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Friday, 4 November 2016
External Commercial Borrowings (ECB) by Startups
Foreign Exchange Management (Manner of receipt and payment) Regulations, 2016
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Unpaid External Commercial Borrowings (ECB) – Extension and conversion
| External Commercial Borrowings (ECB) – Extension and conversion | |
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Review of sectoral caps and simplification of Foreign Direct Investment (FDI) Policy
| Review of sectoral caps and simplification of Foreign Direct Investment (FDI) Policy | |
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Wednesday, 28 September 2016
Four eyes principles in banking
The four eyes principle is a requirement that two individuals approve some action before it can be taken. The four eyes principle is sometimes called the two-man rule or the two-person rule.
In a business context, the four eyes required for approval are often those of the CEO (Chief Executive Officer) and the CFO (Chief Financial Officer), who must both sign off on any significant business decision. In editing, proofreading and translation, documents typically have a second reader to detect errors and typos that a single pair of eyes might miss. Although neither individual might detect all errors, two readers are likely to miss different things so that, collaboratively, they will catch more mistakes.
Here are a few other examples of the four eyes principle at work:
Many legal and financial documents require the signatures of two individuals.
Banks, casinos and sensitive military areas often include no-lone zones: areas in which two people must be present and within each other's line of vision at all times.
The Emergency War Orders (EWO) safe, which contains missile launch keys and codes, is locked by two padlocks with keys held by different launch officers.
Some data management systems require that important record updates be approved by two separate people before the data is committed.
Although the four eyes principle adds an element of security to any decision-making process, its effectiveness relies upon the ability, integrity and diligence of the individuals involved. In a refinement of the basic principle, a random rotation of authorized individuals serves as the second pair of eyes, so that it cannot be known with any certainty which two individuals will be dealing with a given decision.
Some technological advancement that are gradually making a foray into financial sector:
Some technological advancement that are gradually making a foray into financial sector include big data, artificial intelligence, block chain technology and internet of things. Let me mention a few examples.
1. Banco Santander has expressed its intention to provide secure transactions using voice recognition via its banking app. RBS has trialled “Luvo”, an AI customer service assistance to interact with staff and to potentially serve customers in near future. Japan’s Softbank, in collaboration with Paris-based robotics experts, Aldebaran has developed Pepper, the world’s first humanoid robot. Pepper is already being used in customer services industries as a replacement to an information booth or the welcome desk. Mizuho Financial Group Inc. bank has reportedly introduced Pepper to its flagship branch in Tokyo in 2015 to deal with customer enquiries, while Mitsubishi UFJ Financial Group has tested “Nao”, a humanoid robot to interact with customers. Taking cue from their Japanese counterparts, I understand that HDFC Bank in India is also intending to introduce similar automation via robotics.
2. To buttress the point around increasing reliance on technology in the banking sector in India, following are some statistics. As per the latest RBI Annual Report, the share of electronic transactions in total transactions in volume terms has moved up to 84.4 per cent from 74.6 per cent in the previous year. Likewise in value terms, their share has also inched up to 95.2 per cent from 94.6 per cent. At end-March 2016, the national electronic funds transfer (NEFT) facility was available through 130,013 branches of 172 banks, in addition to business correspondent (BC) outlets. NEFT handled 1.2 billion transactions valued at around Rs.83 trillion (approximately $ 1.3 tn) up from 928 million transactions for Rs.60 trillion (approximately $ 0.9 tn) in the previous year. In March 2016, NEFT processed the highest ever monthly volume of 129 million transactions. Similarly, the internet banking and mobile banking based payments are increasing at a rapid pace.
Udyami Mitra portal
Udyami Mitra portal set up by SIDBI leverages IT architecture of Stand-Up Mitra portal and aims at instilling ease of access to MSMEs’ financial and non-financial service needs. The Portal, as a virtual market place endeavours to provide 'End to End' solutions not only for credit delivery but also for the host of credit-plus services by way of hand holding support, application tracking, multiple interface with stakeholders (i.e. banks, service providers, applicants).RBI wants to see development of more such technological interfaces in the coming days making it easier for MSME entrepreneurs to borrow from the banking system. RBI is committed to support such initiatives with appropriate safeguards and consumer protection measures.
TReDS--Trade Receivables Discounting System
TReDS: In order to solve the problem of delayed payment to MSMEs, RBI has licensed three entities for operating the Trade Receivables Discounting System (TReDS). The system would facilitate the financing of trade receivables of MSME enterprises from corporate and other buyers, including government departments and public sector undertakings (PSUs) through multiple financiers. The objective is to create Electronic Bill Factoring Exchanges which could electronically accept and settle bills so that MSMEs could encash their receivables without delay. It is expected that the TReDS will commence operations within this current fiscal. It would be important that the use of TReDS is made mandatory for, to begin with corporate and PSUs and later for the Government departments. RBI would urge the Chambers and the MSME Ministry to proactively examine this aspect as success of TReDS initiative can be a game changer for the MSME sector.
Saturday, 3 September 2016
Know Your Customer Guidelines
(This is a summarised and simplified version of the Reserve Bank of India’s Know Your Customer guidelines.)
Q1. What is KYC? Why is it required?
Response: KYC means “Know Your Customer”. It is a process by which banks obtain information about the identity and address of the customers. This process helps to ensure that banks’ services are not misused. The KYC procedure is to be completed by the banks while opening accounts. Banks are also required to periodically update their customers’ KYC details.
Q2. What are the KYC requirements for opening a bank account?
Response: To open a bank account, one needs to submit a ‘proof of identity and proof of address’ together with a recent photograph.
Q3. What are the documents to be given as ‘proof of identity’ and ‘proof of address’?
Response: The Government of India has notified six documents as ‘Officially Valid Documents’ (OVDs) for the purpose of producing proof of identity. These six documents are Passport, Driving Licence, Voters’ Identity Card, PAN Card, Aadhaar Card issued by UIDAI and NREGA Job Card. You need to submit any one of these documents as proof of identity. If these documents also contain your address details, then it would also be accepted as ‘proof of address’. If the document submitted by you for proof of identity does not contain address details, then you will have to submit another officially valid document which contains address details.
Q4. If I do not have any of the documents listed above to show my ‘proof of identity’, can I still open a bank account?
Response: Yes. You can still open a bank account known as ‘Small Account’ by submitting your recent photograph and putting your signature or thumb impression in the presence of the bank official.
Q5. Is there any difference between such ‘small accounts’ and other accounts
Response: Yes. The ‘Small Accounts’ have certain limitations such as:
- balance in such accounts at any point of time should not exceed Rs.50,000
- total credits in one year should not exceed Rs.1,00,000
- total withdrawal and transfers in a month should not exceed Rs.10,000
- Foreign remittances cannot be credited to such accounts.
Such accounts remain operational initially for a period of twelve months and thereafter, for a further period of twelve months if the holder of such an account provides evidence to the bank of having applied for any of the officially valid documents within twelve months of the opening of such account.
Q6. Would it be possible, if I do not have any of the officially valid documents, to have a bank account, which is not subjected to any limitations as in the case of ‘small accounts’?
Response: A normal account can be opened by submitting a copy of any one of the following documents as Proof of Identity (PoI):
(i) Identity card with person’s photograph issued by Central/State Government Departments, Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, and Public Financial Institutions;
or
(ii) letter issued by a gazetted officer, with a duly attested photograph of the person.
For Proof of Address (PoA), you may submit the following documents:
- Utility bill, which is not more than two months old, of any service provider (electricity, telephone, post-paid mobile phone, piped gas, water bill);
- Property or Municipal Tax receipt;
- Bank account or Post Office savings bank account statement;
- Pension or family Pension Payment Orders (PPOs) issued to retired employees by Government Departments or Public Sector Undertakings, if they contain the address;
- Letter of allotment of accommodation from employer issued by State or Central Government departments, statutory or regulatory bodies, public sector undertakings, scheduled commercial banks, financial institutions and listed companies. Similarly, leave and license agreements with such employers allotting official accommodation; and
- Documents issued by Government departments of foreign jurisdictions or letter issued by Foreign Embassy or Mission in India.
This, however, is not a general rule and it is left to the judgement of the banks to decide whether this simplified procedure can be adopted in respect of any customer.
Q7. If my name has been changed and I do not have any OVD in the new name, how can I open an account?
Response: A copy of the marriage certificate issued by the State Government or Gazette notification indicating change in name together with a certified copy of the ‘Officially Valid Documents’ in the prior name of the person is to be furnished for opening of account in cases of persons who change their names on account of marriage or otherwise.
Q8. Are banks required to categorise their customers based on risk assessment?
Response: Yes, banks are required to classify their customers into ‘low’, ‘medium’ and ‘high’ risk categories depending on their AML risk assessment.
Q9. Do banks inform customers about this risk categorisation?
Response: No
Q10. If I refuse to provide requested documents for KYC to my bank for opening an account, what may be the result?
Response: If you do not provide the required documents for KYC, the bank will not be able to open your account.
Q11. Can I open a bank account with only an Aadhaar card?
Response: Yes, Aadhaar card is accepted as a proof of both identity and address.
Q12. Is it compulsory to furnish Aadhaar Card for opening an account?
Response: No. you may furnish Aadhaar card or any of the other five OVDs for opening an account.
Q13. What is e-KYC? How does e-KYC work?
Response: e-KYC refers to electronic KYC.
e-KYC is possible only for those who have Aadhaar numbers. While using e-KYC service, you have to authorise the Unique Identification Authority of India (UIDAI), by explicit consent, to release your identity/address through biometric authentication to the bank branches/business correspondent (BC). The UIDAI then transfers your data comprising your name, age, gender, and photograph electronically to the bank. Information thus provided through e-KYC process is permitted to be treated as an ‘Officially Valid Document’ under PML Rules and is a valid process for KYC verification.
Q14. Is introduction necessary while opening a bank account?
Response: No, introduction is not required.
Q15. If I am staying in Chennai but if my proof of address shows my address of New Delhi, can I still open an account in Chennai?
Response: Yes. You can open a bank account in Chennai even if the address in the “Officially Valid Document” is that of New Delhi and you do not have a proof of address for your Chennai address. In such case, you can submit the officially valid document having your New Delhi address, together with a declaration about your Chennai address for communication purposes.
Q16. Can I transfer my existing bank account from one place to another? Do I need to undergo full KYC again?
Response: It is possible to transfer an account from one branch to another branch of the same bank. There is no need to undergo KYC exercise again for such transfer. However, if there is a change of address, then you will have to submit a declaration about the current address. If the address appearing in the ‘Officially Valid Documents’ (OVDs) submitted for proof of address is no longer your valid address (i.e. neither your permanent address nor your current address), you need to get an Officially Valid Document for Proof of Address containing the current or the permanent address and furnish the same within six months. In case of opening an account in another bank, however, you will have to undergo KYC exercise afresh.
Q17. Do I have to furnish KYC documents for each account I open in a bank even though I have furnished the documents of proof of identity and address?
Response: No, if you have opened a KYC compliant account with a bank, other than a ‘small account’, then for opening another account with the same bank, furnishing of documents is not necessary.
Q18. For which banking transactions do I need to quote my PAN number?
Response: PAN number needs to be quoted for transactions such as account opening, transactions above Rs.50,000 (whether in cash or non-cash), etc. A full list of transactions where PAN number needs to be quoted can be accessed from website of Income Tax Department at the following URL:
Q19. Whether KYC is applicable for Credit/Debit cards?
Response: Yes. KYC exercise is necessary for Credit/ Smart Cards and also in respect of add-on/ supplementary cards. Since debit cards are issued only to account holders and accounts are opened only after the KYC procedure is completed, there is no need for separate KYC for issuing debit card.
Q20. I do not have a bank account. But I need to make a remittance. Is KYC applicable to me?
Response: Yes. KYC exercise needs to be done for all those who want to make domestic remittances of Rs. 50,000 and above and all foreign remittances.
Q21. Can I purchase a Demand Draft/Payment Order/Travellers Cheque against cash?
Response: Yes, Demand Draft/Payment Order/Travellers Cheques for below Rs.50,000/- can be purchased against cash and such instruments for Rs. 50000/- and above can be issued only by way of debiting the customer's account or against cheques.
Q22. Do I need to submit KYC documents to the bank while purchasing third party products (like insurance or mutual fund products) from banks?
Response: Yes, all customers who do not have accounts with the bank (known as walk-in customers) have to produce proof of identity and address while purchasing third party products from banks if the transaction is for Rs.50,000 and above. KYC exercise will not be necessary for bank’s own customers for purchasing third party products. However, instructions to make payment by debit to customers’ accounts or against cheques for remittance of funds/issue of travellers’ cheques, sale of gold/silver/platinum and the requirement of quoting PAN number for transactions of Rs.50,000 and above will be applicable to purchase of third party products from bank by its customers as also to walk-in customers.
Q23. My KYC was completed when I opened the account. Why does my bank insist on doing KYC again?
Response: Banks are required to periodically update KYC records. This is a part of their ongoing due diligence on bank accounts. The periodicity of such updation varies from account to account depending on its risk categorisation by the bank. Periodic updation of records also helps prevent frauds in customer accounts.
Q24. What are the rules regarding periodic updation of KYC?
Response: Different periodicities have been prescribed for updation of KYC records depending on the risk perception of the bank. KYC is required to be done at least once in two years for high risk customers, once in eight years for medium risk customers and once in ten years for low risk customers. This exercise would involve all formalities for KYC normally taken at the time of opening the account.
While periodic updation of KYC has to be carried out in respect of customer categorised as ‘low risk’ also, if there is no change in status with respect to the identity (change in name, etc.) and/or address of such customers the banks may ask such customers to submit only a self-certification about ‘no-change in status’ at the time of periodic updation. Banks may not ask such customers to submit copies of ‘Officially Valid Documents’ for periodic updation.
In case of change of address of such ‘low risk’ customers, they could merely forward a certified copy of the document (proof of address) by mail/post, etc. Physical presence of such low risk customer is not required at the time of periodic updation.
Customers who are minors have to submit fresh photograph on becoming major.
Q25. What if I do not provide the KYC documents at the time of periodic updation?
Response: If you do not provide your KYC documents at the time of periodic updation, bank has the option to close your account. Before closing the account, the bank may, however, impose ‘partial freezing’ (i.e. initially allowing all credits and disallowing all debits while giving an option to you to close the account and take your money back). Later, even credits also would not be allowed. The ‘partial freezing’ however, would be exercised by the bank after giving you due notice.
Q26. How is partial freezing imposed?
Response: Partial freezing is imposed in the following ways:
- Banks have to give due notice of three months initially to the customers before exercising the option of ‘partial freezing’.
- After that a reminder for further period of three months will be issued.
- Thereafter, banks shall impose ‘partial freezing’ by allowing all credits and disallowing all debits with the freedom to close the accounts.
- If the accounts are still KYC non-compliant after six months of imposing initial ‘partial freezing’ banks shall disallow all debits and credits from/to the accounts, classifying them inoperative.
Meanwhile, the account holders can revive accounts by submitting the KYC documents.
Free Annual Credit Report to Individuals
Free Annual Credit Report to Individuals
In exercise of the powers conferred by subsection (1) of Section 11 of Credit Information Companies (Regulation) Act, 2005, Reserve Bank of India, being satisfied that it is necessary and expedient in the public interest, hereby directs that effective January 1, 2017, all Credit Information Companies (CICs) shall provide access, upon request and after due authentication of the requester, to a free full credit report (FFCR) once in a calendar year to individuals whose credit history is available with the CIC. This report shall show the latest position of the credit institutions’ exposure to the individual as per records available with the CIC.
The FFCR shall be in electronic format, and the procedure for accessing the FFCR shall be displayed on the CIC’s website. The contents of the FFCR shall be the same as appearing in the most detailed version of the reports on the individual provided to credit institutions, including the credit score.
The CIC shall have a Board approved policy on making available the FFCR.
Friday, 19 August 2016
Green growth
Wednesday, 17 August 2016
A daunting New Vocabulary :
FOLLOWING ARE SOME LATEST VOCABULARY USED IN FINANCIAL MARKET:
SFB: Small Finance Banks,
PB: Payment Banks,
P2P: Peer to Peer,
PPI: Prepaid Payment Instruments,
TReDS: Trade Receivables Discounting System,
UPI: Unified Payments Interface
TLAC: Total Loss Absorbency Capacity,
CCB: Capital Conservation Buffer,
LCR: Liquidity Coverage Ratio,
NSFR: Net Stable Funding Ratio,
SIFIs: Systemically Important Financial Intermediaries,
IFRS: International Financial Reporting Standards
LIVING WILL: A living will, also called a directive to physicians or advance directive, is a document that lets people state their wishes for end-of-life medical care, in case they become unable to communicate their decisions. It has no power after death.
The Volcker Rule: refers to Section 619(12 U.S.C. Section 1851) of the Dodd–Frank Wall Street Reform and Consumer Protection Act, originally proposed by American economist and former United States Federal Reserve Chairman Paul Volcker to restrict United States banks from making certain kinds of speculative investments that do not benefit their customers.Volcker argued that such speculative activity played a key role in the financial crisis of 2007–2010. The rule is often referred to as a ban on proprietary trading by commercial banks, whereby deposits are used to trade on the bank's own accounts, although a number of exceptions to this ban were included in the Dodd-Frank law.
Friday, 5 August 2016
Dishonour of cheques – Modification in procedure
1. Banks were advised to introduce a condition for operation of accounts with cheque facility that in the event of dishonour of a cheque valuing rupees one crore and above drawn on a particular account of the drawer on four occasions during the financial year for want of sufficient funds in the account, no fresh cheque book would be issued. Also, the bank may consider closing current account at its discretion.
2. The above instructions have been reviewed and it has been decided to leave it to the discretion of the banks to determine their response to dishonour of cheques of the account holders. Banks should put in place an appropriate policy approved by the Board or its Committee taking into consideration the need to prevent misuse of the cheque drawing facility and avoid penalising customers for unintended dishonour of cheques.
3. This policy should be transparent, made known to every customer upfront and implemented fairly.
Tuesday, 26 July 2016
Masala bonds
Masala bonds
A number of Indian firms are gearing up to raise funds from issuing what are known as ‘masala bonds.’ Coinciding with Prime Minister Narendra Modi’s recent visit to the UK, organisations such as Housing Development Finance Corp., Yes Bank, and the Railways had announced they were going to raise funds through this route from the London market. Ratings agency S&P expects the issuance of masala bonds to touch $5 billion annually over the next two to three years. Here is an explainer on what masala bonds are all about:
What are masala bonds?
Bonds are instruments of debt - typically used by corporates to raise money from investors. Masala bonds have to be explained in the context of Indian corporates raising money from overseas investors. Before masala bonds, corporates have had to rely on avenues such as external commercial borrowings or ECBs. The challenge with the likes of ECBs is the entity raising money is faced with a currency risk - they have to be raised and repaid in dollar terms. A year is a long time in forex markets - currencies fluctuate sharply. So, imagine the risk a bond issuing entity, especially one with largely rupee earnings, if issue and repayment are years apart.
Enter masala bonds! They are rupee-denominated bonds issued to overseas buyers. This is how it is different from other instruments. With a masala bond, a corporate could issue Rs. 10 billion worth of bonds with the promise of paying back Rs. 11 billion in one year. But as the Indian rupee has limited convertibility, the investors will lend the dollar equivalent of the Rs. 10 billion. After one year, the Indian corporate needs to pay back the dollar equivalent of Rs. 11 billion. The currency risk is with the investor.
How did the tag masala come about?
The International Finance Corporation (IFC), the investment arm of the World Bank, issued a Rs. 1,000 crore bond in November last year. The purpose of the issue was to fund infrastructure projects in India. IFC named them ‘masala’ bonds to reflect the Indian angle to it. This kind of naming has been done before. This is, in fact, much like IFC's Chinese yuan-denominated Dim sum bonds. It isn't unusual in the foreign bonds market to encounter names such as Yankee and Bulldog. By the way, Japanese yen-denominated bonds are called Samurai. There was even much speculation about what the rupee-denominated bonds would be called before 'masala' was confirmed. Samosa, Ganga, and Peacock were apparently some of the names doing the rounds.
What has been the regulator's stance on this?
The Reserve Bank of India has issued guidelines allowing Indian companies, non-banking finance companies (HDFC, India Bulls Housing Finance are examples of such companies) and infrastructure investment trusts and real investment trusts (investment vehicles that pool money from various investors and invest in infrastructure and real estate sectors) to issue rupee-denominated bond overseas.
The rules put the issue limit to $750 million and also has a pricing cap for various tenures of issue. Experts say the move to permit masala bonds is an attempt to increase the international status of rupee and is also a step toward full currency convertibility (the freedom to convert Indian currency into other internationally accepted currency without any restrictions).
Why should investors look at masala bonds?
The Finance Ministry has cut the withholding tax (a tax deducted at source on residents outside the country) on interest income of such bonds to 5 per cent from 20 per cent, making it attractive for investors. Also, capital gains from rupee appreciation are exempted from tax.
Globally, there is ample liquidity thanks to lower interest rates in developed markets, but there are very few investment options due to weak economic conditions globally. India is that rare fast-growing large economy, and masala bonds is one way for investors to take advantage of this.
By the way, these bonds are bought by retail investors as well as big institutions overseas.
What do masala bonds mean to the issuer?
An important consideration for issuers is the access to cheaper funding than what's available in the domestic markets, according to ratings firm S&P. For corporates, who would be the main issuers, masala bonds will be one other key source of funding apart from banks and local debt markets. Another ratings firm India Ratings and Research says such bonds would lower the cost of capital over a period of time - the cost remains one of the highest in Asia. This also makes sense given that Indian banks are reluctant to lend to sectors facing weak demand and heavy debt.
Is there anything investors need to worry about?
Investors would need to keenly watch the credibility of the issuer. For example, it would easy for an HDFC or NTPC to easy to raise the bond when compared to a smaller firm. Higher the credit rating of a firm, the better would be the appetite for their issues. Since the currency risk is on the investors, they will like the rupee to be stable. S&P says the initial excitement over masala bonds will give way to the ultimate realisation that because currency and economic growth are external factors, investors will subject issuers to a lot more scrutiny.
To make masala bonds more attractive, the Reserve Bank of India (RBI) has reduced the minimum tenure of such bonds that an Indian company can issue offshore to three years from the previously stated five years.
“It has been decided to reduce the minimum maturity period for the rupee-denominated bonds issued overseas to three years in order to align with the maturity prescription regarding foreign investment in corporate bonds through the foreign portfolio investment (FPI) route,” the central bank said in a circular on Wednesday.
Money raised through masala bonds overseas will be counted in the overall investment limit for FPIs in corporate bonds, which now stands at Rs.2.44 trillion. FPI investment limit in corporate bonds will be expressed in rupees instead of dollars, bringing it on a par with limits in government bonds. The maximum amount a single issuer can raise through masala bonds is Rs.5,000 crore, RBI said.
According to bankers, the reduction in maturity of the bond may not make a big difference in terms of attracting investors.
“This was one of the demands but until the withholding tax and allowing domestic banks to invest is addressed, there is unlikely to be a significant improvement in demand for such bonds,” said a banker on condition of anonymity.
Masala bonds are issued in rupees but can be settled in US dollars and thus besides the credit risk of the issuer, risk of the exchange rate also falls on the investor. In addition, the investor also has to pay 5% withholding tax.
In the pursuit of adequate compensation for credit and exchange rate risk, and the cost of withholding tax, foreign investors have sought higher yield from companies that marketed masala bonds over the last five months.
But to match the yield demanded by investors, companies will have to forego their advantage of borrowing cheap from the offshore market compared with local rates.
Further, Indian banks can only act as arrangers or underwriters of such bonds and cannot invest in them. If an Indian bank does underwrite a masala bond issue, it will have to offload the investment in six months.
Indian companies were allowed to issue rupee-denominated bonds in the offshore market in September last year but so far no company has been able to raise funds through this route.
The idea of masala bonds was first floated by RBI in April 2015 following which the central bank issued guidelines for the same in September. Over the last four months, Indian Railway Finance Corp. (IRFC), Housing Development and Finance Corp., NTPC Ltd, Shriram Transport Finance and Dewan Housing Finance Ltd have all hawked masala bonds without success. Adani Transmission Ltd was the latest to market masala bonds overseas last month.
The guidelines allow multilateral agencies such as the World Bank to also borrow through masala bonds and invest the proceeds in the Indian infrastructure sector.
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Friday, 15 July 2016
WHAT IS COUNTER TRADE IN FOREX
Counter trade is an arrangement involving adjustment of value of goods imported into India against value of goods exported from India in terms of the Reserve Bank guidelines.
Tuesday, 12 July 2016
Computation of Adjusted Net Bank Credit (ANBC)
Computation of Adjusted Net Bank Credit (ANBC)
| Bank Credit in India [As prescribed in item No.VI of Form ‘A’ under Section 42 (2) of the RBI Act, 1934]. | I |
| Bills Rediscounted with RBI and other approved Financial Institutions. | II |
| Net Bank Credit (NBC)* | III (I-II) |
Bonds/debentures in Non-SLR categories under HTM category+ other investments eligible to be treated as priority sector +Outstanding Deposits under RIDF and other eligible funds with NABARD, NHB, SIDBI and MUDRA Ltd. on account of priority sector shortfall + outstanding PSLCs
| IV |
Eligible amount for exemptions on issuance of long-term bonds for infrastructure and affordable housing as per
| V |
| Eligible advances extended in India against the incremental FCNR (B)/NRE deposits, qualifying for exemption from CRR/SLR requirements. | VI |
| ANBC | III+IV-V-VI |
| * For the purpose of priority sector computation only. Banks should not deduct / net any amount like provisions, accrued interest, etc. from NBC. | |
It has been observed that some banks are subtracting prudential write off at Corporate/Head Office level while reporting Bank Credit as above. In such cases it must be ensured that bank credit to priority sector and all other sub-sectors so written off should also be subtracted category wise from priority sector and sub-target achievement.
All types of loans, investments or any other items which are treated as eligible for classification under priority sector target/sub-target achievement should also form part of Adjusted Net Bank Credit.
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