Date of deposit of cheque & opening PPF account by Minor, RBI clarification

Public Provident Fund Scheme, 1968:
1) Clarification regarding reckoning of the date of deposit
2) Reiteration of instructions on opening of an account for a minor
1. Reckoning the date of deposit in case of cheque payment:
As you are aware, Ministry of Finance letter No. F. 3(9)-PD/72 dated September 4, 1972, has issued notification for Public Provident Fund Scheme, 1968 (PPF). In order to bring uniformity in the reckoning of the date of deposit in the PPF vis-à-vis Post Office Savings Schemes (POSS) and Senior Citizens Savings Scheme, 2004 (SCSS), the Government of India (GoI), vide their letter F. No.7/7/2008/NS-II dated February 10, 2010, have decided that hereafter in modification of Ministry of Finance letter No.F.3(9)-PD/72 dated September 4, 1972 "when a deposit is made in the PPF account by means of a local cheque or demand draft by the subscriber, the date of realization of the amount will be the date of deposit."

2. Opening of an account for a minor:
In view of complaints being received about non-opening of accounts for minor by some Agency banks, it is reiterated that as per Rule 3 (1) of PPF Scheme, 1968, an individual may, on his own behalf or on behalf of a minor, of whom he is the guardian, subscribe to the Public Provident Fund. Further it is reiterated that as clarified, vide Ministry of Finance letter F.7/34/88/-NS II dated November 17, 1989, either father or mother can open a PPF account on behalf of his/her minor child but not both.

Source: DGBA.CDD. H- 7530/15.02.001/2009-10 dated 29th March 2010

Again an option to Buyback / Prepayment of FCCB under RBI Approval Route till June 2010

Buyback / Prepayment of Foreign Currency Convertible Bonds (FCCBs)
Attention of Authorised Dealer Category – I (AD Category – I) banks is invited to the A.P. (DIR Series) Circular No. 39 dated December 08, 2008 and A.P. (DIR Series) Circular No. 65 dated April 28, 2009 on the captioned subject. In terms of A.P. (DIR Series) Circular No. 58 dated March 13, 2009, Indian companies were allowed to buyback their Foreign Currency Convertible Bonds (FCCBs) both under the automatic route and approval route until December 31, 2009. The Scheme was discontinued with effect from January 1, 2010.

In view of the representations made by the issuers of FCCBs, it has been decided to consider applications, under the approval route, for buyback of FCCBs until June 30, 2010, subject to issuers complying with all the terms and conditions of buyback/prepayment of FCCBs, as mentioned in abovementioned circulars.

Accordingly, applications complying with the conditions may be submitted, together with the supporting documents, through the designated AD Category - I bank to the Chief General Manager-in-Charge, Reserve Bank of India, Foreign Exchange Department, External Commercial Borrowings Division, Central Office, 11th Floor, Central Office Building, Shahid Bhagat Singh Road, Mumbai-400 001.

Source: A.P. (DIR Series) Circular No. 44 dated 29th March 2010

Practising CS CA CWA to give COP & list of documents for KYC regarding Bank Account for Sole Proprietorship Concerns

Know your Customer (KYC) guidelines - accounts of proprietary concerns
A reference is invited to Para 2.4(a) of the Master Circular on KYC/AML/CFT/Obligation of banks under Prevention of Money laundering Act (PMLA), 2002 issued to banks vide DBOD.AML.BC. No.2/14.01.001/2009-10 dated July 1, 2009. It has been advised to banks that internal guidelines for customer identification procedure of legal entities may be framed by them based on their experience of dealing with such entities, normal bankers’ prudence and the legal requirements as per established practices. If the bank decides to accept such accounts in terms of the Customer Acceptance Policy, the bank should take reasonable measures to identify the beneficial owner(s) and verify his/her/their identity in a manner so that it is satisfied that it knows who the beneficial owner(s) is/are.

For sake of clarity, in case of accounts of proprietorship concerns, it has been decided to lay down criteria for the customer identification procedure for account opening by proprietary concerns. Accordingly, apart from following the extant guidelines on customer identification procedure as applicable to the proprietor, banks / financial institutions should call for and verify the following documents before opening of accounts in the name of a proprietary concern:

• Proof of the name, address and activity of the concern, like registration certificate (in the case of a registered concern), certificate/licence issued by the Municipal authorities under Shop & Establishment Act, sales and income tax returns, CST/VAT certificate, certificate/registration document issued by Sales Tax/Service Tax/Professional Tax authorities, Licence issued by the Registering authority like Certificate of Practice issued by ICAI, ICWAI, ICSI, Indian Medical Council, Food and Drug Control Authorities, etc.
• Any two of the above documents would suffice. These documents should be in the name of the proprietary concern.

These guidelines will apply to all new customers, while in case of accounts of existing customers, the above formalities should be completed in a time bound manner and should be completed before December 31, 2010.

Source: RBI DBOD.AML.BC.No.80 /14.01.001/2009-10 dated 26th March 2010

New definition of PIO includes Mother & Grandmother for FEMA, RBI notification as per Immovable Property Second Amendment 2009

Purchase of Immovable Property in India by Persons of Indian Origin (PIOs) – Amendment of the definition

The term PIO is defined under Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India), Regulations, 2000.

The definition is partially amended by Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) (Second Amendment) Regulations, 2009 to include Mother & Grandmother.

Now, PIO means:

• an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan),
• (i) who at any time, held an Indian Passport or
• (ii) who or either of whose father or mother or whose grandfather or grandmother was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955.

Source: A.P. (DIR Series) Circular No.25 dated 10th January 2o1o

FIU-IND transaction reporting under Money Laundering for Rs.10 lakh or Rs.50,000 as per Amendment Rules, 2009

Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Amendment Rules, 2009 - Obligation of banks/Financial institutions

As you are aware, Prevention of Money-laundering Act (PMLA), 2002 read with Rules is amended by Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries)  Amendment Rules, 2009 vide Records to be maintained from transaction, Non profit organisation included, Suspicious transaction defined in amendment of Money Laundering Rules 2009.

Accordingly, in view of amendments to the above Rules, banks / financial institutions are required to :
i) Maintain proper record of all transactions involving receipts by non- profit organizations of value more than Rs.10 lakh or its equivalent in foreign currency and to forward a report to FIU-IND of all such transactions in the prescribed format every month by the 15th of the succeeding month.
ii) In case of transactions carried out by a non-account based customer, that is a walk-in customer, where the amount of transaction is equal to or exceeds Rs.50,000/-, whether conducted as a single transaction or several transactions that appear to be connected, the customer's identity and address should be verified. Further, if a bank has reason to believe that a customer is intentionally structuring a transaction into a series of transactions below the threshold of Rs.50,000/- the bank should verify identity and address of the customer and also consider filing a suspicious transaction report (STR) to FIU-IND.

Source: DBOD. AML.BC. No. 68 /14.01.001/2009-10 dated 12th January 2010

Money deposit schemes are illegal, RBI cautions public about Unincorporated bodies

RBI cautions public : Not to deposit money in unincorporated bodies

It has come to the notice of the Reserve Bank of India that some individuals/firms/unincorporated association of individuals (unincorporated bodies) have been collecting deposits from the public by making tall promises of high returns. Some of them are stated to have vanished without repaying deposits. Under Section 45-S(1) of the Reserve Bank of India Act, 1934, unincorporated bodies that are carrying on the business of a financial institution or NBFC or whose principal business is that of receiving deposits are prohibited from accepting deposits from the public. Members of public are hereby cautioned not to deposit money with such unincorporated bodies. Persons depositing money with such unincorporated bodies would be doing so at their own risk.

Press Release: 2009-2010/1315

New Format Cheque under Cheque Truncation System (CTS) Standard issued by RBI, in addition to MICR, yet to be notified

"CTS-2010 Standard" for Cheque Forms – Specifications

RBI has proposed a New Cheque Truncation System (CTS) and a Model of proposed cheque, the effective date of which will be intimated soon.

It has since been decided to prescribe certain benchmarks towards achieving
standardisation of cheques issued by banks across the country. These include provision of mandatory minimum security features on cheque forms like quality of paper, watermark, bank’s logo in invisible ink, void pantograph, etc., and standardisation of field placements on cheques. In addition, certain desirable features are also being suggested which could be implemented by banks based on their need and risk perception. The set
of minimum security features would not only ensure uniformity across all cheque forms issued by banks in the country but also help presenting banks while scrutinising /recognising cheques of drawee banks in an image-based processing scenario. The homogeneity in security features is expected to act as a deterrent against cheque frauds, while the standardisation of field placements on cheque forms would enable straightthrough-processing (STP) by use of optical / image character recognition technology (MICR).

Source: RBI Circular DPSS.CO.CHD.No.1832/04.07.05/2009-2010 dated February 22, 2010

New NBFC Classification: AFC, IFC, Investment & Loan company as per RBI

Consequent upon re-classification of NBFCs, in the proposed structure the following categories of NBFCs will emerge:

1. Asset Finance Company
2. Investment Company
3. Loan Company
4. Infrastructure Finance Company (IFC) – a new category as notified by RBI vide DNBS.PD. CC No.168 /03.02.089 /2009-10 dated 12th February 2010.

Conversion into New Pricing Norms for FCCB on or before 15th August 2010 (ie) average 2 week high & low prices only like QIP under ICDR

A Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme was notified in 1993 to allow the Indian Corporate sector to access global capital markets through issue of Foreign Currency Convertible Bonds (FCCB)/Equity Shares under the Global Depository Receipt Mechanism (GDR) and American Depository Receipt Mechanism (ADR). The Scheme has been amended several times since then.

What is FCEB?

Amendment: On or before 15th August 2010 (6 month period from 15th February 2010), the corporates have the option to revise from OLD CONVERSION PRICE norms to NEW CONVERSION PRICE norm (as below) for FCCB’s.  The said revision of conversion price is subject to the following conditions:

• Prior approval from RBI (PRBI) is mandatory.
• The issuing Company shall ensure that the revision of price and consequent issue of shares may not breach Foreign Direct Investment (FDI) limit (Sectoral caps) under Automatic or Approval route.
• The issuing Company shall take approval from its Board as well as from its shareholders (Board Resolution + Ordinary Resolution).
• The issuing Company shall enter into a fresh agreement with the FCCB holders in terms of re-negotiation of the conversion price.

Source: Ministry of finance Press Note F.No.9/3/2009-ECB dated 15th February 2010.

[Old Conversion Price]FCCB Pricing Norm prior to 27th November 2008:

Listed Companies – The pricing should not be less than the higher of the following two averages:

(i) The average of the weekly high and low of the closing prices of the related shares quoted on the stock
      exchange during the six months preceding the relevant date;

(ii) The average of the weekly high and low of the closing prices of the related shares quoted on a stock
       exchange during the two week preceding the relevant date.

The “relevant date” means the date thirty days prior to the date on which the meeting of the general body of shareholders is held, in terms of section 81 (IA) of the Companies Act, 1956, to consider the proposed issue.”

[New Conversion Price]FCCB Pricing Norm from 27th November 2008: similar to QIP pricing under ICDR

Listed Companies – The pricing should not be less than the average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the two weeks preceding the relevant date; [avg 2 weeks high & low]
The “relevant date” means date of the meeting in which the Board of the company or the Committee of Directors duly authorized by the Board of the company decides to open the proposed issue.”

Source: FINMIN

FDI in NBFC-Statutory Auditors Certification-half yearly within 1 month to RBI R.O.

Compliance with FDI norms-Half yearly certificate from Statutory Auditors of NBFCs

NBFCs having Foreign Direct Investment (FDI) whether under automatic route or under approval route have to comply with the stipulated minimum capitalisation norms and other relevant terms and conditions, as amended from time to time under which FDI is permitted.

As such these NBFCs are required to submit a certificate from their Statutory Auditors on half yearly basis (half year ending September and March) certifying compliance with the existing terms and conditions of FDI. Such certificate may be submitted not later than one month from the close of the half year to which the certificate pertains, to the Regional Office in whose jurisdiction the head office of the company is registered.

Source:RBI/2009-10/304 DNBS (PD).CC. No 167 /03.10.01 /2009-10 dated 4th February 2010

Rs.7,500 Currency Notes per resident individual travelling abroad can take outside or bring inside India, RBI FEMA limit amendment/extended

Export and Import of Currency
Attention of Authorised Persons is invited to clauses (a) and (c) of sub-regulation (1) of Regulation 3 of Foreign Exchange Management (Export and Import of Currency) Regulations, 2000, notified vide Notification No. FEMA 6 /RB-2000 dated May 3, 2000, in terms of which, any person resident in India may take outside India or having gone out of India on a temporary visit, may bring into India (other than to and from Nepal and Bhutan) currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding Rs.5,000 per person.
2. As part of providing greater flexibility to the resident individuals travelling abroad, the existing limits, mentioned above, have been enhanced to Rs. 7,500 per person. The Government of India, has notified vide G.S.R.548 (E) in the Gazette of India dated July 24, 2009 [Notification No.FEMA.195/2009-RB dated July 7, 2009] (copy annexed), an amendment to clauses (a) and (c) of sub-regulation (1) of Regulation 3 of the Notification referred to above.
3. Accordingly, any person resident in India,
i) may take outside India (other than to Nepal and Bhutan) currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding Rs.7,500 (Rupees seven thousand five hundred only) per person; and
ii) who had gone out of India on a temporary visit, may bring into India at the time of his return from any place outside India (other than from Nepal and Bhutan), currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding Rs.7,500 (Rupees seven thousand five hundred only) per person.

Source: RBI/2009-10/297 A. P. (DIR Series) Circular No. 30 & A.P. (FL/ RL Series) Circular No.06 dated 1st February 2010.

Mobile Banking Transaction Guidelines & increase in limits 50,000/- per customer, RBI says

Mobile Banking Transactions in India - Operative Guidelines for Banks

A reference is invited to the guidelines appended to our circular no. RBI/2008-09/ 208, DPSS.CO.No.619 /02.23.02/ 2008-09 dated October 08, 2008, on the captioned subject.

Transaction limit: In amendment of provisions of paragraph 8.1 of the above guidelines, banks are now permitted to offer this service to their customers subject to a daily cap of Rs 50,000/- per customer for both funds transfer and transactions involving purchase of goods/services. Presently, such transactions are subject to separate caps of Rs 5000/- and Rs 10000/ -respectively.
Technology and Security Standard: Transactions up to Rs 1000/- can be facilitated by banks without end-to-end encryption. The risk aspects involved in such transactions may be addressed by the banks through adequate security measures.
Remittance of funds for disbursement in cash:
In order to facilitate the use of mobile phones for remittance of cash, banks are permitted to provide fund transfer services which facilitate transfer of funds from the accounts of their customers for delivery in cash to the recipients. The disbursal of funds to recipients of such services can be facilitated at ATMs or through any agent(s) appointed by the bank as business correspondents. Such fund transfer service shall be provided by banks subject to the following conditions:-
I. The maximum value of such transfers shall be Rs 5000/- per transaction.
II. Banks may place suitable cap on the velocity of such transactions, subject to a maximum value of Rs 25,000/- per month, per customer.
III. The disbursal of funds at the agent/ATM shall be permitted only after identification of the recipient. In this connection, attention of banks is drawn to the provisions of the Notification dated November 12, 2009, issued by Government of India, under Prevention of Money Laundering Act, 2002, as amended from time to time.
IV. Banks may carry out proper due diligence of the persons before appointing them as authorized agents for such services.
V. Banks shall be responsible as principals for all the acts of omission or commission of their agents.

Source: RBI/2009-10/273 DPSS.CO.No.1357/02.23.02/ 2009-10 dated 24th December, 2009

RBI Guidelines on Money Changing Activity & Cross Border Inward Remittance under MTSS

Know Your Customer (KYC) norms/Anti-Money Laundering (AML) standards/Combating the Financing of Terrorism (CFT)/Obligation of Authorised Persons under Prevention of Money Laundering Act, (PMLA), 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009- Money changing activities vide RBI/2009-10/235 A.P. (DIR Series) Circular No.17 & A.P. (FL/RL Series) Circular No.04 dated 27th November 2009

Click here to download Norms for Money Changing Activities.

Know Your Customer (KYC) norms/Anti-Money Laundering (AML) standards/Combating the Financing of Terrorism (CFT)/Obligation of APs(Indian Agents) under Prevention of Money Laundering Act, (PMLA), 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009-
Cross Border Inward Remittance under Money Transfer Service Scheme vide RBI/2009-01/ 236 A.P. (DIR Series) Circular No.18 & A.P. (FL Series) Circular No.05 dated 27th November 2009.

Click here to download Norms for Cross Border Inward Remittance under MTSS

These guidelines are also applicable mutatis mutandis to all agents / franchisees of Authorised Persons and it will be the sole responsibility of the
franchisers to ensure that their agents / franchisees also adhere to these guidelines.

Advance Remittance & bank guarantee for import of Services NA to Public Sector Company or a Department of Government, RBI says

Advance Remittance for import of Services
Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to A.P. (DIR Series) Circular No. 15 dated September 8, 2008, in terms of which the limit for advance remittance for all admissible current account transactions for import of services without bank guarantee was raised from USD 100,000 to USD 500,000 or its equivalent.

It is clarified that the increase in the limit for advance remittance for all admissible current account transactions for import of services without bank guarantee is not applicable for a Public Sector Company or a Department/ Undertaking of the Government of India/ State Governments.

In the case of a Public Sector Company or a Department/ Undertaking of the Government of India/ State Governments, approval from the Ministry of Finance, Government of India for advance remittance for import of services without bank guarantee for an amount exceeding USD 100,000 (USD One hundred thousand) or its equivalent would continue to be required.

Source: RBI/2009-10/ 175 A.P. (DIR Series) Circular No.10 dated October 5, 2009

Issue of Bank Guarantee on behalf of service importers
Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to Regulation 4 of the Foreign Exchange Management (Guarantees) Regulations, 2000 notified vide Notification No. FEMA 8/2000-RB dated May 3, 2000, as amended from time to time. In terms of Regulation 4(3)(iv) thereof [amended vide Notification No. FEMA 151/2007-RB dated January 4, 2007] and A.P. (DIR Series) Circular No. 13 dated November 17, 2006, banks are allowed to issue guarantees in favour of a non-resident service provider, on behalf of a resident customer who is a service importer, for an amount up to USD 100,000 or its equivalent, subject to the terms and conditions stipulated in the said circular.

With a view to further liberalise the procedure (other than in respect of a Public Sector Company or a Department/ Undertaking of the Government of India/ State Governments) for import of services, it has been decided to increase the limit for issue of guarantee by AD Category-I banks from USD 100,000 to USD 500,000. Accordingly, AD Category-I banks are now permitted to issue guarantee for amount not exceeding USD 500,000 or its equivalent in favour of a non-resident service provider, on behalf of a resident customer who is a service importer, provided:
(a) the AD Category-I bank is satisfied about the bonafides of the transaction;
(b) the AD Category-I bank ensures submission of documentary evidence for import of services in the normal course; and
(c) the guarantee is to secure a direct contractual liability arising out of a contract between a resident and a non-resident.

In the case of a Public Sector Company or a Department/ Undertaking of the Government of India/ State Governments, approval from the Ministry of Finance, Government of India for issue of guarantee for an amount exceeding USD 100,000 (USD One hundred thousand) or its equivalent would be required.

Source: RBI/2009-10/ 176 A.P. (DIR Series) Circular No.11 dated 5th October, 2009

No limits for royalty/lumpsum payment in FEMA under Current Account Transaction as per PN 8 – DIPP allowed it under Automatic route (ie) without the approval of RBI

Press Note 8 of 2009 as notified by 0/0 IPP F. No. 5(6)/2008-FC dated 16.12.2009

The existing policy of Government of India on the payment of royalties under Foreign Technology Collaboration provides for automatic approval for foreign technology transfers involving payment of lumpsum fee of US$ 2 million and payment of royalty of 5% on domestic sales and 8% on exports. In addition, where there is no technology transfer involved, royalty up to 2% for exports and 1% for domestic sales is allowed under automatic route on use of trademarks and brand names of the foreign collaborator. Separate norms are available for the hotel sector vide Press Note 18 (1991 Series) and Press Note 1 (1995 Series). Technology transfers involving payments above these limits required prior permission of the Government of India (Project Approval Board, Department of Industrial Policy and Promotion).

The Government of India has reviewed the extant policy and it has been decided to permit, with immediate effect, payments for royalty, lumpsum fee for transfer of technology and payments for use of trademark/brand name on the automatic route i.e. without any approval of the Government of India. All such payments will be subject to Foreign Exchange Management (Current Account Transactions) Rules, 2000 as amended from time to time.

Meaning, Payment of Royalty and Lumpsum fees is fully liberalised now without any ceiling limits and will fall under Automatic Route.

ECB NBFC & Spectrum amended w.e.f December 2009 & others applicable from 1st January 2010 – RBI FEMA Notification

On a review of the prevailing macroeconomic conditions and developments in international financial markets, it has been decided to modify some aspects of the ECB policy as indicated below:

AMENDMENTS WITH IMMEDIATE EFFECT

(i) ECB for the NBFC Sector

As per the current ECB norms, Non-Banking Finance Companies (NBFCs), which are exclusively involved in the financing of the infrastructure sector, are permitted to avail of ECBs from multilateral / regional financial institutions and Government owned development financial institutions for on-lending to the borrowers in the infrastructure sector under the approval route.  In view of the thrust  given to development of infrastructure sector, it has been decided with immediate effect to allow NBFCs exclusively involved in financing the infrastructure projects to avail of ECB from the recognized lender category including international banks under the approval route, subject to complying with the prudential standards prescribed by the Reserve Bank and the borrowing entities fully hedging their currency risk. The AD Category-I bank should certify the compliance with the prudential norms by the borrowing NBFCs.

(ii) ECB for Spectrum in the Telecommunication Sector

As per the extant policy, as indicated in A.P. (DIR Series) Circular No. 26 dated October 22, 2008, payment for obtaining license/permit for 3G Spectrum is considered an eligible end - use for the purpose of ECB under the automatic route. It has now been decided to permit eligible borrowers in the telecommunication sector to avail of ECB for the purpose of payment for Spectrum allocation. This modification will come into effect with immediate effect.

AMENDMENTS WITH EFFECT FROM 1ST JANUARY 2010

(i) All-in-cost ceilings

As per the extant policy, the all-in-cost ceilings have been dispensed with, under the approval route, until December 31, 2009. In view of the improvement in the credit market conditions and narrowing credit spreads in the international markets, it has been decided to withdraw the existing relaxation in the all-in-cost ceilings under the approval route with effect from January 1, 2010. Accordingly, the all-in-cost ceilings under the approval route for the ECBs, where Loan Agreements have been signed on or after January 1, 2010 will be as under:

Average Maturity Period	All -in-cost Ceilings over six month Libor*
3 – 5 years	300 basis points
Over 5 years	500 basis points

*for the respective currency of borrowing or applicable benchmark.

Eligible borrowers proposing to avail of ECB after December 31, 2009, where the Loan Agreement has been signed on or before December 31, 2009 and where the all-in-cost exceed the above ceilings, should furnish a copy of the Loan Agreement. Such proposals would continue to be considered under the approval route.

(ii) Integrated township

As per the extant policy, corporates, engaged in the development of integrated township, as defined in Press Note 3 (2002 Series) dated January 04, 2002, issued by the Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry, Government of India are permitted to avail of ECB, under the approval route, until December 31, 2009. On a review of the prevailing conditions, it has been decided to extend the current policy until December 31, 2010, under the approval route. All other terms and conditions, stipulated in the A.P. (DIR Series) Circulars referred to above, remain unchanged.

iii) Buyback of the Foreign Currency Convertible Bonds (FCCBs)

In terms of A.P. (DIR Series) Circular No. 39 dated December 8, 2008, read with A.P. (DIR Series) Circular No. 58 dated March 13, 2009 and A.P. (DIR Series) Circular No. 65 dated April 28, 2009, Indian companies have been allowed to buyback their Foreign Currency Convertible Bonds (FCCBs) both under the automatic route and approval route until December 31, 2009. Keeping in view the prevailing macroeconomic conditions and global developments, especially the improvements in the stock prices, it has been decided to discontinue the facility with effect from January 1, 2010.

Source: RBI/2009-10/252 A.P. (DIR Series) Circular No.19 dated 9th December 2009

Priority lending to Training centres & consultancy services registered as Micro or Small enterprise – RBI instructs banks

Priority Sector Lending – Categorisation of activities under service under the Micro Small & Medium Enterprises Development (MSMED) Act, 2006

Understand the broad CATEGORIES OF PRIORITY SECTOR,
(i) Agriculture (Direct and Indirect finance)
(ii) Small Enterprises (Direct and Indirect Finance)
(iii) Retail Trade
(iv) Micro Credit
(v) Education loans
(vi) Housing loans

Understand about MSMED from http://yehseeyes.blogspot.com/search?q=MSMED

It has been decided to include loans granted by banks in respect of following activities under Micro and Small (Service) Enterprises within the priority sector, provided such enterprises satisfy the definition of Micro and Small (Service) Enterprises in respect of investment in equipment (original cost excluding land and building and furniture, fittings and other items not directly related to the service rendered or as may be notified under the MSMED Act, 2006) (i.e. not exceeding Rs. 10 lakh and Rs. 2 crore respectively).

1. Consultancy Services including Management Services;
2. Composite Broker Services in Risk and Insurance Management;
3. Third Party Administration (TPA) Services for Medical Insurance Claims of Policy Holders;
4. Seed Grading Services;
5. Training-cum-Incubator Centre;
6. Educational Institutions;
7. Training Institutes;
8. Retail Trade;
9. Practice of Law, i.e. legal services;
10. Trading in medical instruments (brand new);
11. Placement and Management Consultancy Services; and
12. Advertising agency and Training centres

Accordingly, there will be no separate category for "Retail Trade" under priority sector. Loans granted by banks for Retail Trade [i.e. advances granted to retail traders dealing in essential commodities (fair price shops), consumer co-operative stores; and advances granted to private retail traders with credit limits not exceeding Rs. 20 lakh) would henceforth be part of the Small (Service) Enterprises.

The commercial banks may report such loans under the head "Total credit to Small Enterprises" in the half-yearly (Ad-hoc) [under 2 (a) and 2 (ii)] and yearly (final) [under 14, 15, 19, 20 and 21] return on priority sector advances.

For All Primary (Urban) Co-operative Banks (read this circular UBD.CO.BPD(PCB) Cir.No.50/09.09.001/2009-10 dated March  25, 2010)

Source: RBI/2009-10/164 RPCD.CO.Plan.BC. 24 /04.09.01/2009-10 dated 18th September 2009

FEM (Deposit) (Amendment) Regulations, 2009 permits transfer of funds from rupee account of diplomatic mission in India which are collected as Visa fees

Foreign Exchange management (Deposit) (Amendment) Regulations, 2009

In exercise of the powers conferred by clause (f) of sub section (3) of section 6 and sub section (2) of section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India makes the following amendments in the Foreign Exchange Management (Deposit) Regulations, 2000 (Notification No.FEMA.5/2000-RB dated May 3, 2000) namely : -
Amendment of the Regulations: -
In the Foreign Exchange Management (Deposit) Regulations, 2000 (Notification No.FEMA.5/2000-RB dated May 3, 2000), Regulation 4, in sub-regulation (3), for clause (a), the following shall be substituted, namely:-
“(a) credits to the account shall be only by way of:-
(i) proceeds of inward remittances received from outside India through normal banking channels; and
(ii) transfer of funds, from the rupee account of the diplomatic mission in India, which are collected in India as visa fees and credited to such account.”

Source: Notification No.FEMA 193/2009-RB dated 2nd June, 2009

The Prevention of Money Laundering (Amendment) Act, 2009 [PMLA] has come into force with effect from 1st June 2009 & Master Circular – RBI/SEBI & Multi Level Marketing (MLM) firms

Download RBI Master Circular on Money Laundering / Know Your Customer (KYC).  This is in continuation of the same.

Preservation  Period of Records

The Prevention of Money Laundering (Amendment) Act, 2009 (No. 21 of 2009) has come into force with effect from June 01, 2009 as notified by the Government. In terms of Sub-Section 2(a) of Section 12 of The Prevention of Money Laundering (Amendment) Act, 2009 (PMLA, 2009), the records referred to in clause (a) of Sub-Section (1) of Section 12 shall be maintained for a period of ten years from the date of transaction between the clients and the banking company and in terms of Sub-Section 2(b) of Section 12 of the Act ibid, the records referred to in clause (c) of Sub-Section (1) of Section 12 shall be maintained for a period of ten years from the date of cessation of transaction between the clients and the banking company.

Accordingly, in modification of paragraph 2.16(iii) (a) of the above said master circular dated July 1, 2009, banks are advised to maintain for at least ten years from the date of transaction between the bank and the client, all necessary records of transactions referred to at Rule 3 of the Prevention of Money-Laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005 (PMLA Rules), both domestic or international, which will permit reconstruction of individual transactions (including the amounts and types of currency involved, if any) so as to provide, if necessary, evidence for prosecution of persons involved in criminal activity.

However, records pertaining to the identification of the customer and his address (e.g. copies of documents like passports, identity cards, driving licenses, PAN card, utility bills etc.) obtained while opening the account and during the course of business relationship, as indicated in paragraph 2.16(iii)(b) of the above said master circular dated July 1, 2009, would continue to be preserved for at least ten years after the business relationship is ended as required under Rule 10 of the Rules ibid.

Accounts of Politically Exposed Persons (PEPs)

Detailed guidelines on Customer Due Diligence (CDD) measures to be made applicable to Politically Exposed Person (PEP) and their family members or close relatives are contained in paragraph 2.5(iv) of the master circular.  It is further advised  that in the event of an existing customer or the beneficial owner of an existing account,subsequently becoming a PEP, banks should obtain senior management approval to continue the business relationship and subject the account to the CDD measures as applicable to the customers of PEP category including enhanced monitoring on an ongoing basis.

Principal Officer

Banks have been advised in Para 2.15 of the master circular referred to above that banks should appoint a senior management officer to be designated as Principal Officer and the role and responsibilities of the Principal Officer have been detailed therein. With a view to enable the Principal Officer to discharge his responsibilities,  it is advised that that the Principal Officer and other appropriate staff should have timely access to customer identification data and other CDD information, transaction records and other relevant information. Further, banks should ensure that the Principal Officer is able to act independently and report directly to the senior management  or  to the Board of Directors.

Source: RBI/2009-10/152 DBOD. AML.BC. No.43 /14.01.001/2009-10 dated 11/09/2009

Further, in view of opening and conduct of the accounts of Multi Level Marketing (MLM) firms, we (RBI) advise that banks should be careful in opening accounts of the marketing/trading agencies etc. Especially, strict compliance with KYC and AML guidelines contained in circulars UBD.CO.BPD (PCB) No. 1/12.05.001/2008-09 dated July 02, 2008 and UBD.PCB. Cir. 30/09.161.00/2004-05 dated December 15, 2004 issued by RBI should be ensured in the matter.

In cases where accounts have already been opened in the names of the marketing agencies, retail traders, investment firms, the banks may undertake quick reviews. Wherever large number of cheque books has been issued to such firms, the relative decision may be reviewed in the light of the following:

• Whether the cheque books have been issued to customers on the basis of their express request and after following the internal processes laid down in the matter.
• Whether the number of cheque books is consistent with/matching the profile of the customers as also their nature of business operations.

Even where the volume of transactions/profile of the customers apparently justify the number of cheque books issued, special ongoing monitoring of the operations in the accounts of such types of firms should be made especially if large volumes of small cash deposits are being made in those accounts and withdrawals are being made there from, through cheques written for small amounts, either across the counters or through clearing. In respect of such account holders banks may, in specific cases, call for the data from the account holders on the number and aggregate amount of post dated cheques issued. The data/information so collected should be analysed in select cases to rule out the possibility of the firms being engaged in deposit taking activities. Certain indicative parameters for selecting accounts for further scrutiny and action are the bunching of dates of the post dated cheques, the uniformity in the amounts of cheques etc. These data should be analysed together with data on cash deposits of small amounts on previous distant dates resembling the deposit contracting/mobilizations dates in terms of similar bunching and uniformity of amounts.

Please acknowledge receipt. Also, unusual operations noticed during the above review may be immediately reported to us and other appropriate authorities, such as, Financial Intelligence Unit (FIU-IND), Department of Revenue, Ministry of Finance, Government of India, Hotel Samrat (6th Floor), Chanakyapuri, New Delhi - 110 021.

Source: RBI/2009-10/158 UBD. CO. BPD. PCB.Cir. No.9/12.05.001 / 2009-10 dated 16/09/2009

Applicability of certification under consortium lending & multiple banking arrangements for 5 crores by CS / CA / CWA for banks – RBI circular

All the banks may seek a declaration from their existing borrowers availing sanctioned limits of Rs.5.00 crore and above or wherever, it is in their knowledge that their borrowers are availing credit facilities from other banks, and introduce a system of exchange of information with other banks and obtain regular certification by a professional, preferably a practising Company Secretary or Chartered Accountant or Cost Accountant, regarding compliance of various statutory prescriptions.

Now, the applicability of the Certification for lending is extended.  Thus, it is now made mandatory (applicable) for

• All Scheduled Commercial Banks (excluding RRBs and LABs)

• Select  All-India Term-lending and Refinancing Institutions
  (Exim Bank, NABARD, NHB and SIDBI)

The list of all RBI circulars regarding Lending under Consortium Arrangements/Multiple Banking Arrangements till date:

• DBOD.No.BP.BC.46/08.12.001/2008-09 [the first original circular] dated September 19, 2008 on the above subject along with
• subsequent circulars DBOD.No.BP.BC.94/ 08.12.001/2008-09 [revised formats] dated December 08, 2008 and
• DBOD No. BP. BC. 110 / 08. 12. 001 /2008-09 dated February 10, 2009 [clarification to include CA & CWA with CS] respectively and
• DBS.CO.FrMC.BC.No.8/23.04.001/2008-09 dated June 24, 2009 to exchange information on multilateral basis regarding incidents of fraud, legal actions taken and covert activities / operations of the borrower after the fraud, etc..

• RBI/2009-2010/116 DBOD.No.FID.FIC.2397/01.02.00/2009-10 dated 5th August 2009 by which it is advised that the above guidelines on consortium arrangements/multiple banking arrangements  issued to banks, shall mutatis mutandis apply to the select all-India Financial Institutions (AIFIs) for sharing of  information among the AIFIs and with banks.