Nov 2016

A SUMMARY OF NOTIFICATIONS ISSUED BY RBI DURING OCTOBER 2016

RBI Policy Rates
The Monetary Policy Committee (MPC) decided (04.10.16) to reduce the Repo rate under Liquidity Adjustment Facility (LAF) by 25 basis points from 6.50% to 6.25% with immediate effect. Consequent to the change in the Repo rate:
1) Marginal Standing Facility rate will stand adjusted to 6.75% .
2) Reverse Repo rate under the LAF will stand adjusted to 5.75%.
3) the Standing Liquidity Facility provided to Primary Dealers (PDs) (collateralised liquidity support) from RBI would be available at the revised repo rate, i.e., at 6.25% with effect from October 4, 2016.
4) Bank Rate stands adjusted by 25 basis points from 7% to 6.75 per cent with effect from October 04, 2016.
Interest Rates on Small Savings w.e.f. 1.10.16
5-years Senior Citizens Saving Scheme 8.5%
5-years National Saving Certificate 8.0%
Public Provident Fund 8.0%
Kissan Vikas Patras 7.7%
Sukanya Samridhi Account 8.5%

Priority Sector Lending – Revised Reporting System
RBI decided (06.10.16) to modify the quarterly and annual reporting formats for reporting priority sector lending. The statements should be furnished to RBI within fifteen days and one month, respectively from the date of ending of each quarter and financial year.

Doubling Farmers’ Income by 2022
Government of India in the Union Budget 2016-17 had announced its resolve to double the income of farmers by 2022.
RBI advised banks (29.09.16) to revisit their documentation for crop loans, simplify it where required and ensure speedy sanctioning and disbursal of loans within specified time limits.
Lead banks have been advised to ensure the following:
a. Work closely with NABARD in preparation of Potential Linked Plans (PLPs) & Annual Credit Plans keeping the above strategy in consideration.
b. Include ‘Doubling of Farmer’s Income by 2022’ as a regular agenda under Lead Bank Scheme in various forums such as SLBC, DCC, DLRC and BLBC.
c. For the purpose of monitoring and reviewing the progress, Lead banks may use the benchmarks as may be provided by NABARD.
d. Map the overall strategy to the agriculture/agro-ancillary lending plan of your bank.

Credit Facilities to Minority Communities
The following communities have been notified as minority communities by the Government of India, Ministry of Minority Affairs: Sikhs, Muslims, Christians, Zoroastrians, Buddhists and Jains. RBI modified the monitoring guidelines on 29.09.16, as under:
1. data on credit assistance provided to members of minority communities should be furnished to RBI and to the Government of India, Ministry of Finance and Ministry of Minority Affairs, on half yearly basis as on the last Friday of March and September every year, to reach RBI within one month from the close of each half year.
2. The Lead Banks in the identified districts should furnish the relevant extracts of the agenda notes and the minutes of the meetings of the DCCs and of the respective SLBCs to the Union Ministry of Finance and to the Ministry of Minority Affairs on a quarterly basis for their use.

Aadhaar-based Authentication for Card Present Transactions
As per RBI circular dated 26.11.13, banks were advised that all new card present infrastructure has to be enabled for both EMV Chip and PIN and Aadhaar (biometric validation) acceptance. RBI reiterated (29.09.16) the instructions and advised banks to ensure that all new card acceptance infrastructure deployed with effect from January 1, 2017 are enabled for processing payment transactions using Aadhaar-based biometric authentication also.

Publishing of photographs of Wilful defaulters
RBI observed that some lending institutions have been publishing the photographs of defaulters/ guarantors in newspapers. Due to sensitivity involved and need to prevent the publishing of photographs in an indiscriminate manner, RBI decided (29.09.16) as under:
(i) A lending institution can consider publication of the photographs of only those borrowers, including proprietors/ partners /directors / guarantors of borrower firms/ companies, who have been declared as wilful defaulters following the mechanism set out in the RBI instructions referred to above. This shall not apply to the non-whole time directors who are exempted from being considered as wilful defaulters unless the special conditions, in accordance with these instructions, are satisfied.
(ii) The lending institutions shall formulate a policy with the approval of their Board of Directors which clearly sets out the criteria based on which the decision to publish the photographs will be taken by them so that the approach is neither discriminatory nor inconsistent.
The lending institutions shall not publish photographs of any other defaulting borrowers.

Investment by Foreign Portfolio Investors (FPI) in Government Securities
The limits for investment by foreign portfolio investors (FPI) in Government securities were last increased in terms of the Medium Term Framework (MTF) announced on 29.03.16. Accordingly, the limits for the next half year are proposed to be increased in two tranches, each of Rs. 100 billion from October 3, 2016 and January 2, 2017 respectively. The limits for State Development Loans (SDLs) are proposed to be increased in two tranches, each of Rs.35 billion, from October 3, 2016 and January 2, 2017 respectively.
4. The revised limits over the next two quarters would be as under (INR billion):
Central Govt. All FPIs Addl for Total State Total
Securities Long term Loans
Existing Limit 1440 560 2000 140 2140
w.e.f. 03.10.16 1480 620 2100 175 2275
w.e.f. 02.01.17 1520 680 2200 210 2410
The operational guidelines relating to allocation and monitoring of limits will be issued by the Securities and Exchange Board of India (SEBI).

CIBIL Limited
Credit Information Bureau (India) Limited changed its name. On 29.09.16, RBI issued a new certificate in the name of : TransUnion CIBIL Limited

Revised Kisan Credit Card (KCC) Scheme
RBI decided (13.10.16) to make changes in Para 13, as under:
13.ii Besides the mandatory crop insurance, KCC holder should have the option to take benefit of any type of Assets Insurance, Accident Insurance (including PAIS), and Health Insurance (wherever product is available) and have premium paid through his KCC account. Premium has to be borne by farmers/bank according to the terms of the Scheme. Farmer beneficiaries should be made aware of the insurance cover available and their consent (except in case of crop insurance, it being mandatory) is to be obtained, at the application stage itself.

Sovereign Gold Bonds – Limit of Investment and Acceptance as Collateral
RBI circulated following clarification on Sovereign Gold Bonds (SGB) (20.10.16):
a. SGB are government securities issued under section 3 (iii) of the government securities Act. The holder of an SGB can create a pledge, hypothecation or lien against the security as collateral security for any loan.
b. Banks and other eligible holders can acquire more than 500 gms. of SGBs in a fiscal year, through transfers etc., including out of recovery proceedings.

Risk Weights for exposures to Housing Finance Companies (HFCs)
RBI decided (20.10.16) that exposures to all HFCs would be risk weighted as per the ratings assigned by the rating agencies registered with the SEBI and accredited by RBI, in a manner similar to that of corporates, AFCs, NBFC-IFCs and NBFC-IDFs.

Foreign investment in Other Financial Services
At present foreign investment up to 100%, under automatic route, in Non-Banking Finance Companies (NBFCs) engaged in the 18 activities listed therein is allowed. RBI decided (20.10.16) to allow foreign investment up to 100% under the automatic route in ‘Other Financial Services’ which activities regulated by any financial sector regulator viz. RBI, SEBI, IRDAI, PFRDA, NHB or any other financial sector regulator. Such investment shall be subject to conditionalities, specified by the concerned Regulator/ Government Agency.
Other salient features of the revised regulatory framework are as under:
a) In activities which are not regulated or partly regulated by any financial sector regulator or where there is lack of clarity regarding regulatory oversight, foreign investment will be allowed up to 100% under the Govt. approval route.
b) Foreign investment in an activity specifically regulated by an Act, will be restricted to foreign investment levels/limits, if any, specified in that Act.