Notifications & Circulars

Reserve Bank of India

26.04.2024

Banking

Circular regarding voluntary transition of Small Finance Banks to Universal Banks

MANU/RMIC/0065/2024

1. This is with reference to Paragraph 14 of the "Guidelines for 'on-tap' Licensing of Small Finance Banks in Private Sector" dated December 5, 2019, which provides a transition path for Small Finance Banks (SFBs) to convert into Universal Banks. Such conversion shall be subject to the SFB's fulfilling minimum paid-up capital/ net worth requirement as applicable to Universal Banks, satisfactory track record of performance as an SFB for a minimum period of five years and RBI's due diligence exercise.

2. These instructions are issued in exercise of the powers conferred on the Reserve Bank of India under Section 22 (1) of the Banking Regulation Act, 1949.

Commencement

3. The provisions contained in the circular shall be effective from the date of this circular.

Applicability

4. This circular is applicable to all Small Finance Banks.

Provisions

5. With the objective of bringing better clarity, the eligibility criteria for an SFB to transition into a Universal bank will now be as follows:

a) scheduled status with a satisfactory track record of performance for a minimum period of five years;

b) shares of the bank should have been listed on a recognised stock exchange;

c) having a minimum net worth of ₹1,000 crore as at the end of the previous quarter (audited);

d) meeting the prescribed CRAR requirements for SFBs;

e) having a net profit in the last two financial years; and

f) having GNPA and NNPA of less than or equal to 3 percent and 1 percent respectively in the last two financial years.

6. The following conditions shall be applicable with regard to shareholding pattern:

a) There is no mandatory requirement for an eligible SFB to have an identified promoter. However, the existing promoters of the eligible SFB, if any, shall continue as the promoters on transition to Universal Bank.

b) Addition of new promoters or change in promoters shall not be permitted for an eligible SFB while transitioning to Universal Bank.

c) There shall be no new mandatory lock-in requirement of minimum shareholding for existing promoters in the transitioned Universal Bank.

d) There shall be no change to the promoter shareholding dilution plan already approved by the Reserve Bank.

e) The eligible SFBs having diversified loan portfolio will be preferred.

7. The eligible SFB shall be required to furnish a detailed rationale for such transition. The application for transition from SFB to Universal Bank shall be assessed in accordance with the Guidelines for 'on tap' Licensing of Universal Banks in the Private Sector dated August 1, 2016, as applicable, and Reserve Bank of India (Acquisition and Holding of Shares or Voting Rights in Banking Companies) Directions, 2023 dated January 16, 2023, as amended from time to time. Further, on transition the bank will be subjected to all the norms including NOFHC structure (as applicable) as per the said Guidelines.

8. The eligible SFB may submit its application for transition to Universal Bank, in the prescribed form (Form III) in terms of Rule 11 of the Banking Regulation (Companies) Rules, 1949, along with other requisite documents, to Department of Regulation, Reserve Bank of India, Central Office, 12th Floor, Central Office Building, Shahid Bhagat Singh Road, Mumbai - 400001.

Tags : Voluntary transition Small Finance Banks Conversion

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Reserve Bank of India

24.04.2024

Banking

Supervisory action against Kotak Mahindra Bank Limited under Section 35A of the Banking Regulation Act, 1949

MANU/RPRL/0274/2024

The Reserve Bank of India has today, in exercise of its powers under Section 35A of the Banking Regulation Act, 1949, directed Kotak Mahindra Bank Limited (hereinafter referred to as 'the bank') to cease and desist, with immediate effect, from (i) on boarding of new customers through its online and mobile banking channels and (ii) issuing fresh credit cards. The bank shall, however, continue to provide services to its existing customers, including its credit card customers.

These actions are necessitated based on significant concerns arising out of Reserve Bank's IT Examination of the bank for the years 2022 and 2023 and the continued failure on part of the bank to address these concerns in a comprehensive and timely manner. Serious deficiencies and non-compliances were observed in the areas of IT inventory management, patch and change management, user access management, vendor risk management, data security and data leak prevention strategy, business continuity and disaster recovery rigour and drill, etc. For two consecutive years, the bank was assessed to be deficient in its IT Risk and Information Security Governance, contrary to requirements under Regulatory guidelines. During the subsequent assessments, the bank was found to be significantly non-compliant with the Corrective Action Plans issued by the Reserve Bank for the years 2022 and 2023, as the compliances submitted by the bank were found to be either inadequate, incorrect or not sustained.

In the absence of a robust IT infrastructure and IT Risk Management framework, the bank's Core Banking System (CBS) and its online and digital banking channels have suffered frequent and significant outages in the last two years, the recent one being a service disruption on April 15, 2024, resulting in serious customer inconveniences. The bank is found to be materially deficient in building necessary operational resilience on account of its failure to build IT systems and controls commensurate with its growth.

In the past two years, the Reserve Bank has been in continuous high-level engagement with the bank on all these concerns with a view to strengthening its IT resilience, but the outcomes have been far from satisfactory. It is also observed that, of late, there has been rapid growth in the volume of the bank's digital transactions, including transactions pertaining to credit cards, which is building further load on the IT systems.

The Reserve Bank, therefore, has decided to place certain business restrictions on the bank as mentioned above, in the interest of customers and to prevent any possible prolonged outage which may seriously impact not only the bank's ability to render efficient customer service but also the financial ecosystem of digital banking and payment systems.

The restrictions now being imposed will be reviewed upon completion of a comprehensive external audit to be commissioned by the bank with the prior approval of RBI, and remediation of all deficiencies that may be pointed out in the external audit as well as the observations contained in the RBI Inspections, to the satisfaction of the Reserve Bank. Further, these restrictions are without prejudice to any other regulatory, supervisory or enforcement action that may be initiated against the bank by the Reserve Bank.

Tags : Supervisory Action New customers On-boarding

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Securities and Exchange Board of India

23.04.2024

Capital Market

Extension of cross margin benefits for offsetting positions having different expiry dates

MANU/SSMD/0012/2024

1. Chapter 5 of SEBI Master Circular dated October 16, 2023 for Stock Exchanges and Clearing Corporations inter-alia provides stipulations for cross margin between index futures position and constituent stock futures position in derivatives segment (Clause 1.2.9) as well as cross margin in respect of offsetting positions in correlated equity indices (Clause 1.2.10). At present, the aforesaid cross margin benefits are provided if both the correlated indices or an index and its constituents, as the case may be, have same expiry day.

2. In discussion with stock exchanges, Clearing Corporations and Risk Management Review Committee of SEBI, it has been decided to extend the cross margin benefit on offsetting positions having different expiry dates subject to the following :

a. A spread margin of 40% would be levied in case of offsetting positions in correlated indices having different expiry dates. Spread margin of 30% would continue to get levied in case of same expiry date (i.e. existing requirement).

b. A spread margin of 35% would be levied in case of offsetting positions in index and its constituents having expiry date different from index. While the expiry date of index futures can be different from that of its constituents, the expiry date of futures contracts of all constituents should be same in order to obtain the aforesaid cross margin benefit. Further, spread margin of 25% would continue to get levied in case of same expiry date of index and constituents (i.e. existing requirement).

c. The aforesaid spread margin benefit would be revoked at the beginning of the expiry day of the position which expires first (i.e. first of the expiring indices or constituents) in case the expiry dates of both legs of the position are different.

d. Exchanges / Clearing Corporations to put in place suitable monitoring mechanism to keep track of cross margin activities of participants.

e. All other requirements pertaining to cross margin remain unchanged and applicable.

3. The circular would be effective three months from its date of issuance. The circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Tags : Extension Cross margin benefits Circular

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Ministry of Finance

23.04.2024

Direct Taxation

Partial modification of Circular No. 3 of 2023 dated 28.03.2023 regarding consequences of PAN becoming inoperative as per rule 114AAA of the Income-tax Rules, 1962

MANU/DTCR/0007/2024

Circular No. 3 of 2023 dated 28.03.2023 issued by the Board details the consequences of PAN becoming inoperative as under:

"Consequent to the notification substituting rule 114AAA of the Income-tax Rules, 1962 (the Rules) vide notification no. 15 of 2023 dated 28th March, 2023, it is hereby clarified that a person who has failed to intimate the Aadhaar number in accordance with section 139AAA of the Income-tax Act, 1961 (the Act) read with rule 114AAA shall face the following consequences as a result of his PAN becoming inoperative:

(i) refund of any amount of tax or part thereof, due under the provisions of the Act shall not be made to him;

(ii) interest shall not be payable to him on such refund for the period, beginning with the date specified under sub-rule (4) of rule 114AAA and ending with the date on which it becomes operative;

(iii) where tax is deductible under Chapter XVII-B in case of such person, such tax shall be deducted at higher rate, in accordance with the provisions of section 206AA;

(iv) where tax is collectible at source under Chapter XVII-BB in case of such person, such tax shall be collected at higher rate, in accordance with the provisions of section 206CC."

2. As per sub-rule (4) of rule 114AAA of the Income-tax Rules, 1962, the above consequences shall have effect from the date specified by the Board. The Board vide Circular No. 03 of 2023 dated 28th March, 2023 had specified that the consequences shall take effect from 1st July, 2023 and continue till the PAN becomes operative.

3. Several grievances have been received from the taxpayers that they are in receipt of notices intimating that they have committed default of 'short-deduction/collection' of TDS/TCS while carrying out the transactions where the PANs of the deductees/collectees were inoperative. In such cases, as the deduction/collection has not been made at a higher rate, demands have been raised by the Department against the deductors/collectors while processing of TDS/TCS statements under section 200A or under section 206CB of the Act, as the case maybe.

4. With a view to redressing the grievances faced by such deductors/collectors, the Board, in partial modification and in continuation of the Circular No. 3 of 2023, hereby specifies that for the transactions entered into upto 31.03.2024 and in cases where the PAN becomes operative (as a result of linkage with Aadhaar) on or before 31.05.2024, there shall be no liability on the deductor/collector to deduct/collect the tax under section 206AA/206CC, as the case maybe, and the deduction/collection as mandated in other provisions of Chapter XVII-B or Chapter XVII-BB of the Act, shall be applicable.

Tags : Partial modification Circular PAN

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Ministry of Commerce and Industry

23.04.2024

Customs

Initiation of anti-dumping investigation concerning imports of "Pretilachlor in any of its form & its intermediate -2, 6-Diethyl-n-(2-propoxy ethyl) Aniline" originating in or exported from China PR

MANU/COMM/0057/2024

No. 6/31/2023-DGTR.--Having regard to the Customs Tariff Act, 1975, as amended from time to time and the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995, as amended from time to time, thereof, the Designated Authority hereby makes the following correction in the initiation notification issued vide Notification No. 6/31/2023-DGTR dated 29th March 2024 in respect of the subject investigation.

The paragraph 8 of the said notification shall be substituted to read as under:

"8. The product under consideration does not have a dedicated classification under the Custom Tariff Act, 1975 and have been classified under following codes - 3808 9199, 3808 9390, 3808 9910, 3808 9990, 2921 4290, 2922 1990 and 2922 2990.

The customs classification code is indicative only and is not binding on the scope of the present investigation."

The paragraph 14 of the said notification shall be substituted to read as under:

"14. As per the information submitted by the applicant, it has imported the subject goods from an un-related producer/exporter in China PR. The imports were made before the commencement of commercial production at plant and were intended for captive consumption and were not made during the POI. Further, the applicant is not related to any producers/exporters in the subject country or any importers of the subject goods in India. The Authority notes, after due examination, prima facie the applicant constitutes eligible domestic industry in terms of the provisions of Rule 2(b) and the application satisfies the criteria in terms of Rule 5(3) of the Rules."

Tags : Anti-dumping Investigation Imports

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