Introduction of Digital Life Certificates for Pensioners

RBI/2014-15/343

DGBA.GAD.H- 2529/45.01.001/2014-15

December 9, 2014

The Chairman/Chief Executive Officer

All agency banks

Dear Sir

Introduction of Digital Life Certificates for Pensioners

As per the present scheme for payment of government pension, pensioners are required to furnish a life certificate in November every year to the bank concerned for continued receipt of pension without interruption. Even though this requirement has been liberalised to enable pensioners to submit their life certificate at any branch of the pension disbursing bank, several pensioners find it difficult to submit the certificates in time for various reasons.

2. In order to alleviate the hardship caused to pensioners, the Government of India has since launched “Jeevan Pramaan”, a digital life certificate based on Aadhaar Biometric Authentication, aimed at further simplifying the process of submission of life certificate and facilitating accuracy and timeliness in disbursal of pensions. In order to facilitate implementation of Jeevan Pramaan, a web portal (jeevanpramaan.gov.in) was launched by the Hon’ble Prime Minister on November 10, 2014. Copy of a brochure on Jeevan Pramaan brought out by the Ministry of Communications and Information Technology of the Government of India, explaining the details of the scheme and its benefits, is enclosed for your information.

3. To facilitate introduction of Jeevan Pramaan, the Central Pension Accounting Office, Ministry of Finance, Government of India (CPAO) has amended the Scheme of Payment of Pensions to Central Government Civil Pensioners. A copy of the relative Office Memorandum dated November 14, 2014, issued by the CPAO, enclosing Correction Slip no. 22 dated November 10, 2014, and the process for getting digital life certificates by the pensioners, is attached. Copies of the memorandum has already been sent by CPAO to all banks and to the governments of all States and Union Territories. Similar amendments to their respective pension regulations have also been made by different Central Government Ministries (e.g., Ministry of Railways and Department of Posts). The Indian Banks Association has also issued a circular dated November 22, 2014, in this regard to their member banks.

4. Once fully implemented, agency bank branches will be able to obtain information about the digital life certificate of their pensioner customers by logging on to the website of Jeevan Pramaan and searching for the certificate or by downloading through their Core Banking Systems. Pensioners will also be able to forward to their bank branches the relative link to their digital life certificate by email/sms.

5. All agency banks disbursing government pension may take necessary action to implement and benefit from the scheme and issue necessary instructions to all their branches concerned and dealing staff. Banks may, in addition, work towards creating awareness about this facility among their pensioner customers through their branches, websites and other means. Banks may also suitably amend the FAQs on pension payments posted on their websites, and provide a link to the website of Jeevan Pramaan.

Yours faithfully

(G. Sreekumar)

Chief General Manager

Non-maintenance of Minimum Balances in Savings Bank Accounts

RBI/2014-15/349

DCBR.BPD (PCB/RCB) Cir. No. 3/12.05.001/2014-15

December 12, 2014

The Chief Executive Officer

All Primary (Urban) Co-operative Banks /

State and Central Co-operative Banks (St CBs / CCBs)

Madam / Dear Sir,

Levy of Penal Charges on Non-maintenance of Minimum Balances in Savings Bank Accounts

Please refer to UBD circular UBD.PCB.Cir.No.15/12.05.001/2008-09 dated September 18, 2008 on ‘Display of information relating to interest rate and service charges’ and RPCDCircular RPCD.CO. RCB. BC. No. 36/07.51.010/2014-15 dated October 22, 2014 on ‘Customer Service in State /District Central Co-operative Banks’ advising Primary (Urban) Cooperative Banks and State and Central Co-operative Banks to display information relating to interest rates and service charges including minimum balance in savings bank account in a prescribed format in their premises as well as websites.

2. In this connection, a reference is invited to paragraph 30 of Part B of First Bi-monthly Monetary Policy Statement, 2014-15 announced on April 1, 2014, regarding ‘Developmental and Regulatory Policies’ proposing certain measures towards consumer protection. One of the proposals contained therein was that banks should not take undue advantage of customer difficulty or inattention. Instead of levying penal charges for non-maintenance of minimum balance in ordinary savings bank accounts, banks should limit services available on such accounts to those available to Basic Savings Bank Deposit Accounts and restore the services when the balances improve to the minimum required level. A reference is also invited to the recommendations of Damodaran Committee on customer service in banks which, inter-alia, recommended that ‘banks should inform the customer immediately on the balance in the account breaching minimum balance and the applicable penal charges for not maintaining the balance by SMS / Email / letter. Further, the penal charges levied should be in proportion to the shortfall observed’.

3. Taking into consideration the recommendations of Damodaran Committee and in the interest of customers, it has been decided that while levying charges for non-maintenance of minimum balance in savings bank account, Primary (Urban) Cooperative Banks and State and Central Co-operative Banks shall adhere to the additional guidelines given in theAnnex. The guidelines will come into effect from April 1, 2015.

4. These guidelines should be brought to the notice of all customers apart from being disclosed on the bank’s website.

5. In the meantime, all banks are advised to take immediate steps to update customer information so as to facilitate sending alerts through electronic modes (SMSs / emails etc) for effective implementation of the guidelines.

Yours faithfully,

(Suma Varma)

Principal Chief General Manager

Annex

Levy of charges for non-maintenance of minimum balance in savings bank account shall be subject to the following additional guidelines :

i) In the event of a default in maintenance of minimum balance / average minimum balance as agreed to between the bank and customer, the bank should notify the customer clearly by SMS / email / letter etc. that in the event of the minimum balance not being restored in the account within a month from the date of notice, penal charges will be applicable.

ii) In case the minimum balance is not restored within a reasonable period, which shall not be less than one month from the date of notice of shortfall, penal charges may be recovered under intimation to the account holder.

iii) The policy on penal charges to be so levied may be decided with the approval of the Board of the bank.

iv) The penal charges should be directly proportionate to the extent of shortfall observed. In other words, the charges should be a fixed percentage levied on the amount of difference between the actual balance maintained and the minimum balance as agreed upon at the time of opening of account. A suitable slab structure for recovery of charges may be finalized.

v) It should be ensured that such penal charges are reasonable and not out of line with the average cost of providing the services.

vi) It should be ensured that the balance in the savings account does not turn into negative balance solely on account of levy of charges for non-maintenance of minimum balance.

Review of FDI policy –Sector Specific Conditions

RBI/2014-15/339

A.P.(DIR Series) Circular No.45

December 8, 2014

To

All Category – I Authorised Dealer banks

Madam/Sir,

Foreign Direct Investment (FDI) in India – Review of FDI policy –Sector Specific conditions

Attention of Authorised Dealer Category – I (AD Category-I) banks is invited to Annex B of Schedule 1 to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000(the Principal Regulations) notified by the Reserve Bank vide Notification No. FEMA. 20/2000-RB dated 3rd May 2000, as amended from time to time whereby description of sectors/activities wherein the entry norms, sectoral cap and other conditions for sectors/activities in which FDI is permitted under Government route and Automatic route are specified. Attention of Authorised Dealer Category – I (AD Category-I) banks is also invited to Annex to A.P. (DIR Series) Circular No. 44 dated September 13, 2013.

2. The Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry, Government of India has been updating/notifying the FDI policy through issue of Consolidated FDI Policy Circular. Accordingly, Government has notified the latest FDI policy changes vide Consolidated FDI Policy Circular of 2014 dated April 17, 2014 and the same is available at Government website www.dipp.gov.in. In order to bring uniformity in the sectoral classification/conditionalities for FDI/foreign investment as notified under the Consolidated FDI Policy Circular with the FEMA Regulations, the position on Annex B of Schedule 1 to Notification No. FEMA. 20/2000-RB dated 3rd May 2000, as amended from time to time, has been suitably revised by amending the notification.

3. Reserve Bank has since amended the Principal Regulations through the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Tenth Amendment) Regulations, 2014 notified vide Notification No. FEMA. 312/2014-RB dated July 2, 2014, c.f. G.S.R. No. 798(E) dated November 13, 2014.

4. Authorised Dealer banks may bring the contents of this circular to the notice of their constituents and customers concerned.

5. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(B.P. Kanungo)

Principal Chief General Manager

Companies (Amendment) Bill, 2014 placed in the Parliament

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi approved the introduction of Companies (Amendment )Bill, 2014 in the Parliament to make certain amendments in the Companies Act, 2013.

The Companies Act, 2013(Act) was notified on 28.08.2013 and of the 470 sections in the Act, 283 sections and 22 set of rules corresponding to such sections have so far been brought into force. In order to address some issues raised by the stakeholders such as Chartered Accountants and professionals , following amendments in the Act have been proposed:

1. Omitting requirement for minimum paid up share capital, and consequential changes. (For ease of doing business)

2. Making common seal optional, and consequential changes for authorization for execution of doing business (For ease of doing business)

3. Prescribing specific punishment for deposits accepted under the new Act. This was left out in the Act inadvertently. (To remove an omission)

4. Prohibiting public inspection of Board Resolutions filed in the Registry. (to meet corporate demand)

5. Including provision for writing off past losses/depreciation before declaring dividend for the year. This was missed in the Act but included in the rules.

6. Rectifying the requirement of transferring equity shares for which unclaimed/unpaid dividend has been transferred to the IEPF even though subsequent dividend has been claimed.

7. Enabling provisions to prescribe thresholds beyond which fraud shall be reported to the Central Government (below the threshold it will be reported to the Audit Committee). Disclosures for the latter category also to be made in the Board’s Report.

8. Exemption u/s 185 (Loans to Directors) provided for loans to wholly owned subsidiaries and guarantees/securities on loans taken from banks bu subsidiaries.(This was provided under the Rules but being included in the Act as a matter of abundant caution)

9. Empowering the Audit Committee to give omnibus approvals for related party transactions on Annual Basis.(Align with SEBI Policy and increase ease of doing business)

10. Replacing ‘special resolution’ with ‘ordinary resolution’ for approval of related party transactions by non-related shareholders. (Meet problems faced by the large stakeholders who are related parties)

11. Exempt related party transactions between holding companies and wholly owned subsidiaries from the requirement of approval of non-related shareholders.

12. Bail restrictions to apply only for offence relating to fraud u/s 447. (Though earlier provision is mitigated, concession is made to Law Ministry &  Enforcement Directorate)

13. Winding up cases to be heard by 2-member bench instead of 3-member bench . (Removal of inadvertent error)

14. Special Courts to try only offences carrying imprisonment of two years or more.(To let magistrate try only minor violations)

RBI’s Final Guidelines on Bharat Bill Payment System

The Reserve Bank of India has today released the final Guidelines for implementation of Bharat Bill Payment System (BBPS).

In terms of the guidelines, the National Payments Corporation of India (NPCI) will function as the authorised Bharat Bill Payment Central Unit (BBPCU) to set the standards for BBPS processes which need to be adhered to by all operating units (Bharat Bill Payment Operating Units – BBPOUs) under the system. NPCI, as the BBPCU, will also undertake clearing and settlement activities related to the BBPS as outlined in the guidelines.

The prospective participants of the BBPS system are advised to interact with the NPCI to work out the modalities. The prospective BBPOUs may submit applications for authorisation under Payment & Settlement Systems Act, 2007 to the Reserve Bank of India from the first quarter of 2015. The exact date from which/format in which such applications for authorisation/approval can be submitted will be notified in due course.

Background

The Payment Systems Vision in India 2012-15 highlighted the existence of a huge bill payments market with a diverse and a complex biller market structure with varied national/regional players and private/state owned entities. In the Second Quarter Review of Monetary Policy 2012-13, the Reserve Bank of India announced the setting up of a Committee to finalise the modalities of implementing an electronic GIRO payment system in India. The Committee was set up under the chairmanship of Shri G. Padmanabhan, Executive Director, Reserve Bank of India to study the feasibility of implementation of an electronic GIRO payment system in the country. Subsequently, based on the recommendations of the Committee, a Giro Advisory Group was constituted under the Chairmanship of Prof. Umesh Bellur, IIT Bombay, with the objective of defining a framework that enables the creation of pan India touch points for bill payments by customers in the country, irrespective of the geographical location of the billers. The Group, which submitted its report on March 20, 2014, had recommended a tiered structure for bill payments system in the country – with a central unit setting the standards and various operating units working in accordance and adherence to the standards set for the BBPS. Accordingly, the draft guidelines for implementation of the Bharat Bill Payment System (BBPS) were placed on the Reserve Bank’s website on August 7, 2014 for public comments. The final guidelines for implementation of the Bharat Bill Payment System (BBPS) have been prepared based on public comments received on draft guidelines.

Alpana Killawala

Principal Chief General Manager

Press Release : 2014-2015/1108

RBI Guidelines for Licensing of Small Finance Banks in the Private Sector

The Reserve Bank of India released on its website today, the Guidelines for Licensing of Small Finance Banks in the Private Sector.

Key features of the Small Finance Bank guidelines are:

i) Objectives:

The objectives of setting up of small finance banks will be to further financial inclusion by (a) provision of savings vehicles, and (ii) supply of credit to small business units; small and marginal farmers; micro and small industries; and other unorganised sector entities, through high technology-low cost operations.

ii) Eligible promoters: Resident individuals/professionals with 10 years of experience in banking and finance; and companies and societies owned and controlled by residents will be eligible to set up small finance banks. Existing Non-Banking Finance Companies (NBFCs), Micro Finance Institutions (MFIs), and Local Area Banks (LABs) that are owned and controlled by residents can also opt for conversion into small finance banks. Promoter/promoter groups should be ‘fit and proper’ with a sound track record of professional experience or of running their businesses for at least a period of five years in order to be eligible to promote small finance banks.

iii) Scope of activities :

The small finance bank shall primarily undertake basic banking activities of acceptance of deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganised sector entities.

There will not be any restriction in the area of operations of small finance banks.

iv) Capital requirement: The minimum paid-up equity capital for small finance banks shall be Rs. 100 crore.

v) Promoter’s contribution: The promoter’s minimum initial contribution to the paid-up equity capital of such small finance bank shall at least be 40 per cent and gradually brought down to 26 per cent within 12 years from the date of commencement of business of the bank.

vi) Foreign shareholding: The foreign shareholding in the small finance bank would be as per the Foreign Direct Investment (FDI) policy for private sector banks as amended from time to time.

vii) Prudential norms :

The small finance bank will be subject to all prudential norms and regulations of RBI as applicable to existing commercial banks including requirement of maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). No forbearance would be provided for complying with the statutory provisions.

The small finance banks will be required to extend 75 per cent of its Adjusted Net Bank Credit (ANBC) to the sectors eligible for classification as priority sector lending (PSL) by the Reserve Bank.

At least 50 per cent of its loan portfolio should constitute loans and advances of upto Rs. 25 lakh.

viii) Transition path: If the small finance bank aspires to transit into a universal bank, such transition will not be automatic, but would be subject to fulfilling minimum paid-up capital / net worth requirement as applicable to universal banks; its satisfactory track record of performance as a small finance bank and the outcome of the Reserve Bank’s due diligence exercise.

ix) Procedure for application: In terms of Rule 11 of the Banking Regulation (Companies) Rules, 1949, applications shall be submitted in the prescribed form (Form III) to the Chief General Manager, Department of Banking Regulation, Reserve Bank of India, 13th Floor, Central Office Building, Mumbai – 400 001. In addition, the applicants should furnish the business plan and other requisite information as indicated. Applications will be accepted till the close of business as on January 16, 2015. After experience gained in dealing with small finance banks, applications will be received on a continuous basis. However, these guidelines are subject to periodic review and revision.

x) Procedure for RBI decisions :

An External Advisory Committee (EAC) comprising eminent professionals like bankers, chartered accountants, finance professionals, etc., will evaluate the applications.

The decision to issue an in-principle approval for setting up of a bank will be taken by the Reserve Bank. The Reserve Bank’s decision in this regard will be final.

The validity of the in-principle approval issued by the Reserve Bank will be eighteen months.

The names of applicants for bank licences will be placed on the Reserve Bank’s website.

Background

It may be recalled that in the Union Budget 2014-2015 presented on July 10, 2014, the Hon’ble Finance Minister announced that:

“After making suitable changes to current framework, a structure will be put in place for continuous authorization of universal banks in the private sector in the current financial year. RBI will create a framework for licensing small banks and other differentiated banks. Differentiated banks serving niche interests, local area banks, payment banks etc. are contemplated to meet credit and remittance needs of small businesses, unorganized sector, low income households, farmers and migrant work force”.

Accordingly, the draft guidelines for licensing of small banks in the private sector were formulated and released for public comments by RBI on July 17, 2014.

Several comments and suggestions were received from interested parties and public on the draft guidelines. Considering the feedback received, the guidelines have been finalised.

Alpana Killawala

Principal Chief General Manager