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Registration RNI No.

67802/98
Postal Regn. No.CHD/0001/2015-17
Posted at - MBU Chandigarh on 7th/10th

events

B anking
Update

Volume - XIX No.01 January 2016


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Contents of this Issue


BANKING POLICY : 2
Old series bank notes - prior 2005
Mobile banking transactions
Cross currency futures / options
SLR holdings under HTM
Evidence of Imports

BANKING FEATURES : 4-8, 20

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Marginal Cost based Lending Rate


Interest Equalization Scheme
Masala Bonds
Maintenance of SLR Rules
Central KYC Records Registry

DIARY OF EVENTS : Dec-2015: 9


Policy, Economy
Banking Developments
Capital Markets & Insurance
General Awareness : 13
Multi-Option questions:15-18
Data Bank : 20

for Online Mock Tests


www.nstoorbankingonline.com
Editor in Chief - Sh. N S Toor

We wish our readers, a very happy and prosperous new year 2016

Banking events updatE January 2016

Market Participants can take positions in cross-currency


futures and exchange traded cross-currency option conOn a review of the matter, RBI decided (Dec 23, 2015)
tracts without establishing underlying exposure subject
to extend the date for exchanging the pre-2005 banknotes to June 30, 2016. to the position limits as prescribed by the exchanges.
However, from January 01, 2016, such facility will be available only at identi- The existing position limits of USD 15 million for USD-INR
fied bank branches and Issue Offices of RBI.
contracts and USD 5 million for non USD-INR contracts,
Banks have been advised to facilitate the exchange of such notes without all put together, per exchange, shall remain unchanged.
causing any inconvenience to the public, whatsoever. These notes will retain AD Category-I banks can undertake trading in all permittheir legal tender status.
ted exchange traded currency derivatives within their
Further banks have been asked to stop re-issue of the pre- 2005 series Net Open Position Limit (NOPL) subject to limits stipubanknotes and ensure that such notes are not dispensed through the ATMs / lated by the exchanges (for the purpose of risk manageover counters.
ment and preserving market integrity) provided that any
synthetic USD-INR position created using a combination
Priority Sector Lending Targets and Classification for RRBs
RBI issued (Dec 03, 2015) comprehensive revised guidelines on Priority Sec- of exchange traded FCY-INR and cross-currency contor Lending for Regional Rural Banks to be implemented w.e.f. 1.1.2016. tracts shall have to be within the position limit prescribed
by the exchange for the USD-INR contract.
Some of the salient features of the guidelines are as under:1. PS Lending Targets: 75% of total outstanding.
When Issued transactions in Govt. Securities
2. Agriculture: 18%% of total outstanding.
RBI permitted (Dec 10, 2015) scheduled commercial
3. Small and Marginal Farmers: 8% of total outstanding*
banks to take short positions in 'When Issued' (WI) mar4. Micro Enterprises: 7.5% of total outstanding**
ket for both new and reissued securities. RBI also al5. Weaker Sectors: 15% of total outstanding.
lowed other eligible entities viz., mutual funds, insurance
(* RRBs that have not achieved the 8% sub target may achieve in a phased companies, pension funds, housing finance companies,
manner i.e. 7% by March 2016 and 8% by March 2017.)
NBFCs and UCBs to take long position in the WI market.
(**RRBs that have not achieved the 7.5% sub target may achieve in a The open position limits in the WI market have been
phased manner i.e. 7% by March 2016 and 7.5% by March 2017.)
revised and will be subject to the following limits both in
case of new securities as well as reissued securities:
Mobile Banking Transactions in India - Operative Guidelines for
1. Primary Dealers and scheduled commercial banks :
Banks Customer Registration for Mobile Banking
Given the high mobile density in the country, the policy focus of RBI has been Long position - No limits, short position - Not exceeding
to encourage banks to leverage on the mobile channel for widening the ac- 5% of the notified amount
cess to banking services. Irrespective of whether the services are offered 2. Other eligible entities : Long position - No Limits,
through SMS, USSD or application channels, customer registration for mobile Short position - Not Permitted
banking is critical. Towards this end, RBI has been reiterating the need for Further, aggregate net short positions (sum of all net
simplification of procedure and greater degree of standardization in proce- short positions across all entities) in a new security will
be capped at 90% of the notified amount and the same
dures relating to registering of customers for mobile banking.
Mobile Banking Registration through ATMs: National Payment Corporation of will be monitored on NDS-OM.
India (NPCI) has developed the mobile banking registration service / option on In case an entity with a net short position is unable to
the National Financial Switch (NFS) and the service is ready to be deployed on deliver securities after the auction on the settlement
date, the transaction will be settled as per the default
ATMs of all the NFS member banks.
RBI advised (Dec 17, 2015) banks, participating in NFS to carry out changes settlement mechanism of CCIL.
in their respective ATM switches and enable the capability of customer regis- The requirement of reporting WI transactions on a daily
basis stands discontinued.
tration for mobile banking at all their ATMs latest by 31st March 2016.
SLR Holdings under Held to Maturity Category
Registration through other Channels and Customer Awareness: In addition
to the above, banks have been asked to strive to facilitate customer registra- Presently, all banks (including Regional Rural banks) are
tion for mobile banking through other channels including internet banking, permitted to exceed the limit of 25% of total investIVR, phone banking, etc. As customer registration is an important pre-requi- ments under HTM category provided (a) the excess comsite for offering mobile banking services, banks should also use multiple chan- prises only of SLR securities, and (b) the total SLR secunels to create awareness among their customers regarding mobile banking rities held in the HTM category are not more than 23.50%
services and options available for customer registration.
of their NDTL with effect from Jan 10, 2015, 23.0% with
effect from April 4, 2015, 22.5% with effect from July
Cross-Currency Futures and Exchange Traded Option Contracts
At present, persons resident in India and persons resident outside India viz., 11, 2015 and 22.0% with effect from Sept 19, 2015.
foreign portfolio investors (FPIs) can participate in the currency futures and The SLR was reduced to 21.50% of NDTL w.e.f. Feb 7,
exchange traded currency options market in India. They can trade in US 2015. Further, it shall be progressively brought down by
Dollar (USD) - Indian Rupee (INR), Euro (EUR)-INR, Pound Sterling (GBP)-INR 0.25% every quarter till March 31, 2017. Concurrently it
and Japanese Yen (JPY)-INR currency futures contracts and USD-INR cur- shall reduce the abovementioned ceiling on SLR holdings
under HTM in alignment with the SLR requirement.
rency option contract in recognized stock exchanges.
RBI permitted (Dec 10, 2015) the recognized stock exchanges to offer cross- RBI advised (Dec 10, 2015) that banks can exceed 25%
currency futures contracts and exchange traded option contracts in the cur- limit of total investments under HTM category provided:
rency pairs of EUR-USD, GBP-USD and USD-JPY and also offer exchange a. the excess comprises only of SLR securities, and
traded currency option contracts in EUR-INR, GBP-INR and JPY-INR in addi- b. the total SLR securities held under the HTM category
tion to the existing USD-INR option contract.
are not more than:

ANKING
POLICY

Old Series Banknotes : prior to 2005

(COMPILATION- SAPANDEEP TOOR & MANJOT TOOR, in Sydney, Australia - on the basis of information available on RBI Website)

Banking events updatE January 2016

CORRESPONDENCE

21.50% from January 9, 2016


21.25% from April 2, 2016;

COURSE

21.00% from July 9, 2016;


20.75% from October 1, 2016;
20.50% from January 7, 2017.

As per extant instructions, banks may shift investments to/from HTM with the approval
of the Board of Directors once a year and such shifting will normally be allowed at the
beginning of the accounting year. RBI decided to allow such shifting of the excess
securities, as also direct sale from HTM category, at the beginning of every quarter
when the HTM ceiling is brought down. This would be in addition to the shifting permitted
at the beginning of the accounting year, i.e., in the month of April. Such transfer to AFS/
HFT category as well as sale of securities from HTM category, to the extent required to
reduce the SLR securities in HTM category in accordance with the regulatory instructions, would be excluded from the 5% cap prescribed for value of sales and transfers of
securities to/from HTM category.
Investment by Foreign Portfolio Investors (FPI) in Corporate Bonds
As per extant RBI guidelines, all future investments by Foreign Portfolio Investors (FPI)
in NCDs/bonds are to be made in securities with a min residual maturity of three years.
On a review, RBI decided (26.11.15) to permit FPI to acquire NCDs/bonds, which are
under default, either fully or partly, in the repayment of principal on maturity or principal
installment in the case of amortising bond. The revised maturity period of such NCDs/
bonds, restructured based on negotiations with the issuing Indian company, should be
three years or more.
Such investment should be within the overall limit prescribed for corporate debt from
time to time (currently Rs. 2443.23 billion). All other existing conditions for investment
by FPIs in the debt market remain unchanged.
Advance Remittance for Import of aircrafts /helicopters / other aviation
related purchases
As per extant RBI guidelines, AD Category I banks could allow advance remittance,
without bank guarantee or an unconditional, irrevocable standby letter of credit up to
USD 50 million, in the case of import of aircrafts/ helicopters/ other aviation related
purchases by scheduled air transport operators permitted by the Director General of
Civil Aviation (DGCA), after ensuring that the requisite approval of the Ministry of Civil
Aviation (MoCA)/ DGCA / other agencies in terms of the extant Foreign Trade Policy, had
been obtained by the company for import.
The Director General of Foreign Trade vide Notification dated October 9, 2015 has
announced that the approval from MoCA will not be required. (RBI direction 26.11.15)
Import of Goods into India Evidence of Import
As per extant RBI policy (19.10.2003), an importer has to submit as evidence of import,
(a) the exchange control copy of the Bill of Entry for home consumption; (b) the exchange control copy of the Bill of Entry for warehousing, in the case of 100% Export
Oriented Units (EOUs); or (c) Customs Assessment Certificate or Postal Appraisal Form
as declared by the importer to the Customs Authorities.
RBI advised AD banks (26.11.15) to consider the Bill of Entry issued by Customs Authorities (in Free Trade Warehouse Zones / SEZ Unit warehouse) named as Ex-Bond Bill of
Entry or by any other similar nomenclature, as evidence for physical import of goods.
Further, in cases where goods have been imported through couriers, the Courier Bill of
Entry, as declared by the courier companies to the Customs Authorities, may also be
considered as evidence of import of goods.
Bank Finance to Factoring Companies
In terms of extant RBI guidelines, banks can extend financial assistance to support the
factoring business of Factoring Companies complying with certain criteria, which, interalia, included:
They derive at least 75% of their income from factoring activity.
The receivables purchased / financed, irrespective of whether on with recourse or
without recourse basis, form at least 75% of the assets of the Factoring Company.
The criteria regarding asset and income of factoring companies eligible for bank finance
have been revised by RBI (26.11.15) to 50% from 75%.

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Banking events updatE January 2016

Marginal Cost Based Lending Rate


To improve the efficiency of monetary policy transmission, RBI advised banks (Dec 17, 2015) to move to marginal-cost-of-funds-based determination of their Base Rate
and follow the following guidelines to price their advances:
a) Internal Benchmark : i. All rupee loans sanctioned and
credit limits renewed w.e.f. April 1, 2016 to be priced
w.r.t. Marginal Cost of Funds based Lending Rate (MCLR).
It will be internal benchmark for such purposes.
ii. The MCLR will comprise of (a) Marginal cost of funds;
(b) Negative carry on account of CRR; (c) Operating costs;
(d) Tenor premium.
iii. Marginal Cost of funds: It has two components (a)
Marginal cost of borrowings and (b) return on networth.
iv. Negative Carry on mandatory CRR: It arises due to return on CRR balances being nil. It will be calculated as:
Required CRR x (marginal cost) / (1- CRR)
The marginal cost of funds arrived at (iii) above will be
used for arriving at negative carry on CRR.
v. Operating Costs: All operating costs associated with providing the loan product including cost of raising funds will
be included. The costs of providing those services which
are separately recovered by way of service charges should
not form part of this component.
vi. Tenor premium: These costs arise from loan commitments with longer tenor. The change in tenor premium
should not be borrower or loan class specific. It should
be uniform for all types of loans for a given residual tenor.
vii. MCLR is a tenor linked benchmark. Hence banks shall
arrive at MCLR of a particular maturity by adding the corresponding tenor premium to sum of Marginal cost of funds,
Negative carry on account of CRR and Operating costs.
viii. Banks are to publish the internal benchmark for the
following maturities: (a) overnight MCLR, (b) one-month
MCLR, (c) three-month MCLR, (d) six month MCLR, (e)
One year MCLR. In addition, banks can publish MCLR of
any other longer maturity.
b) Spread : Banks should have a Board approved policy
delineating the components of spread charged to a customer. The policy shall include principles:
a. To determine quantum of each component of spread.
b. To determine range of spread for a given category of
borrower / type of loan.
c. To delegate powers in respect of loan pricing.
Component of spread : The banks shall adopt the following broad components of spread:
a. Business strategy: The component will be arrived at
taking into consideration the business strategy, market
competition, embedded options in the loan product, market liquidity of the loan etc.
b. Credit risk premium: The credit risk premium charged
to the customer representing the default risk arising from
loan sanctioned should be arrived at, based on an appropriate credit risk rating/scoring model and after taking
into consideration customer relationship, expected losses,
collaterals, etc.
iii. The spread charged to an existing borrower should
Compilation : Arundeep Toor (Sydney - Australia) (Source RBI Website).

BANKING FEATURES
not be increased except on account of deterioration in
the credit risk profile of the customer. Any such decision
regarding change in spread on account of change in credit
risk profile should be supported by a proper risk profile
review of customer. This stipulation is not applicable to
loans under consortium / multiple banking arrangements.
c) Interest Rates on Loans
i. Actual lending rates will be determined by adding the
components of spread to the MCLR. There will be no
lending below the MCLR of a particular maturity for all
loans linked to that benchmark.
ii. The reference benchmark rate used for pricing the
loans should form part of the terms of the loan contract.
d) Exemptions from MCLR
i. Loans covered by schemes formulated by Govt. of India
wherein banks have to charge interest rates as per the
scheme.
ii. Working Capital Term Loan (WCTL), Funded Interest Term
Loan (FITL), etc. granted as part of the rectification/restructuring package.
iii. Loans granted under various refinance schemes formulated by Govt. of India or any Government Undertakings wherein banks charge interest at the rates prescribed
under the schemes to the extent refinance is available.
Interest rate charged on the part not covered under refinance should adhere to the MCLR guidelines.
iv. The following loans can be priced without being linked
to MCLR as the benchmark for determining interest rate:
(a) Loan to banks depositors against their own deposits.
(b) Loan to banks own employees including retired employees.
(c) Advances granted to the Chief Executive Officer / Whole
Time Directors.
(d) Loans linked to a market determined external benchmark.
(e) Fixed rate loans granted by banks. However, in case of
hybrid loans where the interest rates are partly fixed and
partly floating, interest rate on the floating portion should
adhere to the MCLR guidelines.
e) Review of MCLR
i. Banks shall review and publish their MCLR of different
maturities every month on a pre-announced date with
the approval of the Board or any other committee, to
which powers have been delegated.
ii. Banks not having adequate systems to carry out the
review of MCLR on a monthly basis, may review their rates
once a quarter on a pre-announced date for the first
one year i.e. upto March 31, 2017. Thereafter, they should
adopt the monthly review system.
f) Reset of interest rates
i. Banks may specify interest reset dates on their floating
rate loans. Banks can offer loans with reset dates linked
either to the date of sanction of the loan/credit limits or
to the date of review of MCLR.
ii. MCLR prevailing on the day the loan is sanctioned, will
be applicable till the next reset date, irrespective of the
changes in the benchmark during the interim.
iii. The periodicity of reset shall be one year or lower.

BANKING FEATURES
The exact periodicity of reset shall form part of terms of loan contract.
g) Treatment of interest rates linked to Base Rate charged to existing
borrowers
i. Existing loans and credit limits linked to the Base Rate may continue till
repayment or renewal, as the case may be.
ii. Banks will continue to review and publish Base Rate as hitherto.
iii. Existing borrowers will also have the option to move to the Marginal
Cost of Funds based Lending Rate (MCLR) linked loan at mutually acceptable terms. However, this should not be treated as a foreclosure of existing facility.
Methodology for computing marginal cost of funds
Marginal cost of funds = (Rates offered on deposits on date of review / rate at which
fund raised) x Balance outstanding as on previous day of review as a percentage of
total funds other than equity.
Notes : 1. Deposits
a) Current Deposits : The core portion of current deposits identified based on ALM
guidelines (Oct 24, 2007) should be reckoned for arriving at the balance outstanding.
b) Savings Deposits : The core portion of savings deposits identified based on ALM
guidelines (Oct 24, 2007) should be reckoned for arriving at the balance outstanding.
c) Fixed Rate Term deposits various maturities should be included.
d)Floating rate Term deposits : The rate should be arrived at based on the prevailing
external benchmark rate on the date of review.
e) Foreign currency deposits to the extent used for lending in rupees, should be
included. The swap/hedge cost of should be reckoned for computing marginal cost.
2. Borrowings
a) Short term Rupee Borrowings : Interest payable on each type of short term
borrowing will be arrived at using the average rates at which such short term borrowings
were raised in the last one month.
b) Long term Rupee Borrowings - Option 1: Interest payable on each type of borrowing will be arrived at using average rates at which such long term borrowings were
raised.
Option2: The appropriate benchmark yield for bank bonds published by FIMMDA for
valuation purposes will be used as the proxy rate for calculating marginal cost.
c) Foreign Currency Borrowings including HO borrowings by foreign banks (other
than those forming part of Tier-I capital) - FC borrowings, to the extent deployed for
lending in rupees, should be included in computing marginal cost of funds. The all-incost of raising foreign currency borrowings including swap cost and hedge cost would
be reckoned for computing marginal cost of funds.
Marginal cost of borrowings : The marginal cost of borrowings shall have a weightage
of 92% of Marginal Cost of Funds while return on networth will have the balance
weightage of 8%.
Methodology for computing Return on networth
Amount of common equity Tier 1 capital required to be maintained for Risk Weighted
Assets as per extant capital adequacy norms shall be included for computing marginal
cost of funds. Since currently, the common equity Tier 1 capital is (5.5% +2.5%) 8%
of RWA, the weightage given for this component in the marginal cost of funds will be
8%.
In case of newly set up banks (either domestic or foreign banks operating as branches
in India) where lending operations are mainly financed by capital, the weightage for
this component may be higher ie in proportion to the extent of capital deployed for
lending. This dispensation will be available for a period of three years from the date
of commencing operations.
The cost of equity will be the minimum desired rate of return on equity computed as
a mark-up over the risk free rate. Banks could follow any pricing model such as Capital
Asset Pricing Model (CAPM) to arrive at the cost of capital. This rate can be reviewed
annually.
Marginal cost of funds = 92% x Marginal cost of borrowings + 8% x Return on
networth

Banking events updatE January 2016

Submission of Form No.15G and 15H


(Section 197A of Income Tax Act)
Tax payers seeking non-deduction of tax from
incomes are to file a self declaration in Form No.
15G or 15H u/s 197A of the Income-tax Act,
1961. Central Board of Direct Taxes (CBDT) on
29.09.15 simplified the format and procedure
for self declaration in Form No.15G or 15H. The
procedure for submission of the Forms by the
deductor has also been simplified which has become effective from 01.10.2015.
Manner of furnishing 15G or 15H: The declaration may be furnished in any of the following
manners, namely:(a) in paper form;
(b) electronically after duly verifying through an
electronic process in accordance with the specified procedures, formats and standards.
Role and responsibility of the person receiving 15G or 15H (i.e. the deductor): The
deductor responsible for paying any income of
the nature referred to in of section 197A, shall
allot a unique identification number to each declaration received by him in Form No.15G and Form
No.15H respectively during every quarter of the
financial year.
The particulars of declaration received by the
deductor during any quarter of the financial year
shall be furnished along with the unique identification number allotted by him, in the statement
of deduction of tax of the said quarter.
The deductor shall furnish the statement of deduction of tax referred to above containing the
particulars of declaration received by him during
each quarter of the financial year along with the
unique identification number allotted by him irrespective of the fact that no tax has been deducted in the said quarter.
An income-tax authority may, before the end of
7 years from the end of the financial year in
which the declaration has been received, require
the deductor to furnish or make available the
declaration for the purposes of verification or
any proceeding under the Act.
Role of the Principal Director General of
Income-tax (Systems) : He shall specify the
procedures, formats and standards for furnishing and verification of the declaration, allotment
of unique identification number and furnishing or
making available the declaration to the income
tax authority and shall be responsible for the
day-to-day administration in relation to the furnishing of the particulars of declaration.
The Principal Director General of Income-tax (Systems) shall make available the information of
declaration furnished by the person to the Principal Chief Commissioner or Chief Commissioner
or Principal Commissioner or Commissioner to
whom the Assessing Officer having jurisdiction
to assess the person who has furnished the declaration is subordinate.

Banking events updatE January 2016

Interest Equalization Scheme for Rupee


Pre-shipment and Post-shipment credit
The Govt. approved the Interest Equalisation Scheme for
Pre-shipment and Post-Shipment Rupee Export Credit w.e.f
1st April, 2015 for 5 years. The details are as follows:
(a) The rate of interest equalisation @ 3% per annum will
be available on Pre-Shipment Rupee Export Credit and
Post-Shipment Rupee Export Credit.
(b) The scheme would be applicable w.e.f 01.04.2015 for 5
years. Govt. can modify the Scheme at any time.
(c) The scheme is available to all exports under 416 tariff
lines [ITC (HS) code of 4 digit] and exports made by Micro,
Small & Medium Enterprises across all ITC(HS) codes.
(d) Scheme would not be available to merchant exporters.
(e) Banks are required to completely pass on the benefit
of interest equalisation, as applicable, to the eligible
exporters upfront and submit the claims to RBI for
reimbursement, duly certified by the external auditor.
(f) Ministry of Commerce and Industry will place funds in
advance with RBI for a requirement of one month and
reimbursement would be made on a monthly basis through
a revolving fund system.
(g) All eligible exports would have to meet the criteria of
minimum processing for goods to be called as Originating
from India (as per Foreign Trade Policy 2015-20).
Scheduled commercial banks have been advised by RBI
(Dec 04, 2015) to adhere to the following operational procedure for claiming reimbursement:
A. Procedure for passing on the benefit of interest
equalisation to exporters:
1. For the period April 1, 2015 to November 30, 2015,
banks shall identify the eligible exporters as per the Govt.
of India scheme and credit their accounts with the eligible amount of interest equalisation.
2. From Dec 2015 onwards, banks shall reduce the interest rate charged to the eligible exporters as per RBI's
extant guidelines on interest rates on advances by the
rate of interest equalisation provided by Govt. of India.
3. The interest equalisation benefit will be available from
the date of disbursement up to the date of repayment or
up to the date beyond which the outstanding export
credit becomes overdue. However, the interest
equalisation will be available to the eligible exporters only
during the period the scheme is in force.
B. Procedure to claim reimbursement of benefit of interest equalisation already passed on to eligible exporters:
1. The sector-wise consolidated reimbursement claim
for the period April 1, 2015 to Nov 30, 2015 for the amount
of interest equalisation already passed on to eligible exporters should be submitted to RBI by Dec 15, 2015.
2. The sector-wise consolidated monthly reimbursement
claim for interest equalisation for Dec 2015 onwards should
be submitted in original within 15 days from the end of
the respective month, with banks seal and signed by
authorised person, in the prescribed format.
3. The claims should be accompanied by an External
Auditors Certificate (with stamp and membership number) certifying that "the claim for interest equalisation of
Compilation : Sapandeep Toor (in Sydney - Australia) (Source RBI Website).

BANKING FEATURES

Masala bonds
Masala Bonds represent the bonds issued for rupeedenominated borrowings by Indian entities in overseas
markets. The International Finance Corporation (IFC), an
investment arm of World Bank, issued Rs.1,000 crore bonds
(which named it Masala Bonds) to fund infrastructure
projects in India in Nov 2014. These bonds were listed on
the London Stock Exchange (LSE). The name Masala bonds
was chosen to give a flavour of Indian culture and cuisine.
The debt instruments (bonds) have been named after
food stuffs in the past also (Chinese bonds, named Dimsum bonds after a popular dish in Hong Kong, Japanese
bonds named Samurai after the countrys warrior class).
Benefit of issuing Masala Bonds: An Indian company or
issuer of an overseas bond offering bonds in foreign currency runs the risk exchange price fluctuation (foreign
exchange risk). The weakening of the Rupee during the
tenure of the bond can add significantly to costs at the
time of redemption or repayment. By pricing or issuing
bonds in Rupees, is able to pass on the exchange risk to
the investors.
In addition, borrowing overseas can be relatively cheap
compared to borrowing in India, with average costs difference of at least 200 basis points.
Further, it offers new and diversified set of investors for
Indian companies, and more liquidity in exchanges such
as London, apart from bank funding and the corporate
bond market in India.
Benefit to foreign investor: An investor buying such bond
gains around 200 basis points above the globally accepted
pricing benchmark LIBOR (London Inter-bank Offered Rate)
after hedging for foreign exchange risks. With Indias GDP
or national income rising, and projected to grow at a
reasonably fast rate over the next few years, many overseas investors may like to buy into such bonds to earn
higher returns compared to the US and Europe where
interest rates are still low.
Impact : Many Indian companies with large borrowings
abroad donot hedge their debt exposure or cover their
risks. From the external balance sheet management point
of view, issue of Masala Bonds will provide a natural hedge
as it not give risk to foreign exchange risk.
Investment in Masala Bonds shall be a sign of acceptance
of the Indian currency in trading and settlement overseas.
This will be testing the internationalisation of the Indian
currency over the medium and long term.
.......Interest Equalization Scheme for Export Credit

Rupees.. for the month ended .. has been


verified and found to be strictly in accordance with the
provisions of the Government scheme". Claims for reimbursement will be considered for settlement only after
receipt of this certificate.
4. The claims may be sent to RBI Central Office, Mumbai.
5. The reimbursement of interest equalisation claim will
be made when the funds are received from Govt. of India.
RBI shall send a monthly report to Deptt of Commerce/
DGFT indicating reimbursement made commodity wise/bank
wise, as per the prescribed format.

BANKING FEATURES

Banking events updatE January 2016

Practical Problems based on Banking Ombudsman Decisions


1) A customer had deposited a cheque of Rs. 24 lac in his a/c. The amount was duly
transferred to his a/c and he withdrew Rs. 80000 on the same day after which the balance
in his a/c was Rs. 2320008. He claimed that he did not do any further transactions in the
account. On next day somebody apparently in collusion with some employee of the bank
credited Rs.100000 to his a/c and thereafter, the entire amount of Rs. 24 lac was credited
back to the a/c of the drawer of the cheque. The bank did not take any action on his
complaint. In its reply to BO, the bank stated that there was an internal family dispute
between the complainant and his wife, who had issued the said cheque. The bank enclosed
a representation from the drawer of the cheque wherein she claimed that the cheque had
been fraudulently got signed by the beneficiary/complainant. BO observed that the bank
had not offered any comment as to how the disputed transactions in the a/c had been
carried out at the banks end irrespective of the underlying dispute between the drawer
and the drawee. In a meeting with bank officials BO asked bank officials to explain whether
the reversal of transaction was in conformity with existing banking law and practices. The
bank officials had no valid justification. The bank was advised to immediately refund entire
amount along with interest at fixed deposit rate for the delayed period to the complainant.
2) The complainant had deposited a cheque for collection in the cheque drop box of his
bank provided in the ATM kiosk. However, the cheque amount was not credited to his
account. The bank officials informed that the cheque was stolen by miscreants from the
cheque drop box and misused. FIR about theft was lodged with police. As per extant RBI
guidelines, in such cases where there is no fault of bank and the customer, the onus of
payment of compensation (up to a limit) lies with the collecting bank as part of Board
approved policy. BO advised the bank to pay the cheque amount along with interest at
savings bank rate for delayed period.
3) Proprietor of a firm lodged a complaint with the BO office that five cheques issued in the
name of his firm were deposited by his supervisor in his savings account by writing his
savings account number in the pay-in-slip and the proceeds of these cheques were wrongly
credited to his personal savings account. The BO called for original documents and the
action taken on the earlier complaint received by the bank from the complainant. After due
examination of all the documents including the internal investigation report, it was observed
that bank was negligent in collecting and crediting the cheques drawn in the name of the
firm to the personal account of the supervisor. As the protection of Section 131 of Negotiable
Instrument Act was not available to the bank, an advisory was issued directing the bank to
credit the amount of cheques to firms account.
4) The complainant alleged that there was a fraudulent transfer of funds through combo
voucher from his account to an unknown account in other bank. The complainant submitted
a copy of reply by the bank in response to his RTI query wherein the bank had categorically
stated that transfer voucher was meant for internal use of the bank and transfer of fund
was being done on written request of the account holder/authorized person. On taking up
the matter, the bank replied that the transfer of funds was made on the basis of combo
voucher, which had the signature of depositor which tallied with account opening form held
on their record.
Bank also stated that the authority letter required as per internal circular was not obtained
and an internal investigation had been done and disciplinary action initiated against erring
officials of the bank. However, the bank pleaded that since general authority and signature
tallied, the bank had the mandate to debit the account. BO observed that the banks stand
that mere signature on the transfer voucher constituted proper mandate, was not
acceptable, as the bank had been obtaining separate mandate for transfer of funds. A
purported mandate on the combo voucher was not complete in as much as the name of the
beneficiary was not proper as also the amount was mentioned only in figures and not in
words. BO passed an award against the bank directing to pay the value of disputed
transaction with interest at extant savings bank rate from the date of transaction till the
date of payment to the complainant.
5) The complainant alleged that his bank had withheld operations in his pension account for
six months and deducted Rs 1,26,000 and was further demanding Rs.1,98,659 due to
inadvertent credit of excess amount by bank itself. On examination, it was observed that
the mistake was on the part of the bank as it had credited the excess amount to the
complainants account. It was observed that the bank should not have withheld the
operations in the pension account. On intervention by the OBO, the bank allowed operations
in the pension account and agreed to recover the outstanding in suitable installments.

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Office:SCO No.32, Sector 33-D,
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email - banking121@gmail.com

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R
8

Banking events updatE January 2016

Maintenance of SLR
RBI decided (Dec 10, 2015) to reduce the Statutory Liquidity Ratio
(SLR) of scheduled commercial banks, local area banks, primary
(Urban) co-op banks (UCBs), state co-op banks and central cooperative banks from 21.5% of their Net Demand and Time Liabilities (NDTL) to:
(i) 21.25% from April 2, 2016;
(ii) 21.00% from July 9, 2016;
(iii) 20.75% from October 1, 2016; and
(iv) 20.50% from January 7, 2017
of their total NDTL in India as on the last Friday of the second
preceding fortnight, valued in accordance with the method of valuation specified by RBI from time to time.
Hencewith effective from the dates given above these banks shall
maintain in India, SLR assets the value of which shall not, at the
close of business on any day, be less than the percentages above.
For SLR assets:
A. Scheduled commercial banks & local area banks:
(a) cash; or (b) gold valued at a price not exceeding the current
market price: or (c) unencumbered investment in any of the following instruments :
(1) Dated securities of Govt. of India issued under the market
borrowing programme and the Market Stabilization Scheme ; or
(2) Treasury Bills of the Government of India; or
(3) State Development Loans (SDLs) of the State Governments
under the market borrowing programme:
(d) the deposit and unencumbered approved securities required,
under Section 11 of the Banking Regulation Act, to be made with
RBI by a banking company incorporated outside India;
(e) balance maintained by a scheduled bank with RBI in excess of
the CRR balance to be maintained by it u/s 42 of RBI Act,1934 ;
The instruments referred to in items (1) to (3) above acquired from
RBI under Liquidity Adjustment Facility (LAF), shall not be included
as SLR securities for the purpose of maintenance of SLR assets;
Further, the following securities shall not be treated as encumbered for the purpose of maintenance of SLR assets:
(a) securities lodged with another institutionfor an advance or any
other credit arrangement to the extent to which such securities
have not been drawn against or availed of;
(b) securities offered as collateral to RBI for availing liquidity assistance from Marginal Standing Facility (MSF) up to the permissible
percentage of the total NDTL in India, carved out of the required
SLR portfolio of the bank concerned; and
(c) securities offered as collateral to RBI for availing liquidity assistance under Facility to Avail Liquidity for Liquidity Coverage Ratio.
B. Primary (Urban) co-operative banks:
(a) Cash, or (b) Gold valued at a price not exceeding the current
market price, or (c) Unencumbered investment in approved securities as defined in section 5(a) of the Banking Regulation Act, 1949
read with section 56 thereof:
Provided that the instruments acquired from RBI under LAF shall
not be included as SLR securities for maintenance of SLR assets;
Provided further that the following securities shall not be treated
as encumbered for maintenance of SLR assets:
The securities lodged with another institutionfor an advance or any
other credit arrangement to the extent to which such securities
have not been drawn against or availed of;
C. State co-op bank (StCB) and Central co-op bank (CCB):
(a) Cash, or (b) Gold valued at a price not exceeding the current
market price, or (c) Unencumbered investment in approved securities as defined in Section 5(a) of the Banking Regulation Act, 1949
read with Section 56 thereof.
Compilation : Manjot Kaur Toor (Sydney - Australia) (Source Website of RBI).

BANKING FEATURES
Provided that the following securities shall not be treated as encumbered for the purpose of maintenance of SLR assets:
The securities lodged with another institution for an advance or
any other credit arrangement to the extent to which such securities have not been drawn against or availed of.
Notwithstanding anything contained hereinabove,
i. Unencumbered balances maintained by a Central co-op bank with
the State co-op bank of the State concerned, in excess of the CRR
balance required to be maintained by it u/s 18 of the Banking
Regulation Act, 1949 read with section 56 thereof;
ii. Any unencumbered term deposits maintained by a Central coop
bank with the State co-op bank of the State concerned; and
iii. Unencumbered term deposits held by a State co-op bank or a
central co-op bank with SBI or a subsidiary bank or a corresponding
new bank or IDBI Bank Ltd.
shall also be deemed to be assets for calculating the percentage
specified, till March 31, 2017. However, SLR on incremental NDTL
over the level as on July 25, 2014 shall be maintained by StCBs /
CCBs in the form of approved assets. Maintenance of SLR in the
form of approved assets on NDTL as on July 25, 2014 shall be as
per the roadmap advised as under.
March 31, 2016 : 10% of NDTL as on July 25, 2014 to be maintained
in assets as mentioned at (c) above
From April 1, 2017: Entire SLR as prescribed by RBI as on that date
in assets as mentioned in (a) to (c) above

Green bonds
A bond is a debt instrument with which an issuer raises
money from investors. A green bond is a bond where
the issuer of the bond, publicly states that capital is
being raised to fund green projects. Green projects
typically include those projects that relate to renewable energy, emission reductions and so on.
The green bonds are issued by multilateral agencies
such as the World Bank, corporations, government agencies and municipalities. Institutional investors and pension funds generally invest in these bonds.
In the past, certain Indian entities (such as Indian Renewable Energy Development Agency Ltd and Greenko)
issued bonds without the tag of green bonds, but the
proceed were used for financing renewable energy.
In March 2015, Exim Bank of India issued a five-year
$500 million green bond, which is Indias first dollardenominated green bond. Exim Bank proposes to use
the net proceeds to fund eligible green projects in
countries including Bangladesh and Sri Lanka.
In February 2015, Yes Bank also raised Rs 1,000 crore
by issue 10-year Green Infrastructure bonds.
Important of Green Bonds for India: India has an ambitious target of building 175 gigawatt of renewable energy capacity by 2022 (30 gigawatt at present) which
requires a massive funding of $200 billion. The budget
allocations for this have been insufficient. Further, as
per reports, the higher interest rates and unattractive terms under which debt is available in India, raises
the cost of renewable energy by 24-32% compared to
the U.S. and Europe.
In the light of these, for funding the renewable energy
in India, the green bonds appear to be a good option.

Banking events updatE January 2016

GOVT. PROPOSES TO MAKE INDIA DEFENCE EXPORT HUB: The proposed


Defence Procurement Procedure (DPP) 2015 is expected to facilitate export
promotion, making India a Global Hub for arms shipments. To achieve this, the
Ministry of Defence plans to establish a separate export promotion body in
collaboration with the Ministry of Commerce and Industry. The new DPP will also
make India self-reliant in defence production with lower import dependence,
besides the emphasis on:Make in India. Finally, the government wants the
Defence Sector to be transformed into a Global Exporting Hub.
CBDT INKS MORE UNILATERAL APAs: The Central Board of Direct Taxes
(CBDT) has entered into 11 more unilateral Advance Pricing Agreements (APAs).
With this round of signing CBDT has so far entered into 31 APAs (30 unilateral
and one bilateral) An APA is an agreement between a taxpayer and the tax
authority concerning the transfer pricing method and the rate applicable to the
taxpayers inter-company transactions and normally covers multiple years. While
seven of these APAs have rollback provisions contained in them, the other four
agreements are for future five years.
CSS PANEL RECOMMENDATIONS ON SOCIAL WELFARE SCHEMES: The
Centrally-Sponsored Schemes (CSS) Panel headed by MP Chief Minister
recommended that the schemes be divided into core of the core schemes, core
schemes and optional schemes for determining the funding pattern. Allowing
states choice among optional schemes is an innovation. Depending on ease of
its implementation, the same option of preferred allocation in core schemes may
also be introduced, subject to conditions. The innovative idea can be introduced
on the condition that all states mandatorily participate in all the core schemes.
NATIONAL CONSUMER COMMISSION RULING ON CONSUMER COURT:
The National Consumer Commission has ruled that when there is an allegation of
fraud or forgery, consumer forums can not adjudicate the issue invoking
deficiency in service. It can hear the complaint only after the criminality has
been established by the investigation.
SEBI ISSUES NEW LISTING NORMS FOR EXCHANGES: SEBI has issued the
broad guidelines for an initial public offer (IPO) by the bourses. SEBI has made
it mandatory for stock exchanges to ensure that the minimum public shareholding
is at least 51%. Trading members, associates and agents can hold the balance
49%. SEBI has also permitted listing of depositories, which will be governed by
the same norms as those applicable to stock exchanges.
SEBI RELAXED DE-LISTING NORMS FOR SMALL COMPANIES: SEBI has
relaxed delisting norms for small companies. Currently, one pre-condition for
de-listing is that the shares of the company should not have been traded for the
preceding year. Now, small companies, whose trading of equity shares during
the 12 calendar months is less than 10% of the total number of shares of such
company will also be eligible.
EPFO EASES PF CLAIM NORMS: The Employees Provident Fund Organization
(EPFO) said that Aadhar-seeded Universal Account Number (UAN) holders will,
with immediate effect, no longer require employer attestation to make provident
fund claims. Employees whose details like Aadhar number and bank account
number have been seeded in their UAN and their UAN has been activated , may
submit prescribed claim forms to their respective regional office without having
to seek employers attestation.
CHINAS YUAN INCLUSION IN SDR BASKET: The decision to add the Yuan in
the Special Drawing Rights (SDR) basket alongside the dollar, euro, pound

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integration into global finances and nod to the
progress it has made with the reforms. To meet the
IMFs criteria, China has undertaken flurry of
reforms in recent months, including better access
for foreigners to Chinese currency markets, more
frequent debt issuances and expanded Yuan trading
hours. In this regard, RBI Governor said that
inclusion of Yuan in SDR Basket may lead to
devaluation.
EPFO INTRODUCED NEW FACILITIES UNDER
NPS: The Pension Fund Regulatory and
Development Authority (PFRDA) have introduced
new facilities for members of the National Payment
System. Now subscribers will be able to transfer
funds from their investment (Tier-II) to pension (TierI) accounts and points of presence will be able to
process voluntary contributions made by any
corporate subscriber. The government employees
who are members of the NPS will also have the
facility of opening investment accounts. The
government sector nodal offices have now been
provided with utility for activating the Tier-II account
and its operation for all government employees.
PMAC FOR REVIVAL OF CONVERTIBLE
SECURITY ISSUANCES: The Primary Market
Advisory Committee (PMAC) has recommended that
listed entities may issue compulsorily convertible
securities for a maximum period of five years to
revive the issuance of convertible securities.
Currently, there is no such cap. These are securities
which have features of both debt and equity. SEBI
also said that holders of convertible securities should
also be allowed to offload their holdings to the public
akin to equity shares.
GOVT. LAUNCHED ACCESSIBLE INDIA
CAMPAIGN: The Union Finance Minister
inaugurated Accessible India Campaign with the
launch of mobile-based app and web portal
Sugamya Bharat which would enable citizens to
take photographs of inaccessible public places and
help state governments and the centre in making
them accessible. The Government has also
introduced a reward system for proactive citizens.
The Campaign aims to provide universal accessibility
for all, including differently-abled persons.
SEBI OUTLINES ROADMAP FOR E-BOOK FOR
CORPORATE BONDS: SEBI has proposed to set

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Financial Events

Banking events updatE January 2016

up a platform for online sale of privately-placed corporate debt. SEBI has


proposed two approaches to set up the electronic book platform. In the first
model, the electronic book may be provided as an alternative to the existing
mechanism. Subsequently, based on the performance acceptability of such a
book, this could be made mandatory for all issuers for issuance of privatelyplaced non-convertible debentures that are proposed to be listed. In the
second model, the electronic book will be made mandatory for all private
placement issues having a threshold of Rs.500-1000 Crore in terms of the
amount being raised.
FOREIGN GOVERNMENT TO TAP MASALA BONDS: Masala bonds are
basically rupee-denominated bonds issued in offshore capital markets. These
bonds are offered and settled in US Dollar to raise rupees from international
investors for infrastructure development in India. No government has issued
bonds in the offshore INR masala bonds market. Now British Columbia, located
in Western Canada, may become the First Foreign Government to invest
onshore in India as it plans to tap the Masala Bonds. It plans to raise at least
Rs.500 Crore via Masala Bonds in January-March next year.
SEBI BARS OUTSOURCING OF DEPOSITORY-RELATED ACTIVITIES:
SEBI has said that activities such as processing of applications from depository
participants, issuers, registrar and others, allocating International Securities
Identification Number and maintaining beneficial owner data, should not be
outsourced. Depositories are entities that hold securities in dematerialized
form and operate through a network of depository participants. Depositories
have three months time to implement the system.
FINMIN TO SET UP BANK BOARD BURAEU: The Finance Ministry is to
start the process of setting up the proposed Bank Board Bureau, the first
step towards a holding company structure for state-run banks by the end of
this month. A search committee which includes RBI Governor will shortlist six
candidates and a chairman for the part time body which will take over the
selection process for public sector banks and also discuss their business
strategy. The whole process will be completed by February 2016. The
government will transfer its stake in state-run banks to the proposed Bank
Investment Committee, which will help raise capital for banks and reduce the
government stake to below 51%.
GOVT. BONDS TO BE ISSUED UNDER UDAY SCHEME: Last month the
Cabinet cleared the Ujwal Discom Assurance Yojna (UDAY) a restructuring
package to rescue stressed power distribution utilities. As of March 2015,
discoms had accumulated losses of around Rs.3.8 Lakh Crore and debt of
nearly Rs.4.3 Lakh Crore. As per UDAY Scheme, discoms will pass on their
debt to states over a two year period. In turn, states will issue Non-SLR
Bonds either in the market or directly to the bank/ financial institution with an
interest rate not more than the banks base rate plus 0.1%.
LCR TO IMPACT PROFITABILITY OF BANKS: According to India Ratings
and Research, the introduction of liquidity coverage ratio (LCR) is a positive
step for the banking sector but it could come at a high transition cost. LCR is
a regulatory requirement for banks to set aside a certain amount of highlyliquid assets, such as cash or treasury bonds, to meet short term liquidity
disruptions.
CHINA PERMITS YUAN CONVERTIBILITY ON CAPITAL ACCOUNT: China
has allowed Yuan convertibility on the capital account within $10 million in
three Free Trade Zones. The move came less than two weeks after the
Renminbi (RMB) was admitted by the International Monetary Fund into its
Special Drawing Rights basket alongside the dollar, euro, pound sterling and
yen on November 30. China, two decades ago also had permitted RMB
convertibility but almost all capital account transactions are under varying
degrees of control. The guidelines encourage banks in the free trade zones
to deal with transactions between RMB and foreign exchange derivatives.
INDIAS FIRST GOLD SPOT EXCHANGE LAUNCHED: The India Bullion
and Jewellers Association with the Bombay Stock Exchange (BSE) is to launch
the countrys First Gold Spot Exchange. After getting regulatory approval,
the exchange may commence trading in April 2016. BSE will provide the

technology and technical know-how for owning 30%


in the Exchange. The Exchange will collect the gold
from consumers who are willing to sell and recycle it
for use within the country to bring down imports.
India imports about 1000 tonnes of gold every year.
SEBI CHANGES DEMAT ACCOUNT RULES: SEBI
decided that all demat accounts would be considered
as a Basic Services Demat Account (BSDA) unless the
demat a/c holder specifically opts to continue with a
regular demat account. Depository Participants have
to asses the eligibility of the beneficial owner (demat
account holder) at the end of the current billing cycle
and convert eligible demat accounts into BSDA.
Finding few takers after the BSDA was introduced
and the conversion option in place, SEBI took this
decision with the objective of achieving wider financial
inclusion and to encourage holding of demat accounts.
SUPREME COURT RULING ON BUSINESS
EXPENDITURE: Supreme Court has ruled that the
interest paid by a company on borrowings from banks
to advance money to its own subsidiary is Business
Expenditure on which tax deduction can be claimed.
INSURANCE BUREAU LAUNCHES HOSPITAL
REGISTRY: The Insurance Information Bureau of
India has launched a registry of 32, 651 unique
hospitals called the Registry of Hospitals in Network
of insurance to ease inefficiencies in claim settlements.
This portal will provide an electronic exchange of
medical records between hospitals and insurance
companies to ensure faster claims processing. This
will also facilitate national state, regional level
analytical reporting on health-care such as
geography-based trends, patterns of disease
occurrence and cost patterns which will help
determine standardized treatment costs.
GOVT. TRIMS MARKET BORROWING TARGET:
The Government has trimmed its Market Borrowings
target for the second half of the fiscal by Rs.15, 000
Crore. The gross market borrowings have been
adjusted down by Rs.15, 000 Crore to take into
account expected government borrowings through
Sovereign Gold Bonds and Gold Monetization Scheme.
The Centre plans to raise Rs.2.49 Lakh Crore in the
second half of the fiscal out of gross borrowings
target of Rs.6 Lakh Crore. Of this, it plans to raise
Rs.2.34 Lakh Crore through government securities.
NHB UNVEILS SPECIAL REFINANCE PACKAGE
FOR TAMIL NADU: Housing Finance Regulator
National Housing Bank has unveiled an Rs.100 Crore
Special Refinance Package to provide relief to people
in flood-affected areas of Tamil Nadu. Under the
package, Rs.100 Crore has been earmarked at a
concessional interest rate of 6.5% a year to housing
finance companies for providing refinance assistance
to individuals. Both existing and new home loan
borrowers can make use of this special package.
GOVT. TO DISPENSE WITH PLAN AND NON-PLAN
SPEND CLASSIFICATION: After shuttering the
Planning Commission, the Government is considering
to drop the Plan and Non-Plan Spend classification in
the budget. The budget also has capital and

Banking events updatE January 2016 11

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revenue spending classification, which the finance ministry feels is better able
to link expenditure to outcomes. An expert committee headed by C.Rangrajan
had also in 2011 proposed that the distinction between plan and non-plan
expenditure be abolished for both the Centre and the States.
COMPUTER-BASED SCRUTINY TO BE USED BY CBDT: The process of
selecting tax cases is being replaced by a system-based centralized approach.
For the past several years, the process of selecting of cases for scrutiny on a
random basis has been dispensed away with. Instead, CBDT has devised a
system-based in a centralized manner through CASS (Computer Assisted Scrutiny
Selection) whereby the selection is made on the basis of detailed analysis of risk
parameters and 360 degree data profiling of tax payers.
PARLIAMENTARY PANEL FOR HUB OF INSTITUIONAL ARBITRATION:
The Parliamentary Panel headed by EM Sudarshna Natchappan recommended
that institutional arbitration with accredited arbitrators may be provided to the
commercial entities so that they could avail themselves in India the route of
either commercial court or arbitration for resolving their commercial disputes.
The report of the panel highlighted that most of the commercial entities prefer
international arbitration available in Singapore, London and Dubai. The committee
also said that the award of the arbitration should be binding on the parties
without giving the option to the parties to challenge the same in the court of law.
CBDT SIMPLIFIED ONLINE TAX RECTIFICATION: In a move aimed to helping
tax payers, the Central Board of Direct Taxes (CBDT) has simplified the process
of online rectification of incorrect tax deducted at source (TDS) details filed in the
income tax return. A new facility has been provided for pre-filling of TDS schedule
while submitting the online rectification request on the e-filing portal for easy
correction and updating of such details.
GOVT. TO EMPOWER BBB TO SELECT AUDIT FIRMS FOR PSBs: The
government is likely to empower the proposed Bank Board Bureau (BBB) to select
Audit Firms for Public Sector Banks as part of its larger initiative to strengthen
their corporate governance practices. At present, individual public sector banks
(PSBs) choose their auditors themselves from a list of approved firms by RBI.
CBDT REVISES MONETARY LIMITS FOR APPEALS: In order to cut down on
frivolous litigation and taxpayers grievances, CBDT has issued fresh directives
revising the monetary limits for the taxmen to appeal at two important legal
forums- ITAT and high courts. It has asked the Income Tax Department to go into
appeal at the Income Tax Appellate Tribunal (ITAT) only when the tax effect in
question is Rs.10 Lakh (Earlier Rs.4 Lakh) and Rs.20 Lakh from earlier Rs.10 Lakh
if the appeal is to be filed in high court. Monetary limit for filing appeals or Special
Leave Petitions in Supreme Court has been kept unchanged at Rs.25 Lakh.
SUPREME COURT RULING ON BOUNCED CHEQUES: The Supreme Court has
ruled in a large number of appeals that in case of bounced cheques, the complaint
could be filed in the place where the cheques were dishonored and not where it
was issued. This principle which was laid down by the court last year has now
been affirmed in the Negotiable Instruments (Amendment) Ordinance this year.
This rule has come into effect with retrospective effect from June this year.
EDUCATION LOAN INTEREST SUBSIDY CLAIMS: The Central Scheme of
Interest Subsidy on Education Loans was announced in the Union Budget 2014
and has now been closed in accordance with the instructions from the Ministry of
Finance. Canara Bank has been the Nodal bank for its implementation. The
subsidy has been released to all member banks as per claims. From the total
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PAN MADE MANDATORY FOR ALL
TRANSACTIONS: The Finance Ministry has made
mandatory to furnish PAN for all transactions over
Rs.2 Lakh from January 1, 2016. CBDT has also
amended the reporting requirement of PAN for
other specified transactions. Pan will be mandatory
for all transactions of immovable property of over
Rs.10 Lakh from the earlier limit of Rs.5 Lakh. It
will also be required for all term deposits of over
Rs.50, 000 in not only banks but also in co-operative
banks, post offices, NBFCs. Further, PAN will also
be mandatory for opening of an account (Except
basic account) in any bank including co-op bank.
PAN will no longer be required for installation of
telephone or cell-phone connection.
IMGC TO RBI TO INCREASE LTV TO EXPAND
HOSING FINANCE: India Mortgage Guarantee
Corporation (IMGC) is the sole provider of
mortgage guarantee in the country. Till date, IMGC
has signed with only four lenders- ICICI Bank,
Dewan Housing Finance, Reliance home Finance
and First Home for this facility. Their next target is
to bring Public Sector Banks into their fold. They
have asked RBI to increase the loan-to-value (LTV)
ratio so as to expand the market for housing
finance. They have advised RBI for allowing LTV
to go up to 90% so long as there is a mortgage
guarantee along with the loan product. They want
RBI to restrict this facility to first time home
buyers.
SUPREME COURT RULING ON RTI TO BANKS:
The Supreme Court has ruled that RBI and
commercial banks can not hide routine information
such as the names of top defaulters, the losses
suffered by banks and details of action taken
against erring banks, sought by the public under
the Right to information Act. RBI and commercial
banks hitherto denied such information held in a
fiduciary capacity and could not be revealed to
the public at large.
EUROPEAN UNION OKAYS TOUGH DATA
PROTECTION RULES: The European Union
approved long-awaited Data Protection
Regulations to give people a greater say over
how their digital information is collected and
managed. Among the policies approved are to
allow national watchdogs to issue fines potentially

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12

Banking events updatE January 2016


totaling the equivalent of hundreds of millions of dollars if
companies misuse peoples online data, including obtaining
information without peoples consent. Rule also says obliging
any one under 16 to obtain parental consent before issuing
popular services like Facebook, Snapchat and Instagram
unless any national government lowers the age limit to 13.
CVC ALERTS BANKS ON FAKE CA CERTIFICATES: The
Central Vigilance Commission has asked public sector banks
to put in place a system to check the rising instances of fake
Chartered Accountants Certificates being submitted by
borrowers to get loans. To tackle this menace, the Commission
has suggested that the banks check with the chartered
accountants whether they have actually certified the
borrowers balance sheets and profit & loss accounts. Further
it has recommended that the Institute of Chartered
Accountants of India make available an online directory of its
members to banks. This will help bankers to easily get in
touch with the CAs to confirm the genuineness of the
certificates presented at the pre-loan sanction stage.
SEBI ISSUES PROCEDURAL NORMS FOR
INFRASTRUCTURE INVESTMENT TRUSTS: SEBI has
unveiled procedural guidelines for infrastructure investment
trusts. Accordingly, investment managers can allocate only
up to 60% of the qualified institutional buyer (QIB) portion to
anchor investors. At least two anchor investors should be
allowed on a discretionary basis for allocation of up to Rs.250
Crore in the IITrusts and should have at least five anchor
investors in case the amount exceeds Rs.250 Crore. The
investment manager should appoint one or more merchant
bankers with one being a lead merchant banker. The
investment manager should also appoint other intermediaries
in consultation with the lead merchant banker to carry out
the obligations relating to the issue.
BILL FOR INSOLVENCY AND BANKRUPTCY CODE 2015
INTRODUCED IN LOK SABHA: A bill to consolidate and
amend all laws relating to insolvency resolution so as to tackle
the issue of undue delays has been introduced in the Lok
Sabha. The bill has been introduced as Money Bill which means
Rajya Sabha can not reject or amend it once it is passed by
the Lok Sabha. The proposed legislation fixes a time limit of
180 days extended by a further 90 days for completion of
the corporate insolvencyresolution process. The current
system is delay-ridden and it takes 5 to 15 years for lenders
to recover money in the event of corporate default.
EU WATCHDOG FOR SOFTER BONUS REGIME: European
Union watchdog, European Banking Authority said that the
staff in smaller banks should not have to defer large chunks
of their bonuses over several years. After the 2007-09
financial crises the European union introduced rules to stop
bankers from taking excessive risks to win bigger bonuses
and because state bailouts of failed banks had angered tax
payers. At least 40% of a bonus must be deferred for at
least three years with half of the deferred portion paid in
shares or bonds rather than cash .
RBI PLANS GUIDELINES FOR PEER-TO-PEER LENDING:
RBI is working on guidelines for Peer-to-Peer lending
arrangements offered by online platforms. This form of lending
is popular among individual borrowers and lenders, especially
in the small and medium enterprises segment. These lenders
do not need regulatory approval and are not registered as
NBFCs. These portals connect lenders and borrowers for a
fee. Investors earn returns of anything between 12% and

36% by lending on the platform.


BONUS BILL FOR WORKERS PASSED: The Lok Sabha passed the
Payment of Bonus (Amendment) Bill 2015 allowing doubling the wage
ceiling for calculating bonus to Rs.7000 per month for factory workers
with establishments with 20 or more workers with benefits being
applicable retrospectively from April 2014. It also enhanced the
eligibility limit for payment of bonus from Rs.10, 000 per month to
Rs.21, 000 per month.
FINMIN RELEASES DRAFT GUIDELINES FOR POEM: The Finance
Ministry (FINMIN) has issued the draft guidelines for deciding the
Place of Effective Management (POEM) of a company. The proposed
guideline would be used to determine whether a company qualifies
as a resident taxpayer. POEM means a place where key management
and commercial decisions that are necessary for the conduct of the
business of an entity as a whole are, in substance, made. Since
Residence is to be determined on year to year basis.
CBDT INSTRUCTIONS TO ITS STAFF ON MAT: The Central Board
of Direct Taxes (CBDT) issued new instructions to its field authorities
detailing the situations in which Minimum Alternate Tax (MAT) would
not apply on foreign companies for the period prior to April 1, 2015.
The CBDT has now reiterated that with effect from April 1, 2001 the
MAT provision in income tax law will not apply to a foreign company
including a foreign institutional investor/ foreign portfolio investor so
long as certain conditions are met.
RBI ON BITCOIN FOR TRANSFORMATION OF FINANCIAL
MARKETS: Bitcoin, a form of digital currency is looked with suspicion
across the world. RBI in its Financial Stability Report said that the
block-chain technology underlying Bitcoin has the potential to bring
about a major transformation in the financial markets. Bitcoin is an
innovative payment system which gets created electronically using
complex logarithms. It is not held in a physical form but in an electronic
format. Movement of currency is not monitored by any Central Bank.
RBI TELLS PSBs ON DIVIDEND POLICY: RBI said it is imperative
that Public Sector Banks (PSBs) approach their dividend decisions as
strategic business decisions which are in keeping with their objective
of shareholder wealth maximization. PSBs pay out significant amounts
as dividend to the government and other shareholders which have
no relevance to their balance sheet and capital planning. RBI said
the payout also reveals a cross-subsidisation by better banks (given
their relatively higher payouts but a disproportionately higher capital
infusion into weaker banks by the government).
GOVT. EASED AUDIT RULES ON CORPORATE FRAUDS: The
Corporate Affairs Ministry has said that the statutory auditors will
now have to mandatorily report to the Centre all corporate frauds
amounting to Rs.1 Crore and above. First, the auditor has to inform
the Board or Audit Committee and seek their views within 45 days.
On receipt of audit committees views the auditor would have to
send his report within 15 days. For frauds involving amounts lower
than Rs.1 Crore, the auditor now needs to report the matter only to
the Audit Committee of the company. The reporting would have to
be done not later than two days of his knowledge of the fraud. Prior
to this move, the Company Law Board required statutory auditors to
report to the Centre all frauds by the company or against it.
GOVT. ALLOWED 41 MORE HFCs TO USE SARFAESI LAW: The
Finance Ministry has allowed 41 more Housing Finance Companies
(HFCs) to use the SARFAESI law for recovery of their dues and
reduce NPA. Taken together with the 19 HFCs notified earlier for
using the law almost the entire housing finance industry regulated
by the National Housing Bank can now use this law for recovery of
their dues. SARFAESI Act 2002, empowers the banks and financial
institutions to attach pledged assets of the borrower in the event of
the non-repayment of dues by the borrower.

Banking events updatE January 2016 2015 13

GENERAL AWARENESS
The Institute which plans e-hearing facility
for disciplinary cases- CA Institute.
Industrialist who launched Nyay Bharti
Initiative with annual corpus of Rs.100
Crore being legal aid to the poor- Sunil Bharti
Mittal, Chairman of Bharti Enterprises As per India Skills Report, the State which
ranks First among all states with largest
employability level- Andhra Pradesh.
New technology which can offer internet
speed one hundred times faster than the
WiFi and achieve up to 224 GB per secondLiFi.
Private Banking operations have been shut
down in India by- HSBC Holdings.
The Billionaire, who is turning his energy to
a stationary bicycle that can meet a rural
households electricity needs for 24 hoursManoj Bhargava.
As per India Skills report, the State which
has ranked First among preferred states for
working women in India- Tamil Nadu.
The state where the President opened
Worlds largest Mahatma Gandhis Archive
at the Sabarmati Ashram- Gujarat.
The place where Global Climate Summit is to
take place on November 30- Paris.
To make Chinese currency accessible to
regional and global participants, the Dubai
Gold and Commodities Exchange is set to
launch Yuan Futures
As per survey conducted by Nielsen, the
Bank which is the only bank to be featured
in 100 brands Indias Most Valued Banking
Brand- SBI.
The State which has topped in operational
Special Economic Zones- Tamil Nadu.
The State where countrys First Smart
Manufacturing Hub is likely to come upTelengana.
The Bank which has celebrated its Second
Foundation Day on 19th November- Bhartiya
Mahila Bank..
Facebook Founder who gave away 99% of
their company shares worth about $45 billion
to make the world a better place for their
newborn daughter-Mark Zuckerberg-

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The Indian University which stands at


16 ranking among top 200 universities
as per Times rankings- Indian Institute
of Science.
As per Boston list of Worlds 50 Most
Innovative Companies, India has only
one company which ranks 16th- Tata
Motors.
The First Indian Entity to issue Green
Bond- Yes Bank.
Accessible India Campaign has been
inaugurated by the Union FM with the
launch of a mobile-based app and a web
portal- Sugamya Bharat.
The Airline which has been rated as
Airline of the Year for the third
consecutive year- Air New Zealand.
The country whose President Rousseff
is facing impeachment for violating
countrys fiscal laws and manipulating
govt. finances- Brazil.
The German Chancellor, who has been
named as Person of the Year by Time
Magazine- Angela Merkel.
The Foreign Government which will be
First to tap Masala Bonds- British
Columbia.
The temple which is to deposit 160 Kg
of gold with banks to start pick up of
Gold Monetization Scheme- Siddhivinaik
Temple.
As per Global Financial Integrity
research, the country which has been
ranked 4th biggest source of black money
with $51 billion annually on averageIndia.
The Mission under which of the 100 cities
98 have been short-listed and ten may
get funding this year- Smart City
Mission.
At global level, while PM Narendra Modi
is among top 10 in the Facebook Chart,
the person who leads- US President
Barrack Obama.
The City where National green Tribunal
issued order that diesel passenger
vehicles will not be registered- Delhi.
The Country which allowed Yuan
convertibility on the capital account in
three free trade zones- China.
The bank which has celebrated its 97th
Foundation Day on 18th NovemberUnion Bank of India.
The bank which celebrated its 93rd
Foundation day on 28th NovemberAndhra Bank.
As per survey, India has been rated
the Second Most Ignorant Nation after-

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Banking events updatE January 2016


Mexico.
The country which has been rated 6th in number of total annual research
papers published and contributed 4.36% of the global output in 2013- India.
The Rating agency which has affirmed Indias BBB rating with a stable outlook
while pegging the countrys growth rate at 7.5% this fiscal- FITCH.
The Accounts in which PM Narenra Modi came 3rd while Amitabh Bacchan
tops-Twitter Account.
The Bureau which has launched a registry of 32, 651 unique hospitals in
Network of Insurance- Insurance Information Bureau.
The League which suspended two of high-profile franchises Chennai Super
Kings and Rajasthan Royals for two years due to Sport Fixing Scandal- Indian
Premier League.
Manila-based Bank, which will provide $1 Billion loan to Power Grid Corporation
for high voltage transmission lines in Punjab and Rajasthan-ADB.
UPAs Scheme, which has been scrapped by the present Government- Scheme
of Performance Monitoring and Evaluation System
The country which will allow millions of unregistered citizens to obtain documents
vital to secure education and health services long denied to them- China.
The country with whose funds and technology, India is to set up its First
Bullet Train Project connecting Mumbai and Ahemdabad at cost of Rs.98, 000
Crore-Japan.
The Tribunal which has banned the use of Plastics along the stretch of Ganga
from Uttrakhands Gomukh to Hardwar- National Green Tribunal.
Two States whose enacted laws have been upheld by the Supreme Court on
confiscation of wealth of corrupt babus, politicians even at the pre-trial
stage-Bihar and Odisha.
The Apex Direct Taxes Body, which has simplified norms of pre-filing TDS data
online- CBDT.
The Conference in which 195 countries in the World signed a Deal to limit
global warming to well below 2 degrees celsus- UN Climate Change Conference.
The platform which India plans to set up exclusively for the countrys
manufacturers and exporters-Business to Business International Ecommerce
Platform.
The Panel which has recommended conferring executive powers to NITI
Ayog- Parliamentary Panel.
The Conservative Islamic Kingdom where First Woman has been elected to
Municipal Council- Saudi Arabia.
Ailing Legendary Actor, who was awarded Padma Vibhushan by Union Home
Minister for his contribution to Hindi cinema spanning over six decades.- Dilip
Kumar
As per UNDP Report, the index in which India placed low at 130th rank- Human
Development Index.
Government has appointed a Judicial Panel on One Rank One Pension which
is to be headed by- Justice L. Narasmha Reddy (Retd. Chief Justice of Patna
High Court).
The country which has been accepted as Member of the European Bank for
Reconstruction and Development- China.
The country whose design of National Flag is going to be changed- NewZealand.
The country whose SoftBank won its First Solar Power Project in India- Japan.
The City in which the Supreme Court has banned registration of diesel-run
SUVs and cars with an engine capacity beyond 2000cc till March 31, 2016Delhi.
The country in whose Presidential Election, First time, a run-off ballot is being
held because of 115 islands covering 93000 people- Seychelles.
The Internet Giant who is to provide free WiFi at 100 Railway Stations in India
by 2016-end- Google.
The corporation which is the sole provider of mortgage guarantee in the
country- India Mortgage Guarantee Corporation.

Compilation : SP Sharma & Sapandeep Toor

DIARY OF EVENTS
The State in which countrys First Medical Devices Park
is to be set up under the Make in India MissionGujarat.
The country whose Rating has been cut to Junk with
Negative Outlook by FITCH- Brazil.
The city in India which has been rated 6th Most
Expansive Office Hub in the World- Delhis Connaught
Place.
The bank which becomes the First Bank in the country
to introduce e-sign an online electronic signature
service- Axis Bank.
Former Defence Secretary RK Mathur has been
appointed as Chief Information Commissioner.
Noble Laureate who has been made a Saint of Roman
Catholic Church- Mother Teresa.
The company which has made to the Top 50 League of
the Worlds Biggest Companies in terms of R&D
investments- Tata Motors.
The company whose 116 employees are drawing more
than Rs.1 Crore in annual remuneration but 70% of
them are Koreans- Samsung India.
The country which got First Beauty Queen (Shyamaa
Abdelrahman) since 1972- Iraq.
The Tribunal which has banned both President and
Vice-President of FIFA for 8 years from all football
activity due to high scandal- Ethics Tribunal of FIFA.
The country which allowed couples to have two
children to counter shrinking work force and a rapidly
ageing population-China.
The Bill, which passed by Rajya Sabha, provides for
the treatment of juveniles between the ages of 16
and 18 as adults when accused of heinous crimes
such as murder and rape- Juvenile Justice Bill.
The Bill which has been referred to the Joint
Parliamentary Panel by the Lok Sabha- Insolvency
and Bankruptcy Code 2015.
The Country which became the First Asian country to
approve the sale of the Worlds First dengue vaccinePhilippines.
The commodity for which the Government has done
away with the Minimum Export Price due to falling
prices in the domestic market- Onions.
The Country which issued Pollution Red- Alert- China.
The Car which has won the 2016 Trophy- Hyundai
Creta.
The Vehicles whose age has been fixed at 15 years
and which to be off-roads as per Govt. Notification
likely to come soon- Commercial Vehicles.
The country whose Parliament Building has been
inaugurated by PM Narendra Modi on 24 th
Afghanistan.
The country whose President Salva Kiir created 28
new states- Sudan.
The popular social networking platforms, which the
Employees Provident Fund Organization launched
during Good Governance Day Event-Facebook and
Twitter.
China-backed Bank in which India , a Founder Member
with other 56 countries has been established in Beijing
on 25th- Asian Infrastructure Investment Bank.

Source : Financial Newspapers, Financial News-Magazines & Financial and Institutional Web-sites

MOCK-TEST
PAPER
01
a
b
c
d
02

a
b
c
d
03

a
b
c
d
04

a
b
c
d
05

a
b
c
d
06
a
b
c
d
07

Questions based on RBI Policy


The pre-2005 banknotes can be
exchanged at identified bank branches
and Issue Offices of RBI up to:
01.01.2016
01.04.2016
30.06.2016
30.09.2016
As per RBI guidelines, the residents and
eligible non-resident market participants
can trade in (1) US Dollar (USD) - Indian
Rupee (INR), (2) Euro (EUR)-INR, (3)
Pound Sterling (GBP)-INR (4) Japanese
Yen (JPY)-INR currency futures contracts
1 only
1 and 3 only
1, 3 and 4 only
1 to 4 all
The recognized stock exchanges can offer
cross-currency futures contracts and
exchange traded option contracts in the
currency pairs of (1) EUR-USD, (2) GBPUSD (3) USD-JPY (4) USD-INR).
1 only
1 and 3 only
1, 2 and 3 only
1 to 4 all
Statutory Liquidity Ratio (SLR) shall be
20.5% of net demand and time liabilities
of banks w.e.f:
02.04.2016
09.07.2016
01.10.2016
07.01.2017
To comply with the requirement of
investment in SLR assets, the following
securities are included in unencumbered
investment (1) dated securities of Govt.
of India (2) Treasury bills of Govt. of India
(3)State Development Loans (4) high
rated corporate security
1 only
1 to 3 only
1, 3 and 4 only
1 to 4 all
Under liquidity adjustment facility, the
Repo Auctions of RBI are meant to:
absorb excess liquidity
regulate liquidity
inject liquidity
control liquidity
Under liquidity adjustment facility, the

a
b
c
d
08
a
b
c
d
09

a
b
c
d
10

a
b
c
d
11

a
b
c
d
12

a
b
c
d
13
a
b
c
d

Reverse Repo Auctions of RBI are


meant to:
absorb excess liquidity
regulate liquidity
inject liquidity
control liquidity
Banks can shift investments to/from
held to maturity (HTM) with the
approval of the Board of Directors:
in the beginning of every quarter
in the beginning of financial year
twice during the financial year
discretion of bank concerned
The rate of interest equalisation
available on Pre-Shipment Rupee
Export Credit and Post-Shipment Rupee
Export Credit is ___ % per annum:
2%
3%
4%
5%
The duration of interest equalisation
scheme for Pre-Shipment Rupee Export
Credit and Post-Shipment Rupee Export
Credit is ____ w.e.f 01.04.2015:
5 years
4 years
3 years
1 year
The benefit of interest equalisation
scheme for Pre-Shipment Rupee Export
Credit and Post-Shipment Rupee Export
Credit is not available to which of the
following:
SEZ exporters
Warehouse exports
merchant exporters
gold card holder exporters
Banks can submit the claims to RBI
under interest equalisation scheme for
Pre-Shipment Rupee Export Credit and
Post-Shipment Rupee Export Credit on
______ basis, within ____:
quarterly, within 20 days
monthly, within 15 days
half-yearly, within 25 days
annually, within 30 days
As per RBI guidelines of Dec 2015, loans
to priority sector target for Regional
Rural Banks w.e.f 1.1.2016 is :
60% of ANBC
60% of total outstanding
75% of ANBC
75% of total outstanding

Disclaimer : We have taken every care to provide information, we believe to be accurate


and reliable and do not assume responsibility of any kind nor shall be liable for losses &
consequence arising from use thereof. Since this information is based on the published
reports mostly, correctness or otherwise thereof may be verified by the user with the
original sources, in advance. .......................................................................Editor

Banking events updatE January 2016 15


14 As per RBI guidelines of Dec 2015, the
lending to agriculture sector within
priority sector for Regional Rural Banks
w.e.f 1.1.2016 should be:
a 18% of ANBC
b 18% of total outstanding
c 25% of ANBC
d 25% of total outstanding
15 As per RBI guidelines of Dec 2015, the
lending to small and marginal farmers
within agriculture sector for Regional
Rural Banks w.e.f 1.1.2016 should be:
a 8% of ANBC
b 8% of total outstanding
c 7.5% of ANBC
d 7.5% of total outstanding
16 As per RBI guidelines of Dec 2015, the
lending to micro enterprises within
priority sector for Regional Rural Banks
w.e.f 1.1.2016 should be:
a 8% of ANBC
b 8% of total outstanding
c 7.5% of ANBC
d 7.5% of total outstanding
17 As per RBI guidelines of Dec 2015, the
lending to weaker section for Regional
Rural Banks w.e.f 1.1.2016 should be:
a 15% of ANBC
b 15% of total outstanding
c 10% of ANBC
d 10% of total outstanding
18 The rates of interest on loans and
advances given by banks w.e.f.
01.01.2016 are to be determined with
reference to:
a bench mark prime lending rate
b marginal cost of funds based lending
rate
c base rate
d bank rate
19 Which of the following is not a
component of marginal cost of funds
based lending rate (MCLR) which is an
internal benchmark:
a marginal cost of funds
b negative carry on account of CRR and
SLR
c operating cost
d tenor premium
20 Negative carry on the mandatory CRR
which arises due to return on CRR
balances being nil, is calculated as under
for the purpose of marginal cost of funds
based lending rate (MCLR):
a required CRR x marginal cost / (1 CRR)
We strongly believe that the subscribers
are the best consultants, we have. Based
on their feed back, we keep on redesigning
and restructring this publication. Kindly
send your suggestions and views.

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16 Banking events updatE January 2016

b
c
d
21

a
b
c
d
22

a
b
c
d
23

a
b
c
d
24

a
b
c
d
25

a
b
c
d
26

required CRR / marginal cost / (1 CRR)


required CRR + marginal cost / (1 CRR)
required CRR x marginal cost / (1 + CRR)
Under the marginal cost of funds based
lending rate (MCLR), the banks are
required to publish the internal
benchmark for the following maturities
(1) overnight MCLR (2) one-month MCLR
(3) three month MCLR (4) six month
MCLR
1 only
1 and 3 only
1, 3 and 4 only
1 to 4 all
The following categories of loans can
be priced without being linked to MCLR
as the benchmark for determining interest rate: (1) Advances to banks depositors against their own deposits. (2)
Advances to banks own employees including retired employees. (3) Advances
granted to the Chief Executive Officer /
Whole Time Directors. (4) Loans linked
to a market determined external benchmark.
1 only
1 and 3 only
1, 3 and 4 only
1 to 4 all
Banks are to review and publish
their Marginal Cost of Funds based
Lending Rate (MCLR) of different
maturities every ___ on a preannounced date with the approval of
the Board or any other committee to
which powers have been delegated.
fortnight
month
quarter
six months
Banks can reset the interest rates under
Marginal Cost of Funds based Lending
Rate (MCLR) system, for which the
periodicity can be:
one year or lower
6 months or lower
3 months or lower
1 month or lower
Under Marginal Cost of Funds based
Lending Rate (MCLR) system, the
marginal cost of borrowings shall have
a weightage of ___ % of Marginal Cost
of Funds while return on networth will
have the balance weightage of ___%.
50%, 50%
75%, 25%
90%, 10%
92%, 8%
Govt. of India has established Central
KYC Records Registry (CKYCR) under

a
b
c
d
27

a
b
c
d
28
a
b
c
d

29

a
b
c
d
30

a
b
c
d
e
31

provisions of which of the following Act,


as amended from time to time?
RBI Act 1934
Prevention of Money Laundering Act
2002
Banking Regulation Act 1949
Negotiable Instruments Act 1881
Banks can extend financial assistance
to support the factoring business of
Factoring Companies complying with
certain criteria, which, inter-alia states
that they derive at least ____ of their
income from factoring activity.
80%
75%
60%
50%
Recalled Questions
ECS (Credit) payments can be initiated
by any institution (called ECS user) :
which has to make small payments
which has to recover amount of bills
repeatedly
which has to make large size payments
in small numbers
which has to make bulk or repetitive
payments of small amounts to a number
of beneficiaries.
As per RBI guidelines on Framework for
revitalizing distressed assets, in cases
where banks/notified NBFC fail to report
SMA status of the accounts to CRILC or
resort to methods with the intent to
conceal the actual status of the
accounts or evergreen the account,
banks/notified NBFCs will be subjected
to accelerated provisioning of ______%
for an account classified as doubtful
upto one year:
25% for secured balance and 100% for
unsecured balance
30% for secured balance and 100% for
unsecured balance
40% for secured balance and 100% for
unsecured balance
100% for the entire balance.
A customer Y, deposits Rs.3000 with the
bank for remittance by way of
telegraphic transfer for credit of Zs
account at other station which the bank
has done. The relationship between Z
and bank in this case is that of a
principal and agent
beneficiary and trustee
debtor and creditor
bank and a customer
trustee and beneficiary
For import of goods from UK, a customer
of Universal Bank enters into an Free
on Board (FOB) contract. What among

a
b
c
d
e
32

a
b
c
d
33

a
b
c
d
e
34

a
b
c
d
35
a
b
c
d
36
a
b
c
d
e
37
a
b
c
d

the following will be borne by the


importer, as per the contract, in this
case:
cost of goods
freight
insurance
a and b
b and c
Foreign Direct Investment (FDI) up to
100 per cent is permitted under
Government approval route for
investments in existing companies in
pharmaceuticals sector, which is called:
brown-field investments
green-field investments
yellow-filed investments
red-field investments
A usance bill has been accepted by the
drawee and falls due on January 27,
2004, after allowing days of grace.
These 3 days of grace for payment of
bills are allowed as per Section...of NI
Act:
22
23
24
25
26
A forex bill discounted by the bank was
returned back unpaid. The amount will
be recovered from the party by using
the following rate:
bills buying rate
TT selling rate
bills selling rate
TT buying rate
KYC guidelines have been issued by RBI
under provisions of :
Section 21 of Banking Regulation Act
Section 35 of Banking Regulation Act
Section 35 A of RBI Act
Section 35 A of Banking Regulation Act
You are approached to allow operation
in the account of an insane person.
Whom would you allow the operation ?
Guardian appointed by court
A near and dear relative
His wife, if alive
His son or daughter
any of the above
In case of cash credit which of the
following is correct statement:
in hypothecation ownership is with the
bank.
in cash credit pledge, the possession
with the borrower
in case of hypothecation the possession
is with the bank
in case of pledge the ownership remains

with the borrower


e in case of hypothecation ownership and
possession is with the bank
38 As per Government of India notification,
it is mandatory to file the particulars for
registration of mortgage by deposit of
title deeds within _____ of creation of
the mortgage with Central Electronic
Registry of Securitization Asset
Reconstruction and Security Interest of
India in respect of all mortgages created
on or after 31st March 2011.
a 7 days
b 15 days
c 30 days
d 45 days
39 Your branch has sanctioned a bills
purchasing limit of Rs.80 lac to M/s
Rameshwar Hardware Limited under
which demand bills of exchange
accompanied by Railway Receipts or
Goods Receipts are purchased. The
company forgot to file the particulars of
the charge with Registrar of Companies
and inspecting official has raised an
objection. Which of the following
remedies is available to the company/
bank?
a seek ROC permission who has discretion
to waive delay up to 270 days
b No need to file particular for such limits
as it is in the nature of pledge by way of
constructive possession
c seek permission from National Company
Law Tribunal which has replaced CLB.
d seek permission from Ministry of
Company Affairs
e seek permission from Central Govt. for
waivement of delay which has full
discretion
40 In the beginning of the financial year,
the capital of a firm was Rs.24000. The
firm earned a profit of Rs.4500 and paid
tax at 20%. The partners also withdrawn
Rs.1500. What is the closing balance in
the capital account.

a
b
c
d
41

Rs.24000
Rs.26100
Rs. 27000
inadequate information
Ashwani, a saving bank customer of your
branch has deposited certain shares with
your branch for safe custody. This
transaction of keeping articles in safe
custody is governed by:
a Indian Contract Act 1872
b Negotiable Instruments Act
c Banking Regulation Act
d Transfer of Property Act
42 What period is available as limitation in
case of mortgage:
a 3 years from date of mortgage
b 12 from date of mortgage
c 12 years from the date when the
mortgage money has become due
d 12 years from date of loan
e 12 years from date of loan or date or
mortgage, whichever lower.
43 Within how many days does the annual
return of unclaimed deposit accounts is
required to be submitted by banks to
RBI, following the days after close of
the calendar year:
a 15 days
b 23 days
c 30 days
d 45 days
e 60 days
44 Which of the following will be considered
a micro enterprise:
a engaged in manufacturing and maximum
investment in equipment restricted to
Rs.25 lac
b engaged in services and maximum
investment in plant and machinery
restricted to Rs.10 lac
c engaged in manufacturing and maximum
investment in plant and machinery
restricted to Rs.10 lac
d engaged in services and maximum
investment in equipment restricted to

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45

a
b
c
d
46

a
b
c
d
47
a
b
c
d
48
a
b
c
d
49

Banking events updatE January 2016 17


Rs.10 lac
You are incharge of loans department in
your branch. In which situation, in the
loan accounts the interest can be debited
and taken to income to increase the
profits:
It has become due
It has become due and stands recovered
if it is NPA account
It has become due and account has not
been a non-performing account
b and c above
A customer of your branch remits money
to one of your other branches, for credit
of the account of another person, by
way of mail transfer order.
Subsequently, on 2nd day he
approaches you not to credit the amount
to the said account.
The payment cannot be stopped once
the issuing branch despatches the same
The payment can be stopped at any time
The payment can be stopped at any time
before credit to beneficiarys account
The payment can be stopped when
amount has been credited but has not
been withdrawn
Unclaimed deposit with a company would
be shown in their balance sheet as:
Current asset.
Contingent liability
Intangible assets
current liability
Frauds of Rs.1 lac and above are to be
reported to RBI on ____ within _____:
FMR 3, 2 weeks
FMR 2, 1 week
FMR 1, 3 weeks
FMR 1, one week
X received a cheque from Y, which was
dishonoured on July 12, 2013, for
insufficiency of funds. X want to file suit
u/s 138 of NI Act. Which of the following
is the time period, during which he can
file the suit:

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18 Banking events updatE January 2016

a
b
c
d
50
a
b
c

d
51
a
b
c
d
52

a
b
c
d
e
53
a
b
c
d
54
a

within one month from July 12, 2013


within one year from July 12, 2013
within one month from date of cause of
action
within one month from sending notice to
drawer for payment within 15 days
How would you determine the status of
a minor person U/s 3 of Majority Act:
Who is below age of 18 years.
Who is below age of 21 years
Who is below 18 years of age in case
natural guardian is alive and below 21
years if guardian is a person appointed
by court.
who declares himself that he is a major
In case of a loan to an agri-clinic and
agri-business centre, which of the
following is true:
the amount of loan is restricted to Rs.5
lac
loan can be allowed to all farmers
loan is classified as direct finance to
agriculture
collateral security for a loan up to Rs.5
lac not to be taken
The partner of a partnership firm wants
to appoint a person to operate the
account of the firm. Who should sign
such mandate:
All partners
Main partners
Major partners
All but minor
The partner who wants such
appointment.
In which of the following loan accounts,
the risk weight is the least:
education loan
retail loan portfolio
house loan of Rs.85 lac with LTV of 75%
it is equal in all these cases
What is the amount of premium payable
on deposit insurance per Rs.100 per
annum:
5 paise

b
c
d
55
a
b
c
d
56
a
b
c
d
57

a
c
e
58

a
b
c
d
59

8 paise
10 paise
25 paise
Business firms are sanctioned working
capital limits to provide finance for which
of the following:
fixed assets, trade debtors, stocks, cash
holding
fixed assets, trade debtors, stocks,
trade creditors
pre-paid expenses, trade debtors,
stocks, cash holding
trade debtors, stocks, cash holding,
trade creditors
The CERSAI created under SARFAESI Act
2002, is an abbreviation for which of the
following:
Central Electronic Registry of Secured
Asset and Reconstruction of Security
Interest of India
Central Electronic Registry of
Securitization Asset Reconstruction and
Security Interest of India
Central Electronic Registration of
Securitization Asset Reconstruction and
Security Interest
Compulsory Electronic Registry of
Securitization Asset Reconstruction and
Security Interest
A loan had become doubtful account as
on March 15, 2012. On this loan account,
the provision as on Mar 31, 2015 would
be at the rate of:
100%
b
75%
60%
d
50%
30%
Which kind of charge out of the following
is not possible on stocks, in favour of a
bank:
pledge
assignment
hypothecation
lien
There is a self operated FD in the name
of a minor, who wants to nominate his
mother. What precautions you will take

a
b
c
d
60

a
c
61

a
b
c
d
e
62
a
b
c
d
63

a
b
c
d
e

to comply with his request ?


Can not be allowed in the account
Nomination can be made by the person
authorised to act on behalf of the minor
Minor himself can nominate
since nominee is going to be mother, he
can do so
In terms of the recommendations of the
Prime Ministers Task Force on Micro,
Small and Medium Enterprises
(Chairman: Shri T K A Nair) constituted
by the Govt of India the banks are to
achieve a _____ annual growth in
number of micro enterprise accounts.
10%
b
12.5%
15%
d
17.5%
A loan account had become out of order
during December 2012. On this loan
account, the provision as on Mar 31,
2015 would be:
100%
75%
60%
50%
40%
Issue of securities in the primary market
is subject to fulfillment of a no. of
requirements stipulated by:
SEBI
IRDA
RBI
all the above
A current account customer of your
branch deposits with you on Sept 30,
2012 a cheque, dated January 22,
2012, issued by Govt. of Indias Ministry
of Rural Development for collection. The
cheque can be collected as:
Its validity can be 12 months
Its validity can be 9 months
Its validity is for ever till paid
Cannot be collected as its validity is
limited to 3 months
it can be collected any time being govt.
cheque

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Banking events updatE January 2016 19

Revised PAN Requirement


from 01.01.2016
The Central Board of Direct Taxes (CBDT)
made it mandatory to quote PAN or General
Index Number (GIR) on specified
transactions (specified as per Rule 114B)
with a view to ensure voluntary compliance
of the income tax procedures. The quoting
PAN became mandatory with effect from
01.11.1998. Major changes have been
made in these rules wef Jan 01, 2016 by
recasting the list of transaction, where
quoting PAN is mandatory.
What is PAN : A PAN is a 10 character
alphanumeric number allotted by the
Income Tax Deptt, to a tax payer who is
eligible to file the income tax return. First
3 characters are Alphabetic series. 4th is
status of PAN holder. 5th is the 1st
character of PAN holders name. Next 4
are special sequential numbers and the
last one is alphabetic check.
Who must have a PAN? (i) All existing
assesses or taxpayers or persons who are
required to furnish a return of income,
even on behalf of others, (ii) Any person,
who intends to enter into financial
transaction where quoting PAN is
mandatory (details given below). The
Assessing Officer may allot PAN to any
person either on his own or on a specific
request from such person.
Transactions where quoting PAN is
mandatory w.e.f. 1.1.2016 : As per
amendment to Rule 114B, it is compulsory
to quote PAN in all documents pertaining
to financial transactions notified from timeto-time by CBDT, which include the
following:

1. Immovable property
i. Sale/ purchase exceeding Rs.10 lakh;
(Existing : Amount Rs.5 lac or more)
ii. Properties valued by Stamp Valuation
authority at amount exceeding Rs.10 lakh
will also need PAN.
2. Motor vehicle (other than two wheeler)
: All sales/purchases (Existing - No change)
3. Time deposit
i. Deposits with Co-op banks, Post Office,
Nidhi, NBFC companies will also need PAN;
ii. Deposits aggregating to more than Rs.5
lakh during the year will also need PAN
(Existing - Time deposit exceeding
Rs.50,000/- with a banking company)
4. Deposit with Post Office Savings Bank
: Discontinued (Existing - Exceeding
Rs.50,000)
5. Sale or purchase of securities
Contract for sale/purchase of a value
exceeding Rs.1 lakh (No change)
6. Opening an account (other than time

deposit) with a banking company.


i. Basic Savings Bank Deposit Account
excluded (no PAN requirement for opening
these accounts);
ii. Co-operative banks also to comply
(Existing : All new accounts.)
7. Installation of telephone/ cellphone
connections Discontinued (Existing - All
instances)
8. Hotel/restaurant bill(s)
C a s h
payment exceeding Rs.50,000. [Existing
: Exceeding Rs.25,000/- at any one time
(by any mode of payment)]
9. Cash purchase of bank drafts/ pay
orders/ bankers cheques : Exceeding
Rs.50,000/- on any one day. (Existing Amount aggregating to Rs.50,000/- or
more during any one day)
10.Cash deposit with banking company :
Cash deposit exceeding Rs.50,000/- in a
day. (Existing - Cash aggregating to
Rs.50,000/- or more during any one day)
11.Foreign travel : Cash payment in
connection with foreign travel or purchase
of foreign currency of an amount
exceeding Rs.50,000/- at any one time
(including fare, payment to travel agent)
[Existing : Cash payment in connection
with foreign travel of an amount
exceeding Rs.25,000/- at any one time
(including fare, payment to travel agent,
purchase of forex)]
12.Credit card
Application to banking
company/ any other company/institution
for credit card (Existing same). Cooperative banks also to comply.
13.Mutual fund units : Payment exceeding
Rs.50,000/- for purchase. [Existing :
Payment of Rs.50,000/- or more for
purchase]
14.Shares of company
i. Opening a demat account;
ii. Purchase or sale of shares of an unlisted
company for an amount exceeding Rs.1
lakh per transaction.
[Existing - Payment of Rs.50,000/- or
more to a company for acquiring its shares)
15.Debentures/ bonds
Payment
exceeding Rs.50,000/-.
[Existing - Payment of Rs.50,000/- or more
to a company/ institution for acquiring its
debentures/ bonds]
16.RBI bonds : Payment exceeding
Rs.50,000/-. [Existing - Payment of
Rs.50,000/-or more to RBI for acquiring
its bonds]
17.Life insurance premium: Payment
exceeding Rs.50,000/- in a year [Payment
of Rs.50,000/- or more in a year as
premium to an insurer]
18.Purchase of jewellery/bullion: Deleted

and merged with next item in this table


[Existing - Payment of Rs.5 lakh or more
at any one time or against a bill)
19.Purchases or sales of goods or services:
Purchase/ sale of any goods or services
exceeding Rs.2 lakh per transaction.
(Existing no requirement)
20.Cash cards/ prepaid instruments issued
under Payment & Settlement Act : Cash
payment aggregating to more than
Rs.50,000 in a year. (Existing no
requirement)

From 1 January 2005 it is mandatory to


quote PAN on challans for any payments
due to Income Tax Department.
Responsibility to obtain PAN : It is
statutory responsibility of a person
receiving document relating to economic
or financial transactions notified by the
CBDT to ensure that PAN has been duly
quoted in the document.
Minors bank account: Where a
person, opening an account is a minor not
having any income chargeable to incometax, he shall quote the permanent account
number of his father or mother or
guardian.
Persons without PAN/GIR - Persons
who were not allotted the PAN are to make
a declaration in form No.60 giving their in,
the particulars of such transaction.
Persons with agricultural income and those
who are not in receipt of any income
chargeable to tax, have to make a
declaration in Form No. 61.
Non-residents who enter into any of the
above transactions are required to furnish
a copy of their passport.
Exemptions - PAN is not needed if the
payment is via crossed cheque.
Penalty for non-compliance : Rs.500
to Rs.10000 u/s 272A of Income Tax Act
1961.

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Banking & Finance
It is a desirable qualification for
recruitment of PO or Clerk (as per IBA).
Benefits : Enhanced chances of selection.
Financial & promotion benefit on joining
a bank It is equal to JAIIB. Hence direct
exam of CAIIB can be attempted.
3 papers (objective-type) can be
passed in 2 half-yearly attempts.

No negative marking.
Exam conducted half-yearly by IIBF.
Eligibility is 10+2 pass.
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Banking events updatE January 2016 20

Registration RNI No. 67802/98

Postal Regn No.CHD /0001/2015-17

Licensed to be Post Without Prepayment at BPO Centre, PO Sector 17, Chandigarh

Central KYC Records Registry (CKYCR)


The Central Government vide its notification dated July 7, 2015, amended
the Prevention of Money Laundering (Maintenance of Records) Rules, 2005,
(Rules), for setting up of the Central KYC Records Registry (CKYCR). It is
proposed to be established to receive, store, safeguard and retrieve the
KYC records in digital form of clients.
Reporting by banks : All reporting agencies are required to file with CKYCR,
the electronic copy of KYC records of customers within 3 days after commencement of an account based relationship with the customer. These
entities will also maintain the physical copy of these records.
KYC Identifier (KYCI) for new customers: CKYCR shall process the KYC
records received from reporting entities for de-duplicating and issue KYC
identifier (KYCI) for each client to the reporting entity, which shall communicate the KYCI in writing, to their customer.
Customers having KYCI : Where a customer already having KYCI, submits
KYCI details to a reporting entity, such reporting entity shall retrieve KYC
records online from CKYCR, by using KYCI. It shall not require such client
to submit fresh KYC records or information or any other additional identification document or details.
New / additional information from customers having KYCI : Reporting entity may seek new information if (1) there is change in the information
available with CKYCR or (2) the current address of the client requires
verification or (3) the reporting entity considers it necessary to verify the
identity or address or to perform enhanced due diligence or to build
appropriate risk profile of the customer.
In such cases, the reporting entity after obtaining additional information
shall furnish the details to CKYCR, which shall update the existing records
of the customer and inform, electronically, all reporting entities who have
dealt with that customer.
Reporting entity that performed last KYC verification or sent update information, shall be responsible for verifying the authentication of identity
and address of the customer.
Use of CKYCR information : A reporting entity shall not use KYC records
obtained from CKYCR for purpose other than verification of identity or
address of the customer. It shall also not transfer these records to 3rd
parties without obtaining permission of CKYCR.
Functions of CKYCR :

1. to follow operating guidelines issued by Regulator,


2. be responsible for storing, safeguarding and retrieving KYC records and
making such records available online, to reporting entity or Director.
3. take all precautions to ensure that the e-copies of KYC records are not
lost, destroyed or tempered with and that sufficient back-up of records is
available at an alternative, safe and secure place.
4. cause an annual audit of its controls, systems, procedures and safeguards
5. provide information only to reporting entities registered with it on payment of prescribed fee.
6. appoint a Compliance Officer to monitor the compliance of the Act, the
rules and the notifications issued by Central Govt. and Regulators.
Compatibility with FATCA & CRS : The KYC data captured by the template
also fulfills the reporting requirement under Foreign Account Tax Compliance
Act (FATCA) and Common Reporting Standards (CRS). In order to enable
reporting entities to comply with the FATCA and CRS reporting requirement,
reporting entities have been advised by RBI to take all necessary steps to
ensure compliance with the reporting requirements within the timelines
mentioned in the Rules and Guidance Note, expeditiously.

DATA COLUMN
Business of Banks
(Rs.in cr)
Aggregate deposits
Cash in hand/RBI
Investments
Bank Credit:
-Food
-Non-Food
Cash-Deposit Ratio
Investment-Deposit
Credit-Deposit

Apr03'15
891148
420920
2550180
6830960
69230
6761740
4.80
30.03
77.92

Dec11'15
9184960
438150
2746580
6966110
109390
6856720
4.77
29.90
75.84

(Rs.in cr)
Mar31'15
M3 (Out of which)
10545550
(a) Currency with public
1386350
(b) Demand deposits-Banks 890750
(c) Time Deposits - Banks
8253870
(d) Other deposits with RBI
14590

Dec11'15
11332470
1501520
936770
8879380
14790

(a) Net Bank credit to Govt 3006160


(b) Bank credit to Comrcl sector 7039580
(c) Net Forex assets of Banks 2250650

3375170
7471420
2445580

Money Stock

Sources of Money Supply

Important Banking Indicators

Statutory Liquidity Ratio


21.50%
Cash Reserve Ratio
04.00%
Reverse Repo Rate
05.75%
Repo Rate
06.75%
MSF Rate
07.75%
Bank rate
07.75%
Overnight LAF (of NDTL)
0.25%
14-days term Repo (of NDTL) 0.75%
Bank of England Rate
0.50%
European Comm. Bank
0.25%

(07.02.2015)
(15.02.2013)
(29.09.2015)
(29.09.2015)
(29.09.2015)
(29.09.2015)

Capital & Money Market Indicators


Parameter
end-Dec14
Dollar-spot TT (Rs.)
62.04
BSE - Sensex (points)
28694
NSE - Nifty(S&P CNX)
8588
Foreign reserves(Million $) 314878
Gold /Oz in USD)
1233

Dec15
66.13
26034
7925
351107
1072

INDIAN ECONOMY-IMPORTANT PARAMETERS


RBI's growth estimate for 2015-16
: 7.9%
GDP growth-2014-15 (revised estimate) : 7.6%
GDP@constant mkt prices (cr)
: 10656925
GVA@2011-12 basic prices (cr)
: 9857672
GDP projected by Govt. for 2015-16
: 14108945
Fiscal Deficit Target (2015-16) 3.9% of GDP : 555649 cr
Revenue Deficit Target (2015-16) 2.8.% of GDP : 394472 cr
Share of service sector in GVA (2014-15) : 52.7%
Share of manufacturing sector in GVA
: 29.7%
Share of agriculture sector in GVA
: 17.6%
Wholesale Price Index
: -4.5%
Money Supply (M3) expansion
: 12.9%
Exports during 2014-15
: 310.5 bn
Imports during (2014-15)
: 447.5 Bn
Export target - 2015-16 (in $)
: 310 bn
India's share in world merchandise export : 1.70%
India's currency rating (S&P)
: BB Postv
India's external debt (Mar 2015) US $
: 476 Bn
Tax-GDP ratio (2014-15)
: 9.93%
Apr- Nov15:Export $ 144.3 bn$ Imports : 261.9 bn
Per capita Income 2014-15 (Rs.)
: 88533
Indian economy's ranking in PPP terms : 3rd
Indian economy's ranking in world in value: 10th

OUR PUBLICATIONS : REFER PAGE 9,11


DATE OF DESPATCH - Jan 7 / 10, 2016

Published by Chand Singh at 1008, Sector 45-B, Chandigarh - Printed by Chand Singh at Golden Graphics 'n' Printers, Industrial Area, Ram Darbar, Chandigarh

Editor - Chand Singh