Today KYC AML recollected on Aug 04 and 18th 2018

1.FATF 5 TO 7 QUESTION
2.Funnel account
3.Multi tier account
4.Rule based reports
5.Layering based case study
6 placement based case study
7.CASE STUDY AS IT IS FROM MACMILLAN
8.AMENDMENT TO PMLR 1ST JUNE 17 at least 10 questions
9.India helped which country in FIU
10.Basel based risk related
11.Types of risks
12.customer due diligence
13 customer identification related
14.Correspondent bank relation and due diligence
15 .FATF public statement
16.CTR monthly based
17.CCR monthly based
18.STR identification
19.FATF related rules
20Customer definitions
21.Identify beneficiary for Trust and proprietary concern company

22.direct 0.5 question from Vienna convention/ IMF/FATF regional bodies/Wolfsburg GRP/AML in USA/UK/Australia acts/ bilateral agreements


Finally most difficult paper with latest updates


On Aug 18th 2018

Read FATF in detail
PMLA
Other nation fatf
Conceptual question to test depth of your knowledge
Phases of money laundering
Risk categorisation
Case study
Suspicious transaction based questions
Is India a member of fatf
FCRA full form
Different documents required for opening acs of company, trust

KYC AML Exam PMLA 2005 Amendments on June 1st 2017

Prevention of Money Laundering (Maintenance of Records) Rules, 2005
Amendments vide Notification dated 1st June 2017
Salient Highlights
The Prevention of Money Laundering (Maintenance of Records) Rules 2005 have been
amended vide Gazette Notification dated 1st June 2017. Consequential, modifications in
RBI KYC Directions are yet to be issued. This memo captures the highlights of the
amendments made. Only those aspects that have been changed are enumerated below.
Other provisions continue to be as already stated in these Rules.
Changes Made:
(1) ‘Officially Valid Document’ (OVD) definition amended – the Permanent Account
Number (PAN) Card; and the letter issued by the Unique Identification Authority of India
have been removed from this definition.
(2) Now OVD definition includes - the passport, the driving licence, the Voter's Identity
Card issued by Election Commission of India, job card issued by NREGA duly signed by
an officer of the State Government, the letter issued by the National Population Register
containing details of name, address or any other document as notified by the Central
Government in consultation with the Regulator;
(3) KYC Document Requirement for an Individual changed –
(a) An individual eligible for Aadhaar number is required to submit (i) the Aadhaar number
(AN); (ii) the Permanent Account Number (PAN) or Form No. 60.
(b) An individual (eligible for AN), who does not have AN, is required to submit (i) proof
of application of enrolment for Aadhaar (in lieu of AN) and (ii) PAN (and not Form 60).
(c) An individual (eligible for AN), who does not have both AN and PAN, is required to
submit (i) proof of application of enrolment for Aadhaar (in lieu of AN), (ii) one certified
copy of an OVD, and (ii) Form 60.
(d) An individual not eligible for AN is required to submit PAN.
(e) An individual, who is not eligible for AN and does not have PAN, is required to submit
(i) one certified copy of an OVD, (ii) Form 60, and (iii) one recent photograph .
(f) An individual is also required to submit such other documents (including in respect of
the nature of business and financial status of the client) as may be required by the reporting
entity (bank, etc.) (also in earlier rules).
(h) In case of ‘small accounts’ on suspicion of money laundering/ terrorism financing/ other
high risk scenarios to establish identity of the individual customer through (i) an OVD, and
(ii) AN, and where AN has not been obtained proof of application for AN.
(i) In case of ‘small accounts’ on completion of initial 12 month period or additional 12
month period (as the case may be) to obtain an OVD. (as per earlier rules)
(4) KYC Requirement for juridicial entities – These have been modified in repsect of KYC
documents pertaining to individuals connected with these entities. Instead of an OVD (as
per earlier rules) the requirements for the concerned persons are as indicated below.

No.
Type of
Entity
To obtain in respect of KYC Requirement


1 Company managers, officers or
employees holding an
attorney to transact on
the company's behalf
(a) (i) AN, and (ii) PAN/ Form 60.
(b) If does not have AN, (i) proof of
application of enrolment for Aadhaar (in
lieu of AN) and (ii) PAN (and not Form
60)
(c) If does not have both AN and PAN, (i)
proof of application of enrolment for
Aadhaar (in lieu of AN), (ii) one certified
copy of an OVD, and (ii) Form 60.
(d) If not eligible for AN and does not
have PAN, is required to submit (i) one
certified copy of an OVD, and (ii) Form
60.


2 Partnership
Firm
person holding an
attorney to transact on
3 Trust its behalf
4 Unincorpora
ted
association
or Body of
individuals
(5) On receiving  AN to carry out authentication using either e-KYC or Yes/No
authentication facility provided by Unique Identification Authority of India (UIDAI).
(6) NRIs and residents in the States of Jammu and Kashmir, Assam or Maghalaya who do
not submit PAN to submit (i) one certified copy of an OVD, and (ii) photograph and (iii)
such other document including in respect of the nature of business and financial status as
may be required by the reporting entity.
(7) If a person eligible for AN and PAN does not submit these at the time of commencement
of an account based relationship, should submit the same within a period of six months
from the date of the commencement of the account based relationship. If AN and PAN are
not submitted within 6 months, the said account shall cease to be operational till submitted.
(8) For existing clients, eligible for AN and PAN should submit these by 31st December,
2017. If AN and PAN are not submitted by 31st December, 2017, the said account shall
cease to be operational till submitted.
(9) In case the identity information relating to AN and PAN does not have current address
of the client, the client shall submit an OVD to the reporting entity.

Current Affairs on August 4th 2018

Today's Headlines from www:

*Economic Times*

📝 Uday Kotak trims stake in Kotak Mahindra Bank to 19.70 per cent

📝 Twenty 14 Holdings to invest Rs 750 crore in hotels in India

📝 Rupay card, BHIM users to soon get cashbacks for digital payments under GST

📝 Berger Paints lines up Rs 280 crore capex by 2021

📝 TRAI favours net zero imports of telecom equipment by 2022; Rs 1,000 crore fund to push manufacturing

📝 Tata Motors hopeful of JLR returning to profitability soon

📝 Manpasand to invest Rs 1,500cr to set up 10 new plants by 2020

📝 Tata, Dabur among suitors for Kraft Heinz's Complan brand

*Business Standard*

📝 SC allows RCom to sell telecom assets worth Rs 181 billion to Reliance Jio

📝 Worth $1.02 trillion, one Apple equals India's top 50 firms put together

📝 Adani Group, Indian Oil win big in bidding for city gas distribution

📝 Services sector grows fastest since October 2016 to 54.2 in July: PMI

📝 Govt achieves target of 50-mn free LPG connections 8-months before schedule

📝 BSE Q1 net profit up 4% to Rs 515 mn; bourse to focus on next-gen products

📝 RBI rate hikes likely to cause bump in small savings interest rates

*Financial Express*

📝 Home sales in top seven cities up 25% in H1 of 2018 on consumer confidence: Report

📝 Bank of Maharashtra net loss up 2.7 times on provisioning

📝 Committed to meeting Ebit margin of 4-7% between FY19 and FY21: Tata Motors

📝 Monsoon to be normal in August-September, says IMD

📝 US job growth slows in July, unemployment rate dips

📝 Revenue collections may fall due to GST rate cut, says Sushil Modi

*Mint*

📝 Over 2 lakh shell companies to be struck off from records in FY19

📝 China unveils retaliatory tariffs on $60 billion of US goods in latest salvo

📝 HDFC Bank raises ₹15,151 crore from domestic, overseas market

📝 SAIL Q1 net profit at ₹540 crore

📝 Nestle India profit jumps 50% in June quarter on lower input cost

📝 Constellation to buy Medall for $212 million

📝 Titan Q1 profit surges 30% to Rs 349.17 crore.

Startup India Standup India

Startup India Standup India
Introduction
India is a country of many great legends who were famous all over the world because of their works, sharp mind and
high skill. However, our country is still on the developing track because of the lack of some solid support and ways to
work in right direction. Youths in India are very talented, highly skilled and full of innovative ideas. This scheme is a
big help to them to go in right direction using their new and innovative ideas.
What is Startup India Standup India Campaign
A new campaign named as Startup India, Standup India was announced by the Prime Minister Narendra Modi during
his speech on Independence Day 2015. This is an effective scheme launched on 16th of January 2016 by the Modi
government to help youths of the country. This is an initiative by the Indian PM to give opportunities to the youths
to become industrialists and entrepreneurs which need the establishment of a startup network. Startups means
youths of the country will be supported through finance from banks to strengthen those startups better so that they
can create more employment in India.
This programme is a big start to enable startups through financial support so that they can use their innovative ideas
in right direction. PM has also requested to all the banks to support at least one dalit and one woman entrepreneur.
This scheme will motivate and promote new comers towards business and grow their career and economy of the
country.

Action Plan of Startup India Standup India Scheme
A complete action plan of this scheme was launched on 16th January 2016. This scheme will boost entrepreneurship
in the country at grassroots level ensuring youth benefits from the lowest strata of society. Youths have fresh mind,
new ways, and new thinking so they are better to support as startups. Various IITs, NITs, central universities and IIMs
of India were connected through the live connectivity during the successful launch of campaign. The main aim of this
scheme is to promote bank financing as well as offer incentives for start-up ventures to boost the entrepreneurship
and new job creation techniques among them.
Conclusion
This initiative is the necessity to lead India in right direction. The most important point about this campaign is that it
involves youths of the country as start-ups as they have fresh mind, innovative ideas, required strength, energy, skill,
and new thinking to lead business. Youths are the energetic and highly skilled section of the society so they are
better target for this campaign.

Digital India

Digital India project was launched by the Prime Minister Sh. Narendra Modi on 1st of July in 2015. It is an effective
scheme to transform India for better growth and development of the people and country. Digital India week (from
1st July to 7th July) was inaugurated by the PM on Wednesday in the presence of senior ministerial colleagues and
leading companies CEOs. It aims to give India a digital push for good governance and more jobs. The PM of India has
tried his best towards digitizing campaign for India in order to bridge the gap between government services and
people. Digitization was the need to be implemented in India for bright future and grow more than any other
developed country. Following are the benefits of digital India campaign:
 It makes possible the implementation of digital locker system which in turn reduces paper work by
minimizing the usage of physical documents as well as enabling e-sharing through registered repositories.
 It is an effective online platform which may engage people in governance through various approaches like
“Discuss, Do and Disseminate”.
 It ensures the achievement of various online goals set by the government.
 It makes possible for people to submit their documents and certificates online anywhere which reduces
physical work.
 Through e-Sign framework citizens may digitally sign their documents online.
 It may ease the important health care services through e-Hospital system such as online registration, taking
doctor appointments, fee payment, online diagnostic tests, blood check-up, etc.
 It provides benefits to the beneficiaries through National Scholarship Portal by allowing submission of
application, verification process, sanction and then disbursal.
 It is a big platform which facilitates an efficient delivery of government or private services all over the
country to its citizens.
 Bharat Net programe (a high-speed digital highway) will connect almost 250,000 gram panchayats of
country.
 There is a plan of outsourcing policy also to help in the digital India initiative.
 For better management of online services on mobile such as voice, data, multimedia, etc, BSNL’s Next
Generation Network will replace 30-year old telephone exchange.
 National Centre for Flexible Electronics will help in the promotion of flexible electronics.
 Large scale deployment of Wi-Fi hotspots has been planned by the BSNL all across the country.
 There is a Broadband Highways in order to handle all the connectivity related issues.
 Open access of broadband highways in all the cities, towns and villages will make possible the availability of
world-class services on the click of mouse.

LARGE EXPOSURE FRAMEWORK (effective from 1/4/2019 )

LARGE EXPOSURE framework  (from 1/4/2019)

* A large exposure is defined as any exposure to a counter-party or group of counter-parties which is equal to 10 per cent of the bank’s eligible capital base (defined as tier-I capital).

*Single Counterparty: The sum of all the exposure values of a bank to a single counterpart must not be higher than 20 percent of the bank’s available eligible capital base at all times. In exceptional cases, Board of banks may allow an additional 5 percent exposure of the bank’s available eligible capital base. Banks shall lay down a Board approved policy in this regard.

*Groups of Connected Counterparties: The sum of all the exposure values of a bank to a group of connected counterparties, as defined below, must not be higher than 25 percent of the bank’s available eligible capital base at all times.

          Any breach of the above LE limits shall be under exceptional conditions only and shall be reported to RBI   immediately and rectified at the earliest but not later than a period of 30 days from the date of the breach

EXEMPTIONS FROM LEF

The exposures that will be exempted from the LEF are listed below:

a. Exposures to the Government of India and State Governments which are eligible for zero percent Risk Weight under the Basel III – Capital Regulation framework of the Reserve Bank of India;

b. Exposures to Reserve Bank of India;

c. Exposures where the principal and interest are fully guaranteed by the Government of India;

d. Exposures secured by financial instruments issued by the Government of India,

e. Intra-day interbank exposures;

f.  Intra-group exposures;

g. Borrowers, to whom limits are authorised by the Reserve Bank for food credit;

h. Banks’ clearing activities related exposures to Qualifying Central Counterparties (QCCPs)

i. Rural Infrastructure Development Fund (RIDF) deposits placed with NABARD. 

Initiatives of the Ministry of Micro, Small & Medium Enterprises (MSME) in Recent Years 2nd post

10. MSE-Cluster Development Programme (MSE-CDP)
The Programme is being implemented for holistic and integrated development of micro and small enterprises in clusters through Soft Interventions (such as diagnostic study, capacity building, marketing development, export promotion, skill development, technology upgradation, organizing workshops, seminars,
training, study visits, exposure visits, etc.), Hard Interventions (setting up of
Common Facility Centres) and Infrastructure Upgradation (create/upgrade
infrastructural facilities in the new/existing industrial areas/clusters of MSEs). The
guidelines of the MSE-Cluster Development Programme have been
comprehensively modified in February 2010 to provide higher support to the MSEs. The scope of the scheme includes:

(i) Preparation of Diagnostic Study Report with Government of India (GoI)
grant of maximum Rs.2.50 lakh (Rs.1 lakh for field offices of the Ministry of
MSME). (ii) Soft Interventions like training, exposure, technology upgradation, brand
equity, business development, etc. with GoI grant of 75% of the sanctioned
amount of the maximum project cost of Rs. 25 lakh per cluster. For NE &
Hill States, Clusters with more than 50% (a) micro/ village, (b) women
owned, (c) SC/ST units, the GoI grant will be 90%. (iii) Detailed Project Report (DPR) with GoI grant of maximum Rs. 5 lakh for preparation of a technical feasible and financially viable project report. (iv) Hard Interventions in the form of tangible assets like Common Facility
Centre having machinery and equipment for critical processes, research
and development, testing, etc. for all the units of the cluster with GoI grant upto 90% of the cost of project of maximum Rs. 15 crore. (v) Infrastructure Development with GoI grant of upto 80% of the cost of project of Rs. 10 crore, excluding cost of land. (vi) Exhibition Centres by Associations of Women Entrepreneurs of women
owned micro and small enterprises with GoI assistance @ 40% of the
project cost. Over 460 clusters have been undertaken for various cluster development
interventions (i.e., diagnostic study, soft interventions, and hard interventions) and
126 proposals (including 28 for upgradation of existing industrial estates) have
been taken up for infrastructure development under the scheme. 11. Credit Linked Capital Subsidy Scheme To make the Credit Linked Capital Subsidy Scheme (CLCSS) more


attractive, the following amendments were made with effect from September 29, 2005: (a) the ceiling on loans has been raised from Rs.40 lakh to Rs.1 crore; (b)
the rate of subsidy has been raised from 12 per cent to 15 per cent; (c) the
admissible capital subsidy has now been based on the purchase price of plant and machinery, instead of the term loan disbursed to the beneficiary unit; and (d)
the practice of categorisation of MSEs in different slabs on the basis of their present investment for determining the eligible subsidy has been dispensed with. Further, the ambit of Scheme was enlarged in 2009-10 to include 201 new
technologies, including 179 technologies relating to Pharmaceutical sector. The
coverage under the Scheme has shown considerable increase and up to October 2010, 10,952 MSEs have benefited under the Scheme with the total subsidy
sanctioned amounting to Rs.514.13 crore. 12. Entrepreneurship and Skill Development
In line with the overall target set by the Prime Minister’s National Council on Skill
Development, the Ministry has taken up skill development as a high priority area. Under the Entrepreneurship/Skill Development Programmes conducted by
various organisations of the Ministry of MSME, about 3.5 lakh persons were
trained during 2009-10 which is an increase of more than 33% over previous year. To further expand the coverage of training programmes, a new component under
the scheme of ‘Assistance to Training Institutions’ has been added to, inter-alia, provide assistance to the training institutions/centres established by Partner
Institutions (PIs) of National Level Entrepreneurship Development Institutes (EDIs) and franchisees of National Small Industries Development Corporation (NSIC). Further, the Ministry of MSME provides all such trainings to disadvantaged
sections of the society like the trainings for SCs/STs, free of cost. A number of
programmes are also being organised for women and other weaker sections of
the society free of cost, besides providing a monthly stipend of Rs.500/- per month during the entire period of training.
13. Rajiv Gandhi Udyami Mitra Yojana The scheme aims to promote and support establishment of new micro and small enterprises through handholding of potential first generation entrepreneurs, who
have already successfully completed Entrepreneurship Development Programme
(EDP)/Skill Development Programme (SDP)/Entrepreneurship-cum-Skill
Development Programme (ESDP) of at least two weeks’ duration, or have
undergone vocational training from ITIs. One of the main objectives of
handholding is to guide and facilitate the potential entrepreneurs in dealing with
various procedural and legal hurdles and completion of various formalities which
are required for setting up and running of enterprise successfully and to save
them from harassment at the hands of various regulatory agencies for want of required compliances. It will not only increase the proportion of potential entrepreneurs trained under various EDPs/SDPs/ESDPs/Vocational Training (VT)
in setting up their enterprises, more importantly, it will also enhance
survival/success rate of newly set up enterprises. As a component of this scheme, the Ministry has recently launched a MSME Call
Centre (known as ‘Udyami Helpline’) with a toll-free number 1800-180-6763. The Udyami Helpline, inter-alia, provides basic information on how to set up an
enterprise, various schemes being implemented for the promotion of MSMEs, accessing loans from banks and further contacts for obtaining detailed information. 14. Performance and Credit Rating Scheme To sensitize the MSE sector on the need for credit rating and encourage the MSEs to maintain good financial track record enabling them to earn higher rating
for their credit requirements, the Government in April 2005 launched the
‘Performance and Credit Rating Scheme’. The implementation of the scheme is
through National Small Industries Corporation Ltd. (NSIC). Reputed Rating
Agencies have been empanelled by NSIC from which the MSEs can select the
one to be engaged by it for obtaining the rating. The Ministry of


MSME subsidises the cost of rating by sharing 75% of the fee charged by the Rating Agency, subject to a ceiling of Rs.40,000. 15. National Small Industries Corporation Limited
To provide an opportunity for first generation entrepreneurs to acquire skills for enterprise building and to incubate them to become successful small business owners, NSIC has set up 47 Training-cum-Incubator Centres (TICs) under PPP mode. NSIC has also launched a B2B Web portal to provide marketing facilities
to national and international MSMEs for business to business relationship. The MSME Info Call Centre of NSIC has been made functional to provide information
about the schemes and activities being implemented for the benefits of MSMEs. Further, NSIC has established a Marketing Intelligence Cell in May 2010, which
shall provide database and information support to the MSMEs on marketing of
their products/ services. 16. Khadi Reform Development Programme (KRDP)
In order to revitalize and reform the traditional khadi sector with enhanced
sustainability of khadi, increased artisans welfare, increased incomes and
employment opportunities for spinners and weavers with lesser dependence on Government grants, a Khadi Reform Development Programme was formulated by
the Ministry of MSME in consultation with Khadi and Village Industries Commission (KVIC), Asian Development Bank (ADB), Department of Economic Affairs (DEA) and Price Waterhouse Coopers (PWC). This programme is proposed to be implemented in 300 selected khadi institutions willing to undertake
the identified reforms. The DEA has arranged a sum of US$ 150 million
equivalent to Rs.717 crore (approx.) from ADB to be given to KVIC as grant in
four tranches over a period of 36 months. After completion of procedural
formalities, and signing of necessary agreement and announcement by ADB, the
first tranche of Rs.96 crore was released to KVIC in February 2010. The second
tranche of Rs.192 crore has been earmarked in BE 2010-11.


17. Market Development Assistance (MDA) Scheme The scheme has been introduced w.e.f. 01.04.2010 and envisages financial assistance @ 20% on value of production of khadi and polyvastra which will be
shared among artisans, producing institutions and selling institutions in the ratio
25:30:45. The scheme has been introduced on the basis of recommendations of several committees constituted during the past few decades and after running
several pilot projects in the past. The need had arisen because Khadi production
so far was not based on market demand or performance and the rebate system
did not benefit the spinners and weavers. Also KVIC was constrained to devote most of its resources for administration of rebate; to the detriment of its remaining
responsibilities regarding development of the sector. MDA seeks to rectify this
imbalance and provide flexibility/freedom to the khadi institutions to take
innovative measures to improve its marketing infrastructure such as renovation of outlets, training sales persons, computerization of sales, design improvement, publicity, discount to customers, improved equipments of production, training of artisans and capacity building so that khadi can attract more customers not just
because of discount, but because of its quality design and appeal. Most
importantly, for the first time a definite share of 25% of MDA has been earmarked
for spinners and weavers which will give them a prominent role in the entire khadi chain of activities. An amount of Rs.345.05 crore has been earmarked to be
incurred during 2010-11 and 2011-12 as MDA. 18. Workshed Scheme for Khadi Artisans Under this scheme, assistance is provided for construction of Worksheds for Khadi artisans for better work environment. Around 38,000 worksheds are
targetted to be constructed between 2008-09 and 2011-2012 at a total cost of
Rs.127 crore approximately, involving financial assistance of Rs.95 crore as grant
to KVIC from Government of India’s budgetary sources. Financial assistance for establishment of workshed has been provided to 5,951 artisans in 2009-10. In BE


2010-11, an amount of Rs.20 crore has been earmarked for assisting
10,000 artisans under this scheme. 19. Scheme for Enhancing Productivity and Competitiveness of Khadi Industry and Artisans The scheme aims to provide financial assistance to 200 of the ‘A+’ and ‘A’ category khadi institutions of which 50 institutions would be those which are managed exclusively by beneficiaries belonging to Scheduled Castes/Scheduled
Tribes to make them competitive with more market driven and profitable
production by replacement of obsolete and old machinery and equipment. The
total cost of the scheme is Rs.84 crore involving financial assistance of Rs.71.14
crore as grants to KVIC from Government of India’s budgetary sources between
2008-09 and 2011 -2012. 20 khadi institutions were assisted with financial assistance of Rs.2.23 crore under this scheme in 2009- 10. An amount of Rs.21 crore has been earmarked in BE 2010-11 for assisting
60 khadi institutions under this scheme. 20. Scheme for Rejuvenation, Modernisation and Technological Upgradation of
Coir Industry
Under the scheme, assistance is provided to spinners and tiny household sector
for replacement of outdated ratts/looms and for constructing worksheds so as to
increase production and earnings of workers. In 2009-10, 296 spinning units and
410 tiny household units have been assisted under this scheme and a target for assisting 320 spinning units and 880 household units has been fixed for 2010-11 with the budget allocation of Rs.21 crore. During 2010-11 (upto September 2010), Rs. 4.88 crore has been released by the Ministry. 21. Scheme of Fund for Regeneration of Traditional Industries (SFURTI)
This Scheme was launched in 2005 for regeneration of traditional industries,
identified clusters in khadi, village industries and coir


sectors with a view to make these industries more productive and competitive and
increase the employment opportunities in rural and semi-urban areas. The
objective of the Scheme is to establish a regenerated, holistic, sustainable and
replicable model of integrated cluster-based development of traditional industries
in khadi, village and coir sectors. So far 105 clusters (Khadi – 29, Village
Industries – 50 and Coir - 26) have been taken up under SFURTI and production has been
started in 72 clusters. Cluster interventions will be completed in remaining 33
clusters providing employment to around 16,000 rural artisans in 2010-11. 22. Mahatma Gandhi Institute for Rural Industrialization (MGIRI)
A national level institute named MGIRI has been established at Wardha, Maharashtra as a society under Societies Registration Act, 1860 by revamping
Jamnalal Bajaj Central Research Institute in association with IIT, Delhi for strengthening the R&D activities in khadi and village industry sectors. The main
objectives of the institute are as under:

To accelerate rural industrialization for sustainable village economy so that
KVI sector co-exists with the main stream. Attract professionals and experts to Gram Swaraj. Empower traditional artisans.
Innovation through pilot study/field trials. R&D for alternative technology using local resources. During 2010-11, it is proposed to initiate action on handholding support to 68 model enterprises in bio-processing, chemical, energy, rural crafts and solar garments sets and 21 machines/processes/services would be improved.


23. National Board for MSMEs The Government has set up for the first time, a statutory National Board for Micro, Small and Medium Enterprises so as to bring together the representatives of
different sub-sectors of MSMEs, along with policy-makers, bankers, trade unions and others in order to move towards cohesive development of the sector. The
deliberations and directions of the National Board will go a long way to guide and
develop enterprises in this sector to become more competitive and self-reliant. 24. Fiscal Benefits The Government has worked towards enhancing the level of fiscal incentives available for micro and small enterprises. Under the General Excise Exemption Scheme, exemption limit has been raised from Rs.1 crore to Rs.1.5 crore (in
2007-08 budget) and the turnover eligibility limit to avail the exemption benefits has been enhanced from Rs.3 crore to Rs.4 crore (in 2005-06 budget). Further, with effect from 1
st April 2005, small service providers having a turnover of up to Rs.4 lakh has been exempted from service tax. This exemption limit has been
gradually raised to Rs.10 lakh in the subsequent budgets. In order to encourage
small and medium enterprises to invest and grow, the surcharge on all firms and
companies with a taxable income of Rs.1 crore or less has been removed with
effect from 1
st April 2007. The turnover limit for tax audit and for the purpose of
presumptive taxation of small businesses has been enhanced to Rs.60 lakh with
effect from 1
st April 2010. To ease the cash flow position for small scale manufacturers, they have been permitted to take full credit of Central Excise duty
paid on capital goods in a single installment in the year of their receipt. Further,
they have also been permitted to pay Central Excise duty on a quarterly basis
rather than monthly basis.

GUARANTEE

GUARANTEE
Section 126 of Indian Contract

Act,1872 defines guarantee:
“A contract to perform the promise or discharge the liability of a third person in
case of his default.”

GUARANTEE PARTIES INVOLVED
The parties to the contract of guarantee are:
a. Applicant : The principal debtor : The person at
whose request the guarantee is executed.
b. Beneficiary : The person to whom the guarantee is
given and who can enforce it in case of default.
c. Guarantor : The person who undertakes to
discharge the obligations of the applicant in case of
his default.
Thus, a contract of guarantee is a collateral contract,
consequential to a main contract between the
applicant and the beneficiary.

GUARANTEE TYPES
Guarantee may be classified by nature as
under:
1. Inland Guarantee
and
Foreign Guarantee.
2. Financial Guarantee
and
Performance Guarantee.

BANK GUARANTEE
Guarantee issued must be unconditional and for:
Definite period
Definite amount
Definite purpose
Guarantee may be based on location of beneficiary,
Purpose and Currency:
Inland: Issued with in India in favour of beneficiary
located in India for any contract or purpose
originating within India.
Foreign: Issued in India in favour of beneficiary located
in any other country in Foreign Currency.


VARIOUS TYPES OF BANK
GUARANTEES
As per nature of contract, Bank
Guarantees are classified in three types;
1) Financial Guarantee
2) Performance Guarantee
3) Deferred Payment Guarantee


FINANCIAL GUARANTEE
 Financial Guarantees are issued by bank on behalf of
customer’s requirement to deposit a cash security or
earnest money.
 Most Government department insist that before contract
is awarded to contractor, insist on a Earnest Money
Deposit.
 Issued in respect of Excise / Custom duties and Octroi
under dispute etc.
 Issued in respect liabilities towards tax, excise duties,
custom duties etc. to Govt. authorities in relation of
specific transaction;
 Issued for covering payments for supplies/services
favouring Oil Companies, SAIL, Railways etc.


PERFORMANCE
GUARANTEE Performance Guarantees are issued by the
bank on behalf of its customer whereby the
bank assure a third party, that the customer
will perform the contract as per condition
stipulated in the contract.
These are issued on behalf of customer, who
enters into contracts to do certain things on
or before a given date.
It involves a contractual obligation.



DEFERRED PAYMENT GUARANTEES
It is issued in favour of suppliers to guarantee
payment of installments for capital goods
purchased on deferred payment basis.
It required when goods or machinery are
purchase on long term credit and payment is
made through cheque or bills of different dates.
Bank issue guarantee of payment of
installments on due date, in event of default by
Fbouryeexra.mple: Rs. 50 Lacs is cost of Machinery. Repayable
in 5 yearly installments. Default in payment by the buyer.


GUARANTEE EXCLUSIONS
• Guarantees in favour of shipping
companies to obtain delivery of
goods in the absence of Bills of
Lading should not be issued unless
the import bills of the customer are
routed through the Branch and
adequate margin is taken for issue of
the guarantee.

GUARANTEE EXCLUSIONS
• Wherever specific sanction is not
available, Branches should obtain
prior approval from Head Office
before issuing any guarantee where
Foreign Exchange is involved.
• Partly secured guarantee involving
excise or disputed tax payment
should not be issued without prior
permission of Head office


GUARANTEE ONEROUS CLAUSE
Any provision in the guarantee which is likely
to give rise to further pecuniary liability like
interest or liability which is unlimited in terms
of money as well as validity period is considered
as an ONEROUS CLAUSE:
Auto Renewal / Extension.
Jurisdiction clause in different places.
Where time limit is specified for payment say
24 hours, 48 hours etc.
Payment of interest on invoked amount.


DELEGATION OF POWERS
Delegation provides full powers at all levels to
sanction issue of guarantees for periods up to 3
years in case of guarantees fully secured by
cash margin or term deposit or counter
guarantee of other Banks/FIs.
Restrictive powers for issue of guarantees not
fully secured for periods up to 3 years
provided there is no onerous clause in the
guarantee.

SWIFT CODE

SWIFT CODE
SWIFT is the short form of "Society or Worldwide Interbank Financial
Telecommunication". In simple terms swift has two main roles in
international financial transactions, firstly SWIFT provide a secure
communications platform by which financial institutions can
communicate each other reliably & fast and secondly SWIFT establishes
standard message formats which can be used on secure SWIFT
platforms.
Today banks use SWIFT platform to communicate each other when
sending a wire transfer, issuing a letter of credit, advising a discrepancy
message etc.
Each of these message formats have a different code, which is called
swift message types. For example a bank must use MT700 Issue of a
Documentary Credit when issuing a letter of credit and MT 734 advice of
a refusal when giving its refusal message. (MT means Message Type)
Important Note: According to the current letters of credit rules, UCP 600,
a letter of credit will be deemed to be operative letter of credit if it is
transmitted via an authenticated electronic platform such as SWIFT.

Current affairs on August 1st 2018

Today's Headlines from www:

*Economic Times*

📝 NHAI secures Rs 25,000-crore loan from state bank

📝 LPG price hiked by Rs 1.76 per cylinder

📝 GST evasion worth Rs 3,026 crore detected in 1 year: Government

📝 RIL pips TCS to become most valuable company on D-Street

📝 Hathway promoters to infuse Rs 350 crore in company

📝 Taiwanese company CPC Corp proposes $6.6 billion investment in India

📝 Tata Motors to stop manufacturing operations in Thailand

📝 Balance sheets of external sector, banks need greater focus of government: Report

*Business Standard*

📝 RIL wins arbitration case against govt's claim of illegal gas production

📝 JLR drives Tata Motors into 10 year-high loss of Rs 18.6 bn in June quarter

📝 Mahindra Group subsidiaries turn to analytics for better performance

📝 Bank of India Q1 net profit rises 8% to Rs 951 million, stock falls 8.75%

📝 IBC ordinance not aimed at favouring any corporate house: Piyush Goyal

📝 Monsoon deficiency at 5% in June, 6% in July but situation not alarming

📝 PSBs earn Rs 33 bn from customer charges in past 4 yrs: Shiv Pratap Shukla

*Financial Express*

📝 Investment in roads, renewables: Piramal Capital in talks to raise $550 million

📝 Axis Bank puts loans worth Rs 1,062 cr on sale

📝 SBI General Insurance Q1 profit doubles to Rs 113 cr

📝 Jindal Steel and Power wins 20% of Rs 2,500-crore global rail tender

📝 Banks’ bad loans surge to Rs 9.61 lakh cr by FY18: Government

📝 Government seeks Parliament's nod for Rs 11,698 cr additional expenditure

📝 Freshworks raises $100 million in funding led by Accel, Sequoia

*Mint*

📝 SBI to restructure its investment banking arm SBI Capital Markets

📝 TPG leads $100 million funding in non-bank lender Five Star Business Finance

📝 Bharti Airtel partners Razorpay for UPI payments

📝 JK Paper Q1 profit rises 58% to ₹95.14 crore, sales climb 18%

📝 Dabur India Q1 profit up 25% to Rs330 crore

📝 India’s June infrastructure output growth hits 7 month high of 6.7%

📝 Edelweiss infra fund eyes Engie’s India solar business.

Import acts Information Technology (Amendment) Act, 2008

Import acts Information Technology (Amendment) Act, 2008
 Tampering with computer source Documents Sec.65
 Hacking with computer systems , Data Alteration Sec.66
 Sending offensive messages through communication service, etc Sec.66A
 Dishonestly receiving stolen computer resource or communication device Sec.66B
 Identity theft Sec.66C
 Cheating by personation by using computer resource Sec.66D
 Violation of privacy Sec.66E
 Cyber terrorism Sec.66F
 Publishing or transmitting obscene material in electronic form Sec .67
 Hackers scans the computer pre attack to identify - Vulnerability in the systemPunishment for
publishing or transmitting of material depicting children in sexually explicit act, etc.
 in electronic form Sec.67B
 Preservation and Retention of information by intermediaries Sec.67C
 Powers to issue directions for interception or monitoring or decryption of any information through
 any computer resource Sec.69
 Power to issue directions for blocking for public access of any information through any computer
 resource Sec.69A
 Power to authorize to monitor and collect traffic data or information through any computer resource
 for Cyber Security Sec.69B
 Un-authorized access to protected system Sec.70
 Penalty for misrepresentation Sec.71
 Breach of confidentiality and privacy Sec.72
 Publishing False digital signature certificates Sec.73
 Publication for fraudulent purpose Sec.74

IMPORTANT BANKING TERMS

IMPORTANT BANKING TERMS

Repo Rate
Repo rate is the rate at which our banks borrow rupees from RBI. Whenever the banks have any shortage of funds they can borrow it from RBI. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases, borrowing from RBI becomes more expensive.

Reverse Repo Rate
This is exact opposite of Repo rate. Reverse Repo rate is the rate at which Reserve Bank of India (RBI) borrows money from banks. RBI uses this tool when it feels there is too much money floating in the banking system. Banks are always happy to lend money to RBI since their money is in safe hands with a good interest. An increase in Reverse repo rate can cause the banks to transfer more funds to RBI due to these attractive interest rates.

CRR Rate
Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with RBI. If RBI decides to increase the percent of this, the available amount with the banks comes down. RBI is using this method (increase of CRR rate), to drain out the excessive money from the banks.

SLR Rate
SLR (Statutory Liquidity Ratio) is the amount a commercial bank needs to maintain in the form of cash, or gold or govt. Approved securities (Bonds) before providing credit to its customers. SLR rate is determined and maintained by the RBI (Reserve Bank of India) in order to control the expansion of bank credit.

Bank Rate
Bank rate, also referred to as the discount rate, is the rate of interest which a central bank charges on the loans and advances that it extends to commercial banks and other financial intermediaries. Changes in the bank rate are often used by central banks to control the money supply.

Inflation
Inflation is as an increase in the price of bunch of Goods and services that projects the Indian economy. An increase in inflation figures occurs when there is an increase in the average level of prices in Goods and services. Inflation happens when there are fewer Goods and more buyers; this will result in increase in the price of Goods, since there is more demand and less supply of the goods.

Deflation
Deflation is the continuous decrease in prices of goods and services. Deflation occurs when the inflation rate becomes negative (below zero) and stays there for a longer period.

Stagflation
Stagflation is a state of economy in which economic activity is slowing down but wages and prices continue to rise. The term is a blend of words stagnation and inflation. Recession A true economic recession can only be confirmed if GDP (Gross Domestic Product) growth is negative for a period of two or more consecutive quarters.

PLR
The Prime Interest Rate is the interest rate charged by banks to their most creditworthy customers (usually the most prominent and stable business customers). The rate is almost always the same amongst major banks. Adjustments to the prime rate are made by banks at the same time; although, the prime rate does not adjust on any regular basis. The Prime Rate is usually adjusted at the same time and in correlation to the adjustments of the Fed Funds Rate. The rates reported below are based upon the prime rates on the first day of each respective month. Some banks use the name "Reference Rate" or "Base Lending Rate" to refer to their Prime Lending Rate.

Deposit Rate
Interest Rates paid by a depository institution on the cash on deposit.


FII
FII (Foreign Institutional Investor) used to denote an investor, mostly in the form of an institution. An institution established outside India, which proposes to invest in Indian market, in other words buying Indian stocks. FII's generally buy in large volumes which has an impact on the stock markets. Institutional Investors includes pension funds, mutual funds, Insurance Companies, Banks, etc.
FDI
FDI (Foreign Direct Investment) occurs with the purchase of the “physical assets or a significant amount of ownership (stock) of a company in another country in order to gain a measure of management control” (Or) A foreign company having a stake in Indian Company.

IPO
IPO is Initial Public Offering. This is the first offering of shares to the general public from a company wishes to list on the stock exchanges.
Disinvestment
The Selling of the government stake in public sector undertaking.
Fiscal Deficit
It is the difference between the government’s total receipts (excluding borrowings) and total expenditure. Revenue deficit

It defines that, where the net amount received (by taxes & other forms) fails to meet the predicted net amount to be received by the government.

GDP
Gross National Product is measured as GDP plus income of residents from investments made abroad minus income earned by foreigners in domestic market.
National Income
National Income is the money value of all goods and services produced in a country during the year.
Per Capita Income
The national income of a country or region divided by its population. Per capita income is often used to measure a country's standard of living.
Vote on Account
A vote-on account is basically a statement, where the government presents an estimate of a sum required to meet the expenditure that it incurs during the first three to four months of an election financial year until a new government is in place, to keep the machinery running.
Difference between Vote on Account and Interim Budget
Vote-on-account deals only with the expenditure side of the government's budget, an interim Budget is a complete set of accounts, including both expenditure and receipts.

SDR
The SDR (Special Drawing Rights) is an artificial currency created by the IMF in 1969. SDR’s are allocated to member countries and can be fully converted into international currencies so they serve as a supplement to the official foreign reserves of member countries. Its value is based on a basket of key international currencies (U.S. dollar, euro, yen and pound sterling).

SEZ
SEZ means Special Economic Zone is the one of the part of government’s policies in India. A special Economic zone is a geographical region that economic laws which are more liberal than the usual economic laws in the country. The basic motto behind this is to increase foreign investment, development of infrastructure, job opportunities and increase the income level of the people

Monetary policy
A Monetary policy is the process by which the government, central bank, of a country controls (i) the supply of money, (ii) availability of money, and (iii) cost of money or rate of interest, in order to attain a set of objectives oriented towards the growth and stability of the economy.
Fiscal Policy
Fiscal policy is the use of government spending and revenue collection to influence the economy. These policies affect tax rates, interest rates and government spending, in an effort to control the economy. Fiscal policy is an additional method to determine public revenue and public expenditure.

Core Banking Solutions (CBS)
Core banking is a general term used to describe the services provided by a group of networked bank branches. Bank customers may access their funds and other simple transactions from any of the member branch offices. It will cut down time, working simultaneously on different issues and increasing efficiency. The platform where communication technology and information technology are merged to suit core needs of banking is known as Core Banking Solutions.

Liquidity Adjustment Facility (LAF):
A tool used in monetary policy that allows banks to borrow money through repurchase agreements. This arrangement allows banks to respond to liquidity pressures and is used by governments to assure basic stability in the financial markets.

RTGS System
The acronym 'RTGS' stands for Real Time Gross Settlement. RTGS system is a funds transfer mechanism where transfer of money takes place from one bank to another on a 'real time' and on 'gross' basis. This is the fastest possible money transfer system through the banking channel. Settlement in 'real time' means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed. 'Gross settlement' means the transaction is settled on one to one basis without bunching with any other transaction.
Bancassurance
It is the term used to describe the partnership or relationship between a bank and an insurance company whereby the insurance company uses the bank sales channel in order to sell insurance products


Wholesale Price Index
The Wholesale Price Index (WPI) is the index used to measure the changes in the average price level of goods traded in wholesale market. A total of 435 commodity prices make up the index. It is available on a weekly basis. It is generally taken as an indicator of the inflation rate in the Indian economy. The Indian Wholesale Price Index (WPI) was first published in 1902, and was used by policy makers until it was replaced by the Producer Price Index (PPI) in 1978.

Consumer price Index (CPI)
It is a measure estimating the average price of consumer goods and services purchased by households.

Venture Capital
Venture capital is money provided by an outside investor to finance a new, growing, or troubled business. The venture capitalist provides the funding knowing that there’s a significant risk associated with the company’s future profits and cash flow. Capital is invested in exchange for an equity stake in the business rather than given as a loan, and the investor hopes the investment will yield a better-than-average return.

Treasury Bills
Treasury Bills (T-Bills) are short term, Rupee denominated obligations issued by the Reserve Bank of India (RBI) on behalf of the Government of India. They are thus useful in managing short-term liquidity. At present, The Government of India issues three types of treasury bills through auctions, namely, 91-day, 182-day and 364-day. There are no treasury bills issued by State Governments.

Foreign exchange reserves
Foreign exchange reserves (also called Forex reserves) in a strict sense are only the foreign currency deposits and bonds held by central banks and monetary authorities. However, the term in popular usage commonly includes foreign exchange and gold and IMF reserve positions.

Open Market operations (OMO)
Buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system by RBI. Open market operations are the principal tools of monetary policy.

Micro Credit
It is a term used to extend small loans to very poor people for self-employment projects that generate income, allowing them to care for themselves and their families.

Liquidity Adjustment Facility (LAF)
A tool used in monetary policy that allows banks to borrow money through repurchase agreements. This arrangement allows banks to respond to liquidity pressures and is used by governments to assure basic stability in the financial markets.
E-Governance
E-Governance is the public sector’s use of information and communication technologies with the aim of improving information and service delivery, encouraging citizen participation in the decision-making process and making government more accountable, transparent and effective.

Right to information Act
The Right to Information act is a law enacted by the Parliament of India giving citizens of India access to records of the Central Government and State governments. The Act applies to all States and Union Territories of India, except the State of Jammu and Kashmir - which is covered under a State-level law. This law was passed by Parliament on 15 June 2005 and came fully into force on 13 October 2005.

Credit Rating Agencies in India
The credit rating agencies in India mainly include ICRA and CRISIL. ICRA was formerly referred to the Investment Information and Credit Rating Agency of India Limited. Their main function is to grade the different sector and companies in terms of performance and offer solutions for up gradation. The credit rating agencies in India mainly include ICRA and CRISIL (Credit Rating Information Services of India Limited)

Cheque
Cheque is a negotiable instrument instructing a Bank to pay a specific amount from a specified account held in the maker/depositor's name with that Bank. A bill of exchange had drawn a specified banker and payable on demand. “A written order directs a bank to pay money”.
Demand Draft
A demand draft is an instrument used for effecting transfer of money. It is a Negotiable Instrument. Cheque and Demand-Draft both are used for Transfer of money. You can 100% trust a DD. It is a banker's check. A check may be dishonored for lack of funds a DD cannot. Cheque is written by an individual and Demand draft is issued by a bank. People believe banks more than individuals.

SEBI
Securities and exchange Broad of India (SEBI) is the regulator for the Securities Market in India. Originally set up by the Government of India in 1988, it acquired statutory form in 1992 with SEBI Act 1992 being passed by the Indian Parliament.

Mutual funds
Mutual funds are investment companies that pool money from investors at large and offer to sell and buy back its shares on a continuous basis and use the capital thus raised to invest in securities of different companies. The mutual fund will have a fund manager that trades the pooled money on a regular basis. The net proceeds or losses are then typically distributed to the investors annually.

Asset Management Companies
A company that invests its clients' pooled fund into securities that match its declared financial objectives. Asset management companies provide investors with more diversification and investing options than they would have by themselves. Mutual funds, hedge funds and pension plans are all run by asset management companies. These companies earn income by charging service fees to their clients.
Non-performing assets
Non-performing assets, also called non-performing loans, are loans, made by a bank or finance company, on which repayments or interest payments are not being made on time. A debt obligation where the borrower has not paid any previously agreed upon interest and principal repayments to the designated lender for an extended period of time. The nonperforming asset is therefore not yielding any income to the lender in the form of principal and interest payments.
Recession
A true economic recession can only be confirmed if GDP (Gross Domestic Product) growth is negative for a period of two or more consecutive quarters.

Asset Reconstruction Company India Limited (ARCIL)

Asset Reconstruction Company India Limited (ARCIL):
 The genesis of asset reconstruction business in India owes its origin to enactment of the Securitisation Act, 2002. Prior to promulgation of the Securitisation Act,2002 banks and financial institutions had no option but to enforce their security interests through the court process, which was extremely time consuming.
 There was also no provision in any other law in respect of enforcement of hypothecation, though hypothecation was one of the major security interest taken by the banks and financial Institutions in India.
 It was in this backdrop that the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002 was passed on June 21, 2002 which was enacted by the parliament in December 2002 and became the Securitisation Act, 2002.
 The Securitisation Act principally provides for the following:
 Enforcement of Security Interests by secured creditors
 Transfer of NPLs to asset reconstruction companies (ARCs), which can then take measures for recovery as prescribed under the Securitisation Act, 2002.
 A legal framework for securitization of assets.
 This empowerment encouraged the three major players in Indian banking system, namely, State Bank of India (SBI), ICICI Bank Limited (ICICI) and IDBI Bank Limited (IDBI) to come together to set-up the first ARC. Punjab National Bank (PNB) became Sponsor in October 2004 by virtue of its shareholding of10%. Other shareholders predominantly comprise private sector banks.
 ARCIL was incorporated as a public limited company on February 11, 2002 and obtained its certificate of commencement of business on May 7, 2003.
 In pursuance of Section 3 of the Securitisation Act 2002, it holds a certificate of registration dated August 29, 2003, issued by the Reserve Bank of India (RBI) and operates under powers conferred under the Securitisation Act, 2002.
 ARCIL is also a "financial institution" within the meaning of Section 2 (h) (ia) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (the "DRT Act").
 ARCIL is the first ARC in the country to commence business of resolution of NPLs upon acquisition from Indian banks and financial institutions. As the first ARC, ARCIL has played a pioneering role in setting standards for the industry in India.

DEPOSIT INSURANCE AND CREDIT GUARANTEE CORPORATION OF INDIA (DICGC)

DEPOSIT INSURANCE AND CREDIT GUARANTEE CORPORATION OF INDIA (DICGC)

 The functions of the DICGC are governed by the provisions of 'The Deposit Insurance and Credit Guarantee Corporation Act, 1961' (DICGC Act) and “The Deposit Insurance and Credit Guarantee Corporation General Regulations, 1961” framed by the Reserve Bank of India in exercise of the powers conferred by subsection(3) of Section 50 of the said Act.
 The preamble of the Deposit Insurance and Credit Guarantee Corporation Act,1961 states that it is an Act to provide for the establishment of a Corporation for the purpose of insurance of deposits and guaranteeing of credit.
 The concept of insuring deposits kept with banks received attention for the first time in the year 1948 after the banking crises in Bengal.
 The question came up for reconsideration in the year 1949, but it was decided to hold it in abeyance till the Reserve Bank of India ensured adequate arrangements for inspection of banks.
 Subsequently, in the year 1950, the Rural Banking Enquiry Committee also supported the concept. Serious thought to the concept was, however, given by the Reserve Bank of India and the Central Government after the crash of the Palai Central Bank Ltd., and the Laxmi Bank Ltd. in 1960.
 The Deposit Insurance Corporation (DIC) Bill was introduced in the Parliament on August 21, 1961.After it was passed by the Parliament, the Bill got the assent of the President on December 7, 1961 and the Deposit Insurance Act, 1961 came into force on January1, 1962.
 The Deposit Insurance Scheme was initially extended to functioning commercial banks only. This included the State Bank of India and its subsidiaries, other commercial banks and the branches of the foreign banks operating in India.
 Since 1968, with the enactment of the Deposit Insurance Corporation (Amendment) Act, 1968, the Corporation was required to register the 'eligible cooperative banks' as insured banks under the provisions of Section 13A of the Act.


An eligible co-operative bank means a co-operative bank (whether it is a State co-operative bank, a Central co-operative bank or a Primary co-operative bank) in a State which has passed the enabling legislation amending its Cooperative Societies Act, requiring the State Government to vest power in the Reserve Bank to order the Registrar of Co-operative Societies of a State to windup a co-operative bank or to supersede its Committee of Management and to require the Registrar not to take any action for winding up, amalgamation or reconstruction of a co-operative bank without prior sanction in writing from the Reserve Bank of India.
 Further, the Government of India, in consultation with the Reserve Bank of India, introduced a Credit Guarantee Scheme in July 1960. The Reserve Bank of India was entrusted with the administration of the Scheme, as an agent of the Central Government, under Section 17 (11 A)(a) of the Reserve Bank of India Act, 1934and was designated as the Credit Guarantee Organization (CGO) for guaranteeing the advances granted by banks and other Credit Institutions to small scale industries.
 The Reserve Bank of India operated the scheme up to March 31, 1981.
 The Reserve Bank of India also promoted a public limited company on January14, 1971, named the Credit Guarantee Corporation of India Ltd (CGCI).
 The main thrust of the Credit Guarantee Schemes, introduced by the Credit Guarantee Corporation of India Ltd., was aimed at encouraging the commercial banks to cater to the credit needs of the hitherto neglected sectors, particularly the weaker sections of the society engaged in non-industrial activities, by providing guarantee cover to the loans and advances granted by the credit institutions to small and needy borrowers covered under the priority sector.
 With a view to integrating the functions of deposit insurance and credit guarantee, the above two organizations (DIC & CGCI) were merged and the present Deposit Insurance and Credit Guarantee Corporation (DICGC) came into existence on July 15, 1978.
 Consequently, the title of Deposit Insurance Act, 1961was changed to 'The Deposit Insurance and Credit Guarantee Corporation Act, 1961 '.Effective from April 1, 1981, the Corporation extended its guarantee support to credit granted to small scale industries also, after the cancellation of the Government of India's credit guarantee scheme.
 With effect from April 1, 1989, guarantee cover was extended to the entire priority sector advances, as per the definition of the Reserve Bank of India. However, effective from April 1, 1995, all housing loans have been excluded from the purview of guarantee cover by the Corporation.

National Bank of Agriculture and Rural Development (NABARD)

National Bank of Agriculture and Rural Development (NABARD):
 NABARD is set up as an apex Development Bank with a mandate for facilitating credit flow for promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts.
 It also has the mandate to support all other allied economic activities in rural areas, promote integrated and sustainable rural development and secure prosperity of rural areas. In discharging its role as a facilitator for rural prosperity NABARD is entrusted with
1. Providing refinance to lending institutions in rural areas
2. Bringing about or promoting institutional development and
3. Evaluating, monitoring and inspecting the client banks
 Besides this pivotal role, NABARD also:
 Acts as a coordinator in the operations of rural credit institutions
 Extends assistance to the government, the Reserve Bank of India and other organizations in matters relating to rural development
 Offers training and research facilities for banks, cooperatives and organizations working in the field of rural development

 Helps the state governments in reaching their targets of providing assistance to eligible institutions in agriculture and rural development
 Acts as regulator for cooperative banks and RRBs
 Extends assistance to the government, the Reserve Bank of India and other organizations in matters relating to rural development
 Offers training and research facilities for banks, cooperatives and organizations working in the field of rural development
 Helps the state governments in reaching their targets of providing assistance to eligible institutions in agriculture and rural development

Possible indication of Suspicion under PMLA

 Possible indication of Suspicion:
Identity of client

False identification documents
Identification documents which could not be verified within
reasonable time
Non face to face client
Clients in high risk jurisdiction
Doubt over the real beneficiary of the account
 Accounts opened with names very close to other established
business entities
Receipt back of well come kit undelivered at the address given by
the client
Bounced communication
 Frequent change of name, address and bank and demat account
details.

Suspicious Background

Suspicious backgrounds or links with criminals
Multiple Accounts
 Large number of accounts having a common parameters such as
common partners / directors 1 promoters I address I email address /
telephone numbers, introducer or authorized signatory
 Unexplained transfers between such multiple accounts.

Activity in Accounts
 Unusual activity compared to past transactions
 Use of different accounts by client alternatively
 Sudden activity in dormant accounts
 Activity inconsistent with what would be expected fiom declared
income of Client
Nature of Transactions
 Unusual or unjustified complexity
 No economic rationale
Source of funds are doubtful
 Appears to be case of insider trading
Purchases made on own account transferred to a third party through
an off market transactions through DP account
 Transactions reflect likely market manipulations
Suspicious off market transactions

Definitions under PMLA Act 2002

Definitions
Rule 2 of the Prevention of Money-laundering (Maintenance of Records Rules, 2005 lays down following definitions.

Definitions

(1) In these rules, unless the context otherwise requires, -

(a) "Act" means the Prevention of Money-laundering Act, 2002 (15 of 2003);

(b) “client due diligence” means due diligence carried out on a client referred to in clause (ha) of sub-section (1) of section 2 of the Act;

(ba) “Designated Director” means a person designated by the reporting entity to ensure overall compliance with the obligations imposed under Chapter IV of the Act and the Rules and includes—(ba) “Designated Director” means a person designated by the reporting entity to ensure overall compliance with the obligations imposed under Chapter IV of the Act and the Rules and includes—

(i)the Managing Director or a whole-time Director duly authorized by the Board of Directors if the reporting entity is a company,

(ii)the managing partner if the reporting entry is a partnership firm,

(iii)the proprietor if the reporting entity is a proprietorship concern,

(iv)the managing trustee if the reporting entity is a trust

(v)a person or individual, as the case may be, who controls and manages the affairs of the reporting entity if the reporting entity is an unincorporated association or a body of individuals, and

(vi)such other person or class of persons as may be notified by the Government if the reporting entity does not fall in any of the categories above.

 Explanation.—For the purpose of this clause, the terms “Managing Director” and “Whole-time Director” shall have the meaning assigned to them in the Companies Act, 1956 (1 of 1956);

(bb) “Designated Officer” means any officer or a class of officers authorized by a banking company, either by name or by designation, for the purpose of opening small accounts.

(c) “Director” means the Director appointed under sub-section (1) of section 49 of the Act for the purposes of sections 12, 12A and 13 of the Act;

(ca) “non profit organisation” means any entity or organisation that is registered as a trust or a society under the Societies Registration Act, 1860 (21 of 1860) or any similar State legislation or a company registered under section 25 of the Companies Act, 1956 (1 of 1956);

(d) “officially valid do(d) “officially valid document” means the passport, the driving licence, the Permanent Account Number (PAN) Card, the Voter’s Identity Card issued by Election Commission of India, job card issued by NREGA duly signed by an officer of the State Government, the letter issued by the Unique Identification Authority of India containing details of name, address and Aadhaar number or any other document as notified by the Central Government in consultation with the Regulator:
Provided that where simplified measures are applied for verifying the identity of the clients the following documents shall be deemed to be officially valid documents:—

(a)identity card with applicant's Photograph issued by Central/State Government Departments, Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, and Public Financial Institutions;

(b)letter issued by a gazetted officer, with a duly attested photograph of the person.

(e) "prescribed value" means the value of transaction prescribed under these rules;

(f) “Principal Officer” means an officer designated by a 1[reporting entity];

(fa)“Regulator” means a person or an authority or a Government which is vested with the power to license, authorise, register, regulate or supervise the activity of 3[reporting entities or the Director as may be notified by the Government for a specific reporting entity or a class of reporting entities or for a specific purpose;

(faa) “Rules” means the Prevention of Money-laundering(faa) “Rules” means the Prevention of Money-laundering (Maintenance of Records) Rules, 2005;

(fb) “small account” means a savings account in a banking company where—

(i) the aggregate of all credits in a financial year does not exceed rupees one lakh,

(ii) the aggregate of all withdrawals and transfers in a month does not exceed rupees ten thousand, and

(iii) the balance at any point of time does not exceed rupees fifty thousand.

(g) "suspicious transaction" means a transaction i> whether or not made in cash which, to a person acting in good faith-

(a) gives rise to a reasonable ground of suspicion that it may involve proceeds of an offence specified in the Schedule to the Act, regardless of the value involved; or

(b) appears to be made in circumstances of unusual or unjustified complexity; or

(c) appears to have no economic rationale or bonafide purpose; or

(d) gives rise to a reasonable ground of suspicion that it may involve financing of the activities relating to terrorism;



1[Explanation.—Transaction involving financing of the activities relating to terrorism includes transaction involving funds suspected to be linked or related to, or to be used for terrorism, terrorist acts or by a terrorist, terrorist organisation or those who finance or are attempting to finance terrorism.]

2[(h) “transaction” means a purchase, sale, loan, pledge, gift, transfer, delivery or the arrangement thereof and includes—

(i) opening of an account;

(ii) deposits, withdrawal, exchange or transfer of funds in whatever currency, whether in cash or by cheque, payment order or other instruments or by electronic or other nonphysical means;

(iii) the use of a safety deposit box or any other form of safe deposit; (iv) entering into any fiduciary relationship;

(v) any payment made or received in whole or in part of any contractual or other legal obligation;

(vi) any payment made in respect of playing games of chance for cash or kind including such activities associated with casino; and

(vii) establishing or creating a legal person or legal arrangement.]

(2) All other words and expressions used and not defined in these rules but defined in the Act shall have the meaning respectively assigned to them in the Act

Micro, Small and Medium Enterprises (MSME): The Importance in Indian Economy

For a country to grow, the government should actively promote business enterprises. Among business enterprises, the Micro, Small and Medium Enterprises (MSME) deserve special attention. Though MSMEs are small investment enterprises, but their contribution to the Indian economy is very significant.

What are MSMEs?

Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 which was notified on October 2, 2006, deals with the definition of MSMEs. The MSMED Act, 2006 defines the Micro, Small and Medium Enterprises based on

the investment in plant and machinery for those engaged in manufacturing or production, processing or preservation of goods and
the investment in equipment for enterprises engaged in providing or rendering of services.
The guidelines with regard to investment in plant and machinery or equipment as defined in the MSMED Act, 2006 are:
Nature of activity of the Enterprise
Investment in plant and machinery excluding land and building for enterprises engaged in manufacturing or production, processing or preservation of goods
Investment in equipment excluding land and building for enterprises engaged in providing or rendering of services (loans up to Rs 1 crore)
Micro
Not exceeding Rs.25.00 Lakhs
Not exceeding Rs.10.00 Lakhs
Small
More than Rs.25.00 lakhs but does not exceed Rs.500.00 lakhs
More than Rs.10.00 lakhs but does not exceed Rs.200.00 lakhs
Medium
More than Rs.500.00 lakhs but does not exceed Rs.1000.00 lakhs
More than Rs.200.00 lakhs but does not exceed Rs.500.00 lakhs
Note: The investment in plant and machinery is the original cost excluding land and building and other items specified by the Ministry of Small Scale Industries vide its notification no. S.O. 1722 (E) dated 05.10.2006.

List of enterprises that are engaged in providing or rendering services
The illustrative lists of enterprises that are engaged in providing or rendering services are:

Small road and water transport operators (original investment in vehicles up to Rs.200.00 lacs under Priority sector)
Retail trade (with credit limits not exceeding Rs.20.00 lakhs)
Small business (whose original cost price of the equipment used for the purpose of business does not exceed Rs.20.00 lakhs
Professional and self-employed persons (whose borrowing limits do not exceed Rs.10.00 lakhs of which not more than Rs.2.00 lakhs should be for working capital requirements except in case of professionally qualified medical practitioners setting up of practice in semi-urban and rural areas, the borrowing limits should not exceed Rs.15.00 lakhs with a sub-ceiling of Rs.3 lakhs for working capital requirements)
Significance of MSMED Act 2006
With the enactment of MSMED Act 2006, the paradigm shift that has taken place is the inclusion of services sector in the definition of Micro, Small and Medium Enterprises, apart from extending the scope to Medium Enterprises.

Share of MSMEs in India
The Micro, Small and Medium Enterprises occupies a strategic importance in terms of output (about 45% of manufacturing output), exports (about 40% of the total exports) and employment (about 69 million persons in over 29 million units throughout the country) based on the Planning Commission, 2012. It is observed worldwide that as income increases the share of the informal sector decreases and that of the formal SME sector increases.

Worldwide Trends in SME Sector
Japan – SMEs employ 70% of the wage earners and contribute 55% of the value added.
Thailand – SMEs employ 60.7% of the population while contributing 38% to the GDP.
China – SMEs contribute to over 68% of the exports – in the last 20 years created more SMEs than the total number of SMEs in Europe and the US combined.
Note: In China, an industrial SME is defined as having up to 2,000 employees, while a small business has less than 300 employees and a medium sized business has employees between 301 and 2,000.

What is the Importance and role of MSMEs in Indian Economy?

To generate large scale employment
In India, capital is scarce and labor abundant. MSMEs are thought to have lower capital-output and capital-labour ratios than large-scale industries, and therefore, better serve growth and employment objectives. The MSME sector in India has grown significantly since 1960 – with an average annual growth rate of 4.4% in the number of units and 4.62% in employment (currently employing 30 million). Not only do MSMEs generate the highest employment per capita investment, they also go a long way in checking rural-urban migration by providing people living in isolated areas with a sustainable source of employment.

To sustain economic growth and increase exports
Non-traditional products account for more than 95% of the MSME exports (dominating in the export of sports goods, readymade garments, plastic products etc.). Since these products are mostly handcrafted and hence eco-friendly, there exists a tremendous potential to expand the quantum of MSME led exports. Also, MSMEs act as ancillary industries for Large Scale Industries providing them with raw materials, vital components and backward linkages e.g. large scale cycle manufacturers of Ludhiana rely heavily on the MSMEs of Malerkotla which produce cycle parts.

Making Growth Inclusive
MSMEs are instruments of inclusive growth which touch upon the lives of the most vulnerable and marginalized. For many families, it is the only source of livelihood. Thus, instead of taking a welfare approach, this sector seeks to empower people to break the cycle of poverty and deprivation. It focuses on people’s skills and agency. However, different segments of the MSME sector are dominated by different social groups.

The Twelfth Plan has listed the following as the objectives for the MSME sector
Promoting competitiveness and productivity in the MSME space.
Making the MSME sector innovative, improving technology and depth.
Enabling environment for promotion and development of MSMEs.
Strong presence in exports.
Improved managerial processes in MSMEs.
Evolution and Performance of the MSME Sector in India
Pre-Liberalization
During the post-Independence period, small firms were expected to play an important role in the development process, especially in absorbing surplus labor and achieving an equitable income distribution. This is the traditional stylized role assigned to small industries.
At the beginning of the industrialization process, flexibility in production and the ability to offer differentiated products allow smaller firms to grow rapidly.
Later, large-scale firms come to dominate the size distribution, making up a greater share of output, employment, and value-added because of scale economies, managerial efficiency, better access to finance and infrastructure, and a favorable tariff structure.
Post-Liberalization
The growth rate of MSME, on an average, has declined considerably in terms of units and even employment but has improved marginally in terms of output and exports, in the post-liberalization period compared to the pre-liberalization period.
This could be probably due to – (a) With the threat of competition, new MSME units would not have come up as significantly in the liberalization period as compared to the pre-liberalization period (b) The new MSME units that came up after liberalization may have been much more capital intensive than those that have come up in the past – with some proportions of the existing MSME units having modernized themselves to rely less on labour and also to take advantage of developments in the global market (c) Unable to face the competition some MSMEs exited the market, thereby affecting MSME employment and output initially.
However, though it appears that the MSME growth performance (in terms of employment, output, and exports) might have suffered initially but it has been able to recover impressively subsequently in the decade of 2000s.
The share of the registered MSMEs in India’s GDP more than doubled during this period and its share in total organized sector employment increased to 34% during the same period. Although the share of registered MSME exports declined sharply initially, it bounced back to 12% in 2006-07.
The improved economic health of registered MSME sector is reflected in another parameter i.e. industrial sickness. Sickness in the registered MSME sector has declined both absolutely and relatively. This may be the outcome of improvements in management deficiencies, insufficient financial control, research and development, obsolete technology, inadequate demand, shortage of raw materials, infrastructure bottlenecks, etc.
There are two more issues concerning MSME performance:
Ancillarisation – the promotion of inter-firm linkages between large firms and MSME through subcontracting and ancillarisation in both public and private sectors has been an important dimension of India’s MSME policy. Any growth of ancillarisation and sub-contracting would be advantageous to the MSME sector by way of assured marketing, covered technical assistance, finance, and supply of raw materials and training. During this period the percentage of ancillary units increased from 5 percent. Note that however a significant proportion of MSME subcontracting and ancillarisation are informal in nature. The growing inter-firm linkages, formal as well as informal, would have benefited the economic performance of MSME sector.
The degree of internationalization – world over, an export strategy has been the primary foreign market entry mode adopted by MSMEs in their internationalization efforts – this has been observed in the Indian context as well. At the national level, several factors contributed to the increasing trend of MSME internationalization like – structural shift in the composition of MSME exports from traditional to non-traditional items, modes of entry such as MNCs and e-Commerce etc.
Policy Towards Small-Scale Industries


Though MSMEs were recognised as important for employment generation and equitable distribution of income from the earliest days of Indian Independence, it appears that the objectives of policies stressing the role of MSMEs are not being realised.
Since independence in 1947, especially since the late 1950s, development has been wide-ranging, both in terms of programs and regions. Policy measures included inter-alia fiscal concessions, subsidized and directed bank credit, and technical and marketing support, along with reservations of products for exclusive production by the MSME sector.
These policy measures were in tune with the other policies such as the domestic investment and foreign trade policies that became more restrictive over the years.
Since the mid-1980s there has been a gradual turnaround in policy, including reforms in the tax system and liberalization of import policy.
The shift in MSME policy emphasis from protection to the promotion of competitiveness began with the introduction of an exclusive policy for MSME in 1991. Since then, the policy support in the 1990s and early 2000s has been large to enable the MSMEs to overcome key challenges to their performance and growth, namely, finance, technology, and marketing, among others.
To operate these programs and to monitor their progress, new agencies and institutions have been set up, and the existing ones strengthened at the national, regional, state, and lower levels. There is also a special bank for MSMEs – SIDBI. The SSIs have their own associations and are also represented in the national and state level associations of large-scale industries.
Evaluation of the Reservation Policy
The policy of reserving products for exclusive manufacture in the small-scale sector was started in 1967 with forty-seven items; the list of reserved items rose to 873 in 1984.
The number of items on the reserved list for the SSI sector was brought down to 836 by 1989.
The pace of reforms accelerated after 1991: average tariff rates have been steadily lowered, quantitative restrictions have been removed, and domestic investment policies have been liberalized.
Over time, the number of items on the reserved list has also been reduced and stands at 605 in 2005.
With liberalization, since all the items on the reserved list can now be imported, MSMEs face competition from foreign enterprises even though large scale industries in India cannot produce these products.
The Censuses of the SSIs also suggest that the policy of reserving goods for production by SSIs has not been very effective. The number of units making reserved products was small compared to the overall size of the MSME sector, and the reserved products account for a small share of the total value of output in the MSME sector.
Also, it appears that the export performance of India may have suffered because of the reservation policy. Most growing economies witness a changing structure of exports, with a high growth of exports of labour-intensive and resource-based industries. The export structure of India has not changed much in the last two decades, and this may be because many commodities in the potential high-growth category come under the reserved list.
What are the challenges of MSME?
Most of the unregistered MSMEs would predominantly comprise micro enterprises, particularly confined to rural India, operating with obsolete technology, limited access to institutional finance etc. And there is a need to transform the huge unregistered MSME into registered MSME.
Need to improve the competitiveness of the overall MSME sector.
Access to technology.
IPR related issues.
Design as a market driver.
Wasteful usage of resources/manpower.
Energy inefficiency and associated high cost.
Low ICT usage.
Low market penetration.
Quality assurance/certification.
Standardization of products and proper marketing channels to penetrate new markets.
The definition for MSMEs must be updated – considering inflation and availability of better technologies since the last change in 2006.
Recent Initiatives
As part of the National Manufacturing Competitiveness Programme (NMCP) – 10 specific initiatives were taken to enhance the competitiveness of the entire value chain of the MSME sector.
Limited Liability Partnership (LLP) Act, 2008 was introduced to enable early corporatization of MSMEs and tap the capital market for fund raising. Accordingly, MSME platforms are created in BSE and NSE in 2012.
To develop a roadmap for the development and promotion of MSMEs, a task force was created by the Prime Minister of India in 2009. The Task Force, which comprised, among others, six specific theme-based sub-groups (on credit, marketing, infrastructure, technology, skill development, exit policy, labor, and taxation) submitted its report in 2010 suggesting: (1) Immediate policy measures (2) Medium-term institutional measures (3) Legal and regulatory structures to create a conducive environment for entrepreneurship and growth of MSMEs.
The Inter-Ministerial Committee for Accelerating Manufacturing in Micro, Small and Medium Enterprises made recommendations on – (a) the promotion of start-ups (b) facilitating operation and growth (covering credit, technology, and marketing) (c) closure and exit (d) labour laws and regulations.
These policy initiatives are clear and consistent, aimed at transforming the ecosystem for the MSMEs sector by influencing: (1) Birth (encouraging Start-Ups) (2) Operations and growth (by simplifying laws and regulations, and facilitating their access to credit. Better technology and dynamic markets, apart from skilled labour and reliable infrastructure) (3) Orderly and easy exit
Thus, the emerging focus of India’s MSME policy aims at covering the entire lifecycle of MSMEs to ensure a healthy, vibrant and competitive MSME sector.
Summary
The guidelines with regard to investment in plant and machinery or equipment as defined in the MSMED Act, 2006 are: