Category: RBI News

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

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/2020-21/77
A.P. (DIR Series) Circular No. 08

December 04, 2020

To,

All Category – I Authorised Dealer Banks

Madam / Sir,

External Trade – Facilitation – Export of Goods and Services

Please refer to the Statement on Development and Regulatory Polices announced as part of Bi-monthly Monetary Policy Statement dated December 4, 2020. With a view to further enhance the ease of doing business and quicken the approval process, it has been decided to delegate more powers to the Authorised Dealer Category – I banks (AD banks) in the following areas:

1. Direct Dispatch of Shipping Documents

1.1 In terms of Paragraph 2 of A. P. (DIR Series) Circular No. 6 dated August 13, 2008, AD banks have been allowed to regularise cases of dispatch of shipping documents by the exporter direct to the consignee or his agent resident in the country of the final destination of goods, up to USD 1 million or its equivalent per export shipment.

1.2 With a view to simplify the procedure, it has been decided to do away with the limit of USD 1 million per export shipment.

1.3 Accordingly, AD banks may regularize such direct dispatch of shipping documents irrespective of the value of export shipment, subject to following conditions:

1. The export proceeds have been realized in full except for the amount written off, if any, in accordance with the extant provisions for write off.

2. The exporter is a regular customer of AD bank for a period of at least six months.

3. The exporter’s account with the AD bank is fully compliant with Reserve Bank’s extant KYC / AML guidelines.

4. The AD bank is satisfied about the bonafides of the transaction.

2. “Write-off” of unrealized Export bills

2.1 Attention is invited to A.P. (DIR. Series) Circular No. 88 dated March 12, 2013 on “write-off” of unrealized export bills. To provide greater flexibility to the AD banks and to reduce the time taken for according such approvals, the extant procedure is revised as under:

2.2 The above limits of self-write-off and write-off by the AD bank shall be reckoned cumulatively and shall be available subject to the following conditions:

a) The relevant amount has remained outstanding for more than one year;

b) Satisfactory documentary evidence is furnished indicating that the exporter had made all efforts to realise the export proceeds;

c) The exporter is a regular customer of the bank for a period of at least 6 months, is fully compliant with KYC/AML guidelines and AD Bank is satisfied with the bonafides of the transaction.

d) The case falls under any of the undernoted categories:

1. The overseas buyer has been declared insolvent and a certificate from the official liquidator, indicating that there is no possibility of recovery of export proceeds, has been produced.

2. The unrealized amount represents the balance due in a case settled through the intervention of the Indian Embassy, Foreign Chamber of Commerce or similar Organization;

3. The goods exported have been auctioned or destroyed by the Port / Customs / Health authorities in the importing country;

4. The overseas buyer is not traceable over a reasonably long period of time.

5. The unrealized amount represents the undrawn balance of an export bill (not exceeding 10% of the invoice value) remaining outstanding that turned out to be unrealizable despite all efforts made by the exporter;

6. The cost of resorting to legal action would be disproportionate to the unrealized amount of the export bill or where the exporter even after winning the Court case against the overseas buyer could not execute the Court decree due to reasons beyond his control;

7. Bills were drawn for the difference between the letter of credit value and actual export value or between the provisional and the actual freight charges but the amounts have remained unrealized consequent to dishonor of the bills by the overseas buyer with no prospects of realization.

2.3 Notwithstanding anything contained in para 2.1 and 2.2 above, the AD bank may, on request of the exporter, write-off unrealised export bills without any limit in respect of cases falling under any of the categories specified at 2.2 (d) (i), (ii) and (iii) above provided AD bank is satisfied with the documentary evidence produced.

2.4 AD banks may also permit write-off of outstanding amount of export bills up to the specified ceilings indicated in para 2.1 above, where the documents have been directly dispatched by the exporter to the consignee or his agent resident in the country of final destination of goods if the case falls under any of the categories specified at 2.2 (d) (i), (ii) and (iii) above.

2.5 The AD bank shall ensure that the exporter seeking write-off has submitted documentary evidence towards surrendering of proportionate export incentives, if any, availed of in respect of the relative export bill.

2.6 In case of self-write off, the AD bank shall obtain from the exporter, a certificate from Chartered Accountant indicating the export realization in the preceding calendar year and details of the amount of write-off, if any, already availed of during the current calendar year along with the requisite details of the EDF/Export Bill under the write-off request. The certificate shall also indicate that the export incentives, if any, availed by the exporter have been surrendered.

2.7 The following cases, however, would not qualify for the “write-off” facility:

1. Exports made to countries with externalization problem i.e. where the overseas buyer has deposited the value of export in local currency but the amount has not been allowed to be repatriated by the Central Bank authorities of the country concerned.

2. EDF/Softex which are under investigation by agencies like, Enforcement Directorate, Directorate of Revenue Intelligence, Central Bureau of Investigation, etc. as also the outstanding bills which are subject matter of civil / criminal suit.

2.8 AD banks shall report write-off of export bills in Export Data Processing and Monitoring System (EDPMS).

2.9 AD banks shall put in place a system to carry out random check / percentage check of the export bills so written-off by their internal Inspectors/Auditors (including external Auditors).

2.10 Requests of write-off not covered under the above instructions may be referred to the Regional Office concerned of the Reserve Bank.

3. Set-off of Export receivables against Import payables

3.1 Presently, AD banks are allowing exporters/importers to set-off their outstanding export receivables against outstanding import payables from/to the same overseas buyer/supplier. The Bank has been receiving requests from AD banks, on behalf of their Importer/Exporter constituents, for allowing such set-off with their overseas group/associate companies either on net basis or gross basis, through an in-house or outsourced centralised settlement arrangement.

3.2 Accordingly, it has been decided to delegate powers to AD banks to also consider such requests of set-off, and the revised guidelines, in supersession of the instructions contained in circular A.P. (DIR Series) Circular No 47 dated November 17, 2011, are issued as under:

The AD bank may allow set-off of outstanding export receivables against outstanding import payables, subject to the following conditions:

1. The arrangement shall be operationalized/supervised through/by one AD bank only

2. AD bank is satisfied with the bonafides of the transactions and ensures that there are no KYC/AML/CFT concerns;

3. The invoices under the transaction are not under investigation by Directorate of Enforcement/Central Bureau of Investigation or any other investigative agency;

4. Import/export of goods/services has been undertaken as per the extant Foreign Trade policy

5. The export / import transactions with ACU countries are kept outside the arrangement;

6. Set-off of export receivables against goods shall not be allowed against import payables for services and vice versa.

7. AD bank shall ensure that import payables/export receivables are outstanding at the time of allowing set-off. Further, set-off shall be allowed between the export and import legs taking place during the same calendar year.

8. In case of bilateral settlement, the set-off shall be in respect of same overseas buyer/supplier subject to it being supported by verifiable agreement/mutual consent.

9. In case of settlement within the group/associates companies, the arrangement shall be backed by a written, legally enforceable agreement/contract. AD bank shall ensure that the terms of agreement are strictly adhered to;

10. Set-off shall not result in tax evasion/avoidance by any of the entities involved in such arrangement.

11. Third party guidelines shall be adhered to by the concerned entities, wherever applicable;

12. AD bank shall ensure compliance with all the regulatory requirement relating to the transactions;

13. AD bank may seek Auditors/CA certificate wherever felt necessary.

14. Each of the export and import transaction shall be reported separately (gross basis) in FETERS/EDPMS/IDPMS, as applicable

15. AD bank to settle the transaction in E/IDPMS by utilizing the ‘set-off indicator’ and mentioning the details of shipping bills/bill of entry/invoice details being settled in the remark column (including details of entities involved)

4. Refund of Export Proceeds

4.1 Attention is invited to A. P. (DIR Series) Circular No.37 dated April 05, 2007, in terms of which AD banks, through whom the export proceeds were originally realised, were allowed to consider requests for refund of export proceeds of goods exported from India and being re-imported into India on account of poor quality.

4.2 There have been instances when re-importing of goods has not been possible as the exported goods had reportedly been auctioned or destroyed in the importing country.

4.3 The instructions have been reviewed and henceforth AD banks, while permitting refund of export proceeds of goods exported from India, shall:

1. Exercise due diligence on the track record of the exporter;

2. Verify the bona-fides of the transaction/s;

3. Obtain from the exporter a certificate issued by DGFT / Custom authorities that no export incentive has been availed of by the exporter against the relevant export or the proportionate export incentives availed, if any, have been surrendered;

4. Not insist on the requirement of re-import of goods, where exported goods have been auctioned or destroyed by the Port / Customs / Health authorities/ any other accredited agency in the importing country subject to submission of satisfactory documentary evidence.

4.4 In all other cases AD banks shall ensure that procedures as applicable to normal imports are adhered to and that an undertaking from the exporter, to re-import the goods within three months from the date of refund of export proceeds, shall be obtained.

5. AD banks may bring the contents of this Circular to the notice of their constituents concerned. The Master Direction No 16/2015 dated January 01, 2016 is being updated to reflect the above changes.

6. The directions contained in this Circular have been issued under Section 10(4) and 11(1) of Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(Ajay Kumar Misra)
Chief General Manager in Charge