SIMPLIFYING NORMS FOR PERIODICAL UPDATION OF KYC

Notification No: RBI/2013-14/161

Date: 25^th July 2013

Please refer to paragraph 4 of our circular RPCD.CO.RRB.No.BC. 50/03.05.33(E)/2007-08 dated February 27, 2008 and RPCD.CO.RF.AML.BC.No. 51/07.40.00/2007-08 dated February 28, 2008 on Know Your Customer (KYC) Norms / Anti-Money Laundering (AML) Standards/Combating of Financing of Terrorism (CFT) which states that “Banks should introduce a system of periodical updation of customer identification data (including photograph/s) after the account is opened. The periodicity of such updation should not be less than once in five years in the case of low risk category customers and not less than once in two years in case of high and medium risk categories”.

The issue has been reviewed in the light of practical difficulties/constraints expressed by bankers/customers in obtaining/submitting fresh KYC documents at frequent intervals as the relative documents submitted earlier specially by low-risk customers have remained unchanged in most of the accounts. Accordingly, based on the suggestions received, it has been decided to amend the instructions as under:

a) Banks would need to continue to carry out on-going due diligence with respect to the business relationship with every client and closely examine the transactions in order to ensure that they are consistent with their knowledge of the client, his business and risk profile and, wherever necessary, the source of funds.

b) Full KYC exercise will be required to be done at least every two years for high risk individuals and entities.

c) Full KYC exercise will be required to be done at least every ten years for low risk and at least every eight years for medium risk individuals and entities.

d) Positive confirmation (obtaining KYC related updates through e-mail/letter/telephonic conversation/forms/interviews/visits, etc.), will be required to be completed at least every two years for medium risk and at least every three years for low risk individuals and entities.

e) Fresh photographs will be required to be obtained from minor customer on becoming major.

Regards

CA. Mona Singhal

Partner

Arpit Gupta & Associates

Chartered Accountants

701, Nirmal Tower,

26, Barakhamba Road,

Connaught Place, Delhi-110001

Mobile:- +91-9873082769 

Website: www.caaga.co.in

                                                     LENDING AGAINST GOLD

Notification No – RBI/2012-13/541

Dated: – 25^th June 2013

Please refer to paragraph 98 of the Monetary Policy Statement 2013-14 announced on May 3, 2013 on lending against gold, proposing to restrict the facility of advances against the security of gold coins per customer to gold coins weighing up to 50 gms.

As per extant instructions contained in our circular DBOD.Leg.BC.95/C.124 (P) - 78 dated July 22, 1978, RRBs should not grant any advance against gold bullion.

RRBs are, however, currently permitted to grant advances against gold ornaments and jewellery subject to Board approved policies in terms of our circular DBOD.No.BC.138/21.01.023/94 dated November 22, 1994.

Advances may also be granted against specially minted gold coins sold by banks which may not be in the nature of “bullion” or “primary gold”.

However, as pointed out in the monetary policy statement, there is a risk that some of these coins would be weighing much more, thereby circumventing the Reserve Bank’s guidelines regarding restriction on grant of advance against gold bullion. Accordingly, it is advised that while granting advance against the security of specially minted gold coins sold by banks, RRBs should ensure that the weight of the coin(s) does not exceed 50 grams per customer and the amount of loan to any customer against gold ornaments, gold jewellery and gold coins (weighing up to 50 grams) should be within the Board approved limit.

Advance against units of gold Exchange Traded Funds (ETF) and gold Mutual Funds is not permitted. As these products are backed by bullion/primary gold, it is clarified that the restriction on grant of loan against “gold bullion” stipulated in terms of our circular dated July 22, 1978 referred to at para 2 above, will also be applicable to grant of advance against units of gold ETFs and units of gold Mutual Funds.

Regards

CA. Mona Singhal

Partner

Arpit Gupta & Associates

Chartered Accountants

701, Nirmal Tower,

26, Barakhamba Road,

Connaught Place, Delhi-110001

Mobile:- +91-9873082769 

Website: www.caaga.co.in 

ACKNOWLEDGEMENT BY RRBS AT THE TIME OF SUBMISSION OF FORM 15-G / 15-H

Notification:- RBI/2012-13/542

Dated: 24/06/2013

RRBs are not required to deduct TDS from depositors who submit declaration in Form 15-G/15-H under Income Tax Rules, 1962.

However, it has been brought to our notice that despite submission of Form 15-G/15-H by customers, RRBs are deducting tax at source, at times, causing inconvenience to customers resulting in a number of complaints.

Such instances arise because either the forms are misplaced or a track is not kept of forms received in the branches.

The matter has been examined with a view to protect interest of the depositors and for rendering better customer service, RRBs are advised to give an acknowledgment at the time of receipt of Form 15-G/15-H.

This will help in building a system of accountability and customers will not be put to inconvenience due to any omission on part of the banks.

Regards

CA. Mona Singhal

Partner

Arpit Gupta & Associates

Chartered Accountants

701, Nirmal Tower,

26, Barakhamba Road,

Connaught Place, Delhi-110001

Mobile:- +91-9873082769 

Website: www.caaga.co.in 

PRUDENTIAL NORMS FOR OFF-BALANCE SHEET EXPOSURES OF BANKS – DEFERMENT OF OPTION PREMIUM

Notification No.:-RBI/2012-13/535
Dated:-18/06/2013

Banks are permitted to defer, at their discretion, the premium on plain vanilla options sold by them to users subject to certain conditions with effect from January 25, 2012. It has now been decided to extend this facility to cost reduction forex option structures in which the liability of the users never exceeds the net premium payable to the bank under any scenario. This facility would be subject to the following conditions:

     i.        Banks should carry out necessary due diligence with regard to the ability of users to adhere to the premium payment schedule, in accordance with their Board approved policy in this regard, before extending this facility to the users.

    ii.        Payment of premium for option structure with maturity of more than 1-year may be deferred, provided the premium payment period does not extend beyond the maturity date of the contract.

  iii.        The premium should be received uniformly over the maturity of the contract and the periodicity of such payment should be at least once in a quarter.

  iv.        This facility should not be allowed for the contracts which are on past performance basis.

2. Such option structures would continue to be governed by instructions (as amended from time to time) on

·         Suitability and appropriateness as regards structured derivative products laid down in ‘Comprehensive Guidelines on Derivatives: Modifications’ dated November 2, 2011 issued by Department of Banking Operations and Development, RBI; and

·  Cost Reduction Structures as laid down in Master Circular on ‘Risk Management and Inter-Bank Dealings’ dated July 2, 2012 issued by Foreign Exchange Department, RBI.

Regards

CA. Mona Singhal

Partner

Arpit Gupta & Associates

Chartered Accountants

701, Nirmal Tower,

26, Barakhamba Road,

Connaught Place, Delhi-110001

Mobile:- +91-9873082769 

Website: www.caaga.co.in

FOREIGN DIRECT INVESTMENT – REPORTING OF ISSUE / TRANSFER OF SHARES TO/BY A FVCI

RBI/2012-13/529 A.P. (DIR Series) Circular No.110

Dated:- 12/06/2013

1. Attention of Authorised Dealers Category-I (AD Category - I) banks is invited to Regulations 9 and 10 and para 9 of Schedule I to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 notified vide Notification No. FEMA 20/2000 -RB dated May 3, 2000 (hereinafter referred to as Notification No. FEMA 20), as amended from time to time. Attention of AD Category - I banks is also invited to A. P. (DIR Series) Circular No. 44 dated May 30, 2008 and A.P. (DIR Series) Circular No.63 dated April 22, 2009.

2. In terms of the said regulations, transfer of equity shares / fully and mandatorily convertible debentures/ fully and mandatorily convertible preference shares (hereinafter referred to as ‘shares’) of an Indian company, from a person resident outside India (non-resident) to a person resident in India (resident) or vice versa, has to be reported to an Authorized Dealer bank within 60 days of transactions. Further, the receipt of consideration for issue of shares as well as the issue of shares of an Indian company, to a non-resident has to be reported to the Reserve Bank of India through an Authorized Dealer bank within 30 days of the transaction.

3. It has been observed that SEBI registered FVCIs making investments in an Indian Company under FDI Scheme in terms of Schedule 1 of Notification No. FEMA.20 / 2000 - RB dated May 3, 2000, as amended from time to time, also report the same transaction under Schedule 6 of the Notification ibid, resulting in double reporting of the transaction.

4. It is clarified that wherever a SEBI registered FVCI acquires shares of an Indian company under FDI Scheme in terms of Schedule 1 of Notification No. FEMA 20 / 2000-RB dated May 3, 2000, as amended from time to time, such investments have to be reported in form FC-GPR/FC-TRS only, as applicable. Where the investment is under Schedule 6 of the Notification ibid, no FC-GPR/FC-TRS reporting is required. Such transactions would be reported by the custodian bank in the monthly reporting format as prescribed by RBI from time to time.  Revised forms FC-GPR and FC-TRS are annexed as ANNEX-I and ANNEX-II, respectively, to this A.P.(DIR Series) Circular.

5. A SEBI registered FVCI while making investment in an Indian company may determine upfront whether the said investment is under FDI or FVCI scheme and report accordingly. For the guidance of FVCI investors, a suitable remark in para 3(4) and 5(a)(4) of form FC-GPR and para 4(4) and para 5(4) of form FC-TRS, has been incorporated, which would read as follows:

‘The investment/s made by SEBI registered FVCI is/are under FDI Scheme, in terms of Schedule 1 to Notification No. FEMA 20 dated May 3, 2000.’

6. Reserve Bank has since amended the Regulations vide Notification No.FEMA.266/2013-RB dated March 05, 2013 and notified vide G.S.R.No.341(E) dated May 28, 2013.

Regards

CA. Mona Singhal

Partner

Arpit Gupta & Associates

Chartered Accountants

701, Nirmal Tower,

26, Barakhamba Road,

Connaught Place, Delhi-110001

Mobile:- +91-9873082769 

Website: www.caaga.co.in

FRAUD MONITORING CELL OF RESERVE BANK OF INDIA, TO FUNCTION FROM BENGALURU FROM JULY 1, 2013

RBI Cir. No.:- 55/12.05.001/2012-13
Dated :- June 13, 2013

Please refer to the Press Release No. 2012-2013/2045 dated June 5, 2013 hosted on the RBI website.

It would be observed that the Fraud Monitoring Cell attached to the Department of Banking Supervision, Central Office (DBS, C.O.) will start operations from the premises of Bengaluru Regional Office of Reserve Bank of India from July 1, 2013. You are therefore advised to take note of the new address of the Fraud Monitoring Cell of DBS, C.O. and file fraud reports, furnish response to the existing letters from them and address fresh letters if any, to the new address at Bengaluru from June 14, 2013 onwards. The address of the Central Fraud Monitoring Cell of DBS, Central Office is given below:-

Central Fraud Monitoring Cell
Department of Banking Supervision,
Reserve Bank of India, 10/3/8, Nruputhunga Road,
P.B. No. 5467
Bengaluru – 560001.
Phone No: - +91 80 22244120
Fax No.: +91 80 22127754

Regards

CA. Mona Singhal

Partner

Arpit Gupta & Associates

Chartered Accountants

701, Nirmal Tower,

26, Barakhamba Road,

Connaught Place, Delhi-110001

Mobile:- +91-9873082769 

Website: www.caaga.co.in

EXPORT OF GOODS AND SOFTWARE – REALISATION AND REPATRIATION OF EXPORT PROCEEDS – LIBERALISATION

RBI/2012-13/503 A.P. (DIR Series) Circular No. 105

1.   Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to A.P. (DIR Series) Circular No. 52 dated November 20, 2012 extending the enhanced period for realization and repatriation to India, of the amount representing the full  value of goods or software exported, from six months to twelve months from the date of export. This relaxation was available up to March 31, 2013.

2.   The issue has since been reviewed and it has been decided, in consultation with the Government of India, to bring down the above stated realization period from twelve months to nine months from the date of export, with immediate effect, valid till September 30, 2013.

3.   The provisions in regard to period of realization and repatriation to India of the full export value of goods or software exported by a unit situated in a Special Economic Zone (SEZ) as well as exports made to warehouses established outside India remain unchanged.

Regards

CA. Mona Singhal

Partner

Arpit Gupta & Associates

Chartered Accountants

701, Nirmal Tower,

26, Barakhamba Road,

Connaught Place, Delhi-110001

Mobile:- +91-9873082769 

Website: www.caaga.co.in

CLEAN NOTE POLICY

RBI/2012-13/500

DCM (NPD) No.5133/ 09.39.000/2012-13

1.   In recent periods, instances of certain branches of banks continues to follow old practices like stapling, writing number of note pieces in loose packets on watermark window of notes disfiguring the watermark impression and rendering it difficult for easy recognition have come to our notice. Further, it has also been observed that certain bank branches do not sort notes into re-issuables and non-issuables, and issue soiled notes to public. Such practices are against the “Clean Note Policy” of Reserve Bank of India.

2.  In this connection we invite a reference to Reserve Bank of India’s Directive DBOD No. Dir. BC. 43/13.03.00/2001-02 dated November 7, 2001 and reiterate that:

a)   banks should do away with stapling of any note packet and instead secure note packets with paper bands,

b)   banks should sort notes into re-issuables and non-issuables, and issue only clean notes to public; and,

c) banks should forthwith stop writing of any kind on watermark window of bank notes.

Regards

CA. Mona Singhal

Partner

Arpit Gupta & Associates

Chartered Accountants

701, Nirmal Tower,

26, Barakhamba Road,

Connaught Place, Delhi-110001

Mobile:- +91-9873082769 

Website: www.caaga.co.in

CHANGE IN BANK RATE Notification:RBI/2012-13/488 DBOD.No.Ret.BC.91 /12.01.001/2012-13 Dated: 03/05/2013 1.   The Bank Rate rate at which RBI allows finance to commercial banks. Bank Rate is a tool, which central bank uses for short-term purposes. stands adjusted by 25 basis points from 8.50 per cent to 8.25 per cent with effect from May 3, 2013. 2.   All penal interest rates on shortfall in reserve requirements, which are specifically linked to the Bank Rate, also stand revised as indicated in Annex. Annex Penal Interest Rates which are linked to the Bank Rate Item Existing Rate Revised Rate (Effective from May 3, 2013) Penal interest rates on shortfalls in reserve requirements (depending on duration of shortfalls) Bank Rate plus 3.0 percentage points (11.50 per cent) or Bank Rate plus 5.0 percentage points (13.50 per cent). Bank Rate plus 3.0 percentage points (11.25 per cent) or Bank Rate plus 5.0 percentage points (13.25 per cent).

Regards

CA. Mona Singhal

Partner

Arpit Gupta & Associates

Chartered Accountants

701, Nirmal Tower,

26, Barakhamba Road,

Connaught Place, Delhi-110001

Mobile:- +91-9873082769

Website:- www.caaga.co.in