ACCOUNTS FOR NRI/PIO

1. Non-Resident Ordinary Rupee Account (NRO Account) 

 NRO accounts may be opened / maintained in the form of current, savings, recurring or fixed deposit accounts. Interest rates offered by banks on NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits. 

 Account should be denominated in Indian Rupees. 

 NRI/PIO may remit from the balances held in NRO account an amount not exceeding USD one million per financial year, subject to payment of applicable taxes. 

 The limit of USD 1 million per financial year includes sale proceeds of immovable properties held by NRIs/PIOs.

2. Non-Resident (External) Rupee Account (NRE Account) 

 NRE account may be in the form of savings, current, recurring or fixed deposit accounts. 

 Account will be maintained in Indian Rupees. 

 Accrued interest income and balances held in NRE accounts are exempt from Income tax. 

 Authorised dealers/authorised banks may at their discretion allow for a period of not more than two weeks, overdrawings in NRE savings bank accounts, up to a limit of Rs.50,000. 

 Loans up to Rs.100 lakh can be extended against security of funds held in NRE Account either to the depositors or third parties.

3. Foreign Currency Non Resident (Bank) Account – FCNR

(B) Account

FCNR (B) accounts are only in the form of term deposits of 1 to 5

years  

 Account can be in any freely convertible currency.

 Loans up to Rs.100 lakh can be extended against security of funds held in FCNR (B) deposit either to the depositors or third

parties.

 The interest rates are stipulated by the Department of Banking

Operations and Development, Reserve Bank of India.

Accounts for Foreign (Currency/Person) in India

a) NRO A/c (Foreign Tourist)

1) Foreign tourists during their short visit to India can open a Non-Resident (Ordinary) Rupee (NRO) account (Current / Savings) with any Authorised Dealer bank dealing in foreign exchange. Such account can be opened up to a maximum period of 6 months.

2) Tourists can freely make local payments through the NRO account. All payments to residents exceeding INR 50,000 can be made only by means of cheques / pay orders / demand drafts.

b) EEFC A/c

1) Exchange Earners' Foreign Currency Account (EEFC) is an account maintained in foreign currency with an Authorised Dealer i.e. a bank dealing in foreign exchange.

2) It is a facility provided to the foreign exchange earners, including exporters, to credit 100% of their foreign exchange earnings to the account, so that the account holders do not have to convert foreign exchange into Rupees and vice versa,

thereby minimizing the transaction costs.

3) All categories of foreign exchange earners, such as individuals, companies, etc. who are resident in India, may open EEFC accounts.
4) An EEFC account can be held only in the form of a current

account. No interest is payable on EEFC accounts.

DICGC (Deposit Insurance and Credit Guarantee Corporation of India) - Awareness

1. What is the maximum deposit amount insured by the

DICGC?

Each depositor in a bank is insured upto a maximum of Rs.1,00,000 (Rupees One Lakh) for both principal and interest amount held by him in the same capacity.

2. Does the DICGC insure just the principal on an account or both principal and accrued interest?

The DICGC insures principal and interest upto a maximum amount of Rs. One lakh.

NEFT AND RTGS

NEFT: National Electronic Funds Transfer (NEFT)

Under this Scheme, individuals, firms and corporates can electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other

bank branch in the country participating in the Scheme.

Limit using NEFT:

There is no limit – either minimum or maximum – on the amount of funds that could be transferred using NEFT.

However, maximum amount per transaction is limited to Rs.50,000/- for cash-based remittances and remittances to Nepal.

RTGS:

Real Time Gross Settlement, which can be defined as the continuous (real-time) settlement of funds transfers individually

on an order by order basis (without netting). 'Real Time' means the processing of instructions at the time they are received rather than at some later time; 'Gross Settlement' means the settlement of funds transfer instructions occurs individually (on an instruction by instruction basis).

Limit using RTGS:

The RTGS system is primarily meant for large value transactions.

The minimum amount to be remitted through RTGS is Rs. 2 lakhs. There is no upper ceiling for RTGS transactions.

RTGS vs NEFT

NEFT is an electronic fund transfer system that operates on a Deferred Net Settlement (DNS) basis which settles transactions in

batches. Contrary to this, in the RTGS transactions are processed

continuously throughout the RTGS business hours.

DICGC (Deposit Insurance and Credit Guarantee Corporation of India)

1. Which banks are insured by the DICGC?

Commercial Banks: All commercial banks including branches of foreign banks functioning in India, local area banks and regional rural banks are insured by the DICGC.

2. What does the DICGC insure?

In the event of a bank failure, DICGC protects bank deposits that are payable in India. The DICGC insures all deposits such as savings, fixed, current, recurring, etc. except the following types of deposits.

(i) Deposits of foreign Governments;

(ii) Deposits of Central/State Governments;

(iii)Inter-bank deposits;

(iv)Deposits of the State Land Development Banks with the State co-operative bank;

(v) Any amount due on account of any deposit received outside India

(vi) Any amount, which has been specifically exempted by the corporation with the previous approval of Reserve Bank of India.

Assets portfolio of the banks

The assets portfolio of the banks is required to be classified as

(1) standard assets

(2) sub-standard assets

(3) doubtful assets and

(4) loss assets. 

Standard asset is one that does not disclose any problems and which does not carry more than normal risk attached to the business .

An asset which has been classified as NPA for a period not exceeding 12 months is considered as sub-standard asset.

Doubtful asset is one which has remained NPA for a period exceeding 12 months.

An asset which is considered uncollectible and loss has been identified by the bank or internal or external auditors or the RBI inspection and the loss has not been written off is regarded as loss asset.

SARFAESI Act

The SARFAESI Act provides for the manner for enforcement of security interests by a secured creditor without the intervention of a court or tribunal. If any borrower fails to discharge his liability in repayment of any secured debt within 60 days of notice from the date of notice by the secured creditor, the  secured creditor is conferred with powers under the SARFAESIAct to

a) Takes possession of the secured assets of the borrower, including transfer by way of lease, assignment or sale, for realizing the secured assets

b) Takeover of the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured assets,

c) Appoint any person to manage the secured assets possession of which is taken by the secured creditor, and 

d) Require any person, who has acquired any of the secured assets from the borrower and from whom money is due to the borrower, to pay the secured creditor so much of the money as if sufficient to pay the secured debt.

NPA-NON-PERFORMING ASSET & SARFAESI

Q.3. Are the customers eligible for compensation for delays beyond 7 working days?

Ans. Yes. Effective from July 1, 2011, banks have to pay compensation of Rs. 100/- per day for delays in re-crediting the amount beyond 7 working days from the date of receipt of complaint for failed ATM transactions. The compensation  has to be credited to the account of the customer without

any claim being made by the customer. If the complaint is not lodged within 30 days of transaction, the customer is not entitled for any compensation for delay in resolving his / her complaint. The customer can take recourse to the Banking Ombudsman, if the grievance is not redressed by the his/her card issuing bank within 30 days.

SARFAESI Act and Rules

SARFAESI Act (The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) 

It means once the borrower has failed to make interest or  principal payments for 90 days, the loan is considered to be a non-performing asset. 

was enacted to regulate securitization and reconstruction of financial assets and enforcement of security interest created in respect of Financial Assets to enable realization of such assets.

ATM

Q.1 What is White Label ATMs (WLAs)?

Ans. ATMs set up, owned and operated by non-banks are called White Label ATMs. Non-bank ATM operators are authorized under Payment & Settlement Systems Act, 2007 by the Reserve Bank of India.

Q.2 What should a customer take in case of failed ATM transaction at other bank/white label ATMs, when his / her account is debited?

Ans. The customer should file a complaint with the card issuing bank at the earliest. This process is applicable even if the transaction was carried out at another bank’s/non-bank’s ATM. In case of WLAs, the contact number/toll free numbers are also available for lodging complaints regarding failed transactions at their ATMs.

Q.3. Is there any time limit for the card issuing banks for recrediting the customers account for a failed ATM/WLA transaction indicated under Q. No. 5?

Ans. As per the RBI instructions, banks have been mandated to resolve customer complaints by re-crediting the customer’s account within 7 working days from the date of complaint.

Brief about RNBC

a) Residuary Non-Banking Company is a class of NBFC which is a company and has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner and not being Investment, Asset Financing, Loan Company.

b) A RNBC can accept deposits for a minimum period of 12 months and maximum period of 84 months from the date of receipt of such deposit. They cannot accept deposits repayable on demand.

NPA-NON-PERFORMING ASSET & SARFAESI

It means once the borrower has failed to make interest or principal payments for 90 days, the loan is considered to be a

non-performing asset.

SARFAESI Act and Rules

SARFAESI Act (The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002)

Register with RBI

A company incorporated under the Companies Act, 1956 and desirous of commencing business of non-banking financial institution as defined under Section 45 I(a) of the RBI Act, 1934 should comply with the following:

a) It should be a company registered under Section 3 of the companies Act, 1954

b) It should have a minimum net owned fund of Rs 200 lakh.

Deposits in NBFC:

a) Presently, the maximum rate of interest an NBFC can offer is 12.5%. The interest may be paid or compounded at rests not shorter than monthly rests.

b) The NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months and maximum period of 60 months. They cannot accept deposits repayable on demand.

c) The deposits with NBFCs are not insured.

d) The repayment of deposits by NBFCs is not guaranteed by RBI.

Difference between BANK & NBFC

NBFCs lend and make investments and hence their activities are akin to that of banks; however there are a few differences as given below:

i. NBFC cannot accept demand deposits;

ii. NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself;

iii. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.

Different types/categories of NBFCs registered with RBI:

 Asset Finance Company(AFC)

 Investment Company (IC)

 Loan Company (LC)

 Infrastructure Finance Company (IFC)

 Infrastructure Debt Fund

 Non-Banking Financial Company - Micro Finance Institution (NBFCMFI

 Non-Banking Financial Company – Factors (NBFC-Factors)

Taxation of Savings Bank Interest rates

Unlike interest on fixed deposits, interest earned on savings bank accounts is not subject to Tax Deduction at Source. However, this does not mean the interest earned on Savings accounts is

completely tax free. It is exempt upto Rs. 10,000 in a year, and if the interest you earn from Savings accounts crosses this threshold, it becomes subject to tax.

NBFC

A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit fund business.

What actually is FOREX?

India's foreign exchange reserves comprise foreign currency assets, gold and special drawing rights allocated to it by the International Monetary Fund (IMF) in addition to the reserves it has parked with the fund. Foreign exchange reserves are held and managed by the RBI.

ACCOUNTS IN A BANK

a) Minimum age to open a bank account is now 10 years.

b) Maximum Interest rate is given on FD A/c.

c) The maximum period of an FD is 10 years & for RD is 10 years.

Some points related to Interest Rates on Bank Accounts

1)Interest on Savings A/c is calculated on daily balance basis.

2) Now, All Scheduled Commercial Banks (Excluding RRBs) have the discretion to offer differential interest rates based on whether the term deposits are with or without-premature withdrawal- facility, subject to the following guidelines: 

 All term deposits of individuals (held singly or jointly) of ₹ 15 lakh and below should, necessarily, have premature withdrawal facility.

 For all term deposits other than (i) above, banks can offer deposits without the option of premature withdrawal as well.

 Banks should disclose in advance the schedule of interest rates payable on deposits i.e. all deposits mobilized by banks should be strictly in conformity with the published schedule.

What are soiled, mutilated and imperfect banknotes?

Soiled note means a note which, has become dirty due to usage and also includes a two piece note pasted together wherein both the pieces presented belong to the same note, and form the entire note

 Mutilated banknote is a banknote, of which a portion is missing or which is composed of more than two pieces.

 Imperfect banknote means any banknote, which is wholly or

partially, obliterated, shrunk, washed, altered or indecipherable but does not include a mutilated banknote.

NATIONALISATION OF BANKS 

 Nationalisation of  Imperial Bank of India and its conversion into State Bank of India in July 1955.

Conversion of 8 major State-associated banks into subsidiary banks of SBI in 1959.

 Nationalisation of 14 Indian scheduled banks in July 1969.

 Nationalisation of 6 more banks in April 1980 & Indian bank merged into Punjab National Bank.

Reserve Bank of India (RBI)

a) What do you know by currency chest?

Currency chests are operated by RBI so that they can provide

good quality currency notes to the public. However, RBI has

appointed commercial banks to open and monitor currency

chests on behalf of RBI. The cash kept in currency chests is

considered to be kept in RBI.

b) What is a small coin depot?

The bank branches are also authorised to establish Small Coin

Depots to stock small coins. The Small Coin Depots also distribute small coins to other bank branches in their area of operation.

Banking Awareness

Bank Rate 

 Bank rate is the rate of interest which is levied on Long Term loans and Advances taken by commercial banks from RBI.

MSF Rate

  MSF (Marginal Standing Facility Rate) is the rate at which banks can borrow overnight from RBI.

 This was introduced in the monetary policy of RBI for the year 2011-2012.

 Banks can borrow funds through MSF when there is a considerable shortfall of liquidity. This measure has been introduced by RBI to regulate short-term asset liability

mismatches more effectively.

IMPORTANT POINTS ON RBI

 RBI is not expected to perform the function of accepting  deposits from the general public. 

 RBI has its headquarters at Mumbai. 

 Prime lending rate is not decided by RBI. 

 Prime lending rate is decided by the individual banks. 

 RBI decides the following rates namely; Bank rate, repo rate,  reverse repo rate and cash reserve ratio. 

 RBI was set up on the recommendations of Hilton Young  commission. 

 The quantitative instruments of RBI are – bank rate policy,  cash reserve ratio and statutory liquidity ratio. 

 The objective of monetary policy of RBI is to control inflation; discourage hoarding of commodities and  encourage flow of credit into neglected sector. 

 When RBI is lender of the last resort, it means that RBI  advances credit against eligible securities. 

 Government of India decides the quantity of coins to be  minted. 

 The method which is used currently in India to issue  currency note – minimum reserve system. 

 For issuing notes, RBI is required to hold the minimum reserves of Rs. 200 crore of which note less than Rs. 115 crore is to be held in gold. 

RBI & ITS ROLE

1) RBI is the central Bank of India and controls the entire money issue, circulation and control by its monetary policies and lending policies.

2) It is also known as the lender of last resort.

3) It was established on April 1, 1935 in accordance with the

provisions of the Reserve Bank of India Act, 1934 & ntionalized

in 1949.

Main Functions

1) Monetary Authority: Formulate, implements and monitors

the monetary policy.

2) Regulator and supervisor of the financial system:

Prescribes broad parameters of banking operations within

which the country’s banking and financial system functions.

3) Manager of Foreign Exchange: Manages the Foreign

Exchange Management Act, 1999.

4) Issuer of Currency: Issues and exchanges or destroys

currency and coins not fit for circulations.
5) Development role: Performs a wide range of promotional
functions to support national objectives.
6) Bankers to the Government: performs merchant banking
function for the central and the state governments; also acts
as their banker.
7) Bankers to banks: maintains banking accounts of all

scheduled banks.

New Projects Started by Railways This Year

1. 1600 kms electrification will be done this year and 2000 km electrification will be done next year.

2. Mizoram and Manipur soon will be connected through Broad Gauge.

3. Special purpose vehicle for the Ahmedabad-Mumbai high speed corridor registered this month.

4. Broad Gauge Lumding-Silchar section in Assam will be implemented this year which will connect Barak Valley with rest of country.

5. Overnight double-decker trains will be introduced on business travel routes.

RBI Current Reserve Ratios and Policy

Rates as on 1ST December 2015

1 Bank Rate 7.75%

2 Repo Rate 6.75%

3 Reverse Repo Rate 5.75%

4 CRR 4%

5 SLR 21.5%

6 MSF 7.75%

The structure divides the banks into two categories: scheduled

banks and non-scheduled banks. However, the Reserve Bank

of India is at the center of the banking structure.

Scheduled Banks in India

The eligibility criteria exist for scheduled banks:

a) The first of which entails carrying on the business of banking in India.

b) All scheduled banks must maintain a reserve capital of 5

lakhs rupees in the Reserve Bank of India.  

c) These are registered under the second schedule of RBI Act,

1934.