New FAQ Page 2 - RBI - Reserve Bank of India
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US-Dollar Cheque Collection
One of the services rendered by banks as part of their normal banking operations is collection of cheques deposited by their customers, some of which, could also be drawn or payable on banks that are outside the country. Such cheques are called foreign currency cheques and, presently, a significant part of these cheques are US-Dollar denominated payable by banks in the United States of America.
In the interest of better public awareness, the following FAQs have been prepared for cheques denominated in US-Dollars.
The Reserve Bank of India issued a directive vide circular DPSS.CO.OD.No 2785/06.08.005/2017-18 dated April 06, 2018 on ‘Storage of Payment System Data’ advising all system providers to ensure that, within a period of six months, the entire data relating to payment systems operated by them is stored in a system only in India.
Payment System Operators (PSOs) have sought clarification on certain implementation issues, from time to time, from Reserve Bank. The FAQs are intended to provide clarity on those issues to facilitate and ensure expeditious compliance by all PSOs.
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The directions are applicable to all Payment System providers authorised / approved by the Reserve Bank of India (RBI) to set up and operate a payment system in India under the Payment and Settlement Systems Act, 2007.
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Banks function as operators of a payment system or as participant in a payment system. They are participants in (i) payment systems operated by RBI viz., RTGS and NEFT, (ii) systems operated by CCIL and NPCI, and (iii) in card schemes. The directions are, therefore, applicable to all banks operating in India.
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The directions are also applicable in respect of the transactions through system participants, service providers, intermediaries, payment gateways, third party vendors and other entities (by whatever name referred to) in the payments ecosystem, who are retained or engaged by the authorised / approved entities for providing payment services.
- The responsibility to ensure compliance with the provisions of these directions would be on the authorised / approved PSOs to ensure that such data is stored only in India as required under the above directions.
Banks need to ensure compliance to all applicable statutory provisions, rules and regulations, various codes of conducts (including the voluntary ones) and their own internal rules, policies and procedures. It is, however, reiterated that compliance is a shared responsibility of the business units and the compliance function. Therefore, adherence to applicable statutory provisions and regulations needs to be the responsibility of each staff member of the bank and it is the work of the compliance function to ensure the same.
In some banks, there may be separate departments looking after compliance to different statutory and other requirements while the compliance function may be responsible for monitoring compliance with the regulations, internal policies and procedures and reporting to Management. The concerned departments would hold the prime responsibility for their respective areas, which should be clearly outlined, while compliance function would need to ensure overall oversight. If serious gaps are observed in such compliances, the compliance function should take necessary action to correct the compliance culture. There should also be appropriate mechanisms for co-operation among departments and with the Chief Compliance Officer.
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The CIBs issued in 1997 provided inflation protection only to principal and not to interest payment.
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New product of IIBs will provide inflation protection to both principal and interest payments.
In providing the clarifications, an attempt has been made to assist potential applicants in understanding the terms of the guidelines. The clarifications are specific to the queries and must be read in the overall context of the guidelines.
Commercial Banks : All commercial banks including branches of foreign banks functioning in India, local area banks and regional rural banks are insured by the DICGC.
Cooperative Banks : All State, Central and Primary cooperative banks, also called urban cooperative banks, functioning in States / Union Territories which have amended the local Cooperative Societies Act empowering the Reserve Bank of India (RBI) to order the Registrar of Cooperative Societies of the State / Union Territory to wind up a cooperative bank or to supersede its committee of management and requiring the Registrar not to take any action regarding winding up, amalgamation or reconstruction of a co-operative bank without prior sanction in writing from the RBI are covered under the Deposit Insurance Scheme. At present all co-operative banks are covered by the DICGC.
Primary cooperative societies are not insured by the DICGC.
In terms of Section 20 of the RBI Act 1934, RBI has the obligation to undertake the receipts and payments of the Central Government and to carry out the exchange, remittance and other banking operations, including the management of the public debt of the Union. Further, as per Section 21 of the said Act, RBI has the right to transact Government business of the Union in India.
State Government transactions are carried out by RBI in terms of the agreement entered into with the State Governments in terms of section 21 A of the Act. As of now, such agreements exist between RBI and all the State Governments except Government of Sikkim. Thus, the legal provisions vest Reserve Bank of India with both the right and obligation to function as banker to the government.
Let’s assume a bank has following maturity profile of borrowings:
| Sr. No. | Original Maturity | Balance outstanding as a percentage of total funds (other than equity) | Cumulative weightage |
| 1 | 5 years & above | 15.1% | 15.1% |
| 2 | 3 years & above but less than 5 years | 11.8% | 26.9% |
| 3 | 2 years & above but less than 3 years | 9.3% | 36.2% |
| 4 | 1 year & above but less than 2 years | 16.9% | 53.1% |
| 5 | 6 months & above but less than 1 year | 24.3% | 77.4% |
| 6 | 91 days & above but less than 6 months | 10.5% | 87.9% |
| 7 | Up to 90 days | 12.1% | 100% |
| Total | 100% |
In this case, the MCLR shall correspond to the weighted average of tenor of the first three time buckets.
Ans. TReDS is an electronic platform for facilitating the financing / discounting of trade receivables of Micro, Small and Medium Enterprises (MSMEs) through multiple financiers. These receivables can be due from corporates and other buyers, including Government Departments and Public Sector Undertakings (PSUs).
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Inflation rate will be based on the final combined Consumer Price Index [(CPI) base: 2010=100].
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The final combined CPI will be used as reference CPI with a lag of three months. For example, the final combined CPI for September 2013 will be used as reference CPI for whole of December 2013.
Ans: Yes. The banks will have to maintain amount of specified securities for the amount received in TLTRO in its HTM book at all times till maturity of TLTRO.
Government securities offer the benefit of safety, liquidity and attractive returns to investors. With the enactment of the Government Securities Act, 2006 Government securities, including the Relief/Savings Bonds issued by the Government of India, have become more investor friendly. Investors of such bonds will particularly benefit from such changes in the Act. To create public awareness in this regard and as a customer friendly measure, the following Frequently Asked Questions (FAQs) along with the answers have been released by the Reserve Bank of India (RBI).
Government security (G-Sec) means a security created and issued by the Government for the purpose of raising a public loan or any other purpose as notified by the Government in the Official Gazette and having one of the following forms.
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a Government Promissory Note (GPN) payable to or to the order of a certain person; or
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a bearer bond payable to a bearer; or
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a stock; or
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a bond held in a Bond Ledger Account (BLA).
Ans : IDFs are investment vehicles which can be sponsored by commercial banks and NBFCs in India in which domestic/offshore institutional investors, specially insurance and pension funds can invest through units and bonds issued by the IDFs. IDFs would essentially act as vehicles for refinancing existing debt of infrastructure companies, thereby creating fresh headroom for banks to lend to fresh infrastructure projects. IDF-NBFCs would take over loans extended to infrastructure projects which are created through the Public Private Partnership (PPP) route and have successfully completed one year of commercial production. Such take-over of loans from banks would be covered by a Tripartite Agreement between the IDF, Concessionaire and the Project Authority for ensuring a compulsory buyout with termination payment in the event of default in repayment by the Concessionaire.
Note: a) Since SNRR account has been allowed to be used for specified transactions in trade, foreign investments, External Commercial Borrowings, etc., in lieu of sending inward/outward remittances by a person resident outside India in a convertible foreign currency for each transaction with a resident or vice-versa, all precautions need to be taken by Authorized Dealer (AD) banks to ensure identification of the counterparty of such transactions. Some of such precautions are listed out in FAQs below. The onus of ensuring the use and identification of SNRR transactions as per guidelines falls on the AD banks.
b) The provisions of these FAQs will not apply to the SNRR accounts of FPIs, FVCIs and Depository Receipt / FCCB conversion accounts which are operated by a custodian and fall under para 7.1 (i) of Part II of the Master Directions on Deposits and Accounts.
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Payments initiated to the debit of SNRR Accounts: While handling INR payments to the debit of SNRR A/c favouring a person resident in India, AD Bank shall ensure that the transaction is communicated as SNRR transaction (including purpose code and country details, if applicable) to the recipient bank, either through electronic means or manually.
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Payments received for credit to SNRR Accounts: AD Bank holding SNRR account shall ensure that any domestic inward remittance received for credit to SNRR account should be confirmed as SNRR transaction as at A above.
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AD banks shall ensure compliance with various FEMA provisions as contained in the FEMA or the Rules or Regulations framed thereunder or directions issued thereunder in respect of all such transactions involving SNRR accounts.
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Page Last Updated on: December 11, 2022
