BULLETEIN

BANKING AND FINANCE

 Extention granted for Interest Equalization Scheme on Pre and Post Shipment
Rupee Export Credit.

Government of India has approved the extension of Interest Equalization Scheme for Pre and
Post Shipment Rupee Export Credit, with the same scope and coverage, for a further period of
three months, i.e., up to September 30, 2021. This move will bring relief to the exporters.
Consequently, the extant operational instructions issued by the Reserve Bank of India takes
effect from July 1, 2021, and ends on September 30, 2021, covering three months.

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12124&Mode=0#:~:text=Government
%20of%20India%20has%20approved,up%20to%20September%2030%2C%202021.

 Revision of the Instructions on Interest on overdue domestic deposits.

Previously, if the term deposit matured and the proceeds were unpaid, the amount left unclaimed
with the bank attracted rate of interest as applicable to savings deposits. The revision has stated
that it has been decided that if a Term Deposit (TD) matures and proceeds are unpaid, the
amount left unclaimed with the bank shall attract rate of interest as applicable to savings account
or the contracted rate of interest on the matured TD, whichever is lower.

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12125&Mode=0

 New Definition of Micro, Small and Medium Enterprises - Addition of Retail and
Wholesale Trade.

Retail and wholesale traders have been facing severe liquidity crunch after sales were hit by the
Covid-19 lockdowns. Considering this, Ministry of Micro, Small and Medium Enterprises has
decided to include Retail and Wholesale trade as MSMEs for the limited purpose of Priority
Sector Lending and they would be allowed to be registered on Udyam Registration Portal for the
following NIC Codes and activities mentioned against them.

45 Wholesale and retail trade and repair of motor vehicles and

 motorcycles
46 Wholesale trade except of motor vehicles and motorcycles
47 Retail trade except of motor vehicles and motorcycles

The Enterprises having Udyog Aadhaar Memorandum (UAM) under above three NIC Codes are
now allowed to migrate to Udyam Registration Portal or file Udyam Registration afresh.

https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12126&Mode=0

 Inclusion of “Shivalik Small Finance Bank Limited” in the Second Schedule of the
Reserve Bank of India Act, 1934.

The Reserve Bank of India (RBI) advised that “Shivalik Small Finance Bank Limited” has been
included in the Second Schedule to the Reserve Bank of India Act, 1934 and published in the
Gazette of India.

https://rbidocs.rbi.org.in/rdocs/notification/PDFs/
SHIVALIKSFB1E9F5C62820542669FCA412AF24069FC.PDF

 Mandatory Leave for Employees Posted in Sensitive Positions or Areas of

Operation.

As a prudent operational risk management measure, the banks shall put in place a ‘mandatory
leave’ policy wherein the employees posted in sensitive positions or areas of operation shall be
compulsorily sent on leave for a few days (not less than 10 working days) in a single spell every
year, without giving any prior intimation to these employees. It is done in order to maintain an
element of surprise. Banks shall ensure that the employees, while on ‘mandatory leave’, do not
have access to any physical or virtual resources related to their work responsibilities, with the
exception of internal/ corporate email which is usually available to all employees for general
purposes.

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12129&Mode=0

 Cassette - Swaps in ATMs.

In 2018, the banks were advised to consider using lockable cassettes in their ATMs which shall
be swapped at the time of cash replenishment. The same was advised to be implemented in a
phased manner covering at least one third ATMs operated by the banks every year, such that all
ATMs achieve cassette swap by March 31, 2021. Banks shall monitor progress and make the
required course correction at the end of every quarter, at the level of Board / ACB and report
status within seven days of the end of the quarter, starting from the quarter ended September
2021, to the Chief General Manager-in-Charge, Department of Currency Management, Reserve
Bank of India.

https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=12130&Mode=0

 Rating of Deposits of HFCs – Approved Credit Rating Agencies and Minimum

Investment Grade Credit Rating.

It has been decided to align the aforesaid provisions for HFCs with provisions on the subject
prescribed for NBFCs. Accordingly, the names of credit rating agencies and their minimum
investment grade ratings for the purpose of accepting public deposits by HFCs are specified.

https://rbidocs.rbi.org.in/rdocs/notification/PDFs/
NT744BD1CEE45A60477482568509F5C5FD9F.PDF

 Access for Non-banks to Centralised Payment Systems.

Previously, it was announced that the Reserve Bank shall encourage participation of non-banks
in Reserve Bank of India-operated Centralised Payment Systems (CPS) viz. Real Time Gross
Settlement (RTGS) and National Electronic Fund Transfer (NEFT) systems, in a phased manner.
Direct access for non-banks to CPS lowers the overall risk in the payments ecosystem. It also
brings advantages to non-banks like reduction in cost of payments, minimising dependence on
banks, reducing the time taken for completing payments, eliminating the uncertainty in finality
of the payments as the settlement is carried out in central bank money, etc. The risk of failure or
delay in execution of fund transfers can also be avoided when the transactions are directly
initiated and processed by the non-bank entities.

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12133&Mode=0
  Loans and Advances – Regulatory Restrictions.

Six years after they were announced, the Reserve Bank of India (RBI) has eased regulatory
restrictions on loans and advances to bank directors and their relatives. The threshold limit for
board approval for personal loans issued to directors of other banks has been raised to 5 crore
from 25 lakh under the revised guidelines. However, the new threshold would apply only for
grant of ‘personal loans’ and not for business loans, as stated by the banking industry officials.

Unless sanctioned by the Board of Directors/Management Committee, banks should not grant
loans and advance aggregating Rs. 5 crore and above to any relative other than spouse and
minor/dependent children of their own Chairman/Managing Directors or other Directors; any
firm in which any of the relatives other than spouse and minor/dependent children are interested
as a partner or guarantor; and any company in which any of the relatives other than spouse and
minor/dependent children is interested as a major shareholder or as a director or as a guarantor or
is in control. Provided that a relative of a director shall also be deemed to be interested in a
company, being the subsidiary or holding company, if he/she is a major shareholder or is in
control of the respective holding or subsidiary company. This includes directors of Scheduled
Co-operative Banks, directors of subsidiaries/trustees of mutual funds/venture capital funds.

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12132&Mode=0

https://www.taxscan.in/rbi-releases-regulatory-restrictions-on-loans-and-advances/124196/

 Master Direction - Reserve Bank of India [Cash Reserve Ratio (CRR) and Statutory
Liquidity Ratio (SLR)] Directions – 2021.

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12131&Mode=0

GLOSSARY

Interest subsidy Interest subsidy is the value of the tax

deductions of an individual’s or company’s
earnings resulting from interest payments on
its debt over the course of a year.
Pre-Shipment finance Pre-Shipment finance refers to the credit
 extended to the exporters prior to the shipment
of goods for the execution of the export order.
Interest Equalisation Scheme (IES) The Interest Equalisation Scheme (IES) was
implemented on 1st April 2015 to provide pre
and post-shipment export credit to exporters in
rupees. At the time, exporters were facing
increasing credit costs in their export cycles
due to the stagnation of global demand and
extended credit periods. Under the IES/Interest
Subvention meaning, the government identifies
eligible exporters and passes on the interest
equalization amount they are entitled to
directly to them. 
Amount left unclaimed Amount left unclaimed refers to the deposits
where the proceeds/maturity amount has not
been claimed for a period of 10 years or more. 
Term Deposit (TD) A term deposit is a fixed-term investment that
includes the deposit of money into an account
at a financial institution. Term deposit
investments usually carry short-term maturities
ranging from one month to a few years and
will have varying levels of required minimum
deposits.
Priority Sector Lending  Priority Sector Lending is an important role
given by the (RBI) to the banks for providing a
specified portion of the bank lending to few
specific sectors like agriculture and allied
activities, micro and small enterprises, poor
people for housing, students for education and
other low income groups and weaker sections.
Second Schedule to the Reserve Bank of India All banks which are included in the Second
Act Schedule to the Reserve Bank of India Act,
1934 are Scheduled Banks. These banks
comprise Scheduled Commercial Banks and
Scheduled Co-operative Banks. The bank's
paid-up capital and raised funds must be at
least Rs5 lakh to qualify as a scheduled bank.
Scheduled banks are liable for low-interest
loans from the Reserve Bank of India and
membership in clearinghouses.

Credit Rating Agency  A credit rating agency (CRA, also called

Centralised Payment System
a ratings service) is a company that
assigns credit ratings, which rate a debtor's
ability to pay back debt by making timely
principal and interest payments and the
likelihood of default.
A payment processing system in which one
company in an organization manages the
incoming and outgoing payments between
other companies in the same organization. The
other companies still own the invoices. 

INSOLVENCY

 Insolvency and Bankruptcy Board of India amends the Insolvency and Bankruptcy
Board of India (Insolvency Resolution Process for Corporate Persons) Regulations,
2016.

The amendment regulations enhance the discipline, transparency, and accountability in corporate
insolvency proceedings by ensuring that the Insolvency Professional, who conducts Corporate
Insolvency Resolution Process [“CIRP”], to disclose in all the communication and records, all
former names and registered office address(es) of the Corporate Debtor (CD). Further, the
interim resolution professional (IRP) or resolution professional (RP) may appoint any
professional, other than registered valuers, if he is of the opinion that the services of such
professional are required and such services are not available with the CD. Moreover, The RP is
duty bound to find out if a CD has been subject to avoidance transactions, namely, preferential
transactions, undervalued transactions, extortionate credit transactions, fraudulent trading and
wrongful trading, and file applications with the Adjudicating Authority seeking appropriate
relief. For effective monitoring, the amendment requires the RP to file Form CIRP 8 on the
electronic platform of the Board, intimating details of his opinion and determination in respect of
avoidance transactions.

 NCLAT’s grants a stay on the Videocon Resolution plan.

The National Company Law Appellate Tribunal (NCLAT) has stayed Vedanta Group’s winning
bid for debt-laden Videocon Industries after an appeal by dissenting creditors that were unhappy
with the value realised through the administered resolution. A two-judge bench headed by
officiating NCLAT chairman Ashok Iqbal Singh Cheema has stayed the implementation of the
resolution plan and adjourned the matter to September 7, and until then the company will be
continued to be managed by the resolution professional.
https://economictimes.indiatimes.com/markets/stocks/news/nclat-stays-vedantas-videocon-
resolution-plan/articleshow/84571987.cms?
utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst