Business NewsNews

The Reserve Bank of India (RBI) tightened rules on banks’ statutory auditors saying it reserved the right to not approve appointments of such auditors for a specified period if their audit quality was not found satisfactory. The RBI said it will take action against statutory auditors of banks in case of any lapses in their auditing processes including instances such as misstatement of a bank’s financial statement or wrong information in audit report. The framework would cover, inter alia, instances of divergence identified in asset classification and provisioning during the RBI inspection vis-à-vis the audited financial statements of banks.

[Source: The Economic Times]

Legislation UpdatesNotifications

Reserve Bank of India (RBI) has issued instructions to banks regarding the safety of bank lockers for exercising due care and necessary precaution for the protection of the lockers provided to the customer, reviewing the systems in force for their operation on an ongoing basis and taking necessary steps, having well-documented security procedures, properly training staff concerned in the procedure, and internal auditors ensuring that procedures are strictly adhered to. Further, as per an RBI communication to banks (in the context of an incident of bank burglary in which safe deposit lockers were broken open and jewellery reportedly taken away), the liability of the bank depends on the facts and circumstances of the incident and that despite the conditions of the lease agreement that lessees should insure the contents of the lockers, bank can be held liable if negligence is proved (having regard to the conditions of the strong room, the lockers, the safeguards, require in the light of the location etc.).

As per inputs from Public Sector Banks (PSBs), during the last three financial years and for the period up to 31.7.2018 in the current financial year, 43 cases of theft took place in the lockers of PSBs and the approximate amount of loss reportedly suffered by customers is Rs. 16.8 crore? .State / Union territory-wise details of theft from bank lockers of PSBs, reported by PSBs during the said period, are at Annexure. PSBs have informed that FIRs were lodged in all the cases, some arrests have been made by the police, and valuables worth Rs. 6.5 crore have been recovered so far in respect of these cases.

As per inputs from PSBs, banks exercise reasonable care and precaution for the protection of the strong room and the lockers provided, and that security measures including security of locker rooms are reviewed periodically. To strengthen security of lockers, banks also monitor access to locker rooms by CCTV cameras and install burglar alarms. Liability to compensate is governed by provisions of extant applicable laws, such as the Indian Contract Act, 1872, and as such, no specific legislation in this regard is proposed.

Ministry of Finance

Corp Comm LegalExperts Corner

Nudged by several quarters, Reserve Bank of India (RBI) has taken an explicit step towards “ringfencing regulated entities” by prohibiting Indian banks from dealing with or providing services to any entities or individuals who deal with virtual currencies. A specified period of time shall be provided to those entities who are already providing these services to exit the industry.

RBI’s aforesaid step cuts air supply to the highly speculative and unregulated cryptocurrency market. Along with this move, RBI also announced that it would be coming up with its own version of a digital currency which would be a centrally regulated currency.

Before we set out to discuss the implications of this move, it is pertinent to briefly discuss the term “cryptocurrency”.

Cryptocurrencies essentially include digital money. The most popular cryptocurrency which nowadays has become a household name is bitcoin. Cryptocurrencies do not have any intrinsic value and are completely opposite to the Government issued money which has its equivalent in gold.

Cryptocurrencies were devised in order to dispense with the intermediaries and create a peer-to-peer lending system. It has helped in lowering transactional costs and by virtue of being based on cryptography which is quite secure. However, various factors like their volatile nature, lack of a central regulatory authority, no physical equivalent contributed to the growing suspicion around cryptocurrencies and making them unreliable. Institutions and authorities as big as the International Monetary Fund have become wary of cryptocurrencies.

RBI’s move of cordoning the banks under its aegis from any kind of dealing with cryptocurrencies is at best a protective and cautious measure. In the wake of the recent financial scams which have rocked the country and its banking system and massive erosion of public confidence in the financial markets, a pre-emptive step of this kind is welcome.

However, this spells doom for traders who have been dealing in cryptocurrencies. It is to be noted that RBI has not directly placed any ban on cryptocurrencies but has constructively made trading in them almost impossible. If a middle class investor has invested in bitcoins or any other virtual currency, he/she will now not be able to convert their earnings from cryptocurrencies into money. This would lead to huge financial losses not only to the individual but also to the Government which collects huge amounts as taxes from cryptocurrencies.

It is difficult to term RBI’s move blanketly as a positive or a negative step. Some factions are arguing that it is a dictatorial move, as RBI plans to launch its own digital currency while protecting its banks from other virtual currencies.

However, given the volatility and uncertainty extant in the cryptocurrency market, it is efficient, if the Government wants to dispense with the unregulated digital currency and introduce its own digital currency. Such a move is likely to bring about the benefits of a digital currency without having to compromise on the security and safety of small and midsize investors.

One of the most pertinent questions in the wake of this announcement is that whether this step should be looked upon as a death knell to cryptocurrencies in India. RBI has isolated virtual currencies by making them a pariah to its banks. This means that one cannot redeem the cryptocurrencies held by them as bank money. Though, it is beyond doubt that this would hit the cryptocurrency traders hard, but a number of ways may be devised in order to utilise cryptocurrencies through other mechanisms.

For instance, in some countries, people use bitcoins to buy Amazon coupons. Hence, it may be fallacious to term that RBI’s announcement would completely efface unregulated virtual currencies from India. It may be tougher to deal in them but not impossible.

The efficacy of RBI moves in case of cryptocurrencies will have to face the test of time.

* Managing Partner of Corp Comm Legal

** Research Associate.

Hot Off The PressNews

Reserve Bank of India (RBI) has made linking of national biometric ID Aadhaar to bank accounts mandatory as part of its updated ‘Know Your Customer (KYC)’ guidelines. This, however, will be subject to the final decision of the Supreme Court on making of Aadhaar mandatory, RBI stated in its Master Direction – Know Your Customer (KYC) Direction, 2016 (updated as on April 20, 2018).

Till now, an Officially Valid Document (OVD) for address proof together with Permanent Account Number (PAN) issued by the Income Tax Department and a recent passport size photograph were the key KYC documents. But in the amended Customer Due Diligence (CDD) procedure, RBI said, “The Aadhaar number, the PAN or Form No. 60” need to be obtained from an individual who is eligible for applying for the biometric ID. RBI has done away with sections relating to the use of other OVD by banks for address and identity proof.

For residents of Jammu and Kashmir, Assam or Meghalaya, who do not submit Aadhaar or proof of application of enrolment for Aadhaar, the bank may obtain a “certified copy of an OVD containing details of identity and address and one recent photograph,”.

RBI said Aadhaar number shall not be sought from individuals who are not residents. “From an individual who is not eligible to be enrolled for an Aadhaar number, or who is not a resident, the following shall be obtained: PAN or Form No. 60, one recent photograph and a certified copy of an OVD containing details of identity and address.”

In terms of the provisions of Prevention of Money-Laundering Act, 2002 and the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005, Regulated Entities (REs) are required to follow certain customer identification procedures while undertaking a transaction either by establishing an account based relationship or otherwise and monitor their transactions. REs take steps to implement provisions of Prevention of Money-Laundering Act, 2002 and the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005, as amended from time to time, including operational instructions issued in pursuance of such amendment(s).

The revised Master Direction is in accordance with the changes carried out in the PML Rules vide Gazette Notification GSR 538(E) dated June 1, 2017 and thereafter and is subject to the final judgment of the Hon’ble Supreme Court in the case of Justice K.S. Puttaswamy (Retd.)  v. Union of India (Aadhaar case).

Read the Directions HERE.

[RBI/DBR/2015-16/18]

[Master Direction DBR.AML.BC.No.81/14.01.001/2015-16]

Business NewsNews

Reserve Bank has repeatedly through its public notices on December 24, 2013, February 01, 2017 and December 05, 2017, cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies.

2. In view of the associated risks, it has been decided that, with immediate effect, entities regulated by the Reserve Bank shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs. Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer/receipt of money in accounts relating to purchase/sale of VCs.

3. Regulated entities which already provide such services shall exit the relationship within three months from the date of this circular.

4. These instructions are issued in exercise of powers conferred by Section 35A read with Section 36(1)(a) of Banking Regulation Act, 1949, Section 35A read with Section 36(1)(a) and Section 56 of the Banking Regulation Act, 1949, Section 45JA and 45L of the Reserve Bank of India Act, 1934 and Section 10(2) read with Section 18 of Payment and Settlement Systems Act, 2007.

[RBI/2017-18/154 dt. April 6, 2018]
[DBR.No.BP.BC.104 /08.13.102/2017-18]

 

Hot Off The PressNews

Reserve Bank of India  has issued a Prompt Corrective Action (PCA) framework to maintain sound financial health of banks. It facilitates banks in breach of risk thresholds for identified areas of monitoring, viz. capital, asset quality (which is tracked in terms of the net Non-Performing Assets ratio) and profitability, to take corrective measures in a timely manner, in order to restore their financial health. Thus, it is intended to encourage banks to eschew certain riskier activities, improve operational efficiency and focus on conserving capital to strengthen them. The framework is not intended to constrain the performance of normal operations of the banks for the general public.

RBI has placed eleven PSBs, viz., Dena Bank, Central Bank of India, Bank of Maharashtra, UCO Bank, IDBI Bank, Oriental Bank of Commerce, Indian Overseas Bank, Corporation Bank, Bank of India, Allahabad Bank and United Bank of India under the PCA framework.

Ministry of Finance

 

Business NewsNews

Reserve Bank of India has scrapped quasi bank guarantee instruments such as the Letter of Undertaking (LoU) and Letter of Comfort (LoC) that blew a Rs 14,000 crore hole in the books of Punjab National Bank (PNB) as the regulator attempts to plug a loophole and improve banks’ due diligence in trade credit. Banks can continue to issue guarantees and letter of credit for trade purposes which are the international norm, and also have features that makes the claim on the issuer strong. Doing away with these trade instruments would raise the cost of funding for companies that use them, but would increase the responsibility of banks that are lending based on these instruments.

It has been decided to discontinue the practice of issuance of LoUs/LoCs for trade credits for imports into India with immediate effect. Letters of Credit and Bank Guarantees for Trade Credits for imports into India may continue to be issued subject to compliance with the provisions contained in Department of Banking Regulation. Ever since the scandal broke out, banks, PNB, regulator and the government have been bickering over how to settle the liabilities arising out of the fraud. While banks that possess the LoU say that PNB has to honour, the state-run lender in the thick of the scam says that it was a due to a series of fraudulent transactions and others were also lax in due diligence.

This move is welcome in light of the PNB fraud. LoUs were not recognized as a banking instrument according to the international code and now everything will have to be routed through letters of credit. After weeks of deliberations, PNB has come to a kind of a proposal that could lead to part settlement of the liabilities with a caveat. While PNB has agreed to honour claims due by March end, the payments will have conditions attached.

[Source: The Economic Times]

Business NewsNews

The Insolvency and Bankruptcy Board of India (IBBI) has signed a Memorandum of Understanding (MoU) with Reserve Bank of India (RBI) on the side-lines of the 4th meeting of the  Insolvency Law Committee (ILC) at New Delhi.

The Insolvency and Bankruptcy Code, 2016 (Code) provides for reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of the value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders and, for this purpose, has established an institutional infrastructure comprising of Adjudicating Authorities, the IBBI, insolvency professionals, insolvency professional agencies and information utilities. The IBBI exercises regulatory oversight over the Insolvency Professionals, Insolvency Professional Agencies and Information Utilities. It writes and enforces rules for processes, namely, corporate insolvency resolution, corporate liquidation, individual insolvency resolution and individual bankruptcy under the Code.

Both the RBI and the IBBI are interested in the effective implementation of the Code and its allied rules and regulations, through a quick and efficient resolution process. Therefore, they have agreed under the MoU to assist and co-operate with each other for the effective implementation of the Code, subject to limitations imposed by the applicable laws.

The MoU provides for:

(a) sharing of information between the two parties, subject to the limitations imposed by the applicable laws;

(b) sharing of resources available with each other to the extent feasible and legally permissible;

(c) periodic meetings to discuss matters of mutual interest, including regulatory requirements that impact each party’s responsibilities, enforcement cases, research and data analysis, information technology and data sharing, or any other matter that the parties believe would be of interest to each other in fulfilling their respective statutory obligations;

(d) cross-training of staff in order to enhance each party’s understanding of the other’s mission for effective utilisation of collective resources; (e) capacity building of insolvency professionals and financial creditors;

(f) joint efforts towards enhancing the level of awareness among financial creditors about the importance and necessity of swift insolvency resolution process of various types of borrowers in distress under the provisions of the Code, etc.

Ministry of Corporate Affairs

Business NewsNews

In exercise of the powers conferred by Section 45L of the Reserve Bank of India Act, 1934, the Reserve Bank of India (RBI) being satisfied that for the purpose of enabling it to promote conducive credit culture among the Non Banking Financial Companies (NBFCs) and to regulate the credit system of the country to its advantage, it is necessary to provide for a system of Ombudsman for redressal of complaints against deficiency in services concerning deposits, loans and advances and other specified matters, hereby directs that the NBFCs, as defined in Section 45-I(f) of the Reserve Bank of India Act, 1934 and registered with the RBI under Section 45-IA of the Reserve Bank of India Act, 1934 which (a) are authorised to accept deposits; or (b) have customer interface, with assets size of one billion rupees or above, as on the date of the audited balance sheet of the previous financial year, or of any such asset size as the RBI may prescribe, will come within the ambit, and should comply with the provisions of the Ombudsman Scheme for Non-Banking Financial Companies, 2018.

2. The Non-banking Financial Company – Infrastructure Finance Company (NBFC-IFC), Core Investment Company (CIC), Infrastructure Debt Fund – Non-banking Financial Company (IDF-NBFC) and an NBFC under liquidation, are excluded from the ambit of the Scheme.

3. To begin with, the Scheme will be operationalized for all deposit accepting NBFCs and based on the experience gained, the Scheme would be extended to include the remaining identified categories of NBFCs. It is initially being introduced at the four metro centers viz. Chennai, Kolkata, Mumbai and New Delhi for handling complaints from the respective zones, so as to cover the entire country. The area of jurisdiction of these offices is indicated in Annex ‘I’ of the Scheme.

4. The Scheme shall come into effect and force from February 23, 2018.

Reserve Bank of India

[Ref.CEPD.PRS.No.3590/13.01.004/2017-18]

 

Business News

Reserve Bank of India had constituted an inter-departmental Task-force in December 2014, to provide “harmonised” definitions of major balance sheet/profit and loss/off-balance sheet items covered in the banking/regulatory returns received across RBI departments. A set of harmonised definitions for 106 data elements reported in multiple returns was released vide press release dated March 30, 2017. The Reserve Bank has now harmonized the definitions for another set of 83 data elements (Annex) which are reported in multiple returns.

2. Interpretation of a few data elements may be contextual, depending upon the purpose of the return and requirements of the user departments. For granular details, relevant master circulars/ directions/guidance notes need to be referred. In the event of conflict between the definition of a term provided in this circular vis-à-vis the statutory/accounting/regulatory (provided in the relevant circulars) definition, the latter would prevail.

Banking Statistics – Harmonized Definitions of Data Elements – Phase II                                                                                     Annex

Srl. Data Element Harmonised Definition
1 Consumer Credit Consumer credit refers to the loans given to individuals, which consists of (a) loans for consumer durables, (b) credit card receivables, (c) auto loans (other than loans for commercial use), (d) personal loans secured by gold, gold jewellery, immovable property, fixed deposits (including FCNR(B)), shares and bonds, etc., (other than for business / commercial purposes), (e) personal loans to professionals (excluding loans for business purposes), and (f) loans given for other consumptions purposes (e.g., social ceremonies, etc.). However, it excludes (a) education loans, (b) loans given for creation/ enhancement of immovable assets (e.g., housing, etc.), (c) loans given for investment in financial assets (shares, debentures, etc.), and (d) consumption loans given to farmers under KCC. For risk weighting purposes under the Capital Adequacy Framework, the extant regulatory guidelines will be applicable.
2 Personal loans Personal loans refers to loans given to individuals and consist of (a) consumer credit, (b) education loan, (c) loans given for creation/ enhancement of immovable assets (e.g., housing, etc.), and (d) loans given for investment in financial assets (shares, debentures, etc.).
3 Funded Credit Funded credit implies amount actually lent or credited to a borrower’s account or debited to borrower’s loan/ cash credit/ overdraft or any other borrowing account for payment on behalf of the borrower.
4 Weighted Average Lending Rate Weighted average lending rate (WALR) relates to all types of rupee credit accounts (viz., cash credit, demand loans, overdrafts, inland bills financed and discounted, term loans and other types, if any). The amount of loans under each credit account is multiplied with its corresponding interest rates (usually, it is done individual account-wise under each type of credit account) and then, added together. This sum of all products is then divided by the total amount of loans to arrive at WALR.
5 Pre-shipment Credit Pre-shipment credit means any loan or advance granted or any other credit provided by a bank to an exporter for financing the purchase, processing, manufacturing or packing of goods prior to shipment / working capital expenses towards rendering of services on the basis of letter of credit opened in his favour or in favour of some other person, by an overseas buyer or a confirmed and irrevocable order for the export of goods / services from India or any other evidence of an order for export from India having been placed on the exporter or some other person, unless lodgement of export orders or letter of credit with the bank has been waived.
6 Take-out Finance/ Conditional Take-out Finance Take-out finance is an arrangement where an institution / bank, financing infrastructure projects, will have an arrangement with any financial institution for transferring to the latter, the outstanding in respect of such financing in their books on a pre-determined basis. Conditional take-out finance: In this scenario, the taking over institution would have stipulated certain conditions to be satisfied by the borrower before it is taken over from the lending institution.
7 Unsecured Guarantees Unsecured guarantees are those which are not secured by any collateral. Limit on the amount of unsecured guarantees is fixed by a bank’s board.
8 Slippage Slippage refers to new accretion to NPAs during a period.
9 Standard Advances Standard advance is an advance which is not non-performing as per extant IRAC and provisioning norms.
10 Substandard Advances A substandard advance is one, which remains non-performing for a period less than or equal to 12 months.
11 Doubtful Advances An advance which remains in the substandard category for a period of 12 months.
12 Restructured Accounts A restructured account is one where the bank, for economic or legal reasons relating to the borrower’s financial difficulty, grants to the borrower, concessions that the bank would not otherwise consider. Restructuring would normally involve modification of terms of the advances / securities, which would generally include, among others, alteration of repayment period / repayable amount/ the amount of instalments / rate of interest (due to reasons other than competitive reasons). However, extension in repayment tenure of a floating rate loan on reset of interest rate, so as to keep the equated monthly instalment (EMI) unchanged, provided it is applied to a class of accounts uniformly, will not render the account to be classified as ‘Restructured account’. In other words, extension or deferment of EMIs to individual borrowers as against to an entire class, would render the accounts to be classified as ‘restructured accounts’.
13 Restructured Standard Advances Restructured standard advances are the advances restructured/ permitted to be classified as standard, as per extant DBR instructions.
14 Mortgage-backed Security A Mortgage-backed security is a bond-type security in which the collateral is provided by a pool of mortgages. Income from the underlying mortgages is used to meet interest and principal repayments.
15 Treasury Bills Treasury bills are short term negotiable non-coupon bearing instruments issued by the Government of India.
16 Shifted Investments Shifted investments are amount of investments shifted from/to one category to another, among the three categories i.e. held to maturity (HTM), available for sale (AFS), and held for trading (HFT).
17 Equities Participations Equities participations refer to the bank’s investment in equities of subsidiary / associate / joint venture either in India or abroad or equity participation in other entities.
18 Securities Held for Trade (HFT), Available for Sale (AFS), Held to Maturity (HTM) Held for Trading (HFT) Securities: The securities acquired by the banks with the intention to trade by taking advantage of the short-term price / interest rate movements. These securities are to be sold within 90 days. Held to maturity (HTM) Securities: The securities acquired by the banks with the intention to hold them up to maturity. Available for Sale (AFS) Securities: Securities not classified under HFT and HTM are included under AFS.
19 Adjusted Net Bank Credit (ANBC) ANBC denotes the outstanding Bank Credit in India [As prescribed in item No.VI of Form ‘A’ under Section 42 (2) of the RBI Act, 1934] minus bills rediscounted with RBI and other approved Financial Institutions plus permitted non SLR bonds/debentures under Held to Maturity (HTM) category plus other investments eligible to be treated as part of priority sector lending (e.g. investments in securitised assets). The outstanding deposits under RIDF and other funds with NABARD, NHB, SIDBI and MUDRA Ltd. in lieu of non-achievement of priority sector lending targets/sub-targets will form part of ANBC. Advances extended in India against the incremental FCNR (B)/NRE deposits, qualifying for exemption from CRR/SLR requirements, as per the Reserve Bank’s circulars DBOD.No.Ret.BC.36/12.01.001/2013-14 dated August 14, 2013 read with DBOD.No.Ret.BC.93/12.01.001/2013-14 dated January 31, 2014 and DBOD mailbox clarification issued on February 6, 2014 will be excluded from the ANBC for computation of priority sector lending targets, till their repayment. The eligible amount for exemption on account of issuance of long-term bonds for infrastructure and affordable housing as per Reserve Bank’s circular DBOD.BP.BC.No.25/08.12.014/2014-15 dated July 15, 2014 will also be excluded from the ANBC for computation of priority sector lending targets.
20 Inside Liabilities Inside liabilities are capital, reserves and risk provisions.
21 Outside Liabilities Outside liabilities are liabilities excluding capital, reserves and risk provisions.
22 Risk Sensitive Liabilities Liabilities which are sensitive to market risks.
23 Assigned Capital Indian banks operating abroad through branches, assign a specific amount as assigned capital for the overseas branches. This assigned capital is reflected as assigned capital in the overseas branch ledger and reported to DSB (overseas returns) submitted by such banks.
24 Perpetual Non- Cumulative Preference Shares Perpetual non-cumulative preference shares refer to preference shares which are eligible for inclusion in additional Tier I capital subject to prescribed guidelines.
25 Disclosed Reserve Disclosed reserves refer to the appropriations of profit after tax to specific categories of reserves which are required to be disclosed in Schedule 2 of the published balance sheet as per provisions of the Banking Regulation Act 1949 and regulatory instructions.
26 Regulatory Capital Regulatory capital means total of tier I and tier II capital calculated as per extant instructions on capital adequacy.
27 Capital Conservation Buffer (CCB) Capital conservation buffer refers to capital buffer, comprising of common equity tier I capital, which banks are required to maintain above the regulatory minimum capital requirement of 9% under part – D of master circular – Basel III capital regulations – DBR.No.BP.BC.1/21.06.201/2015-16 dated 01-07-2015.
28 Horizontal Disallowance A disallowance of offsets to required capital using the BIS Method for assessing market risk for regulatory capital. In order to calculate the capital required for interest rate risk of a trading portfolio, the BIS Method allows offsets of long and short positions. Yet, interest rate risk of instruments at different horizontal points of the yield curve are not perfectly correlated. Hence, the BIS Method requires that a portion of these offsets be disallowed.
29 Vertical Disallowance In the BIS method for determining regulatory capital, necessary to cushion market risk, a reversal of the offsets of a general risk charge of a long position by a short position in each currency in two or more securities in the same time band in the yield curve where the securities have differing credit risks.
30 Collateralised Borrowing and Lending Obligation (CBLO) The Clearing Corporation of India Ltd. (CCIL) has developed and introduced, with effect from January 20, 2003, a money market instrument called ’Collateralised Borrowing and Lending Obligation (CBLO)’. It is a money market instrument with original maturity varying from one day to one year. It is fully collateralised by government securities, deposited by the borrowers in their SGL or constituents’ subsidiary general ledger (CSGL) account with CCIL and traded on the platform provided by CCIL. This instrument creates an obligation on the borrower to repay the money borrowed along with interest on a predetermined future date; and provide right and authority to the lender to receive money lent along with interest on the predetermined future date.
31 Lower Tier II Bonds Lower tier II bonds are rupee tier II subordinated debt which can be raised by Indian banks for inclusion in lower tier II capital, subject to prescribed terms and conditions. Foreign banks operating in India can raise subordinated debt in tier II capital by way of head office borrowings in foreign currency, subject to prescribed guidelines.
32 Upper Tier II Bonds Upper tier II bonds are the debt capital instruments issued by Indian banks and qualify the required terms and conditions as set out in Annex-3, and also the capital instruments such as perpetual cumulative preference shares (PCPS), redeemable non-cumulative preference shares (RNCPS) and redeemable cumulative preference shares (RCPS) qualifying terms and conditions as set out in Annex-4, of the extant master circular on ’Prudential Guidelines on Capital Adequacy and Market Discipline – New Capital Adequacy Framework (NCAF)’.
33 Hybrid Capital Hybrid capital instruments are those which have close similarities to equity, in particular when they are able to support losses on an ongoing basis without triggering liquidation. These are included as part of tier II capital subject to prescribed guidelines.
34 Securitised Debt Instruments Securitised debt instruments are debt obligations created out of cash flows from the pool of securitised assets.
35 Redeemable Debt Instruments Redeemable debt instruments are the bonds / debentures which Indian banks may raise to augment capital funds for capital adequacy purpose, subject to prescribed guidelines.
36 Subordinated Debt Subordinated debt refers to debt instruments eligible for inclusion in Tier II capital subject to prescribed guidelines. These instruments rank subordinate to claims of other debts in the case of bankruptcy or liquidation of the debtor.
37 Long-term Time Deposit As per the Master Circular on cash reserve ratio (CRR)/ statutory liquidity ratio (SLR) dated July 01, 2015, long-term time deposits are deposits of contractual maturity of more than one year.
38 Core Deposits Core deposits is the sum of all deposits (including current and savings accounts) with maturity of more than a year (as reported in structural liquidity statement) and net worth.
39 Unclaimed Deposits All accounts in India which have not been operated for 10 years. Provided that in case of money deposited for a fixed period the said term of 10 years shall be reckoned from the date of expiry of such period
40 Exchange Earners Foreign Currency Account/ Deposits (EEFC) Exchange Earners’ Foreign Currency Account (EEFC) is an account maintained in foreign currency with an authorised dealer i.e. a bank dealing in foreign exchange. It is a facility provided to the foreign exchange earners, including exporters, to credit 100 per cent of their foreign exchange earnings to the account, so that the account holders do not have to convert foreign exchange into rupees and vice versa, thereby minimising the transaction costs.
41 Risk Provisions Risk provisions cover all charges to profit and loss account to record actual losses / diminution in values recognised and losses / diminution in values estimated and recogonized by the bank during a financial year.
42 Para-banking Activities Para-banking activities are those permitted activities which a banking company may engage, in addition to the business of banking, under Sub-Section 1 of Section 6 of the Banking Regulation Act 1949 subject to regulatory guidelines issued on para-banking activities.
43 Offshore Banking Units An offshore banking unit is a branch of a bank located in a special economic zone (SEZ) and which has obtained the permission under clause (a) of Sub-Section (1) of Section 23 of the Banking Regulation Act, 1949 as defined in Para 2 (u) of Chapter 1 of ’The Special Economic Zones Act, 2005‘ dated June 23, 2005.
44 Liability on Partly Paid-up Shares Liability on partly paid-up shares arise when only a portion of the face value of shares has been paid and the shareholder is still required to pay the remaining amount to the issuer company.
45 Forward Deposits Forward deposits is a commitment to place deposits at a future date for an agreed amount and at pre-determined rate. It is an off-balance sheet item.
46 Non-funded Commitments Non-funded commitments include any commitment which is not covered under funded commitments.
47 Non-fund Based Advances Non-fund based advances refer to contingent credits which are off-balance sheet exposure such as letter of credit, guarantees, etc. issued to a borrower.
48 Short-term Facilities by Bank Short term facilities are credit facilities (funded and/ or non-funded) for less than one year.
49 Revolving Underwriting Facilities Revolving underwriting facilities is an agreement whereby a bank agrees to provide credit facility to an issuer (borrower) by buying any unsold notes / bonds as per the agreed terms and conditions.
50 Formal Standby Facilities and Credit Lines A formal standby facility or credit line is a formalised arrangement in which the counterparty has the right, but not the obligation to draw funds to a specified limit.
51 Gross Exposure Gross exposure includes credit exposure (funded and non-funded credit limits) and investment exposure (including underwriting and similar commitments) without making adjustments.
52 Net Funded Exposure Net funded exposure is the gross exposure ‘minus’ collaterals, guarantees, insurance etc. Netting may be permitted for cash collaterals, bank guarantees and credit insurance available in/ issued by countries in a lower risk category than the country on which exposure is assumed.
53 Real Estate Exposures Real Estate is generally defined as an immovable asset – land (earth space) and the permanently attached improvements to it. Real estate exposure includes exposure to home loans, commercial real estate loans, loans against property, investments in mortgaged backed securities, etc.
54 Securitisation Exposures Securitisation means a process by which a single performing asset or a pool of performing assets are sold to a bankruptcy remote SPV and transferred from the balance sheet of the originator to the SPV in return for an immediate cash payment.
55 Re-securitisation Exposures A re-securitisation exposure is a securitisation exposure in which the risk associated with an underlying pool of exposures is trenched and at least one of the underlying exposures is a securitisation exposure. In addition, an exposure to one or more re-securitisation exposures is a re-securitisation exposure.
56 Non- market Related Exposure Non market related exposure are off-balance sheet exposure (other than market related off balance sheet exposures) such as direct credit substitutes, trade and performance related contingent items and commitments with certain drawdown, other commitments, etc.
57 Market Related Exposure Market related exposure includes foreign exchange contracts, interest rate contracts, and any other market related contracts specifically allowed by the Reserve Bank which gives rise to credit risk.
58 Credit Risk Credit risk is the possibility of losses associated with diminution in the credit quality of borrowers or counterparties. Credit risk emanates from a bank’s dealings with an individual, corporate, bank, financial institution or a sovereign.
59 Credit Event Payments Credit event payment is the amount which is payable by the credit protection provider to the credit protection buyer under the terms of the credit derivative contract following the occurrence of a credit event.
60 Adjusted Value of Credit Risk Mitigant Adjusted value of credit risk mitigant is the value of guarantees and eligible collaterals after application of ‘haircuts’ as per extant instructions on capital adequacy framework.
61 Risk Adjusted Value Risk adjusted value is the net exposure (exposure adjusted for collaterals after applying haircuts) multiplied by the applicable risk weight.
62 Risk Weighted Assets Risk weighted assets are calculated as per risk weights assigned to each asset (funded/ non-funded) as per prescribed guidelines.
63 Credit Default Swap (CDS) Transaction Credit Default Swap (CDS) is a bilateral derivative contract on one or more reference assets in which the protection buyer pays a fee through the life of the contract in return for a credit event payment by the protection seller following a credit event of the reference entities.
64 Forex Buy Sell Swaps A forex buy sell swap involves buying foreign currency on a near maturity date and simultaneous selling of the foreign currency on a future maturity date as per the agreement between the parties Over the counter (OTC)
65 Forex Sell Buy Swaps A forex sell buy swap involves selling foreign currency on a near maturity date and simultaneous buying of the foreign currency on a future maturity date as per the agreement between the parties Over the counter (OTC)
66 Foreign Currency Rupee Swaps An agreement between two counterparties whereby one counterparty agrees to exchange principal and/ or interest payments on a loan or an asset in one currency to the second counter party, in return for receiving payments of principal and/ or interest payments on an equivalent loan or an asset in another currency from the second counter party as per the agreed rates.
67 Open Foreign Exchange Position Limit Capital Charge Open foreign exchange position limit capital charge is the capital charge, which is maintained on total open foreign exchange position limit as the per regulatory prescriptions.
68 Credit Conversion Factor A credit conversion factor is the factor which coverts an off-balance sheet exposure to an on-balance sheet credit risk exposure, which in turn is multiplied by a risk weight applicable to the counterparty to arrive at risk adjusted value for calculation of capital to risk-weighted assets ratio (CRAR).
69 Market Risk Market risk is the risk that the value of ’on‘ or ’off’ balance sheet positions would be adversely affected by movements in equity and interest rate markets, currency exchange rates and commodity prices.
70 Gross Mark to Market Value (Negative/ Positive) Gross mark to market value means the absolute value of a security or contract or position that reflect its market value arrived in accordance with the agreed methods, subject to regulatory prescriptions.
71 Marked to Market Positions Mark to market (MTM) is a method to assess the fair value of assets or liabilities that can change over time. Mark to market aims to provide a realistic assessment of an institution’s current financial situation.
72 Haircut Adjustment Banks are required to adjust both the amount of exposure to a counterparty and the value of any collateral received in support of that counterparty to take account of possible future fluctuations in the value of either the exposure or the collateral, occasioned by market movements. These adjustments are referred to as ‘haircuts’.
73 Gap Limit Cash flows mismatches in terms of maturity buckets are called gaps which lead to liquidity and market risk. Limits placed on such gaps to restrict liquidity or market risk is called gap limit.
74 Cumulative Gap Cumulative gap is the progressive summation over a sequential periodic buckets of individual net gaps with signs. For example, cumulative gap of bucket ‘over 3 months and up to 6 months’ is calculated as cumulative gap of the bucket ‘ 29 days and up to 3 months’ plus net gap of the bucket ‘over 3 months and up to 6 months’. .
75 Net gap Net gap refers to summation of individual bucket-wise balance sheet gap and the total of other products with signs.
76 Maximum Aggregate Gap Limit Maximum aggregate gap refers to summation of tenure-wise (time bucket-wise) gaps in foreign currencies ignoring the signs. A limit placed on the aggregate gap is called maximum aggregate limit.
77 Operational Risk Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. It includes legal risk, but excludes strategic and reputational risk.
78 Extraordinary Items As per accounting standard 5 (AS 5), Extraordinary items are income or expenses that arise from events or transactions that are clearly distinct from the ordinary activities of the enterprise and, therefore, are not expected to recur frequently or regularly.
79 Hurdle Rate Hurdle rate is the minimum acceptable return on business activity. In the context of rating grades, it refers to the rating grade (on the internal master rating scale of the bank) below which, as per bank’s approved internal policy fresh exposures to counterparties will not be undertaken.
80 Extraordinary Loss/ Expenses/ Charges As per accounting standard 5 (AS 5), extraordinary charges are expenses that arise from events or transactions that are clearly distinct from the ordinary activities of the enterprise and, therefore, are not expected to recur frequently or transactions that are clearly distinct from the ordinary activities of the enterprise and, therefore, are not expected to recur frequently or regularly.
81 Diluted Earnings Diluted earnings per share is calculated by assuming that everyone who has an instrument that can be converted into an equity share, converts it into an equity share and so the total number of outstanding shares of the company increases, thereby reducing the EPS. For details, please refer to accounting standard 20 (AS 20).
82 Basic Earnings Per Share Basic earnings per share is the net profit or loss for the period attributable to the equity shareholders divided by the weighted average number of the equity shares outstanding during the period. For details refer to accounting standard 20 (AS 20).
83 Beta Factor Beta serves as a proxy for the industry-wide relationship between the operational risk loss experience for a given business line and the aggregate level of gross income for that business line.

[RBI/2017-18/117]
[DBR.No.BP.BC.99/08.13.100/2017-18]

Hot Off The PressNews

Rationalisation of Merchant Discount Rate (MDR) for Debit Card Transactions

Please refer to paragraph 1 of Statement on Developmental and Regulatory Policies regarding revised framework for Merchant Discount Rate (MDR) for Debit Card Transactions announced in the Fifth Bi-monthly Monetary Policy Statement, 2017-18 by the Reserve Bank of India.

2. The Reserve Bank had specified the maximum MDR applicable to debit card transactions vide its circular DPSS.CO.PD.No.2361/02.14.003/2011-12 dated June 28, 2012, which was revised vide circular DPSS.CO.PD.No.1515/02.14.003/2016-17 dated December 16, 2016.

3. Based on consultations with stakeholders on the “Draft Circular – Rationalisation of Merchant Discount Rate (MDR) for Debit Card Transactions”, as also taking into account the twin objectives of promoting debit card acceptance by a wider set of merchants, especially small merchants, and ensuring sustainability of the business for the entities involved, it has been decided to rationalise the MDR for debit cards based on the following criteria:

  1. Categorisation of merchants on the basis of turnover.
  2. Adoption of a differentiated MDR for QR-code based transactions.
  3. Specifying a ceiling on the maximum permissible MDR for both ‘card present’ and ‘card not present’ transactions.

4. Accordingly, the maximum MDR for debit card transactions shall be as under:

Sr. No Merchant Category Merchant Discount Rate (MDR) for debit card transactions
(as a % of transaction value)
Physical POS infrastructure including online card transactions QR code-based card acceptance infrastructure
1. Small merchants
(with turnover up to Rs 20 lakh during the previous financial year)
Not exceeding 0.40%
(MDR cap of Rs 200 per transaction)
Not exceeding 0.30%
(MDR cap of Rs 200 per transaction)
2. Other merchants
(with turnover above Rs 20 lakh during the previous financial year)
Not exceeding 0.90%
(MDR cap of Rs 1000 per transaction)
Not exceeding 0.80%
(MDR cap of Rs 1000 per transaction)

5. A reference is invited to our circulars DPSS.CO.PD. No. 639/02.14.003/2016-17 dated September 1, 2016 on unbundling of MDR and DPSS.CO.PD.No. 2894/02.14.003/2015-2016 dated May 26, 2016 on putting in place a Board approved policy for merchant acquisition. It is reiterated that the banks and authorised card payment networks shall strictly adhere to the above directions. Further, banks shall ensure that the MDR levied on the merchant shall not exceed the cap rates as prescribed above, irrespective of the entity which is deploying the card acceptance infrastructure at the merchant location.

6. Banks are also advised to ensure that merchants on-boarded by them do not pass on MDR charges to customers while accepting payments through debit cards.

7. The above instructions shall be effective from January 1, 2018. These instructions are subject to review.

8. The directive is issued under Section 10(2) read with Section 18 of Payment and Settlement Systems Act 2007, (Act 51 of 2007).

Reserve Bank of India

Hot Off The PressNews

It has come to the notice of Reserve Bank of India (RBI) that some Co-operative Societies are using the word “Bank” in their names. This is a violation of Section 7 of the Banking Regulation Act, 1949 (as applicable to Co-operative Societies) (the B.R. Act, 1949).

It has also come to the notice of RBI that some Co-operative societies are accepting deposits from non-members/nominal members/associate members which tantamount to conducting banking business in violation of the provisions of the B.R. Act, 1949.

Members of the public are hereby informed that such societies have neither been issued any licence under B.R. Act, 1949 nor are they authorized by the RBI for doing banking business. The insurance cover from Deposit Insurance and Credit Guarantee Corporation (DICGC) is also not available for deposits placed with these societies. Members of public are advised to exercise caution and carry out due diligence of such Co-operative societies before dealing with them.

Reserve Bank of India

 

Case BriefsTribunals/Commissions/Regulatory Bodies

Central Information Commission: The Commission recently dealt with an RTI application in which the appellant had sought information regarding the month and year of release of 500 rupee notes of the series mentioned in the application. The CPIO, RBI presented its defense under Section 7(9) of the RTI Act stating that the information was not available in the form in which it was sought and collecting the same would divert disproportionately the resources of the Bank.

In the appeal before the Commission, the respondent contended that there are four printing presses in all and after the notes are printed, the presses send them to 19 regional offices from where these are sent to four thousand plus currency chests and finally, to the banks and the public.

The Commission pointed out to the respondent that Section 7(9) cannot be invoked to deny the information, but it only casts a positive duty on the authorities to provide the information in the very form it is sought. Information Commissioner Sharat Sabarwal also asked the respondents as to in which form they could provide the information. It was answered by them that they would send the RTI application to four printing presses so that they can inform the appellant about the dates on which the notes of the series he asked about were sent for the first time to the nineteen regional offices.

In light of the foregoing discussion, the Commission directed the CPIO to transfer the application to the printing presses within the next 5 days and prescribed a time-limit of 30 days to the printing presses to furnish the information. [Mukesh Singhal v. CPIO, RBI, 2017 SCC OnLine CIC 1488, decided on 07.09.2017]

Hot Off The PressNews

Supreme Court: Responding to the Notice issued by the bench of J.S. Khehar, CJ and Dr. D.Y. Chandrachud, J asking the Centre and the Reserve Bank of India to consider the option of allow the deposit of the old Rs. 500 and Rs. 1000 notes to those who were not able to deposit the demonetised notes due to genuine and compelling reasons, the Centre and the RBI said that the last window for depositing the demonetised notes cannot be allowed as it will defeat the purpose of demonetisation and the efforts of eliminating black money. It was submitted that if the window is allowed, it could result into increase in benami transactions for producing and depositing old notes and it will make it difficult for departments to distinguish genuine cases from bogus ones.

Earlier this month, stating that genuine cases deserve a chance to deposit the old notes, the Court had explained that if a person was in jail during the period and was not able to deposit the notes without any fault of his then how can such person be barred.

Source: HT

Legislation UpdatesNotifications

G.S.R. 611(E).—In exercise of the powers conferred by sub-section (1) of Section 11 of the Specified Bank Notes (Cessation of Liabilities) Act, 2017 ( 2 of 2017), the Central Government hereby makes the following rules, namely:
1. Short title and commencement.—(1) These rules may be called the Specified Bank Notes (Deposit by Banks, Post Offices and District Central Cooperative Banks) Rules, 2017.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. Deposit of specified bank notes with Reserve Bank.—(1) Where in pursuance of the notification of the Government of India in the Ministry of Finance number S.O. 3407(E), dated the 8th November, 2016, published in the Gazette of India, Extraordinary, the specified banks notes have been accepted from their customers,—

(a) by any Bank or Post Office on or before the 30th December, 2016; or
(b) by any District Central Cooperative Bank within the period of 10th November to 14th November, 2016,

 such specified bank notes may be deposited by such Bank, Post Office or District Central Cooperative Bank, as the case may be, in any office of the Reserve Bank, within a period of 30 days from the commencement of these rules, and get the exchange value thereof by credit to the account of such Bank, Post Office or District Central Cooperative Bank, as the case may be, subject to the satisfaction of the Reserve Bank of the conditions specified in the said notification and the reasons for non-deposit of the specified bank notes within the period under that notification.

Ministry of Finance
(Department of Economic Affairs)

Legislation UpdatesStatutes/Bills/Ordinances

The promulgation of the Banking Regulation (Amendment) Ordinance, 2017 inserting two new Sections (viz. 35AA and 35AB) after Section 35A of the Banking Regulation Act, 1949 enables the Union Government to authorize the Reserve Bank of India (RBI) to direct banking companies to resolve specific stressed assets by initiating insolvency resolution process, where required. The RBI has also been empowered to issue other directions for resolution, and appoint or approve for appointment, authorities or committees to advise banking companies for stressed asset resolution.

This action of the Union Government will have a direct impact on effective resolution of stressed assets, particularly in consortium or multiple banking arrangements, as the RBI will be empowered to intervene in specific cases of resolution of non-performing assets, to bring them to a definite conclusion.

The Government is committed to expeditious resolution of stressed assets in the banking system. The recent enactment of Insolvency and Bankruptcy Code (IBC), 2016 has opened up new possibilities for time bound resolution of stressed assets. The SARFAESI and Debt Recovery Acts have been amended to facilitate recoveries. A comprehensive approach is being adopted for effective implementation of various schemes for timely resolution of stressed assets.

Ministry of Finance

THE BANKING REGULATION (AMENDMENT) ORDINANCE, 2017

No. 1 of 2017

Promulgated by the President in the Sixty-eighth Year of the Republic of India.

An Ordinance further to amend the Banking Regulation Act, 1949.

Whereas the stressed assets in the banking system have reached unacceptably high levels and urgent measures are required for their resolution;

AND WHEREAS the Insolvency and Bankruptcy Code, 2016 has been enacted to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets to promote entrepreneurship, availability of credit and balance the interest of all the stakeholders;

AND WHEREAS the provisions of Insolvency and Bankruptcy Code, 2016 can be effectively used for the resolution of stressed assets by empowering the banking regulator to issue directions in specific cases;

And WHEREAS Parliament is not in session and the President is satisfied that circumstances exist which render it necessary for him to take immediate action;

NOW, THEREFORE, in exercise of the powers conferred by clause (7) of Article 123 of the Constitution, the President is pleased to promulgate the following Ordinance:—

1. Short title and commencement.– (i) This Ordinance may be called the Banking Regulation (Amendment) Ordinance, 2017.

(2) It shall come into force at once.

2. Insertion of new Sections 35AA and 35AB.–In the Banking Regulation Act, 1949, after Section 35A, the following sections shall be inserted, namely:—

35AA. Power of Central Government to authorise Reserve Bank for issuing directions to banking companies to initiate insolvency resolution process.– The Central Government may by order authorise the Reserve Bank to issue directions to any banking company or banking companies to initiate insolvency resolution process in respect of a default, under the provisions of the Insolvency and Bankruptcy Code, 2016.

Explanation.—For the purposes of this section, “default” has the same meaning assigned to it in clause (12) of section 3 of the Insolvency and Bankruptcy Code, 2016.

35AB. Power of Reserve Bank to issue directions in respect of stressed assets.– (1) Without prejudice to the provisions of Section 35A, the Reserve Bank may, from time to time, issue directions to the banking companies for resolution of stressed assets.

(2) The Reserve Bank may specify one or more authorities or committees with such members as the Reserve Bank may appoint or approve for appointment to advise banking companies on resolution of stressed assets.’.

PRANAB MUKHERJEE,

President.

Case BriefsSupreme Court

Supreme Court: Deciding the question as to whether the State Bank of India (SBI) and its branches, which are registered dealers under the Bengal Finance (Sales Tax) Act, 1941 would be liable to levy of purchase tax under Section 5(6a) of the Act for accepting the Exim Scrips (Export Import Licence) on payment of premium of 20 per cent of the face value of the scrips in compliance with the direction contained in the letter of Reserve Bank of India (RBI) dated 18th March, 1992, the bench of Dipak Misra and Shiva Kirti Singh, JJ held the SBI was not liable to levy of purchase tax under the Act.

The Court said that the replenishment licences or Exim scrips are “goods”, and when they are transferred or assigned by the holder/owner to a third person for consideration, they would attract sale tax.However, it was held that the SBI is an agent of the RBI, the principal. The SBI, when it took the said instruments as an agent of the RBI did not hold or purchase any goods. It was merely acting as per the directions of the RBI, as its agent and as a participant in the process of cancellation, to ensure that the replenishment licences or Exim scrips were no longer transferred. The intent and purpose was not to purchase goods in the form of replenishment licences or Exim scrips, but to nullify them. The “ownership” in the goods was never transferred or assigned to the SBI.

The Court further said that the initial issue or grant of scrips is not treated as transfer of title or ownership in the goods. Therefore, as a natural corollary, it must follow when the RBI acquires and seeks the return of replenishment licences or Exim scrips with the intention to cancel and destroy them, the replenishment licences or Exim scrips would not be treated as marketable commodity purchased by the grantor. [Commercial Tax Officer v. State Bank of India, 2016 SCC OnLine SC 1245 , decided on 08.11.2016]

Banking and Negotiable InstrumentsCase BriefsSupreme Court

Supreme Court: In the present matter the question arose that whether Reserve Bank of India can deny giving information to the respondent under RTI Act, 2005 on the ground of economic interest, commercial confidence, and fiduciary relationship with other banks, the Division Bench of  M.Y. Eqbal and C. Nagappan,JJ., held that the RBI is duty bound to give information sought by the respondent and shall comply with the provisions of RTI Act, 2005 and that there is no fiduciary relationship of the RBI with other banks.

In the present case, the Court clubbed eleven petitions which were pending before different High Courts. The common fact in all the petitions was that the respondents sought information from the petitioner under the provisions of Right to Information (RTI) Act, 2005 and the petitioner denied to give information to them by relying on provisions  under the Banking Regulation Act, 1949, Reserve Bank of India Act, 1934 etc. T.R.Andhyarujina on behalf of petitioner contended that petitioner is exempted to give information under Section 8(1) (a), (d),and (e) of the RTI Act, 2005, as disclosure of information would effect the public interest and economic interests of the country and that the RBI receives information from banks under its fiduciary capacity. RTI Act being general legislation cannot overrule the specific legislations related to confidentiality. On the contrary, Prashant Bhushan, on behalf of the respondent, contended that the right to information is a fundamental right enshrined in Article 19 of the Constitution. It was further contended that there is no fiduciary relationship of RBI with other banks. The Exceptions provided under Section 8(1) of RTI Act, 2005 can only be used in exceptional cases.

The Court while analyzing the relationship of RBI with other banks concluded that, RBI can not deny  giving information under the RTI Act, 2005 by taking the plea of its fiduciary relationship with other banks, because the reports of inspection, statements of the bank and information related to business obtained by the RBI from banks, does not come under information which is obtained on confidence or trust. RBI is the statutory body which is constituted to keep a check and regulate the activities of the banks.The Court further observed that inspection reports, documents etc. fall under the definition of ‘information’ as defined under Section 2(f) of the RTI Act, 2005. [Reserve Bank of India v. Jayantilal N. Mistry, 2015 SCC Online SC 1326, decided on 16-12-2015]

Appointments & Transfers

Reserve Bank of India on August 22nd, 2014 placed a draft Charter of Customer Rights comprising of five basic customer rights and explanatory notes for public comments. The draft Charter of Customer Rights to deal with entities regulated by the Reserve Bank, has been framed based on global best practices of consumer protection as also discussions and interaction with various stakeholders. The Charter spells out the rights of the customer and also the responsibilities of the financial service provider.

Draft charter of Customer Rights comprises of the following basic customer rights:

  • Right to Fair Treatment
  • Right to Transparency, Fair and Honest Dealing
  • Right to Suitability
  • Right to Privacy
  • Right to Grievance Redress and Compensation. 
Dr  To read the notification, click here
T