RBI-May2015

A SUMMARY OF NOTIFICATIONS ISSUED BY RBI DURING THE MONTH

Mandatory Leave for Bank Staff
In terms of extant guidelines of RBI (Circular dated May 31, 2011) banks were advised to put in place ‘staff rotation’ policy and policy for ‘mandatory leave’ for staff.
RBI advised (23.04.15) banks that, as a prudent operational risk management measure, it is imperative that employees posted in sensitive positions or areas of operations (viz., treasury, currency chests, risk modelling, model validation, etc.) are covered under a ‘Mandatory Leave’ policy wherein such employees are required to compulsorily avail of leave for a few days (say 10 working days) in a single spell every year, during their posting in such areas. The bank should also identify such highly sensitive positions where the bank will, without any prior intimation, advise the employee to be away from his desk for a specified number of working days each year.
While the employee is on ’mandatory leave’ or asked to be away from his desk as above, it should be ensured that he does not have access to any physical or virtual resources related to his work responsibilities, with the possible exception of corporate email.
An exhaustive list of sensitive positions or areas of operations to be covered under ‘mandatory leave’ and under ‘away from desk’ requirement, may be decided as per the bank’s own policy duly approved by the Board of Directors or committee of the Board, and the incumbents of these positions should be kept aware of the above requirements. Implementation of such policy would be covered under the Pillar 2 review of banks’ risk management system by the Reserve Bank of India.

Appointment of Internal Ombudsman
RBI advised (May 11, 2015) all public sector banks and some private sector and foreign banks to appoint an internal ombudsman, to be designated Chief Customer Service Officer (CCSO). The CCSO should not have worked in the bank in which he/she is appointed as CCSO. RBI has taken this initiative to further boost the quality of customer service and to ensure that there is undivided attention to resolution of customer complaints in banks. The private banks have been selected on the basis of their asset size, business mix, etc. for the purpose of appointment of CCSO.

Ready Forward Contracts in Corporate Debt Securities
As per circular dated Feb 03, 2015 on Repo in Corporate Debt Securities (Reserve Bank) Directions, 2015, RBI listed names of entities eligible to enter into ready forward contracts in corporate debt securities. RBI decided (May 14, 2015) to permit NBFCs registered with RBI including Government companies which adhere to the prudential norms prescribed for NBFCs by the Department of Non-Banking Regulation, RBI, to undertake ready forward contracts in corporate debt securities.

Card Payments – Relaxation in requirement of Additional Factor of Authentication for small value card present transactions
RBI decided (May 14, 2015) to relax the extant instructions relating to the need for additional factor of authentication (AFA) requirements for small value card present transactions, only using contact-less cards. In this regard, RBI advised that :
1. Relaxation for AFA requirement is permitted for transactions for a maximum value of Rs 2,000/- per transaction;
2. Limit of Rs.2000 per transaction will be the limit for all categories of merchants in the country where such contactless payments will be accepted;
3. Beyond this transaction limit, the card has to be processed as a contact payment and authentication with PIN (AFA) will be mandatory;
4. Even for transaction values below this limit, the customer may choose to make payment as a contact payment, which has to be facilitated by both issuing and acquiring banks. In other words, customers cannot be compelled to do a contactless payment;
5. Banks are free to facilitate their customers to set lower per-transaction limits. The responsibility for authorizing the contactless payment based on such card-based limits will lie with the card issuing banks;
6. Suitable velocity checks (i.e., how many such small value transactions will be allowed in a day / week / month) may be put in place by banks as considered appropriate; and
7. The contactless cards should necessarily be chip cards adhering to EMV payment standard, so as to be acceptable across the existing card acceptance infrastructure which are EMV compliant based on the earlier mandate in this regard.
Further, in the interest of customer awareness and protection the banks have also been advised:
1. to clearly explain to customers about the technology, its use, and risks while issuing such contact less cards;
2. to create awareness among customers to look for / identify the “contactless” logo on the card (to distinguish them from other cards) as well as the merchant location / POS terminal (to identify that contactless payments are accepted at that location);
3. to clearly indicate to the customers that they can use the card in contactless mode (without PIN authentication) for transactions upto Rs.2000/- in locations where contactless payments are accepted and to make customers aware that they are free to use the same card as a regular chip card (with PIN authentication) at any location irrespective of transaction value;
4. to clearly indicate the maximum liability devolving on the customer, if any, at the time of issuance of such cards along with the responsibility of the customer to report the loss of such cards to the bank; and
5. to put in place robust mechanism for seamless reporting of lost/stolen cards, which can be accessed through multiple channels (website, phone banking, SMS, IVR).
The above relaxations shall not apply to (i) ATM transactions irrespective of transaction value; and (ii) Card Not Present transactions (CNP).

Foreign Currency Non-Resident A/c (Banks)
RBI observed that Authorised Dealer banks are insisting on different requirements at the time of closure of FCNR deposits and remittance of funds such as (i) Submission of A2 form (ii) Insisting on physical presence of the account holder (iii) Asking for purpose of remittance.
RBI clarified (May 14, 2015) that A2 form is to be filed at the time of purchase of foreign exchange using rupee funds and hence is not applicable while remitting FCNR (B) funds. Further, banks, with the help of technology, will have to devise alternatives/ methods for ensuring bonafides of the transaction rather than insisting on physical presence of the a/c holder, in order to ensure hassle free remittance of funds to the account holder.

Resolution period for BIFR/CDR/JLF cases
In terms of extant RBI Guidelines the maximum resolution period permitted to SCs/RCs for realisation of stressed assets acquired by them is 8 years. In cases of restructuring, approved by BIFR / CDR / JLF, the repayment period goes beyond a time frame of 8 years. In such cases, SCs/RCs, holding a part of the stressed assets, express their inability to go along with the other lenders beyond 8 years due to regulatory constraints and insist on an exit at the end of 5 or 8 years, thereby jeopardizing the restructuring efforts of the majority lenders. RBI decided (May 07, 2015) to make certain modifications to the existing Directions as under:
1. For restructuring proposals requiring approval by BIFR/CDR/JLF, SC/RCs shall be permitted to accept a resolution period co-terminus with other secured lenders.
2. In these cases, redemption period of Security Receipts (SRs) held against these assets may be in congruence with the resolution period approved by BIFR/CDR/JLF, subject to the Independent Credit Rating Agencies continuing to positively rate these SRs, i.e. as long as the Net Asset Value of the SRs continue to be positive.

Acknowledgement to pensioners on submission of life certificates
In terms of extant instructions, all pensioners are required to furnish a life certificate to the pension disbursing bank every year in November for continuance of pension. This certificate can be submitted at any branch of the pension paying bank. Govt. of India has also launched from Sept, 2014 a scheme for introduction of Aadhaar based digital life certificates known as Jeevan Pramaan. RBI advised banks (May 07, 2015) to issue a signed acknowledgement to pensioners on receipt of the life certificate submitted in physical form. Banks may enter the same in their CBS immediately on receipt and issuing a system generated receipt to the pensioners.

Declaration of Exports of Goods/Software
As per Foreign Exchange Management (Export of Goods and Services) Regulations, 2000, every exporter of goods or software has to declare the same in one of the forms stated therein. RBI decided (May 14, 2015) to dispense with the requirement of declaring the export of Goods /Software in the SDF in case of exports taking place through the EDI ports, as the mandatory statutory requirements contained in the SDF have been subsumed in the Shipping Bill format.

Acquisition of Accommodation by Commercial Banks for their use
As per extant guidelines of RBI, the norms for acquisition of accommodation on lease / rental basis by commercial banks for their use, can be determined by the banks themselves. Banks are to ensure that their branches are not functioning from premises not authorized in law. Further, banks have been advised that the legitimate grievances of owners of property leased to the bank should be examined at appropriately senior level in the bank and expeditious action should be taken to redress such grievances.
In keeping with the current liberalized environment with regard to opening of branches, RBI decided (30.04.15) to do away with the periodic statements on disputed premises to the Regional Directors of RBI or to Department of Banking Regulation, Central Office.

Simplified procedure for opening of Currency Chests
The extant instructions dated 02.01.12, for setting up of new currency chests were reviewed by RBI. It decided (23.04.15) to do away with multiple layers of approvals. These simplified guidelines are as under :
A. Locations at/ close to the International Border/ Insurgency affected areas:
1. If the place of the proposed location of a currency chest is within 80 kms from the international border and it is not a State Capital or a cantonment area, banks may approach Regional Offices (ROs) of RBI to obtain security clearance. Under no circumstance, construction can be commenced before receipt of the required clearance.
2. The banks are also to obtain all necessary approvals from other agencies before beginning construction.
3. Strict adherence to the Technical Specifications of construction in terms of the circular dated Nov 14, 2008, must be ensured by banks.
4. Final Approval from the respective RO of RBI may be sought after construction is completed. No deviation will be permitted or considered and any construction falling short of specifications will not be approved.
B. All other locations:
1. Banks may construct new CCs at any place after informing the RO concerned of the RBI, under whose jurisdiction it is to be established.
2. The banks may also note to obtain all necessary approvals from other agencies before beginning construction.
3. Strict adherence to the Technical Specifications of construction in terms of circular dated Nov 14, 2008, must be ensured by banks.
4. Final Approval from the respective RO of RBI may be sought after construction is completed. No deviation will be permitted or considered and any construction falling short of specifications will not be approved.
Approvals for opening of CCs by PSBs & Private Sector Banks will continue to be given by our ROs as hitherto. All other banks (RRBs, Cooperative banks and foreign banks) may continue to seek approvals Central Office, Mumbai. The approvals will normally be accorded within 30 days provided the construction conforms to the specifications.