Chronology of Major Policy Developments - ಆರ್ಬಿಐ - Reserve Bank of India
Chronology of Major Policy Developments
Announcement |
Measures |
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Date |
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A) Commercial Banks |
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2004 |
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April |
10 |
• |
Revised norms issued with regard to cheque Drop Box facility, delivery of cheque books over the |
counter and statement of accounts/pass book. |
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19 |
• |
All Scheduled Commercial Banks (SCBs) advised of the State/Union Territory-wise physical targets |
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for sanctioning and disbursing of loans under the Prime Minister Rozgar Yojana (PMRY) for the |
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purpose of their quarterly targets to be achieved by end-March 2005. |
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22 |
• |
Banks advised to inform their account holders, at least one month in advance of any change in the |
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prescribed minimum balance and the charges that may be levied if the minimum balance is not |
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maintained. |
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23 |
• |
Guidelines relating to the eligibility criteria (inclusive of minimum CRAR, non-performing asset |
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and regulatory compliance) for declaration of dividend by commercial banks without prior approval |
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of the Reserve Bank as well as the quantum of dividend payable (with a ceiling placed at 33 1/3 per |
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cent dividend payout ratio and methods of compilation of the ratio prescribed) modified. |
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30 |
• |
Banks (excluding RRBs and LABs) advised to review at regular intervals policies and practices |
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relating to information system (IS) audit and place the audit reports before the top management. |
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Banks to adopt an IS Audit Policy appropriate to their level of computerisation, review the same at |
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regular intervals in tune with industry best practices and guidelines issued by the Reserve Bank. |
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• |
Banks (excluding RRBs) advised to ensure strict compliance with the three accounting standards |
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(No. 24, 26 and 28) relating to discounting operations, intangible assets and impairment of assets, |
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respectively. |
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May |
8 |
• |
All SCBs advised that the subsidy under Swarna Jayanti Shahari Rozgar Yojana (SJSRY) would be |
back-ended, with a lock-in period of 2 years. |
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12 |
• |
SCBs advised to strictly maintain the confidentiality of information provided by the customer for |
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‘Know Your Customer’ (KYC) compliance. |
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15 |
• |
Banks directed to scrupulously ensure that their branches do not open current accounts of entities |
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which enjoy credit facilities (fund based or non-fund based) without specifically obtaining a no- |
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objection certificate from the lending banks. |
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18 |
• |
The requirement of margin/security for agricultural loans up to Rs.50,000 and in the case of agri- |
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business and agri-clinics for loans up to Rs.5 lakh waived. |
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20 |
• |
The exemption granted to RRBs from ‘mark to market’ norms in respect of the SLR securities |
|
extended for one more year, i.e., up to 2004-05. |
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June |
11 |
• |
To give boost to infrastructure lending, banks allowed to raise long-term bonds with a minimum |
maturity of five years. |
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15 |
• |
The risk weight in respect of exposure by banks to public financial institutions (PFIs) raised to 100 |
|
per cent for credit risk and 2.5 per cent for market risk effective April 1, 2005. |
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17 |
• |
The extant limits on unsecured exposures by banks withdrawn, allowing banks to set their own |
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limits for unsecured exposures. Unsecured exposures were redefined and it was clarified that |
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unsecured sub-standard assets would attract 20 per cent provisioning. |
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• |
The currency of the ad hoc Committees on Procedures and Performance Audit on Customer Services |
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in Banks was extended by six months and they were advised to complete the work within one year |
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from the date of their constitution and also to associate non-officials in the Committees. |
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• |
The extant guidelines on country risk management extended to cover countries where a bank has net |
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funded exposure of one per cent or more of its assets with effect from the year ended March 31, 2005. |
Annex: Chronology of Major Policy Developments (Continued) |
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Announcement |
Measures |
||
Date |
|||
2004 |
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June |
18 |
• |
Banks advised to draw a roadmap for migration to Basel II norms by the end of 2004 and prepare |
a quarterly review of the progress made. |
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21 |
• |
Boards of banks to oversee furnishing of requisite information of all borrowers to CIBIL and report |
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compliance of the same to the Reserve Bank. The role of CIBIL in dissemination of credit information |
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was clarified. CIBIL to move towards a sufficiently diversified ownership structure with no single |
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entity owning more than 10 per cent of its paid-up capital. |
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• |
Graded higher provisioning requirement according to the age of NPAs in ‘doubtful for more than |
||
three years’ category introduced for SCBs, with effect from March 31, 2005. Similar norms made |
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applicable to RRBs on August 6, 2004. |
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• |
It was clarified that the process of identifying wilful defaulters and the mechanism related to redressal |
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of grievances are two distinct processes. The borrower should be suitably advised before being |
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classified as a wilful defaulter. |
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• |
Banks to fully adhere to the ‘Know Your Customer’ (KYC) policy adopted by their Boards: (i) for |
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opening new accounts; (ii) for the existing accounts, where any wrong-doing is suspected or |
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where the summation of the credit/debit transactions is more than Rs.10 lakh; and (iii) in |
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respect of all accounts belonging to trusts, intermediaries or those operated through a mandate |
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or power of attorney. |
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• |
The vigilance procedure in public sector banks modified. Only such vigilance cases in which an |
||
officer of the level of Scale V and above is involved are required to be referred to the Central |
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Vigilance Commission (CVC) for advice. |
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• |
Boards of banks, under exceptional circumstances, allowed to raise single or group exposure limit |
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by 5 per cent of capital funds. |
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24 |
• |
Banks to provide for capital charge for market risk in respect of trading book exposures (including |
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derivatives), effective March 31, 2005. Capital charge would be introduced for securities under |
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‘Available for Sale’ (AFS) category with effect from March 31, 2006. |
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• |
Prudential norms on income recognition, asset classification and provisioning with respect to |
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agricultural advances modified with a view to aligning the repayment dates with harvesting of crops. |
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Effective September 30, 2004 a loan granted for short duration crops were required to be treated |
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as NPA if the instalment of the principal or interest thereon remains unpaid for two crop seasons |
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beyond the due date. A loan granted for long duration crops (with crop season longer than one |
|||
year) is to be treated as NPA, if the instalment of principal or interest thereon remains unpaid for |
|||
one crop season beyond the due date. |
|||
• |
All commercial banks advised to implement the measures, announced by the Union Finance Minister, |
||
for doubling the flow of credit to agriculture. |
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July |
6 |
• |
The types of instruments to be included in the prudential limit of bank’s aggregate investment in |
Tier-II bonds widened. |
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20 |
• |
Banks debarred from prescribing any minimum annual turnover for issuance of Gold Card since |
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the objective of the scheme was to cover all credit worthy exporters, including the SME segment. |
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• |
Investment by banks in the mortgage backed securities (MBS) to be classified as direct lending to |
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housing within the priority sector lending, subject to certain conditions. |
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23 |
• |
Additional measures relating to wilful defaulters introduced. These included: prohibition on |
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additional facilities, debarment from institutional finance for floating new ventures for a period |
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of five years, initiation of legal proceedings and foreclosure and also criminal proceedings, |
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wherever necessary, adoption of a proactive approach for a change of management of the wilfully |
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defaulting borrower unit, incorporation of a covenant in the loan agreement barring borrowing |
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companies to induct a person who is a director on the Board of a company which has been |
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identified as a wilful defaulter. |
Annex: Chronology of Major Policy Developments (Continued) |
|||
Announcement |
Measures |
||
Date |
|||
2004 |
|||
July |
26 |
• |
On the application of the Reserve Bank under Sub-Section (1) of Section 45 of the Banking Regulation |
Act, 1949, the Government of India made an Order of Moratorium in respect of the Global Trust Bank |
|||
Ltd. under Sub-Section (2) of the said Section for the period from the close of business on the July 24, |
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2004 and inclusive of October 23, 2004. The Government of India also issued directions to the said |
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banking company under paragraph (2) thereof authorising payment of certain liabilities and obligations. |
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In order to effect an amalgamation of the Global Trust Bank Ltd. with Oriental Bank of Commerce, the |
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Reserve Bank, in exercise of the powers conferred on it by Sub-Section (4) of the said Section, prepared |
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a scheme and forwarded it, in draft, to each of the aforesaid banking companies for suggestions and |
|||
objections, if any, in terms of clause (a) of Sub-Section (6) of Section 45 ibid by August 7, 2004. |
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29 |
• |
Banks to insist on a declaration from the account holder for opening of current accounts, stating that he/ |
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she is not enjoying any credit facility with any other commercial bank or insist on a declaration giving |
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particulars of credit facilities enjoyed by him/her with any other commercial bank(s). Banks also to |
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ascertain whether he/she is a member of any other co-operative society/bank, if so, the full details thereof. |
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30 |
• |
Norms for inclusion of Self Help Groups (SHGs) for assistance under Prime Minister Rozgar Yojana |
|
(PMRY) modified. |
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August |
3 |
• |
The monetary ceiling of the cases to be referred to the Lok Adalats, organised by Civil Courts, |
enhanced from Rs.5 lakh to Rs.20 lakh. |
|||
17 |
• |
Banks to convert all their equity holding into dematerialised form by the end of December 2004. |
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26 |
• |
Banks to ensure that the schedule of interest/instalment payable on advances on rural housing |
|
granted to agriculturists under ‘Indira Awas Yojana and Golden Jubilee Rural Housing Finance |
|||
Scheme’ is linked to crop cycles. |
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28 |
• |
Banks to initiate action at their level to get the Master Policy under Personal Accident Insurance |
|
Scheme (PAIS) for KCC holders renewed for a period of one year, on the existing terms and conditions. |
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September |
1 |
• |
Banks to take remedial measures suggested by the Group on Frauds in the area of housing finance. |
2 |
• |
Banks permitted to exceed the 25 per cent limit under Held to Maturity (HTM) category provided |
|
that the excess comprises only SLR securities and the total SLR securities held in the HTM category |
|||
are not more than 25 per cent of their NDTLs. To enable the above, banks were allowed to shift SLR |
|||
securities to the HTM category. However, no fresh non-SLR securities are permitted to be included |
|||
in the HTM category once more during the year 2004-05. |
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• |
‘Yes Bank Limited’ included in the Second Schedule to the Reserve Bank of India Act, 1934 with |
||
effect from August 21, 2004. |
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4 |
• |
Some recommendations of the Ganguly Working Group on Flow of Credit to SSI Sector were accepted |
|
and advised to banks for implementation. These include: (i) identification of new clusters and adoption of |
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cluster based approach for financing the SME sector; (ii) sponsoring specific projects as well as widely |
|||
publicising the successful working models of NGOs; (iii) sanctioning higher working capital limits to SSI |
|||
in the North East region for maintaining higher levels of inventory; and (iv) exploring new instruments for |
|||
promoting rural industry. |
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10 |
• |
Banks to open branches having no interface with customers, and which will attend exclusively to data |
|
processing, verification and processing of documents, issuance of cheque books, demand drafts etc. on |
|||
requests received from other branches and other functions incidental to banking business. The licence |
|||
for such branches to be issued under the 'Service Branch' category. |
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11 |
• |
The CRR applicable in respect of SCBs increased by one-half of one percentage point of their Net Demand |
|
and Time Liabilities (NDTL) in two stages - 4.75 per cent effective September 18, 2004 and 5.0 per cent |
|||
effective October 2, 2004. |
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October |
4 |
• |
Guidelines issued for implementing the revised Model KCC Scheme of NABARD to take care of the |
investment credit as also working capital for agriculture and allied activities and a reasonable |
|||
component for consumption needs. |
Annex: Chronology of Major Policy Developments (Continued) |
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Announcement |
Measures |
||
Date |
|||
2004 |
|||
October |
7 |
• |
The Senior Citizens Saving Scheme (SCSS), 2004 being implemented through post offices also to be |
operated through all the branches of public sector banks (PSBs) which are operating ‘PPF Scheme, 1968’. |
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14 |
• |
Industrial Development Bank of India (IDBI) Ltd. included in the Second Schedule to the Reserve |
|
Bank of India Act, 1934 with effect from October 11, 2004. |
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15 |
• |
Banks to implement a few more recommendations of the Vyas Committee. These included: (i) |
|
financing development of wasteland and fallow land; (ii) improving staffing in the rural areas to |
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promote retail lending to agriculture; (iii) relying on village functionaries for credit disbursal; (iv) |
|||
using individual volunteers, farmers’ clubs or NGOs/SHGs as direct selling agents; (v) building |
|||
synergy between good working primary agricultural credit societies and commercial banks; (vi) |
|||
using Information Technology (IT) in rural branches; (vii) working out appropriate incentive structure |
|||
for prompt repayment; (viii) making the rates of interest on small loans reasonable; and (ix) improving |
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the efficiency of credit delivery to small borrowers and association with contract farming. |
|||
• |
Guidelines relating to the process of issue of Subordinated Debt Instruments under Tier-II and |
||
Tier-III Capital issued. |
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19 |
• |
Details of the levy of penalty on a bank to be put in the public domain in the interests of the |
|
investors and depositors. The strictures or directions on the basis of inspection reports or other |
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adverse findings also to be placed in the public domain. |
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27 |
• |
RRBs permitted to undertake insurance business as corporate agent without risk participation |
|
subject to their fulfilling certain terms and conditions related to net worth, gross NPAs, profitability, |
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compliance with IRDA regulations and prudential norms and directions of the Reserve Bank. |
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November |
1 |
• |
Banks advised to formulate a comprehensive and transparent policy covering; (i) immediate credit |
of local/outstation cheques; (ii) time frame for collection of local/outstation cheques; and (iii) interest |
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payment for delayed collection. |
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• |
Banks allowed to reduce the minimum tenor of domestic/ NRO term deposits at their discretion, |
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even below Rs.15 lakh from 15 days to 7 days. |
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6 |
• |
Banks advised to take immediate steps to ensure submission of periodical data to CIBIL and progress |
|
reports to the Reserve Bank. |
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24 |
• |
Banks advised to restructure crop loans and agricultural term loans only in respect of the overdue |
|
instalments including interest thereon as on March 31, 2004. The farmers whose loans have |
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been restructured as above would be eligible for fresh loans. The rescheduled/restructured loans |
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as also the fresh loans to be issued to the farmers may be treated as current due and need not be |
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classified as NPA. |
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29 |
• |
Comprehensive guidelines on ‘Know Your Customer’ norms and Anti-Money Laundering Measures |
|
issued. Banks advised to frame their KYC policies incorporating the following four key elements: |
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(i) Customer Acceptance Policy; (ii) Customer Identification Procedures; (iii) Monitoring of Transactions; |
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and (iv) Risk Management. Similar guidelines were issued to RRBs on February 18, 2005. |
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December |
8 |
• |
The Service Area Approach (SAA) introduced in April 1989 was reviewed and it was decided to |
dispense with the restrictive provisions of the scheme, while retaining the positive features such as |
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credit planning and monitoring of the credit purveyance. |
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• |
The recommendations of the Ganguly Working Group with regard to evaluation of methods of |
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utilisation of deposits made by foreign banks with SIDBI for shortfall in their priority sector obligation |
|||
accepted. Accordingly, the amount of shortfall in priority sector obligation to be placed with SIDBI |
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for a tenor of three years and the funds so placed to have a graded interest rate structure. |
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15 |
• |
Banks advised to align their priority sector lendings/ investments suitably so as to comply with the |
|
extant guidelines. |
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16 |
• |
Banks advised that the due diligence in respect of members of the Nomination Committee be carried |
|
out by the Board itself. |
Annex: Chronology of Major Policy Developments (Continued) |
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Announcement |
Measures |
||
Date |
|||
2004 |
|||
December |
21 |
• |
Comprehensive guidelines issued to banks to play a proactive role in achieving the targets set |
under the Swarnjayanti Gram Swarozgar Yojana (SGSY) scheme. |
|||
23 |
• |
Risk weight on housing loans extended by SCBs increased from 50 per cent to 75 per cent and in |
|
the case of consumer credit including personal loans and credit cards increased from 100 per cent |
|||
to 125 per cent. |
|||
24 |
• |
Banks advised that the finance extended to employees for purchasing shares of their own companies |
|
under ESOP would continue to be treated as banks' exposure to capital market within the overall |
|||
ceiling of 5 per cent, as hitherto. |
|||
27 |
• |
Banks maintaining currency chests advised to direct all their branches to accept coins of all |
|
denominations tendered at their counters either for exchange or for deposit in accounts. |
|||
30 |
• |
Banks advised to enhance the amount of consumption loan for general purposes to Rs.3,000 for |
|
people affected by Tsunami. |
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2005 |
|||
January |
4 |
• |
Guidelines on receipt of foreign contributions by Associations/ Organisations in India under Foreign |
Contribution (Regulation) Act, 1976 for Tsunami Relief issued to banks. |
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18 |
• |
Banks advised to formulate suitable loan policies to finance second hand assets, both directly and |
|
through NBFCs. |
|||
• |
Banks advised to ensure acceptance of coins of all denominations without any restriction from the |
||
members of the public by their branches. |
|||
February |
15 |
• |
Detailed prudential guidelines issued to banks on capital adequacy for implementation of the New |
Capital Adequacy framework under Basel II. In order to maintain consistency and harmony with |
|||
international standards, banks were advised to adopt Standardised Approach for credit risk and |
|||
Basic Indicator Approach for operational risk with effect from March 31, 2007. The Reserve Bank |
|||
may consider allowing some banks to migrate to Internal Rating Based (IRB) approach after |
|||
developing adequate skills both in banks and at supervisory levels. Under the new framework, |
|||
banks adopting Standardised Approach would use the ratings assigned only by those credit rating |
|||
agencies which are identified by the Reserve Bank. Banks were also required to focus on formalising |
|||
and operationalising their internal capital adequacy assessment process (CAAP) which would serve |
|||
as a useful benchmark while undertaking the parallel run with effect from April 1, 2006. |
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28 |
• |
Comprehensive guidelines issued on ownership and governance in private sector banks encompassing |
|
the minimum capital requirement, diversified ownership, procedures for acquisition and transfer |
|||
of shares, ‘fit and proper’ criteria for the directors and important shareholders. |
|||
• |
Roadmap for presence of foreign banks in India laid out in two phases. In the first phase (March |
||
2005 to March 2009) foreign banks wishing to establish presence in India for the first time could |
|||
either choose to operate through branch presence or set up a 100 per cent wholly owned subsidiary |
|||
(WOS), following the one-mode presence criterion. For new and existing foreign banks, it was |
|||
proposed to go beyond the existing WTO commitment of 12 branches in a year. Initially entry of |
|||
foreign banks would be permitted only in private sector banks that are identified by the Reserve |
|||
Bank for restructuring, wherein foreign banks would be allowed to acquire a controlling stake in a |
|||
phased manner. In the second phase beginning April 2009, the experience with Phase I would be |
|||
reviewed and after due consultations with all stakeholders in the banking sector issues concerning |
|||
extension of national treatment to WOS, dilution of stake and permitting mergers and acquisitions |
|||
of any private sector banks in India by a foreign bank would be examined. |
|||
March |
1 |
• |
Master circular issued to SCBs (including RRBs/LABs) in regard to matters relating to lending to |
the small scale industries sector. |
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3 |
• |
SCBs to report to NABARD and the Reserve Bank the progress under micro credit on a half-yearly |
|
basis as at the end of March and September of every year. |
|||
• |
Effective March 31, 2005, SCBs to disclose a minimum framework on their risk exposure in derivatives. |
Annex: Chronology of Major Policy Developments (Continued) |
|||
Announcement |
Measures |
||
Date |
|||
2005 |
|||
March |
11 |
• |
Parameters on pilot implementation of Cheque Truncation Image Standards issued to banks. |
• |
Draft guidelines on implementation of the New Capital Adequacy Framework issued for comments |
||
on management of operational risk. |
|||
29 |
• |
Banks advised to exercise caution in outsourcing of their systems and ensure that risks in this regard are |
|
minimised. |
|||
30 |
• |
Banks advised to implement some recommendations of the Vyas Committee. These included: |
|
(i) constitution of local advisory committee for all rural branches/group of branches; (ii) setting up of |
|||
micro-finance cells at banks, central offices; and (iii) encouraging SHGs to use local book writers in |
|||
association with concerned agencies promoting these SHGs for maintaining the quality of books of accounts. |
|||
April |
4 |
• |
Comprehensive draft guidelines issued on securitisation of standard assets. |
7 |
• |
The lending and deposit rates of interest restructured in the case of amounts disbursed on or |
|
before October 31, 2003 out of RIDF IV to VII, effective April 16, 2005. |
|||
11 |
• |
Detailed guidelines issued to banks on rural lending under Annual Credit Plans on the basis of |
|
Potential Linked Plans (PLPs) prepared by NABARD. |
|||
• |
Banks to pay compensation for delayed credit under ECS/EFT/SEFT suo moto. |
||
12 |
• |
Comprehensive draft guidelines issued on purchase / sale of non-performing assets. |
|
13 |
• |
The rate of interest to be charged on group loans under SGSY linked to per capita size of the loans. |
|
15 |
• |
Banks advised to put in place a Business Continuity Plan including a robust information risk |
|
management system within a fixed time frame. |
|||
16 |
• |
Banks advised to take necessary action to convert the existing ad hoc Committees on Procedures |
|
and Performance Audit of Public Services (CPPAPS) into a Standing Committee on Customer Service. |
|||
19 |
• |
Banks advised on the role of Customer Service Committee of the Board for monitoring the |
|
implementation of awards under the Banking Ombudsman Scheme. |
|||
27 |
• |
Banks permitted to shift their rural branches within the block/service area without obtaining prior |
|
approval of the Reserve Bank, subject to their complying with certain conditions. |
|||
30 |
• |
Banks allowed to formulate schemes for providing services at the premises of a customer within the |
|
framework of Section 23 of the Banking Regulation Act, 1949 and submit to the Reserve Bank for approval. |
|||
• |
Banks with capital of at least 9 per cent of the risk weighted assets for both credit risk and market |
||
risk for both HFT and AFS category of investments may treat the balance in excess of 5 per cent of |
|||
securities included under HFT and AFS categories, in the IFR as Tier-I capital. |
|||
May |
4 |
• |
General permission granted to banks to declare dividends, subject to the fulfilment of certain |
conditions, including observance of minimum CRAR and NPA ratio, subject to a ceiling of dividend |
|||
payout ratio of 40 per cent. |
|||
• |
Effective quarter ended June 2005, the time limit for filing the monthly and quarterly off-site returns |
||
changed to 15 days and 21 days, respectively, from the close of the relevant period for all categories |
|||
of banks. |
|||
6 |
• |
Draft Guidelines on Corporate Debt Restructuring (CDR) proposed. |
|
11 |
• |
Detailed guidelines for merger/amalgamation of private sector banks issued laying down the process |
|
of merger proposal, determination of swap ratios, disclosures, the stages at which Boards will get |
|||
involved in the merger process and norms of buying/selling of shares by the promoters before and |
|||
during the process of merger. |
|||
12 |
• |
Comprehensive guidelines issued allowing all Regional Rural Banks (RRBs) to undertake insurance |
|
business on a referral basis, subject to certain conditions. |
Annex: Chronology of Major Policy Developments (Continued) |
|||
Announcement |
Measures |
||
Date |
|||
2005 |
|||
May |
13 |
• |
The Vision Document on Payment and Settlement System 2005-08 released. |
20 |
• |
Banks advised to initiate early action with regard to scheme for "Small Enterprises Financial Centres" |
|
(SEFCs) envisaged for forming a strategic alliance between branches of banks and SIDBI located in |
|||
the clusters for improving credit flow to the SSIs sector. |
|||
26 |
• |
SCBs advised to put in all efforts to achieve the credit mobilisation targets under SGSY during |
|
2005-06, including the minimum subsidy credit ratio fixed and maintain per family investment of |
|||
Rs.25,000. |
|||
June |
7 |
• |
Banks allowed to extend financial assistance to Indian companies for acquisition of equity in overseas |
joint ventures/wholly owned subsidiaries or in other overseas companies, new or existing, as strategic |
|||
investment in terms of a Board approved policy, duly incorporated in the loan policy of the bank. |
|||
9 |
• |
Instructions issued to banks, in supersession of all earlier instructions on settlement of claims in |
|
respect of deceased depositors, covering aspects relating to (i) access to balance in deposit account; |
|||
(ii) premature termination of term deposit accounts; (iii) treatment of flows in the name of the |
|||
deceased depositor; (iv) access to the safe-deposit lockers/ safe custody articles; and (v) time limit |
|||
for settlement of claims. |
|||
• |
Banks (both in private and public sectors) need not obtain approval of the Reserve Bank for |
||
permitting any of their whole-time officers or employees (other than Chairmen/CEOs) to become |
|||
Director or a part-time employee of any other company. |
|||
14 |
• |
Processing charges waived for all electronic products for transactions under EFT, SEFT and |
|
ECS facility involving Rs.2 crore and above with effect from June 14, 2005 up to the period |
|||
ending March 31, 2006. This was in addition to the existing waiver on transactions involving |
|||
less than Rs.2 crore. |
|||
20 |
• |
Banks advised that while furnishing data/information to the Government or other investigating |
|
agencies they should satisfy themselves that the information is not of such a nature as will violate |
|||
the provisions of the laws relating to secrecy in banking transactions. |
|||
24 |
• |
For the purpose of Section 20 of the Banking Regulation Act, 1949 the term "loans and advances" |
|
shall not include line of credit/ overdraft facility extended by settlement bankers to National Security |
|||
Clearing Corporation Limited (NSCCL) to facilitate smooth settlement. |
|||
25 |
• |
The banks going for rights issues should henceforth make complete disclosure of the regulatory |
|
requirements in their offer documents. |
|||
29 |
• |
Banks advised to have a Board mandated policy in respect of their real estate exposure covering |
|
exposure limits, collaterals to be considered, margins to be kept, sanctioning authority/level, sector |
|||
to be financed. Banks also directed to report their real estate exposure under certain heads and |
|||
disclose their gross exposure to real estate sector as well as the details of the break-up in their |
|||
Annual Reports. |
|||
July |
13 |
• |
Banks advised to furnish information on pricing of services for products based on RTGS / SEFT/ |
EFT/ECS infrastructure. |
|||
• |
Guidelines on sale/purchase of NPAs, including valuation and pricing aspects, and prudential and |
||
disclosure norms. |
|||
20 |
• |
Prior approval of the Reserve Bank not required for offering Internet Banking services, subject to |
|
fulfilment of certain conditions. |
|||
23 |
• |
The authority to grant permission to companies listed on a recognised stock exchange to hedge the |
|
price risk in respect of any commodity (except gold, silver, petroleum and petroleum products) in |
|||
the international commodity exchanges/markets delegated to select commercial banks. |
|||
26 |
• |
The risk weight for credit risk on capital market and commercial real estate exposures increased |
|
from 100 per cent to 125 per cent. |
Annex: Chronology of Major Policy Developments (Continued) |
|||
Announcement |
Measures |
||
Date |
|||
2005 |
|||
July |
29 |
• |
Guidelines issued for relief measures by banks in areas affected by unprecedented rains and floods |
in Maharashtra. Accordingly, banks were advised to consider granting consumption loans to the |
|||
affected persons up to Rs.5,000 without any collateral and Rs.10,000 at the discretion of the |
|||
branch manager, depending on the repaying capacity of the borrower. |
|||
August |
2 |
• |
Banks advised to issue necessary instructions to the Controlling Offices of currency chest branches |
for ensuring verification of balances as per the minimum periodicity stipulated in this regard and |
|||
the essential safeguards in the internal control system (such as surprise verification/joint custody, |
|||
etc.) are adhered to. |
|||
• |
In view of the natural calamity and the need to provide immediate succour, banks instructed to |
||
observe minimum formalities for enabling such persons to open bank account quickly. |
|||
3 |
• |
Banks advised to formulate a detailed mid-term corporate plan for branch expansion for a three- |
|
year period with the approval of the Board. The plan should cover all categories of branches/offices |
|||
having customer contact, including specialised branches, Extension Counters and number of ATMs |
|||
etc. The plan should be formulated on district-wise basis giving number of branches proposed to |
|||
be opened in metropolitan/urban/semi-urban/rural areas. The proposal for branch expansion with |
|||
the above mentioned details should be submitted on an annual basis by December every year. |
|||
19 |
• |
In pursuance to the announcement made by the Union Finance Minister for stepping up credit to |
|
small and medium enterprises, public sector banks were advised to take measures to improve |
|||
the flow of credit to the sector. A reporting and monitoring system for the same was also |
|||
prescribed. Similar guidelines issued to private sector banks, foreign banks, RRBs and LABs |
|||
on August 25, 2005. |
|||
23 |
• |
Banks advised to make all out efforts in achieving the targets set for increasing the credit flow to |
|
SCs/STs under priority sector advances as well as under the Government Sponsored Schemes such |
|||
as SGSY, SJSRY, SLRS and PMRY. Banks also instructed to ensure that sufficient publicity is given |
|||
on the facilities extended to SCs/STs and all the instructions contained in the Master Circular on |
|||
Credit facilities to SC/STs are strictly followed. |
|||
• |
The KYC procedure for opening accounts simplified further for those persons who intend to keep |
||
balances not exceeding rupees fifty thousand (Rs.50,000) in all their accounts taken together and |
|||
the total credit in all the accounts taken together is not expected to exceed rupees one lakh |
|||
(Rs.1,00,000) in a year. Banks may open accounts with introduction from another account holder |
|||
(holding account for at least six months) who has been subjected to full KYC procedure or any |
|||
other evidence as to identify and address of the customer to the satisfaction of the bank. Similar |
|||
guidelines were also issued to RRBs. |
|||
31 |
• |
Local Area Banks were advised to submit returns and statements to the departments / offices of RBI as |
|
indicated in Annexure 'A' and 'B' enclosed to the circular issued to them on August 31, 2005. |
|||
• |
Banks were advised that for the purpose of Section 20 of the Banking Regulation Act, 1949, the term |
||
'Loans and advances' shall not include line of credit / overdraft facilities extended by settlement bankers |
|||
to Clearing Corporation of India Ltd. (CCIL) to facilitate smooth settlement. |
|||
September |
1 |
• |
Banks participating in the Pilot Cheque Truncation Project at New Delhi advised to address issues |
requiring urgent action including finalisation the "point of truncation" for their outward presentations |
|||
and the point of processing for inward payments of the instrument, amendment of their existing |
|||
internal banking and clearing manuals, use of new processing tools, deciding upon the systems for |
|||
storage of inward and outward images, etc. |
|||
• |
Guidelines on one time settlement scheme for SME accounts issued for recovery of NPAs below Rs. |
||
10 crore. |
|||
• |
Banks were advised that with respect to transactions matched on the NDS-OM module, since CCIL |
||
is the central counterparty to all deals, exposure of any counterparty for a trade is only to CCIL and |
|||
not to the entity with whom a deal matches. However, all government securities transactions, other |
|||
than those matched on NDS-OM will continue to be physically confirmed by the back offices of the |
|||
counterparties, as hitherto. |
Annex: Chronology of Major Policy Developments (Continued) |
|||
Announcement |
Measures |
||
Date |
|||
2005 |
|||
September |
5 |
• |
Banks, which are nominated to import gold, were allowed to extend Gold (Metal) Loans to domestic |
jewellery manufacturers, who are not exporters of jewellery, subject to certain conditions. |
|||
8 |
• |
The policy for authorisation of the branches of banks in India liberalised and rationalised with a |
|
framework for a branch authorisation policy which would be consistent with the medium-term |
|||
corporate strategy of banks and public interest. While considering applications for opening branches |
|||
weightage would be given to the nature and scope of banking facilities provided by banks to common |
|||
persons, particularly in underbanked areas, actual credit flow to the priority sector, pricing of |
|||
products and overall efforts for promoting financial inclusion, including introduction of appropriate |
|||
new products and the enhanced use of technology for delivery of banking services. |
|||
• |
Banks advised to implement a debt restructuring mechanism for units in the SME sector. Detailed guidelines |
||
were laid down relating to eligibility criteria for SMEs and accounts, viability criteria, prudential norms |
|||
for restructured accounts, treatment of additional finance, asset classification, repeated restructuring. |
|||
9 |
• |
IDBI Bank Limited excluded from the Second Schedule to the Reserve Bank of India Act, 1934 with effect |
|
from April 2, 2005. |
|||
24 |
• |
Bank of Punjab merged with Centurion Bank with effect from October 1, 2005. |
|
October |
1 |
• |
Conversion/rescheduling of loans in the case of natural calamities, when there is delay in declaration |
of Annewari by the State Government, may be proceeded following such declaration from the District |
|||
Consultative Committee (DCC) which has representatives from banks as well as the State Government |
|||
and is headed by the District Collector. |
|||
9 |
• |
The limit of consumption loan to be provided to the affected persons in the state of Jammu and |
|
Kashmir and other parts of north India in the wake of the earthquake increased up to Rs.5,000 |
|||
without any collateral. This limit may be enhanced to Rs.10,000 at the discretion of the branch |
|||
manager, depending on the repaying capacity of the borrower. Banks may also consider provision |
|||
of financial assistance for the purpose of repairs/reconstruction of dwelling units, etc. damaged on |
|||
account of earthquake. |
|||
10 |
• |
Banks which have maintained capital of at least nine per cent of the risk weighted assets for both |
|
credit risks and market risks for both HFT and AFS categories as on March 31, 2006 would be |
|||
permitted to treat the entire balance in the IFR as Tier-I capital. For this purpose, banks may |
|||
transfer the entire balance in the IFR ‘below the line’ in the Profit and Loss Appropriation Account |
|||
to Statutory Reserve, General Reserve or balance of Profit and Loss Account. |
|||
15 |
• |
Revised guidance note on management of operational risk issued to banks. The design of risk |
|
management framework should be oriented towards banks’ own requirements dictated by the size |
|||
and complexity of business, risk philosophy, market perception and the expected level of capital. |
|||
The risk management systems in the bank should, however, be adaptable to changes in business, |
|||
size, the market dynamics and introduction of innovative products by banks in future. |
|||
17 |
• |
Banks advised to provide details to the customers in their Pass Book/Account Statement regarding |
|
the credits effected through ECS. Similar approach may be adopted for capturing the sender/ |
|||
remittance details for other electronic payment products such as EFT, SEFT, RTGS, etc., as well. |
|||
18 |
• |
Banks advised to take appropriate action to ensure successful implementation of Swarnjayanti |
|
Gram Swarozgar Yojana (SGSY) as per the recommendations of the Central Level Coordination |
|||
Committee (CLCC). The recommendations include; (i) delegation of powers to branch managers to |
|||
sanction SGSY applications; (ii) ensuring disposal of all the pending applications at the end of the |
|||
year in the first quarter of the succeeding year; (iii) utilising micro-finance institutions for bridging |
|||
the credit gap; (iv) achieving the desired credit to subsidy ratio of 1:3; (v) furnishing of status |
|||
report to Ministry of Rural Development on the under-performance of their branches; and |
|||
(vi) maintaining separate record for recovery of data in respect of SGSY distinct from IRDP. |
|||
25 |
• |
Reverse repo rate and the repo rate under the liquidity adjustment facility (LAF) of the Reserve |
|
Bank increased by 25 basis points each with effect from October 26, 2005 to 5.25 per cent and |
|||
6.25, respectively. |
Annex: Chronology of Major Policy Developments (Continued) |
|||
Announcement |
Measures |
||
Date |
|||
2005 |
|||
November |
2 |
• |
Banks advised that while considering granting advances against jewellery may keep in view the |
advantages of hallmarked jewellery and decide on the margin and rates of interest thereon. |
|||
4 |
• |
The general provisioning requirement for ‘standard advances’, with the exception of banks’ direct |
|
advances to agricultural and SME sectors, increased from the present level of 0.5 per cent to 0.40 |
|||
per cent. |
|||
B) Co-operative Banks |
|||
2004 |
|||
April |
15 |
• |
Comprehensive guidelines issued for investment in non-SLR securities by Urban Co-operative Banks. |
12 |
• |
All State Co-operative Banks and Central Co-operative Banks advised that the interest rates on NRE |
|
Deposits for one to three years maturity, contracted effective close of business in India on April 17, |
|||
2004, shall not exceed the LIBOR/SWAP rates for US dollar of corresponding maturity. Further, the |
|||
interest rate on NRE savings deposits has also been linked to LIBOR/SWAP rates with effect from close |
|||
of business in India on April 17, 2004. The interest rates on NRE savings deposits should not exceed |
|||
the LIBOR/SWAP rate for six months maturity on US dollar deposits and may be fixed quarterly on the |
|||
basis of the LIBOR/SWAP rate of US dollar on the last working day of the preceding quarter. |
|||
May |
24 |
• |
The UCBs advised to exercise due caution with regard to valuation while sanctioning loans and |
advances against mortgage of house property. |
|||
26 |
• |
The off-site surveillance system for UCBs already in place for the scheduled UCBs extended to all |
|
non-scheduled UCBs having deposit size of Rs.100 crore and above. |
|||
29 |
• |
UCBs advised to strictly maintain the confidentiality of information provided by the customer for |
|
‘Know Your Customer’ (KYC) compliance. |
|||
July |
12 |
• |
All StCBs and CCBs advised that with effect from September 30, 2004, a loan granted for short |
duration crops will be treated as NPA if the instalment of the principal or interest thereon remains |
|||
unpaid for two crop seasons beyond the due date. A loan granted for long duration crops will be |
|||
treated as NPA, if the instalment of principal or interest thereon remains unpaid for one crop |
|||
season beyond the due date. |
|||
13 |
• |
No application for inclusion in the Second Schedule of the Reserve Bank of India Act, 1934 to be |
|
considered till a proper legislative framework is put in place for the UCBs. |
|||
August |
7 |
• |
UCBs were advised that for the loans and advances (both secured and unsecured) sanctioned by |
them, the directors and relatives are not eligible to stand as surety/guarantor. |
|||
19 |
• |
UCBs were advised that Gilt Account holders are not entitled to undertake any sale transaction |
|
unless the security sold is actually held in the Gilt Account of the constituent. |
|||
September |
2 |
• |
UCBs permitted to exceed the 25 per cent limit under HTM category provided the excess comprises |
only SLR securities and the total SLR securities held in the HTM category do not exceed 25 per cent |
|||
of their NDTLs. In order to enable this, banks allowed to shift SLR securities to the HTM category. |
|||
However, no fresh non-SLR securities were permitted to be included in the HTM category once |
|||
more during the year 2004-05. |
|||
27 |
• |
For advances identified as ‘doubtful for more than three years’, additional provisioning by UCBs |
|
allowed to be phased over a five-year period commencing from the year ending March 31, 2005 |
|||
instead of four years. |
|||
October |
20 |
• |
UCBs advised to follow similar practices as the illustrative best practices followed by well-managed |
banks in the urban co-operative banking sector provided by the Reserve Bank as examples. UCBs, |
|||
however, are free to put in place any other practices, which would result in better customer service and |
|||
business development. |
Annex: Chronology of Major Policy Developments (Continued) |
|||
Announcement |
Measures |
||
Date |
|||
2004 |
|||
November |
1 |
• |
The requirement for UCBs invocation of State Government guarantee for deciding the asset |
classification and provisioning of State Government guaranteed exposure was withdrawn and |
|||
such loans were subjected to the same norms as applicable to exposures not guaranteed by the |
|||
State Governments. |
|||
• |
All StCBs and CCBs advised that the interest rates on NRE Deposits for one to three years maturity, |
||
contracted with effect from November 1, 2004, shall not exceed the LIBOR/SWAP rates, as on the |
|||
last working day of the previous month, for US dollar of corresponding maturity plus 50 basis |
|||
points. |
|||
• |
StCBs and CCBs advised to reduce, at their discretion, the minimum tenor of domestic/ NRO term |
||
deposits even below Rs.15 lakh from 15 days to 7 days. However, the banks would continue to have |
|||
the freedom to offer differential rates of interest on term deposits of Rs.15 lakh and above, as |
|||
hitherto. The revised instructions would come into effect from November 1, 2004. |
|||
18 |
• |
Scheduled or licensed StCBs and licensed CCBs permitted to undertake insurance business |
|
as corporate agent without risk participation subject to their fulfilling certain terms and |
|||
conditions. |
|||
December |
14 |
• |
UCBs permitted to grant housing loan up to Rs.15 lakh as against the existing limit of Rs.10 lakh. |
15 |
• |
Comprehensive guidelines on ‘Know Your Customer’ norms and Anti-Money Laundering Measures |
|
issued. UCBs advised to frame their KYC policies incorporating the following four key elements: (i) |
|||
Customer Acceptance Policy; (ii) Customer Identification Procedures; (iii) Monitoring of Transactions; |
|||
and (iv) Risk Management. |
|||
2005 |
|||
January |
4 |
• |
Guidelines on receipt of foreign contributions by Associations/ Organisations in India under Foreign |
Contribution (Regulation) Act, 1976 for Tsunami Relief issued to UCBs. |
|||
5 |
• |
Risk weight on housing loans increased from 50 per cent to 75 per cent and from 100 per cent to |
|
125 per cent in the case of consumer credit including personal loans and credit cards increased. |
|||
7 |
• |
Guidelines on receipt of foreign contributions by Associations/Organisations in India under Foreign |
|
Contribution (Regulation) Act, 1976 for Tsunami Relief issued to StCBs and CCBs. |
|||
20 |
• |
Guidelines issued to StCBs and CCBs to delink the requirement of invocation of State Government |
|
Guarantee for asset classification and provisioning. |
|||
24 |
• |
Comprehensive guidelines issued allowing all UCBs to undertake insurance business on a referral |
|
basis, subject to certain conditions. |
|||
February |
2 |
• |
Guidelines on merger/amalgamation for UCBs issued with the following pre-conditions: (i) net worth |
of the acquiree bank is positive and the acquirer bank assures to protect entire deposits of all the |
|||
depositors of the acquired bank; (ii) when the net worth of acquiree bank is negative, the acquirer |
|||
bank on its own assures to protect deposits of all the depositors of the acquired bank; and (iii) |
|||
when the net worth of the acquiree bank is negative and the acquirer bank assures to protect the |
|||
deposits of all the depositors with financial support from the State Government extended upfront |
|||
as part of the process of merger. |
|||
17 |
• |
The minimum net worth for undertaking insurance business by scheduled or licensed StCBs and |
|
licensed CCBs reduced to Rs.50 crore from Rs.100 crore. |
|||
18 |
• |
Comprehensive guidelines on ‘Know Your Customer’ norms and ‘Anti-Money Laundering’ measures |
|
issued to StCBs and CCBs and advised to frame their KYC policies incorporating the following four |
|||
key elements: (i) Customer Acceptance Policy; (ii) Customer identification procedures; (iii) Monitoring |
|||
of transactions; and (iv) Risk Management. |
|||
26 |
• |
Guidelines issued to UCBs regarding reporting system on their investment portfolio. |
Annex: Chronology of Major Policy Developments (Continued) |
|||
Announcement |
Measures |
||
Date |
|||
2005 |
|||
March |
1 |
• |
Guidelines issued to StCBs and CCBs in respect of additional provisioning requirement for |
NPAs. |
|||
• |
Guidelines issued to UCBs regarding enhancement of transparency of their operations by having |
||
comprehensive requirements for disclosure. |
|||
28 |
• |
Detailed guidelines issued to UCBs regarding classification and valuation of investment portfolio |
|
for provisioning requirements. |
|||
30 |
• |
Prudential norms in respect of income recognition, assets classification, provisioning and other |
|
related matters for the UCBs revised. |
|||
April |
11 |
• |
Ceilings on donations/contributions for public/charitable purposes out of profits of UCBs |
announced. |
|||
15 |
• |
UCBs to reduce the prudential exposure limits on advances to 15 per cent and 40 per cent of the |
|
‘capital funds’ in the case of a single borrower and a group of borrowers, respectively. The definitions |
|||
of capital funds and exposure were also modified for this purpose. UCBs advised to bring down the |
|||
outstanding or the sanctioned exposure limit exceeding the revised limit within a maximum period |
|||
of 2 years, i.e., by March 31, 2007. |
|||
28 |
• |
UCBs advised to explore the option of merger/ amalgamation, wherever necessary for revitalising |
|
and rehabilitating the weak scheduled UCBs. |
|||
May |
4 |
• |
UCBs advised to forward a quarterly statement on ‘consolidated position of frauds outstanding’ |
with a footnote detailing the position of frauds outstanding in the Housing Loan segment, beginning |
|||
from the quarter ended March 2005. |
|||
6 |
• |
StCBs and district CCBs allowed to undertake insurance business on a referral basis, without any |
|
risk participation through their network of branches, subject to certain conditions. |
|||
11 |
• |
The eligibility to participate in repo market extended to non-scheduled urban co-operative banks |
|
and listed companies, having a gilt account with a scheduled commercial bank subject certain |
|||
conditions. |
|||
July |
4 |
• |
UCBs having a single branch/HO with deposits up to Rs.100 crore and those having multiple branches |
within a single district with deposits up to Rs.100 crore permitted to classify loan NPAs based on |
|||
180 days delinquency norm instead of the extant 90 days norm till March 31, 2007. |
|||
12 |
• |
In the light of the recommendations of the Committee on Procedure and Performance Audit on |
|
Public Services (CPPAPS) and to facilitate expeditious and hassle-free settlement of claims on the |
|||
death of a depositors, settlement of claims in respect of the deceased depositors simplified and |
|||
advised to StCBs and CCBs. |
|||
13 |
• |
The norms relating to classification and valuation of investment portfolio of StCBsand CCBs were |
|
modified allowing them to amortise their additional provisioning requirement. |
|||
August |
3 |
• |
In view of the natural calamity and the need to provide immediate succour, UCBs advised to observe |
minimum formalities for enabling such persons to open a bank account quickly. Similar guidelines |
|||
issued to StCBs and CCBs on August 16, 2005. |
|||
4 |
• |
StCBs and CCBs advised to invest their genuine surplus funds in non-SLR securities without taking |
|
prior approval from the Reserve Bank on a case-to case basis, subject to certain conditions. |
|||
9 |
• |
The risk weight for UCBs raised for the following categories: (i) 125 per cent from100 per cent in |
|
the case of loans extended by UCBs against primary/collateral security of shares/debentures; (ii) 127.5 |
|||
per cent from 102.5 per cent in respect of investment in equities of AIFIs/units of UTI; and (iii) 125 |
|||
per cent from 100 per cent in the case of commercial real estate. |
Annex: Chronology of Major Policy Developments (Continued) |
|||
Announcement |
Measures |
||
Date |
|||
2005 |
|||
August |
23 |
• |
The KYC procedure for opening accounts simplified further for UCBs for those persons who |
intend to keep balances not exceeding rupees fifty thousand (Rs.50,000) in all their accounts |
|||
taken together and the total credit in all the accounts taken together is not expected to exceed |
|||
one lakh (Rs.1,00,000) in a year. Banks may open accounts with introduction from another |
|||
account holder (holding account for at least six months) who has been subjected to full KYC |
|||
procedure or any other evidence as to identify and address of the customer to the satisfaction of |
|||
the bank. Similar guidelines were issued to StCBs and CCBs. |
|||
September |
17 |
• |
Licensed and/or scheduled StCBs permitted to undertake, without risk participation, co-branded |
domestic credit card business with tie-up arrangement with one of the scheduled commercial banks, |
|||
already having arrangement for issue of credit cards, subject to their fulfilling certain conditions. |
|||
These conditions include, minimum positive net worth of Rs.50 crore, earning net profit for the |
|||
last three years and not having accumulated losses, gross NPAs not exceeding 10 per cent, |
|||
compliance of prudential and other norms of the Reserve Bank/NABARD and prior permission of |
|||
the Reserve Bank. |
|||
October |
10 |
• |
The StCBs/CCBs to furnish the information as ‘Notes on Accounts’ to their Balance Sheets from the |
year ending March 31, 2006. |
|||
20 |
• |
UCBs carrying accumulated losses in their balance sheet would not be eligible to make donations. |
|
C) Financial Institutions (FIs) |
|||
2004 |
|||
June |
15 |
• |
The risk weight in respect of exposure by FIs to public financial institutions (PFIs) raised to 100 |
per cent for credit risk and 2.5 per cent for market risk from April 1, 2005. |
|||
21 |
• |
FIs advised that their boards should oversee furnishing of requisite information of all borrowers to |
|
CIBIL and report compliance of the same to the Reserve Bank. |
|||
26 |
• |
FIs advised to strictly adhere to the single/group borrower prudential exposure ceilings i.e., 15 per cent |
|
and 40 per cent, respectively and the additional limits of 5 per cent and 10 per cent, respectively for |
|||
exposure to infrastructure. FIs could, in exceptional circumstances, with the approval of their Boards, |
|||
consider enhancement of the exposure to a borrower up to a further 5 per cent of capital funds, subject |
|||
to the borrower consenting to the FIs making appropriate disclosures in their Annual Reports. |
|||
August |
3 |
• |
Graded higher provisioning requirement according to the age of NPAs in ‘doubtful for more than |
three years’ category introduced. |
|||
30 |
• |
FIs permitted to make fresh investments in equity instruments and hold them in demat form with |
|
immediate effect. All outstanding investments in equity in paper-based form to be converted into |
|||
demat form by the end of December 2004. |
|||
November |
1 |
• |
With effect from March 31, 2005, an asset in the books of FIs is required to be classified as doubtful |
asset, if it remains in the sub-standard category for 12 months. FIs permitted to phase out the |
|||
consequent additional provisioning over a four-year period, commencing from the year ended March |
|||
31, 2005, with a minimum of 20 per cent each year. |
|||
6 |
• |
FIs advised to take immediate steps to ensure submission of periodical data to CIBIL and submit |
|
progress reports to the Reserve Bank. |
|||
2005 |
|||
February |
11 |
• |
FIs to obtain from their Statutory Central Auditors, the certificate relating, inter alia, to their |
treasury operations; reconciliation of their investments; compliance in key areas; income recognition; |
|||
asset classification and provisioning and authentication of their calculation on CRAR. |
|||
April |
26 |
• |
A minimum framework for disclosures by FIs on their risk exposures in derivatives laid out to |
provide a clear picture of their exposure to risks in derivatives, risk management systems, objectives |
|||
and policies. |
Annex: Chronology of Major Policy Developments (Continued) |
||||
Announcement |
Measures |
|||
Date |
||||
2005 |
||||
April |
27 |
• |
FIs not accepting public deposits but having asset size of Rs.500 crore and above would be subjected |
|
to limited off-site supervision by the Reserve Bank. Therefore, with effect from the period ended |
||||
March 31, 2005, the existing system of off-site supervision would stand replaced by a simplified |
||||
information system known as the "Quarterly Return on Important Financial Parameters in respect |
||||
of Select Financial Institutions". |
||||
D) Non-Banking Financial Companies (NBFCs) |
||||
2004 |
||||
April |
24 |
• |
NBFCs prohibited from accepting fresh NRI deposits with effect from April 24, 2004, but could |
|
renew the deposits already accepted. |
||||
May |
18 |
• |
On the basis of the recommendations of the Vyas Committee’s Interim Report, it was decided that |
|
micro-finance institutions would not be permitted to accept public deposits unless they comply |
||||
with the extant regulatory framework of the Reserve Bank. |
||||
June |
15 |
• |
The scope of definition of infrastructure lending by NBFCs expanded to include the following projects/ |
|
sectors: (i) construction relating to projects involving agro-processing and supply of inputs to |
||||
agriculture; (ii) construction for preservation and storage of processed agro-products, perishable |
||||
goods such as fruits, vegetables and flowers, including testing facilities for quality; and (iii) |
||||
construction of educational institutions and hospitals. |
||||
22 |
• |
The investment pattern prescribed for RNBCs rationalised for imparting liquidity and safety to |
||
their investments for enhancing depositors' protection. These measures included: (i) phasing out |
||||
of discretionary investments by RNBCs by April 1, 2006; (ii) investment in specified financial |
||||
institutions restricted to CDs only; (iii) investment only in CDs of SCBs and specified financial |
||||
institutions rated AA+ or its equivalent; (iv) additional investment of 15 per cent of the aggregate |
||||
deposit liability in securities issued by the Central and State Governments in the course of their |
||||
market borrowing programme; (v) investment in debt securities confined to those having minimum |
||||
AA+ or equivalent grade rating and listed on one of the stock exchanges; (vi) investments in units |
||||
of only debt oriented mutual funds not exceeding 10 per cent with a sub-limit of two per cent in |
||||
any one fund; and (vii) exposure to a single SCB limited to one per cent of the aggregate deposit |
||||
liability of the SCB and one per cent of the aggregate deposit liability of the RNBC in case of |
||||
financial institution. |
||||
July |
7 |
• |
NBFCs advised that the issue of debit cards, stored value cards, smart cards, value added cards, |
|
etc. have a characteristic akin to demand deposits as they are payable at the convenience of the |
||||
card holders. The issue of such cards is, therefore, violative of the extant NBFC Directions. |
||||
24 |
• |
NBFCs having certificate of registration (CoR) in the non-public deposit taking category were required |
||
to meet the minimum NOFs requirement of Rs.2 crore for being eligible to apply to the Reserve |
||||
Bank for accepting public deposits. |
||||
August |
10 |
• |
NBFCs advised that whenever they intend to extend the date of their Balance Sheet as per provisions of |
|
the Companies Act, they should take prior approval of the Reserve Bank before approaching the Registrar |
||||
of Companies (RoC) for this purpose. Even in the cases where permission is granted for extension of |
||||
time, the company would be required to furnish to the Reserve Bank a Proforma Balance Sheet (unaudited) |
||||
as on March 31 of the year and the statutory returns due on the above date. |
||||
October |
5 |
• |
The minimum lock-in-period of three months from the date of acceptance of deposits for NBFCs and |
|
Miscellaneous Non-Banking Companies (MNBCs) and twelve months for RNBCs within which they |
||||
cannot repay a public deposit (in case of NBFC) or deposit (in case of RNBC and MNBC) or grant any |
||||
loan against such deposits was retained. It was also decided to stratify the NBFCs, MNBCs and RNBCs |
||||
for the purpose of permission to prepay the deposits (after the lock-in period) into two categories, viz., |
||||
‘problem NBFCs, MNBCs, and RNBCs’ and ‘normally run companies’. Accordingly, different set of |
||||
norms were issued for the two groups with respect to the prepayment norms and the interest rates to |
||||
be paid on the deposits. |
Annex: Chronology of Major Policy Developments (Continued) |
|||
Announcement |
Measures |
||
Date |
|||
2004 |
|||
November |
13 |
• |
A quarterly reporting arrangement introduced for NBFCs not accepting/holding public deposits |
and having assets size of Rs.500 crore and above as on March 31, 2004. |
|||
December |
30 |
• |
In order to ensure that the depositors are served appropriately and systemic risks are avoided, Reserve |
Bank issued comprehensive guidelines to RNBCs with a view to focus on improvements in the their |
|||
functioning including transparency of operations, corporate governance including professionalisation |
|||
of the Boards and ensuring 'fit and proper' criteria, avoiding untenable rates of commission to agents, |
|||
adherence to KYC rules and customer service. With a view to smoothen the process of transition of |
|||
RNBCs to compliance with the revised Directions issued on June 22, 2004, following modifications |
|||
were made: (i) reckoning as eligible, the investments in CDs of specified FIs which had a minimum |
|||
rating of AA+ at the time of investment, if subsequently downgraded, as long as they had the minimum |
|||
investment grade rating; (ii) treating balances held in current accounts with SCBs as eligible investments; |
|||
(iii) treating as eligible, the investments in bonds and debentures of companies which had minimum |
|||
rating of AA+ or equivalent grade rating and listed on stock exchange till the rating continued to be not |
|||
below the minimum investment grade. |
|||
2005 |
|||
February |
7 |
• |
NBFCs accepting/holding public deposits were advised to ensure that at all times there should be |
full cover available for public deposits accepted by them. |
|||
21 |
• |
Comprehensive guidelines on ‘Know Your Customer’ norms and Anti-Money Laundering Measures |
|
issued. NBFCs advised to frame their KYC policies incorporating the following four key elements: |
|||
(i) Customer Acceptance Policy; (ii) Customer Identification Procedures; (iii) Monitoring of |
|||
Transactions; and (iv) Risk Management. |
|||
April |
28 |
• |
Guidelines on merger and amalgamation between private sector banks and NBFCs issued. The |
guidelines cover the process of merger proposal, determination of swap ratios, disclosures, norms |
|||
for buying/selling of shares by promoters before and during the process of merger and the Board’s |
|||
involvement in the merger process. The principles underlying these guidelines would be applicable |
|||
as appropriate to public sector banks, subject to relevant legislation. |
|||
September |
6 |
• |
NBFCs not accepting/holding public deposits and having assets size of ‘Rs. 100 crore and above to |
submit a monthly return that was applicable so far to NBFCs not accepting/holding public deposits |
|||
and having assets size of Rs.500 crore and above. |
|||
October |
11 |
• |
NBFCs to ensure full compliance with KYC guidelines with regard to deposits collected by persons |
authorised by the NBFCs, including brokers/agents etc. inasmuch as such persons are collecting |
|||
the deposits on behalf of NBFCs. |
|||
26 |
• |
Guidelines issued to NBFCs (including RNBCs) on classification of frauds, approach towards |
|
monitoring of frauds and reporting requirements. The individual cases of frauds involving amount |
|||
less that Rs.25 lakh to be reported to the respective Regional Offices of Department of Non-Banking |
|||
Supervision in whose jurisdiction registered office of the company is located, whereas individual |
|||
cases of frauds involving amount of Rs.25 lakh and above to be reported to Frauds Monitoring Cell, |
|||
Department of Banking Supervision, Reserve Bank of India, Central Office, Mumbai. |
|||
E) Primary Dealers (PDs) |
|||
2004 |
|||
June |
3 |
• |
Guidelines issued on dividend distribution by primary dealers (PDs) based on payout ratio linked |
to their CRAR. |
|||
August |
24 |
• |
PDs to hold all their equity investments only in dematerialised form by the end of December 2004 |
(including conversion of their equity holdings in scrip form into dematerialised form) and make all |
|||
fresh investments only in dematerialised form from December 31, 2004. |
|||
October |
15 |
• |
Guidelines on PDs issuing subordinated debt instruments for raising Tier-II and Tier-III capital issued. |
Annex: Chronology of Major Policy Developments(Concluded) |
||||
Announcement |
Measures |
|||
Date |
||||
2004 |
||||
November |
13 |
• |
All PDs advised to ensure that whenever defaults (in maintaining sufficient balances in the current |
|
and/ or SGL accounts to meet their commitments arising out |
of transactions) take place, they |
|||
should immediately report the details of such defaults to the Reserve Bank. |
||||
2005 |
||||
March |
29 |
• |
Guidelines issued to all NDS members regarding conduct of dated Government securities auction |
|
under Primary Market Operations module of PDO-NDS. |
||||
May |
11 |
• |
PDs to adopt standardised settlement on a T+1 basis of all outright secondary market transactions |
|
in Government securities. |
||||
• |
Sale of Government securities allotted to successful bidders in primary issues on the day of allotment |
|||
permitted, with and between CSGL constituent account holders. |
||||
July |
20 |
• |
Guidelines on transaction in Government securities further relaxed by permitting a buyer from an |
|
allottee in primary auction to re-sell the security. |