Category: Notifications

RBI/2020-21/86 DOR.No.CRE.BC.33/21.06.007/2020-21 January 27, 2021 All Scheduled Commercial Banks (Excluding Payment Banks, Local Area Banks and Regional Rural Banks) Dear Sir/Madam, Prudential Guidelines on Capital Adequacy and Market Discipline – New Capital Adequacy Framework (NCAF) – Eligible Credit Rating Agencies – CRISIL Ratings Limited Please refer to the Master Circular DBR.No.BP.BC.4./21.06.001/2015-16 dated July 1, 2015 on ‘Prudential Guidelines on Capital Adequacy and Market Discipline – New Capital Adequacy Framework (NCAF)’ and Master Circular DBR.No.BP.BC.1/21.06.201/2015-16 dated July 1, 2015 on Basel III Capital Regulations. 2. In terms of paragraph 6 of the above circulars, CRISIL Limited has been accredited for the purpose of risk weighting the banks’ claims for capital adequacy purposes along with other credit rating agencies (CRAs) registered with Securities and Exchange Board of India (SEBI). The rating business of CRISIL Limited has since been transferred to CRISIL Ratings Limited, a wholly owned subsidiary of CRISIL Limited in compliance with SEBI’s notification dated September 11, 2018 read with SEBI’s circular dated September 19, 2018. Banks may therefore, use the ratings of the CRISIL Ratings Limited for the purpose of risk weighting their claims for capital adequacy purposes. The rating-risk weight mapping for the long term and short-term ratings assigned by CRISIL Ratings Limited will be the same as was in the case of CRISIL Limited and there is no change in the rating symbols earlier assigned by CRISIL Limited. 3. All other provisions regarding external credit ratings stipulated in the aforementioned Master Circulars remain unchanged. Yours faithfully, (Manoranjan Mishra) Chief General Manager

April 14, 2015

Dear All

Welcome to the refurbished site of the Reserve Bank of India.

The two most important features of the site are: One, in addition to the default site, the refurbished site also has all the information bifurcated functionwise; two, a much improved search – well, at least we think so but you be the judge.

With this makeover, we also take a small step into social media. We will now use Twitter (albeit one way) to send out alerts on the announcements we make and YouTube to place in public domain our press conferences, interviews of our top management, events, such as, town halls and of course, some films aimed at consumer literacy.

The site can be accessed through most browsers and devices; it also meets accessibility standards.

Please save the url of the refurbished site in your favourites as we will give up the existing site shortly and register or re-register yourselves for receiving RSS feeds for uninterrupted alerts from the Reserve Bank.

Do feel free to give us your feedback by clicking on the feedback button on the right hand corner of the refurbished site.

Thank you for your continued support.

Department of Communication

Reserve Bank of India

Next

April 14, 2015

Dear All

Welcome to the refurbished site of the Reserve Bank of India.

The two most important features of the site are: One, in addition to the default site, the refurbished site also has all the information bifurcated functionwise; two, a much improved search – well, at least we think so but you be the judge.

With this makeover, we also take a small step into social media. We will now use Twitter (albeit one way) to send out alerts on the announcements we make and YouTube to place in public domain our press conferences, interviews of our top management, events, such as, town halls and of course, some films aimed at consumer literacy.

The site can be accessed through most browsers and devices; it also meets accessibility standards.

Please save the url of the refurbished site in your favourites as we will give up the existing site shortly and register or re-register yourselves for receiving RSS feeds for uninterrupted alerts from the Reserve Bank.

Do feel free to give us your feedback by clicking on the feedback button on the right hand corner of the refurbished site.

Thank you for your continued support.

Department of Communication

Reserve Bank of India

Next

RESERVE BANK OF INDIA FOREIGN EXCHANGE DEPARTMENT CENTRAL OFFICE MUMBAI 400 001 Notification No. FEMA 23(R)/(4)/2021-RB January 08, 2021 Foreign Exchange Management (Export of Goods and Services) (Amendment) Regulations, 2021 In exercise of the powers conferred by clause (a) of sub-section (1), sub-section (3) of section 7 and clause (b) of sub-section (2) of section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India makes the following amendments in the Foreign Exchange Management (Export of Goods & Services) Regulations, 2015 [Notification No. FEMA 23(R)/2015- RB dated January 12, 2016] (hereinafter referred to as ‘the Principal Regulations’), namely: 1. Short title and commencement: – These Regulations may be called the Foreign Exchange Management (Export of Goods and Services) (Amendment) Regulations, 2021. They shall come into force from the date of their publication in the official Gazette. 2. In the Principal Regulations, in regulation 4, for sub-regulation (ea), the following shall be substituted, namely:- “(ea) re-export of leased aircraft/helicopter and/or engines/auxiliary power units (APUs), either completely or in partially knocked down condition re-possessed by overseas lessor and duly de-registered by the Directorate General of Civil Aviation (DGCA) on the request of Irrevocable Deregistration and Export Request Authorisation (IDERA) holder under ‘Cape Town Convention’ or any other termination or cancellation of the lease agreement between the lessor and lessee subject to permission by DGCA/Ministry of Civil Aviation for such export/s.” (R. S. Amar) Chief General Manager Foot Note: – The Foreign Exchange Management (Export of Goods & Services) Regulations, 2015 [Notification No. FEMA 23(R)/2015-RB dated January 12, 2016] were published in the Official Gazette vide G.S.R.No.19 (E) dated January 12, 2016 in Part II, Section 3, sub-Section (i) and subsequently amended by Notification No. FEMA 23(R)/(1)/2017-RB dated June 23, 2017 published in the Official Gazette vide G.S.R.No.635(E) dated June 23, 2017, No. FEMA 23(R)/(2)/2019-RB dated December 03, 2019 published in the Official Gazette on December 09, 2019 and No. FEMA 23(R)/(3)/2020-RB dated March 31, 2020 published in the Official Gazette on March 31, 2020.

RBI/2020-21/83
Ref.No.DoS.CO.PPG./SEC.04/11.01.005/2020-21

January 07, 2021

The Chairman / Managing Director / Chief Executive Officer
All Scheduled Commercial Banks (Excluding RRBs)
All Local Area Banks
All Small Finance Banks and
All Payments Banks

Madam / Dear Sir,

Risk Based Internal Audit (RBIA) Framework – Strengthening Governance arrangements

In terms of the Guidance Note on Risk-Based Internal Audit issued by RBI vide circular DBS.CO.PP.BC.10/11.01.005/2002-03 dated December 27, 2002, banks, inter alia, are required to put in place a risk based internal audit (RBIA) system as part of their internal control framework that relies on a well-defined policy for internal audit, functional independence with sufficient standing and authority within the bank, effective channels of communication, adequate audit resources with sufficient professional competence, among others.

2. While the aforesaid Guidance Note lays out the basic approach for risk based internal audit functions, banks are expected to re-orient their approach, in line with the evolving best practices, as a part of their overall Governance and Internal Control framework. Banks are encouraged to adopt the International Internal Audit standards, like those issued by the Basel Committee on Banking Supervision (BCBS) and the Institute of Internal Auditors (IIA).

3. To bring uniformity in approach followed by the banks, as also to align the expectations on Internal Audit Function with the best practices, banks are advised as under:

1. Authority, Stature and Independence – The internal audit function must have sufficient authority, stature, independence and resources within the bank, thereby enabling internal auditors to carry out their assignments with objectivity. Accordingly, the Head of Internal Audit (HIA) shall be a senior executive of the bank who shall have the ability to exercise independent judgement. The HIA as well as the internal audit function shall have the authority to communicate with any staff member and have access to all records or files that are necessary to carry out the entrusted responsibilities.

2. Competence – Requisite professional competence, knowledge and experience of each internal auditor is essential for the effectiveness of the bank’s internal audit function. The desired areas of knowledge and experience may include banking operations, accounting, information technology, data analytics and forensic investigation, among others. Banks should ensure that internal audit function has the requisite skills to audit all areas of the bank.

3. Staff Rotation – Except for the entities where the internal audit function is a specialised function and managed by career internal auditors, the Board should prescribe a minimum period of service for staff in the Internal Audit function. The Board may also examine the feasibility of prescribing at least one stint of service in the internal audit function for those staff possessing specialized knowledge useful for the audit function, but who are posted in other departments, so as to have adequate skills for the staff in the Internal Audit function.

4. Tenor for appointment of Head of Internal Audit – Except for the entities where the internal audit function is a specialised function and managed by career internal auditors, the HIA shall be appointed for a reasonably long period, preferably for a minimum of three years.

5. Reporting Line – The HIA shall directly report to either the Audit Committee of the Board (ACB) / MD & CEO or Whole Time Director (WTD). Should the Board of Directors decide to allow the MD & CEO or a WTD to be the ‘reporting authority’ of the HIA, then the ‘reviewing authority’ shall be with the ACB and the ‘accepting authority’ shall be with the Board in matters of performance appraisal of the HIA. Further, in such cases, the ACB shall meet the HIA at least once in a quarter, without the presence of the senior management, including the MD & CEO/WTD. The HIA shall not have any reporting relationship with the business verticals of the bank and shall not be given any business targets. In foreign banks operating in India as branches, the HIA shall report to the internal audit function in the controlling office / head office.

6. Remuneration – The independence and objectivity of the internal audit function could be undermined if the remuneration of internal audit staff is linked to the financial performance of the business lines for which they exercise audit responsibilities. Thus, the remuneration policies should be structured in a way that it avoids creating conflict of interest and compromising audit’s independence and objectivity.

4. The internal audit function shall not be outsourced. However, where required, experts, including former employees, could be hired on contractual basis subject to the ACB 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.

5. Banks must ensure and demonstrate through proper documentation that their risk-based internal audit framework captures all the significant criteria / principles suited for their organisational structure, the business model and the risks.

6. The instructions contained in this circular shall come into effect immediately from the date of this circular.

7. This circular supplement the guidelines issued by Reserve Bank of India on December 27, 2002 on Risk-based internal audit along with other circulars/instruction on the subject issued from time-to time and for any common areas of guidance, the prescription of this circular shall be followed.

Yours faithfully,

(Ajay Kumar Choudhary)
Chief General Manager-In-Charge

RBI/2020-21/82
DPSS.CO.OD No.901/06.24.001/2020-21

January 05, 2021

The Chairman / Managing Director / Chief Executive Officer
of member banks participating in RTGS / NEFT

Madam / Dear Sir,

Introduction of Legal Entity Identifier for Large Value Transactions in Centralised Payment Systems

The Legal Entity Identifier (LEI) is a 20-digit number used to uniquely identify parties to financial transactions worldwide. It was conceived as a key measure to improve the quality and accuracy of financial data systems for better risk management post the Global Financial Crisis.

2. LEI has been introduced by the Reserve Bank in a phased manner for participants in the over the counter (OTC) derivative and non-derivative markets as also for large corporate borrowers.

3. It has now been decided to introduce the LEI system for all payment transactions of value ₹50 crore and above undertaken by entities (non-individuals) using Reserve Bank-run Centralised Payment Systems viz. Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT).

4. In preparation for the wider introduction of LEI across all payment transactions, member banks should:

1. advise entities who undertake large value transactions (₹50 crore and above) to obtain LEI in time, if they do not already have one;

2. include remitter and beneficiary LEI information in RTGS and NEFT payment messages (details of the identified fields in the messaging structures of RTGS and NEFT for inclusion of LEI information are at Annex);

3. maintain records of all transactions of ₹50 crore and above through RTGS and / or NEFT.

5. Entities can obtain LEI from any of the Local Operating Units (LOUs) accredited by the Global Legal Entity Identifier Foundation (GLEIF), the body tasked to support the implementation and use of LEI. In India, LEI can be obtained from Legal Entity Identifier India Ltd. (LEIL) (https://www.ccilindia-lei.co.in), which is also recognised as an issuer of LEI by the Reserve Bank under the Payment and Settlement Systems Act, 2007.

6. These directions are issued under Section 10 (2) read with Section 18 of Payment and Settlement Systems Act, 2007 (Act 51 of 2007) and shall be effective from April 1, 2021.

Yours faithfully,

(P Vasudevan)
Chief General Manager

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Annex

Bank Customers who must obtain LEI

1. All non-individual customers initiating or receiving transactions of ₹50 crore and above through RTGS and / or NEFT.

Fields in NEFT and RTGS payment messages to be used for recording Remitter and Beneficiary LEI

1. For RTGS customer payment transactions, LEI information shall be provided in ‘Remittance information’ field.

2. For NEFT outward debit messages, LEI information shall be provided in ‘Sender to Receiver Information’ field.

3. Technical guidelines for populating LEI in identified fields in RTGS and NEFT messages shall be communicated separately.

RBI/2020-21/81
DPSS.CO.AD No.900/02.29.005/2020-21

January 05, 2021

The Chairman / Managing Director / Chief Executive Officer
Card Issuing and Acquiring Banks and Non-banks / Authorised Card Networks

Madam / Dear Sir,

Operationalisation of Payments Infrastructure Development Fund (PIDF) Scheme

Please refer to the Statement on Developmental and Regulatory Policies dated October 4, 2019 and the Press Release dated June 05, 2020 announcing creation of Payments Infrastructure Development Fund (PIDF). PIDF is intended to subsidise deployment of payment acceptance infrastructure in Tier-3 to Tier-6 centres with special focus on North-Eastern States of the country. It envisages creating 30 lakh new touch points every year for digital payments.

2. The framework of PIDF is enclosed (Annex – I). An Advisory Council (AC), under the Chairmanship of the Deputy Governor, RBI, has been constituted for managing the PIDF. PIDF will be operational for a period of three years from January 01, 2021 and may be extended for two more years depending upon the progress. PIDF presently has a corpus of ₹ 345 crore (₹ 250 crore contributed by RBI and ₹ 95 crore by the major authorised card networks in the country).

3. All stakeholders are requested to co-operate in this endeavour by – (a) making their contributions to PIDF within the timelines, and (b) deploying acceptance infrastructure and seeking reimbursement from PIDF.

4. These directions are issued under Section 10 (2) read with Section 18 of Payment and Settlement Systems Act, 2007 (Act 51 of 2007).

Yours faithfully,

(P Vasudevan)
Chief General Manager

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Annex – I

Payments Infrastructure Development Fund (PIDF) Scheme

The objective of PIDF is to increase the number of acceptance devices multi-fold in the country. The Scheme is expected to benefit the acquiring banks / non-banks and merchants by lowering overall acceptance infrastructure cost.

1. Validity Period and PIDF Target

1.1 Three years from January 01, 2021, extendable by two further years, if necessary.

1.2 Increasing payments acceptance infrastructure by adding 30 lakh touch points – 10 lakh physical and 20 lakh digital payment acceptance devices every year.

2. Governance Structure of PIDF

2.1 PIDF shall be governed by an ex-officio Advisory Council (AC).

2.2 Composition of the AC :–

1. Shri B P Kanungo, Deputy Governor, Reserve Bank of India;

2. Shri Sunil Mehta, Chief Executive, Indian Banks’ Association;

3. Shri D Nageswara Rao, Chief General Manager, DFIBT, NABARD;

4. Shri Dilip Asbe, Chief Executive Officer, National Payments Corporation of India;

5. Shri Vishwas Patel, Chairman, Payments Council of India;

6. Shri Shailesh Paul, Vice President and Head Merchant Sales and Solutions, Visa;

7. Shri Rajeev Kumar, Senior Vice President, Market Development, Mastercard;

8. Shri R Vittal Raj, Chartered Accountant, Kumar & Raj Chartered Accountants; and

9. Shri Ajay Michyari, Regional Director, Reserve Bank of India, Mumbai Regional Office (Administrator of PIDF).

The Chief General Manager, Department of Payment & Settlement Systems, Reserve Bank of India shall function as the Secretariat to the AC.

2.3 The AC may constitute sub-committees to look into different aspects of the PIDF, as required.

2.4 The AC may co-opt members at its discretion.

2.5 AC shall devise suitable rules for operating the PIDF.

3. Target Geographies

3.1 The primary focus shall be to create payment acceptance infrastructure in Tier-3 to Tier-6 centres.

3.2 North Eastern states of the country shall be given special focus.

3.3 While setting parameters for utilisation of funds, the focus shall be to target those merchants who are yet to be terminalised (merchants who do not have any payment acceptance device).

3.4 The AC shall devise a transparent mechanism for allocation of targets to acquiring banks / non-banks in different segments / locations.

3.5 The tentative distribution of targets across centers will be as follows:

Distribution of Acceptance Devices	% Share of Total
Tier-3 and Tier-4 centres	30
Tier-5 and Tier-6 centres	60
North Eastern States	10

4. Market Segments and Merchant Categories

4.1 Merchants providing essential services (transport, hospitality, etc.), government payments, fuel pumps, PDS shops, healthcare, kirana shops may be targeted, especially in the targeted geographies.

5. Types of Acceptance Devices Covered

5.1 Multiple payment acceptance devices / infrastructure supporting underlying card payments, such as physical PoS, mPoS (mobile PoS), GPRS (General Packet Radio Service), PSTN (Public Switched Telephone Network), QR code-based payments, etc.

5.2 As the cost structure of acceptance devices vary, subsidy amounts shall accordingly differ by the type of payment acceptance device deployed. A subsidy of 30% to 50% of cost of physical PoS and 50% to 75% subsidy for Digital PoS shall be offered.

5.3 Payment methods that are not inter-operable shall not be considered under PIDF.

5.4 The subsidy shall not be claimed by applicant from other sources like NABARD, etc. In case other mechanisms exist for providing subsidy or reimbursing cost of deployment of acceptance infrastructure, no reimbursement shall be claimed from PIDF therefor.

6. Initial Corpus

6.1 Initial corpus of PIDF has to be substantial to initiate pan-India terminalisation and to cover the pay-outs in the first year. Contributions to the PIDF shall be mandatory for banks and card networks.

6.2 RBI shall contribute ₹ 250 crore to the corpus; the authorised card networks shall contribute in all ₹ 100 crore.

6.3 The card issuing banks shall also contribute to the corpus based on the card issuance volume (covering both debit cards and credit cards) at the rate of ₹ 1 and ₹ 3 per debit and credit card issued by them, respectively.

6.4 It shall be the endeavour to collect the contributions by January 31, 2021.

6.5 Any new entrant to the card payment eco-system (card issuer and card network) shall contribute an appropriate amount to the PIDF.

7. Recurring Contribution

7.1 Besides the initial corpus, the PIDF shall also receive annual contribution from card networks and card issuing banks as under:

a) Card networks – Turnover based – 1 basis point (bps) i.e., 0.01 paisa per Rupee of transaction;

b) Card issuing banks – Turnover based – 1 bps and 2 bps i.e., 0.01 paisa and 0.02 paisa per Rupee of transaction for debit and credit cards respectively; also at the rate of ₹ 1 and ₹ 3 for every new debit and credit card issued by them respectively during the year.

7.2 RBI shall contribute to yearly shortfalls, if any.

8. Collection Mechanism

8.1 By January 31st and July 31st based on card data of December 31st and June 30th respectively.

9. Types of Expenses Covered

9.1 The parameters / rules for claiming the amount of subsidy for the capital expenditure, taking into account the type of device, deployment location etc., shall be framed by the AC.

9.2 Subsidy shall be granted on half yearly basis, after ensuring that performance parameters are achieved, including conditions for ‘active’ status of the acceptance device and ‘minimum usage’ criteria, as defined by the AC.

9.3 The minimum usage shall be termed as 50 transactions over a period of 90 days and active status shall be minimum usage for 10 days over the 90-day period.

9.4 The subsidy claims shall be processed on half yearly basis and 75 percent of the subsidy amount shall be released. The balance 25 percent shall be released later subject to the status of the acceptance device being active in 3 out of the 4 quarters of the ensuing year.

10. Deployment Targets for Acquirers

10.1 Acquirers need to adopt a scientific process for identification of deployment areas, submit proposals to Regional Director, Mumbai Regional Office (MRO), RBI and effectively implement the project. The PIDF proposal format for submission in this regard is enclosed (Format I).

11. Claims

11.1 The scheme is on reimbursement basis; accordingly, the claim shall be submitted only after making payment to the vendor.

11.2 Maximum cost of physical acceptance device eligible for subsidy – ₹ 10,000 (including one-time operating cost up to a maximum of ₹ 500).

11.3 Maximum cost of digital acceptance device eligible for subsidy – ₹ 300 (including one-time operating cost up to a maximum of ₹ 200).

11.4 Subsidised amount of cost of physical and digital payment acceptance devices based on location of deployment shall be as under:

Location	Physical payment acceptance device (% of total cost)	Digital payment acceptance device (% of total cost)
Tier-3 and Tier-4 centres	30	50
Tier-5 and Tier-6 centres	40	60
North Eastern States	50	75

11.5 Acquirers shall submit their claims through their bankers to RBI, MRO with self-declaration about fulfilment of ‘minimum usage’ and ‘active status’ criteria for deployed devices.

11.6 All initial claims shall be submitted for reimbursement of expenses (less the Input Tax Credit received / receivable by the bank / non-bank under GST) as per format (Format II). The second claim for 25% of eligible subsidy shall be submitted as per format (Format III).

12. Monitoring of Implementation of Targets

12.1 Implementation of targets under PIDF shall be monitored by RBI, MRO with assistance from Card networks, Indian Banks’ Association (IBA) and Payments Council of India (PCI).

12.2 Acquirers shall submit quarterly deployment reports on achievement of targets to RBI, MRO.

12.3 Acquirers meeting / exceeding their targets well in time and / or ensure greater utilisation of acceptance devices in terms of transactions shall be incentivised while those who do not achieve their targets shall be disincentivised, by scaling up or down the extent of reimbursement of subsidy as follows.

Target Achievement / Utilisation	% of Subsidy Eligible
Less than 75 percent	90
75 percent to 125 percent	100
Greater than 125 percent	110

RBI/2020-21/80
DOR.AML.BC.No.31/14.01.001/2020-21

December 18, 2020

The Chairpersons/ CEOs of all the Regulated Entities

Dear Sir/Madam,

Amendment to Master Direction (MD) on KYC – Centralized KYC Registry – Roll out of Legal Entity Template & other changes

Regulated Entities (REs) have been uploading the KYC data pertaining to all individual accounts opened on or after January 1, 2017 on to CKYCR in terms of the provisions of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005. Changes to the template, as and when required are released by CERSAI after consulting the Reserve Bank.

2. As the CKYCR is now fully operational for individual customers, it has been decided to extend the CKYCR to Legal Entities (LEs). Accordingly, REs shall upload the KYC data pertaining to accounts of LEs opened on or after April 1, 2021, on to CKYCR in terms of Rule 9 (1A) of the PML Rules. The LE Template and the Annex thereof are attached as Annex “A” and Annex “B” respectively to this circular. The LE Template would be released by CERSAI well in advance so that REs start using it from the notified date. REs shall also ensure that in case of accounts of LEs opened prior to April 1, 2021, the KYC records are uploaded on to CKYCR during the process of periodic updation as specified in Section 38 of the Master Direction, or earlier when the updated KYC information is obtained/received from the customer in certain cases. REs shall ensure that during periodic updation, the customers’ KYC details are migrated to current Customer Due Diligence (CDD) standards.

3. In order to ensure that all existing KYC records of individual customers are incrementally uploaded on to CKYCR, REs shall upload the KYC data pertaining to accounts of individuals opened prior to January 01, 2017, at the time of periodic updation as specified in Section 38 of the Master Direction, or earlier when the updated KYC information is obtained/received from the customer in certain cases. REs shall ensure that during periodic updation, the customers’ KYC details are migrated to current CDD standard.

4. Where a customer, for the purpose of establishing an account based relationship, submits a KYC Identifier to a RE, with an explicit consent to download records from CKYCR, then such RE shall retrieve the KYC records online from CKYCR using the KYC Identifier and the customer shall not be required to submit the same KYC records or information or any other additional identification documents or details, unless –

1. there is a change in the information of the customer as existing in the records of CKYCR;

2. the current address of the customer is required to be verified;

3. the RE considers it necessary in order to verify the identity or address of the customer, or to perform enhanced due diligence or to build an appropriate risk profile of the client.

5. Once KYC Identifier is generated by CKYCR, the REs shall ensure that the same is communicated to the individual/legal entity as the case may be.

6. The Master Direction on KYC dated February 25, 2016, is hereby updated to reflect the changes effected by the above amendment and shall come into force with immediate effect.

Yours faithfully,

(Thomas Mathew)
Chief General Manager
Encl: As above

RBI/2020-21/79
DOR.No.BP.BC.30/21.04.048/2020-21

December 14, 2020

All Scheduled Commercial Banks
All Payments Banks

Madam / Dear Sir,

Opening of Current Accounts by Banks – Need for Discipline

Please refer to the circulars DOR.No.BP.BC/7/21.04.048/2020-21 dated August 6, 2020 and DOR.No.BP.BC.27/21.04.048/2020-21 dated November 2, 2020 on the captioned subject. On a review, it has been decided to permit banks to open specific accounts which are stipulated under various statutes and instructions of other regulators/ regulatory departments, without any restrictions placed in terms of the above-mentioned circular dated August 6, 2020. An indicative list of such accounts is as given below:

1. Accounts for real estate projects mandated under Section 4 (2) l (D) of the Real Estate (Regulation and Development) Act, 2016 for the purpose of maintaining 70% of advance payments collected from the home buyers.

2. Nodal or escrow accounts of payment aggregators/prepaid payment instrument issuers for specific activities as permitted by Department of Payments and Settlement Systems (DPSS), Reserve Bank of India under Payment and Settlement Systems Act, 2007.

3. Accounts for settlement of dues related to debit card/ATM card/credit card issuers/acquirers.

4. Accounts permitted under FEMA, 1999.

5. Accounts for the purpose of IPO / NFO /FPO/ share buyback /dividend payment / issuance of commercial papers/allotment of debentures/gratuity, etc. which are mandated by respective statutes or regulators and are meant for specific/limited transactions only.

6. Accounts for payment of taxes, duties, statutory dues, etc. opened with banks authorized to collect the same, for borrowers of such banks which are not authorized to collect such taxes, duties, statutory dues, etc.

7. Accounts of White Label ATM Operators and their agents for sourcing of currency.

2. The above permission is subject to the condition that the banks shall ensure that these accounts are used for permitted/specified transactions only. Further, banks shall flag these accounts in the CBS for easy monitoring. Lenders to such borrowers may also enter into agreements/arrangements with the borrowers for monitoring of cash flows/periodic transfer of funds (if permissible) in these current accounts.

3. Banks shall monitor all current accounts and CC/ODs regularly, at least on a half-yearly basis, specifically with respect to the exposure of the banking system to the borrower, to ensure compliance with instructions contained in circular dated August 6, 2020 ibid.

4. A set of frequently asked questions (FAQs) providing clarifications related to implementation of the circulars ibid are provided in the Annex.

5. All other instructions contained in the circulars ibid remain unchanged.

Yours faithfully,

(Prakash Baliarsingh)
Chief General Manager

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Annex

Frequently Asked Questions

1. Whether banks are required to obtain No Objection Certificate (NOC) before opening current accounts as per the revised guidelines?

The previous guidelines which required banks to obtain NOC before opening current accounts have been replaced by the revised guidelines issued vide circular dated August 6, 2020. The requirement of obtaining NOC is no more applicable.

2. How shall banks identify the aggregate exposure of the banking system to a customer/borrower for the purpose of opening current accounts and/or CC/OD accounts under these guidelines?

Banks may compute the aggregate exposure for the purpose of these guidelines based on the information available from Central Repository of Information on Large Credits (CRILC), Credit Information Companies (CICs), National E-Governance Services Ltd. (NeSL), etc. and by obtaining customers’ declaration, if required.

3. For the purpose of this circular, whether exposure of non-banking financial companies (NBFCs) and other financial institutions like National Housing Bank (NHB) shall be included in computing aggregate exposure of the banking system.

The instructions are applicable to Scheduled Commercial Banks and Payments Banks. Accordingly, the aggregate exposure for the purpose shall include exposures of these banks only.

4. Whether aggregate exposure shall include Day Light Over Draft (DLOD)/ intra-day facilities and irrevocable payment commitments, limits set up for transacting in FX and interest rate derivatives, CPs, etc.

All fund based and non-fund based credit facilities sanctioned by the banks and carried in their Indian books shall be included for the purpose of aggregate exposure.

5. The previous guidelines on obtaining NOC were applicable only for entities. Whether the revised guidelines are also applicable to entities only?

The revised guidelines are applicable to all borrowers.

6. Whether current accounts can be opened for borrowers who have availed agricultural/personal ODs or ODs against deposits?

Banks are not permitted to open current accounts for borrowers who have availed any fund or non-fund-based credit in the form of overdraft facilities.

7. In respect of proprietorship firms, whether credit facilities availed by the proprietor in his/her personal capacity like home loan, loan against property, etc shall be included in the aggregate exposure of the banking system for the purpose of this circular.

In case of proprietary firms, the aggregate exposure shall include all the credit facilities availed by him/her, for business purpose or otherwise.

8. As per paragraph 1 (ii) of the circular, where a bank’s exposure to a borrower is less than 10 per cent of the exposure of the banking system to that borrower, while credits are freely permitted, debits to the CC/OD account can only be for credit to the CC/OD account of that borrower with a bank that has 10 per cent or more of the exposure of the banking system to that borrower. Funds will be remitted from these accounts to the said transferee CC/OD account at the frequency agreed between the bank and the borrower. Where shall the funds be credited in cases where none of the lenders have at least 10% exposure to a borrower.

In such cases, funds may be remitted to the account maintained with the bank having the highest share in the exposure of the banking system to the borrower. Credits and debits will be freely permitted in the said account.

Alternatively, the borrower is free to avail working capital only in the form of WCDL/WCTL and open current accounts as per the provisions of paragraph 1 (v) of the circular based on the aggregate exposure.

9. Whether banks with less than 10% of aggregate exposure can debit their dues such as fees and charges and maturity obligations around cross border services like letter of credit/ bank guarantees, derivatives, factoring transactions, other loan instalments, etc. from the CC/OD accounts of their borrowers before transferring the funds to the CC/OD account of the borrower with bank(s) having 10% or more of the aggregate exposure of the banking system to that borrower.

In such cases, banks are permitted to debit interest/charges pertaining to the said CC/OD (not any other facilities granted by the same bank) account as well as fee/charges for opening of LC/ BG, issue of DDs, etc. before transferring the funds to the CC/OD account of the borrower with bank(s) having 10% or more of the aggregate exposure of the banking system to that borrower.

10. Whether banks with less than 10 per cent of the aggregate exposure of the banking system to a borrower can offer only working capital demand loan (WCDL) / working capital term loan (WCTL) facility to the borrower or existing CC/OD facility can be enhanced.

Banks are free to enhance existing CC/OD/WCTL/WCDL facilities or sanction new facilities in these forms subject to provisions of the circular on ‘Guidelines on Loan System for Delivery of Bank Credit’ dated December 5, 2018 as well as the circular dated August 6, 2020 on opening of current accounts.

11. Whether banks can open current accounts for project specific facilities like Term Loan/ Lease Rental Discounting (LRD) term loan against a specific project where cash flows/rent receivables are directed to a specific bank.

Banks may open a current account for receiving/monitoring cash flows of a specific project, provided the borrower has not availed any CC/OD facility for that specific project. Banks opening project specific current/escrow account shall ensure that cash flows coming in the account are from that project only.

12. Whether banks are allowed to open current/escrow accounts of customers availing credit facility from an NBFC/Non-bank financial institution for a project.

Banks are free to open current accounts for borrowers having credit facilities only from NBFCs/FIs/ /co-operative banks/non-bank institutions. However, if such borrowers avail facilities from the banks covered under the guidelines, all the provisions of the circular shall be applicable.

13. As per para 1 (v) (a) of the circular, in case of customers who have not availed CC/OD facility from any bank, banks are required to put in place an escrow mechanism for borrowers where exposure of the banking system is ₹50 crore or more. Further, lending banks can open ‘collection accounts’ for such borrowers subject to the condition that funds will be remitted from these accounts to the said escrow account at the frequency agreed between the bank and the borrower. Whether multiple escrow accounts can be opened for large corporates with multiple business units (BU) / multiple projects.

For borrowers with multiple projects/ multiple business units, banks may open multiple escrow accounts for monitoring of project-wise / unit-wise cash flows. Banks opening project specific current/escrow account shall ensure that cash flows coming in the account are from that project/unit only.

14. Whether all lending banks are required to be part of the same escrow agreement? Whether non-lending banks can open such escrow accounts as mandated under para 1 (v) of the circular. Who will decide as to which bank will act as escrow agent?

All lending banks should be part of the escrow agreement. The terms and conditions may be decided mutually by lending banks and the borrower. Borrowers shall be free to choose their escrow managing banks. Non-lender banks are not permitted to escrow accounts

15. As per para 3 of the circular, term loans should be disbursed directly to the suppliers of goods and services. Whether term loans towards refinancing of existing term debt of borrowers, for general corporate purpose / long term working capital, reimbursement of expenses, etc. can be disbursed to the CC/OD or current accounts of the borrowers.

In cases where term loans are meant for purposes other than for supply of goods and services and where the payment destination is unidentifiable, banks may route such term loans through CC/OD or current accounts of the borrower opened as per the provisions of the circular. Banks shall ensure that where the payment destination is identifiable (i.e. refinance of existing debt, etc.), payment is made directly, without routing it through CC/OD accounts.

16. Whether only banks maintaining CC/OD or collection accounts are obligated to monitor the exposure of a customer on half yearly basis.

All banks, whether lending banks or other account holding banks, are required to monitor the accounts on regular basis as prescribed in the circular.

17. At the time of periodical monitoring, if there is a change in exposure of banks/aggregate exposure of the banking system to the borrower, who will decide about the accounts to which funds from collection accounts or CC/OD accounts with banks less than 10% of the exposure are to be credited. Further, what will be timeline within which the new arrangements will have to be implemented.

Borrowers shall be free to choose the bank(s) for the purpose of maintaining their operating current account/escrow account/CC/OD accounts within the overall framework of the circular. Further, banks will have to implement the new arrangements within a period of three months from the date of change in exposure.

18. Whether banks maintaining collection accounts can debit the collection accounts for liquidating their own dues of WCDL/Bills/ Derivatives/loan instalments, etc.

Collections accounts can be debited only for transferring the funds to the escrow account of the borrower.

RBI/2020-21/78 FMRD.DIRD.01/14.01.001/2020-21 December 04, 2020 All Eligible Market Participants Madam/Sir, Regional Rural Banks- Access to Call/Notice/Term Money Market A reference is invited to the Statement of Developmental and Regulatory Policies dated December 4, 2020 wherein it was announced that Regional Rural Banks (RRBs) shall be permitted to participate in the call/notice/term money market. 2. Accordingly, RRBs shall be permitted to participate in the call/notice and term money markets both as borrowers and lenders. The prudential limits and other guidelines on call/notice/term money markets for the RRBs shall be the same as those applicable to Scheduled Commercial Banks in terms of the RBI Master Direction No.2/2016-17, dated July 7, 2016 on Money Market Instruments: Call/Notice Money Market, Commercial Paper, Certificates of Deposit and Non-Convertible Debentures (original maturity up to one year), as amended from time to time. RRBs may approach the Chief General Manager, Financial Market Regulation Department, Reserve Bank of India Central Office, 9th floor, Central Office building, Shahid Bhagat Singh Marg, Fort, Mumbai-400 001 (cgmfmrd@rbi.org.in) in this regard. 3. These Directions have been issued by RBI in exercise of the powers conferred under section 45W of the Reserve Bank of India Act, 1934 and of all the powers enabling it in this behalf. 4. These Directions shall be applicable with immediate effect. Yours faithfully, (Dimple Bhandia) Chief General Manager