Inquisitive Mind

Reserve Bank of India (RBI) has enhanced the Held to Maturity (HTM) limit for Statutory Liquidity Ratio (SLR) eligible securities. What is Statutory Liquidity Ratio (SLR)? Banks shall maintain in India assets (SLR assets) the value of which shall not, at the close of business on any day, be less than 18% (not exceeding 40%) of their total net demand and time liabilities in India as on the last Friday of the second preceding fortnight. How is SLR to be maintained by banks? The SLR can be maintained by banks in the following forms – Cash Gold Unencumbered investment in any of the following approved securities / SLR securities – Dated securities of the Government of India  Treasury Bills of the Government of India Cash Management Bill (CMB)  State Development Loans (SDLs) of the State Governments  Any other instrument as may be notified by RBI (as and when prescribed) What are investment categories? Banks shall classify their entire investment portfolio (including SLR securi...

We have been withdrawing cash at ATMs using our debit and credit cards. Now, there is an option for card-less cash withdrawals at ATMs. What is interoperable Card-less Cash Withdrawal (ICCW) at ATMs? The customers, who are live on Unified Payments Interface (UPI), can now withdraw cash from any participating banks’ ATMs (enabled for ICCW) without using their cards. How are ICCW transactions offered? The ICCW transactions using UPI for authorisation has been implemented by National Payments Corporation of India (NPCI). Banks and White Label ATM Operators (WLAO) are required to offer ICCW transactions at their ATMs using UPI for customer authorisation. The settlement of the transactions would be through National Financial Switch (NFS) / ATM networks.  What other guidelines are applicable to ICCW transactions? The on-us / off-us ICCW transactions shall be processed without levy of any charges other than those prescribed under the circular on Interchange Fee and Customer Charges. Withd...

Funds can be reemitted abroad for various purposes under Liberalised Remittance Scheme (LRS). What is LRS? And what is the ceiling limit for remittances under LRS? What is Liberalised Remittance Scheme (LRS)? Under the Liberalised Remittance Scheme (LRS), all resident individuals, including minors, are allowed to freely remit up to USD 2,50,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both.  The Scheme is not available to corporates, partnership firms, HUF, Trusts, etc. What if LRS limit is exhausted? The release of foreign exchange exceeding USD 2,50,000 requires prior permission from Reserve Bank of India (RBI). What are permissible capital account transactions under LRS? The permissible capital account transactions by an individual under LRS are – Opening of foreign currency account abroad with a bank. Acquisition of immovable property abroad, Overseas Direct Investment (ODI) and Overseas Portfolio Investme...

Reserve Bank of India (RBI) restricts storage of actual card data [i.e. Card-on-File (CoF)] by non-bank payment aggregators and merchants. What is Card-on-File (CoF)? Card-on-file (CoF) is the storing of customer card and payment information by a merchant, i.e. keeping card information “on file”. What are the guidelines on storage of actual card data [i.e. Card-on-File (CoF)]? No entity in the card transaction / payment chain, other than the card issuers and / or card networks, shall store Card-on-File (CoF) data, and any such data stored previously shall be purged. From when are the restrictions on storage of actual card data [i.e. Card-on-File (CoF)] applicable? Reserve Bank of India (RBI) had periodically extended the deadline for effecting the restriction on storage of actual card data [i.e. Card-on-File (CoF)] from June 30, 2021 to September 30, 2022, taking into account the representations received from the stakeholders. All entities, except card issuers and card networks, are re...

Reserve Bank of India (RBI) has issued guidelines on tokenisation of card transactions.  What is tokenisation? Tokenisation refers to replacement of actual card details with an alternate code called the “token”, which shall be unique for a combination of card, token requestor and device. What is de-tokenisation? Conversion of the token back to actual card details is known as de-tokenisation. What is the benefit of tokenisation? As the actual card details are not shared with the merchant during a transaction, it is expected to make card transactions more safe, secure and convenient for the users.  Which devices or use cases are covered for tokenisation? Authorised card payment networks are allowed to offer card tokenisation services to any token requestor (i.e., third party app provider), through mobile phones, tablets, laptops, desktops, wearables (wrist watches, bands, etc.), Internet of Things (IoT) devices, etc. for all use cases / channels (e.g., contactless card transacti...

Reserve Bank of India (RBI) has revised the regulatory framework for Urban Co-operative Banks (UCBs) based on the recommendations of the Expert Committee on Urban Co-operative Banks. Expert Committee on Urban Co-operative Banks  Reserve Bank of India (RBI) had constituted the Expert Committee on Urban Co-operative Banks on February 15, 2021, under the Chairmanship of Shri N. S. Vishwanathan, former Deputy Governor, RBI. The Committee was constituted to examine the issues in urban co-operative banking sector, provide a medium-term road map, suggest measures for faster resolution of UCBs and recommend suitable regulatory / supervisory changes for strengthening the sector by leveraging the amendments to Banking Regulation Act, 1949 (As Applicable to Cooperative Societies).  What were the recommendations of the Committee? The Committee had a vision of turning UCBs into friendly neighborhood banks. Some of the important recommendations of the Committee were – Four-tiered regulatory...

Reserve Bank of India (RBI) has issued Standard Operating Procedure (SOP) for Inter-operable Regulatory Sandbox (IoRS). What is Regulatory Sandbox (RS)? Regulatory Sandbox (RS) refers to live testing of new products / services in controlled / test regulatory environment for which regulators may (or may not) permit certain regulatory relaxations for the limited purpose of testing. The objective of RS is to foster responsible innovation in financial services, promote efficiency and bring benefit to consumers. What is Inter-operable Regulatory Sandbox (IoRS)? Inter-operable Regulatory Sandbox (IoRS) is a mechanism to facilitate testing of innovative hybrid financial products / services falling within the regulatory ambit of more than one financial sector regulator.  What is the basis of Standard Operating Procedure (SOP) for IoRS? To facilitate testing of innovative products / services falling within the regulatory ambit of more than one financial sector regulators [viz. Reserve Bank ...

Reserve Bank of India (RBI) has revised the eligibility criteria applicable to Regional Rural Banks (RRBs) for offering Internet Banking facility to their customers. What are Regional Rural Banks (RRBs)? Regional Rural Banks (RRBs) are constituted under the Regional Rural Banks Act, 1976. RRBs were setup with a view to developing the rural economy by providing credit and other facilities, particularly to the small and marginal farmers, agricultural labourers, artisans and small entrepreneurs.  Who contribute to the equity of RRBs? The equity of the RRBs is contributed by the Central Government, State Government concerned and the sponsor bank in the proportion of 50:15:35.  Who regulates and supervises RRBs? The function of financial regulation over RRBs is exercised by Reserve Bank of India (RBI) and the supervisory powers have been vested with National Bank for Agriculture and Rural Development (NABARD). What are eligibility criteria for offering Internet Banking facility by ...

Reserve Bank of India (RBI) had extended the timeline for submission of applications for authorisation by Payment Aggregators (PAs). What are Payment Aggregators (PAs)? Payment Aggregators (PAs) are entities that facilitate e-commerce sites and merchants to accept various payment instruments from the customers for completion of their payment obligations without the need for merchants to create a separate payment integration system of their own. PAs facilitate merchants to connect with acquirers. In the process, they receive payments from customers, pool and transfer them on to the merchants after a time period. What are Payment Gateways (PGs)? Payment Gateways (PGs) are entities that provide technology infrastructure to route and facilitate processing of an online payment transaction without any involvement in handling of funds. What was the extended timeline for submission of applications for authorisation by PAs? The online non-bank Payment Aggregators (PAs) existing as on March 17, ...

Reserve Bank of India (RBI) has issued directions on issuance and conduct of credit card and debit card. What is Credit Card? Credit Card is a physical / virtual payment instrument issued with a pre-approved revolving credit limit that can be used to purchase goods and services or draw cash advances. What is Debit Card? Debit Card is a physical / virtual payment instrument linked to a Saving Bank / Current Account which can be used to withdraw cash, make online payments, do PoS terminal / Quick Response (QR) code transactions, fund transfer, etc. From when are the directions on issuance of credit card and debit card applicable?  The directions on issuance and conduct of credit card and debit card are applicable with effect from July 01, 2022. To whom are the directions applicable? Provisions relating to credit cards apply to – Every Scheduled Bank (excluding Payments Banks, State Co-operative Banks and District Central Co-operative Banks) operating in India. All Non-Banking Financi...

Reserve Bank of India (RBI) has published the regulatory framework for microfinance loans. From when is the framework applicable? The regulatory framework is applicable with effect from April 01, 2022. Which entities are covered in the framework? The regulatory framework is applicable to the following regulated entities (REs) – All Commercial Banks (including Small Finance Banks, Local Area Banks, and Regional Rural Banks) excluding Payments Banks. All Primary (Urban) Co-operative Banks / State Co-operative Banks / District Central Co-operative Banks. All Non-Banking Financial Companies (including Microfinance Institutions and Housing Finance Companies). What is Microfinance Loan? A microfinance loan is defined as a collateral-free loan given to a household having annual household income up to ₹3,00,000. For this purpose, the household means an individual family unit, i.e., husband, wife and their unmarried children. All collateral-free loans, irrespective of end use and mode of applic...