RESOURCE RAISING NORMS FOR FINANCIAL INSTITUTIONS

SWAPNIL SHRIVASTAVA MMS FINANCE B-45

TERM DEPOSITS

Term deposits along with other instruments viz. Term money, CPs, CDs and inter corporate deposits should not exceed 100% of its net owned funds. Maturity period is 1-5 years. FIs are free to fix the interest rates.

Minimum size Rs. 10,000

Brokerage 1% of the deposits accepted.

TERM DEPOSITS

Premature withdrawal before 6 months - No interest to be paid. Premature withdrawal between 0.5-1 yr Interest not exceeding savings bank rate for Scheduled Commercial Banks be paid. For premature withdrawal beyond 1 yr FIs are free to decide their penal rate. Rating from rating agencies approved by SEBI is mandatory.

TERM MONEY BORROWINGS

Term money borrowings along with other instruments viz. Term money, CPs, CDs and inter corporate deposits should not exceed 100% of its net owned funds. Maturity period should be between 3-6 months. FIs are free to fix interest rates.

FIs are eligible to borrow term money from Scheduled Commercial Banks and Co-operative Banks only.

CERTIFICATE OF DEPOSIT

CDs can be issued by select all-India Financial Institutions that have been permitted by the RBI to raise short-term resources. Issue of CDs together with other instruments term money, term deposits, CPs and inter corporate deposits should not exceed 100% of its net owned funds. Minimum amount Rs 1 lakh. CDs can be issued to individuals, corporations, companies, trusts, funds, associations, etc.

CERTIFICATE OF DEPOSIT

FIs can issue CDs for a period not less than 1 year and not exceeding 3 years from the date of issue. FIs are free to determine the discount / coupon rate.

COMMERCIAL PAPERS

All India Financial Institutions that have been permitted to raise resources by the RBI are eligible to issue CPs. Issue of CPs together with other instruments viz., term money, term deposits, CDs and inter corporate deposits should not exceed 100% of its net owned funds. The total amount proposed through issue of CPs should be raised within a period of two weeks from the date on which the issuer opens the issue for subscription. CPs can be issued in denomination of Rs.5 lakhs or multiples thereof.

COMMERCIAL PAPERS

FIs shall obtain the credit rating from credit rating agency as may be specified by Reserve Bank of India. Issued to - banking companies, other corporate bodies or unincorporated bodies, NRIs, FIIs. Maturity Minimum of 7 days and maximum upto 1 year.

Issued at a discount - Rate of discount determined by the FI.

CPs can be issued either in form of a promissory note or in a dematerialized form.