Eligible Credit Rating Agencies (ECAI)- Review for Brickworks

With reference to the Press Release: 2022-2023/1033 dated October 12, 2022 in terms of which, regulated entities/market participants were advised that in respect of ratings/credit evaluations required in terms of any guidelines issued by the Reserve Bank, no such fresh ratings/evaluations shall be obtained from Brickwork Ratings India Private Limited (the CRA).

The RBI in revision has permitted to banks to use the ratings of the CRA i.e. Brickworks for risk weighting their claims for capital adequacy purposes, subject to the following:

  1. In respect of fresh rating mandates, rating may be obtained from the CRA for bank loans not exceeding Rs.250 crore.
  2. In respect of existing ratings, the CRA may undertake rating surveillance irrespective of the rated amount, till the residual tenure of such loans.

Provided that in case of existing ratings assigned to working capital facilities exceeding Rs.250 crore, the CRA shall undertake rating surveillance only till the next renewal of such facility by the banks.

RBI vide its circular Master Circular DOR.CAP.REC.4/21.06.201/2024-25 dated April 1, 2024 has given the list of eligible credit rating agencies, which banks may use for the purpose of risk weighting their claims for capital adequacy purpose

(a) Acuite Ratings & Research Limited (Acuite)

(b) CARE Ratings Limited;

(c) CRISIL Ratings Limited

(d) ICRA Limited;

(e) India Ratings and Research Private Limited (India Ratings); and (f) INFOMERICS Valuation and Rating Pvt Ltd. (INFOMERICS)

Financial Inclusion Index – March 2024

The Reserve Bank of India has constructed a composite Financial Inclusion Index (FI-Index) to capture the extent of financial inclusion across the country as announced vide RBI  Statement on Developmental and Regulatory Policies in the first Bi-monthly Monetary Policy Statement for 2021-2022 dated April 07, 2021.

The FI-Index has been conceptualised as a comprehensive index incorporating details of banking, investments, insurance, postal as well as the pension sector in consultation with Government and respective sectoral regulators. The index captures information on various aspects of financial inclusion in a single value ranging between 0 and 100, where 0 represents complete financial exclusion and 100 indicates full financial inclusion. The FI-Index comprises of three broad parameters (weights indicated in brackets) viz., Access (35%), Usage (45%), and Quality (20%) with each of these consisting of various dimensions, which are computed based on a number of indicators.

The Index is responsive to ease of access, availability and usage of services, and quality of services, comprising in all 97 indicators. A unique feature of the Index is the Quality parameter which captures the quality aspect of financial inclusion as reflected by financial literacy, consumer protection, and inequalities and deficiencies in services.

The FI-Index has been constructed without any ‘base year’ and as such it reflects cumulative efforts of all stakeholders over the years towards financial inclusion. The FI-Index will be published annually in July every year.

FI Index for FY 2024: The FI-Index for the year ending March 2024 has since been prepared. The value of the Index for March 2024 stands at 64.2 vis-à-vis 60.1 in March 2023, with growth witnessed across all sub-indices. Improvement in FI-Index is mainly contributed by Usage dimension, reflecting deepening of financial inclusion.

Auto-replenishment of UPI Lite wallet

The UPI Lite facility currently allows a customer to load his UPI Lite wallet upto ₹2000/- and make payments upto ₹500/- from the wallet. In order to enable the customers to use the UPI Lite seamlessly, and based on the feedback received from various stakeholders, it is proposed to bring UPI Lite within the ambit of the e-mandate framework by introducing an auto-replenishment facility for loading the UPI Lite wallet by the customer, if the balance goes below a threshold amount set by him/her. Since the funds remain with the customer (funds move from his/ her account to wallet), the requirement of additional authentication or pre-debit notification is proposed to be dispensed with. Related guidelines in respect of the above proposal will be issued shortly. As per Statement on Development and Regulatory Policies by RBI dated 07.06.2024.

Monetary penalty on Punjab National Bank

The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹1,31,80,000 on Punjab National Bank for non-compliance with certain directions issued by RBI on ‘Loans and Advances – Statutory and Other Restrictions’, and ‘Reserve Bank of India (Know Your Customer (KYC) Direction, 2016’.  This penalty has been imposed in exercise of powers vested in RBI conferred under the provisions of section 47 A (1) (c) read with sections 46 (4) (i) and section 51(1) of the Banking Regulation Act, 1949.

The Statutory Inspection for Supervisory Evaluation (ISE 2022) of the bank was conducted by RBI with reference to its financial position as on March 31, 2022. ISE found non-compliance with RBI directions.   The RBI, considering reply to its the notice and oral submissions made during the personal hearing, found, inter alia, that the charges against the bank were sustained and it warranted imposition of monetary penalty. The following charges as per RBI were sustained against the bank

  • Sanctioned working capital demand loans to two State Government owned Corporations against amounts receivable from Government by way of subsidies/ refunds/ reimbursements, and
    • failed to preserve the records pertaining to the identification of customers and their addresses obtained during the course of business relationship in certain accounts.


The RBI has decided to transfer surplus of Rs. 2.11 trillion to the government for year FY 2024.  The transfer is made even after increasing the buffer to 6.5%. The Jalan Committee has proposed to maintain buffer in the range of 5.5% to 6.5% of the RBI’s balance sheet.  The ongoing growth of economy has prompted the RBI to increase buffer at 6.5% and also pay an amount of Rs. 2.11 trillion to the government.  This payment will provide the government a cushion and greater elbow room for expenditure management. 

The transfer of surplus amounting to Rs. 2.11 trillion will help the government to reduce its budget deficit and ensure that aim of government to maintain fiscal deficit to GDP ratio at 5.1% is maintained or even can be lowered further. The government has set a target of 4.5% of fiscal deficit to GDP ratio by 2026. 

Standing Deposit Facility

It’s a facility provided by Reserve Bank of India in which the banks can park their funds with RBI.  Under Standing Deposit Facility, the eligible entities can place funds/deposits with Reserve Bank of India on overnight basis The overnight SDF facility will be available between 17:30 hrs to 23:59 hrs on all days, including Sundays and holidays and would be reversed on the following working day in Mumbai.

Interest: RBI will pay interest rate at 25 basis points below the policy rate.

Minimum size of deposit to be placed with RBI will be Rs. 1.00 cr and in multiples thereof.

Security: There will be no security given by RBI.

CRR SLR Eligibility: The balances held by banks with the RBI under the SDF shall be an eligible Statutory Liquidity Ratio (SLR) asset and such balances shall form part of “Cash” for SLR maintenance.  The balances held by banks with RBI under the SDF shall not be eligible for Cash Reserve Ratio (CRR) maintenance 

SDF- Auto Facility: The entities (Banks and other permitted entities) can avail SDF- Automated Sweep-in and Sweep-out facility.  The facility can be enables on e-Kuber platform of RBI.  The participating banks can set maximum balance limit and the balance in excess of the maximum set balance at the end of day will be considered as bid for placement of funds with RBI.   The SDF replaces the Fixed Rate Reverse Repo (FRRR) as the floor of the LAF corridor.  Standing Deposit facility was first mooted by Urjit Patel Committee which suggested SDF as non collateralized offering.


(i) Types of Foreign Investment:  Foreign investment can be divided into two parts Foreign Direct Investment and Foreign Portfolio Investment.  

a) Foreign Direct Investment (FDI) is direct investment into production or business in a country by an individual or company in another country, either by buying a company in the target country or by expanding operations of an existing business in that country.  Foreign direct investment includes merger and acquisitions, building new facilities, reinvesting profits earned from overseas operations and intra company loans. As per IMF definition acquisition of at least ten percent of ordinary shares or voting power in a public or private enterprise by non-resident investors makes it eligible to be categorized as Foreign Direct Investment.

  • Horizontal FDI: When a firm duplicates its home country based activities at the same value chain stage in another country through FDI.  Say, Toyota sets up a plant in Bangkok to manufacture cars to cater to Thailand market, and opens another plant in India to cater to Indian market; this will be called Horizontal FDI. 
  • Vertical FDI: when FDI is made in a country to move up or down stream of existing value chain of the company.  Say Toyota is making cars in Bangkok and sets up a plant in India to manufacture some of its parts which are shipped to Bangkok, the investment will be vertical FDI.
  • Platform FDI: FDI from source country to destination country for the purpose of exporting to third country.  Say Toyota invests in a plant in India with the sole purpose of exporting cars to other country. 

b) Foreign Portfolio Investment: Foreign Portfolio Investment is an investment made by non resident Indian in Indian securities, including shares, govt bonds, corporate bonds, convertible securities, infrastructure securities etc.  The class of investors who make an investment in these securities are known as Foreign Portfolio Investors.  Foreign Portfolio investment includes investment groups of Foreign Institutional investors, Qualified institutional investors and small group of investors.

  • Foreign Institutional Investor: An investor or investment fund that is from or registered in a country outside the one in which it is currently investing is called Foreign Institutional Investor. The term is used most commonly in India to refer to outside companies investing in the financial markets of India.

Usually, FIIs invest in the stocks and debentures of Indian companies. In order to invest in the primary and secondary capital markets in India the funds must get themselves registered with the Securities and Exchange Board of India.  The general cap on foreign investment is 24% of paid up capital of Indian company, if the board and the general body approves and passes a special resolution, the ceiling of 24% can be raised up to sectoral caps for that particular segment. Investment upto sectoral caps, through automatic route or government route, is defined in FDI Policy.

The institutions which are usually engaged in foreign institutional investment are:- i) Mutual funds, ii) Hedge Funds, iii) Pension Funds and iv) Insurance cos.


(i) Wholesale Price Index (WPI): The Wholesale Price Index is released by Office of Economic Advisor, Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry.  The index consists of weighted price of commodities and is compared against the prices of a benchmark year.  Currently base year for All India WPI is 2011-12 as revised from the previous base year of 2004-05 by the Office of Economic Advisor (OEA) to align it with the base year of other macroeconomic indicators like the Gross Domestic Product (GDP) and Index of Industrial Production (IIP) vide press note dated 12.05.2017. This is seventh revision.  The earlier six revisions are in 1952-53, 1961-62, 1970-71, 1981-82, 1993-94 and 2004-05.  Key highlights of the revised guidelines are

  1. WPI will continue to constitute three Major Groups namely Primary Articles, Fuel & Power and Manufactured Products
  2. Increase in number of items from 676 to 697. In all 199 new items have been added and 146 old items have been dropped.  The category wise constitution of Major Group items is – 117 items for Primary Articles, 16 items for Fuel & Power and 564 items for Manufactured Products.

The index is fixed at 100.  The weightage of three groups is Primary Article – 22.62, Fuel & Power – 13.15, and Manufactured Products – 64.23.   The provisional monthly data is released on every 14th of the month and on next working day if 14th is a holiday. 

(ii) CPI Consumer Price Index (CPI): Consumer Price Index (CPI) is an economic indicator. It is a measure of change in the prices of consumer goods and services purchased by households. Consumer Price Index is the retail price average of a basket of goods and services directly consumed by the people.

The index is maintained by Ministry of Statistics & Programme Implementation. A new index was put in place by the Indian Government in 2011 and 2011-12 has been taken as base year with effect from release of CPI data for the month of January 2015.  The value of price index of items for year 2012 has been placed at 100.   

The index has following 6 categories and constitute weightage as per March 2024 CPI release by the ministry is as under:-

  1. Food, beverages and tobacco – 54.18% 
  2. Pan Tabacco and Intoxicants – 3.26%
  3. Clothing and Footwear – 7.36%
  4. Housing – (No weightage as of now)
  5. Fuel and Light – 7.94%
  6. Miscellaneous* – 27.26%           

*Miscellaneous consists items with major weightage like House hold goods and services, Health, Transport and communications, Personal care and effect etc.

There are separate indexes for Urban and Rural areas. The nationwide CPI is obtained by combining the rural and urban CPIs with appropriate weights.  Monthly price data are collected from 1114 markets in 310 selected towns by the Field Operations Division of NSSO and the specified State/UT Directorates of Economics and Statistics and from 1181 selected villages by the Department of Posts.  The consumer price index is a good indicator of inflation across categories.  It is more accurate measure of inflation for common consumer.  Dearness Allowances are calculated on the basis of CPI.

(iii) Types of Inflation: Inflation is the rate at which prices of goods and services increase.  It is an indication of the rise in the general level of prices over time.  Inflation (or rise in prices of goods and services) can be due to mainly two reasons i.e. more demand or less supply.

  • Core Inflation: When we measure Core Inflation we exclude items which face transitory pricing movements like food and energy items.  It is also called long term inflation. The core Inflation is considered to be basically demand driven inflation.   
  • Demand Pull Inflation: When the economy is having excess money, there is more demand for goods and services leading to rise in their prices, called Demand Pull Inflation.
  • Cost Push Inflation: is due to rise in prices of raw material or cost of production resulting in enhanced price of final goods and services.  This type of inflation is called Cost Push Inflation.

(iv) Calculating Inflation: Due to innumerable goods and services produced in a country it is practically impossible to find out the average change in prices of all these goods and services traded in an economy.  Therefore, a sample set or a basket of goods and services is used to get an indicative figure of the change in prices, which we call the inflation rate.

Inflation is calculated as the percentage rate of change of a certain price index. Consumer Price Index is widely used for calculating inflation, the countries like USA, UK, Japan, China use CPI for calculating inflation.  India has also moved from WPI to CPI for calculation of Inflation with effect from April 2014. 

If we have the CPI values of two different times, say, beginning of the year and end of the year, the inflation rate for the year will be,

(CPI of end of year – CPI of beginning of year) x 100/CPI of beginning of year

If CPI on 01.01. 2023 is 105 and CPI of 01.01.2024 is 110 then inflation rate for the year 2024 is,

(110 – 105) x 100 /105= 4.76%, therefore inflation rate for the period is 4.76%.

(v) Controlling Inflation: Inflation is the rise in price levels in an economy over a given time period. This means that a given amount of currency will buy a lower number of goods as time passes as it loses its value. So, controlling inflation is one of the main economic objectives of a government. Inflation is mainly controlled by measures aimed at either increasing aggregate supply or decreasing aggregate demand.

  1. Monetary Measures: A government’s monetary policy can decrease aggregate demand by increasing interest rates. This will discourage borrowing and increase savings, both of which constrict consumption, thereby decreasing aggregate demand. These measures are usually taken through Central Bank of the Country and are called Monetary measures. In India, RBI takes measures like hiking CRR, Bank Rate, Repo Rate, Reverse Repo Rate etc. i.e. Liquidity Management Facility
  2. Fiscal Policies: The government can increase taxation and decrease government spending. This will result in consumers and firms having less to spend, therefore coupled with the lower government spending this will reduce aggregate demand. Subsidising the costs of firms will decrease production cost allowing them to lower their prices, also reducing inflation. Reducing tariffs on imports will also lead to lower prices and therefore lower cost-push inflation. In conclusion short term measures to control inflation seek to decrease aggregate demand, whereas long term solutions tend to increase aggregate supply.  The Indian government usually takes fiscal measures like reduction in import duties, permitting import of good not previously permitted etc.
  3. Administrative Measures: These are taken by government like banning export of particular goods, suspension of future trading in commodities.  The stock limits for commodities can be prescribed by the government

Difference between Guarantee and Indemnity

Contract of Guarantee has existence of two contracts. Indemnity is only one contract.

Contract of Guarantee has three parties. Indemnity contract has only two parties.

Liability of Guarantor is co-existence whereas liability of indemnifier is primary.

Guarantor has the right of subrogation.

Contract of Guarantee can be implied like in case of Endorsement.

Contract of Guarantee has always consideration


Securities obtained at the time of giving a loan are of great significance. It is imminent therefore that securities are properly charged in favour of bank for realization of debt at the time of default. Securities are broadly divided into two categories: –

  1. Primary Security                                       ii) Collateral Security

Primary Security: It can be further divided into two categories

i) Personal Primary Security: security created out of execution of documents like Promissory note, acknowledgement of debt etc. and

ii) Impersonal Primary Security: security created out of assets purchased from the borrowed funds like current assets

Collateral Security: can be further divided into two broad categories

i) Personal Collateral Security i.e. given by the borrower himself and

ii) Impersonal Collateral Security i.e. given by third party.

Charging of securities means creating bank’s charge over these securities. The charge on securities is obtained mainly through following modes:

  1. Pledge: According to Section 172 of Indian Contract Act 1872 the pledge is ‘bailment of goods as security for payment of a debt or performance of a promise’. The person who offers security is called the pledgor or pawner and the person who obtains custody of the goods is called pledge or Pawnee. The bailment is transfer of goods from one person to another with the promise of returning them in case the promise is fulfilled. There are two essential characteristics in bailment; i) Delivery of goods and ii) Return of goods. Even handing over of keys of the godown can also be termed as delivery of goods if substantiated by other factors. Similarly handing over document of title to goods like bill of lading, railway receipts, lorry receipts with proper endorsement will also be equivalent to delivery of goods if the warehouseman is authorized to hold goods on behalf of bailee (i.e the person who now holds title to goods) and he accepts it. This is called delivery by attornment. It must be remembered that bailment can be of goods only and not of money. The bailee has right, in case of default, to sell the bailed goods and/or to file the suit for recovery.
    1. The pledgee has to return the goods on fulfillment of promise in good condition.
    1. The pledgee is responsible for any loss damage etc. if happened due to non-returning of the goods in time.
    1. The pledgee is bound to give any increase in profit if it happens so in due course.
    1. The pledgee is bound to take as much due care as a person with ordinary prudence.
  2. Hypothecation: Hypothecation is creating charge over the goods without actually passing on the possession. The hypothecation charge is usually created on current assets, moveable assets. The title and possession remain with the party but charge is hypothecated in favour of bank, this is also called constructive charge. There is always a clause in the agreement by powers of which the bank can take pledge of the hypothecated goods in case of default. The bank can always choose, in case of default, to take control of the goods and sell them to recover the dues without intervention of the court. If the hypothecated goods are lying inside the rented premises, the landlord should give an undertaking that premises will remain on rent till the time bank loans is running. He should also undertake to provide free access to the premises for all purposes relating to goods.
  3. Assignment: Assignment is transfer of right, property or debt existing or future except secured by mortgage of movable and/or immovable property. The person transferring the right is called assignor and person getting the right is called assignee. The assignment is usually for actionable claims like LIC policies, debts recoverable from government etc. The assignment can be legal or equitable. In legal assignment a notice is given to the debtor regarding assignment. In equitable assignment no such notice or information is required.
  4. Lien: means right of the creditor to retain goods or securities offered by the debtors till his debt is serviced. Negative Lien: the borrower sometimes is not ready to give possession of the goods or properties but gives an undertaking that he will not dispose off or make the goods encumbered till he repays the dues. Negative lien is the form of a personal assurance or undertaking which gives no right to the bank to proceed against the property itself and thus creates no encumbrance or charge on the property.
  5. Right of Set Off: is combining of accounts between a debtor and creditor so as to arrive at net balance. Right of Set off for the purpose of a bank means applying the credits in a bank for setting off the debt liabilities of a customer. However, a bank is required to meet following conditions for applying the set off:
    • Both the accounts of the customer are held in same capacity.
    • The repayment of the debt is due
    • The liability is for a sum that is certain
  6. Mortgage: Section 58 of Transfer of Property Act 1882, defines mortgage as ‘transfer of an interest in specific immovable property for the purpose of securing the payment of money, advanced or to be advanced by way of loan, an existing or future debt, or performance of an engagement which may lead to pecuniary liability.’

The main forms of mortgage are: Simple Mortgage, Mortgage by Conditional Sale, Usufructuary mortgage, English Mortgage, Mortgage by deposit of title deed and Anomalous mortgage.