RBI/2022-2023/90
A.P. (DIR Series) Circular No.10

July 11, 2022

To

All Category-I Authorised Dealer Banks

Madam/Sir

International Trade Settlement in Indian Rupees (INR)

In order to promote growth of global trade with emphasis on exports from India and to support the increasing interest of global trading community in INR, it has been decided to put in place an additional arrangement for invoicing, payment, and settlement of exports / imports in INR. Before putting in place this mechanism, AD banks shall require prior approval from the Foreign Exchange Department of Reserve Bank of India, Central Office at Mumbai.

2. The broad framework for cross border trade transactions in INR under Foreign Exchange Management Act, 1999 (FEMA) is as delineated below:

1. Invoicing: All exports and imports under this arrangement may be denominated and invoiced in Rupee (INR).
2. Exchange Rate: Exchange rate between the currencies of the two trading partner countries may be market determined.
3. Settlement: The settlement of trade transactions under this arrangement shall take place in INR in accordance with the procedure laid down in Para 3 of this circular.

3. In terms of Regulation 7(1) of Foreign Exchange Management (Deposit) Regulations, 2016, AD banks in India have been permitted to open Rupee Vostro Accounts. Accordingly, for settlement of trade transactions with any country, AD bank in India may open Special Rupee Vostro Accounts of correspondent bank/s of the partner trading country. In order to allow settlement of international trade transactions through this arrangement, it has been decided that:

1. Indian importers undertaking imports through this mechanism shall make payment in INR which shall be credited into the Special Vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller /supplier.
2. Indian exporters, undertaking exports of goods and services through this mechanism, shall be paid the export proceeds in INR from the balances in the designated Special Vostro account of the correspondent bank of the partner country.

4. Documentation: The export / import undertaken and settled in this manner shall be subject to usual documentation and reporting requirements. Letter of Credit (LC) and other trade related documentation may be decided mutually between banks of the partner trading countries under the overall framework of Uniform Customs and Practice for Documentary Credits (UCPDC) and incoterms. Exchange of messages in safe, secure, and efficient way may be agreed mutually between the banks of partner countries.

5. Advance against exports: Indian exporters may receive advance payment against exports from overseas importers in Indian rupees through the above Rupee Payment Mechanism. Before allowing any such receipt of advance payment against exports, Indian Banks shall ensure that available funds in these accounts are first used towards payment obligations arising out of already executed export orders / export payments in the pipeline. The said permission would be in accordance with the conditions mentioned in para-C.2 on Receipt of advance against exports under Master Direction on Export of Goods and Services 2016 (as amended from time to time). In order to ensure that the advance is released only as per the instructions of the overseas importer, the Indian bank maintaining the Special Vostro account of its correspondent bank shall, apart from usual due diligence measures, verify the claim of the exporter with the advice received from the correspondent bank before releasing the advance.

6. Setting-off of export receivables: ‘Set-off’ of export receivables against import payables in respect of the same overseas buyer and supplier with facility to make/receive payment of the balance of export receivables/import payables, if any, through the Rupee Payment Mechanism may be allowed, subject to the conditions mentioned in para C.26 on Set-off of export receivables against import payables under Master Direction on Export of Goods and Services 2016 (as amended from time to time).

7. Bank Guarantee: Issue of Bank Guarantee for trade transactions, undertaken through this arrangement, is permitted subject to adherence to provisions of FEMA Notification No. 8, as amended from time to time and the provisions of Master Direction on Guarantees & Co-acceptances.

8. Use of Surplus Balance: The Rupee surplus balance held may be used for permissible capital and current account transactions in accordance with mutual agreement. The balance in Special Vostro Accounts can be used for:

1. Payments for projects and investments.
2. Export/Import advance flow management
3. Investment in Government Treasury Bills, Government securities, etc. in terms of extant guidelines and prescribed limits, subject to FEMA and similar statutory provision.

9. Reporting Requirements: Reporting of cross- border transactions need to be done in terms of the extant guidelines under FEMA 1999.

10. Approval Process: The bank of a partner country may approach an AD bank in India for opening of Special INR VOSTRO account. The AD bank will seek approval from the Reserve Bank with details of the arrangement. AD bank maintaining the special Vostro Account shall ensure that the correspondent bank is not from a country or jurisdiction in the updated FATF Public Statement on High Risk & Non Co-operative Jurisdictions on which FATF has called for counter measures.

11. The above instructions shall come into force with immediate effect. AD banks may bring the contents of this Circular to the notice of their constituents and customers concerned.

12. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(Vivek Srivastava)
Chief General Manager

RBI/2022-2023/97
FIDD.CO.GSSD.BC.No.10/09.09.001/2022-23

August 1, 2022

The Chairman/ Managing Director / Chief Executive Officer
All Scheduled Commercial Banks (including Small Finance Banks)

Madam/ Dear Sir,

Master Circular - Credit facilities to Scheduled Castes (SCs) & Scheduled Tribes (STs)

The Reserve Bank of India has, from time to time, issued a number of guidelines/instructions to banks on credit facilities to Scheduled Castes (SCs) & Scheduled Tribes (STs). The enclosed Master Circular consolidates the circulars issued by Reserve Bank on the subject till date, as listed in the Appendix.

Yours faithfully,

(Nisha Nambiar)
Chief General Manager

Banks should take the measures indicated below to step up their advances to SCs/STs.

1. Planning Process

1.1 The District Level Consultative Committees formed under the Lead Bank Scheme should continue to be the principal mechanism of co-ordination between banks and development agencies in this regard. The district credit plans formulated by the lead banks should clearly indicate the linkage of credit with employment and development schemes.

1.2 Banks will have to establish closer liaison with the District Industries Centres, which have been set up in different districts for promoting self-employment.

1.3 At the block level, a certain weightage is to be given to SCs/STs in the planning process. Accordingly, the credit planning should be weighted in their favour and special bankable schemes suited to them should be drawn up to ensure their participation and larger flow of credit to them for self-employment. It will be necessary for the banks to consider their loan proposals with utmost sympathy and understanding.

1.4 Banks should periodically review their lending procedures and policies to see that loans are sanctioned in time, are adequate and production-oriented and that they generate incremental income to make them self-liquidating.

1.5 While 'adopting' villages for intensive lending, villages with sizeable population of SC/ST communities may be specially chosen. Alternatively, specific localities (bastis) in the concerned villages which have a concentration of these communities could also be adopted.

2. Role of Banks

2.1 Bank staff may help the borrowers in filling up the forms and completing other formalities so that they are able to get credit facility within a stipulated period from the date of receipt of applications.

2.2 In order to encourage SC/ST borrowers to take advantage of credit facilities, greater awareness among them about various schemes formulated by banks needs to be created through various means such as brochures, visits by field staff etc so that salient features of the schemes, as also the advantages that will accrue to them are known to such borrowers. Banks should advise their branches to organize meetings more frequently exclusively for SC/ST beneficiaries to understand their credit needs and to incorporate the same in the credit plan.

2.3 Circulars issued by RBI/NABARD should be circulated among the staff for compliance.

2.4 Banks should not insist on deposits while considering loan applications under Government sponsored poverty alleviation schemes/self-employment programmes from borrowers belonging to SCs/STs. It should also be ensured that applicable subsidy is not held back while releasing the loan component till the full repayment of bank dues. Non-release of subsidy upfront amounts to under-financing and hampers asset creation/income generation.

2.5 The National Scheduled Tribes Finance & Development Corporation and National Scheduled Castes Finance & Development Corporation have been set up under the administrative control of Ministry of Tribal Affairs and Ministry of Social Justice & Empowerment, respectively. Banks should advise their branches/controlling offices to render all the necessary institutional support to enable these institutions to achieve the desired objectives.

2.6. Loans sanctioned to State Sponsored Organisations for Scheduled Castes/ Scheduled Tribes for the specific purpose of purchase and supply of inputs and/or the marketing of the outputs of the beneficiaries of these organisations are eligible for priority sector classification.

2.7 Rejection of SC/STs’ loan applications under government programmes should be done at the next higher level instead of at the branch level and reasons of rejection should be clearly indicated.

3. Role of SC/ST Development Corporations

The Government of India has advised all State Governments that the Scheduled Caste/Scheduled Tribes Development Corporations can consider bankable schemes/proposals for bank finance.

4. Reservations for SC/ST beneficiaries under major Centrally Sponsored Schemes.

There are several major centrally sponsored schemes under which credit is provided by banks and subsidy is received through Government Agencies. Credit flow under these schemes is monitored by RBI. Under each of these, there is a significant reservation/relaxation for the members of the SC/ST communities.

4.1 Deendayal Antyodaya Yojana - National Rural Livelihoods Mission (DAY-NRLM)

DAY-NRLM (previously known as NRLM) was launched by the Ministry of Rural Development, Government of India by restructuring the erstwhile Swarnajayanti Gram Swarozgar Yojana, effective from April 1, 2013. DAY-NRLM would ensure adequate coverage of vulnerable sections of the society such that 50% of these beneficiaries are SC/STs. Details of the scheme are available in the Master Circular on DAY-NRLM as updated from time to time.

4.2 Deendayal Antyodaya Yojana - National Urban Livelihoods Mission (DAY-NULM)

The Ministry of Housing and Urban Affairs (MoHUA), Government of India, launched the DAY-NULM (previously known as NULM) by restructuring the erstwhile Swarna Jayanti Shahari Rozgar Yojana (SJSRY), effective from September 24, 2013. Under DAY-NULM, advances should be extended to SCs/STs to the extent of their strength in the local population. Details of the scheme are available in the Master Circular on DAY-NULM as updated from time to time.

4.3 Differential Rate of Interest (DRI) Scheme

Under the DRI Scheme, banks provide finance up to ?15,000/- at a concessional rate of interest of 4 per cent per annum to the weaker sections of the community for engaging in productive and gainful activities. In order to ensure that persons belonging to SCs/STs also derive adequate benefit under the DRI Scheme, banks have been advised to grant eligible borrowers belonging to SCs/STs such advances to the extent of not less than 2/5th (40 percent) of total DRI advances. Further, the eligibility criteria under DRI, viz. size of land holding should not exceed 1 acre of irrigated land and 2.5 acres of unirrigated land, are not applicable to SCs/STs. Members of SCs/STs satisfying the income criteria of the scheme can also avail of housing loan up to ?20,000/- per beneficiary over and above the individual loan of ?15,000/- available under the scheme.

5. Credit Enhancement Guarantee Scheme for Scheduled Castes (CEGSSC)

The CEGSSC was launched by Ministry of Social Justice & Empowerment on May 6, 2015 with the objective of promoting entrepreneurship amongst the Scheduled Castes (SCs), by providing credit enhancement guarantee to Member Lending Institutions (MLIs), which extend financial assistance to these entrepreneurs. IFCI Ltd. has been designated as the Nodal Agency under the scheme, to issue the guarantee cover in favour of MLIs for financing SC entrepreneurs.

Individual SC entrepreneurs/Registered Companies and Societies/Registered Partnership Firms/Sole Proprietorship firms having more than 51% shareholding and management control for the previous 6 months by SC entrepreneurs/ promoters/ members are eligible for guarantee from IFCI Ltd. against the loans extended by MLIs.

The amount of guarantee cover under CEGSSC ranges from a minimum of ?0.15 cr to a maximum of ?5.00 cr.

The tenure of guarantee is up to a maximum of 7 years or repayment period, whichever is earlier.

6. Monitoring and Review

6.1 A special cell should be set up at the Head Office of banks for monitoring the flow of credit to SC/ST beneficiaries. Apart from ensuring the implementation of the RBI guidelines, the cell would also be responsible for collection of relevant information/data from the branches, consolidation thereof and submission of the requisite returns to RBI and Government.

6.2 The Head Office of banks should periodically review the credit extended to SCs/STs on the basis of returns and other data received from the branches. Any major gap or variation in credit flow to SCs/STs on a year to year basis should be reported to the Board as part of the review on the theme of “Financial Inclusion” in term of circular DBR No.BC.93/29.67.001/2014-15 dated May 14, 2015.

6.3 Banks should review the measures taken to enhance the flow of credit to SC/ST borrowers on a quarterly basis. The review should also consider the progress made in lending to these communities directly or through the State Level Scheduled Caste/Scheduled Tribe Corporations for various purposes based, amongst others, on field visits of the senior officers from the Head Office/Controlling Offices.

6.4 SLBC Convenor bank should invite the representative of National Commission for SCs/STs to attend SLBC meetings. Besides, the Convenor bank may also invite representatives from the National Scheduled Castes and Scheduled Tribes Finance and Development Corporation (NSFDC) and State Scheduled Castes and Scheduled Tribes Finance and Development Corporation (SCDC) to attend SLBC meetings.

7. Reporting Requirements

Data on advances to SCs and STs should be reported as prescribed in the Master Direction on Priority Sector Lending as updated from time to time, within the time frames stipulated.

Credit Facilities to Scheduled Castes / Scheduled Tribes

List of Circulars Consolidated in the Master Circular

RBI/2022-23/98
A.P. (DIR Series) Circular No. 11

August 1, 2022

To

All Category-I Authorised Dealer Banks

Madam / Sir,

External Commercial Borrowings (ECB) Policy – Liberalisation Measures

Attention is invited to paragraph 2.2 of FED Master Direction No.5 on External Commercial Borrowings, Trade Credits and Structured Obligations, dated March 26, 2019 (as amended from time to time), in terms of which eligible ECB borrowers are allowed to raise ECB up to USD 750 million or equivalent per financial year under the automatic route, and paragraph 2.1.vi. ibid, wherein the all-in-cost ceiling for ECBs has been specified.

2. As announced in paragraph five of the press release on “Liberalisation of Forex Flows” dated July 06, 2022, it has been decided, in consultation with the Central Government, to:

i) increase the automatic route limit from USD 750 million or equivalent to USD 1.5 billion or equivalent.

ii) increase the all-in-cost ceiling for ECBs, by 100 bps. The enhanced all-in-cost ceiling shall be available only to eligible borrowers of investment grade rating from Indian Credit Rating Agencies (CRAs). Other eligible borrowers may raise ECB within the existing all-in-cost ceiling, as hitherto.

The above relaxations would be available for ECBs to be raised till December 31, 2022.

3. AD Category-I banks may bring the contents of this circular to the notice of their constituents and customers.

4. The aforesaid Master Direction No. 5, is being updated to reflect these changes.

5. Necessary amendments to the relevant regulations have been made through the Foreign Exchange Management (Borrowing and Lending) (Amendment) Regulations, 2022, notified vide notification No. FEMA.3(R)(3)/2022-RB dated July 29, 2022.

6. The directions contained in this circular have been issued under section 10(4) and 11(2) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/ approvals, if any, required under any other law.

Yours faithfully,

(Ajay Kumar Misra)
Chief General Manager-in-Charge

RBI/2022-2023/96
DOR.AML.REC.57/14.06.001/2022-23

July 29, 2022

The Chairpersons/ CEOs of all the Regulated Entities

Madam/Dear Sir,

United Nations Security Council Resolutions (UNSCR) 1718 Sanctions Committee on Democratic People’s Republic of Korea (DPRK) amends 44 existing entries on its Sanctions List

Please refer to our circular DoR.AML.REC.03/14.06.001/2021-22 dated April 08, 2021 advising Regulated Entities (REs) to adhere to the ‘Implementation of Security Council Resolution on Democratic People’s Republic of Korea Order, 2017’ as amended from time to time by the Central Government and also verify every day, the ‘UNSCR 1718 Sanctions List of Designated Individuals and Entities‘, as hyperlinked in ‘Implementation of UNSC Sanctions (DPRK)‘ webpage of the Ministry of External Affairs (MEA) website at https://www.mea.gov.in/Implementation-of-UNSC-Sanctions-DPRK.htm to take note of the modifications to the list in terms of additions, deletions or other changes.

2. In this connection, Ministry of External Affairs (MEA) has informed that on July 26, 2022, the Committee established pursuant to UNSC Resolution has enacted the amendments to 44 entries on its Sanction List of individuals and entities. The changes have been made only in the existing entries of this Sanction List and pertains to address, alias, passport no, date of birth, telephone, fax, email, IMO number, etc. of individuals / entities. The updated consolidated Sanctions List of individuals and entities is enclosed.

3. REs are advised to take note of the aforementioned instructions regarding Security Council Resolution on DPRK and ensure meticulous compliance.

Yours faithfully,

(Santosh Kumar Panigrahy)
Chief General Manager

Enclosure - As above

RBI/2022-23/94
CO.DPSS.POLC.No.S-761/02-14-008/2022-23

July 28, 2022

All Payment System Providers and Payment System Participants

Madam / Dear Sir,

Regulation of Payment Aggregators – Timeline for submission of applications for authorisation – Review

Reference is invited to Reserve Bank of India (RBI) circulars DPSS.CO.PD.No.1810/02.14.008/2019-20 dated March 17, 2020 and CO.DPSS.POLC.No.S33/02-14-008/2020-2021 dated March 31, 2021 on “Guidelines on Regulation of Payment Aggregators and Payment Gateways”. In terms of these circulars, online non-bank Payment Aggregators (PAs) – existing as on March 17, 2020 – were required to apply to RBI by September 30, 2021ⁱ for seeking authorisation under the Payment and Settlement Systems Act, 2007 (PSS Act).

2. It is observed that applications received from some PAs had to be returned as they had not complied with eligibility criteria, including the minimum net worth criterion of ?15 crore by March 31, 2021. This also implied that they have to discontinue their operations within a period of six months from the date of return of application. Though they have the option to apply afresh on meeting the prescribed criteria, ceasing operations may lead to disruption in payment systems. It is also possible that some PAs had not applied to RBI due to non-fulfilment of eligibility criteria.

3. Keeping in view the disruption caused by the COVID-19 pandemic, and to ensure smooth functioning of the payments ecosystem, it has since been decided to allow another window to all such PAs (existing as on March 17, 2020) to apply to RBI. They can apply by September 30, 2022 and shall have a net worth of ?15 crore as on March 31, 2022. They shall be permitted to continue their operations till they receive communication from RBI regarding the fate of their application. The timeline of March 31, 2023 for achieving the net worth of ?25 crore shall, however, remain.

4. All other provisions of the circulars referred to above, shall continue to be applicable.

5. This directive is issued under Section 10 (2) read with Section 18 of the PSS Act, 2007 (Act 51 of 2007).

Yours faithfully,

(P. Vasudevan)
Chief General Manager

RBI/2022-2023/95
CO.DPSS.POLC.No.S-760/02-14-003/2022-23

July 28, 2022

All Payment System Providers and Payment System Participants

Madam / Dear Sir,

Restriction on Storage of Actual Card Data [i.e. Card-on-File (CoF)]

Reference is invited to Reserve Bank of India (RBI) circulars DPSS.CO.PD.No.1810/02.14.008/2019-20 dated March 17, 2020 and CO.DPSS.POLC.No.S33/02-14-008/2020-2021 dated March 31, 2021 on “Guidelines on Regulation of Payment Aggregators and Payment Gateways”, circular CO.DPSS.POLC.No.S-516/02-14-003/2021-22 dated September 07, 2021 on “Tokenisation – Card Transactions: Permitting Card-on-File Tokenisation (CoFT) Services” and, circulars CO.DPSS.POLC.No.S-1211/02-14-003/2021-22 dated December 23, 2021 and CO.DPSS.POLC.No.S-567/02-14-003/2022-23 dated June 24, 2022 on “Restriction on Storage of Actual Card Data [i.e. Card-on-File (CoF)]”.

2. In terms of the above circulars, with effect from October 1, 2022, no entity in the card transaction / payment chain, other than the card issuers and / or card networks, shall store CoF data, and any such data stored previously shall be purged.

3. On a review of the issues involved and after detailed discussions thereon with all stakeholders, as also keeping in view that sufficient time has elapsed since the requirements were specified, the following are advised –

a) There shall be no change in the effective date of implementation of the requirements – all entities, except card issuers and card networks, shall purge the CoF data before October 1, 2022.

b) For ease of transition to an alternate system in respect of transactions where cardholders decide to enter the card details manually at the time of undertaking the transaction (commonly referred to as “guest checkout transactions”), the following are being permitted as an interim measure –

1. Other than the card issuer and the card network, the merchant or its Payment Aggregator (PA) involved in settlement of such transactions, can save the CoF data for a maximum period of T+4 days (“T” being the transaction date) or till the settlement date, whichever is earlier. This data shall be used only for settlement of such transactions, and must be purged thereafter.
2. For handling other post-transaction activities, acquiring banks can continue to store CoF data until January 31, 2023.

4. Appropriate penal action, including imposition of business restrictions, shall be considered by the RBI in case of any non-compliance.

5. This directive is issued under Section 10 (2) read with Section 18 of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007).

Yours faithfully,

(P. Vasudevan)
Chief General Manager

RBI/2022-23/93
DOR.CRE.REC.56/13.05.000/2022-23

July 26, 2022

All Primary (Urban) Co-operative Banks

Madam / Dear Sir,

Board approved Loan Policy – Management of Advances - UCBs

Please refer to para 1 of the Master Circular DOR.CRE.REC.No.17/13.05.000/2022-23 dated April 8, 2022 on Management of Advances – UCBs in terms of which, UCBs are required to lay down, with the approval of their boards, transparent policies and guidelines for credit dispensation, in respect of each broad category of economic activity, keeping in view the credit exposure norms and various other guidelines issued by Reserve Bank from time to time.

2. It has been observed in several UCBs that these policies not only lack comprehensive coverage, but also do not require a periodic review. In order to ensure that the loan policy reflects approved internal risk appetite and remains in alignment with the extant regulations, it is advised that the loan policy of the bank shall be reviewed by the Board at least once in a financial year.

3. The above instructions will come into effect immediately.

Yours faithfully,

(Manoranjan Mishra)
Chief General Manager

RBI/2022-23/92
FIDD.GSSD.CO.BC.No.09/09.01.003/2022-23

July 20, 2022

The Chairman/Managing Director & CEO
Public Sector Banks,
Private Sector Banks (including Small Finance Banks)

Madam/Dear Sir,

Master Circular – Deendayal Antyodaya Yojana - National Rural Livelihoods Mission (DAY-NRLM)

Please refer to the Master Circular FIDD.GSSD.CO.BC.No.04/09.01.01/2021-22 dated April 01, 2021 on Deendayal Antyodaya Yojana - National Rural Livelihoods Mission (DAY-NRLM).

2. The enclosed Master Circular consolidates and updates all the instructions/guidelines on the subject issued till date and replaces the earlier Master Circular issued on the subject.

Yours faithfully,

(Nisha Nambiar)
Chief General Manager

Deendayal Antyodaya Yojana - National Rural Livelihoods Mission (DAY-NRLM)

1. Background

The Ministry of Rural Development (MoRD), Government of India launched the National Rural Livelihood Mission (NRLM) by restructuring Swarnajayanti Gram Swarojgar Yojana (SGSY) with effect from 01st April 2013 (RBI Circular No. RBI/2012-13/559 dated 27 June 2013). NRLM was renamed as DAY-NRLM (Deendayal Antyodaya Yojana - National Rural Livelihoods Mission) w.e.f. March 29, 2016. The DAY-NRLM is the flagship program of Government of India for promoting poverty reduction through building strong institutions of the poor, particularly women, and enabling these institutions to access a range of financial services and livelihoods. DAY-NRLM adopts a demand driven approach, enabling the States to formulate their own State specific poverty reduction action plans. The key features of DAY-NRLM have been furnished in Annex I.

2. Women SHGs and their Federations

2.1 DAY-NRLM promotes affinity-based women Self Help Groups (SHGs). However, only in case of groups to be formed with persons with disabilities and other special categories like elders and transgenders, DAY-NRLM may have both men and women in the Self-Help Groups.

2.2 Women SHGs under DAY-NRLM consist of 10-20 members. In case of special SHGs i.e. groups in the difficult areas, groups with disabled persons, and groups formed in remote tribal areas, this number may be a minimum of 5 members.

2.3 Federations of Self Help Groups formed at village, gram panchayat, cluster or higher level may be registered under appropriate Acts prevailing in their respective states.

Financial Assistance to the SHGs

3. Revolving Fund

DAY-NRLM, MoRD, will provide Revolving Fund (RF) support as corpus ranging between ?10,000 - ?15,000 per SHG to strengthen their institutional and financial management capacity and build a good credit history within the group. SHGs in existence for a minimum period of 3/6 months and follow the norms of good SHGs known as ‘Panchasutras’, viz., regular meetings, regular savings, regular internal lending, regular recoveries and maintenance of proper books of accounts, and which have not received any RF earlier will be eligible for such support.

4. Capital Subsidy

No capital subsidy would be sanctioned to any SHG under DAY-NRLM.

5. Community Investment Support Fund (CIF)

CIF will be provided by MoRD to the SHGs promoted under DAY-NRLM in all blocks and will be routed through the village level/cluster level federations, to be maintained in perpetuity by the federations. The CIF may be used by the federations to advance loans to the SHGs and/or to undertake common/collective socio-economic activities.

6. Interest Subvention

DAY-NRLM has a provision for interest subvention for women SHGs. Salient features of the Scheme are enclosed in Annex II.

7. Role of banks:

7.1 Opening of Savings/Current Accounts: The role of banks would commence with opening of accounts for all the SHGs including those having members with disability and for the federations of SHGs.

(i) The SHGs engaged in promoting of savings habits among their members would be eligible to open savings bank accounts.

(ii) For KYC verification pertaining to SHG members, instructions in the Master Direction on KYC (dated February 25, 2016, as updated from time to time) shall be adhered to.

(iii) Business Correspondents deployed by banks may also be authorized to open saving bank accounts of the SHGs, subject to adherence to extant BC guidelines and in accordance with the bank’s Board approved policy on Business Correspondents.

(iv) Opening of savings account of all members with the bank shall not be made a prerequisite for credit linkage of SHGs. Banks are advised to maintain separate savings and loan accounts for SHGs.

(v) Banks are advised to open savings accounts of federations of SHGs at village, gram panchayat, cluster or higher level. These accounts may be categorized as savings account for ‘Association of persons’. The ‘Know Your Customer’ (KYC) norms for the signatories of such accounts as specified from time to time by Reserve Bank of India would be applicable.

(vi) Banks are advised to open current accounts for Producer Groups promoted under DAY-NRLM at village, gram panchayat, cluster or higher level. The ‘Know Your Customer’ (KYC) norms for the signatories of such accounts as specified from time to time by Reserve Bank of India would be applicable.

7.2 Transaction in Savings/Cash Credit account of SHGs and Federation of SHGs

(i) SHGs and their federations may be encouraged to transact through their respective savings/cash credit accounts.

(ii) Banks are advised to put in place dual-authentication facility in both ON-US and OFF-US¹ environment to enable SHGs to perform transactions in jointly operated savings/cash credit accounts at retail outlets managed by Business Correspondents. Banks are also advised to extend all such services to SHGs and their federations through Business Correspondents as per their board approved policies.

7.3 Lending to SHGs and their individual members

7.3.1 Eligibility Criteria for SHGs to avail loans:

(i) SHGs should be in active existence for at least 6 months as per their books of accounts (and not from the date of opening of S/B account).

(ii) SHGs should be practicing ‘Panchasutras’ i.e., regular meetings, regular savings, regular inter-loaning, timely repayment and up-to-date books of accounts.

(iii) SHGs should qualify as per grading norms fixed by NABARD. As and when the federations of the SHGs come into existence, the grading exercise may be done by the federations to support the banks.

(iv) The existing defunct SHGs are also eligible for credit if these are revived and continue to be active for a minimum period of three months.

7.3.2 Loan Application:

(i) All banks may use the Common Loan Application Forms devised by Indian Bank’s Association (IBA) for extending credit facility to SHGs.

(ii) Banks may encourage SHGs to submit loan applications online through the system developed by DAY-NRLM and the National Portal for Credit Linked Schemes.

7.3.3 Loan amount

(i) Emphasis is laid on the multiple doses of assistance under DAY-NRLM. This would mean assisting an SHG over a period of time, through repeat doses of credit, to enable the group to access higher amounts of credit for taking up sustainable livelihoods and improving the quality of life.

(ii) SHGs may avail either Term Loan (TL) or a Cash Credit Limit (CCL) or both based on their requirement. In case of need, additional loan may be sanctioned even though the previous loan is outstanding, based on the repayment behavior and performance of the SHG.

(iii) In case of CCL, banks are advised to sanction a minimum loan of ?6 lakh to each eligible SHG for a period of 3 years with a yearly drawing power (DP). The drawing power may be enhanced annually based on the repayment performance of the SHG. The drawing power may be calculated as follows:

a) DP for the first year: 6 times of the existing corpus or minimum of ?1.5 lakh, whichever is higher

b) DP for the second year: 8 times of the corpus at the time of review/enhancement or minimum of ?3 lakh, whichever is higher

c) DP for the third year: Minimum of ?6 lakh based on the Micro Credit Plan (MCP) prepared by SHG and appraised by the federations/support agency and the previous credit history.

d) DP for the fourth year onwards: Above ?6 lakh, based on the MCP prepared by SHG and appraised by the federations/support agency and the previous credit history.

(iv) In case of Term Loan, banks are advised to sanction loans in doses as mentioned below:

a) First dose: 6 times of the existing corpus or minimum of ?1.5 lakh, whichever is higher

b) Second dose: 8 times of the existing corpus or minimum of ?3 lakh, whichever is higher

c) Third dose: Minimum of ?6 lakh, based on the MCP prepared by the SHGs and appraised by the federations/support agency and the previous credit history.

d) Fourth dose onwards: Above ?6 lakh, based on the MCP prepared by the SHGs and appraised by the federations/support agency and the previous credit history.

(Corpus is inclusive of revolving funds, if any, received by the SHG, its own savings, interest earned by the SHG from on-lending to its members, income from other sources, and funds from other sources in case of promotion by other institutes/NGOs.)

(v) Banks are advised take necessary measures to ensure that eligible SHGs are provided with repeat loans.

7.3.4 Credit facilities to SHG members

(i) In order to facilitate women SHG members to graduate to entrepreneurs, banks may consider extending loans up to ?10 lakh to individual members of select matured well performing SHGs (SHGs which are more than 2 years old and have accessed at least one dose of bank loan with timely repayment) as per their lending policy. The individual should be running a viable economic enterprise. Banks are advised to share data on individual loans to women SHGs members in a mutually agreed format and periodicity with DAY-NRLM.

(ii) One woman in every SHG under DAY-NRLM may be provided a loan up to ?1 lakh under the MUDRA Scheme, if she is otherwise eligible.

(iii) Banks are advised to provide minimum OD facility of ?5000 to every woman SHG member having PMJDY account in accordance with the guidelines issued by Indian Banks’ Association (IBA). Banks may regularly share data on OD limit to women SHGs’ members in a mutually agreed format and periodicity with DAY-NRLM.

7.3.5 Purpose of loan and repayment:

(i) The loan amount would be distributed among members based on the MCP prepared by the SHGs. The loans may be used by members for meeting social needs, high cost debt swapping, construction or repair of house, construction of toilets and taking up sustainable livelihoods or to finance any viable common activity started by the SHGs.

(ii) In order to facilitate use of loans for augmenting livelihoods of SHG members, at least 50% of loans above ?1 lakh, 75% of loans above ?4 lakh and at least 85% of loans above ?6 lakh should be used primarily for income generating productive purposes. MCPs prepared by SHGs would form the basis for determining the purpose and usage of loans.

(iii) Repayment schedule for Term Loans may be as follows:

a) The first dose of loan may be repaid in 24-36 months in monthly/quarterly instalments.

b) The second dose of loan may be repaid in 36-48 months in monthly/quarterly instalments.

c) The third dose of loan may be repaid in 48-60 months based on the cash flow in monthly/quarterly instalments.

d) From the fourth dose onwards loans may be repaid between 60-84 months based on the cash flow in monthly/quarterly installments.

(iv) All credit facilities sanctioned under DAY-NRLM would be governed by the asset classification norms issued by Reserve Bank of India from time to time.

7.3.6 Security and Margin:

(i) For loans to SHGs up to ?10.00 lakh, no collateral and no margin will be obtained. No lien should be marked against savings bank accounts of SHGs and no deposits should be insisted upon while sanctioning loans.

(ii) For loans to SHGs above ?10 lakh and up to ?20 lakh, no collateral should be obtained, and no lien should be marked against savings bank account of SHGs. However, the entire loan (irrespective of the loan outstanding, even if it subsequently goes below ?10 lakh) would be eligible for coverage under Credit Guarantee Fund for Micro Units (CGFMU).

(iii) For loan to SHGs above ?10 lakh and up to ?20 lakh, a margin not exceeding 10% of the loan amount exceeding ?10 lakh may be obtained as per the bank’s approved loan policy.

7.3.7 Dealing with Defaulters:

Willful defaulters should not be financed under DAY-NRLM. In case willful defaulters are members of a group, they may be allowed to benefit from the thrift and credit activities of the group including the corpus built up with the assistance of Revolving Fund. However, as regards credit facilities, the group may be financed excluding such defaulters while documenting the loan. Banks should not deny loans to SHGs on the grounds of family members of individual members of SHG being defaulters with the bank. Further, non-willful defaulters should not be debarred from receiving loans. In case default is due to genuine reasons, banks may follow the norms prescribed for restructuring the credit facilities.

7.3.8 Documentation and follow- up

(i) Loan pass books or statement of accounts in regional languages may be issued to the SHGs which may contain all the details of the loans disbursed to them and the terms and conditions applicable to the loan sanctioned. The passbook should be updated with every transaction made by the SHGs. At the time of documentation and disbursement of loan, banks may clearly explain the terms and conditions as part of financial literacy.

(ii) Bank branches may designate one fixed day in a fortnight to enable the staff to go to the field and attend the meetings of the SHGs and Federations to observe the operations of the SHGs, keep a track of the regularity of the SHGs’ meetings and monitor their performance.

8 Recovery:

Prompt repayment of the loans is necessary to ensure the success of the programme. Banks shall take all possible measures, such as personal contact and organization of joint recovery camps with District Mission Management Units (DMMUs)/District Rural Development Agency (DRDAs) to ensure the recovery of loans. Keeping in view the importance of loan recovery, banks should prepare a list of defaulting SHGs under DAY-NRLM every month and furnish the list in the Block Level Bankers Committee (BLBC) and District Consultative Committee (DCC) meetings. This would enable the DAY-NRLM staff at the block/district level to assist the bankers in initiating recovery.

9 Credit Target Planning and Monitoring of the Scheme

(i) Banks may set up cells for Self Help Groups in their respective Regional/Zonal offices. These cells should periodically monitor and review the flow of credit to the SHGs, ensure the implementation of the Scheme, collect data from the branches and make available consolidated data to the Head Office and the DAY-NRLM units at the districts/blocks. The consolidated data may also be discussed in the State Level Bankers’ Committee (SLBC), BLBC and DCC meetings regularly to maintain effective communication with the state staff and all banks.

(ii) State Level Bankers’ Committee: SLBCs shall constitute a sub-committee on SHG bank linkage. The sub-committee should consist of members from all banks operating in the State, RBI, NABARD, CEO of SRLM, representatives of State Rural Development Department, Secretary-Institutional Finance and representatives of Development Departments etc. Based on the Potential Linked Plan/State Focus Paper prepared by NABARD, the SLBC sub-committee on SHG Bank Linkage may arrive at the district-wise, block-wise and branch-wise credit plan. The sub-committee should consider the existing SHGs, new SHGs proposed, and number of SHGs eligible for fresh and repeat loans as suggested by the SRLMs to arrive at the credit targets for the states. The targets so decided should be approved in the SLBC and reviewed and monitored periodically for effective implementation. The sub-committee shall discuss a specific agenda of review, implementation and monitoring of the SHG-Bank linkage and the issues/constraints in achievement of the credit target. The decisions of the SLBC should be derived from the analysis of the reports of the sub-committee.

(iii) The district-wise credit plans should be communicated to the District Consultative Committee (DCC). The block- wise/cluster-wise targets are to be communicated to the bank branches through the Controllers.

(iv) District Consultative Committee: The DCC shall regularly monitor the flow of credit to SHGs at the district level and resolve issues that constrain such flow of credit. This committee should include DMMU staff representing DAY-NRLM and office bearers of SHG federations in addition to other members.

(v) Block Level Bankers Committee: The BLBC shall take up issues of SHG bank linkage at the block level. In this Committee, the SHGs/Federations of the SHGs should be included as members to raise their voice in the forum. Branch-wise status of SHG credit shall be monitored at the BLBC.

(vi) Reporting to Lead District Managers: The branches may furnish the progress report and the delinquency report under various activities of DAY-NRLM in the format at Annex–III and IV to the LDM every month for onward submission to Special Sub-Committee constituted by SLBC.

(vii) Reporting to RBI: Banks may furnish a state-wise consolidated report on the progress made under DAY-NRLM to RBI on quarterly basis within a month from the end of the concerned quarter.

(vii) Lead Bank Return (LBR): Existing procedure of submitting LBR is to be continued.

10 Financial Literacy:

Financial Literacy is one of the important strategies to spread awareness on financial behavior and keep households informed about various financial products and services. DAY-NRLM has trained and deployed a large number of cadre called ‘Financial Literacy Community Resource Persons (FL-CRPs)’ to carry out financial literacy camps at village level. Financial Literacy Centers (FLC) established by various banks may coordinate with respective SRLMs and utilize the services of FL-CRPs to conduct village camps on Financial Literacy.

11 Data Sharing:

(i) Banks may furnish data in a mutually agreed format/interval to DAY-NRLM or State Rural Livelihood Missions (SRLMs) for initiating various strategies including recovery etc. Such data may be drawn directly from the CBS platform.

(ii) Banks should share data of Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY) with DAY-NRLM in agreed formats to facilitate higher enrollment and claim settlement under the mentioned schemes.

(iii) Banks should share data of all SHG transactions being done at Business Correspondent points using dual authentication technology, in a mutually agreed format/interval after obtaining consent of the customer. Banks should ensure security and confidentiality of customer information available with BCs.

12 DAY-NRLM support to Banks:

(i) SRLM would develop strategic partnerships with major banks at various levels. It would invest in creating enabling conditions for both the banks and the poor for a mutually rewarding relationship.

(ii) SRLM would assist the SHGs through imparting financial literacy, extending counselling services on savings, credit, insurance, pension and training on micro-investment planning embedded in capacity building.

(iii) SRLMs would extend support to banks for improving quality of banking services to poor clients including follow-up for recovery of over dues if any, by positioning customer relationship managers (Bank Mitra/ Sakhi) with every bank branch involved in financing of SHGs.

(iv) Leveraging IT mobile technologies and institutions of the poor, youth or SHG members as business facilitators and business correspondents.

(v) Community Based Repayment Mechanism (CBRM): One exclusive sub-committee for SHG Bank Linkage may be formed at village/cluster/block level which would provide support to the banks in ensuring proper utilization of loan amount, recovery etc. The bank linkage sub-committee members from each village level federation along with project staff would meet once in a month under the chairmanship of the Branch Manager in the branch premises with the agenda items relating to bank linkage.

Key Features of DAY-NRLM

1. Universal Social Mobilization: To begin with, DAY-NRLM would ensure that at least one member from each identified rural poor household, preferably a woman, is brought under the SHG network in a time bound manner. Subsequently, both women and men would be organized for addressing livelihood issues i.e. farmers organizations, milk producers’ cooperatives, weavers associations, etc. All these institutions are inclusive and no poor would be left out of them. DAY-NRLM would ensure adequate coverage of vulnerable sections of the society such that 50% of the beneficiaries are SC/STs, 15% are minorities and 3% are persons with disability, while keeping in view the ultimate target of 100% coverage of all households under the automatically included criteria and households with at least one deprivation criterion as per Socio-Economic and Caste Census (SECC).

2. Participatory Identification of poor (PIP): DAY-NRLM would undertake a community based process for covering the target beneficiaries i.e. participation of the poor in the process of identifying the target group. Participatory process based on sound methodology and tools (social mapping and well-being categorization, deprivation indicators) and also locally understood and accepted criteria ensures local consensus that inadvertently reduces the inclusion and exclusion errors and enables formation of the groups on the basis of mutual affinity.

The households identified with at least one deprivation criteria as per Socio-Economic and Caste Census (SECC) along with households identified through the P.I.P process would be accepted as DAY-NRLM target group and would be eligible for all the benefits under the programme. The list finalized after P.I.P process would be vetted by the Gram Sabha and approved by the Gram Panchayat.

Till the P.I.P process is undertaken by the State in a particular district/block, the rural households with at least one deprivation criteria as per SECC list would be targeted under DAY-NRLM. As already provided in the Framework for implementation of DAY-NRLM, up to 30% of the total membership of the SHGs may be from among the population marginally above the poverty line, subject to the approval of other members of the group. This 30% also includes the poor households whose name does not figure in the SECC list but are as poor as those included in SECC list.

3. Promotion of Institutions of the poor: Strong institutions of the poor such as SHGs and their village level and higher-level federations are necessary to provide space, voice and resources for the poor and for reducing their dependence on external agencies. They empower them and also act as instruments of knowledge and technology dissemination, and hubs of production, collectivization and commerce. DAY-NRLM, therefore, would focus on setting up these institutions at various levels. In addition, DAY-NRLM would promote specialized institutions like Livelihoods collectives, producers’ cooperative/companies for livelihoods promotion through deriving economies of scale, backward and forward linkages, and access to information, credit, technology, markets etc. The Livelihoods collectives would enable the poor to optimize their limited resource.

4. Strengthening all existing SHGs and federations of the poor. There are existing institutions of the poor women formed by Government efforts and efforts of NGOs. DAY- NRLM would strengthen all existing institutions of the poor in a partnership mode. The self-help promoting institutions both in the Government and in the NGO sector would promote social accountability practices to introduce greater transparency. This would be in addition to the mechanisms that would be evolved by SRLMs and state governments. The learning from one another underpins the key processes of learning in DAY-NRLM.

5. Emphasis on Training, Capacity Building and Skill Building: DAY-NRLM would ensure that the poor are provided with the requisite skills for managing their institutions, linking up with markets, managing their existing livelihoods, enhancing their credit absorption capacity and credit worthiness, etc. A multi-pronged approach is envisaged for continuous capacity building of the targeted families, SHGs, their federations, government functionaries, bankers, NGOs and other key stakeholders. Particular focus would be on developing and engaging community professionals and community resource persons for capacity building of SHGs and their federations and other collectives. DAY- NRLM would make extensive use of Information, Communication & Technology(ICT) to make knowledge dissemination and capacity building more effective.

6. Revolving Fund and Community Investment Support Fund (C.I.F): A Revolving Fund would be provided to eligible SHGs as an incentive to inculcate the habit of thrift and accumulate their own funds towards meeting their credit needs in the long-run and immediate consumption needs in the short-run. The C.I.F would be a corpus and used for meeting the members’ credit needs directly and as catalytic capital for leveraging repeat bank finance. The C.I.F would be routed to the SHGs through the Federations. The key to coming out of poverty is continuous and easy access to finance, at reasonable rates, till they accumulate their own funds in large measure.

7. Universal Financial Inclusion: DAY-NRLM would work towards achieving universal financial inclusion, beyond basic banking services to all the poor households, SHGs and their federations. DAY-NRLM would work on both demand and supply side of Financial Inclusion. On the demand side, it would promote financial literacy among the poor and provides catalytic capital to the SHGs and their federations. On the supply side, it would coordinate with the financial sector and encourage use of ICT based financial technologies, business correspondents and community facilitators like ‘Bank Mitras’. It would also work towards universal coverage of rural poor against loss of life, health and assets. Further, it would work on remittances, especially in areas where migration is endemic.

8. Provision of Interest Subvention: The rural poor need credit at low rate of interest and in multiple doses to make their ventures economically viable. In order to ensure affordable credit, DAY-NRLM has a provision for subvention on interest rates.

9. Funding Pattern: DAY-NRLM is a Centrally Sponsored Scheme and the financing of the programme would be shared between the Centre and the States in the ratio of 60:40 (90:10 in case of North Eastern States including Sikkim; completely from the Centre in case of UTs). The Central allocation earmarked for the states would broadly be distributed in relation to the incidence of poverty in the states.

10. Phased Implementation: Social capital of the poor consists of the institutions of the poor, their leaders, community professionals and more importantly community resource persons (poor women whose lives have been transformed through the support of their institutions). Building up social capital takes some time in the initial years, but it multiplies rapidly after some time. If the social capital of the poor does not play the lead role in DAY-NRLM, then it would not be a people’s programme. Further, it is important to ensure that the quality and effectiveness of the interventions is not diluted. Therefore, a phased implementation approach is adopted in DAY-NRLM.

11. Intensive blocks. The blocks that are taken up for implementation of DAY-NRLM, ‘intensive blocks’, would have access to a full complement of trained professional staff and cover a whole range of activities of universal and intense social and financial inclusion, livelihoods, partnerships etc. However, in the remaining blocks or non- intensive blocks, the activities may be limited in scope and intensity.

12. Rural Self Employment Training Institutes (RSETIs). RSETI concept is built on the model pioneered by Rural Development Self Employment Institute (RUDSETI) – a collaborative partnership between SDME Trust and Canara Bank. The model envisages transforming unemployed youth into confident self-employed entrepreneurs through a short duration experiential learning programme followed by systematic long duration hand holding support. The need-based training builds entrepreneurship qualities, improves self-confidence, reduces risk of failure and develops the trainees into change agents. Banks are fully involved in selection, training and post training follow up stages. The needs of the poor articulated through the institutions of the poor would guide RSETIs in preparing the participants/trainees in their pursuits of self-employment and enterprises. DAY-NRLM would encourage public sector banks to set up RSETIs in all districts of the country.

Interest Subvention Scheme for Women SHGs

I. Interest subvention scheme on Credit to Women SHG during the year 2022-23 for all Public Sector Banks, Private Sector Banks and Small Finance Banks in all districts

i. The scheme is limited to Women Self Help Groups under DAY-NRLM in rural areas only.

ii. For loans up to ?3 lakh under the scheme, banks will extend credit at a concessional interest rate of 7% per annum. For outstanding credit balance upto ?3 lakh, banks will be subvented at a uniform rate of 4.5% per annum during FY 2022-23.

iii. For loans above ?3 lakh and up to ?5 lakh under the scheme, banks will extend credit at interest rate equivalent to their 1 year-MCLR or any other external benchmark based lending rate or 10% per annum, whichever is lower. For outstanding credit balance above ?3 lakh and upto ?5 lakh, banks will be subvented at a uniform rate of 5% per annum during FY 2022-23.

iv. Interest Subvention will be payable only for the period during which an account remains in standard category. Illustrations on calculation of interest subvention are given as Annex V.

v. Women SHGs promoted by other agencies and following the DAY-NRLM protocols will also be eligible for benefit of subvented loans subject to prior submission of the details of such SHGs on the DAY-NRLM SHG database.

vi. The interest subvention scheme shall be implemented for banks through a Nodal Bank selected by the Ministry of Rural Development (MoRD). The Nodal Bank will operationalize the scheme through a web based platform, as advised by MoRD. For the year 2022-23, Indian Bank has been nominated as the Nodal bank by MoRD.

vii. In order to avail the interest subvention on credit extended to the women SHGs, banks may ensure that the accounts of SHGs (both savings and loans) under DAY-NRLM are appropriately identified in their CBS with unique codes assigned by DAY-NRLM/SLRMs.

viii. All banks participating in the interest subvention scheme are required to upload information on the SHG savings and loan account, etc. on the respective Nodal Bank/ Nodal Agency portal as per the required technical specifications provided.

ix. In order to avail the interest subvention on credit upto ?3 lakh extended to women SHGs under DAY-NRLM @7% as well as on credit above ?3 lakh and upto ?5 lakh extended to SHGs, all banks are required to submit claim certificates on quarterly basis (i.e. as on June 30, 2022; September 30, 2022; December 31, 2022 and March 31, 2023) to the Nodal Bank. The claims submitted by any bank should be accompanied by claim certificate (in original) certifying the claims for subvention as true and correct. The claims of any bank for the quarter ending March 2023 will be settled by MoRD only on receipt of the Statutory Auditor’s certificate for the entire financial year i.e., FY2022-23, from the bank.

x. The format of the claims certificates shall be as per Annex VI & VII. All claims pertaining to FY 2022-23 should be submitted by banks latest by September 30, 2023 duly certified by Statutory Auditor.

xi. Any remaining claims pertaining to the disbursements made during the year 2022-23 and not included during the year, may be consolidated separately and marked as an 'Additional Claim' and submitted to the Nodal Bank latest by September 30, 2023, duly certified by Statutory Auditors.

xii. Any corrections in claims by banks shall be adjusted from later claims based on the Statutory Auditor’s certificate. All banks will be required to carry out necessary correction on the Nodal Bank’s/Agency’s portal accordingly.

ON-US/ intra bank transactions: Such transactions where the instrument that is used for the transaction is issued by the same bank whose terminal is acquiring the transaction

OFF-US/ inter bank transactions: Such transactions where the instrument that is used for the transaction is issued by a bank which is different from the bank whose terminal is acquiring the transaction.

RBI/2022-2023/91
DOR.AML.REC.55/14.06.001/2022-23

July 13, 2022

The Chairpersons/CEOs of all the Regulated Entities

Madam/Dear Sir,

UNSCR 1718 Sanctions Committee on DPRK amends one Entry on its Sanctions List

Please refer to our circular DoR.AML.REC.03/14.06.001/2021-22 dated April 08, 2021 advising Regulated Entities (REs) to adhere to the ‘Implementation of Security Council Resolution on Democratic People’s Republic of Korea Order, 2017’ as amended from time to time by the Central Government and also verify every day, the ‘UNSCR 1718 Sanctions List of Designated Individuals and Entities‘, as hyperlinked in ‘Implementation of UNSC Sanctions (DPRK)‘ webpage of the Ministry of External Affairs (MEA) website at https://www.mea.gov.in/Implementation-of-UNSC-Sanctions-DPRK.htm to take note of the modifications to the list in terms of additions, deletions or other changes.

2. In this connection, Ministry of External Affairs (MEA) has informed that on June 30, 2022, the Committee established pursuant to UNSC Resolution has enacted the amendments on its Sanction List of individuals and entities specified with strikethrough and/or underline in the entry below

A. Individual

KPi.029 Name: 1: PAK 2: CHUN 3: IL 4: na Title: na Designation: Served as DPRK Ambassador to Egypt DOB: 28 Jul. 1954 POB: na Good quality a.k.a.: na Low quality a.k.a.: na Nationality: Democratic People's Republic of Korea Passport no: 563410091 National identification no: na Address: na Listed on: 30 Nov. 2016 (amended on 30 Jun. 2022) Other information: Pak Chun Il has served as the DPRK Ambassador to Egypt and provides support to KOMID. He concluded his tour of duty and left Egypt on 15 November 2016.

3. REs are advised to take note of the aforementioned instructions regarding Security Council Resolution on DPRK and ensure meticulous compliance.

Yours faithfully,

(Santosh Kumar Panigrahy)
Chief General Manager

RBI/2022-2023/89
A.P. (DIR Series) Circular No. 09

July 08, 2022

To
All Category-I Authorised Dealer Banks

Madam/Sir,

Asian Clearing Union (ACU) Mechanism – Indo-Sri Lanka trade

Attention of Authorised Dealer Category – I (AD Category-I) banks is invited to Regulations 3 and 5 of Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016 in terms of which export / import transactions between ACU member countries are to be routed through the ACU mechanism.

2. The extant provisions have been reviewed and in terms of clause b of sub-Regulation 2 of Regulation 3 and clause c of sub-Regulation 2 of Regulation 5 of Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016, it has been decided that all eligible current account transactions including trade transactions with Sri Lanka may be settled in any permitted currency outside the ACU mechanism until further notice.

3. The above instructions shall come into force with immediate effect. AD Category-I banks may bring the contents of this circular to the notice of their constituents concerned.

4. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(Vivek Srivastava)
Chief General Manager

RBI/2022-2023/84
A.P. (DIR Series) Circular No. 06

July 07, 2022

All Category – I Authorised Dealer Banks

Madam/Sir

Exim Bank's Government of India supported Short - Term Line of Credit (STLoC)
of USD 55 million to the Government of the Democratic Socialist Republic of Sri
Lanka for procurement of urea fertilizer from India

Export-Import Bank of India (Exim Bank) has entered into an agreement dated June 10, 2022 with the Government of the Democratic Socialist Republic of Sri Lanka, for making available to the latter, Government of India supported Short - Term Line of Credit (STLoC) of USD 55 million (USD Fifty Five Million only) for financing of procurement of urea fertilizer from India. Under the arrangement, financing of export of eligible goods and services from India, as defined under the agreement, would be allowed subject to their being eligible for export under the Foreign Trade Policy of the Government of India and whose purchase may be agreed to be financed by the Exim Bank under this agreement.

2. The Agreement under the STLoC is effective from June 20, 2022. Under the STLoC, the terminal utilization period is 6 months from the date of signing the agreement or such other extended date which EXIM Bank may agree at the request of the borrower, provided however that such extended date shall in no case be beyond 12 months from the date of agreement.

3. Shipments under the STLoC shall be declared in Export Declaration Form/ Shipping Bill as per instructions issued by the Reserve Bank from time to time.

4. No agency commission is payable for export under the above STLoC. However, if required, the exporter may use his own resources or utilize balances in his Exchange Earners’ Foreign Currency Account for payment of commission in free foreign exchange. Authorised Dealer (AD) Category - I banks may allow such remittance after realization of full eligible value of export subject to compliance with the extant instructions for payment of agency commission.

5. AD Category – I banks may bring the contents of this circular to the notice of their exporter constituents and advise them to obtain complete details of the STLoC from the Exim Bank’s office at Centre One, Floor 21, World Trade Centre Complex, Cuffe Parade, Mumbai 400 005 or from their website www.eximbankindia.in.

6. The directions contained in this circular have been issued under section 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions/ approvals, if any, required under any other law.

Yours faithfully

(Vivek Srivastava)
Chief General Manager

RBI/2022-23/85
FIDD.CO.LBS.BC.No.8/02.08.001/2022-23

July 07, 2022

The Chairman / Managing Director & Chief Executive Officer
Lead Banks Concerned

Madam/ Dear Sir,

Formation of new districts in the State of Andhra Pradesh –
Assignment of Lead Bank Responsibility

The Government of Andhra Pradesh has notified formation of 13 new districts in the State of Andhra Pradesh vide Gazette Notifications No.472-497 dated April 03, 2022. Accordingly, it has been decided to designate Lead Banks of the new districts as below:

2. Further, the District Working Codes of the new districts have also been allotted for the purpose of BSR reporting by banks.

3. There is no change in the Lead Banks of the other districts in the State of Andhra Pradesh.

Yours faithfully,

(Sonali Sen Gupta)
Chief General Manager-in-Charge

RBI/2022-23/86
FMRD.FMID.No.04/14.01.006/2022-23

July 07, 2022

To

All participants in Government Securities market

Madam/Sir,

‘Fully Accessible Route’ for Investment by Non-residents in Government Securities – Additional specified securities

Please refer to paragraph 3 of the press release on “Liberalisation of Forex Flows” dated July 06, 2022 regarding inclusion of additional ‘specified securities’ under the Fully Accessible Route (FAR) for investments in Government securities by non-residents.

2. The Reserve Bank introduced the FAR in pursuance of the announcement made in the Union Budget 2020-21 that certain specified categories of Central Government securities would be opened fully for non-resident investors without any restrictions, apart from being available to domestic investors as well, vide A.P. (DIR Series) Circular No. 25 dated March 30, 2020. The Government Securities that were eligible for investment under the FAR (‘specified securities’) were notified by the Bank, vide circular no. FMRD.FMSD.No.25/14.01.006/2019-20 dated March 30, 2020.

3. In addition, it has been decided to designate the two securities listed in the following Table as well as all new issuances of Government securities of 7-year and 14-year tenors as ‘specified securities’ under the FAR. Accordingly, these securities will, henceforth, be eligible for investment under the FAR.

4. The Directions contained in this circular have been issued under Section 45W of Chapter IIID of the Reserve Bank of India Act, 1934 and are without prejudice to permissions/ approvals, if any, required under any other law.

5. These Directions shall be applicable with immediate effect.

Yours faithfully,

(Dimple Bhandia)
Chief General Manager

RBI/2022-23/87
A.P. (DIR Series) Circular No.07

July 07, 2022

To
All Authorised Persons

Madam/Sir,

Investment by Foreign Portfolio Investors (FPI) in Debt - Relaxations

Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to the paragraph 3 of the press release on “Liberalisation of Forex Flows” dated July 06, 2022 regarding relaxations in the regulatory regime under the Medium-Term Framework. A reference is also invited to:

1. the Foreign Exchange Management (Debt Instruments) Regulations, 2019 notified vide Notification No. FEMA. 396/2019-RB dated October 17, 2019, as amended from time to time, and the relevant directions issued thereunder; and
2. the A.P. (DIR Series) Circular No. 31 dated June 15, 2018 (hereinafter, Directions), as amended from time to time.

2. In terms of paragraphs 4(b)(i) and 4(b)(ii) of the Directions, short-term investments by an FPI in government securities (Central Government securities, including Treasury Bills and State Development Loans) and corporate bonds shall not exceed 30% of the total investment of that FPI in any category. It has been decided that investments by FPIs in government securities and corporate bonds made between July 08, 2022 and October 31, 2022 (both dates included) shall be exempted from the limit on short-term investments till maturity or sale of such investments.

3. In terms of paragraph 4(b)(ii) of the Directions, FPI investments in corporate bonds were subject to a minimum residual maturity requirement of one year. It has been decided to allow FPIs to invest in commercial papers and non-convertible debentures with an original maturity of up to one year, during the period between July 08, 2022 and October 31, 2022 (both dates included). These investments shall be exempted from the limit on short-term investments till maturity or sale of such investments.

4. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

5. The Directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approval, if any, required under any other law.

6. These Directions shall be applicable with immediate effect.

Yours faithfully,

(Dimple Bhandia)
Chief General Manager

RBI/2022-23/88
A. P. (DIR Series) Circular No. 08

July 07, 2022

All Authorised Dealer Category-I Banks

Madam/Sir,

Overseas foreign currency borrowings of Authorised Dealer Category-I banks

Attention of Authorised Dealer Category-I (AD Cat-I) banks is invited to the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 [Notification no. FEMA 3(R)/2018-RB dated December 17, 2018] and Master Direction - Risk Management and Inter-Bank Dealings dated July 05, 2016, as amended from time to time.

2. As announced in paragraph 4 of the press release on “Liberalisation of Forex Flows” dated July 06, 2022, AD Cat-I banks can utilise the funds raised from overseas foreign currency borrowings between July 08, 2022 and October 31, 2022 (both dates included) in terms of paragraph Part-C(5)(a) of the Master Direction - Risk Management and Inter-Bank Dealings dated July 05, 2016, as amended from time to time, for lending in foreign currency to constituents in India. Such lending shall be subject to the end-use prescriptions as applicable to External Commercial Borrowings (ECBs) in terms of paragraph 2.1(viii) of the Master Direction - External Commercial Borrowings, Trade Credits and Structured Obligations dated March 26, 2019, as amended from time to time. This facility will be available till the maturity / repayment of the overseas foreign currency borrowings.

3. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(Dimple Bhandia)
Chief General Manager

RBI/2022-23/81
DoR.RET.REC.52/12.07.160/2022-23

July 06, 2022

All Banks

Madam/Sir

Inclusion of “Unity Small Finance Bank Limited” in the Second Schedule of the Reserve Bank of India Act, 1934

It is advised that “Unity Small Finance Bank Limited” has been included in the Second Schedule to the Reserve Bank of India Act, 1934 vide Notification DoR.LIC.No.S543/16.13.216/2022-23 dated April 28, 2022 and published in the Gazette of India (Part III - Section 4) dated July 02-July 08, 2022.

Yours faithfully

(Prakash Baliarsingh)
Chief General Manager

RBI/2022-23/82
DOR.SOG (SPE).REC.No 53/13.03.000/2022-23

July 06, 2022

All Scheduled Commercial Banks (including Regional Rural Banks)
All Small Finance Banks
All Local Area Banks
All Payment Banks
All Primary (Urban) Co-operative Banks/ DCCBs /State Cooperative Banks

Dear Sir / Madam,

Master Direction on Interest Rate on Deposits - Foreign Currency (Non-resident) Accounts (Banks) Scheme [FCNR(B)] and Non-Resident (External) Rupee (NRE) Deposit

Please refer to the instructions regarding interest rates on FCNR (B) deposits contained in Section 19 of the Master Direction (MD) on Interest Rate on Deposits dated March 03, 2016 and Section 18 of the Master Direction (MD) on Interest Rate on Deposits dated May 12, 2016. In this connection, banks are advised that with effect from July 07, 2022, the interest rate ceiling applicable to FCNR (B) deposits is being temporarily withdrawn for incremental FCNR (B) deposits mobilized by banks for the period until October 31, 2022.

2. Further, in terms of Section 15 (d) and Section 14 (d) of the above-mentioned MDs respectively, interest rates on NRE deposits shall not be higher than those offered by the banks on comparable domestic rupee term deposits. In this regard, the said restriction with respect to interest rates offered on incremental NRE deposits mobilized by banks shall be temporarily withdrawn with effect from July 07, 2022, for the period until October 31, 2022. The above relaxation shall not be applicable to Ordinary Non-Resident (NRO) Deposits.

3. These concessions will be subject to review.

4. All other instructions in this regard shall remain unchanged.

Yours faithfully,

(Santosh Kumar Panigrahy)
Chief General Manager

RBI/2022-23/83
DOR.RET.REC.54/12.01.001/2022-23

July 06, 2022

All Scheduled Commercial Banks (including Regional Rural Banks)
Local Area Banks, Small Finance Banks, Payments Banks
Primary (Urban) Co-operative Banks (UCBs)
State and Central Co-operative Banks (StCBs / CCBs)

Madam/Dear Sir,

Section 42 of the Reserve Bank of India Act, 1934 and Section 18 and 24 of the Banking Regulation Act, 1949 – FCNR (B)/NRE Term deposits - Exemption from maintenance of CRR/SLR

At present, banks are required to include all Foreign Currency Non-Resident (Bank) [FCNR (B)] and Non-Resident (External) Rupee (NRE) deposit liabilities for computation of Net Demand and Time Liabilities (NDTL) for maintenance of CRR and SLR.

2. Banks are advised that with effect from the reporting fortnight beginning July 30, 2022, incremental FCNR (B) deposits as also NRE Term deposits with reference to base date of July 1, 2022, mobilised by banks will be exempt from maintenance of CRR and SLR. To amplify, if a bank had total FCNR (B) deposit of say USD 100 as on the base date, and mobilises an incremental deposit of say USD 20, that portion of USD 20 will not be part of liabilities reckoned for the purpose of NDTL computation for CRR and SLR maintenance with effect from the fortnight beginning July 30, 2022. The same principle will apply for calculation of NRE Term deposits for exemption from maintenance of CRR/SLR requirements. However, any transfer from Non-Resident (Ordinary) (NRO) accounts to NRE accounts will not qualify for such exemptions.

3. The above exemptions are valid for deposits raised till November 04, 2022. The exemption on reserves maintenance will be available for the original deposit amounts till such time the deposits are held in the bank books.

Yours faithfully

(Prakash Baliarsingh)
Chief General Manager

RBI/2022-23/80
CO.DPSS.POLC.No.S-590/02-14-006/2022-23

July 04, 2022

The Chairman / Managing Director / Chief Executive Officer
Bank and Non-bank Payment System Operators (PSOs)

Madam / Dear Sir,

Requirement for obtaining prior approval in case of takeover / acquisition of control of non-bank PSOs and sale / transfer of payment system activity of non-bank PSO

A reference is invited to Reserve Bank of India (RBI) instructions contained in paragraph 5.10 of Master Directions on Prepaid Payment Instruments dated August 27, 2021, paragraph 5.2 of Guidelines on Regulation of Payment Aggregators and Payment Gateways dated March 17, 2020 and paragraph 3.1 of Annex-A to White Label ATM Guidelines dated June 20, 2012.

2. The operations of non-bank PSOs (authorised to operate any Payment System) have been reviewed and they shall require prior approval of RBI in the following cases –

1. Takeover / Acquisition of control, which may / may not result in change of management.
2. Sale / Transfer of payment activity to an entity not authorised for undertaking similar activity.

3. The non-bank PSOs shall inform RBI within 15 calendar days in the following cases –

1. Change in management / directors.
2. Sale / Transfer of payment activity to an entity authorised for undertaking similar activity.

4. Details of the requirements are given in Annex-1.

5. This directive is issued under Section 10 (2) read with Section 18 of Payment and Settlement Systems Act, 2007 (Act 51 of 2007) and shall come into effect immediately.

Yours faithfully,

(P. Vasudevan)
Chief General Manager

CO.DPSS.POLC.No.S-590/02-14-006/2022-23 dated July 04, 2022

1. Non-bank PSO shall require prior approval of RBI in the following cases:

a. Takeover / Acquisition of control¹, which may or may not result in change of management

The transferor non-bank PSO shall submit an application to Department of Payment and Settlement Systems (DPSS), Central Office (CO), RBI, along with the following documents –

1. Information about the proposed directors as per Annex-2; and
2. Complete details about the new shareholders, etc., as per Annex-3.

b. Sale / Transfer of payment activity to an entity not authorised for undertaking similar activity

1. The seller / transferor non-bank PSO shall apply to DPSS, CO, RBI for obtaining prior approval along with the minimum appropriate details.
2. The buyer / transferee entity shall apply for authorisation in Form A (available on RBI website) as prescribed under Regulation 3(2) of the Payment and Settlement Systems Regulations, 2008 along with the requisite application fee. This shall be akin to a new authorisation and the procedure specified in the guidelines for respective payment activity will be applicable (except that the last available System Audit Report would be sufficient in case a new system is not being set-up).
3. If the acquiring entity is a bank, it shall apply to DPSS, CO, RBI for approval.
4. After obtaining Certificate of Authorisation (CoA) / approval, the sale / transfer can be proceeded with.
5. The seller / transferor PSO shall voluntarily surrender its CoA as per the process mentioned in RBI circular DPSS.CO.AD.No.2627/02.27.005/2015-16 dated May 12, 2016. The buyer / transferee bank / non-bank shall be liable for complying with any regulatory / supervisory action taken by RBI for periods prior to the sale / transfer.

2. RBI shall endeavour to respond within 45 calendar days after receipt of complete details from both the entities. The timeline is not applicable in case of overseas principal in Money Transfer Service Scheme.

3. Requirement of prior public notice

i. After obtaining RBI approval, a public notice of at least 15 calendar days shall be given before effecting the changes. Such public notice shall be given either separately by the authorised non-bank PSO and the buyer / acquirer bank / non-bank, or jointly by them. The public notice shall indicate the intention and reasons for such changes, particulars of the entities concerned, etc. The notice shall be published in at least one leading national and in one leading local vernacular newspaper (covering the place of the registered office of the respective entities).

ii. The seller / transferor non-bank PSO shall also inform all stakeholders (agents, bankers, customers, merchants, etc.) of the changes, at least 15 calendar days before effecting the same.

4. The authorised non-bank PSO shall inform DPSS, CO, RBI within 15 calendar days in the following cases –

1. Change in management / directors with complete details, including ‘Declaration and Undertaking’ (Annex-2) by each of the new directors. RBI shall examine the fit and proper status of the management / directors, and, if required, may place suitable restrictions.
2. Sale / Transfer of payment activity to an entity authorised by RBI for undertaking similar activity. The entities shall issue prior public notice and the seller / transferor non-bank PSO shall also inform all stakeholders at least 15 calendar days before the actual sale / transfer as per the details given in para 3 above (except that prior approval of RBI is not required for the purpose). The instructions mentioned in para 1(b)(v) above, shall be applicable.

5. The above instructions are in addition to, and not in derogation of the provisions of any other laws, rules, regulations or directions, for the time being in force.

Information to be submitted in case of change in directors

A. Declaration and undertaking by the Director

(with enclosures as appropriate as on ……………)

(To be submitted by non-bank PSO to DPSS, CO, RBI, Mumbai)

Name of applicant company / non-bank PSO:

B. With regard to list of entities in which the director is considered as being interested (other directorships) and entities in which she / he is considered as holding substantial interest (II-B & II-C of declaration and undertaking by director), following details need to be furnished:

a) Whether the entity is being regulated by any financial regulator i.e. RBI, SEBI, IRDAI or PFRDA; and

b) If yes, registration / license number given by the respective financial regulator along with the PAN number.

Information to be submitted in case of change in shareholding

1) Detailed profile of new shareholders. How the new shareholders will be associated with the non-bank PSO in the payment system? If there is any change in the present payment system, then the same may also be furnished.

2) Have the new shareholders earlier applied for authorisation under Payment and Settlement Systems Act, 2007 (PSS Act) and refused? Or, is any application of the new shareholders under PSS Act currently pending?

3) Previous experience of the new shareholders in the payment systems area. Details of existing operations under tie-up and / or co-branding arrangement with any of the authorised payment system operator.

4) Sources of funds of the proposed shareholders acquiring the shares in the non-bank PSO:

1. Amount of own capital proposed to be deployed;
2. Amount of borrowings expected from banks; and
3. Amount of borrowing expected from sources other than banks (sources may be mentioned).

5) How does the applicant propose to recover its investment and earn an income, that is, whether through cash flows or by levying joining fees, security fees, annual / operating charges, etc. (please give full details)?

6) Proposed shareholding* pattern, post acquisition / takeover / change in shareholding of the authorised PSO (direct or indirect) shall be provided in the following format:

* Domestic shareholding and foreign shareholding, including public holdings. Investors with shareholding less than 5% may be mentioned as ‘others’ and cumulative shareholding by ‘others’ shall be provided. If required, we may ask for more details of the same at a later stage.

7) If new shareholders are foreign shareholders, then compliance with RBI circular CO.DPSS.AUTH.No.S190/02.27.005/2021-22 dated June 14, 2021 on ‘Investment in Entities from FATF Non-compliant Jurisdictions’ shall be ensured and following details shall be furnished:

1. Complete details of foreign shareholding or Foreign Direct Investment (FDI) in the non-bank PSO;
2. Copy of the acknowledgement / acceptance / other details from Foreign Exchange Department vis-à-vis prescribed returns and reporting on remittance / fund inflow, share allotment, share valuation, etc.; and
3. Details of 'beneficial ownership' in relation to FDI in the company. Detailed profile of the foreign investors and resultant ultimate beneficial owners in the company, inter-alia, including, country of registration, details of registration, nature of business activity, experience in sector functioning in, details of its directors / management, details of its shareholding / ownership, investments in any other company in India & details thereof, nationality of directors and shareholders, etc.

8) Additionally, a detailed chart of the ‘Group Structure’ shall be submitted by the non-bank PSO. Further, in this regard,

a) The PSO shall identify entities in its structure that are -

1. Listed (domestic / foreign, along with the name of stock exchange);
2. Regulated by a financial sector regulator (domestic / foreign, along with the name of the regulator); and
3. Neither listed nor regulated.

b) In the case of natural persons, the PSO shall mention the nationality and current residential status.

9) Any other information the applicant wishes to furnish.

RBI/2022-23/79
DCM(NPD)No.S488/18.00.14/2022-23

July 1, 2022

The Chairman/ Managing Director/ Chief Executive Officers
All Banks

Dear Sir/Madam

Note Sorting Machines - Authentication and Fitness Sorting Parameters

Please refer to our circular DCM(R&D)No.G-26/18.00.14/2009-10 dated May 11, 2010 setting out ''Note Authentication and Fitness Sorting Parameters'' for the Note Sorting Machines installed in the banks.

2. In the backdrop of introduction of the new series banknotes, these parameters have been reviewed and a revised set of guidelines are enclosed for implementation.

3. The guidelines shall be implemented with immediate effect.

Yours faithfully

(Sanjeev Prakash)
Chief General Manager

Encl : As above.

1. Introduction

A fit note is a note that is genuine, sufficiently clean to allow its denomination to be readily ascertained and thus suitable for recycling. An unfit note is a note that is not suitable for recycling because of its physical condition or belongs to a series that has been phased out by Reserve Bank of India. All the fitness parameters laid down in this document are to be evaluated individually. A note must pass all the fitness parameters to be considered fit for recycling.

These parameters provide the minimum standards for cash handling machines used by banks (hereinafter called ‘the machines’). Notes can only be recycled / reissued if they are evaluated as genuine and fit according to these parameters. Authenticity check is a prerequisite for fitness sorting. Fitness sorting can be done only in case of genuine notes. The machines shall be able to identify and segregrate suspected counterfeits and notes which are unfit for circulation in terms of these standards in a reliable and consistent manner.

The Reserve Bank of India phases out certain series of notes from circulation from time to time. These notes, though considered legal tender unless otherwise specified, are unfit for reissue. As and when the Reserve Bank of India decides to phase out a specific series of a specific denomination of notes, the machines shall sort all the phased out notes as unfit, irrespective of their physical condition.

2. Applicability

These parameters are applicable to machines operated by banks, either directly by their staff or indirectly by their agents. These machines can be of any of the following:

1. machines which check the authenticity and fitness of notes, i.e. note processing machines / note sorting machines, and
2. machines which check only the authenticity of notes, i.e. note authentication machines and classify the individual notes as either genuine or suspect.

3. Authenticity Check

The machines shall perform authenticity check with reference to the features of genuine notes as disclosed by the Reserve Bank of India from time to time on its website. Any note which is not found to be having all the features of a genuine note shall be classified by the machine as suspect/reject.

4. Fitness Sorting

As a part of fitness sorting, notes with any visual or physical defects are to be sorted as unfit as per the criteria set out in Table 1.

(i) Soiling

Soiling refers to the general distribution of dirt across the entire note or in some patterns. It is a measure of the loss of reflectivity from the unprinted areas due to dirt, ageing (yellowing), wear and extraneous markings and includes decolouration due to ageing, excessive folding and other wearing. Soiling increases the optical density and decreases the reflectance of the notes. Notes exceeding the soiling levels set out in Table 2 shall be sorted as unfit. Both the obverse and the reverse of the note shall be checked for soiling.

(ii) Limpness

Limpness relates to structural deterioration or wear resulting in a marked lack of stiffness in the note paper. Notes with very low stiffness of paper, i.e. with paper which is worn out in circulation or mechanically mutilated shall be sorted as unfit. Detectors for paper quality shall be adapted to the same level as for soiling.

(iii) Dog-Ears

Banknotes with dog-ears with an area of more than 100 mm² and a minimum length of the smaller edge greater than 5 mm shall be sorted as unfit. Chipped notes shall also be sorted as unfit.

(iv) Tears

Notes exhibiting at least one tear at the edge shall be classified as those having tears Notes with tears larger than those indicated in Table 3 shall be sorted as unfit.

(v) Holes

This refers to notes with at least one visible hole. Notes with holes with area exceeding 8 mm² shall be sorted as unfit.

(vi) Stains

Stains are visible markings which are not part of the feature of a note. Notes shall be detected as unfit if localized - i.e. with limited extension – stain can be recognised on its surface. In case the total area covered by stains exceeds 500 mm², the note shall be sorted as unfit. A note with a single stain covering an area of more than 200 mm² shall be sorted as unfit. Both the obverse and the reverse of the note shall be checked for stains.

(vii) Graffiti

Graffiti refers to deliberate graphic alteration of the note with for example, figures or letters. Fitness sorting criteria in case of graffiti shall be the same as those for stains. Both the obverse and the reverse of the note shall be checked for graffiti.

(viii) Crumples/Folds

Crumpled/folded notes shall be sorted as unfit if the folds result in reduction of the original note in length or width greater than 5 mm.

(ix) Decolouration

Notes affected by decolouration shall be sorted as unfit if the ink is partially or wholly missing from its surface. Both the obverse and the reverse of the note shall be checked for decolouration.

(x) Repair

A repaired note is created by joining parts of the same note together, for example, by using extraneous matter such as tape, paper or glue. Notes with the following types of repairs shall be sorted as suspect/reject:

• Repairs covering an area greater than 100 mm²; or
• Thickness of the extraneous matter 50 μm or more; or
• Width of the extraneous matter 10 mm or more; or
• Length of the extraneous matter 10 mm or more.

5. Mutilated, Imperfect, Mismatched Notes and Built-up Notes

These notes, as defined in NRR 2009 (amended in December 2018), shall be classified as suspect/reject.

6. Suspect/Reject notes shall be subjected to Manual Inspection for any wrongdoings.

7. Calibration and Periodic Testing of Machines

Banks shall ensure that the Note Sorting machines are tested for accuracy and consistency on a quarterly basis and recalibrated, if required. A certificate (signed by Bank Officials) to this effect shall be maintained for records. A periodicity of quarterly testing as per the Format attached, may be followed.

RBI/2022-23/78
DOR.STR.REC.51/21.04.048/2022-23

June 28, 2022

All Primary (Urban) Co-operative Banks/State Co-operative Banks/ District Central Co-operative Banks
All Local Area Banks and Regional Rural Banks
All All-India Financial Institutions
All Non-Banking Financial Companies

Provisioning Requirement for Investment in Security Receipts (SRs)

Please refer to clause 77 of the Master Direction – Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021 (“MD-TLE”).

2. In order to provide a glide path to the entities which were kept out of the ambit of circular “Guidelines on Sale of Stressed Assets by Banks” dated September 1, 2016 and ensure smooth implementation of clause 77 of the MD-TLE, it is advised as under in respect of valuation of investments in SRs outstanding on the date of issuance of MD-TLE (September 24, 2021):

1. The difference between the carrying value of such SRs and the valuation arrived at as on the next financial reporting date after the date of issuance of MD-TLE, in terms of clause 77 of the MD-TLE, may be provided over a five-year period starting with the financial year ending March 31, 2022 - i.e. from FY2021-22 till FY2025-26.
2. Subsequent valuations of investments in such SRs on an ongoing basis shall, however, be strictly in terms of the provisions of MD-TLE.

3. All lending institutions shall put in place a board approved plan to ensure that the provisioning made in each of the financial years in compliance of clause 2(a) above is not less than one fifth of the required provisioning on this count.

4. Valuation of investments in SRs made after the issuance of MD-TLE shall be strictly in terms of the provisions thereunder.

5. All other provisions of the MD-TLE shall continue to be applicable, as hitherto.

Yours faithfully,

(Manoranjan Mishra)
Chief General Manager

RBI/2022-23/77
CO.DPSS.POLC.No.S-567/02-14-003/2022-23

June 24, 2022

All Payment System Providers and Payment System Participants

Madam / Dear Sir,

Restriction on Storage of Actual Card Data [i.e. Card-on-File (CoF)]

Reference is invited to Reserve Bank of India (RBI) circulars DPSS.CO.PD.No.1810/02.14.008/ 2019-20 dated March 17, 2020 and CO.DPSS.POLC.No.S33/02-14-008/2020-2021 dated March 31, 2021 on “Guidelines on Regulation of Payment Aggregators and Payment Gateways”, and CO.DPSS.POLC.No.S-516/02-14-003/2021-22 dated September 07, 2021 on “Tokenisation – Card Transactions: Permitting Card-on-File Tokenisation (CoFT) Services”.

2. In terms of these circulars, with effect from January 1, 2022, no entity in the card transaction / payment chain, other than the card issuers and / or card networks, shall store the CoF data, and any such data stored previously shall be purged. Subsequently, to allow more time to the industry stakeholders for devising alternate mechanism(s) to handle any use case or post-transaction activity, this timeline was extended to June 30, 2022, vide circular CO.DPSS.POLC.No.S-1211/02-14-003/2021-22 dated December 23, 2021 on “Restriction on storage of actual card data [i.e. Card-on-File (CoF)]”.

3. On a review of the issues involved and after detailed discussions with all stakeholders, it is observed that considerable progress has been made in terms of token creation. Transaction processing based on these tokens has also commenced, though it is yet to gain traction across all categories of merchants. Further, an alternate system in respect of transactions where cardholders decide to enter the card details manually at the time of undertaking the transaction (commonly referred to as “guest checkout transactions”) has not been implemented by the industry stakeholders, so far.

4. Given the above, it has been decided to extend the timeline for storing of CoF data by three months, i.e., till September 30, 2022, after which such data shall be purged.

5. This directive is issued under Section 10 (2) read with Section 18 of Payment and Settlement Systems Act, 2007 (Act 51 of 2007).

Yours faithfully,

(P. Vasudevan)
Chief General Manager

RBI/2022-23/75
DOR.AML.REC.50/14.06.001/2022-23

June 23, 2022

The Chairpersons/ CEOs of all the Regulated Entities

Madam/Dear Sir,

Designation of 7 individuals as ‘Terrorists’ under Section 35 (1) (a) of the Unlawful Activities (Prevention) Act (UAPA), 1967 and their listing in the Schedule IV of the Act- Reg.

In terms of Section 53 of our Master Direction on Know Your Customer dated February 25, 2016 as amended on May 10, 2021, “The procedure laid down in the UAPA Order dated February 2, 2021 (Annex II of this Master Direction) shall be strictly followed and meticulous compliance with the Order issued by the Government shall be ensured.” Further, please also refer to Section 52 of the aforementioned Master Direction on Know Your Customer.

2. In this connection, please refer to the Gazette notification of the MHA in respect of seven individuals who have been declared as ‘Terrorists’ and have been listed in the Schedule IV of the UAPA 1967, under Section 35 (1) (a) of UAPA 1967.

The link to the aforementioned Gazette notification is provided below: https://mha.gov.in/sites/default/files/UAPAlistGazette_25042022.pdf

The Statutory Order (S.O.) numbers and the respective entries are in the table below:

3. REs are advised to take note of the aforementioned Gazette notification issued by MHA for necessary action. Further, REs shall also take note of any amendments to Schedule IV of the UAPA, 1967, in the future, for necessary action.

Yours faithfully,

(Santosh Kumar Panigrahy)
Chief General Manager

RBI/2022-23/76
DOR.CRE.REC.No.49/09.22.010/2022-23

June 23, 2022

All Primary (Urban) Co-operative Banks

Madam/Dear Sir,

Master Circular - Housing Finance for UCBs

Please refer to our Master Circular DCBR.BPD.(PCB) MC No.9/09.22.010/2015-16 dated July 1, 2015 on the captioned subject (available at RBI website https://rbi.org.in/). The enclosed Master Circular consolidates and updates all the instructions / guidelines on the subject issued till date.

Yours faithfully

(Manoranjan Mishra)
Chief General Manager

Encl: as above

Housing Finance for UCBs

1. General

1.1 The role of primary (urban) co-operative banks (UCBs) in providing housing finance has been reviewed from time to time. These banks, with their vast network, occupy a very strategic position in the financial system and have an important role to play in providing credit to the housing sector. Further, housing finance to specified categories up to prescribed limits is treated as priority sector lending, and the need for UCBs providing credit to priority sector has come to be increasingly recognised consistent with the social objectives placed before the banking system.

1.2 Therefore, with a view to enabling the UCBs to play a more positive role in providing finance for housing schemes, particularly to the weaker sections of the community, these banks are permitted to grant loans for housing schemes up to certain limits from their own resources subject to the guidelines detailed hereunder.

1.3 Bigger banks that have large surplus resources may undertake larger lending for housing, as this will provide a remunerative avenue for investment of their surplus funds.

1.4 Wherever banks are still required to obtain special permission of the Registrar for financing housing societies, it is suggested that these banks should obtain general permission to finance housing societies subject to such terms and conditions as may be prescribed for the purpose.

2. Eligible Category of Borrowers

UCBs may grant loans to the following categories of borrowers:

(a) Individuals and co-operative / group housing societies.

(b) Housing boards undertaking housing projects or schemes for economically weaker sections (EWS), low income groups (LIG) and middle income groups (MIG).

(c) Owners of houses / flats for extension and up-gradation, including major repairs.

3. Eligibility for Housing Finance

The borrowers in the above categories will be eligible for finance for the following types of housing schemes:

(a) Construction / purchase of houses / flats by individuals

(b) Repairs, alterations and additions to houses / flats by individuals

(c) Schemes for housing and hostels for scheduled castes and scheduled tribes

(d) Under slum clearance schemes - directly to the slum dwellers on the guarantee of the Government, or indirectly through Statutory Boards established for this purpose

(e) Education, health, social, cultural or other institutions / centres which are part of a housing project and considered necessary for the development of settlements or townships

(f) Shopping centres, markets and such other centres catering to the day to day needs of the residents of the housing colonies and forming part of a housing project

4. Terms and Conditions for Housing Loans

Finance provided by the UCBs to the eligible categories of borrowers for eligible housing schemes will be subject to the following terms and conditions:

4.1 Maximum Loan Amount & Margins

(i) UCBs, based on their commercial judgment and other prudential business considerations, with the approval of their Board of Directors, are free to identify the eligible borrowers, decide margins and grant housing loans depending upon the repaying capacity of borrowers.

(ii) Tier-I UCBs are permitted to extend individual housing loans upto a maximum of ?60 lakh per individual borrower and Tier II UCBs (UCBs other than Tier I) can extend individual housing loans up to a maximum of ?140.00 lakh per individual borrower subject to extant prudential exposure limits.

(iii) The prudential exposure limits for UCBs for a single borrower/party and a group of connected borrowers/parties shall be 15 per cent and 25 per cent, respectively, of their tier-I capital.

* Tier I UCBs are categorised as under:

- Banks having deposits below ?100 crore operating in a single district

- Banks with deposits below ?100 crore operating in more than one district will be treated as Tier I provided the branches are in contiguous districts and deposits and advances of branches in one district separately constitute at least 95% of the total deposits and advances respectively of the bank and

- Banks with deposits below ?100 crore, whose branches were originally in a single district but subsequently, became multi-district due to reorganization of the district

Deposits and advances as referred to in the above definition may be reckoned as on 31st March of the immediate preceding financial year.

4.2 A. Interest

Banks may, with the approval of their Boards, determine the rate of interest, keeping in view the size of accommodation, degree of risk and other relevant considerations.

B. Foreclosure Charges / Prepayment Penalty

With effect from June 26, 2012 it has been decided that UCBs will not be permitted to charge foreclosure charges / prepayment penalties in home loans extended on floating interest rate basis.

4.3 Charging of Penal Interest

Banks may formulate, with the approval of their Boards, transparent policy for charging penal interest rates to be levied for reasons such as default in repayment, non-submission of financial statements, etc. The policy should be governed by well accepted principles of transparency, fairness, incentive to service the debt and due regard to genuine difficulties of customers.

4.4 Security

(i) UCBs may secure housing loans either

(a) by mortgage of property, or

(b) by government guarantee where forthcoming, or

(c) by both.

(ii) Where this is not feasible, banks may accept security of adequate value in the form of LIC policies, Government Promissory Notes, shares / debentures, gold ornaments or such other security as they deem appropriate.

4.5 Period of Loan

(i) Housing loans may be repayable within a maximum period of 20 years, including moratorium or repayment holiday.

(ii) The moratorium or repayment holiday may be granted

(a) at the option of the beneficiary, or

(b) till completion of constructions, or 18 months from the date of disbursement of first instalment of the loan, whichever is earlier.

4.6 Graduated Instalments

(i) The instalments should be fixed on a realistic basis taking into account the repaying capacity of the borrower.

(ii) In order to make housing finance affordable, banks may consider fixing the instalments on a graduated basis, if there is reasonable expectation of growth in the income of the borrower in the coming years. Graduated basis means fixing lower repayment instalments in the initial years and gradually increasing the instalment amount in subsequent years coinciding with expected increase in income in subsequent years.

4.7 Aggregate Limit for Housing Finance

4.7.1 The exposure of UCBs to housing, real estate and commercial real estate loans would be limited to 10 per cent of their total assets. The above ceiling of 10 per cent of total assets can be exceeded by an additional limit of 5 per cent of total assets for the purpose of grant of housing loans to individuals as per the eligibility limits for priority sector classification, as contained in Master Direction FIDD.CO.Plan.BC.5/04.09.01/2020-21 dated September 04, 2020, amended from time to time.

4.7.2 The total assets may be reckoned based on the audited balance sheet as on March 31 of the preceding financial year. For reckoning total assets, losses, intangible assets, contra items like bills receivables etc. would be excluded.

4.7.3 The exposure should take into account both fund based and non-fund based facilities.

4.7.4 Working capital loans given by UCBs against hypothecation of construction materials provided to the contractors who undertake comparatively small construction on their own without receiving advance payments as provided for in paragraph 7 of this circular is exempted from the prescribed limit.

4.7.5 Finance extended to the eligible category of borrowers mentioned in paragraph 2 above will only be eligible to be treated as housing finance. While the purpose of the loan shall determine whether the loans granted against the security of immovable property need to be classified as real estate loans, the source of repayment will determine whether the exposure is against commercial real estate. For classification of such loans as Real Estate / Commercial Real Estate, UCBs may be guided by the instructions contained in Annex 1. As loans to the residential housing projects under the Commercial Real Estate (CRE) Sector exhibit lesser risk and volatility than the CRE Sector taken as a whole, a separate sub-sector called ‘Commercial Real Estate–Residential Housing’ (CRE-RH) has been carved out from the CRE Sector. CRE-RH would consist of loans to builders/developers for residential housing projects (except for captive consumption) under CRE segment. Such projects should ordinarily not include non-residential commercial real estate. However, integrated housing projects comprising some commercial space (e.g. shopping complex, school, etc.) can also be classified under CRE-RH, provided that the commercial area in the residential housing project does not exceed 10% of the total Floor Space Index (FSI) of the project. In case the FSI of the commercial area in the predominantly residential housing complex exceeds the ceiling of 10%, the project loans should be classified as CRE and not CRE-RH.

4.7.6 UCBs shall not exceed the limit prescribed for grant of housing, real estate, commercial real estate loans even for the funds obtained from higher financing agencies and refinance from National Housing Bank.

5. Additional / Supplementary Finance

5.1 UCBs may extend additional finance to carry out alterations, additions, repairs to houses / flats already financed by them, subject to, repayment capacity of borrowers.

5.2 In the case of individuals who might have raised funds for construction / acquisition of accommodation from other sources and need supplementary finance, banks may extend credit after obtaining pari passu or second mortgage charge over the property mortgaged in favour of other lenders and / or against such other security as they may deem appropriate after due assessment of aggregate repayment capacity of borrowers.

5.3 UCBs may extend need-based credit up to a maximum of ?10 lakh in metropolitan centres and up to ?6 lakh in other centres for repairs/additions/alterations, irrespective of whether the house / flat is owner occupied or tenant occupied, after obtaining such security as the banks may deem appropriate. The banks shall satisfy themselves regarding the estimated cost of repairs, additions, etc. having regard to the extent of such repairs or additions, materials to be used, cost of labour and other charges and after obtaining certificate/s from qualified engineers / architects in respect thereof, considered necessary.

5.4 The terms and conditions relating to margin, interest rates, repayment period etc. in respect of additional / supplementary finance may be same as indicated in respect of loans for construction / acquisition.

6. Lending to Housing Boards

6.1 UCBs may extend loans to housing boards within their States. The rate of interest to be charged on the loans to such boards may be fixed at the discretion of the banks.

6.2 While extending loans to housing boards, banks may not only keep in view the past performance of the housing boards in the matter of recovery from the beneficiaries but should also stipulate that the boards will ensure prompt and regular recovery of loan instalments from the beneficiaries.

7. Advances to Builders / Contractors

7.1 Builders / contractors generally require huge funds, take advance payments from the prospective buyers or from those on whose behalf construction is undertaken and, therefore, may not normally require bank finance for the purpose. Any financial assistance extended to them by primary (urban) co-operative banks may result in dual financing. Banks should, therefore, normally refrain from sanctioning loans and advances to this category of borrowers.

7.2 However, where contractors undertake comparatively small construction work on their own, (i.e. when no advance payments are received by them for the purpose), banks may consider extending financial assistance to them against the hypothecation of construction materials, provided such loans and advances are in accordance with the bye laws of the bank and instructions / directives issued by the Reserve Bank from time to time.

7.3 Banks should undertake a proper scrutiny of the relevant loan applications, and satisfy themselves, among other things, about the genuineness of the purpose, the quantum of financial assistance required, creditworthiness of the borrower, repayment capacity, etc. and also observe the usual safeguards, such as, obtaining periodic stock statements, carrying out periodic inspections, determining drawing power strictly on the basis of the stock held, maintaining a margin of not less than 40 to 50 percent, etc. They should also ensure that materials used up in the construction work are not included in the stock statements for the purpose of determining the drawing power.

7.4 Valuation of land: It has been observed that while financing builders / contractors, certain banks valued the land for the purpose of security, on the basis of the discounted value of the property after it is developed, less the cost of development. This is not in conformity with established norms. In this connection, it is clarified that UCBs should not extend fund based / non-fund based facilities to builders / contractors for acquisition of land even as a part of a housing project. Further, wherever land is accepted as collateral, valuation of such land should be at the current market price only.

7.5 UCBs may also take collateral security, wherever available. As construction work progresses, contractors will get paid and such payments should be applied to reduce the balance in the borrowal accounts. If possible, banks could perhaps enter into a tripartite agreement with the borrower and his clients, particularly when no collateral securities are available for such advances.

7.6 It has been observed that some banks have introduced certain innovative Housing Loan Schemes in association with developers / builders, e.g. upfront disbursal of sanctioned individual housing loans to builders without linking the disbursals to various stages of construction of housing project, interest / EMI on the housing loan availed of by the individual borrower being serviced by the builders during the construction period / specified period, etc. In view of the higher risks associated with such lump-sum disbursal of sanctioned housing loans and customer suitability issues, UCBs are advised that disbursal of housing loans sanctioned to individuals should be closely linked to the stages of construction of the housing project / houses and upfront disbursal should not be made in cases of incomplete / under-construction / green field housing projects.

8. Housing Loans under Priority Sector

8.1 Instructions on loans to Housing sector eligible for priority sector classification shall be as per Master Directions – Priority Sector Lending (PSL) – Targets and Classification FIDD.CO.Plan.BC.5/04.09.01/2020-21 dated September 4, 2020, as amended from time to time.

9. Precautions

9.1 A number of cases have come to the notice of Reserve Bank, where unscrupulous persons have defrauded the banks by obtaining multiple bank finance against the same property by preparing a number of sets of the original documents and submitting the same to various banks for obtaining housing finance. Similarly, the salary certificates of employees of certain public sector undertakings were fabricated, so as to match the requirement of banks for availing higher amounts of loan. The estimates given were also on the higher side, so as to avoid contribution of margin money by the borrowers.

Such frauds could take place on account of laxity on the part of the bank officials to follow the laid down procedures for verifying the genuineness of the documents submitted by borrowers independently through their own advocates / solicitors. Banks should, therefore, take due precaution while accepting various documents.

9.2 Banks shall satisfy themselves that loans extended by them are not for unauthorized construction or for misuse of properties / encroachment on public land. For this purpose, they should ensure strict compliance with the procedure laid down in Annex 2.

9.3 In a case which came up before the Hon'ble High Court of Judicature at Bombay, the Hon'ble Court observed that the bank granting finance to housing / development projects should insist on disclosure of the charge / or any other liability on the plot, in the brochure, pamphlets etc., which may be published by developer / owner inviting public at large to purchase flats and properties. The Court also added that this obviously would be part of the terms and conditions on which the loan may be sanctioned by the bank. Keeping in view the above observations, while granting finance for eligible housing schemes, UCBs are advised to stipulate as part of terms and conditions that:

(a) The builder / developer shall disclose in the pamphlets / brochures etc., the name(s) of the bank(s) to which the property is mortgaged.

(b) The builder / developer would append the information relating to mortgage while advertising for a particular scheme in newspapers / magazines etc.

(c) The builder / developer would indicate in the pamphlets / brochures that he would provide No Objection Certificate (NOC) / permission of the mortgagee bank for sale of flats / property, if required. UCBs are advised to ensure compliance of the above terms and conditions. Funds should not be released unless the builder / developer fulfils the above requirements.

10. National Building Code

The Bureau of Indian Standards (BIS) formulates comprehensive building Code namely National Building Code (NBC) of India providing guidelines for regulating the building construction activities across the country. The Code, updated from time to time contains all the important aspects relevant to safe and orderly building development such as administrative regulations, development control rules and general building requirements; fire safety requirements; stipulations regarding materials, structural design and construction (including safety); and building and plumbing services. Adherence to NBC will be advisable in view of the importance of safety of buildings especially against natural disasters. Banks' boards may consider this aspect for incorporation in their loan policies. Further information regarding the NBC can be accessed from the website of Bureau of Indian Standards (http://www.bis.gov.in/).

Definition of Commercial Real Estate Exposure (CRE)

(vide paragraph 4.7.5)

Real Estate is generally defined as an immovable asset - land (earth space) and the permanently attached improvements to it. Income-producing real estate (IPRE) is defined in para 226 of the Basel II Framework as under:

"Income-producing real estate (IPRE) refers to a method of providing funding to real estate (such as, office buildings to let, retail space, multifamily residential buildings, industrial or warehouse space, and hotels) where the prospects for repayment and recovery on the exposure depend primarily on the cash flows generated by the asset. The primary source of these cash flows would generally be lease or rental payments or the sale of the asset. The borrower may be, but is not required to be, an SPE (Special Purpose Entity), an operating company focused on real estate construction or holdings, or an operating company with sources of revenue other than real estate. The distinguishing characteristic of IPRE versus other corporate exposures that are collateralised by real estate is the strong positive correlation between the prospects for repayment of the exposure and the prospects for recovery in the event of default, with both depending primarily on the cash flows generated by a property".

2. The Income Producing Real Estate (IPRE) is synonymous with Commercial Real Estate (CRE). From the definition of IPRE given above, it may be seen that for an exposure to be classified as IPRE / CRE, the essential feature would be that the funding will result in the creation / acquisition of real estate (such as, office buildings to let, retail space, multifamily residential buildings, industrial or warehouse space, and hotels) where the prospects for repayment would depend primarily on the cash flows generated by the asset. Additionally, the prospect of recovery in the event of default would also depend primarily on the cash flows generated from such funded asset which is taken as security, as would generally be the case. The primary source of cash flow (i.e. more than 50% of cash flows) for repayment would generally be lease or rental payments or the sale of the assets as also for recovery in the event of default where such asset is taken as security.

3. In certain cases where the exposure may not be directly linked to the creation or acquisition of CRE but the repayment would come from the cash flows generated by CRE. For example, exposures taken against existing commercial real estate whose prospects of repayments primarily depend on rental / sale proceeds of the real estate should be classified as CRE. Other such cases may include; extension of guarantees on behalf of companies engaged in commercial real estate activities, corporate loans extended to real estate companies etc.

4. It follows from the definition at para 2 and 3 above that if the repayment primarily depends on other factors such as operating profit from business operations, quality of goods and services, tourist arrivals etc., the exposure would not be counted as Commercial Real Estate.

5. UCBs should not extend finance for acquisition of land even if it is part of a project. However, finance can be granted to individuals for purchase of a plot, provided a declaration is obtained from the borrower that he intends to construct a house on the said plot, within such period as may be laid down by the banks themselves.

Simultaneous Classification of CRE into other Regulatory Categories

6. It is possible for an exposure to get classified simultaneously into more than one category, real estate, CRE, infrastructure etc. as different classifications are driven by different considerations. In such cases, the exposure would be reckoned for regulatory / prudential exposure limit, if any, fixed by RBI or by the bank itself, for all the categories to which the exposure is assigned. For the purpose of capital adequacy, the largest of the risk weights applicable among all the categories would be applicable for the exposure. The rationale for such an approach is that, while at times certain classifications / categorizations could be driven by socio-economic considerations and may be aimed at encouraging flow of credit towards certain activities, these exposures should be subjected to appropriate risk management / prudential / capital adequacy norms so as to address the risk inherent in them. Similarly, if an exposure has sensitivity to more than one risk factor it should be subjected to the risk management framework applicable to all the relevant risk factors.

7. In order to assist banks in determining as to whether a particular exposure should be classified as CRE or not, some examples based on the principles described above are given below. Based on the above principles and illustrations given, banks should be able to determine, whether an exposure not included in the illustrative examples is a CRE or not and should record a reasoned note justifying the classification.

Illustrative Examples

A. Exposures which should be classified as CRE

1. Loans extended to builders for construction of any property which is intended to be sold or given on lease (e.g. loans extended to builders for housing buildings, hotels, restaurants, gymnasiums, hospitals, condominiums, shopping malls, office blocks, theatres, amusement parks, cold storages, warehouses, educational institutions, industrial parks) In such cases, the source of repayment in normal course would be the cash flows generated by the sale / lease rentals of the property. In case of default of the loan, the recovery will also be made from sale of the property if the exposure is secured by these assets as would generally be the case.

2. Loans for Multiple Houses intended to be rented out

The housing loans extended in cases where houses are rented out need to be treated differently. If the total number of such units is more than two, the exposure for the third unit onwards may be treated as CRE Exposure as the borrower may be renting these housing units and the rental income would be the primary source of repayment.

3. Loans for integrated Township Projects

Where the CRE is part of a big project which has small non-CRE component, it will be classified as CRE exposure since the primary source of repayment for such exposures would be the sale proceeds of buildings meant for sale.

4. Exposures to Real Estate Companies

In some cases exposure to real estate companies is not directly linked to the creation or acquisition of CRE, but the repayment would come from the cash flows generated by Commercial Real Estate. Such exposures illustratively could be :

* Corporate Loans extended to these companies

* Investments made in the debt instruments of these companies

* Extension of guarantees on behalf of these companies

5. General Purpose loans where repayment is dependent on real estate prices

Exposures intended to be repaid out of rentals / sale proceeds generated by the existing CRE owned by the borrower, where the finance may have been extended for a general purpose.

B. Exposures which may not be classified as CRE

1. Exposures to entrepreneurs for acquiring real estate for the purpose of their carrying on business activities, which would be serviced out of the cash flows generated by those business activities. The exposure could be secured by the real estate where the activity is carried out, as would generally be the case, or could even be unsecured.

a) Loans extended for construction of a cinema theatre, establishment of an amusement park, hotels and hospitals, cold storages, warehouses, educational institutions, running haircutting saloons and beauty parlours, restaurant, gymnasium etc. to those entrepreneurs who themselves run these ventures would fall in this category. Such loans would generally be secured by these properties.

For instance, in the case of hotels and hospitals, the source of repayment in normal course would be the cash flows generated by the services rendered by the hotel and hospital. In the case of a hotel, the cash flows would be mainly sensitive to the factors influencing the flow of tourism, not directly to the fluctuations in the real estate prices. In the case of a hospital, the cash flows in normal course would be sensitive to the quality of doctors and other diagnostic services provided by the hospital. In these cases, the source of repayment might also depend to some extent upon the real estate prices to the extent the fluctuation in prices influence the room rents, but it will be a minor factor in determining the overall cash flows. In these cases, however, the recovery in case of default, if the exposure is secured by the Commercial Real Estate, would depend upon the sale price of the hotel / hospital as well as upon the maintenance and quality of equipment and furnishings.

The above principle will also be applicable in the cases where the developers / owners of the real estate assets (hotels, hospitals, warehouses, etc.) lease out the assets on revenue sharing or profit sharing arrangement and the repayment of exposure depends upon the cash flows generated by the services rendered, instead of fixed lease rentals.

b) Loans extended to entrepreneurs, for setting up industrial units will also fall in this category. In such cases, the repayment would be made from the cash flows generated by the industrial unit from sale of the material produced which would mainly depend upon demand and supply factors. The recovery in case of default may partly depend upon the sale of land and building if secured by these assets.

Thus, it may be seen that in these cases the real estate prices do not affect repayment though recovery of the loan could partly be from sale of real estate.

2. Loans extended to a company for a specific purpose, not linked to a real estate activity, which is engaged in mixed activities including real estate activity.

For instance, a company has two divisions. One division is engaged in real estate activity, and other division is engaged in power production. An infrastructure loan, for setting up of a power plant extended to such a company, to be repaid by the sale of electricity would not be classified as CRE. The exposure may or may not be secured by plant and machinery.

3. Loans extended against the Security of future rent receivables

A few banks have formulated schemes where the owners of existing real estate such as shopping malls, office premises, etc. have been offered finance to be repaid out of the rentals generated by these properties. Even though such exposures do not result in funding / acquisition of commercial real estate, the repayment might be sensitive to fall in real estate rentals and such exposures should be classified as CRE. However, if there are certain in built safety conditions which have the effect of delinking the repayments from real estate price volatility like, the lease rental agreement between the lessor and lessee has a lock in period which is not shorter than the tenor of loan and there is no clause which allows a downward revision in the rentals during the period covered by the loan banks can classify such exposures as non CRE. Banks may, however, record a reasoned note in all such cases.

4. Credit facilities provided to construction companies which work as Contractors

The working capital facilities extended to construction companies working as contractors, rather than builders, will not be treated as CRE exposures because the repayment would depend upon the contractual payments received in accordance with the progress in completion of work.

5. Financing of acquisition / renovation of self-owned office / company premises

Such exposures will not be treated as CRE exposures because the repayment will come from company revenues. The exposures to industrial units towards setting up of units or projects and working capital requirement, etc. would not be treated as CRE Exposures.

Direction of the Hon'ble High Court of Delhi

Procedure for ensuring the loan sought is for authorised structure

(vide paragraph 9.2)

A. Housing Loan for Building Construction

i) In cases where the applicant owns a plot / land and approaches the banks / FIs for a credit facility to construct a house, a copy of the sanctioned plan by competent authority in the name of a person applying for such credit facility must be obtained by the Banks / FIs before sanctioning the home loan.

ii) An affidavit-cum-undertaking must be obtained from the person applying for such credit facility that he shall not violate the sanctioned plan, construction shall be strictly as per the sanctioned plan and it shall be the sole responsibility of the executant to obtain completion certificate within 3 months of completion of construction, failing which the bank shall have the power and the authority to recall the entire loan with interest, costs and other usual bank charges.

iii) An Architect appointed by the bank must also certify at various stages of construction of building that the construction of the building is strictly as per sanctioned plan and shall also certify at a particular point of time that the completion certificate of the building issued by the competent authority has been obtained.

B. Housing Loan for Purchase of Constructed Property / Built up Property

i) In cases where the applicant approaches the bank / FIs for a credit facility to purchase a built up house / flat, it should be mandatory for him to declare by way of an affidavit-cum-undertaking that the built up property has been constructed as per the sanctioned plan and / or building bye-laws and as far as possible has a completion certificate also.

ii) An Architect appointed by the bank must also certify before disbursement of the loan that the built up property is strictly as per sanctioned plan and / or building bye-laws.

C. No loan should be given in respect of those properties which fall in the category of unauthorized colonies unless and until they have been regularized and development and other charges paid.

D. No loan should be given in respect of properties meant for residential use but which the applicant intends to use for commercial purposes and declares so while applying for loan.

E. The above directions will not be applicable to construction of farmhouses on agricultural land since the agricultural land is outside the limit of Grampanchayats and Municipal Councils and as these authorities neither sanction plans nor issue completion certificates for farmhouses constructed by the farmers on the agricultural land. In all such cases, local rules will apply.

A. List of Circulars Consolidated in the Master Circular

B. List of Other Circulars from which instructions relating to Housing Finance have also been consolidated in the Master Circular

RBI/2022-23/74
DoR.AUT.REC.No.48/24.01.041/2022-23

June 21, 2022

All Scheduled Banks (excluding Payments Banks/State Co-operative Banks and District Central Co-operative Banks)
All Non-Banking Financial Companies (NBFCs)

Madam/Dear Sir

Extension of timeline for implementation of certain provisions of Master Direction – Credit
Card and Debit Card – Issuance and Conduct Directions, 2022

Please refer to paragraph 1 (b) of the Master Direction – Credit Card and Debit Card – Issuance and Conduct Directions, 2022 (“Master Direction”) dated April 21, 2022, wherein the Reserve Bank had prescribed a timeline of July 01, 2022, for implementation of the provisions of the Master Direction.

2. Considering various representations received from the industry stakeholders, it has been decided to extend the timeline for implementation of the following provisions of the Master Direction to October 01, 2022:

1. Paragraph 6(a)(vi) - Card-issuers shall seek One Time Password (OTP) based consent from the cardholder for activating a credit card, if the same has not been activated by the customer for more than 30 days from the date of issuance. If no consent is received for activating the card, card-issuers shall close the credit card account without any cost to the customer within seven working days from date of seeking confirmation from the customer.
2. Paragraph 6(b)(v) - Card-issuers shall ensure that the credit limit as sanctioned and advised to the cardholder is not breached at any point in time without seeking explicit consent from the cardholder.
3. Paragraph 9(b)(ii) - No capitalization of unpaid charges/levies/taxes for charging/ compounding of interest.

3. The stipulated timeline for implementation of rest of the provisions of the Master Direction remains unchanged.

Yours faithfully

(Prakash Baliarsingh)
Chief General Manager

RBI/2022-23/72
IDMD.CDD.No.S789/14.04.050/2022-23

June 16, 2022

Scheduled Banks (as per the list attached),
Designated Post Offices (as per the list attached)
Stock Holding Corporation of India Ltd.
National Stock Exchange of India Ltd, Bombay Stock Exchange Ltd.
Clearing Corporation of India Ltd.

Madam/Dear Sir,

Sovereign Gold Bond (SGB) Scheme 2022-23

Government of India, vide its Notification No F.No4.(6)-B (W&M)/2022 dated June 15, 2022, has announced Series I and II of Sovereign Gold Bond Scheme 2022-23. Under the Scheme, there will be a distinct series (Series I and II) for every tranche. The terms and conditions of the issuance of the Bonds shall be as per the above notification.

2. Date of Issue

The bonds shall be issued as per the details given below:

3. Period of subscription

The Subscription of the Gold Bonds under this Scheme shall be open (Monday to Friday) on the dates specified above, provided that the Central Government may, with prior notice, close the Scheme at any time before the period specified above.

4. Application

Subscription for the Bonds may be made in the prescribed application form Form A or in any other form as near as thereto, stating clearly the grams (in units) of gold and the full name and address of the applicant. Every application must be accompanied by valid ‘PAN details’ issued by the Income Tax Department to the investor(s). Designated Scheduled Banks, designated Post Offices, Stock Holding Corporation of India Ltd, Clearing Corporation of India Ltd and recognized stock exchanges, viz. National Stock Exchange of India Ltd and Bombay Stock Exchange Ltd are the Receiving Offices which are authorized to receive applications for the Bonds either directly or through agents and render all services to the customers. The Receiving Office shall issue an acknowledgment receipt in Form B to the applicant.

5. All online applications should be accompanied by email Id of the investor/s which should be uploaded on the Ekuber portal of Reserve Bank of India along with the subscription details.

6. In addition to receipt of application, the Receiving Offices are also entrusted with the responsibility of providing service to the investors of the SGB and are required to be guided by the rules and regulations issued by Reserve Bank in this regard from time to time. With a view to facilitate availability of all current operative instructions regarding servicing of these bonds at one place, Reserve Bank has issued Consolidated Procedural Guidelines vide circular IDMD.CDD.1100/14.04.050/2021-22 dated October 22, 2021 and the same is available on RBI website. The Receiving Offices shall be guided by these instructions while dealing with all the procedural aspects and providing service to the investors.

7. All other terms and conditions specified in the notification of the Government of India, Ministry of Finance (Department of Economic Affairs) F.No.4(2)-W&M/2018 dated March 27, 2018 shall apply to the Bonds.

Yours faithfully,

(Rakesh Tripathy)
Chief General Manager

RBI/2022-23/73
CO.DPSS.POLC.No.S-518/02.14.003/2022-23

June 16, 2022

The Chairman / Managing Director / Chief Executive Officer
All Scheduled Commercial Banks, including Regional Rural Banks /
Urban Co-operative Banks / State Co-operative Banks /
District Central Co-operative Banks / Payments Banks /
Small Finance Banks / Local Area Banks /
Non-bank Prepaid Payment Instrument Issuers / Authorised Card Payment Networks /
National Payments Corporation of India

Madam / Dear Sir,

Processing of e-mandates for recurring transactions

A reference is invited to our circulars DPSS.CO.PD.No.447/02.14.003/2019-20 dated August 21, 2019, DPSS.CO.PD No.1324/02.23.001/2019-20 dated January 10, 2020, DPSS.CO.PD No.754/02.14.003/2020-21 dated December 04, 2020 and CO.DPSS.POLC.No.S34/02-14-003/2020-2021 dated March 31, 2021 (collectively referred to as “e-mandate framework”). The e-mandate framework prescribed an Additional Factor of Authentication (AFA), inter alia, while processing the first transaction in case of e-mandates / standing instructions on cards, prepaid payment instruments and Unified Payments Interface. For subsequent transactions with transaction values up to ?5,000/- (AFA limit), prescription of AFA was waived.

2. On a review of implementation of the e-mandate framework and the protection available to customers, it has been decided to increase the aforesaid AFA limit from ?5,000/- to ?15,000/- per transaction.

3. This circular is issued under Section 10 (2) read with Section 18 of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007), and shall come into effect immediately.

Yours faithfully,

(P. Vasudevan)
Chief General Manager

RBI/2022-23/71
DOR.CRE.REC.No.47/13.03.00/2022-23

June 14, 2022

All Scheduled Commercial Banks
(Excluding RRBs)

Madam / Dear Sir

Bank finance to Government owned entities

Please refer to the Master Circulars DBR.No.Dir.BC.10/13.03.00/2015-16 dated July 1, 2015 on ‘Loans and Advances – Statutory and Other Restrictions’ and DOR.CRE.REC.No.06/08.12.001/2022-23 dated April 1, 2022 on ‘Housing Finance’.

2. We have come across instances where banks have not been strictly complying with our extant instructions on assessment of commercial viability, ascertainment of revenue streams for debt servicing obligations and monitoring of end use of funds in respect of their financing of infrastructure/ housing projects of government owned entities.

3. Banks/ FIs have also been found to have violated our instructions which inter alia require that in case of projects undertaken by government owned entities, term loans should be sanctioned only for corporate bodies; due diligence should be carried out on viability and bankability of the projects to ensure that revenue stream from the project is sufficient to take care of the debt servicing obligations; and that the repayment/ servicing of debt is not from budgetary resources.

4. Attention of the banks is especially drawn towards the specific instructions contained in the paragraphs referred to in the Annex. It is reiterated that banks are required to follow these instructions in letter and spirit.

5. Banks are advised to carry out a review and place before their Boards, a comprehensive report on the status of compliance with the instructions within three months from the date of this circular.

Yours faithfully,

(Manoranjan Mishra)
Chief General Manager

Bank finance to Government owned entities - Extant Instructions

a) Para 2.3.7.3 – ‘Criteria for Financing’ of Master Circular DBR.No.Dir.BC.10/13.03.00/2015-16 on ‘Loans and Advances – Statutory and Other Restrictions’ dated July 1, 2015

b) Para 2.3.7.5 – ‘Appraisal’ of Master Circular DBR.No.Dir.BC.10/13.03.00/2015-16 on ‘Loans and Advances – Statutory and Other Restrictions’ dated July 1, 2015

c) Para 2.3.23 – ‘Bridge Loans against receivables from Government’ of Master Circular DBR.No.Dir.BC.10/13.03.00/2015-16 on ‘Loans and Advances – Statutory and Other Restrictions’ dated July 1, 2015

d) Para 2(B)(ix) of Master Circular DOR.CRE.REC.No.06/08.12.001/2022-23 on ‘Housing Finance’ dated April 1, 2022

RBI/2022-23/70
DOR.MRG.REC.46/00-00-011/2022-23

June 10, 2022

’Madam / Dear Sir,

Punjab and Maharashtra Co-operative Bank Limited (Amalgamation with Unity Small Finance Bank Limited) Scheme, 2022 - Provisioning on interbank exposure and valuation of Perpetual Non-Cumulative Preference Shares (PNCPS) and Equity Warrants

Please refer to Punjab and Maharashtra Co-operative Bank Limited (Amalgamation with Unity Small Finance Bank Limited) Scheme, 2022 (hereinafter referred as ‘the scheme’) notified on January 25, 2022.

2. In terms of circular DOR.(PCB).BPD.Cir.No.11/16.20.000/2019-20 dated April 20, 2020, Primary (Urban) Co-operative Banks (UCBs) were advised that the interbank exposures arising from deposits placed by UCBs with a UCB under All-inclusive Directions (AID) and their non-performing exposures arising from discounted bills drawn under LCs issued by a UCB under AID shall be fully provided within five years at the rate of 20 per cent annually. Further, if UCBs choose to convert such deposits into long term perpetual debt instruments (e.g. Innovative Perpetual Debt Instrument - IPDI) which may be recognised as capital instrument under a scheme of restructuring / revival of a UCB under AID, provision on the portion of deposits converted into such instruments shall not be required.

3. The Scheme has provided for conversion of the outstanding uninsured deposits (which includes the interest accrued till March 31, 2021) to the credit of the institutional depositors into Perpetual Non-Cumulative Preference Shares (PNCPS) and Equity Warrants of the Unity Small Finance Bank (USFB) as on appointed date. However, it is observed that the actual receipt of PNCPS and Equity Warrants in the account of institutional depositors is yet to take place. In this connection, it is clarified that UCBs shall continue to make provisions on inter-bank exposures arising from outstanding uninsured deposits, as per circular dated April 20, 2020 ibid until the actual allotment of PNCPS / Equity Warrants. After the allotment of PNCPS / Equity Warrants, the provisions made on exposures arising from deposits shall be reversed only if such provisions are in excess of loss, if any, due to treatment of PNCPS and Equity Warrants (provided in paragraph 4 and 5 below).

4. Equity Warrants shall be valued at a price of ?1 per warrant. As and when the equity warrants are converted into equity shares, the valuation shall be done on market determined prices. Thus, at present, no provisions need to be made on investment in Equity Warrants.

5. UCBs shall fully provide for their investments in PNCPS. UCBs are allowed to spread the provisions for their investments in PNCPS, net of extant provisions made on exposures arising from outstanding uninsured deposits, equally over two financial years such that the entire loss is fully provided for by March 31, 2024.

6. Further, these PNCPS and Equity Warrants shall be classified as Non-SLR investments and shall be exempt from the limits prescribed in paragraph 12.1.2(a) and 12.1.2(b) of the Master Circular on Investments by Primary (Urban) Co-operative Banks dated April 1, 2022.

Applicability

7. This circular is applicable to all Primary (Urban) Co-operative Banks.

8. These instructions shall come into force with immediate effect.

Yours faithfully

(Usha Janakiraman)
Chief General Manager

RBI/2022-23/69
A.P. (DIR Series) Circular No. 05

June 09, 2022

AD Category I banks

Madam/ Sir,

Discontinuation of Return under Foreign Exchange Management Act, 1999

Attention of Authorised Persons is invited to A.P. (DIR series) circular No 26, dated February 18, 2022, wherein Authorised Persons were advised about proposed discontinuation of the return “Details of guarantee availed and invoked from non-resident entities”. It was also advised that the date of discontinuation would be notified in due course.

2. In this regard, reference may be drawn to A.P. (DIR series) circular No 20, dated August 29, 2012, Master Direction - External Commercial Borrowings, Trade Credits and Structured Obligations dated March 26, 2019 and the Master Direction - Reporting under Foreign Exchange Management Act, 1999 dated January 01, 2016, as amended from time to time (Refer Part X – ‘Statement for reporting of non-resident guarantees issued and invoked in respect of fund and non-fund based facilities between two persons resident in India’).

3. It has now been decided to discontinue the above return, with effect from the quarter ending June 2022.

4. The above-mentioned Master Directions are being updated to reflect these changes. AD banks may bring the contents of this circular to the notice of their constituents.

5. The directions contained in this circular have been issued under Section 10(4) and 11(2) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

Yours faithfully,

(Ajay Kumar Misra)
Chief General Manager-in-Charge

RBI/2022-23/63
FMOD.MAOG.No.145/01.01.001/2022-23

June 08, 2022

All Liquidity Adjustment Facility (LAF) participants

Madam/Sir,

Liquidity Adjustment Facility - Change in rates

As announced in the Monetary Policy Statement, 2022-23, today, it has been decided by the Monetary Policy Committee (MPC) to increase the policy Repo rate under the Liquidity Adjustment Facility (LAF) by 50 basis points from 4.40 per cent to 4.90 per cent with immediate effect.

2. Consequently, the standing deposit facility (SDF) rate and marginal standing facility (MSF) rate stand adjusted to 4.65 per cent and 5.15 per cent respectively, with immediate effect.

3. All other terms and conditions of the extant LAF Scheme will remain unchanged.

Yours sincerely,

(G. Seshsayee)
Chief General Manager

RBI/2022-23/64
MPD.BC.393/07.01.279/2022-23

June 8, 2022

All Primary Dealers,

Standing Liquidity Facility for Primary Dealers

In the Monetary Policy Statement 2022-23, dated June 8, 2022, the policy repo rate under the Liquidity Adjustment Facility (LAF) has been increased by 50 basis points from 4.40 per cent to 4.90 per cent with immediate effect.

2. Accordingly, the Standing Liquidity Facility provided to Primary Dealers (PDs) (collateralised liquidity support) from the Reserve Bank would be available at the revised repo rate of 4.90 per cent with effect from June 8, 2022.

Yours faithfully,

(Muneesh Kapur)
Adviser-in-Charge

RBI/2022-23/65
DOR.RET.REC.44/12.01.001/2022-23

June 08, 2022

All Banks

Madam/Sir,

Change in Bank Rate

Please refer to our circular DOR.RET.REC.32/12.01.001/2022-23 dated May 04, 2022 on the captioned subject.

2. As announced in the Monetary Policy Statement 2022-23 dated June 08, 2022, the Bank Rate is revised upwards by 50 basis points from 4.65 per cent to 5.15 per cent with immediate effect.

3. All penal interest rates on shortfall in reserve requirements, which are specifically linked to the Bank Rate, also stand revised as indicated in the Annex.

Yours faithfully,

(Shrimohan Yadav)
Chief General Manager

Encl.: As above

Penal Interest Rates which are linked to the Bank Rate

RBI/2022-23/66
DOR.REG.No.45/19.51.052/2022-23

June 8, 2022

All Primary (Urban) Co-operative banks

Madam / Dear Sir

Section 23 of the Banking Regulation Act, 1949 – Doorstep Banking

In terms of Section 23 of the Banking Regulation Act, 1949 (AACS) Primary (Urban) Co-operative Banks (UCBs) are required to seek prior approval of the Reserve Bank for opening any new place of business including offering services at the doorstep of the customer.

2. Keeping in view the above, it has been decided to allow financially sound and well managed (FSWM) UCBs to provide Doorstep Banking Services to their customers on a voluntary basis. However, Non-FSWM UCBs would have to seek prior approval of concerned Regional Office of Department of Supervision of the Reserve Bank to provide Doorstep Banking Services.

3. Eligible UCBs may formulate a scheme for providing Doorstep Banking Services to their customers, with the approval of their Boards, in accordance with the guidelines enclosed to this letter.

4. UCBs are further advised to take into account the various risks that may arise on account of offering Doorstep Banking Services to customers either directly through own employees or through agents and take all necessary steps to manage the same.

5. The operation of the scheme may also be reviewed by the Boards of UCBs on a half-yearly basis during the first year of its operation. The scheme may be reviewed thereafter on an annual basis.

Yours faithfully

(Shrimohan Yadav)
Chief General Manager

Encl: as above

Guidelines for Doorstep Banking by UCBs

1. Services to be offered

UCBs can voluntarily offer the following banking services to individual customers/ natural persons at their doorstep: -

1. Pick up of cash against receipt;
2. Pick up of instruments against receipt;
3. Delivery of demand drafts against withdrawal from account;
4. Delivery of cash against withdrawal from account either against cheque received at the counter or request received through any secured convenient channel, such as phone banking, internet banking, etc;
5. Submission of Know Your Customer (KYC) documents;
6. Submission of Life Certificate.

UCBs which offer services of pick-up of cash may take suitable steps to educate their employees and agents to enable them to detect forged and mutilated notes so as to avoid frauds and disputes with customers.

2. Mode of Delivery

1. Through own employees
2. Through Agents

Where UCBs engage the services of Agents for delivery of services, it should be ensured that the policy approved by the Board lays down the broad principles for selection of Agents and payment of fee/commission etc. UCBs must refer to the guidelines on Managing Risks in Outsourcing of Financial Services by co-operative banks issued vide our circular DoR.ORG.REC.27/21.04.158/2021-22 dated June 28, 2021 and ensure that the principles enumerated therein are complied with while offering Doorstep Banking Services.

3. Delivery process

1. Cash collected from the customer should be acknowledged by issuing a receipt on behalf of the UCB;
2. Cash collected from the customer should be credited to the customer’s account on the same day or next working day, depending on the time of collection;
3. At the time of collection of cash, the customer should be informed of the date of credit by issuing a suitable advice;
4. Delivery of demand draft should be done by debit to the account on the basis of requisition in writing/ cheque received and not against cash or instruments collected at the doorstep;
5. Acknowledgment should be provided for collection of KYC documents, Life Certificate.

4. Risk Management

It may be ensured that the agreement entered into with the customer does not entail any legal or financial liability on the bank for failure to offer doorstep services under circumstances beyond its control. The services should be seen as a mere extension of banking services offered at the branch and the liability of the bank should be the same as if the transactions were conducted at the branch. The agreement should not provide any right to the customer to claim the services at his doorstep.

The UCB should provide cash limits (for collection as well as delivery) for their employees/ agents and customers, for doorstep banking. The UCB should also take all necessary steps to contain technology risk while providing these services.

5. Transparency

Charges, if any, to be levied on the customer for doorstep services should be incorporated in the policy approved by the Board and should form part of the agreement entered into with the customer. The charges should be prominently indicated on the banks’ website and brochures offering doorstep services.

6. Other conditions

1. UCBs shall ensure compliance with the Master Direction - Know Your Customer (KYC) Direction, 2016 as updated and amended by the Reserve Bank with regard to customer identification procedures while offering doorstep services to their customers.
2. The services should be offered at either the residence or office of the customer as opted by the customer, the address of which should be clearly and explicitly mentioned in the agreement.
3. The agreement/ contract with the customer shall clearly specify that the UCB will be responsible for the acts of omission and commission of its ‘agent’.
4. UCBs shall keep in view the restrictions imposed by Section 10 (1) (b) (ii) of the Banking Regulation Act, 1949, while making payments for the services outsourced.

7. Redressal of Grievance

1. UCBs should constitute an appropriate Grievance Redressal Machinery internally for redressing complaints about services rendered by its employees/ agents. The name and telephone number of the designated Grievance Redressal Officer of the ‘UCB’ should be made available to the customers including on the UCB’s website. The designated officer should ensure that genuine grievances of customers are redressed promptly.
2. If a customer feels that his complaint has not been satisfactorily addressed, he will have the option to approach the Office of the concerned Banking Ombudsman for redressal of grievance/s in case of (a) Scheduled Primary (Urban) Co-operative Banks and (b) Non-Scheduled Primary (Urban) Co-operative Banks with deposits size of Rupees 50 crore and above as on the date of the audited balance sheet of the previous financial year

RBI/2022-23/67
DOR.CRE.REC.43/09.22.010/2022-23

June 08, 2022

All State Co-operative Banks (StCBs)
All District Central Co-operative Banks (DCCBs)

Madam / Dear Sir,

Enhancement in Individual Housing Loan limits and credit to Commercial Real Estate - Residential Housing (CRE-RH)

Please refer to our circulars RPCD CO.RCBD.BC.No.15 /03.03.01/2009-10 dated August 13, 2009, RPCD.CO.RF.BC.No.109/07.38.01/2008-09 dated May 25, 2009 and RPCD.CO.RCBD. BC.No. 48 /03.03.01/2010-11 dated January 20, 2011 issued on the above subject.

2. As announced in the Statement on Developmental and Regulatory Policies (para no.1 & 2 annexed), it has been decided to revise the limits on residential housing loans sanctioned by rural co-operative banks to an individual borrower as under:

3. Further, it has been decided to allow StCBs and DCCBs to extend finance to Commercial Real Estate-Residential Housing (CRE-RH) within the existing aggregate housing finance limit of 5% of their total assets. For this purpose, CRE-RH shall consist of loans to builders/developers for residential housing projects (except for captive consumption). Such projects should ordinarily not include non-residential commercial real estate. However, integrated housing projects comprising some commercial space (e.g. shopping complex, school, etc.) can also be classified under CRE-RH, provided that the commercial area in the residential housing project does not exceed 10% of the total Floor Space Index (FSI) of the project. Standard asset provision of 0.75% and risk weight of 75% shall be maintained for CRE-RH advances.

4. Banks shall have a Board-approved policy for financing CRE-RH and a review note on the performance of the CRE-RH portfolio shall be placed before the Board at least on a half-yearly basis. All other extant instructions in the matter shall remain unchanged. The above instructions will come into effect from the date of this circular.

Yours faithfully,

(Manoranjan Mishra)
Chief General Manager

1. Individual Housing Loans by Cooperative Banks – Enhancement in Limits

Extant guidelines prescribe prudential limits on the amount of individual housing loans that can be extended by Primary (Urban) Co-operative Banks (UCBs), and Rural Cooperative Banks (RCBs - State Cooperative Banks and District Central Cooperative Banks) to their customers. These limits were last revised for UCBs in 2011 and for RCBs in 2009. Taking into account the increase in housing prices since the limits were last revised and considering the customer needs, it has been decided to increase the existing limits on individual housing loans by cooperative banks. Accordingly, the limits for Tier I /Tier II UCBs shall stand revised from ?30 lakh/ ?70 lakh to ?60 lakh/ ?140 lakh, respectively. As regards RCBs, the limits shall increase from ?20 lakh to ?50 lakh for RCBs with assessed net worth less than ?100 crore; and from ?30 lakh to ?75 lakh for other RCBs. A detailed circular will be issued separately.

2. Permitting Rural Co-operative Banks (RCBs) to Lend to Commercial Real Estate - Residential Housing (CRE-RH) Sector

As per the extant guidelines, State Co-operative Banks (StCBs) and District Central Co-operative Banks (DCCBs) are prohibited from extending loans to the commercial real estate sector. Considering the growing need for affordable housing and to realise their potential in providing credit facilities to the housing sector, it has been decided to allow StCBs and DCCBs to extend finance to Commercial Real Estate – Residential Housing (CRE-RH) within the existing aggregate housing finance limit of 5 per cent of their total assets. A detailed circular will be issued separately.

RBI/2022-23/68
DOR.CRE.REC.42/09.22.010/2022-23

June 08, 2022

All Primary (Urban) Co-operative Banks,

Madam / Dear Sir,

Individual Housing loans – Enhancement in limits

Please refer to circular UBD.BPD.(PCB). Cir.No.7/09.22.010/2011-12 dated October 31, 2011 on the above subject.

2. As announced in the Statement on Developmental and Regulatory Policies (para no.1 annexed), it has been decided to revise the limits on individual housing loans sanctioned by urban co-operative banks to an individual borrower as under:

3. All other extant instructions in the matter shall remain unchanged. The above instructions will come into effect from the date of this circular.

Yours faithfully,

(Manoranjan Mishra)
Chief General Manager

1. Individual Housing Loans by Cooperative Banks – Enhancement in Limits

Extant guidelines prescribe prudential limits on the amount of individual housing loans that can be extended by Primary (Urban) Co-operative Banks (UCBs), and Rural Cooperative Banks (RCBs - State Cooperative Banks and District Central Cooperative Banks) to their customers. These limits were last revised for UCBs in 2011 and for RCBs in 2009. Taking into account the increase in housing prices since the limits were last revised and considering the customer needs, it has been decided to increase the existing limits on individual housing loans by cooperative banks. Accordingly, the limits for Tier I /Tier II UCBs shall stand revised from ?30 lakh/ ?70 lakh to ?60 lakh/ ?140 lakh, respectively. As regards RCBs, the limits shall increase from ?20 lakh to ?50 lakh for RCBs with assessed net worth less than ?100 crore; and from ?30 lakh to ?75 lakh for other RCBs. A detailed circular will be issued separately.

RBI/2022-23/62
DoR.AUT.REC.41/24.01.001/2022-23

June 07, 2022

All Scheduled Commercial Banks

Madam/Dear Sir

Branches of Indian Banks operating in GIFT-IFSC – acting as Professional Clearing Member (PCM) of India International Bullion Exchange IFSC Limited (IIBX)

On a review, it has been decided to allow the branches of Indian banks operating in GIFT-IFSC to act as PCM of IIBX.

2. Accordingly, in exercise of the powers conferred on the Reserve Bank of India under Section 35A of the Banking Regulation Act, 1949, the Reserve Bank, being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the instructions hereinafter specified.

3. Applicability

The instructions are applicable to domestic scheduled commercial banks (including foreign banks operating through a Wholly Owned Subsidiary incorporated in India), which are authorised to deal in foreign exchange and have a branch in GIFT-IFSC.

4. Procedure for Application

The parent bank (‘bank’) shall seek a No Objection Certificate (NoC) from the Reserve Bank of India prior to its branch in GIFT-IFSC seeking professional clearing membership of IIBX, subject to fulfilment of the prudential requirements as set out in Para 21 of the Master Direction/DBR.FSD.No.101/24.01.041/2015-16 dated May 26, 2016. An eligible bank shall, with prior approval of its Board, make an application to the Department of Regulation, Reserve Bank of India with details of its proposed business plan as a PCM along with particulars of the risk management architecture instituted at its branch in GIFT-IFSC.

5. Terms and Conditions

While operating as a PCM of IIBX, the bank shall ensure strict compliance on a continuing basis with the following conditions:

a) The bank shall ensure adherence to extant RBI guidelines on capital requirements for their exposures (including but not limited to default fund contributions, posted collateral, exposure to clients, trade exposure to CCP) arising from its branch in GIFT-IFSC functioning as PCM on IIBX. The bank shall comply with the regulatory capital requirement of the host or home regulator, whichever is more stringent.

b) The bank shall ensure adherence to extant RBI guidelines on management of liquidity risk (including those arising from its functioning as a PCM of IIBX) as issued from time to time.

c) The bank shall ensure adherence to the extant RBI guidelines on large exposure framework as issued from time to time, including all exposures taken by its branch in GIFT-IFSC.

d) In line with the extant prudential regulations applicable to the bank, its branch in GIFT-IFSC shall, with the approval of the bank’s Board, put in place an effective risk management framework including the prudential limits in respect of each of its trading clients, taking into account their net worth, business turnover, and other relevant parameters as per the bank’s assessment. The risk control measures prescribed under the framework shall be in compliance with the guidelines/directions issued by the host or home regulator, whichever is more stringent.

e) The branch of the bank in GIFT-IFSC may, as a PCM of IIBX, clear and settle trades executed by its clients as trading members of the exchanges subject to the condition that the total exposure which the branch would take on its clients should be determined by the Board in relation to the Tier 1 capital of the bank as well as the capital of its branch in GIFT-IFSC and shall be monitored on an ongoing basis. However, the bank shall ensure that its branch in GIFT-IFSC, in its role as a PCM, does not undertake any transaction/activity on IIBX other than what is required as a professional clearing member.

f) The bank shall ensure strict compliance with various margin requirements as may be prescribed by its Board.

g) The bank shall comply with all the conditions, if any, stipulated by other regulatory bodies that may be relevant for its role as a PCM.

h) In the event of non-compliance with extant guidelines, or if the Reserve Bank of India is satisfied that it is necessary and expedient in the public interest so to do, it may issue further necessary directions (including revocation of approval) and/or impose additional conditions, as it deems fit.

Yours faithfully

(Scenta Joy)
Chief General Manager

RBI/2022-23/61
DOR.STR.REC.40/21.04.048/2022-23

June 6, 2022

All Non-Banking Financial Companies
(Including Housing Finance Companies)

Madam / Dear Sir,

Provisioning for Standard assets by Non-Banking Financial Company – Upper Layer

Please refer to the circular DOR.CRE.REC.No.60/03.10.001/2021-22 dated October 22, 2021 on “Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs” wherein it was inter alia mentioned that RBI would issue guidelines on differential provisioning to be held by NBFCs classified as NBFC-Upper Layer (NBFC-UL) towards different classes of standard assets.

2. Accordingly, it has been decided that NBFCs classified as NBFC-UL shall maintain provisions in respect of ‘standard’ assets at the following rates for the funded amount outstanding:

3. Current credit exposures arising on account of the permitted derivative transactions shall also attract provisioning requirement as applicable to the loan assets in the 'standard' category, of the concerned counterparties. All conditions applicable for treatment of the provisions for standard assets would also apply to the aforesaid provisions for permitted derivative transactions.

4. Since NBFCs with net worth of Rs. 250 crore or above are required to comply with Indian Accounting Standards (Ind AS) for the preparation of their financial statements, they shall continue to hold impairment allowances as required under Ind AS, subject to the prudential floor as prescribed under Paragraph 2 of the Annex to the circular DOR (NBFC).CC.PD.No.109/22.10.106/2019-20 dated March 13, 2020. The above-mentioned provisions shall, however, be included in the computation of the prudential floor, but shall not be reckoned for calculating net NPAs.

5. For the purpose of these instructions, the following definitions / clarifications shall apply:

1. The definition of the terms Micro Enterprises, Small Enterprises, and Medium Enterprises shall be as per the circular FIDD.MSME & NFS.BC.No.3/06.02.31/2020-21 dated July 2, 2020 on ‘Credit flow to Micro, Small and Medium Enterprises Sector’ as updated from time to time.
2. Commercial Real Estate (CRE) would consist of loans to builders/ developers/ others for creation/acquisition of commercial real estate (such as office building, retail space, multi-purpose commercial premises, multi- tenanted commercial premises, industrial or warehouse space, hotels, land acquisition, development and construction etc.) where the prospects for repayment, or recovery in case of default, would depend primarily on the cash flows generated by the asset by way of lease/rental payments, sale etc. Further, loans for third dwelling unit onwards to an individual will be treated as CRE exposure.
3. Commercial Real Estate – Residential Housing (CRE–RH) is a sub-category of CRE that consist of loans to builders/ developers for residential housing projects (except for captive consumption). Such projects should ordinarily not include non-residential commercial real estate. However integrated housing project comprising of some commercial spaces (e.g. shopping complex, school etc.) can also be specified under CRE-RH, provided that the commercial area in the residential housing project does not exceed 10 per cent of the total Floor Space Index (FSI) of the project. In case the FSI of the commercial area in the predominantly residential housing complex exceed the ceiling of 10 per cent, the entire loan should be classified as CRE and not CRE-RH.
4. Housing loans extended at teaser rates shall mean housing loans having comparatively lower rates of interest in the first few years after which the rates of interest are reset at higher rates.
5. Current credit exposure is defined as the sum of the gross positive mark-to-market value of all derivative contracts with respect to a single counterparty, without adjusting against any negative marked-to-market values of contracts with the same counterparty.

6. These guidelines shall be effective from October 1, 2022.

Yours faithfully,

(Manoranjan Mishra)
Chief General Manager

RBI/2022-23/93
FMRD.DIRD.02/14.01.023/2022-23

June 01, 2022

To

All Eligible Market Participants

Madam/Sir

Master Direction – Reserve Bank of India (Variation Margin) Directions, 2022

Please refer to Paragraph 10 of the Statement on Developmental and Regulatory Policies announced as a part of the Bi-monthly Monetary Policy Statement for 2019-20 dated February 06, 2020, on issuance of the Directions regarding exchange of variation margin (VM) for non-centrally cleared derivatives (NCCDs).

2. Accordingly, the draft Variation Margin (Reserve Bank) Directions, 2020 were released for public comments on September 07, 2020. Based on the feedback received from the market participants, the draft Directions were reviewed and have since been finalised. The Master Direction – Reserve Bank of India (Variation Margin) Directions, 2022 are enclosed herewith.

Yours faithfully,

(Dimple Bhandia)
Chief General Manager

Notification No. FMRD.DIRD.03/14.01.023/2022-23 dated June 01, 2022

Master Direction - Reserve Bank of India (Variation Margin) Directions, 2022

In exercise of the powers conferred under section 45W of the Reserve Bank of India Act, 1934 (hereinafter called the Act) read with section 45U of the Act, the Reserve Bank of India (hereinafter called the Reserve Bank) hereby issues the following Directions.

A reference is also invited to the Foreign Exchange Management Act, 1999 (42 of 1999), Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 (Notification no. FEMA.25/RB-2000 dated May 3, 2000), Foreign Exchange Management (Debt Instruments) Regulations, 2019 (Notification No. FEMA 396/2019-RB dated October 17, 2019) and Foreign Exchange Management (Margin for Derivative Contracts) Regulations, 2020 (Notification no. FEMA.399/RB-2020 dated October 23, 2020).

1. Short title and commencement

(1) These Directions shall be called the Master Direction – Reserve Bank of India (Variation Margin) Directions, 2022.

(2) These Directions shall come into force with effect from December 01, 2022.

2. Applicability

(1) The provisions of these Directions shall apply to the following contracts, which are entered into on or after the date on which these Directions come into force:

1. Non-centrally cleared foreign exchange derivative contracts undertaken in terms of the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 (Notification No. FEMA 25/RB-2000 dated May 3, 2000) and Master Direction – Risk Management and Inter-Bank Dealings dated July 05, 2016, as amended from time to time;
2. Non-centrally cleared interest rate derivative contracts undertaken in terms of the Rupee Interest Rate Derivatives (Reserve Bank) Directions, 2019 (Notification No. FMRD.DIRD.20/2019 dated June 26, 2019), as amended from time to time;
3. Non-centrally cleared credit derivative contracts undertaken in terms of Master Direction – Reserve Bank of India (Credit Derivatives) Directions, 2022 (Notification No. FMRD.DIRD.11/14.03.004/2021-22 dated February 10, 2022), as amended from time to time; and
4. Any other non-centrally cleared derivative (NCCD) contract as may be specified by the Reserve Bank.

(2) Genuine amendments, including the following, to an existing derivative contract entered into before the date on which these Directions come into force (‘grandfathered contract’) will not qualify as a new derivative contract under these Directions.

1. non-material amendments that do not substantially change the terms and conditions of the contract or create any new significant exposures;
2. amendments made solely for the purpose of addressing benchmark reforms; and
3. contracts arising from novation, portfolio compression and application of standard trade maintenance processes on grandfathered contracts. Contracts resulting from compression of grandfathered contracts together with contracts which are subject to these Directions shall, however, be subject to the margin requirements under these Directions.

3. Definitions

(1) In these Directions, unless the context otherwise requires:

1. Central counterparty means an entity that interposes itself between counterparties to contracts traded in one or more financial markets, becoming the buyer to every seller and the seller to every buyer and thereby ensuring the performance of open contracts.
2. Consolidated group means a group within the meaning of Indian Accounting Standard (Ind AS) 110 - Consolidated Financial Statements, or International Financial Reporting Standards (IFRS) 10 - Consolidated Financial Statements or any other equivalent accounting standards.
3. Collateralise to market means an approach to the exchange of Variation Margin wherein the exchanged margin is characterised as collateral to secure the current mark-to-market exposure between the parties to a derivative contract.
4. Financial sector regulator refers to the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), the Insurance Regulatory and Development Authority of India (IRDAI) and the Pension Fund Regulatory and Development Authority (PFRDA).
5. Netting agreement shall have the same meaning as assigned to it in Section 2(1)(k) of The Bilateral Netting of Qualified Financial Contracts Act, 2020 (30 of 2020).
6. Non-centrally cleared derivatives (NCCDs) mean derivative contracts whose settlement is not guaranteed by a central counterparty.
7. Non-resident means and includes a ‘person resident outside India’ as defined in Section 2(w) of the Foreign Exchange Management Act, 1999 (42 of 1999).
8. Related parties shall have the same meaning as assigned to it under Indian Accounting Standard (Ind AS) 24 – Related Party Disclosures or International Accounting Standard (IAS) 24 – Related Party Disclosures or any other equivalent accounting standards.
9. Resident means and includes a ‘person resident in India’ as defined in Section 2(v) of the Foreign Exchange Management Act, 1999 (42 of 1999).
10. Settle to market means an approach to the exchange of Variation Margin wherein the exchanged margin is deemed to settle the current mark-to-market exposure between the parties to a derivative contract, with no right to reclaim and no obligation to return the Variation Margin. After the settlement, the mark-to-market exposure between the parties is reset to zero.
11. Variation margin means the collateral that is collected or paid to reflect the current mark-to-market exposure resulting from changes in the market value of a derivative contract.

(2) Words and expressions used but not defined in these Directions shall have the meaning as assigned to them in the Reserve Bank of India Act, 1934.

4. Entity Scope

4.1 Covered Entities

(1) The following entities shall be classified as Domestic Covered Entities under these Directions:

1. Entities regulated by a financial sector regulator (including branches of foreign banks operating in India) and having an Average Aggregate Notional Amount (AANA) of outstanding NCCDs of ?25,000 crore and above, on a consolidated group wide basis.
2. Other resident entities having an AANA of outstanding NCCDs of ?60,000 crore and above, on a consolidated group wide basis.

(2) The following entities shall be classified as Foreign Covered Entities under these Directions:

1. Non-resident financial entities having an AANA of outstanding NCCDs of USD 3 billion and above, on a consolidated group wide basis.¹
2. Other non-resident entities having an AANA of outstanding NCCDs of USD 8 billion and above, on a consolidated group wide basis.

(3) For the purposes of paragraph 4.1 (1) and (2), AANA of outstanding NCCDs shall be calculated as set out in paragraph 4.2.

4.2 Average Aggregate Notional Amount of outstanding NCCDs

(1) AANA of outstanding NCCDs shall be calculated as the simple average of the total notional amount of outstanding NCCDs as at the end of March, April and May of a year. AANA for a year shall be used for recognition of Domestic Covered Entities and Foreign Covered Entities for a one-year period from September 1 of that year to August 31 of the next year.

(2) AANA calculation shall include all NCCD contracts of the consolidated group, including those outside the scope of these Directions, but exclude intra-group transactions.

4.3 Directions for Covered Entities

(1) A Domestic Covered Entity shall exchange Variation Margin with a counterparty to an NCCD transaction if the counterparty is a Domestic Covered Entity or a Foreign Covered Entity. A Domestic Covered Entity shall put in place appropriate processes for ascertaining whether a counterparty to an NCCD transaction is a Domestic Covered Entity or a Foreign Covered Entity. For this purpose, Domestic Covered Entities may, inter alia, rely on a declaration from the counterparties.

(2) The provisions of these Directions shall not apply to physically-settled foreign exchange forward and physically-settled foreign exchange swap contracts. However, Domestic Covered Entities are expected to appropriately manage the risks associated with such transactions.²

(3) The provisions of these Directions shall not be applicable to an NCCD transaction in which one of the counterparties is any of the following entities:

1. Government of India and State Governments;
2. A Foreign Sovereign;
3. A Central Bank;
4. Bank for International Settlements; and
5. Multilateral Development Banks (MDBs) listed under paragraph 5.5 of RBI Master Circular on Basel III Capital Regulations dated April 01, 2022³, as amended from time to time.

(4) The provisions of these Directions shall not be applicable to an NCCD transaction between entities belonging to the same consolidated group.

5. Calculation and exchange of Variation Margin

(1) Variation Margin shall be calculated on a daily basis, and called and exchanged at the earliest time possible after the transaction date (“T”) or margin recalculation date (“R”), but no later than three local business days from the transaction date (“T+3”) or margin recalculation date (“R+3”).

(2) Variation Margin shall be exchanged to fully collateralise to market or settle to market, the mark-to-market exposure of an NCCD contract. In the event that the exposures cannot be marked-to-market, a pre-agreed alternative process or fallback mechanism, as set out in the credit support annex, shall be used for the purpose of calculation of Variation Margin.

(3) Variation Margin shall be calculated and exchanged on an aggregate net basis, across all NCCD contracts that are executed under a single, legally enforceable netting agreement.

(4) A minimum transfer amount, not exceeding ?3.5 crore, may be applied for the exchange of Variation Margin. The entire margin amount shall be exchanged if the Variation Margin amount exceeds the minimum transfer amount.

(5) Variation Margin for an NCCD transaction between a Domestic Covered Entity and a Foreign Covered Entity may be posted/collected either in India or in an overseas jurisdiction, subject to the provisions of the A.P. (DIR Series) Circular No. 10 dated February 15, 2021 on Margin for Derivative Contracts.

6. Eligible collateral and haircuts

(1) Variation Margin between two Domestic Covered Entities shall be exchanged using the following collateral types:

(a) Indian Currency;

(b) Debt securities issued by Government of India and State Governments; and

(c) Rupee bonds issued by persons resident in India which are:

1. Listed on a recognised stock exchange in India; and
2. Assigned a credit rating of AAA by a rating agency registered with the Securities and Exchange Board of India. If different ratings are accorded by two or more credit rating agencies, then the lowest rating shall be reckoned.

(2) Variation Margin between a Domestic Covered Entity and a Foreign Covered Entity shall be exchanged using the following collateral types, subject to the provisions of the A.P. (DIR Series) Circular No. 10 dated February 15, 2021 on Margin for Derivative Contracts:

(a) Indian currency;

(b) Freely convertible foreign currency;

(c) Debt securities issued by Government of India and State Governments;

(d) Debt securities issued by foreign sovereigns with a credit rating of AA- and above issued by S&P Global Ratings / Fitch Ratings or Aa3 and above issued by Moody’s Investors Service. If different ratings are accorded by two or more credit rating agencies, then the lowest rating shall be reckoned; and

(e) Rupee bonds issued by persons resident in India which are:

1. Listed on a recognised stock exchange in India; and
2. Assigned a credit rating of AAA by a rating agency registered with the Securities and Exchange Board of India. If different ratings are accorded by two or more credit rating agencies, then the lowest rating shall be reckoned.

(3) Risk-sensitive haircuts shall be applied to the value of the collateral received. A schedule of minimum haircuts to be applied to the collateral received based on the type of collateral is set out in Annex. An additional haircut of 8% shall be applied to all non-cash collateral received in a currency other than the base currency of the NCCD transaction or eligible currencies as agreed to in the credit support annex.

(4) Securities issued by either of the counterparties to an NCCD transaction, or their related parties, shall not be accepted as collateral.

(5) Counterparties shall establish appropriate controls to manage the risks associated with the collateral received including, inter-alia, wrong-way risk⁴, concentration risk and liquidity risk.

7. Treatment of collateral under collateralise to market approach

(1) Cash collateral received as Variation Margin by banks shall not be treated as deposits, and the provisions of Master Direction – Reserve Bank of India (Interest Rate on Deposits) Directions, 2016, as amended from time to time, shall not be applicable to it.

(2) Cash collateral received as Variation Margin by Authorised Dealers shall not be treated as borrowings, and the provisions under Paragraph 5 of Part C of the Master Direction - Risk Management and Inter-Bank Dealings, 2016, as amended from time to time, shall not be applicable to it.

(3) Counterparties may pay interest on cash collateral received as Variation Margin, in terms of the credit support annex.

(4) Cash and non-cash collateral received as Variation Margin may be re-hypothecated, re-pledged or re-used, in terms of the credit support annex.

8. Margin requirements for cross-border transactions

(1) An NCCD transaction between a Domestic Covered Entity and a Foreign Covered Entity may be subject to margin requirements in a foreign jurisdiction. A Domestic Covered Entity and its counterparty in the foreign jurisdiction may decide to comply with these Directions, or the margin requirements implemented by the foreign jurisdiction provided the margining framework in the foreign jurisdiction is assessed by the Domestic Covered Entity to be comparable to the requirements in these Directions.

(2) The Domestic Covered Entity shall assess the comparability of the margining framework of the foreign jurisdictions based on the following broad principles:

1. the foreign jurisdiction whose margining framework is being assessed is a member of the BCBS-IOSCO Working Group on Margin Requirements;
2. the margining framework in the foreign jurisdiction is implemented in line with the policy framework on margin requirements for NCCDs issued by BCBS and IOSCO; and
3. the foreign jurisdiction has a legally enforceable netting framework;

(3) For this purpose, the Domestic Covered Entity shall put in place a Board-approved policy for the comparability assessment. The assessment of the margining framework of each foreign jurisdiction shall be placed before the Risk Management Committee of the Board/ equivalent body and subject to periodic review.

(4) The Domestic Covered Entity intending to comply with the margining framework of a foreign jurisdiction shall comply with the provisions of the A.P. (DIR Series) Circular No. 10 dated February 15, 2021 on Margin for Derivative Contracts.

(5) The Reserve Bank may, at a future date, undertake comparability assessment of margining framework of foreign jurisdictions vis-à-vis these Directions. Such assessment would have regard to whether the margining framework in the foreign jurisdiction is implemented in line with the policy framework on margin requirements for NCCDs issued by the BCBS and IOSCO.

(6) The Reserve Bank, based on its assessment of the margining framework of a foreign jurisdiction, may impose additional conditions to be met by the counterparties intending to comply with the margining framework of that jurisdiction.

(7) A Domestic Covered Entity may not exchange Variation Margin in an NCCD transaction with a Foreign Covered Entity if there is significant doubt regarding the enforceability of close-out netting and/or collateral arrangements, subject to the following:

1. The Domestic Covered Entity shall undertake a legal review and document the basis for identifying a jurisdiction where close-out netting and/or collateral arrangements are not legally enforceable; and
2. For each jurisdiction so assessed, the Domestic Covered Entity shall put in place appropriate internal limits and controls to manage its exposure to counterparties located in the jurisdiction.

9. Dispute resolution

(1) Counterparties shall ensure that appropriate policies and procedures for dispute resolution are in place before undertaking an NCCD transaction. Such policies and procedures shall, inter-alia, include processes for determining discrepancies in material terms or valuations as disputes, mechanism for such disputes to be resolved and escalation of material disputes to senior management, or to the Board, as may be appropriate.

(2) In case of a margin dispute, counterparties shall exchange the non-disputed amount first and make all necessary and appropriate efforts, including timely initiation of dispute resolution protocols, to resolve the dispute and exchange the remaining Variation Margin amount in a time-bound manner.

(Dimple Bhandia)
Chief General Manager

Standardised Haircut Schedule

² Domestic Covered Entities should refer to BCBS Supervisory Guidance for Managing Risks Associated with the Settlement of FX Transactions, February 2013: https://www.bis.org/publ/bcbs241.pdf for management of FX-settlement related risks.

³ https://rbidocs.rbi.org.in/rdocs/notification/PDFs/12MCBASELIIICAPITALREGULATIONSED3EF388F75E48198FF8328B36F43670.PDF

⁴ Wrong-way risk occurs when the value of the collateral collected exhibits a significant correlation with the creditworthiness of the counterparty or the value of the underlying NCCD portfolio in a way that could undermine the effectiveness of the protection offered by the collateral collected

RBI/2022-23/60
DOR.STR.REC.39/04.02.001/2022-23

May 31, 2022

All Scheduled Commercial Banks (excluding RRBs),
Small Finance Banks,
Primary (Urban) Cooperative Banks & State Cooperative Banks (scheduled banks having AD category-I license), andExim Bank

Dear Sir / Madam,

Interest Equalization Scheme (IES) on Pre and Post Shipment Rupee Export Credit - Extension

Please refer to paragraph 2.4 of the circular No. DOR.STR.REC.93/04.02.001/2021-22 dated March 8, 2022, wherein it was stated that the extended IES would not be available to those beneficiaries who were availing of the benefit under any Production Linked Incentive (PLI) scheme of the Government.

2. In this regard, Government has issued a clarification that the extended IES will also be available to such beneficiaries for segments other than for which they have availed of PLI benefits.

3. It is further advised that banks shall obtain a Self-Declaration under the IES from the exporters as per the format given in the Annex.

4. These provisions shall be deemed effective from October 1, 2021. Other provisions of the aforesaid circular shall remain unchanged.

Yours faithfully

(Manoranjan Mishra)
Chief General Manager

SELF DECLARATION

Declaration under Interest Equalization Scheme (IES)

1. I/We hereby declare that I/We am/are not availing benefits under the Production Linked Incentive (PLI) scheme of Government of India in the segment/sector for which this application for pre/post shipment credit under the Interest Equalization Scheme (IES) has been made.

2. I/We fully understand that if any information furnished in the application is found incorrect or false, it will render me/us liable for any penal action or other consequences as may be prescribed in law or otherwise warranted.

3. I/We hereby declare that the particulars and the statements made in this application are true and correct to the best of my/our knowledge and belief and nothing has been concealed or withheld therefrom.

Signature of Exporter

Date:

RBI/2022-2023/58
CO.DPSS.POLC.No. S-253/02-27-020/2022-23

May 26, 2022

The Chairman and Managing Director / Chief Executive Officer
NPCI Bharat BillPay Ltd. / Bharat Bill Payment System Providers /
Participants and prospective Bharat Bill Payment Operating Units

Madam / Dear Sir,

Bharat Bill Payment System – Amendment to guidelines

This has reference to the guidelines on Bharat Bill Payment System (BBPS) issued by the Reserve Bank of India (RBI) vide circular DPSS.CO.PD.No.940/02.27.020/2014-2015 dated November 28, 2014. As announced in the Statement on Development and Regulatory Policies dated April 08, 2022, the minimum net-worth requirement for non-bank Bharat Bill Payment Operating Units (BBPOUs) stands reduced to ?25 crore. The BBPS guidelines have been suitably amended.

2. This circular is issued under Section 10 (2) read with Section 18 of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007), and shall come into effect immediately.

Yours faithfully,

(P. Vasudevan)
Chief General Manager

RBI/2022-2023/57
A.P. (DIR Series) Circular No.04

May 25, 2022

To

All Category-I Authorised Dealer Banks

Madam/Sir,

Guidelines on import of gold by Qualified Jewellers as notified by – The International Financial Services Centers Authority (IFSCA)

Directorate General of Foreign Trade (DGFT) formulate and implement the Foreign Trade Policy and Procedures in terms of Foreign Trade (Development and Regulation) Act, 1992, (FTDR Act 1992, hereinafter) as amended from time to time. In exercise of powers conferred by Section 3 read with Section 5 of FTDR Act 1992, read with paragraph 1.02 and 2.01 of the Foreign Trade Policy, 2015-2020, as amended from time to time, the Central Government has amended the import policy conditions for gold in any form, other than monetary gold and silver in any form under Chapter 71 of ITC (HS), 2017, Schedule-I (Import Policy) vide Notification No. 49/2015-2020 dated January 5, 2022.

2. Attention of Authorised Dealer Category - I (AD) bank is invited to (a) Notification No. 49/2015-2020 dated January 5, 2022, in terms of which, in addition to nominated agencies as notified by RBI (in case of banks) and nominated agencies as notified by DGFT, Qualified Jewellers (QJ) as notified by International Financial Services Centers Authority (IFSCA) will be permitted to import gold under specific ITC(HS) Codes through India International Bullion Exchange IFSC Ltd. (IIBX); (b) Master Direction – Import of Goods and Services and the AP Dir Series Circulars issued for import of Gold by Reserve Bank of India under FEMA, 1999; (c) regulations issued by the International Financial Services Centers Authority (IFSCA) under International Financial Services Centers Authority Act, 2019.

3. In order to enable resident Qualified Jewellers to import gold through IIBX or any other exchange approved by IFSCA and the DGFT, Government of India the following directions under FEMA are being issued.

1. AD banks may allow Qualified Jewellers to remit advance payments for eleven days for import of Gold through IIBX in compliance to the extant Foreign Trade Policy and regulations issued under IFSC Act. AD banks shall ensure that advance remittance for such import through exchange/s authorised by IFSCA shall be as per the terms of the sale contract or other document in the nature of an irrevocable purchase order in terms of IFSC Act and regulations made thereunder by IFSCA. AD bank shall carry out all the due diligence and ensure the remittances sent are only for the bona fide import transactions through exchange/s authorised by IFSCA.
2. The advance remittance for import of Gold should not be leveraged in what-so-ever form for importing Gold worth more than the advance remittance made.
3. In case the import of Gold through IFSCA authorised exchange, for which advance remittance has been made, does not materialize, or the advance remittance made for the purpose is more than the amount required, the unutilised advance remittance shall be remitted back to the same AD bank within the specified time limit of eleven days.
4. For gold imported through IIBX, QJ shall submit the Bill of Entry (or any other such applicable document issued/approved by Customs Department for evidence of import), issued by Customs Authorities to the AD bank from where advance payment has been remitted.
5. All payments by qualified jewellers for imports of gold through IIBX, shall be made through exchange mechanism as approved by IFSCA in terms of IFSC Act and regulations. Any deviation from the extant guidelines for import of Gold through IIBX need to be approved in advance by IFSCA and other applicable and appropriate authority/ies.

4. IFSC Authority (IFSCA) will conduct all required due diligence on the exchange - IIBX including all other entities involved in enabling import of Gold by QJs in terms of the IFSCA regulations. IFSCA shall also put in place necessary system to ensure that the advance remittance received from QJs are solely for the purpose for the import of gold through IIBX.

5. AD bank shall ensure that:

1. all required documentation, custom duty related procedures and filing Bill of Entry as evidence of import, etc. is complete for the import of Gold by QJ within the specified applicable period.
2. single/multiple ORMs created and matched with corresponding BoEs (Bill of Entry) and closed appropriately in IDPMS.
3. the importer - that is QJs comply with the related extant instructions relating to imports under FEMA, 1999, FTDR Act 1992, Foreign Trade Policy and regulations of IFSCA.

AD banks may frame their own internal guidelines to deal with such cases, with the approval of their Board of Directors.

6. Reporting requirement by AD banks:

1. AD bank shall create Outward Remittance Message (ORM) for all such outward remittances in IDPMS in terms of extant guidelines.
2. All these transactions need to be reported in FETERS in terms of extant guidelines.
3. AD bank shall report the import of gold through QJ in XBRL as prescribed in para C.11.1 of Master Direction – Import of Goods and Services.

7. The abovementioned arrangement is for the sole purpose of facilitating physical import of gold through IIBX or any similar exchange authorised by IFSCA, by Qualified Jewellers in India.

8. The above instructions shall come into force with immediate effect. AD banks may bring the contents of this Circular to the notice of their constituents and customers concerned.

9. The directions contained in this Circular have been issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

Yours faithfully,

(Vivek Srivastava)
Chief General Manager

RBI/2022-23/56
DOR.CRE.REC.18/09.22.010/2022-23

May 24, 2022

All Primary (Urban) Co-operative Banks

Madam / Dear Sir,

Housing Finance – Loans for repairs/additions/alterations - Enhancement of limits

Please refer to para 2 of the circular UBD.CO.BPD.(PCB).Cir.No.13/09.22.010/2013-14 dated September 10, 2013 on the captioned subject, wherein, the ceiling on loans to individuals for carrying out repairs/additions/alterations to their dwelling units was revised upwards to ?2 lakh in rural and semi-urban areas and ?5 lakh in urban areas.

2. The ceiling on such loans is now revised to ?10 lakh in metropolitan centres (those centres with population of 10 lakh and above) and ?6 lakh in other centres.

Yours faithfully,

(Manoranjan Mishra)
Chief General Manager