It is not necessary that individual alongwith his related parties have shareholding in the NOFHC. However, if any individual belonging to the Promoter Group chooses to become a promoter of the NOFHC, he along with his relatives (as defined in Section 6 of the Companies Act 1956) and along with entities in which he and / or his relatives hold not less than 50 per cent of the voting equity shares can hold voting equity shares not exceeding 10 per cent of the total voting equity shares of the NOFHC. [para 2 ( C ) (ii) (a) 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.

Exchange Earners' Foreign Currency Account (EEFC) is an account maintained in foreign currency with an Authorised Dealer Category - I bank i.e. a bank authorized to deal in foreign exchange. It is a facility provided to the foreign exchange earners, including exporters, to credit 100 per cent of their foreign exchange earnings to the account, so that the account holders do not have to convert foreign exchange into Rupees and vice versa, thereby minimizing the transaction costs.

Truncation is the process of stopping the flow of the physical cheque issued by a drawer at some point by the presenting bank en-route to the paying bank branch. In its place an electronic image of the cheque is transmitted to the paying branch through the clearing house, along with relevant information like data on the MICR band, date of presentation, presenting bank, etc. Cheque truncation thus obviates the need to move the physical instruments across bank branches, other than in exceptional circumstances for clearing purposes. This effectively eliminates the associated cost of movement of the physical cheques, reduces the time required for their collection and brings elegance to the entire activity of cheque processing.

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).

The incidence of fake Indian currency notes in higher denomination has increased. For ordinary persons, the fake notes look similar to genuine notes, even though no security feature has been copied. The fake notes are used for antinational and illegal activities. High denomination notes have been misused by terrorists and for hoarding black money. India remains a cash based economy hence the circulation of Fake Indian Currency Notes continues to be a menace. In order to contain the rising incidence of fake notes and black money, the scheme to withdraw legal tender character of the old Bank Notes in the denominations of ₹ 500 and ₹ 1000 was introduced.

• Inflation rate will be based on the final combined Consumer Price Index [(CPI) base: 2010=100].

• 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 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.

1. a Government Promissory Note (GPN) payable to or to the order of a certain person; or

2. a bearer bond payable to a bearer; or

3. a stock; or

4. 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.

Ans. The PSS Act, 2007 received the assent of the President on 20th December 2007 and it came into force with effect from 12th August 2008.

1. 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.

2. 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.

3. 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.

Answer: Resident persons are permitted to undertake forex transactions only with authorised persons and for permitted purposes, in terms of the Foreign Exchange Management Act, 1999 (FEMA).

Resident persons undertaking forex transactions with unauthorised persons and for purposes other than those permitted under FEMA shall render themselves liable for penal action under the Act.

Only fresh FCNR (B) deposits mobilized in any of the permitted currencies after September 6, 2013 with a minimum three years maturity and having a lock in period of one year are permissible deposits under the swap window.

Banks are free to mobilise other types of permitted FCNR (B) deposits as specified in the RBI Master Circular on Interest Rates on FCNR (B) Deposits dated July 1, 2013 read with Circular DBOD.Dir.BC. 38/13.03.00/2013-14 dated August 14, 2013. However, such deposits will not qualify as eligible deposit for the purpose of swap with RBI. Banks are advised to maintain separate ledgers for FCNR (B) deposits mobilised under both the schemes along with proper audit trail of transactions.

Ans: The Indo-Nepal Remittance Facility (INRF, Scheme) is a cross-border remittance scheme to transfer funds from India to Nepal (one-way only), enabled under the NEFT ecosystem. The scheme was launched by the Reserve Bank of India (RBI) in May 2008 to provide a safe and cost-efficient avenue to migrant Nepalese workers in India to remit money back to their families in Nepal.

In August 2021, the Scheme was enhanced to boost the trade payments between the two countries, and to facilitate payments relating to retirement, pension, etc., to our ex-servicemen who have settled / relocated in Nepal.

SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India.

Ans. An AD bank must record valid LEI for cross border transactions of INR 50 crore and more undertaken through it on or after October 01, 2022. Post this, the AD bank must report the valid LEI for all cross border transactions, irrespective of the value of the transactions. However, if the AD bank already has a valid LEI of the entity, it must report it for all transactions irrespective of whether the entity has undertaken a transaction of INR 50 crore or above through it.

The scheme is applicable for the transactions involving transfer of Assets through Direct Assignment.

Pradhan Mantri Garib Kalyan Deposit Scheme (PMGKDS), 2016 is a scheme notified by the Government of India on December 16, 2016 which is applicable to every declarant under the Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016.

Participation in the Scheme of non-competitive bidding is open to retail investors. Retail investor is any person including individuals, firms, companies, corporate bodies, institutions, provident funds, trusts and any other entity as prescribed by RBI.

Ans: For the purposes of para 4(iv) of the Directions, the term ’person’ shall include an individual, a body of individuals, a HUF, a firm, a society or any artificial body, whether incorporated or not.

Response

All the existing ‘No-frills’ accounts opened pursuant to guidelines issued vide circular RPCD.RF.BC.54/07.38.01/2005-06 dated December 13, 2005 and RPCD.CO.No.RRB.BC.58/ 03.05.33(F) / 2005-06 dated December 27, 2005 and converted into BSBDA in compliance with the guidelines issued in circular RPCD.CO.RRB.RCB.BC.No.24/07.38.01/2012-13 dated August 22, 2012 as well as fresh accounts opened under the said circular should be treated as BSBDA. Accounts enjoying additional facilities under the reasonable pricing structure for value added services, exclusively for BSBDA customers should not be treated as BSBDAs.

Answer: ‘Remittance of assets' means remittance outside India of funds representing

a deposit with a bank or a firm or a company of:

1. provident fund balance
2. superannuation benefits
3. amount of claim or maturity proceeds of Insurance policy
4. sale proceeds of shares, securities, immovable property or any other asset held in India

Ans. The effective date of these directions is April 1, 2022. However, in view of implementation related difficulties expressed by some regulated entities (REs), REs are advised to implement these directions completely at the earliest on best effort basis, but not later than October 1, 2022.

Ans. The Reserve Bank owns and operates following CPS:

i. Real Time Gross Settlement (RTGS) System – It is the country’s Large Value Payment System and was introduced in March 2004. It was subsequently enhanced to Next Generation-RTGS (NG-RTGS) built on the ISO 20022 standard with advanced features such as hybrid functionality, liquidity management functions, future date functionality, scalability, etc. The transactions settle real-time on a gross basis in the books of RBI and have a floor value of Rs. 2 lakh. RTGS also settles Multilateral Net Settlement Batch (MNSB) files emanating from ancillary payment systems such as CCIL and NPCI. It is available round the clock on all days of the year with effect from December 14, 2020.

ii. National Electronic Fund Transfer (NEFT) system – It is a retail payment system and was introduced in November 2005. NEFT has a straight through process which operates in 48 half-hourly batches 24x7x365 with effect from December 16, 2019. There is no floor or ceiling for the amount that can be transferred in a single transaction, because of which NEFT has emerged as a popular hybrid payment system.

Ans: The valuation criteria as specified for HTM, AFS and HFT would apply.

Valuation (para nos. given are from our MC on investments)

3.1 Held to Maturity

i) Investments classified under HTM need not be marked to market and will be carried at acquisition cost, unless it is more than the face value, in which case the premium should be amortised over the period remaining to maturity. The banks should reflect the amortised amount in 'Schedule 13 - Interest Earned: Item II - Income on Investments', as a deduction. However, the deduction need not be disclosed separately. The book value of the security should continue to be reduced to the extent of the amount amortised during the relevant accounting period.

In the case of IIBs, face value will mean the inflation adjusted principal.

3.2 Available for Sale

The individual scrips in the Available for Sale category will be marked to market at quarterly or at more frequent intervals. Domestic Securities under this category shall be valued scrip-wise and depreciation / appreciation shall be aggregated for each classification referred to in item 2(i) above and foreign investments under this category shall be valued scrip-wise and depreciation / appreciation shall be aggregated for five classifications (viz. Government securities (including local authorities), Shares, Debentures & Bonds, Subsidiaries and / or joint ventures abroad and Other investments (to be specified)). Further, the investment in a particular classification, both in domestic and foreign securities, may be aggregated for the purpose of arriving at net depreciation / appreciation of investments under that category. Net depreciation, if any, shall be provided for Net appreciation, if any, should be ignored. Net depreciation required to be provided for in any one classification should not be reduced on account of net appreciation in any other classification. The banks may continue to report the foreign securities under three categories (Government securities (including local authorities), Subsidiaries and / or joint ventures abroad and other investments (to be specified)) in the balance sheet. The book value of the individual securities would not undergo any change after the marking of market.

3.3 Held for Trading

The individual scrips in the Held for Trading category will be marked to market at monthly or at more frequent intervals and provided for as in the case of those in the Available for Sale category. Consequently, the book value of the individual securities in this category would also not undergo any change after marking to market.

FIMMDA has informed that the price quoted in the market will be the real price and consideration for purchase and sale of the bond will be ((“Real Price x Index Ratio” which is clean price) + (Accrued Interest which is the Broken Period Interest). As per para 5.2 of the Master Circular on Classification, Valuation and Investment Portfolio by banks, broken period interest should not be capitalized but treated as an item of expenditure. In order to be consistent with present valuation norms, only clean price may be considered as acquisition cost.

As regards the mark to market value, in the case of IIBs it is the quoted clean price if available. If it is unquoted, FIMMDA’s valuation methodology for arriving at the clean price as above should be followed.

However, regarding broken period interest, banks would have to be guided by what is indicated in para 5.2 of MC on investments:

5.2 Broken Period Interest

Banks should not capitalise the Broken Period Interest paid to seller as part of cost, but treat it as an item of expenditure under Profit and Loss Account in respect of investments in Government and other approved securities. It is to be noted that the above accounting treatment does not take into account taxation implications and hence the banks should comply with the requirements of Income Tax Authorities in the manner prescribed by them.

In case it falls under unquoted SLR security, FIMMDA’s valuation methodology for arriving at the clean price should be followed.

Ans. Tokenisation refers to replacement of actual card details with an alternate code called the “token”, which shall be unique for a combination of card, token requestor (i.e. the entity which accepts request from the customer for tokenisation of a card and passes it on to the card network to issue a corresponding token) and device (referred hereafter as “identified device”).

Local Cheques

Local cheques are payable within the jurisdiction of the clearing house and will be presented through the clearing system prevailing at the centre. Credit arising out of local cheques shall be given to the customer’s account as indicated in the Cheque Collection Policy (CCP) of the concerned collecting bank.

Notwithstanding to the CCP of concerned collecting bank, ideally, in respect of local clearing, banks shall permit usage of the shadow credit afforded to the customers’ accounts immediately after closure of the relative return clearing on the next working day or maximum within an hour of commencement of business on the third working day from the day of presentation in clearing, subject to usual safeguards.

Under grid-based Cheque Truncation System (CTS) clearing, all cheques drawn on bank branches falling within in the grid jurisdiction are treated and cleared as local cheques. The grid clearing allows banks to present / receive cheques to/ from multiple cities to a single clearing house through their service branches in the grid location.

If there is any delay in credit, beyond the period specified above, customer is entitled to receive compensation at the rate specified in the CCP of the concerned collecting bank. In case, no rate is specified in the CCP for delay in realisation of local cheques, compensation at savings bank interest rate has to be paid for the corresponding period of delay.

Outstation Cheques

Maximum timeframe for collection of cheques drawn on state capitals / major cities / other locations are 7/10/14 days respectively.

If there is any delay in collection beyond this period, customer is entitled to receive compensation at the rate specified in the CCP of the concerned bank. In case the rate is not specified in the CCP, interest rate on Fixed Deposits for the corresponding maturity to be paid. Banks' cheque collection policy also indicates the limit up to which outstation cheques are given immediate / instant credit.

Ans. Under the facility of cash withdrawal at PoS terminals, cardholders can withdraw cash using their debit cards and full KYC prepaid cards issued by banks and non-banks in India. However, credit cards cannot be used under this facility. Cash can also be withdrawn at PoS terminals through Unified Payments Interface (UPI) as well as through use of electronic cards that are linked with overdraft facility provided along with Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts.

Ans: It is clarified that ‘time of transfer’ would mean when the associated risks and rewards, to the extent of economic interest transferred and as documented in the loan participation, assignment or novation contract, becomes binding on the transferor and transferee.

RBI issued circular RPCD.PLNFS.BC.NO.83/06.12.05/2000-01 dated April 28, 2001 on ‘Educational Loan Scheme’ advising all Scheduled Commercial Banks to adopt the Model Education Loan Scheme, formulated by Indian Banks’ Association (IBA). The Scheme has been revised by IBA from time to time and its latest revision is Model Education Loan Scheme (MELS), 2021.

For detailed information on guidelines to banks on education loan, please refer to MELS, 2021 and its related circulars. Copy of the aforesaid Scheme is available on the IBA website.

It is to be noted that the MELS, 2021 provides broad guidelines to the banks for operationalizing the educational loan scheme and implementing banks will have the discretion to make changes as deemed fit.

Ans. Contravention is a breach of the provisions of the Foreign Exchange Management Act (FEMA), 1999 and rules/ regulations/ notification/ orders/ directions/ circulars issued thereunder. Compounding refers to the process of voluntarily admitting the contravention, pleading guilty and seeking redressal. The Reserve Bank is empowered to compound any contravention as defined under section 13 of FEMA, 1999 except the contravention under section 3(a) ibid, for a specified sum after offering an opportunity of personal hearing to the contravener. It is a voluntary process in which an individual or a corporate seeks compounding of an admitted contravention. It provides comfort to any person who contravenes any provisions of FEMA, 1999 by minimizing transaction costs. Further, cases falling under Rule 9 of Foreign Exchange (Compounding Proceedings) Rules, 2024, shall not be eligible for compounding by the Reserve Bank.