MAR 2017

A SUMMARY OF NOTIFICATIONS ISSUED BY RBI DURING FEBRUARY 2017

CGTMSE Guarantee – Modifications
CGTMSE made the following changes in the Credit Guarantee Scheme w.e.f. 01.01.2017, as per their circular dated Jan 09, 2017.
Chapter I Clause 2 (v) : Guarantee Cover means maximum cover available per eligible borrower of the amount in default in respect of the credit facility extended by the lending institution.
Chapter II Clause 4) (para-1) : Credit facility eligible under the Scheme: CGTMSE shall cover credit facilities (Fund based and / or Non fund based) extended by Member Lending Institutions (MLIs) to a single eligible borrower in the Micro and Small Enterprises Sector (i) not exceeding Rs.50 lakh (Regional Rural Banks / Financial Institutions) and (ii) not exceeding Rs.200 lakh (Scheduled Commercial Banks and select Financial Institutions) by way of term loan and / or working capital facilities, without any collateral security and / or third party guarantee.
Chapter II – Clause 5 (Serial No. vi): Credit facilities not eligible under the Scheme: Any credit facility which has been sanctioned by the lending institution with the maximum interest rate not more than 14% p.a. (including cost of guarantee cover) would be eligible for coverage under CGS. The revised guidelines on ceiling on Interest Rate that could be charged for the guarantee covered credit facilities would be applicable, also to those MLIs who would not be eligible for enhanced credit guarantee coverage from Rs.100 lakh to Rs.200 lakh.
Chapter IV Clause 9 (Para.1): Extent of guarantee: The Trust shall provide guarantee as under:
(1) Micro Enterprises : (a) up to Rs.5 lac – 85% of the amount in default subject to a maximum of 4.25 lakh (b) Above 5 lakh upto 50 lakh – 75% of the amount in default subject to a maximum of Rs.37.50 lakh (c) Above Rs.50 lakh and upto Rs.200 lakh – 50% of amount in default subject to a maximum of Rs.100 lakh.
(2) Women Entrepreneur / Units located in North East Region (including Sikkim) (other than credit facility upto Rs.5 lakh to micro enterprises) : (a) Up to Rs.50 lac – 80% of the amount in default subject to a maximum of Rs.40 lakh (b) Above Rs.50 lakh and upto Rs.200 lakh – 50% of amount in default subject to a maximum of Rs.100 lakh.
(3) All other category of borrowers : (a) Up to Rs.50 lac – 75% of the amount in default subject to a maximum of Rs.37.50 lakh (b) Above Rs.50 lakh and upto Rs.200 lakh – 50% of amount in default subject to a maximum of Rs.100 lakh.
All proposals for sanction of guarantee approvals for credit facilities above Rs.50 lakh upto Rs.200 lakh will have to be rated internally by the MLI and should be of investment grade.
Proposals Sanctioned by the MLIs on or after January 01, 2017: The enhancements in existing guarantee cover beyond Rs.100 lakh in respect of working capital facilities, where such enhancements are approved on or after January 01, 2017, would also be eligible for the enhanced coverage up to Rs.200 lakh provided the proposal meets the guidelines of CGS.

Interest rates for Small Savings Schemes (01.01.17 to 31.03.17)
5-years Senior Citizens Saving Scheme 8.5%
5-years National Saving Certificate 8.0%
Sukanya Samriddhi Account 8.5%
Public Provident Fund 8.0%
Kissan Vikas Patras 7.7%

Issuance of Rupee denominated bonds overseas Multilateral and Regional
Financial Institutions as Investors

Further to extent guidelines on External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than ADs, about the criteria of recognized investors in the Rupee denominated bonds issued overseas, in order to provide more choices of investors to Indian entities issuing Rupee denominated bonds abroad, RBI decided on Feb 16, 2017, to also permit Multilateral and Regional Financial Institutions where India is a member country, to invest in these Rupee denominated bonds.
Forward Rate Agreement (FRA) and Interest Rate Swap (IRS)
As per extent notification, banks are to submit a fortnightly return on FRA/IRS to Monetary Policy Department with a copy to various RBI departments. In a further step towards rationalization of returns, RBI decided (Feb 16) to withdraw the said return with immediate effect. The banks have been advised to stop sending the hardcopy of the said return to RBI.
The existing procedure for reporting OTC Foreign exchange and Interest Rate Derivative transactions to the trade repository hosted by CCIL shall continue.

Repayment of Gold Loan
As per circular dated 22.09.2010, Regional Rural Banks (RRBs) were permitted by RBI to grant gold loans up to Rs.1.00 lakh with bullet repayment option. On a review, RBI decided (Feb 16) to increase the quantum of loan that could be granted under the scheme, from Rs.1.00 lakh to Rs.2.00 lakh subject to the following conditions:
(i) The period of loan shall not exceed 12 months from the date of sanction.
(ii) Interest will be charged at monthly rests. It will become due for payment along with principal only at the end of 12 months from the date of sanction.
(iii) RRBs to maintain a Loan to Value (LTV) ratio of 75% on an ongoing basis, failing which the loan will be treated as an NPA.
RBI also clarified that crop loans sanctioned against the collateral security of gold/gold ornaments shall continue to be governed by the extant income recognition, asset classification and provisioning norms for such loans.

Reimbursement of Merchant Discount Rate
Govt. of India (GoI) decided to absorb the Merchant Discount Rate (MDR) charges in respect of debit card transactions for making payments to GoI.
On Feb 16, 2017, RBI advised that it will reimburse banks, the MDR on debit cards used for payment of tax and non-tax dues to the Government of India with effect from January 1, 2017. Agency banks have been advised to forward their claim for reimbursement of MDR along with statutory auditors certificate, as in the case of agency commission claims, to CAS (RBI) Nagpur on a quarterly basis. The claims may be signed by the Officer-in-Charge of the Government Banking Division of the bank. He should also certify that MDR charges for transaction amounts upto Rs. 1.00 lakh have not been collected from the payer. The first such claim may be made by April 30, 2017 for the quarter ending March 31, 2017.

Deposit of SBNs Chest Balance Limit / Cash Holding Limit
A review was undertaken and RBI decided (Feb 13) that till further instructions Specified Bank Notes (SBNs) deposited in the currency chests, since November 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.

Limits on withdrawal of cash from Saving Bank Accounts
In the wake of withdrawal of Specified Bank Notes (SBNs) since Nov 09, 2016 RBI had placed certain limits on cash withdrawals from accounts and withdrawals through ATMs. On a review (Feb 08) RBI partially restored status quo ante by removing the restrictions on cash withdrawals from Current / Cash credit / Overdraft accounts and ATMs effective January 31, 2017 and February 01, 2017 respectively. The limits on cash withdrawal from Savings Bank accounts continued to be in place.
1. Effective February 20, 2017, the limits on cash withdrawals from the Savings Bank accounts will be enhanced to Rs.50,000 per week; and
2. Effective March 13, 2017, there will be no limits on cash withdrawals.

Prohibition on Indian Party from making direct investment in countries identified by the Financial Action Task Force (FATF) as Non Co- operative countries and territories
At present, there is no restriction on an Indian Party with regard to the countries, where it can undertake Overseas Direct Investment. In order to align, the instructions with the objectives of FATF. On a review RBI decided (Jan 25) to prohibit an Indian Party from making direct investment in an overseas entity (set up or acquired abroad directly as JV/ WOS or indirectly as step down subsidiary) located in the countries identified by the FATF as non co-operative countries and territories as per list available on FATF websitewww.fatf-gafi.orgor as notified by RBI.