Dec 2016

A SUMMARY OF NOTIFICATIONS ISSUED BY RBI DURING NOVEMBER 2016

Enhancement in limits for PPIs
Following the withdrawal of legal tender characteristics of existing Rs. 500 and Rs. 1000 Bank Notes (Specified Bank Notes or SBN), RBI (22.11.16) introduced the following special measures on Issuance and Operation of Pre-paid
Payment Instruments (PPIs) in India.
(i) Enhancement in PPI limits:
a. The limit of semi-closed PPI that can be issued has been enhanced from Rs.10,000/- to Rs.20,000/- .
b. The total value of reloads during any given month shall also not exceed Rs.20,000/-
(ii) Special dispensation for merchants:
Merchant establishments which accept the PPIs issued by PPI issuer against the sale of goods and services. For small merchants, PPI issuers can now issue PPIs subject to the following:
a. Merchants shall give a declaration in respect of their merchant status and details of their own bank account, which shall be kept on record by the issuer.
b. PPIs can be issued to such willing merchants only after due verification and validation of their bank account details.
c. Inflows of funds / credit to such PPIs shall emanate only from sale transactions of the merchant.
d. There is no minimum balance requirement. Maximum value in these PPIs shall not exceed Rs.20,000 at any point of time.
e. Funds transfer from such PPIs are permitted only to the merchant’s own linked bank account and upto an amount of Rs.50,000 per month, without any limit per transaction.
f. PPI issuers shall identify such PPIs in their systems for maintenance of escrow, reporting and MIS requirements.
This shall be applicable till Dec 30, 2016, subject to review.

Cash Withdrawal at Point-of-Sale (POS) – Withdrawal limits and customer fee/charges – Relaxation
Following the withdrawal of legal tender characteristics of existing Rs. 500 and Rs. 1000 Bank Notes (Specified Bank Notes – SBN), RBI had advised banks on 14.11.16, to waive levy of ATM charges for all transactions by savings bank customers done at all ATMs, from Nov 10, 2016 till Dec 30, 2016, subject to review.
RBI further decided (18.11.16) that (i) the limit for cash withdrawal at POS (for debit cards and open system prepaid cards issued by banks in India) shall be uniform at Rs. 2000 per day across all centres (Tier I to VI) for all merchant establishments enabled for this facility and (ii) customer charges, if any, shall not be levied on all such transactions, till Dec 30, 2016, subject to review.

Detection and Impounding of Counterfeit Notes
RBI drawn attention of banks (27.10.16) to circular dated 20.07.16, relating to Detection and Impounding of Counterfeit Notes wherein banks were advised to ensure that counterfeit notes making entry into the banking system are promptly detected and under no circumstance, returned to the tenderer or reissue them. Banks were also advised that with a view to facilitating the detection of counterfeit notes, all bank branches / identified back offices should be equipped with ultra-violet lamps / other appropriate banknote sorting / detection machines. Further, banks should ensure that cash receipts in the denominations of Rs. 100 and above are not put into re-circulation without the notes being machine processed for authenticity. These instructions are applicable to all bank branches, irrespective of the volume of daily cash receipt.

Requirement for additional CRR
U/s 42(1) of RBI Act, 1934, Scheduled Banks are to maintain with RBI, a Cash Reserve Ratio of 4% of Net Demand and Time Liabilities (NDTL). On a review (26.11.16) of the current liquidity conditions, RBI required that all Scheduled Commercial Banks/ Regional Rural Banks / all Scheduled Primary (Urban) Co-operative Banks / all Scheduled State Co-operative Banks should maintain with RBI, effective from the fortnight beginning Nov 26, 2016, an incremental CRR of 100% on the increase in NDTL between Sept 16, 2016 and Nov 11, 2016. It shall be reviewed on December 9, 2016 or even earlier.

Exchange facility to foreign citizens
RBI decided (25.11.16) that foreign citizens (i.e. foreign passport holders) can exchange forex for Indian currency notes up to a limit of Rs. 5000 per week till Dec 15, 2016 subject to the tenderer submitting a self-declaration that this facility has not been availed of during the week. The Authorized Person (APs) shall keep the passport details and the above declaration on record. APs may also ensure that the total value of such exchange to Indian currency notes does not exceed Rs.5000/- during the week.

Oil Marketing Companies’ Govt. of India Special Bonds (Oil Bonds) as eligible collateral under LAF/MSF
RBI decided (25.11.16) that the Oil Bonds issued by Govt. of India will qualify as eligible securities for Repos, Reverse Repos and Marginal Standing Facility (MSF) wef 28.11.16. The E-Kuber system will accept Oil Bonds as eligible collateral for the above transactions. There will be no change in the prevailing Non-SLR status of the Oil Bonds.
Further, there will be no margin requirement for the securities provided by RBI as collateral in Reverse Repo operations (including Term Reverse Repos). Margin requirements shall continue in respect of all Repo/MSF transactions. A margin of 4% will be applied in respect of Oil Bonds, i.e. a Repo bid of Rs.100 will have to be backed by Rs.104 of Oil Bonds.

Investment by FPI in corporate debt securities
As per extant guidelines, Foreign Portfolio Investors (FPI) can invest only in listed or to-be-listed debt securities. Investment in unlisted debt securities is permitted only in case of infrastructure sector companies. RBI decided (17.11.16) to expand the investment basket of eligible instruments for investment by FPIs under the corporate bond route to include the following:
(i) Unlisted corporate debt securities in the form of non-convertible debentures/bonds issued by public or private companies subject to minimum residual maturity of 3 years and end use-restriction on investment in real estate business, capital market and purchase of land.
(ii) Securitised debt instruments as under:
a. any instrument issued by a special purpose vehicle set up for securitisation where banks, FIs or NBFCs are originators; and/or
b. any certificate or instrument issued/listed as per SEBI Regulations on Public Offer and Listing of Securitised Debt Instruments, 2008.
Investment by FPIs in the unlisted corporate debt securities and securitised debt instruments shall not exceed Rs. 35,000 crore within the extant investment limits prescribed for corporate bond from time to time which currently is Rs. 2,44,323 crore. Further, investment by FPIs in securitised debt instruments shall not be subject to the minimum 3-year residual maturity requirement. The revised norms will be reviewed after one year.

Specified Bank Notes (SBNs) – Deposit under Guarantee Scheme to decongest the storage facilities at banks
RBI decided (24.11.16) to revive the Guarantee Scheme to enable deposit of SBNs with RBI wef 25.11.16. The details are as under:
i. Banks may deposit SBNs directly with the offices of RBI under whose jurisdiction they are located. These SBNs will remain, in the vaults of RBI, under the lock and key of the depositing banks till taken up for examination.
ii. For the SBNs deposited by banks, RBI will afford credit to their current accounts maintained with RBI. Thereafter, if any shortage, counterfeit note, mutilated note, etc. is detected during detailed processing at RBI, the value of the same will be recovered from the bank concerned.
iii. This facility is available to all banks and at all Issue Offices.

Special knowledge or practical experience useful to banking companies
RBI felt that the domain knowledge and experience enumerated under various statutory provisions for the directors on the boards of commercial banks (excluding RRBs) need to be augmented by knowledge and experience in other specialized areas, to guide the banks, in managing their diversified business portfolios and risks.
RBI decided (24.11.16) to broaden the fields of specialization to include (i) Information Technology (ii) Payment & Settlement Systems (iii) Human Resources (iv) Risk Management and (v) Business Management, for persons to be considered for appointment of director in the banks.

Deposit of specified bank notes in Small Savings Schemes
Govt. of India decided that subscribers of Small Savings Schemes may not be allowed to deposit SBNs in Small Savings Schemes. Banks were advised by RBI (23.11.16) not to accept SBNs for deposits in Small Saving Schemes with immediate effect.

Discontinuation of over the Counters Exchange of SBN
On a review, RBI decided that no over-the-counter exchange (in cash) of specified bank notes (SBNs), will be permitted after midnight of Nov 24, 2016. Public approaching the banks for over the counter exchange of SBN, may be encouraged to deposit SBNs into their bank accounts.