Tag Archives: RBI

risk based internal audit

RBI has vide its circular dated 11th June, 2021 mandated risk based internal audit for housing finance companies (HFCs)as follows:

  1. all deposit taking HFCs irrespective of their size;
  2. all non deposit taking HFCs having asset size of Rs.50 billion million and above

Previously vide circular dated 3rd February, 2021 risk based internal audit was mandated for NBFC companies as follows:

a) all deposit taking NBFCs irrespective of their size;

b) all non deposit taking NBFCs (including core investment companies) with asset size of Rs.50 billion and above;

c) all urban co-operative banks having asset size of Rs.5 billion and above

The risk based internal audit was originally introduced by RBI in 2002 as an overall move towards risk based supervision of the banks. There was a guidance note issued for the same which can be found in this circular i.e.

The importance of risk based internal audit was reiterated by RBI on 7th January, 2021 wherein they have laid down few parameters to give risk based internal audit sufficient importance in the organisation. These parameters are :

  1. Authority, Stature and Independence – The internal audit function must have sufficient authority, stature, independence and resources within the bank, thereby enabling internal auditors to carry out their assignments with objectivity. Accordingly, the Head of Internal Audit (HIA) shall be a senior executive of the bank who shall have the ability to exercise independent judgement. The HIA as well as the internal audit function shall have the authority to communicate with any staff member and have access to all records or files that are necessary to carry out the entrusted responsibilities.
  2. Competence – Requisite professional competence, knowledge and experience of each internal auditor is essential for the effectiveness of the bank’s internal audit function. The desired areas of knowledge and experience may include banking operations, accounting, information technology, data analytics and forensic investigation, among others. Banks should ensure that internal audit function has the requisite skills to audit all areas of the bank.
  3. Staff Rotation – Except for the entities where the internal audit function is a specialised function and managed by career internal auditors, the Board should prescribe a minimum period of service for staff in the Internal Audit function. The Board may also examine the feasibility of prescribing at least one stint of service in the internal audit function for those staff possessing specialized knowledge useful for the audit function, but who are posted in other departments, so as to have adequate skills for the staff in the Internal Audit function.
  4. Tenor for appointment of Head of Internal Audit – Except for the entities where the internal audit function is a specialised function and managed by career internal auditors, the HIA shall be appointed for a reasonably long period, preferably for a minimum of three years.
  5. Reporting Line – The HIA shall directly report to either the Audit Committee of the Board (ACB) / MD & CEO or Whole Time Director (WTD). Should the Board of Directors decide to allow the MD & CEO or a WTD to be the ‘reporting authority’ of the HIA, then the ‘reviewing authority’ shall be with the ACB and the ‘accepting authority’ shall be with the Board in matters of performance appraisal of the HIA. Further, in such cases, the ACB shall meet the HIA at least once in a quarter, without the presence of the senior management, including the MD & CEO/WTD. The HIA shall not have any reporting relationship with the business verticals of the bank and shall not be given any business targets. In foreign banks operating in India as branches, the HIA shall report to the internal audit function in the controlling office / head office.
  6. Remuneration – The independence and objectivity of the internal audit function could be undermined if the remuneration of internal audit staff is linked to the financial performance of the business lines for which they exercise audit responsibilities. Thus, the remuneration policies should be structured in a way that it avoids creating conflict of interest and compromising audit’s independence and objectivity.

It was also emphasised that the internal audit function should not be outsourced. However, where required, experts, including former employees, could be hired on contractual basis subject to the Audit Committee being assured that such expertise does not exist within the audit function of the bank. Any conflict of interest in such matters shall be recognised and effectively addressed. Ownership of audit reports in all cases shall rest with regular functionaries of the internal audit function.

Banks must ensure and demonstrate through proper documentation that their risk-based internal audit framework captures all the significant criteria / principles suited for their organisational structure, the business model and the risks.

All these circulars may be accessed for easy reference on the subject.

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increase in ATM charges

RBI has vide its circular dated 10th June, 2021 increased the ATM usage charges as follows:

  1. Increase in intercharge fee per transaction from Rs.15 to Rs.17 for financial transactions and from Rs.5 to Rs.6 for non financial transactions across all centres, metros or non metros. This will be effective from 1st August, 2021;
  2. Intercharge fee pertains to the fees charged by the banks to the merchants who processes a credit card or debit card payment.
  3. Usage charges for customers at ATM machines beyond the stipulated free usage from Rs.20 to Rs.21 per transaction;
  4. Customers get 5 free transactions at own ATM and 3 free transactions at other bank ATM. In non metro cities, customers get 5 free transactions at other bank ATMs.
  5. This will come into effect from 1st January, 2022.

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monetary penalty on PNB, BOI

RBI has vide its press release levied monetary penalties of Rs.2 crores and Rs.4 crores each respectively on Punjab National Bank and Bank of India. 

For PNB it is relating to 

non-compliance of certain provisions of directions issued by RBI contained in the Master Directions on “Frauds – Classification and Reporting by commercial banks and select FIs” dated July 01, 2016 and, the circular on “Creation of a Central Repository of Large Common Exposures – Across Banks” dated September 11, 2013.

For Bank of India, it is relating to 

non-compliance with certain provisions of directions issued by RBI contained in the “Master Circular on KYC norms/AML standards/ CFT / Obligation of banks under PMLA, 2002” dated July 1, 2014, circular on “The Depositor Education and Awareness Fund Scheme, 2014 – Section 26A of Banking Regulation Act, 1949 – Operational Guidelines” dated May 27, 2014“Master Circular on Frauds – Classification and Reporting” dated July 02, 2012 and circular on “Sale of Financial Assets of Doubtful Standard / Fraudulent Origin to Securitization Company (SC) / Reconstruction Company (RC) – Reporting Requirements” dated April 5, 2011.

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monetary penalty on HDFC Bank

https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=51650

RBI has imposed a monetary penalty of Rs.100 million for contravention of section 6(2) and 8 of the Banking Regulation Act, 1949. As usual the press release gives very scant details as to the non compliance involved.

Section 6(2) specifies that no banking company shall engage in any form of business other than that referred to in section 6(1).

Section 6(1) specifies what kinds of business that a banking company can carry out in India. It is a very inclusive definition leaving no scope for banking companies to do any other business other than those specified in this section.

Section 8 specifies that no banking company shall indulge in any buying or selling or bartering of goods or engage in any trade other than in connection with realisation of security held by it or in connection with bills of exchange received for collection or negotiation.

From newspaper reports, it appears that HDFC Bank has indulged in cross selling of products of third party in its auto loan section.

https://timesofindia.indiatimes.com/business/india-business/hdfc-bank-fined-rs-10-crore-by-rbi-in-car-loan-case/articleshow/83052541.cms

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amalgamation of co-operative banks – RBI guidelines

The Banking Regulation (Amendment) Act, 2020 (39 of 2020) has been notified for the State Co-operative Banks (StCBs) and District Central Co-operative Banks (DCCBs) with effect from, April 1, 2021 vide Notification dated December 23, 2020 issued by Government of India. With the issue of the notification, the amalgamations of the above banks have to be sanctioned by Reserve Bank of India in terms of the provisions of the Section 44-A read with Section 56 of the Banking Regulation Act, 1949.

In recent past, a few State Governments approached RBI for amalgamation of DCCBs with the StCB as a two-tier Short-term Co-operative Credit Structure (STCCS). In order to help the States contemplating delayering their STCCS, following guidelines are being issued to bring the requirements and indicative benchmarks for the amalgamation of DCCBs with the StCB to the notice of all stakeholders. These guidelines will also apply for amalgamation of one or more DCCBs in a State with the StCB or amalgamation of one DCCB with another.

2. The Reserve Bank of India will consider proposals for amalgamation if the following conditions are fulfilled:

  1. When the State Government of the State makes a proposal to amalgamate one or more DCCB/s in the State with the StCB after conducting a detailed study of the legal framework along with additional capital infusion strategy, assurance regarding financial support if required, projected business model with clear profitability and proposed governance model for the amalgamated bank.
  2. When the scheme of amalgamation is approved by the requisite majority of shareholders in accordance with the provisions of Section 44A read with Section 56 of the Banking Regulation Act, 1949.
  3. When such proposal of the State Government has been examined and recommended by NABARD.

3. The proposal for amalgamation of DCCBs with the StCB will be examined by Reserve Bank in consultation with NABARD and the sanction/ approval will be a two-stage process. In the first stage, an ‘in-principle’ approval will be accorded subject to fulfilment of certain conditions, following which the processes for amalgamation may be initiated by all concerned. After completion of the above processes, NABARD and Reserve Bank may be approached for final approval along with compliance report. To enable the Reserve Bank to consider the application for sanction, the State Government shall submit the information and documents specified in the Annex to the concerned Regional Office of Reserve Bank and NABARD.

Regulatory Criteria

4. The basic regulatory criteria for amalgamation shall be as under:

  1. The proposal should be in compliance with the legal requirements, past orders/ rulings of the Courts, if any. The State Government shall verify that there are no Court Orders prohibiting or staying the proposal for amalgamation.
  2. Financial parameters of the amalgamated entity based on notionally consolidated latest audited financial statements should be robust. It should have its CRAR above the prescribed regulatory minimum, Gross NPA below 7% and Net NPA below 5% and availability of adequate liquid assets. Post-amalgamation, it should be a profit making and financially viable entity on sustained basis.
  3. The StCB should have a satisfactory track record of regulatory and supervisory compliance.
  4. The StCB should have strong governance/ management practices.

General considerations governing the In-principle Approval

5. The general considerations governing the in-principle approval by RBI shall be as under:

  1. The scheme of amalgamation shall be presented to the shareholders of the StCB/ DCCBs. A resolution shall be passed by 2/3rd of the majority of the shareholders, both in number and value, present and voting at a General Body Meeting of StCB and each DCCB as required under section 44(A) read with section 56 of the Banking Regulation Act, 1949.
  2. An MOU shall be executed by the constituents i.e. amalgamating DCCBs, StCB and State Government covering issues of governance structure, management, manpower/HR issues and the manner of arriving at the share swap ratio based on the net worth of DCCBs (Networth of the StCB/ DCCB to be computed as per the guidelines issued by NABARD in circular NB.DoS.HO.POL/2069/J-1/2012-13 Circular No.211/DoS 28/2012 dated August 24, 2012 and other circulars issued from time to time) which are proposed to be amalgamated with the StCB. A copy of the MOU shall be submitted to RBI / NABARD.
  3. Due diligence on the amalgamating entities shall be carried out by Chartered Accountants. Shares in the amalgamated entity will be allotted on the basis of the net worth of the amalgamating banks. Share swap ratios for allotment of shares will be required to be worked out on the basis of valuation of assets and liabilities done by a chartered accountant firm registered with IBBI as valuers.
  4. If as a result of share swap ratio based on net worth, shareholders of some DCCBs cannot be allotted any shares, the State Government shall infuse sufficient capital in such DCCBs to ensure that the shareholders of such DCCBs are allotted at least one share each.
  5. In addition to compliance with extant income recognition, asset classification and provisioning norms, full provision shall be made for impairment of assets, if any, on account of frauds, misappropriation etc. while arriving at the value of net assets of the amalgamating banks.
  6. The StCB, post-amalgamation, shall be required to adhere to the CRAR norms prescribed by RBI from time to time. The shortfall in capital, if required, for meeting CRAR requirement shall be met by State Government on an ongoing basis.
  7. The StCB, post-amalgamation, shall meet with the regulatory requirements laid down for grant of various permissions/approvals given to the amalgamating banks so that none of the services currently extended by the banks under amalgamation get jeopardized. The required regulatory approvals for the said services shall be obtained, if required, before the amalgamated entity commences operations. In case the StCB is not eligible to continue with certain lines of business which the amalgamating banks have been permitted, such lines of business shall be phased-out non-disruptively within one year of grant of final approval.
  8. StCB shall ensure to appropriately configure its IT system to enable system integration with all DCCBs before applying for final approval. The migration audit on IT systems of all the DCCBs shall be completed before the amalgamation. System integrity shall be established and certified before the DCCBs can migrate onto the StCB platform.
  9. A new Board of the amalgamated bank shall be constituted within three months of amalgamation. The MD/ CEO who is to be appointed should meet the Fit & Proper criteria prescribed by RBI.
  10. In addition to the Board of Directors, a Board of Management (BoM) shall be set up for the StCB within three months of amalgamation as prescribed in terms of the circular DoR(PCB).BPD.Cir.No.8/12.05.002/2019-20 dated December 31, 2019 addressed to Urban Co-operative banks. For this purpose, the bye-laws of the StCB shall be amended for incorporating the provisions relating to guidelines on BoM issued by RBI.
  11. The banking licence issued to the StCB shall continue after the process of amalgamation. DCCBs which are being amalgamated into the StCB shall surrender their licences to RBI. The process of surrendering licences shall be completed within three months of amalgamation.
  12. Existing branches of the DCCBs shall be converted into branches of the StCB and will come under the purview of Section 23 of the BR Act, 1949 (AACS). Thus, the StCB will be required to apply for branch licence from RBI for all these existing branches of DCCBs within three months from the date of amalgamation. The StCB shall also seek prior approval of RBI for shifting of branches and opening of any new place of business including controlling offices. The granting of permission by RBI for shifting of branches/ opening of any new place of business shall be in accordance with the extant guidelines.
  13. DICGC clearance for the amalgamation shall be obtained by the StCB before applying for final approval.
  14. In case of divergence in interest rates offered on deposits by the StCB and the amalgamating DCCBs, the StCB shall provide sufficient notice period to the customers of DCCBs to enable them to take a decision with regard to continuing their deposits with the amalgamating bank. Depositors deciding to discontinue their deposits within the aforesaid notice period will not be levied any penalty for such premature withdrawal
  15. RBI may prescribe any additional condition/s, as may be considered necessary.
  16. The proposals for amalgamation which meet the indicative benchmarks would be evaluated by NABARD and RBI on merits and would be subject to additional requirements/ conditions as deemed fit.

6. The assets and liabilities of the transferor DCCBs will be transferred to StCB on the date of the amalgamation as advised by Reserve Bank while according final approval for the amalgamation.

Post- amalgamation requirements

7. Post-amalgamation, the StCB will be required to take the following action:

  1. A compliance report with reference to the conditions of the final approval for amalgamation shall be submitted within the prescribed timeframe.
  2. Licences of the transferor banks shall be surrendered. Applications for issue of branch licences shall be made by StCB within the given time frame as per the conditions of amalgamation.
  3. Steps initiated by the authority / institution responsible for settlement of claims of the transferor banks and their members in respect of allotment of shares shall be indicated. Details of the list of pending claims and the time frame to settle such claims should also be indicated.

Disclosures

8. The amalgamated entity shall make disclosures in its first annual accounts post- amalgamation as mentioned below. These disclosures shall continue in the subsequent annual accounts till they are resolved/ closed with concurrence of the Statutory Auditors:

  1. Pension liabilities pre and post-amalgamation. The methodology of valuation/ re-valuation of the pension liabilities shall be disclosed with details of the increase/ reduction in liabilities as a result of change in pension scheme, if any. This disclosure shall capture details of changes, if any, in pension schemes that are made applicable to the employees of amalgamating banks/ amalgamated bank.
  2. Status of vigilance cases and complaints pending in the amalgamating banks as on the date of amalgamation and details of cases that are closed during the year.
  3. Status of pending fraud cases, outstanding inter-bank adjustments (amalgamating/amalgamated) and inter-branch accounts and other intermediary accounts post–merger and their impact on the financial statements of the amalgamated bank.
  4. Outstanding claims of the amalgamating banks and their members in respect of allotment of shares and time frame for settlement of such claims.
  5. Such additional disclosures that may be required by the regulator/ supervisor

Yours faithfully

(Neeraj Nigam)
Chief General Manager in Charge


Annex

Documents to be furnished to the RBI and NABARD along with the Proposal

I. Documents to comply with the Regulatory requirements:

a) Feasibility Study.

b) Formal approval of the State Government.

c) Draft Scheme of Amalgamation along with duly certified resolution passed by the shareholders.

II. Managerial and Governance:

a) Copies of the notices of every meeting of the shareholders called for such approval together with newspaper cuttings evidencing that notices of the meetings were published in newspapers at least once a week for three consecutive weeks in two newspapers circulating in the locality or localities in which the registered offices of the banks are situated and that one of the newspapers was in a language commonly understood in the locality or localities.

b) Certificates signed by each of the officers presiding at the meeting of shareholders certifying the following

  1. A copy of the resolution passed at the meeting;
  2. The number of shareholders present at the meeting
  3. The number of shareholders who voted in favour of the resolution and the aggregate value of the shares held by them
  4. The number of shareholders who voted against the resolution and the aggregate value of the shares held by them
  5. The number of shareholders whose votes were declared as invalid and the aggregate value of the shares held by them
  6. The names of shareholders who have given notice in writing to the Presiding Officer that they dissented from the scheme of amalgamation together with the number of shares held by each of them.

c) Proposed governance reforms enabling professional governance/ management in the amalgamated bank.

III. Financials:

a) Audited Financial position of all the banks proposed to be amalgamated for preceding two financial years.

b) Financial structure of the amalgamated entity post-merger.

c) Areas of operational synergies and cost management.

d) Due-diligence Report (DDR) from Chartered Accountants, which may generally include:

  1. Scope/Mandate of DDR
  2. Sources of information used and limitations, if any, due to incomplete/not available data/information
  3. Nature of business being undertaken including Foreign Exchange Business such as Authorized Dealer (Category 1 or 2), Bharat Bill Payment system (BBPS), Electronic Banking Channels etc.
  4. Share capital and share holding pattern
  5. Management structure and organisational chart of holding Membership
  6. Accounting policies/practices and software in use
  7. Agreements, contracts and insurance in place
  8. Legal cases – by and against the bank
  9. Statutory liability assessment and compliance (IT, PF, TDS, etc); penalty imposed if any
  10. Liability particulars (deposits, to staff, others) and contingent liabilities details
  11. Asset particulars along with its actual IRAC status as per RBI guidelines/ fixed assets-valuation method, other assets
  12. Contra items
  13. Off balance sheet items and contingent liabilities, if any
  14. Review of net assets and net liability including realisable value
  15. Independent study of assets and pointers on erosion in assets, under provisioning (e.g. on gratuity, leave encashment, income tax, depreciation, stamp duty, etc.), understatement of liability (e.g. non-recognition of interest liability on matured term deposits, etc.) and factoring these into net worth calculation
  16. Non-banking assets, if any
  17. Net worth statement
  18. Details of property owned and leased with market value.
  19. Loans etc. to Directors
  20. Any signs of possible frauds or financial malfeasance.

e) Report of the valuers appointed for determination of the swap ratio.

IV. Disclosures:

  1. Pension liabilities pre-amalgamation. The methodology of valuation/ re-valuation of the pension liabilities shall be disclosed with details of the increase/ reduction in liabilities as a result of change in pension scheme, if any. This disclosure shall capture details of changes, if any, in pension schemes that will be made applicable to the employees of amalgamating banks/ amalgamated bank.
  2. Status of vigilance cases and complaints pending in the amalgamating banks as on the date of application/proposal.
  3. Status of pending fraud cases, outstanding inter-bank adjustments and inter-branch accounts and other intermediary accounts pre–merger.

V. Other Documents:

Additional information relevant for the consideration of the scheme of amalgamation.

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payment system compliances – covid relaxations

RBI has vide its circular dated 21st May, 2021 given relaxations from compliances to payment system operators as follows:

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monetary penalty on banks

The Reserve Bank of India (RBI) has, by an order dated May 20, 2021 imposed a monetary penalty of ₹1.00 crore (Rupees One crore only) on Tamilnad Mercantile Bank Ltd. (the bank) for non-compliance with certain provisions of directions issued by RBI on “Cyber Security Framework in Banks” dated June 2, 2016.

The Reserve Bank of India (RBI) has imposed, by an order dated May 19, 2021, a monetary penalty of ₹1 Crore (Rupees one Crore only) on City Union Bank Limited (the bank) for contravention of/non-compliance with certain provisions of the directions contained in the Reserve Bank of India (Lending to Micro, Small & Medium Enterprises (MSME) Sector) Directions, 2017 and the circulars on Educational Loan Scheme and Credit Flow to Agriculture – Agricultural Loans – Waiver of Margin/Security Requirements.

The Reserve Bank of India (RBI) has, by an order dated May 19, 2021, imposed a monetary penalty of ₹10 Lakh (Rupees Ten Lakh only) on Daimler Financial Services India Private Limited, Pune (the company), Maharashtra for non-compliance with certain provisions of the directions issued by RBI contained in ‘Reserve Bank Commercial Paper Directions 2017’ and ‘Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016’

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prepaid payment instruments

RBI circular dated 19th May, 2021 on the subject which is self explanatory

Prepaid Payment Instruments (PPIs) –

(i) Mandating Interoperability;

(ii) Increasing the Limit to ₹2 lakh for Full-KYC PPIs; and

(iii) Permitting Cash Withdrawal from Full-KYC PPIs of Non-Bank PPI Issuers

This has reference to paragraphs 10 and 11 of the Statement on Developmental and Regulatory Policies dated April 07, 2021 wherein it was announced that (a) PPI interoperability shall be made mandatory, (b) the limit for full-KYC PPIs shall be increased from ₹1 lakh to ₹2 lakh, and (c) cash withdrawal shall be permitted using full-KYC PPIs of non-bank PPI issuers.

2. A reference is also invited to the Master Direction DPSS.CO.PD.No.1164/02.14.006/2017-18 dated October 11, 2017 on Issuance and Operation of PPIs (as amended from time to time) and Circular DPSS.CO.PD.No.808/02.14.006/2018-19 dated October 16, 2018 on PPIs – Guidelines for Interoperability.

3. Accordingly, the following are advised –

  1. It shall be mandatory for PPI issuers to give the holders of full-KYC PPIs (KYC-compliant PPIs) interoperability through authorised card networks (for PPIs in the form of cards) and UPI (for PPIs in the form of electronic wallets);
  2. Interoperability shall be mandatory on the acceptance side as well;
  3. The interoperability shall be enabled by March 31, 2022; and
  4. PPIs for Mass Transit Systems (PPI-MTS) shall remain exempted from interoperability while Gift PPI issuers have the option to offer interoperability.

4. The maximum amount outstanding in respect of full-KYC PPIs (KYC-compliant PPIs) has been increased from ₹1 lakh to ₹2 lakh. All other conditions mentioned under paragraphs 9.1 (ii) and 9.2 of the Master Direction on PPIs dated October 11, 2017 shall continue to be applicable.

5. The feature of cash withdrawal shall be permitted in respect of full-KYC PPIs issued by non-bank PPI issuers as well. The following conditions shall, however, be applicable –

  1. Maximum limit of ₹2,000 per transaction with an overall limit of ₹10,000 per month per PPI;
  2. All cash withdrawal transactions performed using a card / wallet, shall be authenticated by an Additional Factor of Authentication (AFA) / PIN;
  3. Any PPI issuer offering this facility shall put in place proper customer redressal mechanisms. Complaints in this regard shall fall under the ambit of the respective ombudsmen schemes and instructions on limiting liability of customers; and
  4. PPI issuers shall put in place suitable cooling period for cash withdrawal upon opening the PPIs or loading / re-loading of funds into PPIs to mitigate the risk of fraudulent use of PPIs.

5. The cash withdrawal limit from Points of Sale (PoS) terminals using debit cards and open system prepaid cards issued by banks in India advised vide circular DPSS.CO.PD.No.449/02.14.003/2015-16 dated August 27, 2015 has also been rationalised to ₹2,000 per transaction within an overall monthly limit of ₹10,000 across all locations (Tier 1 to 6 centres). The requirement of submission of data to RBI mentioned at paragraph 6 of the circular has been dispensed with. All other provisions shall, however, continue to be applicable.

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sovereign gold bond scheme

RBI has announced another round of sovereign gold bond scheme starting from 17th May, 2021 onwards upto 21st May, 2021 and will be issued on 25th May, 2021.

The issue price of the Bond during this subscription period shall be Rs 4,777 (Rupees Four thousand seven hundred Seventy seven only) – per gram, as also published by RBI in their Press Release dated May 14, 2021.

The Government of India in consultation with the Reserve Bank of India has decided to allow discount of Rs 50 (Rupees Fifty only) per gram from the issue price to those investors who apply online and the payment is made through digital mode. For such investors the issue price of Gold Bond will be Rs 4,727 (Rupees Four thousand Seven hundred twenty seven only) per gram of gold.

Government of India has vide its Notification No F.No4.(4)-B (W&M)/2021 dated May 12, 2021 has announced the Sovereign Gold Bond Scheme 2020-21, Series I, II, III, IV, V and VI. Under the scheme there will be a distinct series (starting from Series I) for every tranche. The terms and conditions of the issuance of the Bonds shall be as per the above notification.

2. Date of Issue

The date of issuances shall be as per the details given in the calendar below

S. No.TrancheDate of SubscriptionDate of Issuance
1.2021-22 Series IMay 17–21, 2021May 25, 2021
2.2021-22 Series IIMay 24–28, 2021June 01, 2021
3.2021-22 Series IIIMay 31-June 04, 2021June 08, 2021
4.2021-22 Series IVJuly 12- 16, 2021July 20, 2021
5.2021-22 Series VAugust 09-13, 2021August 17, 2021
6.2021-22 Series VIAugust 30- September 03, 2021September 07, 2021

3. Period of subscription.

The Subscription of the Gold Bonds under this Scheme shall be open (Monday to Friday) on the dates specified above, provided that the Central Government may, with prior notice, close the Scheme at any time before the period specified above.

4. Application

Subscription for the Bonds may be made in the prescribed application form Form A or in any other form as near as thereto, stating clearly the grams (in units) of gold and the full name and address of the applicant. Every application must be accompanied by the ‘PAN details’ issued by the Income Tax Department to the investor(s). Scheduled Commercial Banks (excluding RRBs, Small Finance Banks and Payment Banks)designated Post Offices (as may be notified), Stock Holding Corporation of India Ltd (SHCIL) and recognized stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange Ltd. are authorized to receive applications for the Bonds either directly or through agents and render all services to the customers The Receiving Office shall issue an acknowledgment receipt in Form B’ to the applicant.

5. In addition to receipt of application, the Receiving Offices are also entrusted with the responsibility of providing service to the investors of the SGB and are required to be guided by rules and regulations issued by RBI in this regard from time to time. With a view to facilitate availability of all current operative instructions regarding servicing of these bonds at one place, RBI has issued consolidated procedural/operational guidelines vide circular IDMD.CDD.2730/14.04.050/2019-20, dated April 13, 2020. and the same is available on RBI website. The Receiving Offices shall be guided by these instructions while dealing with all the procedural aspects and providing service to the investors.

6. All other terms and conditions specified in the notification of Government of India in the Ministry of Finance (Department of Economic Affairs) vide Notification F.No.4(2)-W&M/2018 dated March 27, 2018 shall apply to the Bonds.

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alternate investment fund

RBI circular dated 12th May, 2021 allowing Indian party sponsor to make sponsor contribution to an Alternate Investment Fund set up abroad or in the International Financial Services Centre Unit and it will be considered as overseas direct investment. Read on.

Attention of AD Category – I banks is invited to paragraph A.3.(e) and B.6 of Master Direction No.15 dated January 1, 2016, on “Direct Investment by Residents in Joint Venture (JV) / Wholly Owned Subsidiary (WOS) Abroad”, as amended from time to time and Regulation 7 of the Notification FEMA 120/2004-RB, pertaining to provisions for an Indian Party (IP) making investment/ financial commitment in an entity engaged in the financial services sector.

2. It has been decided that any sponsor contribution from a sponsor IP to an Alternative Investment Fund (AIF) set up in an overseas jurisdiction, including International Financial Services Centres (IFSCs) in India, as per the laws of the host jurisdiction, will be treated as Overseas Direct Investment (ODI). Accordingly, IP, as defined in regulation 2(k) of the Notification ibid. can set up AIF in overseas jurisdictions, including IFSCs, under the automatic route provided it complies with Regulation 7 of the Notification FEMA 120/2004-RB.

3. All the other provisions under the Notification ibid. shall remain unchanged. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

4. The Master Direction No. 15 dated January 01, 2016, is being updated to reflect the changes.

5. The directions contained in this circular have been issued under section 10 (4) and 11(1) of the FEMA and are without prejudice to permissions/approvals, if any, required under any other law.

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depositor education & awareness fund

Banking Regulation Act, 1949 – Section 26A
Depositor Education and Awareness Fund Scheme, 2014 –
Interest rates payable on unclaimed interest bearing deposit

Please refer to circulars DBOD.No.DEAF Cell.BC.126/30.01.002/2013-14 dated June 26, 2014 and DBR.DEA Fund Cell.BC.No.110/30.01.002/2017-18 dated June 07, 2018 wherein RBI had specified the rates of interest payable by banks to the depositors on the unclaimed interest bearing deposit amount transferred to the DEA Fund.

2. The rate of interest has since been reviewed and it has been decided that the rate of interest payable by banks to the depositors/claimants on the unclaimed interest bearing deposit amount transferred to the Fund shall be 3 per cent simple interest per annum with effect from the date of this circular.

3. Accordingly, all the banks are advised to calculate the interest payable on interest bearing deposits transferred to RBI at the rate of 4 per cent p.a. up to June 30, 2018, 3.5 per cent w.e.f. July 1, 2018 up to May 10, 2021 and at 3 per cent with effect from May 11, 2021 till the time of payment to the depositor/claimant.

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banking resolution for covid stress – MSME

Resolution Framework 2.0 – Resolution of Covid-19 related stress of Micro, Small and Medium Enterprises (MSMEs)

Please refer to the circular DOR.No.BP.BC/4/21.04.048/2020-21 dated August 6, 2020 on restructuring of advances to the MSME borrowers.

2. In view of the uncertainties created by the resurgence of the Covid-19 pandemic in India in the recent weeks, it has been decided to extend the above facility for restructuring existing loans without a downgrade in the asset classification subject to the following conditions:

(i) The borrower should be classified as a micro, small or medium enterprise as on March 31, 2021 in terms of the Gazette Notification S.O. 2119 (E) dated June 26, 2020.

(ii) The borrowing entity is GST-registered on the date of implementation of the restructuring. However, this condition will not apply to MSMEs that are exempt from GST-registration. This shall be determined on the basis of exemption limit obtaining as on March 31, 2021.

(iii) The aggregate exposure, including non-fund based facilities, of all lending institutions to the borrower does not exceed ₹25 crore as on March 31, 2021.

(iv) The borrower’s account was a ‘standard asset’ as on March 31, 2021.

(v) The borrower’s account was not restructured in terms of the circulars DOR.No.BP.BC/4/21.04.048/2020-21 dated August 6, 2020DOR.No.BP.BC.34/21.04.048/2019-20 dated February 11, 2020; or DBR.No.BP.BC.18/21.04.048/2018-19 dated January 1, 2019 (collectively referred to as MSME restructuring circulars).

(vi) The restructuring of the borrower account is invoked by September 30, 2021. For this purpose, the restructuring shall be treated as invoked when the lending institution and the borrower agree to proceed with the efforts towards finalising a restructuring plan to be implemented in respect of such borrower. The decisions on applications received by the lending institutions from their customers for invoking restructuring under this facility shall be communicated in writing to the applicant by the lending institutions within 30 days of receipt of such applications. The decision to invoke the restructuring under this facility shall be taken by each lending institution having exposure to a borrower independent of invocation decisions taken by other lending institutions, if any, having exposure to the same borrower.

(vii) The restructuring of the borrower account is implemented within 90 days from the date of invocation.

(viii) If the borrower is not registered in the Udyam Registration portal, such registration shall be required to be completed before the date of implementation of the restructuring plan for the plan to be treated as implemented.

(ix) Upon implementation of the restructuring plan, the lending institutions shall keep provision of 10 percent of the residual debt of the borrower.

(x) It is reiterated that lending institutions shall put in place a Board approved policy on restructuring of MSME advances under these instructions at the earliest, and in any case not later than a month from the date of this circular.

(xi) All other instructions specified in the circular DOR.No.BP.BC/4/21.04.048/2020-21 dated August 6, 2020 shall remain applicable.

3. In respect of restructuring plans implemented as per Clause 2 above, asset classification of borrowers classified as standard may be retained as such, whereas the accounts which may have slipped into NPA category between April 1, 2021 and date of implementation may be upgraded as ‘standard asset’, as on the date of implementation of the restructuring plan.

4. In respect of accounts of borrowers which were restructured in terms of the MSME restructuring circulars, lending institutions are permitted, as a one-time measure, to review the working capital sanctioned limits and / or drawing power based on a reassessment of the working capital cycle, reduction of margins, etc. without the same being treated as restructuring. The decision with regard to above shall be taken by lending institutions by September 30, 2021. The reassessed sanctioned limit / drawing power shall be subject to review by the lending institution at least on a half yearly basis and the renewal / reassessment at least on an annual basis. The annual renewal/reassessment shall be expected to suitably modulate the limits as per the then-prevailing business conditions.

5. The above measures shall be contingent on the lending institutions satisfying themselves that the same is necessitated on account of the economic fallout from Covid-19. Further, accounts provided relief under these instructions shall be subject to subsequent supervisory review with regard to their justifiability on account of the economic fallout from Covid-19.

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banking resolution for covid stress – individuals & small business

A. Resolution of advances to individuals and small businesses

4. Lending institutions are permitted to offer a limited window to individual borrowers and small businesses to implement resolution plans in respect of their credit exposures while classifying the same as Standard upon implementation of the resolution plan subject to the conditions specified hereafter.

5. The following borrowers shall be eligible for the window of resolution to be invoked by the lending institutions:

  1. Individuals who have availed of personal loans (as defined in the Circular DBR.No.BP.BC.99/08.13.100/2017-18 dated January 4, 2018 on “XBRL Returns – Harmonization of Banking Statistics”), excluding the credit facilities provided by lending institutions to their own personnel/staff.
  2. Individuals who have availed of loans and advances for business purposes and to whom the lending institutions have aggregate exposure of not more than Rs.25 crore as on March 31, 2021.
  3. Small businesses, including those engaged in retail and wholesale trade, other than those classified as micro, small and medium enterprises as on March 31, 2021, and to whom the lending institutions have aggregate exposure of not more than Rs.25 crore as on March 31, 2021.

Provided that the borrower accounts / credit facilities shall not belong to the categories listed in sub-clauses (a) to (e) of the Clause 2 of the Annex to the Resolution Framework 1.0, read with the response to Sl. No. 2 of FAQs on Resolution Framework for Covid-19 related stress (Revised on December 12, 2020).

Provided further that the borrower accounts should not have availed of any resolution in terms of the Resolution Framework – 1.0 subject to the special exemption mentioned at Clause 22 below.

Provided further that the credit facilities / investment exposure to the borrower was classified as Standard by the lending institution as on March 31, 2021.

6. Any resolution plan implemented in breach of the stipulations of this circular shall be fully governed by the Prudential Framework for Resolution of Stressed Assets issued on June 7, 2019 (“Prudential Framework”), or the relevant instructions as applicable to specific category of lending institutions where the Prudential Framework is not applicable.

Invocation of resolution process

7. The lending institutions shall frame Board approved policies at the earliest (but not later than four weeks from the date of this Circular), pertaining to implementation of viable resolution plans for eligible borrowers under this framework, ensuring that the resolution under this facility is provided only to the borrowers having stress on account of Covid-19. The Board approved policy shall, inter alia, detail the eligibility of borrowers in respect of whom the lending institutions shall be willing to consider the resolution, and shall lay down the due diligence considerations to be followed by the lending institutions to establish the necessity of implementing a resolution plan in respect of the concerned borrower as well as the system for redressing the grievance of borrowers who request for resolution under the window and / or are undergoing resolution under this window. The Board approved policy shall be sufficiently publicised and should be available on the website of the lending institutions in an easily accessible manner.

8. The resolution process under this window shall be treated as invoked when the lending institution and the borrower agree to proceed with the efforts towards finalising a resolution plan to be implemented in respect of such borrower. In respect of applications received by the lending institutions from their customers for invoking resolution process under this window, the assessment of eligibility for resolution as per the instructions contained in this circular and the Board approved policy put in place as above shall be completed, and the decision on the application shall be communicated in writing to the applicant by the lending institutions within 30 days of receipt of such applications. In order to optimise the processing time, lending institutions may prepare product-level standardized templates as part of their Board approved policies, as above, for resolution under this window.

9. The decision to invoke the resolution process under this window shall be taken by each lending institution having exposure to a borrower independent of invocation decisions taken by other lending institutions, if any, having exposure to the same borrower.

10. The last date for invocation of resolution permitted under this window is September 30, 2021.

Permitted features of resolution plans and implementation

11. The resolution plans implemented under this window may inter alia include rescheduling of payments, conversion of any interest accrued or to be accrued into another credit facility, revisions in working capital sanctions, granting of moratorium etc. based on an assessment of income streams of the borrower. However, compromise settlements are not permitted as a resolution plan for this purpose.

12. The moratorium period, if granted, may be for a maximum of two years, and shall come into force immediately upon implementation of the resolution plan. The extension of the residual tenor of the loan facilities may also be granted to borrowers, with or without payment moratorium. The overall cap on extension of residual tenor, inclusive of moratorium period if any permitted, shall be two years.

13. The resolution plan may also provide for conversion of a portion of the debt into equity or other marketable, non-convertible debt securities issued by the borrower, wherever applicable, and the same shall be governed in terms of Paragraphs 30-32 of the Annex to the Resolution Framework – 1.0.

14. The instructions contained in the circular DOR.No.BP.BC/13/21.04.048/2020-21 dated September 7, 2020 on “Resolution Framework for COVID-19-related Stress – Financial Parameters” shall not be applicable to resolution plans implemented under this window.

15. The resolution plan should be finalised and implemented within 90 days from the date of invocation of the resolution process under this window. The resolution plan shall be deemed to be implemented only if all the conditions in Paragraph 10 of the Annex to the Resolution Framework – 1.0 are met.

B. Working capital support for small businesses where resolution plans were implemented previously

24. In respect of borrowers specified at sub-clauses (b) and (c) of Clause 5 above where resolution plans had been implemented in terms of the Resolution Framework – 1.0, lending institutions are permitted, as a one-time measure, to review the working capital sanctioned limits and / or drawing power based on a reassessment of the working capital cycle, reduction of margins, etc. without the same being treated as restructuring. The decision with regard to above shall be taken by lending institutions by September 30, 2021, with the margins and working capital limits being restored to the levels as per the resolution plan implemented under Resolution Framework – 1.0, by March 31, 2022.

25. The above measures shall be contingent on the lending institutions satisfying themselves that the same is necessitated on account of the economic fallout from COVID-19. Further, accounts provided relief under these instructions shall be subject to subsequent supervisory review with regard to their justifiability on account of the economic fallout from COVID-19.

26. Lending institutions may, accordingly, put in place a Board approved policy to implement the above measures, which should be disclosed in the public domain and placed on their websites in a prominent and easily accessible manner.

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priority sector lending – MFIs

Priority Sector Lending (PSL) – On-lending by Small Finance Banks (SFBs) to NBFC-MFIs

As per extant guidelines, lending by Small Finance Banks (SFBs) to Micro-Finance Institutions (MFIs) for on-lending is not reckoned for priority sector lending (PSL) classification. In view of the fresh challenges brought on by the COVID-19 pandemic and to address the emergent liquidity position of smaller MFIs, it has been decided to allow PSL classification to the fresh credit extended by SFBs to registered NBFC-MFIs and other MFIs (Societies, Trusts etc.) which are members of RBI recognised ‘Self-Regulatory Organisation’ of the sector and which have a ‘gross loan portfolio’ of upto ₹500 crore as on 31 March 2021, for the purpose of on-lending to individuals. Bank credit as above will be permitted up to 10% of the bank’s total priority sector portfolio as on 31 March, 2021.

2. The above dispensation shall be valid upto March 31, 2022. However, loans thus disbursed will continue to be classified under Priority Sector till the date of repayment/maturity whichever is earlier. Further, banks will be required to adhere to the conditions prescribed for on-lending under para 21 of our Master Directions on PSL dated September 4, 2020 (updated as on April 29, 2021).

3. The guidelines shall come into effect from the date of the issuance of this circular.

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monetary penalty on ICICI bank

https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=51519

The Reserve Bank of India (RBI) has, by an order dated May 03, 2021, imposed a monetary penalty of ₹3 Crore (Rupees Three Crore only) on ICICI Bank Ltd. (the bank) for contravention of certain directions issued by RBI contained in Master Circular on ‘Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by Banks’ dated July 01, 2015. This penalty has been imposed in exercise of powers vested in RBI under the provisions of section 47 A (1) (c) read with section 46 (4) (i) of the Banking Regulation Act, 1949 (the Act).

It is not clear exactly what the violation was. Wish RBI could be more clearer when it releases such press releases so that the others banks, compliance officers, public, investors etc. know what is the violation for which the penalty is being levied.

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