FAQ Page 1 - RBI - Reserve Bank of India
Business restrictions imposed on Paytm Payments Bank Limited vide Press Releases dated January 31 and February 16, 2024
Paytm Payments Bank Wallet
Coordinated Portfolio Investment Survey – India
What to report under CPIS?
Ans: The survey collects details of portfolio investment assets of domestic residents made in securities issued by unrelated non-residents i.e., securities issued by unrelated non-residents and owned by residents.
External Commercial Borrowings (ECB) and Trade Credits
D. RECOGNISED LENDERS/ INVESTORS
Retail Direct Scheme
Account opening related queries
Biennial survey on Foreign Collaboration in Indian Industry (FCS)
Details of survey launch
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.
Targeted Long Term Repo Operations (TLTROs)
FAQs pertaining to TLTRO 2.0
Ans: In order to provide banks flexibility in investment, this condition will not be applicable for funds availed under TLTRO 2.0.
Housing Loans
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.
Indian Currency
B) Banknotes
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.
FAQs on Master Directions on Priority Sector Lending Guidelines
K. On-lending under Priority Sector
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:
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Name of the beneficiary, Amount sanctioned, Loan amount outstanding, Loan tenure, disbursement date, category of PSL.
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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:
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The PS assets created by the entity may undergo pre-payment or foreclosure thereby changing the ‘weighted maturity’ of the portfolio.
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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.
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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.
Clarification: Bank lending to NBFCs (other than MFIs) and HFCs are subjected 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 registered 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 our Master Directions FIDD.CO.Plan.BC.5/04.09.01/2020-21 dated September 04, 2020 and updated from time to time.
Government Securities Market in India – A Primer
The following steps should be followed in purchase of a security:
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Which security to invest in – Typically this involves deciding on the maturity and coupon. Maturity is important because this determines the extent of risk an investor like an UCB is exposed to – normally higher the maturity, higher the interest rate risk or market risk. If the investment is largely to meet statutory requirements, it may be advisable to avoid taking undue market risk and buy securities with shorter maturity. Within the shorter maturity range (say 5-10 years), it would be safer to buy securities which are liquid, that is, securities which trade in relatively larger volumes in the market. The information about such securities can be obtained from the website of the CCIL (http://www.ccilindia.com/OMMWCG.aspx), which gives real-time secondary market trade data on NDS-OM. Pricing is more transparent in liquid securities, thereby reducing the chances of being misled/misinformed. The coupon rate of the security is equally important for the investor as it affects the total return from the security. In order to determine which security to buy, the investor must look at the Yield to Maturity (YTM) of a security (please refer to Box III under para 24.4 for a detailed discussion on YTM). Thus, once the maturity and yield (YTM) is decided, the UCB may select a security by looking at the price/yield information of securities traded on NDS-OM or by negotiating with bank or PD or broker.
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Where and Whom to buy from- In terms of transparent pricing, the NDS-OM is the safest because it is a live and anonymous platform where the trades are disseminated as they are struck and where counterparties to the trades are not revealed. In case, the trades are conducted on the telephone market, it would be safe to trade directly with a bank or a PD. In case one uses a broker, care must be exercised to ensure that the broker is registered on NSE or BSE or OTC Exchange of India. Normally, the active debt market brokers may not be interested in deal sizes which are smaller than the market lot (usually ₹ 5 cr). So it is better to deal directly with bank / PD or on NDS-OM, which also has a screen for odd-lots (i.e. less than ₹ 5 cr). Wherever a broker is used, the settlement should not happen through the broker. Trades should not be directly executed with any counterparties other than a bank, PD or a financial institution, to minimize the risk of getting adverse prices.
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How to ensure correct pricing – Since investors like UCBs have very small requirements, they may get a quote/price, which is worse than the price for standard market lots. To be sure of prices, only liquid securities may be chosen for purchase. A safer alternative for investors with small requirements is to buy under the primary auctions conducted by RBI through the non-competitive route. Since there are bond auctions almost every week, purchases can be considered to coincide with the auctions. Please see question 14 for details on ascertaining the prices of the G-Secs.
All you wanted to know about NBFCs
B. Entities Regulated by RBI and applicable regulations
Foreign Investment in India
Domestic Deposits
I. Domestic Deposits
Annual Return on Foreign Liabilities and Assets (FLA) under FEMA 1999
Eligible entities and requirements to submit the FLA return
Ans: If the Partnership firms, Branches or Trustees have any outward FDI outstanding as on end-March of the latest FY, then they are required to file the FLA return.
External Commercial Borrowings (ECB) and Trade Credits
E. AVERAGE MATURITY PERIOD
You may refer to /documents/87730/39016390/12EC160712_A6.pdf for illustration purposes.
Remittances (Money Transfer Service Scheme (MTSS) and Rupee Drawing Arrangement (RDA))
Money Transfer Service Scheme (MTSS)
Core Investment Companies
Core Investment Companies (CICs)
Ans: No, they are only exempt from norms regarding submission of Statutory Auditor Certificate regarding continuance of business as NBFC, capital adequacy and concentration of credit / investments norms.
FAQs on Non-Banking Financial Companies
Exemptions to the companies not accepting public deposits
Page Last Updated on: December 10, 2022