RBI Circular Date

Brief  of the Circular

01/09/2009

RBI has advised  that the Government of India Cash Management Bills proposed to be issued will be treated as Government of India Treasury Bills and thus will be eligible for SLR securities

01/09/2009

Guidelines on Exchange Traded Interest Rate Derivatives : RBI has  clarified that stand-alone Primary Dealers (PDs) are allowed to deal in Interest Rate Futures (IRFs) for both hedging and trading on own account and not on client’s account, subject to adherence to the prudential norms contained in the aforesaid circulars

02/09/2009

Display of information regarding Local Level Committees set up under the National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999.   : RBi has informed that in a case which came up before the High Court of Delhi, the Honorable Court has directed that all banks should ensure that their branches display in a conspicuous place (i) essential details about the facilities under the enactment (Mental Disabilities Act); (ii) the fact that the parties can approach the Local Level Committees, for the purposes of issuance of the certificate and that the certificate issued under the Mental Disabilities Act is acceptable; and (iii) the details of the Local Level Committees in that area. The Court has further directed that the information shall be displayed in the local language and English / Hindi (or both).   Banks are advised to strictly comply with the above orders of the Court. Banks are also advised to ensure strict compliance of the provisions of the Mental Disabilities Act.

02/09/2009

Stand-alone Primary Dealers - Increase in Call/Notice Money Borrowing Limit : RBI has decided to increase the limit on borrowing by the PDs from the call / notice money market, on an average in a reporting fortnight, from the existing ceiling of 200 percent of their Net owned funds  (NOF) to 225 percent of Net owned funds (NOF), as at the end March of the preceding financial year.

07/09/2009

Issue of Subordinated Debt for Raising Tier II Capital :  At present, banks are permitted to raise lower Tier II subordinated bonds without special features such as Call and Step up options. On a review of international practices in this regard, it has been decided to permit banks to issue subordinated debt as Tier II capital with call and step-up options.

Subordinated debt instruments shall not be issued with a 'put option'. However banks may issue the instruments with a call option subject to strict compliance with each of the following conditions:
(i) Call option may be exercised after the instrument has run for at least five years; and
(ii) Call option shall be exercised only with the prior approval of RBI (Department of Banking Operations & Development).

The issuing bank may have a step-up option which may be exercised only once during the whole life of the instrument, in conjunction with the call option, after the lapse of five years from the date of issue. The step-up shall not be more than 50 bps. The limits on step-up apply to the all-in cost of the debt to the issuing banks

Subordinated debt instruments will be limited to 50 per cent of Tier-I Capital of the bank. These instruments, together with other components of Tier II capital, should not exceed 100% of Tier I capital.

07/09/2009

Gold Card Scheme for Exporters :   In view of the difficulties faced by exporters on account of weakening of external demand and in realizing the dues within the stipulated time, it has been decided to partially modify paragraph 3.1.3 of our circular dated May 18, 2004 and dispense with the requirement of overdue export bills not exceeding 10% of the previous year’s export turnover, for one year i.e. from April 1, 2009 to March 31, 2010.

08/09/2009

(i) the SLR status of securities issued by the Government of India and the State Governments will be indicated in the Press Release issued by the Reserve Bank of India at the time of issuance of the securities; and

(ii) an updated and current list of the SLR securities will be posted on the Reserve Bank's website under the link "Database on Indian Economy".

09/09/2009

11/09/2009

However, records pertaining to the identification of the customer and his address (e.g. copies of documents like passports, identity cards, driving licenses, PAN card, utility bills etc.) obtained while opening the account and during the course of business relationship, as indicated in paragraph 2.16(iii)(b) of the above said master circular dated July 1, 2009, would continue to be preserved for at least ten years after the business relationship is ended as required under Rule 10 of the Rules ibid.

Accounts of Politically Exposed Persons (PEPs)  : Detailed guidelines on CDD measures to be made applicable to Politically Exposed Person (PEP) and their family members or close relatives are contained in paragraph 2.5(iv) of the master circular.  It is further advised  that in the event of an existing customer or the beneficial owner of an existing account,subsequently becoming a PEP, banks should obtain senior management approval to continue the business relationship and subject the account to the CDD measures as applicable to the customers of PEP category including enhanced monitoring on an ongoing basis.

Principal Officer :  Banks have been advised in Para 2.15 of the master circular referred to above that banks should appoint a senior management officer to be designated as Principal Officer and the role and responsibilities of the Principal Officer have been detailed therein. With a view to enable the Principal Officer to discharge his responsibilities,  it is advised that that the Principal Officer and other appropriate staff should have timely access to customer identification data and other CDD information, transaction records and other relevant information. Further, banks should ensure that the Principal Officer is able to act independently and report directly to the senior management  or  to the Board of Directors.

16/09/2009

Adherence to KYC/AML guidelines while opening and conduct of the accounts of Multi Level Marketing firms:  RBI has advised  that banks should be careful in opening accounts of the marketing/trading agencies etc. Especially, strict compliance with KYC and AML guidelines contained in circulars dated July 02, 2008 and dated December 15, 2004 issued by RBI should be ensured.

16/09/2009

RBI has told the Banks that the incidence of frauds in the banks has been showing an increasing trend over the recent years, both in terms of number of frauds and the amounts involved. It has been observed that the trend is more disquieting in retail  segment especially in housing and mortgage loans, credit card dues, internet banking, etc. In January 2004, RBI has asked Banks  to constitute a Special Committee of the Board for monitoring and follow up of large value frauds involving amounts of Rs 1.00 crore and above. RBI now feels that  the feedback received in the recent times and growing incidence of frauds indicate that in matters of large value frauds, the Committee headed by the CEO of the bank might not have played the role as envisaged.

Therefore, now banks are advised to initiate necessary action at their end at the earliest. Banks may, with the approval of their respective Boards, frame internal policy for fraud risk management and fraud investigation function, based on the above governance standard relating to the ownership of the function and accountability for malfunctioning of the fraud risk management process in their banks. The broad governance framework dictated by the above standard for ownership and accountability may rest on defined and dedicated organizational set up and operating processes. 

The banks' Special Committee of the Board, which is chaired by the CEO, should own the Fraud Investigation and Monitoring Function and discharge the relative oversight responsibility in a pro-active manner

To ensure that "monitoring and investigation of large value frauds" are recognized as a distinct 'function' and the dedicated unit which is adequately enabled and free from potential conflict of interest is assigned the responsibility to undertake the function.

16/09/2009

Rupee Export Credit Interest Rates:  It has been decided to extend the interest subvention of 2% on rupee export credit for a further period of six months i.e. from October 1, 2009 till March 31, 2010 to the same sectors and on the same terms and conditions.

16/09/2009

Agricultural Debt Waiver and Debt Relief Scheme, 2008 – Prudential Norms
on Income Recognition, Asset Classification, Provisioning and Capital Adequacy:  In this context, RBI has  advised  that the Government of India has now decided to extend the last date of payment of 75% of overdue portion by the ‘other farmer’ for One Time Settlement (OTS) under Debt Relief Scheme (under ADWDR) for another six months beyond June 30, 2009, i.e. up to December 31, 2009. The Government of India has also advised that the banks/lending institutions are allowed to receive even less than 75% of the eligible amount under OTS provided the banks/lending institutions bear the difference themselves and do not claim the same either from the Government or from the farmer.  The Government will pay only 25% of the actual eligible amount under debt relief.

The Government has also clarified that the lending institutions would not charge any interest on the eligible amount for the period from February 29, 2008 to June 30, 2009. However, the banks may charge normal rate of interest on the eligible amount from July 01, 2009 up to the date of settlement.

17/09/2009

In a case which came up before the High Court of Delhi, the Honourable Court has directed that all banks should ensure that their branches display in a conspicuous place -

1. essential details about the facilities under the enactment (Mental Disabilities Act);
2.  the fact that the parties can approach the Local Level Committees, for the purposes of issuance of the certificate and that the certificate issued under the Mental Disabilities Act is acceptable; and
3. the details of the Local Level Committees in that area.

The Court has further directed that the information shall be displayed in the local language and English / Hindi (or both).

Therefore, RBI has advised  banks to strictly comply with the above orders of the Court.

18/09/2009

Priority Sector Lending – Categorisation of activities under service under the MSMED Act, 2006:

18/09/2009

The present guideliens provide that  Lending to Priority Sector, credit to small enterprises includes     loans granted to micro and small (manufacturing and service) enterprises, provided investment in plant and machinery [original cost excluding land and building and the items specified by the Ministry of Small Scale Industries vide its notification no. S.O. 1722 (E) dated October 5, 2006] does not exceed Rs. 5 crore in respect of manufacturing enterprises and investment in equipment (original cost excluding land and building and furniture, fittings and other items not directly related to the service rendered or as may be notified under the MSMED Act, 2006) does not exceed Rs. 2 crore in respect of service enterprises.

However,  at present  in terms of paragraphs 3.1 and 3.2, Retail Trade forms a separate category under priority sector.

The Government of India, vide communication No. 5(6)/2/2009-MSME POL dated June 12, 2009, has indicated the categorisation of activities under services under the Micro Small and Medium Enterprises Development (MSMED) Act, 2006.

On examination, it has been decided to include loans granted by banks in respect of following activities under Micro and Small (Service) Enterprises within the priority sector, provided such enterprises satisfy the definition of Micro and Small (Service) Enterprises in respect of investment in equipment (original cost excluding land and building and furniture, fittings and other items not directly related to the service rendered or as may be notified under the MSMED Act, 2006) (i.e. not exceeding Rs. 10 lakh and Rs. 2 crore respectively).

1. Consultancy Services including Management Services;
2. Composite Broker Services in Risk and Insurance Management;
3. Third Party Administration (TPA) Services for Medical Insurance Claims of Policy Holders;
4. Seed Grading Services;
5. Training-cum-Incubator Centre;
6. Educational Institutions;
7. Training Institutes;
8. Retail Trade;
9. Practice of Law, i.e. legal services;
10. Trading in medical instruments (brand new);
11. Placement and Management Consultancy Services; and
12. Advertising agency and Training centres

Accordingly, there will be no separate category for "Retail Trade" under priority sector. Loans granted by banks for Retail Trade [i.e. advances granted to retail traders dealing in essential commodities (fair price shops), consumer co-operative stores; and advances granted to private retail traders with credit limits not exceeding Rs. 20 lakh) would henceforth be part of the Small (Service) Enterprises.