Quality in Business
CEO of Zappy has achieved India 5000 Women Achiever Awards, 2020 and Zappy have received Quality in Business Certificate by the International Trade Council. Try Zappy Compliance a new way of Compliance Calendar that will help you maintain Statutory Registers, Minutes Books and other Repositories online at ease in a safe and secure way.
In this edition, we will be seeing about Director-related Loans by Urban Co-operative Banks (UCBs) Guidance issued by RBI. We will have our usual Legal terms and News Bites related to notifications by MCA, SEBI, RBI, IT and GST following the article.
CS Saranya Deivasigamani,
CEO
DIRECTOR-RELATED LOANS BY UCBs
The Banking Regulation Act, 1949 (“the Act”) has been amended by the Banking Regulation (Amendment) Act, 2020 notified for the Primary (Urban) Co-operative Banks (UCBs) on September 29, 2020 and deemed to have been effective from June 29, 2020. Consequently, section 20 of the principal Act has become applicable to UCBs. Keeping in view the above, the extant directions on the subject issued to UCBs have been reviewed and the revised directions are issued as under.
UCBs shall not make, provide or renew any loans and advances or extend any other financial accommodation to or on behalf of their directors or their relatives, or to the firms / companies / concerns in which the directors or their relatives are interested (collectively called as “director-related loans”). Further, the directors or their relatives or the firms / companies / concerns in which the directors or their relatives are interested shall also not stand as surety/guarantor to the loans and advances or any other financial accommodation sanctioned by UCBs. ‘Advances’ for the purpose shall include all types of funded / working capital limits such as cash credits, overdrafts, credit cards, etc.
The following categories of director-related loans shall, however, be excluded from “loans and advances” for the purpose of these directions:
Regular employee-related loans to staff directors, if any, on the Boards of UCBs;
Normal loans, as applicable to members, to the directors on the Boards of Salary Earners’ UCBs;
Normal employee-related loans to Managing Directors / Chief Executive Officers of UCBs;
Loans to directors or their relatives against Government Securities, Fixed Deposits and Life Insurance Policies standing in their own name.
Explanation: For the purpose of these directions –
The term ‘any other financial accommodation’ shall include funded and non-funded credit limits and underwritings and similar commitments, as under:
The funded limits shall include loans and advances by way of bill/cheque purchase/ discounting, pre-shipment and post-shipment credit facilities and deferred payment guarantee limits extended for any purpose including purchase of capital equipment and acceptance limits in connection therewith sanctioned to borrowers, and guarantees by issue of which a bank undertakes financial obligation to enable its constituents to acquire capital assets. It shall also include investments which are in the nature of / in lieu of credit.
The non-funded limits shall include letters of credit, guarantees other than those referred to in paragraph (a) above, underwritings and similar commitments. It shall also include off-balance sheet exposure in the form of derivatives.
The word “relative” shall have the meaning as under:
A person shall be deemed to be a relative of another, if and only if:-
a) They are members of a Hindu Undivided Family; or
b) They are husband and wife; or
c) The one is related to the other (or vice-versa) in the manner indicated below:
- Father (including step-father)
- Mother (including step-mother)
- Son (including step-son)
- Son’s wife
- Daughter (including step-daughter)
- Daughter’s husband
- Brother (including step-brother)
- Brother’s wife
- Sister (including step-sister)
- Sister’s husband
iii. The word “interested” shall mean the director of the UCB or his relative, as the case may be, being a director, managing agent, manager, employee, proprietor, partner, coparcener or guarantor, as the case may be, of the firm / company / concern (including HUF):
Provided that a director of a UCB or his relative shall also be deemed to be interested in a company, being the subsidiary or holding company, if he/she is a director, managing agent, manager, employee or guarantor of the respective holding or subsidiary company:
Provided further that a director of a UCB shall also be deemed to be interested in a company/firm if he/she holds substantial interest in or is in control of the company/firm or in a company, being the subsidiary or holding company, if he/she holds substantial interest in or is in control of the respective holding or subsidiary company:
Provided further that a relative of a director of a UCB shall also be deemed to be interested in a company/firm if he/she is a major shareholder or is in control of the company/firm or in a company, being the subsidiary or holding company, if he/she is a major shareholder or is in control of the respective holding or subsidiary company:
The term “substantial interest” shall have the same meaning as assigned to it in section 5(ne) of the Banking Regulation Act, 1949.
The term “control” shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in another manner.
The term “major shareholder” shall mean a person holding 10% or more of the paid up share capital.
UCBs shall submit information pertaining to their director-related loans as at the end of each quarter (i.e. Mar 31, Jun 30, Sep 30 and Dec 31), in the format given in the Annex to these directions, to the concerned Regional Office of Department of Supervision of Reserve Bank of India within fifteen days from the end of the respective quarter. In the case of UCBs functioning under Administrator(s) / Person(s)-in-Charge / Special Officers, the UCBs concerned should submit the information in respect of loans and advances availed by the Administrator(s) / Person(s)-in-Charge / Special Officers, including their relatives.
These directions supersede the earlier directives / instructions issued on the subject and shall come into force on Feb 5, 2021. The existing director-related loans sanctioned/granted by UCBs prior to Feb 5, 2021, if any, may continue till their respective maturity and shall not be renewed further.
Legal Terms
Acquiesce
To accept without protest; to give implied consent by silence.
MCA Updates
- Companies (Incorporation) 2nd Amendment Rules 2021.
- Companies (Specification of Definition details) Amendment Rules 2021
- Companies (compromises, arrangements and amalgamations) Amendment Rules 2021
- Companies (CSR Policy) Amendment Rules, 2021
SEBI Updates
- Revised disclosure formats under Regulation 7 of SEBI (Prohibition of Insider Trading) Regulations, 2015.
- Master Circular for Depositories.
- Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2021.
- Revised Framework for Innovation Sandbox.
- Setting up of Limited Purpose Clearing Corporation (LPCC) by Asset Management Companies (AMCs) of Mutual Funds.
- Circular on Revision of Monthly Cumulative Report.
- Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2021.
- Corrigendum to the Securities and Exchange Board of India (Investment Advisers) (Amendment) Regulations, 2021.
- Relaxations relating to procedural matters – Issues and Listing.
RBI Updates
- Margin for Derivative Contracts.
- Investment in NBFCs from FATF non-compliant jurisdictions.
- Basel III Framework on Liquidity Standards – Net Stable Funding Ratio (NSFR).
- Basel III Capital Regulations- Review of transitional arrangements.
- Loans and advances to directors, their relatives, and firms / concerns in which they are interested.
- Risk-Based Internal Audit (RBIA).
- Strengthening of Grievance Redress Mechanism in Banks.
IT Updates
- Procedure, Formats and Standards of issue of Permanent Account Number (IPAN).
- Notification No. 04/2021/ F.No. IT(A)/01/2020-TPL / S.O. 471(E).
GST Updates
- Advisory on Reconciliation Statement (GSTR-9C ).
- Know more about “QRMP scheme and how to furnish details in IFF” and Answers to Frequently Asked Questions.
- Due dates for filing of Form GSTR-3B from the Tax Period of January, 2021.
- Webinar on furnishing of details in IFF and payment of tax (Form GST PMT-06) by Taxpayers in QRMP Scheme.
- Payment of Tax by Fixed Sum Method under QRMP Scheme.
- Auto-population of e-invoice details into GSTR-1.
- Module wise new functionalities deployed on the GST Portal for taxpayers.
'