FAQ Page 1 - ಆರ್ಬಿಐ - Reserve Bank of India
Government Securities Market in India – A Primer
III. Advances
Retail Direct Scheme
Investment and Account holdings related queries
Indian Currency
D) Soiled and Mutilated Banknotes
Guidelines for the exchange of mutilated/torn notes are available in our Master Circular on “Facility for Exchange of Notes & Coins” DCM(NE) No.G-2/08.07.18/2019-20 dated July 01, 2019 which is available on our website www.rbi.org.in under Notifications>Master Circulars>Issuer of Currency. Mutilated notes can be exchanged at all bank branches in terms of RBI (Note Refund) Amendment Rules, 2018.
Foreign Investment in India
III. Investment in other securities
FAQs on Non-Banking Financial Companies
Liquid Asset requirement
Government Securities Market in India – A Primer
Core Investment Companies
Core Investment Companies (CICs)
Ans: Even though public funds include public deposits in the general course, it may be noted that CICs cannot accept public deposits. It may further be reiterated that no NBFC can accept public deposits without specific permission of the Bank even if it holds a CoR from the Bank.
Retail Direct Scheme
Investment and Account holdings related queries
External Commercial Borrowings (ECB) and Trade Credits
J. Reporting
All you wanted to know about NBFCs
D. Definition of deposits, Eligible / Ineligible Institutions to accept deposits and Related Matters
Domestic Deposits
IV. Advances against shares and debentures
Indian Currency
D) Soiled and Mutilated Banknotes
The presence or absence of a serial number or other specific feature is not a determining factor when assessing damaged banknotes for value under the RBI (Note Refund) Amendment Rules, 2018.
All you wanted to know about NBFCs
D. Definition of deposits, Eligible / Ineligible Institutions to accept deposits and Related Matters
The Reserve Bank publishes the list of NBFCs that hold a valid Certificate of Registration for accepting deposits on its website: www.rbi.org.in → Sitemap → NBFC List → List of NBFCs Permitted to Accept Deposits. At times, some companies are temporarily prohibited from accepting public deposits. The Reserve Bank publishes the list of NBFCs temporarily prohibited also on its website. The Reserve Bank keeps both these lists updated. Members of the public are advised to check both these lists before placing deposits with NBFCs.
Foreign Investment in India
III. Investment in other securities
External Commercial Borrowings (ECB) and Trade Credits
J. Reporting
The facility for opting for LSF shall be available up to three years from the due date of reporting/ submission. (Ref: A.P. (DIR Series) Circular No.16 dated September 30, 2022).
Government Securities Market in India – A Primer
Glossary of Important Terms and Commonly Used Market Terminology
Accrued Interest
The accrued interest on a bond is the amount of interest accumulated on a bond since the last coupon payment. The interest has been earned, but because coupons are paid only on coupon dates, the investor has not gained the money yet. In India day count convention for G-Secs is 30/360.
Auction –Multiple price and Uniform Price
In a Multiple Price auction, the successful bidders are required to pay for the allotted quantity of securities at the respective price / yield at which they have bid. On the other hand, in a Uniform Price auction, all the successful bidders are required to pay for the allotted quantity of securities at the same rate, i.e., at the auction cut-off rate, irrespective of the rate quoted by them.
Bid Price/ Yield
The price/yield being offered by a potential buyer for a security.
Big Figure
When the price is quoted as ₹102.35, the portion other than decimals (102) is called the big figure.
Competitive Bid
Competitive bid refers to the bid for the stock at the price stated by a bidder in an auction.
Coupon
The rate of interest paid on a debt security as calculated on the basis of the security’s face value.
Coupon Frequency
Coupon payments are made at regular intervals throughout the life of a debt security and may be quarterly, semi-annual (twice a year) or annual payments.
Discount
When the price of a security is below the par value, it is said to be trading at a discount. The value of the discount is the difference between the FV and the Price. For example, if a security is trading at ₹ 99, the discount is ₹ 1.
Duration (Macaulay Duration)
Duration of a bond is the number of years taken to recover the initial investment of a bond. It is calculated as the weighted average number of years to receive the cash flow wherein the present value of respective cash flows are multiplied with the time to that respective cash flows. The total of such values is divided by the price of the security to arrive at the duration. Refer to Box IV under question 27.
Face Value
Face value is the amount that is to be paid to an investor at the maturity date of the security. Debt securities can be issued at varying face values, however in India they typically have a face value of ₹100. The face value is also known as the repayment amount. This amount is also referred as redemption value, principal value (or simply principal), maturity value or par value.
Floating-Rate Bond
Bonds whose coupon rate is re-set at predefined intervals and is based on a pre-specified market based interest rate.
Gilt/ G-Secs
G-Secs are also known as gilts or gilt edged securities. “G-Sec” means a security created and issued by the Government for the purpose of raising a public loan or for any other purpose as may be notified by the Government in the Official Gazette and having one of the forms mentioned in the G-Secs Act, 2006.
Market Lot
Market lot refers to the standard value of the trades that happen in the market. The standard market lot size in the G-Secs market is ₹ 5 crore in face value terms.
Maturity Date
The date when the principal (face value) is paid back. The final coupon and the face value of a debt security is repaid to the investor on the maturity date. The time to maturity can vary from short term (1 year) to long term (30 years).
Non-Competitive Bid
NCB means the bidder would be able to participate in the auctions of dated G-Secs without having to quote the yield or price in the bid. The allotment to the non-competitive segment will be at the weighted average rate that will emerge in the auction on the basis of competitive bidding. It is an allocating facility wherein a part of total securities are allocated to bidders at a weighted average price of successful competitive bid. (Please also see paragraph no.4.3 under question no.4).
Odd Lot
Transactions of any value other than the standard market lot size of ₹ 5 crore are referred to as odd lot. Generally, the value is less than the ₹ 5 crore with a minimum of ₹10,000/-. Odd lot transactions are generally done by the retail and small participants in the market.
Par value
Par value is nothing but the face value of the security which is ₹ 100 for G-Secs. When the price of a security is equal to face value, the security is said to be trading at par.
Premium
When the price of a security is above the par value, the security is said to be trading at premium. The value of the premium is the difference between the price and the face value. For example, if a security is trading at ₹102, the premium is ₹ 2.
Price
The price quoted is for per ₹ 100 of face value. The price of any financial instrument is equal to the present value of all the future cash flows. The price one pays for a debt security is based on a number of factors. Newly-issued debt securities usually sell at, or close to, their face value. In the secondary market, where already-issued debt securities are bought and sold between investors, the price one pays for a bond is based on a host of variables, including market interest rates, accrued interest, supply and demand, credit quality, maturity date, state of issuance, market events and the size of the transaction.
Primary Dealers
In order to accomplish the objective of meeting the Government borrowing needs as cheaply and efficiently as possible, a group of highly qualified financial firms/ banks are appointed to play the role of specialist intermediaries in the G-Sec market between the issuer on the one hand and the market on the other. Such entities are generally called Primary dealers or market makers. In return of a set of obligations, such as making continuous bids and offer price in the marketable G-Secs or submitting reasonable bids in the auctions, these firms receive a set of privileges in the primary/ secondary market.
Real Time Gross Settlement (RTGS) system
RTGS system is a funds transfer mechanism for transfer of money from one bank to another on a “real time” and on “gross” basis. This is the fastest possible money transfer system through the banking channel. Settlement in “real time” means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed. “Gross settlement” means the transaction is settled on one to one basis without bunching with any other transaction. Considering that money transfer takes place in the books of the Reserve Bank of India, the payment is taken as final and irrevocable.
Repo Rate
Repo rate is the return earned on a repo transaction expressed as an annual interest rate.
Repo/Reverse Repo
Repo means an instrument for borrowing funds by selling securities of the Central Government or a State Government or of such securities of a local authority as may be specified in this behalf by the Central Government or foreign securities, with an agreement to repurchase the said securities on a mutually agreed future date at an agreed price which includes interest for the fund borrowed.
Reverse Repo means an instrument for lending funds by purchasing securities of the Central Government or a State Government or of such securities of a local authority as may be specified in this behalf by the Central Government or foreign securities, with an agreement to resell the said securities on a mutually agreed future date at an agreed price which includes interest for the fund lent.
Residual Maturity
The remaining period until maturity date of a security is its residual maturity. For example, a security issued for an original term to maturity of 10 years, after 2 years, will have a residual maturity of 8 years.
Secondary Market
The market in which outstanding securities are traded. This market is different from the primary or initial market when securities are sold for the first time. Secondary market refers to the buying and selling that goes on after the initial public sale of the security.
Tap Sale
Under Tap sale, a certain amount of securities is created and made available for sale, generally with a minimum price, and is sold to the market as bids are made. These securities may be sold over a period of day or even weeks; and authorities may retain the flexibility to increase the (minimum) price if demand proves to be strong or to cut it if demand weakens. Tap and continuous sale are very similar, except that with Tap sale the debt manager tends to take a more pro-active role in determining the availability and indicative price for tap sales. Continuous sale are essentially at the initiative of the market.
Treasury Bills
Debt obligations of the Government that have maturities of one year or less are normally called Treasury Bills or T-Bills. Treasury Bills are short-term obligations of the Treasury/ Government. They are instruments issued at a discount to the face value and form an integral part of the money market.
Underwriting
The arrangement by which investment bankers undertake to acquire any unsubscribed portion of a primary issuance of a security.
Weighted Average Price/ Yield
It is the weighted average mean of the price/ yield where weight being the amount used at that price/ yield. The allotment to the non-competitive segment will be at the weighted average price/yield that will emerge in the auction on the basis of competitive bidding.
Yield
The annual percentage rate of return earned on a security. Yield is a function of a security’s purchase price and coupon interest rate. Yield fluctuates according to numerous factors including global markets and the economy.
Yield to Maturity (YTM)
Yield to maturity is the total return one would expect to receive if the security is being held until maturity. Yield to maturity is essentially the discount rate at which the present value of future payments (investment income and return of principal) equals the price of the security.
Yield Curve
The graphical relationship between yield and maturity among bonds of different maturities and the same credit quality. This curve shows the term structure of interest rates. It also enables investors to compare debt securities with different maturities and coupons.
Core Investment Companies
Core Investment Companies (CICs)
Ans: No. CICs in a group would not be considered for aggregating the assets of multiple NBFCs in a group under the circular. Instructions contained in the Core Investment Companies (Reserve Bank) Directions, 2011 dated January 5, 2011 shall be applicable to CICs in this regard.
FAQs on Non-Banking Financial Companies
Liquid Asset requirement
Retail Direct Scheme
Investment and Account holdings related queries
Domestic Deposits
IV. Advances against shares and debentures
Indian Currency
D) Soiled and Mutilated Banknotes
Reserve Bank of India has been continuously making efforts to make good quality banknotes available to the members of public. To help RBI and the banking system towards this objective, the members of public are requested to ensure the following:
-
Not to staple the banknotes
-
Not to write/put rubber stamp or any other mark on the banknotes
-
Not to use banknotes for making garlands/toys, decorating pandals and places of worship or for showering on personalities in social events, etc.
All you wanted to know about NBFCs
D. Definition of deposits, Eligible / Ineligible Institutions to accept deposits and Related Matters
Foreign Investment in India
III. Investment in other securities
FAQs on Non-Banking Financial Companies
Liquid Asset requirement
External Commercial Borrowings (ECB) and Trade Credits
J. Reporting
Core Investment Companies
Core Investment Companies (CICs)
Ans: Registered CICs with assets < Rs.500 crore shall follow the asset classification norm as specified in the Non-Systemically Important Non-Banking Financial (Non-Deposit accepting or holding) Companies Prudential Norms (Reserve Bank) Directions, 2015 and those with assets >= Rs.500 crore shall follow the asset classification norm applicable to NBFCs with assets > = Rs. 500 crore as specified in the Systemically Important Non-Banking Financial (Non-Deposit accepting or holding) Companies Prudential Norms (Reserve Bank) Directions, 2015.
Domestic Deposits
IV. Advances against shares and debentures
Retail Direct Scheme
Investment and Account holdings related queries
Indian Currency
D) Soiled and Mutilated Banknotes
Banknotes returned from circulation are received at the Issue Offices of the Reserve Bank of India. The Reserve Bank of India, inter alia, uses highly sophisticated Currency Verification & Processing Systems (CVPS) machines and Shredding and Briquetting Systems (SBS) machines to verify these notes for genuineness, arithmetical accuracy and segregation of notes into fit for reissue and destruction of soiled (unfit) notes."
All you wanted to know about NBFCs
D. Definition of deposits, Eligible / Ineligible Institutions to accept deposits and Related Matters
Foreign Investment in India
III. Investment in other securities
FAQs on Non-Banking Financial Companies
Liquid Asset requirement
Core Investment Companies
Core Investment Companies (CICs)
Ans: Registered CICs with assets < Rs. 500 crore shall maintain standard asset provisioning of 0.25% as specified in the Non-Systemically Important Non-Banking Financial (Non-Deposit accepting or holding) Companies Prudential Norms (Reserve Bank) Directions, 2015 and those with assets >= Rs.500 crore shall maintain standard asset provisioning of 0.40% which would be applicable as specified in the Systemically Important Non-Banking Financial (Non-Deposit accepting or holding) Companies Prudential Norms (Reserve Bank) Directions, 2015.
External Commercial Borrowings (ECB) and Trade Credits
K. MISCELLANEOUS
Yes. Extant norms permit both ECB principal and interest to be converted into equity subject to applicable conditions as given under Paragraph 7.4 of the Master Direction No. 5 on ‘External Commercial Borrowings, Trade Credits and Structured Obligations dated March 26, 2019.
Domestic Deposits
IV. Advances against shares and debentures
Retail Direct Scheme
Investment and Account holdings related queries
Indian Currency
D) Soiled and Mutilated Banknotes
All Bank notes including Mahatma Gandhi (New) series notes with writing or colour stains on them continue to be legal tender, provided they are decipherable. Such notes can be deposited or exchanged in any bank branch.
However, a claim in respect of bank notes which carries any extrinsic words or visible representations intended to convey or capable of conveying any message of a political or religious character or furthering the interest of any person or entity will be rejected as per Reserve Bank of India (Note Refund) Rules, 2009 [As amended by Reserve Bank of India (Note Refund) Amendment Rules, 2018].
FAQs on Non-Banking Financial Companies
Liquid Asset requirement
External Commercial Borrowings (ECB) and Trade Credits
K. MISCELLANEOUS
Core Investment Companies
Core Investment Companies (CICs)
Ans:. Yes. As per the present directions for CICs, they are permitted to make investments in money market instruments, including money market mutual funds. Since Liquid Funds are also mutual funds with the underlying being money market instruments; CICs are permitted to invest their surplus funds in Liquid Fund Schemes also.
All you wanted to know about NBFCs
D. Definition of deposits, Eligible / Ineligible Institutions to accept deposits and Related Matters
Foreign Investment in India
III. Investment in other securities
Domestic Deposits
IV. Advances against shares and debentures
Retail Direct Scheme
Investment and Account holdings related queries
Indian Currency
E) Counterfeits/Forgeries
A suspected forged note, counterfeit note or fake note is any note which does not possess the characteristics of genuine Indian currency note.