Thursday, September 29, 2016

‘Doubling Farmers’ Income by 2022’ - Measures


Government of India in the Union Budget 2016-17 had announced its resolve to double the income of farmers by 2022.

The strategy to achieve this goal, inter-alia, include,
-        Focus on large budget irrigation
-        Provision of quality seeds and nutrients
-        Investments in warehousing and cold storage chains
-        Promoting food processing
-        Creation of a national farm market, removing distortions and develop infrastructure such as e-platform across 585 stations
-        Strengthening of crop insurance scheme
-        Promotion of ancillary activities like poultry, bee-keeping and fisheries.

Bank should simplify their documentation for crop loans and ensure speedy sanctioning and disbursal.

The Lead Bank Scheme should be leveraged for doubling farmer’s income by 2022. Lead banks are accordingly advised to ensure the following:
a)    Work closely with NABARD in preparation of Potential Linked Plans & Annual Credit Plans.
b)    Include ‘Doubling of Farmer’s Income by 2022’ as a regular agenda in SLBC, DCC, DLRC and BLBC.
c)    Use the benchmarks as provided by NABARD.
d)    Map the overall strategy to the agriculture/agro-ancillary lending plan of your bank.
Based on RBI circular dated 29/09/2016. For any further clarification please refer www.rbi.org.in

Credit Facilities to Minority Communities



The following communities have been notified as minority communities:
(a)     Sikhs
(b)    Muslims
(c)     Christians
(d)    Zoroastrians
(e)     Buddhists
(f)      Jains
With a view to monitor Bank’s lending to this community, data on credit assistance provided should be furnished to RBI, Ministry of Finance and Ministry of Minority Affairs, every half year ie. In Sep & March. 

The Lead Banks should furnish the relevant extracts of the agenda notes and the minutes of the meetings of the DCCs and SLBCs to the Union Ministry of Finance and Minority Affairs on a quarterly basis.
Based on RBI notification dated 29/09/2016. For any further clarification, please refer www.rbi.org.in

Aadhaar-based Authentication for Card Present Transactions



RBI has advised that banks are to ensure that all new card acceptance infrastructure deployed with effect from January 1, 2017 should be enabled for processing payment transactions using Aadhaar-based biometric authentication also.
Based on RBI notification dt 29/09/2016. For any further clarification, please refer www.rbi.org.in

Publishing of photographs of wilful defaulters



A lending institution can consider publishing the photographs of only those borrowers, who have been declared as wilful defaulters as per RBI directives.

This shall not apply to the non-whole time directors who are exempted from being considered as wilful defaulters except under special circumstances.

Banks shall formulate a policy which clearly sets out the criteria based on which the decision to publish the photographs will be taken.

The lending institutions shall not publish photographs of any other defaulting borrowers.
Based on RBI notification dated 29/09/2016. For any further clarification please refer www.rbi.org.in

Tuesday, September 13, 2016

Enhancing Credit Supply for Large Borrowers



 Definitions:
(i)     Aggregate Sanctioned Credit Limit (ASCL): The aggregate of the fund based credit limits or outstanding, whichever is higher. It would also include unlisted privately placed debt with the banking system.
(ii)   ‘Specified borrower’: A borrower having an ASCL of more than
a)                     Rs.25,000 crore at any time during FY 2017-18;
b)                    Rs.15,000 crore at any time during FY 2018-19;
c)                     Rs.10,000 crore at any time from April 1, 2019 onwards;
(iii) ‘Reference date’: The date on which a borrower becomes a ‘specified borrower’.
(iv) Normally permitted lending limit (NPLL): 50% of the incremental funds raised by the specified borrower over and above its ASCL as on the reference date, in the financial years (FYs) succeeding the FY of the reference date falls. Any funds raised by way of equity shall be deemed to be part of incremental funds;
Where a specified borrower has
·       already raised funds by way of market instruments and
·       the amount, as on the reference date is 15% or more of ASCL
the NPLL will mean 60% of the incremental funds raised by the specified borrower over and above its ASCL as on the reference date, in the financial years (FYs) succeeding the FY in which the reference date falls.
(v)   Banking system: All banks in India including RRBs and co-operative banks and branches of Indian banks abroad.
(vi) Market instruments, shall include bonds, debentures, redeemable preference shares and any other non-credit liability, other than equity.

Scope:
These guidelines will be applicable on all single counterparties of Scheduled Commercial Banks (SCBs), except other SCBs, NBFCs registered with RBI, AIFIs and HFCs registered with NHB. It will be effective from the year 2017-18 onwards.

Prudential Measures:
From 2017-18 onwards, incremental exposure to a specified borrower beyond NPLL shall be deemed to carry higher risk, hence, higher provisioning and higher risk weights will apply as under:

(i)             3 percentage points over and above the applicable provision, which shall be distributed in proportion to each bank’s funded exposure to the specified borrower.
(ii)           Additional Risk weight of 75 percentage points over and above the applicable risk weight. The additional risk weighted exposure, shall be distributed in proportion to each bank’s funded exposure to the specified borrower.

Explanation:  For the purpose of determining exposure beyond NPLL, subscription by the banking system to market instruments shall be included, except any subscription made by the banking system to the market instruments issued by a specified borrower in 2017-18 and held within the permissible prudential limits by a bank, as derived from the para  below.

Banks may, subscribe to bonds issued by the specified borrowers (over and above NPLL) in the first year, subject to investment guidelines and these being divested in the subsequent three years:
(i)   Not less than 30% by March 31, 2019
(ii) Not less than 60% by March 31, 2020
(iii)                   Not less than 100% by March 31, 2021.

All holdings by a bank of market instruments issued by a 'specified borrower' after the ‘reference date’ shall be held in the AFS/HFT category and marked to market. However, banks may, value their holdings of market instruments issued by the specified borrowers in 2017-18 at book value.
Based on RBI notification dated 25/08/2016. For any further clarification, please refer www.rbi.org.in