Saturday, October 31, 2015

Sovereign Gold Bonds-2015-16

Government of India has decided to issue Sovereign Gold Bonds, 2015 with effect from November 05, 2015 to November 20, 2015. The issue may be closed before 20th Nov with prior notice. 

The terms and conditions of the issuance of the Bonds shall be as follows:

Who can invest:
A resident Indian in his individual capacity, or on behalf of minor child, or jointly with any other individual.

Form of Security
Will be issued as Government of India Stock. The investors will be issued a Holding Certificate which shall be eligible for conversion into de-mat form.

Date of Issue
The investors can apply in receiving offices from November 05, 2015 to November 20, 2015. However, date of issuance shall be November 26, 2015.

In units of one gram of gold and multiples thereof. Minimum investment shall be 2 grams with a maximum of 500 grams per person per fiscal year. In case of joint holding, the limit applies to the first applicant.

Issue Price
Price shall be fixed in Indian Rupees on the basis of the previous week’s simple average closing price for gold of 999 purity, published by the India Bullion and Jewellers Association Ltd. (IBJA).

2.75% fixed per annum on the amount of initial investment. Interest shall be paid in half-yearly rests and the last interest shall be payable on maturity along with the principal.

Receiving Offices
Scheduled commercial banks (excluding RRBs) and designated Post Offices.

Payment Options
Payment shall be accepted in Indian Rupees. Cheque or draft should be drawn in favour of the bank / post office, payable at the place where the applications are tendered.

i)     Repayable after 8 years from the date of issue. Pre-mature redemption is allowed from fifth year on the interest payment dates.
ii)   The redemption price shall be fixed in Indian Rupees on the basis of the previous week’s simple average closing price for gold of 999 purity, published by IBJA.

The receiving office shall inform the investor of the date of maturity of the Bonds, one month before its maturity.

Eligibility for Statutory Liquidity Ratio (SLR)
The investment in the Bonds shall be eligible for SLR.

Loan against Bonds
The Bonds may be used as collateral for loans. The LTV ratio will be as applicable to ordinary gold loan. The lien shall be marked in the depository by the authorized banks.

Tax Treatment
Interest shall be taxable. Capital gains tax treatment will be the same as that for gold.

Subscription for the Bonds may be made in the prescribed application or in any other form stating clearly the grams of gold and the full name and address of the applicant. The receiving office shall issue an acknowledgment receipt.

Nomination and its cancellation shall be allowed.

The Bonds shall be transferable.

Tradability in Bonds
The Bonds shall be eligible for trading from the date notified by RBI.

Commission for distribution
Rupee one per hundred of the total subscription. Receiving offices shall share at least 50% of such commission with the agents or sub-agents.

                                             Operational Guidelines

Forms will be received at the branches during banking hours from November 5 to 20, 2015.

Joint holding and nomination
Multiple joint holders and nominees (of first holder) are permitted.

Interest on application money
Interest will be paid at the savings bank rate from the date of realization to the settlement date. Interest has to be credited by EFT to the account of the applicant.

Cancellation of application is permitted till the closure of the issue. Partial cancellation is not permitted. No interest shall be paid if the application is cancelled.

Marking of Lien will be allowed as per the provisions of Government Securities Act, 2006.

Agency arrangement
Scheduled commercial banks may engage NBFCs, NSC agents and others to collect application forms on their behalf.

Processing through RBI’s e-kuber system
  • Bonds will be available at the branches of scheduled commercial banks and designated post offices through RBI’s e-kuber system, which can be accessed through Infinet or Internet.
  • The receiving offices will enter the data or carry out bulk upload for the subscriptions.
  • An immediate confirmation will be provided. In addition, a confirmation scroll will be provided for file uploads.
  • On the date of allotment Holding Certificates will be generated.
  • The receiving offices can download the certificates and take printouts.
  • The Holding Certificates will also be sent through e -mail to the investors.
  • On the allotment date the securities will be credited to the Demat account of the investors who have provided their account details.

Printing of Holding Certificate
Holding Certificate needs to be printed in colour on A4 size 100 GSM paper.

Servicing and follow up
Receiving offices will “own” the customer and provide necessary services with regards to this bond. They will have to preserve applications till the bonds are matured and repaid.

Based on RBI Circular dt 30/10/15. Updated on 4/11/15. Please visit for any further clarification if required…..    Poppy

Friday, October 30, 2015

No fresh permission/ renewal of permission to LOs of foreign law firms-Supreme Court’s directions

No foreign law firm shall be permitted to open any Liason Office in India till further notification. However, foreign law firms which have been granted permission prior to the date of interim order of Supreme Court, may be allowed to continue provided such permission is still in force. No fresh permission/ renewal of permission shall be granted till the policy is reviewed based on final disposal of the matter by the Hon’ble Supreme Court.

Based on RBI Circular dt 29/10/15. Please visit for any further clarification if required…..          Poppy

Subscription to National Pension System by NRIs

It has been decided, to enable National Pension System (NPS) as an investment option for NRIs under FEMA, 1999. Accordingly, NRIs may subscribe to the NPS, provided such subscriptions are made through normal banking channels and the person is eligible to invest as per the provisions of the PFRDA Act.

The subscription amounts shall be paid by the NRIs either by inward remittance or out of funds held in their NRE/FCNR/NRO account. There shall be no restriction on repatriation of the annuity/ accumulated savings.

Based on RBI Circular dt 29/10/15. Please visit for any further clarification if required…..Poppy 

Amendment to PML Rules, 2005 – ‘Officially Valid Documents’ - Change in name.

 An explanation has been inserted in the clause (d) of Rule 2. Sub rule (1) which says:

"A document shall be deemed to be an “officially valid document” even if there is a change in the name subsequent to its issuance, provided it is supported by a marriage certificate issued by the State Government or a Gazette notification, indicating such a change of name”.

Based on RBI Circular dt 29/10/15. Please visit for any further clarification if required…..Poppy

Secondary Market Transactions in Government Securities – Short Selling

Presently short sale is not allowed between CSGL account holder (custodian) and its gilt account holder (GAH). It has now been decided as under:
i.                    A custodian may undertake a short sale transaction with its GAH within the permissible short sale limits

ii.                  A custodian may put through a cover transaction with a GAH to square a short sale transaction in the related security undertaken with a market participant other than its GAH/s.

The custodians will have to tag the deal as short sale or cover while reporting the same to NDS-OM. This will be reckoned in the computation of the short sale limit utilization.

At the time of settlement at RBI, custodians will have to ensure adequate balance in their SGL failing which it will be treated as a SGL bounce with consequent penalties.

Banks and PDs have to put in place appropriate systems and internal controls and submit a duly certified report of the daily security-wise short sale position, to RBI on a monthly basis. 

Based on RBI Circular dt 29/10/15. Please visit for any further clarification if required…..Poppy

Monday, October 26, 2015

Gold Monetisation Scheme, 2015

GMS, modifies the existing ‘Gold Deposit Scheme’ (GDS) and ‘Gold Metal Loan Scheme (GML). This will mobilise gold held by households and institutions in order to facilitate its use for productive purposes and to reduce reliance on the import of gold.

Revamped Gold Deposit Scheme (R-GDS)
Basic features

i.            Deposits outstanding under the earlier Gold Deposit Scheme will be allowed to run till maturity.
ii.            All designated banks will be eligible to implement the scheme.
iii.            The principal and interest of the deposit under the scheme shall be denominated in gold.
iv.            Persons eligible to make a deposit - Resident Indians (Individuals, HUFs, Trusts including Mutual Funds/ ETFs). Deposits in joint names are allowed. The existing rules of bank deposit accounts will be applicable.
v.            All deposits shall be made at the CPTC or designated branches at the discretion of the Bank. 
vi.            Interest will start accruing from the date of conversion of gold into tradable gold bars or 30 days after the receipt of gold at the CPTC or the bank, whichever is earlier.
vii.            Gold accepted by CPTC or bank shall be treated as an item in safe custody held by the designated bank.
viii.            On the day the gold deposited, starts accruing interest, the designated banks shall translate the gold liabilities and assets in Indian Rupees by crossing the London AM fixing for Gold / USD rate with the Rupee-US Dollar reference rate announced by RBI on that day. The custom duty for import of gold will be added to arrive at the final value of gold. This approach will also be followed for valuation of gold at any subsequent dates and for the conversion of gold into Indian Rupees under the Scheme.
ix.            Reporting – The designated banks need to submit a monthly report on GMS to the RBI .
Acceptance of deposits
i.            The minimum deposit at any one time shall be raw gold equivalent to 30 grams of gold. There is no maximum limit.
ii.            All gold deposits shall be assayed at CPTC:

Types of deposits

Short Term Bank Deposit (STBD)
i.            The deposit will be for a period of 1-3 years and will be treated as their on-balance sheet liability.
ii.            The deposit will attract CRR and SLR from the date of credit. However, the stock of gold held by banks will be an eligible asset for meeting the SLR requirement.
iii.            Banks may allow whole or part premature withdrawal subject to minimum lock-in period and penalties, as determined by them.
iv.            Banks are free to fix the interest rates which shall be credited in the deposit accounts on the due dates. This can be withdrawn periodically or at maturity.
v.            Redemption on maturity will be either in Indian Rupee or in gold at the option of the depositor. The option in this regard shall be made at the time of making the deposit and shall be irrevocable.
vi.            Premature redemption shall be in Indian Rupee equivalent or gold at the discretion of the designated bank.

Medium and Long Term Government Deposit (MLTGD)
i.            The deposit will be accepted on behalf of the Central Government. 
ii.            This deposit will not be reflected in the balance sheet of the banks. It will be the liability of Central Government.
iii.            The deposit can be made for a period of 5-7 years (Medium Term) or 12-15 years (Long Term) or for such period as may be decided by the Central Government. The banks may allow whole or part premature withdrawal subject to minimum lock-in period and penalties as determined by the Central Government. Rate of interest on Medium Term deposits shall be 2.25% and that for Long Term shall be 2.5%.
iv.            Redemption including interest accrued will be only in Indian Rupee equivalent of the value of the gold and accumulated interest as per the price of gold prevailing at the time of redemption.
v.            The gold received under MLTGD will be auctioned and the proceeds will be credited to Government’s account with RBI.
vi.            RBI will maintain the Gold Deposit Accounts denominated in gold in the name of the banks that will in turn hold sub-accounts of individual depositors.

Opening of gold deposit accounts
The rules regarding opening of gold deposit accounts shall be same as applicable to any other deposit account of the bank. Those who do not have an account, shall open a gold deposit account with zero balance before tendering gold at the CPTC.
The banks will credit the STBD or MLTGD with the amount of 995 fineness gold as indicated in the advice received from CPTC, after 30 days of receipt of gold at the CPTC.

Collection and Purity Testing Centres
i.            The Central Government will notify a list of BIS certified CPTCs under the Scheme.
ii.            The banks will be free to select and authorize the CPTCs out of the list notified by the Central Government .
iii.            Each bank authorizing a CPTC to collect deposit of gold on its behalf shall ensure that its name is included in the list of such banks displayed by the CPTC.
iv.            The schedule of fees charged by the CPTCs shall be displayed at a prominent place at the centre.
v.            Before tendering the raw gold to a CPTC, the depositor shall indicate the name of the bank with whom he would like to place the deposit1.
vi.            After assaying the gold, the CPTC will issue a receipt showing the standard gold of 995 fineness on behalf of the bank indicated by the depositor. Simultaneously, the CPTC will also send an advice to the bank regarding the acceptance of deposit.
vii.            The 995 fineness equivalent amount of gold will be final and any difference in quantity or quality found after issuance of the receipt shall be settled among the CPTC, the refiner and the bank in accordance with the terms of the tripartite agreement.
viii.            The depositor shall produce the receipt issued by the CPTC to the bank branch, either in person or through post.
ix.            On submission of the deposit receipt, the bank shall issue the final deposit certificate on the same day or 30 days after the date of the tendering of gold at the CPTC, whichever is later.

Transfer of gold to the Refiners
i.            The banks will be free to select the refiners.
ii.            The CPTCs will transfer the gold to the refiners as per the terms and conditions set out in the tripartite agreement.
iii.            The bank may decide to keep the refined gold either in the vaults maintained by the refiners or at the branch itself.
iv.            The banks will pay a fee to the refiner for his services as decided mutually.
v.            The refiners shall not collect any charge from the depositor.

Tripartite agreement between the designated banks, refiners and CPTCs
i.            Every bank shall enter into a legally binding tripartite agreement with the refiners and CPTCs .
ii.            The agreement shall clearly lay down the details regarding payment of fees, services to be provided, standards of service, the details of the arrangement regarding movement of gold and rights and obligations of all the three parties in connection with the operation of the Scheme.

Utilization of gold mobilized under GMS
Gold accepted under STBD
i.            sell the gold to MMTC for minting India Gold Coins (IGC), to jewellers and to other banks participating in GMS; or
ii.            lend the gold under the GML scheme to MMTC for minting India Gold Coins (IGC) and to jewellers.
Gold accepted under MLTGD
i.            Auctioned by MMTC or any other authorized agency and sale proceeds credited to the Central Government’s account with RBI.
ii.            The entities participating in the auction may include RBI, MMTC, banks and any other notified entities.
iii.            Gold purchased by a bank may be utilized  for any purposes indicated above.

Risk management
i.            Banks are allowed to access the International Exchanges, London Bullion Market Association or make use of Over-the-counter contracts to hedge exposures to bullion prices subject to the RBI guidelines.
ii.            The banks should put in place suitable risk management mechanisms to manage the risk arising from gold price movements.
Oversight over the CPTCs and Refineries
i.            The Central Government, in consultation with BIS, NABL, RBI and IBA, may put in place appropriate supervisory mechanism over the CPTCs and the refiners.
ii.            The Central Government may take appropriate action including levy of penalties against the non-compliant CPTCs and refiners.
iii.            The Central Government may also put in place appropriate grievance redress mechanism regarding any complaints against the CPTCs.
iv.            The complaints against the banks will be handled first by the bank’s grievance redress process and then by the Banking Ombudsman of RBI.

GMS - linked Gold Metal Loan (GML) Scheme
i.            The gold mobilized under STBD may be provided to the jewellers as GML. The banks can also purchase the gold auctioned under MLTGD and extend GML to the jewellers.
ii.            The jewellers will receive the physical delivery of gold either from the refiners or from the bank.
iii.            The existing Gold (Metal) Loan (GML) Scheme operated by nominated banks will continue in parallel with GMS-linked GML scheme. All prudential guidelines for the existing GML Scheme will also be applicable to the new Scheme.
iv.            The banks other than the nominated banks shall be eligible to import gold only for redemption of the gold deposits mobilised under the STBD.
Interest to be charged
The designated banks are free to determine the interest rate to be charged on GMS-linked GML.
The tenor of GMS-linked GML will be the same as under the extant GML scheme
Based on RBI Circular dt 22/10/15. Amended up to 3/11/15. Please visit for any further clarification if required…..Poppy

Thursday, October 22, 2015

Annual Return on Foreign Liabilities and Assets by Limited Liability Partnerships

All LLPs that have received FDI and/or made FDI abroad, shall submit the Foreign Liabilities and Assets (FLA) return to the Reserve Bank of India by 15th July every year.

Based on RBI Circular dt 21/10/15. Please visit for any further clarification if required…..          Poppy

Monday, October 12, 2015

Booking of Forward Contracts- On the basis of a simple declaration

Resident individuals, firms and companies, who have actual or anticipated foreign exchange exposures, can book foreign exchange forward and FCY-INR options contracts up to USD 1,000,000 (USD one million) without any documentation on the basis of a simple declaration. While such contracts would normally be on a deliverable basis, cancellation and rebooking are permitted.
The existing facilities for Small and Medium Enterprises (SMEs) shall remain unchanged.

Based on RBI Circular dt 08/10/15. Please visit for any further clarification if required…..Poppy

Friday, October 9, 2015

Rupee Denominated trade credit

The resident importer can raise trade credit in Rupees (INR) within the following framework after entering into a loan agreement with the overseas lender:
i.        Trade credit can be raised for import of all items (except gold) permissible under the Foreign Trade Policy
ii.        Trade credit period for import of non-capital goods can be upto one year from the date of shipment or upto the operating cycle whichever is lower
iii.        Trade credit period for import of capital goods can be upto five years from the date of shipment
iv.        No extension can be permitted by the AD Category - I bank beyond the permissible period
v.        AD Category - I banks can permit trade credit upto USD 20 million equivalent per import transaction
vi.        AD Category - I banks are permitted to give guarantee, Letter of Undertaking or Letter of Comfort in respect of trade credit for a maximum period of three years from the date of shipment
vii.        The all-in-cost of such Rupee denominated trade credit should be commensurate with prevailing market conditions
viii.        All other guidelines for trade credit will be applicable for such credits.
Overseas lenders of Rupee (INR) denominated trade credits will be eligible to hedge their exposure in Rupees through permitted derivative products in the on-shore market with an AD Category - I bank in India.

Based on RBI Circular dt 10/09/15. Please visit for any further clarification if required…..Poppy

Individual Housing Loans: Rationalisation of Risk-Weights and LTV Ratios

It has been decided to fix the Loan to Value (LTV) ratios and risk weights for individual Housing Loans as under:
Category of loan
LTV ratio (%)
Risk Weight (%)
Upto ₹ 30 lakh
≤ 80
> 80 and ≤ 90
Above ₹ 30 lakh and upto ₹ 75 lakh
≤ 75
> 75 and ≤ 80
Above ₹ 75 lakh
≤ 75

Based on RBI Circular dt 08/10/15. Please visit for any further clarification if required…..          Poppy