Reserve Bank of India
Legislation UpdatesNotifications

   

On 02-08-2022, the Reserve Bank of India (‘RBI') issued Master Circular on Credit Facilities to Minority Communities, consolidating all circulars issued on the subject till date.

It lays out details about the credit facilities available to the minority communities, and how the same has to be made available to them.

Credit Facilities to Minority Community

  1. The benefits flowing from various Government sponsored schemes, Scheduled Commercial Banks (‘Bank') are advised to keep the flow of bank credit smooth to minority communities.

  2. A list of 121 minority concentration districts, having at least 25% minority population, is forwarded by the Government, excluding the state/UTs where minorities are in majority.

  3. The banks have to specially monitor the credit flow of these 121 districts, ensuring a fair and equitable portion of the credit within the overall target of the priority sector.

  4. According to the Master Direction on Priority Sector Lending dated 04-09-2020, a sub target of 11.5% of Adjusted Net Bank Credit or Credit Equivalent amount of Off- Balance Sheet Exposures, whichever is higher, as on March 31 of the previous year, has been mandated for FY: 2022 —2023 for lending to weaker sections which includes, among others, persons from minority communities.

Definition of Minority Communities

  1. These communities have been notified as minority by the Government of India, Ministry of Minority Affairs:

    • Sikhs

    • Muslims

    • Christians

    • Zoroastrians

    • Buddhists

    • Jain

  2. In a partnership firm, majority of partners being of the specified community, advances granted to such firms will be treated as advances granted to such community.

  3. Further, if the majority beneficial ownership in a partnership firm belongs to the minority community, then such lending can be classified as advances to the specified communities.

Creation of Special Cell and designating an exclusive Officer

  1. A special cell has to be set up by each bank, having a Nodal Officer, holding the rank of DGM/ AGM, who will ensure smooth credit flow to minority communities.

  2. Responsibilities of the Nodal Officer:

    • Look after credit flow problems

    • Publicize various programmes of bank credit

    • Prepare suitable schemes

    • Arrange group meetings for formulation of schemes

  3. The Officer should be attached to the Lead Bank set up at the district level so that he can receive necessary guidance from the Lead District Manager.

  4. The name, designation, and address of the Nodal officer and officer appointed by lead banks in the identified districts to take after the problems of a minority community should be furnished by the banks to the National Commission for Minorities, a copy which should be furnished to the Chief General Manager, Financial Inclusion and Development Department, RBI.

Role of Lead Banks

  1. Lead Banks will have to exercise their proactive role, ensuring that the poor and illiterate have access to bank credit for taking up productive activities

  2. In the 121 identified districts, the Lead Banks may involve State Minority Commission/ Finance Corporation in the extension work: creating awareness, identification of beneficiaries, preparation of viable projects, provision of backward and forward linkages.

  3. Lead Banks can also collaborate with District Development Managers of NABARD/ NGOs/ Voluntary Organizations to reach the poor through Self Help Groups (‘SHG').

  4. The Convenor Banks of the District Consultative Committees (‘DCC'), District Level Review Committees (‘DLRCs) and the State Level Bankers Committees (SLBCs) should ensure that steps are taken to facilitate credit flow and the progress is reviewed at the meetings.

Advances under DRI Scheme

  1. Under this scheme, loans can be routed through State Minority Finance/ Development Corporation.

  2. Banks should ensure proper maintenance of the register to evolve timely sanction and disbursement of loan applications.

Monitoring

  1. Data on credit extended to borrowers should be furnished to RBI and to the Government, Ministry of Finance and Ministry of Minority Affairs, on half yearly basis, at the end of March and September every year.

  2. The progress made in credit flow should be reviewed regularly at the meetings of the DCC and the SLBC.

  3. The Lead Banks should furnish the relevant extracts and minutes of the meetings of the DCCs and of the SLBCs to the Union Ministry of Finance and to the Ministry of Minority Affairs on a quarterly basis.

Training

  1. To ensure that the bank staff and officers have a proper perspective of the various programmes for the welfare of minorities, banks should include suitable lecture sessions as part of all training programmes like induction courses, programmes on rural lending, financing of priority sectors and poverty alleviation programmes.

  2. Lead Banks should motivate the staff posted to identified districts through proper training to assist the minority community.

  3. Lead banks should train the staff of the banks regarding micro credit/ lending to SHGs with the help of DDMa pf NABARD, by conducting workshops.

  4. Lead Banks should organize Entrepreneur Development Programmes so that the members of such group in these areas are enabled to derive the benefit of various programmes being financed by the banks.

Publicity

The anti-poverty programmes of the Government regarding credit facilities available from banks should be publicized through:

  • Print media

  • TV channels

  • Participation/ setting of stalls

National Minorities Development and Finance Corporation (NMDFC)

  1. It is the apex body and channelizes its funds through the State Minority Finance Corporation of each State/ Union Territory.

  2. It promotes economic and development activities for the backward sections amongst the minorities.

Prime Minister's new 15 Point Programme for the Welfare of Minorities

  1. The objective is to ensure that an appropriate percentage of the priority sector lending is targeted for the minority communities and that the benefits of various government-sponsored schemes reach the under-privileged, including the minority group.

  2. This programme should be implemented by the Central Ministries/ Departments in minority concentration districts.

  3. All Scheduled commercial banks are required to ensure that the minority communities receive an equitable portion of credit.

Reserve Bank of India
Legislation UpdatesNotifications

   

On 01-08-2022, the Reserve Bank of India (‘RBI') issued Master Circular — Credit facilities to Scheduled Castes (‘SC') & Scheduled Tribes (‘ST') to help the SCs/ STs by increasing self-employment, generate income to make themselves self- liquidating and help in easy loan sanctioning.

The Master Circular consolidates the circulars issued by RBI on the subject till date.

Planning Process

The Banks should follow these measures to set up their advances to SCs/STs:

  1. The District Consultative Committees should continue to be the principal mechanism of co-ordination between banks and development agencies.

  2. Banks should establish a closer working relationship with the District Industries Centres to promote self-employment.

  3. Credit planning should be designed, at the block level itself, in such a way that bank schemes are in the favour of them and they participate in a larger flow of credit ensuring self-employment.

  4. Banks should periodically keep a check that loans are sanctioned in time, are adequate and production oriented and they generate incremental income to make them self- liquidating.

  5. Villages having sizeable population of SC/ ST communities should be specially chosen.

Role of Banks

  1. The staff of the Banks should help the customers to fill in forms, complete formalities to help them to get credit facility within a stipulated time.

  2. Banks should spread awareness through circulating brochures and visits by the field staff about the salient features of the scheme and its advantages.

  3. The bank should also conduct exclusive meetings to understand credit needs and then incorporate them in the credit plan.

  4. Banks should not insist on deposits while considering loan applications under poverty alleviation schemes/ self-employment programmes. It also has to be ensured that subsidy is not held back while releasing the loan component till full repayment of bank dues.

  5. The Banks should enable the National Schedule Tribes Finance & Development Corporation (‘NSFDC') and National Scheduled Castes Finance & Development Corporation (‘SCDC') to achieve their desired objectives.

  6. Rejection of loan applications to be done at the next higher level of Bank and reasons should be clarified as to why the application has been rejected.

Reservation under major Centrally Sponsored Schemes

Under these schemes, credit is provided by banks, and subsidies are received through Government agencies where RBI monitors the credit flow.

Centrally Sponsored Schemes:

  1. Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (‘DAY-NRLM'):

  2. Differential Rate of Interest (‘DRI') Scheme: ensures that persons belonging to SCs/STs also derive adequate benefit under the DRI Scheme, banks have been advised to grant eligible borrowers belonging to SCs/STs such advances to the extent of not less than 2/5th (40 percent) of total DRI advances.

Guidelines on Credit Enhancement Guarantee Scheme for Scheduled Castes (‘CEGSSC')

CEGSSC was launched on 06-05-2015 with the objective of promoting entrepreneurship amongst the Scheduled Castes (SCs), by providing credit enhancement guarantees to Member Lending Institutions (‘MLI'), which extend financial assistance to these entrepreneurs. IFCI Ltd is its Nodal Agency. The amount of guarantee covered under this programme ranges from Rs. 0.15 cr to a maximum of Rs. 5.00 cr. The tenure is up to a maximum of 7 years or repayment period.

Monitoring and Reviewing

  1. The monitoring and reviewing of such Banks will be done at their Head Offices where a special cell will be set up for the same purpose.

  2. Responsibilities of the special cell:

    • Ensure implementation of RBI guidelines

    • Responsible for collection of relevant data from the branches of the banks

    • Submission of the returns to RBI and Government

  3. Every Head Office of the bank has to review the credit extended to SCs/ STs on the basis of returns. Any gap or variation in credit flow should be reported to the Board.

  4. Bank should also review the measures taken to enhance the flow of credit to the borrowers on a quarterly basis. Progress made should also be reviewed.

  5. State Level Banker's Committee (‘SLBC') has to invite the representative of National Commission for SCs/ STs to attend SLBC meetings. The Convenor bank may also invite representatives of NSFDC and SCDC to attend SLBC meetings.

Reporting Requirements

Data/Statements on advances has to be reported quarterly and yearly to RBI, Financial Inclusion and Development Department, Statistics Division, Central Office, within 15 days and 1 month, respectively from the date of ending of each quarter and financial year.

Case BriefsHigh Courts

Delhi High Court: Chandra Dhari Singh, J., granted bail while referring to a catena of Supreme Court decisions with regard to the law on bail.

An application under Section 439 of the Code of Criminal Procedure, 1973 was filed seeking regular bail in an FIR registered for the offences punishable under Sections 406/420/120B of the Penal Code, 1860.

Factual Matrix

In 2014, Auto Web approached the complainant at the office of HDFC Bank Limited for the grant of Credit Facilities in the nature of Inventory Funding and Cash Credit Facilities by the complainant. It was represented that Auto Web was the ‘Authorized Dealer’ of Hyundai and engaged in the business of ‘sales’ and ‘service’ of vehicles manufactured by Hyundai since the year 2013.

Complainants processed and sanctioned the credit facilities on the basis of the request and representation made by the director of Auto Web. Consequent thereto, the loan agreement was executed between the complainant and Auto Web, in relation to the credit facilities.

The stocks of the vehicles (inventory) were the primary security of the complainant, in addition to the cross collateral. Accordingly, from time to time, on the request of Directors, existing facilities were modified/enhances/renewed and other facilities were granted on the basis of the documents. In the balance sheets of Auto-Web, it was shown that the company was generating profits.

As per the last enhancement/renewal, the complainant had sanctioned an amount of Rs 15 Crores towards Inventory funding, Rs 1.50 crores as CC Limit and adhoc limits of Rs 3.50 crore to Auto Web duly utilized said limits sanctioned by the complainant.

Based on the request of the accused persons for disbursal of funds, the complainant used to disburse the amounts directly into the account of manufacturer, whereupon the stocks (cars) got released to the dealer, which stock was hypothecated to the complainant.

Further, in terms of the arrangement between the complainant and Auto Web, proceeds from the sale of the inventory (Cars) were to be credited into the inventory funding account of the dealer for the purposes of repayment of the limits utilized by the dealer.

In 2019, the officials of the Bank noted stress in the accounts of Auto Web and certain gaps in the stock audit report.

After a point of time, the directors of Auto Web failed to regularize the accounts and remained evasive and thereafter started avoiding contact with the bank officials.

In 2020, upon reconciling accounts, it was found that Auto Web utilized a major portion of the credit facilities granted by the complainant towards the purchase of 143 vehicles amounting to Rs 11,40,75,861 from Hyundai.

The Bank found that the vehicles available in stocks was much less than the inventory received from the manufacturer, pursuant to the disbursals made by Complainant. Hence, there was a gap of about Rs 11.45 crores which was not accounted for.

The stock of only 34 Vehicles at 2.35 Crores was found available with accused persons and Vehicles amounting to Rs. 11.45 Crores had been found to been fraudulently misappropriated.

Therefore, the vehicles worth more than 11 crores which were purchased from the funds made available by the complainant had been sold by the accused without crediting the sale proceeds into the inventory funding account of the Bank.

It was clear that the vehicles purchased from the funds of the complainant had been illegally sold without crediting the payments to the complainant and the sale proceeds had been criminally misappropriated.

Accused/borrower illegally removed all the hypothecated vehicles and misappropriated an amount of Rs 13,60,72,600.

The petitioner/applicant was arrested on 5-8-2021, therefore the bail application before the Additional Sessions Judge and the same was dismissed.

Analysis, Law and Decision

In the present matter, the wife of the petitioner/applicant filed an affidavit in pursuance of the order of this Court and disclosed the mode of repayment to the financial institutions at his place/address of residence once he was enlarged on bail.

The investigation had been completed, charge sheet had been filed and the petitioner languished in jail since 5-8-2021.

All the incriminating evidences/materials against the Petitioner/Applicant were documentary in nature and had already been seized by the investigating agency. As per the statutory provisions, the maximum sentence for the offence punishable under Section 420 of the IPC was upto seven years.

Supreme Court in Joginder Kumar v. State of U.P., (1994) 4 SCC 260, had dealt with the contours of Article 21 of the Constitution of India with regard to the arrest of an accused to the effect that the power to arrest cannot be exercised in isolation, and that it must have justification for the exercise of such power, as no arrest can be made in a routine manner on a mere allegation of commission of an offence made against a person, without reasonable satisfaction reached after some investigation as to the genuineness and bonafides of a complaint and a reasonable belief qua the person’s complicity and the need to necessitate such arrest.

Further, in Arnab Manoranjan Goswami v. State of Maharashtra, (2021) 2 SCC 427, Supreme Court reiterated the value of the personal liberty enshrined under Article 21 of the Constitution of India. The Supreme Court further emphasized that the basic rule behind bail jurisprudence is “to bail not jail”. The Court went on to observe that it is our earnest hope that our courts will exhibit acute awareness of the need to expand that footprint of liberty and use our approach as a decision-making yardstick for further cases for the grant of bail.

High Court observed that the consequences of pre-trial detention are grave and keeping an under trial in custody would necessarily impact his right to defend himself during the trial in as much as he will be clearly denied the right to a fair trial, which was guaranteed under Article 21 of the Constitution.

Settled Law

The fraudulent and dishonest intention should be present since inception for an offence of Cheating.

In the present case, a non-payment of miniscule amount in comparison to the huge amounts paid over the years had been deliberately given a criminal colour.

Further, it was stated that since the investigation was complete, there was no apprehension of tampering with any documents, influencing witnesses or absconding from the trial. Hence, Court satisfied the triple test laid down by the Supreme Court in P. Chidambaram v. Directorate of Enforcement, (2020) 13 SCC 791.

Bench noted that it was an admitted fact that the evidence to be adduced in the instant case was substantially documentary in nature, which were already in the custody of the Investigation Agency. The petitioner had been languishing in jail for more than five months.

Conclusion

High Court opined that the petitioner should be enlarged on bail.

The Bench held that,

Let the petitioner be released on regular bail pending trial on his furnishing of personal bond in the sum of Rs. 1,00,000/- (Rupees One Lacs only) with two solvent sureties of like amount to the satisfaction of the Trial Court, subject to the further conditions as follows:-

(a) he shall surrender his passport, if any, to the Investigating Officer and shall under no circumstances leave India without prior permission of the Trial Court;

(b) he shall cooperate in the trial and appear before the Trial Court of the case as and when required;

(c) he shall not directly or indirectly make any inducement, threat or promise to any person acquainted with the facts of the case;

(d) he shall provide his mobile number(s) and keep it operational at all times;

(e) he shall drop a PIN on the Google map to ensure that his location is available to the Investigating Officer;

(f) he shall commit no offence whatsoever during the period he is on bail;

(g) In case of change of residential address and/or mobile number, the same shall be intimated to the Investigating Officer/Court concerned by way of an affidavit.

[Vikas Chawla v. State of NCT of Delhi, 2022 SCC OnLine Del 382, decided on 7-2-2022]


Advocates before the Court:

For the petitioner:

Mr Vikas Pahwa, Sr. Advocate with Mr Sumer Singh Boparai, Mr Abhishek Pati, Mr Sidhant Saraswat and Mr Shadman Siddiqui, Advocates

For the Respondent:

Ms Kusum Dhalla, APP for State Mr Tushar Jarwal, Mr Rahul Sateeja, Mr Ambar Bhushan and Mr Anurag Soan, Advocates for BMW Finance/Complainant

Mr Kunal Tandon and Mr Chetan Roy, Advocates for HDFC Bank/ Complainant

Jharkhand High Court
Case BriefsHigh Courts

Jharkhand High Court: Sujit Narayan Prasad, J., dismissed the writ petition as a writ petition after issuance of notice under Section 13 (4) of the SARFAESI Act, 2002 is not to be entertained.

The brief facts of the case of the petitioner is that the petitioner has extended with the credit facilities of an amount of Rs 80 Lakhs, a cash credit of Rs 70 Lakhs and a bank guarantee facility of Rs 10 Lakhs. The said account having been declared to be a non-performing asset, therefore, a proceeding has been initiated by issuing a notice under Section 13(2) of the SARFAESI Act, 2002, subsequent thereto, a notice under Section 13(4) of the SARFAESI Act, has also been issued. In course of that stage, the respondent-Bank has entered into a settlement under One Time Settlement Scheme by settling the account. The petitioner after entering into the settlement had started making a payment but the terms and conditions of the One Time Settlement were not been complied with, therefore, the One Time Settlement Scheme was cancelled by the impugned order, against which, the present writ petition has been filed by the petitioner.

The Counsel for the petitioner relied upon the judgement of A-One Mega Mart (P) Ltd. v. HDFC Bank, 2012 SCC OnLine P&H 17328, and submitted that the writ petition may be entertained and appropriate direction by quashing the One Time Settlement may be issued.

The Counsel for the respondent submitted that the proceeding has been initiated under the Debt Recovery Act, 1993 and subsequently the notice under Section 13(2) has also been issued now it is at the stage of the proceeding under Section 13(4) of the Act, 2002.

The Court held that the there is no absolute bar in entertaining the writ petition under Article 226 of the Constitution of India but simultaneously in numerous judgements of the Supreme Court it has been laid down that a writ petition after issuance of notice under Section 13(4) of the Act, 2002 is not to be entertained. In this regard, reliance was placed upon the judgement of State Bank of Travancore v. Mathew K.C., (2018) 3 SCC 85. On the basis of views expressed by the Supreme Court, this Court is of the view that this writ petition is not fit to be entertained, accordingly, dismissed.[Ace Sales & Logistics v. H.D.F.C. Bank Ltd.,  2019 SCC OnLine Jhar 1136, decided on 20-08-2019]