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Master Direction – Monitoring of Frauds in NBFCs (Reserve Bank) Directions, 2016

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RBI/DNBS/2016-17/49
Master Direction DNBS. PPD.01/66.15.001/2016-17

September 29, 2016

NOTIFICATION

Master Direction – Monitoring of Frauds in NBFCs (Reserve Bank) Directions, 2016.

In exercise of the powers conferred by sections 45K, 45L and 45M of the Reserve Bank of India Act, 1934 (Act 2 of 1934), and of all the powers enabling it in this behalf, the Reserve Bank of India (the Bank) being satisfied that it is necessary and expedient in the public interest and being satisfied that for the purpose of enabling the Bank to regulate the credit system to the advantage of the country to do so, and in supersession of the Master Circular Frauds – Future Approach Towards Monitoring of Frauds in Non Banking Financial Companies (NBFCs), hereby, issues Master Directions – Monitoring of Frauds in NBFCs (Reserve Bank) Directions, 2016 (the Directions) hereinafter specified.


Index
Chapter I – Preliminary
Chapter II – Introduction
Chapter III – Classification of Frauds
Chapter IV – Reporting of Frauds to Reserve Bank of India
Chapter V – Quarterly Returns
Chapter VI – Reports to the Board
Chapter VII – Guidelines for Reporting Frauds to Police
Chapter VIII – Interpretations
Chapter IX – Repeal Provisions
Annex
Annex I – FMR – 1 : Report on Actual or Suspected Frauds in NBFCs
Annex II – FMR – 2 : Quarterly Report on Frauds Outstanding
Annex III – FMR – 3 : Quarterly Progress Report on Frauds of ₹ 1.00 lakh & above

Chapter – I

Preliminary

1 Short Title and Commencement.

a) These Directions shall be called Monitoring of frauds in NBFCs1, (Reserve Bank) Directions, 2016.

b) These directions shall come into force with immediate effect.

2 Applicability

These Directions shall apply to all deposit taking non-banking financial companies and ‘systemically important non-deposit taking non-banking financial companies’ (NBFC-ND-SI2) hereinafter called as ‘Applicable NBFCs’.

Chapter – II

Introduction

1. Applicable NBFCs shall put in place a reporting system for recording frauds without any delay. They should fix staff accountability in respect of delays in reporting of fraud cases to the Bank.

2. Applicable NBFCs shall strictly adhere to the timeframe fixed in this Direction for reporting fraud) failing which, applicable NBFCs would be liable for penal action as prescribed under the provisions of Chapter V of the Reserve Bank of India Act, 1934 ( the RBI Act).

3. Applicable NBFCs should specifically nominate an official of the rank of General Manager or equivalent who will be responsible for submitting all the returns to the Bank and reporting referred to in this Directions.

4. In case no frauds are detected, applicable NBFCs are not required to submit ‘Nil’ report to Frauds Monitoring Cell/Regional Offices of Department of Non-Banking Supervision of the Bank. At the same time enough precautions should be taken by applicable NBFCs to ensure that the cases reported by them are duly received by Frauds Monitoring Cell/Regional Offices of Department of Non-Banking Supervision as the case may be.

5. Applicable NBFCs shall disclose the amount related to fraud, reported in the company for the year in their balance sheets.

Chapter – III

Classification of Frauds

1. In order to have uniformity in reporting, frauds have been classified as under mainly based on the provisions of the Indian Penal Code:

  1. Misappropriation and criminal breach of trust
  2. Fraudulent encashment through forged instruments, manipulation of books of account or through fictitious accounts and conversion of property
  3. Unauthorised credit facilities extended for reward or for illegal gratification.
  4. Negligence and cash shortages
  5. Cheating and forgery
  6. Irregularities in foreign exchange transactions
  7. Any other type of fraud not coming under the specific heads as above.

2. Cases of ‘negligence and cash shortages’ and ‘irregularities in foreign exchange transactions’ referred to in items (d) and (f) above are to be reported as fraud if the intention to cheat / defraud is suspected / proved. However, the following cases where fraudulent intention is not suspected / proved, at the time of detection, will be treated as fraud and reported accordingly:

(a) Cases of cash shortages more than ₹ 10,000/- and

(b) Cases of cash shortages more than ₹ 5000/- if detected by management /auditor / inspecting officer and not reported on the occurrence by the persons handling cash.

3. Applicable NBFCs having overseas branches/offices should report all frauds perpetrated at such branches/offices also to the Bank as per the format and procedure detailed under Chapter IV.

Chapter – IV

Reporting of Frauds to Reserve Bank of India

1. Frauds involving ₹ 1 lakh and above

(i) Fraud reports should be submitted in all cases of fraud of ₹ 1 lakh and above perpetrated through misrepresentation, breach of trust, manipulation of books of account, fraudulent encashment of FDRs, unauthorised handling of securities charged to the applicable NBFC, misfeasance, embezzlement, misappropriation of funds, conversion of property, cheating, shortages, irregularities, etc.

(ii) Fraud reports should also be submitted in cases where central investigating agencies have initiated criminal proceedings suo moto and/or where the Bank has directed that they be reported as frauds.

(iii) Applicable NBFCs should also report frauds perpetrated in their subsidiaries and affiliates/joint ventures. Such frauds should, however, not be included in the report on outstanding frauds and the quarterly progress reports referred to in Paragraph (vi) below.

(iv) Where the amount involved in fraud is ₹ 1 crore and above, the reports in the prescribed format shall be sent within three weeks from the date of detection of the fraud to:

Central Fraud Monitoring Cell
Department of Banking Supervision,
Reserve Bank of India, 10/3/8, Nrupathunga Road,
P.B. No. 5467
Bengaluru – 560001

and to the Regional Office of the Department of Non Banking Supervision of the Bank under whose jurisdiction the Registered Office of the applicable NBFC falls.

(v) Where the amount involved in fraud is less than ₹ 1 crore, reports in the format given in FMR – 1 shall be sent to the Regional Office of the Department of Non Banking Supervision of the Bank under whose jurisdiction the Registered Office of the applicable NBFC falls, within three weeks (21 days) form the date of detection of the fraud.

(vi) Applicable NBFCs are advised to furnish case-wise quarterly progress reports on frauds involving ₹ 1 lakh and above in the format given in FMR – 3 only to Regional Office of the Bank, Department of Non-Banking Supervision under whose jurisdiction the Registered Office of the applicable NBFC falls within 15 days of the end of the quarter to which it relates.

(vii) Applicable NBFCs are permitted to close the fraud cases only where the actions are complete and prior approval is obtained from the respective Regional Offices of DNBS. The action would be considered complete when

  1. the fraud cases pending with CBI/Police/Court are finally disposed of;
  2. the examination of staff accountability has been completed;
  3. the amount of fraud has been recovered or written off;
  4. insurance claim wherever applicable has been settled; and
  5. the applicable NBFC has reviewed the systems and procedures, identified as the causative factors and plugged the lacunae and the fact of which has been certified by the appropriate authority (Board / Audit Committee of the Board).

(viii) Applicable NBFCs should pursue vigorously with CBI for final disposal of pending fraud cases especially where they have completed staff side action. All possible assistance should be extended by the applicable NBFCs to the Police/CBI/Court for investigation/trial and vigorous follow up with the police authorities and / or court for final disposal of fraud cases shall be undertaken by the applicable NBFCs.

For limited statistical / reporting purposes, applicable NBFCs are advised to close those fraud cases involving amounts upto ₹ 25.00 lakh, where:

(a) the investigation is on or challan / charge sheet not filed in the Court for more than three years from the date of filing of First Information Report (FIR) by the CBI / Police; or

(b) the trial in the courts, after filing of charge sheet / challan by CBI / Police, has not started, or is in progress.

2. Frauds committed by unscrupulous borrowers

(i) Frauds committed by unscrupulous borrowers including companies, partnership firms/proprietary concerns and/or their directors/partners by various methods including the following:

(a) Fraudulent discount of instruments;

(b) Fraudulent removal of pledged stocks/disposing of hypothecated stocks without the NBFC’s knowledge/inflating the value of stocks in the stock statement and drawing excess finance;

(c) Diversion of funds outside the borrowing units, lack of interest or criminal neglect on the part of borrowers, their partners, etc. and also due to managerial failure leading to the unit becoming sick and due to laxity in effective supervision over the operations in borrowal accounts on the part of the NBFC functionaries rendering the advance difficult of recovery;

(ii) In respect of frauds in borrowal accounts, additional information as prescribed under Part B of FMR – 1 should be furnished.

3. Frauds involving ₹ 1 crore and above

In respect of frauds involving ₹ 1 crore and above, in addition to the requirements given above, applicable NBFCs shall report the fraud by means of a D.O. letter addressed to the Chief General Manager-in-charge of the Department of Banking Supervision, Reserve Bank of India, Frauds Monitoring Cell, Central Office Bengaluru and a copy endorsed to the Chief General Manager-in-charge of the Department of Non-Banking Supervision, Reserve Bank of India, Central Office within a week of such frauds coming to the notice of the applicable NBFC. The letter shall contain brief particulars of the fraud such as amount involved, nature of fraud, modus operandi in brief, name of the branch/office, names of parties involved (if they are proprietorship/ partnership concerns or private limited companies, the names of proprietors, partners and directors), names of officials involved, and whether the complaint has been lodged with the Police. A copy of the D.O. letter should be endorsed to the Regional Office of the Bank, Department of Non-Banking Supervision under whose jurisdiction the Registered Office of the applicable NBFC is functioning.

4. Cases of attempted fraud

(a) All individual cases involving ₹ 25 lakh or more should be continued to be placed before the Audit Committee of applicable NBFC’s Board. The report containing attempted frauds which is to be placed before the Audit Committee of the Board should cover inter alia the following viz;

• The modus operandi of the attempted fraud;

• How the attempt did not materialize in the fraud or how the attempt failed / was foiled;

• The measures taken by the applicable NBFC to strengthen the existing systems and controls;

• New systems and controls put in place in the area where fraud was attempted;

• In addition to the above, yearly consolidated review of such cases detected during the year containing information regarding area of operations where such attempts were made, effectiveness of new process and procedures put in place during the year, trend of such cases during the last three years, need for further change in process and procedures, if any, etc. as on March 31 every year (starting from the year ending March 31, 2013) within three months of the end of the relative year.

Chapter – V

Quarterly Returns

1. Report on Frauds Outstanding

(i) Applicable NBFCs should submit a copy of the Quarterly Report on Frauds Outstanding in the format given in FMR – 2 to the Regional Office of the Bank , Department of Non-Banking Supervision under whose jurisdiction the Registered Office of the NBFC falls irrespective of amount within 15 days of the end of the quarter to which it relates.

(ii) Part ­­­– A of the report covers details of frauds outstanding as at the end of the quarter. Parts ­B and C of the report give category-wise and perpetrator-wise details of frauds reported during the quarter respectively. The total number and amount of fraud cases reported during the quarter as shown in Parts B and C should tally with the totals of columns 4 and 5 in Part – A of the report.

(iii) Applicable NBFCs should furnish a certificate, as part of the above report, to the effect that all individual fraud cases of ₹ 1 lakh and above reported to the Bank in FMR – 1 during the quarter have also been put up to the applicable NBFC’s Board and have been incorporated in Part – A (columns 4 and 5) and Parts B and C of FMR – 2.

2. Progress Report on Frauds

(i) Applicable NBFCs should furnish case-wise quarterly progress reports on frauds involving ₹ 1 lakh and above in the format given in FMR – 3 to the Central Office of the Department of Banking Supervision of the Bank, Fraud Monitoring Cell, Bengaluru where the amount involved in fraud is ₹ 1 crore and above and to Regional Office of the, Department of Non-Banking Supervision of the Bank under whose jurisdiction the Registered Office of the applicable NBFC falls where the fraud amount involved in fraud is less than ₹ 1 crore within 15 days of the end of the quarter to which it relates.

(ii) In the case of frauds where there are no developments during a quarter, a list of such cases with a brief description including name of branch and date of reporting shall be furnished in FMR – 3 as mentioned in item (i) above

Chapter – VI

Reports to the Board

1. Reporting of Frauds

(i) Applicable NBFCs should ensure that all frauds of ₹ 1 lakh and above are reported to their Boards promptly on their detection.

(ii) Such reports should, among other things, take note of the failure on the part of the concerned officials, and consider initiation of appropriate action against the officials responsible for the fraud.

2. Quarterly Review of Frauds

(i) Information relating to frauds for the quarters ending March, June and September shall be placed before the Board of Directors during the month following the quarter to which it pertains.

(ii) These should be accompanied by supplementary material analysing statistical information and details of each fraud so that the Board would have adequate material to contribute effectively in regard to the punitive or preventive aspects of frauds.

(iii) All the frauds involving an amount of ₹ 1 crore and above should be monitored and reviewed by the Audit Committee of the Board (ACB) of NBFCs. The periodicity of the meetings of the Committee may be decided according to the number of cases involved. However, the Committee should meet and review as and when a fraud involving an amount of ₹ 1 crore and above comes to light.

3. Annual Review of Frauds

(i) Applicable NBFCs should conduct an annual review of the frauds and place a note before the Board of Directors for information. The reviews for the year-ended December should be put up to the Board before the end of March the following year. Such reviews need not be sent to the Bank. These shall be preserved for verification by the Bank’s inspecting officers.

(ii) The main aspects which shall be taken into account while making such a review may include the following:

(a) Whether the systems in the NBFC are adequate to detect frauds, once they have taken place, within the shortest possible time;

(b) Whether frauds are examined from staff angle;

(c) Whether deterrent punishment is meted out, wherever warranted, to the persons found responsible;

(d) Whether frauds have taken place because of laxity in following the systems and procedures and, if so, whether effective action has been taken to ensure that the systems and procedures are scrupulously followed by the staff concerned;

(e) Whether frauds are reported to local Police, as the case may be, for investigation.

(iii) The annual reviews should also, among other things, include the following details:

(a) Total number of frauds detected during the year and the amount involved as compared to the previous two years;

(b) Analysis of frauds according to different categories detailed in Chapter IV and also the different business areas indicated in the Quarterly Report on Frauds Outstanding (vide FMR – 2);

(c) Modus operandi of major frauds reported during the year along with their present position;

(d) Detailed analyses of frauds of ₹ 1 lakh and above;

(e) Estimated loss to the NBFC during the year on account of frauds, amount recovered and provisions made;

(f) Number of cases (with amounts) where staff are involved and the action taken against staff;

(g) Time taken to detect frauds (number of cases detected within three months, six months and one year of their taking place);

(h) Position with regard to frauds reported to Police;

(i) Number of frauds where final action has been taken by the NBFC and cases disposed of;

(j) Preventive/punitive steps taken by the NBFC during the year to reduce/minimise the incidence of frauds;

(k) Timely reporting of frauds to the concerned authorities.

Chapter – VII

Guidelines for Reporting Frauds to Police

1. Guidelines for Reporting Frauds to Police

Applicable NBFCs should follow the following guidelines for reporting of frauds such as unauthorised credit facilities extended by the applicable NBFC for illegal gratification, negligence and cash shortages, cheating, forgery, etc. to the State Police authorities:

(a) In dealing with cases of fraud/embezzlement, applicable NBFCs should not merely be actuated by the necessity of recovering expeditiously the amount involved, but should also be motivated by public interest and the need for ensuring that the guilty persons do not go unpunished;

(b) Therefore, as a general rule, the following cases should invariably be referred to the State Police:

Cases of fraud involving an amount of ₹ 1 lakh and above, committed by outsiders on their own and/or with the connivance of applicable NBFCs staff/officers;

Cases of fraud committed by employees of applicable NBFCs, when it involves the NBFC funds exceeding ₹ 10,000/-.

Chapter VIII

Interpretations

For the purpose of giving effect to the provisions of these Directions, the Bank may, if it considers necessary, issue necessary clarifications in respect of any matter covered herein and the interpretation of any provision of these Directions given by the Bank shall be final and binding on all the parties concerned. Violation of these Directions shall invite penal action under the provisions of RBI Act. Further, these provisions shall be in addition to, and not in derogation of the provisions of any other laws, rules, regulations or Directions, for the time being in force.

Chapter IX

Repeal Provisions

1. With the issue of these directions, the instructions / guidelines contained in the circulars mentioned in the Appendix (below), issued by the Reserve Bank stand repealed.

2. All approvals / acknowledgements given under the above circulars shall be deemed as given under these directions.

3. All the repealed circulars are deemed to have been in force prior to the coming into effect of these directions.


Appendix

List of Circulars or part thereof repealed with the issuance of Master Direction

Sr No. Circular No Date
1 DNBS PD CC No. 121/03.10.42/2008-09 July 01, 2008
2 DNBS PD CC No. 127/03.10.42/2008-09 August 14, 2008
3 DNBS PD CC No. 149/03.10.42/2009-10 July 01, 2009
4 DNBS PD CC No. 182/03.10.42/2010-11 July 01, 2010
5 DNBS PD CC No. 127/03.10.42/2011-12 July 01, 2011
6 DNBS PD CC No. 256/03.10.42/2011-12 March 02, 2012
7 DNBS.PD.CC. No. 283/03.10.042/2012-13 July 02, 2013
8 DNBS.PD.CC. No. 314/03.10.042/2012-13 December 13, 2012
9 DNBS (PD).CC. No. 315/03.10.42/2012-13 December 13, 2012
10 DNBS(PD)CC.No. 329/03.10.42/2012-13 June 13, 2013
11 DNBS(PD)CC.No. 337/03.10.42/2013-14 July 01, 2013
12 DNBS(PD)CC.No. 385/03.10.42/2014-15 July 01, 2014
13 DNBR (PD) CC.No. 075/03.10.001/2015-16 February 18, 2016

1 non-banking financial company as defined in Section 45 I(f) of the Reserve Bank of India Act, 1934 (Act 2 of 1934) hereinafter referred to as non-banking financial company (NBFC).

2 Currently NBFC not accepting / holding public deposits and having total assets of Rs. 500 crore and above as shown in the last audited balance sheet;


Master Direction – Non-Banking Financial Companies Auditor’s Report (Reserve Bank) Directions, 2016

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RBI/DNBS/2016-17/48
Master Direction DNBS. PPD.03/66.15.001/2016-17

September 29, 2016

Master Direction – Non-Banking Financial Companies Auditor’s Report (Reserve Bank) Directions, 2016

In exercise of the powers conferred by sub-section (1A) of Section 45MA of the Reserve Bank of India Act, 1934 (Act 2 of 1934) and of all the powers enabling it in this behalf, and in supersession of the Non-Banking Financial Companies Auditor’s Report (Reserve Bank) Directions, 2008, the Reserve Bank of India (the Bank) hereby issues Non-Banking Financial Companies Auditor’s Report (Reserve Bank) Directions, 2016 (the Directions) to every auditor of every non-banking financial companies.


Index
Chapter I – Preliminary
Chapter II – Auditors to submit additional Report to the Board of Directors
Chapter III – Auditors to submit Exception Report to the Bank
Chapter IV – Repeal Provisions

Chapter – I

Preliminary

1. Short Title and Commencement.

a) These Directions shall be called Non-Banking Financial Companies Auditor’s Report (Reserve Bank) Directions, 2016.

b) These directions shall come into force with immediate effect.

2. Applicability

The Directions shall apply to every auditor of a non-banking financial company as defined in section 45 I(f) of the Reserve Bank of India Act, 1934 (the RBI Act) hereinafter called as ‘non-banking financial company’.

Chapter- II

Auditors to submit additional Report to the Board of Directors

In addition to the Report made by the auditor under Section 143 of the Companies Act, 2013 or section 227 of the Companies Act, 1956 (Act 1 of 1956) on the accounts of a non-banking financial company examined for every financial year ending on any day on or after the commencement of these Directions, the auditor shall also make a separate report to the Board of Directors of the Company on the matters specified in paragraphs 3 and 4 below.

3. Material to be included in the Auditor’s report to the Board of Directors

The auditor’s report on the accounts of a non-banking financial company shall include a statement on the following matters, namely: –

(A) In the case of all Non-Banking Financial Companies

I. Conducting Non-Banking Financial Activity without a valid Certificate of Registration (CoR) granted by the Bank is an offence under chapter V of the RBI Act, 1934. Therefore, if the company is engaged in the business of non-banking financial institution as defined in section 45-I (a) of the RBI Act and meeting the Principal Business Criteria (Financial asset/income pattern) as laid down vide the Bank’s press release dated April 08, 1999, and directions1 issued by DNBR, auditor shall examine whether the company has obtained a Certificate of Registration (CoR) from the Bank.

II. In case of a company holding CoR issued by the Bank, whether that company is entitled to continue to hold such CoR in terms of its Principal Business Criteria (Financial asset/income pattern) as on March 31 of the applicable year.

III. Whether the non-banking financial company is meeting the required net owned fund requirement as laid down in Master Direction – Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016 and Master Direction – Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016

Note: Every non-banking financial company shall submit a Certificate from its Statutory Auditor that it is engaged in the business of non-banking financial institution requiring it to hold a Certificate of Registration under Section 45-IA of the RBI Act and is eligible to hold it. A certificate from the Statutory Auditor in this regard with reference to the position of the company as at end of the financial year ended March 31 may be submitted to the Regional Office of the Department of Non-Banking Supervision under whose jurisdiction the non-banking financial company is registered, within one month from the date of finalization of the balance sheet and in any case not later than December 30th of that year. The format of Statutory Auditor’s Certificate (SAC) to be submitted by NBFCs has been issued vide DNBS. PPD.02/66.15.001/2016-17 Master Direction- Non-Banking Financial Company Returns (Reserve Bank) Directions, 2016.

(B) In the case of a non-banking financial companies accepting/holding public deposits

Apart from the matters enumerated in (A) above, the auditor shall include a statement on the following matters, namely:-

(i) Whether the public deposits accepted by the company together with other borrowings indicated below viz.

(a) from public by issue of unsecured non-convertible debentures/bonds;

(b) from its shareholders (if it is a public limited company); and

(c) which are not excluded from the definition of ‘public deposit’ in the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016, are within the limits admissible to the company as per the provisions of the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016;

(ii) Whether the public deposits held by the company in excess of the quantum of such deposits permissible to it under the provisions of Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016 are regularised in the manner provided in the said Directions;

(iii) Whether the non banking financial company is accepting “public deposit” without minimum investment grade credit rating from an approved credit rating agency as per the provisions of Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016.

(iv) Whether the capital adequacy ratio as disclosed in the return submitted to the Bank in terms of the Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 has been correctly determined and whether such ratio is in compliance with the minimum CRAR prescribed therein;

(v) In respect of non-banking financial companies referred to in clause (iii) above,

(a) whether the credit rating, for each of the fixed deposits schemes that has been assigned by one of the Credit Rating Agencies listed in Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016 is in force; and

(b) whether the aggregate amount of deposits outstanding as at any point during the year has exceeded the limit specified by the such Credit Rating Agency;

(vi) Whether the company has violated any restriction on acceptance of public deposit as provided in Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016.

(vii) Whether the company has defaulted in paying to its depositors the interest and /or principal amount of the deposits after such interest and/or principal became due;

(viii) Whether the company has complied with the prudential norms on income recognition, accounting standards, asset classification, provisioning for bad and doubtful debts, and concentration of credit/investments as specified in the Directions issued by the Bank in terms of the Master Direction – Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016

(ix) Whether the company has complied with the liquid assets requirement as prescribed by the Bank in exercise of powers under section 45-IB of the RBI Act and whether the details of the designated bank in which the approved securities are held is communicated to the office concerned of the Bank in terms of NBS 3; Non-Banking Financial Company Returns (Reserve Bank) Directions, 2016

(x) Whether the company has furnished to the Bank within the stipulated period the return on deposits as specified in the NBS 1 to – Non- Banking Financial Company Returns (Reserve Bank) Directions, 2016

(xi) Whether the company has furnished to the Bank within the stipulated period the quarterly return on prudential norms as specified in the Non-Banking Financial Company Returns (Reserve Bank) Directions, 2016

(xii) Whether, in the case of opening of new branches or offices to collect deposits or in the case of closure of existing branches/offices or in the case of appointment of agent, the company has complied with the requirements contained in the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016.

(C) In the case of a non-banking financial company not accepting public deposits

Apart from the aspects enumerated in (A) above, the auditor shall include a statement on the following matters, namely: –

(i) Whether the Board of Directors has passed a resolution for non- acceptance of any public deposits;

(ii) Whether the company has accepted any public deposits during the relevant period/year.

(iii) Whether the company has complied with the prudential norms relating to income recognition, accounting standards, asset classification and provisioning for bad and doubtful debts as applicable to it in terms of Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016 and Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016;

(iv) In respect of Systemically Important Non-deposit taking NBFCs as defined in Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016:

(a) Whether the capital adequacy ratio as disclosed in the return submitted to the Bank in form NBS- 7, has been correctly arrived at and whether such ratio is in compliance with the minimum CRAR prescribed by the Bank;

(b) Whether the company has furnished to the Bank the annual statement of capital funds, risk assets/exposures and risk asset ratio (NBS-7) within the stipulated period.

(v) whether the non banking financial company has been correctly classified as NBFC Micro Finance Institutions (MFI) as defined in the Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016 and Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016

(D) In the case of a company engaged in the business of non-banking financial institution not required to hold CoR subject to certain conditions

Apart from the matters enumerated in (A)(I) above where a company has obtained a specific advice from the Bank that it is not required to hold CoR from the Bank, the auditor shall include a statement that the company is complying with the conditions stipulated as advised by the Bank.

4. Reasons to be stated for unfavourable or qualified statements

Where, in the auditor’s report, the statement regarding any of the items referred to in paragraph 3 above is unfavourable or qualified, the auditor’s report shall also state the reasons for such unfavourable or qualified statement, as the case may be. Where the auditor is unable to express any opinion on any of the items referred to in paragraph 3 above, his report shall indicate such fact together with reasons therefor.

Chapter- III

Auditors to submit Exception Report to the Bank

5. Obligation of auditor to submit an exception report to the Bank

(I) Where, in the case of a non-banking financial company, the statement regarding any of the items referred to in paragraph 3 above, is unfavorable or qualified, or in the opinion of the auditor the company has not complied with:

(a) the provisions of Chapter III B of RBI Act (Act 2 of 1934); or

(b) Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016; or

(c) Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016 and Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016

It shall be the obligation of the auditor to make a report containing the details of such unfavourable or qualified statements and/or about the non-compliance, as the case may be, in respect of the company to the concerned Regional Office of the Department of Non-Banking Supervision of the Bank under whose jurisdiction the registered office of the company is located as per first Schedule to the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016.

(II) The duty of the Auditor under sub-paragraph (I) shall be to report only the contraventions of the provisions of RBI Act, 1934, and Directions, Guidelines, instructions referred to in sub-paragraph (1) and such report shall not contain any statement with respect to compliance of any of those provisions

Chapter IV

Repeal Provisions

6. With the issue of the directions, the instructions / guidelines contained in the circular mentioned in the Appendix, issued by the Bank stand repealed.

7. All approvals / acknowledgements given under the circular mentioned hereinafter shall be deemed as given under the directions.

8. The repealed circular as mentioned hereinafter is deemed to have been in force prior to the coming into effect of these directions.


Appendix

List of Circulars or part thereof repealed with the issuance of Master Direction

Sr. No. Circular No. and Date Subject
1 DNBS (PD)201/DG(VL)/2008 dated September 18, 2008 Non-Banking Financial Companies Auditor’s Report (Reserve Bank) Directions, 2008”

1 Master Direction – Para 69 of Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016 and Para 82 of Master Direction – Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016

Master Direction- Non-Banking Financial Company Returns (Reserve Bank) Directions, 2016

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RBI/DNBS/2016-17/47
Master Direction DNBS.PPD.02/66.15.001/2016-17

September 29, 2016

NOTIFICATION

Master Direction- Non-Banking Financial Company Returns (Reserve Bank) Directions, 2016

In exercise of the powers conferred by sections 45 JA, 45K, 45L and 45M of the Reserve Bank of India Act, 1934 (hereinafter referred to as the RBI Act), and of all the powers enabling it in this behalf, the Reserve Bank of India (hereinafter referred to as the Bank) being satisfied that it is necessary and expedient in the public interest and being satisfied that for the purpose of enabling the Bank to regulate the credit system to the advantage of the country to do so, and in supersession of the Master Circular on returns submitted by the NBFCs, hereby, issues Non-Banking Financial Company Returns (Reserve Bank) Directions, 2016 (the Directions) hereinafter specified.


Index

Chapter I – Preliminary
Chapter II – Introduction
Chapter III – Returns to be submitted by NBFCs
Chapter IV – Reporting by Miscellaneous Non-Banking Company
Chapter V – Interpretations
Chapter VI – Repeal Provisions
Annex
Annex I – Format of Statutory Auditors’ Certificate (SAC)
Annex II – Format of Quarterly Return to be submitted by NBFCs having overseas Investment
Annex III – Format of Half-yearly Statement of Interest Rate Futures transactions for the purpose of hedging by NBFCs

Chapter – I
Preliminary

1 Short Title and Commencement.

  1. These Directions shall be called Non-Banking Financial Company Returns (Reserve Bank) Directions, 2016.
  2. These directions shall come into force with immediate effect.

Chapter – II
Introduction

1. All the NBFCs shall put in place a reporting system for filing various returns within the prescribed timeframe.

2. Submission of return should not be delayed for any reason such as the finalization/completion of the Audit of the annual accounts.

3. The compilation of the Return should be on the basis of the figures available in the books of account of the company.

4. The returns shall be filed on-line by an authorised official of the NBFC, who will be specifically authorised in this regard by the Board of Directors.

5. The NBFCs shall strictly adhere to the timeframe fixed in this direction for submitting returns to the Bank failing which concerned NBFCs would be liable for penal action as prescribed under the provisions of Chapter V of the RBI Act.

6. It may be carefully noted that in case the information/particulars furnished by a NBFCs is found incorrect, Reserve Bank of India would take a serious view in the matter.

Chapter – III
Returns to be submitted by NBFCs

The Non Banking Financial Companies (NBFCs) are required to submit various returns to the Bank w.r.t their deposit acceptance, prudential norms compliance, ALM etc. The lists of such returns to be submitted by the NBFCs are as under:

1. NBS-1 Return (on Financial Indicators by deposit taking NBFCs):

With reference to Master Direction – Non Banking Financial Company – Systemically Important – Non Deposit taking and Deposit taking Company (Reserve Bank) Direction 2016, all NBFCs accepting/holding public deposits are required to submit NBS-1 return on a quarterly basis.

Purpose: -To capture financial details, viz. components of Assets and Liabilities, Profit and Loss account, Exposure to sensitive sectors etc.

2. NBS-2 Return (on Prudential Norms by deposit taking NBFCs):

With reference to Master Direction – Non Banking Financial Company – Systemically Important Non Deposit taking and Deposit taking Company (Reserve Bank) Direction 2016, all NBFCs accepting/holding public deposits are required to submit NBS-2 return on a quarterly basis.

Purpose:- To capture compliance with various prudential norms, e.g. Capital Adequacy, Asset Classification, Provisioning, NOF etc.

3. NBS-3 Return (on Liquid Assets by deposit taking NBFCs):

With reference to the provisions of section 45IB (2) of the RBI Act, all NBFCs accepting/holding public deposits are required to submit NBS-3 return on a quarterly basis.

Purpose: – To capture details of Statutory Investments in Liquid Assets (Central/State Government Securities, Fixed Deposits in Scheduled Commercial Bank etc.)

4. NBS-4 Return (on status of public deposits by NBFCs whose CoR is rejected by the Bank):

To be submitted by NBFCs accepting/holding public deposits on an annual basis, whose CoR has been rejected by the Bank.

Purpose:- To know the repayment status of public deposits of rejected NBFCs- D this return is being called for.

5. Asset-Liability Management (ALM) Return (for deposit taking NBFCs):

To be submitted by NBFCs accepting/holding Public Deposits with asset base of ₹ 100 crore & more, or holding public deposits of ₹ 20 crore or more (irrespective of their asset size), as per their latest audited balance sheet as of 31st March. The periodicity of the Asset-Liability Management Return shall be half-yearly.

Purpose: -To address concerns regarding Asset Liability mismatches and interest rate risk exposures, an ALM System was introduced for the deposit taking NBFCs as part of their overall system for effective risk management.

6. NDSI_500cr return (on Important Financial Parameters):

With reference to Master Direction – Non Banking Financial Company – Systemically Important Non Deposit taking and Deposit taking Company (Reserve Bank) Direction 2016, all NBFCs-ND-SI are required to submit NDSI 500cr return on a quarterly basis.

Purpose: – To capture financial details, viz. components of Assets and Liabilities, Profit and Loss account, Exposure to sensitive sectors, sectoral deployment of credit etc.

7. NBS-7 (on Prudential Norms by NBFCs-ND-SI):

With reference to Master Direction – Non Banking Financial Company – Systemically Important Non Deposit taking and Deposit taking Company (Reserve Bank) Direction 2016, all NBFCs-ND-SI are required to submit NBS-7 return on a quarterly basis.

Purpose: – To capture compliance with various prudential norms, e.g. Capital Adequacy, Asset Classification, Provisioning, NOF etc.

8. Asset-Liability Management (ALM) Returns (for NBFCs-ND-SI):

Multiple Returns are to be submitted by NBFCs-ND-SI at various intervals as given below:

a. Statement of short term dynamic liquidity [NBS-ALM1] – Quarterly
b. Statement of structural liquidity [NBS-ALM2] – Half Yearly
c. Statement of Interest Rate Sensitivity [NBS-ALM3] – Half Yearly
d. Statement on Assets Liability Mismatch [ALM-YRLY] – Annually

Purpose: – To address concerns regarding Asset Liability mismatches and interest rate risk, an ALM System was introduced for the NBFC-ND-SI as part of their overall system for effective risk management.

9. Statutory Auditors Certificate (SAC):

Every NBFC shall submit a Certificate from its Statutory Auditor every year to the effect that it is engaged in the business of non-banking financial institution requiring it to hold a Certificate of Registration granted under section 45-IA of the RBI Act.

With a view to ensure consistency in the manner in which the information is received from the Auditors, a uniform format of the SAC has been prescribed. The NBFC would need to fill in the information, as applicable, in COSMOS. Thereafter, the SAC needs to be scanned and uploaded in COSMOS under the menu “Upload Report”. The format of the SAC is given in Annex 1.

Purpose: To ensure continued regulatory compliance.

10. Branch Information Return (for NBFC-D &NBFC-ND-SI):

To be submitted by NBFCs-ND-SI and NBFCs accepting/holding public deposits, on a quarterly basis.

Purpose: To capture the reach and geographical spread of NBFCs.

11. Certificate on compliance with FDI norms:

The NBFCs having Foreign Direct Investment are required to submit a Certificate from their Statutory Auditor on a half-yearly basis certifying compliance with the existing terms and conditions of FDI, to the Regional Office in whose jurisdiction the registered office of the company is located.

Purpose: To capture compliance with the stipulated minimum capitalization norms and that its activities are restricted to the activities prescribed under FEMA.

12. Overseas Investment Return:

The NBFCs (both deposit taking and non-deposit taking) having overseas investment are required to submit the Overseas Investment Return on a quarterly basis to the Regional Office in whose jurisdiction the registered office of the company is located, and also to the Department of Statistics and Information Management (DSIM), Central Office, Mumbai. The format of the Overseas Investment Return is given in Annex 2.

In addition to the above, an annual certificate from statutory auditors shall be submitted by the NBFCs to the concerned Regional Office of the Bank, certifying that it has fully complied with all the conditions stipulated under Master Direction – Non Banking Financial Company – Systemically Important Non Deposit taking and Deposit taking Company (Reserve Bank) Direction 2016.

Purpose: To capture details on overseas investment by NBFCs.

13. ARC Return:

To be submitted by Asset Reconstruction Companies registered with the Bank on a quarterly basis.

Purpose: To capture financial parameters and various operational details e.g. assets (NPA) acquired, acquisition cost, their recovery status etc.

14. NBS-8 Return (on Financial Indicators by NBFCs with asset size between ₹ 100 crore and ₹ 500 crore):

To be submitted by NBFCs (non-deposit taking) with assets size between ₹ 100 crore to ₹ 500 crore on an annual basis.

Purpose: – To capture profile information and financial details, viz. components of Assets and Liabilities, Profit and Loss account, Exposure to sensitive sectors, Branch Information etc.

15. NBS-9 Return (on Financial Indicators by NBFCs with asset size below ₹ 100 crore):

To be submitted by NBFCs (non-deposit taking) with assets size below ₹ 100 crore on an annual basis.

Purpose: – To capture profile information and financial details, viz. components of Assets and Liabilities, Profit and Loss account, Branch Information etc.

16. NBS-1A & NBS-3A Returns (on Financial Indicators by RNBCs)

To be submitted by Residuary Non-Banking Companies (RNBCs) on a quarterly basis.

Purpose: – To capture financial details, viz. components of Assets and Liabilities, Profit and Loss account, Exposure to sensitive sectors, Statutory Investments in Liquid Assets etc.

17. CRILC & SMA-2 Return (on early Recognition of Stress on large accounts)

All NBFCs-ND-SI, NBFCs-D and NBFC-Factors are required to report the CRILC return on a quarterly basis online through XBRL application (https://125.18.33.234/orfsxbrl/customer/index.jsp). The data includes credit information on all the borrowers having aggregate fund-based and non-fund based exposure of ₹ 5 crore and above with them and the SMA status of the borrower. It may be noted that there is no need to submit ‘Nil’ returns.

Further, the concerned NBFCs are required to report all the SMA-2 accounts (as defined in the Master Direction – Non Banking Financial Company – Systemically Important Non Deposit taking and Deposit taking Company (Reserve Bank) Direction, 2016) on the Friday of the week when the relevant account first came in SMA-2 category. If Friday happens to be a holiday, they will report the same on the preceding working day of the week.

Purpose: To facilitate early Recognition of Financial Distress, Prompt Steps for Resolution and Fair Recovery for Lenders.

18. Statement on Interest Rate Futures transaction

NBFCs participating in IRF exchanges for hedging their underlying exposures are required to submit the half yearly statement, in the format given in Annex-3, to the Regional office of the Department of Non-Banking Supervision in whose jurisdiction their company is registered, within a period of one month from the close of the half year.

Purpose: To know the extent of participation of NBFCs in Interest rate Future market.

Note: The Bank has hosted the formats of returns viz., NBS-1, NBS-2, NBS-3, NBS1A, NBS3A, NBS-7, NBS-8, NBS-9, ALM return, Branch Information return, SCRC return, Statutory Auditor Certificate on the Bank’s website, viz, https://cosmos.rbi.org.in. Concerned NBFCs are required to file the specified returns online through COSMOS application.

NBFCs-D -> Deposit taking Non-Banking Financial Companies (NBFCs);

NBFCs-ND->Non-Deposit taking NBFCs NBFCs- ND-SI -> Individual Non-Banking Financial Companies (NBFCs) not accepting/holding public deposits and having asset sizes of ₹ 500 crore and above (also termed as Systemically Important NBFCs or in short NBFCs-ND-SI) RNBCs ->Residuary Non Banking Companies

The details of returns and their periodicity across distinct categories of NBFCs are consolidated in the following table.

A. Details of returns to be submitted by NBFCs-D:-

Sr. Name of the Return Periodi-city Reference Date Reporting Time Due on Remarks
1 NBS1 Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
15 days 15th April/
15th July/
15th Oct./
15th Jan.
2 NBS2 Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
15 days 15th April/
15th July/
15th Oct./
15th Jan.
3 NBS3 Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
15 days 15th April/
15th July/
15th Oct./
15th Jan.
4 ALM (NBFC-D) Half yearly 31st March/
30th Sept.
30 days 30th April/
30th Oct.
NBFCs-D having public deposit of > ₹ 20 crore Or asset size of> ₹ 100 crore
5 Branch Information return Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
15 days 15th April/
15th July/
15th Oct./
15th Jan.
6 Statutory Auditor Certificate Annual 31st March One month from the date of finalisation of Balance Sheet Not later than 31st December
7 Reporting to Central Repository of Information on Large Credits (CRILC) Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
21 days 21st April/
21st July/
21st Oct/
21st Jan
8 Reporting of Special Mention Account status (SMA-2 return) Weekly On Every Friday
9 Statutory Auditor Certificate Annual 31st March One month from the date of finalisation of Balance Sheet. Not later than 31st December.

B. Details of returns to be submitted by NBFC-ND-SI:-

Sr. No Name of the Return Periodicity Reference Date Reporting Time Due on
1 NBS7 Quarterly 31st March/
30th June/
30th Sept/
31st Dec.
15 days 15th April/
15th July/
15th Oct./
15th Jan.
2 NBFCs-ND-SI 500cr Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
15 days 15th April/
15th July/
15th Oct./
15th Jan.
3 ALM-1 Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
15 days 15th April/
15th July/
15th Oct./
15th Jan.
4 ALM-2 & 3 Half yearly 31st March/
30th Sept.
30 days 30th April/
30th Oct.
5 ALM-(NBFC-ND-SI) Annual 31st March 15 days 15th April
6 Branch Info return Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
15 days 15th April/
15th July/
15th Oct./
15th Jan.
7 Reporting to Central Repository of Information on Large Credits (CRILC) Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
21 days 21st April/
21st July/
21st Oct/
21st Jan
8 Reporting of Special Mention Account status (SMA-2 return) Weekly On Every Friday
9 Statutory Auditor Certificate Annual 31st March One month from the date of finalisation of Balance Sheet. Not later than 31st December.

C. Details of returns to be submitted by NBFC-ARC:-

Sr. No Name of the Return Periodicity Reference Date Reporting Time Due on
1 ARC Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
15 days 15th April/
15th July/
15th Oct./
15th Jan.
2 Statutory Auditor Certificate Annual 31st March One month from the date of finalisation of Balance Sheet. Not later than 31st December.

D. Details of returns to be submitted by NBFC-ND-having asset size of ₹ 100 crore – ₹ 500 crore

Sr No Name of the Return Periodicity Reference Date Reporting Time Due on
1 NBS-9 Annual 31st March 60 days 30th May
2 Statutory Auditor Certificate Annual 31st March One month from the date of finalisation of Balance Sheet. Not later than 31st December.

E. Details of returns to be submitted by NBFC-ND-having asset size below ₹ 100 crore

Sr No Name of the Return Periodicity Reference Date Reporting Time Due on
1 NBS-8 Annual 31st March 60 days 30th May
2 Statutory Auditor Certificate Annual 31st March One month from the date of finalisation of Balance Sheet. Not later than 31st December.

F. Details of returns to be submitted by RNBCs

Sr No Name of the Return Periodicity Reference Date Reporting Time Due on
1 NBS1A Annual 31st March 6 months 30th Sept
2 NBS3A Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
15 days 15th April/
15th July/
15th Oct./
15th Jan.
3 Statutory Auditor Certificate Annual 31st March One month from the date of finalisation of Balance Sheet. Not later than 31st December.

G. Other Returns by concerned NBFCs

Sr No Name of the Return Periodicity Reference Date Reporting Time Due on
1 Return on FDI Half yearly 31st March/
30th Sept.
30 days 30th April/
30th Oct.
2 Overseas Investments Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
Within 15 days 15th April/
15th July/
15th Oct./
15th Jan.

Chapter IV
Reporting of Miscellaneous Non-Banking Company

1. Every miscellaneous non-banking company shall deliver to the Reserve Bank an audited balance sheet as on the last date of each financial year and an audited profit and loss account in respect of that year as passed by the company in general meeting together with a copy of the report of the Board of Directors laid before the company in such meeting in terms of section 217(1) of the Companies Act, 1956 (1 of 1956) within fifteen days of such meeting.

2. Without prejudice to the provisions of above paragraph, every miscellaneous non-banking company [holding or accepting deposits] shall submit to the Reserve Bank an annual return furnishing the information specified in the format given.

The format of return is available on https://www.rbi.org.in/Scripts/BS_ViewNBFCForms.aspx

3. (i) Every miscellaneous non-banking company shall, not later than one month from the coming into force of these directions or from the commencement of business, whichever is later, deliver to the Reserve Bank, a written statement containing a list of:-

(a) the names and the official designations of its principal officers;

(b) the names and residential addresses of the directors of the company; and

(c) the specimen signature of the officers authorised to sign on behalf of the company, returns specified in sub-paragraph (1)

(ii) any change in the list referred to in clause (i) of this sub-paragraph shall be intimated to the Reserve Bank within one month from the occurrence of such change.

4. Any balance sheet, returns or information required to be submitted or furnished to the Reserve Bank in pursuance of these directions shall be submitted or furnished to the Regional Office of the [Department of Non Banking Supervision] of the Reserve Bank within whose jurisdiction the registered office of the company is located.

Chapter V
Interpretation

For the purpose of giving effect to the provisions of the Directions, the Bank may, if it considers necessary, issue necessary clarifications in respect of any matter covered herein and the interpretation of any provision of the Directions given by the Bank shall be final and binding on all the parties concerned. Violation of these Directions shall invite penal action under the provisions of RBI Act. Further, these provisions shall be in addition to, and not in derogation of the provisions of any other laws, rules, regulations or directions, for the time being in force

Chapter VI
Repeal Provisions

1. With the issuance of this directions, the instructions / guidelines contained in the circulars mentioned in the Appendix (below), issued by the Bank stand repealed.

2. All approvals / acknowledgements given under the above circulars shall be deemed as given under the directions.

3. All the repealed circulars are deemed to have been in force prior to the coming into effect of these directions.


Appendix

List of Circulars or part thereof repealed with the issuance of Master Direction.

Name of the Return Circulars & Notifications No.
NBS1 CC NO.243 dated September 22, 2011 & Notification No.DFC.118/DG (SPT)-98 dated January 31, 1998
NBS2 CC NO.243 dated September 22, 2011 & Notification No. DNBS. 192/DG (VL)-2007 dated February 22, 2007
NBS3 Notification No DFC(COC) No.108.ED(JRP)/97 dated April 30, 1997
NBS7 CC NO.243 dated September 22, 2011 & DNBS.PD/CC.No. 93/03.05.002/2006-07 dated April 27, 2007
ALM (NBFC-D) DNBS (PD).CC.No.15/02.01/2000-2001 dated June 27, 2001
NBFCs-ND-SI 500cr DNBS(RID)C.C.No.57/02.05.15/2005-06 dated September 6, 2005
ARC DNBS(PD).CC.No.34/SCRC/26.03.001/2013 dated December 31, 2013
ALM-1 Notification No.DNBS.200/CGM(PK)-2008 dated August 1, 2008
ALM-2 & 3
ALM(NBFC-ND-SI)
NBS-8 DNBS (IT).CC.No.02/24.01.191/2015-16 dated July 09, 2016
NBS-9 DNBS (IT).CC.No.02/24.01.191/2015-16 dated July 09, 2016
Branch Info return Notification No.DNBS.(PD): 262/2013-14 dated September 3, 2013
NBS1A CC NO.243 dated September 22, 2011 & Notification No.DFC.118/DG(SPT)-98 dated January 31, 1998
NBS3A Notification No DFC(COC) No.108.ED(JRP)/97 dated April 30, 1997
Statuary auditor certificate DNBS(PD)C.C.No.79/03.05.002/2006-07 September 21, 2006 andDNBS(PD)C.C.No.81/03.05.002/2006-07 dated October 19, 2006
Return on FDI DNBS(PD).CC.No 167/03.10.01/2009-10 dated February 04, 2010
Reporting to Central Repository of Information on Large Credits (CRILC) DNBS(PD) CC.No.371/03.05.02/2013-14 dated March 21, 2014
Reporting of Special Mention Account status
Overseas investment. Notification No. DNBS.(PD)229/CGM(US)-2011 dated June 14, 2011

Annex-1

Format of Statutory Auditors’ Certificate (SAC)
(On the letter head of the Statutory Auditors of the company)

We have examined the books of accounts and other records of ——————– (Name of company) for the Financial Year ending March 31, 20…… On the basis of the information submitted to us, we certify the following:

(Write NA whichever is Not applicable)

Sl. Particulars Details
1 Name of the company
2 Certificate of Registration No.
3 Registered office Address
4 Corporate office Address
5 The company has been classified by RBI as :
(Investment Company/Loan Company/AFC/NBFC-MFI/ NBFC- Factor/ IFC/ IDF- NBFC)
6 Net Owned Fund  (in Rs. Crore)
(Calculation of the same is given in the Annex)
7 Total Assets (in Rs. Crore)
8 Asset-Income pattern:
(in terms of RBI Press Release 1998-99/1269 dated April 8, 1999)
a) % of Financial Assets to Total Assets
b) % of Financial Income to Gross Income
(NBFC-Factor / NBFC-MFI / AFC / IFC may also report separately below)
9 Whether the company was holding any Public Deposits, as on March 31, ____?
If Yes, the amount in Rs. Crore
(Yes/No)
10. Has the company transferred a sum not less than 20% of its Net Profit for the year to Reserve Fund?
(in terms of Sec 45-IC of the RBI Act, 1934).
(Yes/No/NA)
11 Has the company received any FDI?
If Yes, did the company comply with the minimum capitalization norms for the FDI?
(Yes/No)
12 If the company is classified as an NBFC-Factor;
a) % of Factoring Assets to Total Assets
b) % of Factoring Income to Gross Income
13 If the company is classified as an NBFC-MFI;
% of Qualifying Assets to Net Assets
(refer to Notification DNBS.PD.No.234 CGM (US) 2011 dated December 02, 2011)
14 If the company is classified as an AFC;
a) % of Advances given for creation of physical/real assets supporting economic activity to Total Assets
b) % of income generated out of these assets to Total Income
15 If the company is classified as an NBFC-IFC
% of Infrastructure Loans to Total Assets
16 Has there been any takeover/acquisition of control/ change in shareholding/ Management during the year which required prior approval from RBI?
(please refer to Master Directions issued by DNBR
i) Master Direction – Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions ; and
ii) Master Direction – Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions.)
(Yes/No)
If yes, please specify.

In terms of Chapter II of the Master Direction- Non Banking financial Companies Auditor’s Report (Reserve bank) Directions, 2016, a separate report to the Board of Directors of the company has been prepared.

I have read and understood Chapter III of the Master Direction- Non Banking financial Companies Auditor’s Report (Reserve bank) Directions, 2016.

Signature and Stamp of the Statutory Auditor:

Date: ____________

Place: ___________


Annex-2

Quarterly Return to be submitted by NBFCs having overseas Investment –
March 31st / June 30th / September 30th / December 31st

Sr. No. Name of the WOS / JV (for JV, indicate names of partners) Country and date of incorporation Date of NoC from DNBS Business undertaken

 

Sr. no. Parameters at end of period
a) CRAR :
b) NoF :
c) Net Profit of the NBFC as per the last audited balance sheet :
d) Amount of remittance made to the WOS / JV during the quarter :
Name of the WOS / JV Amount remitted
e) Cumulative investment (equity / fund based commitment) in the WOS / JV at the end of the quarter (amount and as percentage of owned funds of the NBFC) :
Name of the WOS / JV Amount remitted and as % of owned funds including step down subsidiaries if any
f) Aggregate overseas investment of the NBFC as percentage of NoF of the NBFC :
h) Whether the overseas WOS / JV is regulated in the host country. If yes :
Name of the regulator Any regulatory visits made during the reporting period Concerns expressed by the regulator Any regulatory changes during the period which would impact the business of the subsidiary Fines / penalties levied by the overseas regulator, if any
j) Nature of support extended to the JV / WOS by the parent NBFC during the quarter including Guarantee, Letter of Comfort (Also mention whether any other kind of support were given including technical knowledge) :
Name of the WOS / JV Nature of support
k) Returns obtained from the WOS / JV during the quarter
Name of the WOS / JV Returns obtained
l) Financial details of JV / WOS
Name of the WOS / JV Net profit Asset size (Details of significant items of assets and liabilities may be attached)

Annex-3

Interest Rate futures transactions for the purpose of hedging by NBFCs – Statement for the Half-year ended……….

Name of the NBFC:

Interest Rate Futures No. of transactions Notional principal amount in Rs
Short
Long

Authorised signatory

Aadhaar-based Authentication for Card Present Transactions

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RBI/2016-17/70
DPSS.CO.PD No.892/02.14.003/2016-17

September 29, 2016

The Chairman and Managing Director / Chief Executive Officers
All Scheduled Commercial Banks including RRBs / Urban Co-operative Banks /
State Co-operative Banks / District Central Co-operative Banks/
Authorised Card Payment Networks / White Label ATM Operators /
Payments Banks / Small Finance Banks

Dear Madam / Sir,

Aadhaar-based Authentication for Card Present Transactions

A reference is invited to our circular dated November 26, 2013 on Security and Risk Mitigation Measures for Card Present Transactions wherein the banks were advised that all new card present infrastructure has to be enabled for both EMV Chip and PIN and Aadhaar (biometric validation) acceptance.

2. With the substantial increase in number of Aadhaar card holders in the country, we reiterate our above mentioned instructions and advise banks to ensure that all new card acceptance infrastructure deployed with effect from January 1, 2017 are enabled for processing payment transactions using Aadhaar-based biometric authentication also.

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

4. Please acknowledge the receipt of this circular.

Yours faithfully,

(Nanda S. Dave)
Chief General Manager

Master Direction- Non-Banking Financial Company Returns (Reserve Bank) Directions, 2016

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RBI/DNBS/2016-17/47
Master Direction DNBS.PPD.02/66.15.001/2016-17

September 29, 2016

NOTIFICATION

Master Direction- Non-Banking Financial Company Returns (Reserve Bank) Directions, 2016

In exercise of the powers conferred by sections 45 JA, 45K, 45L and 45M of the Reserve Bank of India Act, 1934 (hereinafter referred to as the RBI Act), and of all the powers enabling it in this behalf, the Reserve Bank of India (hereinafter referred to as the Bank) being satisfied that it is necessary and expedient in the public interest and being satisfied that for the purpose of enabling the Bank to regulate the credit system to the advantage of the country to do so, and in supersession of the Master Circular on returns submitted by the NBFCs, hereby, issues Non-Banking Financial Company Returns (Reserve Bank) Directions, 2016 (the Directions) hereinafter specified.


Index

Chapter I – Preliminary
Chapter II – Introduction
Chapter III – Returns to be submitted by NBFCs
Chapter IV – Reporting by Miscellaneous Non-Banking Company
Chapter V – Interpretations
Chapter VI – Repeal Provisions
Annex
Annex I – Format of Statutory Auditors’ Certificate (SAC)
Annex II – Format of Quarterly Return to be submitted by NBFCs having overseas Investment
Annex III – Format of Half-yearly Statement of Interest Rate Futures transactions for the purpose of hedging by NBFCs

Chapter – I
Preliminary

1 Short Title and Commencement.

  1. These Directions shall be called Non-Banking Financial Company Returns (Reserve Bank) Directions, 2016.
  2. These directions shall come into force with immediate effect.

Chapter – II
Introduction

1. All the NBFCs shall put in place a reporting system for filing various returns within the prescribed timeframe.

2. Submission of return should not be delayed for any reason such as the finalization/completion of the Audit of the annual accounts.

3. The compilation of the Return should be on the basis of the figures available in the books of account of the company.

4. The returns shall be filed on-line by an authorised official of the NBFC, who will be specifically authorised in this regard by the Board of Directors.

5. The NBFCs shall strictly adhere to the timeframe fixed in this direction for submitting returns to the Bank failing which concerned NBFCs would be liable for penal action as prescribed under the provisions of Chapter V of the RBI Act.

6. It may be carefully noted that in case the information/particulars furnished by a NBFCs is found incorrect, Reserve Bank of India would take a serious view in the matter.

Chapter – III
Returns to be submitted by NBFCs

The Non Banking Financial Companies (NBFCs) are required to submit various returns to the Bank w.r.t their deposit acceptance, prudential norms compliance, ALM etc. The lists of such returns to be submitted by the NBFCs are as under:

1. NBS-1 Return (on Financial Indicators by deposit taking NBFCs):

With reference to Master Direction – Non Banking Financial Company – Systemically Important – Non Deposit taking and Deposit taking Company (Reserve Bank) Direction 2016, all NBFCs accepting/holding public deposits are required to submit NBS-1 return on a quarterly basis.

Purpose: -To capture financial details, viz. components of Assets and Liabilities, Profit and Loss account, Exposure to sensitive sectors etc.

2. NBS-2 Return (on Prudential Norms by deposit taking NBFCs):

With reference to Master Direction – Non Banking Financial Company – Systemically Important Non Deposit taking and Deposit taking Company (Reserve Bank) Direction 2016, all NBFCs accepting/holding public deposits are required to submit NBS-2 return on a quarterly basis.

Purpose:- To capture compliance with various prudential norms, e.g. Capital Adequacy, Asset Classification, Provisioning, NOF etc.

3. NBS-3 Return (on Liquid Assets by deposit taking NBFCs):

With reference to the provisions of section 45IB (2) of the RBI Act, all NBFCs accepting/holding public deposits are required to submit NBS-3 return on a quarterly basis.

Purpose: – To capture details of Statutory Investments in Liquid Assets (Central/State Government Securities, Fixed Deposits in Scheduled Commercial Bank etc.)

4. NBS-4 Return (on status of public deposits by NBFCs whose CoR is rejected by the Bank):

To be submitted by NBFCs accepting/holding public deposits on an annual basis, whose CoR has been rejected by the Bank.

Purpose:- To know the repayment status of public deposits of rejected NBFCs- D this return is being called for.

5. Asset-Liability Management (ALM) Return (for deposit taking NBFCs):

To be submitted by NBFCs accepting/holding Public Deposits with asset base of ₹ 100 crore & more, or holding public deposits of ₹ 20 crore or more (irrespective of their asset size), as per their latest audited balance sheet as of 31st March. The periodicity of the Asset-Liability Management Return shall be half-yearly.

Purpose: -To address concerns regarding Asset Liability mismatches and interest rate risk exposures, an ALM System was introduced for the deposit taking NBFCs as part of their overall system for effective risk management.

6. NDSI_500cr return (on Important Financial Parameters):

With reference to Master Direction – Non Banking Financial Company – Systemically Important Non Deposit taking and Deposit taking Company (Reserve Bank) Direction 2016, all NBFCs-ND-SI are required to submit NDSI 500cr return on a quarterly basis.

Purpose: – To capture financial details, viz. components of Assets and Liabilities, Profit and Loss account, Exposure to sensitive sectors, sectoral deployment of credit etc.

7. NBS-7 (on Prudential Norms by NBFCs-ND-SI):

With reference to Master Direction – Non Banking Financial Company – Systemically Important Non Deposit taking and Deposit taking Company (Reserve Bank) Direction 2016, all NBFCs-ND-SI are required to submit NBS-7 return on a quarterly basis.

Purpose: – To capture compliance with various prudential norms, e.g. Capital Adequacy, Asset Classification, Provisioning, NOF etc.

8. Asset-Liability Management (ALM) Returns (for NBFCs-ND-SI):

Multiple Returns are to be submitted by NBFCs-ND-SI at various intervals as given below:

a. Statement of short term dynamic liquidity [NBS-ALM1] – Quarterly
b. Statement of structural liquidity [NBS-ALM2] – Half Yearly
c. Statement of Interest Rate Sensitivity [NBS-ALM3] – Half Yearly
d. Statement on Assets Liability Mismatch [ALM-YRLY] – Annually

Purpose: – To address concerns regarding Asset Liability mismatches and interest rate risk, an ALM System was introduced for the NBFC-ND-SI as part of their overall system for effective risk management.

9. Statutory Auditors Certificate (SAC):

Every NBFC shall submit a Certificate from its Statutory Auditor every year to the effect that it is engaged in the business of non-banking financial institution requiring it to hold a Certificate of Registration granted under section 45-IA of the RBI Act.

With a view to ensure consistency in the manner in which the information is received from the Auditors, a uniform format of the SAC has been prescribed. The NBFC would need to fill in the information, as applicable, in COSMOS. Thereafter, the SAC needs to be scanned and uploaded in COSMOS under the menu “Upload Report”. The format of the SAC is given in Annex 1.

Purpose: To ensure continued regulatory compliance.

10. Branch Information Return (for NBFC-D &NBFC-ND-SI):

To be submitted by NBFCs-ND-SI and NBFCs accepting/holding public deposits, on a quarterly basis.

Purpose: To capture the reach and geographical spread of NBFCs.

11. Certificate on compliance with FDI norms:

The NBFCs having Foreign Direct Investment are required to submit a Certificate from their Statutory Auditor on a half-yearly basis certifying compliance with the existing terms and conditions of FDI, to the Regional Office in whose jurisdiction the registered office of the company is located.

Purpose: To capture compliance with the stipulated minimum capitalization norms and that its activities are restricted to the activities prescribed under FEMA.

12. Overseas Investment Return:

The NBFCs (both deposit taking and non-deposit taking) having overseas investment are required to submit the Overseas Investment Return on a quarterly basis to the Regional Office in whose jurisdiction the registered office of the company is located, and also to the Department of Statistics and Information Management (DSIM), Central Office, Mumbai. The format of the Overseas Investment Return is given in Annex 2.

In addition to the above, an annual certificate from statutory auditors shall be submitted by the NBFCs to the concerned Regional Office of the Bank, certifying that it has fully complied with all the conditions stipulated under Master Direction – Non Banking Financial Company – Systemically Important Non Deposit taking and Deposit taking Company (Reserve Bank) Direction 2016.

Purpose: To capture details on overseas investment by NBFCs.

13. ARC Return:

To be submitted by Asset Reconstruction Companies registered with the Bank on a quarterly basis.

Purpose: To capture financial parameters and various operational details e.g. assets (NPA) acquired, acquisition cost, their recovery status etc.

14. NBS-8 Return (on Financial Indicators by NBFCs with asset size between ₹ 100 crore and ₹ 500 crore):

To be submitted by NBFCs (non-deposit taking) with assets size between ₹ 100 crore to ₹ 500 crore on an annual basis.

Purpose: – To capture profile information and financial details, viz. components of Assets and Liabilities, Profit and Loss account, Exposure to sensitive sectors, Branch Information etc.

15. NBS-9 Return (on Financial Indicators by NBFCs with asset size below ₹ 100 crore):

To be submitted by NBFCs (non-deposit taking) with assets size below ₹ 100 crore on an annual basis.

Purpose: – To capture profile information and financial details, viz. components of Assets and Liabilities, Profit and Loss account, Branch Information etc.

16. NBS-1A & NBS-3A Returns (on Financial Indicators by RNBCs)

To be submitted by Residuary Non-Banking Companies (RNBCs) on a quarterly basis.

Purpose: – To capture financial details, viz. components of Assets and Liabilities, Profit and Loss account, Exposure to sensitive sectors, Statutory Investments in Liquid Assets etc.

17. CRILC & SMA-2 Return (on early Recognition of Stress on large accounts)

All NBFCs-ND-SI, NBFCs-D and NBFC-Factors are required to report the CRILC return on a quarterly basis online through XBRL application (https://125.18.33.234/orfsxbrl/customer/index.jsp). The data includes credit information on all the borrowers having aggregate fund-based and non-fund based exposure of ₹ 5 crore and above with them and the SMA status of the borrower. It may be noted that there is no need to submit ‘Nil’ returns.

Further, the concerned NBFCs are required to report all the SMA-2 accounts (as defined in the Master Direction – Non Banking Financial Company – Systemically Important Non Deposit taking and Deposit taking Company (Reserve Bank) Direction, 2016) on the Friday of the week when the relevant account first came in SMA-2 category. If Friday happens to be a holiday, they will report the same on the preceding working day of the week.

Purpose: To facilitate early Recognition of Financial Distress, Prompt Steps for Resolution and Fair Recovery for Lenders.

18. Statement on Interest Rate Futures transaction

NBFCs participating in IRF exchanges for hedging their underlying exposures are required to submit the half yearly statement, in the format given in Annex-3, to the Regional office of the Department of Non-Banking Supervision in whose jurisdiction their company is registered, within a period of one month from the close of the half year.

Purpose: To know the extent of participation of NBFCs in Interest rate Future market.

Note: The Bank has hosted the formats of returns viz., NBS-1, NBS-2, NBS-3, NBS1A, NBS3A, NBS-7, NBS-8, NBS-9, ALM return, Branch Information return, SCRC return, Statutory Auditor Certificate on the Bank’s website, viz, https://cosmos.rbi.org.in. Concerned NBFCs are required to file the specified returns online through COSMOS application.

NBFCs-D -> Deposit taking Non-Banking Financial Companies (NBFCs);

NBFCs-ND->Non-Deposit taking NBFCs NBFCs- ND-SI -> Individual Non-Banking Financial Companies (NBFCs) not accepting/holding public deposits and having asset sizes of ₹ 500 crore and above (also termed as Systemically Important NBFCs or in short NBFCs-ND-SI) RNBCs ->Residuary Non Banking Companies

The details of returns and their periodicity across distinct categories of NBFCs are consolidated in the following table.

A. Details of returns to be submitted by NBFCs-D:-

Sr. Name of the Return Periodi-city Reference Date Reporting Time Due on Remarks
1 NBS1 Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
15 days 15th April/
15th July/
15th Oct./
15th Jan.
2 NBS2 Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
15 days 15th April/
15th July/
15th Oct./
15th Jan.
3 NBS3 Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
15 days 15th April/
15th July/
15th Oct./
15th Jan.
4 ALM (NBFC-D) Half yearly 31st March/
30th Sept.
30 days 30th April/
30th Oct.
NBFCs-D having public deposit of > ₹ 20 crore Or asset size of> ₹ 100 crore
5 Branch Information return Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
15 days 15th April/
15th July/
15th Oct./
15th Jan.
6 Statutory Auditor Certificate Annual 31st March One month from the date of finalisation of Balance Sheet Not later than 31st December
7 Reporting to Central Repository of Information on Large Credits (CRILC) Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
21 days 21st April/
21st July/
21st Oct/
21st Jan
8 Reporting of Special Mention Account status (SMA-2 return) Weekly On Every Friday
9 Statutory Auditor Certificate Annual 31st March One month from the date of finalisation of Balance Sheet. Not later than 31st December.

B. Details of returns to be submitted by NBFC-ND-SI:-

Sr. No Name of the Return Periodicity Reference Date Reporting Time Due on
1 NBS7 Quarterly 31st March/
30th June/
30th Sept/
31st Dec.
15 days 15th April/
15th July/
15th Oct./
15th Jan.
2 NBFCs-ND-SI 500cr Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
15 days 15th April/
15th July/
15th Oct./
15th Jan.
3 ALM-1 Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
15 days 15th April/
15th July/
15th Oct./
15th Jan.
4 ALM-2 & 3 Half yearly 31st March/
30th Sept.
30 days 30th April/
30th Oct.
5 ALM-(NBFC-ND-SI) Annual 31st March 15 days 15th April
6 Branch Info return Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
15 days 15th April/
15th July/
15th Oct./
15th Jan.
7 Reporting to Central Repository of Information on Large Credits (CRILC) Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
21 days 21st April/
21st July/
21st Oct/
21st Jan
8 Reporting of Special Mention Account status (SMA-2 return) Weekly On Every Friday
9 Statutory Auditor Certificate Annual 31st March One month from the date of finalisation of Balance Sheet. Not later than 31st December.

C. Details of returns to be submitted by NBFC-ARC:-

Sr. No Name of the Return Periodicity Reference Date Reporting Time Due on
1 ARC Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
15 days 15th April/
15th July/
15th Oct./
15th Jan.
2 Statutory Auditor Certificate Annual 31st March One month from the date of finalisation of Balance Sheet. Not later than 31st December.

D. Details of returns to be submitted by NBFC-ND-having asset size of ₹ 100 crore – ₹ 500 crore

Sr No Name of the Return Periodicity Reference Date Reporting Time Due on
1 NBS-9 Annual 31st March 60 days 30th May
2 Statutory Auditor Certificate Annual 31st March One month from the date of finalisation of Balance Sheet. Not later than 31st December.

E. Details of returns to be submitted by NBFC-ND-having asset size below ₹ 100 crore

Sr No Name of the Return Periodicity Reference Date Reporting Time Due on
1 NBS-8 Annual 31st March 60 days 30th May
2 Statutory Auditor Certificate Annual 31st March One month from the date of finalisation of Balance Sheet. Not later than 31st December.

F. Details of returns to be submitted by RNBCs

Sr No Name of the Return Periodicity Reference Date Reporting Time Due on
1 NBS1A Annual 31st March 6 months 30th Sept
2 NBS3A Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
15 days 15th April/
15th July/
15th Oct./
15th Jan.
3 Statutory Auditor Certificate Annual 31st March One month from the date of finalisation of Balance Sheet. Not later than 31st December.

G. Other Returns by concerned NBFCs

Sr No Name of the Return Periodicity Reference Date Reporting Time Due on
1 Return on FDI Half yearly 31st March/
30th Sept.
30 days 30th April/
30th Oct.
2 Overseas Investments Quarterly 31st March/
30th June/
30th Sept./
31st Dec.
Within 15 days 15th April/
15th July/
15th Oct./
15th Jan.

Chapter IV
Reporting of Miscellaneous Non-Banking Company

1. Every miscellaneous non-banking company shall deliver to the Reserve Bank an audited balance sheet as on the last date of each financial year and an audited profit and loss account in respect of that year as passed by the company in general meeting together with a copy of the report of the Board of Directors laid before the company in such meeting in terms of section 217(1) of the Companies Act, 1956 (1 of 1956) within fifteen days of such meeting.

2. Without prejudice to the provisions of above paragraph, every miscellaneous non-banking company [holding or accepting deposits] shall submit to the Reserve Bank an annual return furnishing the information specified in the format given.

The format of return is available on https://www.rbi.org.in/Scripts/BS_ViewNBFCForms.aspx

3. (i) Every miscellaneous non-banking company shall, not later than one month from the coming into force of these directions or from the commencement of business, whichever is later, deliver to the Reserve Bank, a written statement containing a list of:-

(a) the names and the official designations of its principal officers;

(b) the names and residential addresses of the directors of the company; and

(c) the specimen signature of the officers authorised to sign on behalf of the company, returns specified in sub-paragraph (1)

(ii) any change in the list referred to in clause (i) of this sub-paragraph shall be intimated to the Reserve Bank within one month from the occurrence of such change.

4. Any balance sheet, returns or information required to be submitted or furnished to the Reserve Bank in pursuance of these directions shall be submitted or furnished to the Regional Office of the [Department of Non Banking Supervision] of the Reserve Bank within whose jurisdiction the registered office of the company is located.

Chapter V
Interpretation

For the purpose of giving effect to the provisions of the Directions, the Bank may, if it considers necessary, issue necessary clarifications in respect of any matter covered herein and the interpretation of any provision of the Directions given by the Bank shall be final and binding on all the parties concerned. Violation of these Directions shall invite penal action under the provisions of RBI Act. Further, these provisions shall be in addition to, and not in derogation of the provisions of any other laws, rules, regulations or directions, for the time being in force

Chapter VI
Repeal Provisions

1. With the issuance of this directions, the instructions / guidelines contained in the circulars mentioned in the Appendix (below), issued by the Bank stand repealed.

2. All approvals / acknowledgements given under the above circulars shall be deemed as given under the directions.

3. All the repealed circulars are deemed to have been in force prior to the coming into effect of these directions.


Appendix

List of Circulars or part thereof repealed with the issuance of Master Direction.

Name of the Return Circulars & Notifications No.
NBS1 CC NO.243 dated September 22, 2011 & Notification No.DFC.118/DG (SPT)-98 dated January 31, 1998
NBS2 CC NO.243 dated September 22, 2011 & Notification No. DNBS. 192/DG (VL)-2007 dated February 22, 2007
NBS3 Notification No DFC(COC) No.108.ED(JRP)/97 dated April 30, 1997
NBS7 CC NO.243 dated September 22, 2011 & DNBS.PD/CC.No. 93/03.05.002/2006-07 dated April 27, 2007
ALM (NBFC-D) DNBS (PD).CC.No.15/02.01/2000-2001 dated June 27, 2001
NBFCs-ND-SI 500cr DNBS(RID)C.C.No.57/02.05.15/2005-06 dated September 6, 2005
ARC DNBS(PD).CC.No.34/SCRC/26.03.001/2013 dated December 31, 2013
ALM-1 Notification No.DNBS.200/CGM(PK)-2008 dated August 1, 2008
ALM-2 & 3
ALM(NBFC-ND-SI)
NBS-8 DNBS (IT).CC.No.02/24.01.191/2015-16 dated July 09, 2016
NBS-9 DNBS (IT).CC.No.02/24.01.191/2015-16 dated July 09, 2016
Branch Info return Notification No.DNBS.(PD): 262/2013-14 dated September 3, 2013
NBS1A CC NO.243 dated September 22, 2011 & Notification No.DFC.118/DG(SPT)-98 dated January 31, 1998
NBS3A Notification No DFC(COC) No.108.ED(JRP)/97 dated April 30, 1997
Statuary auditor certificate DNBS(PD)C.C.No.79/03.05.002/2006-07 September 21, 2006 andDNBS(PD)C.C.No.81/03.05.002/2006-07 dated October 19, 2006
Return on FDI DNBS(PD).CC.No 167/03.10.01/2009-10 dated February 04, 2010
Reporting to Central Repository of Information on Large Credits (CRILC) DNBS(PD) CC.No.371/03.05.02/2013-14 dated March 21, 2014
Reporting of Special Mention Account status
Overseas investment. Notification No. DNBS.(PD)229/CGM(US)-2011 dated June 14, 2011

Annex-1

Format of Statutory Auditors’ Certificate (SAC)
(On the letter head of the Statutory Auditors of the company)

We have examined the books of accounts and other records of ——————– (Name of company) for the Financial Year ending March 31, 20…… On the basis of the information submitted to us, we certify the following:

(Write NA whichever is Not applicable)

Sl. Particulars Details
1 Name of the company
2 Certificate of Registration No.
3 Registered office Address
4 Corporate office Address
5 The company has been classified by RBI as :
(Investment Company/Loan Company/AFC/NBFC-MFI/ NBFC- Factor/ IFC/ IDF- NBFC)
6 Net Owned Fund  (in Rs. Crore)
(Calculation of the same is given in the Annex)
7 Total Assets (in Rs. Crore)
8 Asset-Income pattern:
(in terms of RBI Press Release 1998-99/1269 dated April 8, 1999)
a) % of Financial Assets to Total Assets
b) % of Financial Income to Gross Income
(NBFC-Factor / NBFC-MFI / AFC / IFC may also report separately below)
9 Whether the company was holding any Public Deposits, as on March 31, ____?
If Yes, the amount in Rs. Crore
(Yes/No)
10. Has the company transferred a sum not less than 20% of its Net Profit for the year to Reserve Fund?
(in terms of Sec 45-IC of the RBI Act, 1934).
(Yes/No/NA)
11 Has the company received any FDI?
If Yes, did the company comply with the minimum capitalization norms for the FDI?
(Yes/No)
12 If the company is classified as an NBFC-Factor;
a) % of Factoring Assets to Total Assets
b) % of Factoring Income to Gross Income
13 If the company is classified as an NBFC-MFI;
% of Qualifying Assets to Net Assets
(refer to Notification DNBS.PD.No.234 CGM (US) 2011 dated December 02, 2011)
14 If the company is classified as an AFC;
a) % of Advances given for creation of physical/real assets supporting economic activity to Total Assets
b) % of income generated out of these assets to Total Income
15 If the company is classified as an NBFC-IFC
% of Infrastructure Loans to Total Assets
16 Has there been any takeover/acquisition of control/ change in shareholding/ Management during the year which required prior approval from RBI?
(please refer to Master Directions issued by DNBR
i) Master Direction – Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions ; and
ii) Master Direction – Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions.)
(Yes/No)
If yes, please specify.

In terms of Chapter II of the Master Direction- Non Banking financial Companies Auditor’s Report (Reserve bank) Directions, 2016, a separate report to the Board of Directors of the company has been prepared.

I have read and understood Chapter III of the Master Direction- Non Banking financial Companies Auditor’s Report (Reserve bank) Directions, 2016.

Signature and Stamp of the Statutory Auditor:

Date: ____________

Place: ___________


Annex-2

Quarterly Return to be submitted by NBFCs having overseas Investment –
March 31st / June 30th / September 30th / December 31st

Sr. No. Name of the WOS / JV (for JV, indicate names of partners) Country and date of incorporation Date of NoC from DNBS Business undertaken

 

Sr. no. Parameters at end of period
a) CRAR :
b) NoF :
c) Net Profit of the NBFC as per the last audited balance sheet :
d) Amount of remittance made to the WOS / JV during the quarter :
Name of the WOS / JV Amount remitted
e) Cumulative investment (equity / fund based commitment) in the WOS / JV at the end of the quarter (amount and as percentage of owned funds of the NBFC) :
Name of the WOS / JV Amount remitted and as % of owned funds including step down subsidiaries if any
f) Aggregate overseas investment of the NBFC as percentage of NoF of the NBFC :
h) Whether the overseas WOS / JV is regulated in the host country. If yes :
Name of the regulator Any regulatory visits made during the reporting period Concerns expressed by the regulator Any regulatory changes during the period which would impact the business of the subsidiary Fines / penalties levied by the overseas regulator, if any
j) Nature of support extended to the JV / WOS by the parent NBFC during the quarter including Guarantee, Letter of Comfort (Also mention whether any other kind of support were given including technical knowledge) :
Name of the WOS / JV Nature of support
k) Returns obtained from the WOS / JV during the quarter
Name of the WOS / JV Returns obtained
l) Financial details of JV / WOS
Name of the WOS / JV Net profit Asset size (Details of significant items of assets and liabilities may be attached)

Annex-3

Interest Rate futures transactions for the purpose of hedging by NBFCs – Statement for the Half-year ended……….

Name of the NBFC:

Interest Rate Futures No. of transactions Notional principal amount in Rs
Short
Long

Authorised signatory

Master Circular- Credit Facilities to Minority Communities – Modification

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RBI/2016-17/67
FIDD.GSSD.BC.No.15/09.10.01/2016-17

September 29, 2016

The Chairman/ Managing Director
All Scheduled Commercial Banks
(excluding RRBs and Foreign banks with less than 20 branches)

Dear Sir / Madam,

Master Circular- Credit Facilities to Minority Communities – Modification

Please refer to our Master Circular FIDD.GSSD.BC.No.01/09.10.01/2016-17 dated July 01, 2016.

2. In partial modification of the Circular, para 2.1 under “Definition of Minority Communities” and para 5.1 & 5.5 under “Monitoring” may be replaced as under:

“2.1 The following communities have been notified as minority communities by the Government of India, Ministry of Minority Affairs:

  1. Sikhs
  2. Muslims
  3. Christians
  4. Zoroastrians
  5. Buddhists
  6. Jains

“5.1 With a view to monitoring the performance of banks in providing credit to the specified minority communities, data on credit assistance provided to members of minority communities should be furnished to Reserve Bank of India and to the Government of India, Ministry of Finance and Ministry of Minority Affairs, on half yearly basis as on the last Friday of March and September every year. The statements (given in Annexure I) should reach RBI within one month from the close of each half year.”

“5.5 The Lead Banks in the identified districts should furnish the relevant extracts of the agenda notes and the minutes of the meetings of the DCCs and of the respective SLBCs to the Union Ministry of Finance and to the Ministry of Minority Affairs on a quarterly basis for their use.”

Yours faithfully.

(Uma Shankar)
Chief General Manager

Aadhaar-based Authentication for Card Present Transactions

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RBI/2016-17/70
DPSS.CO.PD No.892/02.14.003/2016-17

September 29, 2016

The Chairman and Managing Director / Chief Executive Officers
All Scheduled Commercial Banks including RRBs / Urban Co-operative Banks /
State Co-operative Banks / District Central Co-operative Banks/
Authorised Card Payment Networks / White Label ATM Operators /
Payments Banks / Small Finance Banks

Dear Madam / Sir,

Aadhaar-based Authentication for Card Present Transactions

A reference is invited to our circular dated November 26, 2013 on Security and Risk Mitigation Measures for Card Present Transactions wherein the banks were advised that all new card present infrastructure has to be enabled for both EMV Chip and PIN and Aadhaar (biometric validation) acceptance.

2. With the substantial increase in number of Aadhaar card holders in the country, we reiterate our above mentioned instructions and advise banks to ensure that all new card acceptance infrastructure deployed with effect from January 1, 2017 are enabled for processing payment transactions using Aadhaar-based biometric authentication also.

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

4. Please acknowledge the receipt of this circular.

Yours faithfully,

(Nanda S. Dave)
Chief General Manager

Marginal Standing Facility

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RBI/2016-2017/77
FMOD.MAOG. No.115/01.18.001/2016-17

October 4, 2016

All Scheduled Commercial Banks (excluding RRBs)

Madam / Sir,

Marginal Standing Facility

As announced in the Fourth Bi-monthly Monetary Policy Statement today, it has been decided by the Monetary Policy Committee (MPC) to reduce the Repo rate under the Liquidity Adjustment Facility (LAF) by 25 basis points from 6.50 per cent to 6.25 per cent with immediate effect.

Consequent to the change in the Repo rate, the Marginal Standing Facility (MSF) rate will stand adjusted to 6.75 per cent with immediate effect.

All other terms and conditions of the current MSF scheme will remain unchanged.

Yours sincerely

(M. Rajeshwar Rao)
Chief General Manager


Change in Bank Rate

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RBI/2016-17/74
DBR.No.Ret.BC.19/12.01.001/2016-17

October 04, 2016

The Chairperson / CEOs of all Scheduled and Non-Scheduled Banks,

Dear Sir,

Change in Bank Rate

Please refer to circular DBR.No.Ret.BC.90/12.01.001/2015-16 dated April 05, 2016 on the captioned subject.

2. As announced in the Fourth Bi-Monthly Monetary Policy Statement 2016-17 dated October 04, 2016, the Bank Rate stands adjusted by 25 basis points from 7.00 per cent to 6.75 per cent with effect from October 04, 2016.

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,

(S.S. Barik)
Chief General Manager-In-Charge

Encl: As above.


Annex

Penal Interest Rates which are linked to the Bank Rate

Item Existing Rate Revised Rate
(Effective from October 04, 2016)
Penal interest rates on shortfalls in reserve requirements (depending on duration on shortfalls). Bank Rate plus 3.0 percentage points (10.00 per cent) or Bank Rate plus 5.0 percentage points (12.00 per cent) Bank Rate plus 3.0 percentage points (9.75 per cent) or Bank Rate plus 5.0 percentage points (11.75 per cent)

Import Data Processing and Monitoring System (IDPMS)

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0
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RBI/2016-17/78
A.P. (DIR Series) Circular No. 05

October 06, 2016

To
All Category – I Authorised Dealer Banks

Madam/Sir,

Import Data Processing and Monitoring System (IDPMS)

Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to A.P. (DIR Series) Circular No.65 dated April 28, 2016 read with Section 5 of the Foreign Exchange Management Act 1999 (42 of 1999), Government of India Notification No. G.S.R. 381(E) dated May 3, 2000 viz., Foreign Exchange Management (Current Account Transaction) Rules, 2000 on import of goods and A.P. (DIR Series) Circular No. 9 dated August 24, 2000 which outlines the procedure, mode/manner of payment for imports and submission of related returns.

2. In order to enhance ease of doing business and facilitate efficient data processing for payment of import transactions and effective monitoring thereof, Import Data Processing and Monitoring System (IDPMS) has been developed in consultation with the Customs authorities and other stakeholders. The details of IDPMS were advised to the AD Category-I banks vide above mentioned A.P. (DIR Series) Circular No.65 dated April 28, 2016 and banks were requested to be ready with the required IT changes in their system to generate/submit the data under IDPMS as per specified message format and technical specification.

3. As announced in the fourth Bi-monthly Monetary Policy Statement 2016-17 dated October 4, 2016, all AD Category-I banks are advised that IDPMS will go live with effect from October 10, 2016 and are directed to use IDPMS for reporting and monitoring of the import transactions.

4. Customs department has modified the Bill of Entry (BoE) format to display the AD Code of bank with effect from April 1, 2016 and SEZ from June 1, 2016 respectively. Primary import transaction data (from Customs/SEZ) with effect from the above mentioned dates will be made available to respective AD banks in the IDPMS database for further processing. Starting October 10, 2016 all transactions will flow to IDPMS on daily basis for AD banks, to log all subsequent activities and monitor the import transactions.

5. The User Acceptance Test (UAT) of IDPMS was launched on August 19, 2016 and banks were requested to login and familiarise themselves. AD banks were also advised to be ready with data related to all the outstanding import remittances as per the message “outward remittances against Import” to facilitate uploading of the same in IDPMS.

6. The detailed operational procedures are available at Help Menu on EDPMS Portal under “Import process” tag. The operational directions/guidelines are as below:

  1. AD banks are required to create Outward Remittance Message (ORM) for all such outward remittance/s for import payments on behalf of their importer customer for which the prescribed documents for evidence of import have not been submitted.
  2. Creation of ORM for all outstanding outward remittance/s for import payments needs to be completed on or before October 31, 2016.

Settlement of ORM with BoE

  1. Based on the AD code declared by the importer, the banks shall download the Bill of Entry (BoE) issued by EDI ports from “BOE Master” in IDPMS. For non-EDI ports, AD bank of the importer shall upload the BoE data in IDPMS as per message format “Manual BOE reporting” on daily basis on receipt of BoE from the customer/Customs office.
  2. AD banks will enter BoE details (BoE number, port code and date) for ORM associated with the advance payments for import transactions as per the message format “BOE settlement”.
  3. In case of payment after receipt of BoE, the AD bank shall generate ORM for import payments made by its importer customer as per the message format “BOE settlement”.
  4. Multiple ORMs can be settled against single BoE and also multiple BoE can be settled against one ORM.

Extension and Write Off

  1. AD Category I banks shall give extension for submission of BoE beyond the prescribed period in terms of the extant guidelines on the matter, and the same will be reported in IDPMS as per the message “Bill of Entry Extension” and the date up to which extension is granted will be indicated in “Extension Date” column.
  2. AD Category I banks can consider closure of BoE/ORM in IDPMS that involves write off to the extent of 5% of invoice value in cases where the amount declared in BoE varies from the actual remittance due to operational reasons and the AD bank is satisfied with the reason/s submitted by the importer.
  3. AD Category I banks may close the BoE for such import transactions where write off of import payable is on account of quality issues; short shipment or destruction of goods by the port / Customs / health authorities in terms of extant guidelines on the matter subject to submission of satisfactory documentation by the importer irrespective of the amount involved. AD Bank shall settle and close ORM/BoE with appropriate “Adjustment Indicator” in IDPMS.
  4. The above operational guidelines for extension and write off are meant to facilitate closure of bills in IDPMS and will be subject to extant guidelines on the matter and shall not absolve the importer from remitting / receiving the amount in case of change in circumstances.
  5. Extension and write off cases not covered by the extant guidelines may be referred to the concerned Regional Office of Reserve Bank of India for necessary approvals.

Follow-up for Evidence of Import

  1. AD Category – I banks are required to follow up for submission of prescribed documents for evidence of import in terms of extant guidelines on the subject.

7. Authorised Dealers may bring the contents of this circular to the notice of their constituents and customers concerned.

8. Master Direction No. 17/2015-16 dated January 1, 2016 is being updated to reflect the changes.

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

Yours faithfully,

(A. K. Pandey)
Chief General Manager

Operating Guidelines for Payments Banks

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RBI/2016-17/80
DBR.NBD.No.25/16.13.218/2016-17

October 6, 2016

Chief Executive Officers of Payments Banks

Madam / Dear Sir,

Operating Guidelines for Payments Banks

Please refer to the Guidelines for Licensing of Payments Banks (‘Licensing Guidelines’) dated November 27, 2014, under which in-principle approvals/ licences were issued to the applicants for setting up of the payments banks.

2. The need for separate Operating Guidelines for payments banks was examined, considering the differentiated nature of business and financial inclusion focus of these banks. Accordingly, the Operating Guidelines for payments banks are given in the Annex.

3. The prudential frameworks for market risk and operational risk are being examined and the instructions in this regard will be issued separately.

4. These Operating Guidelines are supplementary to the Licensing Guidelines and take immediate effect.

Yours faithfully,

(S S Barik)
Chief General Manager-in-Charge


Annex

Operating Guidelines for Payments Banks

1. Prudential regulation

The prudential regulatory framework for payments banks (PBs) will largely be drawn from the Basel standards. However, given the financial inclusion focus of these banks, it will be suitably calibrated.

1.1. Capital adequacy framework

Minimum Capital Requirement 15%
Common Equity Tier 1 6%
Additional Tier I 1.5%
Minimum Tier I capital 7.5%
Tier 2 capital 7.5%
Capital Conservation Buffer Not Applicable
Counter-cyclical capital buffer Not applicable
Pre-specified Trigger for conversion of AT1 CET1 at 6% up to March 31, 2019, and 7% thereafter

1.2 Large exposures limits (for investments in deposits of scheduled commercial banks)

The exposure in this regard to an individual scheduled commercial bank shall not be more than five per cent of the total outside liabilities of the PB.

1.3 Capital measurement approaches

Credit Risk Basel II Standardized Approach for credit risk

1.4 Inter-bank borrowings

PBs will be permitted to participate in the call money and CBLO market as both borrowers and lenders. These borrowings would, however, be subject to the limit on call money borrowings as applicable to scheduled commercial banks.

1.5 Investment classification and valuation norms

  1. PBs shall, on any given day, maintain a minimum investment to the extent of not less than 75 per cent of ‘demand deposit balances’ – DDB (including the earnest money deposits of BCs) as on three working days prior to that day, in Government securities/Treasury Bills with maturity up to one year that are recognized by RBI as eligible securities for maintenance of Statutory Liquidity Ratio (SLR).
  2. Further, PBs shall, on any given day, maintain balances in demand and time deposits with other scheduled commercial banks, which shall not be more than 25 per cent of its DDB (including the earnest money deposits of BCs) as on three working days prior to that day.
  3. The investments and deposits made according to (i) and (ii) above, together shall not be less than 100 per cent of the DDB (including the earnest money deposits of BCs) of the PB unless it is less to the extent of balances kept with RBI.

    Note: Balances with other scheduled commercial banks in excess of 25 per cent of DDB (including the earnest money deposits of BCs), is permissible to the extent the excess amount is sourced from funds other than DDB (including the earnest money deposits of BCs).

  4. PBs will not be allowed to classify any investment, other than those made out of their own funds, as HTM category. The investments made out of their own funds shall not, in any case be, in assets or investments in respect of which the promoter / a promoter group entity is a direct or indirect obligor.
  5. PBs will not be allowed to participate in ‘when issued’ and ‘short sale’ transactions.
  6. PBs will be permitted to invest in bank CDs within the limit applicable to bank deposits.
  7. The other directions on the subject as applicable to scheduled commercial banks (see the Master Circular RBI/2015-16/97 DBR No BP.BC.6/21.04.141/2015-16 dated July 1, 2015 and the circulars issued thereafter).

1.6 Restrictions on loans and advances (including lending to NBFCs) including regulatory limits

PBs will not be permitted to lend to any person including their directors. However, PBs may lend to their own employees out of the bank’s own funds, as per a Board approved policy outlining the caps on such loans.

1.7 Para-banking activities

PBs will not be permitted to undertake any para-banking activity except those allowed as per the Licensing Guidelines and the related FAQs issued.

1.8 Product approval

  1. At the time of submitting application for licence, the PBs should submit to RBI a list of financial products they intend to offer with a clear description.
  2. Any new products proposed to be introduced thereafter should be intimated to RBI for information. If required, RBI may place suitable restrictions on the design, functioning, or other features of the product including discontinuing the product.

2. Risk management

2.1 Credit risk management including credit concentration risk

Not applicable, except as indicated in para. 1.3.

2.2 Market risk management

The provisions regarding market risk management for PBs will be as applicable to commercial banks. PBs will be permitted to use derivatives only for the purpose of hedging their foreign currency positions arising out of the activities conducted under the AD Category II authorization.

2.3 Operational risk management

Payment Banks should implement the operational risk management requirements, issued by RBI for scheduled commercial banks for operational risk, including collection of operational loss data.

2.4 Liquidity risk management

The provisions regarding liquidity risk management shall be as applicable to scheduled commercial banks, with suitable enhancements to take into account the liquidity risk profile of PBs.

2.5 Strategic and reputational risk management

The provisions regarding strategic and reputational risk management shall be as applicable to scheduled commercial banks, with suitable enhancements to take care of the reputational risk arising from use of agents.

2.6 Internal controls, audit and compliance

The provisions regarding internal controls, audit and compliance by the PBs shall be as applicable to scheduled commercial banks, with suitable enhancements to take care of the ICT related aspects and operations through agents.

3. CRR, SLR, disclosures and statutory/regulatory reports

For PBs, the CRR and SLR requirements and the various disclosures and statutory/regulatory reports will be as applicable to commercial banks (see the Master Circular RBI/2015-16/98 DBR.No.Ret.BC.24/12.01.001/2015-16 dated July 1, 2015 and the circulars issued thereafter).

4. Ownership and control regulations

The extant provisions in this regard as applicable to private sector banks, as covered in the Master Directions on Issue and Pricing of shares by Private Sector Banks DBR.PSBD.No.95/16.13.100/2015-16 dated April 21, 2016 and Master Directions on Ownership in Private Sector Banks DBR.PSBD.No. 97/16.13.100/2015-16 dated May 12, 2016, shall be applicable to PBs as well, except what is provided in the existing regulation contained in the Licensing Guidelines.

5. Corporate governance

5.1 Constitution and functioning of board of directors

The extant provisions as applicable to banking companies shall be applicable to PBs as well. Specifically in the case of converting entities, the terms and conditions of appointment of existing Directors will be grandfathered till completion of their present term.

5.2 Constitution and functioning of committees of the board, management level committees, remuneration policies

The extant provisions in this regard as applicable to private sector banks, shall be applicable to PBs as well.

6. Banking Operations

6.1 Authorization of Access Points

  1. The annual plans for opening of physical access points by the PBs for the initial five years would need prior approval of RBI. The first of such plan shall be submitted to RBI before commencement of business. After the initial stabilisation period of five years, and after a review, RBI may liberalize the requirement of prior approval.
  2. An employee of the PB should be available for sufficient duration, at a fixed location known to the customers at the district level, to attend to customer grievances and support the agent supervision. This fixed location may also be used to conduct the banking business of the PB, and it will be considered as a physical access point for the purposes of assessing the requirement of opening at least 25 per cent physical access points in rural centres.

6.2 Regulation of Business Correspondents

  1. The PBs can engage all permitted entities including the companies owned by their business partners and own group companies on an arm’s length basis as “BCs”. These companies can have their own branches managed by their employees operating as “access points” or may engage other entities/persons to manage the “access points” which could be managed by the latter’s staff. In the above cases, from the regulatory perspective, the bank will be responsible for the business carried out at the ‘access points’ and the conduct of all the parties in the chain regardless of the organizational structure including any other intermediaries inserted in the chain to manage the BC network.
  2. Inter-operability of the BCs will be allowed except for opening of savings and current accounts.
  3. BCs cannot undertake any offline transactions. Consequently, BCs cannot undertake transactions if there is no internet connectivity.
  4. The PBs will be exempted from the requirement of having a base branch for a certain number of BCs/access points managed by BCs as currently stipulated in the RBI guidelines to scheduled commercial banks.

Note: It is clarified that in cases where a PB is acting as the BC for a bank, the BC engaged by the PB shall not open deposit accounts for the partner bank for whom the PB acts as the BC or undertake KYC documentation for that bank.

6.3 Bank charges, lockers, nominations, facilities to disabled persons, etc.

The extant provisions in this regard as applicable to scheduled commercial banks, shall be applicable to PBs as well.

7. Bank deposits

(i) As provided in the current RBI directions, PBs can accept only savings and current deposits. The aggregate limit per customer shall not exceed ₹100,000, as provided in the Licensing Guidelines. However, the RBI will have no objection to the PBs making arrangements with any other scheduled commercial bank / SFB, for amounts in excess of the prescribed limits, to be swept into an account opened for the customer at that bank. This arrangement should be activated with the prior written consent of the customer.

(ii) The above limit shall apply to customer deposits and not to any security/earnest money deposit the bank may collect from any of its service providers in the ordinary course of business.

(iii) All RBI and BR Act provisions and RBI directions relating to minimum balance, inoperative accounts, unclaimed deposits including transfer of such deposits to the Depositors Education and Awareness Fund maintained by RBI on regular basis, nominations, cheques/drafts, etc., will be applicable to the PBs.

(iv) Payments Banks:

  • need not issue passbooks for the deposit accounts;
  • may provide statement of account in paper form on request on chargeable basis, or otherwise;
  • may provide account information through multiple user friendly modes such as SMS and/or internet banking; and
  • should provide electronic confirmation through SMS/e-mail/printed proof for each account transaction.

8. KYC requirements

  1. At their discretion, PBs may (like all other banks) decide not to take the wet signature while opening accounts and instead rely upon the electronic authentication/confirmation of the terms and conditions of the banking relationship/account relationship keeping in view their confidence in the legal validity and authenticity of such authentications/confirmations. However, all the extant regulations concerning KYC including those covering the Central KYC Registry, and any subsequent instructions in this regard, as applicable to commercial banks, would be applicable to PBs.
  2. PBs should ensure that every customer, including customers of mobile companies on-boarded comply with the KYC regulations, which could include simplified account opening procedures. It is clarified here that if the KYC done by a telecom company, which is a promoter / promoter group entity of the PB, is of the same quality as prescribed for a banking company, PBs may obtain the KYC details of the customer from that telecom company, subject to customer consent.

9. Foreign exchange business

Payments Banks shall:

  • comply with all the conditions attached with the AD Cat II licence that will be issued by the FED, CO.
  • implement the provisions of Foreign Contribution (Regulation) Act, 2010 (As applicable to commercial banks).

10. Other banking services

10.1 Currency distribution(covering detection of forged and counterfeit notes, currency chest facilities, facilities for exchange of notes)

PBs may, at their option, exchange mutilated and defective notes at their branches, subject to compliance with RBI norms.

10.2 Customer education and protection

  1. All customer grievance issues related to a particular access point should be addressed both at the access point and at the district level location mentioned above at paragraph 6.1 (ii).
  2. PBs will be covered by the Banking Ombudsman (BO) Scheme.
  3. The mechanism put in place by PBs to effectively resolve customer complaints and its communication to customers, and role of different levels (access point, controlling office (centre at the district level), and head office) in grievance redressal should be clearly communicated to RBI along with the application for licence.
  4. The customer service policy approved by the boards of the PBs should provide for continuous and intensive monitoring of redressing of customer grievance by the PBs.
  5. RBI will closely supervise the grievance redress system of the bank through both onsite and off-site surveillance system.

11. Outsourcing of operations, internet banking and mobile banking

  1. The extant provisions in this regard as applicable to scheduled commercial banks, shall be applicable to PBs as well.
  2. Loading of PPI balances through other bank credit cards will be permitted.

12. Implementation of Ind AS

Implementation of Ind AS would be applicable to PBs once they become scheduled banks. In view of the same, it is recommended that the PBs start adoption of the same in order to avoid transition costs subsequently.

Revision of interest rates for Small Savings Schemes

$
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RBI/2016-17/82
DGBA.GAD.881/15.02.005/2016-17

October 13, 2016

The Chairman/Chief Executive Officer
Agency Banks handling Public Provident Fund, Kisan Vikas Patra- 2014,
Sukanya Samriddhi Account, Senior Citizen Savings Scheme-2004

Dear Sir

Revision of interest rates for Small Savings Schemes

Please refer to our circular DGBA.GAD.13/15.02.005/2016-17 dated July 7, 2016 on the above subject. The Government of India, had vide their Office Memorandum (OM) No.F.No.1/04/2016–NS.II dated September 29, 2016 and Notification No.5(4)-B(PD)/2016 dated October 3, 2016 advised the revised rate of interest on various small savings schemes for the third quarter of the financial year 2016-17 (copies enclosed).

2. The contents of this circular may be brought to the notice of the branches of your bank operating Government Small Saving Schemes for necessary action. These should also be displayed on the notice boards of your branches for information of the subscribers to these Schemes.

Yours faithfully

(V.S. Prajish)
Assistant General Manager

Encl : as above

Operating Guidelines for Payments Banks

$
0
0

RBI/2016-17/80
DBR.NBD.No.25/16.13.218/2016-17

October 6, 2016

Chief Executive Officers of Payments Banks

Madam / Dear Sir,

Operating Guidelines for Payments Banks

Please refer to the Guidelines for Licensing of Payments Banks (‘Licensing Guidelines’) dated November 27, 2014, under which in-principle approvals/ licences were issued to the applicants for setting up of the payments banks.

2. The need for separate Operating Guidelines for payments banks was examined, considering the differentiated nature of business and financial inclusion focus of these banks. Accordingly, the Operating Guidelines for payments banks are given in the Annex.

3. The prudential frameworks for market risk and operational risk are being examined and the instructions in this regard will be issued separately.

4. These Operating Guidelines are supplementary to the Licensing Guidelines and take immediate effect.

Yours faithfully,

(S S Barik)
Chief General Manager-in-Charge


Annex

Operating Guidelines for Payments Banks

1. Prudential regulation

The prudential regulatory framework for payments banks (PBs) will largely be drawn from the Basel standards. However, given the financial inclusion focus of these banks, it will be suitably calibrated.

1.1. Capital adequacy framework

Minimum Capital Requirement 15%
Common Equity Tier 1 6%
Additional Tier I 1.5%
Minimum Tier I capital 7.5%
Tier 2 capital 7.5%
Capital Conservation Buffer Not Applicable
Counter-cyclical capital buffer Not applicable
Pre-specified Trigger for conversion of AT1 CET1 at 6% up to March 31, 2019, and 7% thereafter

1.2 Large exposures limits (for investments in deposits of scheduled commercial banks)

The exposure in this regard to an individual scheduled commercial bank shall not be more than five per cent of the total outside liabilities of the PB.

1.3 Capital measurement approaches

Credit Risk Basel II Standardized Approach for credit risk

1.4 Inter-bank borrowings

PBs will be permitted to participate in the call money and CBLO market as both borrowers and lenders. These borrowings would, however, be subject to the limit on call money borrowings as applicable to scheduled commercial banks.

1.5 Investment classification and valuation norms

  1. PBs shall, on any given day, maintain a minimum investment to the extent of not less than 75 per cent of ‘demand deposit balances’ – DDB (including the earnest money deposits of BCs) as on three working days prior to that day, in Government securities/Treasury Bills with maturity up to one year that are recognized by RBI as eligible securities for maintenance of Statutory Liquidity Ratio (SLR).
  2. Further, PBs shall, on any given day, maintain balances in demand and time deposits with other scheduled commercial banks, which shall not be more than 25 per cent of its DDB (including the earnest money deposits of BCs) as on three working days prior to that day.
  3. The investments and deposits made according to (i) and (ii) above, together shall not be less than 100 per cent of the DDB (including the earnest money deposits of BCs) of the PB unless it is less to the extent of balances kept with RBI.

    Note: Balances with other scheduled commercial banks in excess of 25 per cent of DDB (including the earnest money deposits of BCs), is permissible to the extent the excess amount is sourced from funds other than DDB (including the earnest money deposits of BCs).

  4. PBs will not be allowed to classify any investment, other than those made out of their own funds, as HTM category. The investments made out of their own funds shall not, in any case be, in assets or investments in respect of which the promoter / a promoter group entity is a direct or indirect obligor.
  5. PBs will not be allowed to participate in ‘when issued’ and ‘short sale’ transactions.
  6. PBs will be permitted to invest in bank CDs within the limit applicable to bank deposits.
  7. The other directions on the subject as applicable to scheduled commercial banks (see the Master Circular RBI/2015-16/97 DBR No BP.BC.6/21.04.141/2015-16 dated July 1, 2015 and the circulars issued thereafter).

1.6 Restrictions on loans and advances (including lending to NBFCs) including regulatory limits

PBs will not be permitted to lend to any person including their directors. However, PBs may lend to their own employees out of the bank’s own funds, as per a Board approved policy outlining the caps on such loans.

1.7 Para-banking activities

PBs will not be permitted to undertake any para-banking activity except those allowed as per the Licensing Guidelines and the related FAQs issued.

1.8 Product approval

  1. At the time of submitting application for licence, the PBs should submit to RBI a list of financial products they intend to offer with a clear description.
  2. Any new products proposed to be introduced thereafter should be intimated to RBI for information. If required, RBI may place suitable restrictions on the design, functioning, or other features of the product including discontinuing the product.

2. Risk management

2.1 Credit risk management including credit concentration risk

Not applicable, except as indicated in para. 1.3.

2.2 Market risk management

The provisions regarding market risk management for PBs will be as applicable to commercial banks. PBs will be permitted to use derivatives only for the purpose of hedging their foreign currency positions arising out of the activities conducted under the AD Category II authorization.

2.3 Operational risk management

Payment Banks should implement the operational risk management requirements, issued by RBI for scheduled commercial banks for operational risk, including collection of operational loss data.

2.4 Liquidity risk management

The provisions regarding liquidity risk management shall be as applicable to scheduled commercial banks, with suitable enhancements to take into account the liquidity risk profile of PBs.

2.5 Strategic and reputational risk management

The provisions regarding strategic and reputational risk management shall be as applicable to scheduled commercial banks, with suitable enhancements to take care of the reputational risk arising from use of agents.

2.6 Internal controls, audit and compliance

The provisions regarding internal controls, audit and compliance by the PBs shall be as applicable to scheduled commercial banks, with suitable enhancements to take care of the ICT related aspects and operations through agents.

3. CRR, SLR, disclosures and statutory/regulatory reports

For PBs, the CRR and SLR requirements and the various disclosures and statutory/regulatory reports will be as applicable to commercial banks (see the Master Circular RBI/2015-16/98 DBR.No.Ret.BC.24/12.01.001/2015-16 dated July 1, 2015 and the circulars issued thereafter).

4. Ownership and control regulations

The extant provisions in this regard as applicable to private sector banks, as covered in the Master Directions on Issue and Pricing of shares by Private Sector Banks DBR.PSBD.No.95/16.13.100/2015-16 dated April 21, 2016 and Master Directions on Ownership in Private Sector Banks DBR.PSBD.No. 97/16.13.100/2015-16 dated May 12, 2016, shall be applicable to PBs as well, except what is provided in the existing regulation contained in the Licensing Guidelines.

5. Corporate governance

5.1 Constitution and functioning of board of directors

The extant provisions as applicable to banking companies shall be applicable to PBs as well. Specifically in the case of converting entities, the terms and conditions of appointment of existing Directors will be grandfathered till completion of their present term.

5.2 Constitution and functioning of committees of the board, management level committees, remuneration policies

The extant provisions in this regard as applicable to private sector banks, shall be applicable to PBs as well.

6. Banking Operations

6.1 Authorization of Access Points

  1. The annual plans for opening of physical access points by the PBs for the initial five years would need prior approval of RBI. The first of such plan shall be submitted to RBI before commencement of business. After the initial stabilisation period of five years, and after a review, RBI may liberalize the requirement of prior approval.
  2. An employee of the PB should be available for sufficient duration, at a fixed location known to the customers at the district level, to attend to customer grievances and support the agent supervision. This fixed location may also be used to conduct the banking business of the PB, and it will be considered as a physical access point for the purposes of assessing the requirement of opening at least 25 per cent physical access points in rural centres.

6.2 Regulation of Business Correspondents

  1. The PBs can engage all permitted entities including the companies owned by their business partners and own group companies on an arm’s length basis as “BCs”. These companies can have their own branches managed by their employees operating as “access points” or may engage other entities/persons to manage the “access points” which could be managed by the latter’s staff. In the above cases, from the regulatory perspective, the bank will be responsible for the business carried out at the ‘access points’ and the conduct of all the parties in the chain regardless of the organizational structure including any other intermediaries inserted in the chain to manage the BC network.
  2. Inter-operability of the BCs will be allowed except for opening of savings and current accounts.
  3. BCs cannot undertake any offline transactions. Consequently, BCs cannot undertake transactions if there is no internet connectivity.
  4. The PBs will be exempted from the requirement of having a base branch for a certain number of BCs/access points managed by BCs as currently stipulated in the RBI guidelines to scheduled commercial banks.

Note: It is clarified that in cases where a PB is acting as the BC for a bank, the BC engaged by the PB shall not open deposit accounts for the partner bank for whom the PB acts as the BC or undertake KYC documentation for that bank.

6.3 Bank charges, lockers, nominations, facilities to disabled persons, etc.

The extant provisions in this regard as applicable to scheduled commercial banks, shall be applicable to PBs as well.

7. Bank deposits

(i) As provided in the current RBI directions, PBs can accept only savings and current deposits. The aggregate limit per customer shall not exceed ₹100,000, as provided in the Licensing Guidelines. However, the RBI will have no objection to the PBs making arrangements with any other scheduled commercial bank / SFB, for amounts in excess of the prescribed limits, to be swept into an account opened for the customer at that bank. This arrangement should be activated with the prior written consent of the customer.

(ii) The above limit shall apply to customer deposits and not to any security/earnest money deposit the bank may collect from any of its service providers in the ordinary course of business.

(iii) All RBI and BR Act provisions and RBI directions relating to minimum balance, inoperative accounts, unclaimed deposits including transfer of such deposits to the Depositors Education and Awareness Fund maintained by RBI on regular basis, nominations, cheques/drafts, etc., will be applicable to the PBs.

(iv) Payments Banks:

  • need not issue passbooks for the deposit accounts;
  • may provide statement of account in paper form on request on chargeable basis, or otherwise;
  • may provide account information through multiple user friendly modes such as SMS and/or internet banking; and
  • should provide electronic confirmation through SMS/e-mail/printed proof for each account transaction.

8. KYC requirements

  1. At their discretion, PBs may (like all other banks) decide not to take the wet signature while opening accounts and instead rely upon the electronic authentication/confirmation of the terms and conditions of the banking relationship/account relationship keeping in view their confidence in the legal validity and authenticity of such authentications/confirmations. However, all the extant regulations concerning KYC including those covering the Central KYC Registry, and any subsequent instructions in this regard, as applicable to commercial banks, would be applicable to PBs.
  2. PBs should ensure that every customer, including customers of mobile companies on-boarded comply with the KYC regulations, which could include simplified account opening procedures. It is clarified here that if the KYC done by a telecom company, which is a promoter / promoter group entity of the PB, is of the same quality as prescribed for a banking company, PBs may obtain the KYC details of the customer from that telecom company, subject to customer consent.

9. Foreign exchange business

Payments Banks shall:

  • comply with all the conditions attached with the AD Cat II licence that will be issued by the FED, CO.
  • implement the provisions of Foreign Contribution (Regulation) Act, 2010 (As applicable to commercial banks).

10. Other banking services

10.1 Currency distribution(covering detection of forged and counterfeit notes, currency chest facilities, facilities for exchange of notes)

PBs may, at their option, exchange mutilated and defective notes at their branches, subject to compliance with RBI norms.

10.2 Customer education and protection

  1. All customer grievance issues related to a particular access point should be addressed both at the access point and at the district level location mentioned above at paragraph 6.1 (ii).
  2. PBs will be covered by the Banking Ombudsman (BO) Scheme.
  3. The mechanism put in place by PBs to effectively resolve customer complaints and its communication to customers, and role of different levels (access point, controlling office (centre at the district level), and head office) in grievance redressal should be clearly communicated to RBI along with the application for licence.
  4. The customer service policy approved by the boards of the PBs should provide for continuous and intensive monitoring of redressing of customer grievance by the PBs.
  5. RBI will closely supervise the grievance redress system of the bank through both onsite and off-site surveillance system.

11. Outsourcing of operations, internet banking and mobile banking

  1. The extant provisions in this regard as applicable to scheduled commercial banks, shall be applicable to PBs as well.
  2. Loading of PPI balances through other bank credit cards will be permitted.

12. Implementation of Ind AS

Implementation of Ind AS would be applicable to PBs once they become scheduled banks. In view of the same, it is recommended that the PBs start adoption of the same in order to avoid transition costs subsequently.

Partial Credit Enhancement (PCE) to Corporate Bonds

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RBI/2016-17/43
DBR.BP.BC.No.5/21.04.142/2016-17

August 25, 2016

All Scheduled Commercial Banks
(excluding RRBs)

Partial Credit Enhancement (PCE) to Corporate Bonds

Please refer to the circular DBR.BP.BC.No.40/21.04.142/2015-16 dated September 24, 2015 on the captioned subject.

2. In terms of para II.6 of the above-mentioned circular, the aggregate exposure limit of all banks towards the PCE for a given bond issue has been capped at 20 per cent of the bond issue size. On a review, it has been decided to increase the aggregate exposure limit from the banking system to 50 per cent of the bond issue size, with a limit up to 20 per cent of the bond issue size for an individual bank.

3. As the purpose of PCE by banks is to enable wide investor participation in the corporate bond market, banks are expected not to invest in corporate bonds which are credit enhanced by other banks.

4. All other instructions contained in the above-mentioned circular, including the single and group borrower limits and aggregate PCE exposure norms as per the para III.24 (a) and (b), remain unchanged.

Yours faithfully,

(Ajay Kumar Choudhary)
Chief General Manager

Review of sectoral caps and simplification of Foreign Direct Investment (FDI) Policy

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RBI/2016-17/88
A.P. (DIR Series) Circular No. 6

October 20, 2016

To
All Category – I Authorised Dealer Banks

Madam/Sir,

Review of sectoral caps and simplification of Foreign Direct Investment (FDI) Policy

Attention of Authorised Dealer Category – I (AD Category-I) banks is invited to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, notified by the Reserve Bank vide Notification No. FEMA. 20/2000-RB dated 3rd May 2000 (FEMA 20), as amended from time to time.

2. The Central Government had reviewed the extant FDI Policy on various sectors and has made amendments in the Consolidated FDI Policy Circular 2015 vide Press Note No. 6(2015 Series) dated June 3, 2015, Press Note No. 7(2015 Series) dated June 3, 2015, Press Note No. 8(2015 Series) dated July 30, 2015, Press Note No. 11(2015 Series) dated October 1, 2015 and Press Note 12(2015 Series) dated November 24, 2015.

3. While Authorised Dealers and their constituents are advised to refer to the said amendments regarding the changes made, some of the salient features are as under:

  1. In all sectors where there is a limit/cap on foreign investment, such limit/cap shall be reckoned in a composite manner. In other words, “sectoral cap”, i.e., the maximum amount which can be invested by foreign investors in an entity will include all types of foreign investments, direct and indirect, regardless of whether the said investments have been made under Schedules 1, 2, 2(A), 3, 6, 8, 9 and 10 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations, 2000. Foreign Currency Convertible Bonds (FCCBs) and Depository Receipts (DRs) having underlying of instruments which can be issued under Schedule 5, being in the nature of debt, shall not be treated as foreign investment under such composite limit/cap. However, any equity holding by a person resident outside India resulting from conversion of any debt instrument under any arrangement shall be reckoned as foreign investment under the composite limit/cap.
  2. “Total foreign investment” in an Indian company will be the sum total of direct and indirect foreign investments.
  3. Portfolio investment up to aggregate foreign investment level of 49% or sectoral/statutory cap, whichever is lower, will not be subject to either Government approval or compliance with the sectoral conditions, as the case may be, provided such investment does not result in change in ownership leading to control of Indian entities [within the meaning of Regulation 14 (1) of Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000] by non-resident entities. Other foreign investments will be subject to conditions of Government approval and compliance of sectoral conditions as laid down in the FDI policy and the related Regulations under the Foreign Exchange Management Act 1999.
  4. The onus of compliance with the sectoral/statutory caps on foreign investment and attendant conditions, if any, shall be on the company receiving foreign investment.
  5. A company shall be considered as owned by resident Indian citizens if more than 50% of the capital in it is beneficially owned by resident Indian citizens and/or Indian companies, which are ultimately owned and controlled by resident Indian citizens. A Limited Liability Partnership (LLP) will be considered as owned by resident Indian citizens if more than 50% of the investment in such an LLP is contributed by resident Indian citizens and/ or entities which are ultimately ‘owned and controlled by resident Indian citizens’ and such resident Indian citizens and entities have majority of the profit share.
  6. ‘Control’ shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreement or voting agreement. For the purpose of LLP, ‘control’ shall mean right to appoint majority of the designated partners, where such designated partners, with specific exclusions to others, have control over all the policies of the LLP.
  7. Foreign investment in LLP is permitted under the automatic route if the LLP is engaged in sector where 100% FDI is allowed and there are no attendant FDI linked performance conditionalities to the sector.
  8. Foreign investment by way of swap of shares has been permitted provided the resident company in which the investment is made is engaged in an automatic route sector subject to the condition that irrespective of the amount, valuation of the shares involved in the swap arrangement will have to be made by a Merchant Banker registered with the Securities and Exchange Board of India (SEBI) or an Investment Banker outside India registered with the appropriate regulatory authority in the host country.
  9. In terms of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations, 2016 notified vide Notification No. FEMA 361/2016-RB dated February 15, 2016, a Non-resident Indian (NRI) has been permitted to purchase or sell shares, convertible preference shares, convertible debentures and warrants of an Indian company or units of an investment vehicle, on repatriation basis (under Schedule 3 to FEMA 20) and non-repatriation basis (under schedule 4 to FEMA 20) . Investment by an NRI, including a company, a trust and a partnership firm incorporated outside India and owned and controlled by NRI, on non-repatriation basis under Schedule 4 of notification ibid, will be deemed to be domestic investment at par with the investment made by residents.
  10. Foreign investment up to 100 percent under the automatic route has been permitted in the plantation sector which includes tea plantations, coffee plantations, rubber plantations, cardamom plantations, palm oil tree plantations and olive oil tree plantations. There have been changes in the foreign investment cap in other sectors. The updated Annex-B to schedule-1 has been notified vide Notification No. FEMA 362/2016-RB dated February 15, 2016.
  11. “Real estate business” shall mean dealing in land and immovable property with a view to earning profit therefrom and does not include development of townships, construction of residential / commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships. Further, earning of rent income on lease of the property, not amounting to transfer, will not amount to “real estate business”.
  12. Manufacturing has been given a precise definition and foreign investment up to 100% under the automatic route is permitted in manufacturing subject to the conditions of the FDI policy and the provisions of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000. A manufacturer is permitted to sell its products manufactured in India through wholesale and/or retail, including through e-commerce without Government approval.
  13. An entity engaged in single brand retail trading operating through brick and mortar stores, is permitted to undertake retail trading through e-commerce.

4. To effect these changes the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 have been amended through the Foreign Exchange (Transfer or Issue of Security by a Person Resident outside India) (Tenth Amendment) Regulations, 2015 notified videNotification No. FEMA.354/2015-RB dated October 30, 2015, (c.f. G.S.R No.823 (E) dated October 30, 2015), the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations, 2016 notified vide Notification No. FEMA 361/2016-RB dated February 15, 2016(c.f. G.S.R No 165(E) dated February 15, 2016) and Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Second Amendment) Regulations, 2016 notified vide Notification No. FEMA 362/2016-RB dated February 15, 2016, (c.f. G.S.R No. 166 (E) dated February 15, 2016).

5. Authorised Dealer banks may bring the contents of this circular to the notice of their constituents and customers concerned.

6. The directions contained in this circular have been issued under section 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,

(Shekhar Bhatnagar)
Chief General Manager-in-Charge


Participation of Foreign Portfolio Investors (FPIs) in Government securities on NDS-OM platform

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RBI/2016-17/86
FMRD.DIRD.08/14.03.007/2016-17

October 20, 2016

All SGL/CSGL Account holders

Dear Sir/Madam,

Participation of Foreign Portfolio Investors (FPIs) in Government securities on NDS-OM platform

In terms of RBI circular FMRD.DIRD.06/14.03.007/2014-15 dated March 20, 2015, FPIs are currently permitted to transact in the Over-The-Counter (OTC) market for Government securities with T+2 settlement.

2. As announced in paragraph 36 of the First Bi-monthly Monetary Policy Statement for the year 2016-17 on April 5, 2016, it has been decided to allow FPIs to trade Government securities in the secondary market through the primary members of NDS-OM including the Web-module. The primary members of NDS-OM shall be responsible for settlement of the trades, which will be on T+1 basis. This facility will become available with effect from December 1, 2016.

3. The existing OTC route with T+2 settlement shall continue to be available to FPIs and subject to review.

4. All other terms and conditions prescribed in the circular, ibid, remain the same.

Yours faithfully,

(T. Rabi Sankar)
Chief General Manager

Foreign Exchange Management (Manner of receipt and payment) Regulations, 2016

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RBI/2016-17/93
A.P. (DIR Series) Circular No. 11 [(1)/14(R)]

October 20, 2016

To
All Category – I Authorised Dealer Banks

Madam/Sir,

Foreign Exchange Management (Manner of receipt and payment) Regulations, 2016

Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to A.D.(M.A. Series) Circular No. 11 dated May 16, 2000 in terms of which ADs were advised of various Rules, Regulations, Notifications/ Directions issued under the Foreign Exchange Management Act, 1999 (hereinafter referred to as the Act). In consultation with the Government of India, the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000; Foreign Exchange Management (Receipt from, and payment to, a person resident outside India) Regulations, 2000 and Foreign Exchange Management Notification (Transactions in Indian rupees with residents of Nepal or Bhutan) Regulations 2000, as amended from time to time have been repealed and superseded by the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016 notified vide G.S.R. No.480 (E) dated May 03, 2016.

Further, attention of Authorised Dealers is invited to para A.3 of Master Direction No 16/2015-16 on Export of Goods and Services and B.4 of Master Direction No 17/2015-16 on Import of Goods and Services dated January 1, 2016 respectively, as amended from time to time.

The synopsis of the new Regulations notified is as under:

2. Manner of receipt in foreign Exchange :

(1) AD bank may receive foreign exchange by way of remittance or by way of reimbursement from his branch or correspondent outside India against payment for exports from India or against any other payment in following manner :

(A) Members of Asian Clearing Union (ACU)

(i) Bangladesh, Myanmar, Pakistan, Sri Lanka and Republic of Maldives –

a) Receipt for export of eligible goods and services, through ACU mechanism i.e. by debit to the ACU Dollar/Euro account in India of a bank of the member country in which the other party to the transaction is resident or by credit to the ACU Dollar/Euro account of the Authorised Dealer maintained with the correspondent bank in that member country,

b) In any freely convertible currency for cases other than export of eligible goods and services,

c) In respect of exports from India to Myanmar, payment may be received in any freely convertible currency or through the ACU mechanism from Myanmar.

(ii) Nepal and Bhutan-

a) In Rupees

b) In respect of exports from India to Nepal, may be received in any freely convertible currency also, provided the importer resident in Nepal has been permitted by the Nepal Rashtra Bank to make payment in free foreign exchange. However, such receipts shall not be routed through the ACU mechanism.

(iii) Islamic Republic of Iran –

In all cases including receipts for export of eligible goods and services, in any freely convertible currency and/or as prescribed by Reserve Bank of India from time to time.

(B) All countries other than those mentioned in (A) above:-

(i) Receipt in rupees from the account of a bank situated in any country other than an ACU member,

(ii) In any freely convertible currency.

(2) (i) In respect of export from India, receipt shall be made in a currency appropriate to the place of final destination as mentioned in the declaration form irrespective of the country of the residence of the buyer,

(ii) Any other mode of receipt of export proceeds as prescribed by the Reserve Bank of India from time to time.

(3) Payment for export of goods / software may be received from a Third Party (a party other than the buyer) as per specified conditions.

(4) Receipt for exports may also be made in following manner:

(i) In the form of a bank draft, cheque, pay order, foreign currency notes/traveller’s cheque from a buyer during his visit to India

(ii) By debit to FCNR/NRE account in India;

(iii) In rupees from the credit card servicing bank in India against the charge slip signed by the buyer;

(iv) From a rupee account held in the name of an Exchange House with an Authorised Dealer if the amount does not exceed fifteen lakh rupees per export transaction;

(v) In accordance with the directions issued by the Reserve Bank to Authorised Dealers, where the export is covered by the arrangement between the Central Government and the Government of a foreign country or by the credit arrangement entered into by the Exim Bank with a financial institution in a foreign state;

(vi) In the form of precious metals i.e. gold / silver / platinum equivalent to value of jewellery exported by Gem & Jewellery units in Special Economic Zones and Export Oriented Units on the condition that the sale contract provides for the same and the value is declared in the relevant EDF;

(vii) In addition to (i) and (iii) above, any person resident in India may also receive any payment other than for exports by means of postal order/postal money order issued by a post office outside India.

3. Manner of payment in foreign exchange:

(1) AD bank may make payment in foreign exchange by way of remittance from India or by way of reimbursement to his branch or correspondent outside India against payment for import into India, or against any other payment in the following manner:

(A) Members of Asian Clearing Union:

(i) Bangladesh, Myanmar, Pakistan, Sri Lanka and Republic of Maldives –

a) Payment for import of eligible goods and services by credit to the ACU Dollar/Euro account in India of a bank of the member country in which the other party to the transaction is resident or by debit to the ACU Dollar/Euro account of the Authorised Dealer maintained with the correspondent bank in that member country,

b) In any freely convertible currency for cases other than import of eligible goods and services

c) In respect of imports to India from Myanmar, payment may be made in any freely convertible currency or through the ACU mechanism from Myanmar.

(ii) Nepal and Bhutan- Payment may be made in Rupees,

(iii) Islamic Republic of Iran –

In all cases including payments for import of eligible goods and services, in any freely convertible currency and/or as prescribed by Reserve Bank of India to ADs from time to time,

(B) All countries other than those mentioned in (A) above:

(i) Payment in rupees from the account of a bank situated in any country other than an ACU member,

(ii) In any freely convertible currency.

(2) In respect of imports into India;

(i) where the goods are shipped from ACU member, but the supplier is resident of a country other than member of ACU (other than Nepal and Bhutan), payment may be made in rupees to the account of a bank situated in any country other than an ACU member or in any freely convertible currency,

(ii) In all other cases, payment shall be made in a currency appropriate to the country of shipment of goods.

(iii) Any other mode of payment as may be prescribed by the Reserve Bank of India from time to time.

(3) Payments for import of goods / software may be made to a Third Party (a party other than the supplier) as per specified conditions.

(4) Manner of Payment in certain cases:

(A) Payments for import of goods may be made in foreign exchange through an international card held by him / in rupees from international credit card / debit card through the credit / debit card servicing bank in India against the charge slip signed by the importer / as prescribed by Reserve Bank from time to time, provided that the transaction is in conformity with the extant provisions including the Foreign Trade Policy in force.

(B) Any person resident in India may also make payment as under:

(i) in rupees towards meeting expenses on account of boarding, lodging and services related thereto or travel to and from and within India of a person resident outside India who is on a visit to India;

(ii) by means of a crossed cheque or a draft as consideration for purchase of gold or silver in any form imported by such person in accordance with the terms and conditions imposed under any order issued by the Central Government under the Foreign Trade (Development and Regulations) Act, 1992 or under any other law, rules or regulations for the time being in force;

(iii) a company or resident in India may make payment in rupees to its non-whole time director who is resident outside India and is on a visit to India for the company’s work and is entitled to payment of sitting fees or commission or remuneration, and travel expenses to and from and within India, in accordance with the provisions contained in the company’s Memorandum of Association or Articles of Association or in any agreement entered into by it or in any resolution passed by the company in general meeting or by its Board of Directors, provided the requirements of any law, rules, regulations, directions applicable for making such payments are duly complied with.

4. Consequent to provisions of para 3.(4) of this circular, para B.4 (iii) of Master Direction No. 17/2015-16 dated January 1, 2016 on Imports of goods and services has been amended and para B.4(iv) inserted. The amendments have already been suitably incorporated in Master Direction No. 16/2015-16 dated January 1, 2016on Exports of goods and services.

5. The new regulations have been notified vide Notification No. FEMA 14 (R)/2016-RB dated May 02, 2016 c.f. G.S.R. No.480 (E) dated May 03, 2016 and shall come into force with effect from May 02, 2016.

6. AD Category- I banks may bring the contents of the circular to the notice of their constituents concerned.

7. The directions contained in this circular have been issued under Section 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,

(Shekhar Bhatnagar)
Chief General Manager-in-Charge

Investment by a Foreign Venture Capital Investor (FVCI) registered under SEBI (FVCI) Regulations, 2000

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RBI/2016-17/89
A.P. (DIR Series) Circular No. 7

October 20, 2016

To
All Category – I Authorised Dealer Banks

Madam/Sir,

Investment by a Foreign Venture Capital Investor (FVCI) registered under SEBI (FVCI) Regulations, 2000

Attention of Authorised Dealers Category – I (AD Category – I) banks is invited to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, notified vide Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time (Principal Regulations).

2. Investment in India by Foreign Venture Capital Investors (FVCI), registered with SEBI, is governed by the provisions of Schedule 6 of the Principal Regulations. In order to further liberalise and rationalise the investment regime for FVCIs and to give a fillip to foreign investment in the startups, the extant regulatory provisions have been reviewed, in consultation with the Government of India and accordingly amendments have been carried out in Schedule 6 of Foreign Exchange Management (Transfer or Issue of security by a person resident outside India) Regulations, 2000, through Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Third Amendment) Regulations, 2016.

3. As per the Amendment Notification referred to above, any FVCI which has obtained registration under the Securities and Exchange Board of India (FVCI) Regulations, 2000, will not require any approval from Reserve Bank of India and can invest in:

a) Equity or equity linked instrument or debt instrument issued by an Indian company whose shares are not listed on a recognised stock exchange at the time of issue of the said securities/instruments and engaged in any of the following sectors:

  1. Biotechnology
  2. IT related to hardware and software development
  3. Nanotechnology
  4. Seed research and development
  5. Research and development of new chemical entities in pharmaceutical sector
  6. Dairy industry
  7. Poultry industry
  8. Production of bio-fuels
  9. Hotel-cum-convention centres with seating capacity of more than three thousand
  10. Infrastructure sector (This will include activities included within the scope of the definition of infrastructure under the External Commercial Borrowing guidelines / policies notified under the extant FEMA Regulations as amended from time to time).

b) Equity or equity linked instrument or debt instrument issued by an Indian ‘startup’ irrespective of the sector in which the startup is engaged. A startup will mean an entity (private limited company or a registered partnership firm or a limited liability partnership) incorporated or registered in India not prior to five years, with an annual turnover not exceeding INR 25 Crores in any preceding financial year, working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property and satisfying certain conditions given in the Regulations.

c) Units of a Venture Capital Fund (VCF) or of a Category I Alternative Investment Fund (Cat-I AIF) (registered under the SEBI (AIF) Regulations, 2012) or units of a Scheme or of a fund set up by a VCF or by a Cat-I AIF.

4. It is clarified that downstream investments by a Venture Capital Fund (VCF) or a Cat-I AIF, which has received investment from FVCI, shall have to comply with the provisions for downstream investment as laid down in Schedule 11 of the Principal Regulations.

5. Other salient features of the revised regulatory framework are as under:

a) FVCI may open a foreign currency account and/or a rupee account with a designated branch of an Authorised Dealer for the purpose of making transactions only and exclusively under this Schedule.

b) The consideration for all investment by an FVCI shall be paid out of inward remittance from abroad through normal banking channels or out of sale / maturity proceeds of or income generated from investment already made as per paragraph 3 above.

c) There will be no restriction on transfer of any security/instrument held by the FVCI to any person resident in or outside India.

6. An entity receiving investment directly from a registered Foreign Venture Capital Investor (FVCI) will be required to report the investment, mutatis mutandis, in form FCGPR. The necessary changes in the E-biz portal is being made and separate instructions will be issued in due course. Till such time, reporting requirements, as hitherto, shall continue.

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

8. Reserve Bank has since amended the Principal Regulations accordingly through the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Third Amendment) Regulations, 2016 which have been notified vide Notification No. FEMA 363/2016-RB dated April 28, 2016, vide G.S.R. No.465(E) dated April 28, 2016.

9. The directions contained in this circular have been issued under section 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,

(Shekhar Bhatnagar)
Chief General Manager-in-Charge

External Commercial Borrowings (ECB) – Extension and conversion

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RBI/2016-17/92
A.P. (DIR Series) Circular No. 10

October 20, 2016

To
All Category – I Authorised Dealer Banks

Madam/Sir,

External Commercial Borrowings (ECB) – Extension and conversion

Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to paragraph No. C.14, F.18 and F.19 of Annex to A.P. (DIR Series) Circular No.32 dated November 30, 2015 and paragraph No. 2.10 and 2.16 of Master Direction No.5 dated January 1, 2016 on External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers as amended from time to time. Based on experience gained, it has been decided to simplify the process of dealing with matured but unpaid ECB.

2. Under the extant ECB guidelines, designated AD Category-I banks can approve requests from borrowers for changes in repayment schedule during the tenure of the ECB, i.e., prior to maturity provided average maturity and all-in-cost are in conformity with applicable ceilings/ norms. To simplify the procedure relating to ECB, it has been decided to delegate the powers to designated AD Category-I banks to approve requests from borrowers for extension of matured but unpaid ECB, subject to the following conditions:

  1. No additional cost is incurred;
  2. Lender’s consent is available;
  3. Reporting requirements are fulfilled.

3. Further, powers are also delegated to designated AD Category – I bank to approve cases of conversion of matured but unpaid ECB into equity subject to same conditions as set out in paragraph 2 while ensuring that conversion is within the terms mentioned in paragraph C.14 of Annex to Circular dated November 30, 2015 as referred to above.

4. It should also be noted that if the ECB borrower concerned has availed credit facilities from the Indian banking system including overseas branches/subsidiaries, any extension of tenure / conversion of unpaid ECBs into equity (whether matured or not) shall be subject to applicable prudential guidelines issued by the Department of Banking Regulation of RBI, including guidelines on restructuring. Further, such conversion into equity shall also be subject to consent of other lenders, if any, to the same borrower or at least information regarding conversions shall be exchanged with other lenders of the borrower.

5. All other aspects of the ECB policy shall remain unchanged. AD Category – I banks should bring the contents of this circular to the notice of their constituents and customers.

6. The aforesaid Master Direction No. 5 dated January 01, 2016 is being updated to reflect the changes.

7. 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,

(Shekhar Bhatnagar)
Chief General Manager-in-Charge

Rupee Drawing Arrangement – Trade related remittance limit

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RBI/2016-17/91
A.P. (DIR Series) Circular No. 9

October 20, 2016

To
All Category – I Authorised Dealer Banks

Madam/Sir,

Rupee Drawing Arrangement – Trade related remittance limit

Attention of Authorised Dealer Category – I (AD Category – I) banks is invited to A.P. (DIR Series) Circular No.102 dated May 21, 2015 permitting them to regularize payments exceeding the prescribed limit under RDA provided that they are satisfied with the bonafide of the transaction

2. On a review and in consultation with Government of India, it has been decided that the permitted trade transaction, under the Rupee Drawing Arrangements (RDAs) shall not exceed fifteen lakh rupees per transaction. All other instructions issued vide A.P. (DIR Series) Circular No. 28 [A. P. (FL/RL Series) Circular No. 02] dated February 6, 2008 will remain unchanged.

3. The Reserve Bank has since amended the subject Regulations accordingly through Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016 which have been notified through notification no. FEMA 14(R)/2016-RB dated May 02, 2016 vide G.S.R No. 480(E) dated May 3, 2016. Master Direction No.2 dated January 1, 2016 is being updated, to reflect the changes. The other instructions issued vide the above mentioned circulars shall remain unchanged.

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

5. The directions contained in this circular have been issued under Section 10(4) and Section 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,

(Shekhar Bhatnagar)
Chief General Manager-in-Charge

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