Inquisitive Mind

Reserve Bank of India (RBI) had issued instructions on certain aspects of corporate governance in banks. To whom are the instructions applicable? The instructions are applicable to – Private Sector Banks including Small Finance Banks (SFBs) and Payment Banks (PBs) Wholly owned subsidiaries of Foreign Banks In respect of State Bank of India and Nationalised Banks, the guidelines are applicable to the extent they are not inconsistent with provisions of specific statutes applicable to these banks or instructions issued under the statutes.  The instructions are not applicable to foreign banks operating as branches in India.  What are the instructions on Chair and meetings of the Board? The Chair of the board shall be an independent director.  In the absence of the Chair of the board, the meetings of the board shall be chaired by an independent director.  The quorum for the board meetings shall be 1/3rd of the total strength of the board or 3 directors, whichever is highe...

Reserve Bank of India (RBI) had issued draft directions on managing risks and code of conduct in outsourcing of financial services. What is the objective of the directions? The purpose of the directions on 'managing risks and code of conduct in outsourcing of financial services' is to ensure that outsourcing arrangements neither diminish the ability of the regulated entity (RE) to fulfil its obligations to customers nor impede effective supervision by the supervisory authority.  What is outsourcing? “Outsourcing” refers to an RE’s use of a third party (either an affiliated entity within a group or an external entity) to perform activities that would normally be undertaken by the RE itself on a continuing basis, now or in the future. ‘Continuing basis’ would include agreements for a limited period. This means REs shall not enter into perpetual agreements. What is material outsourcing? “Material outsourcing arrangement” means an outsourcing arrangement which – In the event of fa...

Reserve Bank of India (RBI) has updated the guidelines on acceptance of bulk deposits by banks. What are bulk deposits?  “Bulk Deposit” means single Rupee term deposits of  – Deposit Banks ₹3 crore (earlier ₹2 crore) and above Scheduled Commercial Banks [excluding Regional Rural Banks (RRBs)] Small Finance Banks ₹1 crore (earlier ₹15 lakh) and above Regional Rural Banks (RRBs) Local Area Banks Scheduled Primary (Urban) Co-operative Banks (UCBs) in Tier 3 & 4 ₹15 lakh and above Other UCBs What are the revised guidelines on pre-mature withdrawal option? Commercial Banks shall have the freedom to offer term deposits without premature withdrawal option, provided that all term deposits accepted from individuals (held singly or jointly) for amount of ₹1 crore (earlier ₹15 lakh) and below shall have premature-withdrawal-facility. Co-operative Banks shall have the freedom to offer term deposits without prem...

Reserve Bank of India (RBI) has issued guidelines for import of gold and silver. Who can import gold and silver in India? The following entities are permitted to import gold under specific ITC(HS) Codes through India International Bullion Exchange IFSC Ltd. (IIBX) – Nominated agencies as notified by Reserve Bank of India (RBI) (in case of banks). Nominated agencies as notified by Directorate General of Foreign Trade (DGFT). Qualified Jewellers (QJ) as notified by International Financial Services Centers Authority (IFSCA). The list of QJs is available at https://www.ifsca.gov.in/Directory/index/%20BeofL9D7gY= . Valid Tariff Rate Quota (TRQ) holders under the India-United Arab Emirates (UAE) Comprehensive Economic Partnership Agreement (CEPA) as notified by the IFSCA. Further, Qualified Jewellers (QJ) as notified by IFSCA are also permitted to import silver under specific ITC(HS) Codes through IIBX. (Updated on February 04, 2024) What are the conditions for import of gold and silver? Res...

Reserve Bank of India (RBI) has issued guidelines for opening / shifting / closure of place of business by District Central Co-operative Banks (DCCBs). What is the pre-condition for opening / shifting place of business by DCCBs? Pursuant to the amendment to the Banking Regulation Act dated September 29, 2020, District Central Co-operative Banks (DCCBs) are permitted to open new place of business / install ATMs or shift the location of such offices only after obtaining prior approval of Reserve Bank of India (RBI).  What is the criteria for opening / shifting / upgrading the place of business by DCCBs? The criteria for opening of branches / extension counters / specialized branches / regional offices / zonal offices / administrative offices / shifting of branches / upgradation of extension counters into full-fledged branches by a DCCB are as follows - A licensed DCCB should have completed at least 3 years of operation. CRAR at least 9%. No default in maintenance of CRR / SLR du...

Reserve Bank of India (RBI) has made addition to the specified securities under Fully Accessible Route (FAR). What is Fully Accessible Route (FAR)? An announcement was made in the Union Budget 2020-21 that certain specified categories of Central Government securities would be opened fully for non-resident investors without any restrictions, apart from being available to domestic investors as well.  Accordingly, Reserve Bank of India (RBI) had introduced a separate route viz., Fully Accessible Route (FAR) for investment by non-residents in securities issued by the Government of India. Who are eligible investors under FAR? Eligible investors shall mean any “person resident outside India” as defined in Foreign Exchange Management Act, 1999. Which are specified securities under FAR? Specified securities include - Government securities of 5-year and 10-year tenors from the financial year 2020-21. Government securities of 7-year tenors (w.e.f. July 07, 2022). Sovereign Green Bonds ...

Reserve Bank of India (RBI) has updated the directions for non-banking financial companies undertaking the business of account aggregator. Who is Account Aggregator (AA)? “Account Aggregator” means a non-banking financial company (NBFC) as notified under section 45-I of Reserve Bank of India (RBI) Act, 1934, that undertakes the business of an account aggregator, for a fee or otherwise. “Business of an account aggregator” means the business of providing under a contract, the service of -  Retrieving or collecting financial information pertaining to its customer and; Consolidating, organizing and presenting such information to the customer or any other financial information user. In simple words, the financial information providers share the financial information of a customer with an Account Aggregator for transferring it to the customer or a financial information user. What is financial information? “Financial Information” means information in respect of the following with financia...

Reserve Bank of India (RBI) has taken regulatory measures towards credit exposures of banks and non-banking financial companies (NBFCs). What is the rationale behind the regulatory measures? The high growth in consumer credit and increasing dependency of non-banking financial companies (NBFCs) on bank borrowings may build-up risk in the portfolios of the banks and NBFCs. In view of this, Reserve Bank of India (RBI) has issued revised guidelines for certain credit exposures of banks and NBFCs. What are the revised guidelines? Previous Instructions Revised Instructions Consumer credit exposure of commercial banks attract a risk weight of 100%. The risk weights in respect of consumer credit exposure of commercial banks (outstanding as well as new), including personal loans, but excluding housing loans, education loans, vehicle loans and loans secured by gold and gold jewellery, has been increased to 125%. NBFCs’ loan exposures generally att...

Reserve Bank of India (RBI) has issued guidelines for regulation of payment aggregators facilitating cross-border payment transactions for import and export of goods and services. Who are Payment Aggregators? 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. Who are Payment Aggregator – Cross Border (PA-CB)? Payment Aggregator – Cross Border (PA-CB) are entities that facilitate cross-border payment transactions for import and export of permissible goods and services in online mode. Who is authorised to operate as PA-CB? AD Category-I Banks AD Category-I banks do not require separate approv...