Dear Members,
Let us share and gain some knowledge on the Banking Industry. Though we are not concerned or related to the banking sector, I feel that we should have some knowledge of the banking industry, which is one of the fastest-growing sectors.
Find the following posts which provide insights into the Banking industry. Your views, feedback, and knowledge-sharing posts are highly invited.
Find more topics interesting and useful at:
- https://www.citehr.com/307617-hr-library-crks-desk.html
- https://www.citehr.com/311518-stories-stories-stories-crks-desk.html
- https://www.citehr.com/290175-some-useful-tips-crks-desk.html
- https://www.citehr.com/284503-our-resume-useful-thread-all-job-seekers-crks-desk.html
- https://www.citehr.com/281161-shocking-shock-crks-desk.html
- https://www.citehr.com/312447-amazing-quotes-crks-desk.html
- https://www.citehr.com/320365-some-spammers-send-fraudulent-mass-messages-crks-desk.html
- https://www.citehr.com/277912-attitude-crks-desk.html
- https://www.citehr.com/233764-inviting-hr-professionals-andhra-pradesh-citehr.html
Thanks & Regards
CRK
crk.mbahr@gmail.com
From India, Vijayawada
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82Let us share and gain some knowledge on the Banking Industry. Though we are not concerned or related to the banking sector, I feel that we should have some knowledge of the banking industry, which is one of the fastest-growing sectors.
Find the following posts which provide insights into the Banking industry. Your views, feedback, and knowledge-sharing posts are highly invited.
Find more topics interesting and useful at:
- https://www.citehr.com/307617-hr-library-crks-desk.html
- https://www.citehr.com/311518-stories-stories-stories-crks-desk.html
- https://www.citehr.com/290175-some-useful-tips-crks-desk.html
- https://www.citehr.com/284503-our-resume-useful-thread-all-job-seekers-crks-desk.html
- https://www.citehr.com/281161-shocking-shock-crks-desk.html
- https://www.citehr.com/312447-amazing-quotes-crks-desk.html
- https://www.citehr.com/320365-some-spammers-send-fraudulent-mass-messages-crks-desk.html
- https://www.citehr.com/277912-attitude-crks-desk.html
- https://www.citehr.com/233764-inviting-hr-professionals-andhra-pradesh-citehr.html
Thanks & Regards
CRK
crk.mbahr@gmail.com
From India, Vijayawada
Acknowledge(0)Amend(0)BANKS IN FINANCIAL MARKETS
- By Shyamala Gopinath
Recently, the emerging post-crisis regulatory landscape for the financial sector viz Basel III framework for banks, OTC derivative markets, etc., has come under sharp focus.
There has been quite some progress internationally in repairing the financial system – strengthening the regulation of institutions – banks/non-banks – and markets as well as the support framework. But increasingly, the central role of banks in the entire network, enmeshed through the financial system, is coming out much sharper.
Even in market-based financial systems, which were supposed to contribute to disintermediation of the role of banks in a big way, the vital support functions being performed by banks came out clearly during the crisis. The recent crisis was, as much as other things, about the centrality of banks as the supporting lifelines of financial markets. There is a clear recognition of the inadequacies of the regulatory approach based on the assumption of self-contained, well-functioning markets which ignored the risks these markets passed on to the banking system.
There is a rich literature on comparative benefits of bank-based versus market-based financial systems. The bank-based view highlights the positive role of banks in leveraging informational advantage about the firms for capital allocation and ensuring better credit discipline. In contrast, the market-based view highlights the growth-enhancing role of well-functioning markets in fostering greater innovation; enhancing greater market discipline and corporate governance. Market-based systems were supposed to reduce the problem of moral hazard inherent in bank-based systems.
However, it is increasingly being recognized that any system is essentially an interplay of dynamic interaction between banks and markets and the right interpretation of this interplay would be critical for addressing systemic stability.
Banks have become intricately linked to financial markets, and hence, more susceptible to strains in financial markets; at the same time, the functioning of markets has become intricately linked to banks, which then emerge as the receptacle for most of the risks within the financial markets.
From India, Vijayawada
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TALENT ACQUISITION
Talent acquisition has remained a matter of concern for public sector banks (PSBs). Recruitment and selection processes play decisive roles in aligning the human capital requirement in view of sea changes in internal processes of banks and the increasing competition levels with the entry of new market players.
The conspicuous changes in the demographic profile and segmentation of customers, in addition to the increasing expectation levels of services, have laid pressure on the banks to enhance human capital skills, particularly at the entry-level positions. Therefore, there is a need to strengthen the present selection processes in view of changes, both internal and external to the banks.
In order to synchronize the new skill requirements and the present selection process, few banks have proactively introduced some relevant changes; however, it appears that similar revisions have not been followed by other PSBs.
This article attempts to highlight the emerging gaps in present selection processes in identifying the appropriate talent in concordance with the skills required in the changing job profile of the employees at PSBs.
Background
The economic reforms in the 1990s marked a decisive changing pattern in the character and structure of the Indian banking sector based on innovation, growth, and value creation (McKinsey, 2005). There has been a spectacular growth in the spatial distribution, size of deposits, and advances in banks.
Banks are transforming to become people-oriented and customer-focused to bring perceptible changes in their business strategies. Initiatives such as technology adaptation, customization of products, and high-quality services have made the business processes barrier-free, reaching far-flung rural areas. In the midst of these positive changes, the reforms also allowed the entry of other players in the market, resulting in aggressive competition and strong forces of globalization.
The process of transformation has impacted PSBs significantly. With the devolution of autonomy of PSBs and to meet the ever-growing competition indigenously and globally, there is an urgent need to revamp the conventional approaches at various fronts to compete with counterparts. Hence, to respond to the changes, banks are adopting advanced technology, promoting partial private shareholding, strengthening institutional skill levels by altering HR strategies, and strengthening infrastructure to reach the remote parts of the country.
From India, Vijayawada
Acknowledge(0)Amend(0)
Talent acquisition has remained a matter of concern for public sector banks (PSBs). Recruitment and selection processes play decisive roles in aligning the human capital requirement in view of sea changes in internal processes of banks and the increasing competition levels with the entry of new market players.
The conspicuous changes in the demographic profile and segmentation of customers, in addition to the increasing expectation levels of services, have laid pressure on the banks to enhance human capital skills, particularly at the entry-level positions. Therefore, there is a need to strengthen the present selection processes in view of changes, both internal and external to the banks.
In order to synchronize the new skill requirements and the present selection process, few banks have proactively introduced some relevant changes; however, it appears that similar revisions have not been followed by other PSBs.
This article attempts to highlight the emerging gaps in present selection processes in identifying the appropriate talent in concordance with the skills required in the changing job profile of the employees at PSBs.
Background
The economic reforms in the 1990s marked a decisive changing pattern in the character and structure of the Indian banking sector based on innovation, growth, and value creation (McKinsey, 2005). There has been a spectacular growth in the spatial distribution, size of deposits, and advances in banks.
Banks are transforming to become people-oriented and customer-focused to bring perceptible changes in their business strategies. Initiatives such as technology adaptation, customization of products, and high-quality services have made the business processes barrier-free, reaching far-flung rural areas. In the midst of these positive changes, the reforms also allowed the entry of other players in the market, resulting in aggressive competition and strong forces of globalization.
The process of transformation has impacted PSBs significantly. With the devolution of autonomy of PSBs and to meet the ever-growing competition indigenously and globally, there is an urgent need to revamp the conventional approaches at various fronts to compete with counterparts. Hence, to respond to the changes, banks are adopting advanced technology, promoting partial private shareholding, strengthening institutional skill levels by altering HR strategies, and strengthening infrastructure to reach the remote parts of the country.
From India, Vijayawada
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Banking in India
Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790; both are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company.
For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India.
History
Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank in India. (Joint Stock Bank: A company that issues stock and requires shareholders to be held liable for the company's debt) It was not the first though. That honor belongs to the Bank of Upper India, which was established in 1863, and which survived until 1913 when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of Simla.
When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States, promoters opened banks to finance trading in Indian cotton. With large exposure to speculative ventures, most of the banks opened in India during that period failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for the next several decades until the beginning of the 20th century.
Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Puducherry, then a French colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking center.
The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the present and is now one of the largest banks in India.
Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had improved. Indians had established small banks, most of which served particular ethnic and religious communities.
The presidency banks dominated banking in India, but there were also some exchange banks and a number of Indian joint stock banks. All these banks operated in different segments of the economy. The exchange banks, mostly owned by Europeans, concentrated on financing foreign trade. Indian joint stock banks were generally undercapitalized and lacked the experience and maturity to compete with the presidency and exchange banks. This segmentation led Lord Curzon to observe, "In respect of banking, it seems we are behind the times. We are like some old-fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments."
The period between 1906 and 1911 saw the establishment of banks inspired by the Swadeshi movement. The Swadeshi movement inspired local businessmen and political figures to found banks of and for the Indian community. A number of banks established then have survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank, and Central Bank of India.
The fervor of the Swadeshi movement led to the establishing of many private banks in Dakshina Kannada and Udupi district, which were unified earlier and known by the name South Canara (South Kanara) district. Four nationalized banks started in this district and also a leading private sector bank. Hence undivided Dakshina Kannada district is known as the "Cradle of Indian Banking."
During the First World War (1914-1918) through the end of the Second World War (1939-1945) and two years thereafter until the independence of India were challenging for Indian banking. The years of the First World War were turbulent, and it took its toll with banks simply collapsing despite the Indian economy gaining an indirect boost due to war-related economic activities. At least 94 banks in India failed between 1913 and 1918.
Post-Independence
The partition of India in 1947 adversely impacted the economies of Punjab and West Bengal, paralyzing banking activities for months. India's independence marked the end of a regime of the Laissez-faire for the Indian banking. The Government of India initiated measures to play an active role in the economic life of the nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy. This resulted in greater involvement of the state in different segments of the economy including banking and finance.
The major steps to regulate banking included: The Reserve Bank of India, India's central banking authority, was nationalized on January 1, 1949, under the terms of the Reserve Bank of India (Transfer to Public Ownership) Act, 1948 (RBI, 2005b). [Reference www.rbi.org.in] In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India."
The Banking Regulation Act also provided that no new bank or branch of an existing bank could be opened without a license from the RBI, and no two banks could have common directors.
Nationalization
Despite the provisions, control, and regulations of the Reserve Bank of India, banks in India except the State Bank of India or SBI, continued to be owned and operated by private persons. By the 1960s, the Indian banking industry had become an important tool to facilitate the development of the Indian economy. At the same time, it had emerged as a large employer, and a debate had ensued about the nationalization of the banking industry. Indira Gandhi, then Prime Minister of India, expressed the intention of the Government of India in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalisation." The meeting received the paper with enthusiasm.
Thereafter, her move was swift and sudden. The Government of India issued an ordinance and nationalized the 14 largest commercial banks with effect from the midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on August 9, 1969.
A second dose of nationalization of 6 more commercial banks followed in 1980. The stated reason for the nationalization was to give the government more control of credit delivery. With the second dose of nationalization, the Government of India controlled around 91% of the banking business of India. Later on, in the year 1993, the government merged New Bank of India with Punjab National Bank. It was the only merger between nationalized banks and resulted in the reduction of the number of nationalized banks from 20 to 19.
After this, until the 1990s, the nationalized banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy.
Liberalization
In the early 1990s, the then Narasimha Rao government embarked on a policy of liberalization, licensing a small number of private banks. These came to be known as New Generation tech-savvy banks and included Global Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, Axis Bank (earlier as UTI Bank), ICICI Bank, and HDFC Bank. This move, along with the rapid growth in the economy of India, revitalized the banking sector in India, which has seen rapid growth with a strong contribution from all three sectors of banks, namely, government banks, private banks, and foreign banks.
The next stage for Indian banking has been set up with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%, at present it has gone up to 74% with some restrictions.
The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of functioning. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks. All this led to the retail boom in India. People not just demanded more from their banks but also received more.
Currently (2007), banking in India is generally fairly mature in terms of supply, product range, and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong, and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body,
From India, Vijayawada
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Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790; both are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company.
For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India.
History
Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank in India. (Joint Stock Bank: A company that issues stock and requires shareholders to be held liable for the company's debt) It was not the first though. That honor belongs to the Bank of Upper India, which was established in 1863, and which survived until 1913 when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of Simla.
When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States, promoters opened banks to finance trading in Indian cotton. With large exposure to speculative ventures, most of the banks opened in India during that period failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for the next several decades until the beginning of the 20th century.
Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Puducherry, then a French colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking center.
The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the present and is now one of the largest banks in India.
Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had improved. Indians had established small banks, most of which served particular ethnic and religious communities.
The presidency banks dominated banking in India, but there were also some exchange banks and a number of Indian joint stock banks. All these banks operated in different segments of the economy. The exchange banks, mostly owned by Europeans, concentrated on financing foreign trade. Indian joint stock banks were generally undercapitalized and lacked the experience and maturity to compete with the presidency and exchange banks. This segmentation led Lord Curzon to observe, "In respect of banking, it seems we are behind the times. We are like some old-fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments."
The period between 1906 and 1911 saw the establishment of banks inspired by the Swadeshi movement. The Swadeshi movement inspired local businessmen and political figures to found banks of and for the Indian community. A number of banks established then have survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank, and Central Bank of India.
The fervor of the Swadeshi movement led to the establishing of many private banks in Dakshina Kannada and Udupi district, which were unified earlier and known by the name South Canara (South Kanara) district. Four nationalized banks started in this district and also a leading private sector bank. Hence undivided Dakshina Kannada district is known as the "Cradle of Indian Banking."
During the First World War (1914-1918) through the end of the Second World War (1939-1945) and two years thereafter until the independence of India were challenging for Indian banking. The years of the First World War were turbulent, and it took its toll with banks simply collapsing despite the Indian economy gaining an indirect boost due to war-related economic activities. At least 94 banks in India failed between 1913 and 1918.
Post-Independence
The partition of India in 1947 adversely impacted the economies of Punjab and West Bengal, paralyzing banking activities for months. India's independence marked the end of a regime of the Laissez-faire for the Indian banking. The Government of India initiated measures to play an active role in the economic life of the nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy. This resulted in greater involvement of the state in different segments of the economy including banking and finance.
The major steps to regulate banking included: The Reserve Bank of India, India's central banking authority, was nationalized on January 1, 1949, under the terms of the Reserve Bank of India (Transfer to Public Ownership) Act, 1948 (RBI, 2005b). [Reference www.rbi.org.in] In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India."
The Banking Regulation Act also provided that no new bank or branch of an existing bank could be opened without a license from the RBI, and no two banks could have common directors.
Nationalization
Despite the provisions, control, and regulations of the Reserve Bank of India, banks in India except the State Bank of India or SBI, continued to be owned and operated by private persons. By the 1960s, the Indian banking industry had become an important tool to facilitate the development of the Indian economy. At the same time, it had emerged as a large employer, and a debate had ensued about the nationalization of the banking industry. Indira Gandhi, then Prime Minister of India, expressed the intention of the Government of India in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalisation." The meeting received the paper with enthusiasm.
Thereafter, her move was swift and sudden. The Government of India issued an ordinance and nationalized the 14 largest commercial banks with effect from the midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on August 9, 1969.
A second dose of nationalization of 6 more commercial banks followed in 1980. The stated reason for the nationalization was to give the government more control of credit delivery. With the second dose of nationalization, the Government of India controlled around 91% of the banking business of India. Later on, in the year 1993, the government merged New Bank of India with Punjab National Bank. It was the only merger between nationalized banks and resulted in the reduction of the number of nationalized banks from 20 to 19.
After this, until the 1990s, the nationalized banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy.
Liberalization
In the early 1990s, the then Narasimha Rao government embarked on a policy of liberalization, licensing a small number of private banks. These came to be known as New Generation tech-savvy banks and included Global Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, Axis Bank (earlier as UTI Bank), ICICI Bank, and HDFC Bank. This move, along with the rapid growth in the economy of India, revitalized the banking sector in India, which has seen rapid growth with a strong contribution from all three sectors of banks, namely, government banks, private banks, and foreign banks.
The next stage for Indian banking has been set up with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%, at present it has gone up to 74% with some restrictions.
The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of functioning. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks. All this led to the retail boom in India. People not just demanded more from their banks but also received more.
Currently (2007), banking in India is generally fairly mature in terms of supply, product range, and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong, and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body,
From India, Vijayawada
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Thankyou sir for great knowledge sharing.. even had worked at lead position with one of the mentioned bank but was not knowing the detail facts and transition mentioned here. Thankyou.
From India, Mumbai
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From India, Mumbai
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Thankyou Propellant consultant.. for your comments and feedback.....:) Keep checking for more information on banking industry.. If possible, kindly post your experience in banking sector... CRK
From India, Vijayawada
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From India, Vijayawada
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Dear CRK,
Thank you for collecting the information and sharing it with the cirehr members. One more thing - we need to know the names of the foreign banks working in India, particularly banks from Switzerland and Italy.
From India, Mumbai
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Thank you for collecting the information and sharing it with the cirehr members. One more thing - we need to know the names of the foreign banks working in India, particularly banks from Switzerland and Italy.
From India, Mumbai
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List of Local Banks in India
1. Allahabad Bank
2. Andhra Bank
3. Bank of Baroda
4. Bank of India
5. Bank of Maharashtra
6. Canara Bank
7. Central Bank of India
8. Corporation Bank
9. Dena Bank
10. IDBI Bank
11. Indian Bank
12. Indian Overseas Bank
13. Oriental Bank of Commerce
14. Punjab National Bank
15. Punjab & Sind Bank
16. Syndicate Bank
17. Union Bank of India
18. UCO Bank
19. United Bank of India
20. Vijaya Bank
21. SBI-State Bank Of India
SBI & associates (Nationalized)
State Bank of India
22. State Bank of Bikaner & Jaipur
23. State Bank of Hyderabad
24. State Bank of Mysore
25. State Bank of Patiala
26. State Bank of Travancore
State Bank of Indore - (merged with SBI in 2010)
State Bank of Saurashtra - (merged with SBI in 2008)
Private Banks
Axis Bank (Formerly UTI Bank)
HDFC Bank
ICICI Bank (Siddhashila)
Kotak Mahindra Bank
Karnataka Bank
Yes Bank
IndusInd Bank
The Nainital Bank Ltd.
ING Vysya Bank
South Indian Bank
Scheduled Urban Co-operative Banks
List of Scheduled Urban Co-operative Bank as on 31-3-2009 as per RBI:
Sapthagiri Coop. Bank Chittoor AP India
Rani Laxmibai urban Co-op Bank, Jhansi
Ahmedabad Mercantile Co-Op Bank Ltd., Ahmedabad
Kalupur Commercial Coop. Bank Ltd., Kalupur
Madhavpura Mercantile Co-Op Bank Ltd., Madhavpur
Mehsana Urban Co-Op Bank Ltd., Mehsana
Nutan Nagarik Sahakari Bank Ltd., Ahmedabad
Rajkot Nagarik Sahakari Bank Ltd., Rajkot
Almora urban co-operative bank ltd., Almora
South Indian Bank, Tirichur
Sardar Bhiladwala Pardi Peoples Coop Bank Ltd., Bulsar
Surat Peoples Coop Bank Ltd., Surat
Amanath Co-operative Bank Ltd., Bangalore
Andhra Pradesh Mahesh Co-Op Urban Bank Ltd., Andhra Pradesh
Charminar Coop. Urban Bank Ltd., Hyderabad
Vasavi Coop Urban Bank Limited., Hyderabad
Indian Mercantile Co-op Bank Ltd., Lucknow
Kallappanna Awade Ichalkaranji Janata Sahakari Bank Ltd., Ichalkaranji
Abhyudaya Co-operative Bank Ltd., Mumbai
Bangalore city cooperative bank., Bengaluru
Bassein Catholic Co-operative Bank Limited., Vasai
Bharat Co-operative Bank (Mumbai) Ltd., Mumbai
Bharati Sahakari Bank Limited., Pune
Bombay Mercantile Co-operative Bank Limited., Mumbai
Citizen Credit Co-operative Bank Ltd., Dadar
Cosmos Co-operative Urban Bank Ltd., Pune
Dombivli Nagari Sahakari Bank Ltd., Dombivli
Goa Urban Co-operative Bank Limited., Goa
Greater Bombay Co-operative Bank Limited., Mumbai
Jalgaon Janata Sahakari Bank Ltd., Jalgaon
Janakalyan Sahakari Bank Ltd., Mumbai
Janalaxmi Co-operative Bank Ltd., Mumbai
Janata Sahakari Bank Ltd., Pune
The Karnataka State Co-Operative Apex Bank Ltd, Bengaluru
Kalyan Janata Sahakari Bank Ltd., Kalyan
Karad Urban Co-operative Bank Ltd., Karad
Mahanagar Co-operative Bank Ltd., Mumbai
Mapusa Urban Co-operative Bank of Goa Ltd., Mapusa
Nagar Urban Co-operative Bank Ltd., Ahmednagar
Nasik Merchant's Co-operative Bank Ltd., Nasik
New India Co-operative Bank Ltd., Mumbai
NKGSB Co-operative Bank Ltd., Mumbai
Parsik Janata Sahakari Bank Ltd., Thane
Pravara Sahakari Bank Ltd., Ahmednagar
Punjab & Maharashtra Co-operative Bank Ltd., Mumbai
Rupee Co-operative Bank Ltd., Pune
Sangli Urban Co-operative Bank Ltd., Sangli
Saraswat Co-operative Bank Ltd., Mumbai
Shamrao Vithal Co-operative Bank Ltd., Mumbai
Solapur Janata Sahakari Bank Ltd., Solapur
Thane Bharat Sahakari Bank Ltd., Thane
Thane Janata Sahakari Bank Ltd., Thane
The Kapol Co-operative Bank Ltd., Mumbai
Zoroastrian Co-operative Bank Ltd., Mumbai
Nagpur Nagrik Sahakari Bank Ltd., Nagpur
Shikshak Sahakari Bank Ltd., Nagpur
The Akola Janata Com.Co-operative Bank Ltd., Akola
The Akola Urban Co-operative Bank Ltd., Akola
The Khamgaon Urban Co-operative Bank Ltd., Khamgaon
Cuttack Gramya Bank., Cuttack
Non-Scheduled Urban Co-operative Banks
List of Non-Scheduled Urban Co-operative Bank as on 31-3-2010 as per RBI:
Janaseva Sahakari Bank Ltd., Pune
Vishweshwar Sahakari Bank Ltd., Pune
Sadhna Sahakari Bank Ltd., Pune
Sanmitra Sahakari Bank Ltd., Pune
CRK
From India, Vijayawada
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1. Allahabad Bank
2. Andhra Bank
3. Bank of Baroda
4. Bank of India
5. Bank of Maharashtra
6. Canara Bank
7. Central Bank of India
8. Corporation Bank
9. Dena Bank
10. IDBI Bank
11. Indian Bank
12. Indian Overseas Bank
13. Oriental Bank of Commerce
14. Punjab National Bank
15. Punjab & Sind Bank
16. Syndicate Bank
17. Union Bank of India
18. UCO Bank
19. United Bank of India
20. Vijaya Bank
21. SBI-State Bank Of India
SBI & associates (Nationalized)
State Bank of India
22. State Bank of Bikaner & Jaipur
23. State Bank of Hyderabad
24. State Bank of Mysore
25. State Bank of Patiala
26. State Bank of Travancore
State Bank of Indore - (merged with SBI in 2010)
State Bank of Saurashtra - (merged with SBI in 2008)
Private Banks
Axis Bank (Formerly UTI Bank)
HDFC Bank
ICICI Bank (Siddhashila)
Kotak Mahindra Bank
Karnataka Bank
Yes Bank
IndusInd Bank
The Nainital Bank Ltd.
ING Vysya Bank
South Indian Bank
Scheduled Urban Co-operative Banks
List of Scheduled Urban Co-operative Bank as on 31-3-2009 as per RBI:
Sapthagiri Coop. Bank Chittoor AP India
Rani Laxmibai urban Co-op Bank, Jhansi
Ahmedabad Mercantile Co-Op Bank Ltd., Ahmedabad
Kalupur Commercial Coop. Bank Ltd., Kalupur
Madhavpura Mercantile Co-Op Bank Ltd., Madhavpur
Mehsana Urban Co-Op Bank Ltd., Mehsana
Nutan Nagarik Sahakari Bank Ltd., Ahmedabad
Rajkot Nagarik Sahakari Bank Ltd., Rajkot
Almora urban co-operative bank ltd., Almora
South Indian Bank, Tirichur
Sardar Bhiladwala Pardi Peoples Coop Bank Ltd., Bulsar
Surat Peoples Coop Bank Ltd., Surat
Amanath Co-operative Bank Ltd., Bangalore
Andhra Pradesh Mahesh Co-Op Urban Bank Ltd., Andhra Pradesh
Charminar Coop. Urban Bank Ltd., Hyderabad
Vasavi Coop Urban Bank Limited., Hyderabad
Indian Mercantile Co-op Bank Ltd., Lucknow
Kallappanna Awade Ichalkaranji Janata Sahakari Bank Ltd., Ichalkaranji
Abhyudaya Co-operative Bank Ltd., Mumbai
Bangalore city cooperative bank., Bengaluru
Bassein Catholic Co-operative Bank Limited., Vasai
Bharat Co-operative Bank (Mumbai) Ltd., Mumbai
Bharati Sahakari Bank Limited., Pune
Bombay Mercantile Co-operative Bank Limited., Mumbai
Citizen Credit Co-operative Bank Ltd., Dadar
Cosmos Co-operative Urban Bank Ltd., Pune
Dombivli Nagari Sahakari Bank Ltd., Dombivli
Goa Urban Co-operative Bank Limited., Goa
Greater Bombay Co-operative Bank Limited., Mumbai
Jalgaon Janata Sahakari Bank Ltd., Jalgaon
Janakalyan Sahakari Bank Ltd., Mumbai
Janalaxmi Co-operative Bank Ltd., Mumbai
Janata Sahakari Bank Ltd., Pune
The Karnataka State Co-Operative Apex Bank Ltd, Bengaluru
Kalyan Janata Sahakari Bank Ltd., Kalyan
Karad Urban Co-operative Bank Ltd., Karad
Mahanagar Co-operative Bank Ltd., Mumbai
Mapusa Urban Co-operative Bank of Goa Ltd., Mapusa
Nagar Urban Co-operative Bank Ltd., Ahmednagar
Nasik Merchant's Co-operative Bank Ltd., Nasik
New India Co-operative Bank Ltd., Mumbai
NKGSB Co-operative Bank Ltd., Mumbai
Parsik Janata Sahakari Bank Ltd., Thane
Pravara Sahakari Bank Ltd., Ahmednagar
Punjab & Maharashtra Co-operative Bank Ltd., Mumbai
Rupee Co-operative Bank Ltd., Pune
Sangli Urban Co-operative Bank Ltd., Sangli
Saraswat Co-operative Bank Ltd., Mumbai
Shamrao Vithal Co-operative Bank Ltd., Mumbai
Solapur Janata Sahakari Bank Ltd., Solapur
Thane Bharat Sahakari Bank Ltd., Thane
Thane Janata Sahakari Bank Ltd., Thane
The Kapol Co-operative Bank Ltd., Mumbai
Zoroastrian Co-operative Bank Ltd., Mumbai
Nagpur Nagrik Sahakari Bank Ltd., Nagpur
Shikshak Sahakari Bank Ltd., Nagpur
The Akola Janata Com.Co-operative Bank Ltd., Akola
The Akola Urban Co-operative Bank Ltd., Akola
The Khamgaon Urban Co-operative Bank Ltd., Khamgaon
Cuttack Gramya Bank., Cuttack
Non-Scheduled Urban Co-operative Banks
List of Non-Scheduled Urban Co-operative Bank as on 31-3-2010 as per RBI:
Janaseva Sahakari Bank Ltd., Pune
Vishweshwar Sahakari Bank Ltd., Pune
Sadhna Sahakari Bank Ltd., Pune
Sanmitra Sahakari Bank Ltd., Pune
CRK
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INDIAN BANKS ABROAD
List of subsidiaries of Indian Banks abroad
SBI (Canada) Ltd. Toronto Vancouver, Mississauga
SBI (California) Ltd. Los Angeles, Artesia, San Jose (Silicon Valley)
SBI Finance Inc. Delaware, U.S.A.
SBI International (Mauritius) (Offshore Bank) Mauritius
Bank of Baroda Uganda) Ltd. Uganda
Bank of Baroda (Kenya) Ltd. Kenya
Bank of Baroda (U.K.) Nominee Ltd. London, UK
BOB (Hong Kong) Ltd. (Converted into Restricted Licensed Bank) Hong Kong
Bank of India Finance (Kenya) Ltd. Kenya
IOB Properties Pte Ltd. Singapore
Bank of Baroda (Botswana) Ltd. Gaborone, Botswana
Bank of Baroda (Guyana) Inc. Georgetown, Guyana (South America)
ICICI Bank UK Ltd. London (UK)
ICICI Bank Canada Ltd. Toronto (Canada)
Bank of Baroda (Tanzania) Tanzania
Bank of Baroda (Dubai, Abu Dhabi, Ras Al Khaimah, Deira, Dammam, Salalah, Al Ain) United Arab Emirates
Bank of Baroda Sultanate of Oman, Muscat,
Bank of Baroda Belgium, Brussels
ICICI Bank Eurasia LLC Russia
PT Bank Indomonex Indonesia
Indian Ocean International Bank Ltd. (IOIB) Mauritius, Port Louis
Punjab National Bank International Limited (PNBIL) United Kingdom, London
Bank of Baroda (Trinidad and Tobago) Limited Trinidad & Tobago
PT Bank Swadesi Tbk Indonesia
Bank of Baroda (Trinidad and Tobago) Limited Trinidad & Tobago
CRK
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List of subsidiaries of Indian Banks abroad
SBI (Canada) Ltd. Toronto Vancouver, Mississauga
SBI (California) Ltd. Los Angeles, Artesia, San Jose (Silicon Valley)
SBI Finance Inc. Delaware, U.S.A.
SBI International (Mauritius) (Offshore Bank) Mauritius
Bank of Baroda Uganda) Ltd. Uganda
Bank of Baroda (Kenya) Ltd. Kenya
Bank of Baroda (U.K.) Nominee Ltd. London, UK
BOB (Hong Kong) Ltd. (Converted into Restricted Licensed Bank) Hong Kong
Bank of India Finance (Kenya) Ltd. Kenya
IOB Properties Pte Ltd. Singapore
Bank of Baroda (Botswana) Ltd. Gaborone, Botswana
Bank of Baroda (Guyana) Inc. Georgetown, Guyana (South America)
ICICI Bank UK Ltd. London (UK)
ICICI Bank Canada Ltd. Toronto (Canada)
Bank of Baroda (Tanzania) Tanzania
Bank of Baroda (Dubai, Abu Dhabi, Ras Al Khaimah, Deira, Dammam, Salalah, Al Ain) United Arab Emirates
Bank of Baroda Sultanate of Oman, Muscat,
Bank of Baroda Belgium, Brussels
ICICI Bank Eurasia LLC Russia
PT Bank Indomonex Indonesia
Indian Ocean International Bank Ltd. (IOIB) Mauritius, Port Louis
Punjab National Bank International Limited (PNBIL) United Kingdom, London
Bank of Baroda (Trinidad and Tobago) Limited Trinidad & Tobago
PT Bank Swadesi Tbk Indonesia
Bank of Baroda (Trinidad and Tobago) Limited Trinidad & Tobago
CRK
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FOREIGN BANKS WITH BRANCHES IN INDIA
ABN AMRO Bank N.V. - Royal Bank of Scotland
Abu Dhabi Commercial Bank Ltd
American Express Bank
Antwerp Diamond Bank
Arab Bangladesh Bank
Bank International Indonesia
Bank of America
Bank of Bahrain & Kuwait
Bank of Ceylon
Bank of Nova Scotia
Bank of Tokyo Mitsubishi UFJ
Barclays Bank
BNP Paribas
Calyon Bank
ChinaTrust Commercial Bank
Citibank
DBS Bank
Deutsche Bank
HSBC (Hongkong & Shanghai Banking Corporation)
JPMorgan Chase Bank
Krung Thai Bank
Mashreq Bank
Mizuho Corporate Bank
Oman International Bank
Shinhan Bank
Société Générale
Sonali Bank
Standard Chartered Bank
State Bank of Mauritius
UBS
VTB
Foreign Banks with Representative Offices in India
American Banks - mayur coprative bank limited
CRK
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ABN AMRO Bank N.V. - Royal Bank of Scotland
Abu Dhabi Commercial Bank Ltd
American Express Bank
Antwerp Diamond Bank
Arab Bangladesh Bank
Bank International Indonesia
Bank of America
Bank of Bahrain & Kuwait
Bank of Ceylon
Bank of Nova Scotia
Bank of Tokyo Mitsubishi UFJ
Barclays Bank
BNP Paribas
Calyon Bank
ChinaTrust Commercial Bank
Citibank
DBS Bank
Deutsche Bank
HSBC (Hongkong & Shanghai Banking Corporation)
JPMorgan Chase Bank
Krung Thai Bank
Mashreq Bank
Mizuho Corporate Bank
Oman International Bank
Shinhan Bank
Société Générale
Sonali Bank
Standard Chartered Bank
State Bank of Mauritius
UBS
VTB
Foreign Banks with Representative Offices in India
American Banks - mayur coprative bank limited
CRK
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TYPES OF BANKS
Banks' activities can be divided into retail banking, dealing directly with individuals and small businesses; business banking, providing services to mid-market business; corporate banking, directed at large business entities; private banking, providing wealth management services to high net worth individuals and families; and investment banking, relating to activities on the financial markets. Most banks are profit-making, private enterprises. However, some are owned by government, or are non-profit organizations.
Types of retail banks
Commercial bank: the term used for a normal bank to distinguish it from an investment bank. After the Great Depression, the U.S. Congress required that banks only engage in banking activities, whereas investment banks were limited to capital market activities. Since the two no longer have to be under separate ownership, some use the term "commercial bank" to refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses.
Community banks: locally operated financial institutions that empower employees to make local decisions to serve their customers and the partners.
Community development banks: regulated banks that provide financial services and credit to under-served markets or populations.
Credit unions: not-for-profit cooperatives owned by the depositors and often offering rates more favorable than for-profit banks. Typically, membership is restricted to employees of a particular company, residents of a defined neighborhood, members of a certain labor union or religious organizations, and their immediate families.
Postal savings banks: savings banks associated with national postal systems.
Private banks: banks that manage the assets of high net worth individuals.
Offshore banks: banks located in jurisdictions with low taxation and regulation. Many offshore banks are essentially private banks.
Savings bank: in Europe, savings banks took their roots in the 19th or sometimes even in the 18th century. Their original objective was to provide easily accessible savings products to all strata of the population. In some countries, savings banks were created on public initiative; in others, socially committed individuals created foundations to put in place the necessary infrastructure. Nowadays, European savings banks have kept their focus on retail banking: payments, savings products, credits and insurances for individuals or small and medium-sized enterprises. Apart from this retail focus, they also differ from commercial banks by their broadly decentralised distribution network, providing local and regional outreach—and by their socially responsible approach to business and society.
Building societies and Landesbanks: institutions that conduct retail banking.
Ethical banks: banks that prioritize the transparency of all operations and make only what they consider to be socially-responsible investments.
A Direct or Internet-Only bank is a banking operation without any physical bank branches, conceived and implemented wholly with networked computers.
Types of investment banks
Investment banks "underwrite" (guarantee the sale of) stock and bond issues, trade for their own accounts, make markets, and advise corporations on capital market activities such as mergers and acquisitions.
Merchant banks were traditionally banks which engaged in trade finance. The modern definition, however, refers to banks which provide capital to firms in the form of shares rather than loans. Unlike venture capital firms, they tend not to invest in new companies.
Both combined
Universal banks, more commonly known as financial services companies, engage in several of these activities. These big banks are very diversified groups that, among other services, also distribute insurance— hence the term bancassurance, a portmanteau word combining "banque or bank" and "assurance", signifying that both banking and insurance are provided by the same corporate entity.
Other types of banks
Central banks are normally government-owned and charged with quasi-regulatory responsibilities, such as supervising commercial banks, or controlling the cash interest rate. They generally provide liquidity to the banking system and act as the lender of last resort in event of a crisis.
Islamic banks adhere to the concepts of Islamic law. This form of banking revolves around several well-established principles based on Islamic canons. All banking activities must avoid interest, a concept that is forbidden in Islam. Instead, the bank earns profit (markup) and fees on the financing facilities that it extends to customers.
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Banks' activities can be divided into retail banking, dealing directly with individuals and small businesses; business banking, providing services to mid-market business; corporate banking, directed at large business entities; private banking, providing wealth management services to high net worth individuals and families; and investment banking, relating to activities on the financial markets. Most banks are profit-making, private enterprises. However, some are owned by government, or are non-profit organizations.
Types of retail banks
Commercial bank: the term used for a normal bank to distinguish it from an investment bank. After the Great Depression, the U.S. Congress required that banks only engage in banking activities, whereas investment banks were limited to capital market activities. Since the two no longer have to be under separate ownership, some use the term "commercial bank" to refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses.
Community banks: locally operated financial institutions that empower employees to make local decisions to serve their customers and the partners.
Community development banks: regulated banks that provide financial services and credit to under-served markets or populations.
Credit unions: not-for-profit cooperatives owned by the depositors and often offering rates more favorable than for-profit banks. Typically, membership is restricted to employees of a particular company, residents of a defined neighborhood, members of a certain labor union or religious organizations, and their immediate families.
Postal savings banks: savings banks associated with national postal systems.
Private banks: banks that manage the assets of high net worth individuals.
Offshore banks: banks located in jurisdictions with low taxation and regulation. Many offshore banks are essentially private banks.
Savings bank: in Europe, savings banks took their roots in the 19th or sometimes even in the 18th century. Their original objective was to provide easily accessible savings products to all strata of the population. In some countries, savings banks were created on public initiative; in others, socially committed individuals created foundations to put in place the necessary infrastructure. Nowadays, European savings banks have kept their focus on retail banking: payments, savings products, credits and insurances for individuals or small and medium-sized enterprises. Apart from this retail focus, they also differ from commercial banks by their broadly decentralised distribution network, providing local and regional outreach—and by their socially responsible approach to business and society.
Building societies and Landesbanks: institutions that conduct retail banking.
Ethical banks: banks that prioritize the transparency of all operations and make only what they consider to be socially-responsible investments.
A Direct or Internet-Only bank is a banking operation without any physical bank branches, conceived and implemented wholly with networked computers.
Types of investment banks
Investment banks "underwrite" (guarantee the sale of) stock and bond issues, trade for their own accounts, make markets, and advise corporations on capital market activities such as mergers and acquisitions.
Merchant banks were traditionally banks which engaged in trade finance. The modern definition, however, refers to banks which provide capital to firms in the form of shares rather than loans. Unlike venture capital firms, they tend not to invest in new companies.
Both combined
Universal banks, more commonly known as financial services companies, engage in several of these activities. These big banks are very diversified groups that, among other services, also distribute insurance— hence the term bancassurance, a portmanteau word combining "banque or bank" and "assurance", signifying that both banking and insurance are provided by the same corporate entity.
Other types of banks
Central banks are normally government-owned and charged with quasi-regulatory responsibilities, such as supervising commercial banks, or controlling the cash interest rate. They generally provide liquidity to the banking system and act as the lender of last resort in event of a crisis.
Islamic banks adhere to the concepts of Islamic law. This form of banking revolves around several well-established principles based on Islamic canons. All banking activities must avoid interest, a concept that is forbidden in Islam. Instead, the bank earns profit (markup) and fees on the financing facilities that it extends to customers.
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Dear Mr. Kartik Chandra Dutta,
Sub: List of Foreign Banks in India
Please find the said list.
Name of Bank / Country of origin / Branch in India / Date of opening
1. Banc Intesa Banca Commerciale * Italiana Spa Italy Mumbai 1.11.1988
2 Sanpaolo IMI Bank * Italy Mumbai 20.01.1991
** Banca Intesa s.p.a and Sanapaolo IMI s.p.a have merged globally
3. Uni Credito Italiano Italy Mumbai 1.08.1998
4. Banca Populare Di Verona E Novara Italy Mumbai 18.06.2001
5. BPU Banca –Banche Popolari Unite S.c.r.l Italy Mumbai 16.01.2006
6. Monte Dei Paschi Di Sienna Italy Mumbai 07.04.2006
7. Banca Popolare di Vicenza Italy Mumbai 29.04.2006
8. Banca di Roma Italy Mumbai 17.01.2007
09.UBS AG Switzerland Mumbai 24.11.1994
10.Zurcher Kantonalbank Switzerland Mumbai 27.06.2006
I will keep posting articles in Banking.
J.Srinivasa Rao,
Ex-Banker, Ex-HR Exe
From India, Hyderabad
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Sub: List of Foreign Banks in India
Please find the said list.
Name of Bank / Country of origin / Branch in India / Date of opening
1. Banc Intesa Banca Commerciale * Italiana Spa Italy Mumbai 1.11.1988
2 Sanpaolo IMI Bank * Italy Mumbai 20.01.1991
** Banca Intesa s.p.a and Sanapaolo IMI s.p.a have merged globally
3. Uni Credito Italiano Italy Mumbai 1.08.1998
4. Banca Populare Di Verona E Novara Italy Mumbai 18.06.2001
5. BPU Banca –Banche Popolari Unite S.c.r.l Italy Mumbai 16.01.2006
6. Monte Dei Paschi Di Sienna Italy Mumbai 07.04.2006
7. Banca Popolare di Vicenza Italy Mumbai 29.04.2006
8. Banca di Roma Italy Mumbai 17.01.2007
09.UBS AG Switzerland Mumbai 24.11.1994
10.Zurcher Kantonalbank Switzerland Mumbai 27.06.2006
I will keep posting articles in Banking.
J.Srinivasa Rao,
Ex-Banker, Ex-HR Exe
From India, Hyderabad
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Thank you Sir, for sharing such detailed knowledge about the banking sector. I work with a multinational bank however was not aware of such details. Please share more details. Thank you once again.
From India, Delhi
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RBI's INSTRUCTIONS ON BANKING MATTERS
I. DOMESTIC DEPOSITS
1. Whether banks can accept interest-free deposits?
Banks cannot accept interest-free deposits other than in a current account.
2. Whether banks can pay interest on savings bank accounts quarterly?
Banks can pay interest on savings bank accounts at quarterly or longer rests.
3. Whether banks can pay interest on term deposits monthly?
Interest on term deposits is payable at quarterly or longer rests. In the case of monthly deposit schemes, as per banking practice, the interest is calculated for the quarter and may be paid monthly at the discounted value.
4. Whether banks can pay differential rates of interest on term deposits aggregating Rs. 15 lakh and above?
Differential rates of interest can be paid on single term deposits of Rs. 15 lakh and above and not on the aggregate of individual deposits where the total exceeds Rs. 15 lakh.
5. Whether banks can pay a commission for mobilizing deposits?
Banks are prohibited from employing/engaging any individual, firm, company, association, institution for the collection of deposits or selling deposit-linked products on payment of remuneration or fees or commission in any form or manner except a commission paid to agents employed to collect door-to-door deposits under a special scheme. Banks have also been permitted to use the services of Non-Governmental Organizations (NGOs)/ Self-Help Groups (SHGs)/ Micro Finance Institutions (MFIs), and other Civil Society Organizations (CSOs) as intermediaries in providing financial and banking services, including the collection of deposits through the use of the Business Facilitator and Business Correspondent models and pay reasonable commission/fees.
6. Whether banks can prematurely repay term deposits on their own?
A term deposit is a contract between the bank and the customer for a definite term and it cannot be paid prematurely at the bank's option. However, a term deposit can be paid prematurely at the request of the customer subject to the terms of the contract, including a penalty, if any.
7. Whether banks can refuse the premature withdrawal of term deposits?
Banks may not normally refuse the premature withdrawal of term deposits of individuals and Hindu Undivided Families (HUF), irrespective of the size of the deposit. However, banks, at their discretion, may disallow the premature withdrawal of large deposits held by entities other than individuals and Hindu Undivided Families. Banks should notify such depositors of their policy of disallowing premature withdrawals in advance, i.e., at the time of acceptance of deposits.
8. Whether banks can levy a penalty for premature withdrawal?
Banks have the freedom to determine their own penal rates of interest for the premature withdrawal of term deposits.
9. How and when are banks required to pay interest on the deposits maturing on a holiday/non-business working day/Sunday?
Banks should pay interest at the originally contracted rate on the deposit amount for the holiday/Sunday/non-business working day intervening between the date of expiry of the specified term of the deposit and the date of payment of the proceeds of the deposit on the succeeding working day.
10. Whether banks can pay additional interest admissible to banks' staff on the deposit placed in the name of a minor child/children of the deceased members of staff?
No. Children (including minors) are not eligible for additional interest admissible to banks' staff members/retired staff members.
11. Whether additional interest admissible to banks' staff can be paid on the compensation awarded by the court to a minor child and deposited in the joint names of the minor child and parent?
No. As the money belongs to the minor child and not the banks' staff, additional interest cannot be paid.
12. Whether banks are permitted to offer a differential rate of interest on other deposits?
Banks can formulate special fixed deposit schemes specifically for resident Indian senior citizens offering higher and fixed rates of interest compared to normal deposits of any size.
13. At what rate is interest payable on a deposit standing in the name of a deceased depositor?
In the case of a term deposit standing in the name/s of a deceased individual depositor or two or more joint depositors, where one of the depositors has died, the criterion for payment of interest on matured deposits in the event of death of the depositor in the above cases has been left to the discretion of individual banks subject to their Board laying down a transparent policy in this regard.
In the case of balances lying in the current account standing in the name of a deceased individual depositor/sole proprietorship concern, interest should be paid only from May 1, 1983, or from the date of death of the depositor, whichever is later, till the date of repayment to the claimant/s at the rate of interest applicable to savings deposits as on the date of payment. However, in the case of NRE deposits, if the claimants are residents, the deposit on maturity is treated as a domestic rupee deposit, and interest is paid for the subsequent period at the rate applicable to domestic deposits of similar maturity.
14. What are the guidelines for the renewal of overdue deposits?
All aspects concerning the renewal of overdue deposits may be decided by individual banks subject to their Board laying down a transparent policy in this regard, and the customers being notified of the terms and conditions of renewal, including the interest rate, at the time of acceptance of the deposit. The policy should be non-discretionary and non-discriminatory.
II. DEPOSITS OF NON-RESIDENTS INDIANS (NRIs)
15. Whether a concessional rate of interest is applicable when a loan against FCNR(B) deposit is repaid in foreign currency?
Banks have the freedom to fix the rate of interest chargeable on loans and advances against FCNR(B) deposits to the depositors without reference to their Benchmark Prime Lending Rate (BPLR), irrespective of whether repayment is made in Rupees or in Foreign Currency.
16. Whether banks can accept recurring deposits under the FCNR(B) Scheme?
No. Banks cannot accept recurring deposits under the FCNR(B) Scheme.
17. Who can fix the interest rates on NRE and FCNR(B) deposits?
The Boards of Directors of banks have been empowered to authorize the Asset-Liability Management Committee to fix interest rates on deposits within the ceiling prescribed by RBI.
18. Whether banks are permitted to offer a differential rate of interest on NRE/ FCNR(B) deposits?
Yes. Banks are permitted to offer differential rates of interest on NRE term deposits as in the case of domestic term deposits of Rs. 15 lakh and above within the ceiling prescribed. Regarding FCNR(B) deposits, banks are free to decide the currency-wise minimum quantum on which differential rate of interest may be offered subject to the overall ceiling prescribed.
19. What is meant by Reinvestment Deposit?
Reinvestment deposits are those deposits where interest (as and when due) is reinvested at the same contracted rate till maturity, which is withdrawable with the principal amount on the maturity date. It is also applicable to domestic deposits.
20. Whether FCNR(B) deposits can be renewed with a retrospective effect (i.e. from the maturity date)? If yes, what is the rate of interest payable?
A bank may, at its discretion, renew an overdue FCNR(B) deposit or a portion thereof provided the overdue period from the date of maturity till the date of renewal (both days inclusive) does not exceed 14 days, and the rate of interest payable on the amount of the deposit so renewed shall be the appropriate rate of interest for the period of renewal as prevailing on the date of maturity or on the date when the depositor seeks renewal, whichever is lower. In the case of overdue deposits where the overdue period exceeds 14 days, the deposits can be renewed at the prevailing rate of interest on the date when the renewal is sought. If the depositor places the entire amount of overdue deposit or a portion thereof as a fresh FCNR(B) deposit, banks may fix their interest for the overdue period on the amount so placed as a fresh term deposit. Banks are free to recover the interest so paid for the overdue period if the deposit is withdrawn after renewal before completion of the minimum stipulated period under the scheme.
21. Whether interest rate stipulations applicable to loans in rupees under FCNR(B) schemes are applicable to loans denominated in foreign currency?
No. Interest rate stipulations applicable to loans in rupees under FCNR(B) schemes are not applicable to loans denominated in foreign currency, which are governed by the instructions issued by the Foreign Exchange Department of RBI.
22. Under what circumstances additional interest over and above the declared rate of interest can be paid in case of FCNR(B) deposits?
In respect of deposits accepted in the name of -
a. a member or a
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- RBI
I. DOMESTIC DEPOSITS
1. Whether banks can accept interest-free deposits?
Banks cannot accept interest-free deposits other than in a current account.
2. Whether banks can pay interest on savings bank accounts quarterly?
Banks can pay interest on savings bank accounts at quarterly or longer rests.
3. Whether banks can pay interest on term deposits monthly?
Interest on term deposits is payable at quarterly or longer rests. In the case of monthly deposit schemes, as per banking practice, the interest is calculated for the quarter and may be paid monthly at the discounted value.
4. Whether banks can pay differential rates of interest on term deposits aggregating Rs. 15 lakh and above?
Differential rates of interest can be paid on single term deposits of Rs. 15 lakh and above and not on the aggregate of individual deposits where the total exceeds Rs. 15 lakh.
5. Whether banks can pay a commission for mobilizing deposits?
Banks are prohibited from employing/engaging any individual, firm, company, association, institution for the collection of deposits or selling deposit-linked products on payment of remuneration or fees or commission in any form or manner except a commission paid to agents employed to collect door-to-door deposits under a special scheme. Banks have also been permitted to use the services of Non-Governmental Organizations (NGOs)/ Self-Help Groups (SHGs)/ Micro Finance Institutions (MFIs), and other Civil Society Organizations (CSOs) as intermediaries in providing financial and banking services, including the collection of deposits through the use of the Business Facilitator and Business Correspondent models and pay reasonable commission/fees.
6. Whether banks can prematurely repay term deposits on their own?
A term deposit is a contract between the bank and the customer for a definite term and it cannot be paid prematurely at the bank's option. However, a term deposit can be paid prematurely at the request of the customer subject to the terms of the contract, including a penalty, if any.
7. Whether banks can refuse the premature withdrawal of term deposits?
Banks may not normally refuse the premature withdrawal of term deposits of individuals and Hindu Undivided Families (HUF), irrespective of the size of the deposit. However, banks, at their discretion, may disallow the premature withdrawal of large deposits held by entities other than individuals and Hindu Undivided Families. Banks should notify such depositors of their policy of disallowing premature withdrawals in advance, i.e., at the time of acceptance of deposits.
8. Whether banks can levy a penalty for premature withdrawal?
Banks have the freedom to determine their own penal rates of interest for the premature withdrawal of term deposits.
9. How and when are banks required to pay interest on the deposits maturing on a holiday/non-business working day/Sunday?
Banks should pay interest at the originally contracted rate on the deposit amount for the holiday/Sunday/non-business working day intervening between the date of expiry of the specified term of the deposit and the date of payment of the proceeds of the deposit on the succeeding working day.
10. Whether banks can pay additional interest admissible to banks' staff on the deposit placed in the name of a minor child/children of the deceased members of staff?
No. Children (including minors) are not eligible for additional interest admissible to banks' staff members/retired staff members.
11. Whether additional interest admissible to banks' staff can be paid on the compensation awarded by the court to a minor child and deposited in the joint names of the minor child and parent?
No. As the money belongs to the minor child and not the banks' staff, additional interest cannot be paid.
12. Whether banks are permitted to offer a differential rate of interest on other deposits?
Banks can formulate special fixed deposit schemes specifically for resident Indian senior citizens offering higher and fixed rates of interest compared to normal deposits of any size.
13. At what rate is interest payable on a deposit standing in the name of a deceased depositor?
In the case of a term deposit standing in the name/s of a deceased individual depositor or two or more joint depositors, where one of the depositors has died, the criterion for payment of interest on matured deposits in the event of death of the depositor in the above cases has been left to the discretion of individual banks subject to their Board laying down a transparent policy in this regard.
In the case of balances lying in the current account standing in the name of a deceased individual depositor/sole proprietorship concern, interest should be paid only from May 1, 1983, or from the date of death of the depositor, whichever is later, till the date of repayment to the claimant/s at the rate of interest applicable to savings deposits as on the date of payment. However, in the case of NRE deposits, if the claimants are residents, the deposit on maturity is treated as a domestic rupee deposit, and interest is paid for the subsequent period at the rate applicable to domestic deposits of similar maturity.
14. What are the guidelines for the renewal of overdue deposits?
All aspects concerning the renewal of overdue deposits may be decided by individual banks subject to their Board laying down a transparent policy in this regard, and the customers being notified of the terms and conditions of renewal, including the interest rate, at the time of acceptance of the deposit. The policy should be non-discretionary and non-discriminatory.
II. DEPOSITS OF NON-RESIDENTS INDIANS (NRIs)
15. Whether a concessional rate of interest is applicable when a loan against FCNR(B) deposit is repaid in foreign currency?
Banks have the freedom to fix the rate of interest chargeable on loans and advances against FCNR(B) deposits to the depositors without reference to their Benchmark Prime Lending Rate (BPLR), irrespective of whether repayment is made in Rupees or in Foreign Currency.
16. Whether banks can accept recurring deposits under the FCNR(B) Scheme?
No. Banks cannot accept recurring deposits under the FCNR(B) Scheme.
17. Who can fix the interest rates on NRE and FCNR(B) deposits?
The Boards of Directors of banks have been empowered to authorize the Asset-Liability Management Committee to fix interest rates on deposits within the ceiling prescribed by RBI.
18. Whether banks are permitted to offer a differential rate of interest on NRE/ FCNR(B) deposits?
Yes. Banks are permitted to offer differential rates of interest on NRE term deposits as in the case of domestic term deposits of Rs. 15 lakh and above within the ceiling prescribed. Regarding FCNR(B) deposits, banks are free to decide the currency-wise minimum quantum on which differential rate of interest may be offered subject to the overall ceiling prescribed.
19. What is meant by Reinvestment Deposit?
Reinvestment deposits are those deposits where interest (as and when due) is reinvested at the same contracted rate till maturity, which is withdrawable with the principal amount on the maturity date. It is also applicable to domestic deposits.
20. Whether FCNR(B) deposits can be renewed with a retrospective effect (i.e. from the maturity date)? If yes, what is the rate of interest payable?
A bank may, at its discretion, renew an overdue FCNR(B) deposit or a portion thereof provided the overdue period from the date of maturity till the date of renewal (both days inclusive) does not exceed 14 days, and the rate of interest payable on the amount of the deposit so renewed shall be the appropriate rate of interest for the period of renewal as prevailing on the date of maturity or on the date when the depositor seeks renewal, whichever is lower. In the case of overdue deposits where the overdue period exceeds 14 days, the deposits can be renewed at the prevailing rate of interest on the date when the renewal is sought. If the depositor places the entire amount of overdue deposit or a portion thereof as a fresh FCNR(B) deposit, banks may fix their interest for the overdue period on the amount so placed as a fresh term deposit. Banks are free to recover the interest so paid for the overdue period if the deposit is withdrawn after renewal before completion of the minimum stipulated period under the scheme.
21. Whether interest rate stipulations applicable to loans in rupees under FCNR(B) schemes are applicable to loans denominated in foreign currency?
No. Interest rate stipulations applicable to loans in rupees under FCNR(B) schemes are not applicable to loans denominated in foreign currency, which are governed by the instructions issued by the Foreign Exchange Department of RBI.
22. Under what circumstances additional interest over and above the declared rate of interest can be paid in case of FCNR(B) deposits?
In respect of deposits accepted in the name of -
a. a member or a
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CONTD..
38. Whether any ceiling has been fixed on the bank’s exposure to the capital market?
With effect from April 1, 2007 a bank's total exposure, including both fund based and non-fund based exposure, to the capital market in all forms covering its direct investment in equity shares, convertible bonds and debentures and units of equity oriented mutual funds; advances against shares to individuals for investment in equity shares (including IPOs), bonds and debentures, units of equity-oriented mutual funds and secured and unsecured advances to stockbrokers and guarantees issued on behalf of stockbrokers and market makers; all exposures to Venture Capital Funds (both registered and unregistered) should not exceed 40 per cent of its net worth, as on March 31 of the previous year. Within this overall ceiling, the bank’s direct investment in shares, convertible bonds / debentures, units of equity-oriented mutual funds and all exposures to Venture Capital Funds (VCFs) [both registered and unregistered] should not exceed 20 per cent of its net worth. For computing the ceiling on exposure to capital market, the bank’s direct investment in shares will be calculated at cost price of the shares.
The aggregate exposure of a consolidated bank to capital markets (both fund based and non-fund based) should not exceed 40 per cent of its consolidated net worth as on March 31 of the previous year. Within this overall ceiling, the aggregate direct exposure by way of the consolidated bank’s investment in shares, convertible bonds / debentures, units of equity-oriented mutual funds and all exposures to Venture Capital Funds (VCFs) [both registered and unregistered] should not exceed 20 per cent of its consolidated net worth.
39. What is the definition of net worth of a bank?
Net worth would comprise of Paid-up capital plus Free Reserves including Share Premium but excluding Revaluation Reserves, plus Investment Fluctuation Reserve and credit balance in Profit & Loss account, less debit balance in Profit and Loss account, Accumulated Losses and Intangible Assets. No general or specific provisions should be included in computation of net worth. Infusion of capital through equity shares, either through domestic issues or overseas floats after the published balance sheet date, may also be taken into account for determining the ceiling on exposure to capital market.
40. Whether banks can make short sales of shares?
No. Banks are prohibited from making any short sales of shares.
41. Whether banks can invest in fixed deposits of non-financial companies?
There is no prohibition on banks’ placing of funds with non-banking non-financial companies under their Public Deposit Schemes. However, investment in the Public Deposit Scheme of such companies should be classified by banks as loans/ advances in their balance sheet and returns submitted under the Banking Regulation Act, 1949 and the Reserve Bank of India Act 1934.
42. What should be the method of valuation for advances against shares/ debentures/ bonds?
Shares/ debentures/ bonds accepted by banks as security for loans/ advances should be valued at the prevailing market prices.
43. Whether banks can sanction bridge loans to companies?
Yes. Banks can sanction bridge loans to companies for a period not exceeding one year against the expected equity flows/ issues as also the expected proceeds of non-convertible Debentures, External Commercial Borrowings, Global Depository Receipts and/ or funds in the nature of Foreign Direct Investments, provided the bank is satisfied that the borrowing company has made firm arrangements for raising the aforesaid resources/ funds. Bridge loans extended by a bank will be included within the ceiling of 40% of net worth prescribed for banks’ aggregate exposure to the capital market.
44. What is the ceiling on the quantum of loans which can be sanctioned by banks to individuals against security of shares, debentures and PSU bonds, if held in physical form and in dematerialized form?
Loans/ advances granted to individuals against the security of shares, debentures and PSU bonds should not exceed Rs.10 lakh and Rs.20 lakh, if the securities are held in physical form and dematerialized form respectively. The maximum amount of finance that can be granted to an individual for subscribing to IPOs is Rs.10 lakh. However, the bank should not provide finance to companies for their investment in IPOs of other companies. Banks can grant advances to employees for purchasing shares of their own companies under Employees Stock Option Plan (ESOP) to the extent of 90% of purchase price of shares or Rs.20 lakh whichever is lower. NBFCs should not be provided finance for on-lending to individuals for subscribing to IPOs. Loans/ advances granted by a bank for subscribing to IPOs should be reckoned as an exposure to capital market.
45. What is the margin stipulated for advances against shares held in physical form and dematerialised form?
A uniform margin of 50% has been stipulated for all advances against shares/ /financing of IPOs/issue of guarantees for capital market operations. Within this 50 percent margin, a minimum cash margin of 25 percent should be maintained in respect of guarantees issued by banks for capital market operations.
46. Is any margin stipulated for banks' exposure to commodity markets?
The minimum margin of 50% and minimum cash margin of 25% (within the margin of 50%), as stipulated in the case of banks' exposure to capital markets, will also apply to guarantees issued by banks on behalf of commodity brokers in favour of the national level commodity exchanges, viz, National Commodity & Derivatives Exchange (NCDEX), Multi Commodity Exchange of India Limited (MCX) and National Multi-Commodity Exchange of India Limited (NMCEIL) in lieu of margin requirements.
V. DONATIONS
47. Whether banks can make donations?
Yes. The profit making banks may make donations during a financial year, aggregating up to one percent of the published profit of the bank for the previous year. However, the contributions/ subscriptions made by banks to Prime Minister’s Relief Fund and to professional bodies/ institutions like Indian Banks’ Association, National Institute of Bank Management, Indian Institute of Bankers, Institute of Banking Personnel Selection, Foreign Exchange Dealers Association of India, during a year will be exempted from the above ceiling. Unutilised amount of the permissible limit of a year should not be carried forward to the next year for the purpose of making donations.
48. Whether loss-making banks can make donations?
Yes, loss making banks can make donations up to Rs.5 lakh only in a financial year.
49. Whether overseas branches of the banks can make donations abroad?
Yes, the overseas branches of the banks can make donations abroad, provided the banks do not exceed the prescribed ceiling of one per cent of their published profit of the previous year.
VI. LOANS FOR PREMISES
50. What are the norms and procedure laid down by RBI for acquisition of accommodation on lease/ rental basis by commercial banks for their use, i.e. for office and residence of the staff?
i. The Board of Directors of the banks should lay down the policy and formulate operational guidelines separately in respect of metropolitan, urban, semi-urban and rural areas covering all areas in respect of acquiring premises on lease/ rental basis for the banks’ use. These guidelines should include also delegation of powers at various levels. The decision in regard to surrendering or shifting of premises other than at rural centers should be taken at the central office level by a committee of senior executives.
ii. The Board of Directors of the bank should lay down separate policy for granting of loans to landlords who provide them premises on lease/ rental basis. The rate of interest to be charged on such loans should be fixed as per the lending rate directives issued by RBI with BPLR as the minimum lending rate for the loans above Rs.2 lakh. The rate of interest may be simple or compound, in accordance with the usual practice of the bank, as applicable to other term loans.
iii. Banks should provide a suitable mechanism for redressing the genuine grievances of the landlord expeditiously.
iv. The details of negotiated contracts in respect of advances to landlords and rental (including taxes etc. and deposits of Rs.25 lakh and above) on premises taken on lease/ rental by the public sector banks, should be reported to the Central Bureau of Investigation (CBI) as per the extant Government instructions. This requirement will not be applicable to banks in the private sector.
VII. SERVICE CHARGES
51. Is there any ceiling on service charges to be levied by the banks?
Indian Banks’ Association (IBA) has dispensed with the practice of prescribing service charges to be levied by banks for various services rendered by them. With effect from September, 1999, the Reserve Bank has granted freedom to banks to prescribe service charges with the approval of the respective Board of Directors.
As announced in the Annual Policy Statement for the year 2006-2007, in order to ensure fair practices in banking services, Reserve Bank of India (RBI) constituted a Working Group to formulate a scheme for ensuring reasonableness of bank charges, and to incorporate it in the Fair Practices Code, the compliance of which would be monitored by the Banking Codes and Standards Board of India (BCSBI). The Working Group, which examined various issues, such as basic banking/financial services to be rendered to individual customers, the methodology adopted by banks for fixing the charges and the reasonableness of such charges, has identified twenty-seven services related to deposit/loan accounts, remittance facilities and cheque collections, as an indicative list of basic banking services to be offered by banks. The recommendations of the Working Group have been accepted by RBI with certain modifications. Based on the recommendations of the Working Group, RBI has issued a circular DBOD. No. Dir. BC. 56/13.03.00/2006-07 dated February 2, 2007 to all scheduled commercial banks.
52. What are the parameters to be adopted for identifying basic banking services?
Banks have been advised to identify basic banking services on the basis of two parameters indicated by the Working Group, namely, (i) banking services that are ordinarily availed by individuals in the middle and lower segments and (ii) the value of transactions, namely, cheque collections and remittances up to Rs. 10,000 for each transaction and up to $500 for forex transactions. The indicative list of banking services includes services relating to Deposit Accounts (cheque book facility, issue of pass book / statement, ATM Card, Debit Card, stop payment, balance enquiry, account closure, cheque return - inward, signature verification); Loan Accounts (no dues certificate); Remittance facilities (Demand Draft – issue/ cancellation/ revalidation, Payment Order - issue/ cancellation/ revalidation/ duplicate, Telegraphic Transfer - issue/ cancellation/ duplicate, Electronic Clearing Service (ECS), National Electronic Fund Transfer (NEFT) / Electronic Fund Transfer (EFT); Collection Facilities (collection of local /outstation cheques, cheque return- outward). Banks are required to implement the recommendations of the Working Group on making available the basic banking services at reasonable prices/ charges and towards this, delivering the basic services outside the scope of the bundled products.
53. What are the principles to be followed by banks in order to ensure reasonableness in fixing and communicating service charges?
Banks are required to follow the following principles for ensuring reasonableness in fixing and communicating the service charges -
(a) For basic services to individuals, banks should levy charges at rates that are lower than the rates applied when the same services are given to non-individuals.
(b) For basic services rendered to special category of individuals (such as individuals in rural areas, pensioners and senior citizens), banks should levy charges on more liberal terms than the terms on which the charges are levied to other individuals.
(c) For basic services rendered to individuals, banks should levy charges only if the charges are just and supported by reason.
(d) For basic services to individuals, banks should levy services charges ad-valorem only to cover any incremental cost and subject to a cap.
(e) Banks should provide to the individual customers upfront and in a timely manner, complete information on the charges applicable to all basic services.
(f) Banks should provide advance information to the individual customers about the proposed changes in the service charges.
(g) Banks should collect for services given to individuals only such charges which have been notified to the customer.
(h) Banks should inform the customers in an appropriate manner recovery of service charges from the account or the transaction.
54. What are the other steps to be taken by banks?
Banks are required to take steps to ensure that customers are made aware of the service charges upfront and changes in the service charges are implemented only with prior notice to the customers. Banks are also required to have a robust grievance redressal structure and processes, to ensure prompt in-house redressal of all their customer complaints. Further, full-fledged information on bank products and their implications should be disclosed to the customers, so that the customers can make an informed judgment about their choice of products.
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38. Whether any ceiling has been fixed on the bank’s exposure to the capital market?
With effect from April 1, 2007 a bank's total exposure, including both fund based and non-fund based exposure, to the capital market in all forms covering its direct investment in equity shares, convertible bonds and debentures and units of equity oriented mutual funds; advances against shares to individuals for investment in equity shares (including IPOs), bonds and debentures, units of equity-oriented mutual funds and secured and unsecured advances to stockbrokers and guarantees issued on behalf of stockbrokers and market makers; all exposures to Venture Capital Funds (both registered and unregistered) should not exceed 40 per cent of its net worth, as on March 31 of the previous year. Within this overall ceiling, the bank’s direct investment in shares, convertible bonds / debentures, units of equity-oriented mutual funds and all exposures to Venture Capital Funds (VCFs) [both registered and unregistered] should not exceed 20 per cent of its net worth. For computing the ceiling on exposure to capital market, the bank’s direct investment in shares will be calculated at cost price of the shares.
The aggregate exposure of a consolidated bank to capital markets (both fund based and non-fund based) should not exceed 40 per cent of its consolidated net worth as on March 31 of the previous year. Within this overall ceiling, the aggregate direct exposure by way of the consolidated bank’s investment in shares, convertible bonds / debentures, units of equity-oriented mutual funds and all exposures to Venture Capital Funds (VCFs) [both registered and unregistered] should not exceed 20 per cent of its consolidated net worth.
39. What is the definition of net worth of a bank?
Net worth would comprise of Paid-up capital plus Free Reserves including Share Premium but excluding Revaluation Reserves, plus Investment Fluctuation Reserve and credit balance in Profit & Loss account, less debit balance in Profit and Loss account, Accumulated Losses and Intangible Assets. No general or specific provisions should be included in computation of net worth. Infusion of capital through equity shares, either through domestic issues or overseas floats after the published balance sheet date, may also be taken into account for determining the ceiling on exposure to capital market.
40. Whether banks can make short sales of shares?
No. Banks are prohibited from making any short sales of shares.
41. Whether banks can invest in fixed deposits of non-financial companies?
There is no prohibition on banks’ placing of funds with non-banking non-financial companies under their Public Deposit Schemes. However, investment in the Public Deposit Scheme of such companies should be classified by banks as loans/ advances in their balance sheet and returns submitted under the Banking Regulation Act, 1949 and the Reserve Bank of India Act 1934.
42. What should be the method of valuation for advances against shares/ debentures/ bonds?
Shares/ debentures/ bonds accepted by banks as security for loans/ advances should be valued at the prevailing market prices.
43. Whether banks can sanction bridge loans to companies?
Yes. Banks can sanction bridge loans to companies for a period not exceeding one year against the expected equity flows/ issues as also the expected proceeds of non-convertible Debentures, External Commercial Borrowings, Global Depository Receipts and/ or funds in the nature of Foreign Direct Investments, provided the bank is satisfied that the borrowing company has made firm arrangements for raising the aforesaid resources/ funds. Bridge loans extended by a bank will be included within the ceiling of 40% of net worth prescribed for banks’ aggregate exposure to the capital market.
44. What is the ceiling on the quantum of loans which can be sanctioned by banks to individuals against security of shares, debentures and PSU bonds, if held in physical form and in dematerialized form?
Loans/ advances granted to individuals against the security of shares, debentures and PSU bonds should not exceed Rs.10 lakh and Rs.20 lakh, if the securities are held in physical form and dematerialized form respectively. The maximum amount of finance that can be granted to an individual for subscribing to IPOs is Rs.10 lakh. However, the bank should not provide finance to companies for their investment in IPOs of other companies. Banks can grant advances to employees for purchasing shares of their own companies under Employees Stock Option Plan (ESOP) to the extent of 90% of purchase price of shares or Rs.20 lakh whichever is lower. NBFCs should not be provided finance for on-lending to individuals for subscribing to IPOs. Loans/ advances granted by a bank for subscribing to IPOs should be reckoned as an exposure to capital market.
45. What is the margin stipulated for advances against shares held in physical form and dematerialised form?
A uniform margin of 50% has been stipulated for all advances against shares/ /financing of IPOs/issue of guarantees for capital market operations. Within this 50 percent margin, a minimum cash margin of 25 percent should be maintained in respect of guarantees issued by banks for capital market operations.
46. Is any margin stipulated for banks' exposure to commodity markets?
The minimum margin of 50% and minimum cash margin of 25% (within the margin of 50%), as stipulated in the case of banks' exposure to capital markets, will also apply to guarantees issued by banks on behalf of commodity brokers in favour of the national level commodity exchanges, viz, National Commodity & Derivatives Exchange (NCDEX), Multi Commodity Exchange of India Limited (MCX) and National Multi-Commodity Exchange of India Limited (NMCEIL) in lieu of margin requirements.
V. DONATIONS
47. Whether banks can make donations?
Yes. The profit making banks may make donations during a financial year, aggregating up to one percent of the published profit of the bank for the previous year. However, the contributions/ subscriptions made by banks to Prime Minister’s Relief Fund and to professional bodies/ institutions like Indian Banks’ Association, National Institute of Bank Management, Indian Institute of Bankers, Institute of Banking Personnel Selection, Foreign Exchange Dealers Association of India, during a year will be exempted from the above ceiling. Unutilised amount of the permissible limit of a year should not be carried forward to the next year for the purpose of making donations.
48. Whether loss-making banks can make donations?
Yes, loss making banks can make donations up to Rs.5 lakh only in a financial year.
49. Whether overseas branches of the banks can make donations abroad?
Yes, the overseas branches of the banks can make donations abroad, provided the banks do not exceed the prescribed ceiling of one per cent of their published profit of the previous year.
VI. LOANS FOR PREMISES
50. What are the norms and procedure laid down by RBI for acquisition of accommodation on lease/ rental basis by commercial banks for their use, i.e. for office and residence of the staff?
i. The Board of Directors of the banks should lay down the policy and formulate operational guidelines separately in respect of metropolitan, urban, semi-urban and rural areas covering all areas in respect of acquiring premises on lease/ rental basis for the banks’ use. These guidelines should include also delegation of powers at various levels. The decision in regard to surrendering or shifting of premises other than at rural centers should be taken at the central office level by a committee of senior executives.
ii. The Board of Directors of the bank should lay down separate policy for granting of loans to landlords who provide them premises on lease/ rental basis. The rate of interest to be charged on such loans should be fixed as per the lending rate directives issued by RBI with BPLR as the minimum lending rate for the loans above Rs.2 lakh. The rate of interest may be simple or compound, in accordance with the usual practice of the bank, as applicable to other term loans.
iii. Banks should provide a suitable mechanism for redressing the genuine grievances of the landlord expeditiously.
iv. The details of negotiated contracts in respect of advances to landlords and rental (including taxes etc. and deposits of Rs.25 lakh and above) on premises taken on lease/ rental by the public sector banks, should be reported to the Central Bureau of Investigation (CBI) as per the extant Government instructions. This requirement will not be applicable to banks in the private sector.
VII. SERVICE CHARGES
51. Is there any ceiling on service charges to be levied by the banks?
Indian Banks’ Association (IBA) has dispensed with the practice of prescribing service charges to be levied by banks for various services rendered by them. With effect from September, 1999, the Reserve Bank has granted freedom to banks to prescribe service charges with the approval of the respective Board of Directors.
As announced in the Annual Policy Statement for the year 2006-2007, in order to ensure fair practices in banking services, Reserve Bank of India (RBI) constituted a Working Group to formulate a scheme for ensuring reasonableness of bank charges, and to incorporate it in the Fair Practices Code, the compliance of which would be monitored by the Banking Codes and Standards Board of India (BCSBI). The Working Group, which examined various issues, such as basic banking/financial services to be rendered to individual customers, the methodology adopted by banks for fixing the charges and the reasonableness of such charges, has identified twenty-seven services related to deposit/loan accounts, remittance facilities and cheque collections, as an indicative list of basic banking services to be offered by banks. The recommendations of the Working Group have been accepted by RBI with certain modifications. Based on the recommendations of the Working Group, RBI has issued a circular DBOD. No. Dir. BC. 56/13.03.00/2006-07 dated February 2, 2007 to all scheduled commercial banks.
52. What are the parameters to be adopted for identifying basic banking services?
Banks have been advised to identify basic banking services on the basis of two parameters indicated by the Working Group, namely, (i) banking services that are ordinarily availed by individuals in the middle and lower segments and (ii) the value of transactions, namely, cheque collections and remittances up to Rs. 10,000 for each transaction and up to $500 for forex transactions. The indicative list of banking services includes services relating to Deposit Accounts (cheque book facility, issue of pass book / statement, ATM Card, Debit Card, stop payment, balance enquiry, account closure, cheque return - inward, signature verification); Loan Accounts (no dues certificate); Remittance facilities (Demand Draft – issue/ cancellation/ revalidation, Payment Order - issue/ cancellation/ revalidation/ duplicate, Telegraphic Transfer - issue/ cancellation/ duplicate, Electronic Clearing Service (ECS), National Electronic Fund Transfer (NEFT) / Electronic Fund Transfer (EFT); Collection Facilities (collection of local /outstation cheques, cheque return- outward). Banks are required to implement the recommendations of the Working Group on making available the basic banking services at reasonable prices/ charges and towards this, delivering the basic services outside the scope of the bundled products.
53. What are the principles to be followed by banks in order to ensure reasonableness in fixing and communicating service charges?
Banks are required to follow the following principles for ensuring reasonableness in fixing and communicating the service charges -
(a) For basic services to individuals, banks should levy charges at rates that are lower than the rates applied when the same services are given to non-individuals.
(b) For basic services rendered to special category of individuals (such as individuals in rural areas, pensioners and senior citizens), banks should levy charges on more liberal terms than the terms on which the charges are levied to other individuals.
(c) For basic services rendered to individuals, banks should levy charges only if the charges are just and supported by reason.
(d) For basic services to individuals, banks should levy services charges ad-valorem only to cover any incremental cost and subject to a cap.
(e) Banks should provide to the individual customers upfront and in a timely manner, complete information on the charges applicable to all basic services.
(f) Banks should provide advance information to the individual customers about the proposed changes in the service charges.
(g) Banks should collect for services given to individuals only such charges which have been notified to the customer.
(h) Banks should inform the customers in an appropriate manner recovery of service charges from the account or the transaction.
54. What are the other steps to be taken by banks?
Banks are required to take steps to ensure that customers are made aware of the service charges upfront and changes in the service charges are implemented only with prior notice to the customers. Banks are also required to have a robust grievance redressal structure and processes, to ensure prompt in-house redressal of all their customer complaints. Further, full-fledged information on bank products and their implications should be disclosed to the customers, so that the customers can make an informed judgment about their choice of products.
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NON-BANKING FINANCIAL COMPANIES
- RBI
QUES -1 What is a Non-Banking Financial Company (NBFC)?
ANS -1 A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by Government or local authority or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property. A non-banking institution which is a company and which has its principal business of receiving deposits under any scheme or arrangement or any other manner, or lending in any manner is also a non-banking financial company (Residuary non-banking company).
QUES 2. NBFCs are doing functions similar to banks. What is difference between banks & NBFCs ?
ANS 2. NBFCs are doing functions akin to that of banks; however there are a few differences:
(i) an NBFC cannot accept demand deposits;
(ii) an NBFC is not a part of the payment and settlement system and as such an NBFC cannot issue cheques drawn on itself; and
(iii) deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available for NBFC depositors unlike in case of banks.
QUES-3. Is it necessary that every NBFC should be registered with RBI?
ANS 3. In terms of Section 45-IA of the RBI Act, 1934, it is mandatory that every NBFC should be registered with RBI to commence or carry on any business of non-banking financial institution as defined in clause (a) of Section 45 I of the RBI Act, 1934.
However, to obviate dual regulation, certain categories of NBFCs which are regulated by other regulators are exempted from the requirement of registration with RBI viz. Venture Capital Fund/Merchant Banking companies/Stock broking companies registered with SEBI, Insurance Company holding a valid Certificate of Registration issued by IRDA, Nidhi companies as notified under Section 620A of the Companies Act, 1956, Chit companies as defined in clause (b) of Section 2 of the Chit Funds Act, 1982 or Housing Finance Companies regulated by National Housing Bank.
QUES 4. What are the different types of NBFCs registered with RBI?
ANS 4. Originally, NBFCs registered with RBI were classified as:
(i) equipment leasing company;
(ii) hire-purchase company;
(iii) loan company;
(iv) investment company.
However, with effect from December 6, 2006 the above NBFCs registered with RBI have been reclassified as
(i) Asset Finance Company (AFC)
(ii) Investment Company (IC)
(iii) Loan Company (LC)
AFC would be defined as any company which is a financial institution carrying on as its principal business the financing of physical assets supporting productive/economic activity, such as automobiles, tractors, lathe machines, generator sets, earth moving and material handling equipments, moving on own power and general purpose industrial machines. Principal business for this purpose is defined as aggregate of financing real/physical assets supporting economic activity and income arising therefrom is not less than 60% of its total assets and total income respectively.
The above type of companies may be further classified into those accepting deposits or those not accepting deposits.
QUES 5. Updated on February 10, 2009 What are the requirements / is the procedure for registration with RBI?
ANS 5. A company incorporated under the Companies Act, 1956 and desirous of commencing business of non-banking financial institution as defined under Section 45 I(a) of the RBI Act, 1934 should have a minimum net owned fund of Rs 25 lakh (raised to Rs 200 lakh w.e.f April 21, 1999).
The company is required to submit its application online by accessing RBI’s secured website <link no longer exists - removed> (the applicant companies do not need to log on to the COSMOS application and hence user ids for these companies are not required). The company has to click on “CLICK” for Company Registration on the login page. A window showing the Excel application forms available for download would be displayed. The company can then download suitable application form (i.e. NBFC or SC/RC) from the above website, key in the data and upload the application form. The company may note to indicate the name of the correct Regional Office in the field “C-8” of the “Annx-Identification Particulars” worksheet of the Excel application form. The company would then get a Company Application Reference Number for the CoR application filed on-line. Thereafter, the company has to submit the hard copy of the application form (indicating the Company Application Reference Number of its on-line application), along with the supporting documents, to the concerned Regional Office. The company can then check the status of the application based on the acknowledgement number. The Bank would issue Certificate of Registration after satisfying itself that the conditions as enumerated in Section 45-IA of the RBI Act, 1934 are satisfied.
QUES 6. Where can one find list of Registered NBFCs and instructions issued to NBFCs?
ANS 6. The list of registered NBFCs is available on the web site of Reserve Bank of India and can be viewed at <link outdated-removed> ( Search On Cite | Search On Google ) . The instructions issued to NBFCs from time to time are also hosted at the above site. Besides, instructions are also issued through Official Gazette notifications. Press Release is also issued to draw attention of the public/NBFCs.
QUES 7. Can all NBFCs accept deposits and what are the requirements for accepting Public Deposits?
ANS 7. All NBFCs are not entitled to accept public deposits. Only those NBFCs holding a valid Certificate of Registration with authorisation to accept Public Deposits can accept/hold public deposits. NBFCs authorised to accept/hold public deposits besides having minimum stipulated Net Owned Fund (NOF) should also comply with the Directions such as investing part of the funds in liquid assets, maintain reserves, rating etc. issued by the Bank.
QUES 8. Is there any ceiling on acceptance of Public Deposits? What is the rate of interest and period of deposit which NBFCs can accept?
ANS 8. Yes, there is a ceiling on acceptance of Public Deposits. An NBFC maintaining required NOF/Capital to Risk Assets Ratio (CRAR) and complying with the prudential norms can accept public deposits
As has been notified on June 17, 2008 the ceiling on level of public deposits for NBFCs accepting deposits but not having minimum Net Owned Fund of Rs 200 lakh is revised
Presently, the maximum rate of interest an NBFC can offer is 12.5%. The interest may be paid or compounded at rests not shorter than monthly rests.
The NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months and maximum period of 60 months. They cannot accept deposits repayable on demand.
The RNBCs have different norms for acceptance of deposits which are explained elsewhere in this booklet.
QUES 9. What are the salient features of NBFCs regulations which the depositor may note at the times of investment?
ANS 9. Some of the important regulations relating to acceptance of deposits by NBFCs are as under:
The NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months and maximum period of 60 months. They cannot accept deposits repayable on demand.
NBFCs cannot offer interest rates higher than the ceiling rate prescribed by RBI from time to time. The present ceiling is 12.5 per cent per annum. The interest may be paid or compounded at rests not shorter than monthly rests.
NBFCs cannot offer gifts/incentives or any other additional benefit to the depositors.
NBFCs (except certain AFCs) should have minimum investment grade credit rating.
The deposits with NBFCs are not insured.
The repayment of deposits by NBFCs is not guaranteed by RBI.
Certain mandatory disclosures are to be made about the company in the Application Form issued by the company soliciting deposits.
QUES 10. What is ‘deposit’ and ‘public deposit’? Is it defined anywhere?
ANS 10. The term ‘deposit’ is defined under Section 45 I(bb) of the RBI Act, 1934. ‘Deposit’ includes and shall be deemed always to have included any receipt of money by way of deposit or loan or in any other form but does not include:
amount raised by way of share capital, or contributed as capital by partners of a firm;
amount received from scheduled bank, co-operative bank, a banking company, State Financial Corporation, IDBI or any other institution specified by RBI;
amount received in ordinary course of business by way of security deposit, dealership deposit, earnest money, advance against orders for goods, properties or services;
amount received by a registered money lender other than a body corporate;
amount received by way of subscriptions in respect of a ‘Chit’.
Paragraph 2(1)(xii) of the Non-Banking Financial Companies Acceptance of Public Deposits ( Reserve Bank) Directions, 1998 defines a ‘ public deposit’ as a ‘deposit’ as defined under Section 45 I(bb) of the RBI Act, 1934 and further excludes the following:
amount received from the Central/State Government or any other source where repayment is guaranteed by Central/State Government or any amount received from local authority or foreign government or any foreign citizen/authority/person;
any amount received from financial institutions;
any amount received from other company as inter-corporate deposit;
amount received by way of subscriptions to shares, stock, bonds or debentures pending allotment or by way of calls in advance if such amount is not repayable to the members under the articles of association of the company;
amount received from shareholders by private company;
amount received from directors or relative of the director of an NBFC;
amount raised by issue of bonds or debentures secured by mortgage of any immovable property or other asset of the company subject to conditions;
the amount brought in by the promoters by way of unsecured loan;
amount received from a mutual fund;
any amount received as hybrid debt or subordinated debt;
any amount received by issuance of Commercial Paper.
Thus, the directions exclude from the definition of public deposit, amount raised from certain set of informed lenders who can make independent decision.
QUES 11. Are Secured debentures treated as Public Deposit? If not who regulates them?
ANS 11. Debentures secured by the mortgage of any immovable property or other asset of the company, if the amount raised does not exceed the market value of the said immovable property or other asset, are excluded from the definition of ‘Public Deposit’ in terms of Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998. Secured debentures are debt instruments and are regulated by Securities & Exchange Board of India.
QUES 12. Whether NBFCs can accept deposits from NRIs?
ANS 12. Effective from April 24, 2004, NBFCs cannot accept deposits from NRIs except deposits by debit to NRO account of NRI provided such amount does not represent inward remittance or transfer from NRE/FCNR (B) account. However, the existing NRI deposits can be renewed.
QUES 13 Is nomination facility available to the Depositors of NBFCs?
ANS 13. Yes, nomination facility is available to the depositors of NBFCs. The Rules for nomination facility are provided for in section 45QB of the Reserve Bank of India Act, 1934. Non-Banking Financial Companies have been advised to adopt the Banking Companies (Nomination) Rules, 1985 made under Section 45ZA of the Banking Regulation Act, 1949. Accordingly, depositor/s of NBFCs are permitted to nominate one person to whom the NBFC can return the deposit in the event of the death of the depositor/s. NBFCs are advised to accept nominations made by the depositors in the form similar to one specified under the said rules, viz Form DA 1 for the purpose of nomination, and Form DA2 and DA3 for cancellation of nomination and change of nomination respectively.
QUES 14. What else should a depositor bear in mind while depositing money with NBFCs?
ANS 14. While making deposits with an NBFC, the following aspects should be borne in mind:
(i) Public deposits are unsecured.
(ii) A proper deposit receipt which should, besides the name of the depositor/s, state the date of deposit, the amount in words and figures, rate of interest payable and the date of maturity. Depositor/s should insist on the above and also ensure that the receipt is duly signed by an officer authorised by the company in that behalf.
(iii) The Reserve Bank of India does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.
QUES 15. It is said that rating of NBFCs is necessary before it accepts deposit? Is it true? Who rates them?
ANS 15. An unrated NBFC, except certain Asset Finance companies (AFC), cannot accept public deposits. An exception is made in case of unrated AFC companies with CRAR of 15% which can accept public deposit without having a credit rating upto a certain ceiling depending upon its Net Owned Funds (c.f Ans to Q 8). AN NBFC may get itself rated by any of the four rating agencies namely, CRISIL, CARE, ICRA and FITCH Ratings India Pvt. Ltd.
QUES 16. Can an NBFC which is yet to be rated accept public deposit?
ANS 16. No, an NBFC cannot accept deposit without rating (except an Asset Finance Company complying with prudential norms and having CRAR of 15%, as explained above at Ans. to Q 8 ).
QUES 18. When a company’s rating is downgraded, does it have to bring down its level of public deposits immediately or over a period of time?
ANS 18. If rating of an NBFC is downgraded to below minimum investment grade rating, it has to stop accepting public deposit, report the position within fifteen working days to the RBI and reduce within three years from the date of such downgrading of credit rating, the amount of excess public deposit to nil or to the appropriate extent permissible under paragraph 4(4) of Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998.
QUES 19. In case an NBFC defaults in repayment of deposit what course of action can be taken by depositors?
ANS 19. If an NBFC defaults in repayment of deposit, the depositor can approach Company Law Board or Consumer Forum or file a civil suit in a court of law to recover the deposits.
QUES 20. What is the role of Company Law Board in protecting the interest of depositors? How one can approach it?
ANS 20. Where an NBFC fails to repay any deposit or part thereof in accordance with the terms and conditions of such deposit, the Company Law Board (CLB) either on its own motion or on an application from the depositor, directs by order the non-banking financial company to make repayment of such deposit or part thereof forthwith or within such time and subject to such conditions as may be specified in the order.
As explained above, the depositor can approach CLB by mailing an application in prescribed form to the appropriate bench of the Company Law Board according to its territorial jurisdiction alongwith the prescribed fee.
QUES 22. We hear that in a number of cases official liquidators have been appointed on the defaulting NBFCs. What is their role and how one can approach them?
ANS 22. Official Liquidator is appointed by the court after giving the company reasonable opportunity of being heard in a winding up petition. The liquidator performs duties of winding up and such duties in reference thereto as the court may impose.
Where the court has appointed an official liquidator or provisional liquidator, he becomes custodian of the property of the company and runs the day-to-day affairs of the company. He has to draw up a statement of affairs of the company in prescribed form containing particulars of assets of the company, its debts and liabilities, names/residences/occupations of its creditors, the debts due to the company and such other information as may be prescribed.
The scheme is drawn up by the liquidator and same is put up to the court for approval. The liquidator realizes the assets of the company and arranges to repay the creditors according to the scheme approved by the court. The liquidator generally inserts advertisement in the newspaper inviting claims from depositors/investors in compliance with court orders. Therefore, the investors/depositors should file the claims within due time as per such notices of the liquidator. The Reserve Bank also provides assistance to the depositors in furnishing addresses of the official liquidator.
QUES 23. Consumer Court play useful role in attending to depositors problems. Can one approach Consumer Forum, Civil Court, CLB simultaneously?
ANS 23. Yes, a depositor can approach any or all of the redressal authorities i.e consumer forum, court or CLB.
QUES 24. Is there an Ombudsman for hearing complaints against NBFCs?
ANS 24. No, there is no Ombudsman for hearing complaints against NBFCs. However, in respect of credit card operations of an NBFC, if a complainant does not get satisfactory response from the NBFC within a maximum period of thirty (30) days from the date of lodging the complaint, the customer will have the option to approach the Office of the concerned Banking Ombudsman for redressal of his grievance/s.
QUES 25. What are various prudential regulations applicable to NBFCs?
ANS 25. The Bank has issued detailed directions on prudential norms, vide Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998. The directions interalia, prescribe guidelines on income recognition, asset classification and provisioning requirements applicable to NBFCs, exposure norms, constitution of audit committee, disclosures in the balance sheet, requirement of capital adequacy, restrictions on investments in land and building and unquoted shares.
QUES 26. Please explain the terms ‘owned fund’ and ‘net owned fund’ in relation to NBFCs?
ANS 26. ‘Owned Fund’ means aggregate of the paid-up equity capital and free reserves as disclosed in the latest balance sheet of the company after deducting therefrom accumulated balance of loss, deferred revenue expenditure and other intangible assets.
'Net Owned Fund' is the amount as arrived at above minus the amount of investments of such company in shares of its subsidiaries, companies in the same group and all other NBFCs and the book value of debentures, bonds, outstanding loans and advances made to and deposits with subsidiaries and companies in the same group, to the extent it exceeds 10% of the owned fund.
QUES 27. What are the responsibilities of the NBFCs accepting/holding public deposits with regard to submission of Returns and other information to RBI?
ANS 27. The NBFCs accepting public deposits should furnish to RBI
Audited balance sheet of each financial year and an audited profit and loss account in respect of that year as passed in the annual general meeting together with a copy of the report of the Board of Directors and a copy of the report and the notes on accounts furnished by its Auditors;
Statutory Annual Return on deposits - NBS 1;
Certificate from the Auditors that the company is in a position to repay the deposits as and when the claims arise;
Quarterly Return on liquid assets;
Half-yearly Return on prudential norms;
Half-yearly ALM Returns by companies having public deposits of Rs. 20 crore and above or with assets of Rs. 100 crore and above irrespective of the size of deposits ;
Monthly return on exposure to capital market by companies having public deposits of Rs. 50 crore and above; and
A copy of the Credit Rating obtained once a year along with one of the Half-yearly Returns on prudential norms as at (v) above.
QUES 28. What are the documents or the compliance required to be submitted to the Reserve Bank of India by the NBFCs not accepting/holding public deposits?
ANS 28. The NBFCs having assets of Rs. 100 crore and above but not accepting public deposits are required to submit a Monthly Return on important financial parameters of the company. All companies not accepting public deposits have to pass a board resolution to the effect that they have neither accepted public deposit nor would accept any public deposit during the year.
However, all the NBFCs (other than those exempted) are required to be registered with RBI and also make sure that they continue to be eligible to retain the Registration. Further, all NBFCs (including non-deposit taking) should submit a certificate from their Statutory Auditors every year to the effect that they continue to undertake the business of NBFI requiring holding of CoR under Section 45-IA of the RBI Act, 1934.
RBI has powers to cause Inspection of the books of any company and call for any other information about its business activities. For this purpose, the NBFC is required to furnish the information in respect of any change in the composition of its Board of Directors, address of the company and its Directors and the name/s and official designations of its principal officers and the name and office address of its Auditors. With effect from April 1, 2007, non-deposit taking NBFCs with assets of Rs 100 crore and above were advised to maintain minimum CRAR of 10% and also comply with single/group exposure norms. The companies have to achieve CRAR of 12% by March 31, 2009 and 15% by March 31, 2010.
QUES 29. The NBFCs have been made liable to pay interest on the overdue matured deposits if the company has not been able to repay the matured public deposits on receipt of a claim from the depositor. Please elaborate the provisions.
ANS 29. As per Reserve Bank’s Directions, overdue interest is payable to the depositors in case the company has delayed the repayment of matured deposits, and such interest is payable from the date of receipt of such claim by the company or the date of maturity of the deposit whichever is later, till the date of actual payment. If the depositor has lodged his claim after the date of maturity, the company would be liable to pay interest for the period from the date of claim till the date of repayment. For the period between the date of maturity and the date of claim it is the discretion of the company to pay interest.
QUES 31. What is the liquid asset requirement for the deposit taking companies? Where these assets are kept? Do depositors have any claims on them?
ANS 31. In terms of Section 45-IB of the RBI Act, 1934, the minimum level of liquid asset to be maintained by NBFCs is 15 per cent of public deposits outstanding as on the last working day of the second preceding quarter. Of the 15%, NBFCs are required to invest not less than ten percent in approved securities and the remaining 5% can be in unencumbered term deposits with any scheduled commercial bank. Thus, the liquid assets may consist of Government securities, Government guaranteed bonds and term deposits with any scheduled commercial bank.
The investment in Government securities should be in dematerialised form which can be maintained in Constituents’ Subsidiary General Ledger (CSGL) Account with a scheduled commercial bank (SCB) / Stock Holding Corporation of India Limited (SHICL). In case of Government guaranteed bonds the same may be kept in dematerialised form with SCB/SHCIL or in a dematerialised account with depositories [National Securities Depository Ltd. (NSDL)/Central Depository Services (India) Ltd. (CDSL)] through a depository participant registered with Securities & Exchange Board of India (SEBI). However in case there are Government bonds which are in physical form the same may be kept in safe custody of SCB/SHCIL.
NBFCs have been directed to maintain the mandated liquid asset securities in a dematerialised form with the entities stated above at a place where the registered office of the company is situated. However, if an NBFC intends to entrust the securities at a place other than the place at which its registered office is located, it may do so after obtaining the permission of RBI in writing. It may be noted that liquid assets in approved securities will have to be maintained in dematerialised form only.
The liquid assets maintained as above are to be utilised for payment of claims of depositors. However, deposit being unsecured in nature, depositors do not have direct claim on liquid assets.
QUES 32. Please tell us something about the companies which are NBFCs, but are exempted from registration?
ANS 32. Housing Finance Companies, Merchant Banking Companies, Stock Exchanges, Companies engaged in the business of stock-broking/sub-broking, Venture Capital Fund Companies, Nidhi Companies, Insurance companies and Chit Fund Companies are NBFCs but they have been exempted from the requirement of registration under Section 45-IA of the RBI Act, 1934 subject to certain conditions.
Housing Finance Companies are regulated by National Housing Bank, Merchant Banker/Venture Capital Fund Company/stock-exchanges/stock brokers/sub-brokers are regulated by Securities and Exchange Board of India, and Insurance companies are regulated by Insurance Regulatory and Development Authority. Similarly, Chit Fund Companies are regulated by the respective State Governments and Nidhi Companies are regulated by Ministry of Corporate Affairs, Government of India.
It may also be mentioned that Mortgage Guarantee Companies have been notified as Non-Banking Financial Companies under Section 45 I(f)(iii) of the RBI Act, 1934.
QUES 33. There are some entities (not companies) which carry on activities like that of NBFCs. Are they allowed to take deposits? Who regulates them?
ANS 33. Any person who is an individual or a firm or unincorporated association of individuals cannot accept deposits except by way of loan from relatives, if his/its business wholly or partly includes loan, investment, hire-purchase or leasing activity or principal business is that of receiving of deposits under any scheme or arrangement or in any manner or lending in any manner.
QUES 34. What is a Residuary Non-Banking Company (RNBC)? In what way it is different from other NBFCs?
ANS 34. Residuary Non-Banking Company is a class of NBFC which is a company and has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner and not being Investment, Asset Financing, Loan Company. These companies are required to maintain investments as per directions of RBI, in addition to liquid assets. The functioning of these companies is different from those of NBFCs in terms of method of mobilisation of deposits and requirement of deployment of depositors' funds as per Directions. Besides, Prudential Norms Directions are applicable to these companies also.
QUES 35. We understand that there is no ceiling on raising of deposits by RNBCs, then how safe is deposit with them?
ANS 35. It is true that there is no ceiling on raising of deposits by RNBCs but every RNBC has to ensure that the amounts deposited and investments made by the company are not less than the aggregate amount of liabilities to the depositors.
To secure the interest of depositor, such companies are required to invest in a portfolio comprising of highly liquid and secure instruments viz. Central/State Government securities, fixed deposits with scheduled commercial banks (SCB), Certificate of deposits of SCB/FIs, units of Mutual Funds, etc.
QUES 36. Can RNBC forfeit deposit if deposit installments are not paid regularly or discontinued?
ANS 36. No Residuary Non-Banking Company shall forfeit any amount deposited by the depositor, or any interest, premium, bonus or other advantage accrued thereon.
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- RBI
QUES -1 What is a Non-Banking Financial Company (NBFC)?
ANS -1 A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by Government or local authority or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property. A non-banking institution which is a company and which has its principal business of receiving deposits under any scheme or arrangement or any other manner, or lending in any manner is also a non-banking financial company (Residuary non-banking company).
QUES 2. NBFCs are doing functions similar to banks. What is difference between banks & NBFCs ?
ANS 2. NBFCs are doing functions akin to that of banks; however there are a few differences:
(i) an NBFC cannot accept demand deposits;
(ii) an NBFC is not a part of the payment and settlement system and as such an NBFC cannot issue cheques drawn on itself; and
(iii) deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available for NBFC depositors unlike in case of banks.
QUES-3. Is it necessary that every NBFC should be registered with RBI?
ANS 3. In terms of Section 45-IA of the RBI Act, 1934, it is mandatory that every NBFC should be registered with RBI to commence or carry on any business of non-banking financial institution as defined in clause (a) of Section 45 I of the RBI Act, 1934.
However, to obviate dual regulation, certain categories of NBFCs which are regulated by other regulators are exempted from the requirement of registration with RBI viz. Venture Capital Fund/Merchant Banking companies/Stock broking companies registered with SEBI, Insurance Company holding a valid Certificate of Registration issued by IRDA, Nidhi companies as notified under Section 620A of the Companies Act, 1956, Chit companies as defined in clause (b) of Section 2 of the Chit Funds Act, 1982 or Housing Finance Companies regulated by National Housing Bank.
QUES 4. What are the different types of NBFCs registered with RBI?
ANS 4. Originally, NBFCs registered with RBI were classified as:
(i) equipment leasing company;
(ii) hire-purchase company;
(iii) loan company;
(iv) investment company.
However, with effect from December 6, 2006 the above NBFCs registered with RBI have been reclassified as
(i) Asset Finance Company (AFC)
(ii) Investment Company (IC)
(iii) Loan Company (LC)
AFC would be defined as any company which is a financial institution carrying on as its principal business the financing of physical assets supporting productive/economic activity, such as automobiles, tractors, lathe machines, generator sets, earth moving and material handling equipments, moving on own power and general purpose industrial machines. Principal business for this purpose is defined as aggregate of financing real/physical assets supporting economic activity and income arising therefrom is not less than 60% of its total assets and total income respectively.
The above type of companies may be further classified into those accepting deposits or those not accepting deposits.
QUES 5. Updated on February 10, 2009 What are the requirements / is the procedure for registration with RBI?
ANS 5. A company incorporated under the Companies Act, 1956 and desirous of commencing business of non-banking financial institution as defined under Section 45 I(a) of the RBI Act, 1934 should have a minimum net owned fund of Rs 25 lakh (raised to Rs 200 lakh w.e.f April 21, 1999).
The company is required to submit its application online by accessing RBI’s secured website <link no longer exists - removed> (the applicant companies do not need to log on to the COSMOS application and hence user ids for these companies are not required). The company has to click on “CLICK” for Company Registration on the login page. A window showing the Excel application forms available for download would be displayed. The company can then download suitable application form (i.e. NBFC or SC/RC) from the above website, key in the data and upload the application form. The company may note to indicate the name of the correct Regional Office in the field “C-8” of the “Annx-Identification Particulars” worksheet of the Excel application form. The company would then get a Company Application Reference Number for the CoR application filed on-line. Thereafter, the company has to submit the hard copy of the application form (indicating the Company Application Reference Number of its on-line application), along with the supporting documents, to the concerned Regional Office. The company can then check the status of the application based on the acknowledgement number. The Bank would issue Certificate of Registration after satisfying itself that the conditions as enumerated in Section 45-IA of the RBI Act, 1934 are satisfied.
QUES 6. Where can one find list of Registered NBFCs and instructions issued to NBFCs?
ANS 6. The list of registered NBFCs is available on the web site of Reserve Bank of India and can be viewed at <link outdated-removed> ( Search On Cite | Search On Google ) . The instructions issued to NBFCs from time to time are also hosted at the above site. Besides, instructions are also issued through Official Gazette notifications. Press Release is also issued to draw attention of the public/NBFCs.
QUES 7. Can all NBFCs accept deposits and what are the requirements for accepting Public Deposits?
ANS 7. All NBFCs are not entitled to accept public deposits. Only those NBFCs holding a valid Certificate of Registration with authorisation to accept Public Deposits can accept/hold public deposits. NBFCs authorised to accept/hold public deposits besides having minimum stipulated Net Owned Fund (NOF) should also comply with the Directions such as investing part of the funds in liquid assets, maintain reserves, rating etc. issued by the Bank.
QUES 8. Is there any ceiling on acceptance of Public Deposits? What is the rate of interest and period of deposit which NBFCs can accept?
ANS 8. Yes, there is a ceiling on acceptance of Public Deposits. An NBFC maintaining required NOF/Capital to Risk Assets Ratio (CRAR) and complying with the prudential norms can accept public deposits
As has been notified on June 17, 2008 the ceiling on level of public deposits for NBFCs accepting deposits but not having minimum Net Owned Fund of Rs 200 lakh is revised
Presently, the maximum rate of interest an NBFC can offer is 12.5%. The interest may be paid or compounded at rests not shorter than monthly rests.
The NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months and maximum period of 60 months. They cannot accept deposits repayable on demand.
The RNBCs have different norms for acceptance of deposits which are explained elsewhere in this booklet.
QUES 9. What are the salient features of NBFCs regulations which the depositor may note at the times of investment?
ANS 9. Some of the important regulations relating to acceptance of deposits by NBFCs are as under:
The NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months and maximum period of 60 months. They cannot accept deposits repayable on demand.
NBFCs cannot offer interest rates higher than the ceiling rate prescribed by RBI from time to time. The present ceiling is 12.5 per cent per annum. The interest may be paid or compounded at rests not shorter than monthly rests.
NBFCs cannot offer gifts/incentives or any other additional benefit to the depositors.
NBFCs (except certain AFCs) should have minimum investment grade credit rating.
The deposits with NBFCs are not insured.
The repayment of deposits by NBFCs is not guaranteed by RBI.
Certain mandatory disclosures are to be made about the company in the Application Form issued by the company soliciting deposits.
QUES 10. What is ‘deposit’ and ‘public deposit’? Is it defined anywhere?
ANS 10. The term ‘deposit’ is defined under Section 45 I(bb) of the RBI Act, 1934. ‘Deposit’ includes and shall be deemed always to have included any receipt of money by way of deposit or loan or in any other form but does not include:
amount raised by way of share capital, or contributed as capital by partners of a firm;
amount received from scheduled bank, co-operative bank, a banking company, State Financial Corporation, IDBI or any other institution specified by RBI;
amount received in ordinary course of business by way of security deposit, dealership deposit, earnest money, advance against orders for goods, properties or services;
amount received by a registered money lender other than a body corporate;
amount received by way of subscriptions in respect of a ‘Chit’.
Paragraph 2(1)(xii) of the Non-Banking Financial Companies Acceptance of Public Deposits ( Reserve Bank) Directions, 1998 defines a ‘ public deposit’ as a ‘deposit’ as defined under Section 45 I(bb) of the RBI Act, 1934 and further excludes the following:
amount received from the Central/State Government or any other source where repayment is guaranteed by Central/State Government or any amount received from local authority or foreign government or any foreign citizen/authority/person;
any amount received from financial institutions;
any amount received from other company as inter-corporate deposit;
amount received by way of subscriptions to shares, stock, bonds or debentures pending allotment or by way of calls in advance if such amount is not repayable to the members under the articles of association of the company;
amount received from shareholders by private company;
amount received from directors or relative of the director of an NBFC;
amount raised by issue of bonds or debentures secured by mortgage of any immovable property or other asset of the company subject to conditions;
the amount brought in by the promoters by way of unsecured loan;
amount received from a mutual fund;
any amount received as hybrid debt or subordinated debt;
any amount received by issuance of Commercial Paper.
Thus, the directions exclude from the definition of public deposit, amount raised from certain set of informed lenders who can make independent decision.
QUES 11. Are Secured debentures treated as Public Deposit? If not who regulates them?
ANS 11. Debentures secured by the mortgage of any immovable property or other asset of the company, if the amount raised does not exceed the market value of the said immovable property or other asset, are excluded from the definition of ‘Public Deposit’ in terms of Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998. Secured debentures are debt instruments and are regulated by Securities & Exchange Board of India.
QUES 12. Whether NBFCs can accept deposits from NRIs?
ANS 12. Effective from April 24, 2004, NBFCs cannot accept deposits from NRIs except deposits by debit to NRO account of NRI provided such amount does not represent inward remittance or transfer from NRE/FCNR (B) account. However, the existing NRI deposits can be renewed.
QUES 13 Is nomination facility available to the Depositors of NBFCs?
ANS 13. Yes, nomination facility is available to the depositors of NBFCs. The Rules for nomination facility are provided for in section 45QB of the Reserve Bank of India Act, 1934. Non-Banking Financial Companies have been advised to adopt the Banking Companies (Nomination) Rules, 1985 made under Section 45ZA of the Banking Regulation Act, 1949. Accordingly, depositor/s of NBFCs are permitted to nominate one person to whom the NBFC can return the deposit in the event of the death of the depositor/s. NBFCs are advised to accept nominations made by the depositors in the form similar to one specified under the said rules, viz Form DA 1 for the purpose of nomination, and Form DA2 and DA3 for cancellation of nomination and change of nomination respectively.
QUES 14. What else should a depositor bear in mind while depositing money with NBFCs?
ANS 14. While making deposits with an NBFC, the following aspects should be borne in mind:
(i) Public deposits are unsecured.
(ii) A proper deposit receipt which should, besides the name of the depositor/s, state the date of deposit, the amount in words and figures, rate of interest payable and the date of maturity. Depositor/s should insist on the above and also ensure that the receipt is duly signed by an officer authorised by the company in that behalf.
(iii) The Reserve Bank of India does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.
QUES 15. It is said that rating of NBFCs is necessary before it accepts deposit? Is it true? Who rates them?
ANS 15. An unrated NBFC, except certain Asset Finance companies (AFC), cannot accept public deposits. An exception is made in case of unrated AFC companies with CRAR of 15% which can accept public deposit without having a credit rating upto a certain ceiling depending upon its Net Owned Funds (c.f Ans to Q 8). AN NBFC may get itself rated by any of the four rating agencies namely, CRISIL, CARE, ICRA and FITCH Ratings India Pvt. Ltd.
QUES 16. Can an NBFC which is yet to be rated accept public deposit?
ANS 16. No, an NBFC cannot accept deposit without rating (except an Asset Finance Company complying with prudential norms and having CRAR of 15%, as explained above at Ans. to Q 8 ).
QUES 18. When a company’s rating is downgraded, does it have to bring down its level of public deposits immediately or over a period of time?
ANS 18. If rating of an NBFC is downgraded to below minimum investment grade rating, it has to stop accepting public deposit, report the position within fifteen working days to the RBI and reduce within three years from the date of such downgrading of credit rating, the amount of excess public deposit to nil or to the appropriate extent permissible under paragraph 4(4) of Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998.
QUES 19. In case an NBFC defaults in repayment of deposit what course of action can be taken by depositors?
ANS 19. If an NBFC defaults in repayment of deposit, the depositor can approach Company Law Board or Consumer Forum or file a civil suit in a court of law to recover the deposits.
QUES 20. What is the role of Company Law Board in protecting the interest of depositors? How one can approach it?
ANS 20. Where an NBFC fails to repay any deposit or part thereof in accordance with the terms and conditions of such deposit, the Company Law Board (CLB) either on its own motion or on an application from the depositor, directs by order the non-banking financial company to make repayment of such deposit or part thereof forthwith or within such time and subject to such conditions as may be specified in the order.
As explained above, the depositor can approach CLB by mailing an application in prescribed form to the appropriate bench of the Company Law Board according to its territorial jurisdiction alongwith the prescribed fee.
QUES 22. We hear that in a number of cases official liquidators have been appointed on the defaulting NBFCs. What is their role and how one can approach them?
ANS 22. Official Liquidator is appointed by the court after giving the company reasonable opportunity of being heard in a winding up petition. The liquidator performs duties of winding up and such duties in reference thereto as the court may impose.
Where the court has appointed an official liquidator or provisional liquidator, he becomes custodian of the property of the company and runs the day-to-day affairs of the company. He has to draw up a statement of affairs of the company in prescribed form containing particulars of assets of the company, its debts and liabilities, names/residences/occupations of its creditors, the debts due to the company and such other information as may be prescribed.
The scheme is drawn up by the liquidator and same is put up to the court for approval. The liquidator realizes the assets of the company and arranges to repay the creditors according to the scheme approved by the court. The liquidator generally inserts advertisement in the newspaper inviting claims from depositors/investors in compliance with court orders. Therefore, the investors/depositors should file the claims within due time as per such notices of the liquidator. The Reserve Bank also provides assistance to the depositors in furnishing addresses of the official liquidator.
QUES 23. Consumer Court play useful role in attending to depositors problems. Can one approach Consumer Forum, Civil Court, CLB simultaneously?
ANS 23. Yes, a depositor can approach any or all of the redressal authorities i.e consumer forum, court or CLB.
QUES 24. Is there an Ombudsman for hearing complaints against NBFCs?
ANS 24. No, there is no Ombudsman for hearing complaints against NBFCs. However, in respect of credit card operations of an NBFC, if a complainant does not get satisfactory response from the NBFC within a maximum period of thirty (30) days from the date of lodging the complaint, the customer will have the option to approach the Office of the concerned Banking Ombudsman for redressal of his grievance/s.
QUES 25. What are various prudential regulations applicable to NBFCs?
ANS 25. The Bank has issued detailed directions on prudential norms, vide Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998. The directions interalia, prescribe guidelines on income recognition, asset classification and provisioning requirements applicable to NBFCs, exposure norms, constitution of audit committee, disclosures in the balance sheet, requirement of capital adequacy, restrictions on investments in land and building and unquoted shares.
QUES 26. Please explain the terms ‘owned fund’ and ‘net owned fund’ in relation to NBFCs?
ANS 26. ‘Owned Fund’ means aggregate of the paid-up equity capital and free reserves as disclosed in the latest balance sheet of the company after deducting therefrom accumulated balance of loss, deferred revenue expenditure and other intangible assets.
'Net Owned Fund' is the amount as arrived at above minus the amount of investments of such company in shares of its subsidiaries, companies in the same group and all other NBFCs and the book value of debentures, bonds, outstanding loans and advances made to and deposits with subsidiaries and companies in the same group, to the extent it exceeds 10% of the owned fund.
QUES 27. What are the responsibilities of the NBFCs accepting/holding public deposits with regard to submission of Returns and other information to RBI?
ANS 27. The NBFCs accepting public deposits should furnish to RBI
Audited balance sheet of each financial year and an audited profit and loss account in respect of that year as passed in the annual general meeting together with a copy of the report of the Board of Directors and a copy of the report and the notes on accounts furnished by its Auditors;
Statutory Annual Return on deposits - NBS 1;
Certificate from the Auditors that the company is in a position to repay the deposits as and when the claims arise;
Quarterly Return on liquid assets;
Half-yearly Return on prudential norms;
Half-yearly ALM Returns by companies having public deposits of Rs. 20 crore and above or with assets of Rs. 100 crore and above irrespective of the size of deposits ;
Monthly return on exposure to capital market by companies having public deposits of Rs. 50 crore and above; and
A copy of the Credit Rating obtained once a year along with one of the Half-yearly Returns on prudential norms as at (v) above.
QUES 28. What are the documents or the compliance required to be submitted to the Reserve Bank of India by the NBFCs not accepting/holding public deposits?
ANS 28. The NBFCs having assets of Rs. 100 crore and above but not accepting public deposits are required to submit a Monthly Return on important financial parameters of the company. All companies not accepting public deposits have to pass a board resolution to the effect that they have neither accepted public deposit nor would accept any public deposit during the year.
However, all the NBFCs (other than those exempted) are required to be registered with RBI and also make sure that they continue to be eligible to retain the Registration. Further, all NBFCs (including non-deposit taking) should submit a certificate from their Statutory Auditors every year to the effect that they continue to undertake the business of NBFI requiring holding of CoR under Section 45-IA of the RBI Act, 1934.
RBI has powers to cause Inspection of the books of any company and call for any other information about its business activities. For this purpose, the NBFC is required to furnish the information in respect of any change in the composition of its Board of Directors, address of the company and its Directors and the name/s and official designations of its principal officers and the name and office address of its Auditors. With effect from April 1, 2007, non-deposit taking NBFCs with assets of Rs 100 crore and above were advised to maintain minimum CRAR of 10% and also comply with single/group exposure norms. The companies have to achieve CRAR of 12% by March 31, 2009 and 15% by March 31, 2010.
QUES 29. The NBFCs have been made liable to pay interest on the overdue matured deposits if the company has not been able to repay the matured public deposits on receipt of a claim from the depositor. Please elaborate the provisions.
ANS 29. As per Reserve Bank’s Directions, overdue interest is payable to the depositors in case the company has delayed the repayment of matured deposits, and such interest is payable from the date of receipt of such claim by the company or the date of maturity of the deposit whichever is later, till the date of actual payment. If the depositor has lodged his claim after the date of maturity, the company would be liable to pay interest for the period from the date of claim till the date of repayment. For the period between the date of maturity and the date of claim it is the discretion of the company to pay interest.
QUES 31. What is the liquid asset requirement for the deposit taking companies? Where these assets are kept? Do depositors have any claims on them?
ANS 31. In terms of Section 45-IB of the RBI Act, 1934, the minimum level of liquid asset to be maintained by NBFCs is 15 per cent of public deposits outstanding as on the last working day of the second preceding quarter. Of the 15%, NBFCs are required to invest not less than ten percent in approved securities and the remaining 5% can be in unencumbered term deposits with any scheduled commercial bank. Thus, the liquid assets may consist of Government securities, Government guaranteed bonds and term deposits with any scheduled commercial bank.
The investment in Government securities should be in dematerialised form which can be maintained in Constituents’ Subsidiary General Ledger (CSGL) Account with a scheduled commercial bank (SCB) / Stock Holding Corporation of India Limited (SHICL). In case of Government guaranteed bonds the same may be kept in dematerialised form with SCB/SHCIL or in a dematerialised account with depositories [National Securities Depository Ltd. (NSDL)/Central Depository Services (India) Ltd. (CDSL)] through a depository participant registered with Securities & Exchange Board of India (SEBI). However in case there are Government bonds which are in physical form the same may be kept in safe custody of SCB/SHCIL.
NBFCs have been directed to maintain the mandated liquid asset securities in a dematerialised form with the entities stated above at a place where the registered office of the company is situated. However, if an NBFC intends to entrust the securities at a place other than the place at which its registered office is located, it may do so after obtaining the permission of RBI in writing. It may be noted that liquid assets in approved securities will have to be maintained in dematerialised form only.
The liquid assets maintained as above are to be utilised for payment of claims of depositors. However, deposit being unsecured in nature, depositors do not have direct claim on liquid assets.
QUES 32. Please tell us something about the companies which are NBFCs, but are exempted from registration?
ANS 32. Housing Finance Companies, Merchant Banking Companies, Stock Exchanges, Companies engaged in the business of stock-broking/sub-broking, Venture Capital Fund Companies, Nidhi Companies, Insurance companies and Chit Fund Companies are NBFCs but they have been exempted from the requirement of registration under Section 45-IA of the RBI Act, 1934 subject to certain conditions.
Housing Finance Companies are regulated by National Housing Bank, Merchant Banker/Venture Capital Fund Company/stock-exchanges/stock brokers/sub-brokers are regulated by Securities and Exchange Board of India, and Insurance companies are regulated by Insurance Regulatory and Development Authority. Similarly, Chit Fund Companies are regulated by the respective State Governments and Nidhi Companies are regulated by Ministry of Corporate Affairs, Government of India.
It may also be mentioned that Mortgage Guarantee Companies have been notified as Non-Banking Financial Companies under Section 45 I(f)(iii) of the RBI Act, 1934.
QUES 33. There are some entities (not companies) which carry on activities like that of NBFCs. Are they allowed to take deposits? Who regulates them?
ANS 33. Any person who is an individual or a firm or unincorporated association of individuals cannot accept deposits except by way of loan from relatives, if his/its business wholly or partly includes loan, investment, hire-purchase or leasing activity or principal business is that of receiving of deposits under any scheme or arrangement or in any manner or lending in any manner.
QUES 34. What is a Residuary Non-Banking Company (RNBC)? In what way it is different from other NBFCs?
ANS 34. Residuary Non-Banking Company is a class of NBFC which is a company and has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner and not being Investment, Asset Financing, Loan Company. These companies are required to maintain investments as per directions of RBI, in addition to liquid assets. The functioning of these companies is different from those of NBFCs in terms of method of mobilisation of deposits and requirement of deployment of depositors' funds as per Directions. Besides, Prudential Norms Directions are applicable to these companies also.
QUES 35. We understand that there is no ceiling on raising of deposits by RNBCs, then how safe is deposit with them?
ANS 35. It is true that there is no ceiling on raising of deposits by RNBCs but every RNBC has to ensure that the amounts deposited and investments made by the company are not less than the aggregate amount of liabilities to the depositors.
To secure the interest of depositor, such companies are required to invest in a portfolio comprising of highly liquid and secure instruments viz. Central/State Government securities, fixed deposits with scheduled commercial banks (SCB), Certificate of deposits of SCB/FIs, units of Mutual Funds, etc.
QUES 36. Can RNBC forfeit deposit if deposit installments are not paid regularly or discontinued?
ANS 36. No Residuary Non-Banking Company shall forfeit any amount deposited by the depositor, or any interest, premium, bonus or other advantage accrued thereon.
From India, Vijayawada
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Dear CRK,
Your posts and threads are wonderful. I truly appreciate your efforts in this community, and all the content you share is very useful to everyone. I admire you a lot. Thank you for continuously sharing valuable material.
I previously requested a thread on Finance & Accounts, and I am asking once again for your consideration on this subject. If possible, please start at your convenience.
Special thanks to you for regularly sharing good content on various subjects. May God bless you, and I wish you all the best.
Regards,
TSK
From India, Hyderabad
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Your posts and threads are wonderful. I truly appreciate your efforts in this community, and all the content you share is very useful to everyone. I admire you a lot. Thank you for continuously sharing valuable material.
I previously requested a thread on Finance & Accounts, and I am asking once again for your consideration on this subject. If possible, please start at your convenience.
Special thanks to you for regularly sharing good content on various subjects. May God bless you, and I wish you all the best.
Regards,
TSK
From India, Hyderabad
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Dear TSK,
Thank you very much for your regular feedback on my posts in various threads. As you requested earlier for the posts on Finance and Accounts, it has been recorded with me and I will make it as soon as possible. If possible, kindly let me know the topics of Finance & Accounts in which you are expecting information, which would be useful to all the members.
Once again, thank you for your warm feedback. Take care. Bye.
CRK
crk.mbahr@gmail.com
Dear CRK,
Your posts and threads are wonderful. I appreciate your efforts in this community, and they are very useful to all. I admire you and thank you for sharing valuable material continuously.
As I requested in an earlier thread about Finance & Accounts, please consider this subject and start at your convenience. Thank you for regularly sharing good content on various subjects. May God bless you, and I wish you all the best.
Regards,
TSK
From India, Vijayawada
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Thank you very much for your regular feedback on my posts in various threads. As you requested earlier for the posts on Finance and Accounts, it has been recorded with me and I will make it as soon as possible. If possible, kindly let me know the topics of Finance & Accounts in which you are expecting information, which would be useful to all the members.
Once again, thank you for your warm feedback. Take care. Bye.
CRK
crk.mbahr@gmail.com
Dear CRK,
Your posts and threads are wonderful. I appreciate your efforts in this community, and they are very useful to all. I admire you and thank you for sharing valuable material continuously.
As I requested in an earlier thread about Finance & Accounts, please consider this subject and start at your convenience. Thank you for regularly sharing good content on various subjects. May God bless you, and I wish you all the best.
Regards,
TSK
From India, Vijayawada
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Dear CRK,
Thank you very much for accepting my request.
We need good material which is useful for today’s market as well knowledge sake. According to your suggestion I stated few topics which are commonly required for accountants and financial professionals.
The below mentioned topics are given according to my knowledge. Apart from these there are many topics to be covered related to this subject, I hope you and our seniors will share the knowledge. I will also try to contribute from my end in this thread.
Expecting Information.
1) Basic Fundamentals in Accountancy and objectives?
2) Present trend in accounting world?
3) Meanings of accounting Terms with explanations?
4) Various types of Head of accounts with explanations?
5) Finalisation of Company/Firm accounts?
6) Accounting adjustment entries?
7) Kinds of Depreciation methods with Illustrations?
8) Necessary statutory obligations for a company/Firm?
9) Brief Notes on all statutory obligations in India?
10) Role of Fiance and Accounts departments in a company?
11) Functions of Accountants?
12) Statutory Audit and internal Audit of Accounts
13) Kinds of Software’s use in fiancé department?
14) Set up Company, shares, Amalgamation and closing activities?
15) GAAP & IFRS objectives and principles?
16) Kinds of expenses and Incomes for business
17) Accounting treatments for various transactions?
18) MIS reports , budget and cost control
19) Liaison work and dealing
20) Accounts/Fiance Jobs opportunities across the globe
I wish you all the best.
Regards,
TSK
From India, Hyderabad
Acknowledge(0)Amend(0)
Thank you very much for accepting my request.
We need good material which is useful for today’s market as well knowledge sake. According to your suggestion I stated few topics which are commonly required for accountants and financial professionals.
The below mentioned topics are given according to my knowledge. Apart from these there are many topics to be covered related to this subject, I hope you and our seniors will share the knowledge. I will also try to contribute from my end in this thread.
Expecting Information.
1) Basic Fundamentals in Accountancy and objectives?
2) Present trend in accounting world?
3) Meanings of accounting Terms with explanations?
4) Various types of Head of accounts with explanations?
5) Finalisation of Company/Firm accounts?
6) Accounting adjustment entries?
7) Kinds of Depreciation methods with Illustrations?
8) Necessary statutory obligations for a company/Firm?
9) Brief Notes on all statutory obligations in India?
10) Role of Fiance and Accounts departments in a company?
11) Functions of Accountants?
12) Statutory Audit and internal Audit of Accounts
13) Kinds of Software’s use in fiancé department?
14) Set up Company, shares, Amalgamation and closing activities?
15) GAAP & IFRS objectives and principles?
16) Kinds of expenses and Incomes for business
17) Accounting treatments for various transactions?
18) MIS reports , budget and cost control
19) Liaison work and dealing
20) Accounts/Fiance Jobs opportunities across the globe
I wish you all the best.
Regards,
TSK
From India, Hyderabad
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Dear TSK,
The information is indeed useful. However, it is solely related to Finance & Accounts. I don't think it falls under General discussion either. It should actually be posted on www.citefin.com. I believe all the information you requested can be found on citefin.com.
CRK
From India, Vijayawada
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The information is indeed useful. However, it is solely related to Finance & Accounts. I don't think it falls under General discussion either. It should actually be posted on www.citefin.com. I believe all the information you requested can be found on citefin.com.
CRK
From India, Vijayawada
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Dear CRK,
Yes, I do agree with you. It is purely finance and accounts-based questions. Anyhow, thank you very much for your information about www. since I don't know as of now about this. I think this forum may be appropriate for the above information. Still, I am requesting you, is there any possibility to start a general discussion about this subject like your threads on HR and banking industry from your end? Thanks a lot for your prompt reply.
I wish you all the best and God bless you.
Regards,
TSK
From India, Hyderabad
Acknowledge(0)Amend(0)
Yes, I do agree with you. It is purely finance and accounts-based questions. Anyhow, thank you very much for your information about www. since I don't know as of now about this. I think this forum may be appropriate for the above information. Still, I am requesting you, is there any possibility to start a general discussion about this subject like your threads on HR and banking industry from your end? Thanks a lot for your prompt reply.
I wish you all the best and God bless you.
Regards,
TSK
From India, Hyderabad
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CUSTOMER SERVICE IN BANKS
Customer service in banking is one of the most important ways to keep customers coming back. It includes responding to customers’ questions and complaints in a thorough and timely manner and interacting with customers through face-to-face meetings, telephone, mail, fax and email. Most if not all bank employees are involved in some aspect of customer service.
[IMG]http://www.ideaguides.com/Resources/customerexcell.jpg[/IMG]
The Facts
Because of increased competition, banks are required to become more and more customer-focused, according to Washburn Financial Services. It is more costly to acquire new customers than it is to retain existing customers. Retaining customers requires customer service staff in banks to provide service that is quick, error-free and convenient.
Bank Tellers
Bank tellers are the first point of contact for many customers. Tellers who are friendly, quick and knowledgeable are a definite tool for customer service in banking. Many customers make a decision on whether or not to do their banking with a particular institution based on the personalities and expertise of bank tellers. On-the-job training is usually offered for bank tellers, including emphasis on customer service skills.
Call Centers
Many banks, particularly large banks, employ customer service representatives in call centers to be the initial point of contact for customer inquiries. Call center representatives may try to solve problems or they may be responsible for directing calls to specialists within the banking organization. Call center representatives should have good communication skills, good listening skills and problem-solving abilities.
Other Jobs in Banking
There are many other staff members who offer customer service in banking. Branch managers may be able to soothe an irate or dissatisfied customer. Customer service representatives are able to perform more complex transactions such as opening accounts. Loan officers offer customer service to customers, both consumer and commercial, who wish to borrow money
Considerations
Good customer service is the heart of banking. Today banks have a wide variety of competitors for business. For example, many department stores and grocery stores offer financial services such as cashing checks and selling money orders. Because of the amount of competition, unique products in the banking industry aren’t as important as outstanding customer service. Banks continually strive for improvements in this area. Examples of such techniques include taking customer surveys and monitoring calls that come in through the call center. Incentives, such as customer service awards, may be offered to encourage staff members to improve the customer support they offer.
CRK
From India, Vijayawada
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- By Valerie Dansereau
Customer service in banking is one of the most important ways to keep customers coming back. It includes responding to customers’ questions and complaints in a thorough and timely manner and interacting with customers through face-to-face meetings, telephone, mail, fax and email. Most if not all bank employees are involved in some aspect of customer service.
[IMG]http://www.ideaguides.com/Resources/customerexcell.jpg[/IMG]
The Facts
Because of increased competition, banks are required to become more and more customer-focused, according to Washburn Financial Services. It is more costly to acquire new customers than it is to retain existing customers. Retaining customers requires customer service staff in banks to provide service that is quick, error-free and convenient.
Bank Tellers
Bank tellers are the first point of contact for many customers. Tellers who are friendly, quick and knowledgeable are a definite tool for customer service in banking. Many customers make a decision on whether or not to do their banking with a particular institution based on the personalities and expertise of bank tellers. On-the-job training is usually offered for bank tellers, including emphasis on customer service skills.
Call Centers
Many banks, particularly large banks, employ customer service representatives in call centers to be the initial point of contact for customer inquiries. Call center representatives may try to solve problems or they may be responsible for directing calls to specialists within the banking organization. Call center representatives should have good communication skills, good listening skills and problem-solving abilities.
Other Jobs in Banking
There are many other staff members who offer customer service in banking. Branch managers may be able to soothe an irate or dissatisfied customer. Customer service representatives are able to perform more complex transactions such as opening accounts. Loan officers offer customer service to customers, both consumer and commercial, who wish to borrow money
Considerations
Good customer service is the heart of banking. Today banks have a wide variety of competitors for business. For example, many department stores and grocery stores offer financial services such as cashing checks and selling money orders. Because of the amount of competition, unique products in the banking industry aren’t as important as outstanding customer service. Banks continually strive for improvements in this area. Examples of such techniques include taking customer surveys and monitoring calls that come in through the call center. Incentives, such as customer service awards, may be offered to encourage staff members to improve the customer support they offer.
CRK
From India, Vijayawada
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How to Understand Different Banking Jobs
*(Source: ehow.com)*
At the heart of our economy lies the financial sector of this country. You can lie at the heart of the financial sector by getting a job in banking. Be it as a teller, manager, financial adviser, or anything in between, you can play a pivotal role.
Banking is an industry with a variety of jobs for anyone interested in the field. You can work for a large commercial bank, a regional or local bank, a savings bank, a credit union, or even an online bank. Follow these steps to familiarize yourself with the available jobs. A probationary officer (PO) is usually absorbed by a bank for the post of Assistant Manager (AM) and ranks in the officer cadre of Scale - I.
INSTRUCTIONS
Bank tellers account for 67 percent of all banking jobs and are now being trained to sell banking products along with their usual functions, such as cashing and depositing checks and accepting loan payments.
Help customers with their accounts as a customer service representative. You will open and close accounts and resolve customer complaints. Customer service representatives are required to know about any products the bank may offer so they can explain and sell them to customers. They often service clients on the telephone and through email.
Review and submit applications as a loan officer. You will help customers complete applications for loans and verify the information on the loan applications. Loan officers usually specialize in either commercial, consumer, or mortgage lending roles. They also sell these products to the public.
Process banking transactions as a clerical worker. Banks also employ clerical workers in collections and as secretaries and receptionists. Administrative assistants manage the work of clerical workers and work with bank executives.
Oversee the operations of the bank branch if you are the financial manager. Financial managers also counsel clients and help employees who cannot answer a customer's questions.
Handle accounts placed in an institution if you are the trust officer. The handling of estates is another function of a trust officer.
Buy and sell securities and handle financial services if you work as a financial services specialist. You will work with customers to help the customer design programs that will make their money grow.
CRK
From India, Vijayawada
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*(Source: ehow.com)*
At the heart of our economy lies the financial sector of this country. You can lie at the heart of the financial sector by getting a job in banking. Be it as a teller, manager, financial adviser, or anything in between, you can play a pivotal role.
Banking is an industry with a variety of jobs for anyone interested in the field. You can work for a large commercial bank, a regional or local bank, a savings bank, a credit union, or even an online bank. Follow these steps to familiarize yourself with the available jobs. A probationary officer (PO) is usually absorbed by a bank for the post of Assistant Manager (AM) and ranks in the officer cadre of Scale - I.
INSTRUCTIONS
Bank tellers account for 67 percent of all banking jobs and are now being trained to sell banking products along with their usual functions, such as cashing and depositing checks and accepting loan payments.
Help customers with their accounts as a customer service representative. You will open and close accounts and resolve customer complaints. Customer service representatives are required to know about any products the bank may offer so they can explain and sell them to customers. They often service clients on the telephone and through email.
Review and submit applications as a loan officer. You will help customers complete applications for loans and verify the information on the loan applications. Loan officers usually specialize in either commercial, consumer, or mortgage lending roles. They also sell these products to the public.
Process banking transactions as a clerical worker. Banks also employ clerical workers in collections and as secretaries and receptionists. Administrative assistants manage the work of clerical workers and work with bank executives.
Oversee the operations of the bank branch if you are the financial manager. Financial managers also counsel clients and help employees who cannot answer a customer's questions.
Handle accounts placed in an institution if you are the trust officer. The handling of estates is another function of a trust officer.
Buy and sell securities and handle financial services if you work as a financial services specialist. You will work with customers to help the customer design programs that will make their money grow.
CRK
From India, Vijayawada
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