Category: RBI News

RBI/2021-22/05
FIDD.GSSD.CO.BC.No.04/09.01.01/2021-22

April 01, 2021

The Chairman/ Managing Director & CEO
Public Sector Banks,
Private Sector Banks (including Small Finance Banks).

Madam/Dear Sir

Master Circular – Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM)

Please refer to the Master Circular FIDD.GSSD.CO.BC.No.06/09.01.01/2020-21 dated September 18, 2020 on Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM).

The Master Circular has been suitably updated by incorporating the modifications in DAY-NRLM scheme issued up to April 01, 2021, which are listed in the appendix and also been placed on website (https://www.rbi.org.in).

Yours faithfully,

(Kaya Tripathi)
Chief General Manager

Master Circular
Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM)

1. Background

The Ministry of Rural Development (MoRD), Government of India launched the National Rural Livelihood Mission (NRLM) by restructuring Swarnajayanti Gram Swarojgar Yojana (SGSY) with effect from 01st April 2013 (RBI Circular No. RBI/2012-13/559 dated 27 June 2013). NRLM was renamed as DAY-NRLM (Deendayal Antyodaya Yojana – National Rural Livelihoods Mission) w.e.f. March 29, 2016. The DAY-NRLM is the flagship program of Govt. of India for promoting poverty reduction through building strong institutions of the poor, particularly women, and enabling these institutions to access a range of financial services and livelihoods. DAY-NRLM adopts a demand driven approach, enabling the States to formulate their own State specific poverty reduction action plans. The blocks and districts in which all the components of DAY-NRLM would be implemented, either through the SRLMs or partner institutions or NGOs, would be the intensive blocks and districts, whereas remaining would be non-intensive blocks and districts. The key features of DAY-NRLM have been furnished in Annex I.

2. Women SHGs and their Federations

2.1 Women SHGs under DAY-NRLM consist of 10-20 persons. In case of special SHGs i.e. groups in the difficult areas, groups with disabled persons, and groups formed in remote tribal areas, this number may be a minimum of 5 persons.

2.2 DAY-NRLM promotes affinity-based women Self Help Groups (SHGs).

2.3 Only for groups to be formed with Persons with disabilities, and other special categories like elder, transgender, DAY-NRLM will have both men and women in the Self-Help Groups.

2.4 SHG is an informal group and registration under any Societies Act, State cooperative Act or a partnership firm is not mandatory vide Circular RPCD.No. Plan BC.13/PL-09.22/90-91 dated July 24th, 1991. However, Federations of Self Help Groups formed at Village, Gram Panchayat, Cluster or higher level may be registered under appropriate acts prevailing in their respective states.

Financial Assistance to the SHGs

3. Revolving Fund: DAY-NRLM, MoRD, would provide Revolving Fund (RF) support to SHGs in existence for a minimum period of 3/6 month and follow the norms of good SHGs, i.e. they follow ‘Panchasutra’ – regular meetings, regular savings, regular internal lending, regular recoveries and maintenance of proper books of accounts. Only such SHGs that have not received any RF earlier would be provided with RF, as corpus, with a minimum of ₹10,000 and up to a maximum of ₹15,000 per SHG. The purpose of RF is to strengthen their institutional and financial management capacity and build a good credit history within the group.

4. Capital Subsidy has been discontinued under DAY-NRLM:

No Capital Subsidy would be sanctioned to any SHG from the date of implementation of DAY-NRLM.

5. Community Investment Support Fund (CIF)

CIF would be provided by MoRD to the SHGs promoted under DAY – NRLM in all blocks (intensive and non-intensive) and would be routed through the Village level/ Cluster level Federations, to be maintained in perpetuity by the Federations. The CIF would be used, by the Federations, to advance loans to the SHGs and/or to undertake the common/collective socio-economic activities.

6. Introduction of Interest subvention:

DAY-NRLM has a provision for interest subvention, to cover the difference between the Lending Rate of the banks and 7%, on all credit from the banks/ financial institutions availed by women SHGs, for a maximum of ₹ 300,000/- per SHG. This would be available across the country in two ways:

(i) In 250 identified districts, banks may lend to the women SHGs @7% up to an aggregated loan amount of ₹300,000/-. The banks would be subvented to the extent of difference between the Weighted Average Interest Charged and 7%, subject to the maximum limit of 5.5%. An additional interest subvention of 3% is also available on prompt repayment by the SHGs, reducing the effective rate of interest to 4%.

(ii) In the remaining districts, the banks may lend at their respective lending rates, applicable to SHGs. In these districts, all women SHGs under DAY– NRLM would be eligible for interest subvention on prompt repayment. The difference between the bank lending rates and 7% for loans up to ₹ 300,000/- subject to a maximum limit of 5.5%, would be subvented directly in the loan accounts of the SHGs by the SRLMs. This part of the scheme would be operationalized by the SRLMs.

• Salient features of the Scheme are enclosed in Annex II.

• The list of 250 identified districts is as per Annex III.

• Subvented interest rate would be communicated separately to the banks by GoI/RBI.

7. Role of banks:

7.1 Opening of Savings account:

7.1.1 Opening of Savings account of SHGs: The role of banks would commence with opening of accounts for all the Women SHGs including members with disability and the Federations of the SHGs. The SHGs engaged in promoting of savings habits among their members would be eligible to open savings bank accounts.

(i) Know Your Customer (KYC) verification of only the office bearers shall suffice for opening of savings bank account.

(ii) Banks may not insist on Permanent Account Number (PAN) of SHGs at the time of opening of account or transactions and may accept declaration in Form No 60 as may be required.

(iii) For KYC verification pertaining to SHG members during opening of accounts, instructions of Department of Banking Regulation in Master Direction on KYC (dated February 25, 2016, updated as on March 23, 2021) shall be adhered to while completing Customer Due Diligence (CDD) process. CDD means identifying and verifying the customer and the beneficial owner. Accordingly, the current instructions under Simplified norms for Self Help Groups (SHGs) mention that while opening of accounts Customer Due Diligence (CDD) of all the members of SHG shall not be required and CDD of only the office bearers shall suffice. At the time of credit linking of SHGs, banks may undertake KYC verification of all the members in the SHG. However, opening of savings account of all members with the bank shall not be made a prerequisite for credit linkage of SHGs. Banks are advised to maintain separate Savings and loan account for Self Help Groups.

(iv) Business Correspondents deployed by banks may also be authorized to open Saving Bank Accounts of the SHGs after verification/approval of the base branch, subject to adherence to extant BC guidelines and in accordance with the bank’s Board approved policy on Business Correspondents. However, ensuring compliance with KYC and AML norms under the BC model continues to be the responsibility of the banks.

7.1.2 Opening of Savings account of Federation of SHGs: Banks are advised to open savings account of Federations of SHGs at village, Gram Panchayat, Cluster or higher level. These accounts may be categorized as savings account for ‘Association of persons’. The ‘Know Your Customer’ (KYC) norms for the signatories of such accounts as specified from time to time by Reserve Bank of India would be applicable.

7.1.3 Opening of Current Account of Producer Groups (PGs): In order to facilitate collective production and marketing for their produce, banks are advised to open current account for Producer Groups promoted under DAY-NRLM at village, Gram Panchayat, Cluster or higher level. The ‘Know Your Customer’ (KYC) norms for the signatories of such accounts as specified from time to time by Reserve Bank of India would be applicable.

7.1.4 Transaction in Savings/Cash Credit account of SHGs and Federation of SHGs: SHGs and their federations may be encouraged to transact through their respective saving accounts and Cash Credit Loan accounts on regular basis. To facilitate this, banks are advised to enable transactions in jointly operated savings/Cash Credit account of SHGs and their federations with interoperable facility at retail outlets managed by Business Correspondents. Banks are also advised to extend all such services to SHGs and their federations through Business Correspondents as per their board approved policies.

7.2 Lending Norms to individual SHG members and SHGs

7.2.1 The eligibility criteria for the SHGs to avail loans:

• SHGs should be in active existence at least since the last 6 months as per the books of account of SHGs and not from the date of opening of S/B account.

• SHGs should be practicing ‘Panchasutras’ i.e. Regular meetings; Regular savings; Regular inter-loaning; Timely repayment; and Up-to-date books of accounts;

• Qualified as per grading norms fixed by NABARD. As and when the federations of the SHGs come to existence, the grading exercise may be done by the Federations to support the banks.

• The existing defunct SHGs are also eligible for credit if they are revived and continue to be active for a minimum period of 3 months.

7.2.2 Loan Application: It is advised that all banks may use the Common Loan Application Forms recommended by Indian Bank’s Association (IBA) for extending credit facility to SHGs.

7.2.3 Loan amount: Emphasis is laid on the multiple doses of assistance under DAY- NRLM. This would mean assisting an SHG over a period of time, through repeat doses of credit, to enable them to access higher amounts of credit for taking up sustainable livelihoods and improve on the quality of life.

SHGs may avail either Term Loan (TL) or a Cash Credit Limit (CCL) loan or both based on the need. In case of need, additional loan may be sanctioned even though the previous loan is outstanding, based on the repayment behavior and performance of the SHG.

The amount of credit under different facilities are as follows:

Cash Credit Limit (CCL): In case of CCL, banks are advised to sanction minimum loan of ₹ 6 lakh to each eligible SHGs for a period of 3 years with a yearly drawing power (DP). The drawing power may be enhanced annually based on the repayment performance of the SHG. The drawing power may be calculated as follows:

• DP for First Year: 6 times of the existing corpus or minimum of ₹1 lakh, whichever is higher

• DP for Second Year: 8 times of the corpus at the time review/ enhancement or minimum of ₹2 lakh, whichever is higher

• DP for Third Year: Minimum of ₹6 lakh based on the Micro credit plan prepared by SHG and appraised by the Federations /Support agency and the previous credit history.

• DP for Fourth Year onwards: Above ₹6 lakh, based on the Micro credit plan prepared by SHG and appraised by the Federations /Support agency and the previous credit History.

Term Loan: In case of Term Loan, banks are advised to sanction loan amount in doses as mentioned below:

• First Dose: 6 times of the existing corpus or minimum of ₹1 lakh, whichever is higher

• Second Dose: 8 times of the existing corpus or minimum of ₹2 lakh, whichever is higher

• Third Dose: Minimum of ₹6 lakh, based on the Micro credit plan prepared by the SHGs and appraised by the Federations /Support agency and the previous credit history.

• Fourth Dose onwards: Above ₹6 lakh, based on the Micro credit plan prepared by the SHGs and appraised by the Federations /Support agency and the previous credit History.

Banks are advised take necessary measures to ensure that eligible SHGs are provided with repeat loans. Banks are advised to coordinate with DAY-NRLM to institutionalize a mechanism for online submission of loan application from SHGs for tracking and timely disposal of application.

(Corpus is inclusive of revolving funds, if any, received by that SHG, its own savings, interest earning by SHG from on-lending to its members, income from other sources, and funds from other sources in case of promotion by other institutes/NGOs.)

7.3 Purpose of loan and repayment:

7.3.1 The loan amount would be distributed among members based on the Micro Credit Plan (MCP) prepared by the SHGs. The loans may be used by members for meeting social needs, high cost debt swapping, construction or repair of house, construction of toilets and taking up sustainable livelihoods by the individual members within the SHGs or to finance any viable common activity started by the SHGs.

7.3.2 In order to facilitate use of loans for augmenting livelihoods of SHG members, it is advised that at least 50% of loans above ₹2 lakh, 75% of loans above ₹4 lakh and at least 85% of loans above ₹6 lakh be used primarily for income generating productive purposes. Micro Credit Plan (MCP) prepared by SHGs would form the basis for determining the purpose and usage of loans.

7.3.3 Repayment schedule for Term Loans may be as follows:

• The First dose of loan may be repaid in 24-36 months in monthly/Quarterly Instalments.

• The Second dose of loan may be repaid in 36-48 months in monthly/Quarterly instalments.

• The Third dose of loan may be repaid in 48-60 months based on the cash flow in monthly/Quarterly instalments.

• The loan from Fourth dose onwards may be repaid between 60-84 months based on the cash flow in monthly/ quarterly installments.

7.3.4 All facilities sanctioned under DAY- NRLM would be governed by the Asset Classification norms issued by Reserve Bank of India from time to time.

7.4. Security and Margin:

No collateral and no margin would be charged up to ₹10.00 lakh limit to the SHGs. No lien should be marked against savings bank account of SHGs and no deposits should be insisted upon while sanctioning loans

7.5. Dealing with Defaulters:

It is desirable that willful defaulters should not be financed under DAY-NRLM. In case willful defaulters are members of a group, they might be allowed to benefit from the thrift and credit activities of the group including the corpus built up with the assistance of Revolving Fund. But at the stage of accessing bank loan by SHG for financing economic activities by its members, the willful defaulters should not have the benefit of such bank loan until the outstanding loans are repaid. Willful defaulters of the group should not get benefits under the DAY-NRLM Scheme and the group may be financed excluding such defaulters while documenting the loan. However, banks should not deny loan to entire SHG on the pretext that spouse or other family members of individual members of SHG being a defaulter with the bank. Further, non-willful defaulters should not be debarred from receiving the loan. In case default is due to genuine reasons, banks may follow the norms suggested for restructuring the account with revised repayment schedule.

8 Credit Target Planning

8.1 Based on the Potential Linked Plan/State Focus Paper prepared by NABARD, SLBC sub-committee on SHG Bank Linkage may arrive at the district-wise, block-wise and branch-wise credit plan. The sub- committee should consider the existing SHGs, New SHGs proposed, and number of SHGs eligible for fresh and repeat loans as suggested by the SRLMs to arrive at the credit targets for the states. The targets so decided should be approved in the SLBC and reviewed and monitored periodically for effective implementation.

8.2 The district-wise credit plans should be communicated to the DCC. The Block- wise/Cluster-wise targets are to be communicated to the bank branches through the Controllers.

9 Post credit follow- up

9.1 Loan pass books or statement of accounts in regional languages may be issued to the SHGs which may contain all the details of the loans disbursed to them and the terms and conditions applicable to the loan sanctioned. The passbook should be updated with every transaction made by the SHGs. At the time of documentation and disbursement of loan, it is advisable to clearly explain the terms and conditions as part of financial literacy.

9.2 Bank branches may observe one fixed day in a fortnight to enable the staff to go to the field and attend the meetings of the SHGs and Federations to observe the operations of the SHGs and keep a track of the regularity in the SHGs meetings and performance.

10 Repayment:

Prompt repayment of the loans is necessary to ensure the success of the programme. Banks shall take all possible measures, i.e. personal contact, organization of joint recovery camps with District Mission Management Units (DPMUs) /District Rural Development Agency(DRDAs) to ensure the recovery of loans. Keeping in view, the importance of loan recovery, banks should prepare a list of defaulting SHGs under DAY-NRLM every month and furnish the list in the BLBC, DCC meetings. This would ensure that DAY-NRLM staff at the district/ block level would assist the bankers in initiating the repayment

11 Supervision and monitoring of the Scheme

Banks may set up cells for Self Help Groups at respective Regional/Zonal offices of banks. These cells should periodically monitor and review the flow of credit to the SHGs, ensure the implementation of the guidelines to the scheme, collect data from the branches and make available consolidated data to the Head office and the DAY-NRLM units at the districts/ blocks. The cell should also discuss this consolidated data in the SLBC, BLBC and DCC meetings regularly to maintain the effective communication with the state staff and all banks.

11.1 State Level Bankers’ Committee: SLBCs shall constitute a sub-committee on SHG bank linkage. The sub-committee should consist of members from all banks operating in the State, RBI, NABARD, CEO of SRLM, representatives of State Rural Development Department, Secretary-Institutional Finance and Representatives of Development Departments etc. The sub- committee shall discuss a specific agenda of review, implementation and monitoring of the SHG-Bank linkage and the issues/ constraints in achievement of the credit target. The decisions of SLBCs should be derived from the analysis of the reports of the sub-committee.

11.2 District Coordination Committee: The DCC shall regularly monitor the flow of credit to SHGs at the district level and resolve issues that constrain the flow of credit to the SHGs at district level. This committee should have participation of LDMs, AGM of NABARD, district coordinators of the banks and DPMU staff representing DAY-NRLM and office bearers of SHG federations

11.3 Block level Bankers Committee: The BLBC shall take up issues of SHG bank linkage at the block level. In this Committee, the SHGs/ Federations of the SHGs should be included as members to raise their voice in the forum. Branch wise status of SHG credit shall be monitored at the BLBC.

11.4 Reporting to Lead District Managers: The branches may furnish the progress report and the delinquency report achieved under various activities of DAY-NRLM in the format at Annex–IV and Annex-V to the LDM every month for onward submission to Special Steering Committee/sub-committee constituted by SLBC.

11.5 Reporting to RBI: Banks may give a state-wise consolidated report on the progress made on DAY-NRLM to RBI/NABARD at quarterly intervals. The data may be submitted within a month from the end of the concerned quarter.

11.6 LBR returns: Existing procedure of submitting LBR returns to be continued duly furnishing the correct code

12 Financial Literacy: Financial Literacy is one of the important strategies to spread awareness on financial behavior and keep households informed about various financial products and services. DAY-NRLM has trained and deployed a large number of cadre called ‘Financial Literacy Community Resource Persons (FL-CRPs)’ to carry out financial literacy camps at village level. Financial Literacy Centers (FLC) established by various banks may coordinate with respective SRLMs and utilize the services of FL-CRPs to conduct village camps on Financial Literacy.

13 Data Sharing:

13.1 Data sharing on a mutually agreed format / interval may be provided to DAY-NRLM or State Rural Livelihood Missions (SRLMs) for initiating various strategies including recovery etc.

The financing banks are advised to regularly share data on loans to SHGs with the DAY- NRLM or SRLMs, directly from the CBS platform.

13.2 Banks should share data of Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY) with DAY-NRLM on agreed formats to facilitate higher enrollment and claim settlement under the mentioned schemes.

13.3 Banks to share data of all SHG transactions being done at Business Correspondents points using Dual Authentication technology introduced by banks on a mutually agreed format/interval only after obtaining consent of the customer. However, the banks should ensure preservation and protection of the security and confidentiality of customer information in the custody or possession of BC.

14 DAY-NRLM support to the bankers:

14.1 SRLM would develop strategic partnerships with major banks at various levels. It would invest in creating enabling conditions for both the banks and the poor for a mutually rewarding relationship.

14.2 SRLM would assist the SHGs through imparting financial Literacy, extending counselling services on savings, credit, insurance, pension and training on Micro- Investment Planning embedded in capacity building.

14.3 SRLMs would extend support to banks for improving quality of banking services to poor clients including follow-up for recovery of over dues if any, by positioning customer relationship managers (Bank Mitra/ Sakhi) with every bank branch involved in financing of SHGs.

14.4 Leveraging IT mobile technologies and institutions of poor, youth or SHG member as business facilitators and business correspondents.

14.5 Community Based Repayment mechanism (CBRM): One exclusive sub – committee for SHG Bank Linkage may be formed at village/cluster/ block level which would provide support to the banks in ensuring proper utilization of loan amount, recovery etc. The bank linkage sub – committee members from each village level federation along with project staff would meet once in a month under the chairmanship of the Branch Manager in the branch premises with the agenda items relating to bank linkage.

Annex I

Key Features of DAY-NRLM

1. Universal Social Mobilization: To begin with, DAY-NRLM would ensure that at least one member from each identified rural poor household, preferably a woman, is brought under the Self Help Group (SHG) network in a time bound manner. Subsequently, both women and men would be organized for addressing livelihood issues i.e. farmers organizations, milk producers’ cooperatives, weavers associations, etc. All these institutions are inclusive and no poor would be left out of them. DAY-NRLM would ensure adequate coverage of vulnerable sections of the society such that 50% of the beneficiaries are SC/STs, 15% are minorities and 3% are persons with disability, while keeping in view the ultimate target of 100% coverage of all households under the automatically included criteria and households with at least one deprivation criteria as per Socio-Economic and Caste Census (SECC).

2. Participatory Identification of poor (PIP): The experience from SGSY suggests that the current BPL list has large inclusion and exclusion errors. To widen the target groups beyond the BPL list and to include all the needy poor identified as households with at least one deprivation criteria as per Socio-Economic and Caste Census (SECC). DAY- NRLM would also undertake community-based process i.e. participation of the poor in the process of identifying the target group. Participatory process based on sound methodology and tools (social mapping and well-being categorization, deprivation indicators) and also locally understood and accepted criterion ensures local consensus that inadvertently reduces the inclusion and exclusion errors and enables formation of the groups on the basis of mutual affinity. Over the years, the participatory method of identifying the poor have been developed and applied successfully in the states like AP, Kerala, Tamil Nadu and Odisha.

The households identified with at least one deprivation criteria as per SECC along with households identified through the P.I.P process would be accepted as DAY-NRLM target group and would be eligible for all the benefits under the programme. The list finalized after PIP process would be vetted by the Gram Sabha and approved by the Gram Panchayat.

Till the PIP process is undertaken by the State in a particular district/Block, the rural households with at least one deprivation criteria as per SECC list would be targeted under DAY-NRLM. As already provided in the Framework for implementation of DAY-NRLM, up to 30% of the total membership of the SHGs may be from among the population marginally above the poverty line, subject to the approval of other members of the group. This 30% also includes the poor households whose name does not figure in the SECC list but are as poor as those included in SECC list.

3. Promotion of Institutions of the poor: Strong institutions of the poor such as SHGs and their village level and higher-level federations are necessary to provide space, voice and resources for the poor and for reducing their dependence on external agencies. They empower them and also act as instruments of knowledge and technology dissemination, and hubs of production, collectivization and commerce. DAY-NRLM, therefore, would focus on setting up these institutions at various levels. In addition, DAY- NRLM would promote specialized institutions like Livelihoods collectives, producers’ cooperative/companies for livelihoods promotion through deriving economies of scale, backward and forward linkages, and access to information, credit, technology, markets etc.

The Livelihoods collectives would enable the poor to optimize their limited resource.

4. Strengthening all existing SHGs and federations of the poor. There are existing institutions of the poor women formed by Government efforts and efforts of NGOs. DAY- NRLM would strengthen all existing institutions of the poor in a partnership mode. The self-help promoting institutions both in the Government and in the NGO sector would promote social accountability practices to introduce greater transparency. This would be in addition to the mechanisms that would be evolved by SRLMs and state governments. The learning from one another underpins the key processes of learning in DAY-NRLM.

5. Emphasis on Training, Capacity building and skill building: DAY-NRLM would ensure that the poor are provided with the requisite skills for managing their institutions, linking up with markets, managing their existing livelihoods, enhancing their credit absorption capacity and credit worthiness, etc. A multi-pronged approach is envisaged for continuous capacity building of the targeted families, SHGs, their federations, government functionaries, bankers, NGOs and other key stakeholders. Particular focus would be on developing and engaging community professionals and community resource persons for capacity building of SHGs and their federations and other collectives. DAY- NRLM would make extensive use of ICT to make knowledge dissemination and capacity building more effective.

6. Revolving Fund and Community investment support Fund (C.I.F): A Revolving Fund would be provided to eligible SHGs as an incentive to inculcate the habit of thrift and accumulate their own funds towards meeting their credit needs in the long-run and immediate consumption needs in the short-run. The C.I.F would be a corpus and used for meeting the members’ credit needs directly and as catalytic capital for leveraging repeat bank finance. The C.I.F would be routed to the SHGs through the Federations. The key to coming out of poverty is continuous and easy access to finance, at reasonable rates, till they accumulate their own funds in large measure.

7. Universal Financial Inclusion: DAY-NRLM would work towards achieving universal financial inclusion, beyond basic banking services to all the poor households, SHGs and their federations. DAY-NRLM would work on both demand and supply side of Financial Inclusion. On the demand side, it would promote financial literacy among the poor and provides catalytic capital to the SHGs and their federations. On the supply side, it would coordinate with the financial sector and encourage use of Information, Communication & Technology (ICT) based financial technologies, business correspondents and community facilitators like ‘Bank Mitras’. It would also work towards universal coverage of rural poor against loss of life, health and assets. Further, it would work on remittances, especially in areas where migration is endemic.

8. Provision of Interest Subvention: The rural poor need credit at low rate of interest and in multiple doses to make their ventures economically viable. In order to ensure affordable credit, DAY-NRLM has a provision for subvention on interest rate above 7% per annum for all eligible SHGs, who have availed loans from mainstream financial institutions.

9. Funding Pattern: DAY-NRLM is a Centrally Sponsored Scheme and the financing of the programme would be shared between the Centre and the States in the ratio of 60:40 (90:10 in case of North Eastern States including Sikkim; completely from the Centre in case of UTs). The Central allocation earmarked for the States would broadly be distributed in relation to the incidence of poverty in the States.

10. Phased Implementation: Social capital of the poor consists of the institutions of the poor, their leaders, community professionals and more importantly community resource persons (poor women whose lives have been transformed through the support of their institutions). Building up social capital takes some time in the initial years, but it multiplies rapidly after some time. If the social capital of the poor does not play the lead role in DAY-NRLM, then it would not be a people’s programme. Further, it is important to ensure that the quality and effectiveness of the interventions is not diluted. Therefore, a phased implementation approach is adopted in DAY-NRLM. DAY-NRLM would reach all districts by the end of 12th Five-year Plan.

11. Intensive blocks. The blocks that are taken up for implementation of DAY-NRLM, ‘intensive blocks’, would have access to a full complement of trained professional staff and cover a whole range of activities of universal and intense social and financial inclusion, livelihoods, partnerships etc. However, in the remaining blocks or non-intensive blocks, the activities may be limited in scope and intensity.

12. Rural Self Employment Training Institutes (RSETIs). RSETI concept is built on the model pioneered by Rural Development Self Employment Institute (RUDSETI) – a collaborative partnership between SDME Trust and Canara Bank. The model envisages transforming unemployed youth into confident self- employed entrepreneurs through a short duration experiential learning programme followed by systematic long duration hand holding support. The need-based training builds entrepreneurship qualities, improves self-confidence, reduces risk of failure and develops the trainees into change agents. Banks are fully involved in selection, training and post training follow up stages. The needs of the poor articulated through the institutions of the poor would guide RSETIs in preparing the participants/trainees in their pursuits of self- employment and enterprises. DAY-NRLM would encourage public sector banks to set up RSETIs in all districts of the country.

Annex II

Interest Subvention Scheme for Women SHGs

Interest subvention scheme on Credit to Women SHGs in rural areas would be available in following two ways:

I. Interest subvention scheme on credit to women SHGs in 250 districts:

i. All women SHGs would be eligible for Interest subvention on credit up to ₹3 lakh at subvented rate of 7% per annum. SHGs availing capital subsidy under SGSY in their existing credit outstanding would not be eligible for benefit under this scheme.

ii. The commercial banks (Public Sector, Private Sector and Small Finance Banks) would lend to all the women SHGs in rural areas at the rate of 7% up to an aggregated loan amount of ₹300,000/- in the 250 districts as provided in Annexure III. For the women SHGs in these districts an additional interest subvention of 3% is also available on prompt repayment, reducing the effective rate of interest to 4%.

iii. All commercial banks (Public Sector, Private Sector and Small Finance Banks) would be subvented to the extent of difference between the Weighted Average Interest Charged (WAIC as specified by Department of Financial Services, Ministry of Finance) and 7% subject to the maximum limit of 5.5%. This subvention would be available to all the banks on the condition that they make SHG credit available at 7% p.a. in the 250 districts.

iv. Further, the SHGs would be provided with an additional 3% subvention on the prompt repayment of loans. For the purpose of Interest Subvention of additional 3% on prompt repayment, an SHG account would be considered prompt payee if it satisfies the following criterion.

a. For Cash Credit Limit:

1. Outstanding balance shall not have remained in excess of the limit/drawing power continuously for more than 30 days.

2. There should be regular credit and debits in the accounts. In any case there shall be at least one customer induced credit during a month.

3. Customer induced credit should be sufficient to cover the interest debited during the month.

b. For the Term loans: A term loan account where all of the interest payments and/or instalments of principal were paid within 30 days of the due date during the tenure of the loan, would be considered as an account having prompt payment.

v. The banks should credit the amount of 3% interest subvention to the eligible prompt payee SHG loan accounts and seek the reimbursement after the end of reporting quarter.

vi. The funding for the scheme would be met out of Central Allocation under DAY- NRLM

vii. The interest subvention scheme shall be implemented through a Nodal Bank selected by the Ministry of Rural Development (MoRD). The Nodal Bank would operationalize the scheme through a web based platform, as advised by MoRD. The nodal bank would be notified by MoRD.

viii. In order to avail the Interest Subvention on credit extended to the SHGs @ 7% (regular subvention), all Public Sector Banks, Private Sector Banks and Small Finance Banks are required to upload the SHG loan account information on the Nodal Bank’s portal as per the required technical specification. The banks should also submit the claims for 3% additional subvention on the same portal.

ix. Public Sector Banks, Private Sector Banks and Small Finance Banks must submit the regular claims (difference between WAIC or lending rate and 7%) and additional claims (@ 3% on prompt repayment) on a quarterly basis as on June 30, September 30, December 31, and March 31 by last week of the subsequent month.

x. The banks are required to submit claim certificate on quarterly basis to the nodal bank. The claims submitted by any bank should be accompanied by claim certificate (in original) certifying the claims for subvention as true and correct (Annexure-VI & VII). The claims of any bank for the quarter ending March would be settled by MoRD only on receipt of the Statutory Auditor’s certificate for the complete Financial Year from the bank.

xi. Any remaining claim pertaining to the disbursements made during the year and not included during the year, may be consolidated separately and marked as an ‘Additional Claim’ and submitted to Nodal Bank by banks latest by June every year, duly audited by Statutory Auditor’s certifying the correctness. No claims from banks pertaining to interest subvention for Financial Year are admissible after June 30.

xii. Any corrections in claims by banks shall be adjusted from later claims based on auditor’s certificate. The corrections must be made on the Nodal Bank’s portal accordingly.

II. Interest subvention scheme for Category II Districts (Other than 250 districts).

In the Category II districts, banks may charge the SHGs as per their respective lending norms and the difference between the lending rates and 7% subject to a maximum limit of 5.5% would be subvented directly in the loan accounts of the SHGs by the SRLMs. The funding for this subvention would be provided to the State Rural Livelihoods Missions (SRLMs) from the allocation for DAY- NRLM. In pursuance of the above, the salient features and the operational guidelines in respect of the interest subvention for the category II districts, are as follows:

(A) Role of the Banks:

All banks are required to furnish the details of the credit disbursement and credit outstanding of the SHGs across all districts in the desired format as suggested by the MoRD, directly from the CBS platform, to the Ministry of Rural Development (through FTP or interface) and to the SRLMs. The information should be provided on a monthly basis to facilitate the calculation and disbursement of the Interest Subvention amount to SHGs.

(B) Role of the State Governments:

i. All women SHGs from rural areas under DAY- NRLM would be eligible for interest subvention on credit upto ₹3 lakh at the rate of 7% per annum on prompt repayment.

ii. This scheme would be implemented by the State Rural Livelihood Missions (SRLMs). SRLMs would provide interest subvention to the eligible SHGs who have accessed loan from commercial and cooperative banks. The funding for this subvention would be met out of the Central Allocation and State Contribution as per the norms of Government of India.

iii. The SHGs would be subvented to the extent of difference between the lending rate of the banks and 7% subject to a maximum limit of 5.5% by the SRLMs, directly on a monthly/quarterly basis. An e-transfer of the subvention amount would be made by the SRLM to the loan accounts of the SHGs who have repaid promptly. In case the loan account is already closed, or e-transfer to the loan account is not successful due to any reason, the subvention amount may be transferred to the corresponding savings account of the concerned SHGs.

iv. For the purpose of the Interest Subvention, an account would be considered as prompt payee if it satisfies the following criterion:

a. For Cash Credit Limit:

1. Outstanding balance shall not have remained in excess of the limit/drawing power continuously for more than 30 days

2. There should be regular credit and debits in the accounts. In any case there shall be at least one customer induced credit during a month

3. Customer induced credit should be sufficient to cover the interest debited during the month.

b. For the Term loans: A term loan account where all of the interest payments and/or instalments of principal were paid within 30 days of the due date during the tenure of the loan, would be considered as an account having prompt payment

v. Women SHGs who have availed capital subsidy under SGSY in their existing loans, would not be eligible for benefit of Interest Subvention for their subsisting loan under this scheme.

vi. SRLMs should submit Quarterly Utilization Certificate indicating subvention amounts transferred to the Loan accounts of the eligible SHGs.

III. The States with state specific interest subvention schemes are advised to harmonize their guidelines with the Central scheme.

Annexure-III

List of 250 eligible Districts for the Interest Subvention on the loan at 7% and additional interest Subvention of 3% on the prompt repayment

Appendix

RBI/2021-22/78
FMRD.DIRD.01/14.01.001/2021-22

April 01, 2021

To,

All Eligible Market Participants

Madam/Sir,

Master Direction – Reserve Bank of India (Call, Notice and Term Money Markets) Directions, 2021

Please refer to Paragraph 6 of the Statement on Developmental and Regulatory Policies, Reserve Bank of India, issued as part of the second Bi-monthly Monetary Policy Statement for 2019-20 dated June 06, 2019 regarding Comprehensive Review of Money Market Directions.

2. The draft Directions were released for public comments on December 04, 2020. Based on the feedback received from the market participants, the Reserve Bank of India (Call, Notice and Term Money Markets) Directions, 2021 were reviewed and have since been finalised. The Directions are enclosed herewith.

Yours faithfully,

(Dimple Bhandia)
Chief General Manager

FINANCIAL MARKETS REGULATION DEPARTMENT
Notification No. FMRD.DIRD.02 /14.01.001/2021-22 dated April 01, 2021

Master Direction- Reserve Bank of India (Call, Notice and Term Money Markets) Directions, 2021

In exercise of the powers conferred under section 45W of the Reserve Bank of India Act, 1934 (hereinafter called the Act) read with section 45U of the Act and of all the powers enabling it in this behalf and in supersession of Section I of the FMRD Master Direction No. 2/2016-17 dated July 07, 2016, Direction No. FMRD.DIRD.09/14.01.001/2018-19 dated October 29, 2018 and Direction No. FMRD.DIRD.01/14.01.001/2020-21 dated December 04, 2020, the Reserve Bank of India (hereinafter called the Reserve Bank), hereby issues the following Directions to all persons and agencies eligible to deal in Call, Notice and Term Money Markets.

1. Short title and commencement

(a) These Directions shall be called the Master Direction- Reserve Bank of India (Call, Notice and Term Money Markets) Directions, 2021.

(b) These Directions shall come into force with effect from April 05, 2021.

2. Definitions

(a) For the purpose of these Directions, unless the context otherwise requires:

(i) “Bank” means a banking company (including a Payment Bank and a Small Finance Bank) as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 or a “regional rural bank”, a “corresponding new bank” or “State Bank of India” as defined in clauses (ja), (da) and (nc), of section 5 respectively thereof, or a “cooperative bank” as defined in clause (cci) of section 5 read with section 56 of the said Act;

(ii) “Call Money” means borrowing or lending in unsecured funds on overnight basis;

(iii) “Capital Funds” shall have the meaning assigned in the applicable capital regulations issued by the Department of Regulation of the Reserve Bank as amended from time to time and shall be calculated as per the latest audited balance sheet;

(iv) “Electronic Trading Platform” or “ETP” shall have the meaning assigned in paragraph 2 (1) (iii) of the Electronic Trading Platform (Reserve Bank) Directions, 2018 dated October 05, 2018, as modified from time to time;

(v) “Exchange” shall mean ‘recognised stock exchange’ and shall have the same meaning as assigned to in Section 2 (f) of the Securities Contract Regulation Act, 1956.

(vi) “Fortnight” shall have the meaning assigned to it under section 42 of the Reserve Bank of India Act, 1934;

(vii) “Negotiated Dealing System-CALL” or “NDS-CALL” is the electronic trading platform for execution and reporting of transactions in Call, Notice and Term Money Markets;

(viii) “Net Owned Fund” shall have the meaning assigned to it under the Explanation to section 45-IA of the Reserve Bank of India Act, 1934;

(ix) “Notice Money” means borrowing or lending in unsecured funds for tenors up to and inclusive of 14 days excluding overnight borrowing or lending;

(x) “Over-the-Counter markets” or “OTC markets” refers to markets where transactions are undertaken in any manner other than on exchanges and shall include those executed on electronic trading platforms;

(xi) “Payment Bank” means a bank licensed under section 22 of the Banking Regulation Act, 1949 and governed by the terms of the “Reserve Bank Guidelines for Licensing of Payments Banks” dated November 27, 2014, as amended from time to time;

(xii) “Primary Dealer” means a Non-Banking Financial Company that holds a letter of authorisation issued by the Reserve Bank to act as a Primary Dealer, in terms of the “Guidelines for Primary Dealer in Government Securities Market” dated March 29, 1995, as amended from time to time;

(xiii) “Small Finance Bank” means a bank licensed under section 22 of the Banking Regulation Act, 1949 and governed by the terms of the “Reserve Bank Guidelines for Licensing of Small Finance Banks” dated November 27, 2014, as amended from time to time;

(xiv) “Term Money” means borrowing or lending in unsecured funds for periods exceeding 14 days and up to one year.

(b) Words and expressions used but not defined in these Directions shall have the meaning assigned to them in the Reserve Bank of India Act, 1934.

3. Participants

The following entities shall be eligible to participate in the Call, Notice and Term Money Markets, both as borrowers and lenders:

(a) Scheduled Commercial Banks (excluding Local Area Banks);

(b) Payment Banks;

(c) Small Finance Banks;

(d) Regional Rural Banks;

(e) State Co-operative Banks, District Central Co-operative Banks and Urban Co-operative Banks (hereinafter Co-operative Banks); and

(f) Primary Dealers.

4. Prudential limits

(a) Prudential limits in respect of outstanding lending transactions in the Call, Notice and Term Money Markets shall be decided by the participants with the approval of their Board within the regulatory framework of the exposure norms prescribed by the Department of Regulation of the Reserve Bank for the eligible participant concerned.

(b) Prudential limits for outstanding borrowing transactions in the Call, Notice and Term Money Markets are set out in Table 1.

(c) Eligible participants may, with the approval of their respective Board of Directors (or equivalent bodies), fix separate internal limits within the prudential limits for borrowing and lending in the Call, Notice and Term Money Markets. The internal limits so arrived at by the eligible participants shall be conveyed to the Clearcorp Dealing System Ltd., or any other NDS-CALL system operator authorised by the Reserve Bank for setting of limits in the NDS-CALL platform, under advice to the Financial Markets Regulation Department (FMRD) of the Reserve Bank through e-mail.

5. General guidelines

(a) Interest rates: Eligible participants are free to decide on interest rates in the Call, Notice and Term Money Markets.

(b) Trading venues: Call, Notice and Term Money transactions shall be executed in Over-the-Counter markets, including on the NDS-CALL platform or any other Electronic Trading Platform authorised for the purpose by the Reserve Bank.

(c) Market timings: The market timings for Call, Notice and Term Money transactions shall be from 9:00 AM to 5:00 PM on each business day or as specified by the Reserve Bank from time to time.

(d) Market practices and documentation: Eligible participants shall follow the standard market practices, methodologies and documentation prescribed by Fixed Income Money Market and Derivatives Association of India (FIMMDA), in consultation with the Reserve Bank, from time to time.

6. Cancellation and termination

(a) A Call, Notice or Term Money transaction shall, normally, not be cancelled.

(b) A Notice or Term Money transaction can be terminated before maturity at a mutually agreed price.

(c) Any cancellation or termination of a Call, Notice or Term Money transaction shall be reported as set out in paragraph 7 of these Directions.

7. Reporting requirements

(a) All Call, Notice or Term Money transactions, other than those executed on NDS-CALL platform, shall be reported to the NDS-CALL platform within 15 minutes of execution (the time when interest rate is agreed), by both counterparties to the transaction or by the Electronic Trading Platform concerned, as the case may be. For this purpose, all eligible participants in the Call, Notice and Term Money Markets shall obtain membership of NDS-CALL platform. Eligible participants who are not members of NDS-CALL platform shall obtain such membership within a period of six months from the date of these Directions.

(b) A Call, Notice or Term Money transaction executed on the NDS-CALL platform need not be reported separately.

(c) Any cancellation or termination of a Call, Notice and Term Money transaction shall be reported on the NDS-CALL platform within 15 minutes of cancellation by each counterparty to the transaction or by the Electronic Trading Platform concerned, as the case may be.

(d) Any misreporting or multiple reporting of the same OTC markets deal by a counterparty shall be immediately brought to the notice of the Clearcorp Dealing System Ltd., or any other NDS-CALL system operator authorised by the Reserve Bank and also to the Financial Markets Regulation Department, Reserve Bank of India, Central Office, Fort, Mumbai, through email.

8. Obligation to provide information sought by the Reserve Bank: The Reserve Bank may call for any information or statement or seek any clarification, which in the opinion of the Reserve Bank is relevant, from persons or agencies dealing in the Call, Notice and Term Money Markets, including eligible participants, and such persons, agencies and participants shall furnish such information, statement or clarification.

9. Dissemination of data: The Reserve Bank or any other person authorised by the Reserve Bank, may publish any anonymised data related to transactions in Call, Notice and Term Money Markets.

10. Violation of Directions: In the event of any person or agency violating any provision of these Directions or the provisions of any other applicable law, the Reserve Bank may, in addition to taking any penal or regulatory action in accordance with law, disallow that person or agency from dealing in the Call, Notice and Term Money Markets for a period not exceeding one month at a time, after providing reasonable opportunity to the person or agency to defend its actions, and such action may be made public by the Reserve Bank.

11. These Directions shall apply to Call, Notice and Term Money transactions entered into from the date these Directions come into force. Provisions of Section I of the FMRD Master Direction No. 2/2016-17 dated July 07, 2016; Direction No. FMRD.DIRD.09/14.01.001/2018-19 dated October 29, 2018 and Direction No. FMRD.DIRD.01/14.01.001/2020-21 dated December 04, 2020, shall continue to be applicable to transactions undertaken in accordance with the said Directions till the expiry of those contracts.

RBI/2021-22/08
DGBA.GBD.No.S-1/31.02.007/2021-22

April 1, 2021

All Agency Banks

Dear Sir/Madam

Master Circular – Disbursement of Government Pension by Agency Banks

Please refer to our Master Circular RBI/2020-21/06 dated July 1, 2020 on the above subject. We have now revised and updated the Master Circular which consolidates important instructions on the subject issued by the Reserve Bank of India till March 31, 2021

2. A copy of the revised Master Circular is enclosed for your information. This circular may also be downloaded from our website www.mastercirculars.rbi.org.in.

Yours faithfully

(R. Kamalakannan)
Chief General Manager

Encl.: As above

Master Circular – Disbursement of Government Pension by Agency Banks

Introduction

Payment of pension to retired government employees, including payment of basic pension, increased Dearness Relief (DR), and other benefits as and when announced by the governments, is governed by the relevant schemes prepared by concerned Ministries/Departments of the Government of India and State Governments. This Master Circular consolidates important instructions on the subject issued by the Reserve Bank of India till March 31, 2021 (listed in Appendix). It does not replace or supersede any existing government instructions on the matter. The instructions issued by Pension Sanctioning Authority of the Central and State Governments and circulated by RBI in the past will continue to remain in operation subject to changes being made by the competent authority. In case of any doubt or apparent contradiction, agency banks may be guided by the relevant government instructions. Contents of various circulars issued in this connection by the Reserve Bank of India are summarized here under.

General Instructions

Government orders on DR, etc. on websites

2. In order to obviate the time lag between issue of DR orders and payment of DR to the beneficiary and to render expeditious service to senior citizens, the following actions are required to be taken:

1. It has been decided to discontinue the procedure of forwarding government orders in respect of dearness relief etc. to pension paying agency banks. Agency Banks may, therefore, act on the copies of government orders supplied by government to them through post, fax, e-mails or by accessing from the website and authorize their pension paying branches to make payments to the pensioners immediately.

2. All agency banks are advised to scrupulously follow all the guidelines/instructions contained in various notifications of Government (Central as well as States) and take necessary action immediately without waiting for any further instructions from RBI.

Timing of pension disbursement by agency banks.

3. The pension paying banks will credit the pension amount in the accounts of the pensioners based on the instructions given by respective Pension Paying Authorities.

Refund of excess pension payment to Government

4. Whenever any excess/overpayment is detected the entire amount thereof should be credited to the Government account in lump sum immediately when the excess/overpayment is due to an error on the part of the agency bank. This action is independent of recovery from the pensioner.

5. If the excess/wrong payment to the pensioner is due to errors committed by the government, banks may take up the matter with the full particulars of the cases with respective Government Department for a quick resolution of the matter. However, this must be a time bound exercise and the government authority’s acknowledgement to this effect must be kept on the bank’s record. The banks may take up such cases with government departments without reference to the Reserve Bank of India.

Withdrawal of pension by old/ sick/ disabled/ incapacitated pensioners

6. In order to take care of problems/ difficulties faced by sick and disabled pensioners in withdrawal of pension / family pension from the banks, agency banks may categorise such pensioners as under:

1. Pensioner who is too ill to sign a cheque / unable to be physically present in the bank.

2. Pensioner who is not only unable to be physically present in the bank but also not even able to put his/her thumb impression on the cheque/ withdrawal form due to certain physical defect /incapacity.

7. With a view to enabling such old/sick/incapacitated pensioners to operate their accounts, banks may follow the procedure as under:

1. Wherever thumb or toe impression of the old/sick pensioner is obtained, it should be identified by two independent witnesses known to the bank, one of whom should be a responsible bank official.

2. Where the pensioner cannot even put his/her thumb/ toe impression and also would not be able to be physically present in the bank, a mark can be obtained on the cheque/withdrawal form, which should be identified by two independent witnesses, one of whom should be a responsible bank official.

8. Accordingly, the agency banks are requested to instruct their branches to display the instructions issued in this regard on their notice board so that sick and disabled pensioners could make full use of these facilities. Agency Banks are also advised to strictly implement the instructions issued by RBI regarding the facilities to be provided to the sick and disabled persons and sensitise staff members in the matter and to refer to the FAQs on pension disbursement hosted on our website www.rbi.org.in in case of any doubt.

Reimbursement of pension payments

9. Link branches of agency banks may submit reimbursement claims to Reserve Bank of India, Central Accounts Section, Nagpur / Government Banking Division at Regional Office for Central/State Government pension payments.

Continuation of either or survivor pension account after death of pensioner

10. All agency banks disbursing Central Government pension have been advised that in case the spouse (Family pensioner) opts for existing joint account for credit of family pension, banks should not insist on opening a new account when the spouse is the survivor and having a joint account with the pensioner and in whose favour an authorisation for payment of family pension exists in the Pension Payment Order (PPO).

Life Certificate – Issuance of Acknowledgement

11. There have been complaints that life certificates submitted over the counter of pension paying branches are misplaced causing delay in payment of monthly pensions. In order to alleviate the hardships faced by pensioners, agency banks were instructed to mandatorily issue duly signed acknowledgements. They were also advised to consider entering the receipt of life certificates in their CBS and issue a system generated acknowledgement which would serve the twin purpose of acknowledgement as well as real time updation of records.

Single Window System for reimbursement of Pension Payments

12. Single Window System was introduced to facilitate prompt settlement of reimbursement claims and reconciliation. The underlying objective is to make each pension paying bank responsible in its own right to effect settlement without the intervention of RBI Offices or SBI (at District Headquarters) in the process eliminating cause of delay in reimbursement claims.

Customer Service

13. All agency banks may issue instructions to their dealing branches to adhere to the recommendations of the Prabhakar Rao Committee relating to pension payments. A checklist may be provided to the inspecting officers/auditors, which may at a minimum include the items given in Annex 1. Agency banks may also instruct their internal auditors/inspectors to comment on the quality of customer service in their reports which may be made available to Reserve Bank’s inspecting officers, as and when they visit the branches.

14. Grievances of pensioners are not being addressed properly at the branch level especially after the setting up of Centralised Pension Processing Centres (CPPCs). To provide hassle free service to the pensioners, there should be a forum for regular interaction and settlement of grievances. Accordingly, agency banks should appoint one/two nodal officers at each Region/Zone for monitoring the resolution of grievances of pensioners on regular basis and the GM/CGM concerned should review the position at monthly intervals

15. At locations outside the CPPCs, there should be designated nodal officers for pension related complaints who should be easily accessible to pensioners and who should hold regular meetings at different locations in their jurisdiction on the lines of Pension Adalat. Each bank should establish toll free dedicated pension line manned by trained persons with access to the database to answer queries, note down and redress complaints.

16. Following several complaints from pensioners alleging inordinate delay in disbursing revised pension and arrears, agency banks are advised as under:

1. Pension paying banks should compensate the pensioner for delay in crediting pension/ arrears thereof at a fixed interest rate of 8 per cent per annum for the delay after the due date of payment and the compensation shall be credited to the pensioner’s account automatically without any claim from the pensioner on the same day when the bank affords credit for revised pension/ pension arrears, in respect of all delayed pension payments made since October 1, 2008.

2. Pension paying banks have been advised to put in place a mechanism to obtain immediately the copies of pension orders from the pension paying authorities directly and make payments without waiting for receipt of instructions from the Reserve Bank of India so that pensioners should get benefits announced by the Governments in the succeeding month’s pension payment itself.

3. When the agency bank is calculating pension, the branch should continue to be a point of referral for the pensioner lest he/she feel disenfranchised.

4. All branches having pension accounts should guide and assist the pensioners in all their dealings with the bank.

5. Suitable arrangements should be made to place the arithmetic and other details about pension calculations on the web, to be made available to the pensioners through the net or at the branches at periodic interval as may be necessary and sufficient advertisement is made about such arrangements.

6. All claims for agency commission by banks in respect of pension payments must be accompanied by a certificate from ED/CGM in charge of government business that there are no pension arrears to be credited/ delays in crediting regular pension/arrears thereof.

7. All agency banks disbursing pension are advised to provide considerate and sympathetic customer service to the pensioners, especially to those pensioners who are of old age.

Annex 1

Checklist relating to Government Business (pension related) for internal/concurrent audit

Internal inspections should assess branch performance in servicing pensioner customers. In this regard, the following may be ensured:

1. A specific questionnaire covering all aspects of pension payment may be devised for use during inspection of pension paying branches.

2. Inspecting officers may also, during inspections, call up pensioners at random and enquire about their satisfaction with pension-related services.

3. A detailed check-list relating to pension payments/government business may be given by banks to internal auditors/inspectors in order to adhere to the recommendations of the Prabhakar Rao Committee, constituted by the Government of India, relating to pension payments/government business.

These include the following:

1. Whether there is delay in payment of pension, revision of pension, revision in dearness relief etc.

2. Whether the branch manager has structured interaction with a cross section of pensioners serviced at the branch on quarterly basis, where the number of pensioners of all governments and departments exceeds affixed number, say, 100 or 200.

3. Whether nominations have been obtained for all pension accounts.

4. Whether pension accounts have been converted into joint accounts wherever applicable.

5. Whether the bank branch has an effective complaint redressal mechanism and the complaints of pensioners are attended promptly and their grievances redressed expeditiously.

6. Whether the pension is credited to pensioner’s account during the last four working days of the month except for the month of March for which pension is to be credited on or after first working day of April.

7. Whether the pension paying branch obtains Life Certificate/ Non-employment certificate/Employment Certificate from the pensioners in the month of November every year.

8. Whether pension paying branches deduct income tax at source from pension payments wherever applicable.

9. Whether paper tokens in acknowledgement of cheques presented are invariably given by the tax collecting branches.

10. Whether the challans are stamped giving bank’s BSR code and Challan Identification Number (CIN) clearly.

11. Whether the stamped challans are kept in the custody of bank’s staff and handed over to the concerned tax payer only on production of the paper token.

Appendix

List of circulars consolidated for the Master Circular

RBI/2021-22/07
DGBA.GBD.No. S-2/31.12.010/2021-22

April 1, 2021

All Agency Banks

Dear Sir / Madam

Master Circular on Conduct of Government Business by Agency Banks – Payment of Agency Commission

Please refer to our Master Circular RBI/2020-21/03; DGBA.GBD.No.2/31.12.010/2020-21 dated July 01, 2020 on the above subject. We have now revised and updated the Master Circular which consolidates important instructions on the subject issued by the Reserve Bank of India till March 31, 2021.

2. A copy of the revised Master Circular is enclosed for your information. This circular may also be downloaded from our website www.mastercirculars.rbi.org.in.

Yours faithfully

(R. Kamalakannan)
Chief General Manager

Encl: As above

MASTER CIRCULAR ON AGENCY COMMISSION

Introduction

1. The Reserve Bank of India carries out the general banking business of the Central and State Governments through its own offices and through the offices of the agency banks appointed under Section 45 of the RBI Act, 1934, by mutual agreement. RBI pays agency commission to the agency banks for the government business handled by them. This Master Circular consolidates the instructions contained in the circulars listed in Annex 1.

Government transactions eligible for agency commission

2. Transactions relating to the following government business undertaken by agency banks are eligible for agency commission paid by RBI:

1. Revenue receipts and payments on behalf of the Central/State Governments

2. Pension payments in respect of Central / State Governments and

3. Any other item of work specifically advised by Reserve Bank as eligible for agency commission

3. The Agency banks also undertake the work related to Small Savings Schemes (SSS) the commission for which is borne by Government of India. Though the settlement of commission on such SSS is processed by RBI and settled at Central Accounts Section (CAS), Nagpur, the rates of agency commission related to SSS transactions are decided by Government of India. Agency commission claims on Special Deposit Scheme (SDS) related transactions (where mirror accounts are maintained in RBI) are also settled at CAS, Nagpur.

4. Short term/long term borrowings of State Governments raised directly from financial institutions and banks are not eligible for agency commission as these transactions are not considered to be in the nature of general banking business. Reserve Bank pays the agency banks separate remuneration as agreed upon for acting as agents for management of public debt.

5. Whenever agency banks collect stamp duty through physical mode or e-mode (challan based), they are eligible for payment of agency commission, provided the agency banks do not collect any charges from the members of public or receive remuneration from the State Government for doing this work.

6. If the agency bank is engaged by the State Government as Franking Vendor and it collects stamp duty from the public for franking the documents, it will not be eligible for agency commission since the State Government is paying commission to it as Franking Vendor. However, the agency bank which collects the stamp duty paid by the Franking Vendor for credit to the Treasury through challan in physical or e-mode for purchase of the franking bar, would be eligible for agency commission since it is a regular payment of Stamp Duty as stated above.

Government transactions not eligible for agency commission

7. Agency banks paying their own tax liabilities through their own branches or through authorised branches of any other agency bank including State Bank of India or offices of Reserve Bank of India wherever they do not have their own authorised direct tax collection branch should indicate the same separately in the scroll. Such transactions will not be eligible for payment of agency commission. Banks should furnish a certificate to the effect that own tax liabilities (TDS, Corporation Tax, etc.) paid by them have been excluded while claiming agency commission.

8. The following activities, inter alia, do not come under the purview of agency bank business and are therefore not eligible for payment of agency commission.

(a) Furnishing of bank guarantees/security deposits, etc. through agency banks by government contractors/suppliers, which constitute banking transactions undertaken by banks for their customers.

(b) The banking business of autonomous/statutory bodies/Municipalities/ companies/Corporations/Local Bodies.

(c) Payments which have been classified as capital in nature by government to cover losses incurred by autonomous/statutory bodies/ Municipalities/ Corporations/Local Bodies, etc.

(d) Prefunded schemes which may be implemented by a Central Government Ministry/Department (in consultation with CGA) and a State Government Department through any bank.

(e) Transactions related to Gold Monetisation Scheme 2015

(f) Transactions arising out of Letters of Credit / Bank Guarantee opened by banks on behalf of Ministries/Departments etc. do not qualify for agency commission as RBI only reimburses the paid amount to the banks based on the mandate received from the governments.

(g) Any other item of work specifically advised by Reserve Bank or Central or State Government as ineligible for agency commission

9. Agency Banks are advised to meticulously follow instructions issued by RBI from time to time regarding transactions which are not eligible for agency commission and submit their claims for agency commission accordingly. All agency banks while claiming agency commission should certify that no claim of agency commission is made on ineligible transactions.

Reporting of transactions by agency banks to RBI

10. After the operationalisation of NEFT 24X7 and RTGS 24X7, agency banks authorised to collect GST shall upload their luggage files in RBI’s QPX/E-Kuber on all days except the Global holidays, which are January 26, August 15, October 2, all non-working Saturdays, all Sundays and any other day declared holiday by RBI for Government Transactions due to exigencies.

11. State government transactions (electronic as well as in physical mode) of previous month reported after 8th of the succeeding month and those pertaining to earlier months should be reported to RBI through a separate statement for accounting, after being confirmed by the competent authorities of concerned state government.

12. For Central Government transactions (electronic as well as in physical mode) or any adjustments thereof, if reported after a gap of 90 days from the date of transaction, agency banks have to obtain prior approval from concerned ministry/department and submit the same to RBI separately at the time of reporting such transactions for settlement.

Rates for agency commission

13. As per agency bank agreement, RBI pays agency commission at rates determined by it. The rates applicable with effect from July 1, 2019 are as under:

14. In this context, the ‘Receipts-e-mode transactions’ indicated against Sr. No. a.(ii) in the above table refer to those transactions involving remittance of funds from the remitter’s bank account through internet banking as well as such transactions which do not involve physical receipt of cash /instruments at all. For example, challan generated electronically and submitted to agency bank along with cash/instrument should be treated as transaction under physical mode.

15. With reference to the implementation of Goods and Service Tax (GST) regime, it is advised that a single Common Portal Identification Number (CPIN), processed successfully leading to generation of a Challan Identification Number (CIN), under GST payment process, may be treated as a single transaction, even if multiple major head/sub major head/minor head of accounts are credited. This means that CGST, SGST, IGST and Cess etc. paid through a single challan would constitute a single transaction. Thus, all such records clubbed under a single challan i.e., CPIN have to be treated as a single transaction for the purpose of claiming agency commission effective July 1, 2017.

16. Similarly, in case of transactions not covered under GST, it is emphasised that a single challan (electronic or physical) should be treated as single transaction only and not multiple transactions, even if the challan contains multiple major head/sub major head/minor head of accounts that will get credited. Therefore, records clubbed under a single challan processed successfully have to be treated as a single transaction for the purpose of claiming agency commission.

17. Agency banks would be eligible to claim agency commission for pension transactions at the rate of ₹75 per transaction only when the entire work relating to disbursement of pension including pension calculation is attended to by them. If the work relating to pension calculations, etc., is attended to by the concerned Government Department / Treasury and the banks are required only to credit the amount of pension to the pensioners’ accounts maintained with them by a single debit to Government Account, such transaction is to be categorised under ‘other than pension payment’ and would be eligible for payment of agency commission @ 6.5 paise per ₹ 100/- turnover w.e.f. July 1, 2019.

18. The number of transactions eligible for payment of agency commission should not exceed 14 per pensioner per year. This includes one monthly credit for payment of net pension and a maximum of two per year for payment of arrears on account of increase in dearness relief, if applicable. Cases involving payment of arrears on account of late start/restart of pension qualifies as a single transaction for claiming of agency commission. In other words, any payment of arrears on account of late start/restart of pension should be treated as a single credit transaction and not as separate monthly credits.

19. Agency commission is payable to an agency bank at the full rate provided the transactions are handled by the bank at all stages. Where, however, the work is shared between two banks, the agency commission is shared between the banks in the proportion of 75:25. Thus, broadly, the agency commission is payable to the agency banks as detailed below:

1. At the full rate, in cases where the transactions are handled by the bank at all stages, i.e., upto the stage of dispatch of scrolls and challans / cheques to the Pay and Accounts Offices, and treasuries/sub-treasuries.

2. At 75% of the applicable rate, where the dealing branch is required to account for the transaction by passing on the scrolls and documents to the local/nearest branch of Reserve Bank of India or by any agency bank conducting government business.

3. At 25% of the applicable rate, in the case of agency branch which received the scrolls and documents from dealing branches of other banks and is responsible for the accounting of these transactions and dispatching of the scrolls and documents to the Pay and Accounts Offices, Treasuries, etc.

20. All agency banks should settle their agency transactions for both funds and agency commission directly with the concerned Regional Office of Reserve Bank instead of routing them through any other agency bank that acts as aggregator in certain cases. So also for payments made by all agency banks on behalf of state government/s get directly settled with the concerned Regional Office of RBI. Agency Transaction details/scrolls may be sent directly by individual agency bank to the concerned State Government/Treasury. This new arrangement for settlement of state government funds on day to day basis (receipts and payments) directly with Reserve Bank is with effect from January 1, 2018.

Claiming agency commission

21. Agency banks are required to submit their claims for agency commission in the prescribed format to CAS Nagpur in respect of Central government transactions and the respective Regional Office of Reserve Bank of India for State government transactions. However, agency commission claims with respect to GST receipt transactions will be settled at Mumbai Regional Office of Reserve Bank of India only and accordingly all agency banks, authorized to collect GST, are advised to submit their agency commission claims pertaining to GST receipt transactions at Mumbai Regional Office only. The formats for claiming agency commission for all agency banks and separate and distinctive set of certificates to be signed by the branch officials and Chartered Accountants or Cost Accountants are given in Annex 2, Annex 2A and Annex 2B respectively. These certificates would be in addition to the usual Certificate from ED / CGM (in charge of government business) to the effect that there are no pension arrears to be credited / delays in crediting regular pension / arrears thereof.

22. Where the External Auditor is also the Concurrent Auditor / Statutory Auditor, claims can be certified by such Concurrent Auditor / Statutory Auditor. In addition to this, agency banks are required to ensure that the agency bank’s internal inspectors / auditors verify the agency commission claims submitted by their branches and confirm their accuracy during the course of their inspection / audit.

23. Reference is also drawn to the instructions contained in our letter dated November 4, 2016 advising the process of claiming reimbursement of service tax (ST) on agency commission received for Central and State Government transactions, centrally from Reserve Bank of India at Central Accounts Section, Nagpur. The same process continued even after Service Tax got subsumed into the Goods and Service Tax (GST) framework. This process of centralised claims submission has been replaced with a system whereby applicable GST (18% at present) shall be paid along with agency commission by the respective Regional Offices of RBI / CAS, Nagpur as the case may be.

24. For eligible government transactions done with effect from July 01, 2019, agency banks shall submit the agency commission claims, including applicable GST amount, as per revised agency commission rates indicated above, to RBI at respective ROs / CAS, Nagpur as per the extant instructions issued by RBI in this regard. TDS on GST shall be deducted as applicable by RBI at the time of making agency commission payment in accordance with Government instructions in the matter.

25. However, for eligible government transactions done by agency banks upto June 30, 2019, agency banks shall continue to submit agency commission claims as well as the centralized claims for ST/GST reimbursement as hitherto.

26. Agency banks are required to ensure that agency commission claims submitted to the Regional Offices of Reserve Bank of India / Central Accounts Section, Nagpur as applicable in the prescribed format are accurate. Agency banks may also alert their branches concerned to ensure that agency commission claims submitted to our Regional Offices are accurate. Such erroneous claims, if certified by the Internal / Concurrent Auditors, will defeat the very purpose of making such requirement an essential condition for making quarterly claims.

27. Agency banks are advised to furnish their claim on agency commission to Reserve Bank within 60 calendar days from the end of the quarter in which the transactions have been conducted. If the banks fail to lodge the claims within the stipulated period mentioned above they may forward the same to RBI only after giving reasons for delay.

Penal interest for wrong claims

28. As per the agreement that agency banks have with RBI, violation or non-compliance of instructions issued by Government or Reserve Bank shall attract imposition of penalty. Agency banks will be liable to pay penal interest at Bank Rate as notified by Reserve Bank of India plus 2% for any wrong claims of agency commission settled.

Annex 1

List of circulars consolidated in the Master Circular