Money Transfer Service Scheme (MTSS) is a way of transferring personal remittances from abroad to beneficiaries in India. Only inward personal remittances into India such as remittances towards family maintenance and remittances favouring foreign tourists visiting India are permissible. Under the scheme there is a tie-up between reputed money transfer companies abroad known as Overseas Principals and agents in India known as Indian Agents who would disburse funds to beneficiaries in India at ongoing exchange rates.

For the purpose of exemption from NBFC Directions, (1998) on Acceptance of Public Deposits, the debentures are required to be fully secured on the date of issue and to the fullest satisfaction of the trustees.

Ans: Yes, entities can modify the already submitted FLA return after taking the approval from RBI.

Banks have freedom to determine their own penal rates of interest for premature withdrawal of term deposits.

Ans: In case the reporting entity does not receive the soft-form of the survey schedule, they may download the same from RBI website (www.rbi.org.in) under the head ‘Regulatory Reporting’-→ ‘List of Returns’-→ ‘CPIS – Survey Schedule’[ or under the head ‘Forms’ (available under ‘More Links’ at the bottom of the home page) and sub-head ‘Survey’] or send a request to the email.

Clarification: As per extant guidelines, SMF includes individuals, SHGs, JLGs, Farmers’ Producer Companies (FPC) and Co-operatives of farmers with the accompanying criteria of membership by number and land-holding. Therefore, loans to partnership firms/ co-borrowers or any director of a Company holding Agriculture land upto 2 hectares / 5 acres are not eligible to be classified under the Small and Marginal farmers category of PSL

Clarification: As per extant guidelines, priority sector loans are eligible for classification as loans to minority communities as per the list notified by the GoI from time to time. The same may be read with Master Circular- Credit Facilities to Minority Communities which under para 2.2 states “In the case of a partnership firm, if the majority of the partners belong to one or the other of the specified minority communities, advances granted to such partnership firms may be treated as advances granted to minority communities. Further, if the majority beneficial ownership in a partnership firm belongs to the minority community, then such lending can be classified as advances to the specified communities. A company has a separate legal entity and hence advances granted to it cannot be classified as advances to the specified minority communities.”

Clarification: Our guidelines do not mandate banks to obtain documentary evidence for classifying credit facilities to Minorities and SCs/STs under weaker section. Therefore, declaration by the customer in the application form would suffice. However, it needs to be ensured that for classification under weaker sections, the loans should first be eligible for classification under priority sector lending as per underlying activity.I. Investment by Banks in securitized assets / Transfer of Assets through Direct Assignment/ Outright Purchase

Ans: These would include real estate or other fixed assets which are required for effective functioning of a company, but should not include other financial investments/loans in non group companies.

As per Section 26 of Reserve Bank of India Act, 1934, the Bank is liable to pay the value of banknote. This is payable on demand by RBI, being the issuer.

The promissory clause printed on the banknotes i.e., "I promise to pay the bearer the sum of Rupees …” denotes the obligation on the part of the Bank towards the holder of the bank note.

An NRI can be an Indian national or a foreign national of Indian origin. If the depositor is an NRI holding a foreign passport, he is to be treated as foreign national despite the fact he is of Indian origin. It is for the depositor to disclose to the company that he is a foreign citizen and for the company to keep on its record an evidence that it had received deposit from a foreign citizen to claim the exemption from the Non-Banking Financial Companies (Reserve Bank) Directions, 1998 on Acceptance of Public Deposits.

Ans: If the Indian entity does not have any outstanding investment in respect of inward and outward FDI as on end-March of reporting year, they need not submit the FLA return.

The Overseas Principal should be a registered entity, licenced by the Central Bank / Government or financial regulatory authority of the country concerned for carrying on Money Transfer Activities. The country of registration of the Overseas Principal should be AML compliant. The Overseas Principal should obtain necessary authorisation from the Department of Payment and Settlement Systems, Reserve Bank of India under the provisions of the Payment and Settlement Systems Act (PSS Act), 2007 to commence/ operate a payment system.

Banks should pay interest at the originally contracted rate on the deposit amount for the holiday/ Sunday/ non-business working day intervening between the date of expiry of the specified term of the deposit and the date of payment of the proceeds of the deposits on the succeeding working day.

Ans: The reporting entities should follow the below-mentioned points for filling and submitting the survey schedule:

i. The company must use the latest survey schedule, which is in .xls format, without incorporating any macros.

ii. The company is required to save the survey schedule in Excel 97-2003 workbook, i.e., in .xls format by following the below-mentioned steps:

1. Go to Office Button / File → Save As → Save As type

2. Select “Excel 97-2003 Workbook” and Save the survey schedule in .xls format.

iii. The company is requested not to incorporate any macro in the survey schedule while submitting the same.

iv. Survey schedule submitted in any other format (other than .xls format) will be rejected by the system.

v. Ensure that all information furnished in the survey schedule are complete and no information is missed out.

vi. After filling required details, the responding entities have to fill the declaration present in the survey schedule, which helps in validating that the information entered by the entity are reconfirmed before submission to RBI. This helps to avoid data entry errors, missed data and other errors.

Clarification: The bank may rely on a CA certificate by the originating entity certifying the PSL composition of the pool. Additionally, bank may conduct a sample check of say 10% of the pool for PSL eligibility. The additional check may be conducted by the bank through its own staff or by engaging a CA for this purpose.J. PSLCs

Banknotes in India are currently being issued in the denomination of ₹10, ₹20, ₹50, ₹100 ₹200, ₹500, and ₹2000. These notes are called banknotes as they are issued by the Reserve Bank of India. The printing of notes in the denominations of ₹2 and ₹5 has been discontinued and these denominations have been coinised as the cost of printing and servicing these banknotes was not commensurate with their life. However, such banknotes issued earlier can still be found in circulation and these banknotes continue to be legal tender. ₹1 notes are issued by the Government of India from time to time and such notes including those issued in the past also continue to be legal tender for transactions.

Ans: Based on the feedback received from banks and taking into account the disruptions caused by COVID-19, it has been decided to extend the time available for deployment of funds under the TLTRO 2.0 scheme from 30 working days to 45 working days from the date of the operation. Funds that are not deployed within this extended time frame will be charged interest at the prevailing policy repo rate plus 200 bps for the number of days such funds remain un-deployed. The incremental interest liability will have to be paid along with regular interest at the time of maturity.

To become an Indian Agent, the applicant should be an Authorised Dealer Category-I bank or an Authorised Dealer Category-II or a Full Fledged Money Changer (FFMC) or the Department of Posts. Further, the Indian agents can also appoint sub-agents which can be retail outlets, commercial entities having a place of business, and whose bonafides are acceptable to the Indian Agent.

Subject to the Exchange Control Regulations, the NBFCs can receive external commercial borrowings from foreign Overseas Corporate Bodies, individuals, FIIs, and other trusts or persons. The moneys received from all these sources are excluded from the definition of public deposit as per the provisions of NBFC Directions. However, Indian companies are required to obtain prior approval of the Exchange Control Department for acceptance of deposits from non-residents.

Ans: If an entity has received only share application money and does not have any foreign direct investment or overseas direct investment outstanding as on end-March of the latest FY, it is not required to fill the FLA return.

Ans: While such accounts could be taken into account in view of the fact that developments after balance sheet date are also taken into account, all NBFCs including CICs-ND-SI would mandatorily have to finalise their accounts as on March 31 of the year, and submit annual auditors certificate based on this figure.

No. Children (including minor) are not eligible for additional interest admissible to bank’s staff member/ retired staff member.

Ans: A consolidated data at the entity level, covering all the branches/offices in India, should be furnished.

Clarification: The banks are required to submit a request to FIDD, CO (fiddplan@rbi.org.in) to obtain registration for PSLC trading by submitting a) DEA Fund Code b) Customer identification number and c) RBI Current account number.

Clarification: The misclassifications, if any, will have to be reduced from the achievement of PSLC seller bank only. There will be no counterparty risk for the PSLC buyer, even if, the underlying asset of the traded PSLC gets misclassified.

Clarification: The premium will be completely market determined. No floor/ ceiling has been prescribed by RBI in this regard.

Clarification: There will be real time settlement of the matched premium and accordingly respective current accounts of the participating banks with RBI will be debited/ credited to the extent of matched premium

Clarification: The order matching will be done on anonymous basis through the portal and the buyer/ seller cannot select the counterparty. Partial matching will happen depending on the matching of premium and availability of category wise PSLC lots for sale and purchase.

Clarification: The normal trading hours shall be from 10 AM to 4:30 PM. The PSLC market operates on all days except Saturdays, Sundays, holidays declared under The Negotiable Instruments Act, 1881 by the Government of Maharashtra. and such holidays as RBI may declare from time to time.

Clarification: The nature of PSLC trading has been kept anonymous to maintain most efficient price discovery. There is no provision for settling deals on bilateral basis and reporting on the portal subsequently. RBI has the discretion to cancel any deals which is settled at substantially higher/ lower premiums as compared to the prevailing rates on the portal.

Clarification: All PSLCs will be valid till end of FY i.e. March 31st and will expire on next day i.e. April 1st.

Clarification: The duration of the PSLCs will depend on the date of issue with all PSLCs being valid till end of FY i.e. March 31st and expiring on next day i.e. April 1st.

Clarification: PSLCs may be construed in the nature of 'goods' in the course of inter-state trade or commerce, dealing in which has been notified as a permissible activity under section 6(1)(o) of BR Act vide Government of India Notification dated May 4, 2016. GST on PSLCs for the period July 01, 2017 to May 28, 2018 has to be paid by the seller bank on forward charge basis at the rate of 12%. With effect from May 28, 2018, GST has to be paid by the buyer bank under Reverse Charge Mechanism (RCM) at the rate of 18%. Further, IGST is payable on the supply of PSLC traded over e-kuber portal. If a bank which was liable to pay GST had already paid CGST/SGST or CGST/UGST, the bank is not required to pay IGST towards such supply. Further, as per the extant guidelines, no transaction charge/ fees is applicable on the participating banks payable to RBI for usage of the PSLC module on e-Kuber portal.

(The clarification given above is not a legal advice or opinion in the matter and it may not necessarily reflect the most current legal developments. The market participants should seek the advice of the tax experts/consultants/specialists before acting upon any of the information provided above).

Clarification: There are only four eligible categories of PSLCs i.e. PSLC General, PSLC Small and Marginal Farmer, PSLC Agriculture & PSLC Micro Enterprises.

Clarification: 'Export Credit' can form a part of underlying assets against the PSLC - General. However, any bank issuing PSLC-General against 'Export Credit' shall ensure that the underlying 'Export Credit' portfolio is also eligible for priority sector classification by domestic banks.

Clarification: Foreign banks with less than 20 branches are not allowed to buy PSLC General for achieving their 8% target of lending to sectors other than exports. However, such banks are allowed to buy PSLC Agriculture, PSLC Micro Enterprises and PSLC Small and Marginal Farmer for the same.

Clarification: The trade summary of PSLC market is available to the participants through the e-Kuber portal. Any new functionality will be notified to the participants via 'News & Announcements' section under e-Kuber portal.

Clarification: A bank can purchase PSLCs as per its requirements. Further, a bank is permitted to issue PSLCs upto 50 percent of previous year’s PSL achievement without having the underlying in its books. This is applicable category-wise. The net position of PSLCs (PSLC Buy – PSLC Sell) has to be considered while reporting the quarterly and annual priority sector returns. However, with regard to ascertaining the underlying assets, as on March 31st, the bank must have met the priority sector target by way of the sum of outstanding priority sector portfolio and net of PSLCs issued and purchased.

Ans: No, only investments in companies registered under Section 3 of the Companies Act 1956 would be regarded as investments in Group companies for the purpose of calculating 90% investment in Group companies. Moreover, CICs are prohibited from contributing capital to any partnership firm or to be partners in partnership firms including Limited Liability Partnerships (LLPs) or any association of person similar in nature to partnership firms.

Not necessarily. In terms of Section 24 of the Reserve Bank of India Act, 1934, bank notes shall be of the denominational values of two rupees, five rupees, ten rupees, twenty rupees, fifty rupees, one hundred rupees, five hundred rupees, one thousand rupees, five thousand rupees and ten thousand rupees or of such other denominational values, not exceeding ten thousand rupees, as the Central Government may, on the recommendation of the Central Board, specify in this behalf.

Ans: In order to provide banks flexibility in investment, this condition will not be applicable for funds availed under TLTRO 2.0.

Indian Agents need permission from the Regional Office concerned of the Foreign Exchange Department, Reserve Bank of India to operate under the MTSS framework. Further, the Overseas Principal also need to obtain necessary authorisation from the Department of Payment and Settlement Systems, Reserve Bank of India under the provisions of the Payment and Settlement Systems Act (PSS Act), 2007.

The prudential norms relating to income recognition, accounting standards, asset classification, provisioning against bad and doubtful debts are the norms which have a bearing on disclosure of true and fair picture of the financial health of the NBFC. These companies normally borrow from other corporate bodies as also from banks and financial institutions. These are also the companies which may commence accepting public deposits at short notice. It is necessary that their Balance Sheets on which all the lenders would rely should be transparent and clean, else these companies would be able to inflate their profits and conceal the decline in the value of their investments as also unprovided NPAs. Such companies might turn out to be potential defaulters in servicing their borrowings from the financial system. The exemptions from capital adequacy and credit/ investment concentration norms have been given because public deposits are not involved.

Ans: If an entity has not ‘received any fresh FDI and/or ODI (overseas direct investment)’ in the latest FY but has outstanding FDI and/or ODI as at end-March of that financial year, then it is required to submit their outstanding position as on March 31 in the FLA return every year by July 15.

No. As the money belongs to the minor child and not the bank’s staff, additional interest cannot be paid.

Ans: The survey collects details of portfolio investment assets of domestic residents made in securities issued by unrelated non-residents i.e., securities issued by unrelated non-residents and owned by residents.

Clarification: In the case of bank’s lending to NBFCs / MFIs / HFCs for on-lending, only that portion of the portfolio should be reckoned for PSL classification that has been disbursed by the NBFC / MFI / HFC to the ultimate borrower/s as on the reporting date. The reckoning of residual portfolio, if any, can be done on subsequent reporting dates, based on the disbursement of eligible loans and reported by the NBFC / MFI / HFC to the bank.

Clarification: The Master Directions on Priority Sector Lending, 2020 under para 21, 22, 23 allows banks to classify as PSL its lending to NBFCs including HFCs and NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of RBI recognised SRO for the sector for on-lending to eligible priority sectors. Banks may adopt a uniform methodology for on-lending as follows:

a) Classification under PSL:

• The banks can classify on-lending to NBFC in the respective categories of PSL. The classification will be allowed only when the NBFC has disbursed the Priority Sector Loans to the ultimate beneficiary after receiving the funds from the bank.

• The NBFCs must provide a CA certificate to the banks stating that the individual loans of the portfolio, against which on-lending benefit is being claimed, are not being used to claim benefit from any other bank(s). Also, NBFC must put in place a suitable process to flag such loan(s) in their systems to enable its internal/statutory auditors as well as RBI supervisors to verify the same.

b) Information sharing:

• The banks may devise internal control mechanisms to ensure that the portfolio under on-lending is PSL compliant and adheres to co-terminus clause. The same should be made available to RBI supervisor/s as and when required. The following information/record should be collected by the bank from the EI:

1. Name of the beneficiary, Amount sanctioned, Loan amount outstanding, Loan tenure, disbursement date, category of PSL.

2. A statement to the effect that the portfolio is PSL compliant must be certified by a CA and shared by the EI with the bank on a quarterly basis in line with the PSL reporting by the bank to RBI. With respect to adherence to the co-terminus clause, the bank should ensure the same as on March 31 each year.

c) Adherence to co-terminus condition:

• The banks availing benefit of on-lending for PS assets must adhere to the condition that the tenure of the loan under on-lending to an EI is broadly co-terminus with the tenure of PS assets created by the EI.

• In view of the operational difficulties of exactly matching the co-terminus duration, the banks are allowed a variance of 3 months from the portfolio duration. An illustration for calculating adherence to the co-terminus duration is given below:

Sr. No.	Loan outstanding (A)	31st March of current FY (B)	Loan end date (C)	Loan period (days) (D= C-B)	Weighted average loan outstanding days (E=A*D)
1	50000	31-03-21	01-02-23	672	33600000
2	80000	31-03-21	01-05-24	1127	90160000
3	100000	31-03-21	11-08-23	863	86300000
4	300000	31-03-21	16-10-22	564	169200000
5	400000	31-03-21	23-11-22	602	240800000
Total	930000				620060000
	Weighted maturity of portfolio in days (F=(sum of E)/(sum of A)				666.73
	In months (F/30)				22.22
	In years (F/365)				1.83

In the above illustration, the residual maturity of bank loan to NBFC should be around 22.22 months. Banks are expected to calculate the weighted average residual maturity of portfolio ever year as on March 31 and ensure that residual maturity of bank loan to NBFC matches with the weighted average residual maturity of on-lending portfolio within the tolerance limit of +-3 months.

d) Treatment of pre-payment, foreclosure loans:

• The PS assets created by the entity may undergo pre-payment or foreclosure thereby changing the ‘weighted maturity’ of the portfolio.

• As the banks are required to calculate ‘weighted maturity’ at the end of FY, the loan outstanding in the event of pre-payment/foreclosure will also change accordingly.

• The NBFC may add PS assets to the on-lending portfolio. However, it must meet conditions mentioned above such as disbursements for the PS asset by the eligible entity must be on/after receipt of funds from the bank. The addition of PS assets to the portfolio pool can also be done in case of pre-payment/foreclosure of other PS assets in the pool to ensure adherence to the co-terminus clause.

Clarification: Bank lending to NBFCs (other than MFIs) and HFCs are subjected to a cap of 5% of average PSL achievement of the four quarters of the previous financial year. In case of a new bank the cap shall be applicable on an on-going basis during its first year of operations. The prescribed cap is not applicable for bank lending to registered NBFC-MFIs and other MFIs (Societies, Trusts, etc.) which are members of RBI recognised ‘Self-Regulatory Organisation’ of the sector. Bank lending to such MFIs can be classified under different categories of PSL in accordance with conditions specified in our Master Directions FIDD.CO.Plan.BC.5/04.09.01/2020-21 dated September 04, 2020 and updated from time to time.

The highest denomination note ever printed by the Reserve Bank of India was the ₹10000 note in 1938 which was demonetized in January 1946. The ₹10000 was again introduced in 1954. These notes were demonetized in 1978.

Ans: This condition applies only to the fourth TLTRO conducted on April 17, 2020. It does not apply to the TLTROs conducted before April 17, 2020. It also does not apply to TLTRO 2.0.

Only cross-border personal remittances, such as, remittances towards family maintenance and remittances favouring foreign tourists visiting India are allowed under this arrangement. Donations/contributions to charitable institutions/trusts, trade related remittances, remittance towards purchase of property, investments or credit to NRE Accounts are not allowed through this arrangement.

Ans: No, they are only exempt from norms regarding submission of Statutory Auditor Certificate regarding continuance of business as NBFC, capital adequacy and concentration of credit / investments norms.

The investment companies which have at least 90 per cent of their total assets (not total investments alone) in the securities issued by their group/subsidiary/holding companies are the core investment companies. The other two conditions are that they should not accept public deposits and should not trade in these shares. All the three conditions are required to be complied with fully. If any company fails to comply with even one of these three conditions, it is not entitled to the total exemptions from the provisions of Reserve Bank Directions on Acceptance of Public Deposits and Prudential Norms. In such a situation, the company would fall either in the category of public deposit taking company (if it has accepted public deposits) and be subject to all the regulations of RBI or in the category of general investment company and be subject to prudential norms to the extent these are applicable to it.

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.

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.

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.

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.

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.

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.

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

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

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

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.

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.

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.

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.

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.

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:

1. Primary Co-operative Credit Society which is being financed by the bank.

2. Khadi and Village Industries Boards.

3. Agriculture Produce Market Committees.

4. Societies registered under Societies Registration Act, 1860 or any other corresponding law in force in State or a Union Territory.

5. 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”.

6. 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.

7. 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.

8. Development of Women and Children in Rural Areas (DWCRA).

9. Self-help Groups (SHGs), registered or unregistered, which are engaged in promoting savings habits among their members.

10. Farmers’ Clubs – Vikas Volunteer Vahini (VVV).

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

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.