Non Performing Assets(NPA)

Non-Performing Assets 

If the customers do not repay principal amount and/or interest for a period of 90 days then such loans become non-performing assets (NPA). 

All those assets which generate periodical income are called as Performing Assets (PA). While all those assets which do not generate periodical income are called as Non-Performing Assets (NPA).

An NPA is a loan or advance where:

1. Term Loan – interest and/or installment of principal remains overdue for more than 90 days.

2. Overdraft / Cash credit - account is out of order.

• Outstanding balance remains continuously in excess of the sanctioned limit / drawing power.
• Outstanding balance is within the sanctioned limit / drawing power, but there are no credits continuously for 90 days as on the date of balance sheet, or the credits are not enough to cover the interest debited during the same period.

3. Bills purchased and discounted – bill remains overdue for more than 90 days.

4. Short duration crops (crop season is upto a year) – installment of principal or the interest thereon remains overdue for two crop seasons.

5. Long duration crops - installment of principal or the interest thereon remains overdue for one crop season.

Types of NPA

NPA have been divided or classified into following four types:-

1. Standard Assets : A standard asset is a performing asset. An assets which is generating regular income to the bank.
2. Sub-Standard Assets : All those assets (loans and advances) which are considered as non-performing for a period of more than 90 days but less than 12 months are called as Sub-Standard assets. ( Special Mention Account : It includes those assets (loans and advances) which are due for a period of 90 days. "Till 90 days = Special Mention Account and Till 12 Months it becomes Sub-Standard Assets")
3. Doubtful Assets : All those assets which are considered as non-performing for period of more than 12 months are called as Doubtful Assets.
4. Loss Assets : All those assets which cannot be recovered are called as Loss Assets.

Example of NPA 

We suppose that a party was disbursed a loan on January 1, 2010. Its due date is June 1, 2010. But the party does not make a payment. So It will be an Standard Asset from January 1, 2010 till June 1, 2010 (Due Date) It will be a Special Mention Account From June 2, 2010 till August 29, 2010 (90 days) It will be Sub-standard from August 30, 2010 till August 29, 2011 It will be doubtful  from August 30, 2011 till August 29, 2012 It may remain doubtful Asset for a period of 3 years, beginning from 12 months of being an NPA, but once the auditors identify it as a loss, it will be assigned a loss asset; however, the period may be anything above 3 years.

Causes of NPA

NPA arises due to a number of factors or causes like:-

1. Speculation : Investing in high risk assets to earn high income.
2. Default : Willful default by the borrowers.
3. Fraudulent practices : Fraudulent Practices like advancing loans to ineligible persons, advances without security or references, etc.
4. Diversion of funds : Most of the funds are diverted for unnecessary expansion and diversion of business.
5. Internal reasons : Many internal reasons like inefficient management, inappropriate technology, labour problems, marketing failure, etc. resulting in poor performance of the companies.
6. External reasons : External reasons like a recession in the economy, infrastructural problems, price rise, delay in release of sanctioned limits by banks, delays in settlements of payments by government, natural calamities, etc.

SARFAESI Act 

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, allow banks and financial institutions to auction properties (residential and commercial) when borrowers fail to repay their loans. It enables banks to reduce their non-performing assets (NPAs) by adopting measures for recovery or reconstruction. The Act provides three alternative methods for recovery of non-performing assets, 

1. Securitisation - This is a process where financial assets (dues from a borrower) are converted into marketable securities (security receipts) that can be sold to investors.
2. Asset Re-construction - The Act uses the term ‘asset re-construction’ for the acquisition of any right or interest, of any bank or financial institution, in any financial assistance, by any securitization company or Re-construction Company, for the purpose of realization of such financial assistance.
3. Enforcement of Security Interest - In the normal course, court intervention is required for sale of property and realization of money due from a defaulter. SARFAESI Act has made provisions for banks and financial institutions to take possession of securities given for financial assistance and sell the same in the event of default.

Here is how this process is takes place:

1. A borrower makes any default in repayment and his account is classified as NPA.

2. The secured creditor has to issue notice to the borrower giving him 60 days to pay his dues.

3. If the dues are not paid, the bank can take possession of the assets and can also give it on lease or sell it.

Reselling of NPAs:

The NPAs can be resold as well. The purchasers are called Asset Reconstruction Companies such as Asset Reconstruction Company (India) (ARCIL).

1. A bank can sell NPA from its books to asset reconstruction companies such only if it has remained NPA for at least two years.

2. These sales are only on Cash Basis and the purchasing bank/ company would have to keep the accounts for at least 15 months before it sells to other bank.

3. Once the NPA is purchased, it is classified as Standard for a period of 90 days.

Debt Recovery Tribunal (DRT)

The Debts Recovery Tribunals have been established by the Government of India under an Act of Parliament (Act 51 of 1993) for expeditious adjudication and recovery of debts due to banks and financial institutions.

Debts Recovery Tribunal is the appellate authority for appeals filed against the proceedings initiated by secured creditors under Sub-Section (4) of Section 13 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002.

Appellate Tribunal

Any person aggrieved by an order of the DRT can appeal to the Appellate Tribunal within 30 days of date of receipt of the order. The borrower has to deposit 50% of the amount claimed by the secured creditor, before filing an appeal. The Appellate Tribunal can reduce the deposit requirement to 25% of the amount claimed, after recording the reasons for such a concession.

Simple Notes on NPA for SBI PO | Banking

Posted By Unknown

Banking Awareness

ATM (Automatic Teller Machines):

Machines that dispense cash and give balance details and mini statements to the customers through Computer network

Bancassurance:

Distribution of insurance products and  policies of insurance companies by banks as agents through their branches.

Bouncing of a cheque:

When an account has insufficient funds, cheque is not payable and is thus returned by the bank with a reason  “funds insufficient”.

Bank Rate:

Rate of interest charged by the central bank to the commercial banks on the advances and the loans they extend.

Call Money:

Loan made for a very short period of only a few days.

Cheque:

Written by an individual to withdraw or transfer amount between two accounts of the same or different bank and the money is withdrawn from the account.

Core Banking Solutions (CBS):

All the branches of the bank are connected together so that the customer can access his/her funds or transactions from any branch.

CRR (Cash Reserve Ratio):

The amount of funds that a bank keeps with RBI. If the percentage of CRR increases then the amount with the bank comes down.

Current Account:

Account opened generally for business purposes with no restrictions on withdrawals and no interest paid

Debit Card:

Card issued by the bank so the customers can withdraw their money from their account electronically.

E-Banking:

Banking in which we can conduct financial transactions electronically. NEFT, RTGS, Online Banking etc come under this category.

Fiscal Deficit:

Amount of Funds borrowed by the government to meet the expenditures.

Inflation:

Increase in the quantity of money in circulation without any corresponding increase in goods thus leading to an abnormal rise in the price level

Liquidity:

Ability of converting an investment quickly into cash with no loss in value.

Market Capitalization:

The product of the share price and number of the company’s outstanding ordinary shares.

Mortgage:

Security which one offers for taking an advance or loan from someone.

Mutual Fund:

Investment scheme that pools money from various investors in order to purchase securities.

Monetary Policy:

Central Government policy with respect to the quantity of money in the economy, the rate of interest and the exchange rate

Non-performing Assets (NPAs):

NPA or non-performing loans are loans given by a bank on which repayments or interest payments are not being made on time

Permanent Account Number (PAN):

PAN is a number issued by the Income Tax Department to their tax payers.

Plastic Money:

Name given to Credit cards, Debit cards, and Other Such Cards issued by banks

Point of Sale (PoS):

PoS refers to a location at which a payment of a card transaction occurs.

Prime Lending Rate (PLR):

Rate of interest at which a bank gives loan to its most reliable customer (customer with ‘zero risk’ )

Pass Book:

Book given to customers, where all the bank transactions are recorded.

Repo Rate:

Commercial banks borrow funds by the RBI if there is any shortage in the form of rupees. If this rate increases it becomes expensive to borrow money from RBI and vice versa.

Reverse Repo Rate:

Exact opposite of repo rate. It is the rate at which RBI borrows money from banks when it feels there is too much money floating in the banking system

SLR (Statutory Liquidity Ratio):

Amount that a commercial bank should have before giving credits to its customers which should be either in the form of gold, money or bonds.

Teller:

Staff member of the bank who cashes cheques, accepts deposits and perform different banking services for the customers.

Virtual Banking:

Internet banking is sometimes known as virtual banking (as it has no bricks and boundaries )

White labeled ATM:

An ATM or cash machine that does not prominently display a bank’s name or logo. A fee will be charged for cash withdrawals in these ATMs and they don’t accept deposits

Wholesale Banking:

Banking that mainly focuses on the financial needs of the institutional clients and the industry.

Zero Coupon Bond:

Bond that is sold at good discount as it has no coupon.
Friends this is it regarding Weekly Banking Awareness capsule. We will update Weekly Banking Awareness Capsule like this every week.If you have any suggestion or query, kindly post it in the comments section.

The first among the banks:

• First Bank in India – Bank of Hindustan
• First Governor of RBI – Osborne Smith
• First Indian governor of RBI – C D Deshmuk
• First Bank to Introduce ATM in India – HSBC
• First Bank to introduce Saving Bank Account in India – Presidency bank in 1830
• First Bank to Introduce Cheque system in India – Bengal Bank 1784
• First Bank to introduce Internet Banking – ICICI BANK
• First Bank to introduce Mutual Fund – State Bank of India
• First Bank to introduce Credit Card in India – Central Bank of India
• First Foreign Bank in India – Comptoire d’Escompte de Paris of France in 1860
•  First Joint Stock Bank of India – Allahabad Bank
•  First Indian bank to open branch outside India in London in 1946 – Bank of India
• First Indian Bank started with Indian capital – Punjab National Bank
• First Regional Rural Bank name Prathama Grameen Bank was started by – Syndicate Bank
• First Universal Bank in India­ – ICICI Bank
• First bank in India listed in New York Stock Exchange (NYSE) – ICICI Bank
• First Bank in India to launch Talking ATMs for differently ­able person – Union Bank of India
• First Bank in India to launch its own Payment Aggregators – State Bank of India. (SBIePay)
• Country’s first all woman bank – Bhartiya Mahila Bank
• First India bank Got ISO – Canara Bank 

Banking Regulation Act,1949

• As per Section 5(b) Banking is defined.
• As per Section 8, Trading of goods by a Banking Company is restricted.
• As per Section 17 every banking company incorporated in India is required to transfer each year to Reserve Fund a sum equivalent to not less than 20% of profit before declaration of dividend
• As per Section 24, SLR is to be maintained.
• As per Section 45(Z) Nomination facility has been granted for bank deposits.
• As per Section 35A ,RBI has prohibited stapling of currency notes.

Reserve Bank of India Act,1934 Scheduled Bank-

• As per Section 2(e) a Scheduled Bank is one whose name is included in the Second Schedule to RBI Act, 1934.
• Section 17(4) enables RBI to grant loans and advances to Scheduled Banks
• Section 20 empowers RBI to act as Banker to the Govt.
• Section 22 gives right to issue Bank Notes.
• As per Section 29, Bank note shall be exempted from stamp duty under Indian Stamp Act.
• Section 31 prohibits issue of notes payable to bearer by any person in India other than RBI.
• As per Section 38 RBI is the sole authority to issue currency in the country except for one rupee note or coins( which is issued by Central Govt.)
• As per Section 42(1) all scheduled banks are required to maintain CRR in the form of cash.
• As per Section 45B RBI collects credit information from all banking companies and furnish consolidated credit information to any banking company.

National Bank for Agriculture and Rural Development Act,1981

• As per Section 3 NABARD was established.
• As per Section 4, capital shall be Rs.100 crore which may be increased to Rs.5000 crore by Central Govt. in consultation with RBI.
• Provides refinance facilities for credit to agriculture, small and village and cottage industries and Co-operative Banks.

Banking Ombudsman Scheme,2006

• As per Section 4, RBI appoints one or more of its officers in the rank of Chief General Manager or General Manager to be known as Banking Ombudsman.
• If a complaint on deficiencies in banking services is not responded by the concerned Bank within one month or the reply has not satisfied the complainant, the Banking Ombudsman whose jurisdiction covers the Bank Branch may be approached.
• The complaint should be made before expiry of one year after the cause of action has arisen. Complaint can be filed simply by writing on a plain paper.
• Complaint can be filed by authorized representative (other than an advocate) of the complainant.
• No fees are charged for resolving a complaint.
• Complaint may be settled by agreement within a period of one month.
• In case it is not settled by agreement, Banking Ombudsman may pass an award by giving reasonable opportunity to both sides.
• The award is on compensation, not more than actual loss suffered on account of the act of omission or commission by the bank or Rs.10 lac whichever is lower.
• In case Award is not acceptable, the party not accepting the award may approach the appellate authority i.e. Deputy Governor of RBI within 30 days from the date of receipt of the award. The complainant has also the recourse before Court.

Prevention of Money Laundering Act, 2002

• Records of cash transactions above Rs.10 lac or its equivalent in foreign currency have to be maintained. Records of series of cash transactions connected to each other of below Rs 10 lac or its equivalent in foreign currency within a month and the aggregate value of such transactions exceeds Rs.10 lac have to be maintained.
• Records of Cash transactions in forged or counterfeit currency notes or bank notes and where forgery of any valuable security has taken place have to be maintained.
• Records of Suspicious transactions in cash or otherwise have to be maintained. Records of transactions, both domestic and international, between the bank and the client need be preserved for at least 10 years from the date of cessation of transaction.
• Cash Transactions Report (CTR) for transactions of above Rs.10 lac in a month have to be submitted to Financial Intelligence Unit-India (FIU-IND) within 15 days of close of the month.
• Suspicious Transactions Report(STR) of a transaction ,in cash or non-cash, or a series of transactions integrally connected have to be reported within 7 days of arriving at the conclusion.

Indian Stamp Act,1989

• As per section 17 of Indian Stamp Act,1989 all instruments/documents chargeable with duty and executed by any person in India shall be stamped before or at the time of execution.
• The Stamp Act extends to whole of India except J&K. Stamp duty on Demand Promissory Note, Bill of Exchange payable otherwise than on demand, money receipts, proxies and transfer of shares comes under Central List.
• Powers to reduce or remit the duty on these instruments are vested with the Central Govt. For other instruments stamp duty rates are prescribed by the respective State Govts.
• In case of Usance Bills, arising out of bonafide commercial or trade transaction, of not more than 3months usance after date or sight drawn on or made by or in favour of a Commercial Bank/Co-operative Bank stamp duty is remitted.
• Documents under Central list are not admissible in evidence if unstamped or understamped and are nullified.

Stamps are of three types:

• Postage stamps- These are covered under India Post Office Act for postal charges.
• Judicial stamps- These are used in connection with filing suit, court fees and other judicial matters as per provisions of Court Fees Act.
• Non-judicial stamps- These are used as per provisions of Stamp Act for commercial transactions.

Non-judicial stamps are of three kinds:

• Adhesive stamps- Adhesive stamps are those which are affixed by adhesive. There are many varieties of adhesive stamps such as revenue stamp, foreign bill stamp, share transfer stamp, insurance stamp, notary stamp, attorney stamp, consular stamp. These stamps are used for transaction.
• Embossed or Impressed stamps- Impressed stamps are Hundi papers( on which Hundis are to be drawn) or Non-judicial stamp papers( on which stamps are already printed). These are mostly used for execution of agreement such as hypothecation, pledge & lien agreements, letter of continuity, letter of guarantees, mortgage deed etc.
• Special adhesive stamps- These stamps are substitutes for non-judicial stamp papers. It is convenient to use them in printed agreements. Special adhesive stamps are to be affixed and cancelled by proper officer notified under the stamp rules.

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI)

In the event of default by a borrower, the bank have the powers to

1. Take possession, sell or lease the secured assets
2. Take over the management of the business of the borrower
3. Appoint a Manager( not below Scale-IV Officers)
4. Recover money from the debtor of the borrower Loans outstanding of Rs.1 lac & above are covered by the Act. Agri. Loans and where 80% recovery has been done are exempted.

• U/s. 13(2) of the Act, secured creditor has to serve 60 days’ notice before taking any of the measures under Section 13(4) of the Act.
• After service of notice if the borrower makes a representation or raises any objection, the secured creditor shall consider such representation or objection and if the same is acceptable or tenable, the reasons of non-acceptance have to be communicated within one week of receipt.

Central Registry under SARFAESI Act,2002 ( CERSAI)

• Central Registry of Securitization, Asset Reconstruction and Security Interest of India(CERSAI in short), a Government Company, licensed under Section 25 of the Companies Act, 1956 has been incorporated CERSAI has become operational from 31.3.2011.

Section 20 of the SARFAESI Act,2002provides for setting up of a Central Registry for the purpose of registration of transactions of securitisation, asset reconstruction and security interest under the SARFAESI Act.
It contains the following Four Forms:

• FORM-I – To be used for filing Particulars of Creation or Modification of Security Interest in favour of Secured Creditors Fee:For a loan upto Rs.5 lac : Rs. 250/- for both creation and modification of security interest For a loan above Rs. 5.00 lakh: Rs. 500/- for creation and for any subsequent modification of security interest in favour of a secured creditor.
• FORM-II – To be used for filing Satisfaction of any existing Security Interest Fee – Rs. 250/-
• FORM-III – To be used for filing Particulars of Securitisation or Reconstruction of Financial Assets Fee – Rs. 1000/- FORM-IV – To be used for filing Particulars of Satisfaction of Securitisation or Reconstruction transactions Fee – Rs. 250/- The particulars of every transaction referred to above shall have to be filed with Central Registrar within a period of thirty days from the date of such transaction. In case of delay in filing, the Central Registrar may on an application being made stating the reasons for delay not exceeding thirty days, allow filing of particulars on payment of additional fees, as specified in the SARFAESI (Central Registry) Rules.-

 

Basal Committee:

• The Basel Committee on Banking Supervision provides a forum for regular cooperation on banking supervisory matters.
• Its objective is to enhance understanding of key supervisory issues and improve the quality of banking supervision worldwide.
• It seeks to do so by exchanging information on national supervisory issues, approaches and techniques, with a view to promoting common understanding.
• The Committee‟s Secretariat is located at the Bank for International Settlements (BIS) in Basel, Switzerland.

NEED FOR BASEL NORMS

• The first accord by the name Basel Accord I was established in 1988 and was implemented by 1992.
• It was the very first attempt to introduce the concept of minimum standards of capital adequacy.
• Then the second accord by the name Basel Accord II was established in 1999 with a final directive in 2003 for implementation by 2006 as Basel II Norms.
• Unfortunately, India could not fully implement this but, is now gearing up under the guidance from the Reserve Bank of India to implement it from 1 April, 2009.
• Basel II Norms have been introduced to overcome the drawbacks of Basel I Accord.
• For Indian Banks, its the need of the hour to buckle-up and practice banking business at par with global standards and make the banking system in India more reliable, transparent and safe.
• These Norms are necessary since India is and will witness increased capital flows from foreign countries and there is increasing cross-border economic & financial transactions.

FEATURES OF BASEL II NORMS

• Basel II Norms are considered as the reformed & refined form of Basel I Accord. The Basel II Norms primarily stress on 3 factors, viz. Capital Adequacy, Supervisory Review and Market discipline.
• The Basel Committee calls these factors as the Three Pillars to manage risks.

Pillar I: Capital Adequacy Requirements

• Under the Basel II Norms, banks should maintain a minimum capital adequacy requirement of 8% of risk assets.
• For India, the Reserve Bank of India has mandated maintaining of 9% minimum capital
  adequacy requirement. This requirement is popularly called as Capital Adequacy Ratio (CAR) or Capital to Risk Weighted Assets Ratio (CRAR).

Pillar II: Supervisory Review

• Banks majorly encounter with 3 Risks, viz. Credit, Operational & Market Risks.
• Basel II Norms under this Pillar wants to ensure that not only banks have adequate capital to support all the risks, but also to encourage them to develop and use better risk management techniques in monitoring and managing their risks.

The process has four key principles:

1. Banks should have a process for assessing their overall capital adequacy in relation to their risk profile and a strategy for monitoring their capital levels.
2. Supervisors should review and evaluate bank‟s internal capital adequacy assessment and
   strategies, as well as their ability to monitor and ensure their compliance with regulatory capital ratios.
3. Supervisors should expect banks to operate above the minimum regulatory capital ratios and should have the ability to require banks to hold capital in excess of the minimum.
4. Supervisors should seek to intervene at an early stage to prevent capital from falling below minimum level and should require rapid remedial action if capital is not mentioned or restored.

Pillar III: Market Discipline

• Market discipline imposes banks to conduct their banking business in a safe, sound and effective manner.
• Mandatory disclosure requirements on capital, risk exposure (semiannually or more
  frequently, if appropriate) are required to be made so that market participants can assess a bank‟s capital adequacy.
• Qualitative disclosures such as risk management objectives and policies, definitions etc. may be also published.

BASEL III

• The Reserve Bank released, guidelines outlining proposed implementation of Basel III capital regulation in India.
• These guidelines are in response to the comprehensive reform package entitled “Basel III: A global regulatory framework for more resilient banks and banking systems” of the Basel Committee on Banking Supervision (BCBS) issued in December 2010.

The major highlights of the draft guidelines are:

Minimum Capital Requirements:

• Common Equity Tier 1 (CET1) capital must be at least 5.5% of risk-weighted assets (RWAs).
• Tier 1 capital must be at least 7% of RWAs.
• Total capital must be at least 9% of RWAs.

Capital Conservation Buffer:

• The capital conservation buffer in the form of Common Equity of 2.5% of RWAs. A such minimum
• Capital Adequacy ratio for banks will be 11.5% after full application of the capital conservation buffer by 31 March 2018.
• Capital conservation buffer requirement is proposed to be implemented between March 31, 2014 and March 31, 2018.

Transitional Arrangements:

•  It is proposed that the implementation period of minimum capital requirements and deductions from Common Equity will begin from January 1, 2013 and be fully implemented as on March 31, 2018.
• The implementation schedule indicated above will be finalized taking into account the feedback received on these guidelines.
• Instruments which no longer qualify as regulatory capital instruments will be phased-out during the period beginning from January 1, 2013 to March 31, 2022.

Enhancing Risk Coverage

• For OTC derivatives, in addition to the capital charge for counterparty default risk under Current Exposure Method, banks will be required to compute an additional credit value adjustments (CVA) risk capital charge.

Leverage Ratio:

• The parallel run for the leverage ratio will be from January 1, 2013 to January 1, 2018, during which banks would be expected to strive to operate at a minimum Tier 1 leverage ratio of 5%.
• The leverage ratio requirement will be finalized taking into account the final proposal of the Basel Committee.

Banking Awareness Capsule for SBI PO

Posted By Unknown

Big Bank Theory

 Regulatory Bodies of the Financial Sector

Banking Awareness is a crucial part of many bank exams. To help you all prepare for this topic better, we have started our series, 'Big Bank Theory'. 
Keeping in mind the banking sector related questions asked in the exams, today we are going to discuss about the Financial Regulatory bodies in our country.
First lets understand what exactly is a Regulatory body. As per definition, a regulatory body is an organisation that supervises a particular industry or business activity. Now another major question that arises is Why financial regulators are required? The objectives of these financial regulators are multifold.

• They help maintain the confidence of the customers in the financial system.
• They help in maintaining the stability of the financial system of the country.
• They help safeguard the interests of the customers.
• They help regulate the foreign participation in the financial markets.

The major financial regulatory bodies of India are -

1. Reserve bank of India (RBI) -

Headquarters - Mumbai
Governor - Mr. Urjit Patel

RBI, or if we may say, ‘the bank of all banks’ is the central banking organisation of the country.It was moulded as an organisation on 1 April 1935 during the British Rule in accordance with the provisions of Reserve Bank of India Act, 134. RBI was nationalised on 1 January 1949. RBI performs following functions -

• It regulates the functioning of scheduled commercial banks of the country.
• The bank issues and exchanges currency notes and coins and destroys the same when they are not fit for circulation.
• It also acts as the banker to the Government of India.
• It also manages the foreign market in the country.
• Following are the fully owned subsidiaries of RBI -
  (a) Deposit Insurance and Credit Guarantee Corporation of India(DICGC)
  (b) Bharatiya Reserve Bank Note Mudran Private Limited(BRBNMPL)
  (c) National Housing Bank(NHB)

2. National Bank for Agriculture and Rural Development (NABARD) -

Headquarters - Mumbai
Chairman - Dr. Harsh Kumar Bhanwala

NABARD is the apex development bank in India. It was established in 1982 on the recommendation of Dr. Shiv Raman Committee. It’s  functions include -

• It works on matters concerning policy, planning and operations in the field of credit for agriculture and other economic activities in rural areas in India.
• NABARD is the most important institution in the country which looks after the development of the cottage industry, small industry and village industry, and other rural industries.
• NABARD also reaches out to allied economies and supports and promotes integrated development.
• It regulates the institutions which provide financial help to the rural economy.

3. Securities and Exchange Board of India -

Headquarters - Mumbai
Chairman - Mr. Ajay Tyagi

It was established in the year 1988 and given statutory powers on 12 April 1992 through the SEBI Act, 1992. It’s functions include -

• Protection of  the interests of investors in securities.
• Promoting the development and regulation of the securities market
• Regulating the activities of the Stock Exchange.
• SEBI helps regulate the intermediaries such as merchant bankers, brokers, underwriters, etc. by forming a code of conduct to regulate them.

4. Insurance Regulatory and Development Authority of India (IRDA) -

Headquarters - Hyderabad
Chairman - Mr. T. S. Vijayan

IRDA is the apex statutory body responsible for the regulation and promotion of the insurance and Re- insurance industries in India. It was constituted by the Insurance Regulatory and Development Authority Act, 1999, duly passed by the government of India. The FDI limit in insurance sector was raised to 100% in June 2016. It’s functions include -

• It is responsible for issuing, renewal, modification, withdrawal, suspension or cancellation of registrations of the insurance institutions.
• It aims at protecting the interest and rights of the policy holders.
• It is also responsible for ensuring speedy settlement of genuine claims and to prevent frauds and malpractices.

5. Pension Fund Regulatory and Development Authority(PFRDA) -

Headquarters - New Delhi
Chairman - Hemant Contractor

On 23rd August, 2003, Interim Pension Fund Regulatory & Development Authority (PFRDA) was established through a resolution by the Government of India to promote, develop and regulate pension sector in India. The Authority shall consist of a Chairperson and should not have more than five members, of whom at least three should be whole-time members, to be appointed by the Central Government. Its key functions are -

• PFRDA is authorized by Ministry of Finance, Department of Financial Services
• To be a model Regulator for promotion and development of an organized pension system to serve the old age income needs of people on a sustainable basis. 
• PFRDA is responsible for appointment of various intermediate agencies such as Central Record Keeping Agency (CRA), Pension Fund Managers, Custodian, NPS Trustee Bank, etc. 

 Banking Ombudsman 

Banking Ombudsman Scheme came into picture in order to resolve the complaints of bank customers related to certain services rendered by the banks.  It was introduced in India for the first time in 1995  under Section 35 A of the Banking Regulation Act, 1949 by RBI and underwent a revision in 2002. Banking Ombudsman Scheme became operational in the country on 1st January 2006, and also replaced the previously operational Scheme of 2002.  Banking Ombudsman resolved around 36000 complaints in the period of 2002 to 2006.At present, Banking Ombudsman have 17 regional offices in the country. The latest regional office was inaugurated in Dehradun in December 2016.

An important question that arises is, Who exactly is a Banking Ombudsman?

Banking Ombudsman is basically an official appointed by the RBI, who is responsible for redressal of the complaints of the customers in case of issues with certain banking services.

Now, let us have a look at the times when a customer can lodge complaint under the Banking Ombudsman Scheme.

In case of deficiencies in the banking services, the customer may lodge complaint under the following circumstances -

Non Acceptance of small denomination notes or coins and/or charging of commission for the same, without sufficient cause.

Non payment or delay in the payment of the cheques, bills, drafts, inward remittances etc.

Failure or Delay in issue of drafts, pay orders, banker’s cheque etc.

Non Adherence of the prescribed work hours

Failure or delay in providing any banking service (other than loans and advances), promised in writing by a bank or its direct selling agents.

Delay or non - credit of proceeds to the party accounts, non - payment of deposits and non - observance of the RBI directives

Complaints related to remittances from abroad, deposits and other bank related matters from the Non - Resident Indians having accounts in India

Refusal to open bank accounts, without sufficient cause/ reason

Levying extra/ unnecessary charges without prior information

Non - adherence to the ATM/ Debit/ Credit Card operations as instructed by RBI

Non - disbursement or delay in disbursement of pension by the bank

Refusal or delay in acceptance of payment towards taxes as required by RBI or the Government

Refusal or Delay in issuing, or failure or delay in servicing or redemption of Government securities.

Forced closure of Deposit Accounts without prior notice or sufficient reason

Refusal or Delay in Closure of accounts

Non adherence to fair practice codes or provisions of the code of bank’s commitment to customers as issued by Banking Codes and Standards Board of India (BCSBI)

Non observance of RBI Guidelines on engagement of recovery agents by Banks.

Any matter related to violation  of the directives issued by RBI for banking and other services.

In cases pertaining to Loans and Advances, a customer can also lodge complaint on the following grounds of deficiency in service -

Non Observance of interest rates as per RBI directives

Delay in sanction, disbursement or non observance of prescribed time schedule for disposal of loan applications

Non acceptance of loan applications without producing valid reasons.

Non adherence to provisions of fair practice codes for lenders as per Code of Bank’s commitment to Customers

Non observance of any direction/ instruction of RBI for this segment

Highlights of Banking Ombudsman Scheme -

The Appellate authority of Banking Ombudsman is vested with the Deputy Governor of the Reserve Bank of India.  
The complaint of the customer may be filed by his/ her authorized representative as well.
There is a limit on the compensation that is offered by the bank. The amount to be paid by the bank as compensation for any loss suffered by the complainant is restricted to the amount arising directly out of the act or Rs 10 lakhs, whichever is lower.
The customer may also be awarded a compensation of amount not exceeding Rs. 1 lakh to the complainant, only in case of complaints related to credit card operations for mental agony or harassment.
In case the customer is not satisfied with the decision passed by the Banking Ombudsman, he/she can approach the appellate authority against the Banking Ombudsman's decision. Such an appeal has to be made within 30 days of the date of receipt of the award.
Banking Ombudsman is appointed for a  period of 3 years.
The Banking Ombudsman Scheme covers all Scheduled Commercial Banks, Regional Rural Banks as well as Scheduled Primary Co-operative Banks.

Micro, Small and Medium Enterprises

Micro, Small and Medium Enterprises have been defined under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, in terms of the investment, which varies for the Manufacturing and the Service Sector.
Let us now have a look at the classification of the Micro, Small and Medium Enterprises, in terms of investment.

(a) For the enterprises that are engaged in the Manufacture or Production, Processing or Preservation of goods, classification based on investment in Plant and Machinery may be made as-

Manufacturing Enterprise	Investment in Plant and Machinery
Micro enterprise	Investment does not exceed Rs. 25 lakh
Small enterprise	investment is more than Rs. 25 lakh but does not exceed Rs. 5 crore
Medium enterprise	Investment is more than Rs.5 crore but does not exceed Rs.10 crore.

In these enterprises, the investment in plant and machinery is the original cost excluding land and building and the items, as specified by the Ministry of Small Scale Industries.

(b)  For the enterprises, that are engaged in providing or rendering of Services, classification of the enterprises based on investment in Equipment is done as -

Service Sector Enterprise	Investment in Equipment
Micro enterprise	Investment does not exceed Rs. 10 lakh
Small enterprise	investment is more than Rs.10 lakh but does not exceed Rs. 2 crore
Medium enterprise	Investment is more than Rs. 2 crore but does not exceed Rs. 5 crore

Highlights of MSMED Act -

• Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 was enacted on June 16, 2006.
• Micro, Small and Medium enterprises Development Act, 2006 aimed to support economic recovery and sustained growth by encouraging a more diversified and efficient industrial structure. To achieve this objective, it is focused on these main areas, these are -
  (i) strengthening competition by establishing an appropriate legal and regulatory framework and removing barriers to competition and trade.
  (ii) facilitating investment and trade by strengthening the framework governing the policy, credit facilities, grants, administration and utilisation of funds, development of skill in the employees, management and entrepreneurs, provisioning for marketing assistance or infrastructure facilities and cluster development of such enterprises with a view to strengthening backward and forward linkages
  (iii) developing a SME policy, regulatory and financing framework.
• The Micro, Small and Medium Enterprises Development Act, 2006 has empowered the Central Government to establish a National Board for MSMEs with its head office at Delhi.
• Accordingly, the National Board for Micro, Small & Medium Enterprises (NBMSME) was established for the first time on 15th May 2007. It consisted of 47 members, including Chairman, Vice- Chairman and Member Secretary.
• The Minister in charge of Ministry of MSME is ex-officio Chairman of the National Board of MSME.
• Bank’s lending to the Micro and Small enterprises engaged in the manufacture or production of goods specified in the first schedule to the Industries (Development and regulation) Act, 1951 and notified by the Government from time to time is reckoned for priority sector advances.
• Bank loans up to Rs.5 crore per borrower / unit to Micro and Small Enterprises engaged in providing or rendering of services and defined in terms of investment in equipment under MSMED Act, 2006 are eligible to be considered for priority sector advances. Lending to Medium enterprises is not eligible to be included for the purpose of computation of priority sector lending.
• Banks have a target of 7.5 percent of ANBC (Adjusted Net Bank Credit) or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher to be invested in micro enterprises for priority sector lending. This is to be achieved in a phased manner i.e. 7 per cent by March 2016 and 7.5 per cent by March 2017.
• The sub-target for Micro Enterprises for foreign banks with 20 branches and above would be made applicable post 2018 after a review in 2017.

 

Important Acts of Banking Sector

Here is a list of some of the acts that are relevant for the Banking Sector -

Societies Registration Act. 1860

Negotiable Instrument act, 1881

Co-operative Societies Act, 1912

Provident Funds Act. 1925

Reserve Bank of India Act, 1934

The Industrial Finance Corporation of India Act–1948

The Banking Companies (Legal Practitioner Clients’ Accounts) Act–1949

The Industrial Disputes (Banking and Insurance Companies) Act–1949

The Banking Regulation(Companies) Rules–1949

The Banking Regulation Act–1949

The State Financial Corporations Act–1951

The State Bank of India Act–1955

The State Bank of India (Subsidiary Banks) Act-1959

The Subsidiary Banks General Regulation–1959

The Deposit Insurance and Credit Guarantee Corporation Act–1961

Limitation Act, 1963

Banking Companies (Acquisition and Transfer of Undertaking) Act, 1969

Foreign Contribution (Regulation) Act, 1976

The Regional Rural Banks Act–1976

The Banking Companies (Acquisition and Transfer of Undertakings) Act–1980

The Export-Import Bank of India Act–1981

The National Bank for Agriculture and Rural Development Act–1981

Chit Fund Act–1982

NABARD General Regulations 1982

Banking Companies (Period of Preservation of Records) Rules, 1985

Banking Companies (Regulation)Rules,1985

Shipping Development Fund Committee (Abolition)Act–1985

Sick Industrial Companies (Special Provisions)Act–1985

The National Housing Bank Act–1987

SIDBI General Regulations, 1990

Securities and Exchange Board of India Act, 1992

The Industrial Finance Corporation (Transfer of Undertakings and Repeal) Act–1993

Recovery of Debts due to Banks and Financial Institutions Act,1993

Industrial Reconstruction Bank (Transfer of Undertaking & Appeal) Act–1997

Insurance Regulatory and Development Authority Act, 1999

Foreign Exchange Management Act, 1999

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI-2002)

Prevention of Money Laundering Act, 2002

Fiscal Responsibility and Budget Management Act, 2003

Industrial Development Bank (Transfer of Undertaking & Repeal) Act–2003

Credit Information Companies (Rules & Regulation) Act–2005

Government Securities Act, 2006

SARFAESI (Central registry) Rules,2011

Before you start to panic, no you do not need to mug up all of them. This was just to give you an overview of the Acts that have been issued in the Banking Sector. We will now have a look at some of the major acts.

Negotiable Instrument act, 1881

Negotiable Instruments Act was introduced by Imperial Legislative Council of India and enacted on 9th December 1881 to define laws related to negotiable instruments. This act has been amended various times, with the last amendment in 2002. As per Section 13 of this Act, "A negotiable instrument means a promissory note, bill of exchange or cheque payable either to order or to bearer. Negotiable Instruments may include Inland Instruments, Foreign Instruments and Bank Drafts.
You can go through the details of this act from the link below -

Negotiable Instrument act, 1881

Reserve Bank of India act, 1934

RBI Act, 1934 is the legislative act under which Reserve bank of India was formed. Along with Companies Act, it was amended in 1936 to provide a framework for the supervision of banking firms in India. The act also defines Scheduled banks. Here are some of the highlights of this act -

• Section 17 of the Act defines manner in which the RBI can conduct business.
• Section 18 deals defines emergency loans to banks.
• Section 21 states the RBI must conduct the banking affairs for the central government and manage public debt.
• Section 22 says that only RBI has the exclusive rights to issue currency notes in India.
• Section 24 states that the maximum denomination a note can be ₹10,000.
• Section 26 describes the legal tender character of Indian bank notes.
• Section 28 allows the RBI to form rules regarding the exchange of damaged and imperfect notes.
• Section 31 says that in India only the RBI or the central government can issue and accept promissory notes that are payable on demand.
• Section 42(1) says that every scheduled bank must have an average daily balance with the RBI.

Banking Regulation Act, 1949

This act regulates all banking firms in India i.e. it provides a framework using which commercial banking in India is supervised and regulated.Important features of this act are -

• Primary Agricultural Credit Society and Cooperative land mortgage banks are not included under this act.
• The act gives RBI, power to license banks, have regulation over shareholding and voting rights of shareholders.
• It also grants RBI to supervise appointment of the boards and management and regulate the operations of banks.
• It also lays down instructions for audits to be conducted by RBI, control moratorium, mergers and liquidation, issue directives in the interests of public good and on banking policy, and impose penalties.
• Cooperative Banks were included in this act under the 1965 amendment.

State Bank of India Act, 1955

Under the State Bank of India Act of 1955, the Reserve Bank of India acquired a controlling interest in the Imperial Bank of India. On 1 July 1955, Imperial Bank of India became State Bank of India. In 2008, the Government of India acquired the Reserve Bank of India's stake in SBI so as to remove any conflict of interest because the RBI is the country's banking regulatory authority.

Deposit Insurance and Credit Guarantee Corporation Act–1961

Under this Act, Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of RBI was set up on 15th July 1978 to provide insurance of deposits and guaranteeing of credit facilities. DICGC insures all bank deposits, such as saving, fixed, current, recurring deposits for up to the limit of Rs. 100,000 of each deposits in a bank.As per this act, all new commercial banks are required to be registered as soon as may be after they are granted licence by the Reserve Bank of India.

Regional Rural Banks Act–1976

Under this act, Regional Rural Banks were established  to create an alternative channel to the cooperative credit structure and to ensure sufficient institutional credit for the rural and agriculture sector, on the recommendations of The M. Narasimham Working Group. They are jointly owned by Government of India, the concerned State Government and Sponsor Banks with the issued capital shared in the proportion of 50 percent, 15 percent and 35 percent respectively.

Securities and Exchange Board of India Act, 1992

Under this act, Securities and Exchange Board of India (SEBI) was given Statutory powers on 30th January 1992. The Act was enacted for regulation and development of securities market in India. It was amended in the years 1995, 1999 and 2002 to meet the requirements of changing needs of the securities market.

Foreign Exchange Management Act, 1999

This act was enacted to consolidate and amend the law relating to foreign exchange in order to facilitate external trade and payments and to promote orderly development and maintenance of foreign exchange market in India. It replaced the Foreign Exchange Regulation Act (FERA), which had become incompatible with the pro-liberalization policies of the Government of India. The act paved way for a new foreign exchange management regime that was consistent with emerging framework of the World Trade Organisation (WTO).

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI-2002)

SARFAESI Act, 2002 enables banks and other financial institutions to auction residential or commercial properties to recover loans. ARCIL, the first asset reconstruction company (ARC) of India was set up under this act. The law does not apply to unsecured loans, loans below ₹100,000 or where remaining debt is below 20% of the original principal.

Prevention of Money Laundering Act, 2002

The act was enacted in order to prevent Money Laundering as well as to provide provisions for confiscation of the property obtained from money laundering. This act was amended in 2005, 2009 and 2012. It involves following - Punishment for Money laundering, powers of attachment of tainted property, adjudicating authority, presumption in inter connected transactions, burden of proof, Appellate tribunal, Special court and FIU - Ind (Financial Intelligence Unit – India)

Fiscal Responsibility and Budget Management Act, 2003

FRBMA Act was introduced to mainly to eliminate the revenue deficit of the country. It also aimed at institutionalizing financial discipline, reducing India's fiscal deficit, improving macroeconomic management and the overall management of the public funds by moving towards a balanced budget. N. K. Singh is currently the chairman for the review committee of FRBMA Act.

 

Payment Banks

Payment Bank is basically a new model of banks that has been conceptualized by RBI. Now, many of you may further ask,

How is it different from a regular bank ?

Yes, A Payment Bank is very similar to a regular bank but it varies from a regular bank on following grounds -

• Payment Banks operate on a smaller scale as compared to the commercial banks of the country.
• Payment Banks do not have any credit risk involved with them as they cannot issue loans and credit cards.
• Payment Banks can accept demand deposits up to Rs 1 lakh only.

Now one may further ask,

Why were the Payment Banks required?

The primary aim of Payment Banks is to expand the availability of financial services to many unbanked entities, for instance small businesses, households with low income, migrant labour force etc i.e. achieve Financial Inclusion as well as increase the access of financial services to all, especially the rural areas of the country.

History of Payment banks

Reserve Bank of India (RBI), on 23rd September 2013 constituted a Committee on Comprehensive Financial Services for Small Businesses and Low Income Households that was headed by Nachiket Mor. The committee submitted it’s report on 7th January 2014 and also recommended the formation of a new category of bank (Payment Banks) among its other recommendations.
Draft guidelines for payment banks, seeking the opinion of interested entities as well as general public was released by RBI on 17th July 2014. Final guidelines for Payment banks were released by RBI on 27th november 2014.
41 applicants applied for the licence of Payment Bank and their list was released by RBI in February 2015. The licence applications were evaluated by External advisory Committee (EAC), headed by Nachiket Mor, which submitted it’s report on 6th July 2015 after examining the financial track record as well as governance issues of the applicant entities.
On 19th august 2015, RBI gave in-principle licence to 11 entities to launch Payment Bank. The In-Principle licence is valid for a period of 18 months and the concerned entities are required to fulfill the requirements within this period. They cannot engage in the Banking activities in this period. Upon satisfactory fulfillment of the conditions required to setup a Payment Bank, RBI will grant full licences under Section 22 of the Banking Regulation act, 1949.
Following 11 entities were initially granted the In-Principle licence by RBI -

• Airtel M-Commerce Services
• Department of Posts
• Aditya Birla Nuvo
• FINO PayTech
• Cholamandalam Distribution Services
• National Securities Depository
• Paytm
• Tech Mahindra
• Vodafone M-Pesa
• Reliance Industries
• Sun Pharmaceuticals (Dilip Shanghvi)

However, 3 out of these 11 organisations surrendered their licences, namely -
(a) Cholamandalam Distribution Services
(b) Sun Pharmaceuticals (Dilip Shanghvi)
(c) Tech Mahindra
Now, let us have a look at the conditions that need to be fulfilled to set up a Payment Bank
An entity in order to setup a Payment Bank is subject to following regulations -

• The minimum capital requirement to set up a Payment Bank is Rs. 100 crore.
• The stake of the promoter for the initial 5 year period should be minimum 40%.
• Foreign share holdings will be permitted subject to the rules of foreign direct investment for private banks in India.
• The voting rights in the bank will be regulated by Banking Regulation Act, 1949 and the upper cap of voting right for any shareholder will be 10%. This may be raised to 26% by Reserve bank of India.
• Any acquisition of more than 5% needs to be approved by RBI.
• Majority of Bank’s board of Directors should consist of independent directors, who should be appointed as per RBI Guidelines.
• Payment Bank can accept Utility Bills and they cannot form separate subsidiary to undertake non-banking activities.
• 25% of the branches of these banks should be in the unbanked rural areas.
• Payment Banks cannot approve/ disburse loans or issue credit cards.
• Payment banks can offer remittance services, mobile payments/transfers/purchases and other banking services like ATM/debit cards, net banking and third party fund transfers.
• Payment Bank will be provided licence under Section 22 of the Banking Regulation act, 1949 and they will be registered as a Public Limited Company under Companies act, 2013.

As of now, 3 entities have already started their operations as Payment Bank. In order of their inception, these are -

1. Airtel Payment bank Ltd.
2. Paytm Payment bank
3. India Post Payment Bank

Let us have a look at the features of these Payment Banks in brief now.

Airtel Payment bank Ltd

• Airtel Payment Bank Ltd is a joint venture between Bharti Airtel (80.1%) and Kotak Mahindra Bank (19.9%).
• Airtel Payment bank Ltd launched its pilot project of its banking services 10,000 Airtel retail outlets in Rajasthan on 23rd November 2016.
• Mr. Shashi Arora is the MD & CEO of Airtel Payments Bank.
• Airtel Payments Bank is a fully digital and paperless bank.
• It offers quick and paperless account opening using Aadhaar based e-KYC i.e no documents are required, only the customer’s Aadhaar number is sufficient.
• Customer’s Airtel mobile number will be his/her bank account number.
• Airtel Payment Bank offers interest rate of 7.25 % p.a. on deposits in savings accounts.
• It also offers personal accidental insurance of Rs. 1 Lac with every Savings Account.

Paytm Payment Bank

• Paytm received approval from RBI to start its Payment Bank in January 2017 and is expected to start its operation this month with first branch coming up in Noida, Uttar Pradesh.
• Vijay Shekhar Sharma, founder of One97 Communications (parent company of Paytm) is expected to take up the executive job in the bank and will hold majority share in Paytm Payments Bank, with the rest being held by One97 Communications.
• Its first branch in Northeast would be opened in Guwahati.

India Post Payment bank

• India Post Payment Bank (IPPB) was incorporated as a Public Sector Bank under the Department of Posts with 100% Government of India equity.
• First branch of IPPB inaugurated at Raipur and Ranchi on 30th January, 2017 .
• IPPB will play a major role in financial inclusion as India Post has about 1,54,000 post offices, of them 90% are in rural areas.
• IPPB will set up 650 branches across the country by September 2017.
• IPPB will offer an interest rate of 4.5 per cent on deposits up to Rs 25,000; 5 per cent on deposits of Rs 25,000-50,000 and 5.5 per cent on Rs 50,000-1,00,000.

Payments Banks will thus help expand the potential of financial inclusion in the economy.

National Payment Corporation of India

National Payments Corporation of India (NPCI) is the core organization for all retail payments system in India. It was set up with the guidance and support of the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA). This organisation was set up with the following objectives-

• The main objective of this organisation as to  consolidate and integrate the multiple systems with varying service levels into nation-wide uniform and standard business process for all retail payment systems.
• It also aims to facilitate an affordable payment mechanism to benefit the common man across the country and help financial inclusion.

Highlights of National Payment Corporation of India

• National Payment Corporation of India (NPCI) was founded in December, 2008 and has been registered under Section 8 of the Companies Act 2013.
• It was issued the Certificate for Commencement of Business in April 2009.
• NPCI commenced business with an authorised capital of Rs. 3 billion and paid up capital of Rs. 600 million.
• NPCI started with 2 million transactions per day and has now grown multi fold to almost 20 million transactions.
• NPCI initially offered a single service of switching interbank ATM transactions. It now covers following -
  Cheque Clearing
  Immediate Payments Service (24x7x365)
  Automated Clearing House
  Electronic Benefit Transfer
  RuPay (Domestic Card Payment Network
• NPCI has its headquarters in Mumbai.
• Currently, NPCI has 10 promoters. These are -
  1. State Bank of India
  2. Punjab National Bank
  3. Canara Bank
  4. Bank of Baroda
  5. Union Bank of India
  6. Bank of India
  7. ICICI Bank
  8. HDFC Bank
  9. Citibank
  10. HSBC
• NPCI Board consists of following -
  1. .Managing Director and Chief Executive Officer of NPCI - Shri A. P. Hota
  2. Chairman - Shri Balachandran M
  2. Nominee from RBI
  3. Nominees from ten core promoter banks
  4. Two Independent Directors

NPCI Brand Philosophy

The brand logo of NPCI signifies the pace at which the organisation has been achieving new benchmarks.

• M. Balachandran, Chairman of NPCI unveiled the logo of the company at the Board Meeting on 15th December 2015.
• Blue, Green and Saffron colours that are present in the logo represent the Indian flag’s colours and pay tribute to the organisation’s deep roots. These colours signify the following -
  1. Blue - This colour (primary corporate colour) represents depth and stability.
  2. Green - This represents balance, growth and harmony.
  3. Saffron - This represents warmth and happiness.
• In NPCI’s logo, the open P and liberal spaces around N and C represent company’s belief in transparency and clear work ethics.

National Payment Corporation of India - Products

Let us now have a look at various products of National Payment Corporation of India -

1. National Financial Switch (NFS) -

• NPCI runs NFS, which is the largest shared network of ATMs (Automated Teller Machines) in India.
• It was initially designed and developed in 2004 by IDRBT (Institute for development and Research in Banking Technology), in order to interconnect various ATMs across the country and hence make banking convenient.  

2. Unified Payment Interface (UPI) -

• This Payment system was launched on 11th April 2016 by NPCI and is regulated by RBI.
• This single mobile application helps users in accessing different bank accounts.

3. BHIM App -

• BHIM App was launched on 30th December 2016 and has been developed by NPCI.
• This app allows users to make simple, easy and quick payments/ transactions.
• It uses UPI interface.

4. Immediate Payment Service (IMPS) -

• This service was launched by NPCI on 22nd November 2010.
• It offers an instant, 24X7, interbank electronic fund transfer service through mobile phones.
• It was built upon NFS network.

5. *99#

• This service works on Unstructured Supplementary Service Data (USSD) channel.
• It is a common number across all Telecom Service Providers (TSPs)
• *99# channel offers the following services -  interbank account to account fund transfer, balance enquiry, mini statement besides host of other services.

6. National Automated Clearing House (NACH) -

• National Automated Clearing House is a centralised clearing system that has been implemented by NPCI in order facilitate interbank, high volume, electronic transactions which are repetitive and periodic in nature.
• This service aims to consolidate multiple ECS (Electronic Clearing Service) systems running across the country.

7. Cheque Truncation System (CTS) -

• This project was launched in 2010.
• Under this system, online image-based cheque clearing system is used where cheque images and Magnetic Ink Character Recognition (MICR) data are captured at the collecting bank branch and transmitted electronically.

8. Aadhaar Payments Bridge System (APBS) -

• Under this system, which is a bank led model, online interoperable financial inclusion transaction can be performed at PoS (Point of Sale - Micro ATM) through the Business correspondent of any bank using the Aadhaar authentication.

9. RuPay Card Scheme -

• This is a new card payment scheme that has been launched by the National Payments Corporation of India on 26th March 2012.
• It offers a domestic, open-loop, multilateral system which will allow all Indian banks and financial institutions in India to participate in electronic payments.

10. Bharat Bill Payment System (BBPS) -

• This system will function as a tiered structure for operating the bill payment system in the country under a single brand image.
• NPCI will function as the authorized Bharat Bill Payment Central Unit (BBPCU) and will be responsible for setting business standards, rules and procedures for technical and business requirements for all the participants.

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