Chronology of Major Policy Developments

RbiAnnouncementWeb

Asset Publisher

ಪ್ರಕಟಿಸಲಾದ ದಿನಾಂಕ ಡಿಸೆಂಬರ್ 17, 2008

listen

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2007
April	20	Comprehensive guidelines on derivatives were issued to all SCBs. The major requirements for
		undertaking any derivative transaction from the regulatory perspective were laid down. Guidelines also
		covered extant instructions relating to rupee interest rate derivatives, while those for foreign exchange
		derivatives would be issued separately.
		Final guidelines on compliance function in banks were issued to all SCBs (excluding RRBs) for
		implementation within six months. Banks were advised that as compliance function was one of the key
		elements in banks’ corporate governance structure, it had to be adequately enabled and made
		sufficiently independent.
		All SCBs (excluding RRBs) were advised to refer to the format of the balance sheet and profit and loss
		account prescribed in the Third Schedule to the Banking Regulation Act, 1949 which indicated the
		accounting of loss on revaluation of investments. With a view to bringing about uniformity in the
		accounting of this aspect, they were advised to adopt the correct accounting methodology while finalising
		their financial statements, including the statements for the year ended March 31, 2007.
		All SCBs (excluding RRBs) were advised that they were exempted from maintaining average CRR with
		effect from April 1, 2007 on: (i) liabilities to the banking system in India as computed under clause (d) of
		the explanation to Section 42 (1) of the RBI Act, 1934; (ii) credit balances in ACU (US$) accounts; (iii)
		transactions in collateralised borrowing and lending obligation (CBLO) with CCIL; and (iv) demand and
		time liabilities in respect of their Offshore Banking Units (OBUs).
	24	All SCBs (excluding RRBs) were advised that the interest rate ceilings on FCNR (B) deposits and NR(E)RA
		deposits were reduced by 50 basis points.
	25	All banks were advised to ensure that none of their bank branches/staff refused to accept lower
		denomination notes/coins. They were advised that stern action would be taken in the event of refusal/
		non-compliance by any staff member. Similar guidelines were issued to RRBs on May 10, 2007.
	27	Prudential Guidelines on Capital Adequacy and Market Discipline – Implementation of the New Capital
		Adequacy Framework were finalised for implementation.
		All SCBs were advised to monitor credit flow to minorities in 103 minority concentration districts
		(districts with at least 25 per cent minority population).
	30	All SCBs (including RRBs) were advised to immediately dispense with the requirement of ‘no dues’
		certificate from small and marginal farmers, share-croppers and the like for small loans up to Rs.50,000
		and, instead, obtain self-declaration from the borrower. Furthermore, banks could accept certificates
		provided by local administration/Panchayati Raj Institutions regarding the cultivation of crops in case of
		loans to landless labourers, share-croppers and oral lessees.
		All agency banks were advised to provide an enabling environment and facilities to the customers for
		making government transactions electronically by providing ECS/EFT facilities.
		Revised guidelines on lending to priority sector were issued to SCBs (excluding RRBs).
		Select banks were advised that the GoI had clarified that in cases where the depositor had expired before
		the maturity of the deposits and the nominee/legal heir approached the bank for closure of the deposit
		account, the nominee/legal heir was entitled to the benefit of saving bank rate of interest for the period
		from the date of death of the depositor to the date of closure of the account under the Senior Citizens
		Savings Scheme (SCSS), 2004.
May	3	All commercial banks (excluding RRBs) were advised that the risk weight in respect of housing loans up
		to Rs.20 lakh to individuals against the mortgage of residential housing properties was reduced from 75
		per cent to 50 per cent. Similarly, the risk weight for banks’ investment in mortgage backed securities,
		which were backed by housing loans and were issued by the housing finance companies regulated by
		the National Housing Bank, was reduced from 75 per cent to 50 per cent. The reduced risk weights
		would be reviewed after one year keeping in view the default experience and other relevant factors.
		All RRBs were permitted to take up corporate agency business, without risk participation, for
		distribution of all types of insurance products, including health and animal insurance, subject to
		specified guidelines.
	7	All commercial banks (excluding RRBs) were advised to lay out appropriate internal principles and
		procedures so that usurious interest, including processing and other charges, were not levied by them
		on loans and advances. Similar guidelines were issued to RRBs on May 15, 2007.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2007
April	20	Comprehensive guidelines on derivatives were issued to all SCBs. The major requirements for
		undertaking any derivative transaction from the regulatory perspective were laid down. Guidelines also
		covered extant instructions relating to rupee interest rate derivatives, while those for foreign exchange
		derivatives would be issued separately.
		Final guidelines on compliance function in banks were issued to all SCBs (excluding RRBs) for
		implementation within six months. Banks were advised that as compliance function was one of the key
		elements in banks’ corporate governance structure, it had to be adequately enabled and made
		sufficiently independent.
		All SCBs (excluding RRBs) were advised to refer to the format of the balance sheet and profit and loss
		account prescribed in the Third Schedule to the Banking Regulation Act, 1949 which indicated the
		accounting of loss on revaluation of investments. With a view to bringing about uniformity in the
		accounting of this aspect, they were advised to adopt the correct accounting methodology while finalising
		their financial statements, including the statements for the year ended March 31, 2007.
		All SCBs (excluding RRBs) were advised that they were exempted from maintaining average CRR with
		effect from April 1, 2007 on: (i) liabilities to the banking system in India as computed under clause (d) of
		the explanation to Section 42 (1) of the RBI Act, 1934; (ii) credit balances in ACU (US$) accounts; (iii)
		transactions in collateralised borrowing and lending obligation (CBLO) with CCIL; and (iv) demand and
		time liabilities in respect of their Offshore Banking Units (OBUs).
	24	All SCBs (excluding RRBs) were advised that the interest rate ceilings on FCNR (B) deposits and NR(E)RA
		deposits were reduced by 50 basis points.
	25	All banks were advised to ensure that none of their bank branches/staff refused to accept lower
		denomination notes/coins. They were advised that stern action would be taken in the event of refusal/
		non-compliance by any staff member. Similar guidelines were issued to RRBs on May 10, 2007.
	27	Prudential Guidelines on Capital Adequacy and Market Discipline – Implementation of the New Capital
		Adequacy Framework were finalised for implementation.
		All SCBs were advised to monitor credit flow to minorities in 103 minority concentration districts
		(districts with at least 25 per cent minority population).
	30	All SCBs (including RRBs) were advised to immediately dispense with the requirement of ‘no dues’
		certificate from small and marginal farmers, share-croppers and the like for small loans up to Rs.50,000
		and, instead, obtain self-declaration from the borrower. Furthermore, banks could accept certificates
		provided by local administration/Panchayati Raj Institutions regarding the cultivation of crops in case of
		loans to landless labourers, share-croppers and oral lessees.
		All agency banks were advised to provide an enabling environment and facilities to the customers for
		making government transactions electronically by providing ECS/EFT facilities.
		Revised guidelines on lending to priority sector were issued to SCBs (excluding RRBs).
		Select banks were advised that the GoI had clarified that in cases where the depositor had expired before
		the maturity of the deposits and the nominee/legal heir approached the bank for closure of the deposit
		account, the nominee/legal heir was entitled to the benefit of saving bank rate of interest for the period
		from the date of death of the depositor to the date of closure of the account under the Senior Citizens
		Savings Scheme (SCSS), 2004.
May	3	All commercial banks (excluding RRBs) were advised that the risk weight in respect of housing loans up
		to Rs.20 lakh to individuals against the mortgage of residential housing properties was reduced from 75
		per cent to 50 per cent. Similarly, the risk weight for banks’ investment in mortgage backed securities,
		which were backed by housing loans and were issued by the housing finance companies regulated by
		the National Housing Bank, was reduced from 75 per cent to 50 per cent. The reduced risk weights
		would be reviewed after one year keeping in view the default experience and other relevant factors.
		All RRBs were permitted to take up corporate agency business, without risk participation, for
		distribution of all types of insurance products, including health and animal insurance, subject to
		specified guidelines.
	7	All commercial banks (excluding RRBs) were advised to lay out appropriate internal principles and
		procedures so that usurious interest, including processing and other charges, were not levied by them
		on loans and advances. Similar guidelines were issued to RRBs on May 15, 2007.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2007
May	7	All SCBs (excluding RRBs) were advised to scale up their financial inclusion efforts by utilising
		appropriate technology. Banks were also advised to ensure that the solutions developed were highly
		secure, amenable to audit and followed widely accepted open standards to allow inter-operability among
		the different systems adopted by different banks. Similar guidelines were issued to RRBs on May 21,
		2007.
	8	All RRBs and their sponsor banks were advised that the exemption from mark to market norms in
		respect of their investments in SLR securities was extended by one more year, i.e., for the financial year
		2007-08. Accordingly, RRBs could classify their entire investment portfolio of SLR securities under HTM
		for the financial year 2007-08, with valuation on book value basis and amortisation of premium, if any,
		over the remaining life of securities.
	10	All SCBs (excluding RRBs and LABs) were permitted to extend funded/non-funded credit facilities to
		wholly-owned step-down subsidiaries of subsidiaries of Indian companies (where the holding by the
		Indian company was more than 51 per cent) abroad within the existing prudential limits and some
		additional safeguards.
	14	All RRBs were advised to ensure that no money transaction of the company/ies, declared as “defaulted
		companies” by the Hon’ble Patna High Court were allowed in their banks. Accordingly, all branches
		should be immediately advised in this regard and compliance of the order reported.
	16	All SCBs were advised that regarding purchase/sale of NPAs, at least 10 per cent of the estimated cash
		flows should be realised in the first year and at least 5 per cent in each half year thereafter, subject to full
		recovery within three years.
	17	‘The Bharat Overseas Bank Ltd’ was excluded from the Second Schedule to the RBI Act 1934 with effect
		from April 1, 2007.
	21	Clarifications on Agency Commission - Public Provident Fund Scheme, 1968 (PPF) and SCSS, 2004
		issued.
	24	The Banking Ombudsman Scheme, 2006 was amended and the Reserve Bank directed all commercial
		banks and RRBs to comply with the amended Banking Ombudsman Scheme, 2006.
		All SCBs (excluding RRBs) were permitted to: (i) deliver cash/draft at the doorstep of the individual
		customers also (in addition to corporate customers/Government Departments/PSUs, etc.) either against
		cheques received at the counter or requests received through any secure convenient channel such as
		phone banking/internet banking; and (ii) deliver cash/draft at the doorstep of corporate customers/
		Government Departments/PSUs, etc., against cheques received at the counter or requests received
		through any secure convenient channel such as phone banking/internet banking, subject to the banks
		adopting technology and security standards and including those specifically relating to authenticating
		users and taking adequate safeguards/precautions in undertaking the above transactions.
	25	All SCBs (excluding RRBs) were advised that concessions/credit relaxations to borrowers/customers in
		Jammu and Kashmir would continue to be operative for a further period of one year, i.e., up to March 31,
		2008.
		AD category-1 banks were allowed to permit BPO companies to make remittances towards the cost of
		equipment to be imported and installed at their overseas sites.
	29	All SCBs (excluding RRBs) were advised that the Government of India had allocated a target of 375,690
		to States/Union Territories (UTs) under the Prime Minister’s Rozgar Yojana (PMRY) for the year 2007-08.
	31	Select banks were advised that tax was required to be deducted at source on the interest exceeding
		Rs.10,000 payable during the financial year on 8 per cent Savings (Taxable) Bonds, 2003 with effect from
		June 1, 2007.
		Guidelines were issued for commodity hedging for domestic transactions (select metals) and commodity
		hedging for domestic purchases - aviation turbine fuel (ATF) to AD category-1 banks.
June	6	All nationalised banks and associate banks of SBI were advised that the remuneration payable to the
		statutory central and branch auditors of public sector banks from the year 2006-07 were revised.
	8	Select banks were informed that the GoI had allowed regularisation of multiple accounts opened by
		depositors (under the SCSS–2004), subject to conditions.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2007
June	13	All SCBs (excluding RRBs) were advised that the limit of loans under the DRI scheme was raised from
		Rs.6,500 to Rs.15,000 and that of housing loan under the scheme, from Rs.5,000 to Rs.20,000 per
		beneficiary.
	15	With a view to encouraging RRBs to open branches in hitherto uncovered districts, the concerned
		Empowered Committees for RRBs were given discretion in respect of certain conditions stipulated for
		opening of branches by RRBs.
	19	With a view to providing more business avenues and opportunities to RRBs for lending, they were
		permitted to participate in consortium lending, within the extant exposure limits, with their sponsor
		banks as also with other public sector banks and developmental financial institutions, subject to the
		condition that the project to be financed was in the area of operation of the RRB concerned and guidance
		and appraisal of the project was provided by its sponsor bank.
	21	Draft guidelines on prudential guidelines on restructuring/ rescheduling of dues by banks issued to all
		SCBs (excluding RRBs and LABs)
	22	All RRBs were allowed to set up service branches/central processing centres/back offices exclusively to
		attend to back office functions and other functions incidental to their banking business.
	26	Guidelines on stress testing were issued to all commercial banks (excluding RRBs and LABs).
	28	All RRBs were permitted to accept FCNR (B) deposits as announced in the Union Budget 2007-08. The
		eligibility criteria prescribed for authorisation to open/maintain Non-Resident (Ordinary/External)
		accounts in rupees were also reviewed.
		All SCBs (excluding RRBs) were permitted to undertake Pension Fund Management (PFM) through their
		subsidiaries set up for the purpose, subject to their satisfying the eligibility criteria prescribed by the
		PFRDA for pension fund managers. Banks desiring to undertake PFM were advised to obtain prior
		approval of the Reserve Bank.
July	3	In view the complaints from credit card subscribers and the observations of the High Court, Delhi, the
		TRAI framed the Telecom Unsolicited Commercial Communications (UCC) Regulations 2007 for curbing
		UCC. Accordingly, commercial banks (excluding RRBs) were advised to implement certain instructions.
	11	All SCBs were advised that the Government had decided to create a buffer stock of 20 lakh tonnes of
		sugar for a period of one year with effect from May 1, 2007. Under the arrangement, the Government
		would release a subsidy of Rs.378 crore out of the Sugar Development Fund and the banks would have
		to sanction additional credit limits amounting to Rs.420 crore to release the margin consequent upon
		creation of the buffer stock from the existing stocks of sugar.
	13	All SCBs (excluding RRBs) were advised that the Government had decided to provide interest subvention
		of 2 per cent per annum to all SCBs in respect of rupee export credit to the specified categories of
		exporters – textiles (including handlooms), RMG, leather products, handicrafts, engineering products,
		processed agricultural products, marine products, sports goods and toys and all exporters from the SME
		sector.
	16	All SCBs were advised that the Government had added 18 districts to the list of minority concentrated
		districts, taking the total number to 121. Banks were to specially monitor the credit flow to minorities in
		these 121 districts thereby ensuring that the minority communities received an equitable portion of the
		credit within the overall target of the priority sector.
	25	All nationalised banks and associate banks of SBI were advised about fee in respect of tax audit for
		public sector banks from the year 2006-07.
	31	All commercial banks (excluding RRBs and LABs) were informed that the SEBI had permitted FIMMDA
		to set up its reporting platform for corporate bonds. It was also mandated to aggregate the trades
		reported on its platform as well as those reported on the BSE and the NSE with appropriate value
		addition. Banks were required to report their secondary market transactions in corporate bonds in OTC
		market on FIMMDA’s reporting platform with effect from September 1, 2007.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2007
July	31	All SCBs (excluding RRBs) were advised that the ceiling of Rs.3,000 crore on daily reverse repo under the
		LAF would be withdrawn with effect from August 6, 2007. The SLAF, introduced on November 28, 2005
		and conducted between 3.00-3.45 p.m. on a daily basis would be withdrawn with effect from August 6,
		2007. The Reserve Bank would continue to conduct LAF operations between 9.30-10.30 a.m. as a single
		LAF window.
		All SCBs were advised that the CRR would be increased by 50 basis points to 7.0 per cent with effect
		from the fortnight beginning August 4, 2007.
August	3	All SCBs (excluding RRBs and LABs) were advised that (i) in cases where negotiation of bills drawn under
		Letter of Credit (LC) was restricted to a particular bank, and the beneficiary of the LC was not a
		constituent of that bank, the bank concerned could negotiate such an LC, subject to the condition that
		the proceeds would be remitted to the regular banker of the beneficiary. However, the prohibition
		regarding negotiation of unrestricted LCs of non-constituents would continue to be in force; and (ii) the
		banks could negotiate bills drawn under LCs, on ‘with recourse’ or ‘without recourse’ basis, as per their
		discretion and based on their perception about the credit worthiness of the LC issuing bank. However,
		the restriction on purchase/discount of other bills (the bills drawn otherwise than under LC) on ‘without
		recourse’ basis would continue to be in force.
	9	In view of the fact that the priority sector guidelines were revised with effect from April 30, 2007, all SCBs
		(excluding RRBs) were advised to furnish the data in the existing formats of special returns I, II and III as
		on the last reporting Friday of June 2007. However, loans granted from April 30, 2007 to June 22, 2007
		could be classified on the basis of revised guidelines on priority sector advances.
	13	All RRBs were advised that they could extend, with the approval of their Boards, direct finance up to
		Rs.20 lakh to the housing sector, irrespective of the area. Further, the limit of 5 per cent of incremental
		deposits over previous year, prescribed earlier also stood withdrawn.
	22	All SCBs were advised to discontinue furnishing of statement on housing finance disbursement that
		were required to be submitted on a quarterly basis indicating details of disbursement made by them
		towards housing finance.
		All SCBs (excluding RRBs) were advised to invariably furnish a copy of the loan agreement to all
		borrowers at the time of sanction/disbursement of loans.
		Revised guidelines on lending to priority sector were issued to all RRBs.
		AD category-1 banks were allowed to grant rupee loans to NRI employees of Indian companies for
		acquiring shares of the companies under the ESOP scheme.
	23	All SCBs (excluding RRBs and LABs) were informed that the CCIL had developed a reporting platform for
		OTC interest rate derivatives, which would capture the transactions in OTC IRS/FRA. The platform
		would be operationalised by August 30, 2007. All banks were required to report all their IRS/FRA trades
		on the reporting platform within 30 minutes from the deal time. Client trades were not to be reported.
		Banks should ensure that details of all the outstanding IRS/FRA contracts (excluding the client trades)
		were migrated to the reporting platform by September 15, 2007. Detailed operational guidelines in this
		regard would be made available by the CCIL.
September	3	All SCBs (excluding RRBs) were advised to take necessary steps for strengthening the branch level
		committees with greater involvement of customers. It was desirable that branch level committees
		included customers too. Further as senior citizens formed an important constituency in banks, a senior
		citizen should preferably be included therein.
		All SCBs (excluding RRBs) were advised that the reporting formats for data on priority sector lending
		were revised in view of the revision of guidelines on lending to priority sector.
	4	All RRBs were allowed to set up extension counters at places of worship and market places. The
		condition of being principal bankers would not apply in such cases. However, RRBs would be required to
		obtain necessary licence from the concerned regional office of the Reserve Bank.
	7	All SCBs were advised that the name of “The Sangli Bank Ltd.” was excluded from the Second Schedule
		to the RBI Act, 1934.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2007
September	10	All public sector banks were advised that in consultation with the Government, it was decided to
		withdraw five more circulars, viz., delegation of powers to CMD/ED of nationalised banks, delegation of
		powers to CMD/ED for compromise/write-off, vigilance arrangements in banks, reporting of cases of
		bank robberies/dacoities/burglaries and meeting of Standing Committee on Customer Services
		Settlement procedures in respect of payment of fraudulent instruments.
	12	Lead banks in Jammu and Kashmir State were informed that the assignment of lead bank responsibility
		to State Bank of India and the Jammu and Kashmir Bank Ltd, in respect of eight newly created districts,
		was regularised.
	13	All RRBs were advised that they could convert their satellite offices into full-fledged branches after
		obtaining concurrence from the Empowered Committee on RRBs. They should also obtain the necessary
		licence from the regional office concerned of the Reserve Bank.
	17	All commercial banks were advised to ensure that all the branches of their bank meticulously adhered to
		the instructions issued by the Reserve Bank on November 17, 2006 for extension of home loans.
	21	All RRBs were advised that since the restrictive provisions of service area approach had been dispensed
		with, some of the provisions relating to shifting of branches in rural and semi-urban areas and merger of
		loss making branches, etc., were modified.
	26	AD category-1 banks were informed that the limit under the Liberalised Remittance Scheme for Resident
		Individuals had been enhanced from US$ 1,00,000 to US$ 2,00,000.
October	4	All commercial banks (excluding RRBs) were advised that while selling NPAs, they should work out the
		NPV of the estimated cash flows associated with the realisable value of the available securities net of the
		cost of realisation. The sale price should generally not be lower than the NPV arrived at in the manner
		described above.
	6	All SCBs (excluding RRBs) were advised that the Rupee Export Credit Interest Rates Scheme was
		extended up to March 31, 2008 and was made applicable to solvent extracted de-oiled cake and plastics
		and linoleum sectors also.
		AD category-1 banks were informed that, in consultation with the Government of India, it had been
		decided to permit all exporters to earn interest on EEFC accounts to the extent of outstanding balances
		of US$ 1 million per exporter. This would be a purely temporary measure and valid up to October 31,
		2008 and would be subject to further review.
	9	All RRBs were advised that the application for accepting NRO/NRE/FCNR deposits by those RRBs which
		had negative net worth but earned net profits for the last three years, could be examined by the
		Empowered Committee on a case to case basis from the supervisory comfort angle and could be
		recommended to the Reserve Bank.
		All RRBs were advised that the Empowered Committee could, taking into account the local conditions
		and the financials of a bank, permit a RRB to open a controlling office, even if it did not have 75 branches.
	18	All RRBs were advised that they could apply for currency chest facility to the Reserve Bank subject to
		compliance with eligibility norms.
	23	All SCBs were advised that the name of ‘Lord Krishna Bank Ltd’ was excluded from the Second Schedule
		to the RBI Act, 1934.
	24	All commercial banks (excluding RRBs) were advised that the guidelines on ALM System were amended:
		(a) banks should adopt a more granular approach to measurement of liquidity risk by splitting the first
		time bucket (1-14 days) in the statement of structural liquidity into three time buckets, viz., next day, 2-
		7 days and 8-14 days, (b) the statement of structural liquidity should be compiled on best available data
		coverage, in due consideration of non-availability of a fully networked environment. Banks should,
		however, make concerted and requisite efforts to ensure coverage of 100 per cent data in a timely
		manner, (c) the net cumulative negative mismatches during the next day, 2-7 days, 8-14 days and 15-28
		days buckets should not exceed 5 per cent, 10 per cent, 15 per cent and 20 per cent of the cumulative
		cash outflows in the respective time buckets in order to recognise the cumulative impact on liquidity;
		and (d) banks should undertake dynamic liquidity management and should prepare the statement of
		structural liquidity on a daily basis. The statement of structural liquidity could, however, be reported to
		the Reserve Bank, once a month, as on the third Wednesday of every month.

Appendix: Chronology of Major Policy Developments *(Continued)*
Announcement Date		Measures
2007
October	25	All SCBs (excluding RRBs) were advised to discontinue the deposit schemes launched by them which
		had lock-in periods not in conformity with Reserve Bank’s instructions. Similar instructions were issued
		to RRBs on November 29, 2007.
	29	All commercial banks (excluding foreign banks, RRBs and LABs) were allowed a wider choice of
		instruments for raising Tier 1 and Upper Tier 2 capital by issuing preference shares such as PNCPS,
		PCPS, RNCPS and RCPS, subject to guidelines.
	30	All SCBs (excluding RRBs) were advised that following a review of the liquidity situation, it was decided
		to increase the CRR of SCBs by 50 basis points to 7.5 per cent of their NDTL with effect from the fortnight
		beginning November 10, 2007. Similar circular was also issued for RRBs on October 31, 2007.
		All SCBs were advised that the name of ‘UTI Bank Ltd’ was changed to ‘Axis Bank Ltd’ in the Second
		Schedule to the RBI Act, 1934 with effect from July 30, 2007.
November	1	All nationalised banks were advised that the Reserve Bank had laid down specific ‘fit and proper’ criteria
		to be fulfilled by the persons elected as directors on the boards of the nationalised banks under the
		provisions of Section 9(3)(i) of Banking Companies (Acquisition and Transfer of undertakings) Act 1970/
		80.
	6	All commercial banks (excluding RRBs) were advised that at the time of financing projects banks
		generally adopted one of the following methodologies as far as determining the level of promoters’ equity
		was concerned: (i) promoters brought their entire contribution upfront before the bank started
		disbursing its commitment; (ii) promoters brought certain percentage of their equity (40 per cent-50 per
		cent) upfront and balance was brought in stages; and (iii) promoters agreed, ab initio, to bring in equity
		funds proportionately as the banks financed the debt portion. The Reserve Bank observed that the last
		method had greater equity funding risk. To contain this risk, banks were advised to have a clear policy
		regarding the DER and to ensure that the infusion of equity/fund by promoters should be such that the
		stipulated level of DER was maintained at all times. Further they were advised to adopt funding
		sequences so that possibility of equity funding by banks was obviated.
		AD category-1 banks were issued guidelines to permit domestic oil marketing and refining companies to
		hedge their commodity price risk to the extent of 50 per cent of their inventory based on the volumes in
		the quarter preceding the previous quarter.
	7	AD category-1 banks were informed that the limit for direct receipt of import bills/documents had
		been enhanced from US$ 1,00,000 to US$ 3,00,000 in the case of import of rough diamonds.
	8	SBI and its associates, all nationalised banks and certain private sector banks were advised that the rate
		of interest on delayed remittances and double/excess reimbursement would remain unchanged at 8 per
		cent (i.e., bank rate + 2 per cent) till further instructions.
	14	Associate banks of SBI were advised that the Reserve Bank had laid down specific ‘fit and proper’ criteria
		to be fulfilled by the persons elected as directors on the boards of associate banks of SBI under the
		provisions of Section 25(1)(d) of State Bank of India (Subsidiary Banks) Act, 1959 (as amended in 2007).
	15	Procedural guidelines for access criteria for clearing houses at MICR centres were issued. The guidelines
		were to come into force from January 1, 2008.
	22	All RRBs were advised to rely upon the Guardianship Certificate issued either by the District Court
		under Mental Health Act or by the Local Level Committees under the above Act for the purpose of
		opening/operating bank accounts for disabled persons with autism, cerebral palsy, mental retardation
		and multiple disabilities. RRBs should also ensure that their branches gave proper guidance so that the
		parents/relatives of the disabled persons did not face any difficulty in this regard.
	29	All RRBs were advised that before launching new domestic deposit mobilisation scheme with the
		approval of their respective Boards, they should ensure that the provisions of Reserve Bank’s directives
		on interest rates on deposits, premature withdrawal of term deposits, sanction of loans/advances
		against term deposits, etc., issued from time to time, were strictly adhered to. Any violation in this regard
		would be viewed seriously and would attract penalty under the Banking Regulation Act, 1949.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2007
November	30	All commercial banks (excluding RRBs and LABs) were advised that the definition of ‘infrastructure
		lending’ had been expanded to include the credit facilities sanctioned by banks and select AIFIs for
		projects involving laying down and/or maintenance of gas/crude oil/petroleum pipelines, in view of the
		importance of pipelines in the industrial development of the country.
		All SCBs (excluding RRBs) were advised to invariably ensure that once a case was filed before a Court/
		DRT/BIFR, any settlement arrived at with the borrower was subject to obtaining a consent decree from
		the Court/DRT/BIFR concerned.
		All SCBs (excluding RRBs) were advised that the additional subvention of 2 per cent (in addition to the 2
		per cent already offered earlier) in pre-shipment and post-shipment rupee export credit was extended to
		leather and leather manufactures, marine products, all categories of textiles under the existing scheme
		including RMG and carpets but excluding man-made fibre and handicrafts sectors. Banks should
		charge interest rates not exceeding BPLR minus 6.5 per cent on pre-shipment credit up to 180 days and
		post-shipment credit up to 90 days on the outstanding amount in respect of the above mentioned
		sectors. The dispensation was to be valid from November 1, 2007 to March 31, 2008.
December	6	All SCBs (excluding RRBs and local area banks) were allowed to invest in unrated bonds of companies
		engaged in infrastructure activities within the ceiling of 10 per cent for unlisted non-SLR securities to
		encourage the flow of credit to infrastructure sector.
	12	All SCBs were advised that all loans granted by commercial banks/sponsor banks to RRBs for on-
		lending to agriculture and allied activities sector could be classified as indirect finance to agriculture in
		the books of commercial banks/sponsor banks. Consequently, the amount lent by RRBs out of funds
		borrowed from commercial banks/sponsor banks, could not be classified by the RRBs as part of their
		priority sector advances. The RRBs should not include such lending as part of their bank credit for the
		purpose of computing achievement level under priority sector lending.
	14	All SCBs (excluding RRBs) were issued instructions regarding loans extended by them to mutual funds
		and IPCs issued to various stock exchanges at the request of mutual funds for their secondary market
		purchases.
		The lead bank responsibility in Chikkaballapura and Ramanagara districts of Karnataka was assigned
		to Canara Bank and Corporation Bank, respectively.
	20	All SCBs (excluding RRBs) were advised to take note of issues relating to corporate social responsibility,
		sustainable development and non-financial reporting and consider putting in place a suitable and
		appropriate plan of action towards helping the cause of sustainable development with the approval of
		their boards.
	28	All RRBs were advised to disclose the level of their CRAR as on March 31, 2008 in their balance sheets
		and thereafter every year as ‘notes on accounts’ to their balance sheets.

2008
January	8	In terms of Section 17 (2) read with Section 51 of the Banking Regulation Act, 1949, where a banking
		company appropriates any sum or sums from the reserve fund, it shall, within twenty one days from the
		dates of such appropriation report the fact to the Reserve Bank explaining the circumstances relating to
		such appropriation. In order to ensure that such recourse to drawing down the reserve fund was done
		prudently and was not in violation of any of the regulatory prescriptions, all RRBs were advised to take
		prior approval from the Reserve Bank before any appropriation was made from the statutory reserve or
		any other reserve. Guidelines were also issued relating to disclosures in balance sheet regarding the
		drawdown of such reserves.
	15	The lead bank responsibility of Ariyalur district of Tamil Nadu was assigned to SBI.
	17	All SCBs (excluding RRBs) were advised that education loans would be classified as non-consumer
		credit for the purpose of capital adequacy norms. Accordingly, the risk weight applicable to education
		loans would be 100 per cent and 75 per cent under Basel I and Basel II frameworks, respectively.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2008
February	18	In terms of KYC guidelines, banks were earlier advised that customer identification meant identifying the
		customer and verifying his/her identity by using reliable, independent source documents, data or
		information to their satisfaction. An indicative list of the nature and type of documents/information that
		could be relied upon for customer identification was also given. It was observed that some banks treated
		this indicative list as exhaustive list and as a result a section of public was denied access to banking
		services. All SCBs (excluding RRBs) were advised to take a review of their extant internal instructions in
		this regard. They were also advised to carry out the review of risk categorisation of customers at a
		periodicity of not less than once in six months. The periodicity of updation of customer identification
		data including photograph should not be less than once in five years in case of low risk category
		customers and not less than once in two years in case of high and medium risk categories. Banks were
		also advised to develop suitable mechanism through appropriate policy framework for enhanced
		monitoring of accounts suspected of having terrorist links. Similar guidelines were issued to RRBs on
		February 27, 2008.
	19	In view of loss of income suffered due to culling of birds as well as steep fall in the demand for poultry
		products and their prices, guidelines on relief measures to poultry industry were issued to all SCBs.
March	3	A revision was effected in the guidelines on managing risks and code of conduct in outsourcing of
		financial services by banks and all SCBs (excluding RRBs) were advised that if a complainant did not get
		a satisfactory response from the bank within 30 days from the date of his lodging the complaint, he
		would have the option to approach the office of the concerned Banking Ombudsman for redressal of his
		grievance/s.
	4	Prudential norms for issuance of LoCs by banks regarding their subsidiaries were issued to all
		commercial banks (excluding RRBs).
	10	With a view to ensuring that the customer was able to access any ATM installed in the country free of
		charge through equitable co-operative initiative by banks, all SCBs were directed to allow their
		customers to use bank’s own ATM for any purpose for free; to use any other bank’s ATMs for balance
		enquiries for free. Furthermore, for use of other bank’s ATMs for cash withdrawals, no bank should
		increase the charges prevailing as on December 23, 2007 and those charging more than Rs.20 per
		transaction should reduce the charge to a maximum of Rs.20 per transaction by March 31, 2008 and
		should be made free with effect from April 1, 2009.
		All commercial banks were advised that with effect from April 1, 2008, all payment transactions of Rs.1
		crore and above between the Reserve Bank regulated entities such as banks/PDs and NBFCs were
		required to be routed through electronic payment mechanism. Furthermore, all payments of Rs.1 crore
		and above in the Reserve Bank regulated markets such as money market, Government securities
		market and foreign exchange market would also be routed through electronic payment mechanism with
		effect from April 1, 2008.
	26	Guidelines on Pillar 2 or the SRP under the New Capital Adequacy Framework were issued to all
		commercial banks (excluding RRBs and LABs).
	27	The lead bank responsibility in Tapi district of Gujarat was assigned to Bank of Baroda.
	31	All commercial banks (excluding RRBs and LABs) were advised that certain amendments were made to
		the New Capital Adequacy Framework with immediate effect.
April	1	The lead bank responsibility in Pratapgarh district of Rajasthan was assigned to Bank of Baroda.
	9	All commercial banks (excluding RRBs) were advised that the frequency of supervisory reporting of the
		structural liquidity position shall be fortnightly, with effect from April 1, 2008, to be submitted on the
		seventh day from the reporting date i.e. the first and third Wednesday of every month to the Reserve
		Bank.
	10	All SCBs (excluding RRBs) were advised that the income criteria for availing loans under the DRI scheme
		were revised. Accordingly, borrowers with annual family income of Rs.18,000 in rural areas and
		Rs.24,000 in urban areas would be eligible to avail the facility.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2008
April	10	SBI and its associates, all nationalised banks and select private sector banks were advised that
		electronic payment of tax by certain categories of tax payers was mandatory with effect from April 1,
		2008.
	15	All SCBs were advised to meet the entire credit requirements of SHG members as envisaged in the Union
		Budget for the year 2008-09.
		Guidelines on new self employment scheme for rehabilitation of manual scavengers were issued to all
		public sector banks (excluding RRBs).
	16	AD category-1 banks were informed that the limit for direct receipt of import bills/documents had
		been enhanced from US$ 1,00,000 to US$ 3,00,000 in the case of import of rough precious and semi-
		precious stones by non-status holder exporters.
	17	The Reserve Bank advised that the matter concerning accounting procedure to be followed for transfer of
		accounts under the SCSS, from one agency bank to another agency bank/post office was examined by
		the Ministry of Finance, and the Ministry conveyed its approval for adopting the same procedure for inter
		agency bank/post office transfer of accounts under SCSS as was being followed for the PPF scheme,
		subject to the payment of transfer fee as applicable under the relevant rules of the captioned scheme.
		Accordingly, the Reserve Bank notified an illustrative list of procedures to be followed in this regard.
	21	All SCBs (excluding RRBs) were advised that the CRR would be increased in two stages of 25 basis points
		each to 7.75 per cent with effect from the fortnight beginning April 26, 2008 and to 8.00 per cent with
		effect from the fortnight beginning May 10, 2008. Similar guidelines were issued to RRBs on April 22,
		2008.
	22	All public sector banks were advised that with a view to reducing the burden on boards of banks on
		account of the calendar of reviews to be undertaken by them and to ensure that the calendar reflected
		present day concerns, the calendar items were revised. The revised schedule would be brought into force
		with effect from June 1, 2008. If for any particular reason it was not possible to place the memorandum
		as per the calendar before the board in the month that it was due, a note should be put up to the board
		giving reasons for the delay and when the review was proposed to be placed before the board.
	24	In view of the rise in the number of disputes and litigations against banks for engaging recovery agents
		in the recent past, it was felt that the adverse publicity would result in serious reputational risk for the
		banking sector as a whole. Against this background, the Reserve Bank issued detailed guidelines
		regarding the policy, practice and procedure involved in the engagement of recovery agents by all SCBs
		(excluding RRBs).
		It was decided to permit banks (including RRBs and LABs) to engage retired bank employees, ex-
		servicemen and retired government employees as BCs with immediate effect, in addition to the entities
		already permitted, subject to appropriate due diligence. While appointing such individuals as BCs,
		banks were advised to ensure that these individuals were permanent residents of the area in which they
		proposed to operate as BCs and also institute additional safeguards as were considered appropriate to
		minimise agency risk.
	29	All SCBs (excluding RRBs) were advised that the CRR would be increased by 25 basis points to 8.25 per
		cent with effect from the fortnight beginning May 24, 2008. Similar instructions were issued to RRBs on
		April 30, 2008.
May	2	All SCBs (excluding RRBs) were advised to ensure that a suitable mechanism existed for receiving and
		addressing complaints from customers/constituents with specific emphasis on resolving such
		complaints fairly and expeditiously.
		All SCBs (excluding RRBs) were advised to formulate a policy which would enable them to settle the
		claims of a missing person. Similar guidelines were issued to RRBs on September 12, 2008.
	6	All SCBs were advised to classify 100 per cent of the credit outstanding under GCCs and overdrafts up
		to Rs.25,000 (per account) granted against ‘no-frills’ accounts in rural and semi-urban areas as indirect
		finance to agriculture under priority sector.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2008
May	6	All domestic SCBs (excluding RRBs) were advised that any shortfall in lending to weaker sections would
		also be taken into account for the purpose of allocating amounts to them for contribution to RIDF
		maintained or funds with other FIs with effect from April 2009.
		The lead bank responsibility in Ramgarh and Khunti districts of Jharkhand was assigned to Bank of
		India.
	8	All SCBs (excluding RRBs and LABs) were advised that in view of the representations made in regard to
		delays in completion of infrastructure projects for legal and other extraneous reasons, the asset
		classification norms for infrastructure projects under implementation were modified with effect from
		March 31, 2008. The revised norms stipulated that in case of infrastructure projects, financed by the
		bank after May 28, 2002, the date of completion of the project should be clearly spelt out at the time of
		financial closure of the project and if the date of commencement of commercial production extended
		beyond a period of two years (as against the earlier norm of one year) after the date of completion of the
		project, as originally envisaged, the account should be treated as sub-standard.
	14	All commercial banks (excluding RRBs and LABs) were advised that there was change in risk weight for
		‘claims secured by residential property’. For loans with LTV ratio less than equal to 75 per cent, the risk
		weight was reduced to 50 per cent if the sanctioned loan amount was up to Rs.30 lakh and 75 per cent
		if the amount exceeded Rs.30 lakh. The risk weight was retained at 100 per cent for loans with LTV ratio
		more than 75 per cent.
	22	In terms of obligations of banks under the Prevention of Money Laundering Act, 2002, all SCBs
		(excluding RRBs) were advised to prepare a profile for each customer based on risk categorisation. The
		need for periodical review of risk categorisation was also emphasised. It was reiterated that banks, as a
		part of transaction monitoring mechanism, were required to put in place an appropriate software
		application to throw alerts when the transactions were inconsistent with risk categorisation and the
		updated profile of customers. Further, a reporting mechanism for attempted banking transactions and
		also for transactions involving counterfeit currency report was also introduced. Similar guidelines were
		issued to RRBs on June 18, 2008.
		All RRBs were advised that they could sell loan assets held by them under the priority sector categories
		in excess of their priority sector lending target of 60 per cent.
	23	The Finance Minister in his Budget Speech (2008-09) had announced the Debt Waiver and Debt Relief
		Scheme for farmers. A detailed scheme in this regard was notified for implementation by all SCBs,
		besides RRBs and co-operative credit institutions. All SCBs (including LABs) were advised that the
		implementation of the Agricultural Debt Waiver and Debt Relief Scheme should be completed by June
		30, 2008.
	29	AD category-1 banks were informed that the policy related to ECBs was reviewed and some aspects of
		the policy including the all-in-cost ceilings and those for borrowers from the infrastructure sector were
		modified.
June	2	AD category-1 banks were informed that entities in the service sector viz., hotels, hospitals and software
		companies could avail ECB up to US$ 100 million, per financial year, for the purpose of import of capital
		goods under the approval route.
	4	All SCBs (excluding RRBs) were advised to ensure that all the banking facilities including cheque book
		facility including third party cheques, ATMs, net banking, locker, retail loans, credit card, etc., were
		invariably offered to the visually challenged without any discrimination. Banks were also advised to
		instruct their branches to render all possible assistance to the visually challenged for availing various
		banking facilities. Similar guidelines were issued to RRBs on July 23, 2008.
	9	All private sector banks were advised that they should adhere to the revised calendar of reviews that was
		prescribed for public sector banks to the extent possible. The revised schedule would come into effect
		from July 1, 2008
	11	All SCBs (excluding RRBs) were advised that the repo rate would be increased by 25 basis points to 8.0
		per cent with effect from June 12, 2008.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2008
June	20	All commercial banks were advised that the threshold for mandatorily routing through the electronic
		payment systems all payment transactions between the Reserve bank regulated entities in the Reserve
		Bank regulated markets would be reduced to Rs.10 lakh with effect from August 1, 2008.
	24	All SCBs (excluding RRBs) were advised that the repo rate would be increased by 50 basis points to 8.5
		per cent with effect from June 25, 2008.
	26	All SCBs were advised that the CRR would be increased by 50 basis points in two stages to 8.5 per cent
		and 8.75 per cent with effect from the fortnights beginning July 5, 2008 and July 19, 2008, respectively.
July	14	All public sector banks were advised that the Government would provide interest subvention of 2 per
		cent per annum to public sector banks in respect of short-term production credit up to Rs.3 lakh
		provided to farmers. This amount of subvention will be calculated on the amount of the crop loan
		disbursed from the date of disbursement/drawal up to the date of payment or up to the date beyond
		which the outstanding loan became overdue i.e., March 31, 2009 for Kharif and June 30, 2009 for Rabi,
		respectively, whichever was earlier.
	23	Instructions were issued to all SCBs (excluding RRBs) on the issue of unsolicited credit cards and
		provision of insurance cover to credit card holders.
	29	All SCBs (excluding RRBs) were advised that the repo rate would be increased by 50 basis points to 9.0
		per cent effective from July 30, 2008.
	30	All SCBs (excluding RRBs) were advised that the CRR would be increased by 25 basis points to 9.0 per
		cent with effect from the fortnight beginning August 30, 2008. Similar notification was issued to RRBs on
		July 31, 2008.
	31	All SCBs (excluding RRBs) were advised that for fine-tuning the management of bank reserves on the
		last day of the maintenance period, it was decided to introduce a SLAF on reporting Fridays, with effect
		from August 1, 2008. SLAF would be conducted between 4.00-4.30 p.m. and the auction results would
		be announced by 5.00 p.m.
August	1	All SCBs (excluding RRBs) were advised that the Government had decided to bring to a close the scheme
		that provided interest rate subvention to exporters from specified sectors with effect from September 30,
		2008. Banks were asked to bring this to the notice of their exporter clients covered under the scheme, so
		that the exporters got adequate time to make necessary adjustments.
	4	AD category-1 banks were informed that the temporary measure under which all exporters were
		permitted to earn interest on EEFC accounts to the extent of outstanding balances of US$ 1 million per
		exporter had been reviewed in consultation with the Government of India and it was decided to withdraw
		the facility from November 1, 2008. Accordingly, with effect from November 1, 2008, all EEFC accounts
		would be permitted to be opened and maintained in the form of non-interest bearing current accounts.
	5	All SCBs (excluding RRBs) were advised that the eligibility income criteria of Rs.24,000 for urban areas
		under the DRI scheme was applicable to semi-urban areas also.
	6	The Reserve Bank issued directives (finalised in consultation with SEBI) covering the framework for the
		trading of currency futures in recognised exchanges.
		All SCBs (excluding RRBs) were advised about the eligibility criteria to become trading/clearing
		members of SEBI-approved exchanges.
	8	Final guidelines on prudential norms for off-balance sheet exposure of banks were issued to all SCBs
		(excluding LABs and RRBs).
	18	The lead bank responsibility in Alirajpur and Singrauli districts of Madhya Pradesh was assigned to
		Bank of Baroda and Union Bank of India, respectively.
	22	All SCBs (excluding RRBs) were issued detailed instructions for dealing with inoperative accounts.
		Banks were asked to consider launching a special drive for finding the whereabouts of the customers/
		legal heirs in respect of existing accounts which had been transferred to the separate ledger of
		‘inoperative accounts’.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2008
August	22	All SCBs (excluding RRBs) were issued detailed instructions regarding display of information through comprehensive notice boards.
	26	All SCBs were advised that they could accept an affidavit submitted by landless labourers, share
		croppers, tenant farmers and oral lessees giving occupational status (i.e., details of land tilled/crops
		grown) for loans up to Rs.50,000. Banks could also encourage the joint liability group/SHG mode of
		lending for such persons. However, banks should go through their procedures of identification as per
		KYC norms, appraisal and usual pre-sanction checks before extending finance.
	27	All SCBs (including RRBs and LABs) were advised that companies registered under Section 25 of the
		Companies Act, 1956, could be employed as BCs provided that the companies were stand-alone entities
		or Section 25 companies in which NBFCs, banks, telecom companies and other corporate entities or
		their holding companies did not have equity holdings in excess of 10 per cent. Further, while engaging
		Section 25 companies as BCs, banks would have to strictly adhere to the distance criterion of 15 kms/
		5 kms, as applicable, between the place of business of the BC and the branch.
	28	All SCBs (excluding RRBs) were advised that banking by definition meant acceptance of deposits of
		money from the public for the purpose of lending and investment. As such, banks could not design any
		product which was not in tune with the basic tenets of banking. Further, incorporating such clauses in
		terms and conditions which restricted deposit of cash over the counters also amounted to an unfair
		practice. Banks were therefore advised to ensure that their branches invariably accepted cash over the
		counters from all their customers who desired to deposit cash at the counters. Further, they were also
		advised to refrain from incorporating clauses in the terms and conditions which restricted deposit of
		cash over the counters.
		All SCBs were advised that each bank could select one rain-fed district for introduction, on a pilot basis,
		of a new product for financing crop production whereby: (a) 80 per cent of the crop loan requirement of
		individual borrowers could be released through a short-term production loan in conformity with the
		extant norms/practices; and (b) the remaining 20 per cent representing the ‘core component’ (expenses
		for land preparation, pre-sowing operations etc., besides self-labour/consumption) could be sanctioned
		as a ‘clean credit limit’ to ensure year-round liquidity.
September	4	All SCBs (including LABs) were advised that procedures for reimbursement of claims and audit of claims
		under the Agricultural Debt Waiver and Debt Relief Scheme, 2008 had been modified.
	8	All SCBs were advised that the name of the “Industrial Development Bank of India Limited” had been
		changed to “IDBI Bank Limited” in the Second Schedule to the RBI Act, 1934 with effect from May 7,
		2008.
	12	All SCBs (excluding RRBs) were advised to adopt the format devised by the Reserve Bank for display of
		information relating to interest rates and service charges which would enable the customer to obtain the
		desired information at a quick glance. Banks should also ensure that only the latest updated
		information in the above format was placed on their websites and the same was easily accessible from
		the home page of their website.
	16	All SCBs (excluding RRBs) were advised that the SLAF would be conducted on a daily basis with effect
		from September 17, 2008.
		All SCBs were advised that from September 17, 2008, as a temporary measure and till further review,
		they could avail additional liquidity support under the LAF to the extent of up to one per cent of their
		NDTL. It was also advised that for any shortfall in maintenance of SLR arising out of availment of this
		additional liquidity support under LAF, banks could apply with a request not to demand payment of the
		penal interest thereon.
		All SCBs (excluding RRBs) were advised that interest rates on NRE rupee deposits and FCNR(B) deposits
		were raised by 50 basis points to LIBOR/SWAP rates plus 50 basis points and LIBOR/SWAP rates
		minus 25 basis points, respectively, with effect from close of business on September 16, 2008. Similar
		instructions were issued to RRBs on September 18, 2008.
	17	It was reiterated to all commercial banks (excluding RRBs) that they should ensure that they employ
		only those DMAs/DSAs who are registered as telemarketers with the DoT. Further, any employment of
		telemarketers who are not registered with DoT would be treated as a violation of Hon’ble Supreme
		Court’s directive by banks.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2008
September	19	All SCBs (excluding RRBs and LABs) were advised to strengthen their information back-up about the
		borrowers enjoying credit facilities from multiple banks through a set of measures prescribed by the
		Reserve Bank.
	22	All SCBs were advised about the access criteria for national payment systems.
		AD category-1 banks were informed that the policy related to ECBs was reviewed and some aspects of
		the policy including the all-in-cost ceilings and those for borrowers from the infrastructure sector were
		modified.
	23	AD category-1 banks were informed that the "Issue of Foreign Currency Exchangeable Bonds (FCEB)
		Scheme, 2008", had been notified by the Government of India, Ministry of Finance, Department of
		Economic Affairs vide Notification G.S.R.89(E) dated February 15, 2008. Accordingly, it was decided to
		operationalise the scheme in order to facilitate the issue of FCEB by Indian companies.
	29	All SCBs were advised that the name of “Centurion Bank of Punjab Ltd” was excluded from the Second
		Schedule to the RBI Act, 1934.
October	8	Operating guidelines for banks regarding mobile banking transactions were issued to all SCBs.
	10	All SCBs were advised that the CRR was to be reduced by 150 basis points to 7.5 per cent with effect from
		the fortnight beginning October 11, 2008.
	13	Issues regarding asset classification status of overdue payments in respect of derivative transactions
		and re-structuring of derivative contracts were examined and guidelines issued to all commercial banks
		(excluding RRBs and LABs).
	14	All SCBs (excluding RRBs) were advised that the Reserve Bank would conduct a special fixed rate repo
		at 9 per cent per annum against eligible securities for a notified amount of Rs.20,000 crore on October
		14, 2008, with a view to enabling banks to meet the liquidity requirements of mutual funds. The reversal
		would take place on October 29, 2008.
	15	All SCBs were advised that interest rates on NRE rupee deposits and FCNR(B) deposits were raised by 50
		basis points to LIBOR/SWAP rates plus 100 basis points and LIBOR/SWAP rates plus 25 basis points,
		respectively, with effect from close of business on October 15, 2008.
		Scheme for temporary liquidity support to scheduled banks and NABARD for financing agricultural
		operations was announced.
		All SCBs were advised that, as a temporary measure, banks could avail additional liquidity support
		exclusively for the purpose of meeting the liquidity requirements of mutual funds to the extent of up to
		0.5 per cent of their NDTL. This additional liquidity support would terminate 14 days from the closure of
		the special term repo facility for mutual funds that was announced on October 14, 2008.
		All SCBs were advised that the CRR was further reduced by 100 basis points to 6.50 per cent with effect
		from the fortnight that began October 11, 2008.
		All SCBs (excluding RRBs) were advised that the special fixed rate term repo under LAF would be
		conducted every day until further notice up to a cumulativeamount of Rs.20,000 crore for the same
		purpose. Accordingly, the residual amount would be notified every day till further notice.
		With a view to providing greater flexibility to AD category - I banks in seeking access to overseas funds,
		they were allowed to henceforth borrow funds from their head office, overseas branches and
		correspondents and overdrafts in nostro accounts up to a limit of 50 per cent of their unimpaired Tier I
		capital as at the close of the previous quarter or US$ 10 million (or its equivalent), whichever is higher, as
		against the existing limit of 25 per cent (excluding borrowings for financing of export credit in foreign
		currency and capital instruments).
	20	All SCBs (excluding RRBs) were advised that the repo rate was cut by 100 basis points to 8.0 per cent
		with immediate effect.
	22	AD category-1 banks were informed that some aspects of the ECB policy including the end-use for
		telecom sector, the limit for per borrower per financial year for rupee/foreign currency expenditure for
		permissible end-uses under the automatic route and the all-in-cost ceilings for ECBs of various
		maturities had been modified.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2008
October	27	All SCBs (excluding RRBs) were advised that the validity of interest rates on rupee export credit would be
		in force up to April 30, 2009.
		AD category-1 banks were informed that the all-in-cost ceiling for trade credits with maturity up to one
		year and between one and three years has been revised to 200 basis points above 6-month LIBOR.
	29	All SCBs (excluding RRBs and LABs) were advised that the principle of borrower-wise asset classification
		to treat all other funded facilities granted to a client as NPA would apply only to the overdues arising from
		forward contracts and plain vanilla swaps and options.

		B) Co-operative Banks

2007
April	4	StCBs advised to increase cash reserve ratio (CRR) by one-half of one percentage point of their net
		demand and time liabilities (NDTL) in two stages, i.e., 6.25 per cent and 6.5 per cent effective from the
		fortnights beginning from April 14, 2007 and April 28, 2007, respectively. However, the effective CRR
		maintained by StCBs on total demand and time liabilities would not be less than 3.00 per cent, as
		stipulated under the Reserve Bank of India Act, 1934.
		With effect from the fortnight beginning on April 14, 2007, the StCBs would be paid interest at the rate
		of 0.50 per cent per annum on eligible cash balances maintained with the Reserve Bank of India under
		current CRR requirement.
	5	UCBs advised to increase cash reserve ratio (CRR) by one-half of one percentage point of their net
		demand and time liabilities (NDTL) in two stages, i.e., 6.25 per cent and 6.5 per cent effective from the
		fortnights beginning from April 14, 2007 and April 28, 2007, respectively. However, the effective CRR
		maintained by UCBs on total demand and time liabilities should not be less than 3.00 per cent, as
		stipulated under the Reserve Bank of India Act, 1934. With effect from the fortnight beginning on April
		14, 2007, the UCBs would be paid interest at the rate of 0.50 per cent per annum on eligible cash
		balances maintained with the Reserve Bank under current CRR requirement.
	9	StCBs were advised to ensure that cheques/drafts issued by clients containing fractions of a rupee are
		not rejected or dishonoured by them.
	12	StCBs and DCCBs were advised to generally insist that the person opening a deposit account makes a
		nomination. In case the person opening an account declined to fill in nomination, the bank should
		explain the advantages of nomination facility. If the person opening the account still did not want to
		nominate, the bank should ask him to give a specific letter to the effect that he does not want to make a
		nomination. In case the person opening the account declined to give such a letter, the bank should
		record the fact on the account opening form and proceed with opening of the account, if otherwise found
		eligible. Under no circumstances, a bank should refuse to open an account solely on the ground that the
		person opening the account refused to nominate.
	17	UCBs were advised to ensure that cheques/drafts issued by clients containing fractions of a rupee are
		not rejected or dishonoured by them.
	18	UCBs were advised that with the enactment of the Micro, Small and Medium Enterprises Development
		(MSMED) Act, 2006 and its notification on October 2, 2006, the definition of micro, small and medium
		enterprises engaged in manufacturing/production or providing/rendering of services was modified and
		required to be implemented by the banks along with other policy measures. Banks’ lending to medium
		enterprises would not be included for the purpose of reckoning under the priority sector. The boards of
		banks could review the existing guidelines/instructions and formulate a comprehensive and liberal
		policy in respect of loans to micro, small and medium sectors and adopt the same at the earliest.
	19	UCBs were advised to generally insist that the person opening a deposit account makes a nomination. In
		case the person opening an account declined to fill in nomination, the bank should explain the
		advantages of nomination facility. If the person opening the account still did not want to nominate, the
		bank should ask him to give a specific letter to the effect that he does not want to make a nomination. In
		case the person opening the account declined to give such a letter, the bank should record the fact on the
		account opening form and proceed with opening of the account, if otherwise found eligible. Under no
		circumstances, a bank should refuse to open an account solely on the ground that the person opening
		the account refused to nominate.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2007
April	24	StCBs were advised that they would be exempted from maintaining average CRR with effect from April
		01, 2007 on the following liabilities as computed under section 42 of the RBI Act, 1934. (i) Liabilities to
		the banking system in India as computed under clause (e) of the explanation to Section 42 (1) of the
		Reserve Bank Act, 1934; (ii) Transactions in Collateralized Borrowing and Lending Obligation (CBLO)
		with Clearing Corporation of India. (CCIL).
	24	Government of India in their Extraordinary Gazette notification No.S.O.337(E) dated March 9, 2007
		notified April 01, 2007 as the date on which the provisions of Section 3 of the Reserve Bank of India
		(Amendment) Act, 2006 came into force. Consequent upon the provisions of Section 3 of the RBI
		(Amendment) Act, 2006 coming into force, the amendment carried out to sub-Section (1) of Section 42 of
		Reserve Bank of India Act, 1934 was brought into force with effect from April 01, 2007. Accordingly, the
		statutory minimum CRR requirement of 3 per cent of total demand and time liabilities no longer existed
		with effect from the said notified date. The Reserve Bank having regard to the needs of securing the
		monetary stability in the country, may from time to time prescribe the CRR for UCBs without any floor
		and ceiling rate. (2) In exercise of the powers conferred on the Reserve Bank, it was decided to continue
		the status quo on the rate of CRR to be maintained by UCBs and the extant exemptions which would be
		operative till further changes are notified. Accordingly, UCBs would continue to maintain CRR on their
		total demand and time liabilities at 6.25 per cent and 6.5 per cent effective from the fortnights beginning
		from April 14, 2007 and April 28, 2007, respectively. In view of Section 3 of the Reserve Bank of India
		(Amendment) Act, 2006 coming into force, sub-section (1B) of Section 42 of the Reserve Bank of India
		Act, 1934 stands omitted with effect from April 01, 2007. Consistent with the amendment it was decided
		that with effect from the fortnight beginning March 31, 2007, the Reserve Bank would not be paying any
		interest on the CRR balances maintained by UCBs.
	26	UCBs were advised that with effect from the close of business in India as on April 24, 2007, the interest
		rates on fresh Non-Resident (External) Rupee Term Deposits for one to three years maturity should not
		exceed the LIBOR/SWAP rates, as on the last working day of April 2007, for US dollar of corresponding
		maturities. The interest rates as determined above for three years will also be applicable in case the
		maturity period exceeds three years and if renewed after their present maturity period.
	30	UCBs were advised that the risk weight on loans up to Rs.1 lakh against gold and silver ornaments was
		reduced to 50 per cent from 125 per cent.
		UCBs were advised that relaxed prudential guidelines on income recognition, asset classification and
		provisioning norms were extended by one year.
May	4	All primary UCBs were advised that risk weight for capital adequacy purpose in respect of housing loans
		up to Rs.20 lakh to individuals against the mortgage of residential housing properties was reduced from
		75 per cent to 50 per cent. The reduced risk weights would be reviewed after one year keeping in view the
		default experience and other relevant factors.
		UCBs were advised to ensure that no money transaction of the company/ies, declared as “defaulted
		companies” by the Patna High Court be allowed in the bank.
	7	UCBs registered in States that had entered into MoUs with the Reserve Bank or registered under the
		Multi State Co-operative Societies Act, 2002 were permitted to undertake insurance agency business as
		corporate agents without risk participation, provided that the UCB had a minimum net worth of Rs.10
		crore and had not been classified as Grade III or IV bank.
	16	StCBs/DCCBs were advised to lay out appropriate internal principles and procedures so that usurious
		interest, including processing and other charges, are not levied by them on loans and advances.
	18	UCBs were advised to lay out appropriate internal principles and procedures so that usurious interest,
		including processing and other charges, were not levied by them on loans and advances.
		StCBs/DCCBs were advised to scale up their financial inclusion efforts by utilising appropriate
		technology. Banks were also advised to ensure that the solutions developed were highly secure,
		amenable to audit and followed widely accepted open standards to allow inter-operability among the
		different systems adopted by different banks.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2007
May	18	Fresh guidelines issued to StCBs/DCCBs on various issues relating to extension of Safe Deposit Locker/
		Safe Custody Article Facility and Access to Safe Deposit Lockers / Return of Safe Custody Articles by
		banks.
	24	UCBs were advised that the Banking Ombudsman Scheme, 2006 had been amended and all scheduled
		primary co-operative banks were directed to comply with the amended Scheme.
	25	Guidelines on KYC Norms/AML Standards/CFT – Wire Transfers were issued to all primary UCBs.
		Similar guidelines were issued to StCBs and DCCBs on May 18, 2007.
June	1	Scheduled UCBs were advised to submit the Structural Liquidity Statement and Interest Rate Sensitivity
		Statement through the ALM Module provided in the OSS software. The Statement of Structural Liquidity
		is to be prepared at fortnightly intervals starting with the last reporting Friday of June 2007 i.e. June 22,
		2007 and that of Interest Rate Sensitivity should be prepared on a monthly basis as on last reporting
		Friday of the month starting with the month of June 2007. Banks were further advised to designate and
		authorize one or two senior official/s who would be responsible for the information furnished therein.
	4	All primary urban co-operative banks registered in States that have entered into a Memorandum of
		Understanding (MoU) with Reserve Bank for supervisory and regulatory co-ordination and those
		registered under the Multi State Co-operative Societies Act, 2002 were permitted to open NRE account
		subject to complying with certain norms. Though UCBs were not permitted to accept NRO deposits and
		were required to close these accounts in a given time frame, the revised guidelines indicate that UCBs
		may maintain NRO accounts, arising from their re-designation as such, upon the account holders
		becoming non resident. Opening of fresh NRO accounts would not be permitted. Further no fresh credits
		barring periodical credit of interest would be allowed in these accounts. However, these restrictions
		would not be applicable to UCBs holding Authorised Dealer Category-I licence.
	22	UCBs were advised that fresh guidelines were issued in regard to extension of safe deposit locker/safe
		custody article facility and access to safe deposit lockers/return of safe custody articles by banks.
July	4	UCBs were urged to scale up their financial inclusion efforts by utilising appropriate technology. Banks
		were advised to take care to ensure that the solutions developed for the purpose are highly secure,
		amenable to audit, and follow widely accepted open standards to allow inter-operability among the
		different systems adopted by different banks.
		The eligibility criteria for opening new branches/extension counters have been relaxed. All primary
		urban co-operative banks satisfying the relaxed criteria would be eligible for additional branches/
		extension counters not exceeding 10 per cent of their existing branch network, over a period of two years.
		All primary urban co-operative banks are required to obtain prior authorisation for opening extension
		counters.
	13	UCBs were advised that they were prohibited from extending any fund based or non-fund based credit
		facilities whether secured or unsecured to stockbrokers and commodity brokers.
		UCBs were advised that the matter of amortisation of goodwill on merger was reviewed were advised as
		follows: (i) where the consideration, if any, paid for the acquisition/amalgamation exceeds the book
		value of the net assets taken over, the excess amount should be treated as goodwill and amortised over
		a period of five years in equal instalments; (ii) where no consideration is paid but the book value of the
		assets is less than the book value of liabilities taken over, the excess of the book value of liabilities over
		the book value of the assets taken over will be considered as goodwill and amortised over a period of five
		years in equal instalments; and (iii) where no consideration is paid, but the book value of the assets
		taken over is greater than the book value of the liabilities taken over, the excess of the book value of
		assets over the book value of the liabilities will be considered as capital reserve.
		Guidelines were issued to UCBs for issuance of ATM-cum-debit cards. Banks which were authorised to
		install on-site/off-site ATMs, could introduce ATM-cum-debit cards with the approval of their board.
	17	UCBs holding AD category I or II licence could act as agents/sub-agents under money transfer service
		schemes (MTSS) which was in conformity with the guidelines issued by Foreign Exchange Department of
		the Reserve Bank, subject to the following conditions: (i) bank’s adherence to AML/KYC standards
		should be satisfactory; (ii) the principal should maintain foreign currency deposits (USD) with the

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2007

		designated bank in favour of the agent which, at present, is equivalent to three days’ average payout or
		USD 50,000, whichever is higher; (iii) where the UCB is acting as a sub-agent, the agent should also
		maintain with the designated bank, security deposits equivalent to 3 days’ average payout or Rs 20 lakh,
		whichever is higher, in favour of the UCB sub-agents concerned; (iv) the UCBs should ensure that the
		payouts not reimbursed do not, at any point of time, exceed the security deposits placed by the overseas
		principal/agent, as the case may be; (v) no UCB could appoint any other UCB/entity as its sub-agent.
July	31	All scheduled primary urban co-operative banks were advised to increase the cash reserve ratio (CRR) by
		50 basis points and maintain it to the level of 7.00 per cent of total demand and time liabilities with effect
		from the fortnight beginning August 4, 2007.
August	14	UCBs were guided about the notification issued by the Ministry of Consumer Affairs, Food and Public
		Distribution in regard to creation of buffer stock. As per the Government of India notification, it was
		decided to create a buffer stock of 20 lakh tons of sugar for a period of one year with effect from May 1,
		2007. Under the arrangement, the Government would release subsidy of Rs.378 crore out of the Sugar
		Development Fund and the banks had to sanction additional credit limit amounting to Rs.420 crore to
		release the margin consequent upon creation of the buffer stock from the existing stock of sugar. For
		operation of the scheme, it would be necessary for sugar mills to segregate the stocks meant for buffer
		stock operations from the stock of sugar already held by them. The banks should allocate out of the
		regular limits, separate sub-limits representing 100 per cent value of buffer stocks held by sugar mills.
		The amount released as a result of providing 100 per cent drawings against buffer stocks, i.e., the
		amount in lieu of the margin money should be credited to a special account. It would be necessary for the
		banks to ensure that the amount available in this account was utilised for making cane payments.
	28	UCBs were advised that the Reserve Bank had decided to consider their requests to shift their branches
		from one city to another in their area of operation within the same State subject to the following
		conditions: (i) the new centre was of the same or lower population group as the existing centre, eg., a
		branch at a ‘D’ centre could be shifted to another ‘D’ centre only; (ii) a branch located in an under-
		banked district can be shifted to another centre in an under-banked district only; and (iii) the shifting
		should be beneficial to the bank in terms of cost and business.
	30	UCBs were advised to specially monitor the credit flow to minorities in the specified 121 minority
		concentrated districts, thereby ensuring that the minority communities receive an equitable portion of
		the credit within the overall target of the priority sector. The above requirement should be kept in view for
		the purpose of earmarking of targets and location of development projects under the ‘Prime Ministers
		New 15 Point Programme for the Welfare of the Minorities’.
		All UCBs were advised on the revised guidelines on lending to priority sector, which take into account the
		revised definition of small and micro enterprises as per the Micro, Small and Medium Enterprises
		Development Act, 2006.
September	13	UCBs were advised to ensure that loan facilities were utilised by borrowers for the purpose sanctioned.
		Banks should therefore have a mechanism for proper monitoring of the end-use of funds. Wherever
		diversion was observed, they should take appropriate action against the borrowers concerned and the
		steps needed to protect the bank’s interest. UCBs could put in place more stringent safeguards,
		especially, where accounts showed signs of turning into NPAs. In such cases UCBs could strengthen
		their monitoring system by resorting to more frequent inspections of borrowers’ godowns, ensuring that
		sale proceeds were routed through the borrower’s accounts maintained with the bank and insisting on
		pledge of the stock in place of hypothecation. Whenever stocks under hypothecation to cash credit and
		other loan accounts were found to have been sold but the proceeds thereof not credited to the loan
		account, such action should normally be treated as a fraud. In such cases, banks should take
		immediate steps to secure the remaining stock so as to prevent further erosion in the value of the
		available security.
	18	UCBs were advised not to insist upon induction of two professional directors on the boards of Salary
		Earners Banks.
		Guidelines were issued to all UCBs with a view to allowing them greater flexibility in making non-SLR
		investments.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2007
September	19	UCBs were advised that when a UCB had availed a loan from a DCCB/StCB with which it was
		maintaining deposits, the amount of loan availed from the DCCB/StCB would be deducted from the
		deposits irrespective of whether lien had been marked on such deposits or not, for the purpose of
		computation of SLR. UCBs were given a period of six months to comply with the SLR requirements in
		case of shortfall, if any, arising from the above instructions.
November	1	All scheduled UCBs were informed about the decision to increase cash reserve ratio (CRR) by 50 basis
		points to 7.50 per cent of their demand and time liabilities with effect from the fortnight beginning
		November 10, 2007.
	12	UCBs were advised to desist from writing anything whatsoever on the banknotes. They were also advised
		to endeavour to educate their staff, customers and members of public, in this regard.
	14	StCBs/DCCBs were advised that before launching new domestic deposit mobilisation scheme with the
		approval of their respective boards, they should ensure that the provisions of the Reserve Bank’s
		directives on interest rates on deposits, premature withdrawal of term deposits, sanction of loans/
		advances against term deposits, etc., issued from time to time, were strictly adhered to. Any violation in
		this regard would be viewed seriously and could attract penalty under the Banking Regulation Act, 1949
		(AACS).
	15	UCBs were advised that the schemes with lock-in periods and some other restrictive features, which
		have been floated by some banks were not in conformity with the provisions of the Reserve Bank’s
		directives on interest rates on deposits, premature withdrawal of term deposits, sanction of loans and
		advances against term deposits, etc. issued from time to time. These types of schemes were advised to
		discontinue.
	16	UCBs were permitted to lay down policies with the approval of their board for sanction of gold loans with
		bullet repayment option subject to satisfying certain guidelines. It was also clarified that crop loans
		sanctioned against the collateral security of gold/gold ornaments would continue to be governed by the
		extant IRAC norms for such loans.
	20	StCBs/DCCBs were advised to rely upon the Guardianship Certificate issued either by the district court
		under the Mental Health Act or by the local level committees under the above Act for the purpose of
		opening/operating bank accounts for disabled persons with autism, cerebral palsy, mental retardation
		and multiple disabilities (Similar instructions were issued to UCBs also).
	30	It was decided to bring down the priority sector lending target for UCBs to 40 per cent of the adjusted
		bank credit (ABC) (total loan and advances plus investments made by UCBs in non-SLR bonds) or credit
		equivalent amount of off-balance sheet exposure (OBE), whichever is higher, as on March 31 of the
		previous year.
December	4	StCBs/DCCBs were previously outside the capital to risk weighted assets ratio (CRAR) framework. In
		order to assess their capital structure in the context of financial stability of the whole system, StCBs/
		DCCBs were advised to disclose their CRAR as on March 31, 2008 and thereafter every year as ‘Notes on
		Accounts’ to their Balance Sheets.

2008
January	23	A Working Group (WG) was constituted for examining prescription of guidelines for access to various
		payment systems. The Working Group has recommended that membership to clearing houses at
		magnetic ink character recognition (MICR) centres be confined to licenced banks meeting certain
		criteria. Further, the WG has recommended that the entities which are presently members of clearing
		houses at MICR centres but ineligible to be members as per the proposed access criteria, would have to
		conform to the prescribed norms within one year failing which membership would be downgraded to
		that of a sub-member. The WG has recommended that such banks may be barred with immediate effect,
		from sponsoring any sub-members.
	29	UCBs were advised not to classify ‘education loans’ as consumer credit for the purpose of capital
		adequacy norms. Accordingly the risk weight applicable to education loans would be 100 per cent.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2008
February	25	In terms of Know Your Customer (KYC) guidelines, UCBs were earlier advised that customer
		identification meant identifying the customer and verifying his/her identity by using reliable,
		independent source documents, data or information to their satisfaction. An indicative list of the nature
		and type of documents/information that could be relied upon for customer identification was also given.
		It was observed that some banks treated this indicative list as exhaustive list and as a result a section of
		public was denied access to banking services. UCBs were advised to take a review of their extant internal
		instructions in this regard. UCBs were also advised to carry out a review of risk categorisation of
		customers at a periodicity of not less than once in six months. The periodicity of the updation of
		customer identification data including photograph should not be less than once in five years in case of
		low risk category customers and not less than once in two years in case of high and medium risk
		category customers. UCBs were also advised to develop suitable mechanism through appropriate policy
		framework for enhanced monitoring of accounts suspected of having terrorist links.
	29	As per extant instructions, UCBs should normally refrain from sanctioning loans to builders/
		contractors. However, where contractors undertake comparatively small construction work on their
		own, UCBs may consider extending financial assistance to them against hypothecation of construction
		material, provided such loans and advances are in accordance with the bye-laws of the banks and
		instructions/directives issued by the Reserve Bank from time to time. Valuing the land for the purpose
		of security, on the basis of discounted value of property after it is developed, less the cost of development
		is not in conformity with established norms. In this connection it was clarified to UCBs that they should
		not extend fund based/non-fund based facilities to builders/contractors for acquisition of land even as
		a part of a housing project. Further, where land is accepted as collateral, valuation of such land should
		be at current market price only.
March	3	In view of the instances of outbreak of avian influenza (bird flu) in some areas of the country and
		consequent loss of income on account of culling of birds for poultry units financed by the banks, UCBs
		were advised to consider extending certain facilities to them: (i) principal and interest due on working
		capital loans as also installments and interest on term loans which have fallen due for payment on or
		after the onset of bird flu, i.e. December 31, 2007 and remaining unpaid amount may be converted into
		term loans. The converted loans may be recovered in instalments based on projected future inflows over
		a period up to three years with an initial moratorium of up to one year (the first year of repayment may
		be fixed after the expiry of moratorium period); (ii) the remaining portion of term loans may be
		rescheduled similarly with a moratorium period up to one year depending upon the cash flow generating
		capacity of the unit; (iii) the reschedulement/conversion may be completed on or before April 30, 2008;
		(iv) the rescheduled/converted loans may be treated as current dues; (v) after conversion as above, the
		borrower will be eligible for fresh need-based finance; (vi) the relief measures as above may be extended
		to all accounts of poultry industry, which were classified as standard accounts as on December
		31, 2007.
	7	The definition of Tier I UCBs was amended. As per the new definition, the following three categories of
		UCBs are to be treated as Tier I banks. (i) Unit banks i.e., UCBs having a single branch/head office and
		UCBs with deposits below Rs.100 crore, whose branches are located in a single district; (ii) UCBs with
		deposits below Rs.100 crore and having branches in more than one district, provided the branches are
		in contiguous districts and deposits and advances of branches in one district separately constitute at
		least 95 per cent of the total deposits and advances respectively of the bank; and (iii) Banks with deposits
		below Rs.100 crore, whose branches were originally in a single district but subsequently, became multi-
		district due to reorganisation of the district. Tier II banks are all other banks. The deposit base of Rs.100
		crore will be determined on the basis of average of fortnightly NDTL in the financial year concerned and
		that of advances on the basis of fortnightly average in the financial year concerned.
	10	Co-operative banks were advised that with effect from April 1, 2008, all payment transactions of Rs.1
		crore and above between the Reserve Bank regulated entities such as banks/primary dealers and
		NBFCs were required to be routed through electronic payment mechanism. Furthermore, all payments
		of Rs.1 crore and above in the Reserve Bank regulated markets such as money market, Government
		securities market and foreign exchange market could also be routed through electronic payment
		mechanism with effect from April 1, 2008.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2008
March	12	In case of UCBs, both use of own ATMs for any purpose and for the use of other bank ATMs for balance
		enquiries, the customer would not be levied any charge under any head and for use of other bank ATMs
		for cash withdrawals, charge of Rs.20 would be levied which was all inclusive and no other charges
		would be levied under any other head irrespective of the amount of withdrwal. The service charges for
		cash withdrawal with the use of credit cards and cash withdrawal in an ATM located abroad may be
		determined by the banks themselves.
April	2	For Tier I UCBs, the 180 day loan delinquency norm for NPAs was extended by one year i.e., up to March
		31, 2009 and the 12 month period for classification of a sub-standard asset in doubtful category would
		be effective from April 1, 2009 instead of April 1, 2008.
	15	Scheduled UCBs were advised to formulate a comprehensive and transparent policy covering immediate
		credit of local/outstation cheques, time-frame for collection of local/outstation instruments and interest
		payment for delayed collection, taking into account their technological capabilities, systems and
		processes adopted for clearing arrangements and other internal arrangements for collection through
		correspondents. They were also advised to review their existing arrangements and capabilities and work
		out a scheme for reduction in collection period. The interests of small depositors should be fully
		protected. The policy should also clearly lay down the liability of the UCBs by way of interest payments
		due to delay for non-compliance with the standards set by the UCBs themselves and should be
		integrated with the deposit policy formulation by the UCB in line with the IBA’s policy. Compensation by
		way of interest payment, where necessary, should be made without any claim from the customer. It
		should also be ensured that the customers are, in no way, worse off than earlier.
	21	UCBs, were advised to include at all times, at least two professional directors on their boards with
		suitable banking experience (at middle/senior management level) or with relevant professional
		qualifications, i.e., C.A. with bank accounting/auditing experience. The scope of professional directors
		prescribed therein was reviewed and it was decided to enlarge the ambit of ‘professional directors’ to
		include persons with professional qualification in the fields of law, accountancy or finance. UCBs were
		advised to initiate steps to amend the bye-laws of their banks accordingly and ensure compliance with
		the above requirements.
	22	Scheduled UCBs were advised to increase cash reserve ratio (CRR) by one-half of one percentage point of
		their net demand and time liabilities (NDTL) in two stages, i.e., 7.75 per cent and 8.00 per cent effective
		from fortnights beginning from April 26, 2008 and May 10, 2008, respectively.
	30	On a review of the liquidity situation it was decided to increase cash reserve ratio (CRR) of scheduled
		UCBs to 8.25 per cent from 8 per cent of their net demand and time liabilities (NDTL) with effect from
		fortnight beginning from May 24, 2008.
May	2	All UCBs with requisite infrastructure related to INFINET, together with a board resolution seeking the
		membership in it would be granted membership of INFINET. Subject to the above parameters,
		unlicensed UCBs could also be permitted to avail of INFINET membership, so long as their application
		for license has not been rejected by Reserve Bank. The membership would not in any way entitle
		unlicensed UCBs to claim a banking license at a later date and their application for license would be
		examined independently on its merits.
	12	All UCBs were advised to formulate a policy for settlement of claims of missing persons after considering
		the legal opinion and taking into account the facts and circumstances of each case. Further, keeping in
		view the imperative need to avoid inconvenience and undue hardship to the common person, UCBs were
		also advised that keeping in view the risk management systems, they should fix a threshold limit, upto
		which claims in respect of missing persons could be settled without insisting on production of any
		document other than (i) FIR and the non-traceable report issued by police authorities and (ii) letter of
		indemnity.
	13	All StCBs and DCCBs were directed to allow customers to use bank’s own ATM for any purpose for free
		and also to use any other bank’s ATMs for balance enquiries for free. Furthermore, banks were also
		instructed to bring down the charge for withdrawal of cash for non-customers to Rs.20 with immediate
		effect and make it free with effect from April 1, 2009.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2008
May	15	It has been decided to permit Tier II UCBs to extend individual housing loans up to a maximum of Rs.50
		lakh from earlier ceiling of Rs.25 lakh per beneficiary of a dwelling unit subject to extant prudential
		exposure limits.
		UCBs other than those classified in grade III and IV and registered in States that have entered into MoU
		with the Reserve Bank or under Multi State Co-operative Societies Act, 2002, were permitted to
		undertake insurance business as corporate agent without risk participation without the prior approval
		of the Reserve Bank. The minimum net worth criteria earlier applicable was dispensed with for such
		banks.
	23	As per the budget speech for 2008-09 by the Hon'ble Finance Minister, a debt waiver and debt relief
		scheme for farmers was notified by the Government of India. UCBs were advised to take necessary action
		towards implementation of the scheme and complete it by June 30, 2008.
	26	As announced in the Annual Policy Statement for the year 2008-09, the eligibility norms for opening up
		of on-site ATMs were liberalised. Accordingly, UCBs that were registered in states which had entered into
		MoU with the Reserve Bank or were registered under the Multi-State Co-operative Societies Act, 2002
		and classified in Grades other than Grade III and IV, could set up on-site ATMs without prior approval of
		the Reserve Bank.
		Keeping in view the nature of membership and loan profile of the salary earner banks (SEBs) and
		representations made by the banks and their federations, it was decided that the Salary Earners’ Banks
		in Tier II may provide for standard assets in respect of personal loans at the rate of 0.4 per cent instead
		of the existing level of two per cent. Provisioning requirement in respect of loans and advances qualifying
		as capital market exposure, commercial real estate loans and loans and advances to systemically
		important NBFCs – ND would however continue to be two per cent for such banks.
		Existing mahila UCBs which conform to the extant entry point norms for general category banks, were
		permitted to enroll male members up to a limit of 25 per cent of their total regular membership, subject
		to compliance by the banks with their respective bye-laws.
June	2	As per the operative instructions issued for smooth implementation of the Agricultural Debt Waiver and
		Debt Relief Scheme, 2008 UCBs were advised that one time consolidated claims for the bank as a whole
		could be submitted by them through their head office by September 30, 2008, to the respective regional
		offices of the Reserve Bank. Guidelines regarding procedure for reimbursement of claims, data
		maintenance, monitoring of progress in implementation, procedure for audit of the claims were also
		issued.
	4	It has been observed that, over the years, the Government of India has, from time to time, issued several
		special securities which do not qualify for the purpose of complying with the SLR requirements of StCBs/
		DCCBs. Such Government securities are governed by a separate set of terms and conditions and entail
		a higher degree of illiquidity spread. Currently, the guidelines issued by FIMMDA regarding the
		valuation of such non-SLR securities provide that such securities be valued by applying a mark-up of 50
		basis points (bps) above the corresponding yield on Government of India securities. The issue of
		valuation of such special securities has since been examined. It has been decided that, for the limited
		purpose of valuation, all special securities issued by the Government of India, directly to the beneficiary
		entities, which do not carry SLR status, may be valued at a spread of 25 bps above the corresponding
		yield on Government of India securities. This amendment would come into force from the financial year
		2008-09.
	12	UCBs were advised to ensure that all banking facilities such as cheque book facility including third party
		cheques, ATM facility, net banking facility, locker facility, retail loans, credit cards etc., are invariably
		offered to the visually challenged persons without any discrimination.
	16	The branch licensing norms have been liberalised. Approvals for branch expansion including off-site
		ATMs in respect of well managed and financially sound UCBs in the States that have signed MoUs and
		those registered under the Multi-State Coop Societies Act, 2002, will henceforth be considered, based on
		their Annual Business Plans, subject to certain conditions.
		It was decided to enhance the limit of Rs.20 lakh to Rs.30 lakh in respect of bank loans for housing in
		terms of applicability of risk weights for capital adequacy purposes. Accordingly, such loans will carry a
		risk weight of 50 per cent.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2008
June	17	Certain additional instructions for smooth implementation of the Agricultural Debt Waiver and Debt
		Relief Scheme, 2008 were issued to UCBs. A format for undertaking to be given by ‘other farmers’ eligible
		for one time settlement (OTS) relief was forwarded to UCBs. They were advised to issue a certificate to
		small and marginal farmers upon waiver of the eligible amount to the effect that the loan has been
		waived and specifically mention the eligible amount so waived under the scheme and take
		acknowledgement from the farmers. A certificate should also be issued to ‘other farmers’ upon granting
		OTS relief, to the effect that the loan account has been settled to the satisfaction of the lending institution
		and specifically mention the eligible amount and the amount paid by the farmer. Formats of such
		certificates were forwarded to the UCBs.
	24	The definition of willful defaulters was extended to include units that have defaulted in meeting their
		payment/repayment obligation to the lender and have also disposed of or removed the movable fixed
		assets or immovable property given by them for the purpose of securing a term loan, without the
		knowledge of the bank/lender.
	26	All scheduled primary urban co-operative banks were advised that it was decided to increase cash
		reserve ratio (CRR) by 50 basis points to 8.75 per cent of their net demand and time liabilities (NDTL) in
		two stages, i.e., 8.50 per cent and 8.75 per cent effective from the fortnights beginning from July 5, 2008
		and July 19, 2008, respectively.
	30	The reporting formats for priority sector lending by UCBs were revised. Accordingly, the UCBs were
		advised that data under the revised formats could be submitted to the regional office concerned of the
		Reserve Bank on a yearly basis within 15 days of close of the financial year to which it pertained. UCBs
		were advised to submit the first set of returns by April 15, 2009.
July	2	As a part of transaction monitoring mechanism, UCBs are required to put in place an appropriate
		software application to through alerts when the transactions are inconsistent with risk categorisation
		and updated profile of customers. They were also advised to initiate urgent steps to ensure electronic
		filing of cash transaction report (CTR) and suspicious transaction report (STR) to FIU-IND. Further,
		UCBs were advised to arrange to file the data of non-computerised branches into an electronic file with
		the help of the editable electronic utilities of CTR/STR as made available by FIU–IND on their website
		(http://fiuindia.gov.in). It was further clarified that cash transaction reporting by branches to their
		Principal Officer should be submitted on a monthly basis and the principal officer, in turn, should
		ensure to submit CTR for every month to FIU-IND within the prescribed time schedule, i.e., by 15th of the
		succeeding month. It was reiterated that the cut-off limit of Rs.10 lakh for reporting in CTR should be
		applicable to integrally connected cash transactions also. UCBs were also advised that the customers
		should not be tipped off on the STRs filed by them with FIU-IND. UCBs should report all such attempted
		transactions in STRs, even if not completed by customers, irrespective of the amounts of transaction.
		UCBs should submit STRs, if they have reasonable grounds to believe that the transaction involves
		proceeds of crime, irrespective of the amount of transaction and/or threshold limit envisaged for
		predicate offences in part B of schedule of Prevention of Money Laundering Act, 2002. UCBs were
		advised to create awareness about KYC/AML among their staff and for generating alerts for suspicious
		transactions, they may consider the indicative list of suspicious activities contained in Annex E of the
		‘IBA’s Guidance Note for banks, 2005.
	3	UCBs were advised that in terms of Agricultural Debt Waiver and Debt Relief Scheme, 2008, the
		Government of India had clarified that: “If the loan is for poultry farming or sheep rearing or piggery or a
		cattle farm and part of the loan amount is used for sheds, pens, fences etc., the entire composite loan
		amount would be reckoned for calculating ‘eligible amount’ as defined in the scheme. If it is a standalone
		loan for putting up fencing or sheds, etc., these would not be covered”. Accordingly the earlier circular in
		respect of the Scheme was modified.
	8	The first meeting of the Working Group on Umbrella Organisations of UCBs and constitution of Revival
		Fund for UCBs was held at the Reserve Bank.
	9	StCBs/DCCBs were advised to ensure that all the banking facilities such as cheque book facility
		including third party cheques, ATM facility, Net banking facility, locker facility, retail loans, credit cards,
		etc., were invariably offered to the visually challenged without any discrimination. StCBs/DCCBs should
		also advise their branches to render all possible assistance to the visually challenged for availing of the
		various banking facilities.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2008
July	15	In order to facilitate raising of capital funds (Tier 1 and Tier 2) UCBs were permitted to issue preference
		shares, viz., (i) perpetual non-cumulative preference shares (PNCPS), (ii) perpetual cumulative
		preference shares (PCPS), (iii) redeemable non-cumulative preference shares (RNCPS) and (iv)
		redeemable cumulative preference shares (RCPS). Further, UCBs were permitted to raise term deposits
		for a minimum period of not less than five years, which would be eligible to be treated as Tier 2 capital.
	31	It was decided to increase the cash reserve ratio for scheduled primary (urban) co-operative banks by 25
		basis points to 9.00 per cent of net demand and time liabilities (NDTL) with effect from the fortnight
		beginning August 30, 2008.
August	12	UCBs were advised that fictitious lottery and money circulation schemes aimed at defrauding members
		of the public had come to light from time to time. It was clarified that remittances in any form towards
		participation in lottery schemes was prohibited under Foreign Exchange Management Act, 1999.
		Further, these restrictions were also applicable to remittances for participation in lottery-like schemes
		functioning under different names, such as money circulation scheme or remittances for the purpose of
		securing prize money/awards etc.
	28	UCBs were advised to ensure that a suitable mechanism exists for receiving and addressing complaints
		from their customers with specific emphasis on resolving such complaints fairly and expeditiously. For
		this purpose, UCBs were advised to: (i) ensure that the complaint registers were kept at prominent
		places in their branches which would make it possible for the customers to enter their complaints; (ii)
		have a system of acknowledging the complaints where they were received; (iii) fix a time frame for
		resolving the complaints received at different levels; (iv) display the name, address, telephone number,
		e-mail address etc., of the official who can be contacted for redressal of complaints. In case of scheduled
		UCBs, complaints not redressed within one month should be reported to the nodal officer concerned
		under the Banking Ombudsman Scheme, who should be kept updated about the status of the
		complaint. Further, they should make the customers aware of his rights to approach the Banking
		Ombudsman concerned in case he is not satisfied with the bank's response and furnish details of
		Banking Ombudsman concerned to the complainant.
September	1	UCBs were advised to consider launching special drive for finding the whereabouts of the customers/
		legal heirs in respect of existing accounts which had been transferred to the separate ledger of ‘in-
		operative accounts’.
		In view of the increase in the amount of the unclaimed deposits with banks year after year and the
		inherent risk associated with such deposits, UCBs were advised to play a more pro-active role in finding
		the whereabouts of the account holders whose accounts have remained in-operative. They were further
		advised to make an annual review of accounts in which there are no operations for more than one year.
		UCBs should inform the customers in writing about it and ascertain the reasons for the same. In case of
		shifting of the customer from the locality, bank should ask for the details of the new bank accounts to
		which the balance in the existing account could be transferred. UCBs should trace the whereabouts of
		the customers or their legal heirs in case they are deceased, through their introducer or employer etc.
		Further, UCBs were advised not to charge for activation of in-operative account. UCBs were also advised
		to ensure that the amounts lying in in-operative accounts ledger are properly audited by the internal
		auditors/statutory auditors of the bank. Interests on savings accounts should be credited on regular
		basis whether the account is operative or not. If a matured fixed deposit is unpaid, the amount will
		attract savings bank rate of interest.
	5	UCBs were advised certain modification of procedure for reimbursement of claims and audit of claims
		under the Agricultural Debt Waiver and Relief Scheme 2008. Claims are required to be filed for 'waiver'
		and 'relief' only after actually passing on the benefit to the beneficiaries. UCBs were advised to forward
		the 'Preliminary' claims to the concerned regional office of the Reserve Bank for release of first instalment
		under the scheme, latest by October 31, 2008 (for debt waiver) and by September 30, 2009 (for debt
		relief), respectively. Subsequently preliminary claims were to be subjected to sample check during the
		annual statutory audit exercise for the year 2009-10 (for debt relief) by the statutory auditors, who can
		be entrusted this job as a special assignment by banks. A representative sample covering at least 20% of
		branches and accounts are required to be covered by the statutory auditors, for certifying the
		correctness of the claims.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2008
September	9	With a view to improving the quality of customer service in UCBs, scheduled urban co-operative banks
		were suggested to consider becoming members of banking codes and standards board of India (BCSBI).
	17	Guidelines on liquidity risk management were issued to Tier I UCBs. They were also advised to prepare
		separate returns as on the last reporting friday of March/June/September/December and submit the
		same to the board within a month from the last reporting friday. The first such set of returns may be put
		to the board as on the last reporting friday of December 2008. Banks were advised to designate and
		authorise one or two senior official/s who would be responsible for the correct compilation and timely
		submission of these returns and would be fully responsible for the information furnished therein.
		It was decided that in addition to scheduled UCBs for which guidelines are already in place, all other Tier
		II UCBs may also adopt Asset Liability Management(ALM) as per the guidelines forwarded to them. UCBs
		which have already adopted more sophisticated systems may ensure to finetune their current system to
		ensure compliance with the requirements of the ALM system suggested in the guidelines. To begin with
		UCBs should ensure coverage of at least 60% of their liabilities and assets. As for the remaining 40% of
		their assets and liabilities, banks may include the position based on their estimates. UCBs were advised
		to set interim targets so as to cover 100 per cent of their business by April 1, 2010. Once the system
		stabilizes, they should prepare to switch to more sophisticated techniques. To start with, the statement
		of structural liquidity should be prepared as on last reporting Friday of March/June/September/
		December and put up to ALCO(Asset-Liability Committee). It is the intention to put the reporting system
		on a fortnightly basis with effect from December 2008. Tolerance level for various maturities may be fixed
		by the bank's Top Management depending on the bank's asset-liability profile, extent of stable deposit
		base, the nature of cash flows etc. In respect of mismatches in cash flows, bank's managements should
		try to keep it at the minimum levels. The object of the Reserve Bank is to enforce the tolerance levels
		strictly with effect from April 1, 2010. UCBs were also advised that in the Statement of Interest Rate
		Sensitivity, only rupee assets, liabilities and off balance sheet positions should be reported. UCBs were
		expected to move over to monthly reporting system with effect from April 1, 2010. In order to enable the
		UCBs to monitor their liquidity on a dynamic basis over a time horizon spanning 1-90 days, an indicative
		format was prescribed. UCBs were advised that the first such ALM return should be put to the ALCO/
		Top Management as on the last reporting Friday of December 2008.
		UCBs which are recognised as Authorised Dealers category I and II may participate in designated
		currency futures exchanges recognised by SEBI as clients only, for the purpose of hedging their
		underlying forex exposures.
		UCBs were inter alia advised to follow a more granular ALM guidelines, i.e., to split the first time
		bucket (1-14 days at present) in the statement of structural liquidity into three time buckets viz., next
		day, 2-7 days and 8-14 days. The revised format will be effective from January 1, 2009.
	18	UCBs have been advised to display the information related to interest rates and service charges, as per
		a given format in their premises as well as post it on their websites to enable customers obtain the
		desired information at a glance.
	19	The interest rates on Non-Resident (External) Rupee (NRE) deposits have been revised with effect from
		September 16, 2008. Interest rate on Term Deposits (NRE) for 1-3 years maturity should not exceed the
		LIBOR/SWAP rates plus 50 basis points as on last working day of the month of August, 2008 for
		corresponding maturities. The interest rates as determined above for three year deposits will also be
		applicable in case the maturity period exceeds three years and will also be applicable to NRE deposits
		renewed after their existing maturity period.
		Interest on all Foreign Currency Non-Resident (B) (FCNRB) deposits of all maturities shall be paid within
		the ceiling rate of LIBOR/SWAP rates minus 25 basis points for the respective currency as against
		LIBOR/SWAP rate minus 75 basis points with effect from September 16, 2008.
		In terms of a Supreme Court Judgement, UCBs have been advised that excess amount realised from
		their borrowers, if any, towards interest tax by way of rounding off may be deposited with a trust created
		for the benefit of disadvantaged people, by the Ministry of Social Justice and Empowerment. It was
		decided to extend the simplified off-site surveillance (OSS) reporting system to all the remaining Tier I
		UCBs having deposits below Rs.50 crore. The system comprises a set of 5 returns of which 4 are required
		to be submitted at quarterly intervals while the fifth return on Bank Profile is an annual return. The
		annual return of the Bank Profile is to be prepared at March 31, every year and the other 4 quarterly

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2008
		returns are to be prepared at the end of March, June, September and December of every year. UCBs are
		required to submit all these returns to concerned regional offices of the Reserve Bank within one month
		from the end of the quarter/year. This would come into effect from quarter ending December 31, 2008
		and the time for submission of the first quarter returns would be 3 months upto March 31, 2009.
September		It was decided to extend the simplified OSS reporting system to all the remaining Tier II UCBs having
		deposits below Rs.50 crore. The system comprises of a set of 8 returns of which 7 are required to be
		submitted at quarterly intervals while the 8th return on Bank Profile is an annual return. The annual
		return of the Bank Profile is to be prepared at March 31, every year and the other 7 quarterly returns are
		to prepared at the end of March, June, September and December of every year. UCBs are required to
		submit all these returns to concerned regional offices of the Reserve Bank within one month from the
		end of the quarter/year. This would come into effect from quarter ending December 31, 2008.
	26	UCBs were advised to review that their branches are operating from premises which have a subsisting
		and valid lease agreement, free of any dispute between the bank and the landlord of the premises in
		question. Banks were also advised to report the list of their branches/offices that are operating in
		premises in respect of which a dispute is pending with the landlord, to the Regional Director of the
		Reserve Bank concerned before October 15, 2008 as per the prescribed format.
	30	As per extant instructions on treatment of deposits with DCCB/StCB as SLR, UCBs availing loan from
		DCCBs/StCBs with which the UCB maintains deposits, can deduct the amount of loan availed from the
		deposits irrespective of whether lien had been marked on such deposits or not, for the purpose of
		reckoning such deposits as SLR. In this connection, salary earners' co-operative banks were allowed
		extension of time upto March 31, 2009 for complying with the instructions.
October	7	Scheduled primary (urban) co-operative banks were advised that cash reserve ratio (CRR) will be
		reduced by 50 basis points from 9.00 per cent to 8.50 per cent of their net demand and time liabilities
		(NDTL) with effect from the fortnight beginning October 11, 2008.
		Scheduled State co-operative banks were advised that cash reserve ratio (CRR) will be reduced by 50
		basis points from 9.00 per cent to 8.50 per cent of their net demand and time liabilities (NDTL) with effect
		from the fortnight beginning October 11, 2008.
	10	On a review of the evolving liquidity situation in the context of global and domestic developments,
		scheduled primary (urban) co-operative banks were advised to reduce the cash reserve ratio (CRR) by
		150 basis points from 9.00 per cent to 7.50 per cent of their net demand and time liabilities (NDTL)
		instead of the 50 basis points (from 9.00 per cent to 8.50 per cent) reduction with effect from the fortnight
		beginning October 11, 2008.
		On a review of the evolving liquidity situation in the context of global and domestic developments,
		scheduled state co-operative banks were advised to reduce the CRR by 150 basis points from 9.00 per
		cent to 7.50 per cent of their net demand and time liabilities (NDTL) instead of 50 basis points (from 9.00
		per cent to 8.50 per cent) reduction with effect from the fortnight beginning October 11, 2008.
	15	All StCBs/DCCBs were advised that the interest rates on fresh Non-Resident (External) Rupee (NRE)
		term deposits for one to three years maturity should not exceed the LIBOR/SWAP rates plus 100 basis
		points, as on the last working day of September, 2008 for US dollar of corresponding maturities. The
		interest rates as determined above for three year deposits will also be applicable in case the maturity
		period exceeds three years. The changes in interest rates will also apply to NRE deposits renewed after
		their present maturity period.
		On a review of the evolving liquidity situation all scheduled State co-operative banks were advised to
		reduce the CRR by 100 basis points from 7.50 per cent to 6.50 per cent of their NDTL with effect from the
		current reporting fortnight beginning on October 11, 2008.
	16	All UCBs were advised that the interest rates on fresh Non-Resident (External) Rupee (NRE) term
		deposits for one to three years maturity should not exceed the LIBOR/SWAP rates plus 100 basis points,
		as on the last working day of September, 2008 for US dollar of corresponding maturities. The interest
		rates as determined above for three year deposits will also be applicable in case the maturity period
		exceeds three years. The changes in interest rates will also apply to NRE deposits renewed after their
		present maturity period.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2008
October		All UCBs were advised that in respect of FCNR (B) deposits of all maturities contracted effective from the
		close of business in India as on October 15, 2008 interest rates shall be paid within the ceiling rate of
		LIBOR/SWAP rates plus 25 basis points for the respective currency/corresponding maturities. On
		floating rate deposits, interest shall be paid within the ceiling of SWAP rates for the respective currency/
		maturity plus 25 basis points. For floating rate deposits, the interest reset period shall be six months.
		On a review of the evolving liquidity situation all scheduled primary (urban) co-operative banks were
		advised to reduce the cash reserve ratio (CRR) by 100 basis points from 7.50 per cent to 6.50 per cent of
		their NDTL with effect from the reporting fortnight beginning on October 11, 2008.
		C) Financial Institutions (FIs)
2007
April	20	Comprehensive guidelines on derivatives were issued to all term-lending and refinancing institutions.
		The major requirements for undertaking any derivative transaction from the regulatory perspective were
		laid down. Guidelines also covered extant instructions relating to rupee interest rate derivatives.
May	16	In partial modification of the earlier guidelines on purchase /sale of NPAs, all India term lending and
		refinance institutions were advised that regarding purchase/sale of NPAs, at least 10 per cent of the
		estimated cash flows should be realised in the first year and at least 5 per cent in each half year
		thereafter, subject to full recovery within three years.
July	31	Select all India FIs (NHB, NABARD, EXIM Bank, SIDBI, TFCI Ltd., IFCI Ltd., IIBI Ltd.) were informed that
		SEBI had permitted FIMMDA to set up its reporting platform for corporate bonds. It was also mandated
		to aggregate the trades reported on its platform as well as those reported on BSE and NSE with
		appropriate value addition. FIMMDA had proposed to go live with its platform from September 1, 2007.
		The select AIFIs were required to report their secondary market transactions in corporate bonds in the
		OTC market on FIMMDA's reporting platform with effect from September 1, 2007.
August	22	All AIFIs were advised to invariably furnish a copy of the loan agreement alongwith a copy each of all
		enclosures quoted in the loan agreement to all borrowers at the time of sanction/disbursement of loans.
2008
May	22	In terms of earlier guidelines issued on 'KYC Norms' and 'AML Measures', FIs were required to prepare a
		profile for each customer based on risk categorisation. The need for periodical review of risk
		categorisation was also emphasised. It was reiterated that financial institutions, as a part of transaction
		monitoring mechanism, are required to put in place an appropriate software application to throw alerts
		when the transactions are inconsistent with risk categorisation and updated profile of customers.
June	4	It was observed that, over the years, the Government of India has, from time to time, issued several
		special securities which do not qualify for the purpose of complying with the SLR requirements of FIs.
		Such Government securities are governed by a separate set of terms and conditions and entail a higher
		degree of illiquidity spread. The issue of valuation of such special securities was examined. It has been
		decided that, for the limited purpose of valuation, all special securities issued by the Government of
		India, directly to the beneficiary entities, which do not carry SLR status, may be valued at a spread of 25
		bps above the corresponding yield on Government of India securities. This amendment would come into
		force from the financial year 2008-09.
		D) Non-Banking Financial Companies (NBFCs)
2007
April	4	NBFCs were advised to explicitly state in their advertisements issued in print/electronic media
		(including web-sites)/statement in lieu of advertisement, that the company is having a valid certificate of
		registration issued by the Reserve Bank. However, the Reserve Bank does not accept any responsibility
		or guarantee about the financial soundness of the company or for the correctness of any of the
		statements or representations made or opinions expressed by the company and for repayment of
		deposits/discharge of the liabilities by the company.
	24	The maximum interest rate payable on public deposits by NBFCs/miscellaneous non-banking
		companies (chit fund companies) (excluding RNBCs) revised to 12.5 per cent per annum. The new rate of
		interest would be applicable to fresh public deposits and renewals of matured public deposits.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2007
April	25	The securitisation companies/reconstruction companies registered with the Reserve Bank were advised
		to submit quarterly statement in the formats SCRC 1 (statement on assets acquired, securitised and
		reconstructed) and SCRC 2 (statement on assets acquired, securitised and reconstructed-bank-wise),
		within 15 days of the close of the quarter to which it pertains. The first such statement was to be
		forwarded for the quarter ending March 31, 2007.
	27	NBFCs - ND-SI advised to put in place a system for submission of an annual statement of capital funds,
		risk asset ratio etc., as at end-March every year in form NBS-7. The first such return was to be submitted
		for the year ending March 31, 2007. The return was to be submitted within a period of three months from
		the close of the financial year, annually.
May	8	Deposit taking NBFCs with deposit size of Rs.20 crore and above and NBFCs-ND-SI were advised to
		frame their internal guidelines on corporate governance which, inter alia, may include constitution of
		audit committee, nomination committee and risk management committee. They were also advised to
		follow disclosure and transparency practices and instructions on connected lending.
	16	In partial modification of the earlier guidelines, all NBFCs (including RNBCs) were advised that regarding
		purchase/sale of NPAs, at least 10 per cent of the estimated cash flows should be realised in the first
		year and at least 5 per cent in each half year thereafter, subject to full recovery within three years.
	24	In view of several complaints regarding levying of excessive interest and charges on certain loans and
		advances by NBFCs, they were advised to lay out appropriate internal principles and procedures in
		determining interest rates and processing and other charges, even though interest rates are not
		regulated by the Reserve Bank. NBFCs were advised to keep in view the guidelines on Fair Practices
		Code about transparency in respect of terms and conditions of the loan.
	28	Guidelines were issued to all registered Securitisation Companies/ Reconstruction Companies on
		declaration of net asset value of Security Receipts issued by them.
July	2	Updated guidelines and directions together with guidance notes as on June 30, 2007 were issued to
		Securitisation Companies and Reconstruction Companies.
	11	Guidelines on Corporate Governance were issued to all NBFCs-D with deposit size of Rs.20 crore and
		above and all NBFCs-ND-SI vide circular dated May 8, 2007. In view of the suggestions received from
		various NBFCs / association of NBFCs, the instructions relating to connected lending were kept in
		abeyance till final evaluation of the suggestions and modifications.
September	4	All deposits taking NBFCs were advised that a copy of FMR-1 where the amount involved in the fraud
		was Rs.25 lakh and above should also be submitted to the regional office of the Reserve Bank under
		whose jurisdiction the registered office of the NBFC falls.
October	10	Guidelines were issued to NBFCs (including RNBCs) on September 28, 2006 for framing the Fair
		Practices Code in which it was prescribed under 'loan appraisal and terms/conditions', that the NBFCs
		should convey in writing to the borrower by means of sanction letter or otherwise, the amount of loan
		sanctioned alongwith the terms and conditions including annualised rate of interest and method of
		application thereof and keep the acceptance of these terms and conditions by the borrower on its record.
		In this connection, NBFCs were advised to invariably furnish a copy of the loan agreement alongwith a
		copy each of all enclosures quoted in the loan agreement to all the borrowers at the time of sanction/
		disbursement of loans.
November	22	The Ministry of Corporate Affairs regulates Mutual Benefit Financial Companies (Notified Nidhis) and
		Mutual Benefit Companies (Potential Nidhis) comprehensively since 2001. Accordingly reflecting this
		status, the provisions of the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve
		Bank) Directions, 1998 as applicable to Mutual Benefit Financial Companies were updated and such
		companies were exempted from the provisions of the said directions. However, if the application of any
		MBC (Potential Nidhis) for grant of Nidhi status was rejected by the Government of India under the
		provisions of the Companies Act 1956, the provisions of the said Directions as applicable to NBFCs
		would apply to such companies.

Appendix: Chronology of Major Policy Developments (Continued)
Announcement Date		Measures
2007
November	26	Keeping in view the continuous complaints from credit card subscribers and the observations of the
		High Court of Delhi in the context of a public interest litigation in this regard, the Telecom Regulatory
		Authority of India (TRAI) has framed the Telecom Unsolicited Commercial Communications Regulations
		2007 for curbing unsolicited commercial communications (UCC). NBFCs were advised to implement the
		instructions issued in this regard.
December	14	RNBCs were advised that keeping in view the interest of the depositors it was decided that, where an
		RNBC failed to repay the deposits alongwith interest on maturity on the claim made by the depositor, it
		would be liable to pay interest in the manner prescribed in the directions.

2008
January	15	With prior approval of Central Government, the Reserve Bank notified mortgage guarantee companies as
		non-banking financial companies. Further, mortgage guarantee companies were exempted from the
		provisions of Section 45-IA (requirement of registration), Section 45-IB (maintenance of liquid assets)
		and Section 45-IC (creation and transfer to Reserve Fund a certain percentage of the net profit) of the RBI
		Act.
February	15	Guidelines on registration and operations of mortgage guarantee companies and prudential norms and
		investment directions as applicable to them were issued.
March	5	The securitisation companies/reconstruction companies registered with the Reserve Bank were advised
		to furnish a copy of audited balance sheets along with the directors report/auditors report every year
		within one month from the date of annual general body meeting, in which the audited results are
		adopted, starting with the balance sheet as on March 31, 2008.
		Deposit taking NBFCs (including RNBCs) were advised that cases of 'negligence and cash shortage' and
		‘irregularities in foreign exchange transactions’ were to be reported as fraud if the intention to cheat/
		defraud was suspected/proved. However certain cases where fraudulent intention is not suspected/
		proved at the time of detection, will be treated as fraud and reported. These include, cases of cash
		shortages more than Rs.10 thousand and cases of cash shortages more than Rs.5 thousand if detected
		by management/auditor/inspecting officer and not reported on the occurance by the persons handling
		cash.
April	22	In order to enable the investors to make informed investment decisions in the security receipts (SRs), the
		disclosure in respect of underlying basket of assets required to be made by Securitisation Companies/
		Reconstruction Companies in the offer documents as above, include disclosure in respect of the date of
		acquisition of the assets, valuation of the assets and the interest of SCs/RCs in such assets at the time
		of issue of SRs.
May	27	Indirect access to the NDS-OM was extended to other segments of investors, such as, other non-deposit
		taking NBFCs, corporates and foreign institutional investors (FIIs). These entities were allowed to place
		orders on NDS-OM through direct NDS-OM members viz., banks and PDs using the CSGL route.
June	2	A system of 'Multi Modal Settlements' (MMS) in Government securities market to facilitate the settlement
		of Government security transactions undertaken by the non-bank/non-PD NDS members. Under this
		arrangement, the funds leg of the transactions would be settled through the fund accounts maintained
		by these entities with select commercial banks chosen as 'designated settlement banks' (DSB).
	17	In order to ensure a measured movement towards strengthening the financials of all deposit taking
		NBFCs by increasing their net owned fund (NoF) to a minimum of Rs.200 lakh, NBFCs-D having a
		minimum NoF of less than Rs.200 lakh were advised to freeze their deposits at the level currently held by
		them. Further AFCs having minimum investment grade credit rating and CRAR of 12 per cent are
		required to bring down their public deposits to a level that is 1.5 times their NoF while all other
		companies may bring down their public deposits upto the revised ceiling prescribed.

July	31	NBFCs were advised that the balance in deferred tax liability (DTL) account would not be eligible for
		inclusion in Tier I or Tier II capital for capital adequacy purpose as it was not an eligible item of capital.
		Further, deferred tax asset (DTA) would be treated as an intangible asset and should be deducted from
		Tier 1 capital.

Appendix: Chronology of Major Policy Developments (Concluded)
Announcement Date		Measures
2008
August	1	NBFCs-ND-SI were advised that they would be required to achieve 12 per cent CRAR by March 31, 2009
		and 15 per cent CRAR by March 31, 2010. A few modifications were made in their disclosure and ALM
		reporting norms as well.
	14	All deposit taking NBFCs were advised that they could report frauds perpetrated in their subsidiaries
		and affiliates/joint ventures. Such frauds should, however, not be included in the report on outstanding
		frauds and the quarterly progress reports. They were further advised that in respect of frauds in
		borrowal accounts additional information under FMR-1 as prescribed may be furnished.
September	15	NBFCs (excluding RNBCs) were advised that the erstwhile equipment leasing/hire purchase NBFCs
		should, duly supported by Statutory Auditor's Certificate as on March 31, 2008, approach the regional
		office concerned for their appropriate reclassification latest by December 31, 2008. Those NBFCs which
		did not opt for the reclassification by the prescribed date would be deemed to be loan companies.
	24	It was decided to call for basic information from non-deposit taking NBFCs with asset size of Rs.50 crore
		and above but less than Rs.100 crore at quarterly intervals. The first such returns for the quarter ended
		September 2008 could be submitted by first week of December 2008. The quarterly return as at end of
		each quarter could be filed online with the regional office of the Department of Non-Banking Supervision
		in whose jurisdiction the company was registered, within a period of one month from the close of the
		quarter.
October	29	Taking into consideration, the need for enhanced funds for increasing business and meeting regulatory
		requirements, it was decided that NBFCs-ND-SI may augment their capital funds by issue of Perpetual
		Debt Instruments (PDI) subject to certain conditions.
	31	As a temporary measure, it was decided to permit NBFCs-ND-SI to raise short-term foreign currency
		borrowings, under the approval route, subject to certain conditions pertaing to eligibility of borrower and
		lenders, end-use of funds, maturity etc.

		E) Primary Dealers (PDs)

2007
April	20	Comprehensive guidelines on derivatives were issued to PDs. The major requirements for undertaking
		any derivative transaction from the regulatory perspective were laid down. Guidelines also covered
		extant instructions relating to rupee interest rate derivatives.
July	31	All PDs were advised that the ceiling of Rs. 3,000 crore on daily reverse repo under the LAF was
		withdrawn with effect from August 6, 2007. The Second LAF (SLAF) introduced on November 28, 2005
		and conducted between 3.00-3.45 p.m. on a daily basis was withdrawn w.e.f. August 6, 2007. The Bank
		would continue to conduct LAF operations between 9.30 am and 10.30 am as a single LAF window.
August	23	All PDs were advised that the CCIL had developed a reporting platform for OTC Interest Rate Derivatives,
		which would capture the transactions in OTC interest rate derivatives (IRS/FRA). All PDs were required
		to report all their IRS/FRA trades on the reporting platform within 30 minutes from the deal time. Client
		trades were not to be reported. PDs should also ensure that details of all the outstanding IRS/FRA
		contracts (excluding the client trades) were migrated to the reporting platform by September 15, 2007.
November	14	All PDs in Government Securities market and scheduled commercial banks undertaking PD business
		departmentally were advised that the scheme of underwriting commitment and liquidity support has
		been revised. It was accordingly decided that the minimum bidding requirement for each PD in the
		additional competitive underwriting (ACU) auction would henceforth be equal to the amount of
		minimum underwriting commitment (MUC) announced by the Reserve Bank.

2008
January	1	The cover leg of when-issued (WI) transactions was permitted to be undertaken even outside the NDS-
		OM platform, i.e., through telephone market.
October	20	The fixed repo rate under the Liquidity Adjustment Facility (LAF) was reduced by 100 basis points from
		9.0 per cent to 8.0 per cent with immediate effect. Accordingly, the special term repo and the repo under
		the second LAF would be conducted at the revised rate of 8.0 per cent with effect from October 20, 2008.