delay that gratification

I realised the difference , skill , talent will help , personality will help but only to a extent ....What matters most is how much can u work , how long can u persevere , how long can u keep going , how often will u delay instant gratification , these are the most important factors that will determine success ....As a student I had realised this and tried to stick to this , the more u delay gratification the more successful u will be . Kill the boy within you and let the man be born.....

a narrative about self

Recently my friend shared a post on how people tell stories and how they potrya themselves in those stories reveals a lot about themselves ....Some are heros in their stories , some are victims , the narrative about self goes on to create your personality ......And so the author says he will have stories in which he is happy .......Can that really help m sitting.on a Friday morning dreading office work ,,this has become a routine now every morning the dread a sinKing feeling in the stomach, how I envy people who have lot of friends and look forward to being in office , why am.i not that enthusiastic ......Is it lethargy or is it some.thing deeper , I don't trust my self enough to give me the luxury of thinKing this is something deeper , m too busy repeating the narration that I have heard from everyone , you are lazy, lethargic . Secondly I have observed that I am too distracted am not living in the present , when am physically present mentally am far off thinking something else. This habit of ruminating thoughts is a big contributor to stress.....Your though t and action have to be aligned for you to be at peace ....It's not been happening for quite some time now . Even while.meditating I was far off mentally 

Do.i quit this all for.mental peace and go away or.do I stay and fight ....Will I learn to overcome these thought habits .  

On 16 th sept 2019

We are our harshest critic which is not a good thing , i in particular criticise my self a bit too much. I understood  the meaning of love thyself, it means just that ,  love ur self , be kind to ur self, forgive ur self.

I feel like a under achiever not because of anything   else but only because am not working and living out of India . That's one thing i have always wanted . But not yet happened.

I do know for a fact that even when my work abroad wish is fulfilled i will still be discontented , and that is because i dont know how to be happy . I have not been happy for a long time .i dont know how that feels anymore.
Is it indifference or is it a shield to protect urself from being hurt i dont know.

Is anyone truly happy, ? And what is beyond happiness , is there an end to this curiosity is there a point where all these thoughts die away ?

On 14th sept

I saw cosmos the series presented by neil degrass. Its a well created series that makes u realise the insignificance of our solar system.  He talks about life on a speck of dust . The earth , the sun the whole solar  system is just a grain of sand on the cosmic ocean.

It changes ur perception that life is something that is fragile and needs to be protected . On the contrary life is strong and survives harshest of climate . It may not be human or animal life but could be microbes , life survives in many forms and lcan adapt to the harshest environment. It's a eternal dance of life emerging and nature either nurturing it or killing it off

It also makes u realise that life is a aberration , the cosmos is happy to keep juggling hot balls of fire or cold balls of ice ,  or the greedy black holes , it's like a vast factory that keeps creating, destroying and recycling celestial bodies. May be life is something that happens unknowingly as the cosmos is busy creating and destroying objects much like a colony of ants in a factory.

On 13 sept 2019

My bday was on 11th sept , all my friends wished me , my parents did not . Since child hood for some reason birthdays were never given much importance in my family.

And that habit is now ingrained in me. Birthdays make u relook at your whole life. i detest nostalgia as i feel  future is more exciting than past . But i tend to make exceptions on birthdays . I listened to all those songs which made me feel cool in my teenage years ...i still like the songs but the emotions don't run high , like when Madonna croons vooooogue i just used to love it , now i just like it .

It's like a shraaadh,  u remember the old you , u hardly miss that guy , but you pay homeage nevertheless to the guy u were coz he made what you are ...

On 9 sept 2019

I Am all dressed  and  sitting here on my couch. Am supposed to go to office , am supposed to earn , am supposed to provide for my family and kid. Of course I bound my self into it pretty much .

Am thinking what is the purpose of all this . Am not a great believer in reincarnation etc , and even if it exists, but if I don't remember my previous birth then it's irrelevant

May be people want to look forward to something even beyond death and hence we invented a elaborate afterlife . It's scary to realise that we live just once

Loans against Gold Ornaments and Jewellery for Non-Agricultural End-uses

Loans against Gold Ornaments and Jewellery for Non-Agricultural End-uses

RBI has issued guidelines that

Loans extended against pledge of gold ornaments and jewellery, for other than agricultural purposes, where both interest and principal are due for payment at maturity of the loan will be subject to the following conditions:

1. Banks, as per their Board approved policy, may decide upon the ceiling with regard to the quantum of loans that may be granted against the pledge of gold jewellery and ornaments for non-agricultural end uses;
   
2. The tenor of the loans shall not exceed 12 months from the date of sanction;
   
3. Interest will be charged to the account at monthly rests and may be recognised on accrual basis provided the account is classified as ‘standard’ account. This will also apply to existing loans;
   
4. Such loans shall be governed by extant norms pertaining to income recognition, asset classification and provisioning which shall be applicable once the principal and interest become overdue.
   

 it is also clarified that LTV of 75 per cent shall be maintained throughout the tenure of the loan for all loans extended against pledge of gold ornaments and jewellery for non-agricultural end uses. The LTV ratio shall be computed against the total outstanding in the account, including accrued interest, and current value of gold jewellery accepted as security / collateral, determined as per the methodology prescribed in our circular dated January 20, 2014.
4. For the purpose of valuation of gold, banks may use the historical spot gold price data publicly disseminated by a commodity exchange regulated by the Forward Markets Commission on a consistent manner as per their Board approved policy, in addition to the prices disseminated by the India Bullion and Jewellers Association Ltd.

Issue of Prepaid Forex Cards- Due Diligence and Adherence to KYC norms

Issue of Prepaid Forex Cards- Due Diligence and Adherence to KYC norms


It was reiterated by RBI that prepaid foreign currency cards are a form of foreign currency, similar to foreign currency notes or travellers cheques. As such, the authorised dealers/FFMCs selling pre-paid foreign currency cards for travel purposes are required to comply with the same rigorous standards of due diligence and KYC as they would in case they were selling foreign currency notes/ travellers cheques to their customers.

Musings of a Departing Forex Market Regulator

Musings of a Departing Forex Market Regulator

 

Address by Shri. G Padmanabhan, Executive Director, Reserve Bank of India at the Foreign Exchange Dealers Association of India Conference at Brussels on April 3, 2015

 

 

 

http://www.rbi.org.in/scripts/BS_SpeechesView.aspx?Id=953

 

 

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Defeating Poverty: Issues and Challenges

Defeating Poverty: Issues and Challenges

 

 

Keynote Address by Shri S. S. Mundra, Deputy Governor, Reserve Bank of India at the 39th Skoch Summit in New Delhi on March 20, 2015

 

 

http://www.rbi.org.in/scripts/BS_SpeechesView.aspx?Id=948

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Recent Policy initiatives in Credit Information Sharing - Speech by

Recent Policy initiatives in Credit Information Sharing - Keynote Address delivered by Shri R. Gandhi, Deputy Governor on March 3, 2015 at Seventh Annual CIBIL TransUnion Credit Information Conference

 

Access full Speech below

 

http://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/RPICIS03032015.pdf

 

 

 

Thanks And Regards

Raghuttam V Jamadagni

Contact no : 9986004160

The empires of the future are the empires of the mind - Winston Churchill

 

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Concerns on Financials of Payment banks

Concerns on Financials of Payment banks

The fine print reading of the payment bank guidelines has been done and  investors have raised question on the viability and profitability of payment banks. How will payment banks make moneyThe payments bank guidelines require the applicants to deposit three fourth of the investment with RBI to maintain the statutory liquidity ratio once they receive the licence.This leaves only 25% of their investment to build their operational and technological infrastructure. Investors believe this would leave the newly formed payment banks with wafer thin margins. "Out of the remaining 25% capital, maximum 15% needs to be deposited with scheduled commercial  .. This will result in just 2% to 4% profit margin," said Anuradha Ramachandran, director, Omidyar Network who have invested in payment solution providers in Africa and Indonesia.

List of entities who have applied for a payment bank license (source: RBI)

1. A Little World Private Limited, Belapur

2. Aditya Birla Nuvo Limited, Mumbai

3. Airtel M Commerce Services Limited, New Delhi

4. Calibre Financial Services Limited, Chennai

5. Cholamandalam Distribution Services Limited, Chennai

6. Citrus Payment Solutions Private Limited, Mumbai

7. Concept Technosoft Ventures Limited, New Delhi

8. Department of Posts, New Delhi

9. Eko India Financial Service Private Limited, New Delhi

10. FINO PayTech Limited, Navi Mumbai

11. Fx Mart Private Limited, Zirakpur, Mohali

12. GI Technology Private Limited, Chennai

13. Instant Global Money Transfer Private Limited, Hoshiarpur

14. Itz Cash Card Limited, Mumbai

15. Kalpataru Corporation, Mumbai

16. KKM Management Centre Private Limited, New Delhi

17. My Mobile Payments Limited, Mumbai

18. National Securities Depository Limited, Mumbai

19. Novopay Solutions Private Limited, Bengaluru

20. NSE Strategic Investment Corporation Limited, Mumbai

21. One MobiKwik Systems Private Limited, Gurgaon

22. Oxigen Services (India) Private Limited, New Delhi

23. Pay Point India Network Private Limited, Mumbai

24. Reliance Industries Limited, Mumbai

25. Resource Square Solutions Private Limited, Chennai

26. Shri Dilip Shantilal Shanghvi, Mumbai

27. Shri Kishore Laxminarayan Biyani, Mumbai

28. Shri M.G. George Muthoot & others, Kochi

29. Shri Nijay Kumar Gupta, Mumbai

30. Shri Rajib Saha, Gurgaon

31. Shri Renuka Mata MultiState Co-operative Urban Credit Society Ltd., Ahmednagar

32. Shri Vijay Shekhar Sharma, Noida

33. Smart Payment Solutions Pvt. Ltd., New Delhi

34. Suvidhaa Infoserve Private Limited, Mumbai

35. Tech Mahindra Limited, Mumbai

36. V. K. Fiscal Services Pvt. Ltd., New Delhi

37. Vakrangee Limited, Mumbai

38. Videocon d2h Limited, Mumbai

39. Vodafone m-pesa Limited, Mumbai

40. Weizmann Forex Limited, Mumbai

41. YouFirst Money Express Private Limited, Mumbai

Source : http://economictimes.indiatimes.com/industry/banking/finance/banking/rbis-payment-ecosystem-doesnt-add-up-say-investors/articleshow/46339971.cms

 

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A New Banking Landscape for New India

Important points from the  Keynote address on “A New Banking Landscape for New India”

(By Shri S. S. Mundra, DG, RBI at the Mint’s Annual Banking Conclave, 2015)

Some questions that the banking profession and the bankers would need to find answers to ensure their relevance in the emerging landscape.

(i) Can there be a possibility of account number portability on similar lines as mobile number portability? So, if an individual is not happy with the service received at one bank, he can possibly opt for shifting his banking relationship, lock, stock and barrel to another bank. Of course, there could be issues around loan contracts etc. but there is no reason to believe that such challenges cannot be surmounted and pave the way for a massive disruption in the way banking is conducted today.  

In fact one of the objectives of UCIC was to prepare ground for this. What also can be considered is to have a look at the approach taken by SEBI/NSDL and  have a central depository of banking customer records which are KYC complied something like the NDML.

(ii) How long can the banks continue increasing their retail loan portfolio? Unless some means to pool and distribute these loans to other investors in the market is created, the retail lending pipeline can get chocked quite quickly.

The issues on securitization in India by  itself is a different subject altogether and necessitates a different article. Keep watching this space for the same

(iii) How is crowd funding going to impact lending business of the banks in future? The amount of funds raised by crowd funding platforms worldwide has increased progressively from $ 1.5 bn in 2011 to $ 2.7 Bn in 2012 and further to $ 5.1 bn in 2013. I hear some of you say it is negligible in volume. The pace of growth however, is quite fast and combined with the peer-to-peer lending business this could create disruptions, at least for some of the players who operate in the same segment.

The use of small amounts of capital from a large number of individuals to finance a new business venture. Crowdfunding makes use of the easy accessibility of vast networks of friends, family and colleagues through social media websites like Facebook, Twitter and LinkedIn to get the word out about a new business and attract investors. Crowdfunding has the potential to increase entrepreneurship by expanding the pool of investors from whom funds can be raised beyond the traditional circle of owners, relatives and venture capitalists.

“The alliance between technology and finance is heading towards a new paradigm with the emergence of peer-to-peer (P2P) lending/crowd funding technology platforms (Box 3.1). While in certain regulatory jurisdictions this space is being looked at as more favorable, some other regulators have raised concerns mainly relating to distress for lenders in the event of a sudden closure of such platforms14. While these platforms are still new to India and the scale of transactions is insignificant, this is a gap which requires regulatory attention. This is all the more important since in developed markets, mainstream financial market participants and products are making an entry into this space amidst concerns over regulatory arbitrage. Recently, the Securities and Exchange Board of India (SEBI) has proposed a framework to encourage and streamline crowd funding market in India15. The proposed framework provides for ‘security based crowd funding’ in India under three routes viz. equity, debt and fund. The proposal intends to develop an additional channel for entrepreneurs to raise early stage funding and seeks to balance the same with adequate investor protection measures. RBI in its publication Financial sector regulation and infrastructure has commented”

Interesting development to watch out for. Meanwhile interesting tit bits : The kannada Film Lucia was made through crowd funding of 71 Lakhs and was sold to Udaya TV for 95 lakhs (http://www.nextbigwhat.com/kannada-film-lucia-crowd-funding-in-india-297/). This mode of funding is awaiting one big success story something like a Whatsapp or facebook .

 (iv) If Mobile Banking were to succeed, would plastic money still be needed? Basically there are two questions rolled in one. First, whether mobile banking can succeed and if that is the case what implications would it have for the future of ATMs and the debit cards that have been issued by banks. There is justifiably a growing need for reducing the reliance placed on cash by the system and hence, if more and more people moved to mobile/ internet based payments, the plastic cards and the investments made thus far, would be rendered useless unless put to more imaginative uses.

That’s also the case if bio metrics take off in  big way.

(v) What IFRS implementation would mean for the banking system? IFRS accounting could potentially overstate assets or overstate capital position. The question is how prudential regulation would exist alongside IFRS? Proposed impairment calculations under IFRS, accounting for interest income on Effective Interest Rate basis and presence of multiple systems for operations and accounting of different portfolios would mean that IT systems would have to be upgraded/realigned for IFRS migration. Banks would also need to overcome challenges around converging policies for financial accounting and tax accounting for preparation of financial statements. The banks would need to train their staff in various departments like credit, and treasury, etc. for acquiring proficiency in IFRS accounting.

IFRS is the International Financial reporting standard. These are designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. They are a consequence of growing international shareholding and trade and are particularly important for companies that have dealings in several countries. They are progressively replacing the many different national accounting standards. The rules to be followed by accountants to maintain books of accounts which is comparable, understandable, reliable and relevant as per the users internal or external

(vi) Would the large corporates continue to borrow from the banks? Of late, the global markets, particularly the emerging market economies, have been flush with funds flowing in on account of variants of QEs launched by the Central Banks in the Advanced Economies. Many large corporate houses have been able to access funds at very cheap rates without needing to reach out to banks. The sustained deflationary trends in the Euro Area and Japan portend further bouts of QEs which can adversely impact the lending business of banks in the emerging markets. Further, the large corporates in developed countries normally access financial markets directly for their funding requirements rather than commercial banks. Hence, even while this time-specific event of QEs might fade away, as Indian economy and the financial markets mature, more and more large corporate could start bypassing banks for their funding requirements.

(vii) Would the pain from the loans restructured earlier return to haunt the banks? the prolonged global economic slowdown might have thrown off the projections made earlier at the time of restructuring the advances in the immediate aftermath of the crisis. As the moratorium period comes to a close, the banks would need to take a hard look at the techno-commercial viability of these projects and take the losses wherever the viability seems in jeopardy. Timely decisions, including for recall/recovery of the loan, wherever the financial prospects are unviable, would be critical.

viii) The D-SIBs(Domestic systemically important banks)  guidelines have also been announced and the list of banks considered systemically important in the domestic context would be unveiled in August 2015. Besides, being subjected to stricter capital and liquidity buffers, these banks may also be nudged to prepare detailed ‘recovery and resolution plans’. Negotiations are also on at the Financial Stability Board level for implementation of a TLAC (Total Loss Absorbency Capital) framework for the banks identified as G-SIBs(Global systemically important banks)  . The essence of all the above discussion is that the banks would need to substantially augment their capital bases to stay in the business. The question is where do you find such capital?

Banker Times updates - Regional Rural banks & FATCA

In further updates to the FATCA implementation , RBI has exempted  following categories of Regional Rural banks from registration with IRS

RRBs having  assets of less than 175 Mn

RRBs along with related entities , taken together do not have more than USD 500 Mn in total assets on their consolidated or combined balance sheet.

Such RRBs will be treated as local banks and need not register with IRS .

However this raises questions , RBI has laid down certain criteria to be fulfilled by RRBs before they are allowed to accept FCNR, NRo, NRE deposits . however none of the criterion specified includes a monetary cut off as above so effectively banks will continue to accept such deposits and still will be considered as local banks. This appears to be contradictory to the FATCA definition of a local FFI

More clarity required from RBI in this regard

Banker Times - 08 Dec 2014 - RJ - Cash to Card

Holding electronic payments hostage

Came across a interesting article in Live mint by Saurabh Tripathi. Below is a gist of the same

The number of ATMs in India has grown very rapidly from 3,000 in 2001 to 160,000 in 2014 at a compound annual growth rate (CAGR) of 36% and it is still growing. Today any bank customer can use ATM of any other bank. As soon as cash is paid out, account of the customer is debited in real time. Customer gets a reassuring instant SMS intimation. 25% of bank account holders are active users of their debit cards at the ATMs. A vibrant vendor industry has evolved to help banks rapidly set up and maintain ATMs. This happened because the network connecting ATMs of all banks in the country was designed elegantly. It ensures everyone in the system is economically sustainable and viable. The Reserve Bank of India (RBI) has intervened several times with very strong measures.

But the good news stops here. The same debit card that is used at the ATM can also be used to pay electronically at merchant shops by swiping the card on the Point of Sale (POS) device. However, in the last financial year i.e., 2013-14, in comparison to the 5 billion ATM cash withdrawal transactions, there were only 620 million debit card transactions on POS devices. As a result, compared to Rs.20 trillion cash withdrawn from ATMs, only R1 trillion was actually spent directly at merchant terminals through debit cards. All this is despite the fact that we have only 160,000 ATMs as against 110,000 POS machines. Understandably, the banks, which set up POS machines, do not find them viable. Consequently we have the lowest number of POS machines among all comparable economies.

This is surprising because there is a big win-win opportunity for all concerned in electronic transactions at merchant outlets. The customer does not have to take out cash from ATM before spending. The merchant does not have to handle cash and go to bank branch to deposit cash. The bank saves cost with fewer ATM transactions and, as a subtle (and not fully appreciated) side benefit, enjoys larger float in customer account for a longer time.

At the heart of this colossal failure is poorly designed interbank scheme, which makes it unviable for banks to set up POS units. Just contrasting the scheme of ATMs with that of POS machines is enough to spot the issue. When a customer of Bank A uses her debit card to withdraw money from ATM of Bank B, Bank A compensates Bank B. Bank B has spent money to set up the ATM and to maintain it. Bank A customer is enjoying the benefit. So Bank A pays. Now look at the absurdity of a similar transaction on a POS device. When a customer of Bank A uses her debit card to make a POS transaction at a merchant where the POS device is installed and maintained by Bank B, Bank B effectively makes a net payout to Bank A under the current arrangement. Bank B charges the merchant some money for each such transaction. This is called Merchant Discount Rate (MDR) and has recently been reduced by RBI to 0.75% for transactions upto Rs.2,000 and 1% for transaction value of more than Rs.2,000. Merchants feel uncomfortable having to pay this. They try to avoid taking payment electronically because cash is better for them. Most banks which set up POS machines (like Bank B in the example) make a loss on the business of setting up and maintaining POS machines. So, most banks are going very slow in setting up new POS machines. The situation is absurd since Bank A saves a lot of money when its customers use debit card at POS in form of avoided ATM transaction cost and higher balances in savings account.

The interbank scheme for ATMs is innovative. It is designed for India’s needs. It has an air of frugal innovation about it. It gets the economics right. Results are for all to see. The debit card scheme for POS transactions is out of sync with underlying economics. Its basic architecture is borrowed from the interbank schemes for credit card transactions. The banking industry is paying a huge price in the form of high cost ATM transactions when so much more of customer spending could have been cashless. The scheme for debit cards payment on POS devices should be along the lines of the scheme for ATMs. The Reserve Bank should make a more concerted effort for a fundamental redesign of the system. Bank CEOs should come together to change the state of affairs in their own interest.

http://www.livemint.com/Opinion/p3YRSXO2FjL8A6eLFeiygI/Holding-electronic-payments-hostage.html

This also explains why in many developed countries all payments are made in cards and cash is sparsely used. In fact most small purchases are made through cards. In India however the situation is exactly reverse and card payments is generally used only for large purchases. Also  the smaller merchants insist on a minimum transaction of say Rs 200 to accept cards or charge 2%  extra for the same thus effectively passing on the charges to customer.

Some statistics :

A large scale card based transactions has the potential to reduce the number of ATM transactions and also the perpetual issue of shortage small denominations(Chutta nai hai).

According to MasterCard, 75% of all card payments are concentrated in the top 20 cities with Delhi, Mumbai and their suburbs alone accounting for 43%.

Credit cards have a higher share in the discretionary category whereas debit cards dominate in routine expenses like utility payments.

About 30% of credit card spends are being done online. At least 10-15% of customers use their cards only online, many from smaller cities.

A Visa study reveals that people in the monthly income band of Rs 75,000-100,000 are the most prolific users of electronic cards.

Electronic payments dominate their expenses: rail/airfare (71%), durable goods (61%), rent (49%), tele/mobile (47%), medical institutions (46%), clothing/footwear (44%), beverage and refreshments (35%).

(source Economic times : Rise in credit & debit cards spending signals India's transformation into a cashless economy Malini Goyal, ET Bureau Oct 6, 2013)

So there is a huge potential for growth in non cash payments if only we are able to make it into a win-win situation for all.

Banker Times - 06 Dec 2014 - RJ - Gist of Draft CRS/FATCA

Gist of Draft CRS/FATCA Rules Version 3

Source : Draft  from first meeting between IBA & CBDT

1. Statement of reportable account is to be filed by 31 may of every year for the previous year starting 31 may 2015
2. The report is to be furnished to the Director of Income tax ( intelligence). The report has to be uploaded in a online system using a digital signature.
3. The details of report will be specified by the IT dept in due course
4. Details about the following type of accounts
   1. Depository accounts
   2. Custodial accounts
   3. Equity Or debt interests in an investment entity
5. Refer Definition of Financial accounts and other definitions on page 2 – 6
6. Refer Nature of Information to be maintained and reported on page 7-9
7. Rule 114 H : Reporting rules – what accounts are to be reported -9

Definition of Financial accounts

1. Depository accounts : "depository account" means any account maintained by a financial institution in the ordinary course of a banking or similar business and includes an amount held by an insurance company pursuant to a guaranteed investment contract or similar agreement to pay or credit interest thereon.
   1. CASA, TD CCOD,and all accounts wherever depository functions can be carried out will be included in this definition.
   2. Credit cards to be included
   3. Prepaid cards to be included
   4. Escrow accounts to be included
   5. Term loans ,consumer finance, LAS to be excluded< to be checked>.
2. Custodial Account: "custodial account" means an account (other than an insurance contract or annuity contract) for the benefit of another person that holds one or more financial assets.

Type of account	Desc	Owner of the acct for FATCA
Securities account	Accounts of the customers to which securities are posted	Bank as a custodian
Collateral on derivative transactions	Collateral held in the form of cash or securities in a collateral acct by a bank pursuant to a derivative contract	The bank which is acting as a custodian of the cash/securities
Inhouse custodial account	An internal account held by the entity in its name	EXCLUDED. Not a financial account

3. Equity /Debit interests : "equity interest" in a financial institution, being,-

1. a partnership means either a capital or profits interest in the partnership;
2. a trust means any interest held by any person treated as a settlor or beneficiary of all or a portion of the trust, or any other natural person exercising ultimate effective control over the trust.

Explanation.- A person will be treated as being a beneficiary of a trust if he has the right to receive directly or indirectly a mandatory distribution or may receive, directly or indirectly, a discretionary distribution from the trust.

Type of account	Desc	Considered as financial account?	Owner of the acct for FATCA
Listed wholesale debt notes	Unsecured debt instruments issued by a bank.	These are considered to be financial accounts only if these are not regularly traded<exact definition of regularly traded needed> or value is not determined wrt a asset giving rise to a withholdable payment.	The issuer of the instrument
Unlisted debt instruments – Commercial paper/Bill	An unsecured short term debt instrument issued by bank custodian , investment entity,	These are considered to be financial accounts only if value is determined wrt a asset giving rise to a withholdable payment.	The issuer of the instrument
Bonds/Promissory note	Issued by a bank	Same as above	The issuer of the instrument
Securitisations(UNLISTED)	Bonds or note or equity instruments issued by a SPV	YES	SPV that issues the instrument
Derivatives	All variations of derivatives including swaps, forwards, futures, options, interest rates, foreign currency equities.	TO BE CHECKED
Repo		TO BE CHECKED

4. Excluded accounts : This means a retirement or a pension account which satisfies the following requirement :

1. Retirement plans :

1. The accounts is subject to regulation as a personal retirement acct or is a part of regd regulated retirement plan. For provision of retirement benefits.
2. Accounts is tax favoured i.e contributions to the account are deductible, or taxed at reduced rate or taxation of invt income is deferred or taxed at reduced rate.(TAX FDs)
3. Reporting is required to be done to IT wrt to these accounts
4. Withdrawls are only related to a specific age , death or disability or penalties apply when withdrawals are made
5. Either annual contributions are limited to 30 lakh rupees or there is maximum life time contribution to the extent of 6 crores

2. Any account that satisfies the following requirements

1. The account is subject to regulation as an investment vehicle for purposes other than for retirement and is regularly traded on an established securities market, or the account is subject to regulation as a savings vehicle for purposes other than for retirement; Mutual fund units , Recurring deposits ?
2. the account is tax-favoured where contributions to the account that would otherwise be subject to tax are deductible or excluded from the total income of the account holder or taxed at a reduced rate, or taxation of investment income from the account is deferred or taxed at a reduced rate;
3. withdrawals are conditioned on meeting specific criteria related to the purpose of the investment or savings account (for example, the provision of educational or medical benefits), or penalties apply to withdrawals made before such criteria are met; and
4. annual contributions are limited to an amount equivalent to thirty lakh rupees or less, applying the rules prescribed in clause (C) of sub-rule (7) of rule 114H for account aggregation and currency translation.

3. An account established in India under the Senior Citizens Saving Scheme of 2004 to provide Indian senior citizens and saving schemes and savings and deposits account.
4. an account that is held solely by an estate if the documentation for such account includes a copy of the deceased's will or death certificate(deceased accounts).
5. An account established in connection with any of the following:

1. a court order or judgment.Court Deposits
2. a sale, exchange, or lease of real or personal property,(EMD for property transactions , or escrow for property transactions)

6. In the case of an account other than a U.S. reportable account<WHAT IT MEANS IS A NON US PERSON >, a depository account that satisfies the following requirements, namely:-

1. the account exists solely because a customer makes a payment in excess of a balance due with respect to a credit card or other revolving credit facility and the overpayment is not immediately returned to the customer; and
2. beginning on or before [xx/xx/xxxx], the financial institution implements policies and procedures either to prevent a customer from making an overpayment in excess of thirty lakh rupees, or to ensure that any customer overpayment in excess of thirty lakh rupees is refunded to the customer within 60 days, in each case applying the rules prescribed in clause (C) of sub-rule (7) of rule 114H for account aggregation and currency translation. For this purpose, a customer overpayment does not refer to credit balances to the extent of disputed charges but does include credit balances resulting from merchandise returns.

7. any other account that presents a low risk of being used to evade tax, has substantially similar characteristics to any of the accounts described in sub-clauses (i) to (vi), and is defined in under any other Act as an excluded account

Other Definitions to be noted :

Financial assets

Financial institution

Non-reporting financial institution

U.S. Reportable Account" means a financial account maintained by a reporting financial institution and, pursuant to the due diligence procedures prescribed in rule 114H, is identified to be held by one or more specified U.S. persons or by a Non-U.S. entity with one or more controlling persons that is a specified U.S. Person

Controlling person : means the natural persons who exercise control over an entity and includes a beneficial owner as defined in Explanation to sub-rule (1A) of rule 9 of 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.

Explanation 1.- In determining the beneficial owner the procedure specified in the following Circular shall be applied, namely:-

35. DBOD.AML.BC. No.71/14.01.001/2012-13 issued on 18^th January, 2013 by the Reserve Bank of India;

(ii) CIR/MIRSD/2/2013 issued on 24^th January, 2013 by the Securities and Exchange Board of India.

In the case of a trust, such term means the settlor, the trustees, the protector (if any), the beneficiaries or class of beneficiaries, and any other natural person exercising ultimate effective control over the trust, and in the case of a legal arrangement other than a trust, such term means persons in equivalent or similar positions

Related Entity : an entity is a "related entity" of another entity if either entity controls the other entity, or the two entities are under common control.

Explanation.- For the purpose of this clause control includes direct or indirect ownership of more than fifty per cent of the vote and value in an entity.

A citizen of United States of America is a resident of United States of America under the tax laws of United States of America.

Nature of Information to be maintained and reported

Rule 114G : The following information shall be maintained and reported by a reporting financial institution in respect of each reportable account

A) The name, address, taxpayer identification number date and place of birth

B) In the case of any entity :

i) the name and address of the entity, taxpayer identification number assigned to the entity by the jurisdiction of its residence; and

ii) The name, address, date and place of birth of each such controlling person and taxpayer identification number assigned to such controlling person by the jurisdiction of his residence;

This would require us to capture the TAX id of all foreign nationals and not only US persons. This would require a mandating of PAN field for all foreign nationals

C) the account number (or functional equivalent in the absence of an account number);

D) the account balance or value for the specified period as per the specified calculation

E) In the case of any custodial account:

(i) the total gross amount of interest, the total gross amount of dividends, and the total gross amount of other income generated with respect to the assets held in the account, in each case paid or credited to the account (or with respect to the account) during each of the four quarters of the relevant calendar year; and

(ii) the total gross proceeds from the sale or redemption of financial assets paid or credited to the account during each of the four quarters of the relevant calendar year with respect to which the reporting financial institution acted as a custodian, broker, nominee, or otherwise as an agent for the account holder;( for reportable wealth customer However it needs to be checked if merely receiving credits in accounts makes a bank a custodian)

F) In the case of any depository account, the total gross amount of interest paid or credited to the account during each of the four quarters of the relevant calendar year;

G) In the case of any account not described in clauses (E) or (F), the total gross amount paid or credited to the account holder with respect to the account during each of the four quarters of the relevant calendar year with respect to which the reporting financial institution is the obligor or debtor, including the aggregate amount of any redemption payments made to the account holder during each of the four quarters of the relevant calendar year; and(NOT CLEAR)

H) Accounts held and payments made to non-participating financial institutions,

Provided that the information to be reported,-

1. with respect calendar year 2014, is the information of U.S. reportable accounts and that is prescribed in clauses (A), (B), (C) and (D);
2. with respect calendar year 2015, is the information of U.S. reportable accounts and that is prescribed in clauses (A), (B), (C), (D), (F), (G), (H) and sub-clause (i) of clause (E);
3. with respect to calendar year 2016, is the information of all reportable accounts and that is prescribed in clauses (A) to (H),
4. with respect to calendar year 2017 and subsequent years, is the information of all reportable accounts and that is prescribed in clauses (A) to (G).

Provided further that with respect to each U.S. reportable account that is maintained by a reporting financial institution as of June 30, 2014, the taxpayer identification number of any relevant person is not required to be reported if such taxpayer identification number is not in the records of the reporting financial institution.

Definitions & notes

Where the person is a resident of more than one jurisdiction outside India under the tax laws of such jurisdiction the reporting financial institution shall maintain the taxpayer identification number in respect of each such jurisdiction. So a dual citizen ship person both US TIN and Indian PAN have to be captured

Notwithstanding anything contained in sub-rule (1), with respect to each reportable account that is a preexisting account, the taxpayer identification number or date of birth is not required to be reported if such taxpayer identification number or date of birth is not in the records of the reporting financial institution and is not otherwise required to be collected by such reporting financial institution under domestic law:

Provided that the reporting financial institution is required to use reasonable efforts to obtain the taxpayer identification number and date of birth with respect to preexisting accounts by the end of the second calendar year following the year in which such accounts were identified as reportable accounts.

Notwithstanding anything contained in sub-rule (1), the place of birth is not required to be reported unless the Reporting Financial Institution is otherwise required to obtain and report it under domestic law and it is available in the electronically searchable data maintained by the Reporting Financial Institution.

Rule 114 H : Reporting rules – what accounts are to be reported

1) An account is treated as a reportable account from the date it is identified as such. Information with respect to a reportable account must be reported annually in the calendar year following the year to which the information relates.

2) For the purpose of this rule,-

(A) "preexisting account" means a financial account maintained by a reporting financial institution as of,

(i) in case of a U.S. reportable account, 30 June, 2014; and

(ii) in case of other reportable account, 31 December 2015.

B) New account means a accounts opened on or after 1 july 2014( for US reportable account). For other reportable accounts date is 31 dec 2015.

(F) "lower value account" means a preexisting individual account with a balance or value that,-

(i) in case of a U.S. reportable account, exceeds thirty lakh rupees but does not exceed six crore rupees as of 30 June, 2014; and

(ii) in case of other reportable account, does not exceed six crore rupees as of 31 December 2015.

(G) "high value account" means a preexisting individual account with a balance or value that,-

(i) in case of a U.S. reportable account, exceeds six crore rupees as of 30 June, 2014 or 31 December of any subsequent year; and

(ii) in case of other reportable account, exceeds six crore rupees as of 31 December 2015 or 31 December of any subsequent year.

(H) "new entity account" means a new account held by one or more Entities.

3. Method for identifying reportable accounts. This rule lays down guidelines/due diligence for identifying reportable accounts from various categories of accounts

Prexisting individual accounts

New individual accounts

Preexisting entity accounts

Nonparticipating financial institutions among new entity accounts

Banker Times - 04 Dec 2014 - RJ - Monetary Policy highlights

Highlights of the Fifth bi monthly monetary policy statement – RBI

 

 

1.       Monetary and Liquidity Measures

 

Repo rate under the liquidity adjustment facility (LAF)	Unchanged at 8.0 per cent
Cash reserve ratio (CRR) of scheduled banks	Unchanged at 4.0 per cent of net demand and time liabilities (NDTL)
Will continue to provide liquidity through . -          Overnight repos  @ 0.25 per cent of bank wise NDTL -          7 day /14 day term repos upto 0.75 percent of NDTL through auctions	@ LAF repo rate
Reverse repo rate under the LAPF	Unchanged at 7.0 per cent
Marginal standing facility (MSF) rate and the bank Rate	9 per cent

 

               

                Glossary :

 

Liquidity adjustment facility (LAF)

 

Is a monetary policy tool which allows banks to borrow money through repurchase agreements.LAF is used to aid banks in adjusting the day to day mismatches in liquidity. LAF consists of repo and reverse repo operations. Repo or repurchase option is a collaterised lending i.e. banks borrow money from Reserve bank of India to meet short term needs by selling securities to RBI with an agreement to repurchase the same at predetermined rate and date.

The rate charged by RBI for this transaction is called the repo rate. Repo operations therefore inject liquidity into the system. Reverse repo operation is when RBI borrows money from banks by lending securities. The interest rate paid by RBI is in this case is called the reverse repo rate. Reverse repo operation therefore absorbs the liquidity in the system. The collateral used for repo and reverse repo operations are Government of India securities. Oil bonds have been also suggested to be included as collateral for Liquidity adjustment facility.

 

Liquidity adjustment facility has emerged as the principal operating instrument for modulating short term liquidity in the economy. Repo rate has become the key policy rate which signals the monetary policy stance of the economy.

REPO PERIOD

2.18. Repo period could be overnight term, open or flexible. Overnight repos lasts only one day. If the period is fixed and agreed in advance, it is a term repo where either party may call for the repo to be terminated at any time although requiring one or two days' notice. Though there is no restriction on the maximum period for which repos can be undertaken generally term repos are for an average period of one week. In an open repo there is no such fixed maturity period and the interest rate would change from day to day depending on the money market conditions. In such cases the lender agrees to provide money for an indefinite period and the agreement can be terminated on any day. Under flexible repos the lender places funds, but they are withdrawn by the borrower as per his requirements over an agreed period.

MSF & LAF : Difference between liquidity adjustment facility-repo rate and marginal standing facility rate of RBI : Under LAF - Repo rate, Banks can borrow from RBI at the Repo -rate  by pledging government securities over and above the statutory liquidity requirements. However, in case of borrowing from the marginal standing facility, banks can borrow funds up to two percentage of their net demand and time liabilities, at the rates announced by RBI and this can be within the statutory liquidity ratio of 23%. The rate of interest payable by banks is less in case of Repo facility than the borrowing availed under MSF i.e. we can say MSF borrowing is costlier for the banks than the borrowing under Repo Rate.

2.      Assessment of the Global Economy

Favorable indicators

Sharp fall in crude prices       

            Recovery in the United States is broadening on the back of stronger domestic consumption, rising investment and industrial activity.

Unfavorable indicators

Euro area : Recessionary forces continue to weaken industrial production and investment sentiment.

Japan : Growth may be picking up again on the back of stronger exports, helped in part by further quantitative and qualitative easing

China : Disappointing activity and still-low inflation have prompted rate cuts by the People’s Bank of China.

Other major emerging market economies (EMEs) : Downside risks to growth from elevated inflation, low commodity prices, deteriorating labour market conditions and stalling domestic demand

3.      Assessment of the Indian Economy

Domestic activity weakened in Q2 of 2014-15, and activity is likely to be muted in Q3 also because of a moderate kharif harvest.

Mfg Sector : Despite the uptick in September, the growth of industrial production slumped to 1.1 per cent in Q2 with negative momentum in September.The persisting contraction in the production of both capital goods and consumer goods in Q2 reflected weak aggregate domestic demand.However, more recent readings of core sector activity, automobile sales and purchasing managers’ indices suggest improvement in likely activity.Exports have buffered the slowdown in industrial activity in Q2 but, going forward, require support

            Services Sector : Purchasing managers’ survey indicates deceleration in new business. Tourist arrivals and domestic and international cargo movements have shown improvement.

            Investments : While low capacity utilization in some sectors is a dampener, the recent strong improvement in business confidence and in investment intentions should help.

Govt finances: The fiscal outlook should brighten because of the fall in crude prices, but weak tax revenue growth and the slow pace of disinvestment suggest some uncertainty about the likely achievement of fiscal targets.

Retail Inflation : consumer price index (CPI), has decelerated sharply since the fourth bi-monthly statement of September. Protein-rich items such as milk and pulses continue to experience upside pressures, reflecting structural mismatches in supply and demand.

Non Food Non fuel inflation : Softening of international crude prices in October eased price pressures in transport and communication .Upside pressures persist in respect of prices of clothing and bedding, housing and other miscellaneous services, resulting in non-food non-fuel inflation for October remaining flat at its level in the previous month, and above headline inflation.

4.      Policy Stance and Rationale : Headline inflation has been receding steadily and current readings are below the January 2015 target of 8 per cent as well as the January 2016 target of 6 per cent. The inflation reading for November – which will become available by mid-December – is expected to show a further softening. Thereafter, however, the favourable base effect(when the inflation % are calculated using a base year then  if the inflation in that year  is abnormally high then all subsequent calculation will show a falling inflation rate) that is driving down headline inflation will likely dissipate and inflation for December (data release in mid-January) may well rise above current levels.

 

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