Monetary and Credit Information Review - ఆర్బిఐ - Reserve Bank of India
Monetary and Credit Information Review
Volume V ♦ Issue 8 |
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February 2009 |
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MONETARY AND CREDIT INFORMATION REVIEW |
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POLICY |
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Financial Literacy and Credit Counselling Centres | ||||||||||||||||||||||||||
The Reserve Bank had placed a concept paper on Financial Literacy and Credit Counselling Centres (FLCCs) on it's website for obtaining feedback from the public as also from banks. Based on the feedback received, the Reserve Bank has formulated a Model Scheme for Financial Literacy and Credit Counselling Centres. The salient features of the Scheme are- | ||||||||||||||||||||||||||
Objectives | ||||||||||||||||||||||||||
The broad objective of the FLCCs will be to provide free financial literacy/education and credit counselling. The specific objectives of the FLCCs would be to: |
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(i) provide financial counselling services through face-to-face interaction as well as through other available media like e-mail, fax, mobile, etc., education on responsible borrowing, proactive and early savings, and offer debt counselling to individuals who are indebted to formal and/ or informal financial sectors; |
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(ii) educate people in rural and urban areas regarding the various financial products and services available from the formal financial sector; |
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(iii) make people aware of the advantages of being connected with the formal financial sector; |
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(iv) formulate debt restructuring plans for borrowers in distress and recommend them to formal financial institutions, including cooperatives, for consideration; and |
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(v) take up any such activity that promotes financial literacy, awareness of banking services, financial planning and amelioration of debt-related distress of individuals. |
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FLCCs should not, however, act as investment advice centres/marketing centres for products of any particular bank/ banks. Counsellors should refrain from marketing/providing advice regarding investment in insurance policies/securities, value of securities, purchase/sale of securities, etc., or promoting investments only in bank’s own products | ||||||||||||||||||||||||||
Organisational/Administrative Set-up/Infrastructure | ||||||||||||||||||||||||||
To start with, banks may set up trusts/societies for running the FLCCs, singly or jointly with other banks. A bank may induct respected local citizens on the Board of such a trust/society. |
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The counselling centres should maintain arm's length relationship with the parent bank and, preferably should not be located in the bank's premises to avoid any impression that such centres are a part of the bank itself. The centres should not promote the products of their parent banks. Initially, if the parent bank's branch premises are used to minimize cost, the FLCC should be kept completely separated with a separate entrance and a different look and feel from that of the bank's branch so as to maintain a distinct identity from the parent bank. Banks' officers may make dummy calls or incognito visits for effective supervision and monitoring of the activities of such trusts/societies. |
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Types of Credit Counselling | ||||||||||||||||||||||||||
Debt counselling/credit counselling can be both preventive | ||||||||||||||||||||||||||
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and curative. In case of preventive counselling, the centres could provide awareness regarding cost of credit, availability of backward and forward linkages, where warranted, etc. The clients could be encouraged to avail of credit on the basis of their repaying capacity. Preventive counselling can be through the media, workshops and seminars. FLCCs may consider introducing a generic financial education module in vernacular language. Broadly, the module content can include the need for savings, budgeting, advantages of banking with formal financial institutions, concept of risk and rewards and time value of money, various products offered by banks, insurance companies, etc. The module may also cover aspects relating to deposits and various other financial products, the method of calculation of interest on savings bank accounts, fixed deposits, etc., and the method of compounding. |
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Mechanism for Credit Counselling/Debt Settlement | ||||||||||||||||||||||||||
Banks may encourage their own customers in distress or customers of any bank to approach the FLCCs set up by them. Information about such FLCCs can be provided through the various fora available under the Lead Bank Scheme. Banks may evolve trigger points to refer cases, where there are early warning signals, to the counselling centres before taking measures for recovery. Timely intervention would help to arrest any further financial deterioration of the borrower. For single-creditor-debts, the FLCCs could assist the borrower in negotiating with the bank concerned. In case of multiple credits availed of by individuals, FLCCs may negotiate with the bank/s having the largest exposure to restructure the debt and the recoveries to be shared on a pro-rata basis. The bank/s, on review of the recommendations/proposal made by the FLCC, may make their independent and informed decision to accept the proposal in its original form or in such other modified form as deemed fit. The choice of finally accepting or rejecting a debt restructuring proposal suggested by a FLCC may be left to the bank/banks concerned. If the restructuring proposals forwarded by FLCCs to banks are not accepted/ rejected, banks should give the reasons in writing to the FLCCs in the interests of transparency |
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Qualification/Training of Counsellors | ||||||||||||||||||||||||||
• Only well qualified/trained counsellors should be selected to man the centre on a full time basis. |
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• FLCCs could consider appointing people with domain knowledge in agriculture for counselling related to agriculture and allied activities. • Individuals, such as, retired bank officers, ex-servicemen, etc., could be appointed, among others, as credit counsellors. • Credit counsellors should have sound knowledge of banking, law, finance, requisite communication and team building skills, etc. |
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To ensure that there is no conflict of interest, persons managing the FLCC should not be staff of the bank. Proper training and skill upgradation is essential for the counsellors to keep themselves abreast of the latest developments in the banking industry. Training should also be provided to the counsellors on an on going basis to constantly upgrade their skills |
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Transparency/Disclosure of Information/Publicity | ||||||||||||||||||||||||||
To help the customers in making informed decisions, all banks should display on their websites necessary information regarding fees, charges, etc., as prescribed in the Reserve Bank’s circular of November 3, 2008. Banks should also place on their websites, details of the services offered by the FLCCs opened by them. All forms of publicity, viz., press conferences, workshops, publications, websites, road shows, mobile units, village fairs, etc., should be actively explored. Banks should provide a suitable budget for the purpose. |
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Security of On-line Credit/Debit Card Transactions | ||||||||||||||||||||||||||
With a view to enhancing the security of online credit/debit card transactions, the Reserve Bank has advised banks to mandatorily put in place from August 1, 2009 - |
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BRANCH BANKING | ||||||||||||||||||||||||||
RTGS Transaction Timings extended | ||||||||||||||||||||||||||
The real time gross settlement (RTGS) system timings have been extended from 12.00 noon to 12.30 hours for customer transactions and from 14.00 to 14.30 hours for interbank transactions on Saturdays. The new RTGS cut off timings for customer and inter-bank transactions are: |
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The new timings have become effective from January 10, 2009 | ||||||||||||||||||||||||||
In order to bring RTGS usage to the desired level, RTGS member banks have been advised to: | ||||||||||||||||||||||||||
• Extend their customer windows commensurate with the Reserve Bank’s business sessions. |
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ATM Transactions - Reimbursement of Wrongful Debits |
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Pursuant to receiving a number of complaints from bank customers regarding debit of accounts even though the automated teller machines (ATMs) have not disbursed cash for various reasons, the Reserve Bank has advised banks to reimburse to customers the amount wrongfully debited within a maximum period of 12 days from the date of receipt of customer complaints. |
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Indo - Nepal Remittance Scheme - Service Charges Revised |
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The service charges to be levied to customers for funds transfer from India to Nepal through the Indo-Nepal remittance scheme have been revised. The revised charges are | ||||||||||||||||||||||||||
(a) Originating bank - maximum Rs 5 per transaction -aligned with NEFT. (b) State Bank of India (SBI) - Rs 20 per transaction. SBI would share the Rs.20 with Nepal State Bank Ltd. (NSBL) at Rs.10 each. NSBL would not charge any additional amount for crediting the beneficiary, if he maintains an account with it. (c) In case the beneficiary does not maintain an account with NSBL then, an additional amount would be charged - Rs 50 for remittances up to Rs. 5,000 and Rs. 75 for remittances above Rs. 5,000. |
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Originating branches of participating banks should recover the entire charges and pass on the appropriate amount to SBI after retaining their share. | ||||||||||||||||||||||||||
UCBs | ||||||||||||||||||||||||||
Placement of Deposits with other Banks | ||||||||||||||||||||||||||
On the basis of representations received from banks and their federations, the guidelines on placement of deposits by non-scheduled UCBs with scheduled UCBs were reviewed by the Reserve Bank and revised guidelines were issued. The revised guidelines are : |
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Prudential Inter-bank (gross) Exposure Limit | ||||||||||||||||||||||||||
The total amount of deposits placed by an UCB with other banks (inter-bank) for all purposes including call money/notice money, and deposits, if any, placed for availing clearing facility, constituent subsidiary general ledger (CSGL) facility, currency chest facility, remittance facility and non-fund based facilities like bank guarantee, letter of credit, etc., should not exceed 20 percent of its total deposit liabilities as on March 31 of the previous year. The balances held in deposit accounts with commercial banks and in permitted scheduled UCBs and investments in certificates of deposit issued by commercial banks, being inter bank exposures, would be included in this 20 per cent limit. |
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Prudential Inter-bank Counter Party Limit |
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Within the prudential inter-bank (gross) exposure limit, deposits with any single bank should not exceed 5 per cent of the depositing bank's total deposit liabilities as on March 31, of the previous year. |
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Exemptions from the Prudential Limit | ||||||||||||||||||||||||||
Non-scheduled UCBs in Tier I are presently exempted from maintaining statutory liquidity ratio (SLR) in government and other approved securities up to 15 per cent of their net demand and time liabilities (NDTL) provided the amount is held in interest bearing deposits with public sector banks and IDBI Bank Ltd. These deposits are exempted from the prudential limit on inter-bank exposure limits indicated above. |
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Investments in Non-SLR Securities | ||||||||||||||||||||||||||
The Reserve Bank has revised its guidelines on investments in non-SLR securities by UCBs. The revised instructions are : |
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Prudential Limit | ||||||||||||||||||||||||||
Non-SLR investments would continue to be limited to 10 per cent of a UCB’s total deposits as on March 31 of the previous year. |
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Instruments | ||||||||||||||||||||||||||
UCBs may invest in - |
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Restrictions |
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(i) Investment in perpetual debt instruments is not permitted. |
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FEMA |
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Opening of Diamond Dollar Accounts Liberalised | ||||||||||||||||||||||||||
AD Category – I banks can now permit firms and companies dealing in purchase/sale of rough or cut and polished diamonds/precious metal jewellery plain, minakari and/or studded with/without diamond and/or other stones, with a track record of at least 3 years in import/export of diamonds/ coloured gemstones/diamond and coloured gemstonesstudded jewellery/plain gold jewellery, and having an average annual turnover of Rs 5 crore or above during preceding three licensing years to open and maintain Diamond Dollar Accounts (DDA) with them, subject to the terms and conditions as follows: |
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(a) The exporter should comply with the eligibility criteria stipulated in the Foreign Trade Policy of the Government of India, issued from time to time. (b) The DDA should be opened in the name of the exporter and maintained in US Dollars only. (c) The account should only be in the form of current account and no interest should be paid on the balance held in the account. (d) No intra-account transfer should be allowed between the DDAs maintained by the account holder. (e) An exporter firm/company should not be permitted to open and maintain more than 5 DDAs. (f) The balances held in the accounts would be subject to cash reserve ratio (CRR) and statutory liquidity ratio (SLR) requirements (h) Exporter firms and companies maintaining foreign currency accounts, excluding exchange earners’ foreign currency (EEFC) accounts, with banks in India or abroad, are not eligible to open Diamond Dollar Accounts. (i) The transactions in the DDA would be as under: |
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Permissible Credits | ||||||||||||||||||||||||||
• Amount of pre-shipment and post-shipment finance availed in US Dollars. • Realisation of export proceeds from shipments of rough, cut, polished diamonds and diamond studded jewellery. • Realisation in US Dollars from local sale of rough, cut and polished diamonds. |
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Permissible Debits |
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• Payment for import/purchase of rough diamonds from overseas/local sources. |
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The exporter firm/company should make an application in the prescribed format to the AD Category - I bank for opening the DDA. AD Category - I banks should assess the track record of the firm/company at the end of every licensing year (April-March). In case any firm/company fails to meet the eligibility criteria, the account should be closed immediately. Earlier, requests for opening DDAs were considered by the Reserve Bank on a case-to-case basis. |
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Edited and published by Alpana Killawala for the Reserve Bank of India, Department of Communication, Central Office, Shahid Bhagat Singh Marg, Mumbai - 400 001 and printed by her at Onlooker Press, 16, Sassoon Dock, Colaba, Mumbai - 400 005. For renewal and change of address please write to the Chief General Manager, Press Relations Division, Reserve Bank of India, Central Office Building, 12th floor, Fort, Mumbai - 400 001 without enclosing DD/cheque. MCIR is also available on Internet at www.mcir.rbi.org.in |