RBI guidelines on safety of bank customers


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RBI guidelines on safety of bank customers 

Reserve Bank of India (RBI) has informed that an incident of data breach with respect to cards was reported and the matter is under investigation. Independent investigation by a forensic auditor approved under Payment Card Industry Data Security Standard (PCI-DSS) framework is under process.


RBI has set up a Cyber Security and IT Examination (CSITE) Cell within its Department of Banking Supervision in 2015. The Bank issued a comprehensive circular on Cyber Security Framework in Banks on June 2, 2016 covering best practices pertaining to various aspects of cyber security. The circular requires banks to have among other things, a cyber-security policy, cyber crisis management plan, a gap assessment vis-a-vis the baseline requirements indicated in the circular, monitoring certain risk indicators in this area, report unusual cyber security incidents within 2 to 6 hours.

RBI has been carrying out IT Examination of banks from last year. RBI has also set up a Cyber Crisis Management Group to address any major incidents reported including suggesting ways to respond and recover to/from the incidents. Department of Banking Supervision also conducts cyber security preparedness testing among banks on the basis of hypothetical scenarios with the help of CERT-In. RBI has also set up an IT Subsidiary, which would focus, among other things, on cyber security within RBI as well as in regulated entities.

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Measures initiated by RBI to prevent fraudulent use of debit cards 

Reserve Bank of India (RBI) has informed that number of debit cards outstanding at the end of August 2016 was 71.2 crore. RBI has informed that frauds related to ATM / Debit cards is 1328 and amount involved is Rs. 6 crore for the period April 2016 to June 2016.

The measure initiated by RBI to prevent such frauds is given below:

        i.            In order to focus more attention on IT related matters, Reserve Bank has set up a Cyber Security and IT Examination (CSITE) Cell within its Department of Banking Supervision in 2015. RBI has issued a comprehensive circular on Cyber Security Framework in Banks on June 2, 2016 covering best practices pertaining to various aspects of cyber security. The progress of banks in scaling up their cyber security preparedness is also monitored by setting up a Cyber Crisis Management Group to address any major incidents reported including suggesting ways to respond. Department of Banking Supervision also conducts cyber security preparedness testing among banks on the basis of hypothetical scenarios with the help of CERT-In. RBI also has set up an IT Subsidiary, which would focus, among other things, on cyber security within RBI as well as in regulated entities.

     ii.            The banks have taken measures including advising the customers to change PIN blocking payments at international locations, reducing the limit and number of withdrawals, monitoring unusual patterns, replacing the cards and re-crediting the accounts of cardholders for amounts wrongly debited.  

    iii.            RBI has issued circular on ‘Skimming of ATM/Debit/Credit Cards’, dated June 26, 2006, advising banks to take various preventive measures to combat frauds relating to skimming or duplicating of credit cards. The banks, inter alia, were also advised to inform to customers not to reveal PIN in response to requests received through e-mail, to periodically verify the transaction history to ensure its correctness and if any unauthorized transaction observed it should be immediately reported to the bank and inform the bank if the card is lost or stolen.

    iv.            In January 2016, Central Fraud Registry (CFR) has been operationised as searchable online central data base for use by the banks for frauds above Rs. 1 lakh. This data base is helpful to the banks not only during credit decisions but also to know about fraud in other areas of the banking including cyber frauds, ATM/debit/ credit card and internet banking.

     v.            Caution advices are also issued as and when necessary for preventing and controlling the frauds.

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Bank loans for the educated unemployed 

Applicants including educated unemployed persons whose proposals are found bankable in accordance with the norms laid down by the concerned bank obtain loans for self-employment ventures. However, there are many applications which are not approved for various reasons which, inter alia, include applicant being unclear about activity proposed to be taken up, applicant wanting to enter activity without training/experience & no apparent capacity to run a business in that line, non-viable/Inflated business plan, Inability/unwillingness of the applicant to furnish requisite margin money, history of previous default etc.

The Government already facilitates educated unemployed youth in obtaining such loans in a number of ways which, inter alia, include,guiding interested applicants on proper filling up of application forms, identifying person specific activity to be taken up for business assistance in preparing a viable business plan, advising the applicants about the processes followed by banks & other funding institutions, Entrepreneurship education, Model business plans for different businesses posted on different portals for the guidance of aspiring entrepreneurs etc.

In addition, self-employment is supported through schemes such as Pradhan Mantri Mudra Yojana (PMMY), Prime Minister's Employment Generation Programme (PMEGP), Pradhan MantriRojgarProtsahanYojana (PMRPY), Stand Up India (SUI), Pradhan Mantri YUVA Yojana (PMYY) etc.

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Gross Non-Performing Assets (GNPA) 

            The details of Total Advances and Gross Non-Performing Assets (GNPA) including the Number of accounts and Amount Involved of Public Sector Banks (PSBs) as on September 30, 2016 are as under.

(Rs. in Crore)
Name of the Bank

TOTAL ADVANCES
GROSS NPA
No. of Accounts
Amount
No. of NPA Accounts
Amount
Public Sector Banks (PSBs)
8,64,19,503
57,01,862
66,40,942
6,30,323
Source: PSBs

            The Government has taken sector specific measures (Infrastructure, Power, Road, textiles, Steel etc.) where incidence of NPA is high. The Insolvency and Bankruptcy code (IBC) has been enacted and Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) and The Recovery of Debts due to Banks and Financial Institutions (RDDBFI) Act have been amended to improve resolution/recovery of bank loans. Six new Debt Recovery Tribunals (DRTs) have been established for improving recovery. RBI has provided a number of tools in this regard- Corporate Debt Restructuring (CDR), Formation of Joint Lenders’ Forum (JLF), Flexible Structuring for long term project loans to Infrastructure and Core industries (5/25 Scheme), Strategic Debt Restructuring Scheme (SDR) and Sustainable Structuring of Stressed Assets (S4A).

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Delisting of BSE and NSE companies 

The Securities and Exchange Board of India (SEBI) has informed that Section 21A of the Securities Contracts (Regulation) Act, 1956 read with rule 21 of the Securities Contracts (Regulation) Rules, 1957 and Chapter V of the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 (‘Delisting Regulations’) grants powers to the recognised stock exchanges to compulsorily delist the equity shares of listed companies on any of the grounds prescribed therein including those companies whose trading has remained suspended for more than six months.

The equity shares of 1021 companies on the Bombay Stock Exchange (BSE) and 132 companies on the National Stock Exchange (NSE) have been suspended from trading for a period of more than seven years.

Based on the abovementioned provisions, the exchanges have initiated the process of delisting those companies which have been under suspension for a long duration and hence, have not been compliant with the listing requirements. Accordingly, a public notice dated 25th August, 2016 was issued by BSE communicating the delisting of 194 companies with effect from 17th August, 2016. Further, NSE issued a public notice dated 14th August, 2016 communicating the delisting of 14 companies with effect from 31st August, 2016. Subsequently, NSE issued public notices dated 27th August, 2016 and 5th November, 2016 respectively regarding the delisting of 20 companies with effect from 12th September, 2016 and 14 companies with effect from 22nd November, 2016.

SEBI has informed that the rights of public shareholders in case of compulsory delisting have been specified under Regulation 23 of the Delisting Regulations. It states that the promoters of the compulsorily delisted company shall acquire shares from the public shareholders by paying them the fair value determined by the independent valuer, subject to their option of retaining their shares. In addition, in order to ensure effective enforcement of exit option to the public shareholders SEBI vide Circular dated 7th September, 2016 directed that in case of such companies whose fair value is positive, the said company and the Depositories shall not effect transfer, by way of sale, pledge, etc., of any of the equity shares. Further, corporate benefits such as dividend, rights, bonus shares, split, etc. shall be frozen for all the equity shares held by the promoters/ promoter group till the promoters of such company provide an exit option to the public shareholders in compliance with the Delisting Regulations, as certified by the concerned recognized stock exchange. The promoters and whole-time directors of the compulsorily delisted company shall also not be eligible to become directors of any listed company till the exit option as stated above is provided

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Permanent residency status for foreigners 

The Government has decided to grant Permanent Residency Status (PRS) for 10 years with multiple entry to foreign investors making investment of minimum of Rs. 10 crores to be brought within 18 months or Rs. 25 crores to be brought within 36 months. PRS will also be granted to the spouse/dependents of the eligible foreign investor. The foreign investment should result in generating employment to atleast 20 resident Indians every financial year. The scheme is expected to encourage foreign investment in India and facilitate Make in India. In addition to the restrictions imposed in the FDI policy, security guidelines issued/ as may be issued by the Government from time to time shall also be applicable.

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Point of Sale (POS) Devices and Goods required for their manufacture exempted from Central Excise Duty till March 31, 2017. 

The Government has demonetised the currency notes of Rs 500 and Rs 1,000 with effect from mid-night of 8th-9th November, 2016. Along with this, the Government has also laid increased emphasis on promoting digital payments.

Point of Sale (POS) devices are used for cashless transactions, both for making payments or disbursing cash. POS do not attract any basic customs duty. To further reduce the cost of such devices and thereby encourage digital payments, the Government has exempted such devices from Central Excise Duty. Consequently, these devices will also be exempt from Additional Duty of Customs [commonly known as CVD] and additional duty of customs [commonly known as SAD]. Simultaneously, to encourage domestic manufacturers of such devices, all goods required for the manufacture of POS devices have also been exempted from excise duty, and consequently from CVD and SAD. These exemptions will be valid till 31st March 2017.

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Framework to regulate and oversee co-operative banks and deposits 

Reserve Bank of India (RBI) regulates and supervises the banking functions of State Cooperative Banks (StCBs)/District Central Cooperative Banks (DCCBs)/Urban Cooperative Banks (UCBs) under the various provisions of the Banking Regulation Act, 1949 (As applicable to Cooperative Societies) and the Reserve Bank of India Act, 1934. However, the matters related to incorporation, registration, management, audit, liquidation, etc. in respect of these banks fall under the jurisdiction of the concerned Registrar of co-operative societies. Under Section 35(6) of the Banking Regulation Act, 1949 (As applicable to Cooperative Societies), National Bank for Agriculture & Rural Development (NABARD) has concurrent powers to inspect StCBs and DCCBs.

NABARD has reported that as on 31.3.2015, the total deposits with 33 StCBs and 371 DCCBs were Rs. 356467 crore. Out of these cooperative banks, 12 banks were having negative net worth as on 31.3.2015. NABARD has informed that these banks are servicing their depositors.

RBI has informed that it has prescribed uniform Know Your Customer (KYC) norms for all commercial and cooperative banks and its Master Directions on KYC guidelines are uniformly applicable to all banks in India. RBI has further informed that it does not have any information on whether extant KYC norms are causing many cooperative banks to be used for money laundering and tax evasion. However, some instances of violations of KYC/Anti Money Laundering (AML) guidelines in UCBs have been observed by RBI and 32 UCBs have been imposed an aggregate penalty of ₹119.50 lakh by RBI for KYC/AML violations from 1st July, 2015 to 30th June, 2016.

NABARD has reported that the compliance to KYC/ AML is monitored during inspection of StCBs and DCCBs and these banks are required to submit Cash Transaction Report, Suspicious Transaction Report, Counterfeit Currency Report and Non-Profit Organization Report, etc. to Financial Intelligence Unit-India regularly.

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Interest rate cut for long term saving schemes 

The interest rates of Public Provident Fund (PPF), Kisan Vikas Patra (KVP), Senior Citizens Savings Scheme, 2004, and Sukanya Samriddhi Account (the Girl Child Scheme) were reduced by 0.10 percentage point for the quarter 01.10.2016 to 31.12.2016, and not 0.10 percentage per annum.
The reduction in the rates of interest by 0.10 percentage point was necessitated by a significant fall in the yields on Government Securities of comparable maturities.

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Present Status of Centre and State funding policy 

Presently, as per the rationalized Centrally Sponsored Schemes (CSS) approved by the Government of India, the Centre and State funding pattern to different States of our country will be as given below.

For the Core of the Core Schemes which are legislatively backed or are designed to subserve the vulnerable sections of our population, the existing funding pattern will continue.

For Core Schemes, the funding pattern for the 8 Northern Eastern States and Himalayan States of Uttarakhand, Himachal Pradesh and Jammu & Kashmir shall be Centre: 90% and State: 10%, whereas for the rest of the States this ratio shall be Centre: 60% and State: 40%.

For Optional Schemes, the funding pattern for the 8 Northern Eastern States and Himalayan States of Uttarakhand, Himachal Pradesh and Jammu & Kashmir shall be Centre: 80% and State: 20%, whereas for the rest of the States this ratio shall be Centre: 50% and State: 50%.

However, all the sharing patterns indicated above shall be subject to the proviso that if the Central share is already below that indicated in the sharing pattern, then the Centre’s share would remain capped at their present level.

All Core and Optional Schemes would be funded 100% by Centre in all Union Territories (without legislature). For Union Territories (with legislature), existing funding pattern would be followed for all Core of the Core and Core Schemes. For Optional Schemes, the funding pattern of 80% by Centre and 20% by Union Territories (with legislature) would be followed.

All schemes of the Government of India are funded as per the above ratios and there is no “special scheme” under implementation.

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Clean Energy Cess
The effective rate of Clean Energy Cess (now renamed as Clean Environment Cess) levied on coal, lignite and peat was increased from Rs.200 per tonne to Rs.400 per tonne in Budget 2016-17 with effect from 01.03.2016, for financing and promoting clean environment or clean energy initiatives and funding research in the area of clean environment or clean energy. Clean Environment Cess also acts as green tax, on the lines of polluter pays principle.

Government has no such proposal under consideration at present to lower down the cost for aforesaid purposes

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