Banks and NBFCs are different entities subject to different statutory and regulatory requirements. However, NBFCs lend and make investments and hence these activities are akin to that of banks. The major differences between banks and NBFCs are given below:

i. NBFCs cannot accept demand deposits;

ii. NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself;

iii. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation (DICGC) is not available to depositors of deposit taking NBFCs.

Ans: Net assets have been defined in Master Direction DoR(NBFC).PD.003/03.10.119/2016-17 dated August 25, 2016 (para3(1) (xviii)) specifically for the purpose of defining a CIC. As such they will only include the items specifically mentioned therein, irrespective of whether any of these qualify as operating assets or not.

The 10% of net assets which CIC’s can hold outside the group may include real estate or other fixed assets which are required for effective functioning of a company but should not include other financial investments/loans in non-group companies.

Clarification: Banks should ensure proper documentation for classifying agricultural loans under PSL as approved by their Board. Particularly while classifying loans under agriculture/SMF category, banks should maintain details regarding the location of the land for cultivation, details of crop grown, hypothecation of crops, if any; sanction of loan based on scale of finance, record of field visit by bank officials to monitor end use of agricultural loans, etc. Some of the above aspects should be available with the bank in the absence of copy of land record/lease deed particularly in case of agriculture loans to landless labourers, sharecroppers etc.

Clarification: As per extant guidelines, loans for Agriculture Infrastructure or loans for Food & Agro-processing activity are each subject to an aggregate sanctioned limit of ₹100 crore per borrower from the banking system. In case aggregate exposure across the banking industry exceeds the limit of ₹100 crore, then total exposure will cease to be classified under PSL category. The sanctioned limit of ₹100 crore has to be ascertained facility-wise for a particular entity and is exclusive of the other borrowings of the entity for PSL / non-PSL purposes. However, it needs to be ensured that the bank has assessed and sanctioned separate limits for the specific purpose of Agriculture Infrastructure or Food & Agro Processing activities of the entity, for the loans to qualify as PSL. Banks should take a declaration from the borrower regarding loan/s sanctioned by any other bank/s for the same activity and also independently seek confirmation from those banks. In the scenario, where new sanction by the bank leads to overall limit across banks exceeding ₹100 crore, it will have to inform other banks about the same. Accordingly, all other banks will have to declassify the same from PSL.

Clarification : As per Annex-III of Master Directions on Priority Sector Lending, 2025 transportation is an eligible activity under indicative list of permissible activities under Food Processing Sector. However, while classifying any facility to transporters for purchasing commercial vehicles under “Food & Agro-processing” category, it needs to be ensured that the vehicles are used exclusively for transportation of food and agro-processed products or are types of vehicles specifically used for “Food & Agro-processing” e.g. cold storage trucks, vans etc. If the commercial vehicle is also used for transportation of products other than those related to food & agro processing, the facility shall not be eligible for classification under ‘Food & Agro-processing’ category. Such loans may, however, be classified under MSME, if the borrower is eligible for classification as MSME in terms of definition given in the Master Direction – Lending to Micro, Small & Medium Enterprises (MSME) Sector dated July 24, 2017 (as updated from time to time)

Clarification: While classifying any facility to transporters for purchasing commercial vehicles under “Agriculture Infrastructure” category, it needs to be ensured that the vehicle is used exclusively for activities that are ancillary to “Agriculture Infrastructure”. If the commercial vehicle is also used for other purposes, the facility shall not be eligible for classification under ‘Agriculture Infrastructure’. Such loans may, however, be classified under MSME, if the borrower is eligible for classification as MSME as per the definition given in the Master Direction – Lending to Micro, Small & Medium Enterprises (MSME) Sector dated July 24, 2017 (as updated from time to time)

Clarification: Export credit extended by banks to the agriculture and MSME sectors is eligible to be classified as priority sector lending under the respective categories viz, agriculture and MSME, without any upper limit.

Clarification: The outstanding value may exceed ₹25 lakh on account of accrued interest due to moratorium on repayment during the study period. Accordingly, the entire outstanding amount shall be reckoned for priority sector provided the sanctioned limit does not exceed ₹25 lakh.

Ans: The Reserve Bank will send emails to all the eligible entities from generic email IDs of the Reserve Bank to notify them about the launch of the CPIS for the latest reference period. Entities are required to fill in the latest survey schedule attached along with the mail and send to the generic email IDs of the Reserve Bank as per the instruction given in the survey schedule.

Prior to introduction of auctions as the method of issuance, the interest rates were administratively fixed by the Government. With the introduction of auctions, the rate of interest (coupon rate) gets fixed through a market-based price discovery process.

4.1 An auction may either be yield based or price based.

i. Yield Based Auction: A yield-based auction is generally conducted when a new G-Sec is issued. Investors bid in yield terms up to two decimal places (e.g., 8.19%, 8.20%, etc.). Bids are arranged in ascending order and the cut-off yield is arrived at the yield corresponding to the notified amount of the auction. The cut-off yield is then fixed as the coupon rate for the security. Successful bidders are those who have bid at or below the cut-off yield. Bids which are higher than the cut-off yield are rejected. An illustrative example of the yield-based auction is given below:

Yield based auction of a new security Maturity Date: January 11, 2026 Coupon: It is determined in the auction (8.22% as shown in the illustration below) Auction date: January 08, 2016 Auction settlement date/Issue date: January 11, 2016* Notified Amount: ₹1000 crore * January 9 and 10 being holidays (Saturday and Sunday), settlement is done on January 11, 2016 (T+1 settlement).

Details of bids received in the increasing order of bid yields
Bid No.	Bid Yield	Amount of bid (₹ Cr)	Cumulative amount (₹ Cr)	Price* with coupon as 8.22%
1	8.19%	300	300	100.19
2	8.20%	200	500	100.14
3	8.20%	250	750	100.13
4	8.21%	150	900	100.09
5	8.22%	100	1000	100
6	8.22%	100	1100	100
7	8.23%	150	1250	99.93
8	8.24%	100	1350	99.87
The issuer would get the notified amount by accepting bids up to bid at sl. no. 5. Since the bid number 6 also is at the same yield, bid numbers 5 and 6 would get allotment on pro-rata basis so that the notified amount is not exceeded. In the above case each of bidder at sl. no. 5 and 6 would get ₹ 50 crore. Bid numbers 7 and 8 are rejected as the yields are higher than the cut-off yield.
*Price corresponding to the yield is determined as per the relationship given under YTM calculation in question 24.

ii. Price Based Auction: A price based auction is conducted when Government of India re-issues securities which have already been issued earlier. Bidders quote in terms of price per ₹100 of face value of the security (e.g., ₹102.00, ₹101.00, ₹100.00, ₹ 99.00, etc., per ₹100/-). Bids are arranged in descending order of price offered and the successful bidders are those who have bid at or above the cut-off price. Bids which are below the cut-off price are rejected. An illustrative example of price based auction is given below:

Price based auction of an existing security 8.22% GS 2026 Maturity Date: January 11, 2026 Coupon: 8.22% Auction date: January 08, 2016 Auction settlement date: January 11, 2016* Notified Amount: ₹1000 crore * January 9 and 10 being holidays (Saturday and Sunday), settlement is done on January 11, 2016 under T+1 cycle.

Details of bids received in the decreasing order of bid price
Bid no.	Price of bid	Amount of bid (₹ Cr)	Implicit yield	Cumulative amount (₹ Cr)
1	100.19	300	8.19%	300
2	100.14	200	8.20%	500
3	100.13	250	8.20%	750
4	100.09	150	8.21%	900
5	100	100	8.22%	1000
6	100	100	8.22%	1100
7	99.93	150	8.23%	1250
8	99.87	100	8.24%	1350
The issuer would get the notified amount by accepting bids up to 5. Since the bid number 6 also is at the same price, bid numbers 5 and 6 would get allotment in proportion so that the notified amount is not exceeded. In the above case each of bidders at sl. no. 5 and 6 would get securities worth ₹ 50 crore. Bid numbers 7 and 8 are rejected as the price quoted is less than the cut-off price.

4.2 Depending upon the method of allocation to successful bidders, auction may be conducted on Uniform Price basis or Multiple Price basis. 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. On the other hand, 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. In the example under (ii) above, if the auction was Uniform Price based, all bidders would get allotment at the cut-off price, i.e., ₹100.00. On the other hand, if the auction was Multiple Price based, each bidder would get the allotment at the price he/ she has bid, i.e., bidder 1 at ₹100.19, bidder 2 at ₹100.14 and so on.

4.3 An investor, depending upon his eligibility, may bid in an auction under either of the following categories:

Competitive Bidding: In a competitive bidding, an investor bids at a specific price / yield and is allotted securities if the price / yield quoted is within the cut-off price / yield. Competitive bids are made by well-informed institutional investors such as banks, financial institutions, PDs, mutual funds, and insurance companies. The minimum bid amount is ₹10,000 and in multiples of ₹10,000 in dated securities and minimum ₹ 10,000 in case of T-Bills and in multiples of ₹ 10,000 thereafter. Multiple bidding is also allowed, i.e., an investor may put in multiple bids at various prices/ yield levels.

Non-Competitive Bidding (NCB):

With a view to encouraging wider participation and retail holding of Government securities, retail investors are allowed participation on “non-competitive” basis in select auctions of dated Government of India (GoI) securities and Treasury Bills. Participation on a non-competitive basis in the auctions will be open to a retail investor who (a) does not maintain current account (CA) or Subsidiary General Ledger (SGL) account with the Reserve Bank of India; and (b) submits the bid indirectly through an Aggregator/Facilitator permitted under the scheme. Retail investor, for the purpose of scheme of NCB, is any person, including individuals, firms, companies, corporate bodies, institutions, provident funds, trusts, and any other entity as may be prescribed by RBI. Regional Rural Banks (RRBs) and Cooperative Banks shall be covered under this Scheme only in the auctions of dated securities in view of their statutory obligations and shall be eligible to submit their non-competitive bids directly. State Governments, eligible provident funds in India, the Nepal Rashtra Bank, Royal Monetary Authority of Bhutan and any Person or Institution, specified by the Bank, with the approval of Government, shall be covered under this scheme only in the auctions of Treasury Bills without any restriction on the maximum amount of bid for these entities and their bids will be outside the notified amount. Under the Scheme, an investor can make only a single bid in an auction.

Allocation of non-competitive bids from retail investors except as specified above will be restricted to a maximum of five percent of the aggregate nominal amount of the issue within the notified amount as specified by the Government of India, or any other percentage determined by Reserve Bank of India. The minimum amount for bidding will be ₹10,000 (face value) and thereafter in multiples in ₹10,000 as hitherto. In the auctions of GoI dated securities, the retail investors can make a single bid for an amount not more than Rupees Two crore (face value) per security per auction.

In addition to scheduled banks and primary dealers, specified stock exchanges are also permitted to act as aggregators/facilitators. These stock exchanges submit a single consolidated non-competitive bid in the auction process and will have to put in place necessary processes to transfer the securities so allotted in the primary auction to their members/clients.

Allotment under the non-competitive segment will be at the weighted average rate of yield/price that will emerge in the auction on the basis of the competitive bidding. The Aggregator/Facilitator can recover up to six paise per ₹100 as brokerage/commission/service charges for rendering this service to their clients. Such costs may be built into the sale price or recovered separately from the clients. It may be noted that no other costs, such as funding costs, should be built into the price or recovered from the client. In case the aggregate amount of bid is more than the reserved amount (5% of notified amount), pro rata allotment would be made. In case of partial allotments, it will be the responsibility of the Aggregator/Facilitator to appropriately allocate securities to their clients in a transparent manner. In case the aggregate amount of bids is less than the reserved amount, the shortfall will be taken to competitive portion.

The updated Scheme for Non-Competitive Bidding Facility in the auctions of Government Securities and Treasury Bills is issued by RBI vide IDMD.1080/08.01.001/2017-18 dated November 23, 2017.

4.4 NCB scheme has been introduced in SDLs from August 2009. The aggregate amount reserved for the purpose in the case of SDLs is 10% of the notified amount (e.g. ₹100 Crore for a notified amount of ₹1000 Crore) subject to a maximum limit of 1% of notified amount for a single bid per stock. The bidding and allotment procedure is similar to that of G-Secs.

Conversion (Switch) of Government of India Securities through auction

RBI has from April 22, 2019 started conducting the auction for conversion of Government of India securities on third Monday of every month. Bidding in the auction implies that the market participants agree to sell the source security/ies to the Government of India (GoI) and simultaneously agree to buy the destination security from the GoI at their respective quoted prices. The source securities along with notified amount and corresponding destination securities are provided in the press release issued before the auction. The market participants are required to place their bids in e-kuber giving the amount of the source security and the price of the source and destination security expressed up to two decimal places. The price of the source security quoted must be equal to the FBIL closing price of the source security as on the previous working day.