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All you wanted to know about NBFCs

B. Entities Regulated by RBI and applicable regulations

It is illegal for any person/ entity/ financial company to make a false claim of being regulated by the Reserve Bank to mislead the public to collect deposits and is liable for penal action under the Law. Information in this regard may be forwarded to the nearest office of the Reserve Bank and the Police.

Foreign Investment in India

Answer: Indian company includes all those entities covered under section 1(4) of the Companies Act, 2013.

Biennial survey on Foreign Collaboration in Indian Industry (FCS)

Some important definitions and concepts

Ans.: Indian company which has entered into an agreement with a foreign entity in terms of technology transfer, know-how transfer, use of patent, brand name etc, then such type of agreements are treated as Foreign Technical Collaborations (FTC).

Coordinated Portfolio Investment Survey – India

What to report under CPIS?

Ans: The portfolio investment assets are required to be reported on marked to market basis as at the end of the reference period, with the breakups into type of securities viz., equity securities, short-term debt securities (with and original maturity of up to one year) and long-term debt securities (with an original maturity of more than a year) and country of residence of issuer.

Indian Currency

B) Banknotes

The highest denomination note ever printed by the Reserve Bank of India was the ₹10000 note in 1938 which was demonetized in January 1946. The ₹10000 was again introduced in 1954. These notes were demonetized in 1978.

Core Investment Companies

B. Registration and related matters:

Ans: In such a case only C will be registered, provided C is not funding any of the other CICs either directly or indirectly. HCo as well as A and B would not require registration as they neither access public funds directly nor access public funds indirectly through C.

Housing Loans

Yes, most banks allow you to repay the loan ahead of schedule by making lump sum payments. However, many banks charge early repayment penalties up to 2-3% of the principal amount outstanding. Prepayment penalty may vary according to the reasons and source of funds - if you obtain a loan from another bank for pre-payment the charges are usually higher than when you pay from your own sources. However, you may credit more than your EMI amount into your loan account on a periodic basis and bring down your interest burden as and when funds are available with you. Most banks do not charge a pre-payment penalty if you deposit more than your EMI payable on a periodic basis. Please check such stipulations while availing the loan.

Targeted Long Term Repo Operations (TLTROs)

FAQs pertaining to TLTRO 2.0

Ans: In terms of the press release 2237/2019-2020 dated April 17, 2020 notifying the TLTRO 2.0 scheme, at least 50 per cent of the total funds availed under the scheme has to be deployed in specified securities issued by small NBFCs of asset size of ₹ 500 crores and below, mid-sized NBFCs of asset size between ₹ 500 crores and ₹ 5000 crores and MFIs. The objective is to ease any liquidity stress and/or impediments to market access that these small and mid-sized entities might be facing. In order to incentivise banks’ investment in the specified securities of these entities, it has been decided that a bank can exclude the face value of such securities kept in the HTM category from computation of adjusted non-food bank credit (ANBC) for the purpose of determining priority sector targets/sub-targets. This exemption is only applicable to the funds availed under TLTRO 2.0.

FAQs on Non-Banking Financial Companies

Net owned fund

The definition of NOF has been provided in Section 45IA of the Reserve Bank of India Act, 1934. This definition would be applicable to the computation of minimum capital fund for the purpose of Statutory Registration of an NBFC with the Reserve Bank of India. For the purpose of acceptance of public deposit and compliance of the prudential norms, the definition of NOF has been modified and it would include the paid up amount of preference shares which are compulsorily convertible into equity. However, the redeemable preference share capital would not be included in the definition of NOF or the Owned Fund.

Domestic Deposits

I. Domestic Deposits

Savings bank account cannot be opened in the name of the Government Department/ Government Scheme, except in respect of deposits of Government organizations/ agencies listed below:

  1. Primary Co-operative Credit Society which is being financed by the bank.

  2. Khadi and Village Industries Boards.

  3. Agriculture Produce Market Committees.

  4. Societies registered under Societies Registration Act, 1860 or any other corresponding law in force in State or a Union Territory.

  5. Companies governed by the Companies Act, 1956 which have been licensed by the Central Government under Section 25 of the said Act, or under the corresponding provision in the Indian Companies Act, 1913 and permitted, not to add to their names the word “Limited” or the words “Private Limited”.

  6. Institutions other than those mentioned in clause (i) above and whose entire income is exempt from payment of income tax under Income-Tax Act, 1961.

  7. Government departments/ bodies/ agencies in respect of grants/ subsidies released for implementation of various programmes/ Schemes sponsored by Central Government/ State Governments subject to production of an authorisation from the respective Government departments to open savings bank accounts.

  8. Development of Women and Children in Rural Areas (DWCRA).

  9. Self-help Groups (SHGs), registered or unregistered, which are engaged in promoting savings habits among their members.

  10. Farmers’ Clubs – Vikas Volunteer Vahini (VVV).

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

Money Transfer Service Scheme (MTSS)

A cap of USD 2,500 has been placed on individual remittances under the scheme. In addition, thirty remittances can be received by a single individual beneficiary under the scheme during a calendar year.

Retail Direct Scheme

Know Your Customer (KYC) related queries

There are two ways of doing KYC verification – CKYC based and video KYC.

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

Eligible entities and requirements to submit the FLA return

Ans: FLA return and Annual Performance Report (APR) for ODI are two different returns and monitored by two different departments of RBI. So, you are required to submit both the returns if these are applicable for your entity. For more information on APR, please refer to the Master Direction – Reporting under Foreign Exchange Management Act, 1999 on RBI’s website.

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

Paytm Payments Bank Wallet

Yes. Refunds and cashbacks are allowed to be credited.

External Commercial Borrowings (ECB) and Trade Credits

E. AVERAGE MATURITY PERIOD

No.

Government Securities Market in India – A Primer

The price of a G-Sec, like other financial instruments, keeps fluctuating in the secondary market. The price is determined by demand and supply of the securities. Specifically, the prices of G-Secs are influenced by the level and changes in interest rates in the economy and other macro-economic factors, such as, expected rate of inflation, liquidity in the market, etc. Developments in other markets like money, foreign exchange, credit, commodity and capital markets also affect the price of the G-Secs. Further, developments in international bond markets, specifically the US Treasuries affect prices of G-Secs in India. Policy actions by RBI (e.g., announcements regarding changes in policy interest rates like Repo Rate, Cash Reserve Ratio, Open Market Operations, etc.) also affect the prices of G-Secs.

All you wanted to know about NBFCs

B. Entities Regulated by RBI and applicable regulations

If companies that are required to be registered with the Reserve Bank as NBFCs, are found to be conducting non-banking financial activity, such as, lending, investment or deposit acceptance as their principal business, without obtaining Certificate of Registration from the Reserve Bank, the same would be treated as contravention of the provisions of the RBI Act, 1934 and would invite penal action viz., penalty or fine or even prosecution in a Court of Law. If members of public come across any entity which undertakes non-banking financial activity but does not figure in the list of authorized NBFCs on the Reserve Bank’s website, they should inform the nearest Regional Office of the Reserve Bank, for appropriate action to be taken for contravention of the provisions of the RBI Act, 1934.

Foreign Investment in India

Answer: Foreign investment percentage has to be calculated on a fully diluted basis i.e. at the time of issuance of Employee Stock Options.

Indian Currency

B) Banknotes

The paper currently being used for printing of banknotes in India is made by using 100% cotton.

Core Investment Companies

B. Registration and related matters:

Ans: The NBFC would have to apply to RBI with full details of the plan and exemptions could be considered on a selective basis on the merits of the case.

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