After a detailed study of message formats available in other systems such as the Society for Worldwide Inter-bank Financial Telecommunication (SWIFT), UN/EDIFACT and COMET standards, the choice has devolved on SWIFT message formats for intra- and inter-bank communication message transmission with suitable modifications. Alongside, the Indian Financial Systems Code (IFSC), a uniform coding structure, was developed to uniquely identify every bank branch in the country in routing of payment messages and Straight Through Processing (STP). The pattern adopted has also been drawn from that used by the SWIFT. The IFSC system can also be effectively used for national routing of SWIFT international messages with the help of a suitable interface at INFINET.

The IFSC has been designed as an 11-digit alpha-numeric routing number. This is in consonance with the number of digits in the SWIFT coding system which follows the ISO standard (9362) for identifying banks/branches. The composition of bank code and branch code is as follows:

The four-digit alphanumeric codes for banks are the same as registered with SWIFT. In the last six spaces, most banks use the Basic Statistical Returns (BSR) codes allotted by the Reserve Bank for reporting statistics while some use their own existing internal branch codes. As a member of the INFINET, the Reserve Bank would use SFMS for financial and non-financial communication between its own offices and the banking and financial sector. For this purpose, the Reserve Bank has assigned IFSC codes for its own departments in the Central Office and Regional Offices.

Describing the typical modality of such offers, the Reserve Bank of India stated that certain foreign entities / individuals, including Indian residents acting as representatives of such entities / individuals, make offers through letters / emails, etc., of huge money in foreign currency to resident individuals / entities (including schools / hospitals), on the pretext of helping them in their business / ventures in India. Once the contact is established, the offer is followed by a request seeking details of bank account of the Individuals / Indian entity and asking some amount to be remitted to them as initial deposit / commission so that the offer money could be transferred. Likewise, references have been also received in the Reserve Bank in the recent past from individuals / authorised dealers seeking approvals / clarifications for effecting remittances in foreign currency towards commission / fees for receiving prizes won in overseas lottery schemes etc. It has also come to the notice of the Reserve Bank that certain overseas organisations have been advising individuals / companies / trusts in India that huge sums of money for disbursal of loans in India at cheap rates has been kept in an account with the Reserve Bank and the funds would be released after approval from the Reserve Bank. To substantiate their claims, even copies of certificate / deposit receipts purported to have been issued by the Reserve Bank are produced by such operators.

The Reserve Bank of India has today clarified that remittance in any form towards participation in lottery schemes is prohibited under Foreign Exchange Management Act, 1999. Further, these restrictions are also applicable to remittances for participation in lottery-like schemes functioning under different names, such as, money circulation scheme or remittances for the purpose of securing prize money / awards, etc. The Reserve Bank of India has further clarified that it does not maintain any account in the name of individuals / companies / trusts in India to hold funds for disbursal

G. Raghuraj
Deputy General Manage

To view press release in various languages - Click Here

New Delhi, the January 15, 2010

NOTIFICATION

Auction for Sale (Re-issue) of Government of India Floating Rate Bonds, 2020

F.No.4(1)-W&M/2009(i): Government of India hereby notifies sale (re-issue) of Floating Rate Bonds, 2020 ( hereinafter called ‘the Bonds’) for an aggregate amount of Rs 3,000 crore. The sale shall be subject to the terms and conditions spelt out in this notification (called ‘Specific Notification’) as also the terms and conditions specified in the General Notification F. No. 4 (13)–W&M/2008, dated October 8, 2008 issued by Government of India.

Method of Issue
2.   The Bonds shall be sold through the Reserve Bank of India, Public Debt Office, Mumbai Office, Fort, Mumbai – 400 001 in the manner as prescribed in paragraph 5.1 of the General Notification  F.No. 4(13)- W&M /2008, dated October 8, 2008 by a price based auction using the Uniform Price Auction Method.

Allotment to Non-competitive Bidders
3. The Bonds up to 5 % of the notified amount of the sale shall be allotted to eligible individuals and institutions as per the enclosed Scheme for Non-competitive Bidding Facility in the Auctions of Government Securities (Annex).

Place and Date of Auction
4. The auction shall be conducted by the Reserve Bank of India, (Public Debt Office), Mumbai Office, Fort, Mumbai on January 22, 2010.  Bids for the auction should be submitted in electronic format on the Negotiated Dealing System (NDS) on January 22, 2010. The non-competitive bids should be submitted between 10.30 a.m. and 11.30 a.m. and the competitive bids should be submitted between 10.30 a.m. and 12.30 p.m.

When Issued Trading
5. The Bonds shall be eligible for “When Issued” trading in accordance with the guidelines issued by the Reserve Bank of India.

Tenure
6. The Bonds shall be of eleven-year tenure commencing from December 21, 2009. The Bonds shall be repaid at par on December 21, 2020.

Date of Issue and Payment for the Bonds
7. The result of the auction shall be displayed by the Reserve Bank of India at its Fort, Mumbai Office on January 22, 2010. The payment by successful bidders shall be made on January 25, 2010 (Monday), i.e., the date of re-issue. The payment for the Stock shall include accrued interest on the nominal value of the Stock allotted in the auction from the date of original issue i.e., December 21, 2009 to January 24, 2010.

Interest
8. (i) Interest at a rate of 3.79 per cent per annum shall accrue on the nominal value of the Bonds from December 21, 2009 (date of original issue) and shall be paid on June 21, 2010. For the subsequent periods, the interest at a variable rate shall be paid every half-year on December 21 and June 21.

(ii) The variable coupon rate for payment of interest on subsequent semi-annual periods shall be the average rate (rounded off up to two decimal places) of the implicit yields at the cut-off prices of the last three auctions of Government of India 182 day Treasury Bills held up to the commencement of the respective semi-annual coupon periods. The implicit yields shall be computed by reckoning 365 days in a year.

(iii) In the event of Government of India 182-day Treasury Bill auctions being discontinued during the currency of the Bonds, the coupon rate shall be the average of Yield to Maturity (YTM) rates prevailing for six month Government of India Security/ies as on the last three non-reporting Fridays prior to the commencement of the semi-annual coupon period. In case particular Friday/s is/are holiday/s, the yield to maturity rates as on the previous working day shall be taken.

(iv) The rate of interest payable half yearly on the Bonds during the subsequent periods shall be announced by the Reserve Bank of India before the commencement of the relative semi-annual coupon period.

By Order of the President of India

(Shaktikanta Das)
Joint Secretary to the Government of India

New Delhi, dated January 15, 2010

NOTIFICATION

Auction for Sale (Re-issue ) of ‘7.32 per cent Government Stock, 2014′

F. No.4 (1)-W&M/2009: Government of India hereby notifies sale (reissue) of ‘7.32 per cent Government Stock, 2014’ (hereinafter called ‘the Stock’) for an aggregate amount of Rs. 2,000 crore (nominal). The sale will be subject to the terms and conditions spelt out in this notification (called ‘Specific Notification’) as also the terms and conditions specified in the General Notification F. No. 4 (13)–W&M/2008, dated October 8, 2008 issued by Government of India.

Method of Issue

2    The Stock will be sold through Reserve Bank of India, Mumbai Office, Fort, Mumbai- 400 001 in the manner as prescribed in paragraph 5.1 of the General Notification F. No. 4 (13)–W&M/2008, dated October 8, 2008 by a price based auction using uniform price auction method.

Allotment to Non-competitive Bidders

3.   The Government Stock up to 5 % of the notified amount of the sale will be allotted to eligible individuals and institutions as per the enclosed Scheme for Non-competitive Bidding Facility in the Auctions of Government Securities (Annex).

Place and date of auction

4.    The auction will be conducted by Reserve Bank of India, Mumbai Office, Fort, Mumbai-400 001 on January 22, 2010. Bids for the auction should be submitted in electronic format on the Negotiated Dealing System (NDS) on January 22, 2010. The non-competitive bids should be submitted between 10.30 a.m. and 11.30 a.m. and the competitive bids should be submitted between 10.30 a.m. and 12.30 p.m.

When Issued Trading

5.   The Stock will be eligible for “When Issued” trading in accordance with the guidelines issued by the Reserve Bank of India.

Tenure

6     The Stock will be of five-year tenure commencing from October 20, 2009. The Stock will be repaid at par on October 20, 2014.

Date of issue and payment for the stock

7.   The result of the auction shall be displayed by the Reserve Bank of India at its Fort, Mumbai Office on January 22, 2010. The payment by successful bidders will be on January 25, 2010, i.e., the date of re-issue. The payment for the Stock will include accrued interest on the nominal value of the Stock allotted in the auction from the date of original issue i.e., October 20, 2009 to January 24, 2010.

Interest

8.Interest at the rate of 7.32 per cent per annum will accrue on the nominal value of the Stock from the date of original issue and will be paid half yearly on April 20 and October 20.

By Order of the President of India

(Shaktikanta Das)
Joint Secretary to the Government of India

January 15, 2010

All Scheduled Commercial Banks /
All State Co-operative Banks/
All Scheduled Primary (Urban) Co-operative Banks/
All Financial Institutions/ All Primary Dealers

Dear Sirs,

Auction of Government of India Dated Securities

Government of India have offered to sell (re-issue) of  (a) “7.32 percent  Government Stock 2014 ” for a notified amount of Rs.2,000 crore (nominal) through a price based auction using uniform price method vide Notification No.4(1)-W&M/2009 dated January 15, 2010, (b)   ”Floating Rate Bonds 2020″ for a notified amount of Rs.3,000 crore (nominal) through a  price based auction using uniform price method vide Notification No.4(1)-W&M/2009(i) dated January 15, 2010 and (c) “8.28 percent Government Stock 2032” for a notified amount of Rs. 2,000 crore (nominal) through a price based auction using uniform price method vide Notification No.4(1)-W&M/2009(ii) dated January 15, 2010. The Reserve Bank of India at Mumbai will conduct the auctions on January 22, 2010. The salient features of the auctions and the terms and conditions governing the issue of the Stocks are given in the Notifications (copies enclosed), which should be read along with the General Notification F. No.  4 (13)–W&M/2008, dated October 8, 2008 issued by Government of India.

2.    We wish to draw your attention, in particular, to the following:

A. With regard to Floating Rate Bonds (FRBs)

1. The coupon rate for payment of interest for the first half year ending June 20, 2010 will be  3.79 per cent . For the subsequent periods, the interest will be paid at a variable rate on a semi-annual basis.
2. The variable interest rate for payment of interest will be the average of the implicit yields at cut-off prices of last three auctions of Government of India 182 day Treasury Bills.
3. The reset of variable interest rates will be made semi-annually and will be announced by the Reserve Bank of India on or before the commencement of the respective coupon periods

1. The Stocks will be issued for a minimum amount of Rs.10,000/- (nominal) and in multiples of Rs.10,000/- thereafter
2. ‘Floating Rate Bonds 2020′ will be repaid at par on December 21, 2020.

B. With regard to ’7.32% Government Stock 2014′ and ’8.28% Government Stock 2032′

1. The Stocks will be issued for a minimum amount of Rs.10,000/- (nominal) and in multiples of Rs.10,000/- thereafter.
2. ’7.32% Government Stock 2014′ and ’8.28% Government Stock 2032′ will be repaid at par on October 20, 2014, and February 15, 2032 respectively.

C. In all the cases

1. Government Stock up to 5% of the notified amount of sale will be allotted to the eligible individuals and institutions under the Scheme for Non-competitive Bidding Facility in the Auctions of Government Securities (enclosed with the notifications F. No.4 (1)-W&M/2009, F. No.4 (1)-W&M/2009(i) and F. No.4 (1)-W&M/2009(ii) all dated January 15, 2010). Each bank or PD on the basis of firm orders received from their constituents will submit a single consolidated non-competitive bid on behalf of all its constituents in electronic format on the Negotiated Dealing System (NDS).  Allotment under the non-competitive segment to the bank or PD will be at the cut-off price that will emerge in the auction on the basis of the competitive bidding.
2. Both competitive and non-competitive bids for the auction should be submitted in electronic format on the Negotiated Dealing System (NDS) on January 22, 2010. Bids in physical form will not be accepted except in extraordinary circumstances such as general failure of the NDS system. The non-competitive bids should be submitted between 10.30 a.m. and 11.30 a.m. and the competitive bids should be submitted between 10.30 a.m. and 12.30 p.m.
3. An investor can submit more than one competitive bids at different prices in electronic format on the Negotiated Dealing System (NDS). However, the aggregate amount of bids submitted by a person in an auction should not exceed the notified amount of auction.
4. On the basis of bids received, the Reserve Bank will determine the minimum price up to which tenders for purchase of Government Stock will be accepted at the auctions. Bids quoted at rates lower than the minimum price determined by the Reserve Bank of India will be rejected. Reserve Bank of India will have the full discretion to accept or reject any or all bids either wholly or partially without assigning any reason.
5. The result of the auctions will be announced on January 22, 2010 and payment by successful bidders will be on January 25, 2010 (Monday).
6. The Government Stocks will be issued by credit to Subsidiary General Ledger Account (SGL) of parties maintaining such account with Reserve Bank of India or in the form of Stock Certificate. Interest on the Government Stock will be paid half-yearly.
7. The Floating Rate Bonds/ Government stocks will qualify for the ready forward facility.
8. The Stock will be eligible for “When Issued” trading during the period January 18-22, 2010 in accordance with the guidelines on ‘When Issued’ transactions in Central Government Securities’ issued by the Reserve Bank of India vide circular No. RBI /2006-07/178 dated November 16, 2006  as amended from time to time.

Yours faithfully,

(Rajendra Kumar)
Deputy General Manager

January 18, 2010

All Regional Rural Banks

Dear Sir,

Computation of Net Demand and Time Liabilities (NDTL)
for the purpose of Maintenance of CRR/SLR

It has been observed that the Regional Rural Banks (RRBs) are not following a uniform practice in reckoning their liability in respect of arrangements with correspondent banks (mainly sponsor banks) for remittance facilities. Under the arrangements, there is a transfer of funds by accepting bank to its correspondent bank and it is an obligation of the correspondent bank to honour the instruments. However, such transfer of funds and obligation of correspondent bank to honour the instruments in no way absolve the primary liability of the accepting bank issuing drafts and interest/dividend warrants to its customers. It is, therefore, advised that all RRBs should reckon the liability in the following manner:

i)  When an RRB accepts funds from a client under its remittance facility scheme, it becomes a liability (Liabilities to Others) in its books. The liability of the RRB accepting funds will extinguish only when the correspondent bank honours the drafts issued by the accepting bank to its customers. As such, the balance amount in respect of the drafts issued by the RRB on its correspondent bank under the remittance facility scheme and remaining unpaid should be reflected in the RRB’s books as an outside liability and the same should also be taken into account for computation of NDTL for CRR/SLR purpose.

ii)  The amount received by correspondent banks has to be shown as ‘ Liabilities to the Banking System ‘ by them and not as ‘ Liabilities to Others ‘ and this liability could be netted off by the correspondent banks against their inter-bank assets. Likewise sums placed by banks issuing drafts/interest/duplicate warrants are to be treated as Assets within banking system in their books and can be netted off from their inter-bank liabilities.

2. Please acknowledge receipt to our Regional Office concerned.

Yours faithfully,

(A.K.Pandey)
General Manager

A.P. (DIR Series) Circular No. 27

January 19, 2010

To

All Authorised Dealer Category – I Banks

Madam / Sir,

Guidelines on trading of Currency Futures

in Recognized Stock Exchanges

Attention of Authorized Dealers Category – I (AD Category – I) banks is invited to A.P.(DIR Series) Circular No. 05 dated August 06, 2008, permitting persons resident in India to participate in the currency futures market in India, subject to the directions contained in Currency Futures (Reserve Bank) Directions,  2008 [Notification No. FED.1/ DG (SG)-2008 dated August 6, 2008].

2. Currently, persons resident in India are permitted only to trade in US Dollar (USD) – Indian Rupee (INR) currency futures contracts in recognized stock exchanges. In order to facilitate direct hedging of currency risk in other currency pairs as well, it has been decided, as announced in the Second Quarter Review of Monetary Policy 2009-10 (Para 117), to permit the recognized stock exchanges to offer currency futures contracts in the currency pairs of Euro-INR, Japanese Yen (JPY)-INR and Pound Sterling (GBP)-INR, in addition to the USD-INR contracts, with immediate effect.

3.  Accordingly, the Notification No.FED. 2 / ED (HRK)-2009 dated January 19,  2010 viz. Currency Futures (Reserve Bank) (Amendment) Directions, 2010, amending the Directions notified vide Notification No.FED.1/DG(SG)-2008 dated August 6, 2008 has been issued. A copy of the Notification is annexed.

4. AD Category-I banks may bring the contents of this circular to the notice of their constituents and customers, concerned.

5. This circular has been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

Salim Gangadharan

Chief General Manager-in-charge

[A.P.(DIR Series) Circular No.27

dated January 19, 2010]

Currency Futures (Reserve Bank) (Amendment) Directions, 2010

Notification No. FED. 2/ ED (HRK)-2010 dated January 19, 2010

The Reserve Bank of India having considered necessary in the public interest and having regard to the need for regulating the financial system of the country to its advantage, in exercise of its powers conferred by section 45W of the Reserve Bank of India Act, 1934 and of all the powers enabling it in this behalf, hereby makes the following amendments to the Currency Futures (Reserve Bank) Directions, 2008 which werenotified vide Notification No. FED.1/ DG (SG)-2008 dated August 6, 2008 and published in Part III, Section 4 of the Gazette of India (Weekly) dated October 11, 2008.

1. Short title and commencement of the directions

These Directions may be called the Currency Futures (Reserve Bank) (Amendment) Directions, 2010 and they shall come into force with effect from January 19, 2010.

2. Amendment of the directions

In paragraph 4 of the Currency Futures (Reserve Bank) Directions, 2008,

(i)  in clause (a), after the words “Only USD-INR”, the comma and words, “, Euro-INR, Pound Sterling (GBP)-INR  and Japanese Yen (JPY)-INR ” shall be inserted.

(ii)  in clause (b),  after the words “USD 1000”, the words, “ for USD-INR contracts, Euro 1000 for Euro-INR contracts, GBP 1000 for GBP-INR contracts and JPY 100,000 for JPY-INR contracts.” shall be inserted.

(iii)  for clause (e) , the following clause shall be substituted, namely :-

“e. The settlement price for USD-INR and Euro-INR contracts shall be the Reserve Bank’s Reference Rates and for GBP-INR and JPY-INR contracts shall be the exchange rates published by the Reserve Bank in its press release on the last trading day.”

(H. R. Khan)

Executive Director

RBI/2009-10/287DBOD.BP.BC.No. 69 / 21.01.002/ 2009-10
January 13, 2010
All Commercial Banks(excluding RRBs )
Dear Sir,
Retail Issue of Subordinated Debt for Raising Tier II Capital
Please refer to our circular DBOD.No.BP.BC. 38 /21.01.002/2009-10 September 7, 2009 on ‘Issue of Subordinated Debt for Raising Tier II Capital’.
2. Some banks have indicated that they would like to issue subordinated debt to retail investors. With a view to enhancing investor education relating to risk characteristics of regulatory capital instruments, banks issuing subordinated debt to retail investors are advised to adhere to the following conditions:
a)  The requirement for specific sign-off as quoted below, from the investors for having understood the features and risks of the instrument may be incorporated in the common application form of the proposed debt issue.
” By making this application, I/We acknowledge that I/We have understood the terms and conditions of the Issue of [ insert the name of the instruments being issued ] of [ Name of The Bank ] as disclosed in the Draft Shelf Prospectus, Shelf Prospectus and Tranche Document “.
b)  For floating rate instruments, banks should not use its Fixed Deposit rate as benchmark.
c)    All the publicity material, application form and other communication with the investor should clearly state in bold letters (with font size 14) how a subordinated bond is different from fixed deposit particularly that it is not covered by deposit insurance.
3.The guidelines contained in this circular would be applicable with immediate effect.
Yours faithfully
(B. Mahapatra)

Chief General Manager

RBI/2009-10/ 286A.P. (DIR Series) Circular No.25
January 13, 2010
To
All Authorised Dealers in Foreign Exchange
Madam / Sir,
Purchase of Immovable Property in India byPersons of Indian Origin (PIOs) – Amendment of the definition
Attention of Authorised Dealer Category-I banks is invited to clause (c) of Regulation 2 of Notification No. FEMA 21/2000-RB dated May 3, 2000 viz. Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India), Regulations, 2000, as amended from time to time, in terms of which ‘a Person of Indian Origin’ means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who (i) at any time, held an Indian Passport or (ii) who or either of whose father or whose grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
2. Government of India, has notified vide G.S.R.813 (E) in the Gazette of India dated November 12, 2009 [Notification No.FEMA.200/2009-RB dated October 5, 2009] an amendment to clause (c) of Regulation 2 of the Notification referred to above.  Accordingly, ‘a Person of Indian Origin’ means an individual (not being a citizen of Pakistan or Bangladesh or Sir Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who (i) at any time, held an Indian Passport or (ii) who or either of whose father or mother or whose grandfather or grandmother was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).  A copy of the Notification is annexed.
3. Authorised Dealer Category-I banks may bring the contents of this circular to the notice of their constituents and customers concerned.
4. The Directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully,
(Salim Gangadharan )                                                                                              Chief General Manager in Charge

Faced with a rising number of customer complaints on excessive charges, the Reserve Bank of India (RBI) has asked the Indian Banks’ Association (IBA) to come up with guidelines on what the reasonable charges should be.

Accordingly, the industry lobby has asked its Committee for Customer Service headed by Standard Chartered Bank CEO Neeraj Swaroop to submit a report to the regulator. In turn, a sub-committee of bankers from State Bank of India, Corporation Bank, Citibank and ICICI Bank, which is headed by Union Bank of India Executive Director S Raman, has been tasked with framing the guidelines.

Sources associated with the sub-committee told Business Standard that the panel has been mandated to look into 27 items categorised as basic transaction services.

Apart from charges for issuing cheque books and drafts, the committee is looking at charges for cheque return, reviving inoperative accounts, issue of duplicate pass books and others such as not maintaining the prescribed minimum balance.

Charges for special services such as loans and credit cards are not within the committee’s purview.

“There is wide disparity between what different banks charge their customers. The committee will come up with caps on what banks can charge for basic services,” said a member of the sub-committee.

For instance, public sector lenders such as State Bank of India (SBI) require regular savings account customers to maintain a minimum average balance of Rs 1,000 per quarter, while private sector lenders such as ICICI Bank and HDFC Bank require a minimum balance of Rs 10,000.

Foreign lenders such as Citibank, Standard Chartered and HSBC have minimum balance requirements of Rs 25,000 per quarter.

The penalties for non-maintenance of minimum balance are also steep for private and foreign banks.

SBI charges Rs 75 per year for non-maintenance of minimum balance. ICICI Bank and Citibank charge Rs 750 per quarter.

“A lot of these charges are deterrents and the banks don’t really make money from them. They are used to increase efficiency and improve customer behaviour,” said another sub-committee member.

The committee is expected to submit its recommendations next month, and if RBI accepts them, the guidelines will come into effect from 1 April 2010.

Banks are currently required to prominently display their service charges and fees in an RBI-prescribed format on their website and at all branches.

Before 1997, service charges and fees were governed by IBA guidelines. Later, RBI decided to allow banks to frame their own charges subject to approval from respective boards.

Similarly, RBI had asked IBA to come up with guidelines on the use of ATMs for inter-bank transactions.

Adherence to IBA guidelines on reasonable service charges and fees would be voluntary.

(BS)

According to RBI data, the government’s balance with the central bank stood at Rs 37,193 crore as of January 1. In the previous week, strong advance tax and excise duty collections led to a Rs 5,145-crore increase in the balance.

(BS)

DBOD. AML.BC. No. 68 /14.01.001/2009-10

January 12,  2010

The Chairmen and Chief Executive Officers
(All Scheduled Commercial Banks excluding RRBs)
/ Financial Institutions/ Local Area Banks

Dear Sir,

Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Amendment Rules, 2009 – Obligation of banks/Financial institutions

As you are aware Government of India vide its Notification No.13/2009/F.No.6/8/2009-ES dated November 12, 2009, has amended  the Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005. A copy of the Notification is enclosedfor ready reference.

2. Some of the salient features of the amendment, relevant to banks and financial institutions, are as under:

• Clause (ca) inserted in sub-rule (1) of Rule 2 defines “non-profit organization”
• Clause (BA) inserted in sub-rule (1) of Rule 3  requires  banks/financial  institutions  to maintain proper record of all transactions involving receipts by non-profit organizations of value more than rupees ten lakh or its equivalent in foreign currency.
• The amended Rule 6 provides  that the records referred to in rule 3 should be maintained for a period of ten years from the date of transactions between the client and the banking company/financial institution.
• A proviso has been inserted in  sub-rule (3) of Rule 8, which requires  that banks /financial institutions and its employees should keep the fact  of furnishing suspicious transaction information strictly confidential.
• Rule 9, now requires banks/financial institutions to verify identity of the non-account based customer while carrying out transaction of an amount equal to or exceeding rupees fifty thousand, whether conducted as a   single transaction or several transactions that appear to be connected.
• The amended sub-rule (1) of Rule 9, in terms of clause (b) (ii) requires verification of identity  of the customer  for all international money transfer operations.
• Proviso to Rule 9 (1) regarding the verification of  identity of the client within a reasonable time after opening the account/execution of the transaction has been deleted.

3. Accordingly, in view of amendments to the above Rules, banks  / financial institutions  are  required to :

• Maintain proper record  of all transactions involving receipts by non- profit organizations of value more than rupees ten lakh or its equivalent  in foreign currency  and to forward a report to FIU-IND  of all such transactions in the prescribed format  every month  by the 15th of the succeeding month.
• In case of transactions carried out by a non-account based customer, that is a walk-in customer, where the amount of transaction is equal to or exceeds rupees fifty thousand, whether conducted as a single transaction or several transactions that appear to be connected, the customer’s identity and address should be verified.  Further, if a bank has reason to believe that a customer is intentionally structuring a transaction into a series of transactions below the threshold of Rs.50,000/-  the bank should verify identity and address of the customer and also consider filing  a suspicious transaction report (STR)  to FIU-IND.

4. Banks/ financial institutions are advised to strictly follow the amended provisions of PMLA Rules and ensure meticulous compliance to these Rules.

Yours faithfully,

(Vinay Baijal)
Chief General Manager

RBI/2009-10/284IDMD.DOD. 05 /11.08.38/2009-10
January 8, 2010
To All Market Participants
Ready Forward Contracts in Corporate Debt Securities
A reference is invited to paragraph 111 of the Second Quarter Review of the Annual Policy Statement for 2009-10 regarding the introduction of repo in corporate bonds.
2. It has been decided to introduce repo in corporate bonds. In this regard, the Reserve Bank of India has issued a direction IDMD.DOD.04/11.08.38/2009-10 dated January 08, 2010 under section 45W of the RBI Act, 1934, which has been placed on the Reserve Bank of India website. A copy of the direction is enclosed.
3. The Reserve Bank of India Notification, in exercise of the powers conferred on the Reserve Bank of India under section 16 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) vide Government of India Notification No. 183(E) dated March 1, 2000 issued under Section 29 A of the Act, ibid, is being issued separately.
Yours faithfully,
(K V Rajan)Chief General Manager
Encl.: as above
RESERVE BANK OF INDIAINTERNAL DEBT MANAGEMENT DEPARTMENT 23RD FLOOR CENTRAL OFFICEFORT MUMBAI 400 001
Mumbai, January 08, 2010 Repo in Corporate Debt Securities (Reserve Bank) Directions, 2010
The Reserve Bank of India having considered it necessary in public interest and to regulate the financial system of the country to its advantage, in exercise of its powers conferred by section 45W of the Reserve Bank of India Act, 1934 and of all the powers enabling it in this behalf, hereby gives the following directions to all the persons dealing in repo in Corporate Debt Securities.
1. Short title and commencement of the directions
These directions may be called the Repo in Corporate Debt Securities (Reserve Bank) Directions, 2010 and they shall come into force with effect from March 01, 2010.
2. Definitions
‘Corporate Debt Security’ means non-convertible debt securities, which create or acknowledge indebtedness, including debentures, bonds and such other securities of a company or a body corporate constituted by or under a Central or State Act, whether constituting a charge on the assets of the company or body corporate or not, but does not include debt securities issued by Government or such other persons as may be specified by the Reserve Bank, security receipts and securitized debt instruments”
‘Security Receipts’ means a security as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002)
‘Securitized debt instrument’ means securities of the nature referred to in sub-clause (ie) of clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956(42 of 1956).
3. Eligible securities for repo in Corporate Debt Securities
Only listed corporate debt securities which are rated ‘AA’ or above by the rating agencies, that are held in the security account of the repo seller, in demat form, shall be eligible provided that Commercial Papers (CPs), Certificates of Deposit (CDs) and other instruments including Non-Convertible Debentures (NCDs) of less than one year of original maturity, shall not be eligible securities for undertaking repo.4. Eligible Participants
The following entities shall be eligible to undertake repo transactions in corporate debt securities:
Any scheduled commercial bank excluding RRBs and LABs;
Any Primary Dealer authorised by the Reserve Bank of India;
Any non-banking financial company registered with the Reserve Bank of India (other than Government companies as defined in section 617 of the Companies Act, 1956);
All-India Financial Institutions, namely, Exim Bank, NABARD, NHB and SIDBI;
Other regulated entities, subject to the approval of the regulators concerned, viz.,
Any mutual fund registered with the Securities and Exchange Board of India;
Any housing finance company registered with the National Housing Bank; and
Any insurance company registered with the Insurance Regulatory and Development Authorit
Any other entity specifically permitted by the Reserve Bank
5. Tenor
Repos in corporate debt securities shall be for a minimum period of one day and a maximum period of one year.
6. Trading
Participants shall enter into repo transactions in corporate debt securities in the OTC market.
7. Reporting of Trades
All repo trades shall be reported within 15 minutes of the trade on the FIMMDA reporting platform.
The trades shall also be reported to any of the clearing houses of the exchanges for clearing and settlement.
8. Settlement of trades
All repo trades in corporate debt securities shall settle either on a T+1 basis or a T+2 basis under DvP I (gross basis) framework.
Repo transactions in corporate debt securities shall settle in the same manner as outright OTC trades in corporate debt securities.
On the date of reversal of repo trades, the clearing houses shall compute the obligations of the parties and facilitate settlement on DvP basis.
9. Prohibition on sale of repoed security
The security acquired under repo shall not be sold by the repo buyer (lender of the funds) during the period of repo.
10. Haircut
A haircut of 25% (or higher as maybe decided by the participants depending on the term of the repo) shall be applicable on the market value of the corporate debt security prevailing on the date of trade of 1st leg.
Participants may refer to the rating-haircut matrix that may be published by the Fixed Income Money Market and Derivatives Association of India (FIMMDA), to determine the appropriate haircut.
11. Valuation
For arriving at the market value of the corporate debt security, the participants undertaking repo in corporate bonds may refer to the credit spreads published by the FIMMDA.
12. Capital Adequacy
The repo transactions in corporate debt securities shall attract capital charge in terms of para 7.3.8 of the Master Circular DBOD No.BP.BC.21/21.06.001/2009-10 dated July 01, 2009.
13. Disclosure
The details of corporate debt securities lent or acquired under repo or reverse repo transactions shall be disclosed in the “Notes on Accounts” to the Balance Sheet.
14. Accounting
The repo transactions in corporate debt securities shall be accounted as per the revised guidelines on uniform accounting for repo/reverse repo transactions in Government securities, which would be issued separately.
15. Computation of CRR/SLR & borrowing limit
The amount borrowed by a bank through repo shall be reckoned as part of its Demand and Time Liabilities (DTL) and the same shall attract CRR/SLR as per the provisions of the Master Circular DBOD.Ret.BC.45/12.01.001/2009-10 dated September 18, 2009.
The borrowings of a bank through repo in corporate bonds shall be reckoned as its liabilities for reserve requirement and, to the extent these liabilities are to the banking system, they shall be netted as per clause (d) of the explanation under section 42(1) of the RBI Act, 1934. Such borrowings shall, however, be subject to the prudential limits for inter-bank liabilities prescribed vide circular DBOD.BP.BC.66/21.01.002/2006-07 dated March 06, 2007.
16. Documentation
The participants shall enter into bilateral Master Repo Agreement as per the documentation finalized by the FIMMDA.
H R Khan Executive Director
IDMD.DOD. 04 /11.08.38/2009-10

January 8, 2010

All Scheduled Commercial Banks /
All State Co-operative Banks/All Scheduled Primary
(Urban) Co-operative Banks /All Financial Institutions/
All Primary Dealers

Dear Sirs,

Auction of Government of India Dated Securities

Government of India have offered to sell (re-issue) of  (a) “7.02 percent  Government Stock 2016 ” for a notified amount of Rs.3,000 crore (nominal) through a price based auction using uniform price method vide Notification No.4(1)-W&M/2009 dated January 8, 2010, (b) “6.35 percent Government Stock 2020” for a notified amount of Rs.4,000 crore (nominal) through a price based auction using uniform price method vide Notification No.4(1)-W&M/2009(i) dated January 8, 2010 and (c) “8.24 percent Government Stock 2027” for a notified amount of Rs. 3,000 crore (nominal) through a price based auction using uniform price method vide Notification No.4(1)-W&M/2009(ii) dated January 8, 2010. The Reserve Bank of India at Mumbai will conduct the auctions on January 15, 2010. The salient features of the auctions and the terms and conditions governing the issue of the Stocks are given in the Notifications (copies enclosed), which should be read along with the General Notification F. No.  4 (13)–W&M/2008, dated October 8, 2008 issued by Government of India.

2. We wish to draw your attention, in particular, to the following:

1. The Stocks will be issued for a minimum amount of Rs.10,000/- (nominal) and in multiples of Rs.10,000/- thereafter.
2. In all the auctions, Government Stock up to 5% of the notified amount of sale will be allotted to the eligible individuals and institutions under the Scheme for Non-competitive Bidding Facility in the Auctions of Government Securities (enclosed with the notifications F. No.4 (1)-W&M/2009, F. No.4 (1)-W&M/2009(i) and F. No.4 (1)-W&M/2009(ii) all dated January 8, 2010). Each bank or PD on the basis of firm orders received from their constituents will submit a single consolidated non-competitive bid on behalf of all its constituents in electronic format on the Negotiated Dealing System (NDS).  Allotment under the non-competitive segment to the bank or PD will be at the cut-off price that will emerge in the auction on the basis of the competitive bidding.
3. Both competitive and non-competitive bids for the auction should be submitted in electronic format on the Negotiated Dealing System (NDS) on January 15, 2010. Bids in physical form will not be accepted except in extraordinary circumstances such as general failure of the NDS system. The non-competitive bids should be submitted between 10.30 a.m. and 11.30 a.m. and the competitive bids should be submitted between 10.30 a.m. and 12.30 p.m.
4. An investor can submit more than one competitive bids at different prices in electronic format on the Negotiated Dealing System (NDS). However, the aggregate amount of bids submitted by a person in an auction should not exceed the notified amount of auction.
5. On the basis of bids received, the Reserve Bank will determine the minimum price up to which tenders for purchase of Government Stock will be accepted at the auctions. Bids quoted at rates lower than the minimum price determined by the Reserve Bank of India will be rejected. Reserve Bank of India will have the full discretion to accept or reject any or all bids either wholly or partially without assigning any reason.
6. The result of the auctions will be announced on January 15, 2010 and payment by successful bidders will be on January 18, 2010 (Monday).
7. The Government Stocks will be issued by credit to Subsidiary General Ledger Account (SGL) of parties maintaining such account with Reserve Bank of India or in the form of Stock Certificate. Interest on the Government Stock will be paid half-yearly.
8. The Government Stocks will be repaid at par on August 17, 2016, January 2, 2020 and February 15, 2027, respectively.
9. The Stocks will qualify for the ready forward facility.
10. The Stock will be eligible for “When Issued” trading during the period January 11-15, 2010   in accordance with the guidelines on ‘When Issued’ transactions in Central Government Securities’ issued by the Reserve Bank of India vide circular No. RBI /2006-07/178 dated November 16, 2006 as amended from time to time.

Yours faithfully,

(Rajendra Kumar)
Deputy General Manager

New Delhi, dated January 8, 2010

NOTIFICATION

Auction for Sale (Re-issue ) of ‘7.02 per cent Government Stock, 2016’

F. No.4 (1)-W&M/2009: Government of India hereby notifies sale (reissue) of ‘7.02 per cent Government Stock, 2016’ (hereinafter called ‘the Stock’) for an aggregate amount of Rs. 3,000 crore (nominal). The sale will be subject to the terms and conditions spelt out in this notification (called ‘Specific Notification’) as also the terms and conditions specified in the General Notification F. No. 4 (13)–W&M/2008, dated October 8, 2008 issued by Government of India.

Method of Issue
2. The Stock will be sold through Reserve Bank of India, Mumbai Office, Fort, Mumbai- 400 001 in the manner as prescribed in paragraph 5.1 of the General Notification F. No. 4 (13)–W&M/2008, dated October 8, 2008 by a price based auction using uniform price auction method.

Allotment to Non-competitive Bidders
3.    The Government Stock up to 5 % of the notified amount of the sale will be allotted to eligible individuals and institutions as per the enclosed Scheme for Non-competitive Bidding Facility in the Auctions of Government Securities (Annex I).

Place and date of auction
4.  The auction will be conducted by Reserve Bank of India, Mumbai Office, Fort, Mumbai-400 001 on January 15, 2010. Bids for the auction should be submitted in electronic format on the Negotiated Dealing System (NDS) on January 15, 2010. The non-competitive bids should be submitted between 10.30 a.m. and 11.30 a.m. and the competitive bids should be submitted between 10.30 a.m. and 12.30 p.m.

When Issued Trading
5.   The Stock will be eligible for “When Issued” trading in accordance with the guidelines issued by the Reserve Bank of India.

Tenure
6.   The Stock will be of seven-year tenure commencing from August 17, 2009. The Stock will be repaid at par on August 17, 2016.

Date of issue and payment for the stock
7.   The result of the auction shall be displayed by the Reserve Bank of India at its Fort, Mumbai Office on January 15, 2010. The payment by successful bidders will be on January 18, 2010 i.e., the date of re-issue. The payment for the Stock will include accrued interest on the nominal value of the Stock allotted in the auction from the date of original issue i.e., August 17, 2009 to January 17, 2010.

Interest
8.   Interest at the rate of 7.02 per cent per annum will accrue on the nominal value of the Stock from the date of original issue and will be paid half yearly on February 17  and August 17.

By Order of the President of India

(Shaktikanta Das)
Joint Secretary to the Government of India

New Delhi, dated January 8, 2010

NOTIFICATION

Auction for Sale (Re-issue ) of ‘6.35 per cent Government Stock, 2020′

F. No.4 (1)-W&M/2009(i): Government of India hereby notifies sale (reissue) of ‘6.35 per cent Government Stock, 2020’ (hereinafter called ‘the Stock’) for an aggregate amount of Rs. 4,000 crore (nominal). The sale will be subject to the terms and conditions spelt out in this notification (called ‘Specific Notification’) as also the terms and conditions specified in the General Notification F. No. 4 (13)–W&M/2008, dated October 8, 2008 issued by Government of India.

Method of Issue

2. The Stock will be sold through Reserve Bank of India, Mumbai Office, Fort, Mumbai- 400 001 in the manner as prescribed in paragraph 5.1 of the General Notification F. No. 4 (13)–W&M/2008, dated October 8, 2008 by a price based auction using uniform price auction method.

Allotment to Non-competitive Bidders

3. The Government Stock up to 5 % of the notified amount of the sale will be allotted to eligible individuals and institutions as per the enclosed Scheme for Non-competitive Bidding Facility in the Auctions of Government Securities (Annex).

Place and date of auction

4. The auction will be conducted by Reserve Bank of India, Mumbai Office, Fort, Mumbai-400 001 on January 15, 2010. Bids for the auction should be submitted in electronic format on the Negotiated Dealing System (NDS) on January 15, 2010. The non-competitive bids should be submitted between 10.30 a.m. and 11.30 a.m. and the competitive bids should be submitted between 10.30 a.m. and 12.30 p.m.

When Issued Trading

5. The Stock will be eligible for “When Issued” trading in accordance with the guidelines issued by the Reserve Bank of India.

Tenure

6.  The Stock will be of seventeen-year tenure commencing from January 2, 2003. The Stock will be repaid at par on January 2, 2020.

Date of issue and payment for the stock

7. The result of the auction shall be displayed by the Reserve Bank of India at its Fort, Mumbai Office on January 15, 2010. The payment by successful bidders will be on January 18, 2010, i.e., the date of re-issue. The payment for the Stock will include accrued interest on the nominal value of the Stock allotted in the auction from the date of last coupon payment, i.e., January 2, 2010 to January 17, 2010.

Interest

8. Interest at the rate of 6.35  per cent per annum will accrue on the nominal value of the Stock from the date of last coupon payment and will be paid half yearly on July 2 and January 2.

By Order of the President of India

(Shaktikanta Das)
Joint Secretary to the Government of India

New Delhi, dated January 8, 2010

NOTIFICATION

Auction for Sale (Re-issue ) of ‘6.35 per cent Government Stock, 2020′

F. No.4 (1)-W&M/2009(i): Government of India hereby notifies sale (reissue) of ‘6.35 per cent Government Stock, 2020’ (hereinafter called ‘the Stock’) for an aggregate amount of Rs. 4,000 crore (nominal). The sale will be subject to the terms and conditions spelt out in this notification (called ‘Specific Notification’) as also the terms and conditions specified in the General Notification F. No. 4 (13)–W&M/2008, dated October 8, 2008 issued by Government of India.

Method of Issue

2. The Stock will be sold through Reserve Bank of India, Mumbai Office, Fort, Mumbai- 400 001 in the manner as prescribed in paragraph 5.1 of the General Notification F. No. 4 (13)–W&M/2008, dated October 8, 2008 by a price based auction using uniform price auction method.

Allotment to Non-competitive Bidders

3. The Government Stock up to 5 % of the notified amount of the sale will be allotted to eligible individuals and institutions as per the enclosed Scheme for Non-competitive Bidding Facility in the Auctions of Government Securities (Annex).

Place and date of auction

4. The auction will be conducted by Reserve Bank of India, Mumbai Office, Fort, Mumbai-400 001 on January 15, 2010. Bids for the auction should be submitted in electronic format on the Negotiated Dealing System (NDS) on January 15, 2010. The non-competitive bids should be submitted between 10.30 a.m. and 11.30 a.m. and the competitive bids should be submitted between 10.30 a.m. and 12.30 p.m.

When Issued Trading

5. The Stock will be eligible for “When Issued” trading in accordance with the guidelines issued by the Reserve Bank of India.

Tenure

6.  The Stock will be of seventeen-year tenure commencing from January 2, 2003. The Stock will be repaid at par on January 2, 2020.

Date of issue and payment for the stock

7. The result of the auction shall be displayed by the Reserve Bank of India at its Fort, Mumbai Office on January 15, 2010. The payment by successful bidders will be on January 18, 2010, i.e., the date of re-issue. The payment for the Stock will include accrued interest on the nominal value of the Stock allotted in the auction from the date of last coupon payment, i.e., January 2, 2010 to January 17, 2010.

Interest

8. Interest at the rate of 6.35  per cent per annum will accrue on the nominal value of the Stock from the date of last coupon payment and will be paid half yearly on July 2 and January 2.

By Order of the President of India

(Shaktikanta Das)
Joint Secretary to the Government of India