Monetary and Credit Information Review - ஆர்பிஐ - Reserve Bank of India
Monetary and Credit Information Review
Volume XII MONETARY AND CREDIT INFORMATION REVIEW Banking Regulation Modified Guidelines on Revitalising Stressed Assets On a review and based on feedback received from stakeholders, the Reserve Bank has partly modified and also clarified, some aspects of its Prudential Guidelines for Revitalising Stressed Assets in the Economy. The salient features of the Review are as follows: a. SDR:
b. Framework to Revitalise the Distressed Assets in the Economy
c. Restructuring of Advances
It may be recalled that the Reserve Bank had issued various guidelines aimed at revitalising the stressed assets in the economy. These include: Strategic Debt Restructuring (SDR) Mechanism, Framework to Revitalise the Distressed Assets in the Economy, Revisions to the Guidelines on Restructuring of Advances by Banks, Flexible structuring of Long Term Project Loans and amendments to guidelines on Sale of Financial Assets to Securitisation Companies (SC)/Reconstruction Companies (RC).(/en/web/rbi/-/press-releases/rbi-partially-modifies-clarifies-prudential-guidelines-on-revitalising-stressed-assets-in-the-economy-36335) Implementation of Indian Accounting Standards The Reserve Bank on February 11, 2016 advised the scheduled commercial banks (excluding regional rural banks) to follow the Indian Accounting Standards (Ind AS) as notified under the Companies (Indian Accounting Standards) Rules, 2015, subject to any guideline or direction issued by the Reserve Bank in this regard, in the following manner:
The Reserve Bank also advised that notwithstanding the roadmap for companies, the holding, subsidiary, joint venture or associate companies of banks shall be required to prepare Ind AS based financial statements for accounting periods beginning from April 1, 2018 onwards, with comparatives for the periods ending March 31, 2018 and thereafter. Banks are further advised to set up a Steering Committee headed by an official of the rank of an Executive Director (or equivalent) comprising members from cross-functional areas of the bank to immediately initiate the implementation process. The Audit Committee of the Board shall oversee the progress of the Ind AS implementation process and report to the Board at quarterly intervals. Banks would start submission of proforma Ind AS financial statements to the Reserve Bank from the half-year ended September 30, 2016. To facilitate the implementation process, the Reserve Bank shall hold periodic meetings with banks in this regard from April 2016. Banks shall disclose in the Annual Report, the strategy for Ind AS implementation, including the progress made in this regard. These disclosures shall be made from the financial year 2016-17 until implementation.(/en/web/rbi/-/notifications/implementation-of-indian-accounting-standards-ind-as-10274) Basel III Framework on Liquidity Standards The Reserve Bank on February 11, 2016 permitted banks to reckon government securities held by them up to another three per cent of their Net Demand and Time Liabilities (NDTL) under Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR) within the mandatory Statutory Liquidity Ratio (SLR) requirement as Level 1 High Quality Liquid Assets (HQLAs) for the purpose of computing their Liquidity Coverage Ratio (LCR). This is in addition to the assets allowed to banks as the Level 1 HQLAs for the purpose of computing the LCR of banks. Hence, the total carve-out from SLR available to banks would be 10 per cent of their NDTL. For this purpose, banks should continue to value such reckoned government securities within the mandatory SLR requirement at an amount not greater than their current market value (irrespective of the category of holding the security). (/en/web/rbi/-/notifications/basel-iii-framework-on-liquidity-standards-liquidity-coverage-ratio-lcr-liquidity-risk-monitoring-tools-and-lcr-disclosure-standards-10279) Legal Guardianship Certificates - Mental Health Act The Reserve Bank on February 11, 2016, clarified that banks need to necessarily seek appointment of a guardian only in such cases where they are convinced on their own or based on documentary evidence available, that the concerned person is mentally ill and is not able to enter into a valid and legally binding contract. Further, the Reserve Bank clarified that banks need not mandatorily insist on appointment of a guardian as a matter of routine from every person “who is in need of treatment by reason of any mental disorder”. The clarifications were issued after receiving feedback that banks are insisting on guardianship certificate from all mentally ill persons. (/en/web/rbi/-/notifications/legal-guardianship-certificates-issued-under-the-mental-health-act-1987-10280) Sixth Bi-monthly Monetary Policy Statement, 2015-16 On the basis of an assessment of the current and evolving macroeconomic situation, the Reserve Bank in its sixth Bi-monthly Monetary Policy Statement, 2015-16, announced on February 2, 2016, decided to:
Consequently, the reverse repo rate under the LAF will remain unchanged at 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 7.75 per cent. The first bi-monthly monetary policy statement for 2016-17 will be announced on Tuesday, April 5, 2016. Foreign Exchange Management RBI rationalises FEMA Regulations The Reserve Bank, in consultation with the Government of India, has revised nine regulations issued under the Foreign Exchange Management Act, 1999 (FEMA). Consequently, the respective original notifications and subsequent amendments stand repealed. For easy identification, revised regulations will carry the same numbers as in the old regulations with a suffix ‘(R)’ along with the year in which they are published. The objective was to consolidate the regulations and rationalise them in the light of evolving business environment and changing practices in cross-border transactions relating to external trade and payments to promote ease of doing business. Some of the important AP (DIR Series) circulars issued on February 4, 2016 in respect of revised regulations include- Possession and Retention of Foreign Currency The Reserve Bank on February 4, 2016 advised AD Banks on the limits for possession or retention of foreign currency or foreign coins, as under :-
a) While on a visit to any place outside India by way of payment for services not arising from any business in or anything done in India; or b) From any person not resident in India and who is on a visit to India, as honorarium or gift or for services rendered or in settlement of any lawful obligation; or c) By way of honorarium or gift while on a visit to any place outside India; or d) Represents unspent amount of foreign exchange acquired by him from an authorised person for travel abroad. The Reserve Bank also advised that a person resident in India but not permanently resident therein may possess without limit foreign currency in the form of currency notes, bank notes and travellers cheques, if such foreign currency was acquired, held or owned by him when he was resident outside India and, has been brought into India in accordance with the regulations made under the Act. (/en/web/rbi/-/notifications/foreign-exchange-management-possession-and-retention-of-foreign-currency-regulations-2015-10271) Realisation, Repatriation and Surrender of Foreign Exchange The Reserve Bank on February 4, 2016 advised AD Banks on regulations on Realisation, Repatriation and Surrender of Foreign Exchange, as under: Duty of Persons to realise Foreign Exchange due:- A person resident in India to whom any amount of foreign exchange is due or has accrued, shall take all reasonable steps to realise and repatriate to India such foreign exchange, and shall in no case do or refrain from doing anything, or take or refrain from taking any action, which has the effect of securing (a) that the receipt by him of the whole or part of that foreign exchange is delayed; or (b) that the foreign exchange ceases in whole or in part to be receivable by him. Manner of Repatriation :-
Period for Surrender of Realised Foreign Exchange:- A person not being an individual resident in India shall sell the realised foreign exchange to an authorised person, within the specified period. Period for Surrender in Certain Cases:-
The Reserve Bank in the revised regulations, also specified the period for surrender of received/realised/unspent/unused foreign exchange by resident individuals and advised that these regulations shall not apply to foreign exchange in the form of currency of Nepal or Bhutan. (/en/web/rbi/-/notifications/foreign-exchange-management-realisation-repatriation-and-surrender-of-foreign-exchange-regulations-2015-10269) Export and Import of Currency The Reserve Bank on February 4, 2016 advised AD Banks on Regulations on Export and Import of Currency, as under- Export and Import of Indian Currency and Currency Notes
Import of Foreign Exchange into India A person may send into India without limit foreign exchange in any form other than currency notes, bank notes and travellers cheques; and may bring into India from any place outside India without limit foreign exchange (other than unissued notes) subject to the condition that such person makes, on arrival in India, a declaration to the Customs authorities in Currency Declaration Form (CDF). Export of Foreign Exchange and Currency Notes
The Reserve Bank in its revised regulations also advised AD banks on export and import of currency to or from Nepal and Bhutan and prohibition on export of Indian Coins. (/en/web/rbi/-/notifications/foreign-exchange-management-export-and-import-of-currency-regulations-2015-10268) Acquisition and Transfer of Immovable Property The Reserve Bank on February 4, 2016, advised AD banks that acquisition or transfer of any immovable property outside India by a person resident in India would require prior approval of Reserve Bank except in the following cases:
An Indian company having overseas offices may acquire immovable property outside India for its business and residential purposes provided total remittances do not exceed the following limits prescribed for initial and recurring expenses, respectively:
Acceptance of Payments To facilitate ease of doing business, the Reserve Bank on February 11, 2016, issued certain clarifications relating to acceptance of payments in case of start-ups, as under:
Issue of Shares The Reserve Bank on February 11, 2016, clarified that Indian companies are permitted to issue (i) shares without cash payment by the investor through sweat equity, subject to certain conditions; and (ii) equity shares against any other funds payable by the investee company (e.g. payments for use or acquisition of intellectual property rights, for import of goods, payment of dividends, interest payments, consultancy fees, etc.), remittance of which does not require prior permission.(/en/web/rbi/-/notifications/regulatory-relaxations-for-startups-clarifications-relating-to-issue-of-shares-10278) The clarifications were issued apropos the announcement in the Sixth Bi-Monthly Monetary Policy Statement for 2015-16, that in case of start-ups, to facilitate ease of doing business, certain permissible transactions under the existing regime shall be clarified. Settlement of Export/ Import Transactions in Currencies To further liberalise the procedure and facilitate settlement of export and import transactions where the invoicing is in a freely convertible currency and the settlement takes place in the currency of the beneficiary, which though convertible, does not have a direct exchange rate, the Reserve Bank on February 4, 2016 permitted authorised dealer category-I banks to settle such export and import transactions (excluding those put through the ACU mechanism), subject to certain conditions. (/en/web/rbi/-/notifications/settlement-of-export-import-transactions-in-currencies-not-having-a-direct-exchange-rate-10263) Compilation of R-Returns: Reporting under FETERS The Reserve Bank on February 11, 2016 modified the guidelines for compilation of R-Returns for reporting under the Foreign Exchange Transactions Electronic Reporting System (FETERS), with effect from the first fortnight of April 2016 (reporting of transactions which take place from April 1, 2016), as under: i. The present email-based submission will be replaced by web-portal based data submission. ii. Nodal offices of banks have to access the web-portal https://bop.rbi.org.in with the RBI-provided login-name and password, to submit data. iii. Banks may perform off-line check of their FETERS data-file for error, if any, before its submission on the portal, by downloading RBI-provided validator template from the portal. iv. On uploading validated files, banks will get acknowledgment. They can view the data-files with download facility and also revise the purpose codes for transaction submitted earlier. v. Banks may report (a) addition of AD code for their bank and (b) update AD category, which will be incorporated in the AD-master database by the Reserve Bank after due authentication. vi. The purpose codes P0105 [Export bills (in respect of goods) sent on collection – other than Nepal and Bhutan] and P0107 [Realisation of NPD export bills (full value of bill to be reported) – other than Nepal and Bhutan] have been discontinued. The Reserve Bank also advised AD banks to report transactions relating to LRS under respective FETERS purpose codes (e.g. travel, medical treatment, purchase of immovable property, studies abroad, maintenance of close relatives; etc.) instead of reporting collectively under the purpose code S0023 and allow customers for online submission of Form A2 and also enable uploading/submission of documents, if and as may be necessary. (/en/web/rbi/-/notifications/compilation-of-r-returns-reporting-under-feters-10276) Application for Regularisation of Assets held Abroad The Reserve Bank on February 10, 2016 stated that applications seeking regularisation of assets held abroad by a person resident in India and declared under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (22 of 2015) (Black Money Act) under Foreign Exchange Management Act, 1999 (FEMA) will be considered at the Reserve Bank of India’s Central Office, Mumbai. Applications in this regard may be addressed to Principal Chief General Manager, Foreign Exchange Department (Foreign Investment Division, (NRFAD)), Central Office, 11th floor, Central Office Building, Shahid Bhagat Singh Marg, Mumbai 400 001.(/en/web/rbi/-/press-releases/application-for-regularisation-of-assets-held-abroad-under-black-money-act-to-be-sent-to-rbi-fed-central-office-mumbai-36214) Payment and Settlement Systems To ensure that RTGS services are adequately priced, the Reserve Bank on February 4, 2016, has revised the fee structure for members and rationalised the charges levied on them. Inward transactions of the members will not attract any service charges and will continue to be free, as earlier. The membership fee has been marginally enhanced and it is now ₹ 5,000 for scheduled commercial banks and ₹ 2,500 for banks other than SCBs, primary dealers, clearing entities, other special entities, etc. Every outward transaction will attract flat processing charge at the earlier cap of ₹ 0.50 (exclusive of service tax) and a time varying charge as prescribed. The revised service charges for RTGS members will come into effect from April 1, 2016. (/en/web/rbi/-/notifications/rtgs-service-charges-for-members-and-customers-rationalisation-10260) Non-Banking Regulation The Reserve Bank on February 18, 2016 reviewed the guidelines on provision of factoring services by banks and specified certain conditions under which banks can departmentally undertake factoring activities. Prudential Norms – Identification as NPA The Reserve Bank clarified that receivable acquired by a nonbanking finance company (NBFC)- Factor which is not paid within such period of its due date, as applicable in terms of certain Acts/Directions, should be treated as Non-Performing Asset (NPA) irrespective of when the receivable was acquired by the NBFC - Factor or whether the factoring was carried out on “with recourse” basis or “non-recourse” basis. Exposure Norms-Single and Group Borrower Limits It is clarified that for the purpose of compliance with concentration of credit norms, exposure shall be reckoned as under: a) In case of factoring on “with-recourse” basis, the exposure would be reckoned on the assignor. b) In case of factoring on “without-recourse” basis, the exposure would be reckoned on the debtor, irrespective of credit risk cover/ protection provided, except in cases of international factoring where the entire credit risk has been assumed by the import factor. Risk Management Proper and adequate control and reporting mechanisms should be put in place before such business is undertaken. Exchange of Information For the purpose of exchange of information, the assignor will be deemed to be the borrower. Factors and banks should share information about common borrowers. Factors must ensure to intimate the limits sanctioned to the borrower to the concerned banks/ NBFCs and details of debts factored to avoid double financing.(/en/web/rbi/-/notifications/nbfc-factors-reserve-bank-directions-2012-review-10286) The Reserve Bank on February 18, 2016, has decided in public interest that non-banking finance companies shall not undertake Point of Presence (PoP) services for National Pension System.(/en/web/rbi/-/notifications/undertaking-of-point-of-presence-pop-services-under-pension-fund-regulatory-and-development-authority-for-national-pension-system-nps-10284) The Reserve Bank on February 18, 2016 revised the threshold for reporting of frauds and submission of quarterly progress reports on frauds to Central Fraud Monitoring Cell, Reserve Bank of India, Department of Banking Supervision, from ₹ 25 lakh as on date to ₹ one crore with immediate effect. As regard reporting of frauds and submission of quarterly progress reports on frauds below the revised threshold, non-banking finance companies (NBFCs) will have to furnish the quarterly progress reports to the regional office of Reserve Bank of India, Department of Non-Banking Supervision under whose jurisdiction the registered office of the NBFC falls.(/en/web/rbi/-/notifications/frauds-future-approach-towards-monitoring-of-frauds-in-nbfcs-10287) Co-operative Banking The Reserve Bank on February 11, 2016, advised scheduled urban cooperative banks holding authorised dealer category I licences which are eligible under the Interest Equalisation Scheme on Pre and Post Shipment Rupee Export Credit to eligible exporters Scheme to adhere to prescribed operational procedure for claiming reimbursement, particularly the procedure for passing on the benefit of interest equalisation to exporters, and procedure for claiming reimbursement of interest equalisation benefit already passed on to eligible exporters. (/en/web/rbi/-/notifications/interest-equalisation-scheme-on-pre-and-post-shipment-rupee-export-credit-10281) Edited and published by Alpana Killawala for the Reserve Bank of India, Department of Communication, Central Office, Shahid Bhagat Singh Marg, Mumbai - 400 001. MCIR can be accessed at www.mcir.rbi.org.in |