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Untitled Document

RPCD CO BC GSSD NO. 48/09.09.01/2012-13

Dated: November 26, 2012

Setting up of a Special Cell for SCs /STs in Scheduled Commercial Banks

Please refer to Para. 2.1 of Master Circular on Priority Sector Lending - Credit Facilities to Scheduled Castes / Scheduled Tribes dated July 02, 2012, advising all the Indian Scheduled Commercial Banks to set up a Special Cell for monitoring the flow of credit to SC / ST beneficiaries.

2. The 15th Lok Sabha Committee on Welfare of Scheduled Castes / Scheduled Tribes during its recent visit to one of the Scheduled Commercial Banks, observed that there was no such Cell in that bank. It is therefore, reiterated that all Indian Scheduled Commercial Banks should set up a Special Cell for SCs / STs, if they have already not done so and ensure that instructions issued by us regarding credit facilities to Scheduled Castes / Scheduled Tribes are implemented properly.

RBI/2012-13/308

(C. D. Srinivasan)
Chief General Manager

DBOD.BP.BC.No. 58/08.12.014/2012-13

Dated: November 20, 2012

Second Quarter Review of Monetary Policy 2012-13 Definition of 'Infrastructure Lending'

Please refer to our circular DBOD.No.BP.BC.52/21.04.048/2007-08 dated November 30, 2007 on Financing of Infrastructure by the Banks and Financial Institutions - Definition of Infrastructure Lending'. The latest list of the items included under infrastructure sector is furnished in Annex 1 of our Master Circular DBOD.No.Dir.BC. 3/13.03.00/2012-13 dated July 2, 2012 on Exposure Norms'.

2. As indicated in the Second Quarter Review of Monetary Policy 2012-13 under paragraphs 110 and 111 ( extract enclosed ) announced on October 30, 2012 on Definition of Infrastructure Lending', it has been decided to harmonise the definition of infrastructure lending for the purpose of financing of infrastructure by the banks and Financial Institutions' with that of the Master List of Infrastructure sub-sectors' notified by the Government of India on March 27, 2012. Accordingly, the revised definition of infrastructure lending' is given in the Annex to this circular.

3. The revised definition of infrastructure lending' will be effective from the date of this circular. The exposure of banks to projects under sub-sectors which were included under our previous definition of infrastructure, but not included under the revised definition, will continue to get the benefits under infrastructure lending' for such exposures till the completion of the projects. However, any fresh lending to those sub-sectors from the date of this circular will not qualify as infrastructure lending'.

RBI/2012-13/297

(Deepak Singhal)
Chief General Manager-in-Charge

Annex

List of sub-sectors for Infrastructure Lending'

A credit facility extended by lenders (i.e. banks and select AIFIs) to a borrower for exposure in the following infrastructure sub-sectors will qualify as infrastructure lending':

Sl.No.

Category

Infrastructure sub-sectors

1.

Transport

  1. Roads and bridges
  2. Ports
  3. Inland Waterways
  4. Airport
  5. Railway Track, tunnels, viaducts, bridges 1
  6. Urban Public Transport (except rolling stock in case of urban road transport)

2.

Energy

  1. Electricity Generation
  2. Electricity Transmission
  3. Electricity Distribution
  4. Oilpipelines
  5. Oil/Gas/Liquefied Natural Gas (LNG) storage facility 2
  6. Gas pipelines 3

3.

Water & Sanitation

  1. Solid Waste Management
  2. Water supplypipelines
  3. Water treatment plants
  4. Sewage collection, treatment and disposal system
  5. Irrigation (dams, channels, embankments etc)
  6. Storm Water Drainage System

4.

Communication

  1. Telecommunication (Fixed network) 4
  2. Telecommunication towers

5.

Social and Commercial Infrastructure

  1. Education Institutions (capital stock)
  2. Hospitals (capital stock) 5
  3. Three-star or higher category classified hotels located outside cities with population of more than 1 million
  4. Common infrastructure for industrial parks, SEZ, tourism facilitiesand agriculture markets
  5. Fertilizer (Capital investment)
  6. Post harvest storage infrastructure for agriculture and horticultural produce includingcold storage
  7. Terminal markets
  8. Soil-testing laboratories
  9. Cold Chain 6

1. Includes supporting terminal infrastructure such as loading/unloading terminals, stations and buildings

2. Includes strategic storage of crude oil

3. Includes city gas distribution network

4. Includes optic fibre/cable networks which provide broadband / internet

5. Includes Medical Colleges, Para Medical Training Institutes and Diagnostics Centres

6. Includes cold room facility for farm level pre-cooling, for preservation or storage of agriculture and allied produce, marine products and meat.

Extract from Second Quarter Review of Monetary Policy 2012-13 announced on October 30, 2012.

V. Regulatory and Supervisory Measures

Definition of Infrastructure Lending

110. Banks' lending to the infrastructure sector has grown significantly. As a multiplicity of definitions among various regulators gives rise to confusion and difficulties, the Government of India has notified a master list of infrastructure sectors/sub-sectors in March 2012. Accordingly, it is proposed:

  • to harmonise the definition of infrastructure for the purpose of banks' lending with the master list notified by the Government of India.

111. Detailed guidelines in this regard are being issued separately.

 

DBOD.No.Dir.BC.57/13.03.00/2012-13

Dated: November 19, 2012

Bank finance for purchase of gold

Please refer to paragraphs 102 and 103 ( extract enclosed ) of the Second Quarter Review of Monetary Policy 2012-13 announced on October 30, 2012, proposing that other than working capital finance, banks are not permitted to finance purchase of gold in any form.

2. In terms of extant guidelines issued vide circular DBOD.No.Leg.BC.74/C.124(P)-78 dated June 1, 1978, no advances should be granted by banks against gold bullion to dealers/traders in gold if, in their assessment, such advances are likely to be utilised for purposes of financing gold purchase at auctions and/or speculative holding of stocks and bullion. In this context, the significant rise in imports of gold in recent years is a cause for concern as direct bank financing for purchase of gold in any form viz., bullion/primary gold/jewellery/gold coin etc. could lead to fuelling of demand for gold. Accordingly, it is advised that no advances should be granted by banks for purchase of gold in any form, including primary gold, gold bullion, gold jewellery, gold coins, units of gold Exchange Traded Funds (ETF) and units of gold Mutual Funds. However, banks can provide finance for genuine working capital requirements of jewellers. The scheme of Gold (Metal) Loan detailed vide our circular DBOD.No.IBS.BC/ 1519/23.67.001/1998-99 dated December 31,1998, as amended from time to time, will continue to be in force.

RBI/2012-13/296

Yours faithfully,
(Sudha Damodar)
Chief General Manager

Extract of Second Quarter Review of Monetary Policy 2012-13

Bank Finance for the Purchase of Gold and Advances against Gold

102. In terms of extant guidelines, no advances should be granted by banks against gold bullion to dealers/traders in gold if, in their assessment, such advances are likely to be utilised for purposes of financing gold purchase at auctions and/or speculative holding of stocks and bullion. In this context, the significant rise in imports of gold in recent years is a cause for concern as direct bank financing for purchase of gold in any form viz., bullion/primary gold/jewellery/gold coin could lead to fuelling of demand for gold for speculative purposes. The Monetary Policy Statement of April 2012 announced the constitution of a Working Group (Convenor: Shri K.U.B. Rao) to study issues relating to gold imports and gold loans by Non-Banking Financial Companies (NBFCs) in India. The Working Group submitted its draft report in August 2012. Pending a decision on its recommendations, it is proposed to advise banks that:

  • other than working capital finance, banks are not permitted to finance purchase of gold in any form.

103. Detailed guidelines in this regard are being issued separately.

 

 

 

 

 


RPCD.MSME&NFS.BC.No. 46/06.12.05/2012-13

Dated: November 9, 2012

Service Area Approach - Educational Loan Scheme

We have been receiving a number of complaints where students have been refused educational loan as the residence of the borrower does not fall under the bank's service area. In this connection, we advise that Service area norms are to be followed only in the case of Government sponsored schemes as advised in our circular RPCD.LBS (SAA).BC.No.62/08.01.00/2004-05 dated December 8, 2004 and are not applicable to sanction of educational loans.

2. Hence, banks are advised not to reject any educational loan application for reasons that the residence of the borrower does not fall under the bank's service area.

3. You are, therefore requested to issue suitable instructions to your branches / controlling offices for meticulous and strict compliance in this regard.

4. Please acknowledge receipt.

RBI/2012-13/291

(C D Srinivasan)
Chief General Manager

FMD.MSRG.No.72/02.05.002/2012-13

Dated: October 12, 2012

Reporting Platform for OTC Foreign Exchange and Interest Rate Derivatives

Reserve Bank, vide it’s circular FMD.MSRG.No.67/02.05.002/2011-12 dated March 9, 2012, had advised that all inter-bank OTC foreign exchange derivatives transactions should be reported on a platform to be developed by the CCIL. The first phase of reporting covering inter-bank OTC USD-INR forwards, FX swaps and FCY-INR options had commenced on July 9, 2012. The first phase of reporting was introduced vide our circular FMD.MSRG.No.69/02.05.002/2011-12 dated June 22, 2012 wherein it was indicated that reporting of other inter-bank OTC foreign exchange derivatives and all/selective trades in OTC foreign exchange and interest rate derivatives between the AD category–I banks/market makers (banks/PDs) and their clients on CCIL’s reporting platform will be introduced in a phase-wise manner to be advised in due course

The CCIL has since completed development of the platform for reporting of the following inter-bank OTC derivatives:

  • FCY(excluding USD)-INR forwards

  • FCY(excluding USD)-INR FX swaps

  • FCY-FCY forwards

  • FCY-FCY FX Swaps

  • FCY-FCY options

It has been decided that the platform should be operationalised with effect from November 5, 2012. The salient features of the reporting requirement are as under.

  1. The inter-bank OTC FCY (excluding USD)-INR forward and FX swap trades are to be reported in hourly batches within 30 minutes from completion of the hour. For example, the first hourly batch will cover trades undertaken between 9 a.m. and 10 a.m. which shall have to be reported on the CCIL’s platform by 10.30 a.m.

  2. The inter-bank OTC FCY-FCY forward, FX swap and option trades (i.e. trades that do not involve INR as one of the currencies) executed up to 5 p.m. on any given day are to be reported in one lot by 5.30 p.m of that day. The inter-bank OTC FCY-FCY forward, FX swap and option trades executed after 5 p.m. may be reported in one batch by 10 a.m. on the following business day.

  3. The AD banks are also required to report FCY-FCY forward, FX swap and option trades executed with overseas counterparties including their own branches/parent body.  There shall be no matching of such trades in the CCIL platform as overseas counterparties are not required to report/confirm the trade details.

  4. Details of all the outstanding inter-bank OTC FCY(excluding USD)-INR forwards, FX swaps and FCY-FCY forwards, FX swaps and options as on the date of commencement of the reporting, i.e, November 5, 2012 are required to be reported to CCIL by November 30, 2012.

  5. Currently the reporting will cover transactions involving 14 currencies namely USD, EUR, GBP, JPY, AUD, CAD, CHF, HKD, DKK, NOK, NZD, SGD, SEK and ZAR. The reporting will be extended to other currencies in due course and shall be communicated by CCIL.

  6. Detailed operational guidelines in this regard would be made available by CCIL.

Banks may take steps to familiarise their personnel with technical and other aspects of reporting which will be facilitated by CCIL.

RBI/2012-13/248

(G. Mahalingam)
Chief General Manager

RPCD.CO.RCB.RRB.BC.No.28/07.02.01/2012-13

Dated: September 18, 2012

Section 42(1) of the Reserve Bank of India Act, 1934 Maintenance of Cash Reserve Ratio (CRR)

Please refer to our circular RPCD.CO.RCB.RRB.BC.No.65/03.05.33/2011-12 dated March 12, 2012 , on the captioned subject.

2. As set out in the Reserve Bank's Press Release 2012-2013/452 dated September 17, 2012 , it has been decided to reduce the Cash Reserve Ratio (CRR) of Scheduled State Co-operative Banks / Regional Rural Banks by 25 basis points from 4.75 per cent to 4.50 per cent of their Net Demand and Time Liabilities (NDTL) with effect from the fortnight beginning September 22, 2012.

3. A copy of the relative notification RPCD.CO.RCB.RRB.BC.No.27/ 07.02.01/2012-13 dated September 18, 2012 is enclosed .

4. Please acknowledge receipt to our Regional Office Concerned.

RBI/2012-13/216

(C.D.Srinivasan)
Chief General Manager

RPCD.CO.RCB.RRB.BC.No.27/07.02.01/2012-13

September 18, 2012

Notification

In exercise of the powers conferred under the sub-section (1) of Section 42 of the Reserve Bank of India Act, 1934 and in partial modification of the earlier notification RPCD.CO.RCB.RRB.BC.No.64/03.05.33/2011-12 dated March 12, 2012 , the Reserve Bank hereby notifies that the average Cash Reserve Ratio (CRR) required to be maintained by every Scheduled State Co-operative Bank / Regional Rural Bank shall be 4.50 per cent of its net demand and time liabilities from the fortnight beginning September 22, 2012.

(V.K.Sharma)
Executive Director

 

RPCD.MSME&NFS.BC.No. 30/06.11.01/2012-13

Dated: September 18, 2012

The Scheme of 1% Interest Subvention on Housing Loans up to Rs. 15.00 lakh

Please refer to our circular RPCD.SME&NFS.BC.No.29/06.11.01/2011-12 dated November 04, 2011 on the captioned subject. In this connection, it is now advised that:

a. The interest subvention scheme has been liberalized with effect from FY 2011-12 by extending it to housing loans up to Rs.15 lakh where the cost of the house does not exceed Rs.25 lakh. The Scheme has since been extended by Government of India and will remain in force up to March 31, 2013.

b. A Budgetary provision of Rs. 400.00 crore has been made under the Scheme for the year 2012-13 by Government of India.

c. The National Housing Bank is the sole Nodal Agency for implementation of the Scheme for Scheduled Commercial Banks, Regional Rural Banks and Housing Finance Companies.

d. All SCBs are advised to implement the Scheme vigorously, submit their claims to NHB expeditiously and extend the benefits of the Scheme to all eligible borrowers / beneficiaries. SCBs are further requested to give wide publicity to the Scheme.

2. Please acknowledge receipt.

RBI/2012-13/214

(C D Srinivasan)
Chief General Manager

DPSS.CO.CHD.No. 399/04.07.05/2012-13

Dated: September 3, 2012

Standardisation and Enhancement of Security Features in Cheque Forms - Migrating to CTS 2010 standards

A reference is invited to our circular DPSS.CO.CHD.No./1112/04.07.05/2011-12 dated December 27, 2011 advising all banks providing cheque facility to their customers to issue only 'CTS-2010' standard cheques in a time bound action plan not later than September 30, 2012.

2. However, it is observed that non-CTS-2010 Standard cheque forms continue to be issued by many banks even in regions which are forming  part of the northern (New Delhi) and southern (Chennai) CTS grids. As you may be aware, adherence to CTS-2010 standards has inherent advantages as the security features in cheque forms help the presenting banks to identify the genuineness of the drawee banks' instruments while handling them in the image based scenario. The homogeneity in security features act as deterrent against frauds, and the fixed field placement specifications facilitate straight-through-processing at drawee banks' end through the use of optical/image character recognition technology.

3. In view of the above and to ensure the time-bound migration to CTS-2010 standard cheque formats, all banks are advised to adhere to the procedures indicated below:

1. Arrange to issue only multi-city/payable at par CTS-2010 standard cheques not later than September 30, 2012 . A confirmation stating that necessary arrangements have been put in place for issue of CTS-2010 standard cheques across the country may be submitted to this department by September 14, 2012 .

2. Arrange to withdraw the non-CTS-2010 Standard cheques in circulation before December 31, 2012 by creating awareness among customers through SMS alerts, letters, display boards in branches/ATMs, log-on message in internet banking, notification on the web-site etc. Progress in this regard may be submitted to this department by November 30, 2012 .

3. Banks holding post-dated EMI cheques (received either on their own behalf or on behalf of their NBFC clients) may arrange to ensure the replacement of non-CTS-2010 Standard cheques with CTS-2010 standard cheques before December 31, 2012 .

4. The above instructions are issued under section 18 of the Payment and Settlement Systems Act 2007 (Act 51 of 2007).

5. Please acknowledge receipt and ensure compliance within the target dates indicated above.

RBI/2012-13/190

(Vijay Chugh)
Chief General Manager

DBOD.No.Dir.BC.36/13.03.00/2012-13

Dated: August 14, 2012

Interest Rate on Deposits

Please refer to our circular DBOD. No. Dir. BC.36/13.03.00/98 dated April 29, 1998 whereby banks were permitted to offer, at their discretion, differential rates of interest on single term deposits of Rs 15 lakh and above, subject to the condition that the schedule of interest rates payable on deposits, including deposits on which differential interest is paid, is disclosed in advance and not subject to negotiation between the depositor and the bank.

2. In this connection, attention is invited to paragraphs 84 and 85 of the Monetary Policy Statement 2012-13 announced on April 17, 2012 (extract enclosed) on Variation in Interest Rates on Deposits. It has been observed that there are wide variations in the interest rates offered by banks on single term deposits of ` 15 lakh and above and those offered on other deposits (i.e. deposits less than ` 15 lakh) of corresponding maturities. Further, banks are offering significantly different rates on deposits with very little difference in maturities. This suggests inadequate liquidity management system and inadequate pricing methodologies. Banks are, therefore, advised to put in place a Board approved transparent policy on pricing of liabilities. The Board/ALCO should ensure that the variation in interest rates on single term deposits of ` 15 lakh and above and other term deposits (i.e. deposits less than Rs 15 lakh) is minimal for corresponding maturities.

RBI/2012-13/167

(Sudha Damodar)
Chief General Manager

Extract of Monetary Policy Statement 2012-13

Variation in Interest Rates on Deposits to be Minimal

84. The Reserve Bank has stipulated, inter alia, that banks should not discriminate in the matter of interest rate paid on deposits, except in respect of fixed deposit schemes specifically meant for resident Indian senior citizens and single term deposits of ` 1.5 million and above. However, it is observed that there are wide variations in banks' retail and bulk deposits rates, making it unfair to retail depositors. Further, banks are offering significantly different rates on deposits with very little difference in maturities. This suggests inadequate liquidity management system and inadequate pricing methodologies. It is, therefore, advised that:

  • banks should have a board approved transparent policy on pricing of liabilities and they should also ensure that variation in interest rates on single term deposits of ` 1.5 million and above and other term deposits is minimal.

85. Detailed guidelines in this regard will be issued separately.

RPCD.CO.RRB.NO.16 /03.05.33(C) /2012-13

Dated: July 31, 2012

Interest Rates on Rupee Deposits held in Domestic, Ordinary Non-Resident (NRO) and Non-Resident (External) (NRE) Accounts

Please refer to paragraph 5 of the directives enclosed to the circular DBOD.Dir.BC.47/13.03.00/2000-2001 dated November 4, 2000 and mail box clarification dated May 13, 2005 in terms of which it was clarified that in the case of Non-Resident (External) deposits of staff members, existing or retired, interest rate including any additional interest paid to them by virtue of their being staff members, should not exceed the ceiling stipulated by RBI from time to time.

2. On a review, it has now been decided that RRBs should not allow the benefit of additional interest rate on any type of deposits of non-residents. Accordingly, the discretion given to RRBs to allow the benefit of additional interest rate of one per cent per annum as available to bank's own staff on deposits under NRE/NRO accounts stands withdrawn.

3. All other instructions in this regard, as amended from time to time, will remain unchanged.

RBI/2012-13/148

(C.D.Srinivasan)
Chief General Manager

DBOD.Dir.BC. 29/13.03.00/2012-13

Dated: July 18, 2012

Interest Rates on Rupee Deposits held in Domestic, Ordinary Non-Resident (NRO) and Non-Resident (External) (NRE) Accounts

Please refer to paragraph 5 of the directives enclosed to the circular DBOD.Dir.BC.47/13.03.00/2000-2001 dated November 4, 2000 and mail box clarification dated May 13, 2005 in terms of which it was clarified that in the case of Non-Resident (External) deposits of staff members, existing or retired, interest rate including any additional interest paid to them by virtue of their being staff members, should not exceed the ceiling stipulated by RBI from time to time.

2. On a review, it has now been decided that banks should not allow the benefit of additional interest rate on any type of deposits of non-residents. Accordingly, the discretion given to banks to allow the benefit of additional interest rate of one per cent per annum as available to bank's own staff on deposits under NRE/NRO accounts stands withdrawn.

3. All other instructions in this regard, as amended from time to time, will remain unchanged.

RBI/2012-13/136

(Sudha Damodar)
Chief General Manager

UBD.BPD.(PCB) CIR No.41/12.05.001/2011-12

Dated: June 26, 2012

Home Loans - Levy of Fore-closure Charges / Pre-payment Penalty by Urban Co-operative Banks (UCBs)

Please refer to our Circular UBD.(PCB).Cir.No.54/09.39.000/05-06 dated May 26, 2006 on levy / display of bank charges.

2. The attention of UCBs is invited to paragraphs 81 to 83 of the Monetary Policy Statement 2012-13 announced on April 17, 2012 with regard to home loans on floating interest rates. The Committee on Customer Service in Banks (Chairman : M. Damodaran) had observed that foreclosure charges levied by banks on prepayment of home loans are resented upon by home loan borrowers across the board especially since banks were found to be hesitant in passing on the benefits of lower interest rates to the existing borrowers in a falling interest rate scenario. As such, foreclosure charges are seen as a restrictive practice deterring the borrowers from switching over to cheaper available source.

3. The removal of foreclosure charges / prepayment penalty on home loans will lead to reduction in the discrimination between existing and new borrowers and competition among banks will result in finer pricing of the floating rate home loans. Though some banks have in the recent past voluntarily abolished pre-payment penalties on floating rate home loans, there is a need to ensure uniformity across the banking system.  It has, therefore, been decided that UCBs will not be permitted to charge foreclosure charges / pre-payment penalties on home loans on floating interest rate basis, with immediate effect.

RBI/2011-12/622

(A. Udgata)
Chief General Manager in Charge

FMD.MSRG.No.69/02.05.002/2011-12

Dated: June 22, 2012

Reporting Platform for OTC Foreign Exchange and Interest Rate Derivatives

Reserve Bank, vide it's circular No.FMD.MSRG.No.67/02.05.002/2011-12 dated March 9, 2012 , had advised that all inter-bank OTC foreign exchange derivatives transactions should be reported on a platform to be developed by the CCIL. The CCIL has since completed development of the platform for reporting of USD-INR forwards, FX swaps and FCY-INR options. It has been decided that the platform should be operationalised with effect from July 9, 2012. The salient features of the reporting requirement are as under.

  1. AD category-I banks are required to report all their inter-bank OTC USD-INR forwards, FX swaps and FCY-INR options in hourly batches within 30 minutes from completion of the hour. For example, the first hourly batch will cover trades undertaken between 9 a.m. and 10 a.m. which shall have to be reported on the CCIL's platform by 10.30 a.m.

  2. Trades with banks' own overseas branches need not be reported.

  3. Details of all the outstanding inter-bank OTC USD-INR forwards, FX swaps and FCY-INR options as on the date of commencement of the reporting, i.e, July 9, 2012 are required to be reported to CCIL by July 31, 2012.

  4. AD category-I banks may complete the pre-commencement formalities including membership of the reporting platform well in time.

  5. Detailed operational guidelines in this regard would be made available by CCIL.

Reporting of other inter-bank OTC foreign exchange derivatives and all/selective trades in OTC foreign exchange and interest rate derivatives between the AD categoryI banks/market makers (banks/PDs) and their clients on CCIL's reporting platform will be introduced in a phase-wise manner to be advised in due course.

RBI/2011-12/616

(G. Mahalingam)
Chief General Manager

DBOD. No. Dir. BC.107/13.03.00/2011-12

Dated: June 5, 2012

Home Loans-Levy of fore-closure charges/pre-payment penalty

Please refer to our circular DBOD. No. Dir. BC. 56/13.03.00/2006-2007 dated February 2, 2007 on reasonableness of bank charges.

2.  In this context, attention is invited to paragraphs 81 to 83 of the Monetary Policy Statement 2012-13 announced on April 17, 2012 with regard to home loans on floating interest rates. The Committee on Customer Service in Banks (Chairman: M. Damodaran) had observed that foreclosure charges levied by banks on prepayment of home loans are resented upon by home loan borrowers across the board especially since banks were found to be hesitant in passing on the benefits of lower interest rates to the existing borrowers in a falling interest rate scenario. As such, foreclosure charges are seen as a restrictive practice deterring the borrowers from switching over to cheaper available source.

3. The removal of foreclosure charges/prepayment penalty on home loans will lead to reduction in the discrimination between existing and new borrowers and competition among banks will result in finer pricing of the floating rate home loans. Though many banks have in the recent past voluntarily abolished pre-payment penalties on floating rate home loans, there is a need to ensure uniformity across the banking system. It has, therefore, been decided that banks will not be permitted to charge foreclosure charges/pre-payment penalties on home loans on floating interest rate basis, with immediate effect.

RBI/2011-12/589

(Deepak Singhal)
Chief General Manager-in-Charge

 

DBOD.AML. BC. No. 97/14.01.001/2011-12

Dated: April 27, 2012

Intra-bank Deposit Accounts Portability

It has been brought to our notice that some banks are insisting on opening of fresh accounts by customers when customers approach them for transferring their account from one branch of the bank to another branch of the same bank. Such insistence on opening of fresh account or making the customer undergo full KYC process again causes inconvenience to them resulting in poor customer service. It is not reasonable in view of the fact that most bank branches are now on CBS and KYC records of a particular customer can be accessed by any branch of the bank.

2. Banks are advised that KYC once done by one branch of the bank should be valid for transfer of the account within the bank as long as full KYC has been done for the concerned account. The customer should be allowed to transfer his account from one branch to another branch without restrictions. In order to comply with KYC requirements of correct address of the person, fresh address proof may be obtained from him/her upon such transfer by the transferee branch. It may be noted that instructions regarding periodical updation of KYC data in terms of para 2.4(e) and those on maintenance of records of identity and transaction in terms of para 2.21(iii) of our Master circular DBOD.AML.BC. No.2/14.01.001/ 2009-10 dated July 01, 2011 remain unchanged and banks will be required to carry out the updation at prescribed intervals as also maintain records of transactions and verification of identity as prescribed.

3. Please acknowledge receipt.

RBI/2011-12/528

(Sudha Damodar)
Chief General Manager

DGBA.CDD. No. H- 6506 /15.02.001/2011-12

Dated: April 3, 2012

Public Provident Fund Scheme, 1968 (PPF, 1968) and Senior Citizens Savings Scheme, 2004 (SCSS, 2004) - Revision of interest rates

Please refer to our circular RBI/2011-12/359 dated January 20, 2012 regarding interest rates on small savings schemes, wherein it was indicated that as per Government's decision on revision of interest on small savings schemes, the interest rates on various small savings schemes for every financial year will be notified by the Government before April 01st of that year.

2. The Government of India have vide their Office Memorandum (OM) No. 6-1/2011-NS.II (Pt.) dated March 26, 2012, advised the rate of interest on various small savings schemes for the financial year 2012-13. Accordingly, the rates of interest on PPF, 1968 and SCSS, 2004 for the financial year 2012-13 effective from April 01, 2012, on the basis of the interest compounding/payment built-in in the schemes, will be as under:

Scheme

Rate of interest w.e.f. 01.12.2011

Rate of interest w.e.f. 01.04.2012

5 year SCSS, 2004

9.0% p.a

9.3% p.a

PPF, 1968

8.6% p.a

8.8% p.a

3. The contents of this circular may be brought to the notice of the branches of your bank operating the PPF, 1968 and SCSS, 2004 schemes. These should also be displayed on the notice boards of your branches for information of the PPF, 1968 and SCSS, 2004 subscribers.

RBI/2011-12/483

(Sangeeta Lalwani)
Deputy General Manager

DNBS.CC.PD.No.265/03.10.01/2011-12

Dated: March 21, 2012

Lending Against Security of Single Product Gold Jewellery

It is observed that NBFCs that are predominantly engaged in lending against the collateral of gold jewellery have recorded significant growth in recent years both in terms of size of their balance sheet and physical presence. This in turn, has led to their increased dependence on public funds including bank finance and non-convertible debentures issued to retail investors.

2. Given the rapid pace of their business growth and the nature of their business model, which has inherent concentration risk and is exposed to adverse movement of gold prices, as a prudential measure, it has been decided that all NBFCs shall

i. hereafter maintain a Loan-to-Value(LTV) ratio not exceeding 60 percent for loans granted against the collateral of gold jewellery and

ii. disclose in their balance sheet the percentage of such loans to their total assets.

3. NBFCs primarily engaged in lending against gold jewellery (such loans comprising 50 percent or more of their financial assets) shall maintain a minimum Tier l capital of 12 percent by April 01, 2014.

4. NBFCs should not grant any advance against bullion / primary gold and gold coins.

5. Copies of Amending Notifications No.DNBS.241/CGM(US)-2012 and DNBS.242/CGM(US)-2012 of date are enclosed for meticulous compliance.

RBI/2011-12/467

 

(Uma Subramaniam)
Chief General Manager-in-Charge

RESERVE BANK OF INDIA
DEPARTMENT OF NON-BANKING SUPERVISION
CENTRAL OFFICE
CENTRE I, WORLD TRADE CENTRE,
CUFFE PARADE, COLABA,
MUMBAI, 400 005.

Notification No.DNBS(PD).241/ CGM(US)-2012 dated March 21, 2012

The Reserve Bank of India, having considered it necessary in public interest and being satisfied that, for the purpose of enabling the Bank to regulate the credit system to the advantage of the country, it is necessary to amend the Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007(hereinafter referred to as the said Directions), contained in Notification No. DNBS. 193/DG(VL)-2007 dated February 22, 2007 , in exercise of the powers conferred by section 45JA of the Reserve Bank of India Act, 1934 (2 of 1934) and of all the powers enabling it in this behalf, hereby directs that the said Directions shall be amended with immediate effect as follows, namely

Insertion of new paragraph 17 A-
After paragraph 17 of the said Directions, the following paragraph 17A shall be inserted.

Loans against security of single product - gold jewellery

a. All NBFCs shall

i. maintain a Loan-to-Value(LTV) ratio not exceeding 60 percent for loans granted against the collateral of gold jewellery and

ii. disclose in their balance sheet the percentage of such loans to their total assets.

b. NBFCs should not grant any advance against bullion / primary gold and gold coins. NBFCs primarily engaged in lending against gold jewellery (such loans comprising 50 percent or more of their financial assets) shall maintain a minimum Tier l capital of 12 percent by April 01, 2014.

(Uma Subramaniam)
Chief General Manager-in-Charge

RESERVE BANK OF INDIA
DEPARTMENT OF NON-BANKING SUPERVISION
CENTRAL OFFICE
CENTRE I, WORLD TRADE CENTRE,
CUFFE PARADE, COLABA,
MUMBAI, 400 005.

Notification No. DNBS(PD).242/ CGM(US)-2012 dated March 21, 2012

The Reserve Bank of India, having considered it necessary in public interest and being satisfied that, for the purpose of enabling the Bank to regulate the credit system to the advantage of the country, it is necessary to amend the Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007(hereinafter referred to as the said Directions), contained in Notification No. DNBS.192/DG(VL)-2007 dated February 22, 2007 , in exercise of the powers conferred by sections 45JA of the Reserve Bank of India Act, 1934 (2 of 1934) and of all the powers enabling it in this behalf, hereby directs that the said Directions shall be amended with immediate effect as follows, namely -

Insertion of new paragraph 17 A-
After paragraph 17 of the said Directions, the following paragraph 17A shall be inserted.

Loans against security of single product - gold jewellery

a. All NBFCs shall

i. maintain a Loan-to-Value(LTV) ratio not exceeding 60 percent for loans granted against the collateral of gold jewellery and

ii. disclose in their balance sheet the percentage of such loans to their total assets.

b. NBFCs should not grant any advance against bullion / primary gold and gold coins. NBFCs primarily engaged in lending against gold jewellery (such loans comprising 50 percent or more of their financial assets) shall maintain a minimum Tier l capital of 12 percent by April 01, 2014.

(Uma Subramaniam)
Chief General Manager-in-Charge

DGBA.GAD.No.H - 6150/42.01.029/2011-12

Dated: March 19, 2012

Annual Closing of Government Accounts - Transactions of Central / State Governments - Special Measures for the Current Financial Year (2011-12)

With a view to facilitating accounting of all Government transactions of the current financial year (2011-12) by March 31, 2012 and meeting the probable rush of tax-payers towards the end of the year, it has been decided in consultation with the Controller General of Accounts, Government of India that all Regional Offices of Reserve Bank of India (RBI) and branches of Agency banks conducting Government business will suitably extend the banking hours to conduct Government business by keeping their counters open for the purpose on March 30 and 31, 2012 to facilitate receipt of Government revenue from members of public even at late hours.

2. As regards conduct of special clearing on March 31, 2012 (with return clearing on the same day), you will hear from our Department of Payment and Settlement Systems, Central Office, Mumbai.

3. You are requested to advise all concerned to strictly implement the above instructions.

4. Please acknowledge receipt.

RBI/2011-12/457

(P. M. Rajagopal)
Assistant General Manager

Ref.No.MPD.BC.352/05.03.004/2011-12

Dated: February 13, 2012

Bank Rate

Section 49 of the Reserve Bank of India Act, 1934 requires the Reserve Bank to make public (from time to time) the standard rate at which it is prepared to buy or re-discount bills of exchange or other commercial paper eligible for purchase under that Act.

2. Being the discount rate, the Bank Rate should technically be higher than the policy repo rate. The Bank Rate has, however, been kept unchanged at 6 per cent since April 2003. This was mainly for the reason that monetary policy signalling was done through modulations in the reverse repo rate and the repo rate under the Liquidity Adjustment Facility (LAF) (till May 3, 2011) and the policy repo rate under the revised operating procedure of monetary policy (from May 3, 2011 onwards). Moreover, under the revised operating procedure, marginal standing facility (MSF), instituted at 100 basis points above the policy repo rate, has been in operation, which in many ways serves the purpose of the Bank Rate.

3. While the policy repo rate and the MSF rate have become operational, the Bank Rate continues to remain at 6 per cent. Currently, the Bank Rate acts as the penal rate charged on banks for shortfalls in meeting their reserve requirements (cash reserve ratio and statutory liquidity ratio). The Bank Rate is also used by several other organisations as a reference rate for indexation purposes.

4. The Reserve Bank has consulted various organizations/stakeholders relying on the Bank Rate as a reference rate. Based on the feedback received, it is determined that the Bank Rate should normally stay aligned to the MSF rate. Accordingly, it has been decided that with effect from the close of business today (February 13, 2012), the Bank Rate will stand increased by 350 basis points, i.e., from 6.00 per cent per annum to 9.50 per cent per annum. This should be viewed and understood as one-time technical adjustment to align the Bank Rate with the MSF rate rather than a change in the monetary policy stance.

5. All penal interest rates on shortfall in reserve requirements, which are specifically linked to the Bank Rate, will also stand revised as indicated in the Annex .

6. Kindly acknowledge receipt of this letter to the Adviser-in-Charge, Monetary Policy Department, Reserve Bank of India, Central Office, Shahid Bhagat Singh Road, Mumbai 400 001.

RBI/2011-2012/396

D. Subbarao
Governor

Annex

Penal Interest Rates which are linked to the Bank Rate

Item

Existing Rate

New Rate
(Effective close of business on February 13, 2012)

Penal interest rates on shortfalls in reserve requirements (depending on duration of shortfalls).

Bank Rate plus 3.0 percentage points (9.00 per cent) or Bank Rate plus 5.0 percentage points (11.00 per cent).

Bank Rate plus 3.0 percentage points (12.50 per cent) or Bank Rate plus 5.0 percentage points (14.50 per cent).

DBOD.AML.BC.No.80/ 14.08.001/ 2011-12

Dated: February 6, 2012

 

Guidelines issued under Section 36(1)(a) of the Banking Regulation Act, 1949 - Implementation of the provisions of Foreign Contribution (Regulation) Act, 2010

The Reserve Bank, considering the public interest and on being satisfied that it is necessary so to do, in exercise of the powers conferred by Clause (a) of sub-section (1) of Section 36 of the Banking Regulation Act, 1949 (Act 10 of 1949) and of all the powers enabling it in this behalf, hereby issue the guidelines on Foreign Contribution (Regulation) Act, 2010 and Foreign Contribution (Regulation) Rules, 2011  enclosed herewith, for compliance of all scheduled commercial banks (excluding Regional Rural Banks). With the coming into force of the Act, Foreign Contribution (Regulation) Act, 1976 stands repealed.

2. The salient features of the new Act are given in the Annex to this circular. This circular is intended only to serve as a guide to the banks for carrying out their obligations under the Act and the Rules made thereunder. In case of doubt, banks should make it a point to refer to the text of the Act and the Rules, and if found necessary, proper legal advice should be taken.

RBI/2011-12/388

(Deepak Singhal)
Chief General Manager- in-Charge

Encl: As above

GUIDELINES

Government of India, Ministry of Home Affairs has published a Notification S.O. 909 (E) dated the 29th April, 2011, in the Official Gazette bringing into force the Foreign Contribution (Regulation) Act, 2010 (the Act) with effect from May 1, 2011. A Gazette Notification G.S.R. 349 (E) dated the 29th April, 2011, has also been issued notifying the Foreign Contribution (Regulation) Rules, 2011 (the Rules) made under Section 48 of the Act. The Rules have come into force simultaneously with the Act. With the coming into force of the Act, Foreign Contribution (Regulation) Act, 1976 stands repealed. Therefore, it has now become necessary for the banks to ensure that the provisions of the new Act and the Rules made there under are fully complied with.

2. The Act prohibits certain classes of persons from receiving foreign contribution'. It also restricts certain classes of persons from accepting foreign hospitality while visiting any country or territory outside India, without the prior permission of the Central Government. The Act provides that persons having definite cultural, economic, educational, religious and social programmes should get themselves registered with the Government of India before accepting any foreign contribution'. In case a person falling in the above category is not registered with the Central Government, it can accept foreign contribution only after obtaining prior permission of the Central Government. Further, under the Act, the Central Government is empowered to prohibit any person or organisation not specified in the Act from accepting any foreign contribution and to require any person or class of persons, not specified in it to obtain prior permission of the Central Government before accepting any foreign hospitality.

3. The Act casts certain obligations on banks in relation to the receipt of foreign contributions. The Act stipulates that every person who has been granted a certificate of registration/prior permission as stipulated in the Act shall receive foreign contribution in a single account and only through such branches of a bank as may be specified in his application. It strictly prohibits the receipt or deposit of any other funds (other than foreign contribution) in such accounts. The Act mandates that every bank or authorized person in foreign exchange shall report to specified authority, the prescribed amount of foreign remittance, source and manner in which foreign remittance was received and other particulars in such form and manner as may be prescribed. Section 18 of the Act requires every person who has been granted a certificate of registration or prior permission under the Act to intimate the Central Government on the details provided therein in the manner stipulated therein. This intimation has to be accompanied by a copy of the statement indicating the particulars of foreign contribution received duly certified by an officer of the bank or authorized person in foreign exchange.

4. Associations which were granted certificates of registration or prior permission under Section 6 of the Foreign Contribution (Regulation) Act, 1976, will continue to be eligible to receive foreign contribution under the Act and such registration shall be valid for a period of five years from the date on which the Act came into force. Any permission to accept foreign hospitality granted under Section 9 of the repealed Act would also be deemed to be the permission granted under the Act until such permission is withdrawn by the Central Government.

5. Reserve Bank had been issuing guidelines from to time under the Foreign Contribution Regulation Act, 1976 advising banks, that while accepting foreign contribution' for onward credit to the accounts of persons, it needs to be ensured that the concerned persons/organisations are registered with the Central Government or has the prior permission to receive such foreign contribution if required by law, and that no branch other than the specified branch accepts foreign contribution'. Banks were also advised to forward the report of receipts of such contributions to the Central Government. Some irregularities and deviations from the prescribed procedures were noticed in the implementation of the repealed enactment. Banks and Financial Institutions are required to strictly adhere to the provisions of the new Act while dealing with the receipt of foreign contributions.

6. The salient features of the new Act are given in the Annex to these guidelines. This circular is intended only to serve as a guide to the banks and Financial Institutions for carrying out their obligations under the Act and the Rules made thereunder. In case of doubt, banks and Financial Institutions should make it a point to refer to the text of the Act and the Rules, and if found necessary, proper legal advice should be taken.

Annex

1. Introduction

As the Preamble suggests, the Foreign Contribution (Regulation) Act, 2010, is intended to consolidate the law regulating the acceptance and utilisation of foreign contribution or foreign hospitality by certain individuals or associations or companies and to prohibit acceptance and utilisation of foreign contribution or foreign hospitality for any activities detrimental to the national interest and for matters connected therewith. The Act extends to the whole of India, to its citizens outside India and also to associate branches or subsidiaries outside India, of companies or body corporate, registered or incorporated in India. 

2.  Prohibition on acceptance of foreign contribution

The Act stipulates that certain persons are totally barred from accepting any foreign contribution. The term foreign contribution' is defined in Clause (h) of Section 2 of the Act to mean the donation, delivery or transfer made by a foreign source of any article (not being an article of gift for personal use, the market value of which is not more than the specified amount), currency (whether Indian or foreign) or any security. The following are the persons prohibited from accepting foreign contribution:

  1. Candidate for election;

  2. Correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper;

  3. Judge, government servant or employee of any entity controlled or owned by the Government;

  4. Member of any Legislature;

  5. Political party or office bearers thereof;

  6. Organisations of a political nature as may be specified;

  7. Associations or companies engaged in the production or broadcast of audio news or audiovisual news or current affairs programmes through any electronic mode or form or any other mode of mass communication;

  8. Correspondent or columnist, cartoonist, editor, owner of the association or company referred to in (g) above.

The Act empowers the Central Government to specify organizations as organizations of political nature by publication in the Official Gazette. Foreign contribution can however be accepted by the above-mentioned persons in the following specific cases:

  1. by way of salary, wages or other remuneration due to him or to any group of persons working under him, from any foreign source or by way of payment in the ordinary course of business transacted in India by such foreign source; or

  2. by way of payment, in the course of international trade or commerce, or in the ordinary course of business transacted by him outside India; or

  3. as an agent of a foreign source in relation to any transaction made by such foreign source with the Central Government or State Government; or

  4. by way of a gift or presentation made to him as a member of any Indian delegation, provided that such gift or present was accepted in accordance with the rules made by the Central Government with regard to the acceptance or retention of such gift or presentation; or

  5. from his relative; or

  6. by way of remittance received, in the ordinary course of business through any official channel, post office, or any authorised person in foreign exchange under the Foreign Exchange Management Act, 1999; or

  7. by way of any scholarship, stipend or any payment of like nature.

For appreciating the scope of the term foreign contribution', it is necessary to understand the meaning assigned by the Act to the term foreign source'. This term is given an inclusive definition, with a very wide coverage. Generally, it covers foreign governments and its agencies, any international agencies (other than certain specified agencies such as United Nations, World Bank, etc.), foreign citizens, foreign companies and foreign corporations, entities such as trade unions, trusts, societies, clubs, etc. formed or registered outside India.

3. Restrictions on acceptance of foreign hospitality

The Act imposes restrictions on acceptance of foreign hospitality by certain specified persons. It mandates that no member of a Legislature or office-bearer of a political party or Judge or Government servant or employee of any corporation or any other body owned or controlled by the Government shall, while visiting any country or territory outside India, accept, except with the prior permission of the Central Government, any foreign hospitality. However, such permission would not be necessary for an emergent medical aid needed on account of sudden illness contracted during a visit outside India. The term foreign hospitality' is defined to mean any offer, not being a purely casual one, made in cash or kind by a foreign source for providing a person with the costs of travel to any foreign country or territory or with free boarding, lodging, transport or medical treatment.

Apart from this, the Central Government is empowered to prohibit any person or organisation not specified in the Act from accepting any foreign contribution and to require any person or class of persons, not specified in the Act to obtain prior permission of the Central Government before accepting any foreign hospitality.

4. Registration for the acceptance of foreign contribution

Section 11 of the Act mandates that except as otherwise provided in the Act, no person having a definite cultural, economic, educational, religious or social program shall accept foreign contribution, unless such person obtains a certificate of registration from the Central Government. In case a person falling in the above category is not registered with the Central Government, it can accept foreign contribution only after obtaining prior permission of the Central Government. The Central Government can, by Notification in the Official Gazette, specify the person or class of persons who shall obtain its prior permission before accepting the foreign contribution, the areas in which such contribution shall be accepted, the purpose for which foreign contribution shall be utilised and the sources from which foreign contribution shall be accepted. The Central Government is also authorised to suspend or cancel the registration so granted. Every person who has been granted a certificate under Section 12 shall have such certificate renewed within six months before the expiry of the period of the certificate.

5. Prohibitions and restrictions on receipt, transfer, utilization etc. of foreign contribution

The Act imposes a prohibition, on persons registered and granted certificate or has obtained prior permission under the Act, from transferring such contribution to any other person, unless such other person is also registered and had been granted a certificate or obtained the prior permission under the Act. Certain restrictions have been imposed on the utilisation of the foreign contribution received and the Act mandates that the foreign contribution shall be utilised only for the purposes for which contribution was received. No foreign contribution or any income arising out of it can be used for speculative purposes. Use of foreign contribution for defraying administrative expenses has been restricted by the Act.

The Act empowers the Central Government to prohibit any person or organisation not specified in Section 3 from accepting any foreign contribution and also to require any person or class of persons not specified in Section 6 to obtain prior permission of the Central Government before accepting any foreign hospitality. Where the Central Government is satisfied, after making such inquiry as it may deem fit, that any person has in his custody or control any article or currency or security, whether Indian or foreign , which  has  been  accepted  by such person  in  contravention  of any  of  the provisions of the Act, it may, by order in writing, prohibit such person from paying, delivering, transferring or otherwise dealing with, in any manner whatsoever, such article or currency or security except in accordance with the written orders of the Central Government.

6. Foreign contribution to be received through a scheduled bank

Section of 17 is of special importance to bankers. It states that every person who has been granted a certificate or given prior permission under Section 12 shall receive foreign contribution in a single account only through such one of the branches of a bank as he may specify in his application for grant of certificate. Such person can open one or more accounts in one or more banks for utilising the foreign contribution received by him. However, no funds other than foreign contribution shall be received or deposited in such account or accounts. The Act makes it mandatory for every bank or authorised person in foreign exchange to report to such specified authority (a) the prescribed amount of foreign remittance (b) the source and manner in which the foreign remittance was received and (c) other particulars, in such form and manner as may be prescribed.

Every person who has been granted a certificate or given prior approval under the Act has to give, within such time and in such manner as may be prescribed, an intimation to the Central Government, and such other authority as may be specified by the Central Government, as to the amount of each foreign contribution received by it, the source from which and the manner in which such foreign contribution was received, and the purposes for which, and the manner in which such foreign contribution was utilised by him. Further, every person receiving foreign contribution has to submit a copy of a statement indicating therein the particulars of foreign contribution received, duly certified by officer of the bank or authorised person in foreign exchange, and furnish the same to the Central Government.

7. Maintenance of accounts and disposal of assets

Section 19 of the Act stipulates that every person who has been granted a certificate or given prior approval as above has to maintain accounts of the foreign contribution received and utilized in the prescribed manner. Where any person who was permitted to accept foreign contribution under the Act ceases to exist or has become defunct, all the assets of  such  person  shall  be  disposed  of  in  accordance  with  the provisions contained in any law for the time being in force under which the person was registered or incorporated.

8. Powers of inspections and seizure

The Act empowers the Central Government to authorize inspection of accounts or records for verifying contravention of the provisions of the Act. It also provides for seizure of accounts and records and also articles or currency or security received in contravention of the provisions of the Act.

9. Miscellaneous Issues

The Act describes certain offences and the punishment/penalties for violation of its provisions. Section 37 of the Act provides that whoever fails to comply with any provision of the Act for which no separate penalty has been provided, shall be punished with imprisonment for a term which may extend to one year, or with fine or with both.

The Act provides that any offence punishable under the Act (whether committed by an individual or association or any officer or employee thereof), not being an offence punishable with imprisonment only, may, before the institution of any prosecution, be compounded by such officers or authorities and for such sums as the Central Government may, by Notification in the Official Gazette, specify in this behalf.

The Central Government may give such directions as it may deem necessary to any other authority or any person or class of persons regarding the carrying into execution of the provisions of the Act.

10. Rules framed under the Act

In exercise of the powers conferred by Section 48 of the Act, the Central Government has framed the Foreign Contribution (Regulation) Rules, 2011 for carrying out the provisions of the Act. The Rules, inter alia, provide for Guidelines for the Central Government for declaration of an organisation to be of a political nature, the nature of activities which would be treated as speculative activities, what constitutes administrative expenses, procedure for availing of foreign hospitality by specified categories of persons, procedure relating to application for obtaining 'registration' or 'prior permission' to receive foreign contribution, whom to make application for compounding, procedure for transferring foreign contribution to other registered or unregistered persons, the Forms to be used for various purposes etc.

Rule 13 of the said Rules mandates that in case a person who has been granted a certificate of registration or prior permission receives foreign contribution in excess of one crore rupees, or equivalent thereto, in a financial year, he/it shall place the summary data on receipts and utilisation of the foreign contribution pertaining to the year of receipt as well as for one year thereafter, in the public domain.

It is important to note that in terms of Rule 15, the amount of foreign contribution lying, unutilised in the exclusive foreign contribution bank account of a person whose certificate of registration has been cancelled shall vest with the banking authority concerned till the Central Government issues further directions is the matter. In case a person whose certificate of registration has been cancelled transfers/has transferred the foreign contribution to any other person, the above condition would apply to the person to whom the fund has been transferred.

Rule 16 of the said Rules provides that every bank has to send a report to the Central Government within thirty days of any transaction in respect of receipt of foreign contribution by any person who is required to obtain a certificate of registration or prior permission under the Act, but who was not granted such certificate or prior permission as on the date of receipt of such remittance. Such report has to contain the following details:

a. Name and address of the donor.

b .Name and address of the recipient.

c. Account number.

d.Name of the Bank and Branch.

e Amount of foreign contribution (in foreign currency as well as Indian Rupees).

f. Date of receipt.

g. Manner of receipt of foreign contribution (cash/cheque/electronic transfer etc.):

It has been made a duty of the bank concerned to send a report to the Central Government within thirty days from the date of such last transaction in respect of receipt of any foreign contribution in excess of one crore rupees or equivalent thereto in a single transaction or in transactions within a duration of thirty days, by any person, whether registered or not under the Act, and such report also has to include the aforesaid details.

DBOD.No.BP.BC. 78 /08.12.001/2011-12

Dated: February 03, 2012

Housing Loans by Commercial Banks Loan to Value (LTV) Ratio

Please refer to our circular DBOD.No.BP.BC.69/08.12.001/2010-11 dated December 23, 2010 on Housing loans by commercial banks LTV ratio, risk weight and provisioning wherein it was advised that in order to prevent excessive leveraging, the LTV ratio in respect of housing loans should not exceed 80 per cent. However, for small value housing loans i.e. for loans below Rs. 20 lakh (which are classified as priority sector advances) the LTV ratio should not exceed 90 per cent.

2. In this connection, it has been brought to our notice that banks adopt different practices for deciding the value of the house property while sanctioning housing loans. Some banks include stamp duty, registration and other documentation charges in the cost of the house property. This overstates the realisable value of the property as stamp duty, registration and other documentation charges are not realisable and consequently the margin stipulated gets diluted. Accordingly, banks should not include these charges in the cost of the housing property they finance so that the effectiveness of LTV norms is not diluted.

RBI/2011-12/383

(Deepak Singhal)
Chief General Manager-in Charge

DBOD.No.BP.BC.79/21.01.001/2011-12

Dated: February 3, 2012

Grant of Loans and Advances and Award of Contracts to Directors of Banks and their Relatives

Please refer to instructions contained in our circulars DBOD.No.GC.BC.34/C.408C(59)S-84 dated April 12, 1984 read with DBOD.No.BC.110/21.01.001/94 dated October 10, 1994 and DBOD.No.BP.BC.23/21.01.001/96 dated March 1, 1996 on the above subject.

2.  We have come across an instance, where loans and advances have been sanctioned to the relative of a Director of a bank, at a concessional rate of interest, thereby circumventing the spirit of the restrictions contained under Section 20 of the Banking Regulation Act, 1949.  The matter has, therefore, been examined by us and it has been decided that the restrictions as contained in Section 20 of the Act would apply to grant of loans and advances to spouse and minor/dependent children of the Directors of banks. However, banks may grant loan or advance to or on behalf of spouses of their Directors in cases where the spouse has his/her own independent source of income arising out of his/her employment or profession and the facility so granted is based on standard procedures and norms for assessing the creditworthiness of the borrower. Such facility should be extended on commercial terms. As mentioned in the circular dated March 1, 1996, all credit proposals for Rs. 25 lakhs and above should be sanctioned by the bank's Board of Directors/Management Committee of the Board. The proposals for less than Rs. 25 lakhs may be sanctioned by the appropriate authority in banks in terms of the powers delegated to them.

3. The above norms relating to grant of loans and advances will be equally applicable to award of contracts.

RBI/2011-12/385

(Deepak Singhal)
Chief General Manager-in-Charge

DGBA.GAD.No.H - 5029/42.01.033/2011-12

Dated: January 31, 2012

Government Agency Business Arrangement Appointment of Private Sector Banks as Agency Banks of Reserve Bank of India (RBI)

As you are aware, currently all public sector banks are eligible to conduct Government business as agents of RBI.  However, only three private sector banks viz. ICICI Bank Ltd., HDFC Bank Ltd. and Axis Bank Ltd. were appointed by RBI as its agents to carry out limited general banking business of the Central Government and of those State Governments which had entered into an agreement with RBI for the purpose. Of late, we have been receiving formal/informal requests from various Central Government Ministries/Departments, State Governments and from the banks themselves for granting authorization for additional/fresh business to these/other private sector banks for conducting Government business.

2. With a view to enhancing the quality of customer service in Government business through more competition, improving customer convenience by increasing the number of customer service outlets and broad basing the revenue collection and payments mechanism of Governments, the existing policy was recently reviewed by us and it has been decided that all private sector banks will now be considered eligible to handle any Central/State Government business (where RBI pays agency commission) at par with public sector banks.

3. In this connection, it may be mentioned that all banks intending to handle Government business need to be appointed as agents of RBI. For this purpose, for Central Government / Union Territory business, the concerned Civil / Non-Civil Ministry / Department may work out the arrangement with the bank and send the proposal to the Controller General of Accounts (CGA) for examination. The CGA will forward his recommendation on the proposal to the Reserve Bank of India, Department of Government and Bank Accounts, Central Office, Mumbai (DGBA, CO) and on consideration, RBI will formally appoint a bank as an agency bank, on its execution of an agreement.

4. For State Government business, the concerned Department of the State may work out the arrangement and approach the Finance Department of the State which will recommend the proposal to the Regional Director of RBI for the State, who will forward the case with his comments to the DGBA, CO for approval and further action.

5. For the purpose of authorisation of fresh/additional business, an agency bank will be required to obtain approval from DGBA, CO, as at present. Once RBI authorises a bank for any Government business, its subsequent approval with regard to mode (Physical or e-Mode) and area of operation is not required and the same will be decided by the office of CGA (for Central Government) or the Finance Department of the State Government, keeping RBI informed in the matter.

6. It is also hereby clarified that a Central Government Ministry/Department (in consultation with CGA) and a State Government Department (in consultation with the respective AG's Office) may engage any bank for implementation of any of the prefunded schemes without reference to RBI, as such schemes do not fall under the purview of Government agency business arrangement and hence do not qualify for payment of agency commission by RBI.

7. The revised guidelines come into effect immediately.

RBI/2011-2012/377

(A. K. Bera)
Chief General Manager-in-Charge

DGBA.CDD. No.H- 4836 /15.02.001/2011-12

Dated: January 20, 2012

Clarification on regulation of interest rates for Small Savings Schemes

As per the decision of the Government on the recommendations of the Committee for Comprehensive Review of National Small Savings Fund (NSSF), the rate of interest on small savings schemes will be aligned with G-Sec rates of similar maturity with a spread of 25 basis points (bps), with two exceptions. The spread on 10 year National Savings Certificate (NSC) will be 50 bps and on Senior Citizens Savings Scheme, 2004 (SCSS, 2004) 100 bps. The interest rates for every financial year will be notified before April 01st of that year. Notifications on changes in the interest rates, in various small savings schemes with effect from December 01, 2011 have already been issued by Government of India. We have also, vide our circular No. RBI/2011-12/291 dated December 05, 2011 circulated Government’s Notification dated November 25, 2011 indicating change in the interest rate on Public Provident Fund Scheme, 1968 (PPF, 1968).

2. It is observed that news items are appearing in certain sections of the press, which convey an impression that the interest rates on small savings schemes linked to G-Sec rates, are floating in nature and will undergo change depending on the yields on G-Sec during the currency of an instrument.

3. As per the rules of small savings schemes, the rate of interest on an investment made in all schemes except PPF, 1968 on a particular date, remains unchanged for the entire duration of the investment, till maturity, irrespective of the revisions in subsequent years.

4. The above clarification may be brought to the notice of the branches of your bank operating the PPF Scheme, 1968 and SCSS, 2004 advising them to display the same on their notice boards.

RBI/2011-12/359

(P S Ranga Rao)
Assistant General Manager