As a
result of this increase in CRR on liabilities of the banking system, an amount
of about Rs.18,500 crore of resources of banks would be absorbed.
DRI
– Eligibilty Criteria Revised
The Reserve Bank has
advised all Indian scheduled commercial banks that borrower’s eligibility criteria
for availing loan under the Differential Rate of Interest Scheme (DRI) scheme
has now been increased. Accordingly, borrowers with annual family income of Rs.18,000
in rural areas and Rs.24,000 in urban areas would now be eligible to avail of
this facility. Earlier, the annual income criteria for availing loan under the
DRI scheme was Rs.6,400 in rural areas and Rs.7,200 in urban areas.
Banks
have been further advised that the target for lending under the DRI scheme would
continue to be 1 per cent of the previous year’s total advances as hitherto. The
other terms and conditions of the DRI scheme remain unchanged.
FOREX
Non-Status
Holder Exporters - Direct Receipt of Import Bills
The
limit for direct receipt of import bills/documents has been enhanced from USD
100,000 to USD 300,000 in the case of import of rough precious and semi-precious
stones by non-status holder exporters. Accordingly, AD Category - I banks can
now allow remittance for imports up to USD 300,000 where the importer of rough
precious and semiprecious stones has received the import bills/documents directly
from the overseas supplier and the documentary evidence for import is submitted
by the importer at the time of remittance. AD Category - I banks can undertake
such transactions subject to the conditions that-
(i) The
import is subject to the prevailing foreign trade policy.
(ii)
The transactions are based on their commercial judgment and they are satisfied
about the bonafides of the transactions.
(iii) The ‘know
your customer’ (KYC) and due diligence exercise are done and they are fully satisfied
about the financial standing/status and track record of the importer customer.
Before extending the facility, they should also obtain a report on each individual
overseas supplier from the overseas banker or reputed credit agency overseas.
Aggregate
Ceiling for Overseas Investment by MFs Enhanced
With
a view to providing greater opportunity for investment overseas, the aggregate
ceiling for overseas investment by mutual funds (MFs) registered with the Securities
and Exchange Board of India (SEBI) has been enhanced from USD 5 billion to USD
7 billion with immediate effect. The existing facility of allowing a limited number
of qualified Indian MFs to invest cumulatively up to USD 1 billion in overseas
exchange traded funds, as may be permitted by SEBI, would continue.
UCBs
Asset
Classification Norms
The Reserve Bank has advised
Tier I urban co-operative banks (UCBs) that the 180 day loan delinquency norm
for non-performing assets (NPAs) has been extended by one more year i.e. up to
March 31, 2009. Further, the 12-month period for classification of a sub-standard
asset in doubtful category by Tier I UCBs has been made effective from April 1,
2009 instead of April 1, 2008.
It may be recalled that in
March 2008, the Reserve Bank had amended the definition of Tier I UCBs. According
to the revised classification, the following types of UCBs fall into Tier I category.
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.
Formulation
of Cheque Collection Policy
The Reserve Bank has
advised UCBs to formulate a comprehensive and transparent cheque collection policy
taking into account their technological capabilities, systems/processes adopted
for clearing arrangements and other internal arrangements for collection through
correspondents. Further, they have also been advised to review their existing
arrangements and capabilities and work out a scheme for reduction in the cheque
collection period. Adequate care should also be taken to ensure that the interests
of small depositors are fully protected. The policy framed in this regard should
be integrated with the deposit policy formulated by them in line with the IBA's
model policy. The policy should also clearly lay down the liability of the UCB
by way of interest payments due to delays for non-compliance with the standards
set by it. Compensation by way of interest payment, where necessary, should be
made without any claim from the customer. It may also be ensured that the customers
are, in no way, worse off than earlier.
UCBs should place
the formulated cheque collection policy before their Board along with the Reserve
Bank’s current instructions and the Board's specific approval should be obtained
on the reasonableness of the policy and its compliance with the spirit of the
Reserve Bank’s guidelines.
CUSTOMER SERVICE
Electronic
Payment of Tax Mandated
The Central Board of Direct
Taxes have made electronic payment of taxes mandatory for the following categories
of tax payers from April 1, 2008 :
* A company.
* A
person (other than a company), to whom the provisions of Section 44AB are applicable.
In
this regard, the Reserve Bank has advised all agency banks that -
(i)
the status of all corporate taxpayers can be identified from the name itself.
Further, the 4th digit of the permanent account number (PAN) of all corporate
assessees would necessarily be ';C';. Physical challans from such assessees
should not be accepted across the counter;
(ii) in case
of tax payers covered under Section 44AB, agency banks should not insist upon
any proof of eligibility to pay tax through physical challans at the bank counters.
The responsibility of making e-payment rests primarily with the taxpayer. Hence,
the taxpayer’s word should be taken as final;
(iii) the
acknowledgement for e-payment should be made available immediately on screen;
(iv)
the transaction id of e-payment should reflect in the bank’s statement;
(v)
they should prominently display on their e-payment gateway page, the official/s
to be contacted in case the taxpayer faces any difficulty in making the payment,
completing the e-transaction, generating the counterfoil, etc; and
(vi)
the income tax department and the National Securities Depository Limited (NSDL)
should be given a list of officials with their contact details, to be contacted
by the income tax department or taxpayers in case of any problems faced by them.
NBFCs
Reporting
of Frauds in NBFCs
Incidences of fraud in non-banking
finance companies (NBFCs) is a matter of concern. While the primary responsibility
for preventing frauds lies with NBFCs themselves, a reporting system for frauds,
which may be adopted by NBFCs, has been prescribed by the Reserve Bank as detailed
below:
Classification
In order
to have uniformity in reporting, frauds have been classified based mainly on the
provisions of the Indian Penal Code. The classifications are –
(a)
Misappropriation and criminal breach of trust.
(b) Fraudulent encashment through
forged instruments, manipulation of books of account or through fictitious accounts
and conversion of property.
(c) Unauthorised credit facilities extended for
reward or for illegal gratification.
(d) Negligence and cash shortages. (e)
Cheating and forgery.
(f) Irregularities in foreign exchange transactions.
(g)
Any other type of fraud not coming under the specific heads indicated above.
Cases
of ‘negligence and cash shortages’ and ‘irregularities in foreign exchange transactions’
should be reported as fraud if the intention to cheat/defraud is suspected/ proved.
The following cases, however, where fraudulent intention is not suspected/proved
at the time of detection, should be treated as fraud and reported accordingly:
(i) Cases of cash shortages of more than Rs.10,000.
(ii)
Cases of cash shortages of more than Rs. 5,000 if detected by management/auditor/inspecting
officer and not reported by the persons handling the cash.
NBFCs
having overseas branches/offices should also report all frauds perpetrated at
such branches/offices to the Reserve Bank.
Reporting
Frauds
committed by unscrupulous borrowers
A large number of
frauds are committed by unscrupulous borrowers, including companies, partnership
firms/proprietary concerns and/or their directors/partners by various methods,
such as –
* Fraudulent discount of instruments.
* Fraudulent
removal of pledged stocks/disposing of hypothecated stocks without the NBFC’s
knowledge/ inflating the value of stocks in the stock statement and drawing excess
finance.
* Diversion of funds outside the borrowing units,
lack of interest or criminal neglect on the part of the borrowers, their partners,
etc., managerial failure leading to the unit becoming sick and laxity in effective
supervision over the operations in borrowal accounts on the part of the NBFC functionaries
rendering the advance difficult to recover.
Frauds involving
Rs. 1 lakh and above
* NBFCs should submit fraud
reports in all cases of fraud of Rs. 1 lakh and above perpetrated through misrepresentation,
breach of trust, manipulation of books of account, fraudulent encashment of fixed
deposit receipts (FDRs), unauthorised handling of securities charged to the NBFC,
misfeasance, embezzlement, misappropriation of funds, conversion of property,
cheating, shortages, irregularities, etc.
* Fraud reports
should also be submitted in cases where the central investigating agencies have
initiated criminal proceedings suo moto and/or where the Reserve Bank has
directed that they be reported as frauds.
* NBFCs should
also report frauds perpetrated in their subsidiaries and affiliates/joint ventures.
* Where
the fraud amount involved is less than Rs 25 lakh, the fraud report should be
sent within three weeks from the date of detection, to the regional office concerned
of the Reserve Bank’s Department of Non-Banking Supervision under whose jurisdiction
the registered office of the NBFC falls.
Frauds involving
Rs. 25 lakh and above
Where the amount involved in fraud
is Rs 25 lakhs and above, the fraud report should be sent to the Reserve Bank’s
Department of Banking Supervision, Frauds Monitoring Cell. A copy of the fraud
report should also be submitted to the regional office concerned of the Reserve
Bank’s Department of Non-Banking Supervision under whose jurisdiction the registered
office of the NBFC falls.
Attempted Fraud
Cases
of attempted fraud, where the likely loss would have been Rs. 25 lakh or more,
had the fraud taken place, should be reported to the Reserve Bank’s Central Office,
Department of Banking Supervision, Frauds Monitoring Cell and a copy endorsed
to the Reserve Bank’s Central Office, Department of Non-Banking Supervision indicating
the modus operandi and how the fraud was detected.
Reporting
to the Board
* NBFCs should ensure that all frauds
of Rs. 1 lakh and above are reported to their Boards promptly on their detection.
Such reports should, among other things, take note of the failure on the part
of the concerned officials and consider initiation of appropriate action against
the officials responsible for the fraud.
* Information
relating to frauds for the quarters ending March, June and September may be placed
before the Board of Directors during the month following the quarter to which
it pertains.
* All frauds involving an amount of Rs 25
lakh and above should be monitored and reviewed by the Audit Committee of the
Board (ACB) or if the ACB is not there, other Committee of the NBFC. The periodicity
of the meetings of the Committee should be decided according to the number of
cases involved. The Committee should, however, meet and review as and when a fraud
involving an amount of Rs 25 lakh and above comes to light.
Reporting
to Police
The following cases should invariably be referred
to the state police:
* Cases of fraud involving an amount
of Rs. 1 lakh and above, committed by outsiders on their own and/or with the connivance
of NBFC staff/officers.
* Cases of fraud committed by
NBFC employees, which involve NBFC funds exceeding Rs. 10,000.