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Targeted Long Term Repo Operations (TLTROs)

Q6: What happens if a bank fails to deploy the funds availed under TLTRO scheme in specified securities within the stipulated timeframe? +

Ans: The banks have already been given sufficient time to deploy funds availed under TLTRO scheme. It has now been decided to allow up to 30 working days for deployment in specified securities for those banks who have availed funds under the first tranche of TLTRO conducted on March 27, 2020. However, if a bank fails to deploy funds within the specified time frame, the interest rate on un-deployed funds will increase to prevailing policy repo rate plus 200 bps for the number of days such funds remain un-deployed. This incremental interest will have to be paid along with regular interest at the time of maturity.

Indian Currency

A) Basics of Indian Currency/Currency Management

6. What is the role of the Reserve Bank of India in currency management ? +

In terms of Section 22 of the Act, Reserve Bank has the sole right to issue banknotes in India. Section 25 states that the design, form and material of bank notes shall be such as may be approved by the Central Government after consideration of the recommendations made by the Central Board of RBI.

The Reserve Bank, in consultation with the Central Government and other stake holders, estimates the quantity of banknotes that are likely to be needed denomination-wise in a year and places indents with the various currency printing presses for supply of banknotes. The Reserve Bank in terms of its clean note policy, provides good quality banknotes to the members of public. With this objective in view the banknotes received back from circulation are examined and those fit for circulation are reissued while the others (soiled and mutilated) are destroyed so as to maintain the quality of banknotes in circulation.

In respect of coins, the role of RBI is limited to distribution of coins that are supplied by Government of India. The Government of India is responsible for the designing and minting of coins in various denominations as per the Coinage Act, 2011.

FAQs on Master Directions on Priority Sector Lending Guidelines

F. Education

Query 19: In the revised PSL guidelines, ₹20 lakh is referred to Outstanding Limit or Sanctioned Limit ? +

Clarification: Only such loans that are within the sanctioned limit of ₹20 lakh shall be eligible for priority sector classification.

Query 20: If the same borrower is having multiple education loans with different opening dates before and after 04-09-20, which value is required to be considered under PSL (0/s of ₹10 lakhs per borrower or Limit of ₹20 lakhs per borrower). For instance, Student had an education loan of ₹12 Lakhs prior to 04.09.2020, then avails second education loan of ₹18 Lakhs after 04.09.2020, how PSL outstanding will be calculated for this particular customer ? +

Clarification: For the loans sanctioned before September 4, 2020, outstanding value up to ₹10 lakh, irrespective of the sanctioned limit, shall continue to be classified under priority sector till maturity. However, while reckoning any fresh loan under PSL to a borrower who had already availed education loan from the bank prior to September 4, 2020, it needs to be ensured that the aggregate sanctioned limit does not exceed ₹20 lakh for classification of the loans under PSL.

In the mentioned scenario, as the combined sanctioned limit becomes ₹30 lakh, the ₹18 lakh loan extended after September 4, 2020 shall not be eligible for PSL classification. However, with regard to the ₹12 lakh loan, which was already PSL as per earlier guidelines, the outstanding value under the facility, up to ₹10 lakh shall continue to be eligible under PSL till maturity.

Query 21: Under revised PSL guidelines, sanctioned limit has been capped at ₹ 20 lakhs. If a customer is sanctioned a loan of ₹20 lakhs and the outstanding amount becomes ₹22 Lakhs, in such a scenario whether entire outstanding will be reckoned for PSL ? +

Clarification: The outstanding value may exceed ₹20 lakh on account of accrued interest due to moratorium on repayment during study period. Accordingly, the entire outstanding amount shall be reckoned for priority sector provided the sanctioned limit does not exceed ₹20 lakh.

Query 22: If a student avails two education loans after September 4, 2020 for ₹12 lakhs and ₹18 lakhs, how PSL will be calculated for this particular customer ? +

Clarification: Post September 4, 2020, if the aggregate sanctioned limit of multiple education loans either from a bank or across banks to a single borrower exceeds ₹20 lakh limit, all loans of the borrower sanctioned after September 4, 2020 shall become ineligible for PSL classification. In this regard, banks should take a declaration from the borrower regarding education loan sanctioned by any other bank/s and also independently seek confirmation from those banks.

Government Securities Market in India – A Primer

7. How and in what form can G-Secs be held? +

7.1 The Public Debt Office (PDO) of RBI, acts as the registry and central depository for G-Secs. They may be held by investors either as physical stock or in dematerialized (demat/electronic) form. From May 20, 2002, it is mandatory for all the RBI regulated entities to hold and transact in G-Secs only in dematerialized (SGL) form.

a. Physical form: G-Secs may be held in the form of stock certificates. A stock certificate is registered in the books of PDO. Ownership in stock certificates cannot be transferred by way of endorsement and delivery. They are transferred by executing a transfer form as the ownership and transfer details are recorded in the books of PDO. The transfer of a stock certificate is final and valid only when the same is registered in the books of PDO.

b. Demat form: Holding G-Secs in the electronic or scripless form is the safest and the most convenient alternative as it eliminates the problems relating to their custody, viz., loss of security. Besides, transfers and servicing of securities in electronic form is hassle free. The holders can maintain their securities in dematerialsed form in either of the two ways:

SGL Account: Reserve Bank of India offers SGL Account facility to select entities who can hold their securities in SGL accounts maintained with the Public Debt Offices of the RBI. Only financially strong entities viz. Banks, PDs, select UCBs and NBFCs which meet RBI guidelines (please see RBI circular IDMD.DOD.No. 13/10.25.66/2011-12 dt Nov 18, 2011) are allowed to maintain SGL with RBI.
Gilt Account: As the eligibility to open and maintain an SGL account with the RBI is restricted, an investor has the option of opening a Gilt Account with a bank or a PD which is eligible to open a CSGL account with the RBI. Under this arrangement, the bank or the PD, as a custodian of the Gilt Account holders, would maintain the holdings of its constituents in a CSGL account (which is also known as SGL II account) with the RBI. The servicing of securities held in the Gilt Accounts is done electronically, facilitating hassle free trading and maintenance of the securities. Receipt of maturity proceeds and periodic interest is also faster as the proceeds are credited to the current account of the custodian bank / PD with the RBI and the custodian (CSGL account holder) immediately passes on the credit to the Gilt Account Holders (GAH).

7.2 Investors also have the option of holding G-Secs in a dematerialized account with a depository (NSDL / CDSL, etc.). This facilitates trading of G-Secs on the stock exchanges.

All you wanted to know about NBFCs

A. Definitions

7. What are the essential documents required to be submitted along with the application form to the Regional Office of the Reserve Bank? +

The application form and an indicative checklist of the documents required to be submitted along with the application is available at www.rbi.org.in → Site Map → NBFC List → Forms/ Returns.

Domestic Deposits

I. Domestic Deposits

7. Whether banks can refuse premature withdrawal of term deposits? +

Banks may not normally refuse premature withdrawal of term deposits of individuals and Hindu Undivided Families (HUF), irrespective of the size of the deposit. However, the bank at its discretion, may disallow premature withdrawal of large deposits held by entities other than individuals and Hindu Undivided Families. Banks should notify such depositors of its policy of disallowing premature withdrawals in advance i.e. at the time of acceptance of deposits.

Annual Return on Foreign Liabilities and Assets (FLA) under FEMA 1999

Eligible entities and requirements to submit the FLA return

Q7. If an old/new entity wants to fill the previous year FLA form, can they do so? +

Ans: Yes, entities can fill the FLA return even after due date, after taking approval from RBI. But in that case, penalty clause may be invoked on the entity for late submission.

External Commercial Borrowings (ECB) and Trade Credits

D. RECOGNISED LENDERS/ INVESTORS

7. Is the minimum equity holding requirement of foreign equity holder (direct/indirect) applicable where the end uses is other than general corporate purpose/working capital/repayment of Rupee loans? +

The foreign equity holders as defined at Paragraph 1.11 of the Master Direction No. 5 on ‘External Commercial Borrowings, Trade Credits and Structured Obligations dated March 26, 2019 (MD) are eligible to lend for the end-uses given at Paragraph 2.1.viii(d), 2.1.viii(e) and 2.1.viii(f) of the MD. For end-uses, other than those in the negative list, recognised lenders are given at Paragraph 2.1.iv of the MD.

Remittances (Money Transfer Service Scheme (MTSS) and Rupee Drawing Arrangement (RDA))

Rupee Drawing Arrangement (RDA)

7. Can the remittance be credited to the bank account of the beneficiary even if the bank does not have any tie-up with a non-resident Exchange House ? +

Yes, foreign inward remittances received by the AD Category-I Bank having RDA with a Non Resident Exchange House may be credited directly to the account of the beneficiary held with a bank other than the AD Category-I Bank through electronic mode, such as, NEFT, IMPS, etc.Money Transfer Service Scheme (MTSS)

Core Investment Companies

Core Investment Companies (CICs)

7. Would Current Liabilities also form part of Outside Liabilities? What will be the treatment of DTL, Advance Tax Due and Provision for Income Tax? Will they be Outside Liabilities? +

Ans: Anything that has to be repaid will be an outside liability.

FAQs on Non-Banking Financial Companies

Definition of public deposits

7. What is the status of optionally fully convertible debentures in `public deposits? +

A. Optionally Fully Convertible Debentures (OFCDs), which were brought within the purview of Regulations in the year 1996, have now (in 1998) been taken out of the Regulations. Any money raised by issue of OFCDs is not to be treated as public deposit.

Business restrictions imposed on Paytm Payments Bank Limited vide Press Releases dated January 31 and February 16, 2024

Bank Accounts with Paytm Payments Bank

7. My monthly electricity bill is paid automatically from my bank account with Paytm Bank Limited? Can this continue? +

Withdrawal/debit mandates (such as National Automated Clearing House (NACH) mandates) will continue to get executed till there is balance available in your account. However, after March 15, 2024, credit or deposit in your accounts will not be allowed. Therefore, to avoid inconvenience, it is suggested that you make alternative arrangements through another bank, before March 15, 2024

Coordinated Portfolio Investment Survey – India

Details for survey launch

Q7. What is the due date for participating in CPIS? +

Ans: In general, the due date for participating in CPIS for end-March and end-September position is July 15 and December 31 of that year respectively.

Framework for Compromise Settlements and Technical Write-offs

B. TECHNICAL WRITE-OFF

7. The circular also permits the lenders to undertake technical write-offs of amount outstanding relating to borrowers in default. Doesn’t such a practice encourage default behavior, as the costs of default are borne entirely by the lenders and defaulting borrowers do not face any consequences? +

No. As defined in the circular, technical write-off refers to cases where the NPAs remain outstanding at borrowers’ loan account level, but are derecognised by the lenders only for accounting purposes. Technical write-off is a normal banking practice undertaken by the lenders to cleanse the balance sheets of bad debts which are either considered unrecoverable or whose recovery is likely to consume disproportionate resources of the lenders. However, such technical write-offs do not entail any waiver of claims against the borrower and thus the lenders’ right to recovery is not undermined in any manner. Therefore, the defaulting borrowers are not benefited in any manner and their legal obligation as well as the costs of such defaults for them remain unchanged vis-à-vis the position prior to technical write-offs.

The circular only provides clarity on definition of technical write-off and a broad guidance on the process to be followed by the lenders for technical write-offs, which will ensure consistency in the approach followed by various lenders.

Biennial survey on Foreign Collaboration in Indian Industry (FCS)

Details of survey launch

Q7. How do I know whether my response has been submitted successfully or not? +

Ans.: After sending the duly filled in survey schedule (excel based) to the generic email IDs of the Reserve Bank as per the instruction in the survey schedule, the respondent will receive the system-generated acknowledgement. No separate mail will be sent in this regard. If some error is mentioned in the acknowledgement, then the respondent is required to resubmit the form by rectifying the mentioned error. After corrections, the respondent should receive a successful processing acknowledgement email.

Foreign Investment in India

Q.7: What is meant by capital on a fully diluted basis ? +

Answer: Fully diluted basis means the total number of shares that would be outstanding if all possible sources of conversion are exercised.

Retail Direct Scheme

Scheme related queries

7. What are the facilities available on the RBI Retail Direct Portal? +

The RBI Retail Direct Online Portal will facilitate the following:

Buying Government securities through primary auctions (non-competitive segment only).
Buying and selling Government securities in the secondary market.
Buying and selling Sovereign Gold Bonds (SGBs) in the primary and secondary market.
Investor services such as account statement, nomination facility, pledge/lien, gift transactions, grievance redressal, and managing profile like contact details etc.