Registration RNI No.

67802/98
Postal Regn. No.CHD/0001/2015-17
Posted at - MBU Chandigarh on 7th/10th
Volume - XIX No.01 January 2016

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Update
events

Contents of this Issue

BANKING POLICY : 2
• Old series bank notes - prior 2005
• Mobile banking transactions
• Cross currency futures / options
• SLR holdings under HTM
• Evidence of Imports

BANKING FEATURES : 4-8, 20

• Marginal Cost based Lending Rate
• Interest Equalization Scheme
• Masala Bonds
• Maintenance of SLR Rules
• Central KYC Records Registry
DIARY OF EVENTS : Dec-2015: 9
Those who win, are those, who think they can • Policy, Economy
• Banking Developments
Corporate & Distribution Office • Capital Markets & Insurance
1008, Sector 45-B, Chandigarh
Phone 0172 2665 623 General Awareness : 13
eMail - bankingupdate123 @ gmail.com
Multi-Option questions:15-18
www.banking update
update.. com
bankingindiaupdate Data Bank : 20

Elearning class for for Online Mock Tests

Promn/JAIIB/CAIIB e-Learning CDs
(Ongoing -See page 3) Details- Page no.7 www.nstoorbankingonline.com

Executive Editor - S. Chand Singh, Editor in Chief - Sh. N S Toor

We wish our readers, a very happy and prosperous new year 2016
2 ♦ Banking events updatE ♦ January 2016

B ANKING Old Series Banknotes : prior to 2005 Market Participants can take positions in cross-currency
futures and exchange traded cross-currency option con-
POLICY On a review of the matter, RBI decided (Dec 23, 2015)
tracts without establishing underlying exposure subject
to extend the date for exchanging the pre-2005 banknotes to June 30, 2016. to the position limits as prescribed by the exchanges.
However, from January 01, 2016, such facility will be available only at identi- The existing position limits of USD 15 million for USD-INR
fied bank branches and Issue Offices of RBI. contracts and USD 5 million for non USD-INR contracts,
Banks have been advised to facilitate the exchange of such notes without all put together, per exchange, shall remain unchanged.
causing any inconvenience to the public, whatsoever. These notes will retain AD Category-I banks can undertake trading in all permit-
their legal tender status. ted exchange traded currency derivatives within their
Further banks have been asked to stop re-issue of the pre- 2005 series Net Open Position Limit (NOPL) subject to limits stipu-
banknotes and ensure that such notes are not dispensed through the ATMs / lated by the exchanges (for the purpose of risk manage-
over counters. ment and preserving market integrity) provided that any
Priority Sector Lending – Targets and Classification for RRBs synthetic USD-INR position created using a combination
RBI issued (Dec 03, 2015) comprehensive revised guidelines on Priority Sec- of exchange traded FCY-INR and cross-currency con-
tor Lending for Regional Rural Banks to be implemented w.e.f. 1.1.2016. tracts shall have to be within the position limit prescribed
Some of the salient features of the guidelines are as under:- by the exchange for the USD-INR contract.
1. PS Lending Targets: 75% of total outstanding. When Issued transactions in Govt. Securities
2. Agriculture: 18%% of total outstanding. RBI permitted (Dec 10, 2015) scheduled commercial
3. Small and Marginal Farmers: 8% of total outstanding* banks to take short positions in 'When Issued' (WI) mar-
4. Micro Enterprises: 7.5% of total outstanding** ket for both new and reissued securities. RBI also al-
5. Weaker Sectors: 15% of total outstanding. lowed other eligible entities viz., mutual funds, insurance
(* RRBs that have not achieved the 8% sub target may achieve in a phased companies, pension funds, housing finance companies,
manner i.e. 7% by March 2016 and 8% by March 2017.) NBFCs and UCBs to take long position in the ‘WI’ market.
(**RRBs that have not achieved the 7.5% sub target may achieve in a The open position limits in the WI market have been
phased manner i.e. 7% by March 2016 and 7.5% by March 2017.) revised and will be subject to the following limits both in
Mobile Banking Transactions in India - Operative Guidelines for case of new securities as well as reissued securities:
Banks – Customer Registration for Mobile Banking 1. Primary Dealers and scheduled commercial banks :
Given the high mobile density in the country, the policy focus of RBI has been Long position - No limits, short position - Not exceeding
to encourage banks to leverage on the mobile channel for widening the ac- 5% of the notified amount
cess to banking services. Irrespective of whether the services are offered 2. Other eligible entities : Long position - No Limits,
through SMS, USSD or application channels, customer registration for mobile Short position - Not Permitted
banking is critical. Towards this end, RBI has been reiterating the need for Further, aggregate net short positions (sum of all net
simplification of procedure and greater degree of standardization in proce- short positions across all entities) in a new security will
dures relating to registering of customers for mobile banking. be capped at 90% of the notified amount and the same
Mobile Banking Registration through ATMs: National Payment Corporation of will be monitored on NDS-OM.
India (NPCI) has developed the mobile banking registration service / option on In case an entity with a net short position is unable to
the National Financial Switch (NFS) and the service is ready to be deployed on deliver securities after the auction on the settlement
ATMs of all the NFS member banks. date, the transaction will be settled as per the default
RBI advised (Dec 17, 2015) banks, participating in NFS to carry out changes settlement mechanism of CCIL.
in their respective ATM switches and enable the capability of customer regis- The requirement of reporting WI transactions on a daily
tration for mobile banking at all their ATMs latest by 31st March 2016. basis stands discontinued.
Registration through other Channels and Customer Awareness: In addition SLR Holdings under Held to Maturity Category
to the above, banks have been asked to strive to facilitate customer registra- Presently, all banks (including Regional Rural banks) are
tion for mobile banking through other channels including internet banking, permitted to exceed the limit of 25% of total invest-
IVR, phone banking, etc. As customer registration is an important pre-requi- ments under HTM category provided (a) the excess com-
site for offering mobile banking services, banks should also use multiple chan- prises only of SLR securities, and (b) the total SLR secu-
nels to create awareness among their customers regarding mobile banking rities held in the HTM category are not more than 23.50%
services and options available for customer registration. of their NDTL with effect from Jan 10, 2015, 23.0% with
Cross-Currency Futures and Exchange Traded Option Contracts effect from April 4, 2015, 22.5% with effect from July
At present, persons resident in India and persons resident outside India viz., 11, 2015 and 22.0% with effect from Sept 19, 2015.
foreign portfolio investors (FPIs) can participate in the currency futures and The SLR was reduced to 21.50% of NDTL w.e.f. Feb 7,
exchange traded currency options market in India. They can trade in US 2015. Further, it shall be progressively brought down by
Dollar (USD) - Indian Rupee (INR), Euro (EUR)-INR, Pound Sterling (GBP)-INR 0.25% every quarter till March 31, 2017. Concurrently it
and Japanese Yen (JPY)-INR currency futures contracts and USD-INR cur- shall reduce the abovementioned ceiling on SLR holdings
rency option contract in recognized stock exchanges. under HTM in alignment with the SLR requirement.
RBI permitted (Dec 10, 2015) the recognized stock exchanges to offer cross- RBI advised (Dec 10, 2015) that banks can exceed 25%
currency futures contracts and exchange traded option contracts in the cur- limit of total investments under HTM category provided:
rency pairs of EUR-USD, GBP-USD and USD-JPY and also offer exchange a. the excess comprises only of SLR securities, and
traded currency option contracts in EUR-INR, GBP-INR and JPY-INR in addi- b. the total SLR securities held under the HTM category
tion to the existing USD-INR option contract. are not more than:

(COMPILATION- SAPANDEEP TOOR & MANJOT TOOR, in Sydney, Australia - on the basis of information available on RBI Website)
 Banking events updatE ♦ January 2016 ♦ 3

CORRESPONDENCE
• 21.50% from January 9, 2016
• 21.25% from April 2, 2016;
•
•
21.00% from July 9, 2016;
20.75% from October 1, 2016;
COURSE
• 20.50% from January 7, 2017.
As per extant instructions, banks may shift investments to/from HTM with the approval
PROMOTION EXAM
of the Board of Directors once a year and such shifting will normally be allowed at the Based on latest trends of IBPS exam. A large
beginning of the accounting year. RBI decided to allow such shifting of the excess no. of bankers already succeeded by using
securities, as also direct sale from HTM category, at the beginning of every quarter the course material. If unable to attend class
when the HTM ceiling is brought down. This would be in addition to the shifting permitted room program, this is the best option.
at the beginning of the accounting year, i.e., in the month of April. Such transfer to AFS/ Course Kit : The course kit include:
HFT category as well as sale of securities from HTM category, to the extent required to (a) subject-wise basic study material,
reduce the SLR securities in HTM category in accordance with the regulatory instruc- (b) assignment to improve retention
tions, would be excluded from the 5% cap prescribed for value of sales and transfers of
(c) objective type practice exercise
securities to/from HTM category.
(d) recalled questions
Investment by Foreign Portfolio Investors (FPI) in Corporate Bonds
(e) mock test papers.
As per extant RBI guidelines, all future investments by Foreign Portfolio Investors (FPI)
Fee : May differ from bank to bank. May be
in NCDs/bonds are to be made in securities with a min residual maturity of three years.
checked before remittance). Fee to be paid
On a review, RBI decided (26.11.15) to permit FPI to acquire NCDs/bonds, which are in advance.
under default, either fully or partly, in the repayment of principal on maturity or principal
How to enrol : To enrol, advise (a) name,
installment in the case of amortising bond. The revised maturity period of such NCDs/
(b) address for correspondence (c) Email
bonds, restructured based on negotiations with the issuing Indian company, should be
address, (d) bank name, (e) scale for which
three years or more.
appearing, (f) phone / Cell number and (f)
Such investment should be within the overall limit prescribed for corporate debt from details of subjects for the exam (relevant
time to time (currently Rs. 2443.23 billion). All other existing conditions for investment course material, other than internal bank
by FPIs in the debt market remain unchanged. guidelines shall be sent).
Advance Remittance for Import of aircrafts /helicopters / other aviation
related purchases
As per extant RBI guidelines, AD Category I banks could allow advance remittance,
without bank guarantee or an unconditional, irrevocable standby letter of credit up to CAIIB/
USD 50 million, in the case of import of aircrafts/ helicopters/ other aviation related
purchases by scheduled air transport operators permitted by the Director General of
Civil Aviation (DGCA), after ensuring that the requisite approval of the Ministry of Civil
JAIIB
Aviation (MoCA)/ DGCA / other agencies in terms of the extant Foreign Trade Policy, had
Course is based on exam pattern of IIB&F. A
been obtained by the company for import.
large no. of candidate have succeeded in all 3
The Director General of Foreign Trade vide Notification dated October 9, 2015 has papers in first attempt with our study material.
announced that the approval from MoCA will not be required. (RBI direction 26.11.15)
Course Kit : The course kit include:
Import of Goods into India – Evidence of Import (a) subject-wise basic study material,
As per extant RBI policy (19.10.2003), an importer has to submit as evidence of import, (c) objective type practice exercise
(a) the exchange control copy of the Bill of Entry for home consumption; (b) the ex-
(d) mock test papers.
change control copy of the Bill of Entry for warehousing, in the case of 100% Export
Oriented Units (EOUs); or (c) Customs Assessment Certificate or Postal Appraisal Form Fee : Fee differs for different papers. Fee
as declared by the importer to the Customs Authorities. payable in advance, for which details may be
obtained by calling 01722665623 .
RBI advised AD banks (26.11.15) to consider the Bill of Entry issued by Customs Authori-
ties (in Free Trade Warehouse Zones / SEZ Unit warehouse) named as Ex-Bond Bill of How to enrol : To enrol, advise name,
Entry or by any other similar nomenclature, as evidence for physical import of goods. address for correspondence, eMail id, mobile
phone, bank name, subjects for enrolment.
Further, in cases where goods have been imported through couriers, the Courier Bill of
Entry, as declared by the courier companies to the Customs Authorities, may also be
considered as evidence of import of goods.
Bank Finance to Factoring Companies
In terms of extant RBI guidelines, banks can extend financial assistance to support the
factoring business of Factoring Companies complying with certain criteria, which, inter- DS Institute of Banking
alia, included:
• They derive at least 75% of their income from factoring activity. Office:SCO No.32, Sector 33-D,
• The receivables purchased / financed, irrespective of whether on ‘with recourse’ or Chandigarh 160 020
Phone: 0172-2665623, 09988221167
‘without recourse’ basis, form at least 75% of the assets of the Factoring Company.
email - [email protected]
The criteria regarding asset and income of factoring companies eligible for bank finance
www.banking update
update.. com
bankingindiaupdate
have been revised by RBI (26.11.15) to 50% from 75%. •
4 ♦ Banking events updatE ♦ January 2016 BANKING FEATURES
Marginal Cost Based Lending Rate not be increased except on account of deterioration in
the credit risk profile of the customer. Any such decision
To improve the efficiency of monetary policy transmis-
regarding change in spread on account of change in credit
sion, RBI advised banks (Dec 17, 2015) to move to mar-
risk profile should be supported by a proper risk profile
ginal-cost-of-funds-based determination of their Base Rate
review of customer. This stipulation is not applicable to
and follow the following guidelines to price their advances:
loans under consortium / multiple banking arrangements.
a) Internal Benchmark : i. All rupee loans sanctioned and
c) Interest Rates on Loans
credit limits renewed w.e.f. April 1, 2016 to be priced
i. Actual lending rates will be determined by adding the
w.r.t. Marginal Cost of Funds based Lending Rate (MCLR).
components of spread to the MCLR. There will be no
It will be internal benchmark for such purposes.
lending below the MCLR of a particular maturity for all
ii. The MCLR will comprise of (a) Marginal cost of funds;
loans linked to that benchmark.
(b) Negative carry on account of CRR; (c) Operating costs;
ii. The reference benchmark rate used for pricing the
(d) Tenor premium.
loans should form part of the terms of the loan contract.
iii. Marginal Cost of funds: It has two components (a)
d) Exemptions from MCLR
Marginal cost of borrowings and (b) return on networth.
i. Loans covered by schemes formulated by Govt. of India
iv. Negative Carry on mandatory CRR: It arises due to re-
wherein banks have to charge interest rates as per the
turn on CRR balances being nil. It will be calculated as:
scheme.
Required CRR x (marginal cost) / (1- CRR)
ii. Working Capital Term Loan (WCTL), Funded Interest Term
The marginal cost of funds arrived at (iii) above will be
Loan (FITL), etc. granted as part of the rectification/re-
used for arriving at negative carry on CRR.
structuring package.
v. Operating Costs: All operating costs associated with pro-
iii. Loans granted under various refinance schemes for-
viding the loan product including cost of raising funds will
mulated by Govt. of India or any Government Undertak-
be included. The costs of providing those services which
ings wherein banks charge interest at the rates prescribed
are separately recovered by way of service charges should
under the schemes to the extent refinance is available.
not form part of this component.
Interest rate charged on the part not covered under re-
vi. Tenor premium: These costs arise from loan commit- finance should adhere to the MCLR guidelines.
ments with longer tenor. The change in tenor premium
iv. The following loans can be priced without being linked
should not be borrower or loan class specific. It should
to MCLR as the benchmark for determining interest rate:
be uniform for all types of loans for a given residual tenor.
(a) Loan to banks’ depositors against their own deposits.
vii. MCLR is a tenor linked benchmark. Hence banks shall
(b) Loan to banks’ own employees including retired em-
arrive at MCLR of a particular maturity by adding the cor-
ployees.
responding tenor premium to sum of Marginal cost of funds,
(c) Advances granted to the Chief Executive Officer / Whole
Negative carry on account of CRR and Operating costs.
Time Directors.
viii. Banks are to publish the internal benchmark for the
(d) Loans linked to a market determined external bench-
following maturities: (a) overnight MCLR, (b) one-month
mark.
MCLR, (c) three-month MCLR, (d) six month MCLR, (e)
(e) Fixed rate loans granted by banks. However, in case of
One year MCLR. In addition, banks can publish MCLR of
hybrid loans where the interest rates are partly fixed and
any other longer maturity.
partly floating, interest rate on the floating portion should
b) Spread : Banks should have a Board approved policy
adhere to the MCLR guidelines.
delineating the components of spread charged to a cus-
e) Review of MCLR
tomer. The policy shall include principles:
i. Banks shall review and publish their MCLR of different
a. To determine quantum of each component of spread.
maturities every month on a pre-announced date with
b. To determine range of spread for a given category of
the approval of the Board or any other committee, to
borrower / type of loan.
which powers have been delegated.
c. To delegate powers in respect of loan pricing.
ii. Banks not having adequate systems to carry out the
Component of spread : The banks shall adopt the follow-
review of MCLR on a monthly basis, may review their rates
ing broad components of spread:
once a quarter on a pre-announced date for the first
a. Business strategy: The component will be arrived at
one year i.e. upto March 31, 2017. Thereafter, they should
taking into consideration the business strategy, market
adopt the monthly review system.
competition, embedded options in the loan product, mar-
f) Reset of interest rates
ket liquidity of the loan etc.
i. Banks may specify interest reset dates on their floating
b. Credit risk premium: The credit risk premium charged
rate loans. Banks can offer loans with reset dates linked
to the customer representing the default risk arising from
either to the date of sanction of the loan/credit limits or
loan sanctioned should be arrived at, based on an appro-
to the date of review of MCLR.
priate credit risk rating/scoring model and after taking
ii. MCLR prevailing on the day the loan is sanctioned, will
into consideration customer relationship, expected losses,
be applicable till the next reset date, irrespective of the
collaterals, etc.
changes in the benchmark during the interim.
iii. The spread charged to an existing borrower should
iii. The periodicity of reset shall be one year or lower.

Compilation : Arundeep Toor (Sydney - Australia) (Source RBI Website).

BANKING FEATURES Banking events updatE ♦ January 2016 ♦ 5
The exact periodicity of reset shall form part of terms of loan contract. Submission of Form No.15G and 15H
g) Treatment of interest rates linked to Base Rate charged to existing (Section 197A of Income Tax Act)
borrowers
i. Existing loans and credit limits linked to the Base Rate may continue till Tax payers seeking non-deduction of tax from
repayment or renewal, as the case may be. incomes are to file a self declaration in Form No.
ii. Banks will continue to review and publish Base Rate as hitherto. 15G or 15H u/s 197A of the Income-tax Act,
1961. Central Board of Direct Taxes (CBDT) on
iii. Existing borrowers will also have the option to move to the Marginal
29.09.15 simplified the format and procedure
Cost of Funds based Lending Rate (MCLR) linked loan at mutually accept-
for self declaration in Form No.15G or 15H. The
able terms. However, this should not be treated as a foreclosure of exist-
procedure for submission of the Forms by the
ing facility. deductor has also been simplified which has be-
Methodology for computing marginal cost of funds come effective from 01.10.2015.
Marginal cost of funds = (Rates offered on deposits on date of review / rate at which Manner of furnishing 15G or 15H: The dec-
fund raised) x Balance outstanding as on previous day of review as a percentage of laration may be furnished in any of the following
total funds other than equity. manners, namely:-
(a) in paper form;
Notes : 1. Deposits
(b) electronically after duly verifying through an
a) Current Deposits : The core portion of current deposits identified based on ALM electronic process in accordance with the speci-
guidelines (Oct 24, 2007) should be reckoned for arriving at the balance outstanding. fied procedures, formats and standards.
b) Savings Deposits : The core portion of savings deposits identified based on ALM Role and responsibility of the person re-
guidelines (Oct 24, 2007) should be reckoned for arriving at the balance outstanding. ceiving 15G or 15H (i.e. the deductor): The
c) Fixed Rate Term deposits various maturities should be included. deductor responsible for paying any income of
d)Floating rate Term deposits : The rate should be arrived at based on the prevailing the nature referred to in of section 197A, shall
external benchmark rate on the date of review. allot a unique identification number to each dec-
laration received by him in Form No.15G and Form
e) Foreign currency deposits to the extent used for lending in rupees, should be
No.15H respectively during every quarter of the
included. The swap/hedge cost of should be reckoned for computing marginal cost.
financial year.
2. Borrowings The particulars of declaration received by the
a) Short term Rupee Borrowings : Interest payable on each type of short term deductor during any quarter of the financial year
borrowing will be arrived at using the average rates at which such short term borrowings shall be furnished along with the unique identifi-
were raised in the last one month. cation number allotted by him, in the statement
b) Long term Rupee Borrowings - Option 1: Interest payable on each type of borrow- of deduction of tax of the said quarter.
ing will be arrived at using average rates at which such long term borrowings were The deductor shall furnish the statement of de-
raised. duction of tax referred to above containing the
Option2: The appropriate benchmark yield for bank bonds published by FIMMDA for particulars of declaration received by him during
valuation purposes will be used as the proxy rate for calculating marginal cost. each quarter of the financial year along with the
c) Foreign Currency Borrowings including HO borrowings by foreign banks (other unique identification number allotted by him irre-
than those forming part of Tier-I capital) - FC borrowings, to the extent deployed for spective of the fact that no tax has been de-
lending in rupees, should be included in computing marginal cost of funds. The all-in- ducted in the said quarter.
cost of raising foreign currency borrowings including swap cost and hedge cost would An income-tax authority may, before the end of
be reckoned for computing marginal cost of funds. 7 years from the end of the financial year in
which the declaration has been received, require
Marginal cost of borrowings : The marginal cost of borrowings shall have a weightage
the deductor to furnish or make available the
of 92% of Marginal Cost of Funds while return on networth will have the balance
declaration for the purposes of verification or
weightage of 8%.
any proceeding under the Act.
Methodology for computing Return on networth Role of the Principal Director General of
Amount of common equity Tier 1 capital required to be maintained for Risk Weighted Income-tax (Systems) : He shall specify the
Assets as per extant capital adequacy norms shall be included for computing marginal procedures, formats and standards for furnish-
cost of funds. Since currently, the common equity Tier 1 capital is (5.5% +2.5%) 8% ing and verification of the declaration, allotment
of RWA, the weightage given for this component in the marginal cost of funds will be of unique identification number and furnishing or
8%. making available the declaration to the income
In case of newly set up banks (either domestic or foreign banks operating as branches tax authority and shall be responsible for the
in India) where lending operations are mainly financed by capital, the weightage for day-to-day administration in relation to the fur-
this component may be higher ie in proportion to the extent of capital deployed for nishing of the particulars of declaration.
lending. This dispensation will be available for a period of three years from the date The Principal Director General of Income-tax (Sys-
of commencing operations. tems) shall make available the information of
The cost of equity will be the minimum desired rate of return on equity computed as declaration furnished by the person to the Prin-
a mark-up over the risk free rate. Banks could follow any pricing model such as Capital cipal Chief Commissioner or Chief Commissioner
Asset Pricing Model (CAPM) to arrive at the cost of capital. This rate can be reviewed or Principal Commissioner or Commissioner to
annually. whom the Assessing Officer having jurisdiction
to assess the person who has furnished the dec-
Marginal cost of funds = 92% x Marginal cost of borrowings + 8% x Return on
laration is subordinate.
networth
6 ♦ Banking events updatE ♦ January 2016 BANKING FEATURES
Interest Equalization Scheme for Rupee Masala bonds
Pre-shipment and Post-shipment credit Masala Bonds represent the bonds issued for rupee-
denominated borrowings by Indian entities in overseas
The Govt. approved the Interest Equalisation Scheme for markets. The International Finance Corporation (IFC), an
Pre-shipment and Post-Shipment Rupee Export Credit w.e.f investment arm of World Bank, issued Rs.1,000 crore bonds
1st April, 2015 for 5 years. The details are as follows: (which named it Masala Bonds) to fund infrastructure
(a) The rate of interest equalisation @ 3% per annum will projects in India in Nov 2014. These bonds were listed on
be available on Pre-Shipment Rupee Export Credit and the London Stock Exchange (LSE). The name Masala bonds
Post-Shipment Rupee Export Credit. was chosen to give a flavour of Indian culture and cuisine.
(b) The scheme would be applicable w.e.f 01.04.2015 for 5 The debt instruments (bonds) have been named after
years. Govt. can modify the Scheme at any time. food stuffs in the past also (Chinese bonds, named Dim-
(c) The scheme is available to all exports under 416 tariff sum bonds after a popular dish in Hong Kong, Japanese
lines [ITC (HS) code of 4 digit] and exports made by Micro, bonds named Samurai after the country’s warrior class).
Small & Medium Enterprises across all ITC(HS) codes. Benefit of issuing Masala Bonds: An Indian company or
(d) Scheme would not be available to merchant exporters. issuer of an overseas bond offering bonds in foreign cur-
(e) Banks are required to completely pass on the benefit rency runs the risk exchange price fluctuation (foreign
of interest equalisation, as applicable, to the eligible exchange risk). The weakening of the Rupee during the
exporters upfront and submit the claims to RBI for tenure of the bond can add significantly to costs at the
reimbursement, duly certified by the external auditor. time of redemption or repayment. By pricing or issuing
(f) Ministry of Commerce and Industry will place funds in bonds in Rupees, is able to pass on the exchange risk to
advance with RBI for a requirement of one month and the investors.
reimbursement would be made on a monthly basis through In addition, borrowing overseas can be relatively cheap
a revolving fund system. compared to borrowing in India, with average costs dif-
(g) All eligible exports would have to meet the criteria of ference of at least 200 basis points.
minimum processing for goods to be called as Originating Further, it offers new and diversified set of investors for
from India (as per Foreign Trade Policy 2015-20). Indian companies, and more liquidity in exchanges such
Scheduled commercial banks have been advised by RBI as London, apart from bank funding and the corporate
(Dec 04, 2015) to adhere to the following operational pro- bond market in India.
cedure for claiming reimbursement: Benefit to foreign investor: An investor buying such bond
A. Procedure for passing on the benefit of interest gains around 200 basis points above the globally accepted
equalisation to exporters: pricing benchmark LIBOR (London Inter-bank Offered Rate)
1. For the period April 1, 2015 to November 30, 2015, after hedging for foreign exchange risks. With India’s GDP
banks shall identify the eligible exporters as per the Govt. or national income rising, and projected to grow at a
of India scheme and credit their accounts with the eli- reasonably fast rate over the next few years, many over-
gible amount of interest equalisation. seas investors may like to buy into such bonds to earn
2. From Dec 2015 onwards, banks shall reduce the in- higher returns compared to the US and Europe where
terest rate charged to the eligible exporters as per RBI's interest rates are still low.
extant guidelines on interest rates on advances by the Impact : Many Indian companies with large borrowings
rate of interest equalisation provided by Govt. of India. abroad donot hedge their debt exposure or cover their
3. The interest equalisation benefit will be available from risks. From the external balance sheet management point
the date of disbursement up to the date of repayment or of view, issue of Masala Bonds will provide a natural hedge
up to the date beyond which the outstanding export as it not give risk to foreign exchange risk.
credit becomes overdue. However, the interest Investment in Masala Bonds shall be a sign of acceptance
equalisation will be available to the eligible exporters only of the Indian currency in trading and settlement overseas.
during the period the scheme is in force. This will be testing the internationalisation of the Indian
B. Procedure to claim reimbursement of benefit of inter- currency over the medium and long term.
est equalisation already passed on to eligible exporters:
1. The sector-wise consolidated reimbursement claim .......Interest Equalization Scheme for Export Credit
for the period April 1, 2015 to Nov 30, 2015 for the amount Rupees…………….. for the month ended ………….. has been
of interest equalisation already passed on to eligible ex- verified and found to be strictly in accordance with the
porters should be submitted to RBI by Dec 15, 2015. provisions of the Government scheme". Claims for reim-
2. The sector-wise consolidated monthly reimbursement bursement will be considered for settlement only after
claim for interest equalisation for Dec 2015 onwards should receipt of this certificate.
be submitted in original within 15 days from the end of 4. The claims may be sent to RBI Central Office, Mumbai.
the respective month, with bank’s seal and signed by 5. The reimbursement of interest equalisation claim will
authorised person, in the prescribed format. be made when the funds are received from Govt. of India.
3. The claims should be accompanied by an External RBI shall send a monthly report to Deptt of Commerce/
Auditor’s Certificate (with stamp and membership num- DGFT indicating reimbursement made commodity wise/bank
ber) certifying that "the claim for interest equalisation of wise, as per the prescribed format. •
Compilation : Sapandeep Toor (in Sydney - Australia) (Source RBI Website).
BANKING FEATURES Banking events updatE ♦ January 2016 ♦ 7
Practical Problems based on Banking Ombudsman Decisions
1) A customer had deposited a cheque of Rs. 24 lac in his a/c. The amount was duly eLearning
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transferred to his a/c and he withdrew Rs. 80000 on the same day after which the balance
in his a/c was Rs. 2320008. He claimed that he did not do any further transactions in the
account. On next day somebody apparently in collusion with some employee of the bank

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credited Rs.100000 to his a/c and thereafter, the entire amount of Rs. 24 lac was credited
back to the a/c of the drawer of the cheque. The bank did not take any action on his
complaint. In its reply to BO, the bank stated that there was an internal family dispute
between the complainant and his wife, who had issued the said cheque. The bank enclosed Features of CDs
a representation from the drawer of the cheque wherein she claimed that the cheque had • Explanation for each question/answer.
been fraudulently got signed by the beneficiary/complainant. BO observed that the bank • Improve understanding and retention.
had not offered any comment as to how the disputed transactions in the a/c had been • Remove confusions. .
carried out at the bank’s end irrespective of the underlying dispute between the drawer • Improve time management. Set your own
and the drawee. In a meeting with bank officials BO asked bank officials to explain whether time during practice.
the reversal of transaction was in conformity with existing banking law and practices. The • Test your preparation before Exam.
bank officials had no valid justification. The bank was advised to immediately refund entire • Practice on-line without use of internet.
amount along with interest at fixed deposit rate for the delayed period to the complainant. • Questions are shuffled when used again.
• Large no. of questions based on latest
2) The complainant had deposited a cheque for collection in the cheque drop box of his
guidelines and memory recalled questions.
bank provided in the ATM kiosk. However, the cheque amount was not credited to his
account. The bank officials informed that the cheque was stolen by miscreants from the Bank Promotion Exam - Rs.300
cheque drop box and misused. FIR about theft was lodged with police. As per extant RBI
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guidelines, in such cases where there is no fault of bank and the customer, the onus of
payment of compensation (up to a limit) lies with the collecting bank as part of Board Banking Ready Recknor - Rs.300
approved policy. BO advised the bank to pay the cheque amount along with interest at CAIIB (New Syllabus)
savings bank rate for delayed period. • Bank Financial Mgmt - Rs.300
3) Proprietor of a firm lodged a complaint with the BO office that five cheques issued in the • Advanced Bank Mgmt - Rs.300
name of his firm were deposited by his supervisor in his savings account by writing his
savings account number in the pay-in-slip and the proceeds of these cheques were wrongly • Retail Banking - Rs.300
credited to his personal savings account. The BO called for original documents and the • Risk Management - Rs.300
action taken on the earlier complaint received by the bank from the complainant. After due CAIIB (Case Studies)
examination of all the documents including the internal investigation report, it was observed
• Advanced Bank Mgmt -Rs.300
that bank was negligent in collecting and crediting the cheques drawn in the name of the
firm to the personal account of the supervisor. As the protection of Section 131 of Negotiable • Bank Financial Mgmt -Rs.300
Instrument Act was not available to the bank, an advisory was issued directing the bank to JAIIB - All three papers Rs.300 (each)
credit the amount of cheques to firm’s account. Economics Mock Test - Rs.150
4) The complainant alleged that there was a fraudulent transfer of funds through combo Book-Keeping Mock Test - Rs.150
voucher from his account to an unknown account in other bank. The complainant submitted
a copy of reply by the bank in response to his RTI query wherein the bank had categorically
stated that transfer voucher was meant for internal use of the bank and transfer of fund
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was being done on written request of the account holder/authorized person. On taking up Promotion,CAIIB/JAIIB, log in
the matter, the bank replied that the transfer of funds was made on the basis of combo nstoorBankingonline.com
voucher, which had the signature of depositor which tallied with account opening form held
on their record.
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and an internal investigation had been done and disciplinary action initiated against erring
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tallied, the bank had the mandate to debit the account. BO observed that the bank’s stand
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purported mandate on the combo voucher was not complete in as much as the name of the
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beneficiary was not proper as also the amount was mentioned only in figures and not in Contact 09814 331 661
words. BO passed an award against the bank directing to pay the value of disputed
transaction with interest at extant savings bank rate from the date of transaction till the
date of payment to the complainant.
5) The complainant alleged that his bank had withheld operations in his pension account for DS Institute of Banking
six months and deducted Rs 1,26,000 and was further demanding Rs.1,98,659 due to
inadvertent credit of excess amount by bank itself. On examination, it was observed that Office:SCO No.32, Sector 33-D,
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 R

8 ♦ Banking events updatE ♦ January 2016 BANKING FEATURES

Provided that the following securities shall not be treated as en-
Maintenance of SLR
cumbered for the purpose of maintenance of SLR assets:
RBI decided (Dec 10, 2015) to reduce the Statutory Liquidity Ratio The securities lodged with another institution for an advance or
(SLR) of scheduled commercial banks, local area banks, primary any other credit arrangement to the extent to which such securi-
(Urban) co-op banks (UCBs), state co-op banks and central co- ties have not been drawn against or availed of.
operative banks from 21.5% of their Net Demand and Time Liabili- Notwithstanding anything contained hereinabove,
ties (NDTL) to: i. Unencumbered balances maintained by a Central co-op bank with
(i) 21.25% from April 2, 2016; the State co-op bank of the State concerned, in excess of the CRR
(ii) 21.00% from July 9, 2016; balance required to be maintained by it u/s 18 of the Banking
(iii) 20.75% from October 1, 2016; and Regulation Act, 1949 read with section 56 thereof;
(iv) 20.50% from January 7, 2017 ii. Any unencumbered term deposits maintained by a Central coop
of their total NDTL in India as on the last Friday of the second bank with the State co-op bank of the State concerned; and
preceding fortnight, valued in accordance with the method of valu- iii. Unencumbered term deposits held by a State co-op bank or a
ation specified by RBI from time to time. central co-op bank with SBI or a subsidiary bank or a corresponding
Hencewith effective from the dates given above these banks shall new bank or IDBI Bank Ltd.
maintain in India, SLR assets the value of which shall not, at the shall also be deemed to be assets for calculating the percentage
close of business on any day, be less than the percentages above. specified, till March 31, 2017. However, SLR on incremental NDTL
For SLR assets: over the level as on July 25, 2014 shall be maintained by StCBs /
A. Scheduled commercial banks & local area banks: CCBs in the form of approved assets. Maintenance of SLR in the
(a) cash; or (b) gold valued at a price not exceeding the current form of approved assets on NDTL as on July 25, 2014 shall be as
market price: or (c) unencumbered investment in any of the follow- per the roadmap advised as under.
ing instruments :
(1) Dated securities of Govt. of India issued under the market March 31, 2016 : 10% of NDTL as on July 25, 2014 to be maintained
borrowing programme and the Market Stabilization Scheme ; or in assets as mentioned at (c) above
(2) Treasury Bills of the Government of India; or From April 1, 2017: Entire SLR as prescribed by RBI as on that date
(3) State Development Loans (SDLs) of the State Governments in assets as mentioned in (a) to (c) above
under the market borrowing programme:
(d) the deposit and unencumbered approved securities required, Green bonds
under Section 11 of the Banking Regulation Act, to be made with A bond is a debt instrument with which an issuer raises
RBI by a banking company incorporated outside India; money from investors. A green bond is a bond where
(e) balance maintained by a scheduled bank with RBI in excess of the issuer of the bond, publicly states that capital is
the CRR balance to be maintained by it u/s 42 of RBI Act,1934 ; being raised to fund ‘green’ projects. Green projects
The instruments referred to in items (1) to (3) above acquired from typically include those projects that relate to renew-
RBI under Liquidity Adjustment Facility (LAF), shall not be included able energy, emission reductions and so on.
as SLR securities for the purpose of maintenance of SLR assets;
The green bonds are issued by multilateral agencies
Further, the following securities shall not be treated as encum-
bered for the purpose of maintenance of SLR assets: such as the World Bank, corporations, government agen-
(a) securities lodged with another institutionfor an advance or any cies and municipalities. Institutional investors and pen-
other credit arrangement to the extent to which such securities sion funds generally invest in these bonds.
have not been drawn against or availed of; In the past, certain Indian entities (such as Indian Re-
(b) securities offered as collateral to RBI for availing liquidity assis- newable Energy Development Agency Ltd and Greenko)
tance from Marginal Standing Facility (MSF) up to the permissible issued bonds without the tag of green bonds, but the
percentage of the total NDTL in India, carved out of the required proceed were used for financing renewable energy.
SLR portfolio of the bank concerned; and In March 2015, Exim Bank of India issued a five-year
(c) securities offered as collateral to RBI for availing liquidity assis- $500 million green bond, which is India’s first dollar-
tance under Facility to Avail Liquidity for Liquidity Coverage Ratio. denominated green bond. Exim Bank proposes to use
B. Primary (Urban) co-operative banks:
the net proceeds to fund eligible green projects in
(a) Cash, or (b) Gold valued at a price not exceeding the current
countries including Bangladesh and Sri Lanka.
market price, or (c) Unencumbered investment in approved securi-
ties as defined in section 5(a) of the Banking Regulation Act, 1949 In February 2015, Yes Bank also raised Rs 1,000 crore
read with section 56 thereof: by issue 10-year Green Infrastructure bonds.
Provided that the instruments acquired from RBI under LAF shall Important of Green Bonds for India: India has an ambi-
not be included as SLR securities for maintenance of SLR assets; tious target of building 175 gigawatt of renewable en-
Provided further that the following securities shall not be treated ergy capacity by 2022 (30 gigawatt at present) which
as encumbered for maintenance of SLR assets: requires a massive funding of $200 billion. The budget
The securities lodged with another institutionfor an advance or any allocations for this have been insufficient. Further, as
other credit arrangement to the extent to which such securities per reports, the higher interest rates and unattrac-
have not been drawn against or availed of; tive terms under which debt is available in India, raises
C. State co-op bank (StCB) and Central co-op bank (CCB): the cost of renewable energy by 24-32% compared to
(a) Cash, or (b) Gold valued at a price not exceeding the current
the U.S. and Europe.
market price, or (c) Unencumbered investment in approved securi-
ties as defined in Section 5(a) of the Banking Regulation Act, 1949 In the light of these, for funding the renewable energy
read with Section 56 thereof. in India, the green bonds appear to be a good option.

Compilation : Manjot Kaur Toor (Sydney - Australia) (Source Website of RBI).

 Banking events updatE ♦ January 2016 ♦ 9
• GOVT. PROPOSES TO MAKE INDIA DEFENCE EXPORT HUB: The proposed Financial
Defence Procurement Procedure (DPP) 2015 is expected to facilitate export
promotion, making India a Global Hub for arms shipments. To achieve this, the Events
Ministry of Defence plans to establish a separate export promotion body in sterling and yen is an important milestone in China’s
collaboration with the Ministry of Commerce and Industry. The new DPP will also integration into global finances and nod to the
make India self-reliant in defence production with lower import dependence, progress it has made with the reforms. To meet the
besides the emphasis on:”Make in India”. Finally, the government wants the IMF’s criteria, China has undertaken flurry of
Defence Sector to be transformed into a Global Exporting Hub. reforms in recent months, including better access
• CBDT INKS MORE UNILATERAL APAs: The Central Board of Direct Taxes for foreigners to Chinese currency markets, more
(CBDT) has entered into 11 more unilateral Advance Pricing Agreements (APAs). frequent debt issuances and expanded Yuan trading
With this round of signing CBDT has so far entered into 31 APAs (30 unilateral hours. In this regard, RBI Governor said that
and one bilateral) An APA is an agreement between a taxpayer and the tax inclusion of Yuan in SDR Basket may lead to
authority concerning the transfer pricing method and the rate applicable to the devaluation.
taxpayers’ inter-company transactions and normally covers multiple years. While • EPFO INTRODUCED NEW FACILITIES UNDER
seven of these APAs have rollback provisions contained in them, the other four NPS: The Pension Fund Regulatory and
agreements are for future five years. Development Authority (PFRDA) have introduced
• CSS PANEL RECOMMENDATIONS ON SOCIAL WELFARE SCHEMES: The new facilities for members of the National Payment
Centrally-Sponsored Schemes (CSS) Panel headed by MP Chief Minister System. Now subscribers will be able to transfer
recommended that the schemes be divided into core of the core schemes, core funds from their investment (Tier-II) to pension (Tier-
schemes and optional schemes for determining the funding pattern. Allowing I) accounts and points of presence will be able to
states choice among optional schemes is an innovation. Depending on ease of process voluntary contributions made by any
its implementation, the same option of preferred allocation in core schemes may corporate subscriber. The government employees
also be introduced, subject to conditions. The innovative idea can be introduced who are members of the NPS will also have the
on the condition that all states mandatorily participate in all the core schemes. facility of opening investment accounts. The
• NATIONAL CONSUMER COMMISSION RULING ON CONSUMER COURT: government sector nodal offices have now been
The National Consumer Commission has ruled that when there is an allegation of provided with utility for activating the Tier-II account
fraud or forgery, consumer forums can not adjudicate the issue invoking and its operation for all government employees.
“deficiency in service”. It can hear the complaint only after the criminality has • PMAC FOR REVIVAL OF CONVERTIBLE
been established by the investigation. SECURITY ISSUANCES: The Primary Market
• SEBI ISSUES NEW LISTING NORMS FOR EXCHANGES: SEBI has issued the Advisory Committee (PMAC) has recommended that
broad guidelines for an initial public offer (IPO) by the bourses. SEBI has made listed entities may issue compulsorily convertible
it mandatory for stock exchanges to ensure that the minimum public shareholding securities for a maximum period of five years to
is at least 51%. Trading members, associates and agents can hold the balance revive the issuance of convertible securities.
49%. SEBI has also permitted listing of depositories, which will be governed by Currently, there is no such cap. These are securities
the same norms as those applicable to stock exchanges. which have features of both debt and equity. SEBI
• SEBI RELAXED DE-LISTING NORMS FOR SMALL COMPANIES: SEBI has also said that holders of convertible securities should
relaxed delisting norms for small companies. Currently, one pre-condition for also be allowed to offload their holdings to the public
de-listing is that the shares of the company should not have been traded for the akin to equity shares.
preceding year. Now, small companies, whose trading of equity shares during • GOVT. LAUNCHED “ACCESSIBLE INDIA
the 12 calendar months is less than 10% of the total number of shares of such CAMPAIGN”: The Union Finance Minister
company will also be eligible. inaugurated “Accessible India Campaign” with the
• EPFO EASES PF CLAIM NORMS: The Employees Provident Fund Organization launch of mobile-based app and web portal
(EPFO) said that Aadhar-seeded Universal Account Number (UAN) holders will, “Sugamya Bharat” which would enable citizens to
with immediate effect, no longer require employer attestation to make provident take photographs of inaccessible public places and
fund claims. Employees whose details like Aadhar number and bank account help state governments and the centre in making
number have been seeded in their UAN and their UAN has been activated , may them accessible. The Government has also
submit prescribed claim forms to their respective regional office without having introduced a reward system for proactive citizens.
to seek employer’s attestation. The Campaign aims to provide universal accessibility
• CHINA’S YUAN INCLUSION IN SDR BASKET: The decision to add the Yuan in for all, including differently-abled persons.
the Special Drawing Rights (SDR) basket alongside the dollar, euro, pound • SEBI OUTLINES ROADMAP FOR E-BOOK FOR
CORPORATE BONDS: SEBI has proposed to set
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10 ♦ Banking events updatE ♦ January 2016 Financial Events
up a platform for online sale of privately-placed corporate debt. SEBI has technology and technical know-how for owning 30%
proposed two approaches to set up the electronic book platform. In the first in the Exchange. The Exchange will collect the gold
model, the electronic book may be provided as an alternative to the existing from consumers who are willing to sell and recycle it
mechanism. Subsequently, based on the performance acceptability of such a for use within the country to bring down imports.
book, this could be made mandatory for all issuers for issuance of privately- India imports about 1000 tonnes of gold every year.
placed non-convertible debentures that are proposed to be listed. In the • SEBI CHANGES DEMAT ACCOUNT RULES: SEBI
second model, the electronic book will be made mandatory for all private decided that all demat accounts would be considered
placement issues having a threshold of Rs.500-1000 Crore in terms of the as a Basic Services Demat Account (BSDA) unless the
amount being raised. demat a/c holder specifically opts to continue with a
• FOREIGN GOVERNMENT TO TAP “MASALA BONDS”: Masala bonds are regular demat account. Depository Participants have
basically rupee-denominated bonds issued in offshore capital markets. These to asses the eligibility of the beneficial owner (demat
bonds are offered and settled in US Dollar to raise rupees from international account holder) at the end of the current billing cycle
investors for infrastructure development in India. No government has issued and convert eligible demat accounts into BSDA.
bonds in the offshore INR masala bonds market. Now British Columbia, located Finding few takers after the BSDA was introduced
in Western Canada, may become the First Foreign Government to invest and the conversion option in place, SEBI took this
onshore in India as it plans to tap the “Masala Bonds. It plans to raise at least decision with the objective of achieving wider financial
Rs.500 Crore via “Masala Bonds” in January-March next year. inclusion and to encourage holding of demat accounts.
• SEBI BARS OUTSOURCING OF DEPOSITORY-RELATED ACTIVITIES: • SUPREME COURT RULING ON BUSINESS
SEBI has said that activities such as processing of applications from depository EXPENDITURE: Supreme Court has ruled that the
participants, issuers, registrar and others, allocating International Securities interest paid by a company on borrowings from banks
Identification Number and maintaining beneficial owner data, should not be to advance money to its own subsidiary is “Business
outsourced. Depositories are entities that hold securities in dematerialized Expenditure” on which tax deduction can be claimed.
form and operate through a network of depository participants. Depositories • INSURANCE BUREAU LAUNCHES HOSPITAL
have three months time to implement the system. REGISTRY: The Insurance Information Bureau of
• FINMIN TO SET UP BANK BOARD BURAEU: The Finance Ministry is to India has launched a registry of 32, 651 unique
start the process of setting up the proposed Bank Board Bureau, the first hospitals called the Registry of Hospitals in Network
step towards a holding company structure for state-run banks by the end of of insurance to ease inefficiencies in claim settlements.
this month. A search committee which includes RBI Governor will shortlist six This portal will provide an electronic exchange of
candidates and a chairman for the part time body which will take over the medical records between hospitals and insurance
selection process for public sector banks and also discuss their business companies to ensure faster claims processing. This
strategy. The whole process will be completed by February 2016. The will also facilitate national state, regional level
government will transfer its stake in state-run banks to the proposed Bank analytical reporting on health-care such as
Investment Committee, which will help raise capital for banks and reduce the geography-based trends, patterns of disease
government stake to below 51%. occurrence and cost patterns which will help
• GOVT. BONDS TO BE ISSUED UNDER UDAY SCHEME: Last month the determine standardized treatment costs.
Cabinet cleared the Ujwal Discom Assurance Yojna (UDAY) –a restructuring • GOVT. TRIMS MARKET BORROWING TARGET:
package to rescue stressed power distribution utilities. As of March 2015, The Government has trimmed its Market Borrowings
discoms had accumulated losses of around Rs.3.8 Lakh Crore and debt of target for the second half of the fiscal by Rs.15, 000
nearly Rs.4.3 Lakh Crore. As per UDAY Scheme, discoms will pass on their Crore. The gross market borrowings have been
debt to states over a two year period. In turn, states will issue Non-SLR adjusted down by Rs.15, 000 Crore to take into
Bonds either in the market or directly to the bank/ financial institution with an account expected government borrowings through
interest rate not more than the bank’s base rate plus 0.1%. Sovereign Gold Bonds and Gold Monetization Scheme.
• LCR TO IMPACT PROFITABILITY OF BANKS: According to India Ratings The Centre plans to raise Rs.2.49 Lakh Crore in the
and Research, the introduction of liquidity coverage ratio (LCR) is a positive second half of the fiscal out of gross borrowings
step for the banking sector but it could come at a high transition cost. LCR is target of Rs.6 Lakh Crore. Of this, it plans to raise
a regulatory requirement for banks to set aside a certain amount of highly- Rs.2.34 Lakh Crore through government securities.
liquid assets, such as cash or treasury bonds, to meet short term liquidity • NHB UNVEILS SPECIAL REFINANCE PACKAGE
disruptions. FOR TAMIL NADU: Housing Finance Regulator
• CHINA PERMITS YUAN CONVERTIBILITY ON CAPITAL ACCOUNT: China National Housing Bank has unveiled an Rs.100 Crore
has allowed Yuan convertibility on the capital account within $10 million in Special Refinance Package to provide relief to people
three Free Trade Zones. The move came less than two weeks after the in flood-affected areas of Tamil Nadu. Under the
Renminbi (RMB) was admitted by the International Monetary Fund into its package, Rs.100 Crore has been earmarked at a
Special Drawing Rights basket alongside the dollar, euro, pound sterling and concessional interest rate of 6.5% a year to housing
yen on November 30. China, two decades ago also had permitted RMB finance companies for providing refinance assistance
convertibility but almost all capital account transactions are under varying to individuals. Both existing and new home loan
degrees of control. The guidelines encourage banks in the free trade zones borrowers can make use of this special package.
to deal with transactions between RMB and foreign exchange derivatives. • GOVT. TO DISPENSE WITH PLAN AND NON-PLAN
• INDIA’S FIRST GOLD SPOT EXCHANGE LAUNCHED: The India Bullion SPEND CLASSIFICATION: After shuttering the
and Jewellers Association with the Bombay Stock Exchange (BSE) is to launch Planning Commission, the Government is considering
the country’s First Gold Spot Exchange. After getting regulatory approval, to drop the Plan and Non-Plan Spend classification in
the exchange may commence trading in April 2016. BSE will provide the the budget. The budget also has “capital” and
 Banking events updatE ♦ January 2016 ♦ 11

“revenue” spending classification, which the finance ministry feels is better able position it has been revealed that Tamil Nadu has
to link expenditure to outcomes. An expert committee headed by C.Rangrajan topped the States of the country having received
had also in 2011 proposed that the distinction between plan and non-plan the maximum claims.
expenditure be abolished for both the Centre and the States. • PAN MADE MANDATORY FOR ALL
• COMPUTER-BASED SCRUTINY TO BE USED BY CBDT: The process of TRANSACTIONS: The Finance Ministry has made
selecting tax cases is being replaced by a system-based centralized approach. mandatory to furnish PAN for all transactions over
For the past several years, the process of selecting of cases for scrutiny on a Rs.2 Lakh from January 1, 2016. CBDT has also
random basis has been dispensed away with. Instead, CBDT has devised a amended the reporting requirement of PAN for
system-based in a centralized manner through CASS (Computer Assisted Scrutiny other specified transactions. Pan will be mandatory
Selection) whereby the selection is made on the basis of detailed analysis of risk for all transactions of immovable property of over
parameters and 360 degree data profiling of tax payers. Rs.10 Lakh from the earlier limit of Rs.5 Lakh. It
• PARLIAMENTARY PANEL FOR HUB OF INSTITUIONAL ARBITRATION: will also be required for all term deposits of over
The Parliamentary Panel headed by EM Sudarshna Natchappan recommended Rs.50, 000 in not only banks but also in co-operative
that institutional arbitration with accredited arbitrators may be provided to the banks, post offices, NBFCs. Further, PAN will also
commercial entities so that they could avail themselves in India the route of be mandatory for opening of an account (Except
either commercial court or arbitration for resolving their commercial disputes. basic account) in any bank including co-op bank.
The report of the panel highlighted that most of the commercial entities prefer PAN will no longer be required for installation of
international arbitration available in Singapore, London and Dubai. The committee telephone or cell-phone connection.
also said that the award of the arbitration should be binding on the parties • IMGC TO RBI TO INCREASE LTV TO EXPAND
without giving the option to the parties to challenge the same in the court of law. HOSING FINANCE: India Mortgage Guarantee
• CBDT SIMPLIFIED ONLINE TAX RECTIFICATION: In a move aimed to helping Corporation (IMGC) is the sole provider of
tax payers, the Central Board of Direct Taxes (CBDT) has simplified the process mortgage guarantee in the country. Till date, IMGC
of online rectification of incorrect tax deducted at source (TDS) details filed in the has signed with only four lenders- ICICI Bank,
income tax return. A new facility has been provided for pre-filling of TDS schedule Dewan Housing Finance, Reliance home Finance
while submitting the online rectification request on the e-filing portal for easy and First Home for this facility. Their next target is
correction and updating of such details. to bring Public Sector Banks into their fold. They
• GOVT. TO EMPOWER BBB TO SELECT AUDIT FIRMS FOR PSBs’: The have asked RBI to increase the loan-to-value (LTV)
government is likely to empower the proposed Bank Board Bureau (BBB) to select ratio so as to expand the market for housing
Audit Firms for Public Sector Banks as part of its larger initiative to strengthen finance. They have advised RBI for allowing LTV
their corporate governance practices. At present, individual public sector banks to go up to 90% so long as there is a mortgage
(PSBs) choose their auditors themselves from a list of approved firms by RBI. guarantee along with the loan product. They want
• CBDT REVISES MONETARY LIMITS FOR APPEALS: In order to cut down on RBI to restrict this facility to first time home
frivolous litigation and taxpayers grievances, CBDT has issued fresh directives buyers.
revising the monetary limits for the taxmen to appeal at two important legal • SUPREME COURT RULING ON RTI TO BANKS:
forums- ITAT and high courts. It has asked the Income Tax Department to go into The Supreme Court has ruled that RBI and
appeal at the Income Tax Appellate Tribunal (ITAT) only when the tax effect in commercial banks can not hide routine information
question is Rs.10 Lakh (Earlier Rs.4 Lakh) and Rs.20 Lakh from earlier Rs.10 Lakh such as the names of top defaulters, the losses
if the appeal is to be filed in high court. Monetary limit for filing appeals or Special suffered by banks and details of action taken
Leave Petitions in Supreme Court has been kept unchanged at Rs.25 Lakh. against erring banks, sought by the public under
• SUPREME COURT RULING ON BOUNCED CHEQUES: The Supreme Court has the Right to information Act. RBI and commercial
ruled in a large number of appeals that in case of bounced cheques, the complaint banks hitherto denied such information held in a
could be filed in the place where the cheques were dishonored and not where it fiduciary capacity and could not be revealed to
was issued. This principle which was laid down by the court last year has now the public at large.
been affirmed in the Negotiable Instruments (Amendment) Ordinance this year. • EUROPEAN UNION OKAYS TOUGH DATA
This rule has come into effect with retrospective effect from June this year. PROTECTION RULES: The European Union
• EDUCATION LOAN –INTEREST SUBSIDY CLAIMS: The Central Scheme of approved long-awaited Data Protection
Interest Subsidy on Education Loans was announced in the Union Budget 2014 Regulations to give people a greater say over
and has now been closed in accordance with the instructions from the Ministry of how their digital information is collected and
Finance. Canara Bank has been the Nodal bank for its implementation. The managed. Among the policies approved are to
subsidy has been released to all member banks as per claims. From the total allow national watchdogs to issue fines potentially

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12 ♦ Banking events updatE ♦ January 2016
totaling the equivalent of hundreds of millions of dollars if 36% by lending on the platform.
companies misuse people’s online data, including obtaining • BONUS BILL FOR WORKERS PASSED: The Lok Sabha passed the
information without people’s consent. Rule also says obliging Payment of Bonus (Amendment) Bill 2015 allowing doubling the wage
any one under 16 to obtain parental consent before issuing ceiling for calculating bonus to Rs.7000 per month for factory workers
popular services like Facebook, Snapchat and Instagram with establishments with 20 or more workers with benefits being
unless any national government lowers the age limit to 13. applicable retrospectively from April 2014. It also enhanced the
• CVC ALERTS BANKS ON FAKE CA CERTIFICATES: The eligibility limit for payment of bonus from Rs.10, 000 per month to
Central Vigilance Commission has asked public sector banks Rs.21, 000 per month.
to put in place a system to check the rising instances of fake • FINMIN RELEASES DRAFT GUIDELINES FOR POEM: The Finance
Chartered Accountants Certificates being submitted by Ministry (FINMIN) has issued the draft guidelines for deciding the
borrowers to get loans. To tackle this menace, the Commission “Place of Effective Management” (POEM) of a company. The proposed
has suggested that the banks check with the chartered guideline would be used to determine whether a company qualifies
accountants whether they have actually certified the as a resident taxpayer. POEM means a place where key management
borrowers’ balance sheets and profit & loss accounts. Further and commercial decisions that are necessary for the conduct of the
it has recommended that the Institute of Chartered business of an entity as a whole are, in substance, made. Since
Accountants of India make available an online directory of its “Residence” is to be determined on year to year basis.
members to banks. This will help bankers to easily get in • CBDT INSTRUCTIONS TO ITS STAFF ON MAT: The Central Board
touch with the CAs to confirm the genuineness of the of Direct Taxes (CBDT) issued new instructions to its field authorities
certificates presented at the pre-loan sanction stage. detailing the situations in which Minimum Alternate Tax (MAT) would
• SEBI ISSUES PROCEDURAL NORMS FOR not apply on foreign companies for the period prior to April 1, 2015.
INFRASTRUCTURE INVESTMENT TRUSTS: SEBI has The CBDT has now reiterated that with effect from April 1, 2001 the
unveiled procedural guidelines for infrastructure investment MAT provision in income tax law will not apply to a foreign company
trusts. Accordingly, investment managers can allocate only including a foreign institutional investor/ foreign portfolio investor so
up to 60% of the qualified institutional buyer (QIB) portion to long as certain conditions are met.
anchor investors. At least two anchor investors should be • RBI ON BITCOIN FOR TRANSFORMATION OF FINANCIAL
allowed on a discretionary basis for allocation of up to Rs.250 MARKETS: Bitcoin, a form of digital currency is looked with suspicion
Crore in the IITrusts and should have at least five anchor across the world. RBI in its Financial Stability Report said that the
investors in case the amount exceeds Rs.250 Crore. The block-chain technology underlying Bitcoin has the potential to bring
investment manager should appoint one or more merchant about a major transformation in the financial markets. Bitcoin is an
bankers with one being a lead merchant banker. The innovative payment system which gets created electronically using
investment manager should also appoint other intermediaries complex logarithms. It is not held in a physical form but in an electronic
in consultation with the lead merchant banker to carry out format. Movement of currency is not monitored by any Central Bank.
the obligations relating to the issue. • RBI TELLS PSBs ON DIVIDEND POLICY: RBI said it is imperative
• BILL FOR INSOLVENCY AND BANKRUPTCY CODE 2015 that Public Sector Banks (PSBs) approach their dividend decisions as
INTRODUCED IN LOK SABHA: A bill to consolidate and strategic business decisions which are in keeping with their objective
amend all laws relating to insolvency resolution so as to tackle of shareholder wealth maximization. PSBs pay out significant amounts
the issue of undue delays has been introduced in the Lok as dividend to the government and other shareholders which have
Sabha. The bill has been introduced as Money Bill which means no relevance to their balance sheet and capital planning. RBI said
Rajya Sabha can not reject or amend it once it is passed by the payout also reveals a cross-subsidisation by better banks (given
the Lok Sabha. The proposed legislation fixes a time limit of their relatively higher payouts but a disproportionately higher capital
180 days extended by a further 90 days for completion of infusion into weaker banks by the government).
the corporate insolvency–resolution process. The current • GOVT. EASED AUDIT RULES ON CORPORATE FRAUDS: The
system is delay-ridden and it takes 5 to 15 years for lenders Corporate Affairs Ministry has said that the statutory auditors will
to recover money in the event of corporate default. now have to mandatorily report to the Centre all corporate frauds
• EU WATCHDOG FOR SOFTER BONUS REGIME: European amounting to Rs.1 Crore and above. First, the auditor has to inform
Union watchdog, European Banking Authority said that the the Board or Audit Committee and seek their views within 45 days.
staff in smaller banks should not have to defer large chunks On receipt of audit committee’s views the auditor would have to
of their bonuses over several years. After the 2007-09 send his report within 15 days. For frauds involving amounts lower
financial crises the European union introduced rules to stop than Rs.1 Crore, the auditor now needs to report the matter only to
bankers from taking excessive risks to win bigger bonuses the Audit Committee of the company. The reporting would have to
and because state bailouts of failed banks had angered tax be done not later than two days of his knowledge of the fraud. Prior
payers. At least 40% of a bonus must be deferred for at to this move, the Company Law Board required statutory auditors to
least three years with half of the deferred portion paid in report to the Centre all frauds by the company or against it.
shares or bonds rather than cash . • GOVT. ALLOWED 41 MORE HFCs TO USE SARFAESI LAW: The
• RBI PLANS GUIDELINES FOR PEER-TO-PEER LENDING: Finance Ministry has allowed 41 more Housing Finance Companies
RBI is working on guidelines for Peer-to-Peer lending (HFCs) to use the SARFAESI law for recovery of their dues and
arrangements offered by online platforms. This form of lending reduce NPA. Taken together with the 19 HFCs notified earlier for
is popular among individual borrowers and lenders, especially using the law almost the entire housing finance industry regulated
in the small and medium enterprises segment. These lenders by the National Housing Bank can now use this law for recovery of
do not need regulatory approval and are not registered as their dues. SARFAESI Act 2002, empowers the banks and financial
NBFCs. These portals connect lenders and borrowers for a institutions to attach pledged assets of the borrower in the event of
fee. Investors earn returns of anything between 12% and the non-repayment of dues by the borrower.
 Banking events updatE ♦ January 2016 2015 ♦13

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14 ♦ Banking events updatE ♦ January 2016 DIARY OF EVENTS
Mexico. • The State in which country’s First Medical Devices Park
• The country which has been rated 6th in number of total annual research is to be set up under the “Make in India” Mission-
papers published and contributed 4.36% of the global output in 2013- India. Gujarat.
• The Rating agency which has affirmed India’s BBB rating with a stable outlook • The country whose Rating has been cut to “Junk” with
while pegging the country’s growth rate at 7.5% this fiscal- FITCH. “Negative Outlook” by FITCH- Brazil.
• The Accounts in which PM Narenra Modi came 3rd while Amitabh Bacchan • The city in India which has been rated 6th Most
tops-Twitter Account. Expansive Office Hub in the World- Delhi’s Connaught
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Kings and Rajasthan Royals for two years due to Sport Fixing Scandal- Indian service- Axis Bank.
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• Manila-based Bank, which will provide $1 Billion loan to Power Grid Corporation appointed as – Chief Information Commissioner.
for high voltage transmission lines in Punjab and Rajasthan-ADB. • Noble Laureate who has been made a “Saint” of Roman
• UPA’s Scheme, which has been scrapped by the present Government- Scheme Catholic Church- Mother Teresa.
of Performance Monitoring and Evaluation System • The company which has made to the Top 50 League of
• The country which will allow millions of unregistered citizens to obtain documents the World’s Biggest Companies in terms of R&D
vital to secure education and health services long denied to them- China. investments- Tata Motors.
• The country with whose funds and technology, India is to set up its First • The company whose 116 employees are drawing more
Bullet Train Project connecting Mumbai and Ahemdabad at cost of Rs.98, 000 than Rs.1 Crore in annual remuneration but 70% of
Crore-Japan. them are Koreans- Samsung India.
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from Uttrakhand’s Gomukh to Hardwar- National Green Tribunal. Abdelrahman) since 1972- Iraq.
• Two States whose enacted laws have been upheld by the Supreme Court on • The Tribunal which has banned both President and
confiscation of wealth of corrupt babus, politicians even at the pre-trial Vice-President of FIFA for 8 years from all football
stage-Bihar and Odisha. activity due to high scandal- Ethics Tribunal of FIFA.
• The Apex Direct Taxes Body, which has simplified norms of pre-filing TDS data • The country which allowed couples to have two
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global warming to well below 2 degrees celsus- UN Climate Change Conference. • The Bill, which passed by Rajya Sabha, provides for
• The platform which India plans to set up exclusively for the country’s the treatment of juveniles between the ages of 16
manufacturers and exporters-Business to Business International Ecommerce and 18 as adults when accused of heinous crimes
Platform. such as murder and rape- Juvenile Justice Bill.
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and Bankruptcy Code 2015.
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• As per UNDP Report, the index in which India placed low at 130th rank- Human
prices in the domestic market- Onions.
Development Index.
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• Government has appointed a Judicial Panel on “One Rank One Pension” which
is to be headed by- Justice L. Narasmha Reddy (Retd. Chief Justice of Patna • The Car which has won the 2016 Trophy- Hyundai
High Court). Creta.
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Reconstruction and Development- China. and which to be off-roads as per Govt. Notification
likely to come soon- Commercial Vehicles.
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Zealand. • The country whose Parliament Building has been
inaugurated by PM Narendra Modi on 24 th —
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Afghanistan.
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SUVs and cars with an engine capacity beyond 2000cc till March 31, 2016-
new states- Sudan.
Delhi.
• The popular social networking platforms, which the
• The country in whose Presidential Election, First time, a run-off ballot is being
Employees Provident Fund Organization launched
held because of 115 islands covering 93000 people- Seychelles.
during Good Governance Day Event-Facebook and
• The Internet Giant who is to provide free WiFi at 100 Railway Stations in India
Twitter.
by 2016-end- Google.
• China-backed Bank in which India , a Founder Member
• The corporation which is the sole provider of mortgage guarantee in the
with other 56 countries has been established in Beijing
country- India Mortgage Guarantee Corporation.
on 25th- Asian Infrastructure Investment Bank.

Compilation : SP Sharma & Sapandeep Toor Source : Financial Newspapers, Financial News-Magazines & Financial and Institutional Web-sites
 Banking events updatE ♦ January 2016 ♦15
Reverse Repo Auctions of RBI are 14 As per RBI guidelines of Dec 2015, the
MOCK-TEST
meant to: lending to agriculture sector within
PAPER a absorb excess liquidity priority sector for Regional Rural Banks
Questions based on RBI Policy b regulate liquidity w.e.f 1.1.2016 should be:
01 The pre-2005 banknotes can be c inject liquidity a 18% of ANBC
exchanged at identified bank branches d control liquidity b 18% of total outstanding
and Issue Offices of RBI up to: 08 Banks can shift investments to/from c 25% of ANBC
a 01.01.2016 held to maturity (HTM) with the d 25% of total outstanding
b 01.04.2016 approval of the Board of Directors: 15 As per RBI guidelines of Dec 2015, the
c 30.06.2016 a in the beginning of every quarter lending to small and marginal farmers
d 30.09.2016 b in the beginning of financial year within agriculture sector for Regional
02 As per RBI guidelines, the residents and c twice during the financial year Rural Banks w.e.f 1.1.2016 should be:
eligible non-resident market participants d discretion of bank concerned a 8% of ANBC
can trade in (1) US Dollar (USD) - Indian 09 The rate of interest equalisation b 8% of total outstanding
Rupee (INR), (2) Euro (EUR)-INR, (3) available on Pre-Shipment Rupee c 7.5% of ANBC
Pound Sterling (GBP)-INR (4) Japanese Export Credit and Post-Shipment Rupee d 7.5% of total outstanding
Yen (JPY)-INR currency futures contracts Export Credit is ___ % per annum: 16 As per RBI guidelines of Dec 2015, the
a 1 only a 2% lending to micro enterprises within
b 1 and 3 only b 3% priority sector for Regional Rural Banks
c 1, 3 and 4 only c 4% w.e.f 1.1.2016 should be:
d 1 to 4 all d 5% a 8% of ANBC
03 The recognized stock exchanges can offer 10 The duration of interest equalisation b 8% of total outstanding
cross-currency futures contracts and scheme for Pre-Shipment Rupee Export c 7.5% of ANBC
exchange traded option contracts in the Credit and Post-Shipment Rupee Export d 7.5% of total outstanding
currency pairs of (1) EUR-USD, (2) GBP- Credit is ____ w.e.f 01.04.2015: 17 As per RBI guidelines of Dec 2015, the
USD (3) USD-JPY (4) USD-INR). lending to weaker section for Regional
a 5 years
a 1 only Rural Banks w.e.f 1.1.2016 should be:
b 4 years
b 1 and 3 only a 15% of ANBC
c 3 years
c 1, 2 and 3 only b 15% of total outstanding
d 1 year
d 1 to 4 all c 10% of ANBC
11 The benefit of interest equalisation
04 Statutory Liquidity Ratio (SLR) shall be scheme for Pre-Shipment Rupee Export d 10% of total outstanding
20.5% of net demand and time liabilities Credit and Post-Shipment Rupee Export 18 The rates of interest on loans and
of banks w.e.f: Credit is not available to which of the advances given by banks w.e.f.
a 02.04.2016 following: 01.01.2016 are to be determined with
b 09.07.2016 a SEZ exporters reference to:
c 01.10.2016 b Warehouse exports a bench mark prime lending rate
d 07.01.2017 c merchant exporters b marginal cost of funds based lending
05 To comply with the requirement of d gold card holder exporters rate
investment in SLR assets, the following 12 Banks can submit the claims to RBI c base rate
securities are included in unencumbered under interest equalisation scheme for d bank rate
investment (1) dated securities of Govt. Pre-Shipment Rupee Export Credit and 19 Which of the following is not a
of India (2) Treasury bills of Govt. of India Post-Shipment Rupee Export Credit on component of marginal cost of funds
(3)State Development Loans (4) high ______ basis, within ____: based lending rate (MCLR) which is an
rated corporate security a quarterly, within 20 days internal benchmark:
a 1 only b monthly, within 15 days a marginal cost of funds
b 1 to 3 only c half-yearly, within 25 days b negative carry on account of CRR and
c 1, 3 and 4 only SLR
d annually, within 30 days
d 1 to 4 all c operating cost
13 As per RBI guidelines of Dec 2015, loans
06 Under liquidity adjustment facility, the to priority sector target for Regional d tenor premium
Repo Auctions of RBI are meant to: Rural Banks w.e.f 1.1.2016 is : 20 Negative carry on the mandatory CRR
a absorb excess liquidity a 60% of ANBC which arises due to return on CRR
b regulate liquidity b 60% of total outstanding balances being nil, is calculated as under
c inject liquidity c 75% of ANBC for the purpose of marginal cost of funds
d control liquidity d 75% of total outstanding based lending rate (MCLR):
07 Under liquidity adjustment facility, the a required CRR x marginal cost / (1 – CRR)
Disclaimer : We have taken every care to provide information, we believe to be accurate We strongly believe that the subscribers
and reliable and do not assume responsibility of any kind nor shall be liable for losses & are the best consultants, we have. Based
consequence arising from use thereof. Since this information is based on the published on their feed back, we keep on redesigning
reports mostly, correctness or otherwise thereof may be verified by the user with the and restructring this publication. Kindly
original sources, in advance. .......................................................................Editor send your suggestions and views.

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16 ♦ Banking events updatE ♦ January 2016
b required CRR / marginal cost / (1 – CRR) provisions of which of the following Act, the following will be borne by the
c required CRR + marginal cost / (1 – CRR) as amended from time to time? importer, as per the contract, in this
d required CRR x marginal cost / (1 + CRR) a RBI Act 1934 case:
21 Under the marginal cost of funds based b Prevention of Money Laundering Act a cost of goods
lending rate (MCLR), the banks are 2002 b freight
required to publish the internal c Banking Regulation Act 1949 c insurance
benchmark for the following maturities d Negotiable Instruments Act 1881 d a and b
(1) overnight MCLR (2) one-month MCLR 27 Banks can extend financial assistance e b and c
(3) three month MCLR (4) six month to support the factoring business of 32 Foreign Direct Investment (FDI) up to
MCLR Factoring Companies complying with 100 per cent is permitted under
a 1 only certain criteria, which, inter-alia states Government approval route for
b 1 and 3 only that they derive at least ____ of their investments in existing companies in
c 1, 3 and 4 only income from factoring activity. pharmaceuticals sector, which is called:
d 1 to 4 all a 80% a brown-field investments
22 The following categories of loans can b 75% b green-field investments
be priced without being linked to MCLR c 60% c yellow-filed investments
as the benchmark for determining inter- d 50% d red-field investments
est rate: (1) Advances to banks’ de- Recalled Questions 33 A usance bill has been accepted by the
positors against their own deposits. (2) 28 ECS (Credit) payments can be initiated drawee and falls due on January 27,
Advances to banks’ own employees in- by any institution (called ECS user) : 2004, after allowing days of grace.
cluding retired employees. (3) Advances a which has to make small payments These 3 day’s of grace for payment of
granted to the Chief Executive Officer / b which has to recover amount of bills bills are allowed as per Section...of NI
Whole Time Directors. (4) Loans linked repeatedly Act:
to a market determined external bench- a 22
c which has to make large size payments
mark. b 23
in small numbers
a 1 only c 24
d which has to make bulk or repetitive
b 1 and 3 only payments of small amounts to a number d 25
c 1, 3 and 4 only of beneficiaries. e 26
d 1 to 4 all 29 As per RBI guidelines on Framework for 34 A forex bill discounted by the bank was
23 Banks are to review and publish revitalizing distressed assets, in cases returned back unpaid. The amount will
their Marginal Cost of Funds based where banks/notified NBFC fail to report be recovered from the party by using
Lending Rate (MCLR) of different SMA status of the accounts to CRILC or the following rate:
maturities every ___ on a pre- resort to methods with the intent to a bills buying rate
announced date with the approval of conceal the actual status of the b TT selling rate
the Board or any other committee to accounts or evergreen the account,
which powers have been delegated. c bills selling rate
banks/notified NBFCs will be subjected
a fortnight d TT buying rate
to accelerated provisioning of ______%
b month 35 KYC guidelines have been issued by RBI
for an account classified as doubtful
under provisions of :
c quarter upto one year:
a Section 21 of Banking Regulation Act
d six months a 25% for secured balance and 100% for
b Section 35 of Banking Regulation Act
24 Banks can reset the interest rates under unsecured balance
c Section 35 A of RBI Act
Marginal Cost of Funds based Lending b 30% for secured balance and 100% for
Rate (MCLR) system, for which the unsecured balance d Section 35 A of Banking Regulation Act
periodicity can be: c 40% for secured balance and 100% for 36 You are approached to allow operation
a one year or lower unsecured balance in the account of an insane person.
Whom would you allow the operation ?
b 6 months or lower d 100% for the entire balance.
a Guardian appointed by court
c 3 months or lower 30 A customer Y, deposits Rs.3000 with the
d 1 month or lower bank for remittance by way of b A near and dear relative
25 Under Marginal Cost of Funds based telegraphic transfer for credit of Z’s c His wife, if alive
Lending Rate (MCLR) system, the account at other station which the bank d His son or daughter
marginal cost of borrowings shall have has done. The relationship between Z e any of the above
a weightage of ___ % of Marginal Cost and bank in this case is that of a 37 In case of cash credit which of the
of Funds while return on networth will a principal and agent following is correct statement:
have the balance weightage of ___%. b beneficiary and trustee a in hypothecation ownership is with the
a 50%, 50% c debtor and creditor bank.
b 75%, 25% d bank and a customer b in cash credit pledge, the possession
c 90%, 10% e trustee and beneficiary with the borrower
d 92%, 8% 31 For import of goods from UK, a customer c in case of hypothecation the possession
26 Govt. of India has established Central of Universal Bank enters into an Free is with the bank
KYC Records Registry (CKYCR) under on Board (FOB) contract. What among d in case of pledge the ownership remains
 Banking events updatE ♦ January 2016 ♦17
with the borrower a Rs.24000 Rs.10 lac
e in case of hypothecation ownership and b Rs.26100 45 You are incharge of loans department in
possession is with the bank c Rs. 27000 your branch. In which situation, in the
38 As per Government of India notification, d inadequate information loan accounts the interest can be debited
it is mandatory to file the particulars for 41 Ashwani, a saving bank customer of your and taken to income to increase the
registration of mortgage by deposit of branch has deposited certain shares with profits:
title deeds within _____ of creation of your branch for safe custody. This a It has become due
the mortgage with Central Electronic transaction of keeping articles in safe b It has become due and stands recovered
Registry of Securitization Asset custody is governed by: if it is NPA account
Reconstruction and Security Interest of a Indian Contract Act 1872 c It has become due and account has not
India in respect of all mortgages created b Negotiable Instruments Act been a non-performing account
on or after 31st March 2011. d b and c above
c Banking Regulation Act
a 7 days 46 A customer of your branch remits money
d Transfer of Property Act
b 15 days to one of your other branches, for credit
42 What period is available as limitation in
c 30 days case of mortgage: of the account of another person, by
d 45 days a 3 years from date of mortgage way of mail transfer order.
39 Your branch has sanctioned a bills b 12 from date of mortgage Subsequently, on 2nd day he
purchasing limit of Rs.80 lac to M/s approaches you not to credit the amount
c 12 years from the date when the
Rameshwar Hardware Limited under to the said account.
mortgage money has become due
which demand bills of exchange a The payment cannot be stopped once
d 12 years from date of loan
accompanied by Railway Receipts or the issuing branch despatches the same
e 12 years from date of loan or date or
Goods Receipts are purchased. The b The payment can be stopped at any time
mortgage, whichever lower.
company forgot to file the particulars of c The payment can be stopped at any time
the charge with Registrar of Companies 43 Within how many days does the annual
before credit to beneficiary’s account
and inspecting official has raised an return of unclaimed deposit accounts is
required to be submitted by banks to d The payment can be stopped when
objection. Which of the following amount has been credited but has not
remedies is available to the company/ RBI, following the days after close of
the calendar year: been withdrawn
bank? 47 Unclaimed deposit with a company would
a seek ROC permission who has discretion a 15 days
be shown in their balance sheet as:
to waive delay up to 270 days b 23 days
a Current asset.
b No need to file particular for such limits c 30 days
b Contingent liability
as it is in the nature of pledge by way of d 45 days
c Intangible assets
constructive possession e 60 days
d current liability
c seek permission from National Company 44 Which of the following will be considered
a micro enterprise: 48 Frauds of Rs.1 lac and above are to be
Law Tribunal which has replaced CLB.
reported to RBI on ____ within _____:
d seek permission from Ministry of a engaged in manufacturing and maximum
investment in equipment restricted to a FMR 3, 2 weeks
Company Affairs
Rs.25 lac b FMR 2, 1 week
e seek permission from Central Govt. for
waivement of delay which has full b engaged in services and maximum c FMR 1, 3 weeks
discretion investment in plant and machinery d FMR 1, one week
40 In the beginning of the financial year, restricted to Rs.10 lac 49 X received a cheque from Y, which was
the capital of a firm was Rs.24000. The c engaged in manufacturing and maximum dishonoured on July 12, 2013, for
firm earned a profit of Rs.4500 and paid investment in plant and machinery insufficiency of funds. X want to file suit
tax at 20%. The partners also withdrawn restricted to Rs.10 lac u/s 138 of NI Act. Which of the following
Rs.1500. What is the closing balance in d engaged in services and maximum is the time period, during which he can
the capital account. investment in equipment restricted to file the suit:

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 18 ♦ Banking events updatE ♦ January 2016
a within one month from July 12, 2013 b 8 paise to comply with his request ?
b within one year from July 12, 2013 c 10 paise a Can not be allowed in the account
c within one month from date of cause of d 25 paise b Nomination can be made by the person
action 55 Business firms are sanctioned working authorised to act on behalf of the minor
d within one month from sending notice to capital limits to provide finance for which c Minor himself can nominate
drawer for payment within 15 days of the following: d since nominee is going to be mother, he
50 How would you determine the status of a fixed assets, trade debtors, stocks, cash can do so
a minor person U/s 3 of Majority Act: holding 60 In terms of the recommendations of the
a Who is below age of 18 years. b fixed assets, trade debtors, stocks, Prime Minister’s Task Force on Micro,
b Who is below age of 21 years trade creditors Small and Medium Enterprises
c Who is below 18 years of age in case c pre-paid expenses, trade debtors, (Chairman: Shri T K A Nair) constituted
natural guardian is alive and below 21 stocks, cash holding by the Govt of India the banks are to
years if guardian is a person appointed d trade debtors, stocks, cash holding, achieve a _____ annual growth in
by court. trade creditors number of micro enterprise accounts.
d who declares himself that he is a major 56 The CERSAI created under SARFAESI Act a 10% b 12.5%
51 In case of a loan to an agri-clinic and 2002, is an abbreviation for which of the c 15% d 17.5%
agri-business centre, which of the following: 61 A loan account had become out of order
following is true: a Central Electronic Registry of Secured during December 2012. On this loan
a the amount of loan is restricted to Rs.5 Asset and Reconstruction of Security account, the provision as on Mar 31,
lac Interest of India 2015 would be:
b loan can be allowed to all farmers b Central Electronic Registry of a 100%
c loan is classified as direct finance to Securitization Asset Reconstruction and b 75%
agriculture Security Interest of India c 60%
d collateral security for a loan up to Rs.5 c Central Electronic Registration of d 50%
lac not to be taken Securitization Asset Reconstruction and e 40%
52 The partner of a partnership firm wants Security Interest 62 Issue of securities in the primary market
to appoint a person to operate the d Compulsory Electronic Registry of is subject to fulfillment of a no. of
account of the firm. Who should sign Securitization Asset Reconstruction and requirements stipulated by:
such mandate: Security Interest a SEBI
a All partners 57 A loan had become doubtful account as b IRDA
b Main partners on March 15, 2012. On this loan account, c RBI
the provision as on Mar 31, 2015 would
c Major partners d all the above
be at the rate of:
d All but minor 63 A current account customer of your
a 100% b 75%
e The partner who wants such branch deposits with you on Sept 30,
c 60% d 50% 2012 a cheque, dated January 22,
appointment.
e 30% 2012, issued by Govt. of India’s Ministry
53 In which of the following loan accounts,
the risk weight is the least: 58 Which kind of charge out of the following of Rural Development for collection. The
is not possible on stocks, in favour of a cheque can be collected as:
a education loan
bank: a Its validity can be 12 months
b retail loan portfolio
a pledge b Its validity can be 9 months
c house loan of Rs.85 lac with LTV of 75%
b assignment c Its validity is for ever till paid
d it is equal in all these cases
c hypothecation d Cannot be collected as its validity is
54 What is the amount of premium payable
on deposit insurance per Rs.100 per d lien limited to 3 months
annum: 59 There is a self operated FD in the name e it can be collected any time being govt.
a 5 paise of a minor, who wants to nominate his cheque
mother. What precautions you will take
Answers
Name:____________________________________________________ 01 c 02 d 03 c 04 d 05 b
SUBSCRIPTION FORM

06 c 07 a 08 a 09 b 10 a
Address:__________________________________________________ 11 c 12 b 13 d 14 b 15 b
16 d 17 b 18 b 19 b 20 a
_________________________________________________________
21 a 22 d 23 d 24 b 25 d
__________________________________________Pin ____________ 26 b 27 d 28 d 29 c 30 c
31 e 32 a 33 a 34 b 35 d
EMail Id_____________________________Mobile:________________ 36 a 37 d 38 c 39 e 40 b
DraftNo___________Date_________drawn on___________Bank, for Rs______fvg 41 a 42 c 43 c 44 d 45 d
Banking & Management Academy. PERIOD from ________ to________ 46 c 47 d 48 c 49 c 50 a
51 d 52 a 53 d 54 c 55 c
( Old Subscn No. _______ ) 56 b 57 a 58 b 59 a 60 a
61 e 62 a 63 d

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 Banking events updatE ♦ January 2016 ♦19
Revised PAN Requirement deposit) with a banking company. and merged with next item in this table
from 01.01.2016 i. Basic Savings Bank Deposit Account [Existing - Payment of Rs.5 lakh or more
excluded (no PAN requirement for opening at any one time or against a bill)
The Central Board of Direct Taxes (CBDT)
these accounts); 19.Purchases or sales of goods or services:
made it mandatory to quote PAN or General
ii. Co-operative banks also to comply Purchase/ sale of any goods or services
Index Number (GIR) on specified
exceeding Rs.2 lakh per transaction.
transactions (specified as per Rule 114B) (Existing : All new accounts.)
(Existing – no requirement)
with a view to ensure voluntary compliance 7. Installation of telephone/ cellphone
20.Cash cards/ prepaid instruments issued
of the income tax procedures. The quoting connections – Discontinued (Existing - All
under Payment & Settlement Act : Cash
PAN became mandatory with effect from instances)
payment aggregating to more than
01.11.1998. Major changes have been 8. Hotel/restaurant bill(s) C a s h Rs.50,000 in a year. (Existing – no
made in these rules wef Jan 01, 2016 by payment exceeding Rs.50,000. [Existing requirement)
recasting the list of transaction, where : Exceeding Rs.25,000/- at any one time
(by any mode of payment)]
From 1 January 2005 it is mandatory to
quoting PAN is mandatory.
quote PAN on challans for any payments
What is PAN : A PAN is a 10 character 9. Cash purchase of bank drafts/ pay
due to Income Tax Department.
alphanumeric number allotted by the orders/ banker’s cheques : Exceeding
Rs.50,000/- on any one day. (Existing - Responsibility to obtain PAN : It is
Income Tax Deptt, to a tax payer who is
Amount aggregating to Rs.50,000/- or statutory responsibility of a person
eligible to file the income tax return. First
more during any one day) receiving document relating to economic
3 characters are Alphabetic series. 4th is
10.Cash deposit with banking company : or financial transactions notified by the
status of PAN holder. 5th is the 1st
Cash deposit exceeding Rs.50,000/- in a CBDT to ensure that PAN has been duly
character of PAN holder’s name. Next 4
day. (Existing - Cash aggregating to quoted in the document.
are special sequential numbers and the
last one is alphabetic check. Rs.50,000/- or more during any one day) Minor’s bank account: Where a
11.Foreign travel : Cash payment in person, opening an account is a minor not
Who must have a PAN? (i) All existing
connection with foreign travel or purchase having any income chargeable to income-
assesses or taxpayers or persons who are
of foreign currency of an amount tax, he shall quote the permanent account
required to furnish a return of income, exceeding Rs.50,000/- at any one time number of his father or mother or
even on behalf of others, (ii) Any person, (including fare, payment to travel agent) guardian.
who intends to enter into financial [Existing : Cash payment in connection
transaction where quoting PAN is Persons without PAN/GIR - Persons
with foreign travel of an amount
mandatory (details given below). The exceeding Rs.25,000/- at any one time
who were not allotted the PAN are to make
Assessing Officer may allot PAN to any (including fare, payment to travel agent, a declaration in form No.60 giving their in,
person either on his own or on a specific purchase of forex)] the particulars of such transaction.
request from such person. Persons with agricultural income and those
12.Credit card Application to banking
company/ any other company/institution who are not in receipt of any income
Transactions where quoting PAN is
mandatory w.e.f. 1.1.2016 : As per for credit card (Existing – same). Co- chargeable to tax, have to make a
amendment to Rule 114B, it is compulsory operative banks also to comply. declaration in Form No. 61.
to quote PAN in all documents pertaining 13.Mutual fund units : Payment exceeding Non-residents who enter into any of the
to financial transactions notified from time- Rs.50,000/- for purchase. [Existing : above transactions are required to furnish
to-time by CBDT, which include the Payment of Rs.50,000/- or more for a copy of their passport.
following: purchase] Exemptions - PAN is not needed if the
1. Immovable property 14.Shares of company payment is via crossed cheque.
i. Sale/ purchase exceeding Rs.10 lakh; i. Opening a demat account; Penalty for non-compliance : Rs.500
(Existing : Amount Rs.5 lac or more) ii. Purchase or sale of shares of an unlisted to Rs.10000 u/s 272A of Income Tax Act
ii. Properties valued by Stamp Valuation company for an amount exceeding Rs.1 1961.
authority at amount exceeding Rs.10 lakh lakh per transaction.
will also need PAN.
2. Motor vehicle (other than two wheeler)
[Existing - Payment of Rs.50,000/- or
more to a company for acquiring its shares)
Diploma in
: All sales/purchases (Existing - No change)
3. Time deposit
15.Debentures/ bonds
exceeding Rs.50,000/-.
Payment Banking & Finance
It is a desirable qualification for
i. Deposits with Co-op banks, Post Office, [Existing - Payment of Rs.50,000/- or more recruitment of PO or Clerk (as per IBA).
Nidhi, NBFC companies will also need PAN; to a company/ institution for acquiring its Benefits : Enhanced chances of selection.
ii. Deposits aggregating to more than Rs.5 debentures/ bonds] • Financial & promotion benefit on joining
lakh during the year will also need PAN 16.RBI bonds : Payment exceeding a bank • It is equal to JAIIB. Hence direct
exam of CAIIB can be attempted.
(Existing - Time deposit exceeding Rs.50,000/-. [Existing - Payment of
Rs.50,000/-or more to RBI for acquiring
• 3 papers (objective-type) can be
Rs.50,000/- with a banking company)
its bonds] passed in 2 half-yearly attempts.
4. Deposit with Post Office Savings Bank
: Discontinued (Existing - Exceeding 17.Life insurance premium: Payment • No negative marking.
Rs.50,000) exceeding Rs.50,000/- in a year [Payment • Exam conducted half-yearly by IIBF.
5. Sale or purchase of securities of Rs.50,000/- or more in a year as • Eligibility is 10+2 pass.
Contract for sale/purchase of a value premium to an insurer]
exceeding Rs.1 lakh (No change) 18.Purchase of jewellery/bullion: Deleted For BEST & EASY STUDY KITS or 40
hours E-Learning. Call us 01722665623
6. Opening an account (other than time
Banking events updatE ♦ January 2016 ♦ 20 Registration RNI No. 67802/98 Postal Regn No.CHD /0001/2015-17
Licensed to be Post Without Prepayment at BPO Centre, PO Sector 17, Chandigarh
Central KYC Records Registry (CKYCR) DATA COLUMN
The Central Government vide its notification dated July 7, 2015, amended Business of Banks
the Prevention of Money Laundering (Maintenance of Records) Rules, 2005, (Rs.in cr) Apr03'15 Dec11'15
(Rules), for setting up of the Central KYC Records Registry (CKYCR). It is Aggregate deposits 891148 9184960
proposed to be established to receive, store, safeguard and retrieve the Cash in hand/RBI 420920 438150
Investments 2550180 2746580
KYC records in digital form of clients. Bank Credit: 6830960 6966110
Reporting by banks : All reporting agencies are required to file with CKYCR, -Food 69230 109390
-Non-Food 6761740 6856720
the electronic copy of KYC records of customers within 3 days after com-
Cash-Deposit Ratio 4.80 4.77
mencement of an account based relationship with the customer. These Investment-Deposit 30.03 29.90
entities will also maintain the physical copy of these records. Credit-Deposit 77.92 75.84
KYC Identifier (KYCI) for new customers: CKYCR shall process the KYC Money Stock
(Rs.in cr) Mar31'15 Dec11'15
records received from reporting entities for de-duplicating and issue KYC M3 (Out of which) 10545550 11332470
identifier (KYCI) for each client to the reporting entity, which shall com- (a) Currency with public 1386350 1501520
municate the KYCI in writing, to their customer. (b) Demand deposits-Banks 890750 936770
(c) Time Deposits - Banks 8253870 8879380
Customers having KYCI : Where a customer already having KYCI, submits (d) Other deposits with RBI 14590 14790
KYCI details to a reporting entity, such reporting entity shall retrieve KYC Sources of Money Supply
records online from CKYCR, by using KYCI. It shall not require such client (a) Net Bank credit to Govt 3006160 3375170
(b) Bank credit to Comrcl sector 7039580 7471420
to submit fresh KYC records or information or any other additional identi- (c) Net Forex assets of Banks 2250650 2445580
fication document or details. Important Banking Indicators
New / additional information from customers having KYCI : Reporting en- Statutory Liquidity Ratio 21.50% (07.02.2015)
Cash Reserve Ratio 04.00% (15.02.2013)
tity may seek new information if (1) there is change in the information
Reverse Repo Rate 05.75% (29.09.2015)
available with CKYCR or (2) the current address of the client requires Repo Rate 06.75% (29.09.2015)
verification or (3) the reporting entity considers it necessary to verify the MSF Rate 07.75% (29.09.2015)
identity or address or to perform enhanced due diligence or to build Bank rate 07.75% (29.09.2015)
Overnight LAF (of NDTL) 0.25%
appropriate risk profile of the customer. 14-days term Repo (of NDTL) 0.75%
In such cases, the reporting entity after obtaining additional information Bank of England Rate 0.50%
shall furnish the details to CKYCR, which shall update the existing records European Comm. Bank 0.25%
of the customer and inform, electronically, all reporting entities who have Capital & Money Market Indicators
Parameter end-Dec14 Dec15
dealt with that customer. Dollar-spot TT (Rs.) 62.04 66.13
Reporting entity that performed last KYC verification or sent update infor- BSE - Sensex (points) 28694 26034
mation, shall be responsible for verifying the authentication of identity NSE - Nifty(S&P CNX) 8588 7925
Foreign reserves(Million $) 314878 351107
and address of the customer. Gold /Oz in USD) 1233 1072
Use of CKYCR information : A reporting entity shall not use KYC records
obtained from CKYCR for purpose other than verification of identity or INDIAN ECONOMY-IMPORTANT PARAMETERS
address of the customer. It shall also not transfer these records to 3rd RBI's growth estimate for 2015-16 : 7.9%
parties without obtaining permission of CKYCR. GDP growth-2014-15 (revised estimate) : 7.6%
GDP@constant mkt prices (cr) : 10656925
Functions of CKYCR : GVA@2011-12 basic prices (cr) : 9857672
1. to follow operating guidelines issued by Regulator, GDP projected by Govt. for 2015-16 : 14108945
Fiscal Deficit Target (2015-16) 3.9% of GDP : 555649 cr
2. be responsible for storing, safeguarding and retrieving KYC records and
Revenue Deficit Target (2015-16) 2.8.% of GDP : 394472 cr
making such records available online, to reporting entity or Director.
Share of service sector in GVA (2014-15) : 52.7%
3. take all precautions to ensure that the e-copies of KYC records are not Share of manufacturing sector in GVA : 29.7%
lost, destroyed or tempered with and that sufficient back-up of records is Share of agriculture sector in GVA : 17.6%
available at an alternative, safe and secure place. Wholesale Price Index : -4.5%
Money Supply (M3) expansion : 12.9%
4. cause an annual audit of its controls, systems, procedures and safe-
Exports during 2014-15 : 310.5 bn
guards Imports during (2014-15) : 447.5 Bn
5. provide information only to reporting entities registered with it on pay- Export target - 2015-16 (in $) : 310 bn
ment of prescribed fee. India's share in world merchandise export : 1.70%
India's currency rating (S&P) : BB Postv
6. appoint a Compliance Officer to monitor the compliance of the Act, the
India's external debt (Mar 2015) US $ : 476 Bn
rules and the notifications issued by Central Govt. and Regulators.
Tax-GDP ratio (2014-15) : 9.93%
Compatibility with FATCA & CRS : The KYC data captured by the template Apr- Nov15:Export $ 144.3 bn$ Imports : 261.9 bn
also fulfills the reporting requirement under Foreign Account Tax Compliance Per capita Income 2014-15 (Rs.) : 88533
Act (FATCA) and Common Reporting Standards (CRS). In order to enable Indian economy's ranking in PPP terms : 3rd
reporting entities to comply with the FATCA and CRS reporting requirement, Indian economy's ranking in world in value: 10th
reporting entities have been advised by RBI to take all necessary steps to
ensure compliance with the reporting requirements within the timelines OUR PUBLICATIONS : REFER PAGE 9,11
mentioned in the Rules and Guidance Note, expeditiously. • DATE OF DESPATCH - Jan 7 / 10, 2016

Published by Chand Singh at 1008, Sector 45-B, Chandigarh - Printed by Chand Singh at Golden Graphics 'n' Printers, Industrial Area, Ram Darbar, Chandigarh Editor - Chand Singh