The Reserve Bank has decided to permit UCBs registered in states, which have signed memorandum of understanding and those registered under the Multi-State Co-operative Societies Act, 2002 to enter into agreements with mutual funds (MFs) for marketing their units. The permission to market MF units is, however, subject to the conditions indicated below -

(i) The bank should act as an agent of the customers, forwarding the investors’ application for purchase/sale of MF units to the mutual fund/Registrar/transfer agents.

(ii) The MF units should be purchased at the customers’ risk and without the bank guaranteeing any assured return.

(iii) The MF units should not be acquired from the secondary market.

(iv) The MF units should not be bought back from the customers.

(v) UCBs holding custody of MF units on behalf of customers should ensure that their own investments and their customers’ investments are kept distinct from each other.

(vi) Retailing of MF units should be confined to certain selected branches to ensure better control.

(vii) The extant ‘know your customer’ (KYC)/anti-money laundering (AML) guidelines in respect of the applicants should be complied with.

UCBs have been further advised to report the details of the tie-up together with a copy of the agreement entered into with the mutual fund, to the Reserve Bank’s respective regional office within a period of ten days from the date of entering into the arrangement.

Regional rural banks (RRBs) have also been permitted to undertake marketing of units of mutual funds with the approval of their board of directors and subject to the conditions enumerated above.

The Reserve Bank has revised the eligibility norms for setting up of automated teller machines (ATMs) by UCBs. To be eligible to set up on-site/off-site ATMs, the UCB should have -

i) minimum deposits of Rs. 100 crore;
ii) complied with the prescribed capital to risk weighted assets ratio (CRAR);
iii) net non-performing asset (NPA) of less than 10 per cent; and
iv) consistent record of profitability and compliance with cash reserve ratio (CRR)/statutory liquidity ratio (SLR).

Accordingly, UCBs satisfying these eligibility norms may apply to the Reserve Bank’s regional office for prior approval for installing on-site and/or off-site ATMs. UCBs registered under the Multi-State Cooperative Societies Act may apply to the Reserve Bank’s regional office under the jurisdiction of which the registered/head office of the UCB is situated.

Scheduled UCBs, other than those classified as Grade II to IV, do not require the Reserve Bank’s prior approval for setting up on-site ATMs. UCBs should install off-site ATMs approved by the Reserve Bank, only within the area of their operation. Shifting and relocation of ATMs would require the Reserve Bank’s prior approval.

Scheduled and non-scheduled UCBs permitted to have ATMs, both under the automatic and approval route, may also issue ATM-cum-Debit Cards.

The Reserve Bank has further advised that UCBs now need not obtain the Reserve Bank’s prior approval to share/interlink with other banks, the ATMs/BTMs installed at their branches/ extension counters.

The Reserve Bank has been, for the past couple of years, endeavouring towards having the banks to deliver quality service to their customers at a reasonable price. It has also taken several measures towards financial inclusion, so that basic banking facilities are made available to a larger Indian population. Some recent initiatives that the Reserve Bank has taken are : l With effect from January 1, 2006, the Reserve Bank has put in place a revised Banking Ombudsman Scheme for redressal of grievances of banking customers. The scope of the scheme has been enlarged to cover customer complaints in areas, such as, levying service charges without prior notice to the customer, non-adherence to the fair practices code as adopted by individual banks, credit card complaints, deficiencies in providing the services assured by banks and banks’ sales agents, etc.

The Monetary and Credit Information Review will, from this issue, regularly cover the Reserve Bank’s instructions useful to common bank customers.

In order to ensure transparency in banking services, the Reserve Bank has advised banks to display and update, on their website, the details of various service charges levied by them for the services provided/products offered to their customers.

Banks have also been advised to display the charges relating to certain services (please see page 3) in their offices/ branches. These charges should also be displayed in the local language.

Banks are required to furnish the details of service charges presently applicable, to the Reserve Bank by May 31, 2006 to enable the Reserve Bank to place them on its website.

It may be recalled that the Reserve Bank has deregulated the levy of service charges by commercial banks and the decision to prescribe service charges has been left to the discretion of individual banks’ boards. While fixing service charges, banks have been advised to ensure that the charges are reasonable, consistent with the cost of providing these services and that customers with low value/volume of transactions are not penalised.

The Reserve Bank had been receiving representations from the public about the unreasonable and non-transparent service charges being levied by banks indicating that the existing institutional mechanism in this regard is not adequate.

The remittance limits for incurring initial and recurring expenses of branch offices opened abroad have been raised to ten per cent and five per cent respectively, of average annual sales/income or turnover during the last two accounting years of the Indian entity. The earlier limits for such remittance were up to two and one per cent respectively.

As a measure of further liberalisation, it has been decided that henceforth, authorised dealer banks may grant extension of time for realisation of export proceeds beyond the prescribed period from the date of export, up to the invoice value limit of USD 1 million. The earlier invoice value limit for such relaxation was USD 100,000.

The Reserve Bank has constituted a Working Group to Suggest measures to assist distressed farmers including provision of financial counselling services and introduction of a specific Credit Guarantee Scheme under the Deposit Insurance and Credit Guarantee Corporation of India (DICGC) Act for such farmers.

It may be recalled that paragraph 152 of the Annual Policy Statement 2006-07, observed that despite the spread of banking facilities in rural areas and availability of bank finance at reasonable rates, farmers in several areas are still in distress.

The rates of agency commission payable to banks for conduct of government business have been revised from July 1, 2005 as indicated below :

The Reserve Bank had been receiving representations from agency banks that the rates of agency commission do not compensate the banks adequately and that there has been reduction in the commensurate commission receivable by them. The agency banks had particularly highlighted the fact that they remain out of funds for a few days on account of high value payments on behalf of the government.

Edited and published by Alpana Killawala for the Reserve Bank of India, Press Relations Division, Central Office, Shahid Bhagat Singh Marg, Mumbai - 400 001 and printed by her at Onlooker Press Ltd., 16, Sassoon Dock, Colaba, Mumbai - 400 005. For renewal and change of address please write to the Chief General Manager, Press Relations Division, Reserve Bank of India, Central Office Building, 12th floor, Fort, Mumbai - 400 001 without enclosing DD/cheque. MCIR is also available on Internet at www.mcir.rbi.org.in