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Housing Loans

4. What documents are generally sought for a loan approval? +

In addition to all legal documents relating to the house being bought, banks will also ask you to submit Identity and Residence Proof, latest salary slip ( authenticated by the employer and self attested for employees ) and Form 16 ( for business persons/ self-employed ) and last 6 months bank statements / Balance Sheet, as applicable . You also need to submit the completed application form along with your photograph. Loan applications form would give a checklist of documents to be attached with the application.

Do not be in a hurry to seal the deal quickly.

Please do discuss and seek more information on any waivers in terms and conditions provided by the commercial bank in this regard. For example some banks insist on submission of Life Insurance Policies of the borrower / guarantor equal to the loan amount assigned in favour of the commercial bank. There are usually amount ceilings for this condition which can also be waived by appropriate authority. Please read the fine print of the bank’s scheme carefully and seek clarifications.

All you wanted to know about NBFCs

A. Definitions

4. Is it necessary that every NBFC should be registered with the Reserve Bank?

In terms of Section 45-IA of the RBI Act, 1934, no NBFC can commence or carry on business of a non-banking financial institution without a) obtaining a certificate of registration from the Reserve Bank and without having a Net Owned Funds (NOF) of ₹10 crore with effect from October 01, 2022 (NBFCs seeking registration shall have NOF of ₹10 crore ab initio, and existing NBFCs have timeline upto March 31, 2027 to attain NOF of ₹10 crore). However, in terms of the powers conferred upon the Reserve Bank, to obviate dual regulation, certain categories of NBFCs which are regulated by other regulators are exempted from the requirement of registration with the Reserve Bank viz., Alternative Investment Fund/ Merchant Banking companies/ Stock broking companies registered with SEBI; Insurance Company holding a valid Certificate of Registration issued by IRDA; Nidhi companies as notified under Section 620A of the Companies Act, 1956; Chit companies doing the business of chits as defined in clause (b) of Section 2 of the Chit Funds Act, 1982; Stock Exchange or a Mutual Benefit company, etc.

Core Investment Companies

A. Definitions:

4. What does the term public funds, being used in the definition of CICs provided in para 3 (1) (viii) of Master Direction, include? Is it the same as public deposits? Can CICs accept deposits?

Ans: Public funds are not the same as public deposits. Public funds include public deposits, inter-corporate deposits, bank finance and all funds received whether directly or indirectly from outside sources such as funds raised by issue of Commercial Papers, debentures etc. Indirect receipt of public funds means funds received not directly but through associates and group entities which have access to public funds.

Even though public funds include public deposits as clarified above, it may be noted that CICs cannot accept public deposits. That is one of the eligibility criteria to be classified as a CIC. It may further be clarified that no NBFC can accept public deposits without specific permission of the Bank even if it holds a Certificate of Registration (CoR) from the Bank.

Indian Currency

A) Basics of Indian Currency/Currency Management

4. What is a currency chest?

To facilitate the distribution of banknotes and rupee coins, the Reserve Bank has authorised select scheduled banks to establish currency chests. These are storehouses where banknotes and rupee coins are stocked on behalf of the Reserve Bank for distribution to bank branches in their area of operation. As on February 28, 2025, there were 2691 currency chests.

[The currency chests are expected to distribute banknotes and rupee coins to other bank branches in their area of operation.]

Biennial survey on Foreign Collaboration in Indian Industry (FCS)

Details of survey launch

Q4. What is the due date for the submission in FCS Survey?

Ans.: The respondent companies can submit their responses on or before July 15 of the survey year.

FAQs on Priority Sector Lending (PSL)

G. Housing

Query 16: If housing loans are extended to banks’ own employees on commercial terms applicable to other customers, are they eligible for classification under priority sector lending ?

Clarification: Housing loans to banks’ own employees are not eligible for classification under priority sector lending, irrespective of whether they are extended on commercial terms or at subsidised rates.

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.

Foreign Investment in India

Q.5: Who can invest in a convertible note and what are the instructions in this regard ? +

Answer: A person resident outside India (other than an individual who is a citizen of Pakistan or Bangladesh or an entity which is registered/ incorporated in Pakistan or Bangladesh), may purchase convertible notes issued by an Indian start-up company for an amount of twenty five lakh rupees or more in a single tranche. A start-up company engaged in a sector where foreign investment requires Government approval may issue convertible notes to a non-resident only with the approval of the Government. The amount of consideration should be received by inward remittance through banking channels or by debit to the NRE/ FCNR (B)/ Escrow account maintained by the person concerned.

External Commercial Borrowings (ECB) and Trade Credits

B. ELIGIBILITY FOR RAISING ECB

5. Are LLPs eligible to raise ECBs? +

As LLPs are not eligible to receive FDI, they cannot raise ECBs.

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

Rupee Drawing Arrangement (RDA)

5. Is there any limit on the amount of money which can be sent under RDA ? +

There is no limit on the remittance amount as well as on the number of remittances. However, there is an upper cap of Rs.15.00 lakh for trade related transactions.

FAQs on Non-Banking Financial Companies

Definition of public deposits

5. Are the following types of deposits included in the definition of public deposit? +

Unsecured debentures Inter-Corporate Deposits (ICDs) Money received in trust Security deposits from employees Equated Monthly Investments (EMI) received in advance against lease/hire purchase finance. Unsecured debentures issued to the shareholders by a public limited company and to the general members of public by public and private limited companies are included in the definition of `public deposit. However, unsecured debentures issued to other companies and banks/all India financial institutions are not public deposit. The money received in trust is no longer an exempted borrowing and hence forms part of the public deposit. However, other borrowings by way of ICDs, security deposits from employees (provided these are deposited in an account with a bank or a post office, jointly with the employee) and advance receipt of lease or hire purchase instalments, are exempted borrowings and hence fall outside the purview of 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

5. My salary is credited into my account with Paytm Payments Bank. Can I continue to receive my salary into this account?

No. After March 15, 2024, you will not be able to receive any such credits into your account with Paytm Payments Bank. It is suggested that you make alternative arrangements with another bank before March 15, 2024 to avoid inconvenience.

Framework for Compromise Settlements and Technical Write-offs

A. COMPROMISE SETTLEMENT IN WILFUL DEFAULT AND FRAUD CASES

5. From a public policy perspective, what is the rationale for permitting lenders to enter into compromise settlement with borrowers classified as fraud or wilful defaulter? +

The primary regulatory objective is to enable multiple avenues to lenders to recover the money in default without much delay. Apart from the time value loss, inordinate delays result in asset value deterioration which hampers ultimate recoveries. Compromise settlement is recognized as a valid resolution mechanism under the Prudential Framework on Resolution of Stressed Assets dated June 7, 2019. The imperatives for lenders are no different when it comes to recovery from borrowers classified as fraud or wilful defaulter. Continuing such exposures on the balance sheets of the lenders without resolution due to legal proceedings would lock lenders’ funds in an unproductive asset, which would not be a desirable position. As long as larger policy concerns are suitably addressed and the costs of malafide actions are made to be borne by the perpetrators, early recoveries by lenders should be a preferred option, subject to safeguards. Further, continuation of criminal proceedings underway or to be initiated against the borrowers classified as fraud or wilful defaulter, would ensure that perpetrators of any malafide action do not go scot-free.

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

Eligible entities and requirements to submit the FLA return

Q5. In case where account closing period of the entity is different from reference period (end-March), can we report the information as per account closing period? +

Ans: No, the entity cannot report the information as per the account closing period, in case it is different from March closing. Information should be reported for the reference period only, i.e., previous March and latest March, based on the entity’s internal assessment.

Domestic Deposits

I. Domestic Deposits

5. Whether banks can pay commission for mobilizing deposits? +

Banks are prohibited from employing/ engaging any individual, firm, company, association, institution for collection of deposits or selling of deposit linked products on payment of remuneration or fees or commission in any form or manner except commission paid to agents employed to collect door-to-door deposits under a special scheme.

Retail Direct Scheme

Scheme related queries

5. How many Retail Direct Gilt (RDG) accounts can I open? +

An individual can open only one RDG account. The second holder in a joint RDG account may also open an individual RDG account.

Government Securities Market in India – A Primer

5. What are Open Market Operations (OMOs)? +

OMOs are the market operations conducted by the RBI by way of sale/ purchase of G-Secs to/ from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis. When the RBI feels that there is excess liquidity in the market, it resorts to sale of securities thereby sucking out the rupee liquidity. Similarly, when the liquidity conditions are tight, RBI may buy securities from the market, thereby releasing liquidity into the market.

5 (b) What is meant by repurchase (buyback) of G-Secs?

Repurchase (buyback) of G-Secs is a process whereby the Government of India and State Governments buy back their existing securities, by redeeming them prematurely, from the holders. The objectives of buyback can be reduction of cost (by buying back high coupon securities), reduction in the number of outstanding securities and improving liquidity in the G-Secs market (by buying back illiquid securities) and infusion of liquidity in the system. The repurchase by the Government of India is also undertaken for effective cash management by utilising the surplus cash balances. For e.g. Repurchase of four securities (7.49 GS 2017 worth ₹1385 cr, 8.07 GS 2017 worth ₹50 cr, 7.99 GS 2017 worth ₹1401.417 cr and 7.46 GS 2017 worth ₹125 cr) was done through reverse auction on March 17, 2017. State Governments can also buy-back their high coupon (high cost debt) bearing securities to reduce their interest outflows in the times when interest rates show a falling trend. States can also retire their high cost debt pre-maturely in order to fulfill some of the conditions put by international lenders like Asian Development Bank, World Bank etc. to grant them low cost loans. For e.g. Repurchase of seven securities of Government of Maharashtra was done through reverse auction on March 29, 2017. RBI vide DBR.No.BP.BC.46/21.04.141/2018-19 dated June 10, 2019 notified that apart from transactions that are already exempted from inclusion in the 5 per cent cap, it has been decided that repurchase of State Development Loans (SDLs) by the concerned state government shall also be exempted. Governments make provisions in their budget for buying back of existing securities. Buyback can be done through an auction process (generally if amount is large) or through the secondary market route, i.e. NDS-OM (if amount is not large).

Targeted Long Term Repo Operations (TLTROs)

Q5: Can a bank categorise specified securities acquired under TLTRO scheme as AFS or HFT? +

Ans: The specified securities acquired under TLTRO scheme will be classified in HTM category. However, if a bank decides to classify such securities under AFS/HFT category at the time of acquisition, it will not be allowed to later shift such securities to HTM category and it should maintain sufficient records to demonstrate and separately identify securities purchased under TLTRO scheme within the AFS/HFT portfolio. Further, all regulations applicable to securities classified under AFS/HFT including those on valuation, will be applicable on such specified securities.

Housing Loans

5. What are the different interest rate options offered by banks? +

Banks generally offer either of the following loan options: Floating Rate Home Loans and Fixed Rate Home Loans. For a Fixed Rate Loan, the rate of interest is fixed either for the entire tenure of the loan or a certain part of the tenure of the loan. In case of a pure fixed loan, the EMI due to the bank remains constant. If a bank offers a Loan which is fixed only for a certain period of the tenure of the loan, please try to elicit information from the bank whether the rates may be raised after the period (reset clause). You may try to negotiate a lock-in that should include the rate that you have agreed upon initially and the period the lock-in lasts.

Hence, the EMI of a fixed rate loan is known in advance. This is the cash outflow that can be planned for at the outset of the loan. If the inflation and the interest rate in the economy move up over the years, a fixed EMI is attractively stagnant and is easier to plan for. However, if you have fixed EMI, any reduction in interest rates in the market, will not benefit you.

Determinants of floating rate:

The EMI of a floating rate loan changes with changes in market interest rates. If market rates increase, your repayment increases. When rates fall, your dues also fall. The floating interest rate is made up of two parts: the index and the spread. The index is a measure of interest rates generally (based on say, government securities prices), and the spread is an extra amount that the banker adds to cover credit risk, profit mark-up etc. The amount of the spread may differ from one lender to another, but it is usually constant over the life of the loan. If the index rate moves up, so does your interest rate in most circumstances and you will have to pay a higher EMI. Conversely, if the interest rate moves down, your EMI amount should be lower.

Also, sometimes banks make some adjustments so that your EMI remains constant. In such cases, when a lender increases the floating interest rate, the tenure of the loan is increased (and EMI kept constant).

Some lenders also base their floating rates on their Benchmark Prime Lending Rates (BPLR). You should ask what index will be used for setting the floating rate, how it has generally fluctuated in the past, and where it is published/disclosed. However, the past fluctuation of any index is not a guarantee for its future behavior.

Flexibility in EMI:

Some banks also offer their customers flexible repayment options. Here the EMIs are unequal. In step-up loans, the EMI is low initially and increases as years roll by (balloon repayment). In step-down loans, EMI is high initially and decreases as years roll by.

Step-up option is convenient for borrowers who are in the beginning of their careers. Step-down loan option is useful for borrowers who are close to their retirement years and currently make good money.

All you wanted to know about NBFCs

A. Definitions

5. What are the requirements for registration with the Reserve Bank?

A ‘company’ desirous of commencing the business of non-banking financial institution as defined under Section 45 I(a) of the RBI Act, 1934 should comply with the following:

i. It should be a company incorporated under Section 3 of the companies Act, 1956 or corresponding Section under the Companies Act, 2013;

ii. It should have a minimum net owned fund of ₹10 crore. (The minimum net owned fund requirements for specialized NBFCs are NBFC-Infrastructure Finance Company (NBFC-IFC) – ₹300 crore; Infrastructure Debt Fund – NBFC (IDF-NBFC) – ₹300 crore; Mortgage Guarantee Company (MGC) – ₹100 crore; Housing Finance Company (HFC) – ₹20 crore, Standalone Primary Dealers (SPDs) which undertake only the core activities – ₹150 crore and SPDs which also undertake non-core activities – ₹250 crore; NBFC-AA – ₹2 crore; and NBFC-P2P – ₹2 crore).