RTGS v/s NEFT & DICGC (Deposit Insurance and Credit Guarantee Corporation of India)

 

NPA-Non-Performing Asset & SARFAESI

It means once the borrower has failed to make interest or

principal payments for 90 days, the loan is considered to be a

non-performing asset.

SARFAESI Act and Rules

SARFAESI Act (The Securitization and Reconstruction of

Financial Assets and Enforcement of Security Interest Act,

2002) was enacted to regulate securitization and

reconstruction of financial assets and enforcement of security

interest created in respect of Financial Assets to enable

realization of such assets.

The SARFAESI Act provides for the manner for enforcement

of security interests by a secured creditor without the

intervention of a court or tribunal. If any borrower fails to

discharge his liability in repayment of any secured debt

within 60 days of notice from the date of notice by the

secured creditor, the secured creditor is conferred with

powers under the SARFAESI Act to

 

a) Takes possession of the secured assets of the borrower,

including transfer by way of lease,assignment or sale, for

realizing the secured assets

 

b) Takeover of the management of the business of the

borrower including the right to transferby way of lease,

assignment or sale for

realizing the secured assets,

 

c) Appoint any person to manage the secured assets

possession of which is taken by thesecured creditor, and

d) Require any person, who has acquired any of the secured

assets from the borrower andfrom whom money is due to

the borrower, to

pay the secured creditor so much of the money as if sufficient

to pay the secured debt.

The assets portfolio of the banks is required to be classified as

(1) standard assets (2) sub-standard assets(3) doubtful

assets and (4) loss assets.

Ø Standard asset is one that does not disclose any problems

and which does not carry more than normal risk attached

to the business .

Ø An asset which has been classified as NPA for a period

not exceeding 12 months is considered as sub-standard

asset.

Ø Doubtful asset is one which has remained NPA for a

period exceeding 12 months.

Ø An asset which is considered uncollectible and loss has

been identified by the bank or internal or external

auditors or the RBI inspection and the loss has not been

written off is regarded as loss asset

DICGC (Deposit Insurance and Credit

Guarantee Corporation of India)

 

1. Which banks are insured by the DICGC?

Commercial Banks: All commercial banks including branches

of foreign banks functioning in India, local area banks and

regional rural banks are insured by the DICGC.

 

2. What does the DICGC insure?

In the event of a bank failure, DICGC protects bank deposits

that are payable in India. The DICGC insures all deposits

such as savings, fixed, current, recurring, etc. except the

following types of deposits.

(i) Deposits of foreign Governments;

(ii) Deposits of Central/State Governments;

(iii)Inter-bank deposits;

(iv)Deposits of the State Land Development Banks with the

State co-operative bank;

(v) Any amount due on account of any deposit received

outside India

(vi) Any amount, which has been specifically exempted by the

corporation with the previous approval of Reserve Bank

of India.

3. What is the maximum deposit amount insured by the

DICGC?

Each depositor in a bank is insured upto a maximum of

Rs.1,00,000 (Rupees One Lakh) for both principal and interest

amount held by him in the same capacity.

4. Does the DICGC insure just the principal on an account or

both principal and accrued interest?

The DICGC insures principal and interest upto a maximum

amount of Rs. One lakh.

NEFT AND RTGS

NEFT:

National Electronic Funds Transfer (NEFT) is a nation-wide

payment system facilitating one-to-one funds transfer.

Under this Scheme, individuals, firms and corporates can

electronically transfer funds from any bank branch to any

individual, firm or corporate having an account with any

other bank branch in the country participating in the Scheme.

Limit using NEFT:

 

There is no limit – either minimum or maximum – on the

amount of funds that could be transferred using NEFT.

However, maximum amount per transaction is limited to

Rs.50,000/- for cash-based remittances and remittances to

Nepal.

RTGS:

Real Time Gross Settlement, which can be defined as the

continuous (real-time) settlement of funds transfers

individually on an order by order basis (without netting).

'Real Time' means the processing of instructions at the time

they are received rather than at some later time; 'Gross

Settlement' means the settlement of funds transfer

instructions occurs individually (on an instruction by

instruction basis).

Limit using RTGS:

The RTGS system is primarily meant for large value

transactions. The minimum amount to be remitted through

RTGS is

Rs. 2 lakhs. There is no upper ceiling for RTGS transactions.

RTGS v/s NEFT

NEFT is an electronic fund transfer system that operates on a

Deferred Net Settlement (DNS) basis which settles

transactions in batches. Contrary to this, in the RTGS

transactions are processed continuously throughout the RTGS

business hours.

Accounts for Foreign (Currency/Person)

in India

a) NRO A/c (Foreign Tourist)

1) Foreign tourists during their short visit to India can open a

Non-Resident (Ordinary) Rupee (NRO) account (Current /

Savings) with any Authorised Dealer bank dealing in foreign

exchange. Such account can be opened up to a maximum

period of 6 months.

2) Tourists can freely make local payments through the NRO

account. All payments to residents exceeding INR 50,000 can

be made only by means of cheques / pay orders / demand

drafts.

b) EEFC A/c

1) Exchange Earners' Foreign Currency Account (EEFC) is an

account maintained in foreign currency with an

Authorised Dealer i.e. a bank dealing in foreign exchange.

2) It is a facility provided to the foreign exchange earners,

including exporters, to credit 100 per cent of their foreign

exchange earnings to the account, so that the account

holders do not have to convert foreign exchange into

Rupees and vice versa, thereby minimizing the

transaction costs.

3) All categories of foreign exchange earners, such as

individuals, companies, etc. who are resident in India,

may open EEFC accounts.

4) An EEFC account can be held only in the form of a current

account. No interest is payable on EEFC accounts.

ACCOUNTS FOR NRI/PIO

1. Non-Resident Ordinary Rupee Account (NRO Account)

Ø NRO accounts may be opened / maintained in the form of

current, savings, recurring or fixed deposit accounts.

Interest rates offered by banks on NRO deposits cannot

be higher than those offered by them on comparable

domestic rupee deposits.

Ø Account should be denominated in Indian Rupees.

Ø NRI/PIO may remit from the balances held in NRO

account an amount not exceeding USD one million per

financial year, subject to payment of applicable taxes.

Ø The limit of USD 1 million per financial year includes sale

proceeds of immovable properties held by NRIs/PIOs.

2. Non-Resident (External) Rupee Account (NRE Account)

Ø NRE account may be in the form of savings, current,

recurring or fixed deposit accounts.

Ø Account will be maintained in Indian Rupees.

Ø Accrued interest income and balances held in NRE

accounts are exempt from Income tax.

Ø Authorised dealers/authorised banks may at their

discretion allow for a period of not more than two weeks,

overdrawings in NRE savings bank accounts, up to a limit

of Rs.50,000.

Ø Loans up to Rs.100 lakh can be extended against security

of funds held in NRE Account either to the depositors or

third parties.

3. Foreign Currency Non Resident (Bank) Account – FCNR

(B) Account

Ø FCNR (B) accounts are only in the form of term deposits

of 1 to 5 years

Ø Account can be in any freely convertible currency.

Ø Loans up to Rs.100 lakh can be extended against security

of funds held in FCNR (B) deposit either to the depositors

or third parties.

Ø The interest rates are stipulated by the Department of

Banking Operations and Development, Reserve Bank of

India.

9) Foreign Accounts in India

a) NRO A/c (Foreign Tourist)

Can foreign tourists open a bank account in India during their short visit?

Yes. Foreign tourists during their short visit to India can open a Non-Resident (Ordinary) Rupee (NRO) account (Current / Savings) with any Authorised Dealer bank dealing in foreign exchange. Such account can be opened up to a maximum period of 6 months.

What credits can be made to such accounts?

Funds remitted from outside India through banking channel or those obtained by sale of foreign exchange brought by the tourists to India can be credited to the NRO account.

Can the NRO account be used for making local payments?

Yes. Tourists can freely make local payments through the NRO account. All payments to residents exceeding INR 50,000 can be made only by means of cheques / pay orders / demand drafts.

b) EEFC A/c

What is an EEFC Account and what are its benefits?

Ans. Exchange Earners' Foreign Currency Account (EEFC) is an account maintained in foreign currency with an Authorised Dealer i.e. a bank dealing in foreign exchange. It is a facility provided to the foreign exchange earners, including exporters, to credit 100 per cent of their foreign exchange earnings to the account, so that the account holders do not have to convert foreign exchange into Rupees and vice versa, thereby minimizing the transaction costs.

Who can open an EEFC account?

Ans. All categories of foreign exchange earners, such as individuals, companies, etc. who are resident in India, may open EEFC accounts.

What are the different types of EEFC accounts? Can interest be paid on these accounts?

Ans. An EEFC account can be held only in the form of a current account. No interest is payable on EEFC accounts.

Accounts for NRI/PIO

What are the different types of accounts which can be maintained by an NRI/PIO in India?

Types of accounts which can be maintained by an NRI / PIO in India:

A. Non-Resident Ordinary Rupee Account (NRO Account)

NRO accounts may be opened / maintained in the form of current, savings, recurring or fixed deposit accounts. Interest rates offered by banks on NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits.

● Account should be denominated in Indian Rupees.

● Permissible credits to NRO account are transfers from rupee accounts of non-resident banks, remittances received in permitted currency from outside India through normal banking channels, permitted currency tendered by account holder during his temporary visit to India, legitimate dues in India of the account holder like current income like rent, dividend, pension, interest, etc., sale proceeds of assets including immovable property acquired out of rupee/foreign currency funds or by way of legacy/ inheritance.

● NRI/PIO may remit from the balances held in NRO account an amount not exceeding USD one million per financial year, subject to payment of applicable taxes.

● The limit of USD 1 million per financial year includes sale proceeds of immovable properties held by NRIs/PIOs.

B. Non-Resident (External) Rupee Account (NRE Account)

1) NRE account may be in the form of savings, current, recurring or fixed deposit accounts.

2) Such accounts can be opened only by the non-resident himself and not through the holder of the power of attorney.

3) Account will be maintained in Indian Rupees.

4) Accrued interest income and balances held in NRE accounts are exempt from Income tax.

5) Authorised dealers/authorised banks may at their discretion allow for a period of not more than two weeks,

overdrawings in NRE savings bank accounts, up to a limit of Rs.50,000.

6) Loans up to Rs.100 lakh can be extended against security of funds held in NRE Account either to the depositors or third parties.

C. Foreign Currency Non Resident (Bank) Account – FCNR (B) Account

● FCNR (B) accounts are only in the form of term deposits of 1 to 5 years

● Account can be in any freely convertible currency.

● Loans up to Rs.100 lakh can be extended against security of funds held in FCNR (B) deposit either to the depositors or third parties.

● The interest rates are stipulated by the Department of Banking Operations and Development, Reserve Bank of India.