Reservation Policy in Banks

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Reservation Policy in Banks 

As per existing reservation policy of Department of Personnel & Training (DoPT) for SCs/STs and OBCs, there is reservation in direct recruitment in lowest rung in officer cadres of Group A post i.e. Middle Management Grade Scale-I post. However, based on the guidelines of the DoPT, Public Sector Banks (PSBs) were clarified on 18.02.2014 that concessions mentioned in DoPT’s O.M. dated 07.6.2013 will be available to the SC/ST officers in PSBs in promotion by selection to posts within the officer cadre up to Middle Management Grade Scale-III of Grade-C(lowest three rungs in officers’ cadres), whichever is applicable. There is no reservation of OBCs in promotions.

Overall percentage representation of SC/ST vis-à-vis number of employee in Group A in Public Sector Banks/Financial Institutions/Public Sector Insurance Companies (PSBs/FIs/PSICs) is 17.79% and 7.53% respectively, which is fulfilling the condition of percentage of 15% and 7.5% required as per the existing reservation policy of Government of India.

As per existing reservation policy of DoPT, the post of DGM and GM are treated under Senior Management Grade. These posts are filled up on selection basis. Based on the instructions of the DoPT for reservation is available for SCs/STs in PSBs/FIs up to lowest rung of officer cadre Group A.

Systematic Investment Plans (SIPs) in Mutual Funds in India

The number of Systematic Investment Plans (SIPs) in Mutual Funds in India has almost doubled from 60 lakh as on 31st March 2014 to 116.3 lakh as on 31st March 2016. It has further increased to 134.5 lakh as on 31st October 2016.

The details of number of SIPs are as follows:

As on Number of SIPs (in lakh)
31st March 2014 60.0
31st March 2015 90.2
31st March 2016 116.3
31st October 2016 134.5

The increase in number of SIPs can be attributed to:

·          Increased investor awareness.
·         Focus on other than top 15 cities by Assets Under Management (AUM) of Mutual Funds.
·         General buoyancy in markets : With the Sensex remaining continuously above the 22,000
levels during 2014-15 and 2015-16 and above 24,000 level during 2016-17 has led to
renewed interest in SIPs from investors.

The details of the steps taken by the Securities and Exchange Board of India (SEBI) to create awareness regarding SIP investments is placed at Annexure.


Steps taken by SEBI to create awareness regarding SIP investments

(i) To increase investor awareness:

2 basis points for investor education: In order to have greater and more focused investor education, mutual funds/Asset Management Companies (AMCs) are required to annually set apart at least 2 basis points on daily net assets within the maximum limit of Total Expense Ratio (TER) for investor education and awareness. Several AMCs have utilized this amount to create awareness about SIPs through print, electronic and digital media. Also, 31 AMCs have adopted 182 districts across, 26 States to conduct focused financial literacy campaigns. These campaigns include explanation of the concept of SIPs. As a result, greater number of investor understands the importance of rupee-cost averaging [buying more units at lower Net Asset Value (NAV) and less units at higher NA V] and disciplined investing for long-term wealth creation.

Use of regional languages: Further, to promote financial inclusion, Mutual Foods (MFs) need to make available printed literature on MFs for investor awareness and education in regional languages. Also, MFs need to introduce investor awareness campaign, both in print an electronic media, in regional languages. The use of regional languages has helped in broadening the reach of marketing and investor education material related to SIP.

Also, to energize the distribution system, a new cadre of distributors was introduced b including postal agents, retired officials from government, banks, retired teachers etc. for distribution of simple products with simplified National Institute of Securities Markets (NISM )certification.

(ii) To focus on other than top 15 cities by Assets Under Management (AUM) of MFs:

Introduction of additional Total Expense Ratio (FER) (up to 30 bps): To improve the geographical reach of mutual funds and bring in long term money from smaller towns, Asset Management Companies (AMCs) have been allowed to charge additional TER of up to 30 bas points on inflows from cities beyond top 15 cities by AUM of MFs. As a result, fund house have pushed aggressively into other than top 15 cities.

The details of no. of SIPs from other than top 15 cities by AUM of MFs are as follows:

As on  No. of SIPs from other than to 15 cities b AUM of MFs (in lakh)
31st March 2014 29.6
31st March 2015 43.5
31st March 2016 56.2
31st October 2016 63.1

Thus, the number of SIPs from other than top 15 cities has also almost doubled from 29.6 lakh  as on 3 l " March 2014 to 56.2 lakh as on 3 pt March 2016, keeping pace with the growth number of SIPs across the country. It has further increased to 63.1 lakh as on 31st October 2016.


Value of Currency Notes in Indian Languages

The Indian banknotes are printed in two languages, English and Hindi. In addition, the other languages printed on the language panel of the Indian notes are Assamese, Bengali, Gujarati, Kannada, Kashmiri, Konkani, Malayalam, Marathi, Nepali, Oriya, Punjabi, Sanskrit, Tamil, Telugu and Urdu. Inclusion of languages on Banknotes is more a part of design and a matter of convention and in terms of Section 25 of RBI Act 1934, “The design, form and material of banknotes shall be such as may be approved by the Central Government after consideration of the recommendations made by the Central Board”.


Listing of Indian Insurance Companies

Insurance Regulatory and Development Authority of India (IRDAI) issued a Discussion Paper on “Listing of Indian Insurance Companies” on 11th August 2016 in order to seek feedback on mandatory listing of life and non-life insurers.

The Discussion Paper inter-alia suggests the following:

i) Public listing enables the retail and institutional investors to participate in the fortunes of the company.

ii) The mandate for disclosure requirements is significantly higher for listed entities. These include disclosures required to be made to the stock exchanges and through print media;

iii) Public shareholding by both retail and institutional investors means that there is a greater scrutiny of the decision making process, resulting in greater transparency of operations;

iv) The Statutory and regulatory provisions ensure that the interest of minority shareholders are protected.


Senior Citizen Savings Schemes

Senior Citizens Saving Scheme, 2004 is a scheme of Department of Economic Affairs, Ministry of Finance and is operated through post offices and designated branches of banks. The following are the details of number of accounts being operated in various banks.

Sr.No Name of Bank No. of Accounts
1.Andhra Bank 2059
2.Bank of Baroda 49943
3.Punjab National Bank 25656
4.State Bank Hyderabad 4789
5.State Bank of India 59801
6.State Bank of Mysore 4179
7. Syndicate Bank 2677
8.Union Bank of India 11619
9.Vijaya Bank 1189
Total  161912

The upper limit of investment under the Senior Citizen Savings Scheme, 2004 (SCSS) is: (i) rupees 15 lakh for those having attained the age of 60 years, (ii) the total amount of retirement benefits for those not having attained the age of 60 but retired on superannuation or otherwise as per the rules of the schemes. The rate of interest for SCSS, 2004 for the quarter 01.10.2016 to 31.12.2016 is 8.5%. The deposits made in the scheme are exempted from income tax under section 80C of Income Tax Act, 1961. However, the interest earned on the deposit is not exempted from income tax. Provisions of Tax Deduction at Source (TDS) are applicable to the Scheme.


Foreign portfolio investors (FPIs)

Foreign portfolio investors (FPIs) raised certain taxation issues relating to applicability of Minimum Alternate Tax (MAT) on them. The Government set up a committee under Justice A. P. Shah to examine the issue raised by them. On the recommendations of the committee, an amendment in section 115JB of the Income-tax Act, 1961 has been carried out vide Finance Act, 2016 to the effect that MAT will not be applicable to foreign companies with effect from 01.04.2001, if

(i) the assessee is a resident of a country or a specified territory with which India has an agreement referred to in sub-section (1) of section 90 of the Income-tax Act, 1961 (‘the Act’) or the Central Government has adopted any agreement under sub-section (1) of section 90A of the Act and the assessee does not have a permanent establishment in India in accordance with the provisions of such agreement; or

(ii) the assessee is a resident of a country with which India does not have an agreement of the nature referred to in clause (i) and the assessee is not required to seek registration under any law for the time being in force relating to companies.


ATM operating agencies/companies by Public Sector Banks

Banks have been permitted outsourcing of financial services vide circulars dated November 3, 2006 and March 11, 2015 on ‘Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by Banks’ issued by Reserve Bank of India (RBI).

Due diligence in outsourcing involves an evaluation of all available information about the service provider, inter alia including but not limited to security and internal control, audit coverage, reporting and monitoring environment, Business continuity management. The terms and conditions governing the contract between the bank and the service provider should be carefully defined in written agreements and vetted by bank''s legal counsel on their legal effect and enforceability.

Total ATMs for Scheduled Commercial Banks as on June 30, 2016 is 201334. The details of White Label ATMs (WLAs) managed by agencies is as under:-

Name of the Entity
Metro Centres
Urban Centres
Semi-Urban Centres
Rural Centres
Tata Communications Payment Solutions Ltd
Hitachi Payment Services Pvt. Ltd.
Muthoot Finance Ltd
BTI Payments Pvt. Ltd
Vakrangee Limited
Riddhi Siddhi Bullions Limited
AGS Transact Technologies Ltd

Regular audits by either the internal auditors or external auditors of the bank is conducted to assess the adequacy of the risk management practices adopted in overseeing and managing the outsourcing arrangement.  The audit reports are to be acted upon by the banks.


Registration of non-banking financial companies

Reserve Bank of India has informed that they have cancelled the registration of 44 non-banking financial companies on supervisory concerns and 71 on voluntary grounds during the current year (from April 1, to November 18, 2016). NBFC registered with RBI surrender their Certificate of Registration (CoR) voluntarily if the NBFC desires to undertake non-financial business or mergers with another financial company to undertake NBFI business as provided under RBI Act, 1934 or with a non-financial company to undertake a different line of business. RBI cancels the CoR on supervisory grounds, only if the registered NBFC fails to adhere to the terms and conditions under which the CoR is issued despite providing the NBFC adequate opportunity to rectify the deficiency. This measure is taken to ensure that all NBFCs registered with RBI function in a healthy manner contributing to the growth of the sector but within the regulations framed by RBI for the sector. The cancellation of CoR of such delinquent NBFCs is to make the sector strong and complaint with the regulations.


PPP Contracts in the Infrastructure Sector

Public Private Sector (PPP) concessions are usually long term arrangements spanning over decades and contracting parties are required to manage the uncertainties and complexities that arise over the long-term concession periods. The Committee on Revisiting and Revitalizing the PPP Model of Infrastructure chaired by Dr. V.Kelkar, in its Report submitted in November 2015, noted that PPP projects are faced with risks that were not foreseen/contemplated at the time of signing the concession agreement. Keeping in view the fact that renegotiation for amendment of the terms of a concession agreement could lead to litigation, reallocation of the risks of the parties involved and allegation of lack of transparency, the Kelkar Committee emphasized on having an ex-ante provisioning for triggers in the bid documents itself. A draft guidance framework for building in ex-ante trigger in concession agreements of National Highway project and Major Port projects have been prepared and shared with the Ministry of Road Transport and Ministry of Shipping to consider.

Government has taken various steps to attract investment in infrastructure sector which includes launching of innovative financial vehicles such as Infrastructure Debt Funds (IDFs), Real Estate Investment Trusts (REITs)/Infrastructure Investment Trust (InVITs), National Infrastructure Investment Fund (NIIF), laying down a framework for municipal bonds, issuance of Tax Free Bonds, allowing complete pass through of income tax to securitization trusts including trusts of Asset Reconstruction Companies (ARCs), bringing in 5/25 Scheme to extend long tenor loans to infrastructure projects, take-out finance, flexible structuring and refinancing of project loans, higher credit exposure limits for single and group borrowers, and single NBFC/NBFC-Asset Financing Company and Infrastructure Financing Company, amendment in investment norms of insurance companies, Employees’ Provident Funds, etc. Further, Government has set up the Project Monitoring Group (PMG) in the Cabinet Secretariat with a view to putting in place an institutional mechanism to track stalled projects, both in the public and private sectors involving investment of Rs. 1000 crore or more, or any other critical projects in sectors such as infrastructure, manufacturing, etc.


Violation of RBI Regulations

Reserve Bank of India (RBI) has informed that Public Sector Banks (PSBs) have not been found to have deliberately indulged in forex frauds, though staff collusion in the irregularities in the import transactions detected in the Bank of Baroda (BOB) case cannot be ruled out.

BOB reported a case with the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED) on Sept 24, 2015 regarding serious irregularities having been committed in overseas remittances of foreign exchange suspecting money laundering in the Ashok Vihar Branch of the bank. CBI and ED have registered cases on the basis of a complaint filed by BOB. CBI has informed that charge sheet has been filed in the court. Case is under further investigation against other bank officials and private persons.

RBI has informed that comprehensive guidelines on handling export/import transactions have been issued to all Authorised Dealer (AD) banks covering inter-alia, advance remittance for imports, submission of evidence for imports, follow up and monitoring of overdue cases and reporting requirements etc.

In order to streamline import monitoring systems across different agencies viz. AD banks, customs and the STPI/SEZ, RBI has devised an Import Data Processing and Monitoring System (IDPMS) which will facilitate tracking of each and every import transaction without exception. IDPMS is already functional since October 10, 2016.

Strict directions have been issued to all AD Category banks to ensure adherence to extant guidelines on export/imports and to look into internal security/system administration aspects, such that system capabilities including alerts/warning protocols provided therein are not compromised or ignored.


Simplified investment rules to attract more domestic and foreign investment

Government has put in place a liberal, transparent and investor-friendly policy on Foreign Direct Investment (FDI) wherein most of the sectors are open to FDI under the automatic route. The Government reviews FDI policy on an ongoing basis and significant changes are made in the FDI policy regime, from time to time, to ensure that India remains increasingly attractive and investor-friendly investment destination. All such policy decisions are available on the website of the Foreign Investment Promotion Board ( ) The Finance Minister has further announced a number of measures to encourage FDI in India in the Budget Speech 2016-17. Recent steps taken by the Government to boost foreign investments in India are given below:

• 100% FDI permitted under government approval route for trading, including through ecommerce, in respect of food products manufactured and/or produced in India
• In Defence, FDI beyond 49% permitted through government approval route, in cases resulting in access to modern technology in the country or for other reasons to be recorded
• FDI limit for defence made applicable to Manufacturing of Small Arms and Ammunitions covered under Arms Act 1959
• 100% FDI under automatic route allowed in Broadcasting Carriage Services
• 74% FDI under automatic route permitted in brownfield pharmaceuticals
• FDI beyond 74% under government approval in brownfield pharmaceuticals
• 100% FDI under automatic route permitted in Brownfield Airport projects
• FDI limit for Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline and Regional Air Transport Service raised to 100%
• FDI up to 49% under automatic route and FDI beyond 49% through Government approval in Air Transport Service/ Domestic Scheduled Passenger Airline and Regional Air Transport Service
• Foreign airlines would continue to be allowed to invest in capital of Indian companies operating scheduled and non-scheduled air-transport services up to the limit of 49% of their paid up capital
• FDI limit for Private Security Agencies raised to 74%
• FDI up to 49% allowed under automatic route and, beyond 49% and up to 74% with government approval in Private Security Agencies
• RBI permission not required for establishment of branch office, liaison office or project office or any other place of business in India if the principal business of the applicant is Defence, Telecom, Private Security or Information and Broadcasting, in cases where FIPB approval or license / permission by the concerned Ministry / Regulator obtained.
• Local sourcing norms relaxed up to three years for entities undertaking Single Brand Retail Trading of products having “state-of-art? and “cutting edge? technology


Measures to effectively tackle the issue of black money

Analysis of seizure of valuables and admission of undisclosed income during searches conducted by Income-tax Department during last three financial years indicates that the persons searched were involved in multiple activities in varied sectors and it may not be feasible to comprehensively apportion the undisclosed income detected amongst the specific sectors. However, the data indicates that the main sectors in which black money is rampant include real estate, finance, trading, manufacturing, educational institutes, and services.

 Specific and comprehensive sector-wise apportionment of undisclosed income detected during searches is not feasible. However, the initial outcome of the searches conducted by the Income-tax Department during last 3 financial years is as under:

Number of groups searched
Total assets seized (In Rs. crore)
Undisclosed income admitted u/s 132(4) of the Income-tax Act, 1961 [in Rs. crore]

Action against tax evasion/black money is an on-going process. Such action under direct tax laws includes searches, surveys, enquiries, assessment of income, levy of penalties and filing of prosecution complaints before criminal courts, wherever applicable.

In recent times, the Government has taken several measures to effectively tackle the issue of black money. Such measures include putting in place robust legislative and administrative frameworks, systems and processes with due focus on capacity building and integration of information and its mining through increasing use of information technology; prohibition of acceptance of payment/repayment/advance of Rs.20,000 or more in cash; enactment of the Benami Transactions (Prohibition) Amendment Act, 2016 to amend the Benami Transactions (Prohibition) Act, 1988 with a view to, inter alia, enable confiscation of Benami property and provide for prosecution; initiation of the information technology based ‘Project Insight’ for strengthening the non-intrusive information driven approach for improving tax compliance and effective utilization of available information; amendment in rule 114B of the Income Tax Rules (the Rules) making mandatory quoting of PAN for transactions of sale or purchase of goods or services of any nature above Rs. 2 Lakh; constitution of the Special Investigation Team (SIT) on Black Money under Chairmanship and Vice-Chairmanship of two former Judges of Hon’ble Supreme Court, etc.


Amendment in SARFAESI Act and DRT Act

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and the Recovery of Debts Due to Banks and Financial Institutions Act (RDDB & FI Act) have been amended for speedier resolution of defaulted loans through ‘The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 (44 of 2016) and it was notified in the Gazette on 16th August, 2016..


Write off education loans given to the poor and middle class family students who could not get employment

Government has no Plan to write off education loans given to the poor and middle class family students who could not get employment. However, for the students belonging to economically weaker sections, an interest subsidy scheme on educational loans is in place. Under the scheme during the period of moratorium full interest subsidy is available for educational loans disbursed on or after 1st April, 2009.

The Indian Banks’ Association (IBA) has formulated a Model Educational Loan Scheme for adoption by banks. As per the scheme, Banks may also provide additional moratorium upto 6 months at a time taking into account spells of under-employment/unemployment during the tenure of the loan.

Government of India has launched a Credit Guarantee Fund Scheme for Education Loans (CGFSEL) wherein collateral free loan is given upto Rs.7.5 lakh. The fund provides guarantee against default in repayment of education loans to the extent of 75% of the amount in default.


Rating of Indian firms among the global rapid growth companies

The number of Indian firms among the global rapid growth companies identified by the World Economic Forum have increased from 17 in 2014 to 26 currently. The current 26 companies are: Allcargo Logistics Limited, Ola Cabs, Apollo Hospitals Enterprise Ltd, Apollo International Ltd, ATC Tires Private Limited, BMR Advisors, Centum Electronics Ltd, Dabur India Ltd, Educomp Solutions Ltd, Eram Group, Forbes Marshall Private Limited, Genpact Ltd, Jain Irrigation Systems Ltd, Nash Industries (I) Pvt. Limited, Navayuga Group, Paytm, Welspun Energy, Siddho Mal Group, Parle Agro, Sonata Software Limited, Sunjewels Group, Tandon Group, The Eastern Group, Transport Corporation of India Ltd, Velankani Information Systems Private Limited, and WNS Global Services.

As per the World Economic Forum’s Global Competitiveness Report 2016-17, India’s competitiveness has improved and India rose 16 ranks faster to climb to 39th place among 138 countries. However, there still remain substantial changes in the ease of doing business and the taxation system and the Government at both Central and State levels are rigorously working on improving the ease of doing business in the country. In a landmark initiative, the Government of India has started assessing the ease of doing business reforms in the states every year. This has generated healthy competition among states to improve the ease of doing business and the momentum is picking up continuously, which is reflected in the survey results. As compared to the first round of survey, which was conducted last year, the highest score has moved up from 71.1% (by Gujarat) to 98.8% now (by Andhra Pradesh and Telegana). As many as 12 states (out of 36 states / UTS) have scored more than 90%, with 9 of them scoring more than 96%. Further, both Central and State Governments are making endeavour to reduce the compliance cost of tax filing. In majority of the states, tax filing has been made online, which has opened up provisions like e-payment gateway, e-filing service centres, establishment of tax database, advance tax provisions, and establishment of risk-based mobile check posts. Implementation of Goods and Services Tax (GST) will further improve the ease of doing business in the context to taxation.


norms on gold monetisation scheme

Government has recently issued norms on gold monetisation scheme. Based on the feedback received from the stakeholders of the scheme and the reviews held, Government has allowed following Tax Exemptions:

i). Deposit Certificates issued under Gold Monetisation Scheme, 2015 notified by the Central Government, are excluded from the definition of capital asset and hence are exempt from capital gains tax.

ii). Interest income on Deposit Certificates issued under the Gold Monetisation Scheme, 2015 is also exempt from income-tax.
These amendments are effective from the 1st day of April, 2016 and shall accordingly apply in relation to assessment year 2016-17 and subsequent years.


Regulatory mechanism on Micro Finance Institutions operating in private sector

Micro Finance Institutions (MFIs) in India can operate in different forms- Non-Banking Financial Companies - Micro Finance Institutions (NBFC-MFIs), Trusts, Societies etc. Depending upon the nature of organisational structure, ownership, level of operations etc., MFIs are regulated under extant laws and guidelines of the Reserve Bank of India (RBI) and money lending laws of State Governments.

RBI regulates microfinance entities which are having corporate (company) legal structures i.e. NBFC-MFIs. NBFC-MFIs are regulated by RBI under the provisions of Chapter IIIB of the RBI Act, 1934. RBI has issued regulatory guidelines and Fair Practice Code for these NBFC-MFIs. RBI has given recognition to two Self Regulatory Organisations (SROs). MFIs which are members of these Self Regulatory Organisations (SROs) also adhere to a voluntary industry Code of Conduct.


Minimum Balance in Saving Accounts

Reserve Bank of India (RBI) vide its circular dated August 10, 2012 on Financial Inclusion – Access to Banking Services – Basic Saving Bank Deposit Account, advised all Scheduled Commercial Banks to offer a ‘Basic Savings Bank Deposit Account’ which shall not have the requirement of any minimum balance. In terms of aforesaid circular, banks have been advised to offer Facility of ATM card or ATM-cum-Debit Card to all BSBD account holders without any charges.

In other cases, as per extant instructions, with effect from April 1, 2015, banks have to follow additional guidelines on levy of penal charges for non-maintenance of minimum balance in savings bank account which include – notifying the customer clearly by SMS/email/letter etc. that in the event of the minimum balance not being restored in the account within a month from the date of notice, penal charges will be applicable; penal charges may be recovered under intimation to the account holder; the policy on penal charges to be so levied may be decided with the approval of Board of the Bank and the penal charges should be directly proportionate to the extent of shortfall observed. It should be ensured that such penal charges are reasonable and not out of line with the average cost of providing the services. It should be ensured that the balance in the savings account does not turn into negative balance solely on account of levy of charges for non-maintenance of minimum balance.

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