SUMMARY OF IMPORTANT NOTIFICATIONS ISSUED BY RBI DURING AUGUST 2015

 


RBIInterest Subvention for Crop Loans
RBI in its Circular dated 13.08.15, informed that Central Government approved the implementation of the Interest Subvention Scheme for the year 2015-16 for short term crop loans with the following stipulations:
i) Interest subvention @ 2% pa will be available to Public Sector Banks and Private Sector Scheduled Commercial Banks (in respect of loans given by their rural and semi-urban branches) on their own funds used for short-term crop loans up to Rs.3 lac per farmer provided the banks make available, short term credit at the ground level at 7% pa to the farmers. The subvention will be calculated on the loan amount from the date of disbursement/drawal to date of actual repayment of the loan or up to the due date of the loan fixed by the banks whichever is earlier, subject to a maximum period of one year.
ii) Additional interest subvention @3% pa will be available to the farmers repaying the loan promptly from the date of disbursement of the crop loan up to the actual date of repayment or up to the due date fixed by the bank for repayment of crop loan, whichever is earlier, subject to a maximum period of one year from the date of disbursement. This implies that the farmers paying promptly would get short term crop loans @4% pa during the year 2015-16. It is not available for farmers who repay after one year.
iii) To discourage distress sale and to encourage to store the produce in warehouses against warehouse receipts, the benefit of subvention is available to small and marginal farmers having Kisan Credit Card for a further period of up to 6 months post-harvest on the same rate as available to crop loan against negotiable warehouse receipt for keeping produce in warehouses.
iv) To provide relief to farmers affected by natural calamities, the interest subvention of 2% will continue to be available to banks for the first year on the restructured amount. Such restructured loans may attract normal rate of interest from the second year onwards as per RBI policy.
Subvention Claims: Claims are to be submitted to RBI as under:
i) In respect of 2% interest subvention, banks are to submit their claims on a half-yearly basis as at Sept 30, 2015 and March 31, 2016, of which, the latter needs to be accompanied by the Statutory Auditor’s certificate certifying the claims for subvention for the entire year ended March 31, 2016 as true and correct. Any remaining claim pertaining to the disbursements made during the year 2015-16 and not included in the claim for March 31, 2016, may be consolidated separately and marked as an ‘Additional Claim’ duly audited by the Statutory Auditors certifying the correctness.
ii) For 3% additional subvention, banks may submit their one-time consolidated claims pertaining to the disbursements made during the entire year 2015-16 latest by April 30, 2017, duly audited by the Statutory Auditors certifying the correctness.

Deposits of Army Group Insurance Directorate, Naval Group Insurance Fund and Air Force Group Insurance Society
In terms of extant guidelines (11.09.87), Public Sector Banks can pay additional interest of 1.28% p.a. over and above the normal rate of interest permissible in terms of directives on interest rates on deposits issued by RBI, only on the term deposits for 2 years and above of Army Group Insurance Directorate (AGID), Naval Group Insurance Fund (NGIF) and Air-Force Group Insurance Society (AFGIS), provided such deposits are not in any way linked with payment of insurance premia by the bank.
RBI decided (06.08.15) to withdraw the prescription of offering additional interest of 1.28% pa on these deposits. Accordingly, interest rates on such deposits should be at par with other deposits of similar maturity and amount.
The revised guidelines will be applicable at the time of accepting fresh deposits or renewal of the existing deposits. In other words, existing term deposits of AGID, NGIF and AFGIS may be continued till maturity.

Relief Measures in areas affected by Natural Calamities
Based on Govt. of India notification dated 08.04.15, RBI decided (21.08.15) to allow State Level Bankers’ Committees/District Level Consultative Committees/banks to take a view on rescheduling of loans if the crop loss is 33% or more. Banks may allow a max period of repayment of up to 2 years (including the moratorium of 1 year) if the loss is between 33% and 50%. If the crop loss is 50% or more, the restructured period for repayment may be extended to a maximum of 5 years (including the moratorium period of one year).

Exposure Norms limit for the Standalone Primary Dealers (SPDs)
RBI decided (06.08.15) to increase exposure ceiling limits in respect of single borrower / counterparty from 25% to 50% of latest audited Net Owned Funds (NOF) and in respect of group borrower from 40% to 65% of latest audited NOF only for investments in AAA rated corporate bonds.
The existing norm of exposure ceilings for single borrower / counterparty and group borrower of 25% and 40% respectively will continue to apply in respect of other investments in the corporate bonds.

Suspension of Guarantee Approvals under Credit Guarantee Scheme
CGTMSE decided (28.04.15) that no guarantees (includes fresh, renewals and enhancements) will be issued to member lending institutions (MLIs) which have marked cumulative NPAs (in terms of amount) of 10% or more vis-à-vis the cumulative amount of guarantees issued by the Trust to it. If this NPA level crosses the 12% mark, the claims of such MLIs will be settled after giving notice and after thorough scrutiny of each claim.

Composite Guarantee Fee at differential rates by CGTMSE
As per extant policy of CGTMSE, the composite guarantee fee is being paid upfront, by MLIs as under:
a) Women, Micro Enterprises and units in North East Region (includingSikkim) : Up to Rs.5 lac @ 0.75% p.a. and above Rs.5 lac @ 0.85% p.a. of sanctioned amount.
b) Others : 1% p.a. of sanctioned amount.
For loans above Rs.5 lac, CGTMSE decided (17.04.15) to charge differential rates of fee on the basis of NPA levels reported by MLIs, for guarantees approved by the Trust on or after October 01, 2015 as under:
NPA level Guarantee Fee 1 Above 20% SR + 100 bps 2 15% – 20% SR + 50 bps 3 12% – 15% SR + 25 bps 4 12% and below SR 5 Below 6% SR – 25 bps @ SR = Standard Rate (Existing ASF/AGF prescribed rate).
NPA level shall be computed as a % of guarantees issued on and up to March 31 every year.
@ Provided MLI has been obtaining guarantee cover from the Trust for at least 5 complete years.
For non-payment of fee by MLI within given period, the guarantee shall not be available to MLI unless the Trust agrees for continuance of guarantee and the lending institution pays penal interest on the fee due and unpaid, with effect from the due date, at 4% over Bank Rate, per annum, or at such rates specified by the Trust from time to time, for the period of delay.

Modifications in the Interest Rate Cap under Credit Guarantee Scheme (CGS) of CGTMSE
As per Circular dated Dec 17, 2013 any credit facility sanctioned by MLIs under CGS, to eligible Borrowers with interest rate more than 4% over its Base Rate (BR) was made ineligible for coverage under CGS.
CGTMSE decided (15.07.15) to reduce the cap on Interest Rate from up to 4% above base rate, to up to 2% for loans up to Rs.50 lac and 3% above Base Rate for loans above Rs. 50 lakh. The interest rate cap could be enhanced to 3% for the entire loans if the amount of credit facility up to Rs.50 lac is enhanced to above Rs.50 lac.
The revised guidelines shall be applicable for the credit facilities sanctioned by MLIs on or after Sept 01, 2015, including additional term loans for existing credit facilities covered under CGS. The revised guidelines shall, however, not be applicable for existing working capital cases already covered under CGS where enhancement and / or renewal takes place subsequent to Sept 01, 2015.

Reporting under FDI Scheme on the e-Biz platform
To promote the ease of reporting of transactions under FDI, RBI, under the aegis of the e-Biz project of the Government (hosted at National Informatics Centre- NIC) has enabled (21.08.15) online filing of the Foreign Currency Transfer of Shares (FCTRS) returns for reporting transfer of shares, convertible debentures, partly paid shares and warrants from a person resident in India to a person resident outside India or vice versa.
The design of the reporting platform enables the customer to login into the eBiz portal, download the reporting form (FCTRS), complete and then upload the same onto the portal using their digitally signed certificates. ADs banks are required to download the completed forms, verify the contents from the available documents and if necessary, call for additional information from the customer and then upload the same for RBI to process and allot the Unique Identification Number (UIN).

Govt. Business by Agency Banks – Payment of Agency Commission
RBI clarified (13.08.15) that the following activities do not come under the purview of agency bank business and are not eligible for payment of agency commission.
a. Furnishing of bank guarantees/security deposits, etc through private sector banks by government contractors/suppliers, which constitute banking transactions undertaken by banks for their customers.
b. Banking business of autonomous/statutory bodies.
c. Payments of a capital nature such as capital contributions/subsidies/grants made by governments to cover losses incurred by autonomous/statutory bodies.
d. Prefunded schemes which may be implemented by a Central Govt. Ministry/Department (in consultation with CGA) and a State Govt. Department through any bank without reference to RBI.

Relaxations in Branch Authorisation Policy
RBI revised (06.08.15) the instructions regarding merger, closure, shifting, part shifting, opening of extension counters and reporting requirements as under:
1. Merger/Closure/ Shifting of branches
i) Banks may shift, merge or close all branches except rural branches and sole semi-urban branches at their discretion.
ii) Shifting, merger, or closure of any rural branch as well as a sole semi urban branch would require approval of the DCC/DLRC. Banks may ensure that the centre should not be left unbanked.
iii) Customers should be informed well in time before actual shifting/merger/closure of the branch. Further, while considering shifting/merger/closure of branches, banks should ensure that they continue to fulfil the role entrusted to these branches under the Government sponsored programmes and DBT Schemes.
iv) It may further be ensured that branches are shifted/ within the same or to a lesser population category, i.e., semi urban branches to semi urban or rural centres and rural branches to other rural centres.
v) In all such cases, the license, if any was issued, of the merged/closed/shifted branch may be surrendered to RBI.
2. Part-shifting of Branches: It can be done without seeking prior approval of RBI. The banking activity, i.e., deposit or loan business cannot be maintained at both places, and the new location for part shifting would have to be within 1 km of the existing location. They may also spin off certain activities such as Government business into separate branches at their discretion.
3. Opening of Extension Counters: Presently banks can open Extension Counters in the premises of institutions where they are the principal bankers, or obtain a NOC from the principal banker. With a view to enabling customer choice and operational freedom, the requirement of being the principal banker for opening of EC is not required.