RBI Circular Notification Press Release and Instructions issued by Reserve bank of India. News and Article on provisions, Rate changes, Policy changes and FAQ
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We have come across an instance, where loans and advances have been sanctioned to the relative of a Director of a bank, at a concessional rate of interest, thereby circumventing the spirit of the restrictions contained under Section 20 of the Banking Regulation Act, 1949. The matter has, therefore, been examined by us and it has been decided that the restrictions as contained in Section 20 of the Act would apply to grant of loans and advances to spouse and minor/dependent children of the Directors of banks.
Please refer to our circular DBOD.No.BP.BC.69/08.12.001/2010-11 dated December 23, 2010 on “Housing loans by commercial banks – LTV ratio, risk weight and provisioning” wherein it was advised that in order to prevent excessive leveraging, the LTV ratio in respect of housing loans should not exceed 80 per cent. However, for small value housing loans i.e. for loans below Rs. 20 lakh (which are classified as priority sector advances) the LTV ratio should not exceed 90 per cent.
We advise that the name of Industrial and Commercial Bank of China Limited has been included in the Second Schedule to the Reserve Bank of India Act, 1934 by notification DBOD.IBD.No./8136/ 23.03.026/2011-12 dated December 01, 2011 published in the Gazette of India (Part III- Section 4) dated December 31, 2011.
To prevent adverse impact of volatile forex market movement on corporates and their lenders, the Reserve Bank has directed banks to evaluate risks from unhedged foreign currency exposure of companies while extending them credit facilities.
Reserve Bank of India has said that all private sector banks will now be considered eligible to handle any Central or State Government at par with public sector banks. Till now, only three private banks, namely ICICI Bank Ltd, HDFC Bank Ltd and Axis Bank Ltd were appointed by RBI as its agents to carry out limited general banking business.
AD Category-I banks are advised that a further revision has taken place on January 17, 2012 and accordingly, the Rupee value of the Special Currency Basket has been fixed at Rs.71.456679 with effect from January 20, 2012. AD Category-I banks may bring the contents of this Circular to the notice of their constituents concerned.
There has been appreciation for India for weathering the financial crisis relatively unscathed. Much of it hinged on the sound and resilient banking system in the country. The foundation for the banking sector resilience was laid with the introduction of the financial sector reforms in 1991 with focus on prudential regulation and increased competition. These reforms resulted in a comprehensive transformation of the banking sector. The reforms had a major impact on the overall efficiency and stability of the banking system. The outreach of banks increased in terms of branch / ATM presence. The balance sheets and overall banking business also grew in size. The financial performance and efficiency of Indian banks improved with increased competition, as reflected in their profitability, net interest margins, ROA and ROE. The capital position improved significantly, and banks were able to bring down their non-performing assets sharply. This reform phase also witnessed increased use of technology which in turn, helped improve customer service.
This Master Circular consolidates the existing instructions on the subject of “Memorandum of Instructions governing money changing activities” at one place. The list of underlying circulars/ notifications is set out in Appendix. This Master Circular is being issued with a sunset clause. It will stand withdrawn on July 1, 2012 and would be replaced by an updated Master Circular on the subject.
As you are aware, currently all public sector banks are eligible to conduct Government business as agents of RBI. However, only three private sector banks viz. ICICI Bank Ltd., HDFC Bank Ltd. and Axis Bank Ltd. were appointed by RBI as its agents to carry out limited general banking business of the Central Government and of those State Governments which had entered into an agreement with RBI for the purpose. Of late, we have been receiving formal/informal requests from various Central Government Ministries/Departments, State Governments and from the banks themselves for granting authorization for additional/fresh business to these/other private sector banks for conducting Government business.
Based on the references received from banks, we clarify that the revised guidelines issued vide our circulars referred to above would be applicable to domestic savings bank deposits held by residents in India. Further, the interest rates applicable on the domestic savings deposit will be determined on the basis of end-of-day balance in the account. Accordingly, while calculating interest on domestic savings bank deposits, RRBs/StCBs/DCCBs are required to apply the uniform rate set by them on end-of-day balance up to Rs. 1 lakh and for any end-of-day balance exceeding Rs.1 lakh, banks may apply the differential rate(s) as fixed by them.
