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| Overseas corporate bodies (OCBs) derecognised in India as an eligible "class of investor". Cap on interest rate on non-resident external deposits in US dollar reduced to Libor-plus 100 basis points from Libor-plus 250 bps. |
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| October Banks need not obtain central bank's prior approval for insurance business or referral arrangement without any risk participation. Grade III and IV urban co-operative banks (UCBs) banned from declaring dividend. Grade-I UCBs can declare dividend if it does not impair the bank's liquidity, while grade-II will need prior RBI permission. Project/service exporters, being resident in India, permitted to open, hold and maintain foreign currency account with a bank outside or in India. Individual residents allowed to borrow a up to $2,50,000 from close relatives residing outside India, without the RBI's prior permission. Foreign embassy/diplomat/consulate general permitted to purchase/sell immovable property in India, other than agricultural land/plantation property/farm house, subject to certain conditions. |
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| November Banks banned from investing in unrated non-SLR securities and also in non-SLR securities of original maturity of less than one year. Investments in unlisted non-SLR may exceed the 10 per cent limit by additional 10 per cent provided the investment is in securities of SPVs for mortgage-backed securities, and papers issued for infrastructure projects. Foreign banks operating in India permitted to remit, without prior RBI nod, net profits/surplus (net of tax) earned in the normal course of business arising out of their operations, on a quarterly basis to their headquarters. Educational loans up to the Rs 7.50 lakh for studies in India and Rs 15 lakh for studies abroad, reckoned under priority sector advances. Banks allowed to increased limit of dispensation of collateral for loans to SSIs with good track record to Rs 25 lakh from Rs 15 lakh. |
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| December Banks to ensure hedging of foreign currency loans to firms above $10 million. Flexibility to exporters in realisation of export proceeds and write off of overdues, up to 10 per cent of their export proceeds in a calendar year. Roadmap for financial institutions to adopt 90-day norm for recognition of loan impairment. |
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2004
January "Know your customer" guidelines made applicable to non-banking financial companies (NBFCs) to prevent their use for transfer or deposit of funds derived from criminal activity or for financing of terrorism. Margin on advances against shares/financing of IPOs raised to 50 per cent from 40 per cent. Banks advised to maintain a minimum cash margin of 25 per cent within the 50 per cent margin for guarantees issued for capital market operations. |
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| March Remittances by residents freely allowed for health insurance from a company abroad and for commission to agents abroad for sale of residential flats/commercial plots in India up to $25,000 or 5 per cent of inward remittance, whichever is higher. No RBI prior approval for short-term credit to overseas offices of Indian companies. Remittances freely allowed for advertisement on foreign television channels, for royalty up to 5 per cent of local sales and for lump-sum fee not exceeding $2 million. |
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| April Interest rates on NRE dollar deposits capped at Libor rates. End-use of external commercial borrowings not permitted for working capital, general corporate purpose and repayment of existing rupee loans. |
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| May Status quo ante on margins for financing against shares/IPOs restored to 40 per cent from 50 per cent. The minimum cash margin of 25 per cent also reduced to 20 per cent. Banks advised to inform, at least one month in advance, their existing account holders any change in the prescribed minimum balance and the charges that would be levied if the prescribed minimum balance is not maintained. |
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| June Banks to reschedule/restructure debts as on March 31, 2004 of farmers, who have suffered production and income losses due to successive natural calamities. On restructuring, the concerned farmers would be eligible for fresh loans. Banks may waive margin/security requirements for agricultural loans up to Rs 50,000 and in the case of agri-business and agri-clinics for loans up to Rs 5 lakh with immediate effect. If securitised loans represent direct advances to agriculture, banks' investment in securitised loans representing direct advances to agriculture treated as direct lending to agriculture under priority sector. Loans to storage units, including cold storage units, designed to store agricultural produce/products, irrespective of their location, treated as indirect agricultural finance under priority sector. Advances classified as "doubtful for more than three years" on or after April 1, 2004 will need 100 per cent provisioning. |
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| July Draft policy for ownership and governance in private banks released. |
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| September CRR raised by 50 basis points in two stages, effective from fortnights beginning September 18 and October 2, to 5 per cent. Interest rate on CRR balances cut to 3.5 per cent against at the bank rate. As a one-time measure, banks permitted to shift their SLR securities to the HTM category any time, once more, during the current accounting year at the acquisition cost/book value/market value, whichever is the least. Banks need to provide for depreciation, if any, on such transfer. |
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| October General permission granted for conversion of ECB into equity. Import payables, deemed as ECBs, would not be eligible for conversion into equity/preference shares. RBI to make public penalties imposed on and any strictures passed against banks. |
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