Basis for Charging Interest

14:12 IST
Lok Sabha

According to the Reserve Bank of India (RBI) guidelines, banks are required to charge interest rate on loans at monthly rest with effect from April 1, 2002. Charging of interest on loans at monthly rests is, however, not applicable to agricultural advances where, for the convenience of borrower, interest rests are linked to crop seasons or harvesting/marketing season. In the case of savings & term deposits, Banks are required to pay interest at quarterly or longer rests. In the case of savings deposits, at present, interest is calculated on minimum balance to the credit of the deposit account during the period from the 10th to the last day of each calendar month and credited to the account only when it is Rs.1/-or more.

On a review and in view of computerization in commercial bank branches, it is proposed that payment of interest on savings bank accounts by Scheduled Commercial Banks (SCBs) would be calculated on a daily product basis with effect from April 1, 2010.

This information was given by Minister of State for Finance, Shri Namo Narain Meena in written reply to a question raised in Lok Sabha today.

BSC/BY/GN-285/09 

RBI's Master Circulars - 1st July '09

RBI has issued Master circulars on various issues. The full list is here:
http://www.rbi. org.in/scripts/ NotificationUser .aspx

Some specific circulars from above:
FCRA -
http://www.rbi. org.in/scripts/ NotificationUser .aspx?Id= 5131&Mode= 0

FE Remittance by NRIs, PIOs etc.,:
http://www.rbi. org.in/scripts/ NotificationUser .aspx?Id= 5119&Mode= 0

FE Remittance by Residents:
http://www.rbi. org.in/scripts/ NotificationUser .aspx?Id= 5118&Mode= 0

Exports of Goods and Services:
http://www.rbi. org.in/scripts/ NotificationUser .aspx?Id= 5115&Mode= 0

Imports of Goods and Services:
http://www.rbi. org.in/scripts/ NotificationUser .aspx?Id= 5114&Mode= 0

Foreign Investment in India
http://www.rbi. org.in/scripts/ NotificationUser .aspx?Id= 5094&Mode= 0

Direct Investment by residents abroad:
http://www.rbi. org.in/scripts/ NotificationUser .aspx?Id= 5093&Mode= 0

RBI cautions Public against Fictitious Offers of Remitting Cheap Funds from Abroad

The Reserve Bank of India has advised members of public not to fall prey to
fictitious offers for release of cheap funds claimed to have been remitted by overseas
entities to banks in India / Reserve Bank of India. Members of public should also not
make any remittance towards participation in such schemes/offers from unknown
entities.
Describing the typical modality of such offers, the Reserve Bank of India
stated that certain foreign entities / individuals, including Indian residents acting as
representatives of such entities / individuals, make offers through letters / emails,
etc., of huge money in foreign currency to resident individuals / entities (including
schools / hospitals), on the pretext of helping them in their business / ventures in
India. Once the contact is established, the offer is followed by a request seeking
details of bank account of the Individuals / Indian entity and asking some amount to
be remitted to them as initial deposit / commission so that the offer money could be
transferred. Likewise, references have been also received in the Reserve Bank in
the recent past from individuals / authorised dealers seeking approvals / clarifications
for effecting remittances in foreign currency towards commission / fees for receiving
prizes won in overseas lottery schemes etc. It has also come to the notice of the
Reserve Bank that certain overseas organisations have been advising individuals /
companies / trusts in India that huge sums of money for disbursal of loans in India at
cheap rates has been kept in an account with the Reserve Bank and the funds would
be released after approval from the Reserve Bank. To substantiate their claims, even
copies of certificate / deposit receipts purported to have been issued by the Reserve
Bank are produced by such operators.
The Reserve Bank of India has today clarified that remittance in any form
towards participation in lottery schemes is prohibited under Foreign Exchange
Management Act, 1999. Further, these restrictions are also applicable to remittances
for participation in lottery-like schemes functioning under different names, such as,
money circulation scheme or remittances for the purpose of securing prize money /
awards, etc. The Reserve Bank of India has further clarified that it does not maintain
any account in the name of individuals / companies / trusts in India to hold funds for
disbursal.
G. Raghuraj
Deputy General Manager
Press Release : 2007-2008/770

NPA 2009-10

Just click here to get rates of NPA 2009-10: NPA

Banks can close old fraud cases of up to Rs 25 lakh: RBI

Banks can close old fraud cases of up to Rs 25 lakh: RBI

Mumbai
June 6, 2009

The Reserve Bank of India (RBI) has decided to relax the existing
norms on the closure of fraud cases by banks saying that banks would
be allowed, for limited statistical or reporting purposes, to close
those fraud cases involving amounts up to Rs 25 lakh, where the
investigation is on challan or chargesheet not filed in the court for
more than three years from the date of filing of first information
report (FIR) by the police or the trial in the courts, after filing of
charge sheet or challan by the police, has not started, or is in
progress.

“We had been receiving representations from various banks requesting
us to allow them to close the old cases of fraud in which all actions
at their end were completed but the investigation by police or court
cases filed by these agencies had been still pending for several
years. This has been resulting in accumulation of large number of
outstanding fraud cases in the records of banks, projecting an adverse
picture about the banks before the stakeholders or public, thereby
exposing them not only to reputational risk but also lower rating by
international agencies,” said the RBI in a notification.

With regard to the cases now being made eligible for closure, the
banks will have to submit their proposals, case wise, for closure to
the regional office of RBI under whose jurisdiction their head offices
are situated.

The cases may be closed after getting the approval of the respective
regional offices of RBI.

“The banks should maintain the record of details of such cases in a
separate ledger. Even after closure of the fraud cases for limited
statistical purposes, banks should vigorously follow up with the
investigating agencies to ensure that the investigation process is
taken to its logical conclusion. The banks should continue to ensure
that they are regularly and appropriately represented in the court
proceedings as and when required. All the relevant records pertaining
to such cases must be preserved till the cases are finally disposed of
by police or courts, as the case may be,” said the RBI.

The banks may, with the approval of their respective boards, frame
their own internal policy for closure of such fraud cases,
incorporating the above revised norms and other internal procedures as
deemed necessary, it added.

The RBI also mentioned that notwithstanding the fact that banks may
close cases of fraud even when police investigation is in progress or
cases are pending in the court of law, they should complete, within
the prescribed time frame, the process of examination of staff
accountability or conclude staff side actions.

In cases of frauds involving amounts above Rs 25 lakh, banks can close
fraud cases only after the fraud cases pending with police or court
have been finally disposed off, examination of staff accountability
has been completed, amount of fraud has been recovered or written off,
insurance claim, wherever applicable, has been settled and the bank
has reviewed the systems and procedures, identified the causative
factors, plugged the lacunae and the relative facts have been
certified by appropriate authority, which is the board or audit
committee.

[Source: The Financial Express]

RBI NBFCs - Treatment of Deferred Tax Assets/Deferred Tax Liabilities for Computaion of Capital

RBI/2008-09/494

DNBS.PD/ CC.No. 142 / 03.05.002 /2008-09 June 9, 2009

All NBFCs

Dear Sir,

Accounting for taxes on income- Accounting Standard 22- Treatment of deferred tax assets (DTA) and deferred tax liabilities (DTL) for computation of capital

NBFCs were advised vide DNBS (PD) C.C. No. 124/ 03.05.002/ 2008-09 dated July 31, 2008 that in terms of Accounting Standard 22, the tax effects of timing differences are included in the tax expense in the statement of profit and loss as deferred tax assets (DTA) (subject to the consideration of prudence) or as deferred tax liabilities (DTL) in the balance sheet.

Further that the balance in DTL account will not be eligible for inclusion in Tier I or Tier II capital for capital adequacy purpose and that DTA being an intangible asset, should be deducted from Tier I Capital.

2. In this connection it is further clarified that

a) DTL created by debit to opening balance of Revenue Reserves or to Profit and Loss Account for the current year should be included under ‘others’ of "Other Liabilities and Provisions."

b) DTA created by credit to opening balance of Revenue Reserves or to Profit and Loss account for the current year should be included under item ‘others’ of "Other Assets."

c) Intangible assets and losses in the current period and those brought forward from previous periods should be deducted from Tier I capital.

2

d) DTA computed as under should be deducted from Tier I capital:

(i) DTA associated with accumulated losses; and

(ii)The DTA (excluding DTA associated with accumulated losses) net of DTL. Where the DTL is in excess of the DTA (excluding DTA associated with accumulated losses), the excess shall neither be adjusted against item (i) nor added to Tier I capital."

3. NBFCs shall comply with all instructions as above and also contained in the circular dated July 31, 2008 in this regard meticulously.

Yours sincerely

(P Krishnamurthy)

Chief General Manager-In-Charge