Inquisitive Mind

Women Enterprise Acceleration Fund has been created to empower women entrepreneurs. What is the objective of Women Enterprise Acceleration Fund? A dedicated ‘Women Enterprise Acceleration Fund’ has been set up to catalyse and make available medium term to long term debt financing to women entrepreneurs to enable them to invest in viable enterprises. This fund will also incentivize first-time women entrepreneurs to start their enterprises and also support existing women-owned enterprises to grow and scale-up. What are the schemes under Women Enterprise Acceleration Fund? Individual women-led enterprises would be provided the following benefits under Women Enterprise Acceleration Fund – Reimbursement of Credit Guarantee fees to lending institutions The fund will extend support in form of reimbursement of actual credit guarantee fees incurred by banks / financial institutions for taking credit guarantee cover under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) or Cr...

Reserve Bank of India (RBI) has issued draft guidelines on digital lending for transparency in aggregation of loan products from multiple lenders. What is the rationale behind the draft guidelines? Many of the lending service providers (LSPs) offer aggregation services for loan products, wherein an LSP, or a Regulated Entity (RE) acting as an LSP, has outsourcing arrangements with several lenders and the Digital Lending App / Platform (DLA) of the LSP / RE matches the borrower to one of the lenders. In such cases, particularly where an LSP has arrangements with multiple lenders, identity of the potential lender to the borrower may not be known upfront to the borrower. What are the draft guidelines for ensuring transparency in aggregation of loan products from multiple lenders? With the objective of enabling the borrowers to have prior information about the potential lenders in order to make an informed decision, the REs are advised to ensure as under – The LSP shall provide a digital v...

Reserve Bank of India (RBI) has updated the guidelines on voluntary transition of Small Finance Banks to Universal Banks. What is the difference between Small Finance Bank (SFB) and Universal Bank? Particulars Small Finance Bank (SFB) Universal Bank Minimum paid-up voting equity capital ₹300 crore ₹1000 crore Capital requirement 15% of Risk Weighted Assets (RWA) 9% of RWA Scope of activities Basic banking activities of acceptance of deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganised sector entities. No such restrictions. Loan portfolio At least 50% of loan portfolio should constitute loans and advances of up to ₹25 lakh. No such restrictions. Priority sector lending target 75% of Adjusted Net Bank Credit (ANBC) 40% of ...

Reserve Bank of India (RBI) has issued draft amendments to the existing directions on Payment Aggregators and new draft directions on regulation of Payment Aggregators – Physical Point of Sale. Existing directions on Payment Aggregators (PAs) The existing directions on Payment Aggregators (PAs) regulate the PAs facilitating online payment transactions.  What are the requirements for authorisation as PA? Banks provide PA services as part of their normal banking relationship and do not require a separate authorisation from RBI.  Non-bank PAs shall require authorisation from RBI under the Payment and Settlement Systems Act, 2007 (PSSA). Draft amendments to the existing directions on Payment Aggregators (PAs) The draft amendments to some of the existing directions are given below. Who are Payment Aggregators (PAs)? Existing Definition Amended (draft) Definition PAs are entities that facilitate e-commerce sites and merchants to accept various payment in...

Reserve Bank of India (RBI) has revised the guidelines on Key Facts Statement (KFS) for loans & advances. What are Key Facts? Key Facts of a loan agreement between a regulated entity (RE) / a group of REs and a borrower are legally significant and deterministic facts that satisfy basic information required to assist the borrower in taking an informed financial decision. What is Key Facts Statement (KFS)? Key Facts Statement (KFS) is a statement of key facts of a loan agreement, in simple and easier to understand language, provided to the borrower in a standardised format. What is Annual Percentage Rate (APR)? Annual Percentage Rate (APR) is the annual cost of credit to the borrower which includes interest rate and all other charges associated with the credit facility. What is Equated Periodic Instalment (EPI)? Equated Periodic Instalment (EPI) is an equated or fixed amount of repayments, consisting of both the principal and interest components, to be paid by a borrower towards repa...

The Banking Regulation Act, 1949 (BR Act, 1949) governs the working of banks in India. In a series of articles, we will briefly go through some of the important provisions of the BR Act, 1949. This is the fifth and last article in the series. Part 3B - Provisions Relating to Certain Operations of Banking Companies Section 45ZA – Nomination for payment of depositors' money  Where a deposit is held by a banking company to the credit of one or more persons, the depositor / all the depositors together, may nominate one person to whom in the event of his / their death, the amount of deposit may be returned by the banking company. Where the nominee is a minor, the depositor shall appoint any person to receive the amount of deposit in the event of his death during the minority of the nominee. Section 45ZC – Nomination for return of articles kept in safe custody with banking company  Where any person leaves any article in safe custody with a banking company, such person may nominate o...

The Banking Regulation Act, 1949 (BR Act, 1949) governs the working of banks in India. In a series of articles, we will briefly go through some of the important provisions of the BR Act, 1949. This is the fourth article in the series. Part 2A - Control over Management Section 36AA – Power of Reserve Bank to remove managerial and other persons from office  RBI may remove from office any chairman / director / chief executive officer / other officer / employee of the banking company. Any person against whom an order of removal has been made under section 36AA(1), may appeal to the Central Government within 30 days from the date of communication to him of the order. The decision of the Central Government on such appeal and order made by RBI where appeal is not made, shall be final. Where an order under section 36AA(1) has been made, RBI may appoint a suitable person in place of the chairman / director / chief executive officer / other officer / employee who has been removed from his of...

The Banking Regulation Act, 1949 (BR Act, 1949) governs the working of banks in India. In a series of articles, we will briefly go through some of the important provisions of the BR Act, 1949. This is the third article in the series. Section 26 – Return of unclaimed deposits  Every banking company shall submit to RBI, within 30 days after the close of each calendar year, a return of all accounts in India which have not been operated upon for 10 years. In the case of money deposited for a fixed period, the term of 10 years shall be reckoned from the date of the expiry of such fixed period. Every regional rural bank shall also furnish a copy of the return to the National Bank. Section 26A – Establishment of Depositor Education and Awareness Fund  RBI shall establish a Fund to be called the "Depositor Education and Awareness Fund". There shall be credited to the Fund the amount to the credit of any account in India with a banking company which has not been operated upon for 10 y...

The Banking Regulation Act, 1949 (BR Act, 1949) governs the working of banks in India. In a series of articles, we will briefly go through some of the important provisions of the BR Act, 1949. This is the second article in the series. Section 17 – Reserve Fund  Every banking company incorporated in India shall create a reserve fund and shall transfer to the reserve fund at least 20% of profit (before any dividend is declared) each year. On the recommendation of RBI, the Central Government may declare that the provisions of section 17(1) shall not apply to the banking company for specified period provided the reserve fund together with the share premium account is not less than the paid-up capital of the banking company. Where a banking company appropriates any sum from the reserve fund / share premium account, it shall report the fact to RBI within 21 days of such appropriation. RBI may extend the period of 21 days by such period as it thinks fit or condone any delay in making such...