The Reserve Bank of India has today issued an advisory to
members of public urging them to carefully evaluate their investment decisions,
including making deposit with NBFCs. The advisory is part of the Frequently
Asked Questions (FAQs) issued by the central bank. The FAQs explain in detail
the various kinds of financial entities and the regulations governing them.
They also list where members of public can lodge complaints in case some
financial entity is found to be conducting business unauthorisedly or does not
repay the deposits.
The FAQs, for instance, state that the Reserve Bank
regulates Non-Bank Financial Companies that conduct financial activity as their
principal business; it has authorised only a few Non-bank Financial Companies
to accept deposits; all incorporated entities must necessarily be authorised to
collect deposits either under the Reserve Bank of India Act 1934 or under the
Companies Act, 1956; and it does not regulate chit fund activities or
Collective Investment Schemes (CIS).
The FAQs also state that a detailed list of NBFCs
authorised by the Reserve Bank to accept deposits is available on the RBI
website (www.rbi.org.in → Sitemap → NBFC List → List of NBFCs
Permitted to Accept Deposits) and hasadvised themembers of public to check
the list before placing deposits with Non-Banking Financial Companies.
The Reserve Bank has been, on several occasions in the
past, through press releases and through its outreach and sensitisation
programmes conducted by its Regional Offices, cautioning the general public not
to fall prey to fictitious offers promising unsustainable returns by
individuals, unincorporated bodies and companies.
The RBI FAQs also advise members of public to immediately
register their complaints in case they notice any company accepting deposits
unauthorisedly or not repaying the principal and/or interest with the local
police or with the Economic Offences Wing of the State Police and in case the
entity is a company, to register their complaints with the Registrar of
Companies.
RBI Advisory on What* to check
before making deposits with NBFCs
A depositor wanting to place deposit with an NBFC must
ensure that :
The NBFC is registered with RBI and is specifically
authorised to accept deposits. This can be checked from the list of deposit
taking NBFCs published on the RBI website – www.rbi.org.in → Sitemap → NBFC
List. The depositor should check the list of NBFCs permitted to accept
public deposits and also check that it is not appearing in the list of
companies prohibited from accepting deposits.
NBFCs have to prominently display the Certificate of
Registration (CoR) issued by the Reserve Bank on its site. If an NBFC is
authorised to accept public deposit, the certificate reflects that.
RBI does not guarantee the repayment of deposits accepted
by NBFCs
NBFCs cannot use the name of the RBI in any manner while
conducting their business
Currently, the maximum interest rate that an NBFC can pay
to a depositor should not exceed 12.5%. The Reserve Bank, however, keeps
changing these interest rates depending on the macro-economic environment. The
Reserve Bank publishes the change in the interest rates on www.rbi.org.in →
Sitemap → NBFC List → FAQs.
The depositor must insist on a proper receipt for every
amount of deposit placed with the company. The receipt should be duly signed by
an officer authorised by the company and should state the date of the deposit,
the name of the depositor, the amount in words and figures, rate of interest
payable, maturity date and amount.
Investors must generally be circumspect if the interest
rates or rates of return on investments offered are higher than those offered
by others in the market place. Unless the entity accepting funds is able to
earn more than what it promises, the entity will not be able to repay the
investor as promised. For earning higher returns, the entity will have to take
higher risks on the investments it makes. Higher risk could mean undertaking
speculative activities and on such activities, there can be no assured return.
As such, the public should forewarn themselves that the likelihood of losing
money in schemes that offer high rates of interest are more. Still, if they
want to invest in schemes that promise high rates of return, investors must
ensure that the entity offering such returns is registered with one of the
financial sector regulators and is authorised to accept funds, whether in the
form of deposits or otherwise.
1. What is a Non-Banking Financial Company?
A Non-Banking Financial Company (NBFC) is a company a)
registered under the Companies Act, 1956, b) its principal business is lending,
investments in various types of shares/stocks/bonds/debentures/securities,
leasing, hire-purchase, insurance business, chit business, and c) its principal
business is receiving deposits under any scheme or arrangement in one lump sum
or in installments. However, a Non-Banking Financial Company does not
include any institution whose principal business is agricultural activity,
industrial activity, trading activity or sale/purchase/construction of
immovable property. (Section 45 I (c) of the RBI Act, 1934) . One key
aspect to be kept in view is that the financial activity of loans/advances as
stated in 45 I ( c) , should be for activity other than its own. In the absence
of this provision, all companies would have been NBFCs.
2. What are systemically important NBFCs?
NBFCs whose asset size is of Rs.100 cr or more as per
last audited balance sheet are considered as systemically important NBFCs. The
rationale for such classification is that the activities of such NBFCs will
have a bearing on the financial stability in our country
3. Does the Reserve Bank regulate all financial
companies?
No. Some financial businesses have specific regulators
established by law to regulate and supervise them, such as, IRDA for insurance
companies, Securities Exchange Board of India (SEBI) for Merchant Banking Companies,
Venture Capital Companies, Stock Broking companies and mutual funds, National
Housing Bank (NHB) for housing finance companies, Department of Companies
Affairs (DCA) for Nidhi companies and State Governments for Chit Fund
Companies. Companies which do financial business but are regulated by other
regulators, are given specific exemption by the Reserve Bank from its
regulatory requirements, such as, registration, maintenance of liquid assets,
statutory reserves, etc. The Chart below gives the nature of activities and the
concerned regulators.
* NBFC is a financial Institution that is into Lending or
Investment or collecting monies under any scheme or arrangement but does not
include any institutions which carry on its principal business as agriculture
activity, industrial activity, trading and purchase or sale of immovable
properties. A company that carries on the business of accepting deposits as its
principal business is also a NBFC.
4. Why are insurance companies, stock broking and merchant
banking companies, Nidhis, housing finance companies and Chit Fund Companies
not regulated by the Reserve Bank of India?
These companies have been exempted from registration and
other regulations of RBI in order to avoid dual regulation on them as they are
regulated by other financial sector regulators.
5. Does the Reserve Bank have any statutory power vis a
vis these exempted NBFCs?
It depends on the extent of exemption granted. Housing
Finance Companies, for instance, are exempt from RBI regulations. Other
entities like Chit Funds, Nidhi companies, Mutual Benefit companies, Insurance
companies, Merchant Banking companies, Stock Broking companies, etc., are
granted exemption from the requirements of registration, maintenance of liquid
assets and statutory reserves. RBI though does not issue directions that could
conflict with the directions issued by other financial regulators, viz.,
Housing Finance Companies are regulated by the National Housing Bank, Insurance
Companies by IRDA, Stock broking, Merchant Banking Companies, Venture Capital
Companies and companies that run Collective Investment Schemes and Mutual Funds
are regulated by SEBI, Nidhi Companies are regulated by the Ministry of
Corporate Affairs and Chit Fund Companies are under the regulatory ambit of the
respective State Governments.
6. What kind of specific financial companies are
regulated by RBI?
The Reserve Bank of India regulates and supervises
Non-Banking Financial Companies which are into the business of (i) lending (ii)
acquisition of shares, stocks, bonds, etc., or (iii) financial leasing or hire
purchase. The Reserve Bank also regulates companies whose principal business is
to accept deposits. (Section 45I (c) of the RBI Act, 1934)
7. Does RBI regulate companies that carry on the financial
activities as part of their business?
The Reserve Bank regulates and supervises companies which
are engaged in financial activities as their principal business. Hence
if there are companies engaged in agricultural operations, industrial activity,
purchase and sale of goods, providing services or purchase, sale or
construction of immovable property as their principal business and are doing
some financial business in a small way, they will not be regulated by the
Reserve Bank.
8. What does conducting financial activity as “principal
business” mean?
Financial activity as principal business is when a
company’s financial assets constitute more than 50 per cent of the total assets
and income from financial assets constitute more than 50 percent of the gross
income. A company which fulfils both these criteria will be registered as
NBFC by RBI. The term ‘principal business’ is not defined by the Reserve Bank
of India Act. The Reserve Bank has defined it so as to ensure that only
companies predominantly engaged in financial activity get registered with it
and are regulated and supervised by it and other trading, manufacturing or
industrial companies are not brought under its regulatory jurisdiction.
Interestingly, this test is popularly known as 50-50 test and is applied to
determine whether or not a company is into financial business.
9. What is a Residuary Non-Banking Company (RNBC)? In
what way is it different from other NBFCs?
Residuary Non-Banking Company is a class of NBFCs whose
’principal business’ is to receive deposits, under any scheme
or arrangement or in any other manner. These companies are not into investment,
asset financing or lending. Functioning of these companies is different
from that of NBFCs in terms of method of mobilization of deposits and
requirement of deployment of depositors’ funds. These companies, however,
have now been directed by the Reserve Bank not to accept any deposits and to
wind up their businesses as RNBCs.
10. We understand that there is no ceiling on raising of
deposits by RNBCs, then how safe is deposit with them?
It is true that there is no ceiling on raising of
deposits by RNBCs. However, every RNBC has to ensure that the amounts
deposited with it are fully invested in approved investments. In other
words, in order to secure the interests of depositor, such companies are
required to invest 100 per cent of their deposit liability into highly liquid
and secure instruments, namely, Central/State Government securities, fixed
deposits with scheduled commercial banks (SCB), Certificate of deposits of
SCB/FIs, units of Mutual Funds, etc.
11. Can RNBC forfeit deposit if deposit instalments
are not paid regularly or discontinued?
No. Residuary Non-Banking Company cannot forfeit any
amount deposited by the depositor, or any interest, premium, bonus or other
advantage accrued thereon.
12. What is the rate of interest that an RNBC must pay on
deposits and what should be maturity period of deposits taken by them?
The minimum interest an RNBC should pay on deposits
should be 5% (to be compounded annually) on the amount deposited in lump sum or
at monthly or longer intervals; and 3.5% (to be compounded annually) on the
amount deposited under daily deposit scheme. Interest here includes premium,
bonus or any other advantage, that an RNBC promises to the depositor by way of
return. An RNBC can accept deposits for a minimum period of 12 months and
maximum period of 84 months from the date of receipt of such deposit. They
cannot accept deposits repayable on demand. However, at present, the two
RNBCs in existence (Peerless and Sahara India Financial Corporation Ltd) have
been directed by the Reserve Bank to stop collecting deposits, repay the
deposits to the depositor and wind up their RNBC business as their business
model is inherently unviable..
13. What are the powers of the Reserve Bank with regard
to ‘Non-Bank Financial Companies’, that is, companies that meet the 50-50
criteria?
The Reserve Bank has been given the powers under the RBI
Act 1934 to register, lay down policy, issue directions, inspect, regulate,
supervise and exercise surveillance over NBFCs that meet the 50-50 criteria of
principal business. The Reserve Bank can penalize NBFCs for violating the
provisions of the RBI Act or the directions or orders issued by RBI under RBI
Act. The penal action can also result in RBI cancelling the Certificate of
Registration issued to the NBFC, or prohibiting them from accepting deposits
and alienating their assets or filing a winding up petition.
14. In respect of companies which do not fulfill the
50-50 criteria but are accepting deposits – do they come under RBI purview?
A company which does not have financial assets which is
more than 50% of its total assets and does not derive at least 50% of its gross
income from such assets is not an NBFC. Its principal business would be
non-financial activity like agricultural operations, industrial activity,
purchase or sale of goods or purchase/construction of immoveable property, and
will be a non-banking non-financial company. Acceptance of deposits by a
Non-Banking Non-Financial Company is governed by the Companies Acceptance of
Deposits Rules, 1975. The Registrar of Companies in the State Governments
administer the schemes.
15. What are deposits?
Deposits mean monies collected in any manner, other
than that collected by way of share capital, contribution of capital by the
partners of a partnership firm, security deposit, earnest money deposit,
advance consideration for purchase of goods, services or construction, loans
taken from banks, financial institutions and money lenders and subscription to
chit funds. Monies collected in any manner other than these would be termed as
deposits.
16. Which entities can legally accept deposits from
public?
Banks, including co-operative banks, can accept
deposits. Non-bank finance companies, which have been issued Certificate
of Registration by RBI with a specific licence to accept deposits, are entitled
to accept public deposit. In other words, not all NBFCs registered with
the Reserve Bank are entitled to accept deposits but only those that hold a
deposit accepting Certificate of Registration can accept deposits. They
can, however, accept deposits, only to the extent permissible. Housing Finance
Companies, which are again specifically authorized to collect deposits and
companies authorized by Ministry of Corporate Affairs under the Companies
Acceptance of Deposits Rules framed by Central Government under the Companies
Act can also accept deposits also upto a certain limit. Cooperative
Credit Societies can accept deposits from their members but not from the
general public. The Reserve Bank regulates the deposit acceptance only of
banks, cooperative banks and NBFCs.
It is not legally permissible for other entities to
accept public deposits. Unincorporated bodies like individuals,
partnership firms, and other association of individuals are prohibited from
carrying on the business of acceptance of deposits as their principal
business. Such unincorporated bodies are prohibited from even accepting
deposits if they are carrying on financial business.
17. Can all NBFCs registered by RBI accept deposits ?
Does getting Certificate of Registration from RBI mean the company can also
raise deposits?
No. As stated above, registration with RBI does not
automatically allow an NBFC to accept deposits. The Reserve Bank
specifically authorizes an NBFC to accept deposits. This permission is given
after verifying a registered NBFC’s performance for three years. That an NBFC is
permitted to raise deposits from public is specifically mentioned in its
certificate of registration. In fact as a matter of public policy, Reserve Bank
has decided that only banks should be allowed to accept public deposits and as
such has since 1997 not issued any Certificate of Registration (CoR) for new
NBFCs for acceptance of public deposits.,
18. Why is the RBI so restrictive in allowing NBFCs to
raise public deposits?
The Reserve Bank’s overarching concern while supervising
any financial entity is protection of depositors’ interest. Depositors place
deposit with any entity on trust unlike an investor who invests in the shares
of a company with the intention of sharing the risk as well as return with the
promoters. Protection of depositors’ interest thus is supreme in financial
regulation. Banks are the most regulated financial entities. The Deposit
Insurance and Credit Guarantee Corporation pays insurance on deposits up to
Rs.one lakh in case a bank failed.
19. Which are the NBFCs specifically authorized by RBI to
accept deposits?
The Reserve Bank publishes the list of NBFCs that hold a
valid Certificate of Registration for accepting deposits on its website : www.rbi.org.in
→ Sitemap → NBFC List → List of NBFCs Permitted to Accept Deposits. At times, some
companies are temporarily prohibited from accepting public deposits. The
Reserve Bank publishes the list of NBFCs temporarily prohibited also on its
website. The Reserve Bank keeps both these lists updated. Members of the public
are advised to check both these lists before placing deposits with NBFCs.
20. What precautions should a depositor take before
placing deposit with an NBFC?
A depositor wanting to place deposit with an NBFC must
ensure the following before placing deposits :
i.
That the NBFC is registered with RBI and specifically
authorized by the RBI to accept deposits. A list of deposit taking NBFCs
entitled to accept deposits is available at www.rbi.org.in → Sitemap →
NBFC List. The depositor should check the list of NBFCs permitted to
accept public deposits and also check that it is not appearing in the list of
companies prohibited from accepting deposits, which is available at www.rbi.org.in
→ Sitemap → NBFC List → NBFCs who have been issued prohibitory orders, winding
up petitions filed and legal cases under Chapter IIIB, IIIC and others.
ii.
NBFCs have to prominently display the Certificate of
Registration (CoR) issued by the Reserve Bank on its site. This certificate
should also reflect that the NBFC has been specifically authorized by RBI to accept
deposits. Depositors must scrutinize the certificate to ensure that the NBFC is
authorized to accept deposits.
iii.
The maximum interest rate that an NBFC can pay to a
depositor should not exceed 12.5%. The Reserve Bank keeps altering the interest
rates depending on the macro-economic environment. The Reserve Bank publishes
the change in the interest rates on www.rbi.org.in → Sitemap → NBFC List →
FAQs.
iv.
The depositor must insist on a proper receipt for every
amount of deposit placed with the company. The receipt should be duly signed by
an officer authorized by the company and should state the date of the deposit,
the name of the depositor, the amount in words and figures, rate of interest
payable, maturity date and amount.
21. What precautions have to be taken by the public to
forewarn themselves about the likelihood of losing money in schemes that offer
high rates of interest?
Before investing in schemes that promise high rates of
return investors must ensure that the entity offering such returns is registered
with one of the financial sector regulators and is authorized to accept funds,
whether in the form of deposits or otherwise. Investors must generally be
circumspect if the interest rates or rates of return on investments offered are
high. Unless the entity accepting funds is able to earn more than what it
promises, the entity will not be able to repay the investor as promised. For
earning higher returns, the entity will have to take higher risks on the
investments it makes. Higher the risk, the more speculative are its investments
on which there can be no assured return. As such, the public should
forewarn themselves that the likelihood of losing money in schemes that offer
high rates of interest are more.
22. Does RBI guarantee the repayment of the deposits
collected by NBFCs ?
No. The Reserve Bank does not guarantee repayment of
deposits by NBFCs even though they may be authorized to collect
deposits. As such, investors and depositors should take informed
decisions while placing deposit with an NBFC.
23. What action can a depositor take if any NBFC fails to
return principal, interest thereof on deposits?
If an NBFC registered with the RBI fails to return
depositor’s money, the depositor can complain against the NBFC to the nearest
Regional Office of the Reserve Bank. Depositors can also approach the Company
Law Board constituted under the Companies Act 1956 or a civil court or Consumer
Disputes Redressal Forums for recovery of their money. Affected persons
can complain to the State Police authorities/Economic Offences Wing of the
State Police as well. Some States have passed the Protection of Interest
of Depositors (in Financial Establishments) Act, which empowers the States to
attach the assets of such entities and distribute the proceeds thereof to the
depositors.
24. Can the exempted category of NBFCs accept/hold
deposits?
No. NBFCs which are exempted from the provisions of the
RBI Act or its directions cannot hold/accept deposits from the public as not
holding or accepting deposits is one of the conditions for granting them such
exemption. HFCs can however accept deposits to the extent allowed by NHB.
25. Can a Co-operative Credit Society accept
deposits from the public?
No. Co-operative Credit Societies cannot accept deposits
from general public. They can accept deposits only from their members within
the limit specified in their bye laws.
26. Can a Salary Earners’ Society accept deposits from
the public?
No. These societies are formed for salaried employees and
hence they can accept deposit only from their own members and not from general
public.
27. How does the Reserve Bank come to know about
unauthorized acceptance of deposits by companies not registered with it or of
NBFCs engaged in lending or investment activities without obtaining the Certificate
of Registration from it?
The Reserve Bank gets to know of NBFCs unauthorizedly
accepting deposits or engaged in lending and investment without its
authorization, mainly through complaints and grievances received from the
public, from industry sources and from Exception Reports received from
Statutory Auditors of these companies. The Reserve Bank also gets to know about
this through market intelligence gathered from newspapers or from information
gathered by its own Regional Offices or any other such sources.
Further, RBI has put in place an institutional mechanism
at all its Regional Offices to coordinate between the financial sector
regulators in the form of State Level Coordination Committee (SLCC). The
members of SLCC include State Government officials from the Home and Law
Departments, Registrar of Companies, Regional Directorate of Ministry of
Corporate Affairs, National Housing Bank, SEBI, Registrar of Chits, and
ICAI. The SLCC meets every half year to exchange information on such
unauthorized activities of financial entities.
28. Can Proprietorship/Partnership Concerns
associated/not associated with registered NBFCs accept public deposits ?
No. Proprietorship and partnership concerns are
un-incorporated bodies. Hence they are prohibited under the RBI Act 1934
from accepting public deposits.
29. There are many jewellery shops taking money from the
public in instalments. Is this amounting to acceptance of deposits?
It depends on whether the money is received as advance
for delivering jewellery at a future date or whether the money is received with
a promise to return the same with interest. The money accepted by
Jewellery shops in instalments for the purpose of delivering jewellery at the
end of the period of contract is not deposit. It will amount to
acceptance of deposits if in return for the money received, the jewellery shop
promises to return the principal amount along with interest.
30. What action can be taken if such unincorporated
entities accept public deposits? What if NBFCs which have not been authorized
to accept public deposits use proprietorship/partnership firms floated by their
promoters to collect deposits?
Such unincorporated entities, if found accepting public
deposits, are liable for criminal action. Further NBFCs are prohibited by RBI
from associating with any unincorporated bodies. If NBFCs associate themselves
with proprietorship/partnership firms accepting deposits in contravention of
RBI Act, they are also liable to be prosecuted under criminal law or under the
Protection of Interest of Depositors (in Financial Establishments) Act, if
passed by the State Governments.
31. What does RBI do to protect the interest of NBFC
depositors?
RBI has issued detailed regulations on deposit
acceptance, including the quantum of deposits that can be collected, mandatory
credit rating, mandatory maintenance of liquid assets for repayment to
depositors, manner of maintenance of its deposit books, prudential regulations
including maintenance of adequate capital, limitations on exposures, and inspection
of the NBFCs, besides others, to ensure that the NBFCs function on sound
lines. If the Bank observes through its inspection or audit of any NBFC
or through complaints or through market intelligence, that a certain NBFC is
not complying with RBI directions, it may prohibit the NBFC from accepting
further deposits and prohibit it from selling its assets. In addition, if
the depositor has complained to the Company Law Board (CLB) which has ordered
repayment and the NBFC has not complied with the CLB order, RBI can
initiate prosecution of the NBFC, including criminal action and winding up of
the company.
More importantly, RBI initiates prompt action, including
imposing penalties and taking legal action against companies which are found to
be violating RBI’s instructions/norms on basis of Market Intelligence reports,
complaints, exception reports from statutory auditors of the companies,
information received through SLCC meetings, etc. The Reserve Bank immediately
shares such information with all the financial sector regulators and
enforcement agencies in the State Level Coordination Committee Meetings.
As a premier public policy institution, as part of its
public policy measure, the Reserve Bank of India has been in the forefront in
taking several initiatives to create awareness among the general public
on the need to be careful while investing their hard earned money. The
initiatives include issue of cautionary notices in print media and distribution
of informative and educative brochures/pamphlets and close interaction with the
public during awareness/outreach programs, Townhall events, participation in
State Government sponsored trade fairs and exhibitions. At times, it even
requests newspapers with large circulation (English and vernacular) to desist
from accepting advertisements from unincorporated entities seeking deposits.
32. What is the purpose of enacting Protection of
Interest of Depositors in Financial Establishments by the State Governments?
The purpose of enacting this law is to protect the
interests of the depositors. The provisions of RBI Act are directed towards
enabling RBI to issue prudential regulations that make the financial entities
function on sound lines. RBI is a civil body and the RBI act is a civil Act.
Both do not have specific provisions to effect recovery by attachment and sale
of assets of the defaulting companies, entities or their officials. It is the
State government machinery which can effectively do this. The Protection of
Interest of Depositors in Financial Establishments Acts, confers adequate
powers on the State Governments to attach and sell assets of the defaulting
companies, entities and their officials.
33. Will the passage of the Protection of Interest of
Depositors in Financial Establishments by the State Governments help in nailing
unincorporated entities and companies from unauthorisedly accepting deposits?
Yes, to a large extent. The Act makes offences, such as,
unauthorized acceptance of deposits by any entity, firm or company a cognizable
offence, that is entities that are indulging in unauthorized deposit acceptance
or unlawful financial activities can be immediately imprisoned and prosecuted.
Under the Act, the State Governments have been given vast powers to
attach the property of such entities, dispose them off under the orders of
special courts and distribute the proceeds to the depositors. The widespread
State Government / State Police machinery is best positioned to take quick
action against the culprits. The Reserve Bank has, therefore, been urging all
the State Governments to pass the legislation on Protection of Interest of
Depositors in Financial Establishment Act. Sixteen States and 1 Union Territory
have this legislation in place as on date. These States are Andhra
Pradesh, Assam, Bihar, Goa, Gujarat, Himachal Pradesh, Karnataka, Madhya
Pradesh, Maharashtra, Mizoram, New Delhi, Tamil Nadu, Tripura, Uttaranchal,
Sikkim, Meghalaya, J&K and Chandigarh Administration. Some State
Governments have used this Act effectively to safeguard the interests of
the depositors.
34. Does RBI have any grievance redressal mechanism in
place?
If complaints or grievances against the NBFCs are
submitted to the nearest office of the Reserve Bank of India, the same
are taken up with the NBFC concerned to facilitate resolution of the
grievance/complaint.
35. Where can one find the list of registered Non-deposit
taking NBFCs which are engaged in lending and investment activities?
The list of non-deposit taking NBFCs that hold a valid
Certificate of Registration and allowed to lend and make investments is
available on the RBI website : www.rbi.org.in → Sitemap → NBFC List →
List of NBFCs not accepting public deposits.
36. What action is taken if financial companies which are
lending or making investments as their principal business do not obtain a
Certificate of Registration from the Reserve Bank ?
If companies that are required to be registered with the
Reserve Bank as NBFCs, are found to be conducting non-banking financial
activity, such as, lending, investment or deposit acceptance as their principal
business, without seeking registration, the Reserve Bank can impose penalty or
fine on them or can even prosecute them in a court of law. If members of
public come across any entity which does non-banking financial activity but
does not figure in the list of authorized NBFC on RBI website, they should
inform the nearest Regional Office of the Reserve Bank, for appropriate action
to be taken for contravention of the provisions of the RBI Act, 1934.
37. NBFCs are charging high interest rates from their
borrowers. Is there any ceiling on interest rate charged by the NBFCs to
their borrowers?
Reserve Bank of India has deregulated interest rates to
be charged to borrowers by financial institutions (other than NBFC- Micro
Finance Institution). The rate of interest to be charged by the company
is governed by the terms and conditions of the loan agreement entered into
between the borrower and the NBFCs. However, the NBFCs have to be transparent
and the rate of interest and manner of arriving at the rate of interest to
different categories of borrowers should be disclosed to the borrower or
customer in the application form and communicated explicitly in the sanction
letter etc.
38. What action can be taken against persons/financial companies
making false claim of being regulated by the Reserve Bank ?
It is illegal for any financial entity or unincorporated
body to make a false claim of being regulated by the Reserve Bank to mislead
the public to collect deposits and is liable for penal action under the Indian
Penal Code. Information in this regard may be forwarded to the nearest office
of the Reserve Bank and the Police.
39. What is the difference between acceptance of money by
Chit Funds and acceptance of deposits?
Deposits are defined under the RBI Act 1934 as acceptance
of money other than that raised by way of share capital, money received from
banks and other financial institutions, money received as security deposit,
earnest money and advance against goods or services and subscriptions to
chits. All other amounts, received as loan or in any form are treated as
deposits. Chit Funds activity involves contributions by members in
instalments by way of subscription to the Chit and by rotation each member of
the Chit receives the chit amount. The subscriptions are specifically
excluded from the definition of deposits and cannot be termed as
deposits. While Chit funds may collect subscriptions as above, they are
prohibited by RBI from accepting deposits with effect from August 2009.
40. Is the conducting of Chit Fund business permissible
under law?
The chit funds are governed by Chit Funds Act, 1982 which
is a Central Act administered by state governments. Those chit funds which are
registered under this Act can legally carry on chit fund business.
41. If Chit Fund companies are financial entities, why
are they not regulated by RBI?
Chit Fund companies are regulated under the Chit
Fund Act, 1982, which is a Central Act, and is implemented by the State
Governments. RBI has prohibited chit fund companies from accepting deposits
from the public in 2009. In case any Chit Fund is accepting public
deposits, RBI can prosecute such chit funds.
42. Who has the power to take action against
Unincorporated Bodies (UIBs) accepting deposits?
As per Section 45T of RBI Act, both the RBI and State
Governments have been given concurrent powers. Nonetheless, in order to take
immediate action against the offender, the information should immediately be
passed on to the State Police or the Economic Offences Wing of the concerned
State who can take prompt and appropriate action. Since the State
Government machinery is widespread and the State Government is also empowered
to take action under the provisions of RBI Act, 1934, any information on such entities
accepting deposits may be provided immediately to the respective State
Government’s Police Department/EOW.
Many of the State Governments have enacted the State
Protection of Interests of Depositors Act in Financial Establishments, which
empowers the State Government to take appropriate and timely action.
Section 45S of the RBI Act 1934 specifically prohibits
unincorporated bodies like individuals, firms and unincorporated association of
individuals from accepting deposits from the public if they are carrying on
financial activity or are accepting deposits as their principal business. The
Act makes acceptance of deposits by such UIBs punishable with imprisonment or
fine or both.
The RBI Act, 1934, gives concurrent powers to the Reserve
Bank and the State Government to obtain a search warrant from the Court to
investigate the acceptance of deposits by such UIBs.
An authorised Officer of the Reserve Bank or the State
Government can file a complaint in a court of law against the unincorporated
bodies and the individuals concerned for the offence.
43. Still there are cases of unscrupulous financial
entities cheating public time and again. How does RBI plan to strengthen its
surveillance on unauthorized acceptance of deposits/unauthorized conduct of
NBFI business by companies?
The Reserve Bank is strengthening its market intelligence
function in various Regional Offices and is constantly examining the
financials of companies, references for which have been received through market
intelligence or complaints to the Reserve Bank. In this, context, members
of public can contribute a great deal by being vigilant and lodging a complaint
immediately if they come across any financial entity that contravenes the RBI
Act. For example, if they are accepting deposits unauthorisedly and/conducting
NBFC activities without obtaining due permission from the RBI. More
importantly, these entities will not be able to function if members of public
start investing wisely. Members of the public must know that high returns
on investments will also have high risks. And there can be no assured
return for speculative activities. Before investing the public must
ensure that the entity they are investing in is a regulated entity with one of
the financial sector regulators.
44. What are money circulation/Ponzi/multi-level
marketing schemes?
Money circulation, multi level marketing / Chain
Marketing or Ponzi schemes are schemes promising easy or quick money upon
enrollment of members. Income under Multi level marketing or pyramid structured
schemes do not come from the sale of products they offer as much as from
enrolling more and more members from whom hefty subscription fees are
taken. It is incumbent upon all members to enroll more members, as a
portion of the subscription amounts so collected are distributed among the
members at the top of the pyramid. Any break in the chain leads to the
collapse of the pyramid, and the members lower in the pyramid are the ones that
are affected the most. Ponzi schemes are those schemes that collect money
from the public on promises of high returns. As there is no asset
creation, money collected from one depositor is paid as returns to the
other. Since there is no other activity generating returns, the scheme
becomes unviable and impossible for the people running the scheme to meet the
promised return or even return the principal amounts collected. The
scheme inevitably fails and the perpetrators disappear with the money.
45. Is acceptance of money under Money
Circulation/Multi-level Marketing/Pyramid structured schemes allowed?
No. Acceptance of money under Money
Circulation/Multi-level Marketing/Pyramid structured schemes and Ponzi schemes
is not allowed as acceptance of money under those schemes is a cognizable
offence under the Prize Chit and Money Circulation (Banning) Act 1978.
46. Does RBI regulate Money Circulation/Multi-level
Marketing/Pyramid structured scheme?
No. Prize Chits and Money Circulation Schemes are banned
under the Prize Chits and Money Circulation Schemes (Banning) Act of 1978. The
Reserve Bank has no role in implementation of this Act, except advising and
assisting the Central Government in framing the Rules under this Act.
47. Then who regulates entities that run such schemes?
Money Circulation/Multi-level Marketing /Pyramid structured
schemes are an offence under the Prize Chits and Money Circulation Schemes
(Banning) Act, 1978. The Act prohibits any person or individual to promote or
conduct any prize chit or money circulation scheme or enrol as member to its
schemes or anyone to participate in it by either receiving or remitting any
money in pursuance of such chit or scheme. Contravention of the provisions of
this Act, is monitored and dealt with by the State Governments.
48. What if someone operates such a scheme?
Any information/grievance relating to such schemes should
be given to the police / Economic Offence Wing (EOW) of the concerned State
Government or the Ministry of Corporate Affairs. If brought to RBI notice – we
will inform the same to the concerned State Government authorities.
49. Are Collective Investment Schemes (CIS) regulated by
the Reserve Bank of India?
No. CIS are schemes where money is exchanged for units,
be it time share in resorts, profit from sale of wood or profits from the
developed commercial plots and buildings and so on. Collective Investment
Schemes (CIS) do not fall under the regulatory purview of the Reserve Bank.
50. Which is the authority that regulates Collective
Investment Schemes (CIS)?
SEBI is the regulator of CIS. Information on such schemes
and grievances against the promoters may be immediately forwarded to SEBI as
well as to the EOW/Police Department of the State Government.
51. Who can the Depositor/Investor turn to in case of
grievances?
The two Charts given at the end of Q3 above gives the activity
and the regulator overseeing the activity. Complaints may hence be
addressed to the concerned regulator. If the activity is a banned
activity, the aggrieved person can approach the State Police/Economic Offences
Wing of the State Police and lodge a suitable complaint.
Master Circular on Miscellaneous
Instructions to All Non-Banking Financial Companies
Miscellaneous Instructions to All Non-Banking Financial
Companies
Master Circular DNBS (PD).CC.No.290/03.02.001/2012-13,
dated 2-7-2012
In order to have all current instructions in one place,
the Reserve Bank of India has issued master circulars to NBFCs on various
subjects. It is advised that Miscellaneous Directions/Instructions issued upto
June 30, 2012, which do not find a place in such master circulars have been
compiled herein. A consolidated list of all such instructions is enclosed for
ready reference. The Master circular has also been placed on the RBI web-site
(http://www.rbi.org.in).
1. Asset Liability Management (ALM) System for NBFCs –
Guidelines
It was decided to introduce an ALM System for the
Non-Banking Financial Companies (NBFCs), as part of their overall system for
effective risk management in their various portfolios. The abovementioned
guidelines would be applicable to all the NBFCs irrespective of whether they
are accepting/holding public deposits or not. However to begin with, NBFCs
(engaged in and classified as equipment leasing, hire purchase finance, loan,
investment and residuary non-banking companies) meeting the criteria of asset
base of Rs.100 crore (whether accepting/holding public deposits or not) or
holding public deposits of Rs. 20 crore or more (irrespective of their asset
size) as per their audited balance sheet as of 31 March 2001 would be required
to put in place the ALM System.
A system of half yearly reporting was put in place in
this regard and the first Asset Liability Management return as on 30 September
2002 was to be submitted to RBI by only those NBFCs which are holding public
deposits within a month of close of the relevant half year i.e., before 31
October 2002 and continue thereafter in similar manner. The half yearly returns
would comprise of three parts :
(i) Statement of structural liquidity
in format ALM
(ii) Statement of short term dynamic liquidity
in format ALM and
(iii) Statement of Interest Rate
Sensitivity in format ALM.
In the case of companies not holding public deposits,
separate supervisory arrangements would be made and advised in due course of
time.
2. Nomination rules under Section 45QB of RBI Act for
NBFC Deposits
In terms of Section 45QB of the RBI Act, the depositor/s
of NBFCs may nominate, in the manner prescribed under the rules made by the
Central Government under Section 45ZA of the Banking Regulation Act, 1949
(B.R.Act). one person to whom, in the event of death of the depositor/s,
the amount of deposit may be returned by the NBFC. It has been decided in
consultation with the Government of India, that the Banking Companies
(Nomination) Rules, 1985 are the relevant rules made under Section 45ZA of the
B. R. Act. A copy of the rules is enclosed. Accordingly, NBFCs may accept
nominations made by the depositors in the form similar to that specified under
the said rules.
3. Safe Custody of Liquid Assets/Collection of Interest
on SLR Securities
NBFCs including RNBCs are required to maintain liquid
assets in the form of Government securities/guaranteed bonds as per the
provisions of Section 45-IB of the RBI Act and lodge such securities in a
Constituents’ Subsidiary General Ledger (CSGL) Account with a scheduled
commercial bank (SCB)/Stock Holding Corporation of India Ltd., (SHCIL) or in a
demat account with a depository through a depository participant (DP)
registered with Securities & Exchange Board of India (SEBI) or with a branch
of SCB to the extent such securities are yet to be dematerialised.
In order to protect the interest of depositors, an
exclusive CSGL or demat account to hold Government securities shall be
maintained for securities held for the purpose of compliance with Section 45-IB
of the RBI Act. This account should be operated only for purchase or sale of
securities due to increase or decrease in the quantum of public deposits or
withdrawal of securities for encashment on maturity or for repayment to
depositors in special circumstances, and not be used to undertake repo or other
transactions.
In case an NBFC (including RNBC) deals in the government
securities in a manner other than that permitted above, another CSGL account
may be opened for this purpose.
It is also observed that some of the NBFCs have either
not dematerialised the government securities or have dematerialized but failed
to report the same to the RBI. For this purpose the quarterly liquid asset
return in the reporting formats of NBS 3 and NBS 3A has been amended to include
the information about the demat accounts, which will ensure that the
information in this regard is not omitted by NBFCs.
It may be possible that there may be a few Government
securities/Government guaranteed bonds that have not been dematerialized and
are held in physical form which for the purpose of collection of interest are
withdrawn from the safe custody with their designated bankers and re-deposited
with the banks after collection of interest. To avoid the process of withdrawal
and re-depositing the same it has now been decided that NBFCs/RNBCs shall
authorize the designated banks as agents for collection of interest on due
dates on these securities held in physical form and lodged for safe custody.
NBFCs/RNBCs may approach their designated banker and exercise a Power of
Attorney in favour of the designated bank to enable it to collect interest on
the securities/guaranteed bonds held in physical form on the due date.
4. Prudential Norms Directions – Preparation of Balance
Sheet as on March 31 of every year
In terms of paragraph 9B of Non Banking Financial
Companies Prudential Norms (Reserve Bank) Directions, 1998 NBFCs are to prepare
the Balance Sheet and profit and loss account as on March 31 every year.
Whenever an NBFC intends to extend the date of its Balance Sheet as per
provisions of the Companies Act, it should take prior approval of the RBI
before approaching the ROC for this purpose. It may, however, be clarified that
even in the cases where RBI and ROC grant extension of time, the company would
be required to furnish to RBI a Proforma Balance Sheet (unaudited ) as on March
31 of the year and the statutory returns due on the above date.
5. Certificate of Registration (CoR) issued under Section
45-IA of the RBI Act, 1934 – Continuation of business of NBFI – Submission of
Statutory Auditors Certificate – Clarification
It has been observed that there are NBFCs which are no
longer engaged in the business of NBFI and hence are not required/eligible to
hold the CoR granted by RBI. but still continue to do so. In order to ensure
that CoRs are only held by NBFCs which are actually engaged in the business of
NBFI, all NBFCs 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.
It is clarified that the business of non-banking
financial institution (NBFI) means a company engaged in the business of
financial institution as contained in Section 45I(a) of the RBI Act, 1934. For
this purpose, the definition of ‘Principal Business’ given, vide Press Release
1998-99/1269 dated April 8, 1999 may be followed.
Non- Reckoning Fixed Deposits with Banks as Financial
Assets
It was clarified, that the Reserve Bank issues a
Certificate of Registration for the specific purpose of conducting NBFI
activities. Investments in fixed deposits cannot be treated as financial assets
and receipt of interest income on fixed deposits with banks cannot be treated
as income from financial assets as these are not covered under the activities
mentioned in the definition of “financial Institution” in Section 45I(c) of the
RBI Act 1934. Besides, bank deposits constitute near money and can be used only
for temporary parking of idle funds, and/or in the above cases, till
commencement of NBFI business.
In addition, the NBFC which is in receipt of a CoR from
the Bank must necessarily commence NBFC business within six months of obtaining
CoR. If the business of NBFC is not commenced by the company within the period
of six months from the date of issue of CoR, the CoR will stand withdrawn
automatically. Further, there can be no change in ownership of the NBFC prior
to commencement of business and regularization of its CoR
6. Operative instructions relating to
relaxation/modification in Ready Forward Contracts, Settlement of Government
Securities Transactions and Sale of securities allotted in Primary Issues
All NBFCs/RNBCs are instructed to follow the guidelines
on transactions in Government Securities as given in the circular
IDMD.PDRS.05/10.02.01/2003-04 dated March 29, 2004 meticulously, wherever
applicable. The revised guidelines come into effect from April 2, 2004.
All NBFCs including RNBCs may refer to the circular
IDMD.PDRS.4777, 4779 & 4783/10.02.01/2004-05 all dated May 11, 2005
addressed to all RBI regulated entities.
All NBFCs/RNBCs are instructed to follow the guidelines
on transactions in Government Securities as given in the circulars
meticulously, wherever applicable. In cases of doubt they may refer to IDMD.
7. FIMMDA Reporting Platform for Corporate Bond
Transactions
SEBI has permitted FIMMDA to set up its reporting
platform for corporate bonds. It has also been mandated to aggregate the trades
reported on its platform as well as those reported on BSE and NSE with
appropriate value addition.
All NBFCs would be required to report their secondary
market transactions in corporate bonds done in OTC market, on FIMMDA’s
reporting platform with effect from September 1, 2007. Detailed operational
guidelines in this regard would be issued by FIMMDA. In the meanwhile, the
NBFCs may approach FIMMDA directly for participating in the mock reporting
sessions.
8. Prior Public Notice about change in control/management
Need for public notice before (a) Closure of the
Branch/Office by any NBFC (b) Sale/Transfer of Ownership by an NBFC
(a) NBFC should give at least three
months public notice prior to the date of closure of any of its
branches/offices in, at least, one leading national news paper and a leading
local (covering the place of branch/office) vernacular language newspaper
indicating therein the purpose and arrangements being made to service the
depositors etc.
(b) (i) A
public notice of 30 days shall be given before effecting the sale of, or
transfer of the ownership by sale of shares, or transfer of control, whether
with or without sale of shares. Such public notice shall be given by the NBFC
and also by the transferor, or the transferee or jointly by the parties
concerned.
For this purpose, the term ‘control’ shall have the same
meaning as defined in Regulation 2(1)(c) of the Securities and Exchange Board
of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
(ii) The public notice should indicate
the intention to sell or transfer ownership/control, the particulars of
transferee and the reasons for such sale or transfer of ownership/control. The
notice should be published in one leading national and another in leading local
(covering the place of registered office) vernacular language newspaper.
9. Change in Management and Mergers/Amalgamation
It has been observed that the change in management also
takes place by way of amalgamation/merger of an NBFC with another NBFC or a
non-financial company and as such, these mergers/amalgamations would tantamount
to the change in the management, as aforesaid.
It would be obligatory on the part of such an NBFC
seeking change in management or merger or amalgamation with any other company
to give an option to every depositor to decide whether to continue the deposits
with the company under the new management or the transferee company or not. The
company would also be obliged to make the payment to the depositors who seek
the repayment of their deposits. The Bank would view the non-compliance of the
above instructions very seriously and penal action would be initiated against
the defaulter company on the merits of each case.
The following changes are effected in the above
instructions in January 2006 :
(i) Merger and Amalgamation in
terms of the High Court Order
(a) Where merger and amalgamation takes
place in terms of the High Court order in pursuance of Sections 391 and 394 of
the Companies Act 1956, the company shall inform the Bank about merger or
amalgamation along with Court’s order approving the same within a period of one
month from the date of the order. As the public notice is given by the
companies under the Companies Act 1956 and Rules made thereunder, no further
public notice is required to be given by the companies in terms of the Bank’s
Circular as mentioned above.
(b) However there will be no change in
other instructions contained in paragraph 5(iii) (b) of the Company Circular
DNBS(PD).CC.No.12/02.01/99-2000 dated January 13, 2000.
10. The Non-Banking Financial Companies (Deposit
Accepting) (Approval of Acquisition or Transfer of Control) Directions, 2009.
In exercise of the powers conferred by sections 45K and
45L of the Reserve Bank of India Act, 1934 (2 of 1934) and of all the powers
enabling it in this behalf, Reserve Bank of India having considered it
necessary in the public interest and being satisfied that for the purpose of
enabling the Bank to regulate the credit system to the advantage of the
country, it is necessary so to do, gives to every deposit taking NBFC the
Directions hereinafter specified.
Short title and commencement of the Directions
1. (1) These Directions shall be known as the Non-Banking
Financial Companies (Deposit Accepting) (Approval of Acquisition or Transfer of
Control) Directions, 2009.
(2) These Directions shall come into force with immediate
effect.
Definitions
2. For the purpose of these Directions, unless the
context otherwise requires, -
(a) ”control” shall have the same
meaning as is assigned to it under clause (c) of sub-regulation (1) of
regulation 2 of Securities and Exchange Board of India (Substantial Acquisition
of Shares and Takeovers) Regulations, 1997.
(b) ”NBFC” means non-banking financial
company as defined in clause (xi) of sub-paragraph (1) of Paragraph 2 of
Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank)
Directions, 1998.
Prior approval of RBI in cases of acquisition or transfer
of control of deposit taking NBFCs
Any takeover or acquisition of control of a deposit
taking NBFC, whether by acquisition of shares or otherwise, or any
merger/amalgamation of a deposit taking NBFC with another entity, or any
merger/amalgamation of an entity with a deposit taking NBFC, shall require
prior written approval of Reserve Bank of India.
Application of other laws not barred
The provisions of these Directions shall be in addition
to, and not in derogation of the provisions of any other law, rules,
regulations or directions, for the time being in force.
Exemptions
The Reserve Bank of India may, if it considers necessary
for avoiding any hardship or for any other just and sufficient reason, exempt
any NBFC or class of NBFCs, from all or any of the provisions of these
Directions either generally or for any specified period, subject to such
conditions as the Reserve Bank of India may impose.
(ii) Other cases
Where merger and amalgamation or change in the management
of the company takes place upon sale/transfer otherwise than as stated in
sub-paragraph (i) above, the NBFCs (including RNBCs) (deposit taking and
non-deposit taking companies) should give prior public notice of 30 days.
11. Cover for public deposits – creation of floating
charge on Liquid Assets by deposit taking NBFCs
NBFCs raise funds for their operations from various
sources like public deposits, bank borrowings, inter-corporate deposits,
secured/unsecured debentures, etc.
In order to ensure protection of depositors interest,
NBFCs should ensure that at all times there is full cover available for public
deposits accepted by them. While calculating this cover the value of all
debentures (secured and unsecured) and outside liabilities other than the
aggregate liabilities to depositors may be deducted from the total assets.
Further, the assets should be evaluated at their book value or
realizable/market value whichever is lower for this purpose. It shall be
incumbent upon the NBFC concerned to inform the Regional Office of the Reserve
Bank in case the asset cover calculated as above falls short of the liability
on account of public deposits. NBFCs accepting/holding public deposits were
directed to create a floating charge on the statutory liquid assets invested in
terms of Section 45-IB of the RBI Act, 1934, in favour of their depositors.
Such charge should be duly registered in accordance with the requirements of
the Companies Act, 1956.
In view of the practical difficulties expressed by the
NBFCs in creating charge on the statutory liquid assets in favour of large
number of depositors, it was subsequently decided that NBFCs accepting/holding
public deposits may create the floating charge on the statutory liquid assets
maintained in terms of Section 45-IB of the RBI Act, 1934 and notifications
issued by the Bank from time to time, in favour of their depositors through the
mechanism of ‘Trust Deed’.
12. Unsolicited Commercial Communications – National Do
Not Call Registry
It is an emerging practice in India to engage
agents/outsource business operations for the purpose of soliciting or promoting
any commercial transactions using telecommunication mode. There is a need to
protect the right to privacy of the members of public and to curb the
complaints relating to unsolicited commercial communications being received by
customers/non-customers, as part of best business practices.
Telecom Regulatory Authority of India (TRAI) has framed
the Telecom Unsolicited Commercial Communications (UCC) Regulations for curbing
UCC. Further, the Department of Telecommunications (DoT) has issued relevant
guidelines for telemarketers alongwith the registration procedure on June 6,
2007. These guidelines have made it mandatory for telemarketers to register
themselves with DoT or any other agency authorized by DoT and also specified
that the telemarketers shall comply with the Guidelines and Orders/Directions
issued by DoT and Orders/Directions/Regulations issued by Telecom Regulatory
Authority of India (TRAI) on Unsolicited Commercial Communications(UCC). The
detailed procedure in this regard is also available on TRAI’s website (www.trai.gov.in).
NBFCs are therefore; advised
(i) not to engage Telemarketers
(DSAs/DMAs) who do not have any valid registration certificate from DoT, Govt
of India, as telemarketers;
(ii) to furnish the list of
Telemarketers (DSAs/DMAs) engaged by them along with the registered telephone
numbers being used by them for making telemarketing calls to TRAI; and
(iii) to ensure that all agents
presently engaged by them register themselves with DoT as telemarketers.
13. Requirement of minimum NOF of Rs. 200 lakh for all
deposit taking NBFCs
In accordance with the consultative approach adopted by
the Bank in framing of guidelines, a draft circular on enhancement of minimum
NOF level for deposit taking NBFCs was placed on web-site www.rbi.org.in on May
21, 2007.
The suggestions/comments received in this regard were
considered. To ensure a measured movement towards strengthening the financials
of all deposit taking NBFCs by increasing their NOF to a minimum of Rs.200 lakh
in a gradual, non-disruptive and non-discriminatory manner, it has been decided
to prescribe that :
(a) As a first step, NBFCs having
minimum NOF of less than Rs. 200 lakh may freeze their deposits at the level
currently held by them.
(b) Further, Asset Finance Companies
(AFC) having minimum investment grade credit rating and CRAR of 12% may bring
down public deposits to a level that is 1.5 times their NOF while all other
companies may bring down their public deposits to a level equal to their NOF by
March 31, 2009.
(c) Those companies which are presently
eligible to accept public deposits upto a certain level, but have, for any
reason, not accepted deposits upto that level will be permitted to accept
public deposits upto the revised ceiling prescribed above.
(d) Companies on attaining the NOF of
Rs.200 lakh may submit statutory auditor’s certificate certifying its NOF.
(e) The NBFCs failing to achieve the
prescribed ceiling within the stipulated time period, may apply to the Reserve
Bank for appropriate dispensation in this regard which may be considered on
case to case basis.
14. Reclassification of NBFCs
In terms of Company Circular DNBS.PD.CC
No.85/03.02.089/2006-07 dated December 06, 2006 it was advised that NBFCs
financing real/physical assets for productive/economic activity will be classified
as Asset Finance Company (AFC) as per the criteria given under paragraph 4 of
that circular. Consequent upon re-classification of NBFCs, in the proposed
structure the following categories of NBFCs will emerge :
(i) Asset Finance Company
(ii) Investment Company
(iii) Loan Company
1(iv) Infrastructure
Finance Company
2(v) Core
Investment Companies-ND-SI
Accordingly, it was advised that the companies satisfying
the conditions specified may approach the Regional Office in the jurisdiction
of which their Registered Office is located, along with the original
Certificate of Registration (CoR) issued by the Bank to recognize their
classification as Asset Finance Companies. Their request must be supported by
their Statutory Auditors’ certificate indicating the asset/income pattern of
the company as on March 31, 2006.
As substantial time has elapsed, since the issue of the
circular, it has now been decided that erstwhile EL/HP NBFCs should, duly
supported by Statutory Auditors’ Certificate as on March 31, 2008, immediately
approach the Regional Office concerned for appropriate classification latest by
December 31, 2008 after which NBFCs which have not opted for the classification
would be deemed to be loan companies.
15. Monitoring Framework for non-deposit taking NBFCs
with asset size of Rs 50 crore and above but less than Rs 100 crore
It was decided to call for basic information from
non-deposit taking NBFCs with asset size of Rs 50 crore and above but less than
Rs 100 crore at quarterly intervals. The first such returns for the quarter
ended September 2008 were to be submitted by first week of December 2008. The
quarterly return as at the end of each quarter were to be filed online with the
Regional Office of the Department of Non-Banking Supervision in whose
jurisdiction the company was registered, within a period of one month from the
close of the quarter, while the the procedure/system for online submission
would be conveyed at a later date.
Applicable NBFCs were later advised to submit the above
return as hard copy and soft copy (via e-mail in Excel format) to the Regional
Office of the Department of Non-Banking Supervision in whose jurisdiction their
company was registered, within a period of one month from the close of the
quarter, till the online procedure in this regard is advised.
16. Accounting for taxes on income – Accounting Standard
22 – Treatment of deferred tax assets (DTA) and deferred tax liabilities (DTL)
for computation of capital
As creation of DTA or DTL would give rise to certain
issues impacting the balance sheet of the company, it is clarified that the
regulatory treatment to be given to these issues are as under :-
- The balance in DTL account will not be
eligible for inclusion in Tier I or Tier II capital for capital adequacy purpose
as it is not an eligible item of capital.
- DTA will be treated as an intangible asset
and should be deducted from Tier I Capital.
- NBFCs may keep the above clarifications in
mind for all regulatory requirements including computation of CRAR and ensure
compliance with effect from the accounting year ending March 31, 2009.
In this connection it is further clarified that
DTL created by debit to opening balance of Revenue
Reserves or to Profit and Loss Account for the current year should be included
under ‘others’ of “Other Liabilities and Provisions.”
DTA created by credit to opening balance of Revenue
Reserves or to Profit and Loss account for the current year should be included
under item ‘others’ of “Other Assets.”
Intangible assets and losses in the current period and
those brought forward from previous periods should be deducted from Tier I
capital.
DTA computed as under should be deducted from Tier I
capital :
(i) DTA associated with
accumulated losses; and
(ii) The DTA (excluding DTA associated
with accumulated losses) net of DTL. Where the DTL is in excess of the DTA
(excluding DTA associated with accumulated losses), the excess shall neither be
adjusted against item (i) nor added to Tier I capital.”
17. Introduction of Interest Rate Futures – NBFCs
All NBFCs (excluding RNBCs) were advised to refer to the
Directions issued by the Reserve Bank of India in terms of Notification No.
FMD.1/ED(VKS)-2009 dated August 28, 2009, covering the framework for trading of
Interest Rate Futures (IRFs) in recognized exchanges in India.
It has been decided that NBFCs may participate in the
designated interest rate futures exchanges recognized by SEBI, as clients,
subject to RBI/SEBI guidelines in the matter, for the purpose of hedging their
underlying exposures.
NBFCs participating in IRF exchanges may submit the data
in this regard half yearly, in the format enclosed, to the Regional office of
the Department of Non-Banking Supervision in whose jurisdiction their company
is registered, within a period of one month from the close of the half year.
18. Compliance with FDI norms-Half yearly certificate
from Statutory Auditors of NBFCs
NBFCs having 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.
19. Finance for Housing Projects – Incorporating clause
in the terms and conditions to disclose in pamphlets/brochures/advertisements,
information regarding mortgage of property to the NBFC
In a case which came up before the Hon’ble High Court of
Judicature at Bombay, the Hon’ble Court observed that the bank granting finance
in housing, should insist on projects, disclosure of the charge or any other
liability on the plot in question or development project being duly made in the
Brochure or pamphlet etc. which may be published by developer/owner inviting
public at large to purchase flats and properties. The Court also added that
this obviously would be part of the terms and conditions on which the loan may
be sanctioned by the bank.
Keeping in view the above, it is felt desirable that
while granting finance to housing/development projects, NBFCs also should
stipulate as a part of the terms and conditions that :
(i) the builder/developer/owner/company
would disclose in the Pamphlets/Brochures/advertisements etc., the name(s) of
the entity to which the property is mortgaged.
(ii) the
builder/developer/owner/company should indicate in the pamphlets/brochures,
that they would provide No Objection Certificate (NOC)/permission of the
mortgagee entity for sale of flats/property, if required.
NBFCs were advised to ensure compliance with the above
stipulations and funds should not be released unless the
builder/developer/owner/company fulfils the above requirements.
20. Loan facilities to the physically/visually challenged
by NBFCs
It was brought to the notice of RBI that a NBFC has
discriminated against physically/visually challenged persons in the matter of
offering loans.
NBFCs were therefore advised that there shall be no
discrimination in extending products and facilities including loan facilities
to the physically/visually challenged applicants on grounds of disability.
NBFCs were also instructed to advise their branches to render all possible
assistance to such persons for availing of the various business facilities.
21. Participation in Currency Futures
Reserve Bank had issued guidelines to banks on trading in
currency futures in recognised stock/new exchanges on August 6, 2008. It was
decided that all NBFCs excluding RNBCs may participate in the designated
currency futures exchanges recognized by SEBI as clients, subject to RBI
(Foreign Exchange Department) guidelines in the matter, only for the purpose of
hedging their underlying forex exposures. NBFCs were advised tomake appropriate
regarding transactions undertaken in the Balance sheet.
22. Services to persons with Disability – Training
Programme for Employees
In terms of DNBS.CC.PD.No.191/03.10.01/2010-11 dated July
27, 2010 NBFCs were advised that there shall be no discrimination in extending
products and facilities including loan facilities to the physically/visually
challenged applicants on grounds of disability and that they may also advise
their branches to render all possible assistance to such persons for availing
of the various business facilities.
In continuation to the above, NBFCs are advised that they
may include a suitable module containing the rights of persons with
disabilities guaranteed to them by the law and international conventions, in
all the training programmes conducted for their employees at all levels.
Further, NBFCs may ensure redressal of grievances of persons with disabilities
under the Grievance Redressal Mechanism already set up by them.
23. Submission of data to Credit Information Companies –
Format of data to be submitted by Credit Institutions
In terms of Section 2(f)(ii) of the Credit Information
Companies (Regulation) Act, 2005, a non-banking financial company as defined
under clause (f) of Section 45-I of the Reserve Bank of India Act, 1934 has also
been included as “credit institution”. Further, the Credit Information
Companies (Regulation) Act provides that every credit institution in existence
shall become a member of at least one credit information company. Thus all
NBFCs being credit institutions are required to become a member of at least one
credit information company as per the statute.
In this regard, in terms of sub-sections (1) and (2) of
Section 17 of the Credit Information Companies (Regulation) Act, 2005, a credit
information company may require its members to furnish credit information as it
may deem necessary in accordance with the provisions of the Act and every such
credit institution has to provide the required information to that credit
information company. Further, in terms of Regulation 10(a)(ii) of the Credit
Information Companies Regulations, 2006, every credit institution shall :
(a) keep the credit information
maintained by it, updated regularly on a monthly basis or at such shorter
intervals as may be mutually agreed upon between the credit institution and the
credit information company; and
(b) take all such steps which may be
necessary to ensure that the credit information furnished by it, is update,
accurate and complete.
It is therefore, advised that NBFCs which have become
member/members of any new credit information company/companies may provide them
the current data in the existing format. Such NBFCs may also provide historical
data in order to enable the new credit information companies to validate their
software and develop a robust database. Care should be taken to ensure that no
wrong data/history regarding borrowers is given to Credit Information
Companies.
24. Implementation of Green Initiative of the Government
As part of the ‘Green Initiative’ of the Government, the
Government of India has suggested that steps be taken by entities in financial
sector, including NBFCs to help better utilisation of their resources and also
better delivery of services.
NBFCs were therefore, requested to take proactive steps
in this regard by increasing the use of electronic payment systems, elimination
of post-dated cheques and gradual phase-out of cheques in their day to day
business transactions which would result in more cost-effective transactions
and faster and accurate settlements.
25. Attempt to defraud using fake
bank guarantee-modus operandi
In view of reports of instances of frauds involving fake
Bank Guarantee with forged signature etc in certain bank branches, NBFCs were
advised to take notice of the names of the beneficiaries/representative of
beneficiaries and applicants of BGs in order to exercise due caution while
handling cases involving the firms/individuals cited in the circular.
26. Credit Default Swaps – NBFCs as Users
NBFCs shall only participate in CDS market as users. As
users, they would be permitted to buy credit protection only to hedge their
credit risk on corporate bonds they hold. They are not permitted to sell
protection and hence not permitted to enter into short positions in the CDS
contracts. However, they are permitted to exit their bought CDS positions by
unwinding them with the original counterparty or by assigning them in favour of
buyer of the underlying bond.
Apart from complying with all the provisions above, NBFCs
were advised that, as users, they shall also be required to ensure that the
guidelines enclosed including operational requirements for CDS are fulfilled by
them.
Annex-1
Guidelines for Credit Default Swaps – NBFCs as users
Definitions
The following definitions are used in these guidelines:
(i) Credit event payment – the
amount which is payable by the credit protection seller to the credit
protection buyer under the terms of the credit derivative contract following
the occurrence of a credit event. The payment can be only in the form of physical
settlement (payment of par in exchange for physical delivery of a
deliverable obligation).
(ii) Underlying asset/obligation –
The asset1 which a protection buyer is seeking to hedge.
(iii) Deliverable asset/obligation –
any obligation2 of the reference entity which can be delivered,
under the terms of the contract, if a credit event occurs. (Assets under (iii)
above, will rank at least pari-passu or junior to the underlying
obligation).
(iv) Reference obligation - the
obligation3 used to calculate the amount payable when a credit event
occurs under the terms of a credit derivative contract. [A reference obligation
is relevant for obligations that are to be cash settled (on a par-less-recovery
basis).]
2. Operational requirements for CDS
(a) A CDS contract should represent a
direct claim on the protection seller and should be explicitly referenced to
specific exposure, so that the extent of the cover is clearly defined and
incontrovertible.
(b) Other than non-payment by a
protection buyer of premium in respect of the credit protection contract, it
should be irrevocable.
(c) There should be no clause in the
contract that would allow the protection seller unilaterally to cancel the
credit cover or that would increase the effective cost of cover as a result of
deteriorating credit quality in the hedged exposure.
(d) The CDS contract should be
unconditional; there should be no clause in the protection contract outside the
direct control of the NBFC that could prevent the protection seller from being
obliged to pay out in a timely manner in the event that the original
counterparty fails to make the payment(s) due.
(e) The credit events specified by the
contracting parties should at a minimum cover:
(i) failure to pay the amounts
due under terms of the underlying obligation that are in effect at the time of
such failure (with a grace period that is closely in line with the grace period
in the underlying obligation);
(ii) bankruptcy, insolvency or
inability of the obligor to pay its debts, or its failure or admission in
writing of its inability generally to pay its debts as they become due, and
analogous events; and
(iii) restructuring of the underlying
obligation (as contemplated in the guidelines on CDS issued vide Circular No.
IDMD.PCD.No.5053/14.03.04/2010-11 dated May 23, 2011) involving forgiveness or
postponement of principal, interest or fees that results in a credit loss
event;
(iv) when the restructuring of the
underlying obligation is not covered by the CDS, but the other requirements in
paragraph 2 are met, partial recognition of the CDS will be allowed. If the
amount of the CDS is less than or equal to the amount of the underlying
obligation, 60% of the amount of the hedge can be recognised as covered. If the
amount of the CDS is larger than that of the underlying obligation, then the
amount of eligible hedge is capped at 60% of the amount of the underlying
obligation.
(f) If the CDS specifies deliverable
obligations that are different from the underlying obligation, the resultant asset
mismatch will be governed under paragraph (j).
(g) The CDS shall not terminate prior
to expiration of any grace period required for a default on the underlying
obligation to occur as a result of a failure to pay4.
(h) If the protection buyer’s right/ability
to transfer the underlying obligation to the protection seller is required for
settlement, the terms of the underlying obligation should provide that any
required consent to such transfer may not be unreasonably withheld.
(i) The identity of the parties
responsible for determining whether a credit event has occurred should be
clearly defined. This determination should not be the sole responsibility of
the protection seller. The protection buyer should have the right/ability to
inform the protection seller of the occurrence of a credit event.
(j) A mismatch between the underlying
obligation and the reference obligation or deliverable obligation is
permissible if (1) the reference obligation or deliverable obligation ranks pari
passu with or is junior to the underlying obligation, and (2) the
underlying obligation and reference obligation or deliverable obligation share
the same obligor (i.e. the same legal entity) and legally enforceable
cross-default or cross-acceleration clauses are in place.
(k) A mismatch between the underlying
obligation and the obligation used for purposes of determining whether a credit
event has occurred is permissible if (1) the latter obligation ranks pari
passu with or is junior to the underlying obligation, and (2) the underlying
obligation and reference obligation share the same obligor (i.e. the same legal
entity) and legally enforceable cross-default or cross acceleration clauses are
in place.
3. Treatment of exposures below materiality thresholds
Materiality thresholds on payments below which no payment
is made in the event of loss as per the CDS contract, are equivalent to
retained first loss positions and should be assigned risk weight of 667%
(1/0.15*100 as minimum CRAR requirement for NBFCs is 15%) for capital adequacy
purpose by the protection buyer.
4. Prudential treatment post-credit event
In case the credit event payment is not received within
the period as stipulated in the CDS contract, the NBFC shall ignore the credit
protection of the CDS and reckon the credit exposure on the underlying asset
and maintain appropriate level of capital and provisions as warranted for the
exposure. On receipt of the credit event payment, (a) the underlying asset
shall be removed from the books if it has been delivered to the protection
seller; or (b) the book value of the underlying asset shall be reduced to the
extent of credit event payment received if the credit event payment does not
fully cover the book value of the underlying asset and appropriate provisions
shall be maintained for the reduced value.
5. Capital Adequacy
In terms of NBFC Prudential Norms Directions, 2007, risk
weights for credit risk for corporate bonds held by NBFCs is 100%. A CDS
contract creates a counterparty exposure on the protection seller on account of
the credit event payment. In case of hedging of the cash position by CDS, the
exposure will be reckoned on the protection seller subject to the conditions
mentioned in para 6 below. NBFCs shall calculate the counterparty credit risk
charge for all bought CDS positions as the sum of the current mark-to-market
value, (if positive and zero, if MTM is negative) and the potential future
exposure.
6. Treatment of exposure to the protection seller
6.1 Exposure to the underlying asset in
respect of the hedged exposure shall be deemed to have been substituted by
exposure to the protection seller, if the following conditions are satisfied:
a. Operational requirements
mentioned in para 2 are satisfied
b. There is no maturity
mis-match between the underlying asset and the deliverable obligation. If this
condition is not satisfied, then the amount of credit protection to be
recognised should be computed as indicated in paragraph 6.2 below.
In all other cases the exposure will be deemed to be on
the underlying asset.
6.2 Risk weights as applicable to the
underlying assets shall be applied for the unprotected portion of the exposure.
The amount of credit protection shall be adjusted if there are any mismatches
between the underlying asset/obligation and the deliverable asset/obligation
with regard to asset or maturity. These are dealt with in detail
in the following paragraphs.
6.3 Mismatches
The amount of credit protection shall be adjusted if
there are any mismatches between the underlying asset/obligation and the
deliverable asset/obligation with regard to asset or maturity.
(i) Asset mismatches
Asset mismatch will arise if the underlying asset is
different from the deliverable obligation. Protection will be reckoned as
available to the NBFC only if the mismatched assets meet the requirements
specified in paragraph 2 (j) above.
(ii) Maturity mismatches
The NBFC would be eligible to reckon the amount of
protection if the maturity of the credit derivative contract were to be equal
to the maturity of the underlying asset. If, however, the maturity of the CDS
contract is less than the maturity of the underlying asset, then it would be
construed as a maturity mismatch. In case of maturity mismatch the amount of
protection will be determined in the following manner:
a. If the residual maturity of
the credit derivative product is less than three months no protection
will be recognized.
b. If the residual maturity of
the credit derivative contract is three months or more protection
proportional to the period for which it is available will be recognised. When
there is a maturity mismatch the following adjustment will be applied.
Pa = P x (t- .25) ÷ (T- .25)
Where:
Pa = value of the credit protection adjusted for maturity
mismatch
P = credit protection
t = min (T, residual maturity of the credit protection
arrangement) expressed in years
T = min (5, residual maturity of the underlying exposure)
expressed in years
Example: Suppose the underlying
asset is a corporate bond of Face Value of Rs. 100 where the residual maturity
is of 5 years and the residual maturity of the CDS is 4 years. The amount of
credit protection is computed as under:
100 * {(4-.25) ÷ (5-.25)} = 100*(3.75÷ 4.75) = 78.95
c. Once the residual
maturity of the CDS contract reaches three months, protection ceases to
be recognised.
6.4 NBFCs as users need to adhere to all
the criteria required for transferring the exposures fully to the protection
seller in terms of paragraph 7.1 above on an on-going basis so as to qualify
for exposure relief on the underlying asset. In case any of these criteria are
not met subsequently, the NBFC will have to reckon the exposure on the
underlying asset. Therefore, NBFCs should restrict the total exposure to an
obligor including that covered by way of CDS within an internal exposure
ceiling considered appropriate by the Board of the NBFC in such a way that it
does not breach the single/group borrower exposure limit prescribed by RBI. In
case of the event of any breach in the single/group borrower exposure limit,
the entire exposure in excess of the limit will be risk weighted at 667%. In
order to ensure that consequent upon such a treatment, the NBFC does not breach
the minimum capital requirement prescribed by RBI, it should keep sufficient
cushion in capital in case it assumes exposures in excess of normal exposure
limit.
6.5 No netting of positive and negative
marked-to-market values of the contracts with the same counterparty will be
allowed for the purpose of complying with the exposure norms.
7. General Provisions Requirements
For the CDS positions of NBFCs, they should hold general
provisions for gross positive marked-to-market values of the CDS contracts.
8. Reporting Requirement:
On a quarterly basis, NBFCs should report “total
exposure” in all cases where they have assumed exposures against borrowers in
excess of the normal single/group exposure limits due to the credit protections
obtained by them through CDS, guarantees or any other permitted instruments of
credit risk transfer, to the Regional Office of Department of Non-Banking
Supervision where they are registered.
9. NBFCs shall also disclose in their
notes to accounts of balance sheet the details given in annex- 2.
ANNEX-2
Format of disclosure to be made in the Annual Financial
Statements
(Rs. crore)
1. No. of transactions
during the year
2. Amount of protection
bought during the year
3. No. of transactions
where credit event payment was received during the year
(a) pertaining to current year’s
transactions
(b) pertaining to previous year(s)’
transactions
4. Outstanding transactions as on
March 31:
(a) No. of Transactions
(b) Amount of protection
5. Net income/profit
(expenditure/loss) in respect of CDS transactions during year-to-date:
(a) premium paid
(b) Credit event payments received (net
of value of deliverable obligation).
Appendix
List of Circulars
Sl. No.
|
Circular No.
|
Date
|
1.
|
DNBS.(PD).CC.No.11/02.01/99-2000
|
November 15, 1999
|
2.
|
DNBS.(PD).CC.No.12/02.01/99-2000
|
January 13, 2000
|
3.
|
DNBS.(PD).CC.No.15/02.01/2000-2001
|
June 27, 2001
|
4.
|
DNBS.(PD).C.C.No.27/02.05/2003-04
|
July 28, 2003
|
5.
|
DNBS.(PD).C.C.No.28/02.02/2002-03
|
July 31,2003
|
6.
|
DNBS.(PD).CC.No.37/02.02/2003-04
|
May 17, 2004
|
7.
|
DNBS.(PD).CC.No.38/02.02/2003-04
|
June 11, 2004
|
8.
|
DNBS.(PD).C.C.No.42/02.59/2004-05
|
July 24, 2004
|
9.
|
DNBS.(PD).C.C.No.43/05.02/2004-05
|
August 10, 2004
|
10.
|
DNBS.(PD).C.C.No.47/02.01/2004-05
|
February 07, 2005
|
11.
|
DNBS.(PD).CC.No.49/02.02/2004-05
|
June 9, 2005
|
12.
|
DNBS.(PD).CC.No.63/02.02/2005-06
|
January 24, 2006
|
13.
|
DNBS.(PD).C.C.No.79/03.05.002/2006-07
|
September 21, 2006
|
14.
|
DNBS.(PD).C.C.No.81/03.05.002/2006-07
|
October 19, 2006
|
15.
|
DNBS.(PD).CC.No.82/03.02.02/2006-07
|
October 27, 2006
|
16.
|
DNBS.PD.CC. No.85/03.02.089/2006-07
|
December 06, 2006
|
17.
|
DNBS.(PD)C.C No.87/03.02.004/2006-07
|
January 4, 2007
|
18.
|
DNBS.PD/C.C.No.105/03.10.001/2007-08@
@ Actual Circular Number should be DNBS.PD/C.C.No.96/03.10.001/2007-08
|
July 31, 2007
|
19.
|
DNBS.PD/C.C No.109/03.10.001/2007-08
|
November 26, 2007
|
20.
|
DNBS. (PD).C.C.No.114/03. 02.059/2007-08
|
June 17, 2008
|
21.
|
DNBS.(PD).C.C.No.124/03.05.002/2008-09
|
July 31, 2008
|
22.
|
DNBS.PD.CC No.128/03.02.059/2008-09
|
September 15, 2008
|
23.
|
DNBS.PD. Notification No.208
|
September 17, 2008*
* Actual date should be 17-09-09
|
24.
|
DNBS.PD.CC.No.130/03.05.002/2008-09
|
September 24, 2008
|
25.
|
DNBS.PD.CC.No.137/03.05.002/2008-09
|
March 02, 2009
|
26.
|
DNBS.PD/CC.No.142/03.05.002/2008-09
|
June 9, 2009
|
27.
|
DNBS.(PD).CC.No.167/03.10.01/2009-10
|
February 04, 2010
|
28.
|
DNBS.PD.CC.No.168/03.02.089/2009-10
|
February 12, 2010
|
29.
|
DNBS.(PD).CC.No.173/03.10.01/2009-10
|
May 03, 2010
|
30.
|
DNBS.(PD).C.C.No.174/03.10.001/2009-10
|
May 6, 2010
|
31.
|
DNBS.CC.PD.No.191/03.10.01/2010-11
|
July 27, 2010
|
32.
|
DNBS (PD) CC No. 195/03.10.001/2010-11
|
August 9, 2010
|
33.
|
DNBS.(PD).CC.No.200/03.10.001/2010-11
|
September 17, 2010
|
34.
|
DNBS(PD).CC.No.206/03.10.001/2010-11
|
January 5, 2011
|
35.
|
DNBS.CC.PD.No.208/03.10.01/2010-11
|
January 27, 2011
|
36.
|
DNBS(PD).CC. No.245/03.10.42/2011-12
|
September 27, 2011
|
37.
|
DNBS(PD).CC. No 248/03.10.01/2011-12
|
October 28, 2011
|
38.
|
DNBS (PD)CC.No.259/03.02.59/2011-12
|
March 15, 2012
|
39.
|
DNBS.CC.PD.No.253/03.10.01/2011-12
|
December 26, 2011
|
■■
____________
1. Please refer to paragraph 2.4 of the circular
IDMD.PCD.No. 5053/14.03.04/2010-11 dated May 23, 2011
2. For the present, only deliverable obligation
permitted in terms of guidelines on CDS vide circular IDMD.PCD.No.
5053/14.03.04/2010-11 dated May 23, 2011.
3. Please refer to paragraph 2.4 of the circular
IDMD.PCD.No. 5053/14.03.04/2010-11 dated May 23, 2011
4. Definition of maturity – the maturity of the
underlying exposure and the maturity of the hedge should both be defined
conservatively. The effective maturity of the underlying should be gauged as
the longest possible remaining time before the counterparty is scheduled to
fulfill its obligation, taking into account any applicable grace period.
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