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Indian Currency

D) Soiled, Mutilated and Imperfect Banknotes

4. Can soiled, mutilated and imperfect banknotes be exchanged for value?

Yes. Such banknotes can be exchanged for value.

Foreign Investment in India

Q.33: Whether Pricing Guidelines apply for Indian company buying back shares in a scheme of merger/ de-merger/ amalgamation of Indian companies approved by NCLT/ competent authority for Buyback of shares/ Reduction of Capital by an Indian company ? +

Answer: Yes. Also, FC-TRS is required to be filed by the Indian company.

Retail Direct Scheme

Investment and Account holdings related queries

33. What is the process for bidding in primary auctions through the Retail Direct platform? +

After logging into the Primary Market Retail Direct platform, select the ‘Primary Market’ option beside the Dashboard, at the top of the page.
Select a security to bid from the ‘Auction Watch’ and enter the bid amount in the ‘Bid Entry’ window.
Individuals can fund their bid either at the time of bidding or at a later time, but before the closure of bidding/subscription window. Bids which are not funded as on the date of submission of bids to RBI will be cancelled.
For making payment for the bids, retail clients can use services like UPI (Transfer or Block) and Net Banking to transfer funds to a designated current account using Payment Gateways linked to the Online Portal.
Based on the allotment advice received as a part of the auction result, the allotments will be made to the individual investors.
In case of full allotment, each bidder will be allocated the entire Face Value for which bids were submitted. In case of partial allotment, a pro-rata allotment will be made to the bidder based on the partial allocation percentage determined in the auction.

For further details on the biding process, you may refer to the User Manual in the Help section of the Retail Direct Portal.

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

Some Useful Definitions

Q33. What is Direct Investment abroad by Indian companies? +

Ans: If the reporting Indian company invests in equity and/or participating preference shares of overseas company, under the Overseas Direct Investment Scheme in India, i.e. investment in Joint venture or wholly owned subsidiaries abroad, then it is considered as direct investment abroad of the Indian company.

NOTE: Registration guidelines and section-wise FAQs for further guidance to be file the FLA return are available in the FAQs section of the FLAIR portal (https://flair.rbi.org.in/fla/faces/pages/login.xhtml).

External Commercial Borrowings (ECB) and Trade Credits

I. HEDGING UNDER ECB FRAMEWORK

33. Can an entity raising INR ECB including issuance of Rupee denominated bonds overseas, assume foreign currency risk on account of liabilities arising out of such ECBs? +

Any entity raising INR ECB (including issuance of Rupee denominated bonds overseas) is not permitted to convert the liability arising out of such ECBs into a foreign currency liability in any manner or assume foreign currency risk in any manner by either entering into a derivative contract or otherwise.

FAQs on Non-Banking Financial Companies

Credit Rating

33. Rating Agencies use different symbols for their Investment Grade Rating. Is it possible for the common man to understand the strength of the company on the basis of these symbols ? +

Reserve Bank of India has specified the minimum level of investment grade Rating for eligibility for acceptance of deposits from public by Equipment Leasing/Hire Purchase Finance Companies. However, the Rating Agencies have been advised to bring about uniformity in their Rating Levels for the common man to understand the meaning of a particular Rating.

Government Securities Market in India – A Primer

Annex 1 +

Specimen of a G-Sec

Domestic Deposits

III. Advances

33. Whether banks are permitted to charge interest below their declared BPLR under consortium arrangement to offer rate comparable to leader bank? +

No. The banks need not charge a uniform rate of interest even under a consortium arrangement. Each member bank should charge rate of interest on the portion of the credit limits extended by them to the borrowers subject to their BPLR.

Indian Currency

D) Soiled, Mutilated and Imperfect Banknotes

5. Where are soiled/mutilated banknotes accepted for exchange?

All banks are authorized to accept and exchange soiled banknotes for full value. They shall extend the facility of exchange of soiled/mutilated notes to non-customers also.

All branches of commercial banks are authorised to adjudicate mutilated banknotes (which are legal tender) and pay value for these, in terms of the Reserve Bank of India (Note Refund) Rules, 2009 [as amended by Reserve Bank of India (Note Refund) Amendment Rules, 2018].

Small Finance Banks (up to two years from the commencement of their banking business) and Payment Banks may exchange mutilated and imperfect/defective notes at their option.

All you wanted to know about NBFCs

C. Residuary Non-Banking Companies (RNBCs)

33. What is the rate of interest that an RNBC must pay on deposits and what should be maturity period of deposits taken by them?

The minimum interest an RNBC should pay on deposits should be 5% (to be compounded annually) on the amount deposited in lump sum or at monthly or longer intervals; and 3.5% (to be compounded annually) on the amount deposited under daily deposit scheme. Interest here includes premium, bonus or any other advantage, that an RNBC promises to the depositor by way of return. An RNBC can accept deposits for a minimum period of 12 months and maximum period of 84 months from the date of receipt of such deposit. They cannot accept deposits repayable on demand.

Foreign Investment in India

Q.34: What are the guidelines for reporting of transfer of shares ? +

Answer: Form FC-TRS is required to be filed for transfer of capital instruments by way of sale in accordance with FEMA 20(R), from:a person resident outside India holding capital instruments in an Indian company on a repatriable basis to a person resident outside India holding capital instruments on a non-repatriable basis;a person resident outside India holding capital instruments in an Indian company on non-repatriable basis to a person resident outside India holding capital instruments on repatriable basis;a person resident outside India holding capital instruments in an Indian company on repatriable basis to a person resident in India;a person resident in India holding capital instruments in an Indian company to a person resident outside India holding capital instruments on repatriable basis.Sale of capital instruments on a recognized stock exchange by a person resident outside India as prescribed in regulation 10(3) of FEMA 20(R) has to be reported by such person in Form FC-TRS.FC-TRS is not required for:for transfer of shares of an Indian company from a non-resident holding the shares on non-repatriable basis to a resident and vice versa.for transfer of shares from a person resident outside India holding capital instruments in an Indian company on a repatriable basis to a person resident outside India holding capital instruments on a repatriable basisfor transfer of shares by way of gift.The onus of reporting is on the resident (transferor or transferee) or the person resident outside India holding capital instruments on a non-repatriable basis, as the case may be. The form FC-TRS has to be filed with the AD bank within sixty days of receipt/ remittance of funds or transfer of capital instruments whichever is earlier.II. Foreign Portfolio Investment

Retail Direct Scheme

Investment and Account holdings related queries

34. How many bids can I place in primary auctions? +

You can submit only one final bid per security in each primary auction of dated G-Sec, T-Bills and SDLs.

External Commercial Borrowings (ECB) and Trade Credits

I. HEDGING UNDER ECB FRAMEWORK

34. Can the existing hedge(s) for ECBs be rolled over to the extent of 100 per cent of outstanding ECB exposure? +

Yes. The prescription is that of a minimum mandatory hedge.

FAQs on Non-Banking Financial Companies

Credit Rating

34. What is the period of validity of a companys Rating ? +

The Reserve Bank has stipulated that the Credit Rating should be obtained by the NBFCs once in a year. Normally, the Credit Rrating of a company is valid till it is reviewed by the concerned Rating Agency.

Government Securities Market in India – A Primer

Annex 2 +

List of Primary Dealers (As on April 01, 2020)

STANDALONE PRIMARY DEALERS	BANK PRIMARY DEALERS
ICICI Securities Primary Dealership Limited ICICI Centre H.T.Parekh Marg Churchgate Mumbai- 400 020 Phone: (022) 22882460/70, 66377421	Bank of America, N.A. One BKC, ‘A’ Wing ‘G’ Block, Bandra Kurla Complex Bandra (E), Mumbai – 400 051 Phone: 022-66323111
Morgan Stanley India Primary Dealer Pvt. Ltd. 18F / 19F One Indiabulls Centre Tower 2, Jupiter Mills Compound Elphinstone Road Mumbai - 400013 Phone : (022) 61181000 Fax : (022) 61181011	Bank Of Baroda Specialised Integrated Treasury 4th & 5th Floor, Baroda Sun Tower, C-34, G-Block, Bandra Kurla Complex Bandra East, Mumbai-400 051 Phone:(022) 66363636 / 67592705
Nomura Fixed Income Securities Pvt. Ltd. Ceejay House, 11th Level Plot F, Shivsagar Estate Dr.Annie Besant Road Worli Mumbai - 400 018 Phone : (022) 40374037 Fax : (022) 40374111	Canara Bank Domestic Back Office Integrated Treasury Wing VI Floor, Canara Bank Building C-14, G Block, Bandra Kurla Complex Bandra East Mumbai- 400 051 Phone: (022) 26725126, 123
PNB Gilts Ltd. 5, Sansad Marg New Delhi- 110 001 Phone: Mumbai - (022) 22693315/17 New Delhi - (011) 23325751,22693315/17	Citibank N.A FIFC, 12th floor, C-54 and 55, G block, Bandra Kurla Complex, Mumbai – 400 051. Phone:(022) 6175 7187
SBI DFHI Ltd 3rd Floor, Voltas House, 23, J.N.Heredia Marg, Ballard Estate, Mumbai- 400 001 Phone:(022) 22625970/73, 22610490, 66364696	Union Bank of India Treasury Branch, Central Office, Union Bank Bhavan, 3rd Floor, 239, Vidhan Bhavan Marg, Nariman Point, Mumbai 400 021 Ph 022-22892118/22892102
STCI Primary Dealer Limited Marathon Innova, Marathon Nextgen Compound, Off Ganpatrao Kadam Marg, Lower Parel(W), Mumbai- 400 013 Phone:(022) 30031100, 66202261/2200	HDFC Bank Ltd. Treasury Mid Office, 1st Floor,HDFC Bank House Senapati Bapat Marg, Lower Parel Mumbai- 400 013 Phone:(022) 24904702/4935/3899, 66521372/9892975232
Goldman Sachs (India) Capital Markets Pvt. Ltd. 951-A, Rational House, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025 Phone : (022) 66169000	Hongkong and Shanghai Banking Corpn. Ltd.(HSBC) Treasury Services 52/60, Mahatma Gandhi Road Mumbai- 400 001 Phone:(022) 22681031/34/33, 22623329/22681031/34/38
	J P Morgan Chase Bank N.A, Mumbai Branch J.P. Morgan Tower Off C.S.T. Road, Kalina Santacruz (East) Mumbai - 400 098 Phone -61573000 Fax- 61573990 & 61573916
	Kotak Mahindra Bank Ltd. 27BKC, 5th Floor Plot No. C-27, G-Block Bandra Kurla Complex Bandra East Mumbai 400 051. Phone:(022) 6659 6022/6454, 66596235/6454
	Standard Chartered Bank Financial Markets Financial Market Operation Crescenzo, 5th Floor Plot no. C-38 & 39, G – Block Bandra Kurla Complex Mumbai – 400 051 Phone : (022) 61158893
	Axis Bank Ltd. Treasury Operations Corporate Office, 4th Floor, Axis House Bombay Dyeing Compound Pandurang Budhkar Marg Worli, Mumbai - 400 025 Phone- (022) 24254430, 24254434 Fax- (022) 24252400 / 5400
	IDBI Bank Limited IDBI Tower, Cuffe Parade Mumbai- 400 005 Phone- (022) 66263351
	Deutsche Bank AG C-70, G Block, Bandra Kurla Complex Mumbai-400051 Phone: (022) 71804444
	Yes Bank Limited Yes Bank Tower, IFC 2, Elphinstone (W), Senapati Bapat Marg, Mumbai-400013 Phone: (022) 33669000

* Bank PDs are those which take up PD business departmentally as part of the bank itself.

** Stand alone PDs are Non Banking Financial Companies (NBFCs) that exclusively take up PD business.

Update to the list of Primary dealers is available on the RBI website at /en/web/rbi/citizen-corner/primary-dealers

Domestic Deposits

III. Advances

34. What should be penal rate of interest? +

With effect from October 10, 2000, banks have been given freedom to formulate transparent policy for charging penal interest with the approval of their Board of Directors. However, in the case of loans to borrowers under priority sector, no penal interest should be charged for loans up to Rs.25,000. Penal interest may be levied for reasons such as default in repayment, non-submission of financial statements, etc. However, the policy on penal interest should be governed by well-accepted principles of transparency, fairness, incentive to services the debt and genuine difficulties of customers.

Indian Currency

D) Soiled, Mutilated and Imperfect Banknotes

6. How much value would one get in exchange of imperfect banknotes?

The value of an imperfect note may be paid for full value/half value under rules as specified in Part III of Reserve Bank of India (Note Refund) Rules, 2009 [As amended by Reserve Bank of India (Note Refund) Amendment Rules, 2018] available in our website under www.rbi.org.in → Publications → Occasional.

All you wanted to know about NBFCs

D. Definition of deposits, Eligible / Ineligible Institutions to accept deposits and Related Matters

34. What is ‘deposit’ and ‘public deposit’? Is it defined anywhere? +

The term ‘deposit’ is defined under Section 45 I(bb) of the RBI Act, 1934. ‘Deposit’ includes and shall be deemed always to have included any receipt of money by way of deposit or loan or in any other form but does not include:
i. amount raised by way of share capital, or contributed as capital by partners of a firm;
ii. amount received from a scheduled bank, a co-operative bank, a banking company, Development bank, State Financial Corporation, IDBI or any other institution specified by RBI;
iii. amount received in ordinary course of business by way of security deposit, dealership deposit, earnest money, advance against orders for goods, properties or services;
iv. amount received by a registered money lender other than a body corporate;
v. amount received by way of subscriptions in respect of a ‘Chit’.
Para 3(xiii) of the Master Direction – Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016 (as amended from time to time) defines a ‘public deposit’ as a ‘deposit’ as defined under Section 45I(BB) of the RBI Act, 1934 and further excludes the following:
a. amount received from the Central/ State Government or any other source where repayment is guaranteed by Central/ State Government or any amount received from local authority or foreign government or any foreign citizen/ authority/ person;
b. any amount received from financial institutions specified by RBI for this purpose;
c. any amount received by a company from any other company;
d. amount received and held pursuant to an offer made in accordance with the provisions of the Companies Act, 2013, towards subscription to any securities, including share application money or advance towards allotment of securities pending allotment, to such extent and for such period as permissible under the Companies (Acceptance of Deposit) Rules, 2014 and as amended from time to time;
e. amount received from directors of a company or from its shareholders by private company or by a private company which has become a public company, provided that the director or shareholder furnishes a declaration in writing that the amount is not given out of funds acquired by borrowing or accepting from others;
f. amount raised by issue of bonds or debentures secured by mortgage of any immovable property or other asset of the company subject to conditions;
fa. any amount raised by issuance of non-convertible debentures with a maturity more than one year and having the minimum subscription per investor at ₹1 crore and above, provided it is in accordance with the guidelines issued by the Bank.
g. the amount brought in by the promoters by way of unsecured loan;
h. amount received from a mutual fund;
i. any amount received as hybrid debt or subordinated debt, the minimum maturity of which is not less than 60 months provided there is no option for recall by the issuer within the period;
j. amount received from a relative of the director of an NBFC;
k. any amount received by issuance of Commercial Paper in accordance with the guidelines issued by the Bank;
l. any amount received by a NBFC-Middle Layer and above, by issuance of ‘perpetual debt instruments’ in accordance with the guidelines issued by the Bank;
m. any amount raised by the issue of infrastructure bonds by an Infrastructure Finance Company as specified in the notification issued by Central Government under Section 80CCF of the Income Tax Act, 1961.
Thus, the directions exclude from the definition of public deposit, amounts raised from certain set of informed lenders who can make independent decision.

Foreign Investment in India

II. Foreign Portfolio Investment

Q.35: What are the regulations regarding investments on the stock exchanges in India +

Answer: Foreign Portfolio Investors (FPIs) registered in accordance with the provisions of SEBI (FPI) Regulations and NRIs/ OCIs can make investment on the stock exchanges in India, subject to the individual and aggregate limits prescribed in schedules 2 and 3, respectively of FEMA 20(R).III. Investment in other securities

FAQs on Non-Banking Financial Companies

Credit Rating

35. If the company questions the Rating given to it, to whom can it appeal ? +

A. The Credit Rating is the opinion of the Agency about the companys ability to service its debt. The company has the discretion to accept the Rating or reject it. There is no appellate authority.

External Commercial Borrowings (ECB) and Trade Credits

I. HEDGING UNDER ECB FRAMEWORK

35. What are the permitted derivative products for hedging of ECB? +

Users may refer to Master Direction on Risk Management and Inter-bank dealings dated July 5, 2016, as amended from time to time.

Government Securities Market in India – A Primer

Annex 3 +

Sample of Auction Calendar

Domestic Deposits

III. Advances

35. Consequent on the deregulation of interest rate on advances over Rs.2 lakhs with effect from October 18, 1994, whether banks should pay DICGC Guarantee fees in respect of priority sector advances? +

As regards DICGC Guarantee fees, the banks have been given discretion to absorb or to pass on the guarantee fees to the borrower in case of advances over Rs.25,000/- excluding advances to weaker sections. Banks should bear DICGC guarantee fees in respect of advances upto Rs.25,000/- and all advances to weaker sections.

Retail Direct Scheme

Investment and Account holdings related queries

35. What amount should I pay at the time of placing a bid in primary auctions? +

For dated G-Sec, T-Bills and SDLs, the amount per unit will be based on the indicative price of the security, the accrued interest and a mark-up.

For SGBs, the funding will be based on the Issue Price declared by RBI for that particular issue.

Indian Currency

D) Soiled, Mutilated and Imperfect Banknotes

7. What types of banknotes are eligible/not eligible for payment under the Note Refund Rules?

The details are available on our website at the following link: www.rbi.org.in >> Currency Management >>Notifications.

A summary of the old (2009) and amended NRR (2018) is as under:

Note Refund Rules - Amended

Sr. No.	As per Old NRR (2009)	As per Amended NRR (2018)
1	Notes up to ₹20 denominations i) area of single largest undivided piece of the note > 50% - Full value ii) area of largest undivided piece of the note =/< 50% - Reject	No change
2	Notes of ₹50/- and above denominations i) If area is less than 40% - Reject ii) If the area is equal to or more than 40% and less than or equal to 65% - Half value iii) If the area of the single largest undivided pieces is more than 65% - Full value	Notes of ₹50/- & above denominations i) If area is less than 40% - Reject ii) If the area is more than or equal to 40% and less than or equal to 80% - Half value iii) If the area of the single largest undivided pieces is more than 80% - Full value

All you wanted to know about NBFCs

D. Definition of deposits, Eligible / Ineligible Institutions to accept deposits and Related Matters

35. Which entities can legally accept deposits from public? +

Banks, including co-operative banks, can accept deposits. NBFCs (including Housing Finance Companies), which have been issued Certificate of Registration by the Reserve Bank with a specific licence to accept deposits, are entitled to accept public deposit. In other words, not all NBFCs registered with the Reserve Bank are entitled to accept deposits but only those that hold a deposit accepting Certificate of Registration, can accept deposits. Further, these deposit accepting NBFCs can accept deposits, only to the extent permissible. Companies authorized by Ministry of Corporate Affairs under the Companies (Acceptance of Deposits) Rules framed by Central Government under the Companies Act can also accept deposits upto a certain limit. Cooperative Credit Societies can accept deposits from their members but not from the general public. The Reserve Bank regulates the deposit acceptance only of banks, cooperative banks and NBFCs.

It is not legally permissible for other entities to accept public deposits. Unincorporated bodies like individuals, partnership firms, and other association of individuals are prohibited from carrying on the business of acceptance of deposits as their principal business. Such unincorporated bodies are prohibited from accepting deposits even if they are carrying on financial business.

Further, The First Schedule of the ‘The Banning of Unregulated Deposit Schemes Act, 2019’ may be referred for the list of regulated deposit schemes.

FAQs on Non-Banking Financial Companies

Liquid Asset requirement

36. Whether the liquid assets are required to be maintained only on the principal amount of public deposits or the interest accrued on such deposits should be included in the deposit liabilities? +

The liquid assets are required to be maintained in relation to the deposit outstanding together with the amount of interest accrued but not paid.

Government Securities Market in India – A Primer

Annex 4 +

Sample of Auction notification

Domestic Deposits

III. Advances

36. Whether interest on loans and advances could be charged at varying periods ranging from monthly rests to yearly rests? +

With effect from April 1, 2002 banks have been charging interest on loans and advances at monthly rests except in the case of agricultural advances (including short term loans and other allied activities) where the existing practice continues.

External Commercial Borrowings (ECB) and Trade Credits

J. Reporting

36. What precautions have to be taken at the time of filing of Form ECB in respect of an ECB? +

Any draw-down in respect of an ECB should happen only after obtaining the Loan Registration Number (LRN) from RBI by filing duly certified Form ECB to the Director, External Commercial Borrowings Division, Department of Statistics and Information Management (DSIM), Reserve Bank of India, Bandra-Kurla Complex, Mumbai – 400 051. It should be ensured that all terms and conditions of the ECB are reported correctly in Form ECB and none of the columns are left blank (such columns which are not applicable for the borrowing or against which ‘nil’ information has to be given, should be suitably covered). Changes in ECB parameters, whether under the automatic route with the approval of Authorised Dealer Category –I banks or under the approval route with prior approval of the RBI, should also be reported to the DSIM through revised Form ECB at the earliest, in any case not later than 7 days from the changes effected. While submitting revised Form ECB, the changes should be specifically mentioned in the communication. Any failure to comply with reporting guidelines in respect of Form ECB for an ECB may invite penal action under FEMA.

Foreign Investment in India

III. Investment in other securities

Q.36: Can a person resident outside India invest in Government Securities/ Treasury bills/ corporate debt/ other securities ? +

Answer: Foreign Portfolio Investors (FPIs), Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), Foreign Central Banks, Multilateral Development Bank, Long term investors like Sovereign Wealth Funds (SWFs), Multilateral Agencies, Endowment Funds, Insurance Funds and Pension Funds which are registered with SEBI Long Term Investors may invest in other securities as specified in Schedule 5 to Notification No FEMA 20.

Retail Direct Scheme

Investment and Account holdings related queries

36. At what price will the securities be allotted in primary auctions? +

At the weighted average price of the successful bids in the auction.

Indian Currency

D) Soiled, Mutilated and Imperfect Banknotes

8. What if a banknote is found to be non-payable?

Non-payable banknotes are retained by the receiving banks and sent to the Reserve Bank where they are destroyed.

All you wanted to know about NBFCs

D. Definition of deposits, Eligible / Ineligible Institutions to accept deposits and Related Matters

36. Can all NBFCs accept deposits? Is there any ceiling on acceptance of Public Deposits? What is the rate of interest and period of deposit which NBFCs can accept? +

All NBFCs are not entitled to accept public deposits. Only those NBFCs that hold a deposit accepting Certificate of Registration, and have a minimum investment grade credit rating of ‘BBB–‘ from any of the SEBI-registered credit rating agencies, are allowed to accept/ hold public deposits up to a limit of 1.5 times of their Net Owned Funds. Presently, the maximum rate of interest an NBFC can offer is 12.5%. The interest may be paid or compounded at rests not shorter than monthly rests. The NBFCs are allowed to accept/ renew public deposits which are repayable after 12 months but not later than 60 months. They cannot accept deposits repayable on demand.

However, as a matter of public policy, Reserve Bank has decided that only banks should be allowed to accept public deposits and as such, has, since 1997, not issued any Certificate of Registration (CoR) to new NBFCs for acceptance of public deposits.

Foreign Investment in India

III. Investment in other securities

Q.37: Who is an FVCI ? +

Answer: Foreign Venture Capital Investor’ (FVCI) means an investor incorporated and established outside India and registered with Securities and Exchange Board of India under Securities and Exchange Board of India (Foreign Venture Capital Investors) Regulations, 2000

FAQs on Non-Banking Financial Companies

Liquid Asset requirement

37. What is the ratio of liquid asset requirement and the base of deposits to which the liquid asset are linked ? +

The minimum level of liquid asset between January 1 and March 31, 1998 remains unchanged at 10 per cent and 5 per cent of the regulated deposits outstanding as on September 30, 1997 for equipment leasing/hire purchase finance companies and loan/investment companies respectively, depending upon their Registration status under erstwhile Registration Scheme. However, on and from April 1, 1998, the requirement of liquid assets would be uniform for all these NBFCs except RNBCs at 12.5 per cent of the "public deposits". The ratio will be 15 per cent of public deposits on and from April 1, 1999. For RNBCs, the ratio shall remain unchanged at 10 per cent of the deposits outstanding.

External Commercial Borrowings (ECB) and Trade Credits

J. Reporting

37. How are actual transactions of an ECB reported to RBI? +

The borrowers are required to report actual ECB transactions, correctly and fully, through duly certified Form ECB 2 through the Authorised Dealer Category-I bank to DSIM as per the periodicity specified by the RBI. None of the columns in Form ECB 2 should be left blank (such columns which are not applicable for the borrowing or against which ‘nil’ information has to be given, should be suitably covered). The Form ECB 2 should reach DSIM within seven working days from the close of month to which it relates. Changes, if any, in ECB parameters should also be incorporated in Form ECB 2 suitably. Any failure to comply with reporting guidelines in respect of Form ECB 2, including failure to adhere to periodicity of reporting, may invite penal action under FEMA.

Government Securities Market in India – A Primer

Annex 5 +

Specimen of Deal slip

Domestic Deposits

III. Advances

37. What rate of interest is chargeable on loans/ advances granted to Staff Members of the banks or Staff Members of Co-operative Credit Societies? +

The interest rate directives on advances granted by banks will not be applicable to loans or advances or other financial accommodation made or provided or renewed by a scheduled bank, inter alia, to its own employees. Where the advances are provided by the bank to co-operative credit societies formed by the bank’s staff members for lending to constituents (i.e. staff of the bank), the interest rate directives of the RBI will not apply in such advances.

Retail Direct Scheme

Investment and Account holdings related queries

37. Is markup a fee charged for investing through the Retail Direct portal? +

No. Markup is not a fee charged by RBI. It is refundable depending upon the price at which the bids are allotted in the auction.

Indian Currency

D) Soiled, Mutilated and Imperfect Banknotes

9. Have guidelines been issued to deposit/exchange mutilated/soiled banknotes of new notes issued under Mahatma Gandhi (New) Series?

Guidelines for the exchange of mutilated/torn notes are available in our Master Direction on “Facility for Exchange of Notes & Coins” DCM (NE) No.G-5/08.07.18/2025-26 dated April 01, 2025 available on our website www.rbi.org.in under Notifications>Master Directions>Issuer of Currency. Mutilated notes can be exchanged at all bank branches in terms of Reserve Bank of India (Note Refund) Rules, 2009 [As amended by Reserve Bank of India (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

37. In respect of companies which do not fulfill the 50-50 criteria but are accepting deposits – do they come under Reserve Bank’s purview? +

A company which does not have financial assets which are more than 50% of its total assets and does not derive at least 50% of its gross income from such assets is not an NBFC. Its principal business would be non-financial activity like agricultural operations, industrial activity, purchase or sale of goods or purchase/construction of immovable property, and will be a non-banking non-financial company. Acceptance of deposits by a Non-Banking Non-Financial Company are governed by the rules and regulations issued by the Ministry of Corporate Affairs.

Foreign Investment in India

III. Investment in other securities

Q.38: Where can a Foreign Venture Capital Investor (FVCI) invest ? +

Answer: A SEBI registered Foreign Venture Capital Investor may make investment in terms of schedule 7 of FEMA 20(R) as per the conditions prescribed therein.

FAQs on Non-Banking Financial Companies

Liquid Asset requirement

38. Whether a part of the liquid assets can be held in the form of investments in bonds of and deposits with the scheduled commercial banks ? +

No. An NBFC is required to invest in approved securities a part of the deposits, for compliance with the provisions of section 45IB of the RBI Act. The term `approved securities has been defined in the RBI Act itself which means the Government securities and Government guaranteed bonds. Hence it is not permissible for the NBFCs to maintain a part of the securities in the form of investments in bonds of and deposits with banks.

Government Securities Market in India – A Primer

Annex 6 +

Important Excel functions for bond related calculations

Retail Direct Scheme

Investment and Account holdings related queries

38. Why do I have to pay a markup during my primary auction bid? +

In the non-competitive segment of primary auctions, the price at which the securities are allotted is the weighted average price of the successful competitive bids in the auction. Since this weighted average price can be calculated only after the auction is over, the price of the security through the non-competitive segment is unknown during the time of bidding. To cover for this uncertainty, a markup is applied in case the weighted average price comes out to be higher.

External Commercial Borrowings (ECB) and Trade Credits

J. Reporting

38. In light of the New ECB framework, does the borrower need to file revised Form ECB? +

No, in case no changes are made in terms and conditions of ECB, there is no need to file revised Form ECB (erstwhile Form 83).

Domestic Deposits

IV. Advances against shares and debentures

38. Whether banks can sanction loans to Trust and Endowments against the security of shares and debentures? +

No.

Indian Currency

D) Soiled, Mutilated and Imperfect Banknotes

10. Is the serial number essential when assessing the value of a damaged banknote?

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 Reserve Bank of India (Note Refund) Rules, 2009 [as amended by Reserve Bank of India (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

38. Why is the Reserve Bank so restrictive in allowing NBFCs to raise public deposits?

The Reserve Bank's overarching concern while regulating/ supervising any financial entity is protection of depositors' interest. Depositors place deposit with any entity on trust unlike an investor who invests in the shares of a company with the intention of sharing the risk as well as return with the promoters. Protection of depositors' interest, thus, is supreme in financial regulation. Further, the deposits of NBFCs do not have insurance from the Deposit Insurance and Credit Guarantee Corporation.

Foreign Investment in India

III. Investment in other securities

Q.39: How can the FVCI make payment for the investment ? +

Answer: The amount of consideration for all investment by an FVCI has to be received/made through inward remittance from abroad through banking channels or out of funds held in a foreign currency account and/ or a Special Non-Resident Rupee (SNRR) account maintained by the FVCI with an AD bank in India. The foreign currency account and SNRR account shall be used only and exclusively for transactions under the relevant Schedule.

External Commercial Borrowings (ECB) and Trade Credits

J. Reporting

39. Is LSF applicable to old ECB 2 returns also? +

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

Annex 7 +

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.

FAQs on Non-Banking Financial Companies

Liquid Asset requirement

39. The securities meant for maintaining the liquid assets are required to be valued at their market value. What should be the value for the unquoted Government securities? +

The unquoted Government securities are to be valued at their carrying cost. The term `carrying cost has been defined in the Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998 to mean the net book value of the asset and interest accrued thereon but not received.

Retail Direct Scheme

Investment and Account holdings related queries

39. When will I get the refund for the excess markup? +

The excess markup, i.e., the price charged at the time of placing the bid, minus the actual allotment price, will be refunded to your linked bank account within two business days from the date of auction.

Domestic Deposits

IV. Advances against shares and debentures

39. Whether banks can sanction loans against the equity shares of the banking company to its directors? +

No.

All you wanted to know about NBFCs

D. Definition of deposits, Eligible / Ineligible Institutions to accept deposits and Related Matters

39. Which are the NBFCs specifically authorized by the Reserve Bank to accept deposits?

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) under Regulation → Non-Banking → NBFCs. Members of the public are advised to check the list before placing deposits with NBFCs.

Foreign Investment in India

III. Investment in other securities

Q.40: How can the sale/ maturity proceeds be taken out by the FVCI ? +

Answer: The sale/ maturity proceeds (net of taxes) of the securities may be remitted outside India or credited to the foreign currency account or a Special Non-resident Rupee Account of the FVCI.

FAQs on Non-Banking Financial Companies

Liquid Asset requirement

40. The liquid asset securities are required to be lodged with a scheduled commercial bank for the purpose of safeguarding the depositors interest. Whether a company can lodge these securities at two places or with two banks ? +

The liquid assets securities can be lodged with one bank branch only and at one place only. However, the company has the discretion now to keep such securities with a bank branch either at the place of its registered office or at another place of its choice after taking prior approval of the concerned Regional Office of RBI.

External Commercial Borrowings (ECB) and Trade Credits

J. Reporting

40. Is LSF applicable for each Form ECB 2 and to nil returns as well? +

Yes. LSF is applicable for non-submission of each Form ECB 2, including Nil returns.

Domestic Deposits

IV. Advances against shares and debentures

40. Whether any ceiling has been fixed on the bank’s exposure to the capital market? +

A banks total exposure, including both fund based and non-fund based, to capital market in all forms covering its direct investment in equity shares, convertible bonds and debentures and units of equity oriented mutual funds; Advances against shared to individuals for investment in equity shares (including IPOs), bonds and debentures, units of equity-oriented mutual funds and secured and unsecured advances to stockbrokers and guarantees issued on behalf of stockbrokers and market makers should not exceed 5% of its total outstanding advances as on March 31 of the previous year (including Commercial Paper). Within the above ceiling, bank’s direct investment should not exceed 20 per cent of its networth. For computing the ceiling on exposure to capital market, the bank’s direct investment in shares will be calculated at cost price of the shares

Retail Direct Scheme

Investment and Account holdings related queries

40. Can I use a different bank account other than the one registered with the Retail Direct portal for funding my bids? +

No. However, if you want to use a different bank account, you can replace the linked bank account through the Retail Direct portal.

Indian Currency

D) Soiled, Mutilated and Imperfect Banknotes

11. What happens when the banknotes return to RBI from circulation?

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

40. Whether NBFCs can accept deposits from NRIs? +

NBFCs can accept deposits from NRIs subject to compliance with Foreign Exchange Management (Deposit) Regulations 2016 (as amended from time to time) and also subject to the condition that the rate of interest on these deposits shall not exceed the rate specified by the Reserve Bank for such deposits with scheduled commercial banks.

Foreign Investment in India

III. Investment in other securities

Q.41: What is an investment vehicle ? +

Answer: Investment Vehicle is an entity registered and regulated under relevant regulations framed by SEBI or any other authority designated for the purpose. For the purpose of Schedule 8 of FEMA 20(R), an Investment Vehicle is a Real Estate Investment Trust (REIT) governed by the SEBI (REITs) Regulations, 2014, an Infrastructure Investment Trust (InvIt) governed by the SEBI (InvIts) Regulations, 2014 and an Alternative Investment Fund (AIF) governed by the SEBI (AIFs) Regulations, 2012. It does not include a Venture Capital Fund registered under the erstwhile SEBI (Venture Capital Funds) Regulations, 1996.

FAQs on Non-Banking Financial Companies

Liquid Asset requirement

41. Can the securities held by an NBFC with the designated bank branch in the concerned banks Constituents SGL Accountl be treated as investments in liquid assets for the purpose of the provisions of Section 45IB?. If so, whether approved securities in physical form held by the NBFC towards part compliance of the liquidity requirement can be lodged with another bank branch?. +

A. The securities held on behalf of and NBFC, in a banks Constituents SGL Account can be reckoned towards compliance of requirements of Section 45IB. The securities are required to be deposited with one bank branch and at one place only for the purpose of adequate control. Hence, if an NBFC holds securities with its designated bank branch in its Constituents SGL Account, it would be necessary for the company to lodge its physical securities also with the same bank branch.

External Commercial Borrowings (ECB) and Trade Credits

K. MISCELLANEOUS

41. Can the interest accrued on ECB be converted into Equity under the extant norms? +

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

41. Whether banks can make short sales of shares? +

No. Banks are prohibited from making any short sales of shares.

Retail Direct Scheme

Investment and Account holdings related queries

41. Can I place a competitive bid (i.e., a bid at my desired price) in the primary auctions of dated G-Sec, T-Bills and SDLs? +

No. The Scheme is designed to facilitate only Non-competitive participation (i.e., bids without choosing your own price) by individuals. However, if one desires to place a competitive bid, he/she may contact a Bank/Primary Dealer/any other authorized institution.

Indian Currency

D) Soiled, Mutilated and Imperfect Banknotes

12. Are coloured/stained notes or scribbled notes legal tender?

All Bank notes including Mahatma Gandhi (New) series notes with writing or colour/ oil 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].

All you wanted to know about NBFCs

D. Definition of deposits, Eligible / Ineligible Institutions to accept deposits and Related Matters

41. Can a Co-operative Credit Society accept deposits from the public? +

No. Co-operative Credit Societies cannot accept deposits from general public. They can accept deposits only from their members within the limit specified in their bye laws. It may be noted that Co-operative Credit Societies do not fall under the regulatory purview of the Reserve Bank and fall under the purview of Registrar of Cooperative Societies.

FAQs on Non-Banking Financial Companies

Liquid Asset requirement

42. The companies have been advised to obtain prior approval of the Regional Office of the Reserve Bank of India if it is intended to lodge the securities with a bank branch at a place other than the place of its Registered Office. Please explain the purpose behind it. +

Most of the companies are unitary entities. They function from the place of their Registered Office. Some of the large sized companies as also some others may intend to keep the securities at metropolitan centres for operational advantages. The place where the securities are held could be outside the jurisdiction of the concerned Regional Office of RBI because the jurisdictional areas are decided on the basis of place of location of the Registered Office of the companies. In such cases, it is imperative for the Regional Offices to know the place where the securities are being kept.

External Commercial Borrowings (ECB) and Trade Credits

K. MISCELLANEOUS

42. When ECB is partially converted into equity, should the remaining ECB amount comply with all the ECB guidelines? +

Yes. The part conversion of ECB into equity will be freely permitted only when the part amount remaining as ECB complies with all the applicable ECB norms.

Foreign Investment in India

III. Investment in other securities

Q.42: What are the provisions with regard to Downstream investment for an investment vehicle ? +

Answer: Investment made by an Investment Vehicle into an Indian company or an LLP will be indirect foreign investment for the investee company or the LLP, as the case may be, if either the Sponsor or the Manager or the Investment Manager (i) is not owned and not controlled by resident Indian citizens or (ii) is owned or controlled by persons resident outside India.

Domestic Deposits

IV. Advances against shares and debentures

42. Which of the bills should not be discounted by banks? +

The bills covering payment of electricity charges, customs duty, hire purchase/ lease rental installments, sale of securities and other types of financial accommodation should not be discounted by banks.

Retail Direct Scheme

Investment and Account holdings related queries

42. What other fees/ charges are applicable? +

No fee will be charged for opening and maintaining the Retail Direct Gilt (RDG) account with RBI. No fee will be charged by RBI at the time of submission of bids in primary auctions. However, applicable payment gateway charges will have to be borne by the investor while funding his/her purchases.

Indian Currency

E) Counterfeits/Forgeries

1. What is a forged note? +

A suspected forged note, counterfeit note or fake note is any note which does not possess the characteristics of genuine Indian currency note.

All you wanted to know about NBFCs

D. Definition of deposits, Eligible / Ineligible Institutions to accept deposits and Related Matters

42. Can a Salary Earners’ Society accept deposits from the public? +

No. These societies are formed for salaried employees and hence they can accept deposit only from their own members and not from general public. It may be noted that Salary Earners’ Societies do not fall under the regulatory purview of the Reserve Bank and fall under the purview of Registrar of Cooperative Societies.

Foreign Investment in India

III. Investment in other securities

Q.43: What are the restrictions on the investments made by an AIF ? +

Answer: An Alternative Investment Fund (Category III) with foreign investment can make portfolio investment in only those securities or instruments in which an FPI is allowed to invest under the Act, rules or regulations made thereunder.IV. Reporting Delays

FAQs on Non-Banking Financial Companies

Extent of regulations over NBFCs accepting public deposits and not accepting public deposits

43. What are the responsibilities of the NBFCs accepting/holding public deposits with regard to submission of Returns and other information to RBI? +

The NBFCs accepting public deposits shall furnish to RBI Certificate from the Auditors regarding solvency of the company in repayment of the deposits as and when the claims arise; Balance Sheet and the Auditors Reports submitted to the Board of Directors as also to the Shareholders of the company; Statutory Annual Return on deposits in the First Schedule; Quarterly Return on liquid assets; Half-yearly Return on prudential norms; and a copy of the Credit Rating once a year alongwith one of the Half-yearly Returns on prudential norms as at (v) above.

External Commercial Borrowings (ECB) and Trade Credits

K. MISCELLANEOUS

43. Can fixed deposits created out of ECB proceeds, pending utilization, be renewed after completion of maximum permitted period? +

No.

Domestic Deposits

IV. Advances against shares and debentures

43. Whether banks can invest in fixed deposits of non-financial companies? +

There is no prohibition on banks’ placing of funds with non-banking non-financial companies under their Public Deposit Schemes. However, investment in the Public Deposit Scheme of such companies should be classified by banks as loans/ advances in their balance sheet and returns submitted under the Banking Regulation Act, 1949 and the Reserve Bank of India Act 1934.

Retail Direct Scheme

Investment and Account holdings related queries

43. When will the securities be credited in my Retail Direct Gilt (RDG) account? +

Securities will be credited in your Retail Direct account on the settlement date, which is typically one working day after the trade date/auction date.

Indian Currency

E) Counterfeits/Forgeries

2. How to check whether a note is genuine or not? +

A forged note can be identified on the basis of the security features which are present in a genuine Indian currency note. These features are easily identifiable by seeing, touching and tilting the note. The information regarding security features present in the Indian banknotes is available on the website www.rbi.org.in>>Currency Management>>paisaboltahai at https://website.rbi.org.in/web/rbi/rbi-kehta-hai/know-your-banknotes

All you wanted to know about NBFCs

D. Definition of deposits, Eligible / Ineligible Institutions to accept deposits and Related Matters

43. Is nomination facility available to the Depositors of NBFCs? +

Yes, nomination facility is available to the depositors of NBFCs. The Rules for nomination facility are provided for in Section 45QB of the RBI Act, 1934. NBFCs have been advised to adopt the Banking Companies (Nomination) Rules, 1985 made under Section 45ZA of the Banking Regulation Act, 1949. Accordingly, depositor/s of NBFCs are permitted to nominate a person to whom the NBFC can return the deposit in the event of the death of the depositor/s. NBFCs are advised to accept nominations made by the depositors in the form similar to one specified under the said rules, viz., Form DA 1 for the purpose of nomination, and Form DA2 and DA3 for cancellation of nomination and change of nomination respectively.

Foreign Investment in India

IV. Reporting Delays

Q.44: What is meant by Late Submission Fee (LSF) ? +

Answer: For the transactions undertaken on or after November 7, 2017, in case of reporting delays, the person/ entity responsible for filing the reports as provided in Part IV of the Master Direction on Reporting shall be liable for payment of Late Submission Fee (LSF). The payment of LSF is an additional option for regularising reporting delays without undergoing the compounding procedure.

FAQs on Non-Banking Financial Companies

Extent of regulations over NBFCs accepting public deposits and not accepting public deposits

44. What are the documents or the compliance required to be submitted to the Reserve Bank of India by the NBFCs not accepting/holding public deposits ? +

The NBFCs except RNBCs not accepting/holding public deposits are not required to submit to RBI their Statutory Returns in the First Schedule or the Balance Sheet or the Quarterly Liquid Asset Return or the Half-yearly Prudential Norm Return. However, all the NBFCs (other than those exempted - see answer to question No. 1) are required to be Registered with RBI and and also make sure that they continue to be eligible to remain Registered. RBI has powers to cause Inspection of the Books of any company and call for any other information about its business activities. For this purpose, the NBFCs are required to furnish the information in respect of any change in the composition of their Board of Directors, address of the company and its Directors and the name/s of its Auditors.

External Commercial Borrowings (ECB) and Trade Credits

PART II: TRADE CREDITS (TC)

44. Can SBLC be issued by AD banks on behalf of their customers for availing short term trade finance from overseas lenders in foreign currency? +

AD banks can issue SBLC on behalf of their customers for availing short term trade credit from overseas lenders in foreign currency subject to such SBLCs complying with the provisions contained in Department of Banking Regulation Master Circular No. DBR. No. Dir. BC.11/13.03.00/2015-16 dated July 1, 2015 on “Guarantees and Co-acceptances”, as amended from time to time.

Domestic Deposits

IV. Advances against shares and debentures

44. Whether banks can purchase letter of allotment in respect of PSU Bonds? +

Banks can purchase letter of allotment in respect of PSU bonds subject to the following conditions.

The transactions (other than interbank transactions) should be undertaken only through recognized Stock Exchanges and registered brokers.
While purchasing the bonds, the bank should ensure that it gets a clear title to the security and the security is tradable in the secondary market.
The bank should prescribe its internal guidelines with the approval of the Board for undertaking such transaction.

Retail Direct Scheme

Investment and Account holdings related queries

44. Will I get a physical certificate on the purchase of securities through the Retail Direct platform? +

No. However, the securities purchased will reflect in the holdings statement in your Retail Direct account.

Indian Currency

E) Counterfeits/Forgeries

3. What are the legal provisions relating to printing and circulation of forged banknotes? +

Counterfeiting banknotes / using forged or counterfeit banknotes as genuine banknotes / possession of forged or counterfeit banknote / making or possessing instruments or materials for forging or counterfeiting banknotes/making or using documents resembling banknotes are offences under various sections including Sections 178 to 182 the Bhartiya Nyaya Sanhita (BNS), 2023 and are punishable in the Courts of Law by fine or imprisonment ranging from seven years to life imprisonment or both, depending on the offence.

The Government of India has framed Investigation of High-Quality Counterfeit Indian Currency Offences Rules, 2013 under Unlawful Activities (Prevention) Act (UAPA), 1967. The Third Schedule of the Act defines High Quality Counterfeit Indian Currency Note. Activity of production, smuggling or circulation of High-Quality Counterfeit Indian Notes has been brought under the ambit of the BNS, 2023.

All you wanted to know about NBFCs

D. Definition of deposits, Eligible / Ineligible Institutions to accept deposits and Related Matters

44. How does the Reserve Bank come to know about unauthorized acceptance of deposits by companies not registered with it or of NBFCs engaged in lending or investment activities without obtaining the Certificate of Registration from it? +

NBFCs that ought to have sought registration from the Reserve Bank but are functioning without doing so are committing a breach of law. Such companies are liable for action as envisaged under the RBI Act, 1934. To identify such entities, the Reserve Bank has multiple sources of information. These include market intelligence, complaints received from affected parties, industry sources, and exception reports submitted by statutory auditors in terms of Master Direction - Non-Banking Financial Companies Auditor’s Report (Reserve Bank) Directions, 2016 (as amended from time to time). Further, the State Level Co-ordination Committees (SLCC) is convened by the Reserve Bank in all the States/UTs on quarterly basis. The SLCC is now chaired by the Chief Secretary/ Administrator of the concerned State/UT and has, as its members, apart from the Reserve Bank, the Regional Directorate of the MCA/ ROC, local unit of SEBI, NHB, Registrar of Chits, ICAI, Economic Intelligence Unit of the State Police and officials from Law and Home Ministries of the State Government. As all the relevant financial sector regulators and enforcement agencies participate in the SLCC, it is possible to quickly share the information and agree on an effective course of action to be taken against entities indulging in unauthorized and suspect businesses involving funds mobilization from public.

Foreign Investment in India

IV. Reporting Delays

Q.45: Whether compounding option is available for reporting delays +

Answer: The payment of LSF is an additional facility for regularising reporting delays without undergoing the compounding procedure. However, this does not mean that the applicant cannot apply for compounding. Both options are available to the applicant for the transactions undertaken on or after November 7, 2017.

FAQs on Non-Banking Financial Companies

Repayment of matured deposits

45. The NBFCs have been made liable to pay interest on the overdue matured deposits if the company has not been able to repay the matured public deposits on receipt of a claim from the depositor. Please elaborate the provisions. +

There had been instances when some companies had not paid matured deposits on due dates and such claims have been honoured after some delay. The companies did not pay any interest for the delayed period in the absence of any specific provisions in the Reserve Bank Directions in this regard in the past. A provision has, therefore, been inserted subsequently in the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions dated 31.1.1998 to the effect that interest is payable to the depositors only in case the company has delayed the repayment of matured deposits, from the date of receipt of such claim by the company or the date of maturity of the deposit whichever is later, till the date of actual payment. If the depositor has lodged his claim after the date of maturity, the company would be liable to pay interest for the period from the date of claim till the date of repayment. In other words, for the period between the date of maturity and the date of claim it is the discretion of the company to pay interest.

External Commercial Borrowings (ECB) and Trade Credits

PART II: TRADE CREDITS (TC)

45. As per the new guidelines AD banks are required to report permissions granted for settlement of delayed import dues as per the applicable procedure. AD banks are also required to report permissions granted for settlement of delayed import dues by Regional offices of Reserve Bank on a similar basis. Is the mandated reporting only for approvals accorded for extensions up to one year/three years for non-capital/capital goods respectively? +

AD banks are required to report all permissions granted by the AD banks/Regional offices of Reserve Bank for settlement of delayed import dues irrespective of the tenures of extension sought.

Domestic Deposits

IV. Advances against shares and debentures

45. What should be the method of valuation for advances against shares/ debentures/ bonds? +

Shares/ debentures/ bonds accepted by banks as security for loans/ advances should be valued at the prevailing market prices.

Retail Direct Scheme

Investment and Account holdings related queries

45. Where will my securities be held and with whom? +

The securities will be held in a Gilt account with RBI.

Indian Currency

E) Counterfeits/Forgeries

4. Does possession of a forged note attract the punishment of fine or imprisonment? +

Mere possession of a forged note does not attract punishment. Possession of any forged or counterfeit banknotes, knowing or having reason to believe the same to be forged or counterfeit and intending to use the same as genuine or that it may be used as genuine are offences under Section 180 of the Bhartiya Nyaya Sanhita (BNS), 2023 and are punishable in the Courts of Law by fine or imprisonment upto seven years or both.

All you wanted to know about NBFCs

D. Definition of deposits, Eligible / Ineligible Institutions to accept deposits and Related Matters

45. Can Proprietorship/Partnership Concerns associated/not associated with registered NBFCs accept public deposits? What action can be taken if such unincorporated entities accept public deposits? +

No. Proprietorship and partnership concerns are un-incorporated bodies. Hence, they are prohibited under the RBI Act 1934 from accepting public deposits. Such unincorporated entities, if found accepting public deposits, are liable for penal action under the Act.