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Indian Currency

A) Basics of Indian Currency/Currency Management

5. What is a small coin depot?

Some banks are authorised to establish Small Coin Depots to stock and distribute small coins i.e. coins of value below Rupee One to bank branches in their area of operation. As on February 28, 2025, there were 2299 small coin depots.

Biennial survey on Foreign Collaboration in Indian Industry (FCS)

Details of survey launch

Q5. What is the reference period of this FCS survey?

Ans.: Last two financial year (FY) starting from April YYYY to March YYYY. For eg., FCS survey for the reference period 2023-2025 covers April 2023 to March 2024 and April 2024 to March 2025.

Coordinated Portfolio Investment Survey – India

Details for survey launch

Q5. How do I know whether my response has been submitted successfully or not? +

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

FAQs on Priority Sector Lending (PSL)

H. Social Infrastructure

Query 17: How is PSL classification considered for lending to Social Infrastructure activities viz. schools etc. (prescribed limit of ₹8 crore) and health care facilities (prescribed limit of ₹12 crore), where such facilities are also eligible to be classified under MSME as per the PSL guidelines.

Clarification: Bank loans for above purposes can be classified under MSME, wherein no cap on credit has been prescribed. However, banks can classify such activities either under MSME or Social Infrastructure, and not both. It may be noted that for classification under Social Infrastructure, the associated cap on credit shall be applicable.

I. Weaker Sections

Query 18: Are all credit facilities extended to the thirteen borrower categories under ‘Weaker Sections’ eligible to be classified under ‘Weaker Sections’ category?

Clarification: For classification under ‘Weaker Sections’, the loans should first be eligible for classification under any of the eight PSL categories as per underlying activity.

Government Securities Market in India – A Primer

6. What is Liquidity Adjustment Facility (LAF) and whether Re-repo in Government Securities Market is allowed? +

LAF is a facility extended by RBI to the scheduled commercial banks (excluding RRBs) and PDs to avail of liquidity in case of requirement or park excess funds with RBI in case of excess liquidity on an overnight basis against the collateral of G-Secs including SDLs. Basically, LAF enables liquidity management on a day to day basis. The operations of LAF are conducted by way of repurchase agreements (repos and reverse repos – please refer to paragraph numbers 30.4 to 30.8 under question no. 30 for more details) with RBI being the counter-party to all the transactions. The interest rate in LAF is fixed by RBI from time to time. LAF is an important tool of monetary policy and liquidity management. The substitution of collateral (security) by the market participants during the tenor of the term repo is allowed from April 17, 2017 subject to various conditions and guidelines prescribed by RBI from time to time. The accounting norms to be followed by market participants for repo/reverse repo transactions under LAF and MSF (Marginal Standing Facility) of RBI are aligned with the accounting guidelines prescribed for market repo transactions. In order to distinguish repo/reverse repo transactions with RBI from market repo transactions, a parallel set of accounts similar to those maintained for market repo transactions but prefixed with ‘RBI’ may be maintained. Further market value of collateral securities (instead of face value) will be reckoned for calculating haircut and securities acquired by banks under reverse repo with RBI will be bestowed SLR status.

RBI vide its notification FMRD.DIRD.01/14.03.038/2018-19 dated July 24, 2018 has issued Repurchase Transactions (Repo) (Reserve Bank) Directions, 2018 applicable to all the persons eligible to participate or transact business in market repurchase transactions (repos).

Scheduled commercial banks, Primary Dealers along with Mutual Funds and Insurance Companies (subject to the approval of the regulators concerned) maintaining Subsidiary General Ledger account with RBI are permitted to re-repo the government securities, including SDLs and Treasury Bills, acquired under reverse repo, subject to various conditions and guidelines prescribed by RBI time to time.

Foreign Investment in India

Q.6: What is meant by Foreign Investment, Foreign Direct Investment and Foreign Portfolio Investment ? +

Answer: Foreign Investment means any investment made by a person resident outside India on a repatriable basis in capital instruments of an Indian company or to the capital of an LLP.Foreign Direct Investment (FDI) is the investment through capital instruments by a person resident outside India (a) in an unlisted Indian company; or (b) in 10 percent or more of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company.Foreign Portfolio Investment is any investment made by a person resident outside India in capital instruments where such investment is (a) less than 10 percent of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company or (b) less than 10 percent of the paid up value of each series of capital instruments of a listed Indian company.

Domestic Deposits

I. Domestic Deposits

6. Whether banks can prematurely repay the term deposit on their own? +

The term deposit is a contract between the bank and the customer for a definite term and it cannot be paid prematurely at bank’s option-. Term deposit can be paid prematurely at the request of the customer.

External Commercial Borrowings (ECB) and Trade Credits

C. CURRENCY OF ECB

6. Can INR denominated ECB be converted into foreign currency ECB? +

Any entity raising INR denominated ECB is not permitted to convert the liability arising out of INR ECB into foreign currency liability in any manner or assuming foreign currency risk is any manner by either entering into a derivative contract or otherwise.

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

Rupee Drawing Arrangement (RDA)

6. Can cash payment be made to the beneficiary under RDA ? +

No cash disbursement of remittances is allowed under RDA. The remittances have to be credited to the bank account of the beneficiary.

FAQs on Non-Banking Financial Companies

Definition of public deposits

6. Whether deposits received from relatives and friends of the directors are reckoned as public deposits? +

Money received by a private limited NBFC from relatives and friends of directors who are not its shareholders, is public deposit. In the case of public limited companies, the deposits received from shareholders also are public deposit.

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

Bank Accounts with Paytm Payments Bank

6. I receive a subsidy or certain direct benefit transfers linked to my Aadhar from the Government in my account with Paytm Payments Bank. Can I continue to receive it into this account? +

No. After March 15, 2024, you will not be able to receive any such credit into your account with Paytm Payments Bank. Please arrange to change your linked account to another bank before March 15, 2024 to avoid any inconvenience or disruption.

Framework for Compromise Settlements and Technical Write-offs

A. COMPROMISE SETTLEMENT IN WILFUL DEFAULT AND FRAUD CASES

6. As per Prudential Framework for Resolution of Stressed Assets dated June 7, 2019, lenders are not permitted to restructure borrower accounts classified as fraud or wilful defaulter, except in case of change in ownership. Why a different treatment is prescribed for compromise settlements for such borrowers?

Restructuring in general entails the lenders having a continuing exposure to the borrower entity even after restructuring and hence, in case of borrowers classified as fraud or wilful defaulter, permitting lenders to continue their credit relationship with the borrower entity would be fraught with moral hazard. On the other hand, a compromise settlement entails a complete detachment of the lender with the borrower. Therefore, permitting lenders to settle with the borrowers as per their commercial judgement would enhance recovery prospects.

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

Eligible entities and requirements to submit the FLA return

Q6. If the old/new entity fails to fill the FLA form before the due date, can the entity submit the FLA form? +

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

Retail Direct Scheme

Scheme related queries

6. Whether Retail Direct Gilt (RDG) account can be opened in a joint name? +

The RDG account can be opened singly or jointly with another retail investor who meets the eligibility criteria.

Housing Loans

6. What is monthly reducing balances method? +

Borrowers benefit more from a loan that's calculated on a monthly reducing basis than on an annual basis. In case of monthly resets, interest is calculated on the outstanding principal balance for that month. The principal paid is deducted from the opening principal outstanding balance to arrive at the opening principal for the next month and interest is computed on the new, reduced principal outstanding. In case of annual resets, principal paid is adjusted only at the end of the year. Hence, you continue to pay interest on a portion of the principal that has been paid back to the lender.

Targeted Long Term Repo Operations (TLTROs)

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

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

All you wanted to know about NBFCs

A. Definitions

6. What is the procedure for application to the Reserve Bank for Registration? +

The applicant company is required to apply online on https://pravaah.rbi.org.in and also submit a physical copy of the application along with the necessary documents as per the process prescribed by the Reserve Bank vide its Press Release 2015-2016/2935 dated June 17, 2016 to the Chief General Manager-in-Charge, Department of Regulation, Reserve Bank of India, Central Office, 2nd Floor, Main Office Building, Shahid Bhagat Singh Marg, Fort, Mumbai-400 001.

Core Investment Companies

A. Definitions:

6. What is a Group company?

Ans: For the purposes of determining whether a company is a CIC, ‘companies in the group’ have been exhaustively defined in para 3 (1) (v) of of Master Direction DoR(NBFC).PD.003/03.10.119/2016-17 dated August 25, 2016 as “an arrangement involving two or more entities related to each other through any of the following relationships: Subsidiary – parent (defined in terms of AS 21), Joint venture (defined in terms of AS 27), Associate (defined in terms of AS 23), Promoter–promotee [as provided in the SEBI (Acquisition of Shares and Takeover) Regulations, 1997] for listed companies, a related party (defined in terms of AS 18), common brand name, and investment in equity shares of 20 percent and above.”

Indian Currency

A) Basics of Indian Currency/Currency Management

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

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

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

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