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Domestic Deposits

II. Deposits of Non-Residents Indians (NRIs)

25. Whether banks can pay interest on NRE and FCNR(B) deposits for the intervening Saturday, Sunday and holidays between the date of maturity and payment? +

Yes. Whenever the due dates fall on Saturday/Sunday/non-business working day/holidays, banks are permitted to pay interest on NRE and FCNR(B) deposits at the originally contracted rate for the intervening period between the due date and date of payment so that no interest loss is suffered by the depositors.

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

Some Useful Definitions

Q25. What is meant by “Residence of Enterprises”? +

Ans: An enterprise is said to have a centre of economic interest and to be a resident unit of a country (economic territory) when the enterprise is engaged in a significant amount of production of goods and/or services in that centre or when it owns land or buildings located in that centre. The enterprise must maintain at least one production establishment in the country and must plan to operate the establishment indefinitely or over a long period of time.

Core Investment Companies

Core Investment Companies (CICs)

25. A CIC-ND-SI should have 90% investment within the group, and in terms of current exposure norms, NBFCs-ND-SI are permitted only 40% of both lending and investment within any group. Therefore, no NBFC as it stands, would be able to become a CIC without breaching the NOF, CRAR or Concentration Norms, since its entire business is in a subsidiary. However, an NBFC may voluntarily seek to become a CIC-ND-SI since it brings clarity to the holding structure in their organization. How would this issue be resolved? +

Ans: The NBFC would have to apply to RBI with full details of the plan and exemptions could be considered on a selective basis on the merits of the case.

Government Securities Market in India – A Primer

25. What are the day count conventions used in calculating bond yields? +

Day count convention refers to the method used for arriving at the holding period (number of days) of a bond to calculate the accrued interest. As the use of different day count conventions can result in different accrued interest amounts, it is appropriate that all the participants in the market follow a uniform day count convention.

For example, the conventions followed in Indian market are given below.

Bond market: The day count convention followed is 30/360, which means that irrespective of the actual number of days in a month, the number of days in a month is taken as 30 and the number of days in a year is taken as 360.

Money market: The day count convention followed is actual/365, which means that the actual number of days in a month is taken for number of days (numerator) whereas the number of days in a year is taken as 365 days. Hence, in the case of T-Bills, which are essentially money market instruments, money market convention is followed.

In some countries, participants use actual/actual, some countries use actual/360 while some use 30/actual. Hence the convention changes in different countries and in different markets within the same country (eg. Money market convention is different than the bond market convention in India).

26. How is the yield of a T- Bill calculated? +

It is calculated as per the following formula

Indian Currency

C. Different Types of Bank Notes and Security Features of banknotes

6. What are the Security Features of banknotes in circulation? +

The security features in MG Series 2005 and MG (New) Series banknotes are as under:

i. Security Thread: The silver coloured machine-readable security thread in ₹10, ₹20 and ₹50 denomination banknotes is windowed on front side and fully embedded on reverse side. The thread fluoresces in yellow on both sides under ultraviolet light. The thread appears as a continuous line from behind when held up against light. ₹100 and above denomination banknotes have machine-readable windowed security thread with colour shift from green to blue when viewed from different angles. It fluoresces in yellow on the reverse and the text will fluoresce on the obverse under ultraviolet light.

ii. Intaglio Printing: The portrait of Mahatma Gandhi, Reserve Bank seal, Guarantee and promise clause, Ashoka Pillar emblem, RBI’s Governor's signature and the identification mark for the visually impaired persons are printed in intaglio in denominations ₹100 and above.

iii. See through register: On the left side of the note, a part of the numeral of each denomination is printed on the obverse (front) and the other part on the reverse. The accurate back to back registration makes the numeral appear as one when viewed against light.

iv. Water Mark and electrotype watermark: The banknotes contain the portrait of Mahatma Gandhi in the watermark window with a light and shade effect and multi-directional lines. An electrotype mark showing the denominational numeral in each denomination banknote also appears in the watermark widow and these can be viewed better when the banknote is held against light.

v. Colour Shifting Ink: The numeral 200, 500 & 2000 on the ₹200, ₹500 and ₹2000 banknotes are printed in a colour-shifting ink. The colour of these numerals appears green when the banknotes are held flat but would change to blue when the banknotes are held at an angle.

vi. Fluorescence: The number panels of the banknotes are printed in fluorescent ink. The banknotes also have dual coloured optical fibres. Both can be seen when the banknotes are exposed to ultra-violet lamp.

vii. Latent Image: In the banknotes of ₹20 and above in the MG-2005 Series, the vertical band next to the (right side) Mahatma Gandhi’s portrait contains a latent image, showing the denominational value as the case may be. The value can be seen only when the banknote is held horizontally and light allowed to fall on it; otherwise this feature appears only as a vertical band. In the MG (New) Series banknotes, the latent image exists in denominations ₹100 and above.

viii. Micro letterings: This feature appears at different places on the banknotes and can be seen better under a magnifying glass.

ix. Additional Features introduced since 2015

• New Numbering Pattern

The numerals in both the number panels of the banknotes are in ascending size from left to right while the first three alpha-numeric characters (prefix) will remain constant in size.

• Angular Bleed Lines and Increase in the size of Identification Marks

Angular Bleed Lines have been introduced in banknotes - 4 lines in 2 blocks in ₹100, 4 angular bleed lines with two circles in between in ₹200, 5 lines in 3 blocks in ₹500, 7 in ₹2000. In addition, the size of the identification marks in denominations ₹100 and above have been increased by 50 percent.

Information about the above security features present in the Indian banknotes denomination-wise is also available on the website www.rbi.org.in>>press releases. Alternately, information can also be accessed from /en/web/rbi/-/notifications/master-circular-detection-and-impounding-of-counterfeit-notes-11610

Core Investment Companies

Core Investment Companies (CICs)

26. A company has investments in Group companies but does not meet the criteria of principal business as defined in terms of asset-income criteria to be as an NBFC. Can the company still be registered as a CIC or does it need to first register as an NBFC? +

Ans: CICs need not meet the principal business criteria for NBFCs.

FAQs on Non-Banking Financial Companies

Classification of NBFCs into sub-groups

26. Whether the classification of NBFCs into sub-groups as equipment leasing/hire purchase finance/loan/investment companies is still relevant when the overall ceiling on borrowing have been abolished? +

The NBFCs in the category of equipment leasing and hire purchase finance companies are allowed higher leveraging of their NOF for accepting public deposits as compared to the loan and investment companies. As a result, the classification into sub-groups of the NBFCs is relevant only for the purpose of ceiling on public deposits.

Foreign Investment in India

Q.26: What if the Capital Instruments are not issued within the stipulated time period ? +

Answer: If the capital instruments are not issued by the Indian company within sixty days from the date of receipt of the consideration, the amount so received has to be refunded to the person concerned by outward remittance, through banking channels or by credit to his NRE/ FCNR (B) accounts, as the case may be, within fifteen days from the date of completion of sixty days.

Domestic Deposits

III. Advances

26. What is the meaning of the word ‘Free’ in the lending rate prescription? +

Banks are free to fix Benchmark Prime Lending Rate (BPLR) for credit limits over Rs.2 lakhs with the approval of their respective Boards. BPLR has to be declared and made uniformly applicable at all the branches. The banks may authorize their Asset-Liability Management Committee (ALCO) to fix interest rates on Deposits and Advances, subject to their reporting to the Board immediately thereafter. The banks should also declare maximum spread over the BPLR with the approval of the ALCO/Board for all advances.