No. Banks are prohibited from making any short sales of shares.

The bills covering payment of electricity charges, customs duty, hire purchase/ lease rental installments, sale of securities and other types of financial accommodation should not be discounted by banks.

There is no prohibition on banks’ placing of funds with non-banking non-financial companies under their Public Deposit Schemes. However, investment in the Public Deposit Scheme of such companies should be classified by banks as loans/ advances in their balance sheet and returns submitted under the Banking Regulation Act, 1949 and the Reserve Bank of India Act 1934.

Banks can purchase letter of allotment in respect of PSU bonds subject to the following conditions.

1. The transactions (other than interbank transactions) should be undertaken only through recognized Stock Exchanges and registered brokers.

2. While purchasing the bonds, the bank should ensure that it gets a clear title to the security and the security is tradable in the secondary market.

3. The bank should prescribe its internal guidelines with the approval of the Board for undertaking such transaction.

Shares/ debentures/ bonds accepted by banks as security for loans/ advances should be valued at the prevailing market prices.

Yes. Banks can sanction bridge loans to companies for a period not exceeding one year against the expected equity flows/ issues as also the expected proceeds of non-convertible Debentures, External Commercial Borrowings, Global Depository Receipts and/ or funds in the nature of Foreign Direct Investments, provided the bank is satisfied that the borrowing company has made firm arrangements for raising the aforesaid resources/ funds. Bridge loans extended by a bank will be included within the 5% ceiling prescribed for banks’ exposure to capital market.

The loans/ advances granted to individuals against the security of shares, debentures and PSU bonds should not exceed Rs.10 lakhs and Rs.20 lakhs, if the securities are held in physical form and dematerialized form respectively. The maximum amount of finance that can be granted to an individual for subscribing to IPOs is Rs.10 lakhs. However, the bank should not provide finance to companies for their investment in IPOs of other companies. Banks can grant advances to employees for purchasing shares of their own companies under Employees Stock Option Plan (ESOP) to the extent of 90% of purchase price of shares or Rs.20 lakhs whichever is lower. NBFCs should not be provided finance for lending to individuals for subscribing the IPOs. Loans/ advances granted by a bank for subscribing to IPOs should be reckoned as an exposure to capital market.

A uniform margin of 50% has been stipulated for all advances against shares/ issue of guarantees. Within this 50 percent margin, a minimum cash margin of 25 percent should be maintained in respect of guarantees issued by banks for capital market operation.

Yes. The profit making banks may make donations during a financial year, aggregating upto one percent of the published profit of the bank for the previous year. However, the contributions/ subscriptions made by banks to Prime Minister’s Relief Fund and to professional bodies/ institutions like Indian Banks’ Association, National Institute of Bank Management, Indian Institute of Bankers, Institute of Banking Personnel Selection, Foreign Exchange Dealers Association of India, during a year will be exempted from the above ceiling. Unutilized amount of the permissible limit of a year should not be carried forward for the next year for the purpose of making donations.

Yes, loss making banks can make donations upto Rs.5 lakhs only in a financial year.