RBI has changed the definition of Politically Connected Persons (PEPs) under its norms. This will facilitate them in doing various bank related transactions including taking loan. For this, RBI has made some changes in the ‘Know Your Customer’ (KYC) rules. Bank officials, MPs and others sometimes had to face difficulties due to lack of clarity in the old norms related to PEP. At times, PEP was finding it difficult to raise loans or open bank accounts.
RBI revised KYC standards
In view of this problem, RBI has revised the KYC standards for politically connected people. Under the revised KYC instructions, PEPs are persons who have been entrusted with the responsibility of major public functions by any other country. These also include heads of states/governments, senior politicians, senior government or judicial or military officials, senior officials of government-owned companies and officials of important political parties.
The new rules also include a person to whom any other country has entrusted the responsibility of a public function. Bank accounts of PEPs have additional KYC norms under the existing provisions and special due diligence is required by a senior bank official. The central bank has asked chairmen and chief executive officers of banks and other financial services to implement these changes immediately.
Rules for issuing CP and NCD have been tightened
RBI has tightened the norms for issuance of short-term commercial papers (CPs) and non-convertible debentures (NCDs) with initial maturity up to one year. The new norms, which will come into effect from April 1, include six major changes. The central bank has said that the tenure of such short-term commercial paper cannot be less than seven days or more than one year.
Similarly, the tenure of NCD cannot be less than 90 days or more than one year. The minimum value of CPs and NCDs to be issued from April 1 will be Rs 5 lakh and in multiples of Rs 5 lakh thereafter. Both these debt instruments cannot be issued with options.
These are required to be settled within a period not exceeding T+4 working days. CPs and NCDs will be issued only in demat form and can be held with SEBI registered depositories only. One special thing is that the Central Bank has made it mandatory to give information about the money raised through these instruments.
