For
the service at 3 above, the charge of Rs.20 indicated would be all inclusive and
no other charges should be levied to the customers under any other head irrespective
of the amount of withdrawal.
Banks are free to determine the service charges
for the following types of cash withdrawal transactions :
- Cash withdrawal
with the use of credit cards.
- Cash withdrawal from an ATM located abroad.
The
Reserve Bank had examined the issue of usage and pricing of ATMs of banks and
placed an approach paper on its website on December 24, 2007 seeking public comments.
The comments received have been analysed. Based on the feedback, the Reserve Bank
has indicated to banks a frame work of service charges to be levied by them for
offering ATM service. The gist of the comments received from the members of the
public, banks and the Indian Banks’ Association (IBA) is given below :
Comments
from Public: Comments received from the public were overwhelmingly in favour
of making the service free and ensuring enhanced access. A few have suggested
making the service free immediately instead of April 2009. On the other hand,
some respondents apprehend that such a move of making service charges free may
decelerate the deployment of ATMs by the acquiring banks.
Comments
from Banks: All the major banks who own a substantially large number of ATMs
have welcomed the regulatory move for enhanced access to ATM facility by bank
customers. Some of them have, however, suggested that instead of making the service
totally free, number of free withdrawals in a quarter/month can either be prescribed
or left to individual banks. Two banks suggested that certain nominal charges
should be prescribed.
IBA in its
comments has indicated that banks are in favour of greater financial inclusion
and fairness and transparency in levy of charges. Banks, however, fear that availability
of free ATM services at convenient locations could lead to an increase in the
number of transactions and a reduction in the amount withdrawn per transaction.
IBA has suggested that the number of free transactions at ATMs of other banks
be restricted to two per month. Also in metro centres, the minimum cash withdrawal
may be stipulated at Rs.500 for accounts other than no-frill accounts. Also a
cap should be fixed for balance enquiry as such transactions also attract interchange.
The
other suggestions made by banks/IBA are –
(i) Third party advertisement
on the ATMs may be permitted as a revenue stream for banks.
(ii) White label
ATMs may be permitted.
(iii) Cash withdrawal at the point of sale may be permitted
so that the load on the ATMs would be reduced.
Thus, it
is observed that the approach has been found to be generally acceptable. The suggestions
on third party advertisement, white label ATMs and cash withdrawal at the point
of sale had been examined in depth earlier and it had been decided not to implement
the same. Circumstances have not changed significantly warranting a review. As
regards a cap on the number of free cash withdrawals in a month, it is neither
desirable nor practical.
Electronic Mode of Payment for
Large Value Transactions
The Reserve Bank has advised
all commercial/cooperative banks to mandatorily route large value payments of
Rs.1 crore and above through the electronic payment mechanism. The time frame
within which this has to be done is indicated below :
It may be recalled that an internal Working Group set up by
the Reserve Bank had examined various issues relating to migration from paper-based
systems to electronic systems and had recommended a phased approach of encouraging,
monitoring and mandating. Based on the recommendations of the Group, an approach
paper was placed on the Reserve Bank's website inviting comments from the members
of public on the need for making payment transactions of Rs. 1 crore and above
between RBI regulated entities to be mandatorily routed through the electronic
payment systems.
Issuance of Letters of Comfort
Examining
the matter of issuance of letters of comfort (LoCs) by banks, the Reserve Bank
has decided to lay down prudential norms in this regard. The revised instructions
are –
(i) Every LoC issued should be subject to prior approval
by the bank’s board of directors. The bank should lay down a well defined policy
for issuance of LoCs, including the indicative cumulative ceilings up to which
LoCs could be issued by the bank for various purposes. The policy must, inter
alia, provide that the bank will obtain and keep on record a legal opinion
regarding the legally binding nature of the LoC issued. An appropriate system
for keeping record of all the LoCs issued should also be put in place.
(ii)
Banks should make an assessment, at least once a year, of the likely financial
impact that might arise from the LoCs issued by it and outstanding, in case it
is called upon to support its subsidiary in India or abroad, as per the obligations
assumed under the LoCs issued. Such an assessment should be made qualitatively
on judgmental basis and the amount so assessed should be reported to the Board,
at least once a year. As a first time exercise, such an assessment should be undertaken
for all the outstanding LoCs issued and outstanding as on March 31, 2008 and the
results placed before the Board in the ensuing meeting. Such an assessment should
form a part of the bank’s liquidity planning exercise as well.
(iii)
Any LoC that is assessed to be a contingent liability of the bank by a rating
agency/internal or external auditors/internal inspectors or the Reserve Bank’s
inspection team, should be treated, for all prudential regulatory purposes, on
the same footing as a financial guarantee issued by the bank.
(iv)
Banks should disclose full particulars of all the LoCs issued by them during the
year, including their assessed financial impact, as also their assessed cumulative
financial obligations under the LoCs issued by them in the past and outstanding,
in their published financial statements, as part of the ‘Notes to Accounts';.
It
had been observed that banks in India have been issuing LoCs to meet the requirements
of overseas regulators while seeking their approval for establishing subsidiaries/
opening branches in their countries as also to support certain activities of their
subsidiaries in India. Such LoCs are intended to provide comfort to: (i) the overseas
and domestic regulators that the parent bank would support its foreign/domestic
subsidiaries in case they face any financial problems in future; and (ii) the
rating agencies in India, which might be rating the issuances/products of the
bank’s Indian subsidiaries, regarding the availability of parental support to
the subsidiary.
BRANCH BANKING
Repayment
of 6.5% Savings Bonds, 2003 (Non Taxable)
The 6.5
per cent Savings Bonds, 2003 (non-taxable) will mature for repayment from March
24, 2008 onwards according to the date of individual investments. Agency banks
have been advised to strictly adhere to the general procedures given below regarding
repayment of the bonds held under bond ledger account (BLA) :
Advices
to Investors
The attention of the holders should be
drawn to the ensuing maturity of their bonds one month before the date on which
the investment in the BLA is due for repayment. Advices should be sent to the
holders by registered/speed post. Agency banks should ensure that the advices
are sent only in respect of BLAs which are free from stoppage.
Post Maturity
Interest
No interest would accrue after the maturity
of the bond. Agency banks should, therefore, intimate the investors, prominently
in the advices that the investment does not carry post maturity interest.
Discharge
of Certificates
- As per Regulation 24
(2)(b) of the Government Securities Regulations, 2007, payment of maturity proceeds
to the registered holder of a government security, held in the form of a BLA should
be made by pay order or by credit to the account of the holder in any bank having
facility of receipt of funds through electronic means. This regulation obviates
the necessity of the investor submitting a discharge receipt for seeking repayment
of the bonds and enables agency banks to automatically redeem the matured bonds
on the due date and despatch the payment advice. To facilitate automatic redemption
on due dates, agency banks may ask holders of BLAs whose bank account details
are not available with them to furnish the relevant particulars and a mandate
for crediting the proceeds electronically to their account. In the absence of
a mandate, repayment should be made on receipt of discharge certificate, as hitherto.
- As
per extant instructions, if the repayment amount exceeds Rs. 1 lakh, the investor
is required to furnish the particulars of his PAN/GIR number or a declaration
in Form No 60, in case the investor does not have PAN/GIR number.
Payment
(i)
Although the discharge receipt is submitted well in advance for repayment, it
should be ensured that the actual payment of discharge value is made only on the
due date, and if the payment is made through electronic mode, the investor’s account
is credited on the due date only and not before that. In the event of a holiday
being declared by the state government under the Negotiable Instruments Act, 1881
on the maturity date or the maturity date falling on a Sunday, the maturity proceeds
should be paid on the previous working day.
(ii) The repayment
should be made only by the bank branch maintaining the BLA. Details of closure
of the investment(s) i.e., date(s) and amount(s) etc., should be maintained and
invariably indicated in the BLA, duly authenticated by the supervising official.
(iii)
If multiple investments are made against the same BLA, the redemption of individual
investment should be reflected therein and a fresh statement of holding duly indicating
the BLA number, date of maturity and amounts in respect of individual investments
should be generated and given to the investor. It should be ensured that the outstanding
balance appearing in the BLA and the statement of holding are the same.
Delivery
of Payment Order
In case of repayment by ‘payment order’
agency banks should ensure that the payment orders bearing the dates of redemption
are prepared and kept ready/despatched (in case of request to send by post) so
as to reach the holder at least one day in advance and for senior citizens, three
days in advance. The payment order may be despatched by speed/ registered post.
Interest Payments
As regards BLAs held under the
non-cumulative scheme, the interest for last broken period should be paid along
with the principal. The interest warrants pertaining to such investments should
be despatched on the due date of maturity irrespective of whether the investor
has furnished discharge receipt for repayment or not. While despatching such interest
warrants of matured BLAs, the covering letter addressed to the investor should
indicate that the investment has matured on the specific date. Advices to the
investors should invariably contain the legend 'Interest will not accrue on the
investment after----/ ----/ ---- (date of maturity)'.
Accounting
The
principal and the interest should be separately accounted for and the scrolls
drawn separately and kept on record for audit/verification.
Reporting
To
GOI : The designated branches should submit a statement showing the payments
and outstanding in respect of the BLAs under the scheme on a monthly basis to
the Controller of Accounts, Department of Economic Affairs, Ministry of Finance,
Government of India, New Delhi through their Link Office. The repayment scrolls
pertaining to the principal and the interest should be drawn separately.
To
PDO of jurisdiction: The monthly report sent to the PDO of jurisdiction should
invariably contain the details of repayments. The repayment scrolls pertaining
to the principal and the interest drawn separately should also be submitted alongside.
Reimbursement
Agency
banks may prefer claims for reimbursement only in respect of the repayments effected
by them. Such claims may be submitted in the usual manner to the Reserve Bank’s
Central Accounts Section (CAS), at Nagpur through the respective link cells along
with the consolidated scrolls separately for principal and interest. The claims
should be duly supported by a certificate from the internal/concurrent auditors
stating that the repayment figures have been checked 100 per cent and that the
amount has already been paid to the investors.
UCBs
Advances
to Builders/Contractors
The Reserve Bank has clarified
that urban co-operative banks (UCBs) should not extend fund based/non-fund based
facilities to builders/contractors for acquisition of land even as a part of a
housing project. Further, wherever land is accepted as collateral, valuation of
such land should be at the current market price only.
It
had been observed that while financing builders/ contractors, certain banks were
valuing the land for the purpose of security, on the basis of the discounted value
of the property after it is developed, less the cost of development. This is not
in conformity with established norms.
It may be recalled
that in November 1987, UCBs were advised to refrain from sanctioning loans and
advances to builders/contractors. Where contractors undertake comparatively small
construction work on their own (i.e. when no advance payment are received by them
for the purpose), UCBs could consider extending financial assistance to them against
hypothecation of construction materials provided, such loans and advances are
in accordance with their bye-laws and instructions/ directives issued by the Reserve
Bank from time to time.
Classification of UCBs for Regulatory
Purposes Revised
Based on the representations received
from the UCB sector, the definition of Tier I banks has been amended. Accordingly,
for regulatory purposes, UCBs would now be classified as under:
Tier
I UCBs
Tier I UCBs would comprise of –
i) Unit
banks i.e. banks having a single branch/head office and banks with deposits below
Rs.100 crore, whose branches are located in a single district.
ii)
Banks with deposits below Rs.100 crore having branches in more than one district,
provided the branches are in contiguous districts and deposits and advances of
branches in one district separately constitute at least 95 per cent of the total
deposits and advances respectively of the bank.
iii) Banks
with deposits below Rs.100 crore, whose branches were originally in a single district
but subsequently, became multi-district due to reorganisation of the district.
Tier II UCBs
Tier II UCBs would comprise of ‘all other banks’.
As
hitherto, the deposit base of Rs. 100 crore would be determined on the basis of
average of the fortnightly net demand and time liabilities in the financial year
concerned. Similarly, advances would be determined on the basis of fortnightly
average in the financial year concerned.
These revised instructions are
applicable with immediate effect.
Earlier, UCBs were categorised for regulatory
purposes as under:
Tier
I Banks: Unit banks i.e. banks having a single branch/head office with deposits
up to Rs. 100 crore and banks having multiple branches within a single district
with deposits up to Rs. 100 crore.
Tier II Banks: All other banks.
CUSTOMER
SERVICE
In August 2007, the Reserve Bank has advised
banks to issue suitable instructions to all their pension disbursing branches
not to deduct income tax from the disability pension paid to pensioners of the
armed forces as per the provisions of the Defence Pension Payment Instructions,
2005.