Jan 2017

A SUMMARY OF NOTIFICATIONS ISSUED BY RBI DURING DECEMBER 2016

MDR for transactions up to Rs.2000
Vide circular dated 16.12.16, banks were advised by RBI, to cap the Merchant Discount Rate (MDR) for debit card transactions at not exceeding 0.75% of the transaction amount for value upto Rs.2000/- and not exceeding 1% for transaction amount for value above Rs.2000/-.
On 16.12.16, RBI revised these charges as under:
1. For transactions upto Rs.1000/-, MDR shall be capped at 0.25% of the transaction value.
2. For transactions above Rs. 1000/- and upto Rs.2000/-, MDR shall be capped at 0.5% of the transaction value.
These measures shall not apply to ATM transactions. These shall for the period Jan 1, 2017 till March 31, 2017.

Charges for Immediate Payment Service (IMPS), Unified Payment Interface (UPI) & Unstructured Supplementary Service Data (USSD)
As a temporary measure, RBI decided (16.12.16) that all participating banks and Prepaid Payment Instrument (PPI) issuers shall not levy any charges on customers for transactions upto Rs.1000 settled on the Immediate Payment Service (IMPS), USSD-based *99# and Unified Payment Interface (UPI) systems during the period January 1, 2017 till March 31, 2017.

Preservation of CCTV recordings
On 27.10.16, RBI had stated that in order to facilitate identification of people abetting circulation of counterfeit notes, banks are advised to cover the banking hall/area and counters under CCTV surveillance and recording and preserve the recording. On 13.12.16, the banks were further advised to preserve CCTV recordings of operations at bank branches and currency chests for the period from November 08 to December 30, 2016, until further instructions, to facilitate coordinated and effective action by the enforcement agencies in dealing with matters relating to illegal accumulation of new currency notes.

Aadhaar-based Authentication for Card Present Transactions
On 29.10.16, banks were advised to ensure that all new card present acceptance infrastructure deployed with effect from January 1, 2017 are enabled for processing payment transactions using Aadhaar-based biometric authentication also. On a review, RBI decided (02.12.16) to extend the time for deployment of Aadhaar-enabled devices till June 30, 2017. These instructions are for deployment of new card acceptance infrastructure. As regards enablement of existing card acceptance infrastructure for processing payment transactions using Aadhaar-based biometric authentication, the timeline will be advised in due course.

Definition of ‘Infrastructure Lending’
Government updated the Harmonised Master List of Infrastructure sub-sectors vide Gazette Notifications dated October 13, 2014, April 8, 2016 and August 1, 2016. RBI advised (01.12.16) the banks that for the purpose of definition of ‘Infrastructure Lending’, banks and select All India Term-Lending and Refinancing Institutions may henceforth be guided by the Gazette Notifications issued by the Department of Economic Affairs, Ministry of Finance, Government of India, from time to time.
Chest Guarantee Scheme for Specified Bank Notes (SBNs) – CGSS
With a view to expand the ambit of the CGSS, RBI decided (28.11.16) that banks operating currency chests may be allowed to operate CGSS if they have additional space in their existing currency chest or additional storage space at the same centre which is nearly as safe and secure as that of a currency chest. The requisite approval will be granted by RBI’s Regional Office (RO) concerned.

Accounts under PMJDY – Precautions
With a view to protect the innocent farmers and rural account holders of PMJDY from activities of money launders and legal consequences under the Benami Property Transaction & Money Laundering laws, RBI decided (29.11.16) to place certain limits, as a matter of precaution, on the operations in the PMJDY accounts funded through deposits of Specified Bank Notes (SBNs) after November 09, 2016. As a temporary measure, the banks have been advised to observe the following in respect of the PMJDY accounts:
1. Fully KYC compliant account holders may be allowed to withdraw Rs. 10,000/- from their account, in a month. The branch managers may allow further withdrawals beyond Rs.10,000 within the current applicable limits only after ascertaining the genuineness of such withdrawals and duly documenting the same on bank’s record.
2. Limited or Non KYC compliant account holders may be allowed to withdraw Rs. 5,000 per month from the amount deposited through SBNs after November 09, 2016 within the overall ceiling of Rs.10,000.
Deposit of Specified Bank Notes (SBNs) – Chest Balance Limit / Cash Holding Limit
As per extant direction (27.10.09) of RBI, the balance in a currency chest, exceeding the Chest Balance Limit / Cash Holding Limit  is deemed to be bank’s own cash, not allowing for inter-chest fungibility. Due to deposits of SBNs in massive quantity and accumulations thereof, RBI advised (29.11.16) the banks that SBNs deposited in the currency chests, since Nov 10, 2016 will be considered as part of the chest balance in the soiled note category but such deposits will not be reckoned for calculating Chest Balance Limit / Cash Holding Limit. A review will be taken up in February 2017.

Mahatma Gandhi (New) Series Banknotes – Records
On 12.12.16, RBI advised banks to maintain, at the Currency Chest level and at link branches level, a Daily Record of Issuances showing the serial numbers of Mahatma Gandhi (New) Series banknotes in the denominations of Rs.500 and above received from RBI as remittance and issuance thereof to their own branches, branches of other banks and post offices, branch wise and denomination wise on daily basis. The Daily Record of Issuances should be signed by Joint custodians and branch manager at end of day.
The records should be preserved for 2 years and made available during inspection by Chest Inspection Officials of RBI or Banks’ Internal Auditors.

Withdrawal of the Incremental CRR
On 26.11.16, all scheduled banks were advised by RBI to maintain, u/s 42 (1A), incremental cash reserve ratio of 100% of increase in NDTL between Sep 16, 2016 and Nov 11, 2016, wef fortnight beginning Nov 26, 2016. On a review on 07.12.16, RBI decided to withdraw the requirement of incremental CRR, effective the fortnight beginning Dec 10, 2016.

Customer due diligence and need for maintenance of records
As per RBI circular dated 01.07.15, operation in dormant accounts with banks may be allowed after due diligence as per risk category of the customer. ‘Due diligence’ would mean ensuring genuineness of the transaction, verification of the signature and identity etc.
As per Master Directions on KYC (25.02.16) :
1. as part of the Customer Due Diligence Procedure, certified copies of officially valid documents for proof of identity and address are to be obtained while establishing an account based relationship;
2. REs shall, among others, take steps for preserving the customer account information including preservation of records pertaining to the identification of the customers and their addresses obtained while opening the account, for at least five years after the business relationship is ended.
RBI reiterated on 06.12.16, that REs shall ensure compliance, inter alia, with the above mentioned instructions as applicable on activation of dormant accounts, customer due diligence and record management, scrupulously.

Amendment to Master Direction on Know Your Customer
RBI made two major changes to KYC as under (08.12.16):
1. to allow One Time Pin (OTP) based e-KYC subject to certain restrictions
2. to invariably upload the KYC data pertaining to all new individual accounts opened on or after January 1, 2017, with Central KYC Records Registry. SCBs are, however, allowed time upto February 1, 2017 for uploading date in respect of accounts opened during January 2017. REs other than SCBs are to upload the KYC data pertaining to all new individual accounts opened on or after from April 1, 2017, with CKYCR.