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Foreign Investment in India

Q.10: Whether any approval is required for an entity which has received foreign investment under automatic route and subsequently the sector was brought under approval route +

Answer: As long as the foreign shareholding in the entity remains the same and there is no corporate action pursuant to the sector being brought under approval route, approval is not required.

Core Investment Companies

Core Investment Companies (CICs)

10. Is there an enabling provision for use of statutory accounts based on some date other than 31st March, such as December 31st? +

Ans: While such accounts could be taken into account in view of the fact that developments after balance sheet date are also taken into account, all NBFCs including CICs-ND-SI would mandatorily have to finalise their accounts as on March 31 of the year, and submit annual auditors certificate based on this figure.

Retail Direct Scheme

Account opening related queries

10. Can I change the email id or phone number linked with my Retail Direct Gilt (RDG) account later? +

Yes, you can change your registered mobile number and e-mail id on the Retail Direct portal.

Government Securities Market in India – A Primer

10. What are the Do's and Don’ts prescribed by RBI for the Co-operative banks dealing in G-Secs? +

While undertaking transactions in securities, UCBs should adhere to the instructions issued by the RBI. The guidelines on transactions in G-Secs by the UCBs have been codified in the master circular DCBR. BPD (PCB).MC.No. 4/16.20.000/2015-16 dated July 1, 2015 which is updated from time to time. This circular can also be accessed from the RBI website under the Notifications – Master circulars section. The important guidelines to be kept in view by the UCBs relate to formulation of an investment policy duly approved by their Board of Directors, defining objectives of the policy, authorities and procedures to put through deals, dealings through brokers, preparing panel of brokers and review thereof at annual intervals, and adherence to the prudential ceilings fixed for transacting through each of the brokers, etc.

The important Do’s & Don’ts are summarized in the Box I below.

BOX I

Do’s & Don’ts for Dealing in G-Secs

Do’s

Segregate dealing and back-office functions. Officials deciding about purchase and sale transactions should be separate from those responsible for settlement and accounting.
Monitor all transactions to see that delivery takes place on settlement day. The funds account and investment account should be reconciled on the same day before close of business.
Keep a proper record of the SGL forms received/issued to facilitate counter-checking by their internal control systems/RBI inspectors/other auditors.
Seek a Scheduled Commercial Bank (SCB), a PD or a Financial Institution (FI) as counterparty for transactions.
Give preference for direct deals with counter parties.
Insist on Delivery versus Payment for all transactions.
Take advantage of the NCB facility for acquiring G-Secs in the primary auctions conducted by the RBI.
Restrict the role of the broker only to that of bringing the two parties to the deal together, if a deal is put through with the help of broker.
Have a list of approved brokers. Utilize only brokers registered with NSE or BSE or OTCEI for acting as intermediary.
Place a limit of 5% of total transactions (both purchases and sales) entered into by a bank during a year as the aggregate upper contract limit for each of the approved brokers. A disproportionate part of the business should not be transacted with or through one or a few brokers.
Maintain and transact in G-Secs only in dematerialized form in SGL Account or Gilt Account maintained with the CSGL Account holder.
Open and maintain Gilt account or dematerialized account
Open a funds account for securities transactions with the same Scheduled Commercial bank or the State Cooperative bank with whom the Gilt Account is maintained.
Ensure availability of clear funds in the designated funds accounts for purchases and sufficient securities in the Gilt Account for sales before putting through the transactions.
Observe prudential limits and abide by restrictions for investment in permitted non-SLR securities (Prudential limit : shall not exceed 10% of the total deposits of bank as on March 31 of the preceding financial year) ( Instruments : (i) “A” or equivalent and higher rated CPs, debentures and bonds, (ii) units of debt mutual funds and money market mutual funds, (iii) shares of market infrastructure companies eg. CCIL, NPCI, SWIFT).
The Board of Directors to peruse all investment transactions at least once a month

Don’ts

Do not undertake any purchase/sale transactions with broking firms or other intermediaries on principal to principal basis.
Do not use brokers in the settlement process at all, i.e., both funds settlement and delivery of securities should be done with the counter-parties directly.
Do not give power of attorney or any other authorisation under any circumstances to brokers/intermediaries to deal on your behalf in the money and securities markets.
Do not undertake G-Secs transaction in the physical form with any broker.
Do not routinely make investments in non-SLR securities (e.g., corporate bonds, etc) issued by companies or bodies.

Targeted Long Term Repo Operations (TLTROs)

FAQs pertaining to TLTRO 2.0

Q10: What happens if a bank fails to deploy the funds availed under the TLTRO 2.0 scheme in specified securities within the stipulated timeframe? +

Ans: Based on the feedback received from banks and taking into account the disruptions caused by COVID-19, it has been decided to extend the time available for deployment of funds under the TLTRO 2.0 scheme from 30 working days to 45 working days from the date of the operation. Funds that are not deployed within this extended time frame will be charged interest at the prevailing policy repo rate plus 200 bps for the number of days such funds remain un-deployed. The incremental interest liability will have to be paid along with regular interest at the time of maturity.

Housing Loans

10. What security will you have to provide? +

The security for a housing loan is typically a first mortgage of the property, normally by way of deposit of title deeds. Banks also sometimes ask for other collateral security as may be necessary. Some banks insist on margin / down payment (borrowers contribution to the creation of an asset) to be maintained / made also.

Collateral security assigned to your bank could be life insurance policies, the surrender value of which is set at a certain percentage to the loan amount, guarantees from solvent guarantors, pledge of shares/ securities and investments like KVP/ NSC etc. that are acceptable to your banker. Banks would also require you to ensure that the title to the property is free from any encumbrance. (i.e., there should not be any existing mortgage, loan or litigation, which is likely to affect the title to the property adversely).

Indian Currency

B) Banknotes

2. Which denomination banknotes are currently in circulation? +

Banknotes in India are currently being issued in the denomination of ₹10, ₹20, ₹50, ₹100 ₹200, ₹500, and ₹2000. These notes are called banknotes as they are issued by the Reserve Bank of India. The printing of notes in the denominations of ₹2 and ₹5 has been discontinued and these denominations have been coinised as the cost of printing and servicing these banknotes was not commensurate with their life. However, such banknotes issued earlier can still be found in circulation and these banknotes continue to be legal tender. ₹1 notes are issued by the Government of India from time to time and such notes including those issued in the past also continue to be legal tender for transactions.

FAQs on Master Directions on Priority Sector Lending Guidelines

J. PSLCs

Query 28: How can banks register for PSLC trading ? +

Clarification: The banks are required to submit a request to FIDD, CO (fiddplan@rbi.org.in) to obtain registration for PSLC trading by submitting a) DEA Fund Code b) Customer identification number and c) RBI Current account number.

Query 29: What is the expiry date of PSLC ? +

Clarification: All PSLCs will be valid till end of FY i.e. March 31st and will expire on next day i.e. April 1st.

Query 30: Whether PSLCs can be issued for a limited period i.e., for one reporting quarter and multiples thereof ? +

Clarification: The duration of the PSLCs will depend on the date of issue with all PSLCs being valid till end of FY i.e. March 31st and expiring on next day i.e. April 1st.