FAQ Page 1 - RBI - Reserve Bank of India
Content Type:
FAQs on Non-Banking Financial Companies
Registration
Business restrictions imposed on Paytm Payments Bank Limited vide Press Releases dated January 31 and February 16, 2024
Bank Accounts with Paytm Payments Bank
Yes. Refunds, cashbacks, sweep-in from partner banks or interest are permitted credits into your account even after March 15, 2024
Coordinated Portfolio Investment Survey – India
Eligible entities and requirements to report under CPIS
Ans: Yes, since AIFs are considered under non-banking financial institutions.
Framework for Compromise Settlements and Technical Write-offs
A. COMPROMISE SETTLEMENT IN WILFUL DEFAULT AND FRAUD CASES
No. The cooling period has been introduced as a general prescription for normal cases of compromise settlements, without prejudice to the penal measures applicable in respect of borrowers classified as fraud or wilful defaulter as per the Master Directions on Frauds dated July 1, 2016 and the Master Circular on Wilful Defaulters dated July 1, 2015, respectively, as mentioned at (2) above.
External Commercial Borrowings (ECB) and Trade Credits
A. BASIC QUERIES
Borrowings from overseas have to be in compliance with the applicable ECB guidelines / provisions contained in the Foreign Exchange Management (Borrowing and Lending in Foreign Exchange) Regulations, 2018 issued vide Notification No. FEMA 3 (R)/2018-RB dated December 17, 2018, as amended from time to time.
Biennial survey on Foreign Collaboration in Indian Industry (FCS)
Details of survey launch
Ans.: Biennial.
Core Investment Companies
Core Investment Companies (CICs)
Ans: No, Existing CICs which have been exempted from registration in the past and have an asset size of less than Rs 100 crore are exempted from registration as stated in Notification No. DNBS.(PD) 220/CGM(US)-2011 dated January 5, 2011. As such they are not required to submit any auditor’s certificate that they comply with the requirements of the Notification.
Domestic Deposits
I. Domestic Deposits
Retail Direct Scheme
Scheme related queries
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Government of India Treasury Bills (T-Bills)
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Government of India dated securities (dated G-Sec)
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State Development Loans (SDLs)
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Sovereign Gold Bonds (SGB)
Targeted Long Term Repo Operations (TLTROs)
Ans: There is no maturity restriction on the specified securities to be acquired under TLTRO scheme. However, the outstanding amount of specified securities in bank’s HTM portfolio should not fall below the level of amount availed under TLTRO scheme.
Housing Loans
Indian Currency
A) Basics of Indian Currency/Currency Management
Bank notes are printed at four currency presses, two of which are owned by the Government of India through its Corporation, Security Printing and Minting Corporation of India Ltd. (SPMCIL) and two are owned by the Reserve Bank, through its wholly owned subsidiary, Bharatiya Reserve Bank Note Mudran Private Ltd. (BRBNMPL). The currency presses of SPMCIL are at Nasik (Western India) and Dewas (Central India). The two presses of BRBNMPL are at Mysuru (Southern India) and Salboni (Eastern India).
Coins are minted in four mints owned by SPMCIL. The mints are located at Mumbai, Hyderabad, Kolkata and NOIDA. The coins are issued for circulation only through the Reserve Bank in terms of Section 38 of the RBI Act.
FAQs on Master Directions on Priority Sector Lending Guidelines
C. Agriculture
Clarification: The PSL guidelines are activity and beneficiary specific and are not based on type of collateral. Therefore, bank loans given to individuals/ businesses for undertaking agriculture activities do not automatically become ineligible for priority sector classification, only on account of the fact that underlying asset is gold jewellery/ornament etc. It may, however, be noted that as per FIDD Circular dated February 7, 2019 and updated from time to time, it has been advised that banks may waive margin requirements for agricultural loans upto ₹1.6 lakh. Therefore, bank should have extended the loan based on scale of finance and assessment of credit requirement for undertaking the agriculture activity and not solely based on available collateral in the form of gold. Further, as applicable to all loans under PSL, banks should put in place proper internal controls and systems to ensure that the loans extended under priority sector are for approved purposes and the end use is continuously monitored.
Clarification: As per Annex-III of Master Directions on Priority Sector Lending (PSL) dated September 4, 2020, transportation is an eligible activity under indicative list of permissible activities under Food Processing Sector. However, while classifying any facility to transporters for purchasing Commercial Vehicles under “Food & Agro-processing” category, it needs to be ensured that the transporter is using the vehicle exclusively for transportation of food & agro-processed products or is a type of vehicle which is specifically used for “Food & Agro-processing” e.g. cold storage trucks, vans etc. If the commercial vehicle is also used for transportation of products other than those related to food & agro processing, the facility shall not be eligible for classification under ‘Food & Agro-processing’ category. In such cases, the same may be classified under MSME (Services), if it meets the conditions prescribed for the same in our Master Direction on PSL.
Government Securities Market in India – A Primer
Prior to introduction of auctions as the method of issuance, the interest rates were administratively fixed by the Government. With the introduction of auctions, the rate of interest (coupon rate) gets fixed through a market-based price discovery process.
4.1 An auction may either be yield based or price based.
i. Yield Based Auction: A yield-based auction is generally conducted when a new G-Sec is issued. Investors bid in yield terms up to two decimal places (e.g., 8.19%, 8.20%, etc.). Bids are arranged in ascending order and the cut-off yield is arrived at the yield corresponding to the notified amount of the auction. The cut-off yield is then fixed as the coupon rate for the security. Successful bidders are those who have bid at or below the cut-off yield. Bids which are higher than the cut-off yield are rejected. An illustrative example of the yield-based auction is given below:
Yield based auction of a new security
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| Details of bids received in the increasing order of bid yields | ||||
| Bid No. | Bid Yield | Amount of bid (₹ Cr) |
Cumulative amount (₹ Cr) |
Price* with coupon as 8.22% |
| 1 | 8.19% | 300 | 300 | 100.19 |
| 2 | 8.20% | 200 | 500 | 100.14 |
| 3 | 8.20% | 250 | 750 | 100.13 |
| 4 | 8.21% | 150 | 900 | 100.09 |
| 5 | 8.22% | 100 | 1000 | 100 |
| 6 | 8.22% | 100 | 1100 | 100 |
| 7 | 8.23% | 150 | 1250 | 99.93 |
| 8 | 8.24% | 100 | 1350 | 99.87 |
| The issuer would get the notified amount by accepting bids up to bid at sl. no. 5. Since the bid number 6 also is at the same yield, bid numbers 5 and 6 would get allotment on pro-rata basis so that the notified amount is not exceeded. In the above case each of bidder at sl. no. 5 and 6 would get ₹ 50 crore. Bid numbers 7 and 8 are rejected as the yields are higher than the cut-off yield. | ||||
| *Price corresponding to the yield is determined as per the relationship given under YTM calculation in question 24. | ||||
ii. Price Based Auction: A price based auction is conducted when Government of India re-issues securities which have already been issued earlier. Bidders quote in terms of price per ₹100 of face value of the security (e.g., ₹102.00, ₹101.00, ₹100.00, ₹ 99.00, etc., per ₹100/-). Bids are arranged in descending order of price offered and the successful bidders are those who have bid at or above the cut-off price. Bids which are below the cut-off price are rejected. An illustrative example of price based auction is given below:
Price based auction of an existing security 8.22% GS 2026
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| Details of bids received in the decreasing order of bid price | ||||
| Bid no. | Price of bid | Amount of bid (₹ Cr) |
Implicit yield | Cumulative amount (₹ Cr) |
| 1 | 100.19 | 300 | 8.19% | 300 |
| 2 | 100.14 | 200 | 8.20% | 500 |
| 3 | 100.13 | 250 | 8.20% | 750 |
| 4 | 100.09 | 150 | 8.21% | 900 |
| 5 | 100 | 100 | 8.22% | 1000 |
| 6 | 100 | 100 | 8.22% | 1100 |
| 7 | 99.93 | 150 | 8.23% | 1250 |
| 8 | 99.87 | 100 | 8.24% | 1350 |
| The issuer would get the notified amount by accepting bids up to 5. Since the bid number 6 also is at the same price, bid numbers 5 and 6 would get allotment in proportion so that the notified amount is not exceeded. In the above case each of bidders at sl. no. 5 and 6 would get securities worth ₹ 50 crore. Bid numbers 7 and 8 are rejected as the price quoted is less than the cut-off price. | ||||
4.2 Depending upon the method of allocation to successful bidders, auction may be conducted on Uniform Price basis or Multiple Price basis. In a Uniform Price auction, all the successful bidders are required to pay for the allotted quantity of securities at the same rate, i.e., at the auction cut-off rate, irrespective of the rate quoted by them. On the other hand, in a Multiple Price auction, the successful bidders are required to pay for the allotted quantity of securities at the respective price / yield at which they have bid. In the example under (ii) above, if the auction was Uniform Price based, all bidders would get allotment at the cut-off price, i.e., ₹100.00. On the other hand, if the auction was Multiple Price based, each bidder would get the allotment at the price he/ she has bid, i.e., bidder 1 at ₹100.19, bidder 2 at ₹100.14 and so on.
4.3 An investor, depending upon his eligibility, may bid in an auction under either of the following categories:
Competitive Bidding: In a competitive bidding, an investor bids at a specific price / yield and is allotted securities if the price / yield quoted is within the cut-off price / yield. Competitive bids are made by well-informed institutional investors such as banks, financial institutions, PDs, mutual funds, and insurance companies. The minimum bid amount is ₹10,000 and in multiples of ₹10,000 in dated securities and minimum ₹ 10,000 in case of T-Bills and in multiples of ₹ 10,000 thereafter. Multiple bidding is also allowed, i.e., an investor may put in multiple bids at various prices/ yield levels.
Non-Competitive Bidding (NCB):
With a view to encouraging wider participation and retail holding of Government securities, retail investors are allowed participation on “non-competitive” basis in select auctions of dated Government of India (GoI) securities and Treasury Bills. Participation on a non-competitive basis in the auctions will be open to a retail investor who (a) does not maintain current account (CA) or Subsidiary General Ledger (SGL) account with the Reserve Bank of India; and (b) submits the bid indirectly through an Aggregator/Facilitator permitted under the scheme. Retail investor, for the purpose of scheme of NCB, is any person, including individuals, firms, companies, corporate bodies, institutions, provident funds, trusts, and any other entity as may be prescribed by RBI. Regional Rural Banks (RRBs) and Cooperative Banks shall be covered under this Scheme only in the auctions of dated securities in view of their statutory obligations and shall be eligible to submit their non-competitive bids directly. State Governments, eligible provident funds in India, the Nepal Rashtra Bank, Royal Monetary Authority of Bhutan and any Person or Institution, specified by the Bank, with the approval of Government, shall be covered under this scheme only in the auctions of Treasury Bills without any restriction on the maximum amount of bid for these entities and their bids will be outside the notified amount. Under the Scheme, an investor can make only a single bid in an auction.
Allocation of non-competitive bids from retail investors except as specified above will be restricted to a maximum of five percent of the aggregate nominal amount of the issue within the notified amount as specified by the Government of India, or any other percentage determined by Reserve Bank of India. The minimum amount for bidding will be ₹10,000 (face value) and thereafter in multiples in ₹10,000 as hitherto. In the auctions of GoI dated securities, the retail investors can make a single bid for an amount not more than Rupees Two crore (face value) per security per auction.
In addition to scheduled banks and primary dealers, specified stock exchanges are also permitted to act as aggregators/facilitators. These stock exchanges submit a single consolidated non-competitive bid in the auction process and will have to put in place necessary processes to transfer the securities so allotted in the primary auction to their members/clients.
Allotment under the non-competitive segment will be at the weighted average rate of yield/price that will emerge in the auction on the basis of the competitive bidding. The Aggregator/Facilitator can recover up to six paise per ₹100 as brokerage/commission/service charges for rendering this service to their clients. Such costs may be built into the sale price or recovered separately from the clients. It may be noted that no other costs, such as funding costs, should be built into the price or recovered from the client. In case the aggregate amount of bid is more than the reserved amount (5% of notified amount), pro rata allotment would be made. In case of partial allotments, it will be the responsibility of the Aggregator/Facilitator to appropriately allocate securities to their clients in a transparent manner. In case the aggregate amount of bids is less than the reserved amount, the shortfall will be taken to competitive portion.
The updated Scheme for Non-Competitive Bidding Facility in the auctions of Government Securities and Treasury Bills is issued by RBI vide IDMD.1080/08.01.001/2017-18 dated November 23, 2017.
4.4 NCB scheme has been introduced in SDLs from August 2009. The aggregate amount reserved for the purpose in the case of SDLs is 10% of the notified amount (e.g. ₹100 Crore for a notified amount of ₹1000 Crore) subject to a maximum limit of 1% of notified amount for a single bid per stock. The bidding and allotment procedure is similar to that of G-Secs.
Conversion (Switch) of Government of India Securities through auction
RBI has from April 22, 2019 started conducting the auction for conversion of Government of India securities on third Monday of every month. Bidding in the auction implies that the market participants agree to sell the source security/ies to the Government of India (GoI) and simultaneously agree to buy the destination security from the GoI at their respective quoted prices. The source securities along with notified amount and corresponding destination securities are provided in the press release issued before the auction. The market participants are required to place their bids in e-kuber giving the amount of the source security and the price of the source and destination security expressed up to two decimal places. The price of the source security quoted must be equal to the FBIL closing price of the source security as on the previous working day.
Core Investment Companies
Core Investment Companies (CICs)
Ans: All companies in the group that are CICs would be regarded as CICs-ND-SI (provided they have accessed public fund) and would be required to obtain a Certificate of Registration from the Bank.
All you wanted to know about NBFCs
A. Definitions
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: Entities should mandatorily fill the FLA return within the due date. In case the entities do not have their audited balance sheet ready, they may fill the return with the provisional/unaudited numbers. Thereafter, once the audited numbers are ready, request for revision of the previously filed return to RBI needs to be raised. Once approved by RBI, you can revise the previously filed return with audited numbers and re-submit the same to RBI.
External Commercial Borrowings (ECB) and Trade Credits
A. BASIC QUERIES
FAQs on Non-Banking Financial Companies
Registration
Business restrictions imposed on Paytm Payments Bank Limited vide Press Releases dated January 31 and February 16, 2024
Bank Accounts with Paytm Payments Bank
The existing Deposits of Paytm Payments Bank customers maintained with partner banks can be brought back (sweep-in) to the accounts with Paytm Payments Bank, subject to the ceiling on balance prescribed for a Payments Bank (i.e. ₹2 lakh per individual customer at the end of day). Such sweep-ins for the purpose of making available the balances for use or withdrawal by the customer will continue to be allowed. However, no fresh deposits with partner banks through Paytm Payments Bank will be allowed after March 15, 2024.
Indian Currency
A) Basics of Indian Currency/Currency Management
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 March 31, 2024, there were 2,794 currency chests.
[The currency chests are expected to distribute banknotes and rupee coins to other bank branches in their area of operation.]
Coordinated Portfolio Investment Survey – India
Details for survey launch
Ans: The Reserve Bank will send emails to all the eligible entities from generic email IDs of the Reserve Bank to notify them about the launch of the CPIS for the latest reference period. Entities are required to fill in the latest survey schedule attached along with the mail and send to the generic email IDs of the Reserve Bank as per the instruction given in the survey schedule.
Framework for Compromise Settlements and Technical Write-offs
A. COMPROMISE SETTLEMENT IN WILFUL DEFAULT AND FRAUD CASES
Compromise settlement is not available to borrowers as a matter of right; rather it is a discretion to be exercised by the lenders based on their commercial judgement.
The prudential guidelines provide sufficient safeguards with regard to such settlements considered by the lenders:
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All such decisions are required to be taken by lenders as per their Board approved policies, instead of adopting an ad-hoc approach in each case;
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The circular further strengthens the regulatory guidance by mandating that all such cases of compromise settlement involving borrowers classified as fraud or wilful defaulter must be approved by the Board;
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Such settlements shall be without prejudice to the criminal proceeding underway or to be initiated, if under consideration of the lenders against such borrowers;
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As already mentioned, the extant penal provisions continue to remain applicable in such cases.
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Wherever recovery proceedings are pending before a judicial forum, any settlement arrived at with the borrower shall be subject to obtaining a consent decree from the concerned judicial authorities.
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The Boards of lenders have been entrusted with the oversight of the overall trends in approvals of all compromise settlements, including specifically the breakup of accounts classified as fraud, red-flagged, wilful defaulter and quick mortality accounts.
These guidelines will ensure greater transparency of the whole process.
Remittances (Money Transfer Service Scheme (MTSS) and Rupee Drawing Arrangement (RDA))
Rupee Drawing Arrangement (RDA)
Retail Direct Scheme
Scheme related queries
a. Retail investors, that is, individuals (natural persons) are allowed to open an RDG account. The following are required to open an account:
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Rupee savings bank account maintained in India.
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Permanent Account Number (PAN) issued by the Income Tax Department.
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Any Officially Valid Document (OVD) for Know Your Customer (KYC) purpose.
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Valid email id.
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Registered mobile number.
b. Non-Resident retail investors eligible to invest in Government Securities under Foreign Exchange Management Act, 1999.
Biennial survey on Foreign Collaboration in Indian Industry (FCS)
Details of survey launch
Ans.: The respondent companies can submit their responses on or before July 15 of the survey year.
Targeted Long Term Repo Operations (TLTROs)
Ans: The specified securities acquired under TLTRO scheme will be allowed to remain in HTM portfolio till their maturity.
Housing Loans
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.
FAQs on Master Directions on Priority Sector Lending Guidelines
D. MSME
Clarification: Government of India (GoI), vide Gazette Notification S.O. 2119 (E) dated June 26, 2020 and updated from time to time, has notified the new composite criteria of investment in plant & machinery as well as turnover for classification of an enterprise under MSME. Under the composite criteria, if an enterprise crosses the ceiling limits specified for its present category in either of the two criteria of investment or turnover, it will cease to exist in that category and be placed in the next higher category but no enterprise shall be placed in the lower category unless it goes below the ceiling limits specified for its present category in both the criteria of investment as well as turnover. Based on the new definition, the earlier criteria regarding continuity of PSL status for three years even after an enterprise grows out of the MSME category concerned, is no longer valid.
Core Investment Companies
Core Investment Companies (CICs)
Ans: In such a case only C will be registered, provided C is not funding any of the other CICs either directly or indirectly.
All you wanted to know about NBFCs
A. Definitions
A company incorporated under the Companies Act, 1956 and desirous of commencing 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 registered under Section 3 of the companies Act, 1956
ii. It should have a minimum net owned fund of ₹ 200 lakh. (The minimum net owned fund (NOF) required for specialized NBFCs like NBFC-MFIs, NBFC-Factors, CICs is indicated separately in the FAQs on specialized NBFCs)
Foreign Investment in India
External Commercial Borrowings (ECB) and Trade Credits
B. ELIGIBILITY FOR RAISING ECB
Remittances (Money Transfer Service Scheme (MTSS) and Rupee Drawing Arrangement (RDA))
Rupee Drawing Arrangement (RDA)
FAQs on Non-Banking Financial Companies
Definition of public deposits
Business restrictions imposed on Paytm Payments Bank Limited vide Press Releases dated January 31 and February 16, 2024
Bank Accounts with Paytm Payments Bank
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.
Indian Currency
A) Basics of Indian Currency/Currency Management
Some banks are authorised to establish Small Coin Depots to stock and distribute small coins i.e. coins of value below Rupee One to bank branches in their area of operation. As on March 31, 2024, there were 2,460 small coin depots.
Coordinated Portfolio Investment Survey – India
Details for survey launch
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.
Framework for Compromise Settlements and Technical Write-offs
A. COMPROMISE SETTLEMENT IN WILFUL DEFAULT AND FRAUD CASES
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
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
Biennial survey on Foreign Collaboration in Indian Industry (FCS)
Details of survey launch
Ans.: Last two financial year (FY) starting from April YYYY to March YYYY. For eg., FCS survey for the reference period 2021-2023 covers April 2021 to March 2022 and April 2022 to March 2023.
Retail Direct Scheme
Scheme related queries
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Page Last Updated on: December 10, 2022
