Monetary and Credit Information Review - আরবিআই - Reserve Bank of India
Monetary and Credit Information Review
Volume VII MONETARY AND CREDIT INFORMATION REVIEW Priority Sector Status for Bank Loans to MFIs The Reserve Bank has advised that bank credit to micro finance institutions (MFIs) extended on, or after, April 1, 2011 for on-lending to individuals and also to members of self help groups (SHGs)/joint liability groups (JLGs) will be eligible for categorisation as priority sector advance under respective categories viz., agriculture, micro and small enterprise, and micro credit (for other purposes), as indirect finance, provided not less than 85 per cent of the total assets of the MFI (other than cash, balances with banks and financial institutions, government securities and money market instruments) are in the nature of “qualifying assets”. In addition, aggregate amount of loan extended for income generating activity, is not less than 75 per cent of the total loans given by the MFI. A “qualifying asset” shall mean a loan disbursed by a MFI which satisfies the following criteria :
Further, to be eligible to classify these loans under priority sector, banks have to ensure that MFIs comply with the caps on margin and interest rate as also other ‘pricing guidelines’ as folllows:
At the end of each quarter, banks should obtain from the MFI, a chartered accountant’s certificate stating, inter-alia, that (i) 85 per cent of the total assets of the MFI are in the nature of “qualifying assets’’; (ii) the aggregate amount of loan extended for income generation activity is not less than 75 per cent of the total loans given by the MFI; and (iii) pricing guidelines have been followed. The guidelines relating to categorisation of (i) investment by banks in securitised assets originated by MFIs; and (ii) outright purchase of loan portfolios of MFIs as priority sector advances in the banks’ books, would be issued in due course. In the meantime, fresh assets would qualify for priority sector treatment only if they satisfy the criteria of qualifying assets and adhere to the pricing guidelines as specified above. Bank loans to MFIs which do not comply with the above conditions and bank loans to other non-banking finance companies (NBFCs), will not be reckoned as priority sector loans from April 1, 2011. Bank loans extended prior to April 1, 2011, classified under priority sector, will continue to be reckoned under priority sector till they mature. Enhanced Provisioning for NPAs/Restructured Advances The provisioning requirements on certain categories of non-performing advances and restructured advances have been enhanced. The enhanced rates are -
Sub-Standard Advances Advances classified as “sub-standard” will attract a provision of 15 per cent as against the earlier 10 per cent. The “unsecured exposures” classified as sub-standard assets will attract an additional provision of 10 per cent, i.e., a total of 25 per cent as against the earlier provision of 20 per cent. “Unsecured exposures” in respect of infrastructure loan accounts classified as sub-standard, in case of which certain safeguards, such as, escrow accounts are available as indicated in the Reserve Bank’s circular of April 23, 2010, will attract an additional provision of 5 per cent only i.e., a total of 20 per cent as against the earlier 15 per cent. Doubtful Advances Doubtful advances will continue to attract 100 per cent provision to the extent the advance is not covered by the realisable value of the security to which the bank has a valid recourse and the realisable value is estimated on a realistic basis. In respect of the secured portion, however, the following provisioning requirements will be applicable:
Restructured Advances
Provisioning Coverage Ratio for Advances Till such time that the Reserve Bank introduces a more comprehensive methodology of countercyclical provisioning taking into account the international standards as are being currently developed by the Basel Committee on Banking Supervision (BCBS) and other provisioning norms, banks are advised that:
Banks that had been granted extension of time beyond the stipulated date i.e., September 30, 2010 for achieving PCR of 70 per cent on their request, should calculate the required provisions for 70 per cent PCR as on September 30, 2010 and compute the shortfall therefrom. This shortfall should be built up at the earliest and these banks should reassess the further time required beyond March 31, 2011, if any, to build up the buffer and seek the Reserve Bank’s approval for the purpose. Further, as hitherto, the PCR should be disclosed in the ‘Notes to Accounts’ to the balance sheet. Savings Deposits The interest rate on domestic and ordinary non-resident savings deposits as well as savings deposits under nonresident (external) accounts scheme has been increased by 0.5 percentage point from 3.5 per cent to 4.0 per cent per annum from May 3, 2011. Repo/Reverse Repo Rates The repo rate under the liquidity adjustment facility (LAF) has been increased by 50 basis points from 6.75 per cent to 7.25 per cent from May 3, 2011. The reverse repo rate under the LAF, determined with a spread of 100 basis points below the repo rate, stands at 6.25 per cent from May 3, 2011. Housing Loan limit under Priority Sector Increased The limit of housing loans for being eligible for classification under priority sector has now been enhanced from Rs.20 lakh to Rs.25 lakh. The increased limit will be applicable to housing loans sanctioned on or after April 1, 2011 to individuals for purchase/construction of dwelling unit per family, excluding loans granted by banks to their own employees. Regulatory and Audit Compliance The Reserve Bank has advised all foreign banks operating in India, that the chief executive officer would be responsible for effective oversight of regulatory and statutory compliance as also the audit process and compliance thereof in respect of all operations in India. It has been observed that Indian operations of foreign banks functioning in India as branches of the parent banks generally do not have a separate audit committee vested with the responsibility of examining and reviewing inspection/audit reports for their compliance. Marginal Standing Facility – Scheme A new marginal standing facility (MSF) has been introduced from May 9, 2011. The salient features of the Scheme are : Eligibility All scheduled commercial banks having current account and subsidiary general ledger (SGL) account with the Reserve Bank, Mumbai are eligible to participate in the MSF Scheme. Tenor and Amount Under the facility, eligible entities can avail overnight, up to one per cent of their respective net demand and time liabilities (NDTL) outstanding at the end of the second preceding fortnight. But for the intervening holidays, the MSF facility will be for one day except on Fridays when the facility will be for three days or more, maturing on the following working day. If banks’ statutory liquidity ratio (SLR) holdings fall below the statutory requirement up to one per cent of their NDTL, they will not have the obligation to seek a specific waiver for default in SLR compliance arising out of use of this facility in terms of notification issued under sub section (2A) of Section 24 of the Banking Regulation Act, 1949. Timing The facility will be available on all working days in Mumbai, excluding Saturdays, between 3.30 P.M. and 4.30 P.M. Rate of Interest The rate of interest on amount availed under this facility will be 100 basis points above the LAF repo rate, or as decided by the Reserve Bank from time to time. Discretion The Reserve Bank reserves the right to accept or reject partially or fully, the request for funds under this facility. Operations
Minimum Request Size Requests will be received for a minimum amount of Rs. one crore and in multiples of Rs. one crore thereafter. Eligible Securities MSF will be undertaken in all SLR-eligible transferable Government of India (GoI) dated securities/treasury bills and state development loans (SDLs). Margin Requirement A margin of five per cent will be applied in respect of GoI dated securities and treasury bills. In respect of SDLs, a margin of 10 per cent will be applied. Thus, the amount of securities offered on acceptance of a request for Rs.100 will be Rs.105 (face value) of GoI dated securities and treasury bills or Rs.110 (face value) of SDLs. Settlement The settlement of all applications received under the MSF scheme will take place on the same day after the closure of the window for acceptance of applications. Issuance and Operation of Semi Closed M-Wallets Keeping in view the need to facilitate larger acceptance of mobile phone based prepaid payment instruments (mwallets) as a mode of payment, it has been decided to bring semi closed m-wallets on par with other semi-closed prepaid instruments subject to the conditions that –
Mobile Banking Transactions in India The limit for mobile banking transactions without end-to-end encryption has been increased to Rs. 5000 from the earlier limit of Rs. 1000. The revised limit is effective from May 4, 2011. Banks have been advised to put in place adequate security measures and velocity limits based on their own risk perception. Exposure to Housing/Real Estate/Commercial Real Estate Urban (primary) co-operative banks (UCBs) are now permitted to lend up to an additional 5 per cent of their total assets, for housing loans to individuals up to Rs.15 lakh. Earlier, in November 2010, UCBs were permitted to lend up to 10 per cent of their total assets to housing, real estate and commercial real estate and an additional 5 per cent of total assets for purchase and construction of dwelling units costing up to Rs. 10 lakh. Import of Rough/Cut/Polished Diamonds AD Category – I banks have been advised that ‘suppliers’ and ‘buyers’ credit (trade credit) including the usance period of letters of credit opened for import of rough, cut and polished diamonds should not exceed 90 days from the date of shipment. AD Category – I banks have also been advised to ensure that due diligence is undertaken and ‘know your customer’ (KYC) norms and anti-money laundering (AML) standards, issued by the Reserve Bank are adhered to while undertaking the import transactions. Further, any large or abnormal increase in the volume of business should be closely examined to ensure that the transactions are bonafide and are not intended for interest/currency arbitrage. Pledge of Shares for Business Purposes With a view to further liberalise, rationalise and simplify the processes associated with foreign direct investment (FDI) flows to India and reduce the transaction time, AD Category – I banks have been delegated powers to allow pledge of shares of an Indian company held by non-resident investor/s in accordance with the FDI policy, in the following cases: (i) Shares of an Indian company held by the non-resident investor can be pledged in favour of an Indian bank in India to secure the credit facilities being extended to the resident investee company for bonafide business purposes, subject to the conditions that -
(ii) Shares of the Indian company held by the non-resident investor can be pledged in favour of an overseas bank to secure the credit facilities being extended to the nonresident investor/non-resident promoter of the Indian company or its overseas group company, subject to the conditions that -
Edited and published by Alpana Killawala for the Reserve Bank of India, Department of Communication, Central Office, Shahid Bhagat Singh Marg, Mumbai - 400 001 and printed by her at Onlooker Press, 16, Sassoon Dock, Colaba, Mumbai - 400 005. |