The prudential norms relating to income recognition, accounting standards, asset classification, provisioning against bad and doubtful debts are the norms which have a bearing on disclosure of true and fair picture of the financial health of the NBFC. These companies normally borrow from other corporate bodies as also from banks and financial institutions. These are also the companies which may commence accepting public deposits at short notice. It is necessary that their Balance Sheets on which all the lenders would rely should be transparent and clean, else these companies would be able to inflate their profits and conceal the decline in the value of their investments as also unprovided NPAs. Such companies might turn out to be potential defaulters in servicing their borrowings from the financial system. The exemptions from capital adequacy and credit/ investment concentration norms have been given because public deposits are not involved.

Yes. You can continue to use, withdraw or transfer to another wallet or bank account upto the balance available in the wallet. Minimum KYC wallets can, however, be used only for merchant payments

Yes.

Yes.

Ans.: In case the reporting entity does not receive the soft-form of the survey schedule, they may download the same from RBI website www.rbi.org.in---> ‘Regulatory Reporting’-→ ‘List of Returns’-→ ‘FCS – Survey Schedule’ or Forms→Survey or send a request to the email: fcsquery@rbi.org.in.

Ans: In order to provide banks flexibility in investment, this condition will not be applicable for funds availed under TLTRO 2.0.

Ensure that the documents being provided to you are not colour photocopies. Check the internet for other modus operandi to fraud and ensure clear title to the asset. Seek advice only from authentic sources such as your bank.

Get the no encumbrance certificate to find the true title holder and if it is mortgaged to any financier. Obtain all tax papers to ensure that all documents are up to date.

Not necessarily. In terms of Section 24 of the Reserve Bank of India Act, 1934, bank notes shall be of the denominational values of two rupees, five rupees, ten rupees, twenty rupees, fifty rupees, one hundred rupees, five hundred rupees, one thousand rupees, five thousand rupees and ten thousand rupees or of such other denominational values, not exceeding ten thousand rupees, as the Central Government may, on the recommendation of the Central Board, specify in this behalf.

Clarification: In the case of bank’s lending to NBFCs / MFIs / HFCs for on-lending, only that portion of the portfolio should be reckoned for PSL classification that has been disbursed by the NBFC / MFI / HFC to the ultimate borrower/s as on the reporting date. The reckoning of residual portfolio, if any, can be done on subsequent reporting dates, based on the disbursement of eligible loans and reported by the NBFC / MFI / HFC to the bank.

Clarification: The Master Directions on Priority Sector Lending, 2020 under para 21, 22, 23 allows banks to classify as PSL its lending to NBFCs including HFCs and NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of RBI recognised SRO for the sector for on-lending to eligible priority sectors. Banks may adopt a uniform methodology for on-lending as follows:

a) Classification under PSL:

• The banks can classify on-lending to NBFC in the respective categories of PSL. The classification will be allowed only when the NBFC has disbursed the Priority Sector Loans to the ultimate beneficiary after receiving the funds from the bank.

• The NBFCs must provide a CA certificate to the banks stating that the individual loans of the portfolio, against which on-lending benefit is being claimed, are not being used to claim benefit from any other bank(s). Also, NBFC must put in place a suitable process to flag such loan(s) in their systems to enable its internal/statutory auditors as well as RBI supervisors to verify the same.

b) Information sharing:

• The banks may devise internal control mechanisms to ensure that the portfolio under on-lending is PSL compliant and adheres to co-terminus clause. The same should be made available to RBI supervisor/s as and when required. The following information/record should be collected by the bank from the EI:

1. Name of the beneficiary, Amount sanctioned, Loan amount outstanding, Loan tenure, disbursement date, category of PSL.

2. A statement to the effect that the portfolio is PSL compliant must be certified by a CA and shared by the EI with the bank on a quarterly basis in line with the PSL reporting by the bank to RBI. With respect to adherence to the co-terminus clause, the bank should ensure the same as on March 31 each year.

c) Adherence to co-terminus condition:

• The banks availing benefit of on-lending for PS assets must adhere to the condition that the tenure of the loan under on-lending to an EI is broadly co-terminus with the tenure of PS assets created by the EI.

• In view of the operational difficulties of exactly matching the co-terminus duration, the banks are allowed a variance of 3 months from the portfolio duration. An illustration for calculating adherence to the co-terminus duration is given below:

Sr. No.	Loan outstanding (A)	31st March of current FY (B)	Loan end date (C)	Loan period (days) (D= C-B)	Weighted average loan outstanding days (E=A*D)
1	50000	31-03-21	01-02-23	672	33600000
2	80000	31-03-21	01-05-24	1127	90160000
3	100000	31-03-21	11-08-23	863	86300000
4	300000	31-03-21	16-10-22	564	169200000
5	400000	31-03-21	23-11-22	602	240800000
Total	930000				620060000
	Weighted maturity of portfolio in days (F=(sum of E)/(sum of A)				666.73
	In months (F/30)				22.22
	In years (F/365)				1.83

In the above illustration, the residual maturity of bank loan to NBFC should be around 22.22 months. Banks are expected to calculate the weighted average residual maturity of portfolio ever year as on March 31 and ensure that residual maturity of bank loan to NBFC matches with the weighted average residual maturity of on-lending portfolio within the tolerance limit of +-3 months.

d) Treatment of pre-payment, foreclosure loans:

• The PS assets created by the entity may undergo pre-payment or foreclosure thereby changing the ‘weighted maturity’ of the portfolio.

• As the banks are required to calculate ‘weighted maturity’ at the end of FY, the loan outstanding in the event of pre-payment/foreclosure will also change accordingly.

• The NBFC may add PS assets to the on-lending portfolio. However, it must meet conditions mentioned above such as disbursements for the PS asset by the eligible entity must be on/after receipt of funds from the bank. The addition of PS assets to the portfolio pool can also be done in case of pre-payment/foreclosure of other PS assets in the pool to ensure adherence to the co-terminus clause.