July 2016

A SUMMARY OF NOTIFICATIONS ISSUED BY RBI DURING JUNE 2016

Reporting requirement under Basel III
As per Master Circular dated 01.07.15 on Basel III capital regulation, banks can raise perpetual non-cumulative preference shares (PNCPS) & perpetual debt instruments (PDI) for inclusion in Additional Tier 1 capital. and debt capital instruments, perpetual cumulative preference shares (PCPS) / redeemable non-cumulative preference shares (RNCPS) / redeemable cumulative preference shares (RCPS) for inclusion in Tier 2 capital. The banks are required to submit a report to RBI, giving the details of the debt raised, including the terms of the issue with a copy of the offer document soon after the issue is completed. On a review of the extant instructions, RBI decided (23.06.16) that banks need not submit a copy of the offer document to RBI, as hitherto. Banks shall report the details of the debt raised as per the prescribed format, to RBI.

Export Data Processing and Monitoring System (EDPMS) – Additional modules for caution listing of exporters, reporting of advance remittance for exports and migration of old XOS data
To simplify the procedure for filing returns on a single platform and for better monitoring, RBI decided (26.05.16) to integrate the following returns (wef 15.06.16) with EDPMS, in operation since March 1, 2014.
a) Caution / De-caution Listing of Exporters : AD banks can access the updated list of caution listed exporters through EDPMS on daily basis. Criteria for cautioning / de-cautioning in EDPMS are as under:
i. The exporters would be caution listed if any shipping bill against them remains open for more than two years (from date of shipment) in EDPMS. If bills are realised and closed or extension for realisation is granted, the exporter will automatically be de-caution listed.
ii. The exporters can also be caution listed on the recommendation of AD banks. RBI will caution / de-caution the exporters in such cases.
b) Reporting of Advance Remittance for Exports: RBI decided to capture the details of advance remittances received for exports in EDPMS. Banks will have to report all the inward remittances including advance as well as old outstanding inward remittances received for export of goods / software to EDPMS. The quarterly return presently being submitted by banks for delay in utilization of advances received for export has been discontinued.
c) Export Outstanding Statement (XOS): With effect from March 01, 2014, details of all export outstanding bills can be obtained from the EDPMS. AD banks were required to report the old outstanding bills prior to Mar 01, 2014 in XOS on half yearly basis as at the end of June and December every year. To reduce the reporting burden of AD Banks, RBI decided to migrate the XOS data reported by the AD banks for HY ended Dec 2015 onwards to EDPMS and discontinue separate reporting of XOS for the subsequent periods. AD banks should mark off / close the XOS data pertaining to pre March 01, 2014 as and when amount has been realised.
Foreign Exchange Management (FC Accounts by persons Resident in India) Regulations 2015
Further to extant guidelines, RBI decided (23.06.16) that an Indian startup, having an overseas subsidiary, may open a FC account with a bank outside India for crediting to the account, the foreign exchange earnings out of exports/sales made. The balances held in such accounts, to the extent they represent exports from India, shall be repatriated to India within prescribed period for realization of exports.
In addition, payments received in foreign exchange by an Indian startup arising out of sales/ export made by the startup or its overseas subsidiaries will be a permissible credit to EEFC account maintained in India by the startup.
Further, any insurance/ reinsurance company registered with the Insurance Regulatory and Development Authority of India (IRDAI) may open a foreign currency account with a bank outside India to carry out insurance/ reinsurance business.

Credit Information Reporting in respect of Self Help Group (SHG) members
As per RBI circular dated 14.01.16, banks were advised by RBI to put in place necessary systems and procedures including making necessary changes to their systems software so as to be able to begin collection of the relevant information from the SHG members and the reporting of the required information to Credit Information Companies. RBI decided (16.06.16) to incorporate the SHG member level data into the existing Microfinance data sharing file format. The modified view of Microfinance Data file format to be submitted to all the four CICs from July 1, 2016 has been prescribed by RBI.

Prudential Norms on spread over of shortfall on Sale of NPAs to SCs/RCs
As per extant RBI guidelines (26.02.14), as an incentive for early sale of NPAs to Securitisation Companies/Reconstruction Companies (SCs/RCs) created under SARFAESI Act, 2002, banks can spread over any shortfall, if the sale value is lower than the net book value (NBV), over a period of two years for NPAs sold up to March 31, 2015. On 21.05.15, this facility of spreading over the shortfall was extended for NPAs sold up to March 31, 2016.
RBI extended (13.06.16) dispensation of amortising the shortfall on sale of NPAs to SCs/RCs up to March 31, 2017. For assets sold from April 1, 2016 to March 31, 2017, banks can amortise the shortfall over a period of only four quarters from the quarter in which the sale took place.
Further, where a bank chooses to make the necessary provisions over more than one quarter and this results in the full provisioning remaining to be made as on the close of a financial year, banks should debit ‘other reserves’ [i.e., reserves other than, created u/s 17(2) of the Banking Regulation Act 1949] by the amount remaining un-provided at the end of the financial year, by credit to specific provisions. However, banks should proportionately reverse the debits to ‘other reserves’ and complete the provisioning by debiting profit and loss account, in the subsequent quarters of the next financial year.

Merchant Acquisition for Card transactions
As per extant guidelines (22.09.11) various measures were prescribed by RBI, for strengthening the payment infrastructure and future proofing the system. To encourage banks to expand card acceptance infrastructure to a wider segment of merchants across all geographical locations banks have been advised by RBI (26.05.16) that they may put in place their own Board approved policy on merchant acquisition.
Memorandum of Procedure for channeling transactions through Asian Clearing Union (ACU)
In terms of Memorandum (17.02.10), the minimum amounts and the multiples in which RBI receives and pays U.S. Dollar/ Euro was fixed as $ 25000/ Euro 25000 and $ 1000/ Euro 1000, respectively. RBI decided (26.05.16) to revise the minimum amount and the multiples in which RBI will receive and pay for the purpose of funding or for repatriating the excess liquidity in the ACU Dollar and ACU Euro accounts to $ 500 / Euro 500.

ATMs – Measures for Card Present (CP) Transactions
The POS terminal infrastructure in India has been enabled to accept and process EMV Chip and PIN cards but the ATM infrastructure continues to process the card transactions based on data from the magnetic stripe due to which the transactions remain vulnerable to skimming, cloning, frauds etc. Banks and the White Label ATM operators have been advised by RBI (26.05.16) to ensure that all the existing ATMs installed/operated by them are enabled for processing of EMV Chip and PIN cards by Sept 30, 2017. All new ATMs shall necessarily be enabled for EMV Chip and PIN processing from inception. For switching, clearing and settlement of their ATM transactions, banks with the approval of their Board, may join any authorised ATM/Card network provider. A quarterly progress report should be within 15 days following the quarter end, to RBI.

Information on Investment in Commercial Papers and Unhedged Foreign Currency Exposures of the Borrowers to Credit Information Companies
On recommendations of Committee to Recommend Data Format for Furnishing of Credit Information to Credit Information Companies (Chairman: Shri Aditya Puri) RBI decided (23.06.16) to capture the information on CPs and UFCE:
Commercial papers : The information on CPs issued by the companies shall be reported on a monthly basis to all the four credit information companies (CICs) by the bank which has been designated as the Issuing and Payment Agent (IPA) for the particular CP issue. If there are multiple IPAs for a single CP issue, they shall report to the CICs, the details pertaining to the portion of the issue which is with them. The IPA shall also report any default in the redemption of the relevant CP issue. It is clarified that the investing credit institutions need not report the information on CPs to the CICs.
Unhedged Foreign Currency Exposures : The information regarding UFCE of individual borrowers shall be reported on a quarterly basis to all the four CICs by the lending bank (in the case of solo lenders) /consortium leader (in the case of consortium arrangements)/largest lender (in the case of multiple lending arrangements). This information shall be reported in the Credit Facility (CR) Segment of Commercial Data format.
The reporting requirements is effective from July 1, 2016 i.e. from the credit information reports showing the position for the month of June 2016.

Implementation of Supreme Court Orders in Writ Petition by Swaraj Abhiyan against Union of India and others- Guidelines on Relief Measures by banks in areas affected by Natural Calamities
During the hearing of the captioned Writ Petition, the Hon’ble Supreme Court has directed the concerned authorities in the Union of India, the State Governments and RBI and other banks to religiously implement their policies since they are ultimately intended for the benefit of the people of our country and not for the benefit of any stranger. In view of the above, all the Scheduled Commercial Banks (excluding RRBs) have been advised by RBI (02.06.16) to ensure implementation of our guidelines on Relief Measures by banks in areas affected by Natural Calamities (RBI circular 01.07.15).