Clearing Money Policy

8/2/2019 Clearing Money Policy

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Clean Note Policy: RBI

Shri Vepa Kamesam, Deputy Governor, Reserve Bank of India, exhorted the banks to implementthe Reserve Bank's instructions issued from November 2001 to do away with stapling of note

packets and to introduce banding the packets with paper/polythene bands so that the life of the

currency notes is increased. The Deputy Governor took a meeting of Chief Executives of publicsector banks and other banks having currency chests in Delhi today to discuss matters connected

with implementing the Reserve Bank of India's Clean Note Policy. The objective of the Reserve

Bank's Clean Note Policy is to give the citizens good quality currency notes and coins while the

soiled notes are withdrawn out of circulation. The Reserve Bank has also instructed the banks toissue only good quality clean notes to the public and refrain from recycling the soiled notes

received by them over their counters. The Reserve Bank has installed high speed Currency

Verification and Processing Systems (CVPS) machines at all its offices which deal with

currency. These machines are capable of processing 50,000-60,000 pieces per hour and soilednotes are shredded and briquetted on-line.

Ever since 1999, when the Governor announced the Clean Note Policy, several steps were taken

for augmenting the supply of currency notes and coins. The members of public were urged not to

write on the currency notes and banks were instructed to provide unrestricted facility forexchange of soiled and mutilated notes. As per the Reserve Bank instructions, currency chest

branches of the banks must offer, even to non-customers, good quality notes and coins in

exchange for soiled and mutilated notes. Complaints, however, continue to be received in this

regard from the public and trade bodies that these instructions have not been given full effect.

Some complaints of restrictive practices were also being received according to which some

currency chest branches in the rural and semi urban areas do not accept lower denominationnotes. To mitigate the position, the Reserve Bank has given specific monthly targets for

distribution of coins to these currency chests. The Reserve Bank monitors these targets from thefeedback reports. Further in an experimental basis, the Reserve Bank had requested banksbetween September and November this year to open one currency chest branch on one Sunday in

a month at selected centres to exclusively provide currency exchange and distribution of small

coins and suck out the bad notes. The reports received from the banks show that this experiment

received tremendous response from the public. It has, therefore, been decided that banks shouldrun this scheme on a permanent basis with wholehearted participation. The choice of the centre

and the choice of the Sunday in the month should be left to the individual bank to decide.

The Deputy Governor emphasized that high degree of coordination is necessary between chest

branches and non-chest branches and it was time that the currency chest branches also

mechanized their operations by installing smaller desk top versions in addition to bandingmachines so that members of public receive good staple free notes and the Reserve Bank also

receives staple free soiled notes ready for processing and destruction. He also stated that the

Regional Directors of the Reserve Bank could be contacted for proper coordination ofremittances of notes and coins. He hoped that the banks will extend full cooperation to the

Reserve Bank in delivery of its Clean Note Policy and it may not have to think of any Regulatory

intervention for this purpose.


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Anti-Money Laundering Guidelines

In view of the increased concerns regarding money laundering

activities and to prevent AMCs from being misused for such activities,

Reserve bank of India has formulate suitable policies and procedures inthis regard. To enable AMCs to put in place the policy framework and

systems for prevention of money laundering while undertaking money

changing transactions, the Reserve Bank has brought out detailed Anti-Money Laundering (AML) guidelines.

The purpose of prescribing Anti-Money Laundering Guidelines is toprevent the system of Authorised Money Changers (AMCs) engaged inthe purchase and / or sale of foreign currency notes/Travelers cheques

from being used for money laundering. Therefore, Anti-Money

Laundering (AML) measures should include a) Identification ofCustomer according to Know Your Customer norms, b) Recognition,

handling and disclosure of suspicious transactions, c) Appointment of

Money Laundering Reporting Officer (MLRO), d) Staff Training, e)

Maintenance of records, f) Audit of transactions.

The following are broad guidelines to enable AMCs to formulate

and put in place a proper policy framework for AML measures. KnowYour Customer (KYC) Identification of Customers All transactionsshould be undertaken only after proper identification of the customer.

Photocopies of proof of identification should invariably be retained bythe AMC after verifying the document in original. Full details of nameand address as well as the details of the identity document provided

should also be kept on record. If a transaction is being undertaken on

behalf of another person, identification evidence of all the personsconcerned should be obtained and kept on record.

Purchase

Purchase of Foreign Exchange

a) For encashment of foreign currency notes and/or Travelers Cheques

upto USD 500 or its equivalent, production of passport need not beinsisted upon and any other suitable document of identification likeration card, driving licence etc. can also be accepted.

b) For verification of the identity of customer for encashment in excess

of USD 500 or its equivalent, a photo identity document such aspassport, driving licence, PAN Card, voter identity card issued by the

Election Commission, etc. should be obtainedc) Requests for payment of sale proceeds in cash may be acceded tothe extent of USD 1000 or its equivalent per transaction. All

encashment within one month may be treated as single transaction forthe purpose. In all other cases AMCs should make payment by way of"Account Payee" cheque / demand draft only.d) Where the amount of forex tendered for encashment by a non-

resident or a person returning from abroad exceeds the limits

prescribed for Currency Declaration Form (CDF), the AMC shouldinvariably insist for production of declaration in CDF.

Sales


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In all cases of sale of foreign exchange, irrespective of the amount

involved, for identification purpose the passport of the customer should

be insisted upon. The sale of forex should be made only on personalapplication and identification. Payment in excess of Rs. 50,000/-

towards sale of foreign exchange should be received only by account

payee cheque / demand draft. All purchases by a person within one

month may be treated as single transaction for the purpose.Encashment Certificate, wherever required, should also be insisted

upon.

For more detailed information you can visit RBI Site atwww.RBI.gov.in

Monetary Policy Dilemmas: Some RBIPerspectives (Dr. D. subbarao, Governor,RBI)

Monetary policy making is both an art and science. Textbooks typically simplify

monetary policy analysis by classifying the various shocks into demand and supply

shocks. Under such textbook abstractions, monetary policy actions are unambiguous.

If inflation is high, raise interest rates. If inflation is below target, reduce interest rates.

But real world problems are too complex to fit template solution of text books. In

particular, it is difficult to segregate the shocks neatly into the two boxes of demand

shocks and supply shocks and this complicates monetary management.

This blog addresses some of the complexities and dilemmas in the management of

monetary policy. In particular, I will focus on two topical issues. First, how should

monetary policy deal with shocks which are a combination of both demand and supply

factors? And, second, is there any inconsistency between the central bank injecting

liquidity while pursuing a tight monetary policy?

What is the appropriate monetary policy response to complex growth-inflation

dynamics?

India recovered from the crisis sooner than even other emerging economies, butinflation too caught up with us sooner than elsewhere. Inflation, as measured by the

wholesale price index (WPI), which actually went into negative territory for a brief

period in mid-2009, started rising in late 2009, and it has remained around 9- 10 per

cent since January 2010 reflecting both supply and demand pressures. Supply

pressures stemmed from elevated domestic food prices and rising global prices of oil


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and other commodities. The source of demand pressures was an economy with low

per capita income which recovered sharply from the crisis. The supply pressures and

demand pressures collided triggering a wider inflationary process.

In response to the inflationary pressures, the Reserve Bank began to reverse itsaccommodative monetary policy as early as October 2009. We have been criticized

for our anti-inflationary stance, ironically from two different directions.

From one side, we have been criticized for being hawkish on inflation. The argument

has been that our inflation is driven largely by supply shocks, particularly, since mid-

2010, by high oil and other commodity prices, and that monetary policy should not

respond to such inflation. We will only end up hurting growth. The criticism from the

other side has been that the Reserve Bank has been soft on inflation, the baby step

approach we followed - of increasing policy interest rates by 25 basis points (bps)

each time - was not deterrent enough, and that the persistence of inflation is a result

of our delayed response. Both these critiques cannot obviously be right at the same

time. Let me offer a response to them and in the process explain the rationale for our

anti-inflationary stance.

Monetary Policy Too Hawkish

My response to the doves is as follows. Admittedly, monetary policy is best suited to

contain inflationary pressures stemming from the aggregate demand side. In that

case, the policy prescription is clear. If inflation is high, tighten monetary policy; and ifinflation is low, loosen monetary policy. Monetary policy options in the face of supply

shocks are less straight forward. Whether monetary policy is effective in dealing with

supply shocks is therefore a matter of both academic debate and policy contention.

The conventional wisdom is that if inflation expectations are well anchored, monetary

policy need not react to supply shocks. This premise is based on two assumptions;

first that the supply shocks are purely temporary, and second that supply shocks are

the only ones driving inflation. These assumptions do not always hold. In the real

world, oftentimes supply shocks lead to a permanent trend upward shift in prices.

Also, sometimes, demand pressures combine with supply shocks to stoke inflationary

pressures.

A good illustration of the first assumption - mean reverting supply shocks - not holding

comes from the world prices of oil which have trended up on a long period basis.

International crude oil prices recorded an annual average increase of around 17 per


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cent during the 2000s as against only a modest increase of 2 per cent during the

1990s and a decline of 3 per cent during the 1980s. This obviously is the outcome of

structural changes in supply and demand for oil. Monetary policy has to recognize

these underlying trends and respond to them. If it looks upon these trends as pure

transient supply shocks and ignores them, it runs the risk of destabilizing inflation

expectations.

And now about the second assumption - of supply shocks not usually acting alone to

stoke inflation. The shifting drivers of inflation in India over the past year and a half

offer a good illustration. The increase in global commodity prices coincided with

rapidly rising demand at home. GDP grew at 8.5 per cent last year (2010/11), faster

than the trend growth rate which is now estimated to be of the order of 8 per cent. In

an environment of rapid growth and high capacity utilization, corporates regained

pricing power and were able to pass through the increase in input prices to higher

output prices thus fuelling generalized inflationary pressures.

Similar dynamics were at play on the food front. Rising incomes, especially toward

protein-based foods, have resulted in a shift in dietary habits away from cereals and

toward protein-based foods. This is a structural change and monetary policy will be

misled if it treats this as a one-off supply shock. Given the high share of food in the

various consumer price indices (46%-70%), persistent supply pressures on the food

front can fuel inflation expectations; and in the face of growing demand pressures,

rising inflation expectations can trigger a wage-price spiral. Recent reports that real

wages of rural labour have gone up markedly suggest that such a wage-price spiral

may already be under way.

To summarize, the inflation that we have experienced over the last two years - 2010

and 2011 - is a result of a combination of supply shocks that had a trend impact on

prices as well as demand pressures. Given the nature of the inflation drivers and their

combined impact, clearly there is a significant role for monetary policy in combating

inflation. Our monetary policy stance is guided by this understanding, and is aimed at

restraining demand and anchoring inflation expectations. The argument of our critics

that monetary policy has no role because inflation is a result of imported commodity

prices would have been valid if the increase in commodity prices was a pure and

transient supply shock or if there were no demand pressures. That clearly was not the

case in India.


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Monetary Tightening Hurts Growth

Another argument made in this line of criticism is that monetary policy tightening is

hurting growth. I believe a much more nuanced evaluation of our policy stance is

necessary. Evidence from empirical research suggests that the relationship betweengrowth and inflation is non-linear. At low inflation and stable inflation expectations,

there is a trade-off between growth and inflation. But above a certain threshold level of

inflation, this relationship reverses, the trade-off disappears, and high inflation actually

starts taking a toll on growth. Estimates by the Reserve Bank using different

methodologies put the threshold level of inflation in the range of 4% - 6%. With WPI

inflation ruling above 9 per cent, we are way past the threshold. At this high level,

inflation is unambiguously inimical to growth; it saps investor confidence and erodes

medium term growth prospects. The Reserve Banks monetary tightening is

accordingly geared towards safeguarding medium term growth even if it means some

sacrifice in near term growth.

Monetary Policy Behind the Curve

Now let me turn to the criticism from the opposite side - that the Reserve Bank was

slow in closing the monetary spigots, that our baby step approach was inadequate to

tame the inflationary pressures, and that we had to tighten aggressively lately to make

up for lost time.

This criticism fails to appreciate the context - the nature of domestic inflation andglobal uncertainty - in which we were operating. The calibration of our monetary

tightening was guided by the changing drivers of inflation over the course of fiscal

year 2010/11. Early on in the year, inflation pressures had their origin in food prices,

and accordingly our monetary policy response was aimed at containing the spillover

risk to non-food inflation. Note that policy rates had gone down to historically low

levels during the crisis, and an abrupt adjustment would have disrupted the market.

Our judgement, therefore, was that tightening should be done gradually, in small

steps, so as to allow time for the banks and the private sector to adjust to a higher

interest rate environment.

The inflation scenario changed beginning August 2010 when global commodity prices

surged higher than anticipated. Global oil prices came under further pressure starting

January 2011 because of political developments in the Middle East and North-Africa.

Also, as I had indicated earlier, because of the narrowing of the output gap, producers


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were able to pass on higher input prices to higher output prices leading to inflationary

pressures getting generalized as evidenced by the increase in non-food manufactured

product inflation from 5.3 per cent per cent in August 2010 to 8.5 per cent in March

2011. We responded to these changes in underlying drivers of inflation by tightening

more aggressively in May 2011 and again in July 2011.

The second factor relevant in the behind the curve debate is that we also had to

contend with an uncertain global recovery. Even as there was some talk of spring

shoots in April 2010, the optimism did not last; soon thereafter, the Greek sovereign

debt crisis and unemployment concerns in the US revived concerns about the pace

and shape of global recovery. These uncertainties increased both in nature and size

as time passed with the euro area sovereign debt problem not only spreading but

proving to be intractable, the US recovery stalling and the Japanese economy

assaulted by an unprecedented natural disaster. Our baby step approach during

2010 was accordingly a delicate balancing act between supporting recovery at home

amidst growing global uncertainty and containing inflation pressures.

If the above factors are reckoned with, the behind-the-curve argument loses potency.

Between March 2010 and October 2011, we raised the policy interest rate (the repo

rate) by 375 bp. The effective tightening was even more, 525 bp, as the operational

policy rate shifted from reverse repo rate (absorption mode) to repo rate (infusion

mode).

As the above discussion shows, every monetary policy action involves complex

judgement. The supply shocks we confront in the real world are different from pure

text book versions; oftentimes they coincide with rising demand pressures. We had to

balance growth-inflation concerns. On top of that, monetary policy actions need to be

forward looking even in the face of external uncertainty. This in essence was the

dilemma of monetary policy decisions.

How do you justify liquidity injection in the midst of a tightening cycle?

The conventional tools of monetary policy are controls over the volume of money

(liquidity) and the price of money (policy interest rate). Typically an expansionary

stance would involve easing both the rate and volume, and conversely, a

contractionary stance would involve tightening both of them. Occasionally, there arise

situations when the price and volume instruments are deployed in opposite directions

- for example, injecting liquidity amidst a rate tightening cycle - that call for both


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cautious judgement and extra effort at communication.

In understanding the motive force for liquidity adjustment by a central bank, it must be

noted that a growing economy requires the central bank to inject primary liquidity to

meet the requirement for currency and credit. Even if the central bank is in atightening mode, it needs to provide primary liquidity, albeit the volume of liquidity

injection in such a scenario would surely be less than the injection if the monetary

policy were in a neutral or easing mode. The injection of central bank liquidity can

come about only through an expansion of the reserve (base) money. In the first

instance, liquidity injection happens through the overnight borrowing by banks under

the Liquidity Adjustment Facility (LAF). If the liquidity shortage is of a durable nature,

the central bank needs to meet that need through outright open market operations

(OMOs) by buying government securities.

As we progressed with monetary tightening through 2010, the LAF window shifted

from a surplus (absorption) mode to a deficit (injection) mode. This was consistent

with our anti-inflationary stance since a deficit liquidity situation would improve

monetary transmission. We had also indicated clearly that it would be the endeavour

of the Reserve Bank to maintain the absorption or injection through the LAF window at

about 1 per cent of the net demand and time liabilities (NDTL) of banks. However,

towards the second half of 2010, systemic liquidity tightened further pushing the

injection through the LAF window beyond 1 per cent of NDTL. This was due to a

combination of structural and one-off factors. Recognizing that the deficit in systemic

liquidity was of a durable nature, the Reserve Bank conducted outright OMOs to inject

liquidity of a durable nature during November 2010-January 2011. Again, as liquidity

conditions tightened beginning early November 2011, partly reflecting intervention

operations in the foreign exchange market, we conducted OMOs during November-

December 2011.

The liquidity injection through OMOs during late 2010 and early 2011 happened at a

time when we were tightening policy rates to combat inflation. Similarly, the more

recent injection of liquidity during November-December 2011 occurred when the

monetary policy stance remained tight. These were seemingly contrarian actions, and

many observers may have seen them as being conflicting and incoherent. We

realized that there was a communication challenge here - to explain to the market that

we remained committed to bringing inflation down, that our action in injecting liquidity

was not inconsistent with our anti-inflation stance, that we continued to hold that


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liquidity should be in a deficit mode in a monetary tightening cycle, but that we were

injecting liquidity only to ease the excessivedeficit in order to ensure that flow of

credit for productive purposes was not choked.

Informed market participants did, of course, understand the rationale for our actions.But we recognized the importance of communicating the rationale to the public at

large. If people got confused policy signals and believed thereby that the central

banks commitment to inflation control was not credible, inflation expectations would

get unhinged and that would erode the effectiveness of our anti-inflation strategy. We,

therefore, went the extra mile to communicate the rationale at a non-technical level.

While we have injected durable liquidity through outright OMOs so far, we have other

instruments to do the same. These include the statutory liquidity ratio (SLR) and the

cash reserve ratio (CRR). We have preferred OMOs to the alternatives since OMOs

do not require a change in the monetary policy stance. On the other hand, the CRR

and the SLR straddle the divide between liquidity and monetary management. Indeed,

in advanced economies, which dont rely on instruments such as the CRR and the

SLR, repo operations/OMOs remain the only instrument of liquidity injection.

To summarise, liquidity injection by the central bank can take place and is indeed

necessary even as monetary policy is in a tightening mode. However, there are

communication challenges for the central bank in articulating the need for liquidity

injection in a tightening phase.

Anti-Money Laundering Policy

(Pursuant to the provisions of various circulars of Reserve Bank of India issued from timeto time)

|| Key Policies || Know Your Customer || Suspicious Transactions ||

|| Purchase of Foreign Exchange || Sale of Foreign Exchange ||

|| Establishment of Business Relationship || PO Appointment || Reporting Suspicious Activity ||

|| Staff Training || Audit & Compliance || Maintenance of Records || Furnishing Information ||

IntroductionThis policy has been made in compliance with the instructions of the Reserve Bank of Indiavide its various circulars .

ObjectiveIn view of the increased concerns regarding money-laundering activities and to prevent theCompany from being misused for such activities, it was felt that it is necessary for the
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Company to formulate suitable policies and procedures in this regard. This policy is aneffort to develop a system in the Company to prevent Money Laundering Activities. Theobjective of this policy is to formulate such Anti-Money Laundering measures, which canprevent the Company from being misused for the Money Laundering activi ties.

Money Laundering:-Money Laundering can be called a process by which money or otherassets obtained as proceeds of crime are exchanged for Clean Money or other assets

with no obvious link to their criminal origins.

Scope of PolicyThe policy is being made to formulate necessary measures for prevention of MoneyLaundering activities and these measures include the following:-

Customer Identification Procedure- Know Your Customer norms Recognition, handling and disclosure of suspicious transactions Appointment of Principal Officer Staff Training Maintenance of records Audit of transactions.

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Key Policies

The Company hereby adopts the following key policies. The Company & its Branches/employees/ officers/ authorities shall:

Not knowingly launder money and have adequate procedures and controls toensure that its money transfer business is not misused for money launderingand/or terrorist financing.

Not advice customers on how to avoid identification, record keeping or reporting

requirements. Not process a transaction unless it believes that it has a legitimate purpose. Comply with the laws of both countries involved in the transaction. Refuse obviously suspicious transactions. Report suspicious transaction in accordance with the applicable laws, instructions

issued by RBI and Western Union Anti-Money Laundering Policies.

Not split transactions to avoid government identification and reportingrequirements or any policy of the concerned authority/ party.

Not knowingly record false names or information. Not create false records. Co-operate with local regulators and law enforcement bodies. Not use consumer information collected for the purpose of managing Compliance

or other risks for marketing or any other purpose.

Maintain records in accordance with the law and concerned authorities. Ensure that its entire staff receives regular anti-money laundering training and

that attendance at such training is documented.

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Know Your Customer (KYC)

All employees of the Company, engaged in the money transfer/changing servicesshall execute any transaction only after verifying and obtaining a photocopy of avalid identification proof and address proof of the customer. The Branch will

invariably retain photocopies of proof of identification and address after verifyingthe document in original. The identification proof must have a photograph of thecustomer.

Full details of name and address as well as the details of the identity documentsprovided will be kept on record by the Branches.

> If a transaction is being undertaken on behalf of another person, identification evidenceof all the persons concerned should be obtained and kept on record by the concernedbranch.

> Before completing the transaction, it is compulsory for the Branch to review the customerID for the following:

Must contain the customers photograph. Must be valid (current) not expired. Must be government issued. Must contain customers name. Customers address should be either mentioned on the identity proof or should be

traceable based on such ID.

The branch must maintain a photocopy of the photo ID. In case of foreign nationals only passport along with valid visa shall be accepted. In case of foreign nationals who have a refugee status in India, the refugee card

may be accepted provided, additional precaution should be taken to take downthe address and phone number of such persons.

Acceptable ID /Address proof :

Only following documents can be accepted as ID proof :

Passport Driving Licence Voters ID PAN Card(As Id Proof Only) Refugee Card Bank Pass Book (photograph is mandatory)(As Address Proof Only) Army card Photo ID Cards issued by Central or State Government to its employees. This

includes photo ID cards of Police or Army personnel. (Any ID issued to nonemployees will not be accepted).

Utility Bills(As Address Proof Only)

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Suspicious Transactions

The branches should be vigilant against the money laundering transactions at all times.The Branches should determine that whether a transaction is suspicious or not. A
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transaction may be of suspicious nature irrespective of the amount involved. The followingare the possible suspicious activity indicators:

Customer is reluctant to provide details/ documents on frivolous grounds. The transaction is undertaken by one or more intermediaries to protect the identity

of the beneficiary or hide their involvement.

Large cash transactions Size and frequency of transactions is high considering the normal business of the

customer.

Change in the pattern of business transacted etc.

If the branch finds any symptom of suspicious transaction in any transaction then it shouldbe reported to the prescribed authority.

Watch List Report:The Compliance Officer will maintain and control a watch list to keep records of theindividuals who were identified as showing unusual behavior or requesting transactionsthat were identified as questionable or suspicious. This report shall contain details such asthe full names of the individuals, full address, contact details (if available), and possibly, abrief physical description of the individual(s).

An updated report shall be distributed to all locations on a regular basis so that it is readilyavailable. If a person whose name is mentioned in the Watch List Report reaches thebranch for transaction then the branch will not process the transaction and the PO &Compliance Officer should be intimated immediately about the matter.

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Purchase of Foreign Exchange

For purchase of foreign exchange less than US $ 200 or its equivalent,photocopies of the identification document need not be kept on record. However,full details of the identification document should be maintained.

For encashment in excess of US $200 or its equivalent, the photocopies of theidentification document should be maintained for a minimum period of Ten years.

Payment of sale proceeds in cash:Requests for payment of sale proceeds in cash may be acceded to extent of US$1000 or its equivalent per transaction. All encashment within one month may betreated as single transaction for the purpose. In all other cases payment shouldbe made by way of "Account Payee" cheque/ demand draft only.

Explanation :Requests for payment in cash by foreign visitors / Non-Resident Indians may be accededto the extent of US $ 3000 or its equivalent. For any other party the limit will be US$ 1000only.Production of declaration in CDF :Where the amount of forex tendered for encashment by a non-resident or a personreturning from abroad exceeds the limits prescribed for Currency Declaration Form (CDF),the Branch should invariably insist for production of declaration in CDF.

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Sale of Foreign Exchange


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In all cases of sale of foreign exchange, irrespective of the amount involved, foridentification purpose the passport of the customer should be insisted upon.

The sale of forex should be made only on personal application and identification. Payment in excess of Rs. 50,000/- towards sale of foreign exchange should be

received only by Account Payee cheques/ demand draft.

All purchases by a person within one month may be treated as single transactionfor the purpose.

Encashment Certificate, wherever required, should also be insisted upon.

Establishment of Business Relationship

Relationship with a business entity like a Company / firm should be establishedonly after obtaining and verifying suitable documents in support of name, addressand business activity such as certificate of incorporation under the CompaniesAct, 1956, Memorandum and Articles of Association of the Company, registrationcertificate of a firm (if firm is registered), partnership deed, etc.

A list of employees who would be authorised to transact on behalf of the

Company/ firm, the documents of their identification together with their signatures,should also be called for.

Copies of all documents called for verification should be kept on record.

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Appointment of Money Laundering Reporting Officer (PO) & ComplianceOfficer & His/Her Responsibilities

An PO & Compliance Officer will be appointed by the Company, who will beresponsible for monitoring the transactions and ensuring the compliance with theAnti-money laundering guidelines issued by the Reserve Bank of India from timeto time.

The PO & Compliance Officer will also be responsible for reporting of suspicioustransaction(s) to the Financial Intelligence Unit (FIU).

Any suspicious transaction(s), if undertaken, should have prior approval of PO. The PO & Compliance Officer shall have reasonable access to all the necessary

information/ documents, which would help him in effective discharge of hisresponsibilities.

The PO & Compliance Officer will be responsible for the following:

Putting in place necessary controls for detection of suspicious transactions. Receiving disclosures related to suspicious transactions from the staff or

otherwise. Deciding whether a transaction should be reported to the appropriate authorities. Training of staff and preparing detailed guidelines/ handbook for detection of

suspicious transactions.

Preparing annual reports on the adequacy or otherwise of systems andprocedures in place to prevent money laundering and submit it to the TopManagement within 3 months of the end of the financial year.

Consistently reviewing and keeping the management updated of local laws andregulations, guidelines issued by the authorities covering the matters related to


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the compliance of the law & instructions of regulatory authorities.

The PO & Compliance Officer will ensure a compliant and secure money transfersystem by :

o Working co-operatively with governments, regulators and lawenforcement agencies around the world.

o Supporting the enforcement of existing lawso Promoting the use of workable solutions to prevent the improper use of

the Western Union system.o Implementing these policies across all the locations of the Company.o Conduct training session for the field staff of the Company and document

the attendance.o Conduct periodic audit across the Company's Branches.o Confirming the use of Voyager, which is a monitoring system that has

the ability to import transaction and compliance information?

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Reporting of Suspicious Activity

To the extent possible, all suspicious transactions shall be reported to the PObefore they are undertaken.

Full details of all suspicious transactions, whether put through or not, should bereported, in writing, to the PO. This report will contain the following details:

o A statement describing the grounds on which the employee believes thetransaction to be suspicious.

o Details regarding full name, address, occupation etc. of the personrelated to the transaction.

o Physical description and photograph (if available) of the person relatedto the transaction.

o Any transaction which seems suspicious shall be undertaken only withprior approval of PO & Compliance Officer.

o PO & Compliance Officer will make a report to the appropriate authorityi.e. Financial Intelligence Unit (FIU), about all the transaction for whichhe is satisfied that these transaction has/ may have resulted in moneylaundering.

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Staff Training

The Company will have an ongoing training programme for the following purposes :

For the consistent implementation of the Anti-Money Laundering measures. For giving the necessary training to all the managers and staff of the Company to

make them aware of the policies and procedures relating to prevention of moneylaundering, provisions of the Prevention of Money Laundering Act, 2002 and theneed of monitoring all transactions to ensure that no suspicious activity can beundertaken under the guise of money changing.

To give the training to the staff for the necessary steps to be taken when theycome across any suspicious transactions such as asking questions about thesource of funds, checking the identification documents carefully, reporting


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immediately to the PO & Compliance Officer, etc.

The PO & Compliance Officer shall be responsible for providing regular training to allexisting employees, new employees and other concerned persons. At least twocompliance training sessions shall be conducted for all the stakeholders in a year andrecord of attendance shall be maintained.

The PO & Compliance Officer shall develop an Anti Money Laundering Compliancetraining program in consultation with the Board and the Western Union Compliance Officerand shall be responsible for updating it from time to time.

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Audit & Compliance

The concurrent auditor will check all transactions to verify that they have beendone in compliance with the anti-money laundering guidelines/ policy and havebeen reported as required and if he finds any lacuna in compliance of theguidelines/ policies related to the money laundering, he will put up his report to

the Board of Directors of the Company. The concurrenct Audit will be conductedas per the RBI rules i.e. every month in those branches where the monthlyturnover is more then US$100000 and quarterly where the monthly turnover isless then US$100000.

A certificate from the Statutory Auditor on the compliance with the Anti-MoneyLaundering Guidelines will be obtained at the time of preparation of the AnnualReport and it will be kept in records by the Company.

Maintenance of Records

The following documents will be preserved for a minimum period of ten/ prescribed years: -

Records including identification obtained in respect of all transactions. Statements/ Registers prescribed by the Reserve Bank of India from time to time. All inspection/ Audit/ Concurrent Audit Reports. Annual reports of the PO & Compliance Officer submitted to the Top

Management.

Details of all suspicious transactions reported in writing or otherwise to the PO &Compliance Officer.

Details of all transactions involving purchase of foreign exchange againstpayment in cash exceeding Indian Rupees 10,00,000 for inter-related personsduring one month.

All correspondence/ reports with the appropriate authority in connection withsuspicious transactions.

References from Law Enforcement Authorities, including FIU, shall be preserveduntil the cases are adjudicated and closed.

In case of payment of INR 50,000/- or above, the branch must maintain a photocopy of theaccount payee cheque. All records to be maintained in hard and soft copies in accordancewith the procedures specified by RBI.


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Furnishing the Information

A principal officer will be designated and his name & address will be intimated tothe Director appointed under PMLA, 2002.

An internal mechanism will be developed to furnish information as required by RBIfrom time to time.

All instances of fake/counterfeit currency and suspicious actions will be reportedto Director within 3 working days.

Instances of cash transactions shall be reported by seventh day of succeedingmonth.

Bank Rate9.00% (w.e.f.close of

businessof 17/04/2012)

Decreased from

9.50% to9.00% which

wascontinuing since

13/02/2012

CashReserve Ratio

(CRR)

4.75% (wef10/03/2012)-announced

on24/01/2012

Decreased from5.50%which

wascontinuing since24/01/2012

Statutory Liquidity

Ratio (SLR)

24%(w.e.f.18/12/2010)

Decreased from

25%which

was continuingsince

07/11/2009

Repo

Rate under LAF

8.00%(w.e.f.

17/04/2012)

Decreased from

8.50%which

was continuingsince

25/10/2011

Reverse Repo

Rate under LAF

*

7.00%(w.e.f.

17/04/2012)

Decreased from

7.50%which

was continuing since

25/10/2011


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What is Bank rate? Bank Rate is the rate at which central bank of the

country ( Bank Rate in India is decided by RBI) allows finance

to commercial banks. Bank Rate is a tool, which central bank uses for

short-term purposes. Any upward revision in Bank Rate by central bank is

an indication that banks should also increase deposit rates as well as Base

Rate / Benchmark Prime Lending Rate. Thus any revision in the Bank rate

indicates that it is likely that interest rates on yourdeposits are likely to

either go up or go down, and it can also indicate an increase or decrease

in your EMI.

What is Bank Rate ? (For Non Bankers) : Bank Rate in

India is decided by RBI. This is the rate at which central bank

(RBI) lends money to other banks or financial institutions. If the bank rategoes up, long-term interest rates also tend to move up, and vice-versa. Thus, it

can said that if bank rate is hiked, in all likelihood, banks will soon hikes their

own lending rates to ensure that they continue to make profit.

[Remember Bank Rate is not the same thing as Deposit Rates offered by banks for

fixed deposits and recurring deposits. If you are a non banker and have landed on

this page while looking at Deposit Rates, please click here to go to correct page

i.e.Best Deposit Rates offered by banks for fixed deposits]

What is CRR? or What is CRR Ratio or What is CRR Rate : The Reserve Bank of India

(Amendment) Bill, 2006 has been enacted and has come into force with its gazette notification.

Consequent upon amendment to sub-Section 42(1), the Reserve Bank, having regard to the needs of

securing the monetary stability in the country, RBI can prescribe Cash Reserve Ratio (CRR) for

scheduled banks without any floor rate or ceiling rate ( [Before the enactment of this

amendment, in terms of Section 42(1) of the RBI Act, the Reserve Bank could prescribe CRR for

scheduled banks between 3 per cent and 20 per cent of total of their demand and time liabilities].

RBI uses CRR either to drain excess liquidity or to release funds needed

for the growth of the economy from time to time. Increase in CRR means

that banks have less funds available and money is sucked out of

circulation. Thus we can say that this serves duel purposes i.e.(a) ensures that

a portion of bank deposits is kept with RBI and is totally risk-free, (b) enables RBI

to control liquidity in the system, and thereby, inflation by tying the hands of the

banks in lending money.
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What is CRR (For Non Bankers) :CRR means Cash Reserve

Ratio. Banks in India are required to hold a certain proportion oftheir deposits in the form of cash. However, actually Banks dont

hold these as cash with themselves, but deposit such case with

Reserve Bank of India (RBI) / currency chests, which is considered

as equivlanet to holding cash with RBI. This minimum ratio (that is

the part of the total deposits to be held as cash) is stipulated by the

RBI and is known as the CRR or Cash Reserve Ratio. Thus, When

a banks depositsincrease by Rs100, and if the cash reserve ratio is

6%, the banks will have to hold additional Rs 6 with RBI and Bank

will be able to use only Rs 94 for investments and lending / credit

purpose. Therefore, higher the ratio (i.e. CRR), the lower is theamount that banks will be able to use for lending and

investment. This power of RBI to reduce the lendable amount by

increasing the CRR, makes it an instrument in the hands of a

central bank through which it can control the amount that banks

lend. Thus, it is a tool used by RBI to control liquidity in the

banking system. Some non bankers also wrongly use CRR Ratio

or CRR Rate instead of Cash Reserve Ratio ).

What is SLR? : Every bank is required to maintain at the close of business

every day, a minimum proportion of their Net Demand and Time

Liabilities as liquid assets in the form of cash, gold and un-encumbered

approved securities. The ratio of liquid assets to demand and time

liabilities is known as Statutory Liquidity Ratio (SLR). RBI is empowered

to increase this ratio up to 40%. An increase in SLR also restrict the banks

leverage position to pump more money into the economy.

What is SLR ? or What is SLR Ratio or What is SLR Rate : (For

Non Bankers) : SLR stands for Statutory Liquidity Ratio. This

term is used by bankers and indicates the minimum percentage

of deposits that the bank has to maintain in form of gold, cash or

other approved securities. Thus, we can say that it is ratio of cash

and some other approved securities to liabilities (deposits) It


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regulates the credit growth in India. Some non bankers also

wrongly use SLR ratio or SLR Rate instead of Statutory Liquidity

Ratio.

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Read About : More Banking Terms

What are Repo rate and Reverse Repo rate?

Repo (Repurchase) rate is the rate at which the RBI lends shot-term

money to the banks against securities. When the repo rate increases

borrowing from RBI becomes more expensive. Therefore, we can say that

in case, RBI wants to make it more expensive for the banks to borrow money, it

increases the repo rate; similarly, if it wants to make it cheaper for banks to

borrow money, it reduces the repo rate.

RBI cuts Repo rate by 50 bps (reduced from 8.50% to8.00%). Reverse repo to be adjusted to 7.00%. Bank Rate

and Marginal Standing Facility to 9.00%. No change inCRR (updated on 17/04/2012)

Reverse Repo rate is the rate at which banks park their short-term excess

liquidity with the RBI. The banks use this tool when they feel that they are

stuck with excess funds and are not able to invest anywhere for reasonable
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returns. An increase in the reverse repo rate means that the RBI is ready to

borrow money from the banks at a higher rate of interest. As a result, banks

would prefer to keep more and more surplus funds with RBI.

Thus, we can conclude that Repo Rate signifies the rate atwhich liquidity is injected in the banking system by RBI,

whereas Reverse repo rate signifies the rate at which the

central bank absorbs liquidity from the banks

The policy announcements on 03/05/2011, indicates that now repo rate has

become the only independent variable policy rate, marking a shift from

earlier method of calibrating various policy rates separately. The

reverse repo rate -- the rate at which RBI borrows will be kept 100 basis

points lower than therepo rate. On the other hand Marginal Standing Facility

(MSF) rate will be kept 100 basis points higher than the repo rate.

Clearing Money Policy

Documents

Transcript of Clearing Money Policy