Credit guarantee scheme for facilitating MFIs loans announced, BFSI News, ET BFSI

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New Delhi, The government on Monday announced a new credit guarantee scheme that will facilitate loans to 25 lakh people through micro finance institutions (MFIs).

The announcement was made by Finance Minister Nirmala Sitharaman as part of economic relief package provided to spur investment climate in the country affected by the Covid pandemic.

As per the new scheme, guarantee will be provided to Scheduled Commercial Banks for loans to new or existing NBFC-MFIs or MFIs for on lending up to Rs 1.25 lakh to approximately 25 lakh small borrowers.

Interest Rate on Loans from banks will be capped at MCLR plus 2 per cent.

Maximum loan tenure 3 years, 80 per cent of assistance to be used by MFI for incremental lending, interest at least 2 per cent below maximum rate prescribed by RBI.

The focus of the scheme will that lending would be for new activities and not repayment of old loans. Loans to borrowers to be in line with extant RBI guidelines such as number of lenders, borrower to be member of JLG, ceiling on household income and debt.

All borrowers (including defaulters upto 89 days) will be eligible for guarantee cover for funding provided by MLIs to MFIs/NBFC-MFIs till March 31, 2022 or till guarantees for an amount of Rs 7,500 crore are issued, whichever is earlier.

Guarantee upto 75 per cent of default amount for up to 3 years through National Credit Guarantee Trustee Company (NCGTC) which will also not charge any guarantee fee.

–IANS

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‘Urgent need to fast-track insurance penetration’

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The fear of the pandemic may have accelerated purchase of health insurance and life cover among the public, but India still has miles to go in increasing overall insurance penetration and building awareness of its benefits, according to the CEOs of private life insurers and intermediaries.

On the occasion of the National Insurance Awareness Day (June 28), most of them felt that there is a need to fast-track insurance penetration, given that only 3 per cent of the population are covered under life insurance. One may have to take a leaf out of India’s vaccination drive and get insurance penetration levels up on a mission mode, they added.

Naveen Tahilyani, Chief Executive Officer and Managing Director, Tata AIA Life Insurance, said: “The Covid-19 pandemic has underlined the need for life insurance more emphatically than ever before. With only 3 per cent of the population covered under life insurance, clearly there is an urgent need to fast-track insurance penetration in the country.

“This National Insurance Day, let us, as an industry, pledge to bring more of the country’s population under life insurance protection cover and secure the future of their families and loved ones.”

‘Land of savers’

Prashant Tripathy, MD& CEO, Max Life Insurance, told BusinessLine that despite a gradual increase in insurance penetration in the country over the last couple of years, India predominantly remains the land of savers over land of protectors. “Consumers need to be educated on the role life insurance plays in the long-term financial protection and aspects like the right sum assured that can affect the accomplishment of life goals of their loved ones in their absence. By offering a range of innovative and flexible products combined with the digital first approach in all our processes, our focus is steadfastly aligned with customer expectations. We believe the digital approach will help enhance penetration, deliver on superior customer experience and harness the trust of the customer,” he said.

‘Grave economic crisis’

Mahesh Balasubramanian, MD & CEO, Kotak Mahindra Life Insurance, said that the pandemic has infected more than three crore lives and witnessed the death of close to four lakh people, thus plunging the nation into a state of health and economic crisis.

“It has also caused huge financial stress to victims and survivors. This calamity has shown the need for financial protection more than ever before. We, as a nation, must commit ourselves to protect our people by increasing both penetration and density of term and health insurance,” he said. Sarbvir Singh, CEO, Policybazaar.com, said: “During unprecedented times like these, it is important to understand our customer’s outlook towards insurance products and serve them with the right solutions specific to their needs.

“A well-insured nation is always better equipped to deal with economic uncertainties. The pandemic has definitely accelerated awareness around insurance and the quest to buy the right insurance plans.”

Parag Raja, MD & CEO, Bharti AXA Life Insurance, said that the current environment and its impact on economy has not only made people conscious about their security in terms of health, life and future, but also made them aware of the risks of not having a life cover.

“Therefore, we will further enhance our digital model to provide seamless customer service, along with a robust claims management system that ensures customer satisfaction especially in such dire situations,” he said.

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Reserve Bank of India – Press Releases

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Government of India (GOI) has announced the sale (re-issue) of four dated securities for a notified amount of ₹32,000 crore as per the following details:

Sr No Security Date of Repayment Notified Amount
(₹ crore)
GoI specific Notification Auction Date Settlement Date
1 5.63% GS 2026 April 12, 2026 11,000 F.No.4(3)-B(W&M)/2021 dated June 28, 2021 July 02, 2021
(Friday)
July 05, 2021
(Monday)
2 GoI FRB 2033 * September 22, 2033 4,000
3 6.64% GS 2035 June 16, 2035 10,000
4 6.67% GS 2050 December 17, 2050 7,000
  Total   32,000      
*The base rate for the coupon payment for the period ending September 21, 2021 shall be 3.48 per cent per annum.

2. GoI will have the option to retain additional subscription up to ₹8,000 crore against above security/securities.

3. The securities will be sold through Reserve Bank of India Mumbai Office, Fort, Mumbai – 400001, The sale will be subject to the terms and conditions spelt out in the ‘Specific Notification’ mentioned above and the General Notification F.No.4(2)–W&M/2018, dated March 27, 2018.

4. Both competitive and non-competitive bids for the auction should be submitted in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system on July 02, 2021. The non-competitive bids should be submitted between 10.30 a.m. and 11.00 a.m. and the competitive bids should be submitted between 10.30 a.m. and 11.30 a.m. The result will be announced on the same day and payment by successful bidders will have to be made on July 05, 2021 (Monday).

5. Bids for underwriting of the Additional Competitive Underwriting (ACU) portion can be submitted by ‘Primary Dealers’ from 9.00 a.m. up to 9.30 a.m. on July 02, 2021 (Friday) on the Reserve Bank of India Core Banking Solution (E-Kuber) system.

6. The Stocks will be eligible for “When Issued” trading for a period commencing June 29, 2021 – July 02, 2021.

7. Operational guidelines for Government of India dated securities auction and other details are given in the Annex.

Ajit Prasad
Director   

Press Release: 2021-2022/437


ANNEX

Type of Auction

1. The auction will be a multiple price-based auction i.e. successful bids will get accepted at their respective quoted price for the security.

2. The auction will be yield based for new security and price based for securities which are re-issued.

3. In case of a Floating Rate Bonds (FRB), the auction will be spread-based for new security and price based for securities which are reissued. At the time of placing bids for new FRB, the spread should be quoted in percentage terms.

Minimum Bid Size

4. The Stocks will be issued for a minimum amount of ₹10,000/- (nominal) and in multiples of ₹10,000/- thereafter.

Non-Competitive Segment

5. In all the auctions, Government Stock up to 5% of the notified amount of sale will be allotted to the eligible individuals and institutions under the Scheme for Non-competitive Bidding Facility in the Auctions of Government Securities.

6. Each bank or Primary Dealer (PD) on the basis of firm orders received from their constituents will submit a single consolidated non-competitive bid on behalf of all its constituents in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system.

7. Allotment under the non-competitive segment to the bank or PD will be at the weighted average rate of yield/price of the successful bids that will emerge in the auction on the basis of the competitive bidding.

Submission of Bids

8. Both competitive and non-competitive bids for the auction should be submitted in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system.

9. Bids in physical form will not be accepted except in extraordinary circumstances.

Business Continuity Plan (BCP)-IT failure

10. Only in the event of system failure, physical bids will be accepted. Such physical bids should be submitted to the Public Debt Office, Mumbai through (email; Phone no: 022-22632527, 022-22701299) in the prescribed form which can be obtained from RBI website (https://www.rbi.org.in/Scripts/BS_ViewForms.aspx) before the auction timing ends.

11. In case of technical difficulties, Core Banking Operations Team should be contacted (email; Phone no: 022-27595666, 022-27595415, 022-27523516).

12. For other auction related difficulties, IDMD auction team can be contacted (email; Phone no: 022-22702431, 022-22705125).

Multiple Bids

13. An investor can submit more than one competitive bid in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system.

14. However, the aggregate amount of bids submitted by a person in an auction should not exceed the notified amount of auction.

Decision Making Process

15. On the basis of bids received, the Reserve Bank will determine the minimum price up to which tenders for purchase of Government Stock will be accepted at the auctions.

16. Bids quoted at rates lower than the minimum price determined by the Reserve Bank of India will be rejected.

17. Reserve Bank of India will have the full discretion to accept or reject any or all bids either wholly or partially without assigning any reason.

Issue of Securities

18. Issue of securities to the successful bidders will be by credit to Subsidiary General Ledger Account (SGL) of parties maintaining such account with Reserve Bank of India or in the form of Stock Certificate.

Periodicity of Interest Payment

19. Interest on the Government Stock will generally be paid half-yearly other than in case of securities with non-standard maturities. The exact periodicity of coupon payment is invariably mentioned in the specific notification for the issue of security.

Underwriting of the Government Securities

20. The underwriting of the Government Securities under auctions by the ‘Primary Dealers’ will be as per the “Revised Scheme of Underwriting Commitment and Liquidity Support” announced by the Reserve Bank vide circular RBI/2007-08/186 dated November 14, 2007 as amended from time to time.

Eligibility for Repurchase Transactions (Repo)

21. The Stocks will eligible for Repurchase Transactions (Repo) as per the conditions mentioned in Repurchase Transactions (Repo) (Reserve Bank) Directions, 2018 (Reserve Bank) Directions, 2018 as amended from time to time.

Eligibility for ‘When Issued’ Trading

22. The Stocks will be eligible for “When Issued” trading in accordance with the guidelines on ‘When Issued transactions in Central Government Securities’ issued by the Reserve Bank of India vide circular No. RBI/2018-19/25 dated July 24, 2018 as amended from time to time.

Investment by Non-Residents

23. Investments by Non-Residents are subject to the guidelines on ‘Fully Accessible Route’ for Investment by Non-residents in Government Securities and Investment by Foreign Portfolio Investors (FPI) in Government Securities: Medium Term Framework (MTF).

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Reserve Bank of India – Tenders

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Reserve Bank of India, Kanpur invites e-tender for ‘Design, fabrication, supply and fixing of open office modular workstation furniture with M.S. framework in DOS, 1st floor, Main Office Building, RBI Kanpur

The e-tendering shall be done through the e-tendering portal of MSTC Ltd (http://mstcecommerce.com/eprochome/rbi). All eligible and interested companies / agencies / firms must register themselves with MSTC Ltd through the above-mentioned website to participate in the e-tendering process. The Schedule of e-tender is as follows:

E-Tender No. RBI/Kanpur/Estate/3/21-22/ET/3
a) Estimated cost ₹17,71,850/- (Rupees Seventeen Lakhs Seventy-One Thousand Eight Hundred Fifty only) (Including GST @18%)
b) Mode of e-tender e-Procurement System
(Online Part I – Techno-Commercial Bid and Part II – Price Bid through www.mstcecommerce.com/eprochome/rbi)
c) Type of e-tender Limited (Only for firms empaneled with RBI, Kanpur under Modular Workstation category of Works)
d) Date of NIT available to parties to download June 28, 2021 from 05.00PM
e) Pre-bid meeting (Offline) August 11, 2021 at 11.00 AM
Venue: Estate Department, 2nd Floor, Reserve Bank of India, Mall Road, Kanpur, Uttar Pradesh-208001
f) EMD through NEFT and upload the details on the MSTC portal. Also intimate / forward the transaction details (UTR number) to brijesh@rbi.org.in and / or estatekanpur@rbi.org.in ₹35,437/- (Rupees Thirty-Five Thousand Four Hundred Thirty-Seven only) paid through NEFT / Net banking to A/c No. 186003001, IFSC RBIS0KNPA01 (See Annexure- V)
g) E-Tender Fees NIL
h) Date of Starting of e-tender for submission of on-line Techno-Commercial Bid and price Bid at http://mstcecommerce.com/eprochome/rbi August 11, 2021 from 01.00 PM
i) Last date of submission of EMD August 23, 2021 till 01.00 PM
j) Date of closing of online e-tender for submission of Techno-Commercial Bid & Price Bid. August 23, 2021 till 01.00 PM
k) Date & time of opening of Part-I (i.e. Techno-Commercial Bid)
Date of opening of Part II i.e. price bid shall be informed separately
August 23, 2021 from 03.00 PM
l) Validity of the e-tender 90 days from the date of opening of Techno–Commercial bid
m) Transaction Fee (Non-refundable) (To be paid separately by the tenderers to MSTC vide MSTC E-Payment Gateway for participating in the e-tender) ₹1,180/- (incl. GST @18%)

2. Intending tenderers shall pay a sum of ₹35,437/- (Rupees Thirty-Five Thousand Four Hundred Thirty-Seven only) as earnest money through NEFT to Reserve Bank of India, Kanpur.

3. Applicants intending to apply will have to satisfy the Bank by furnishing documentary evidence in support of their possessing required eligibility and in the event of their failure to do so, the Bank reserves the right to reject their bids. E-tenders without EMD will not be accepted under any circumstances.

4. The Bank is not bound to accept the lowest tender and reserves the right to accept either in full or in part any tender. The Bank also reserves the right to reject any or all the tenders, either in whole or in part, without assigning any reason thereof.

5. Any amendments / corrigendum to the tender, if any, issued in future will only be notified on the RBI Website and MSTC Website as given above and will not be published in the newspaper.

Regional Director
Reserve Bank of India
Kanpur

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Best Pharma ETFs To Invest For Long Term In India 2021

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Why should you invest in Pharma ETFs?

For those who may not be well versed in stock picking, mutual funds are the best route and likewise they can go for ETFs. Most of the ETFs though are passively managed and track the underlying index so herein they will tend to replicate returns of the healthcare index. Further because of the passive nature of the fund management these funds carry lower expense ratio.

Other advantages of ETFs in general

1. As the name suggests these funds are primarily traded on exchanges and so during the market hours, investors can conveniently sell or buy their units.

2. They also provide the benefit of you getting the units in real time. This is against the mutual funds which allot the unit based on the closing NAV or net asset value.

3. Another positive is that the allocation is in line with the index there is no likelihood of the fund manager going wrong in the selection.

So, investors can have the best exposure to listed pharma scrips on Indian exchanges via the ETF route:

Here are some such Pharma ETFs where investors can test their fate and make good returns in line with the Nifty healthcare index.

1.	ICICI Prudential Pharma ETF:

1. ICICI Prudential Pharma ETF:

Like with ETF, these ETFs shall serve an investor with the highest return if held for a long term of say over 7 years. NAV of the fund as on June 25, 2021 is 85.93. The fund aims to provide before expenses that closely correspond to the total return of the benchmark index subject to tracking errors.

Minimum lump sum investment in the fund can be to the tune of Rs. 1000. As on May 31, 2021, the fund’s size is to the tune of Rs. 20 crore. Benchmark of the fund is Nifty Healthcare TRI.

Notably this is the most recently launched ETF so return and all other such data is not available. Top holdings of the fund include Sun Pharma, Dr. Reddy’s, Divi’s, Cipla, Apollo Hospitals, Lupin, Aurobindo Pharma etc.

Mr. Kayzad Eghlim is the fund manager of the scheme.

2.	Axis Healthcare ETF:

2. Axis Healthcare ETF:

Minimum investment in the fund is Rs. 5000 and the AUM of the fund is Rs. 28 crore as on May 31, 2021. This ETF is also lately launched and tracks the benchmark as Nifty Healthcare TRI. Expense ratio of the fund is 0.22 percent. Since the launch date i.e. May 17, 2021, the fund has yielded over 2% return.

Some of the top holdings of the fund have been Sun Pharma, Divis Labs, Dr. Reddy’s, Cipla, Apollo Hospitals, Lupin, Aurobindo Pharma, Laurus Labs, Biocon.

Mr. Jinesh Gopani is the fund manager of the Axis pharma ETF. As on June 28, 2021, the ETF trades at an NAV of 86.55, with day’s range between 85.25-86.95. Volume in the ETF is 5000.

3. Nippon India Nifty Pharma ETF:

3. Nippon India Nifty Pharma ETF:

This Nippon India Nifty Pharma ETF is currently available as a NFO. Minimum application for the NFO is Rs. 1000 and thereafter. The portfolio of the fund shall comprise stocks that constitute the Nifty Pharma Index and in exactly the same proportion as the underlying Index.

Nonetheless, investors should be mindful of the various risks such as risk per se liquidity, settlement, default risks etc.

Notably, even some of these are new ETF launches, it important to note that their benchmark has done exceedingly well over the last year and 1-year return from the Nifty healthcare has been to the tune of 48 percent and the Covid outbreak has only enhanced the prospects for the sector.

Taxation of Pharma ETFs

If the mutual funds are sold after holding for a period of 1 year and gains are over Rs. 1 lakh then they will be taxed at the rate of 10%. Note capital gains of up to Rs. 1 lakh shall be exempt from tax.

Nonetheless if the holding period is less than 1 year then capital gains shall be taxed at the rate of 15%.

Taxation of dividend if realized on Pharma ETFs:

Dividends are added to the individual’s income and taxed as per the investors’ respective tax slab. Note, if an investor’s dividend income exceeds Rs. 5,000 in a fiscal year, then the AMC shall also deduct a TDS of 10% before the distribution of dividend.

Conclusion:

Notably even as these schemes are lately launched they provide investors the opportunity to have an exposure to an overwhelming pharma pack that has the potential to general multibagger returns in few years time.

Disclaimer: Note these ETFs are listed for informational purpose. Authors, company will not be liable for any losses incurred based on the decision taken considering the above story. Investors should do their research and consult professional investment consultants.

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Covid-19: Out-of-pocket expenses down at about 30% of claim amount

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Insured people are seeing a drop in out-of-pocket expenses for Covid treatment in recent months, but they still have to shell out about 30 per cent of the claim amount.

Data with the Insurance Regulatory and Development Authority of India (IRDAI) reveals that, on an average, about 71.4 per cent of the claimed amount for Covid-19 treatment is settled by insurers while the remaining 29 per cent has to be paid out of pocket by the policy-holder.

The data reveals that of the average claim amount of ₹1.33 lakh, as much as ₹95,512 is settled through insurance.

Also read: Insurers settle Covid claims worth over ₹15,000 cr

Earlier, the out-of-pocket expenses were higher and could be to the tune of about 40-45 per cent.

Insurers say that there are various factors which lead to out-of-pocket expenses for customers during Covid treatment. However, it has come down significantly due to lower costs of consumables and standardised treatment protocols.

“Disallowances are around four main buckets. The first one is when the product runs out sum insured,” said Rajagopal Rudraraju, Senior Vice-President and National Head – Accident and Health Claims at Tata AIG General Insurance.

Reasons for out-of-pocket expenses

According to him, one of the biggest reasons for out-of-pocket expenses by customers is that the amount of treatment exceeds the sum insured. “The insurer cannot do anything in such a case. In normal claims, this issue of sum insured running out comes up less frequently but is more common in Covid-related health claims,” he noted.

The cost of consumables such as PPE kits and gloves has also come down but depending on the insurance cover, can add to the out of pocket expenses. “During the peak of the pandemic last year, it was up to 13 per cent to 15 per cent of the bill. Now, it is eight per cent to seven per cent of the bill,” he said.

In regular health insurance claims, the cost of consumables is usually two to three per cent of the bill.

The third reason for out-of-pocket expenses tend to be the sub-limits in the policy, such as those for co-pay. There are also technical reasons regarding medications that lead to such disallowances.

“Treatment costs for Covid have gone down and so have the out-of-pocket expenses for most policy-holders who have to go in for hospitalisation. There is much more standardisation of procedures and costs,” noted another insurer who did not wish to be named on the issue.

Parag Ved, President and Head, Consumer Lines at Tata AIG General Insurance noted that the sum insured for health covers has also increased to about ₹5 lakh on average. While, to some extent, this is due to higher treatment costs of Covid, there has also been a higher medical inflation in the last three to four years.

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4 Best Special FD Schemes For Senior Citizens To End On June 30, 2021

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Investment

oi-Vipul Das

|

Banks had lowered interest rates in the wake of the Covid-19 epidemic since last year. Senior folks who rely on a steady stream of income have been hurt the hardest by the current low-interest-rate environment. For older folks, bank fixed deposits have traditionally been a viable trend. As a result, in May 2020, a senior citizen special fixed deposit (FD) scheme was issued by some leading banks of India in an attempt to uphold senior citizens’ earnings throughout the emergence of the Covid-19 epidemic. Banks, including SBI, ICICI Bank, and HDFC Bank, provide elderly citizens special rates on deposits of five years or more. These banks grant an additional 50 basis points above the standard bank FD rates under their senior citizen special FD scheme. However, according to the official websites of these banks, the senior citizen savings scheme will be phased down on June 30, 2021. So now let’s know about the special fixed deposit schemes of these banks.

SBI Special Fixed Deposit Scheme

SBI Special Fixed Deposit Scheme

SBI Wecare deposit scheme offers an additional 30 basis points of interest above the 50 basis points of additional FD interest rate provided to senior citizens. SBI We Care scheme gives a senior citizen an extra 80 basis points on a 5- to 10-year fixed deposit. Under this special SBI FD scheme, they will earn 6.20 per cent interest on their fixed deposit. Here are the most recent fixed deposit interest rates of SBI for senior citizens which are in force from 08.01.2021.

Tenure Senior Citizen FD Rates In %
7 days to 45 days 3.4
46 days to 179 days 4.4
180 days to 210 days 4.9
211 days to less than 1 year 4.9
1 year to less than 2 year 5.5
2 years to less than 3 years 5.6
3 years to less than 5 years 5.8
5 years and up to 10 years 6.2
Source SBI, (Below Rs. 2 crore)

HDFC Bank Senior Citizen FD Scheme

HDFC Bank Senior Citizen FD Scheme

A senior individual can earn 75 basis points more on an HDFC Bank Senior Citizen Care FD. Under this special FD scheme, a senior citizen would receive a 6.25 per cent return on his or her FD if it is maintained for more than 5 years and up to 10 years. The current HDFC bank fixed deposit interest rates for elderly persons, effective from May 21, 2021, are listed below.

Tenure Senior Citizen FD Rates
7 – 14 days 3.00%
15 – 29 days 3.00%
30 – 45 days 3.50%
46 – 60 days 3.50%
61 – 90 days 3.50%
91 days – 6 months 4.00%
6 months 1 day – 9 months 4.90%
9 months 1 day – 1 Year 4.90%
1 Year 5.40%
1 year 1 day – 2 years 5.40%
2 years 1 day – 3 years 5.65%
3 year 1 day- 5 years 5.80%
5 years 1 day – 10 years 6.25%
Source: HDFC Bank, (Below Rs. 2 crore)

ICICI Bank Special Fixed Deposit Scheme

ICICI Bank Special Fixed Deposit Scheme

The ICICI Bank Golden Years FD Scheme for elderly persons offers an additional 0.80% FD interest rate over standard FD rates, effective from October 21, 2020. Under the ICICI Bank Golden Years FD scheme, an elderly citizen would get a 6.30 per cent interest rate respectively.

Tenure Senior Citizen FD Rates
7 days to 14 days 3.00%
15 days to 29 days 3.00%
30 days to 45 days 3.50%
46 days to 60 days 3.50%
61 days to 90 days 3.50%
91 days to 120 days 4.00%
121 days to 184 days 4.00%
185 days to 210 days 4.90%
211 days to 270 days 4.90%
271 days to 289 days 4.90%
290 days to less than 1 year 4.90%
1 year to 389 days 5.40%
390 days to 5.40%
18 months days to 2 years 5.50%
2 years 1 day to 3 years 5.65%
3 years 1 day to 5 years 5.85%
5 years 1 day to 10 years 6.30%
5 Years (80C FD) 5.85%
Source: ICICI Bank, (Below Rs. 2 crore)

Bank of Baroda Special FD Scheme

Bank of Baroda Special FD Scheme

Compared to the standard fixed deposit interest rates, Bank of Baroda is providing elderly people with a 1% higher return. Senior citizen special FD scheme of BoB will offer a 6.25 per cent annual interest rate applicable from November 16, 2020.

Tenure Senior Citizen FD Rates In %
7 days to 14 days 3.3
15 days to 45 days 3.3
46 days to 90 days 4,2
91 days to 180 days 4.2
181 days to 270 days 4.8
271 days & above and less than 1 year 4.9
1 year 5.4
Above 1 year to 400 days 5.5
Above 400 days and up to 2 Years 5.5
Above 2 Years and up to 3 Years 5.6
Above 3 Years and up to 5 Years 5.75
Above 5 Years and up to 10 Years 6.25
Source: BoB, (Below Rs. 2 crore)

Story first published: Monday, June 28, 2021, 16:43 [IST]



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Reserve Bank of India – Tenders

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Reserve Bank of India invites E-Tender for Supply Installation Testing & Commissioning of electrical works in proposed FED Area, RBI Kanpur. The tendering would be done through the e-Tendering portal of MSTC Ltd. (http://mstcecommerce.com/eprochome/rbi). All Bank’s empaneled electrical contractors /agencies/firms enlisted for works more than 2 lakhs must register themselves with MSTC Ltd through the above-mentioned website to participate in the tendering process. The Schedule of e-Tender is as follows:

a. E-Tender No RBI/Kanpur/Estate/521/20-21/ET/813
b. Estimated cost Rs. 4.95 Lakh
c. Mode of Tender e-Procurement System (Online Part I – Techno-Commercial Bid and Part II – Price Bid through www.mstcecommerce.com/eprochome/rbi)
d. Date of NIT available to parties to download June 28, 2021
e. Pre-Bid meeting Offline at 11:30 AM on July 19, 2021 Venue: Reserve Bank of India, 2nd Floor Estate Department, Mall Road, Kanpur.
f. Date of Starting of e-Tender for submission of on line Techno-Commercial Bid and price Bid at RBI Kanpur at e-Tendering portal of MSTC (http://mstcecommerce.com/eprochome/rbi). July 19, 2021
g. Date of closing of online e-tender for submission of Techno-Commercial Bid & Price Bid. July 29, 2021 till 11:00 AM
h. Date & time of opening of Part-I (i.e. Techno-Commercial Bid) Part-II Price Bid: Date of opening of Part II i.e. price bid shall be informed separately July 29, 2021 at 12:00 PM
i. Transaction Fee (To be submitted separately by the vendors to MSTC vide MSTC E-Payment Gateway for participating in the E-Tender) Rs. 1,180/- inclusive of GST @ 18% Payment of Transaction fee through MSTC payment gateway /NEFT/RTGS in favour of MSTC LIMITED

Applicants intending to apply will have to satisfy the Bank by furnishing documentary evidence in support of their possessing required eligibility and in the event of their failure to do so, the Bank reserves the right to reject their bids.

The Bank is not bound to accept the lowest tender and reserves the right to accept either in full or in part any tender. The Bank also reserves the right to reject all the tenders without assigning any reason thereof.

Any amendments / corrigendum to the tender, if any, issued in future will only be notified on the RBI Website and MSTC Website as given above and will not be published in the newspaper.

Regional Director,
Reserve Bank of India
Kanpur

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Reserve Bank of India – Notifications

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RBI/2021-22/64
DOR.ORG.REC.27/21.04.158/2021-22

June 28, 2021

The Chief Executive Officer
All Co-operative Banks

Madam / Dear Sir,

Guidelines for Managing Risk in Outsourcing of Financial Services by Co-operative Banks

It is observed that the co-operative banks are increasingly using outsourcing as a means for reducing costs as well as for availing specialist expertise, where these are not available internally.

2. While it is entirely the banks’ prerogative to take a view on the desirability of outsourcing a permissible activity having regard to all relevant factors, including the commercial aspects of the decision, such outsourcing results in banks being exposed to various risks. To enable the co-operative banks to put in place necessary safeguards for addressing the risks inherent in outsourcing of activities, guidelines on managing risks in outsourcing are given in Annex.

3. Co-operative banks are advised to conduct a self-assessment of their existing outsourcing arrangements and bring the same in line with these guidelines within a period of six months from the date of issue of this circular.

Yours faithfully

(Sunil T. S. Nair)
Chief General Manager


Annex

Guidelines on Managing Risks in Outsourcing of Financial services by Co-operative Banks

Introduction

1.1 ‘Outsourcing’ is defined as use of a third party to perform activities on a continuing basis that would normally be undertaken by a co-operative bank itself, now or in the future. ‘Continuing basis’ would include agreements for a limited period.

1.2 These guidelines are intended to provide direction and guidance to co-operative banks to adopt sound and responsive risk management practices for effective oversight, due diligence and management of risks arising from outsourcing activities.

1.3 The underlying principles behind these guidelines are that the co-operative bank should ensure that outsourcing arrangements neither diminish its ability to fulfil its obligations to customers and RBI, nor impede effective supervision by Reserve Bank of India (RBI)/ National Bank for Agriculture and Development (NABARD)1. Co-operative banks, therefore, have to take steps to ensure that the service provider employs the same high standard of care in performing the services as would be employed by them, if the activities were conducted by the banks and not outsourced. Accordingly, co-operative banks should not engage in outsourcing that would result in their internal control, business conduct or reputation being compromised or weakened.

1.4 These guidelines are concerned with managing risks in outsourcing of financial services and are not applicable to technology-related issues as also activities not related to financial services like usage of courier, catering of staff, housekeeping and janitorial services, security of the premises, movement and archiving of records, etc. Co-operative banks which desire to outsource would not require prior approval from RBI / NABARD. However, such arrangements would be subject to on-site / off-site monitoring and inspection/scrutiny by RBI / NABARD.

2. Activities that shall not be outsourced

Co-operative banks which choose to outsource financial services, however, shall not outsource core management functions including policy formulation, internal audit and compliance, compliance with KYC norms, credit sanction and management of investment portfolio. However, where required, experts, including former employees, could be hired on a contractual basis subject to the Audit Committee of Board/Board being assured that such expertise does not exist within the audit function of the bank. Any conflict of interest in such matters shall be recognised and effectively addressed. Ownership of audit reports in all cases shall rest with regular functionaries of the internal audit function.

3. Material Outsourcing

During Inspections/ scrutinies, RBI / NABARD will review the implementation of these guidelines to assess the quality of related risk management systems particularly in respect of material outsourcing. Material outsourcing arrangements are those, which if disrupted, have the potential to significantly impact the business operations, reputation or profitability of co-operative banks. Materiality of outsourcing would be based on:-

  1. The level of importance to the co-operative bank of the activity being outsourced as well as the significance of the risk posed by the same;

  2. The potential impact of the outsourcing by the co-operative bank on various parameters such as earnings, solvency, liquidity, funding capital and risk profile;

  3. The likely impact on the co-operative bank’s reputation and brand value, and ability to achieve its business objectives, strategies and plans, should the service provider fail to perform the service;

  4. The cost of the outsourcing as a proportion of total operating costs of the co-operative bank;

  5. The aggregate exposure to that particular service provider, in cases where the co-operative bank outsources various functions to the same service provider;

  6. The significance of activities outsourced in context of customer service and protection.

4. Co-operative bank’s role

4.1 The outsourcing of any activity by a co-operative bank does not diminish its obligations, and those of its Board and CEO along with the Management, who have the ultimate responsibility for the outsourced activity. Co-operative banks shall, therefore, be responsible for the actions of their service provider including actions of the Business Correspondents and their retail outlets / sub-agents and the confidentiality of information pertaining to the customers that is available with the service provider. The bank shall retain ultimate control of the outsourced activity.

4.2 The co-operative banks shall consider all relevant laws, regulations, guidelines and conditions of approval, licensing or registration when performing its due diligence in relation to outsourcing.

4.3 The grievance redressal mechanism of co-operative banks should not be compromised on account of outsourcing. Outsourcing arrangements shall not affect the rights of a customer against the co-operative bank, including the ability of the customers to redress their grievances as applicable under relevant laws.

4.4 Outsourcing shall not impede or interfere with the ability of a co-operative bank to effectively oversee and manage its activities nor should it impede RBI / NABARD in carrying out its supervisory functions and objectives.

4.5 The service provider should not be owned or controlled by any director or officer/employee of the co-operative bank or their relatives having the same meaning as assigned under the Companies Act, 2013 and the Rules framed thereunder from time to time.

5. Risk Management practices for outsourcing

5.1 Outsourcing Policy

A co-operative bank intending to outsource any of its financial activities shall put in place a comprehensive outsourcing policy, approved by its Board, which incorporates, inter alia, criteria for selection of such activities as well as service providers, parameters for defining material outsourcing based on the broad criteria indicated in para 3, delegation of authority depending on risks and materiality and systems to monitor and review the operations of these activities.

5.2 Role of the Board of Directors (Board), and CEO along with the Senior Management

5.2.1 The Board, and CEO along with the Senior Management shall be ultimately responsible for outsourcing operations and for managing risks inherent in such outsourcing relationships. The Board and CEO along with the Management shall have the responsibility to institute an effective governance mechanism and risk management process for all outsourced operations.

The Board shall be responsible, inter alia, for: –

  1. Approving a framework to evaluate the risks and materiality of all existing and prospective outsourcing and the policies that apply to such arrangements;

  2. Laying down appropriate approval authorities for outsourcing depending on risks and materiality;

  3. Undertaking regular review of the framework for its efficacy and update the same to ensure that the outsourcing strategies and arrangements have continued relevance, effectiveness, safety and soundness;

  4. Deciding on business activities of a material nature to be outsourced and approving such arrangements;

  5. Assessment of management competencies to develop sound and responsive outsourcing risk management policies and procedures commensurate with the nature, scope, and complexity of outsourcing arrangements; and

  6. Setting up suitable administrative framework of management for the purpose of these guidelines.

5.2.2 Chief Executive Officer (CEO) and Senior Management of the bank shall be responsible for:

  1. Evaluating the risks and materiality of all existing and prospective outsourcing, based on the framework approved by the Board;

  2. Developing and implementing sound and prudent procedures commensurate with the nature, scope and complexity of the outsourcing;

  3. Reviewing periodically the effectiveness of policies and procedures;

  4. Communicating information pertaining to material outsourcing risks to the Board in a timely manner;

  5. Ensuring that contingency plans, based on realistic and probable disruptive scenarios, are in place and tested;

  6. Ensuring that there is independent review and audit for compliance with set policies; and

  7. Undertaking periodic review of outsourcing arrangements to identify new material outsourcing risks.

5.3 Evaluation of the Risks

The indicative key risks in outsourcing that need to be evaluated by the co-operative banks are: –

  1. Strategic Risk – The service provider may conduct business on its own behalf, which is inconsistent with the overall strategic goals of the bank.

  2. Reputation Risk – Poor service from the service provider, its customer interaction not being consistent with the overall standards of the bank, or failure in preservation and protection of confidential customer information.

  3. Compliance Risk – Privacy, consumer and prudential laws not adequately complied with.

  4. Operational Risk – Arising due to technology failure, fraud, error, inadequate financial capacity to fulfil obligations and/or provide remedies.

  5. Legal Risk – Includes but is not limited to exposure to fines, penalties, or punitive damages resulting from supervisory actions, as well as private settlements due to omissions and commissions of the service provider.

  6. Exit Strategy Risk – This could arise from over-reliance on one firm, the loss of relevant skills in the bank itself preventing it from bringing the activity back in-house and where the bank has entered into contracts wherein speedy exits would be prohibitively expensive.

  7. Counterparty Risk – Due to inappropriate underwriting or credit assessments.

  8. Contractual Risk – Arising from whether or not the bank has the ability to enforce the contract.

  9. Country Risk – Due to political, social or legal climate creating added risk.

  10. Concentration and Systemic Risk – Due to lack of control of individual banks over a service provider, more so when overall banking industry has considerable exposure to one service provider.

5.4 Evaluating the Capability of the Service Provider

5.4.1 In considering or renewing an outsourcing arrangement, co-operative banks shall undertake appropriate due diligence to assess the capability of the service provider to comply with obligations in the outsourcing agreement. Due diligence should take into consideration qualitative, quantitative, financial, operational and reputational factors. Co-operative banks shall consider whether the service providers’ systems are compatible with their own and also whether their standards of performance including in the area of customer service are acceptable to it. Co-operative banks shall also consider, while evaluating the capability of the service provider, issues relating to undue concentration of outsourcing arrangements with a single service provider. Where possible, co-operative banks may obtain independent reviews and market feedback on the service provider to supplement their own findings.

5.4.2 Due diligence should involve an evaluation of all available information about the service provider, including but not limited to the following: –

  1. Past experience, competence to implement and support the proposed activity over the contracted period;

  2. Financial soundness and ability to service commitments even under adverse conditions;

  3. Business reputation, culture, compliance, complaints and outstanding or potential litigation;

  4. Security, internal controls, audit coverage, reporting, monitoring and business continuity management;

  5. External factors like political, economic, social and legal environment of the jurisdiction in which the service provider operates and other events that may impact service performance;

  6. Ensuring due diligence by service provider of his employees; and.

  7. Ability to effectively service all the customers with confidentiality where a service provider has exposure to multiple banks.

5.5 The Outsourcing Agreement

The terms and conditions governing the contract between a co-operative bank and service provider should be carefully defined in written agreements and vetted by bank’s legal counsel on their legal effect and enforceability. Every such agreement should address the risks and risk mitigation strategies. The agreement should be sufficiently flexible to allow the bank to retain an appropriate level of control over the outsourcing and the right to intervene with appropriate measures to meet legal and regulatory obligations. The agreement should also bring out the nature of legal relationship between the parties, i.e., whether agent, principal or otherwise.

Some of the key provisions of the contract would be:

  1. The contract should clearly define the activities being outsourced including Service Level Agreements (SLAs) to agree and establish accountability for performance expectations. SLAs must clearly formalize the performance criteria to measure the quality and quantity of service levels.

  2. The co-operative bank shall ensure its ability to access all books, records and information relevant to the outsourced activity available with the service provider.

  3. The contract should provide for continuous monitoring and assessment of the service provider by the co-operative bank so that any necessary corrective measure can be initiated immediately.

  4. Controls to ensure customer data confidentiality and service providers’ liability in case of breach of security and leakage of confidential customer related information shall be incorporated.

  5. A termination clause and notice period should be included.

  6. Contingency plans to ensure business continuity should be included.

  7. The contract should provide for the prior approval/consent of co-operative bank for use of subcontractors by the service provider for all or part of an outsourced activity. Before according the consent, co-operative banks should review the subcontracting arrangement and ensure that these arrangements are compliant with the extant guidelines on outsourcing.

  8. The contract should provide the co-operative banks with the right to conduct audits on the service provider whether by its internal or external auditors, or by agents appointed to act on its behalf and to obtain copies of any audit or review reports and findings made on the service provider in conjunction with the services performed for the co-operative bank.

  9. Outsourcing agreement should include a clause to allow RBI/NABARD or persons authorised by it to access the co-operative bank’s documents, records of transactions, logs and other necessary information given to, stored or processed by the service provider, within a reasonable time. This includes information maintained in paper and electronic formats.

  10. Outsourcing agreement should also include a clause to recognise the right of the RBI / NABARD to cause an inspection of a service provider of a co-operative bank and its books and accounts by one or more of its officers or employees or other authorised persons.

  11. The outsourcing agreement should also provide that confidentiality of customers’ information should be maintained even after the contract expires or gets terminated. Further, co-operative bank shall have necessary provisions to ensure that the service provider preserves documents as required by law and take suitable steps to ensure that its interests are protected in this regard even post termination of the services.

5.6 Confidentiality and Security

5.6.1 Public confidence and customer trust in co-operative bank is a prerequisite for the stability and reputation of the bank. Hence, the co-operative banks shall seek to ensure the preservation and protection of the security and confidentiality of customer information in the custody of the service provider.

5.6.2 Access to customer information by staff of the service provider shall be on ‘need to know’ basis, i.e., limited to those areas where the information is required in order to perform the outsourced function.

5.6.3 The co-operative banks shall ensure that the service provider is able to isolate and clearly identify the co-operative bank’s customer information, documents, records and assets to protect the confidentiality of the information. In the instances, where service provider acts as an outsourcing agent for multiple banks, care should be taken to build adequate safeguards so that there is no comingling of information/documents, records and assets.

5.6.4 The co-operative banks shall review and monitor the security practices and control processes of the service provider on a regular basis and require the service provider to disclose security breaches.

5.6.5 The co-operative banks shall immediately notify RBI / NABARD in the event of any breach of security and leakage of confidential customer related information. In these eventualities, the co-operative bank shall be liable to its customers for any damage.

5.7 Business Continuity and Management of Disaster Recovery Plan

5.7.1 Co-operative banks shall require its service providers to develop and establish a robust framework for documenting, maintaining and testing business continuity and recovery procedures. Banks need to ensure that the service provider periodically tests the Business Continuity and Recovery Plan. Banks may also conduct joint testing and recovery exercises with its service provider at mutually agreed frequency but at least annually.

5.7.2 In order to mitigate the risk of unexpected termination of the outsourcing agreement or liquidation of the service provider, co-operative banks shall retain an appropriate level of control over their outsourcing and the right to intervene with appropriate measures to continue its business operations in such cases without incurring prohibitive expenses and without any break in the operations of the bank and its services to the customers.

5.7.3 In establishing a viable contingency plan, co-operative banks should consider the availability of alternative service providers or the possibility of bringing the outsourced activity back in-house in an emergency and the costs, time and resources that would be involved.

5.7.4 Co-operative banks to ensure that in adverse conditions and/ or termination of the contract, all documents, records of transactions and information given to the service provider and assets of the bank can be removed from the possession of the service provider in order to enable the bank to continue its business operations; or deleted, destroyed or rendered unusable.

5.8 Monitoring and Control of Outsourced Activities

5.8.1 The co-operative banks shall have in place a management structure to monitor and control their outsourcing activities. It shall also be ensured that outsourcing agreements with the service provider contain provisions to address their monitoring and control of outsourced activities.

5.8.2 A central record of all material outsourcing that is readily accessible for review by the Board and CEO along with the management of the co-operative bank shall be maintained. The records should be updated promptly and half yearly reviews should be placed before the Board.

5.8.3 Regular audits at least annually by either the internal auditors or external auditors of the bank should assess the adequacy of the risk management practices adopted in overseeing and managing the outsourcing arrangement, the bank’s compliance with its risk management framework and these guidelines.

5.8.4 Co-operative banks shall at least on an annual basis, review the financial and operational condition of the service provider to assess its ability to continue to meet its outsourcing obligations. Such due diligence reviews, which can be based on all available information about the service provider should highlight any deterioration or breach in performance standards, confidentiality and security, and in business continuity preparedness. Co-operative banks shall also submit an Annual Compliance Certificate giving the particulars of outsourcing contracts, the prescribed periodicity of audit by internal / external auditor, major findings of the audit and action taken through Board, to the Regional Offices of RBI / NABARD.

5.8.5 The event of termination of any outsourcing agreement for any reason where the service provider deals with customers, shall be publicised by displaying at a prominent place in the branches and posting it on the bank’s website so as to ensure that the customers do not continue to deal with the service provider.

5.8.6 Certain cases, like outsourcing of cash management, might involve reconciliation of transaction between the co-operative banks, the service provider and its sub-contractors. In such cases, banks should ensure reconciliation of transactions between the bank and the service provider (and /or its subcontractor) are carried out as advised in RBI guidelines on ‘Outsourcing of Cash Management – Reconciliation of Transactions’ dated May 14, 2019 as amended from time to time.

5.8.7 A robust system of internal audit of all outsourced activities shall be put in place and monitored at the Board level.

5.9 Redressal of Grievances related to Outsourced services

5.9.1 The co-operative banks shall give wide publicity to the Grievance Redressal Machinery within the bank and also by placing the information on their website. It should be clearly indicated that co-operative banks’ Grievance Redressal Machinery will also deal with the issues relating to services provided by the outsourced agencies. The name and contact number of designated grievance redressal officer of the co-operative bank should be made known and widely publicised. The designated officer should ensure that genuine grievances of customers are redressed promptly.

5.9.2 The grievance redressal procedure of the co-operative bank and the time frame fixed for responding to the complaints shall be placed on the bank’s website.

5.10 Reporting of transactions to FIU or other competent authorities

Co-operative banks shall be responsible for making Currency Transactions Reports and Suspicious Transactions Reports to FIU or any other competent authority in respect of the banks’ customer related activities carried out by the service providers.

6 Centralised List of Outsourced Agents

If a service provider’s contract is terminated prematurely prior to the completion of contracted period of service, Indian Banks’ Association (IBA) would have to be informed with reasons for termination. IBA would be maintaining a caution list of such service providers for the entire banking industry for sharing among banks.


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Reserve Bank of India – Press Releases

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The following State Governments have offered to sell securities by way of an auction, for an aggregate amount of ₹ 20,600 Cr. (Face Value). The revision is due to the addition of Meghalaya.

Sr. No. State/ UT Amount to be raised
(₹ Cr)
Additional Borrowing (Greenshoe) Option
(₹ Cr)
Tenure
(Yrs)
Type of Auction
1 Goa 100 10 Yield
2 Gujarat 1500 500 10 Yield
3 Jammu and Kashmir 900 12 Yield
4 Kerala 2000 25 Yield
1000 35 Yield
5 Maharashtra 1000 500 10 Yield
1000 11 Yield
6 Manipur 200 10 Yield
7 Meghalaya 200 20 Yield
8 Punjab 1000 10 Yield
1000 20 Yield
9 Rajasthan 500 5 Yield
500 10 Yield
1000 20 Yield
10 Tamil Nadu 1000 Re-issue of 6.96% Tamil Nadu SDL 2051 issued on May 19, 2021 Price
1000 Re-issue of 6.96% Tamil Nadu SDL 2056 issued on May 19, 2021 Price
11 Telangana 1000 30 Yield
12 Uttarakhand 700 10 Yield
13 Uttar Pradesh 2500 10 Yield
14 West Bengal 2500 7 Yield
  TOTAL 20,600      

The auction will be conducted on the Reserve Bank of India Core Banking Solution (E-Kuber) system on June 29, 2021 (Tuesday). The Government Stock up to 10% of the notified amount of the sale of each stock will be allotted to eligible individuals and institutions subject to a maximum limit of 1% of its notified amount for a single bid per stock as per the Scheme for Non-competitive Bidding Facility.

Both competitive and non-competitive bids for the auction should be submitted in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system on June 29, 2021 (Tuesday). The non-competitive bids should be submitted between 10.30 A.M. and 11.00 A.M. and the competitive bids should be submitted between 10.30 A.M. and 11.30 A.M.

In case of technical difficulties, Core Banking Operations Team (email; Phone no: 022-27595666, 022-27595415, 022-27523516) may be contacted.

For other auction related difficulties, IDMD auction team can be contacted (email; Phone no: 022-22702431, 022-22705125).

Only in the event of system failure, physical bids would be accepted. Such physical bids should be submitted to the Public Debt Office (email; Phone no: 022-22632527, 022-22701299) in the prescribed form obtainable from RBI website (https://www.rbi.org.in/Scripts/BS_ViewForms.aspx) before the auction timing ends.

The yield percent per annum expected by the bidder should be expressed up to two decimal points. An investor can submit more than one competitive bid at same/different rates of yield or prices in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system. However, the aggregate amount of bids submitted by a bidder should not exceed the notified amount for each State.

The Reserve Bank of India will determine the maximum yield /minimum price at which bids will be accepted. Securities will be issued for a minimum nominal amount of ₹10,000.00 and multiples of ₹10,000.00 thereafter.

The results of the auction will be announced on June 29, 2021 (Tuesday) and payment by successful bidders will be made during banking hours on June 30, 2021 (Wednesday) at Mumbai and at respective Regional Offices of RBI.

The State Government Stocks will bear interest at the rates determined by RBI at the auctions. For the new securities, interest will be paid half yearly on December 30 and June 30 of each year till maturity. The Stocks will be governed by the provisions of the Government Securities Act, 2006 and Government Securities Regulations, 2007.

The investment in State Government Stocks will be reckoned as an eligible investment in Government Securities by banks for the purpose of Statutory Liquidity Ratio (SLR) under Section 24 of the Banking Regulation Act, 1949. The stocks will qualify for the ready forward facility.

Ajit Prasad
Director   

Press Release: 2021-2022/436

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