FAQ Page 1 - আরবিআই - Reserve Bank of India
External Commercial Borrowings (ECB) and Trade Credits
A. BASIC QUERIES
FAQs on Non-Banking Financial Companies
Registration
Business restrictions imposed on Paytm Payments Bank Limited vide Press Releases dated January 31 and February 16, 2024
Bank Accounts with Paytm Payments Bank
The existing Deposits of Paytm Payments Bank customers maintained with partner banks can be brought back (sweep-in) to the accounts with Paytm Payments Bank, subject to the ceiling on balance prescribed for a Payments Bank (i.e. ₹2 lakh per individual customer at the end of day). Such sweep-ins for the purpose of making available the balances for use or withdrawal by the customer will continue to be allowed. However, no fresh deposits with partner banks through Paytm Payments Bank will be allowed after March 15, 2024.
Indian Currency
A) Basics of Indian Currency/Currency Management
To facilitate the distribution of banknotes and rupee coins, the Reserve Bank has authorised select scheduled banks to establish currency chests. These are storehouses where banknotes and rupee coins are stocked on behalf of the Reserve Bank for distribution to bank branches in their area of operation. As on March 31, 2024, there were 2,794 currency chests.
[The currency chests are expected to distribute banknotes and rupee coins to other bank branches in their area of operation.]
Coordinated Portfolio Investment Survey – India
Details for survey launch
Ans: The Reserve Bank will send emails to all the eligible entities from generic email IDs of the Reserve Bank to notify them about the launch of the CPIS for the latest reference period. Entities are required to fill in the latest survey schedule attached along with the mail and send to the generic email IDs of the Reserve Bank as per the instruction given in the survey schedule.
FAQs on Master Directions on Priority Sector Lending Guidelines
D. MSME
Clarification: Government of India (GoI), vide Gazette Notification S.O. 2119 (E) dated June 26, 2020 and updated from time to time, has notified the new composite criteria of investment in plant & machinery as well as turnover for classification of an enterprise under MSME. Under the composite criteria, if an enterprise crosses the ceiling limits specified for its present category in either of the two criteria of investment or turnover, it will cease to exist in that category and be placed in the next higher category but no enterprise shall be placed in the lower category unless it goes below the ceiling limits specified for its present category in both the criteria of investment as well as turnover. Based on the new definition, the earlier criteria regarding continuity of PSL status for three years even after an enterprise grows out of the MSME category concerned, is no longer valid.
Framework for Compromise Settlements and Technical Write-offs
A. COMPROMISE SETTLEMENT IN WILFUL DEFAULT AND FRAUD CASES
The primary regulatory objective is to enable multiple avenues to lenders to recover the money in default without much delay. Apart from the time value loss, inordinate delays result in asset value deterioration which hampers ultimate recoveries. Compromise settlement is recognized as a valid resolution mechanism under the Prudential Framework on Resolution of Stressed Assets dated June 7, 2019. The imperatives for lenders are no different when it comes to recovery from borrowers classified as fraud or wilful defaulter. Continuing such exposures on the balance sheets of the lenders without resolution due to legal proceedings would lock lenders’ funds in an unproductive asset, which would not be a desirable position. As long as larger policy concerns are suitably addressed and the costs of malafide actions are made to be borne by the perpetrators, early recoveries by lenders should be a preferred option, subject to safeguards. Further, continuation of criminal proceedings underway or to be initiated against the borrowers classified as fraud or wilful defaulter, would ensure that perpetrators of any malafide action do not go scot-free.
Annual Return on Foreign Liabilities and Assets (FLA) under FEMA 1999
Eligible entities and requirements to submit the FLA return
Ans: No, the entity cannot report the information as per the account closing period, in case it is different from March closing. Information should be reported for the reference period only, i.e., previous March and latest March, based on the entity’s internal assessment.
Domestic Deposits
I. Domestic Deposits
Biennial survey on Foreign Collaboration in Indian Industry (FCS)
Details of survey launch
Ans.: Last two financial year (FY) starting from April YYYY to March YYYY. For eg., FCS survey for the reference period 2021-2023 covers April 2021 to March 2022 and April 2022 to March 2023.
Retail Direct Scheme
Scheme related queries
Government Securities Market in India – A Primer
OMOs are the market operations conducted by the RBI by way of sale/ purchase of G-Secs to/ from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis. When the RBI feels that there is excess liquidity in the market, it resorts to sale of securities thereby sucking out the rupee liquidity. Similarly, when the liquidity conditions are tight, RBI may buy securities from the market, thereby releasing liquidity into the market.
5 (b) What is meant by repurchase (buyback) of G-Secs?
Repurchase (buyback) of G-Secs is a process whereby the Government of India and State Governments buy back their existing securities, by redeeming them prematurely, from the holders. The objectives of buyback can be reduction of cost (by buying back high coupon securities), reduction in the number of outstanding securities and improving liquidity in the G-Secs market (by buying back illiquid securities) and infusion of liquidity in the system. The repurchase by the Government of India is also undertaken for effective cash management by utilising the surplus cash balances. For e.g. Repurchase of four securities (7.49 GS 2017 worth ₹1385 cr, 8.07 GS 2017 worth ₹50 cr, 7.99 GS 2017 worth ₹1401.417 cr and 7.46 GS 2017 worth ₹125 cr) was done through reverse auction on March 17, 2017. State Governments can also buy-back their high coupon (high cost debt) bearing securities to reduce their interest outflows in the times when interest rates show a falling trend. States can also retire their high cost debt pre-maturely in order to fulfill some of the conditions put by international lenders like Asian Development Bank, World Bank etc. to grant them low cost loans. For e.g. Repurchase of seven securities of Government of Maharashtra was done through reverse auction on March 29, 2017. RBI vide DBR.No.BP.BC.46/21.04.141/2018-19 dated June 10, 2019 notified that apart from transactions that are already exempted from inclusion in the 5 per cent cap, it has been decided that repurchase of State Development Loans (SDLs) by the concerned state government shall also be exempted. Governments make provisions in their budget for buying back of existing securities. Buyback can be done through an auction process (generally if amount is large) or through the secondary market route, i.e. NDS-OM (if amount is not large).
Targeted Long Term Repo Operations (TLTROs)
Ans: The specified securities acquired under TLTRO scheme will be classified in HTM category. However, if a bank decides to classify such securities under AFS/HFT category at the time of acquisition, it will not be allowed to later shift such securities to HTM category and it should maintain sufficient records to demonstrate and separately identify securities purchased under TLTRO scheme within the AFS/HFT portfolio. Further, all regulations applicable to securities classified under AFS/HFT including those on valuation, will be applicable on such specified securities.
Housing Loans
Banks generally offer either of the following loan options: Floating Rate Home Loans and Fixed Rate Home Loans. For a Fixed Rate Loan, the rate of interest is fixed either for the entire tenure of the loan or a certain part of the tenure of the loan. In case of a pure fixed loan, the EMI due to the bank remains constant. If a bank offers a Loan which is fixed only for a certain period of the tenure of the loan, please try to elicit information from the bank whether the rates may be raised after the period (reset clause). You may try to negotiate a lock-in that should include the rate that you have agreed upon initially and the period the lock-in lasts.
Hence, the EMI of a fixed rate loan is known in advance. This is the cash outflow that can be planned for at the outset of the loan. If the inflation and the interest rate in the economy move up over the years, a fixed EMI is attractively stagnant and is easier to plan for. However, if you have fixed EMI, any reduction in interest rates in the market, will not benefit you.
Determinants of floating rate:
The EMI of a floating rate loan changes with changes in market interest rates. If market rates increase, your repayment increases. When rates fall, your dues also fall. The floating interest rate is made up of two parts: the index and the spread. The index is a measure of interest rates generally (based on say, government securities prices), and the spread is an extra amount that the banker adds to cover credit risk, profit mark-up etc. The amount of the spread may differ from one lender to another, but it is usually constant over the life of the loan. If the index rate moves up, so does your interest rate in most circumstances and you will have to pay a higher EMI. Conversely, if the interest rate moves down, your EMI amount should be lower.
Also, sometimes banks make some adjustments so that your EMI remains constant. In such cases, when a lender increases the floating interest rate, the tenure of the loan is increased (and EMI kept constant).
Some lenders also base their floating rates on their Benchmark Prime Lending Rates (BPLR). You should ask what index will be used for setting the floating rate, how it has generally fluctuated in the past, and where it is published/disclosed. However, the past fluctuation of any index is not a guarantee for its future behavior.
Flexibility in EMI:
Some banks also offer their customers flexible repayment options. Here the EMIs are unequal. In step-up loans, the EMI is low initially and increases as years roll by (balloon repayment). In step-down loans, EMI is high initially and decreases as years roll by.
Step-up option is convenient for borrowers who are in the beginning of their careers. Step-down loan option is useful for borrowers who are close to their retirement years and currently make good money.
Core Investment Companies
Core Investment Companies (CICs)
Ans: In such a case only C will be registered, provided C is not funding any of the other CICs either directly or indirectly.
All you wanted to know about NBFCs
A. Definitions
A company incorporated under the Companies Act, 1956 and desirous of commencing business of non-banking financial institution as defined under Section 45 I(a) of the RBI Act, 1934 should comply with the following:
i. it should be a company registered under Section 3 of the companies Act, 1956
ii. It should have a minimum net owned fund of ₹ 200 lakh. (The minimum net owned fund (NOF) required for specialized NBFCs like NBFC-MFIs, NBFC-Factors, CICs is indicated separately in the FAQs on specialized NBFCs)