RBI Regulatory Updates & Developments
  • Credit Flow to Agriculture – Collateral Free Agricultural Loans

It has been decided to raise the limit for collateral free agricultural loans from the existing level of ₹1 lakh to ₹1.6 lakh. Accordingly, banks may waive margin requirements for agricultural loans up to ₹1.6 lakh.

Banks have been advised to give adequate publicity to this change and instruct their controlling offices and branches to implement the same immediately.


  • Change in Bank Rate

As announced in the Sixth Bi-Monthly Monetary Policy Statement 2018-19 dated 7th February 2019, the bank rate stands adjusted by 25 basis points from 6.75 per cent to 6.50 per cent with immediate effect.

All penal interest rates on shortfall in reserve requirements, which are specifically linked to the Bank Rate, also stand revised as indicated in the Annex to the circular dated 7th February 2019


  • Review of Instructions on Bulk Deposit

In terms of extant instructions, banks have been given discretion to offer a differential rate of interest on bulk deposits, as per their requirements and Asset-Liability Management (ALM) projections.

Reserve Bank has decided to revise the definition of ‘bulk deposits’ and provide operational freedom to banks in raising these deposits.

The threshold limit for banks to consider a deposit as a bulk deposit has been revised from the present INR 1 crore to INR 2 crores. Banks have been advised to maintain the bulk deposit interest rate card in their Core banking system to facilitate supervisory review.


  • Risk Weights for Exposures to Non-Banking Financial Companies (NBFCs)

It has been decided that exposures to all NBFCs, excluding Core Investment Companies (CICs), will be risk weighted as per the ratings assigned by the rating agencies registered with SEBI and accredited by RBI, in a manner similar to that of corporates as prescribed by RBI. Exposures to CICs, rated as well as unrated, will continue to be risk-weighted at 100%.


  • External Commercial Borrowings (ECB) Policy – ECB Facility for Resolution Applicant Under Corporate Insolvency Resolution Process

 As stated in A.P. (DIR Series) Circular No. 17, dated 16th January 2019 ECB proceeds cannot be utilised for repayment of domestic Rupee loans, except when the ECB comes from a Foreign Equity Holder as defined in the aforesaid framework.

RBI has relaxed the end-use restrictions for resolution applicants under the Corporate Insolvency Resolution Process (CIRP) allowing them to raise ECBs from recognised lenders (except the branches and overseas subsidiaries of Indian banks), for repayment of Rupee term loans of the target company under the approval route. Accordingly, the resolution applicants, who are otherwise eligible borrowers, can forward such proposals to raise ECBs, through their AD bank, to the Foreign Exchange Department, Central Office, Mumbai of the Reserve Bank for approval. 


  • Establishment of Branch Office (BO) or Liaison Office (LO) or Project Office (PO) or any Other Place of Business in India by Foreign Entities

Under current regulations, applications received from a Non-Government Organisation, Non-Profit Organisation, Agency or Department of a foreign Government for the opening of a branch office, liaison office, project office, or any other place of business in India, are to be forwarded to the Reserve Bank for prior approval and be considered in consultation with the Government of India. This has since been reviewed and advice now is that if such an entity is engaged, partly or wholly, in any of the activities covered under Foreign Contribution (Regulation) Act, 2010 (FCRA), it would be required to obtain a certificate of registration under the said Act and should not seek permission under FEMA 22(R).


  • Standing Liquidity Facility for Primary Dealers

The repo rate under the Liquidity Adjustment Facility (LAF) has been reduced by 25 basis points to 6.25 per cent from 6.50 per cent with immediate effect.

Accordingly, the Standing Liquidity Facility provided to Primary Dealers (PDs) (collateralised liquidity support) from the Reserve Bank would be available at the revised repo rate of 6.25 per cent with effect from 7th February 2019.


  • Liquidity Adjustments Facility – Repo and Reserve Repo Rates

The Reverse Repo rate under the LAF stands adjusted to 6.0 per cent with immediate effect. All other terms and conditions of the extant LAF Scheme will remain unchanged.


  • Micro, Small and Medium Enterprises (MSME) Sector - Restructuring of Advances

Conditions for the restructuring of existing loans of MSMEs without a downgrade in the asset classification have now changed.  Whereas previously the borrowing entity should be GST-registered on the date of implementation of the restructuring, it has now been decided that this condition will not apply to MSMEs that are exempt from GST-registration.  The eligibility for restructuring without GST-registration would be determined on the basis of the exemption limit and came into force on  1st January 2019.


  • Storage of Notes and Coins

RBI had constituted a Committee on Currency Movement (CCM) to review the entire gamut of security of treasure in transit. The recommendations of the Committee have been examined and it has been decided to implement the following measures:

  1. Currency Chests (CCs) which have large vault space would be required to consider segregation of storage of coins inside the vault, duly segregated by mesh structure or barricades, without obstructing clear view and CCTV coverage.
  2. CCs, which do not have sufficient storage space inside the vault to segregate storage of coins, may continue to store the coins under CCTV coverage, in a manner operationally convenient to them, keeping in view the spirit of the circular, so that notes and coin spaces are clearly identifiable.
  3. Banks have been advised to devise suitable processes to clearly colour code their bins for identification of denomination details and clear segregation of fresh, re-issuable and soiled notes, which shall be uniformly applied across their CCs.
  4. The bins containing notes that are yet to be processed on Note Sorting Machines (NSMs) would also need to be colour coded separately.
  5. Banks have been advised to send a confirmation of implementation across all Currency Chests to RBI by September 30, 2019.


  • Investment by FPIs in Debt

RBI has relaxed one of the restrictions imposed on Foreign Portfolio Investors (FPIs) while investing in the Indian debt market by withdrawing the restriction that previously required FPIs to ensure that their exposure to a single corporate entity (including related parties) does not exceed 20% of their total corporate bond portfolio. While the above restriction has been removed, FPIs are still required to ensure that investment by any FPI (including related FPIs), shall not exceed 50% of any issue of a corporate bond.


  • Harmonisation of Different Categories of NBFCs

In order to provide NBFCs with greater operational flexibility, different categories of NBFCs have been streamlined into fewer ones.  Accordingly, it has been decided to merge the three categories of NBFCs - Asset Finance Companies (AFC), Loan Companies (LCs) and Investment Companies (ICs) - into a new category called NBFC - Investment and Credit Company (NBFC-ICC).


Press Releases

During February 2019, six NBFCs surrendered their Certificates of Registration to RBI who consequently cancelled them. RBI also cancelled the registration certificates of a further fifty seven NBFCs. All of these companies cannot now undertake the business of a Non-Banking Financial Institution, as laid down under clause (a) of Section 45-I of the Reserve Bank of India Act, 1934. 

SEBI Regulatory Updates & Developments

The following changes have been introduced in the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 and the SEBI (Depositories and Participants) Regulations, 2018 (See Circular dated 5th February 2019):

  • Appointment of PIDs in Stock Exchanges, Clearing Corporations and Depositories (referred to as Market Infrastructure Institutions or MIIs) would be subject to the conditions as specified below:
    • The tenure of the PIDs appointed in the governing board of MIIs may be extended by another 3 years, subject to a performance review in the manner specified by SEBI.
    • Consequent to the expiry of his or her term at the MII, the PID may be nominated for a further term of three years in any other MII only after a cooling-off period of one year.
    • A person may be nominated as a PID for a maximum of three terms across MIIs, subject to a maximum age limit of seventy-five years.
  • While developing a framework for performance review of PIDs, MIIs would need to take into account the procedure and the guiding criteria prescribed by SEBI.
  • Performance evaluation criteria for PIDs would need to be disclosed in the annual report as well as on the website of the concerned MII.

In terms of the amendments introduced in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, every listed entity and its material unlisted subsidiaries incorporated in India would be required to undertake a secretarial audit. The secretarial audit report, given by a company secretary in practice, would need to be annexed with its annual report with effect from 31st March 2019. (See Circular dated 8th February 2019)

Whilst this audit would cover a broad check on compliance with the laws applicable to the entity, listed entities would be required, in addition, to have a check undertaken by a practising company secretary on compliance with all applicable SEBI Regulations.

Stock derivatives, which were being cash settled, were to move to physical settlement in a phased manner, as prescribed by SEBI, who has now stipulated that in case of a stock satisfying any of the following criteria, the derivative on such stock would be moved to physical settlement from the new expiry cycle. (See circular dated 8th February 2019)

  • Intra-day movement of 10% or more on 10 or more occasions in last 6 months or
  • Intra-day movement of 10% or more on 3 or more occasions in last 1 month or
  • Intra-day movement of 25% or more on 1 or more occasion in last 1 month or
  • Maximum daily volatility of the stock (as estimated for margining purpose) of more than 10% in either equity or equity derivatives segment in the last 1 month.

The above conditions would be reviewed by the Exchanges on a monthly basis.

Transferees as well as transferors are required to   furnish a copy of their PAN card to the listed entity for registration of transfer of securities.

However, SEBI has now granted a relaxation to non-residents (such as Non-Resident Indians, Persons of Indian Origin, Overseas Citizens of India and foreign nationals) from the requirement of furnishing a PAN for transfer of securities. These investors are permitted to transfer equity shares held by them in listed entities to their immediate relatives, subject to the following conditions (See Circular dated 11th February 2019).

  • The relaxation would only be available for transfers executed after 1st January 2016.
  • The relaxation would only be available to non-commercial transactions, i.e. transfers by way of gift among immediate relatives.
  • The non-resident would be required to provide a copy of an alternate valid document to ascertain his or her identity as well as the non-resident status.

Previously, SEBI had prescribed the applicable haircuts (i.e. reduction applied to the value of an asset) for acceptable liquid assets deposited by members with the exchanges or clearing corporation for various requirements. The minimum haircuts applicable to Central Government securities deposited by clearing members have been revised, as below. (See circular dated 21st February 2019)

  • For Treasury Bills and Liquid Government of India Dated Securities having residual maturity of less than 3 years – 2%
  • For Liquid Government of India Dated Securities having residual maturity of more than 3 years – 5%
  • For all other Semi-liquid and Illiquid Government of India Dated Securities – 10%

The classification of the Government of India Dated Securities, as above, would be jointly decided by the clearing corporations and these would need to be reviewed on the 15th of every month. The revision in classification, if any, would be required to be implemented with effect from the 1st day of the next month.

India Market Updates

SEBI has ordered impounding of alleged illegal gains of over INR 1.02 crore from the promoters of ADF Foods and four others in an insider trading case. It has been reported that the promoter had communicated Unpublished Price Sensitive Information to other entities classified as insiders.

SEBI has reportedly initiated criminal proceedings against about 300 brokers for their alleged role in the National Spot Exchange Limited (NSEL) scam in 2013.This decision is based on the recommendation of the designated authorities that SEBI had set up to look into the NSEL matter.

SEBI has imposed a fine of INR 54 lakhs on ten entities for “non-genuine” trading in illiquid stock options in the Bombay Stock Exchange during the period April 2014 to September 2015.

RBI has imposed the following penalties:

  • INR 1 crore on Syndicate Bank for non-compliance with the regulations on Frauds-Classification and Reporting and Risk Management Systems in Banks.
  • INR 2 crore each on Axis Bank and UCO Bank for non-compliance with the regulations on Collection of Account Payee Cheques- Prohibition of Crediting Proceeds to Third Party Account and Frauds-Classification and Reporting by Commercial Banks and select FIs.
  • INR 20 lakhs on Axis Bank for contravention of the directions contained in Detection and Impounding of Counterfeit Notes and the Sorting of Notes-Installation of Note Sorting Machines. Monetary penalty imposed on three banks for non-compliance with various directions issued by RBI on Know Your Customer (KYC) norms and Anti-Money Laundering (AML) standards, as below 

Name of the Bank

Amount of penalty (in INR lakhs)





Kotak Mahindra Bank



  • Monetary penalty levied on eleven banks for non-compliance with various directions issued by RBI on monitoring and end use of funds, exchange of information with other banks, classification and reporting of frauds, and on restructuring of accounts. 

Name of the Bank

Amount of penalty (in INR crore)

Bank of Baroda


Corporation Bank


State Bank of India


Union Bank of India


Allahabad Bank


Andhra Bank


Bank of Maharashtra


Indian Overseas Bank


Bank of India


Oriental Bank of Commerce


Punjab National Bank





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