, 2010 can seek voluntary deregistration. Both audited balance sheet and auditors certificate are required to be submitted for the purpose.

FAQs on Non-Banking Financial Companies

Ceiling on deposits

15. Whether an NBFC with entitlement of accepting public deposits as per the revised Regulations and holding deposits much above the level, can still accept fresh deposits ? If so, what are the conditions ? +

All the Rated Companies have been allowed 3 years time to regularise their excess deposits by repayment or otherwise. During this period, while a company can accept fresh deposits and renew such maturing deposits subject to reducing the excess holding of public deposits by one-third at the end of every calendar year beginning December 1998. However in such a case, the company should not exceed the level of public deposits outstanding as at the close of business on January 1, 1998. The unrated and underrated NBFCs are not entitled to accept fresh deposits.

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

Eligible entities and requirements to submit the FLA return

Q15. If an entity issues the shares to non-resident on non-repatriable basis, whether that entity is required to submit the FLA return? +

Ans: Shares issued by reporting entities to non-resident on non-repatriable basis should not be considered as foreign investment; therefore, entities which have issued the shares to non-resident only on non-repatriable basis, is not required to submit the FLA return.

Domestic Deposits

I. Domestic Deposits

15. What are the guidelines for renewal of overdue deposits? +

All aspects concerning renewal of overdue deposits may be decided by individual banks subject to their Board laying down a transparent policy in this regard and the customers being notified of the terms and conditions of renewal including interest rate, at the time of acceptance of deposit. The policy should be non-discretionary and non-discriminatory.

Coordinated Portfolio Investment Survey – India

What to report under CPIS?

Q15. What information should be reported in the CPIS, if balance sheet of the entity is not audited before the due date of submission? +

Ans.: If the entity’s accounts are not audited before the due date of submission, then they should report in the survey based on unaudited (provisional) account.