Understanding the loan to value (LTV) RATIO

Simply stated the loan to value (LTV) is the ratio of the amount that you wish to borrow for a home to the actual value of the home. The LTV can be calculated from the actual worth of the home, the mortgage being taken and the down payment that has been made prior to the loan. 

For example, the value of a house is Rs.40,00,000 and a down payment of Rs.400,000 has been made a loan of the balance amount that is Rs.36,00,000 is being sought. In this case the LTV comes to be Rs.36,00,000 of the actual value of R40,00,000, which works out to 90%. Thus the LTV is 90%.

Transactions in derivatives by regulated institutional entities on electronic platforms.

At present regulated entities, other than scheduled banks, are unable to conduct transactions on electronic platforms for interest rate swaps (IRS) as one party to such transactions has to be either the Reserve Bank of India (RBI) or a scheduled bank or such other agency falling under the regulatory purview of the RBI which may be specified by the RBI in this regard. In this context, the Reserve Bank of India, in exercise of its powers conferred by Section 45V of the Reserve Bank of India Act, 1934 and of all the powers enabling it in this behalf, hereby specifies the Clearing Corporation of India Ltd (CCIL) as an approved counterparty for IRS transactions undertaken on electronic trading platforms where CCIL is the central counterparty.

A reference is invited to para 37 of the First Bi-monthly Monetary Policy Statement announced on April 5, 2016, in terms of which, it was proposed to review the existing guidelines on OTC derivatives in order to make participation in OTC derivative markets through electronic platforms more broad-based. Accordingly, it has been decided to enable any institutional entity regulated by the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), the Insurance Regulatory and Development Authority of India (IRDAI), the Pension Fund Regulatory and Development Authority (PFRDA) and the National Housing Bank (NHB) to trade in interest rate swaps (IRS) on electronic trading platforms.

The above guidelines would become effective from June 1st, 2016.

Discontinuation of Statements on Special Agriculture Credit Plan (SACP)

Discontinuation of Statements on Special Agriculture Credit Plan (SACP)


In order to monitor and augment the flow of credit to Agriculture, Special Agriculture Credit Plans (SACP) were introduced for Public Sector banks in 1994 and extended to Private Sector Banks in 2004. Under SACP, the banks are required to fix self-set targets for achievement during the year (April-March), with an increase of about 25% over the disbursement made in the previous year. The banks were required to forward half yearly statements to RBI (FIDD) indicating their progress of implementation as at the end of March and September every year.

It has been decided to discontinue the submission of the above statements from April 2016. Accordingly, banks are advised not to furnish half yearly statements as above for the year 2016-17 to FIDD

Escrow Account under FEMA

Escrow Account  under FEMA

i) Resident/ non-resident acquirers and non-resident corporates may open Escrow account in INR with an Authorized Dealer in India as an escrow agent subject to the terms and conditions specified in Schedule 5 of the Deposit Regulations.

ii) Transactions shall be in accordance with the Foreign Exchange Management (Transfer or Issue of Security by a person resident Outside India) Regulations, 2000 and regulations of the Securities and Exchange Board of India (SEBI), as applicable.

iii) The accounts shall be non-interest bearing.

iv) No fund/ non-fund based facility would be permitted against the balances in the account.

Escrow Account under FEMA

 Escrow Account under FEMA

i) Resident/ non-resident acquirers and non-resident corporate's may open Escrow account in INR with an Authorized Dealer in India as an escrow agent subject to the terms and conditions specified in Schedule 5 of the Deposit Regulations.

ii) Transactions shall be in accordance with the Foreign Exchange Management (Transfer or Issue of Security by a person resident Outside India) Regulations, 2000 and regulations of the Securities and Exchange Board of India (SEBI), as applicable.

iii) The accounts shall be non-interest bearing.

iv) No fund/ non-fund based facility would be permitted against the balances in the account.

S N R R ----Special Non-Resident Rupee (SNRR) Account.

S N R R ---Special Non-Resident Rupee                                               (SNRR) Account.

i) Any person resident outside India, having a business interest in India, may open an SNRR account in Indian Rupee with Authorized Dealers for the purpose of putting through bona fide transactions in rupees, subject to the conditions specified in Schedule 4 of the Deposit Regulations.

ii) The SNRR account shall carry the nomenclature of the specific business for which it is opened and shall not earn any interest.

iii) The debits/ credits and the balances in the account shall be incidental and commensurate with the business operations of the account holder.

iv) The tenure of the account should be concurrent to the tenure of the contract/ period of operation/ the business of the account holder and shall in no case exceed seven years.

v) The balances in the SNRR account shall be eligible for repatriation.

vi) Opening of account by individual/ entities of Pakistan/ Bangladesh nationality/ ownership will require prior approval of the Reserve Bank of India.

CHANGES IN FEMA (DEPOSIT) REGULATIONS

CHANGES IN FEMA (DEPOSIT) REGULATIONS;

CHANGES IN A) Non-Resident (External) Account (NRE) Scheme:

i) Authorised Dealers/ banks in India may grant loans against the security of the funds held in NRE accounts to the account holder/ third party in India, without any limits, subject to the usual margin requirements. The loan sanctioned to the account holder can be repaid either by adjusting the deposits or through inward remittances from outside India through banking channels or out of balances held in the NRO account of the account holder. The loan shall be used for the purpose laid down in the regulations and cannot be repatriated outside India.

ii) Authorised Dealers may allow their branches/ correspondents outside India to grant loans outside India to the non-resident depositor or to a third party against the security of deposits, subject to the conditions laid down in the regulations.

iii) The facility for premature withdrawal of the deposits shall not be available where loans against such deposits are availed of.

iv) The term “loan” shall include all types of fund based/ non-fund based facilities.

v) Income from interest on the balances in the account is exempt from income tax and balances are exempt from wealth tax.

vi) Current income like rent, dividend, pension, interest, etc. of NRIs and PIOs will be construed as a permissible credit to their NRE account provided the Authorised Dealer is satisfied that the credit represents current income of the NRI/ PIO account holder and income tax thereon has been deducted/ paid/ provided for, as the case may be.