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Business restrictions imposed on Paytm Payments Bank Limited vide Press Releases dated January 31 and February 16, 2024

Bank Accounts with Paytm Payments Bank

10. The instalment (EMI) for my loan is automatically paid through my account with a bank other than Paytm Payments Bank. Can this continue? +

Yes, EMIs registered with any bank other than Paytm Payments Bank can continue.

Government Securities Market in India – A Primer

10. What are the Do's and Don’ts prescribed by RBI for the Co-operative banks dealing in G-Secs? +

While undertaking transactions in securities, UCBs should adhere to the instructions issued by the RBI. The guidelines on transactions in G-Secs by the UCBs have been codified in the master circular DCBR. BPD (PCB).MC.No. 4/16.20.000/2015-16 dated July 1, 2015 which is updated from time to time. This circular can also be accessed from the RBI website under the Notifications – Master circulars section. The important guidelines to be kept in view by the UCBs relate to formulation of an investment policy duly approved by their Board of Directors, defining objectives of the policy, authorities and procedures to put through deals, dealings through brokers, preparing panel of brokers and review thereof at annual intervals, and adherence to the prudential ceilings fixed for transacting through each of the brokers, etc.

The important Do’s & Don’ts are summarized in the Box I below.

BOX I

Do’s & Don’ts for Dealing in G-Secs

Do’s

Segregate dealing and back-office functions. Officials deciding about purchase and sale transactions should be separate from those responsible for settlement and accounting.
Monitor all transactions to see that delivery takes place on settlement day. The funds account and investment account should be reconciled on the same day before close of business.
Keep a proper record of the SGL forms received/issued to facilitate counter-checking by their internal control systems/RBI inspectors/other auditors.
Seek a Scheduled Commercial Bank (SCB), a PD or a Financial Institution (FI) as counterparty for transactions.
Give preference for direct deals with counter parties.
Insist on Delivery versus Payment for all transactions.
Take advantage of the NCB facility for acquiring G-Secs in the primary auctions conducted by the RBI.
Restrict the role of the broker only to that of bringing the two parties to the deal together, if a deal is put through with the help of broker.
Have a list of approved brokers. Utilize only brokers registered with NSE or BSE or OTCEI for acting as intermediary.
Place a limit of 5% of total transactions (both purchases and sales) entered into by a bank during a year as the aggregate upper contract limit for each of the approved brokers. A disproportionate part of the business should not be transacted with or through one or a few brokers.
Maintain and transact in G-Secs only in dematerialized form in SGL Account or Gilt Account maintained with the CSGL Account holder.
Open and maintain Gilt account or dematerialized account
Open a funds account for securities transactions with the same Scheduled Commercial bank or the State Cooperative bank with whom the Gilt Account is maintained.
Ensure availability of clear funds in the designated funds accounts for purchases and sufficient securities in the Gilt Account for sales before putting through the transactions.
Observe prudential limits and abide by restrictions for investment in permitted non-SLR securities (Prudential limit : shall not exceed 10% of the total deposits of bank as on March 31 of the preceding financial year) ( Instruments : (i) “A” or equivalent and higher rated CPs, debentures and bonds, (ii) units of debt mutual funds and money market mutual funds, (iii) shares of market infrastructure companies eg. CCIL, NPCI, SWIFT).
The Board of Directors to peruse all investment transactions at least once a month

Don’ts

Do not undertake any purchase/sale transactions with broking firms or other intermediaries on principal to principal basis.
Do not use brokers in the settlement process at all, i.e., both funds settlement and delivery of securities should be done with the counter-parties directly.
Do not give power of attorney or any other authorisation under any circumstances to brokers/intermediaries to deal on your behalf in the money and securities markets.
Do not undertake G-Secs transaction in the physical form with any broker.
Do not routinely make investments in non-SLR securities (e.g., corporate bonds, etc) issued by companies or bodies.

Foreign Investment in India

Q.10: Whether any approval is required for an entity which has received foreign investment under automatic route and subsequently the sector was brought under approval route +

Answer: As long as the foreign shareholding in the entity remains the same and there is no corporate action pursuant to the sector being brought under approval route, approval is not required.

Indian Currency

B) Banknotes

3. Which denomination banknotes are currently in circulation?

Banknotes in India are currently being issued in the denomination of ₹10, ₹20, ₹50, ₹100 ₹200, ₹500, and ₹2000*. These notes are called banknotes as they are issued by the Reserve Bank of India. The printing of notes in the denominations of ₹2 and ₹5 has been discontinued and these denominations have been coinised as the cost of printing and servicing these banknotes was not commensurate with their life. However, such banknotes issued earlier can still be found in circulation and these banknotes continue to be legal tender. ₹1 notes are issued by the Government of India from time to time and such notes including those issued in the past also continue to be legal tender for transactions.

*₹2000 denomination notes continue to be legal tender. For more details, please refer to our press release 2023-2024/851 dated September 01, 2023 (https://rbi.org.in/web/rbi/-/press-releases/withdrawal-of-%E2%82%B92000-denomination-banknotes-status-56301).

Biennial survey on Foreign Collaboration in Indian Industry (FCS)

Details of survey launch

Q10. If the company does not have FTC during the survey reference period, do they need to participate in the survey?

Ans.: In case the company does not have any FTC during the survey reference period, then they have to submit the survey schedule of FCS survey by filling Part I and II of the form.

Core Investment Companies

B. Registration and related matters:

10. In case an existing NBFC is converted into a CIC after fulfilling the stipulated criteria, will the existing CoR continue or will a fresh application need to be made?

Ans: Existing NBFCs seeking conversion of CoR to CIC shall be required to make an application in the prescribed format through the Bank’s Pravaah Portal.

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

Money Transfer Service Scheme (MTSS)

10. Who is an Indian Agent ? +

To become an Indian Agent, the applicant should be an Authorised Dealer Category-I bank or an Authorised Dealer Category-II or a Full Fledged Money Changer (FFMC) or the Department of Posts. Further, the Indian agents can also appoint sub-agents which can be retail outlets, commercial entities having a place of business, and whose bonafides are acceptable to the Indian Agent.

Portfolio Investment Positions (PIP) by Counterpart Economy (formerly CPIS) – India

What to report under PIP?

Q10. Should we report data for a particular branch of the reporting entity or the consolidated data of the entity? +

Ans: A consolidated data at the entity level, covering all the branches/offices in India, should be furnished.

All you wanted to know about NBFCs

B. Entities Regulated by RBI and applicable regulations

10. Where can one find list of Registered NBFCs and instructions issued to NBFCs?

The list of registered NBFCs is available on the web site of Reserve Bank (Home - Reserve Bank of India) under ‘Regulation → Non-Banking’. Further, the Directions issued to NBFCs from time to time are hosted on the Reserve Bank’s website under ‘Notifications’, and some instructions are issued through Official Gazette notifications and press releases as well.

FAQs on Priority Sector Lending (PSL)

J. PSLCs

Query 27: Will the net PSLC position only be reckoned for ascertaining the underlying asset?

Clarification: A bank can purchase PSLCs as per its requirements. Further, a bank is permitted to issue PSLCs upto 50 percent of previous year’s PSL achievement without having the underlying in its books. This is applicable category-wise. The net position of PSLCs (PSLC Buy – PSLC Sell) has to be considered while reporting the quarterly and annual priority sector returns. However, with regard to ascertaining the underlying assets, as on March 31st, the bank must have met the priority sector target by way of the sum of outstanding priority sector portfolio and net of PSLCs issued and purchased.

Query 28: What happens if the RBI inspection team, at a later date, de-classifies the underlying assets which had already been traded by the bank as PSLC, from eligibility for PSL classification?

Clarification: The misclassifications, if any, will have to be reduced from the achievement of PSLC seller bank only. There will be no risk for the PSLC buyer, even if the underlying asset of the traded PSLC gets misclassified.

Query 29: Is the premium payment to be done through the e-Kuber portal or a separate RTGS transaction?

Clarification: There will be a real time settlement of the matched premium. Accordingly, the respective current accounts of the participating banks with RBI will be debited/ credited to the extent of the matched premium.

Query 30: How does the PLSC order matching take place in the e-Kuber portal?

Clarification: The trading platform will match the buy and sell offer by following the Rule of Lowest Sale offer to the Buy offer and then within that on FIFO basis. For example, a buyer offered to pay 2% premium for a particular PSLC type and the same is available at 1.5%, 1.8% and 2%, the portal will first match with the sale deal at 1.5% and for any leftover units, it will then match with the sale offers of 1.8% and then 2% in that order, provided the buy offer is first in the queue (based on the timing of the placement of the buy offer).

Query 31: Will there be automatic matching of PSLC trades on the e-Kuber portal or can the buyer/seller select the counterparty? Will partial matching also happen?

Clarification: The order matching will be done on anonymous basis through the portal and the buyer/seller cannot select the counterparty. Partial matching will happen depending on the matching of premium and availability of category-wise PSLC lots for sale and purchase.

Query 32: What are the timings of PSLC market in the e-Kuber portal?

Clarification: The normal trading hours shall be from 10 AM to 4:30 PM. The PSLC market operates on all days except Saturdays, Sundays and holidays declared under The Negotiable Instruments Act, 1881 by the Government of Maharashtra.

K. On-lending under Priority Sector

Query 33: What is the methodology to be followed by a bank for PSL classification of lending to eligible entities for on-lending to priority sector?

Clarification: Paras 22, 23 and 24 of the Master Directions on Priority Sector Lending, 2025 permit banks to classify as PSL their 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 PSL classification of on-lending as follows:

a) Classification under PSL:

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

• The entities must provide auditors’ 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, they must put in place a suitable process to flag such loan(s) in their systems to enable internal/statutory auditors as well as RBI supervisors (in case of NBFCs) 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. The following information/record, at the very minimum, should be collected by the bank from the eligible entities:

name of the beneficiary, amount sanctioned, loan amount outstanding, loan tenure, disbursement date, category of PSL.

Query 34: What is the cap for bank lending to NBFCs and HFCs for on-lending?

Clarification: Bank lending to NBFCs (other than MFIs) and HFCs is subject to a cap of 5% of average PSL achievement of the four quarters of the previous financial year. In case of a new bank the cap shall be applicable on an on-going basis during its first year of operations. The prescribed cap is not applicable for bank lending to NBFC-MFIs and other MFIs (Societies, Trusts, etc.) which are members of RBI recognised ‘Self-Regulatory Organisation’ of the sector. Bank lending to such MFIs can be classified under different categories of PSL in accordance with conditions specified in the Master Directions on Priority Sector Lending, 2025.

L. Co-lending by Banks & NBFCs

Query 35: Does co-lending arrangement allow NBFCs to retain 100% of the risk?

Clarification: While the guidelines allow sharing of risks and rewards between the bank and the NBFC for ensuring appropriate alignment of respective business objectives, the priority sector assets on the bank’s books should at all times be without recourse to the NBFC.

Query 36: Are direct assignment of assets applicable only where bank can exercise its discretion?

Clarification: Only if the bank can exercise its discretion regarding taking into its books the loans originated by NBFC as per the agreement, the arrangement will be akin to a direct assignment transaction. If the Agreement entails a prior, irrevocable commitment on the part of the bank to take into its books its share of the individual loans as originated by the NBFC, it shall not be akin to direct assignment transaction.

Query 37: Does the term "mandatorily" in the CLM guidelines mean that the bank must take all the loans originated by the NBFC or can a cap be affixed on the number and amount in the Master Agreement?

Clarification: Both entities, the bank and the NBFC, shall be guided by the bilateral Master Agreement entered by them for implementing the Co-lending Model (CLM). The agreement may specify any cap on the number and amount of loans that can be originated by the NBFC under the Co-lending model.