Important RBI Circulars Jan-June 2018 For RBI GRADE B

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Important RBI Circulars for RBI GRADE B (January to

June 2018)
Kisan Credit Card (KCC) Scheme: The Kisan Credit Card (KCC) scheme was introduced in 1998
for issue of Kisan Credit Cards to farmers on the basis of their holdings for uniform adoption by
the banks so that farmers may use them to readily purchase agriculture inputs such as seeds,
fertilizers, pesticides etc. and draw cash for their production needs. The scheme was further
extended for the investment credit requirement of farmers viz. allied and non-farm activities in
the year 2004. The scheme was further revisited in 2012 by a working Group under the
Chairmanship of Shri T. M. Bhasin, CMD, Indian Bank with a view to simplify the scheme and
facilitate issue of Electronic Kisan Credit Cards. The scheme provides broad guidelines to banks
for operationalizing the KCC scheme. Implementing banks will have the discretion to adopt the
same to suit institution/location specific requirements.
Eligibility
 Farmers - individual/joint borrowers who are owner cultivators;
 Tenant farmers, oral lessees & share croppers;
 Self Help Groups (SHGs) or Joint Liability Groups (JLGs) of farmers including tenant
farmers, share croppers etc.
Fixation of credit limit / Loan amount: The credit limit under the Kisan Credit Card may be
fixed as under:
All farmers other than marginal farmers:
The short term limit to be arrived for the first year (For cultivating single crop in a year): Scale
of finance for the crop (as decided by District Level Technical Committee) x Extent of area
cultivated + 10% of limit towards post-harvest/household/ consumption requirements + 20% of
limit towards repairs and maintenance expenses of farm assets + crop insurance and/or
accident insurance including PAIS, health insurance & asset insurance.
Limit for second & subsequent year: First year limit for crop cultivation purpose arrived at as
above plus 10% of the limit towards cost escalation / increase in scale of finance for every
successive year (2nd, 3rd, 4th and 5th year) and estimated term loan component for the tenure
of Kisan Credit Card, i.e., five years.
For cultivating more than one crop in a year: The limit is to be fixed as above depending upon
the crops cultivated as per proposed cropping pattern for the first year plus an additional 10%
of the limit towards cost escalation / increase in scale of finance for every successive year (2nd,
3rd, 4th and 5th year). It is assumed that the farmer adopts the same cropping pattern for the
succeeding four years. In case the cropping pattern adopted by the farmer is changed in the
subsequent year, the limit may be reworked.
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Maximum Permissible Limit: The short term loan limit arrived for the 5th year plus the
estimated long term loan requirement will be the Maximum Permissible Limit (MPL) and is to
be treated as the Kisan Credit Card limit. Short term loans and term loans are governed by
different interest rates. At present, short term crop loans upto ₹ 3 lakh are covered under
Interest Subvention Scheme/Prompt Repayment Incentive scheme of the Government of India.
Term loan for investment: The term loan for investment is to be made towards land
development, minor irrigation, purchase of farm equipment and allied agricultural activities.
The banks may fix the quantum of credit for term and working capital limit for agricultural and
allied activities, etc., based on the unit cost of the asset/s proposed to be acquired by the
farmer, the allied activities already being undertaken on the farm, the bank's judgment on
repayment capacity vis-a-vis total loan burden devolving on the farmer, including existing loan
obligations. The long term loan limit should be based on the proposed investment(s) during the
five year period and the bank's perception on the repaying capacity of the farmer.
For Marginal Farmers: A flexible limit of ₹ 10,000 to ₹ 50,000 may be provided (as Flexi KCC)
based on the land holding and crops grown including post-harvest warehouse storage related
credit needs and other farm expenses, consumption needs, etc., plus small term loan
investment(s) like purchase of farm equipment(s), establishing mini dairy/backyard poultry as
per assessment of the Branch Manager without relating it to the value of land. The composite
KCC limit is to be fixed for a period of five years on this basis.
Disbursement: The short term component of the KCC limit is in the nature of revolving cash
credit facility. There should be no restriction in number of debits and credits. The drawing limit
for the current season/year could be allowed to be drawn using any of the following delivery
channels.
 operation through branch;
 operation using cheque facility;
 withdrawal through ATM /debit cards
 operation through Business Correspondents and ‘banking outlet/part-time banking
outlet’
 operation through PoS available in Sugar Mills/Contract farming companies, etc.,
especially for tie-up advances;
 operations through PoS available with input dealers;
 Mobile based transfer transactions at agricultural input dealers and mandies.
The long term loan for investment purposes may be drawn as per installment fixed.
Repayment Period :
 The repayment period may be fixed by banks as per the anticipated harvesting and
marketing period for the crops for which the loan has been granted.

 The term loan component will be normally repayable within a period of 5 years
depending on the type of activity/investment as per the existing guidelines applicable
for investment credit.
 Financing banks may, at their discretion, provide longer repayment period for term loan
depending on the type of investment.
Issue of Electronic Kisan Credit Cards: All new KCC must be issued as smart card cum debit
card. Further, at the time of renewal of existing KCC; farmers must be issued smart card cum
debit card.
Security requirement may be as under:
Hypothecation of crops: For KCC limit upto ₹ 1.00 lakh banks are to waive margin/security
requirements.
With tie-up for recovery: Banks may consider sanctioning loans on hypothecation of crops up to
card limit of ₹ 3.00 lakh without insisting on collateral security.
In states where banks have the facility of on-line creation of charge on the land records, the
same shall be ensured.
Other requirements:
Besides the mandatory crop insurance, the KCC holder should have the option to avail the
benefit of any type of asset insurance, accident insurance (including PAIS), health insurance
(wherever product is available) and have premium paid through his/her KCC account. Premium
has to be borne by the farmer/bank according to the terms of the scheme.
A one-time documentation at the first time of availing of KCC loan and thereafter simple
declaration (about crops grown/proposed) by farmer from the second year onwards.
In case the farmer applies for loan against the warehouse receipt of his produce, the banks
would consider such requests as per the established procedure and guidelines.
The National Payments Corporation of India (NPCI) will design the KCC card to be adopted by all
the banks with their branding.
Credit Facilities to Minority Communities: The Government of India has indicated that care should
be taken to see that minority communities secure, in a fair and adequate measure the benefits flowing
from various Government sponsored schemes. Accordingly, all commercial banks are advised to ensure
smooth flow of bank credit to minority communities.
Government of India has also forwarded a list of 121 minority concentration districts having at least 25%
minority population, excluding those States / UTs where minorities are in majority (J & K, Punjab,
Meghalaya, Mizoram, Nagaland and Lakshadweep). Accordingly all scheduled commercial banks are

requested to specially monitor the credit flow to minorities in these 121 districts, thereby, ensuring that
the minority communities receive a fair and equitable portion of the credit within the overall target of
the priority sector
In terms of Reserve Bank's extant guidelines on lending to priority sector, a target of 40 percent of
Adjusted Net Bank Credit (ANBC) or Credit Equivalent amount of Off-Balance Sheet Exposures (OBE),
whichever is higher, as on March 31 of the previous year, has been mandated for lending to the priority
sector by domestic scheduled commercial banks and foreign banks with 20 and above branches, for
Small Finance Banks it is 75% of their Adjusted Net Bank Credit (ANBC). Within this, a sub-target of 10
per cent of ANBC or Credit Equivalent amount of OBE, whichever is higher, as on March 31 of the
previous year, has been mandated for lending to weaker sections which includes, among others,
persons from minority communities.
Definition of Minority Communities: The following communities have been notified as minority
communities by the Government of India, Ministry of Minority Affairs; Sikhs, Muslims, Christians,
Zoroastrians, Buddhists, Jains.
A Special Cell should be set up in each bank to ensure smooth flow of credit to minority communities
and it should be headed by an officer holding the rank of Deputy General Manager/Assistant General
Manager or any other similar rank who should function as a 'Nodal Officer'.
The Lead Bank in each of the minority concentration districts should have an officer who
shall exclusively look after the problems regarding the credit flow to minority communities. It shall be
his responsibility to publicise among the minority communities various programmes of bank credit and
also to prepare suitable schemes for their benefit in collaboration with branch managers.
The Convenor banks of DLRC/SLRM/SLBCs may invite Chairman/ Managing Directors of State Minority
Commissions/Boards or the State Minorities Financial Corporations or their representatives to attend
the meetings of District Level Review Committee (DLRC), State Level Review Meeting (SLRM) and State
Level Bankers Committee (SLBC).
National Minorities Development and Finance Corporation (NMDFC) was established in September
1994 to promote economic and developmental activities for the backward sections amongst the
minorities. NMDFC works as an apex body and channelises its funds to the beneficiaries through the
State Minority Finance Corporation of the respective State/Union Territory Governments.
The NMDFC is operating, inter-alia, the Margin Money Scheme. Bank finance under the scheme will be
upto 60 percent of the project cost. The remaining amount of the project cost is shared by NMDFC, the
State channelising agency and the beneficiary in the proportion of 25%, 10%, and 5%, respectively.
Computation and Dissemination of Reference Rate - Taking Over by Financial Benchmarks India
Private Limited (FBIL): As announced in the Sixth Bi-monthly policy statement for the year 2017-18,
Financial Benchmarks India Private Limited (FBIL) will assume, i.e., take over from RBI, the responsibility
of computation and dissemination of reference rate for USD/INR and exchange rate of other major
currencies. FBIL will commence the process of computing and disseminating reference rate for USD/INR
and exchange rate of other major currencies with effect from July 10, 2018 .

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Lead Bank Scheme (LBS): The genesis of the Lead Bank Scheme (LBS) can be traced to the Study Group
headed by Prof. D. R. Gadgil (Gadgil Study Group) on the Organizational Framework for the
Implementation of the Social Objectives, which submitted its report in October 1969. The Study Group
drew attention to the fact that commercial banks did not have adequate presence in rural areas and also
lacked the required rural orientation.
A Committee of Bankers on Branch Expansion Programme of public sector banks appointed by the
Reserve Bank of India under the Chairmanship of Shri F. K. F. Nariman (Nariman Committee) endorsed
the idea of an ‘Area Approach’ in its report (November 1969), recommending that in order to enable the
Public Sector Banks to discharge their social responsibilities, each bank should concentrate on certain
districts where it should act as a 'Lead Bank'.
Pursuant to the above recommendations, the Lead Bank Scheme was introduced by the Reserve Bank of
India in December 1969. The Scheme aims at coordinating the activities of banks and other
developmental agencies through various fora in order to achieve the objective of enhancing the flow of
bank finance to the priority sector and other sectors and to promote banks' role in the overall
development of the rural sector.
The Lead Bank Scheme was last reviewed by the High Level Committee headed by Smt. Usha Thorat,
Deputy Governor of the Reserve Bank of India in 2009.
Monitoring the Performance of Credit Plans:
At Block Level Block Level Bankers’ Committee (BLBC)

District Consultative Committee (DCC) & District Level Review
At District Level
Committee (DLRC)
At State Level State Level Bankers’ Committee (SLBC)
SLBC meetings are required to be held regularly at quarterly intervals. The meetings are chaired by the
Chairman & Managing Director (CMD)/Executive Director of the Convenor Bank and co-chaired by the
Additional Chief Secretary or Development Commissioner of the State concerned.
In cases where the Managing Director/Chief Executive Officer/Executive Director of the SLBC Convenor
Bank is unable to attend SLBC Meetings, the Regional Director of the RBI shall co-chair the meetings
along with the Additional Chief Secretary/Development Commissioner of the State concerned. A High
Level of participation in SLBC/UTLBC meetings ensures an effective and desired outcome with
meaningful discussion on issues of public policy of both the Government of India and the Reserve Bank
of India.
Lead Bank Scheme is administered by the Reserve Bank of India since 1969.
In June 2012, a roadmap to provide banking services in unbanked villages with less than 2,000
population was rolled out. SLBC Convener Banks and Lead Banks were advised to complete the process
of providing banking services in unbanked villages with population below 2000 by August 14, 2015.

SLBC Convener Banks were advised to identify villages with population above 5000 without a bank
branch of a scheduled commercial bank in their State and allot these villages among scheduled
commercial banks (including Regional Rural Banks) for opening of branches.
Banks have been advised to achieve a CD Ratio of 60% in respect of their rural and semi-urban
branches separately on an All-India basis. While it is not necessary that this ratio should be achieved
separately, branch-wise, district-wise or region-wise, the banks should, nevertheless, ensure that wide
disparity in the ratios between different States / Regions is avoided in order to minimize regional
imbalance in credit deployment.
The Lead Bank Scheme, which ensures inter-departmental/governmental coordination in the financial
sector, should, therefore, be leveraged to further the objective of doubling farmer’s income by 2022.
Lead Banks are accordingly advised to ensure the following:
 Work closely with NABARD in the preparation of Potential Linked Plans Credit (PLPs) & Annual
Credit Plans (ACPs) keeping the above strategy in consideration.
 Include ‘Doubling of Farmer’s Income by 2022’ as a regular agenda under the Lead Bank Scheme
in various fora such as State Level Bankers’ Committee (SLBC), District level Consultative
Committee (DCC) and Block Level Bankers’ Committee (BLBC) District Level Review Committee
(DLRC)
Facility for Exchange of Notes and Coins: All branches of banks in all parts of the country are mandated
to provide the following customer services, more actively and vigorously to the members of public so
that there is no need for them to approach the RBI Regional Offices for this purpose:
(i) Issuing fresh / good quality notes and coins of all denominations on demand,
(ii) Exchanging soiled / mutilated / defective notes, and
(iii) Accepting coins and notes either for transactions or exchange.
 It will be preferable to accept coins, particularly, in the denominations of ₹ 1 and 2, by

weighment. However, accepting coins packed in polythene sachets of 100 each would perhaps
be more convenient for the cashiers as well as the customers. Such polythene sachets may be
kept at the counters and made available to the customers.
 All branches should provide the above facilities to members of public without any discrimination
on all working days. The scheme of providing exchange facility by a few select currency chest
branches on one of the Sundays in a month will remain unchanged. The names and addresses of
such bank branches should be available with the respective banks.
 The availability of the above-mentioned facilities at the bank branches should be given wide
publicity for information of the public at large.
 None of the bank branches should refuse to accept small denomination notes and / or coins
tendered at their counters
Reserve Bank of India (Note Refund) Rules, 2009 - Delegation of powers:

(a) In terms of Section 28 read with Section 58 (2) of Reserve Bank of India Act, 1934, no person is
entitled as a right to recover from the Government of India or RBI the value of any lost, stolen, mutilated
or imperfect currency note of the GOI or banknote. However, with a view to mitigating the hardship to
the public in genuine cases, it has been provided that the RBI may, with the previous sanction of the
Central Government, prescribe the circumstances in, and the conditions and limitations subject to
which, the value of such currency notes or banknotes may be refunded as a matter of grace.
(b) With a view to extending the facility for the benefit and convenience of public, all branches of banks
have been delegated powers under Rule 2(j) of Reserve Bank of India (Note Refund) Rules, 2009 for
exchange of mutilated / defective notes free of cost.
Soiled Note: A ‘soiled note’ means a note which has become dirty due to normal wear and tear and also
includes a two piece note pasted together wherein both the pieces presented belong to the same note
and form the entire note with no essential feature missing. These notes should be accepted over bank
counters in payment of Government dues and for credit to accounts of the public maintained with
banks. However, in no case, these notes should be issued to the public as re-issuable notes and shall be
deposited in currency chests for onward transmission to RBI offices as soiled note remittances for
further processing.
Mutilated Notes – Presentation and Passing: A mutilated note is a note of which a portion is missing or
which is composed of more than two pieces. Mutilated notes may be presented at any of the bank
branches. The notes so presented shall be accepted, exchanged and adjudicated in accordance
with Reserve Bank of India (Note Refund) Rules, 2009.
Extremely brittle, burnt, charred, stuck up Notes: Notes which have turned extremely brittle or are
badly burnt, charred or inseparably stuck up together and, therefore, cannot withstand normal handling,
shall not be accepted by the bank branches for exchange. Instead, the holders may be advised to tender
these notes to the Issue Office concerned where they will be adjudicated under a Special Procedure.
Exchange of soiled notes:
 Notes presented in small number: Where the number of notes presented by a person is up to
20 pieces with a maximum value of ₹ 5000 per day, banks should exchange them over the
counter, free of charge.
 Notes presented in bulk: Where the number of notes presented by a person exceeds 20 pieces
or ₹ 5000 in value per day, banks may accept them, against receipt, for value to be credited
later. Banks may levy service charges as permitted. In case tendered value is above ₹ 50000,
banks are expected to take the usual precautions.
Exchange of mutilated and imperfect notes:
 Notes presented in small number: Where the number of notes presented by a person is up to 5
pieces, non-chest branches should normally adjudicate the notes as per the procedure laid
down in Part III of NRR, 2009 and pay the exchange value over the counter.

 Notes presented in bulk: Where the number of notes presented by a person is more than 5
pieces not exceeding ₹ 5000 in value, the tenderer should be advised to send such notes to
nearby currency chest branch by insured post giving his / her bank account details (a/c no,
branch name, IFSC, etc.) or get them exchanged thereat in person. All other persons tendering
mutilated notes whose value exceeds ₹ 5000 should be advised to approach nearby currency
chest branch. Currency chest branches receiving mutilated notes through insured post should
credit the exchange value to the account of sender by electronic means within 30 days of receipt
of notes.
Uncurrent Coins: The coins of 25 paise and below, issued from time to time, ceased to be legal tender
for payments as well as account with effect from June 30, 2011 in terms of Gazette Notification No.
2529 dated December 20, 2010 issued by the Government of India.
Detection and Impounding of Counterfeit Notes: The Counterfeit Notes can be impounded by-
 All Banks
 All Treasuries and Sub-Treasuries
 Issue Offices of Reserve Bank of India
Banknotes tendered over the counter should be examined for authenticity through machines.
Similarly, banknotes received directly at the back office / currency chest through bulk tenders should
also be examined through machines.
For cases of detection of Counterfeit Notes up to 4 pieces, in a single transaction, a consolidated report
in the prescribed format should be sent by the Nodal Bank Officer to the police authorities or the Nodal
Police Station, along with the suspect Counterfeit Notes, at the end of the month.
For cases of detection of Counterfeit Notes of 5 or more pieces, in a single transaction, the Counterfeit
Notes should be forwarded immediately by the Nodal Bank Officer to the local police authorities or the
Nodal Police Station for investigation by filing FIR in the prescribed format.
The progress made by banks in detection and reporting of Counterfeit Notes to Police, RBI, etc. and
problems thereof, should be discussed regularly in the meetings of various State Level Committees viz.
State Level Bankers’ Committee (SLBC), Standing Committee on Currency Management (SCCM), State
Level Security Committee (SLSC) etc.
The banks should re-align their cash management in such a manner so as to ensure that cash receipts in
the denominations of ₹100 and above are not put into re-circulation without the notes being machine
processed for authenticity.
Each bank shall establish at its Head Office, a Forged Note Vigilance (FNV) Cell.
Penalty at 100% of the notional value of Counterfeit Notes, in addition to the recovery of loss to the
extent of the notional value of such notes, will be imposed under the following circumstances:
a) When Counterfeit Notes are detected in the soiled note remittance of the bank.

b) If Counterfeit Notes are detected in the currency chest balance of a bank during Inspection / Audit by
RBI.
Conduct of Government Business by Agency Banks - Payment of Agency Commission: The Reserve
Bank of India carries out the general banking business of the Central and State Governments through its
own offices and through the offices of the agency banks appointed under Section 45 of the RBI Act,
1934, by mutual agreement. RBI pays agency commission to the agency banks for the government
business handled by them.
Transactions relating to the following government business undertaken by agency banks are
eligible for agency commission:
 Revenue receipts and payments on behalf of the Central/State Government
 Pension payments in respect of Central / State Governments
 Public Provident Fund (PPF) Scheme, 1968
 Special Deposit Scheme (SDS) 1975
 National Saving Time Deposit Scheme, 1981,
 National Saving Recurring Deposit Scheme, 1981
 National Saving (Monthly Income Account) Scheme, 1987,
 National Saving Certificates (VIII Issue) Scheme, 1989
 Senior Citizen Savings Scheme (SCSS), 2004
 Kisan Vikas Patra, 2014 and
 Sukanya Samriddhi Account
 Any other item of work specifically advised by Reserve Bank as eligible for agency
commission (viz. Relief Bonds/ Savings Bonds etc. transactions), Small saving scheme
Agency banks paying their own tax liabilities through their own branches or through authorised
branches of State Bank of India or offices of Reserve Bank of India wherever they do not have their own
authorised direct tax collection branch should indicate the same separately in the scroll. Such
transactions will not be eligible for payment of agency commission
The following activities do not come under the purview of agency bank business and are therefore not
eligible for payment of agency commission.
(a) Furnishing of bank guarantees/security deposits, etc. through agency banks by government
contractors/suppliers, which constitute banking transactions undertaken by banks for their customers.
(b) The banking business of autonomous/ statutory bodies/ Municipalities/ companies/

Corporations/Local Bodies.
(c) Payments of a capital nature such as capital contributions/ subsidies/ grants made by governments
to cover losses incurred by autonomous/statutory bodies/ Municipalities/ Corporations/Local Bodies.

(d) Prefunded schemes which may be implemented by a Central Government Ministry/Department (in
consultation with CGA) and a State Government Department through any bank.
(e) Transactions related to Gold Monetisation Scheme 2015
The reimbursement of MDR charges on debit card use (up to Rs.one lakh) can be claimed from RBI
separately as per extant guidelines.
Deduction of MDR charges from the receipts of government is not permissible. The full amount paid to
the Government by the customers / through debit / credit cards should be remitted to the concerned
Government Ministry / Department.
The MDR charges on debit card transactions above Rs.one lakh are not being absorbed by Government
of India and hence will not be reimbursed by RBI.
MDR charges on any credit card transaction are not eligible for reimbursement by RBI.
The reimbursement of MDR charges on debit cards / BHIM – UPI transactions of value less than or equal
to ₹ 2000/- will be borne by Government of India and the claims for reimbursement will be settled by
Central Accounts Section, RBI, Nagpur.
Merchant Discount Rate: It is a charge to a merchant by a bank for accepting payment from their
customers in credit and debit cards every time a card is used for payments (like swiping) in their stores.
The merchant discount rate is expressed in percentage of the transaction amount.
Priority Sector Lending – Targets and Classification: These Directions shall be called the Reserve
Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2016. The provisions of
these Directions shall apply to every Scheduled Commercial Bank {excluding Regional Rural Banks (RRBs)
and Small Finance Banks (SFBs)} licensed to operate in India by the Reserve Bank of India.
Off-balance sheet interbank exposures are excluded for computing Credit Equivalent of Off - Balance
Sheet Exposures for the priority sector targets.
The categories under priority sector are as follows:

1. Agriculture
2. Micro, Small and Medium Enterprises
3. Export Credit
4. Education
5. Housing
6. Social Infrastructure
7. Renewable Energy
8. Others

Domestic scheduled commercial banks and Foreign banks with less than 20
Categories
foreign banks with 20 branches and above branches
Total Priority 40 per cent of Adjusted Net Bank Credit [ANBC or 40 per cent of Adjusted Net Bank Credit
Sector Credit Equivalent Amount of Off-Balance Sheet [ANBC defined in sub paragraph (iii)] or
Exposure, whichever is higher. Credit Equivalent Amount of Off-Balance
Sheet Exposure, whichever is higher; to
be achieved in a phased manner by 2020
as indicated in sub paragraph (ii) below.
Agriculture 18 per cent of ANBC or Credit Equivalent Amount Not applicable

of Off-Balance Sheet Exposure, whichever is
higher.
Within the 18 per cent target for agriculture, a

target of 8 percent of ANBC or Credit Equivalent
Amount of Off-Balance Sheet Exposure, whichever
is higher is prescribed for Small and Marginal
Farmers.##
Micro 7.5 per cent of ANBC or Credit Equivalent Amount Not applicable
Enterprises of Off-Balance Sheet Exposure, whichever is
higher
Advances to 10 percent of ANBC or Credit Equivalent Amount of Not applicable
Weaker Sections Off-Balance Sheet Exposure, whichever is higher
(ii) The Total Priority Sector target of 40 percent for foreign banks with less than 20 branches has
to be achieved in a phased manner as under:-
The Total Priority Sector as percentage of ANBC or

Financial Year Credit Equivalent Amount of Off- Balance Sheet
Exposure, whichever is higher
2015-16 32
2016-17 34
2017-18 36
2018-19 38
2019-20 40
The additional priority sector lending target of 2 percent of ANBC each year from 2016-17 to 2019-
20 has to be achieved by lending to sectors other than exports. The sub- targets for these banks,
to be made applicable post 2020, would be decided in due course.
7.5 per cent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is
higher for bank lending to the Micro Enterprises shall also become applicable for the foreign
banks with 20 branches and above from FY 2018-19.

It has been decided that the sub-target of 8 percent of Adjusted Net Bank Credit (ANBC) or Credit
Equivalent Amount of Off-Balance Sheet Exposure (CEOBE), whichever is higher, shall become
applicable for the foreign banks with 20 branches and above, for lending to the small and marginal
farmers from FY 2018-19.
It has been decided to remove the currently applicable loan limits of ₹ 5 crore and ₹ 10 crore per
borrower to Micro/ Small and Medium Enterprises (Services) respectively, for classification under
priority sector. Accordingly, all bank loans to MSMEs, engaged in providing or rendering of
services as defined in terms of investment in equipment under MSMED Act, 2006, shall qualify
under priority sector without any credit cap.
Export Credit: The Export Credit extended as per the details below will be classified as priority sector.
Foreign banks with 20 Foreign banks with less

Domestic banks
branches and above than 20 branches
Incremental export credit over Incremental export credit over Export credit will be allowed
corresponding date of the corresponding date of the up to 32 percent of ANBC or
preceding year, up to 2 percent of preceding year, up to 2 Credit Equivalent Amount of
ANBC or Credit Equivalent Amount percent of ANBC or Credit Off-Balance Sheet Exposure,
of Off-Balance Sheet Exposure, Equivalent Amount of Off- whichever is higher.
whichever is higher, effective from Balance Sheet Exposure,
April 1, 2015 subject to a whichever is higher, effective
sanctioned limit of up to ₹25 crore from April 1, 2017.
per borrower to units having
turnover of up to ₹100 crore.
Micro, Small and Medium Enterprises (MSMEs): The limits for investment in plant and machinery /
equipment for manufacturing/ service enterprise, as notified by Ministry of Micro, Small and Medium
Enterprises.
All loans to units in the KVI sector will be eligible for classification under the sub-target of 7.5 percent
prescribed for Micro Enterprises under priority sector.
Education: Loans to individuals for educational purposes including vocational courses upto ₹10 lakh
irrespective of the sanctioned amount will be considered as eligible for priority sector.
Housing: With a view to bringing convergence of the Priority Sector Lending guidelines for housing loans
with the Affordable Housing Scheme, and to give a filip to low-cost housing for the Economically Weaker
Sections and Low Income Groups, the housing loan limits for eligibility under priority sector
lending will be revised to ₹ 35 lakh in metropolitan centres (with population of ten lakh and
above), and ₹ 25 lakh in other centres, provided the overall cost of the dwelling unit in the
metropolitan centre and at other centres does not exceed ₹ 45 lakh and ₹ 30 lakh, respectively.
Furthermore, the existing family income limit of ₹ 2 lakh per annum for loans to housing projects
exclusively for the purpose of construction of houses for Economically Weaker Sections (EWS) and Low
Income Groups (LIG), is revised to ₹ 3 lakh per annum for EWS and ₹ 6 lakh per annum for LIG, in
alignment with the income criteria specified under the Pradhan Mantri Awas Yojana. The loans
sanctioned by banks for housing projects exclusively for the purpose of construction of houses for
economically weaker sections and low income groups, the total cost of which does not exceed ₹10 lakh
per dwelling unit.
Loans for repairs to damaged dwelling units of families up to ₹5 lakh in metropolitan centres and up to ₹2
lakh in other centres.

Bank loans to any governmental agency for construction of dwelling units or for slum clearance and
rehabilitation of slum dwellers subject to a ceiling of ₹10 lakh per dwelling unit.
Bank loans to Housing Finance Companies (HFCs), approved by NHB for their refinance, for on-lending
for the purpose of purchase/construction/reconstruction of individual dwelling units or for slum clearance
and rehabilitation of slum dwellers, subject to an aggregate loan limit of ₹10 lakh per borrower.The
eligibility under priority sector loans to HFCs is restricted to five percent of the individual bank’s total
priority sector lending, on an ongoing basis.
Social infrastructure: Bank loans up to a limit of ₹5 crore per borrower for building social infrastructure
for activities namely schools, health care facilities, drinking water facilities and sanitation facilities
including construction/ refurbishment of household toilets and household level water improvements.
Bank credit to Micro Finance Institutions (MFIs) extended for on-lending to individuals and also to
members of SHGs/JLGs for water and sanitation facilities will be eligible for categorization as priority
sector under ‘Social Infrastructure’, subject to the criteria laid down in paragraph 19 of these Master
Directions.
Renewable Energy: Bank loans up to a limit of ₹15 crore to borrowers for purposes like solar based
power generators, biomass based power generators, wind mills, micro-hydel plants and for non-
conventional energy based public utilities viz. street lighting systems, and remote village electrification.
For individual households, the loan limit will be ₹10 lakh per borrower.
Others: Loans not exceeding ₹50,000/- per borrower provided directly by banks to individuals and their
SHG/JLG, provided the individual borrower’s household annual income in rural areas does not exceed
₹1,00,000/- and for non-rural areas it does not exceed ₹1,60,000/-.
Loans to distressed persons (other than farmers) not exceeding ₹1,00,000/- per borrower to prepay their
debt to non-institutional lenders.
Priority sector loans to the following borrowers are eligible to be considered under Weaker Sections
category:-
No. Category
1. Small and Marginal Farmers
Artisans, village and cottage industries where individual credit limits do not exceed ₹ 1
2.
lakh
3. Beneficiaries under Government Sponsored Schemes such as National Rural Livelihoods
Mission (NRLM), National Urban Livelihood Mission (NULM) and Self Employment
Scheme for Rehabilitation of Manual Scavengers (SRMS)
4. Scheduled Castes and Scheduled Tribes
5. Beneficiaries of Differential Rate of Interest (DRI) scheme
6. Self Help Groups
7. Distressed farmers indebted to non-institutional lenders
Distressed persons other than farmers, with loan amount not exceeding ₹ 1 lakh per
8.
borrower to prepay their debt to non-institutional lenders
9. Individual women beneficiaries up to ₹ 1 lakh per borrower
10. Persons with disabilities
11. Overdrafts upto ₹ 5,000/- under Pradhan Mantri Jan-DhanYojana (PMJDY) accounts,
provided the borrowers’ household annual income does not exceed ₹ 100,000/- for rural
areas and ₹ 1,60,000/- for non-rural areas
12. Minority communities as may be notified by Government of India from time to time

ANBC: Total loans and advance minus bills rediscounted with RBI and other approved Financial
Institutions plus investments made or credit equivalent amount of off-balance-sheet exposure, whichever
is higher.
Revised guidelines on lending to Priority Sector for Primary (Urban) Co-operative Banks (UCBs):
 Target for lending to total priority sector and weaker section will continue as 40 per cent and 10
per cent, respectively, of Adjusted Net Bank Credit (ANBC) or credit equivalent of off-balance
sheet exposure, whichever is higher, as hitherto.
 Agriculture: Distinction between direct and indirect agriculture is dispensed with.
 Bank loans to food and agro processing units will form part of Agriculture.
 Medium Enterprises, Social Infrastructure and Renewable Energy will form part of priority
sector.
 A target of 7.5 per cent of ANBC or credit equivalent of off-balance sheet exposure, whichever is
higher, has been prescribed for Micro Enterprises.
 Education: Distinction between loans for education in India and abroad is dispensed with.
 Micro Credit ceases to be a separate category under priority sector.
 Loan limits for housing loans qualifying under priority sector have been revised.
 Priority Sector assessment will be monitored through quarterly and annual statements.
Priority Sector Lending Certificates – Scheme: To enable banks to achieve the priority sector lending
target and sub-targets by purchase of these instruments in the event of shortfall and at the same time
incentivize the surplus banks; thereby enhancing lending to the categories under priority sector. The
PSLCs will be traded through the CBS portal (e-Kuber) of RBI.
Sellers/Buyers: Scheduled Commercial Banks (SCBs), Regional Rural Banks (RRBs), Local Area Banks
(LABs), Small Finance Banks (when they become operational) and Urban Co-operative Banks who have
originated PSL eligible category loans subject to such regulations as may be issued by the Bank.
The PSLCs would have a standard lot size of ₹ 25 lakh and multiples thereof.
The fee paid for purchase of the PSLC would be treated as an ‘Expense’ and the fee received for the sale
of PSLCs would be treated as ‘Miscellaneous Income’.
All PSLCs will expire by March 31st and will not be valid beyond the reporting date (March 31st),
irrespective of the date it was first sold.
Types of PSLCs: There would be four kinds of PSLCs:–

i) PSLC Agriculture: Counting for achievement towards the total agriculture lending target.
ii) PSLC SF/MF: Counting for achievement towards the sub-target for lending to Small and Marginal
Farmers.
iii) PSLC Micro Enterprises: Counting for achievement towards the sub target for lending to Micro
Enterprises.
iv) PSLC General: Counting for achievement towards the overall priority sector target.
Liberalized Remittance Scheme: Under the Liberalised Remittance Scheme, Authorised Dealers may
freely allow remittances by resident individuals up to USD 2,50,000 per Financial Year (April-March) for

any permitted current or capital account transaction or a combination of both. The Scheme is not
available to corporates, partnership firms, HUF, Trusts, etc.
It has been decided that furnishing of Permanent Account Number (PAN), which was not mandatory for
permissible current account transactions of up to USD 25,000 ubder Foreign Exchange Management Act,
1999 , shall now be mandatory for making all remittances under Liberalised Remittance Scheme (LRS).
The limit of USD 2,50,000 per Financial Year (FY) under the Scheme also includes/subsumes remittances
for current account transactions (viz. private visit; gift/donation; going abroad on employment;
emigration; maintenance of close relatives abroad; business trip; medical treatment abroad; studies
abroad) available to resident individuals to Foreign Exchange Management (Current Account
Transactions) Amendment Rules, 2015 dated May 26, 2015. Release of foreign exchange exceeding USD
2,50,000 requires prior permission from the Reserve Bank of India.
Control measures for ATMs – Timeline for compliance:
Implement security measures such as BIOS password, disabling USB ports, disabling auto-run facility,
applying the latest patches of operating system and other softwares, terminal security solution, time-
based admin access, etc. by August 2018.
Implement anti-skimming and whitelisting solution by March 2019.
Upgrade all the ATMs with supported versions of operating system by June 2019.
Basel III Framework on Liquidity Standards - Liquidity Coverage Ratio (LCR), Liquidity Risk
Monitoring Tools and LCR Disclosure Standards:
All Scheduled Commercial Banks (excluding RRBs) & Small Finance Banks (SFBs).
Presently, the assets allowed as the Level 1 High Quality Liquid Assets (HQLAs) for the purpose of
computing the LCR of banks, inter alia, include (a) Government securities in excess of the minimum SLR
requirement and, (b) within the mandatory SLR requirement, (i) Government securities to the extent
allowed by RBI under Marginal Standing Facility (MSF) [presently 2 per cent of the bank's NDTL] and
(ii) under Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR) [presently 9 per cent of the
bank's NDTL].
It has been decided to permit banks, with effect from the date of this circular, to reckon Government
securities held by them up to another 2 per cent of their NDTL, under FALLCR within the mandatory SLR
requirement, as Level 1 HQLA for the purpose of computing their LCR. Hence, the carve-out from SLR,
under FALLCR will now be 11 per cent, taking the total carve out from SLR available to banks to 13 per
cent of their NDTL
Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by Banks –
Spreading of MTM losses and creation of Investment Fluctuation Reserve (IFR): In view of the
continuing rise in the yields on Government Securities, as also the inadequacy of time to build
investment fluctuation reserve (IFR) for many banks, it has been decided to grant banks the option to
spread provisioning for their mark to market (MTM) losses on all investments held in Available for Sale

(AFS) and Held for Trading (HFT) for the quarter ending June 30, 2018 as well. The provisioning required
may be spread equally over up to four quarters, commencing with the quarter ending June 30, 2018.
Mark-to-market losses appear when an asset is priced according to a mark-to-market (MTM)

accounting method. Under MTM, an asset's value is adjusted on a daily basis to reflect its market price.
In other words, an asset experiences a mark-to-market loss if its market price falls from one business
day to the next.
Investment by Foreign Portfolio Investors (FPI) in Debt:
FPIs were required to invest in Government bonds with a minimum residual maturity of three years.
Henceforth, FPIs are permitted to invest in Central Government securities (G-secs), including in Treasury
Bills, and State Development Loans (SDLs) without any minimum residual maturity requirement,
subject to the condition that short-term investments by an FPI under either category shall not exceed
20% of the total investment of that FPI in that category.
FPIs were required to invest in corporate bonds with a minimum residual maturity of three years.
Henceforth, FPIs are permitted to invest in corporate bonds with minimum residual maturity of above
one year, subject to the condition that short-term investments in corporate bonds by an FPI shall not
exceed 20% of the total investment of that FPI in corporate bonds.
The cap on aggregate FPI investments in any Central Government security, currently at 20% of the
outstanding stock of that security, stands revised to 30% of the outstanding stock of that security.
These above stipulations would not apply to investments in SRs by FPIs. SRs” mean Security Receipts
issued by Asset Reconstruction Companies.
Short-term investments by an FPI may exceed 20% of total investments, only if the short-term
investments consist entirely of investments made on or before April 27, 2018; that is, short-term
investments do not include any investment made after April 27, 2018
No FPI shall invest in partly paid debt instruments.
FPI: Portfolio Investment by any single investor or investor group cannot exceed 10% of the equity of an
Indian company, beyond which it will now be treated as FDI.
Alteration in the name of “The Bank of Tokyo-Mitsubishi UFJ, Ltd.” to “MUFG Bank, Ltd.” in the
Second Schedule to the Reserve Bank of India Act, 1934.
Section 23 of the Banking Regulation Act, 1949 – Branch Authorisation Policy – Left Wing
Extremism affected districts – Revised List: As the Government of India has revised the list to 90 Left
Wing Extremism (LWE) affected districts, banks are advised to follow the revised list.
Interest Rate Options in India:
(i) An interest rate option is a financial derivative contract whose value is based on Rupee interest rates.
Products permitted: An entity eligible under these directions may transact in the following European
Interest Rate Options:

4.1 Interest Rate Call and Put Options

4.2 Interest Rate Caps
4.3 Interest Rate Floors
4.4 Interest Rate Collars or Reverse Collars
4.5 Interest Rate Swaptions
(ii) An interest rate call option is an interest rate derivative in which the holder (or buyer) has the right
but not the obligation to receive an interest payment based on a variable interest rate, and simultaneously
pay an interest payment based on a fixed interest rate.
(iii) An interest rate put option is an interest rate derivative in which the holder (or buyer) has the right
but not the obligation to pay an interest payment based on a variable interest rate, and simultaneously
receive an interest payment based on a fixed interest rate.
(iv) An option which could be exercised by the buyer on the expiration date is called a European option.
(v) An interest rate cap is a series of interest rate call options (called caplets) in which the buyer of the
option receives a payment at the end of each period when the underlying interest rate is above a rate
agreed in advance (strike rate).
(vi) An interest rate floor is a series of interest rate put options in which the buyer of the option receives
a payment at the end of each period when the underlying interest rate is below the strike rate.
(vii) An interest rate collar is a derivative contract where a market participant simultaneously purchases
an interest rate cap and sells an interest rate floor on the same interest rate for the same maturity and
notional principal amount and vice versa.
(viii) An interest rate swap is a financial contract between two parties exchanging or swapping a stream
of interest payments for a `notional principal’ amount on multiple occasions during a specified period.
Such contracts generally involve exchange of `fixed to floating’ or `floating to floating’ rates of interest.
(ix) Interest rate swaptions are options on interest rate swaps. A swaption gives the buyer the right, but
not the obligation, to enter into an interest rate swap.
Participation in the OTC market for Interest Rate Options shall be limited: The following entities may
offer Interest Rate Options in the OTC market as market makers:- (i) Banks, subject to meeting the
following criteria: - (a) net worth of not less than ₹ 500 crore, and (b) CRAR of not less than 9%.
A market maker shall report all OTC transactions in Interest Rate Options, within 30 minutes of entering
into the transaction, to the Trade Repository of Clearing Corporation of India Ltd. (CCIL).
Settlement basis and other market conventions for OTC transactions in Interest Rate Options will be
specified by FIMMDA, in consultation with market participants.
OTC transactions executed among market makers shall be settled bilaterally or through any clearing
arrangement approved by the Reserve Bank for the purpose.

Banking Regulation Act, 1949 – Section 26A Depositor Education and Awareness Fund (DEA
Fund) Scheme, 2014 – Operational Guidelines - Payment of Interest: Reserve Bank had specified
that the rate of interest payable by banks to the depositors/claimants on the unclaimed interest bearing
deposit amount transferred to the DEA Fund shall be 3.5% (earlier it was 4%) simple interest per annum
with effect from July 01, 2018.
Amendments in the Reserve Bank of India (Gold Monetization Scheme, 2015):
These Directions shall be called the Reserve Bank of India (Gold Monetization Scheme) Directions, 2015.
All Scheduled Commercial Banks excluding RRBs will be eligible to implement the Scheme.
The short term deposits shall be treated as bank’s on-balance sheet liability. These deposits will be made
with the designated banks for a short period of 1-3 years (with a facility of roll over). Deposits can also be
allowed for broken periods (e.g. 1 year 3 months; 2 years 4 months 5 days; etc.).
The Medium Term Government Deposit (MTGD) can be made for 5-7 years and Long Term Government
Deposit (LTGD) for 12-15 years or for such period as may be decided by the Central Government from
time to time. Deposits can also be allowed for broken periods (e.g. 5 years 7 months; 13 years 4 months
15 days; etc.).
Rate of interest:
i) On medium term deposit – 2.25% p.a.
(ii) On long term deposit – 2.50% p.a.
Minimum lock-in period: A Medium Term Government Deposit (MTGD) is allowed to be withdrawn any
time after 3 years and a Long Term Government Deposit (LTGD) after 5 years.
“In the case of MLTGD, the redemption of principal at maturity shall, at the option of the depositor, be
either in Indian Rupee equivalent of the value of deposited gold at the time of redemption, or in gold.
However, any pre-mature redemption of MLTGD shall be only in INR. Where the redemption of the
deposit is in gold, an administrative charge at a rate of 0.2% of the notional redemption amount in terms
of INR shall be collected from the depositor.
Collection and Purity Testing Centre (CPTC) - The collection and assaying centres certified by the
Bureau of Indian Standards (BIS) and notified by the Central Government for the purpose of handling 995
fineness gold deposited and redeemed under GMS.
Prohibition on dealing in Virtual Currencies (VCs): Reserve Bank has repeatedly through its public
notices cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various
risks associated in dealing with such virtual currencies.
In view of the associated risks, it has been decided that, with immediate effect, entities regulated by the
Reserve Bank shall not deal in VCs or provide services for facilitating any person or entity in dealing with
or settling VCs. Such services include maintaining accounts, registering, trading, settling, clearing, giving
loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with
them and transfer / receipt of money in accounts relating to purchase/ sale of VCs.
Regulated entities which already provide such services shall exit the relationship within three months from
the date of this circular.

Sovereign Gold Bond Scheme 2018-19 Series-I, Operational Guidelines: The Bonds shall be
denominated in units of one gram of gold and multiples thereof. Minimum investment in the Bonds shall
be one gram with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family
(HUF) and 20 kg for trusts and similar entities notified by the government from time to time per fiscal year
(April – March).
Issue Price: The nominal value of the Bonds shall be fixed in Indian Rupees on the basis of simple
average of closing price of gold of 999 purity published by the India Bullion and Jewelers Association
Limited for the last 3 working days of the week preceding the subscription period. The issue price of the
Gold Bonds will be ₹ 50 per gram less than the nominal value to those investors applying online and the
payment against the application is made through digital mode.
The redemption price shall be fixed in Indian Rupees and the redemption price shall be based on simple
average of closing price of gold of 999 purity of the previous 3 working days, published by the India
Bullion and Jewelers Association Limited.
Interest: The Bonds shall bear interest from the date of issue at the rate of 2.50 percent (fixed rate) per
annum on the nominal value. Interest shall be paid in half-yearly rests and the last interest shall be
payable on maturity along with the principal.
Receiving Offices: Scheduled Commercial Banks (excluding RRBs), designated Post Offices (as may be
notified), Stock Holding Corporation of India Ltd (SHCIL) and recognized stock exchanges viz., National
Stock Exchange of India Limited and Bombay Stock Exchange Ltd. are authorized to receive applications
for the Bonds either directly or through agents.
Sovereign Gold Bonds will be available for subscription at the Receiving Offices through RBI’s e- Kuber
system. The Bonds may be used as collateral for loans.
Interest on the Bonds shall be taxable as per the provisions of the Income-tax Act, 1961. The capital
gains tax arising on redemption of SGB to an individual has been exempted.
The Bonds shall be eligible for trading from such date as may be notified by the Reserve Bank of India.
Bonds acquired by the banks through the process of invoking lien/hypothecation/pledge alone shall be
counted towards Statutory Liquidity Ratio.
RBI/depository shall inform the investor of the date of maturity of the Bond one month before its maturity.
External Commercial Borrowings (ECB) Policy – Rationalisation and Liberalisation: Applicable for
All Category-I Authorized Dealer Banks
Revisiting ECB Liability to Equity Ratio provisions: It has been decided to increase the ECB Liability
to Equity Ratio for ECB raised from direct foreign equity holder under the automatic route to 7:1. This ratio
will not be applicable if total of all ECBs raised by an entity is up to USD 5 million or equivalent
Rationalisation of all-in-cost for ECB under all tracks and Rupee denominated bonds (RDBs): With
a view to harmonising the extant provisions of Foreign Currency and Rupee ECBs and RDBs, it has been
decided to stipulate a uniform all-in-cost ceiling of 450 basis points over the benchmark rate. The
benchmark rate will be 6 month USD LIBOR while it will be prevailing yield of the Government of India
securities of corresponding maturity for Rupee ECBs and RDBs.
Expansion of Eligible Borrowers’ list for the purpose of ECB: It has been decided to permit:

 Housing Finance Companies, regulated by the National Housing Bank, as eligible borrowers to
avail of ECBs under all tracks. Such entities shall have a board approved risk management policy
and shall keep their ECB exposure hedged 100 per cent at all times for ECBs raised.
 Port Trusts constituted under the Major Port Trusts Act, 1963 or Indian Ports Act, 1908 to avail of
ECBs under all tracks. Such entities shall have a board approved risk management policy and
shall keep their ECB exposure hedged 100 per cent at all times for ECBs raised.
 Companies engaged in the business of Maintenance, Repair and Overhaul and freight forwarding
to raise ECBs denominated in INR only.
Basel III Framework on Liquidity Standards – Net Stable Funding Ratio (NSFR) – Final Guidelines:
Applicable for All Scheduled Commercial Banks (excluding RRBs):
In the backdrop of the global financial crisis that started in 2007, the Basel Committee on Banking
Supervision (BCBS) proposed certain reforms to strengthen global capital and liquidity regulations with
the objective of promoting a more resilient banking sector. In this regard, the Basel III rules text on
liquidity – “Basel III: International framework for liquidity risk measurement, standards and monitoring”
was issued in December 2010 which presented the details of global regulatory standards on liquidity. Two
minimum standards, viz., Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) for
funding liquidity were prescribed by the Basel Committee for achieving two separate but complementary
objectives.
The LCR promotes short-term resilience of banks to potential liquidity disruptions by ensuring that they
have sufficient high quality liquid assets (HQLAs) to survive an acute stress scenario lasting for 30 days.
The NSFR promotes resilience over a longer-term time horizon by requiring banks to fund their activities
with more stable sources of funding on an ongoing basis.
The objective of NSFR is to ensure that banks maintain a stable funding profile in relation to the
composition of their assets and off-balance sheet activities.
Definition of NSFR: The NSFR is defined as the amount of available stable funding relative to the
amount of required stable funding. “Available stable funding” (ASF) is defined as the portion of capital and
liabilities expected to be reliable over the time horizon considered by the NSFR, which extends to one
year. The amount of stable funding required ("Required stable funding") (RSF) of a specific institution is a
function of the liquidity characteristics and residual maturities of the various assets held by that institution
as well as those of its off-balance sheet (OBS) exposures.
Minimum Requirement:
Setting up of International Financial Services Centres (IFSC) Banking Units (IBUs) – Permissible
activities: You may be aware that Government of India has already announced setting up of an IFSC in
Gujarat namely Gujarat International Finance Tec-City (GIFT) in Gandhinagar, Gujarat.
The parent bank will be required to provide a minimum capital of USD 20 million or equivalent in any
foreign currency to start their IBU operations and the IBU should maintain the minimum prescribed
regulatory capital on an on-going basis as per regulations amended from time to time.
Exposure ceiling for IBUs shall be 5 percent of the parent bank’s Tier 1 capital in case of a single
borrower and 10 percent of parent bank’s Tier 1 capital in the case of a borrower group.

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Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India)
(Amendment) Regulations, 2018: Foreign Exchange Management Act, 1999
Foreign Investment in investing companies not registered as Non-Banking Financial Companies with the
Reserve Bank and in core investment companies (CICs), both engaged in the activity of investing in the
capital of other Indian entities, will require prior Government approval.
Foreign investment in investing companies registered as Non-Banking Financial Companies (NBFCs)

with the Reserve Bank, will be under 100% automatic route.
Wherever the person resident outside India who has made foreign investment specifies a particular
auditor/ audit firm having international network for the audit of the Indian investee company, then audit of
such investee company shall be carried out as joint audit wherein one of the auditors is not part of the
same network.
Foreign investment in M/s Air India Ltd., including that of foreign airline(s), shall not exceed 49% either
directly or indirectly.
Substantial ownership and effective control of M/s Air India Ltd. shall continue to be vested in Indian
Nationals.”
Real estate broking services shall be excluded from the definition of “real estate business” and 100%
foreign investment is allowed in real estate broking services under automatic route.
Investment in Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline and Regional Air
Transport Service -Automatic up to 49%, Government route beyond 49% (Automatic up to 100% for NRIs
and OCIs).
Single Brand Product Retail Trading -100% Automatic.
Single brand retail trading entity shall be permitted to set off its incremental sourcing of goods from India
for global operations during initial 5 years, beginning 1st April of the year of the opening of first store,
against the mandatory sourcing requirement of 30% of purchases from India.
Overseas Citizen of India (OCI)’, Non-Resident Indian (NRI)’.
Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India)

Regulations, 2018:
No person being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan,
Hong Kong or Macau or Democratic People’s Republic of Korea (DPRK) without prior permission of the
Reserve Bank shall acquire or transfer immovable property in India, other than lease, not exceeding five
years. Provided this prohibition shall not apply to an OCI.
A Foreign Embassy/ Diplomat/ Consulate General may purchase/ sell immovable property in India other
than agricultural land/ plantation property/ farm house provided (i) clearance from Government of India,
Ministry of External Affairs is obtained for such purchase/ sale, and (ii) the consideration for acquisition of
immovable property in India is paid out of funds remitted from abroad through banking channels.
A person resident outside India, not being a Non-Resident Indian or an Overseas Citizen of India, who is
a spouse of a Non-Resident Indian or an Overseas Citizen of India may acquire one immovable property
(other than agricultural land/ farm house/ plantation property), jointly with his/ her NRI/ OCI spouse.

A person being a citizen of Afghanistan, Bangladesh or Pakistan belonging to minority communities in

those countries, namely, Hindus, Sikhs, Buddhists, Jains, Parsis and Christians who is residing in India
and has been granted a Long Term Visa (LTV) by the Central Government may purchase only one
residential immovable property in India as dwelling unit for self-occupation and only one immovable
property for carrying out self-employment.
Discontinuance of Letters of Undertaking (LoUs) and Letters of Comfort (LoCs) for Trade Credits:
On a review of the extant guidelines, it has been decided to discontinue the practice of issuance of LoUs/
LoCs for Trade Credits for imports into India by AD Category –I banks with immediate effect. Letters of
Credit and Bank Guarantees for Trade Credits for imports into India may continue to be issued subject to
compliance with the provisions contained in Department of Banking Regulation.
Earlier It was decided to accord general permission to ADs to issue guarantees/LoUs/LoCs in favour of
overseas supplier, bank and financial institution, up to USD 20 million per transaction for a period up to
one year for import of all non-capital goods permissible under Foreign Trade Policy (except gold) and up
to three years for import of capital goods, subject to prudential guidelines issued by Reserve Bank from
time to time. The period of such guarantees/LoUs/LoCs has to be co-terminus with the period of credit,
reckoned from the date of shipment.
Letter of Undertaking (LOU): There is a widely accepted provision of bank guarantees known as a letter
of undertaking (LOU) under which a bank can allow its customer to raise money from another Indian
bank's foreign branch in the form of a short term credit. The LOU serves the purpose of a bank guarantee
for a bank's customer for making payment to its offshore suppliers in the foreign currency.
For raising the LOU, the customer (importer) is supposed to pay margin money to the bank that issues
the LOU and accordingly, they are granted a credit limit. But in Nirav Modi's case, neither was there a
credit limit, nor did he ever give any margin money.
Once the letter of credit is acknowledged and accepted, the lender (foreign branch of Indian bank)
transfers money to the nostro account of the bank that has issued the LoU. In this case, Nostro account is
the Punjab National Bank's account held in another bank in a foreign country for the purpose of holding
foreign currency.
A Letter of Comfort (LoC) is an Informal letter from a bank indicating its willingness to support a
customer with a short-term loan, if and when required. It is not a letter of commitment.
For corporates it is a letter issued to a lending institution by a stakeholder of the company acknowledging
support of the attempt for financing asked by that company. A letter of comfort does not imply that the
parent company guarantees repayment of the loan being sought by the subsidiary company. It merely
gives reassurance to the lending institution that the parent company is aware of the credit facility being
sought by the subsidiary company, and supports its decision.
LC (Letter of Credit): A letter of credit is a letter from a bank guaranteeing that a buyer's payment to a
seller will be received on time and for the correct amount. In the event that the buyer is unable to make
payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase.
This means, if you do not perform your obligations, your bank pays.

Separate limit of Interest Rate Futures (IRFs) for Foreign Portfolio Investors (FPIs): It has been
decided to allocate FPIs a separate limit of ₹ 5,000 crore for long position in IRFs
Total gross short (sold) position of any Foreign Portfolio Investor shall not exceed its consolidated long
position in Government securities and Interest Rate Futures, at any point in time”.
Revised guidelines relating to participation of a person resident in India and Foreign Portfolio
Investor (FPI) in the Exchange Traded Currency Derivatives (ETCD) Market: It has now been
decided to permit persons resident in India and FPIs to take positions (long or short), without having to
establish existence of underlying exposure, upto a single limit of USD 100 million equivalent across all
currency pairs involving INR, put together, and combined across all exchanges.
Refinancing of External Commercial Borrowings: It has been decided, in consultation with the
Government of India, to permit the overseas branches/subsidiaries of Indian banks to refinance ECBs of
highly rated (AAA) corporates as well as Navratna and Maharatna PSUs, provided the outstanding
maturity of the original borrowing is not reduced and all-in-cost of fresh ECB is lower than the existing
ECB.
Resolution of Stressed Assets – Revised Framework:
Applicable to: All Scheduled Commercial Banks (Excluding Regional Rural Banks (RRB)), All-India
Financial Institutions (Exim Bank, NABARD, NHB and SIDBI)
In view of the enactment of the Insolvency and Bankruptcy Code, 2016 (IBC), it has been decided to
substitute the existing guidelines with a harmonised and simplified generic framework for resolution of
stressed assets. So RBI has come out with the new framework regarding resolution of stressed assets.
The new norms seek for speedy resolution of bad loans in future. With this, existing debt restructuring
schemes such as SDR (Strategic Debt Restructuring Scheme), S4A(Scheme for Sustainable Structuring
of Stressed Assets), 5/25, Corporate Debt Restructuring Scheme, Flexible Structuring of Existing Long
Term Project Loans (most of these we have discussed in previous CGS documents), have been
withdrawn from immediate effect.
Lenders shall identify incipient stress in loan accounts, immediately on default, by classifying
stressed assets as special mention accounts (SMA) as per the following categories:
Basis for classification – Principal

or interest payment or any other
SMA Sub-categories
amount wholly or partly overdue
between
SMA-0 1-30 days
SMA-1 31-60 days
SMA-2 61-90 days
All lenders shall report credit information, including classification of an account as SMA to Central
Repository of Information on Large Credits (CRILC) on all borrower entities having aggregate exposure of
₹ 50 million and above with them. The CRILC-Main Report will now be required to be submitted on a
monthly basis effective April 1, 2018. In addition, the lenders shall report to CRILC, all borrower entities in
default (with aggregate exposure of ₹ 50 million and above), on a weekly basis, at the close of business
on every Friday, or the preceding working day if Friday happens to be a holiday.

Implementation of Resolution Plan: All lenders must put in place Board-approved policies for
resolution of stressed assets under this framework, including the timelines for resolution. As soon as
there is a default in the borrower entity’s account with any lender, all lenders − singly or jointly − shall
initiate steps to cure the default. The resolution plan (RP) may involve any actions / plans / reorganization
including, but not limited to, regularization of the account by payment of all over dues by the borrower
entity, sale of the exposures to other entities / investors, change in ownership, or restructuring. The RP
shall be clearly documented by all the lenders (even if there is no change in any terms and conditions).
If the resolution plan involves restructuring or change of ownership of accounts of more than 100 crore ( 1
billion) then an independent credit evaluation (ICE) of the residual debt will be done by the credit rating
agencies (CRAs) appointed by RBI. Whereas the accounts with exposure of 500 crore (5 billion)and
above will require two ICEs
Banks will have 180 days to implement the Resolution Plan where the default is of Rs2000 crore or
above taking March 1, 2018 as the reference date. If the default is done after March 1, 2018 then 180
days will be calculated from the date of first default.
If a resolution plan (RP) in respect of such large accounts is not implemented as per the timelines
specified, lenders shall file insolvency application, singly or jointly, under the Insolvency and
Bankruptcy Code 2016 (IBC) within 15 days from the expiry of the said timeline.
In case of defaults by the borrowers is above 100 crore (1 billion) and below 2000 crore (5 billion), a
timeline for implementation of resolution plans will be announced over a two year period
Ombudsman Scheme for Non-Banking Financial Companies, 2018:

NBFCs, as defined in Section 45-I(f) of the Reserve Bank of India Act, 1934 and registered with the RBI
under Section 45-IA of the Reserve Bank of India Act, 1934 which (a) are authorised to accept deposits;
or (b) have customer interface, with assets size of one billion rupees or above, as on the date of the
audited balance sheet of the previous financial year, or of any such asset size as the RBI may prescribe,
will come within the ambit, and should comply with the provisions of the Ombudsman Scheme for Non-
Banking Financial Companies, 2018.
The Non-banking Financial Company - Infrastructure Finance Company (NBFC-IFC), Core Investment
Company (CIC), Infrastructure Debt Fund - Non-banking Financial Company (IDF-NBFC) and an NBFC
under liquidation, are excluded from the ambit of the Scheme.
It is initially being introduced at the four metro centers viz. Chennai, Kolkata, Mumbai and New Delhi
for handling complaints from the respective zones, so as to cover the entire country.
The Reserve Bank may appoint one or more of its officers in the rank of not less than General Manager
to be known as Ombudsman to carry out the functions entrusted by or under the Scheme.
The appointment of Ombudsman under the above Clause may be made for a period not exceeding three
years at a time. Provided that the Reserve Bank may reduce the term of appointment or reappoint the
Ombudsman, if it considers necessary to do so.
The Reserve Bank shall depute such number of its officers and other staff to the office of the
Ombudsman as is considered necessary to function as the secretariat of the Ombudsman. The cost of
the Secretariat shall be borne by the Reserve Bank.

One can file a complaint with the NBFC Ombudsman by writing on a plain paper and sending it to the
concerned office of the NBFC Ombudsman by post/fax/hand delivery. One can also file it by email to the
NBFC Ombudsman.
The NBFC Ombudsman does not charge any fee for filing and resolving customers’ complaints.
The Ombudsman shall not entertain a complaint unless:-
the complainant, before making a complaint to the Ombudsman, had made a written representation to
the respective NBFC and the NBFC had rejected the complaint or the complainant had not received any
reply within a period of one month after the NBFC received his representation or the complainant is not
satisfied with the reply given to him by the NBFC;
the complaint is made not later than one year after the complainant has received the reply of the NBFC
to his representation or, where no reply is received, not later than one year and one month after the
date of the representation to the NBFC;
The Ombudsman may, also award compensation not exceeding one hundred thousand rupees to the
complainant, taking into account the loss of time, expenses incurred, harassment and mental anguish
suffered by the complainant.
An Award allowing the complaint shall lapse and be of no effect unless the complainant furnishes to the
NBFC and the Ombudsman concerned within a period of 30 days from the date of receipt of copy of the
Award, a letter of acceptance of the Award in full and final settlement of his claim.
The NBFC shall, unless it has preferred an appeal, comply with the Award and intimate compliance to
the complainant and the Ombudsman within one month from the date of receipt by it of the
acceptance in writing of the Award by the complainant.
One can file appeal against the award or the decision of the NBFC Ombudsman rejecting the complaint,
within 30 days of the date of receipt of communication of Award or rejection of the complaint. The
Appellate Authority may, if he/ she is satisfied that the applicant had sufficient cause for not making an
application for appeal within time, also allow a further period not exceeding 30 days.
It shall be the obligation of the NBFC concerned to implement the settlement arrived with the
complainant or the Award passed by the Ombudsman when it becomes final and send a report in this
regard to the Reserve Bank within 15 days of the award becoming final.
The NBFCs covered by the Scheme shall appoint Nodal Officers (NOs) at their
Head/Registered/Regional/Zonal Offices and inform all the Offices of the Ombudsman about the same.

Definition of MSME for priority sector lending:
The Government of India has enacted the Micro, Small and Medium Enterprises Development
(MSMED) Act, 2006 in terms of which the definition of micro, small and medium enterprises is as
under:
(a) Enterprises engaged in the manufacture or production, processing or preservation of goods as

specified below:
(i) A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25
lakh;
(ii) A small enterprise is an enterprise where the investment in plant and machinery is more than Rs. 25
lakh but does not exceed Rs. 5 crore; and
(iii) A medium enterprise is an enterprise where the investment in plant and machinery is more than Rs.5
crore but does not exceed Rs.10 crore.
(b) Enterprises engaged in providing or rendering of services and whose investment in

equipment (original cost excluding land and building and furniture, fittings and other items not
directly related to the service rendered or as may be notified under the MSMED Act, 2006) are
specified below.
(i) A micro enterprise is an enterprise where the investment in equipment does not exceed Rs. 10 lakh;
(ii) A small enterprise is an enterprise where the investment in equipment is more than Rs.10 lakh but
does not exceed Rs. 2 crore; and
(iii) A medium enterprise is an enterprise where the investment in equipment is more than Rs. 2 crore but
does not exceed Rs. 5 crore
In terms of the recommendations of the Prime Minister’s Task Force on MSMEs (Chairman: Shri
T.K.A. Nair, Principal Secretary), banks have been advised to achieve a 20 per cent year-on-year
growth in credit to micro and small enterprises, a 10 per cent annual growth in the number of
micro enterprise accounts and 60 percent of total lending to MSE sector as on corresponding
quarter of the previous year to Micro enterprises.
Scheme of Penalties for bank branches based on performance in rendering customer service to
the members of public:
Sr.No. Nature of Irregularity Penalty
i. Shortages in soiled note remittances For notes in denomination upto ₹ 50

and currency chest balances
₹ 50 per piece in addition to the loss
For notes in denomination of ₹ 100 & above
Equal to the value of the denomination per piece in

addition to the loss.
Shortages of 100 pieces and above per

remittance shall be debited immediately.

Penalty may be levied on reaching a limit of 100
pieces in a cumulative manner.
ii. Counterfeit notes detected in soiled note Penalty at 100% of the notional value of
remittances and currency chest Counterfeit Notes, in addition to the recovery of
balances. loss to the extent of the notional value of such
notes, will be imposed
iii. Mutilated notes detected in soiled note ₹ 50 per piece irrespective of the denomination
remittances and currency chest
balances Mutilated notes of 100 pieces and above per
remittance shall be debited immediately.
Penalty may be levied on reaching a limit of 100
pieces in a cumulative manner.
iv. Non-compliance with operational Penalty of ₹ 5000 for each irregularity.

guidelines by currency chests detected
by RBI officials Penalty will be enhanced to ₹ 10,000 in case of
repetition.
a) Non-functioning of CCTV
Penalty will be levied immediately.
b) Branch cash/documents kept in
strong room
c) Non-utilization of NSMs for sorting of

notes (NSMs not used for sorting of high
denomination notes received over the
counter or not used for sorting notes
remitted to chest/RBI)
v. Violation of any term of agreement with ₹ 10,000 for any violation of agreement or
RBI (for opening and maintaining deficiency of service.
currency chests) or deficiency in service
in providing exchange facilities, as ₹ 5 lakh in case there are more than 5 instances of
detected by RBI officials. violation of agreement/deficiency in service by the
branch. The levy of such penalty will be placed in
public domain.

30th Half Yearly Report on Management of Foreign Exchange Reserves: October 2017-March
2018:
The position of foreign exchange reserves as on June 29, 2018 is as under:

US $ Billion
Foreign Exchange Reserves (i+ii+iii+iv) 406.1
i. Foreign Currency Assets (FCA) 380.7
ii. Gold 21.4
iii. Special Drawing Rights (SDR) 1.5
iv. Reserve Tranche Position (RTP) 2.5
RBI releases June 2018 Financial Stability Report: The Reserve Bank of India released the Financial
Stability Report (FSR), 17th in the series. It is being released half yearly.
 Global growth outlook for 2018 remains positive despite some recent softness.
 The stress in the banking sector continues as gross non-performing advances (GNPA) ratio rises
further.
 Profitability of SCBs declined, partly reflecting increased provisioning. While this has added
pressure on SCBs’ regulatory capital ratios, the provision coverage ratio has increased.
 Credit growth of SCBs picked up during 2017-18 notwithstanding sluggish deposit growth.
 Macro-stress tests indicate that under the baseline scenario of current macroeconomic outlook,
SCBs’ GNPA ratio may rise from 11.6 per cent in March 2018 to 12.2 per cent by March 2019.
 The system-level capital to risk-weighted assets ratio (CRAR) may come down from 13.5 per cent
to 12.8 per cent during the period; eleven public sector banks under prompt corrective action
framework (PCA PSBs) may experience a worsening of their GNPA ratio from 21.0 per cent in
March 2018 to 22.3 per cent, with six PCA PSBs likely experiencing capital shortfall relative to the
required minimum CRAR of 9 per cent.
Report of the High Level Task Force on Public Credit Registry (PCR) for India: The Reserve Bank
of India constituted a High Level Task Force (HTF) on Public Credit Registry (PCR) under the
chairmanship of Shri Y. M. Deosthalee, ex-CMD, L&T Finance Holdings Limited, to examine the current
availability of information on credit and data gaps in India that could be filled by a comprehensive and
near-real-time PCR for India.
In India, there are multiple granular credit information repositories, with each having somewhat distinct
objective and coverage. Within the RBI, CRILC is a borrower level supervisory dataset with a threshold in
aggregate exposure of INR 50 million, whereas the BSR-1 is a loan level statistical dataset without any
threshold in amount outstanding and focus on the distribution aspects of credit disbursal. Also there are
four privately owned CICs operating in India. RBI has mandated all its regulated entity to submit credit
information individually to all four CICs. CICs offer, based on this unique access to the credit data, value
added services like credit scoring and analytics to the member credit institutions and to the borrowers, for
commercial purposes.
With a view to remove information asymmetry, to foster the level of access to credit, and to strengthen the
credit culture in the economy, there is a need to establish a Public Credit Registry (PCR). The PCR
maybe the single point of mandatory reporting for all material events for each loan, notwithstanding any
threshold in the loan amount or type of borrower. Thereby, the PCR will serve as a registry of all credit

contracts, duly verified by reporting institutions, for all lending in India and any lending by an Indian
institution to a company incorporated in India.
Existing CICs: The four CICs currently operating in the country are TransUnion CIBIL, Equifax, Experian,
and CRIF Highmark.
1. Trans Union CIBIL - The Credit Information Bureau Limited or CIBIL was founded in the year
2000. It was the first CIC in India. CIBIL has a member base including public and private sector
banks, non-banking financial institutions and housing finance companies. CIBIL collects
commercial, consumer finance and MFI related data and forms a credit report. The company also
issues a score derived from this data commonly known as CIBIL score.
2. Equifax - Equifax got its Certificate of Registration in India in the year 2010. The company has a
separate bureau dedicated to address the growing lending and regulatory needs of the
Microfinance Institutions.
3. Experian - Experian Credit Information Company was established as a joint venture with several
banks and financial institutions in India in the year in 2006. Experian prepares credit reports of
individuals based on the information provided by banks and other financial institutions about the
financial history of the individual.
4. CRIF High Mark Credit Information Services – High Mark was founded in 2007. It commenced
its bureau operations in March 2011, on receipt of Certificate of Registration (CoR) from the
Reserve Bank of India (RBI) to operate as a Credit Information Bureau in India in 2010. CRIF
acquired majority stake in High Mark in mid-2014. Following the acquisition, High Mark Credit
Information Services was renamed CRIF High Mark Credit Information Services.
Central Repository of Information on Large Credits (CRILC): Central Repository of Information on

Large Credits (CRILC) was set up by Reserve Bank in 2014-15 for ease in offsite supervision. The CRILC
database contains information from all SCBs (excluding RRBs) on all credit instruments for borrowers
having aggregate fund-based and non-fund based exposure of INR 50 million and above. Although the
CRILC database captures about 60 per cent of the entire bank credit and around 80 per cent of the non-
performing loans of SCBs by value, its coverage is miniscule in terms of number of accounts.
Central Registry of Securitisation Asset Reconstruction and Security Interest (CERSAI): The
Central Registry of Securitisation Asset Reconstruction and Security Interest (CERSAI) was set up by the
Govt. of India on 31st March 2011 under the provisions of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, to make available the data
of all equitable mortgages in the country at one place, so that the frauds due to multiple financing against
the same property may be prevented

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FOR RBI GRADE B PHASE 2 STUDY MATERIALS, VISIT WWW.CRACKGRADEBEXAMS.

Important RBI Circulars for RBI GRADE B (January to

All farmers other than marginal farmers:

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Security requirement may be as under:

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Monitoring the Performance of Credit Plans:

At Block Level Block Level Bankers’ Committee (BLBC)

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(ii) Exchanging soiled / mutilated / defective notes, and

(iii) Accepting coins and notes either for transactions or exchange.

 It will be preferable to accept coins, particularly, in the denominations of ₹ 1 and 2, by

Reserve Bank of India (Note Refund) Rules, 2009 - Delegation of powers:

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Exchange of soiled notes:

Exchange of mutilated and imperfect notes:

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(b) The banking business of autonomous/ statutory bodies/ Municipalities/ companies/

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(e) Transactions related to Gold Monetisation Scheme 2015

The categories under priority sector are as follows:

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Agriculture 18 per cent of ANBC or Credit Equivalent Amount Not applicable

Within the 18 per cent target for agriculture, a

The Total Priority Sector as percentage of ANBC or

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Foreign banks with 20 Foreign banks with less

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Types of PSLCs: There would be four kinds of PSLCs:–

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Control measures for ATMs – Timeline for compliance:

Implement anti-skimming and whitelisting solution by March 2019.

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Mark-to-market losses appear when an asset is priced according to a mark-to-market (MTM)

Investment by Foreign Portfolio Investors (FPI) in Debt:

No FPI shall invest in partly paid debt instruments.

Interest Rate Options in India:

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4.1 Interest Rate Call and Put Options

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Amendments in the Reserve Bank of India (Gold Monetization Scheme, 2015):

i) On medium term deposit – 2.25% p.a.

(ii) On long term deposit – 2.50% p.a.

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Foreign investment in investing companies registered as Non-Banking Financial Companies (NBFCs)

Single Brand Product Retail Trading -100% Automatic.

Overseas Citizen of India (OCI)’, Non-Resident Indian (NRI)’.

Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India)

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A person being a citizen of Afghanistan, Bangladesh or Pakistan belonging to minority communities in

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Resolution of Stressed Assets – Revised Framework:

Basis for classification – Principal