External Benchmark Based Lending – Medium Enterprises
In terms of which all new floating rate personal or retail loans (housing, auto, etc.) and floating rate loans to Micro and Small Enterprises (MSEs) extended by banks with effect from October 01, 2019 were linked to external benchmarks.
Subsequent to the introduction of an external benchmark system, the monetary policy transmission has improved in respect of the sectors where new floating rate loans have been linked to the external benchmarks.With a view to further strengthening monetary policy transmission, it has now been decided that all new floating rate loans to the Medium Enterprises extended by banks from April 01, 2020 shall be linked to the external benchmarks.
Short Term Crop Loans eligible for Interest Subvention Scheme (ISS) and Prompt Repayment Incentive (PRI) through KCC
Ministry of Agriculture & Farmers Welfare vide their Office Memorandum, No. F. 1-20/2018-Credit-I, dated January 23, 2020 has advised that Short Term Crop Loans eligible for Interest Subvention Scheme (ISS) and Prompt Repayment Incentive (PRI) should be extended only through KCC thus making KCC a prerequisite for claiming Interest Subvention (IS) and Prompt Repayment Incentive (PRI) by farmers w.e.f. April 1, 2020.
In view of this, banks are advised to ensure that all Short Term Crop Loans eligible for Interest Subvention (IS) and Prompt Repayment Incentive (PRI) benefit are extended only through KCC w.e.f. April 1, 2020. The existing Short Term Crop Loans which are not extended through KCC shall be converted to KCC loans by March 31, 2020.Accordingly, reimbursement of interest subvention for Short Term Crop Loans through non-KCC accounts shall not be considered beyond March 31, 2020.
Investment in Certificates of Deposit (CDs) – Reporting in Form ‘A’ Return
Investment in Certificates of Deposit (CDs)” whereby banks were advised about the reporting of transactions related to issuance and investment in Certificates of Deposit (CDs) in Form ‘A’ Return under Section 42 of the Reserve Bank of India Act, 1934.
On a review, it has been decided that the banks should follow the following practice while reporting their transactions in CDs in Form ’A’ Return.
A) Based on the statement issued by depositories, if the CDs issued are held by banks on reporting Friday, the issuer bank should report such CDs under item I of the Form ‘A’ Return i.e., “Liabilities to the Banking System in India”. The CDs held by non-bank entities should be reported as “Liabilities to Others in India”, as hitherto. If the bank is not in a position to segregate the holders of CDs issued between bank and non-bank entities, then the total CDs issued should be reported under item II of the Form ‘A’ Return i.e., “Liabilities to Others in India”. The reporting of CDs should be done as per the issue price of the CDs.B) Investments in CDs issued by other banks should be reported under item III of the Form ‘A’ Return i.e., “Assets with the Banking System in India” and these assets could be netted off against “Liabilities to the Banking System in India”.
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