Banks, FIs and NBFCs – Rule 6 of CCR adapts

The move to do away with restricting the credit to 50 per cent notwithstanding any other rule, and replacing it as an additional option to banks etc, is indeed welcome. However, as The new Explanation 3 to sub rule 1 of Rule 6 deems any activity which is not even as service as exempted service, would it not create an illogical scenario for banks and lenders where Loans and deposits received or given, being transactions in money, also get covered under exempted service. If that becomes the case, wouldnt banks lose more than 50 per cent of the credit they were enjoying till date. Clarity on the inclusion of Explanation 3 from CBEC would be required as to how it is to be interpreted.

Unnikrishnan Mohan 04/03/2016