Ans: Equity consists of all instruments and records that acknowledge claims on the residual value of a corporation or quasi-corporation, after the claims of all creditors have been met. Equity may be split into listed shares, unlisted shares, and other equity. Both listed and unlisted shares are equity securities. Equity securities are commonly called shares or stocks. Other equity is equity that is not in the form of securities.

Ans: Entities can submit the FLA return through the online web-based portal Foreign Liabilities and Assets Information Reporting (FLAIR) system, having address https://flair.rbi.org.in/fla/faces/pages/login.xhtml.

• To access the URL https://flair.rbi.org.in/fla/faces/pages/login.xhtml, any of the browsers viz, Internet Explorer, Google chrome, Firefox etc. can be used, as all of these would support this application.

• The entity has to register on the portal by clicking Registration for New Entity Users.

• The entity has to fill the details in the FLA user registration form, upload the documents mentioned (Verification Letter and Authority Letter) and click submit to complete the registration.

• After successful registration, user id and default password will be sent to the authorized person’s mail id. Using this user id and password, entities can login to the FLAIR portal and file the FLA Return.

• Please note: The excel-based format and email-based reporting system has been replaced by the web-based format for submission of annual FLA return from June 2019.

Ans.: In the FCS form, industry codes are given as per the National Industrial Classification (NIC) (2 digit) codes. Please specify, if you have chosen “Other” industry codes, like Other manufacturing, Other services activities.

Ans: There is no restriction with respect to primary/ secondary market investments in specified securities under the on Tap TLTRO scheme.

Fresh banknotes issued by Reserve Bank of India till August 2006 were serially numbered. Each of these banknote bears a distinctive serial number along with a prefix consisting of numerals and letter/s. The banknotes are issued in packets containing 100 pieces.

The Bank adopted the "STAR series" numbering system for replacement of defectively printed banknote in a packet of 100 pieces of serially numbered banknotes. The Star series banknotes are exactly similar to the other banknotes, but have an additional character viz., a *(star) in the number panel in the space between the prefix.

Ans: 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.

The Bank has issued detailed directions on prudential norms, vide Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007, Non-Systemically Important Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015 and Systemically Important Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015. Applicable regulations vary based on the deposit acceptance or systemic importance of the NBFC.

The directions inter alia, prescribe guidelines on income recognition, asset classification and provisioning requirements applicable to NBFCs, exposure norms, disclosures in the balance sheet, requirement of capital adequacy, restrictions on investments in land and building and unquoted shares, loan to value (LTV) ratio for NBFCs predominantly engaged in business of lending against gold jewellery, besides others. Deposit accepting NBFCs have also to comply with the statutory liquidity requirements. Details of the prudential regulations applicable to NBFCs holding deposits and those not holding deposits is available in the section ‘Regulation – Non-Banking – Notifications - Master Circulars’ in the RBI website.

Ans: The following are included under equity securities:

• Ordinary shares.

• Stocks.

• Participating preference shares.

• Shares/units in mutual funds and investment trusts

• Depository receipts (e.g., American Depository Receipts) denoting ownership of equity securities issued by non-residents.

• Securities sold under repos or “lent” under securities lending arrangements.

• Securities acquired under reverse repos or securities borrowing arrangements and subsequently sold to a third party should be reported as a negative holding.

Ans.: Yes, it is mandatory. Here the person authorised to fill the form owns the responsibility of information furnished and declares its accuracy including CIN number. It is a final check for all the details which are filled-up in the survey schedule of FCS survey.

The scheme of reverse mortgage has been introduced recently for the benefit of senior citizens owning a house but having inadequate income to meet their needs. Some important features of reverse mortgage are:

• A homeowner who is above 60 years of age is eligible for reverse mortgage loan. It allows him to turn the equity in his home into one lump sum or periodic payments mutually agreed by the borrower and the banker.
  
  
• The property should be clear from encumbrances and should have clear title of the borrower.
  
  
• NO REPAYMENT is required as long as the borrower lives, Borrower should pay all taxes relating to the house and maintain the property as his primary residence.
  
  
• The amount of loan is based on several factors: borrower’s age, value of the property, current interest rates and the specific plan chosen. Generally speaking, the higher the age, higher the value of the home, the more money is available.
  
  
• The valuation of the residential property is done at periodic intervals and it shall be clearly specified to the borrowers upfront. The banks shall have the option to revise the periodic / lump sum amount at such frequency or intervals based on revaluation of property.
  
  
• Married couples will be eligible as joint borrowers for financial assistance. In such a case, the age criteria for the couple would be at the discretion of the lending institution, subject to at least one of them being above 60 years of age.
  
  
• The loan shall become due and payable only when the last surviving borrower dies or would like to sell the home, or permanently moves out.
  
  
• On death of the home owner, the legal heirs have the choice of keeping or selling the house. If they decide to sell the house, the proceeds of the sale would be used to repay the mortgage, with the remainder going to the heirs.
  
  
• As per the scheme formulated by National Housing Bank (NHB), the maximum period of the loan period is 15 years. The residual life of the property should be at least 20 years. Where the borrower lives longer than 15 years, periodic payments will not be made by lender. However, the borrower can continue to occupy.
  
  
• From FY 2008-09, the lump sum amount or periodic payments received on reverse mortgage loan will not attract income tax or capital gains tax.

Note- Reverse mortgage is a fixed interest discounted product in reverse. It does not take into account the changes in interest rates as yet.

Important – This part is fine printed to help you practice reading the fine print. The loan agreement documentation runs into nearly 50 pages and its language is complex. If you thought everyone signs the same agreements with the bank, where is the need to read? You are not taking an informed decision. If you thought somebody would have pointed this to me if there was any problem, then maybe they did but you could not read or listen to it. Think again! Borrowers' and lenders' rights may not be expressed clearly in a transparent manner in all the loan agreements. The home loan agreement may not be provided to you in advance so that this could be read and understood before you sign the agreement. Every method may be used to delay handing over a copy to the borrower in sufficient time. Some areas you may focus are a) check the “reset clause” incorporated by some banks in their home loan agreements that allows them to change the interest rate in the future, even on fixed rate loans. Banks may set their reset clauses for 3 or 2 year intervals.  They say a lender cannot have an agreement that a fixed rate is set for the entire tenure of 15 to 20 years as this will cause an asset-liability mismatch. Talk to your bank. b) Please seek clarifications on the term “exceptional circumstances” (if stated in the loan agreement) under which loan rates can be unilaterally changed by your bank. c) A common person thinks that default ideally means non-payment of one or more loan installments. In some loan documentation it can include divorce and death (in individual case) and even involvement in civil litigation or criminal offence. d) Does the loan agreement say that disbursement of the loan may be made directly to the builder or developer and in the case of a ready-built property to the vendor thereof and/or in such other manner as may be decided solely by bank? It is the borrower whose original property papers are retained with the bank, so why disburse to the builder. Possession of property has been  delayed in some cases when the cheque was issued in the name of the builder and the builder refused to pay delay penalty to the borrower e) Does the agreement enable assignment of your loan to a third party?  You take into account reputation and credibility of the bank before entering into a loan agreement with it. Are you comfortable with third party takes over or should you also be allowed to move your home loan from one bank to another in that case? Look for ambiguous clauses and discuss with the banker. Some agreements say changes in employment etc. have to be informed well in advance without quantifying the term “well in advance”. f) In one case the loan documentation says “issuance of pre-approval letter should not be construed as a commitment by the bank to grant the housing loan and processing fees is not re-fundable even if the home loan is not processed”. This is never ending it seems. The above are only indicative instances of what has been observed / reported/ indicated by various sources. However, our main objective was to get you into the habit of reading the fine print. If you have read this, you would have understood the importance of reading fine print in any document and we have achieved our objective. I only wish I could have made the print smaller as in the real cases.

In terms of Section 25 of the RBI Act, the design, form and material of bank notes shall be such as may be approved by the Central Government after consideration of the recommendations made by Central Board.

Ans: The term used in the CIC circulars is block sale and not block deal which has been defined by SEBI. In the context of the circular, a block sale would be a long term or strategic sale made for purposes of disinvestment or investment and not for short term trading. Unlike a block deal, there is no minimum number/value defined for the purpose.

Ans: You will receive the system-generated acknowledgement of FLA data submitted by you at the time of final submission itself. No separate mail will be sent in this regard.

Ans: The following are not included under equity securities:

• Equity securities issued by a nonresident enterprise that is related to the resident owner of those securities should be excluded from this survey.

• Non-participating preference shares.

• Securities acquired under reverse repos.

• Securities acquired under borrowing arrangements.

EXAMPLE OF EMI CALCULATION (PURE FIXED LOAN)

Loan amount x rpm x  (1+pm)  
                                    (1+pm)

• rpm= interest per month (rate of interest per year/12)
• n= number of installments

NB: If you have a fixed budget towards EMI you can arrive at loan amount by changing the other variables such as by reducing the rate of interest or by increasing the tenure of loan. This can also be arrived at through EMI calculator by a trial-and-error approach.

The volume and value of banknotes to be printed in a year depends on various factors such as (i) the expected increase in Notes in Circulation (NIC) to meet the growing needs of the public and (ii) the need for replacing soiled/mutilated notes so as to ensure that only good quality notes are in circulation. The expected increase in NIC is estimated using statistical models which consider macro-economic factors such as expected growth in GDP, inflation, interest rates, growth in non-cash modes of payment etc. The replacement requirement depends on the volume of notes already in circulation and the average life of banknotes. The Reserve Bank estimates the volume and value of notes to be printed in a year based on the above factors as well as feedback received from its own Regional Offices and banks regarding expected demand for cash and finalises the same in consultation with the Government of India and the printing presses.

Ans: No, CICs/ CICs-ND-SI cannot accept deposits. That is one of the eligibility criteria.

1. NBS-1 Quarterly Returns on deposits in First Schedule.

2. NBS-2 Quarterly return on Prudential Norms is required to be submitted by NBFC accepting public deposits.

3. NBS-3 Quarterly return on Liquid Assets by deposit taking NBFC.

4. NBS-4 Annual return of critical parameters by a rejected company holding public deposits. (NBS-5 stands withdrawn as submission of NBS 1 has been made quarterly.)

5. NBS-6 Monthly return on exposure to capital market by deposit taking NBFC with total assets of ₹ 100 crore and above.

6. Half-yearly ALM return by NBFC holding public deposits of more than ₹ 20 crore or asset size of more than ₹ 100 crore

7. Audited Balance sheet and Auditor’s Report by NBFC accepting public deposits.

8. Branch Info Return.

B. Returns to be submitted by NBFCs-ND-SI

9. NBS-7 A Quarterly statement of capital funds, risk weighted assets, risk asset ratio etc., for NBFC-ND-SI.

10. Monthly Return on Important Financial Parameters of NBFCs-ND-SI.

11. ALM returns:
    (i) Statement of short term dynamic liquidity in format ALM [NBS-ALM1] -Monthly,
    (ii) Statement of structural liquidity in format ALM [NBS-ALM2] Half yearly,
    (iii) Statement of Interest Rate Sensitivity in format ALM -[NBS-ALM3], Half yearly

12. Branch Info return

C. Quarterly return on important financial parameters of non deposit taking NBFCs having assets of more than ₹ 50 crore and above but less than ₹ 100 crore

Basic information like name of the company, address, NOF, profit / loss during the last three years has to be submitted quarterly by non-deposit taking NBFCs with asset size between ₹ 50 crore and ₹ 100 crore.

There are other generic reports to be submitted by all NBFCs as elaborated in Master Circular on Returns to be submitted by NBFCs as available on www.rbi.org.in → Notifications → Master Circulars → Non-banking and Circular DNBS (IT) CC.No.02/24.01.191/2015-16 dated July 9, 2015 as available on www.rbi.org.in → Notifications.

Ans: An AIF needs to register on the FLAIR portal. Since there is no provision for online filing of FLA return for AIF in the prescribed format as of now, they need to send a mail requesting for the latest format for filing of FLA Return for AIF after completing registration process on the portal. Thereafter FLA Team will send the excel based format for filling FLA return by AIF via mail to them. They need to fill the excel format and send us the same on email. Email based acknowledgement form will be sent to them by FLA Team on receiving the filled-in FLA form.

Ans.: Please refer to the below table containing the error codes (Fatal error, non-Fatal error) with their descriptions. If you get an acknowledgment of the processed data with any Fatal error codes, then follow the below-mentioned fatal error message/description and revise your data and resubmit it on fcs@rbi.org.in. If you get an acknowledgment of the processed data with any Non-fatal error codes then give justification/clarification on the errors, by sending the same to fcsquery@rbi.org.in.

Ans: Debt securities are negotiable instruments serving as evidence of a debt. They include bills, bonds, notes, negotiable certificates of deposit, commercial paper, debentures, asset-backed securities, money market instruments, and similar instruments normally traded in the financial markets.

All banknotes issued by RBI are backed by assets such as gold, Government Securities and Foreign Currency Assets, as defined in Section 33 of RBI Act, 1934.

Ans: Public funds are not the same as public deposits. Public funds include public deposits, inter-corporate deposits, bank finance and all funds received whether directly or indirectly from outside sources such as funds raised by issue of Commercial Papers, debentures etc. However, even though public funds include public deposits in the general course, it may be noted that CICs/CICs-ND-SI cannot accept public deposits.

Ans: Any query regarding filling of FLA return should be sent by email. We will revert back to you within one or two working days.

Ans: Debt securities with original maturity of more than one year is classified as long-term debt securities. These include bonds, debentures, and notes that usually give the holder the unconditional right to a fixed cash flow or contractually determined variable money income.

Ans: Please follow the below given step to revise the FLA return for a previous year:

Visit https://flair.rbi.org.in/fla/faces/pages/login.xhtml → Login to FLAIR → Click on MENU tab on the left-hand side of the homepage → ONLINE FLA FORM → FLA ONLINE FORM → “Please click here to get the approval to fill revised FLA form for current year after due date /previous year” → select "Year" and click on → Click “Request”.

Your request status will be visible in the table below available on the screen. After sending request to RBI through FLA portal, entities need to wait for at least one working day for approval. Entities can check the status of their request in “Multiple Year Enable Screen” under menu on the left corner. Once approved by DSIM, RBI, the entity can revise FLA return for selected year.

Ans: Indirect receipt of public funds means funds received not directly but through associates and group entities which have access to public funds.

The details are as under:

i. Ashoka Pillar Banknotes:

The first banknote issued by independent India was the one rupee note issued in 1949. While retaining the same designs the new banknotes were issued with the symbol of Lion Capital of Ashoka Pillar at Sarnath in the watermark window in place of the portrait of King George.

The name of the issuer, the denomination and the guarantee clause were printed in Hindi on the new banknotes from the year 1951. The banknotes in the denomination of ₹1000, ₹5000 and ₹10000 were issued in the year 1954. Banknotes in Ashoka Pillar watermark Series, in ₹10 denomination were issued between 1967 and 1992, ₹20 denomination in 1972 and 1975, ₹50 in 1975 and 1981, and ₹100 between 1967-1979. The banknotes issued during the above period, contained the symbols representing science and technology, progress, orientation to Indian Art forms. In the year 1970, banknotes with the legend "Satyameva Jayate", i.e., truth alone shall prevail were introduced for the first time. In October 1987, ₹500, banknote was introduced with the portrait of Mahatma Gandhi and the Ashoka Pillar watermark.

ii. Mahatma Gandhi (MG) Series 1996

The details of banknotes issued in MG Series – 1996 is as under:

All the banknotes of this series bear the portrait of Mahatma Gandhi on the obverse (front) side, in place of symbol of Lion Capital of Ashoka Pillar, which has also been retained and shifted to the left side next to the watermark window. This means that these banknotes contain Mahatma Gandhi watermark as well as Mahatma Gandhi's portrait.

iii. Mahatma Gandhi series – 2005 banknotes

MG series 2005 banknotes were issued in the denomination of ₹10, ₹20, ₹50, ₹100, ₹500 and ₹1000 and contain some additional/new security features as compared to the 1996 MG series. The year of introduction of these banknotes is as under:

The Legal tender of banknotes of ₹500 and ₹1000 of this series was subsequently withdrawn w.e.f. the midnight of November 8, 2016.

iv. Mahatma Gandhi (New) Series (MGNS) – Nov 2016

The Mahatma Gandhi (New) Series, introduced in the year 2016, highlights the cultural heritage and scientific achievements of the country. The banknotes in the series are more wallet friendly, being of reduced dimensions and hence expected to incur less wear and tear. For the first time, designs for banknotes has been indigenously developed on themes reflecting the diverse history, culture and ethos of the country as also its scientific achievements. The colour scheme is sharp and vivid to make the banknotes distinctive.

The first banknote from the new series was introduced on November 8, 2016 and is a new denomination, ₹2000-with the theme of Mangalyaan. Subsequently, banknotes in this series in denomination of ₹500, ₹200, ₹100, ₹50, ₹20 and ₹10 have also been introduced.

Ans: Debt securities with original maturity of one year or less is classified as short-term debt securities. Examples of short-term securities are treasury bills, negotiable certificates of deposit, bankers’ acceptances, promissory notes, and commercial paper.

₹500, ₹1000 and ₹10000 banknotes, which were then in circulation were demonetized in January 1946. The higher denomination banknotes in ₹1000, ₹5000 and ₹10000 were reintroduced in the year 1954, and these banknotes (₹1000, ₹5000 and ₹10000) were again demonetized in January 1978.

Recently, banknotes in the denomination of ₹500 and ₹1000 issued under the Mahatma Gandhi Series have been withdrawn from circulation with effect from the midnight of November 08, 2016 and are, therefore, no more legal tender.

As regards prohibition on holding, transferring or receiving specified bank notes, Section 5 of The Specified Banknotes (Cessation of Liabilities) Act, 2017 reads as under:

On and from the appointed day, no person shall, knowingly or voluntarily, hold, transfer or receive any specified bank note:

Provided that nothing contained in this section shall prohibit the holding of specified bank notes—

(a) by any person—

(i) up to the expiry of the grace period; or

(ii) after the expiry of the grace period,—

1. not more than ten notes in total, irrespective of the denomination; or

2. not more than twenty-five notes for the purposes of study, research or numismatics;

(b) by the Reserve Bank or its agencies, or any other person authorised by the Reserve Bank;

(c) by any person on the direction of a court in relation to any case pending in the court

Directions and Circulars issued by RBI from time to time in connection with SBNs are available on our website www.rbi.org.in under Function wise sites>>Issuer of Currency>>All You Wanted Know About SBNs. All You wanted to know from RBI about Withdrawal of Legal Tender Status of ₹ 500 and ₹ 1000 Notes

Ans: Yes, CICs may be required to issue guarantees or take on other contingent liabilities on behalf of their group entities. Guarantees per se do not fall under the definition of public funds. However, it is possible that CICs which do not accept public funds take recourse to public funds if and when the guarantee devolves. Hence, before doing so, CICs must ensure that they can meet the obligation there under, as and when they arise. In particular, CICs which are exempt from registration requirement must be in a position to do so without recourse to public funds in the event the liability devolves. If unregistered CICs with asset size above Rs. 100 crore access public funds without obtaining a Certificate of Registration (CoR) from RBI, they will be seen as violating Core Investment Companies (Reserve Bank) Directions, 2011 dated January 05, 2011.

Ans: Direct investment is a category of international investment in which a resident entity in one economy [Direct Investor (DI)] acquires a lasting interest in an enterprise resident in another economy [Direct Investment Enterprise (DIE)]. It consists of two components, viz., Equity Capital and Other Capital.

Ans: Equity securities should be reported at market prices converted to domestic currency using the exchange rate prevailing at March 31/ September 30, [Year]. For enterprises listed on a stock exchange, the market value of your holding of the equity securities should be calculated using the market price on the main stock exchange prevailing at March 31/ September 30, [Year]. For unlisted enterprises, if a market value is not available at the close of business on March 31/ September 30, [Year], estimate of the market value of your holding of equity securities can be calculated by using one of the six alternatives methods given in Q23.

Debt securities should be recorded at market prices converted to domestic currency, using the exchange rate prevailing at the close of business on March 31/ September 30, [Year]. For listed debt securities, a quoted traded market price at the close of business on March 31/ September 30, [Year], should be used. When market prices are unavailable (e.g., in the case of unlisted debt securities), the following methods for estimating fair value (which is an approximation of the market value of such instruments) should be used:

• discounting future cash flows to the present value using a market rate of interest and

• using market prices of financial assets and liabilities that are similar.

In respect of deposit accepted in the name of –

1. member or a retired member of the bank’s staff, either singly or jointly with any other member or members of his/ her family, or

2. the spouse of a deceased member or a deceased retired member of the bank’s staff,

the bank may, in its discretion, allow additional interest at a rate not exceeding one per cent per annum over and above the rate of interest stipulated, subject to the condition that overall ceiling prescribed for FCNR(B) deposits is not breached,

Provided that –

1. the depositor or all the depositors of a joint account is/ are non-resident/s of Indian nationality or origin, and

2. the bank shall obtain a declaration from the depositor concerned that the moneys so deposited or which may, from time to time, be deposited, shall be moneys belonging to the depositor as stated in clause (a) and (b) above.

Explanation: The word “family” shall mean and include the spouse of the member/ retired member of the bank’s staff, his/her children, parents, brothers and sisters who are dependent on such a member/ retired member but shall not include a legally separated spouse.

Reserve Bank of India decided to withdraw from circulation all banknotes issued prior to 2005 as they have fewer security features as compared to banknotes printed after 2005. It is a standard international practice to withdraw old series notes. The RBI has already been withdrawing these banknotes in a routine manner through banks. It is estimated that the volume of such banknotes (pre-2005) in circulation is not significant enough to impact the general public in a big way. The exchange facility for pre-2005 banknotes is available only at the following offices of the Reserve Bank: Ahmedabad, Bengaluru, Belapur, Bhopal, Bhubaneswar, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Jammu, Kanpur, Kolkata, Lucknow, Mumbai, Nagpur, New Delhi, Patna, Thiruvananthapuram and Kochi. This, however, did not imply that banks cannot accept deposits of pre-2005 banknotes for crediting to the customers’ accounts. Please refer to our Press Release no. 2016-17/1565 dated December 19, 2016 in this regard which can be accessed at the following link /en/web/rbi/-/press-releases/banks-should-accept-pre-2005-banknotes-in-deposit-rbi-clarifies-38951

Ans: For the purposes of determining whether a company is a CIC/CIC-ND-SI, ‘companies in the group’ have been exhaustively defined in para 3(1) b of Notification No. DNBS. (PD) 219/CGM(US)-2011 dated January 5, 2011 as “an arrangement involving two or more entities related to each other through any of the following relationships, viz.,Subsidiary – parent (defined in terms of AS 21), Joint venture (defined in terms of AS 27), Associate (defined in terms of AS 23), Promoter-promotee [as provided in the SEBI (Acquisition of Shares and Takeover) Regulations, 1997] for listed companies, a related party (defined in terms of AS 18) Common brand name, and investment in equity shares of 20% and above).”