HELD FOR TRADING (HFT) PORTFOLIOS

 Held for Trading investment are financial assets that are held with the sole intent of generating short term profits. HFT investments are reported at its fair value on the balance sheet and any change in any the value of investment or dividend and interest income received during the period of holding will be reported in the profit and loss statement.

 The securities under HFT category have to be sold within 90 days of investment. If the bank is not able to sell the security within 90 days due to exceptional circumstances such as tight liquidity conditions or extreme volatility or market becoming unidirectional, the security should be shifted to the Available for Sale category.

WHAT IS SECONDARY MARKET?

 The secondary market, also called the aftermarket and follow on public offering is the financial market in which previously issued financial instruments such as stock, bonds, options, and futures are bought and sold.

 The term "secondary market" is also used to refer to the market for any used goods or assets, or an alternative use for an existing product or asset where the customer base is the second market (for example, corn has been traditionally used primarily for food production and feedstock, but a "second" or "third" market has developed for use in ethanol production).

 With primary issuances of securities or financial instruments, or the primary market, investors purchase these securities directly from issuers such as corporations issuing shares in an IPO or

private placement, or directly from the federal government in the case of treasuries. After the initial issuance, investors can purchase from other investors in the secondary market.

OVER-THE-COUNTER GOVERNMENT SECURITIES TRANSACTION BY FOREIGN PORTFOLIO INVESTORS (FPIS) – SETTLEMENT PERIOD 

WHAT WAS THE NOTIFICATION?

 Earlier, Foreign Portfolio Investors (FPIs) are required to settle transactions in Government Securities in the Over-the-Counter-(OTC) market on a T+2 basis.

 It has now been decided to permit FPIs to settle OTC secondary market transactions in Government Securities either on T+1 or on T+2 basis. It may be ensured that all trades are reported on the trade date itself.

SECONDARY MARKET TRANSACTIONS IN GOVERNMENT SECURITIES – NOTIONAL SHORT SALE

WHY THIS NOTIFICATION?

Earlier, market participants undertaking ‘notional’ short sale are not permitted to use securities from their HTM/AFS/HFT portfolio for delivery against the short sale.

WHAT WAS THE NOTIFICATION?

 It has now been decided that market participants undertaking ‘notional’ short sale need not compulsorily borrow securities in the repo market

 While the short selling entity may ordinarily borrow securities from the repo market, in exceptional situations of market stress (e.g. short squeeze), it may deliver securities from its own HTM/AFS/HFT portfolios

 If securities are delivered out of its own portfolio, it must be accounted for appropriately and reflect the transactions as internal borrowing. All ‘notional’ short sales must be closed by an outright purchase in the market.

 It may be ensured that the securities so borrowed are brought back to the same portfolio, without any change in book value.

 The short selling entity must adhere to the extant regulations and accounting norms governing sale or valuation of securities in its portfolios.

 The bank may frame a Board approved policy for this purpose.

WHAT ARE HELD TO MATURITY (HTM) PORTFOLIOS?

 Held to Maturity investments are investments made by the bank. which it intends to hold till maturity. Only debt securities can be classified as HTM because they have a definite maturity.

A HTM investment is reported on balance sheet at its amortized cost.

LINE OF CREDIT(LOC)

 A line of credit, abbreviated as LOC, is an arrangement between a financial institution, usually a bank, and a customer that establishes a maximum loan balance that the lender permits the

borrower to access or maintain.

 The borrower can access funds from the line of credit at any time, as long as he does not exceed the maximum amount set in the agreement and as long as he meets any other requirements set by the financial institution, such as making timely minimum payments.

EXIM BANK'S GOVERNMENT OF INDIA SUPPORTED LINE OF CREDIT OF USD 81 MILLION TO THE GOVERNMENT OF THE REPUBLIC OF RWANDA

WHAT WAS THE NOTIFICATION?

 Export-Import Bank of India (Exim Bank) has entered into an Agreement on May 24, 2017 with the Government of the Republic of Rwanda for making available to the latter, a Government of

India supported Line of Credit (LoC) of USD 81 million (USD Eighty one million only) for the purpose of financing establishment of ten Vocational Training Centers and four Business Incubation Centers in the Republic of Rwanda.

 Under the arrangement financing export of eligible goods and services from India would be allowed which are eligible for export under the Foreign Trade Policy of the Government of India

and whose purchase may be agreed to be financed by the Exim Bank under this agreement.

UTKARSH SMALL FINANCE BANK LIMITED

INCLUSION OF “UTKARSH SMALL FINANCE BANK LIMITED” IN THE SECOND SCHEDULE TO THE RESERVE BANK OF INDIA ACT, 1934

WHAT WAS THE NOTIFICATION? 

 The “Utkarsh Small Finance Bank Limited” has been included in the Second Schedule to the Reserve Bank of India Act, 1934. 

 With this announcement, Utkarsh Small Finance Bank Limited is a scheduled bank. 

EXIM BANK'S GOVERNMENT OF INDIA SUPPORTED LINE OF CREDIT OF USD 500 MILLION TO THE SBM (MAURITIUS) INFRASTRUCTURE DEVELOPMENT COMPANY LTD.

WHAT WAS THE NOTIFICATION? 

 Export-Import Bank of India (Exim Bank) has entered into an Agreement on May 27, 2017 with the SBM (Mauritius) Infrastructure Development Company Ltd. for making available to the latter, a Government of India supported Line of Credit (LoC) of USD 500 million (USD Five hundred million only) for the purpose of financing its participation through Redeemable Preference Shares in public sector entities to implement infrastructure or other projects in Mauritius. 

 Under the arrangement financing export of eligible goods and services from India would be allowed which are eligible for export under the Foreign Trade Policy of the Government of India and whose purchase may be agreed to be financed by the Exim Bank under this agreement. 

 The goods include plant, machinery and equipment and services include consultancy services. Out of the total credit by Exim Bank under this agreement, goods and services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India and the remaining 25 per cent of goods and services may be procured by the seller for the purpose of the eligible contract from outside India. 

Cheque Book Facility

 Banks shall issue cheque books to customers, whenever a request is received, through a requisition slip which is part of the cheque book issued earlier. 

 Banks are advised to provide minimum 25 cheque leaves every year, if requested, in savings bank account, free of charge.  Banks shall not insist on physical presence of any customer including senior citizens and differently abled persons for getting cheque books.

 Banks may also issue cheque books, on requisition, by any other mode as per bank’s laid down policy. 

 It is further clarified that providing such facility in BSBDA will not render the account to be classified as non-BSBDA 

 Automatic conversion of status of accounts Presently, in some banks, even fully KYC - compliant accounts are not automatically converted into ‘Senior Citizen Accounts’ on the basis of date of birth maintained in the bank’s records. Banks are advised that a fully KYC compliant account should automatically be converted into a ‘Senior Citizen Account’ based on the date of birth available in bank’s records. 

 Additional Facilities to visually impaired customers Banks are advised that the facilities provided to sick/old/incapacitated persons on Customer Service in Banks (regarding operations of accounts through identification of thumb/toe impression/mark by two independent witnesses and authorising a person who would withdraw the amount on behalf of such customers) shall also be extended to the visually impaired customers. 

 Ease of filing Form 15G/H Banks are advised to provide senior citizens and differently abled persons Form 15G/H once in a year (preferably in April) to enable them to submit the same, where applicable, within the stipulated time. (What is 15G: The bank includes deposits held in all its branches to calculate this limit. But if your total income is below the taxable limit, you can submit Forms 15G and 15H to the bank requesting them not to deduct any TDS on your interest.) 

 Door Step Banking However, in view of the difficulties faced by senior citizens of more than 70 years of age and differently abled or infirm persons (having medically certified chronic illness or disability) including those who are visually impaired, banks are advised to make concerted effort to provide basic banking facilities, such as pick up of cash and instruments against receipt, delivery of cash against withdrawal from account, delivery of demand drafts, submission of Know Your Customer (KYC) documents and Life certificate at the premises/ residence of such customers