RBI releases Guidelines on Criteria for Institutions, seeking Financial Assistance from the Depositor Education and Awareness Fund

Key features

i) Objectives and Scope of activities: To grant financial assistance to institutions/ organisations/ associations for taking up various activities relating to promoting bank depositors’ education and awareness.

ii) Eligible entities: The institutions/ organisations/ associations, viz., not for profit public charitable trusts, corporates, universities, etc., who are already engaged in activities relating to bank depositors’ education and awareness or proposing to take up depositors’ education programmes, organising seminars, symposia, etc., including research activities, can be considered for assistance.

iv) Procedure for application: Entities may apply in the prescribed format given as Annex to the Guidelines along with necessary documents/ information as per the list of documents indicated in the application form, to The Chief General Manager, Department of Banking Regulation, Reserve Bank of India, Central Office, 12th Floor, Central Office Building, Shahid Bhagat Singh Road, Mumbai 400001. In the first tranche, applications will be received at the above address till the close of business as on February 27, 2015.

Background

Pursuant to the amendment of The Banking Laws (Amendment) Act, 2012, Section 26A has been inserted in the Banking Regulation Act, 1949 that empowers the Reserve Bank to establish a fund called Depositor Education and Awareness Fund (Fund). Accordingly the Reserve Bank of India, placed on its website, the draft Depositor Education and Awareness Fund Scheme, 2014 (Scheme) for public consultation on January 21, 2014. Based on the comments and suggestions received on the draft criteria, the Scheme was formulated and notified in the Official Gazette on May 24, 2014. The Scheme envisages registration of institutions, organisations or associations and grant of financial assistance to them for promotion of depositors’ interests. Accordingly, the draft criteria for registering institutions, organisations and associations for grant of financial assistance from the Fund under the Scheme were formulated and released for public comments on October 28, 2014. Based on the comments and suggestions received on the draft criteria, the guidelines on the criteria for registering institutions, organisations and associations for grant of financial assistance from the Fund have been finalized.

Alpana Killawala
Principal Chief General Manager

Press Release : 2014-2015/1453

Guidelines on the Criteria for registering institutions, organisations and associations for grant of financial assistance from the Depositor Education and Awareness Fund

I. Background

Pursuant to the amendment of The Banking Laws (Amendment) Act, 2012, Section 26A has been inserted in the Banking Regulation Act, 1949 that empowers the Reserve Bank to establish a fund called Depositor Education and Awareness Fund (Fund). Accordingly the Reserve Bank of India, placed on its website, the draft Depositor Education and Awareness Fund Scheme for public consultation on January 21, 2014. Based on the comments and suggestions received on the draft criteria, the Depositor Education and Awareness Scheme, 2014 (Scheme) was formulated and notified in the Official Gazette on May 24, 2014.

2. The Fund has been created and all banks (Scheduled Commercial Banks including Regional Rural Banks and Local Area Banks /Urban Co-operative Banks / State Co-operative Banks /District Central Co-operative Banks) have been advised to transfer inoperative deposit accounts which have not been claimed or operated for a period of ten years or more or any deposit or any amount remaining unclaimed for more than 10 years to the Fund as mentioned in paragraph 3(vii) of the Scheme, banks shall transfer to the Fund the amounts becoming due in each calendar month (i.e. proceeds of the inoperative accounts and balances remaining unclaimed for ten years or more) as specified in the Scheme and the interest accrued thereon on the last working day of the subsequent month.

3. The Fund shall be utilised for promotion of depositors’ interest and for such other purposes which may be necessary for the promotion of depositors’ interests as specified by the Reserve Bank from time to time. The depositor would, however, be entitled to claim from the bank his deposit or operate his account after the expiry of ten years, even after the unclaimed deposit funds have been transferred to the Fund. The bank would be liable to pay the deposit amount to the depositor and claim refund of such amount from the Fund.

4. Paragraph 8(i) of the Scheme requires a Committee to be formed to administer and manage the Fund in accordance with the Scheme. Paragraph 11(i) of the Scheme states that for promotion of depositors’ interests, the Committee may register/recognise from time to time various institutions, organisations or associations, engaged in activities relating to depositor awareness and education, including those proposing to conduct programmes for depositors of banks, organising seminars and symposia for depositors and undertaking projects and research activities relating to these areas. Further, Paragraph 11(iii) of the Scheme states that the Committee shall determine and lay down the criteria for grant of financial assistance to institutions, organisations and associations. Accordingly the draft criteria for registering institutions, organisations and associations for grant of financial assistance from the Fund under the Scheme were formulated and released for public comments on October 28, 2014. Based on the comments and suggestions received on the draft criteria, the following guidelines for the Criteria for registering institutions, organisations and associations for grant of financial assistance from the Fund have been finalized.

II. Guidelines

1. Entities eligible for Registration

A. The following entities will be considered for registration

The institutions/ organisations/ associations already engaged in activities relating to bank depositors’ education and awareness or proposing to take up depositors’ education programmes, organising seminars, symposia, etc., including research activities, can be considered for assistance.

B. The institutions/ organisations/ associations may be

(a) constituted as a public charitable trust,
(b) Registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India;
(c) Registered under the State Co-operative Societies Acts
(d) Registered under section 25 of the Companies Act, 1956 (1 of 1956) or Section 8 of the Companies Act, 2013 (8 of 2013);
(e) A University established by law;
(f) Any other educational institution recognised by the Government or by any University established by law or affiliated to any University established by law;
(g) An institution wholly or partly financed by the Government or a local authority; or
(h) A Regimental Fund or Non-Public Fund established by the armed forces of the Union for the welfare of past or present members of such forces or their dependants.

2. Objectives

To grant financial assistance to institutions/ organisations/ associations for taking up activities relating to promoting bank depositors’ education and awareness or taking up depositors’ education programmes, organising seminars, symposia, etc., including research activities.

3. Conditions required to be fulfilled by Eligible entities

1. The institutions/ organisations/ associations shall have rules, regulations and or bye-laws for the governance and management of the institutions/ organisations/ associations. These rules, regulations and/ or bye-laws should be in conformity with the conditions of registration. The institutions/ organisations/ associations shall be managed by a Governing Board/Management Committee. Further, the bye-laws or objectives of the institution/organisation/association should not contain any provision for spending their income or assets for purposes other than charitable purposes.
2. The institutions/ organisations/ associations shall have a minimum of 20 members and should have a clean track record. For companies registered under Section 25 of the Companies Act, 1956 or Section 8 of the Companies Act, 2013, besides the requirement of minimum 20 shareholders/ members, it is necessary for it to have a well-diversified shareholding, at least 3 independent directors, good corporate governance and audit committee. This requirement can be applied at the level of the applicant company or its promoter company.
3. The institutions/ organisations/ associations, shall unless specific exemption has been made in this regard by the Committee, be in existence for a minimum period of 5 years prior to date of application for registration. Out of these 5 years, the entities should have track record of the last 3 years in the area of consumer protection/awareness.

4. Scope of activities

The scope of activities for which financial assistance would be provided by the Depositor Education and Awareness Fund are as follows:

1. Conducting programmes/events for educating or spreading awareness among the excluded sections of the society, about benefits of financial literacy, information about various products available on various channels explaining the procedure/formalities, etc., for enrolment and actual opening of accounts in association with recognised Depositors’ associations/ NGOs etc.
2. Holding seminars and symposia for depositors/ depositors’ associations for imparting financial literacy including safe and secure banking.
3. Funding projects and research activities relating to depositors’ education, rights awareness, etc.
4. Production/ Procurement of material for distribution at exhibitions, seminars, town hall events, outreach programmes conducted for depositors’ awareness.
5. Running Media Campaigns on financial literacy, customer protection, etc.
6. Other consumer protection/awareness related programmes.

This is only an indicative list in terms of Section 26A(4) of the BR Act, 1949 and the Reserve Bank may consider such other activities which it may deem necessary for furthering the objectives of the Fund from time to time

5. Project plan and financial assistance

A registered institution/ organisation/ association, having a viable project /proposal on Bank Depositors’ Education and Awareness, may be eligible for assistance from the Fund. The registered entities may apply for financial assistance giving details of their proposed projects including the estimated cost of the project and the assistance required.

Institutions or organizations or associations registered/ recognized by the Committee may be considered for grant-in-aid as a onetime measure or in stages by way of reimbursement, depending upon the nature of activity proposed.

6. Other conditions

1. The institution/ organization/ association should not be for the benefit of any particular individual, religion, community, or caste.
2. The institutions/ organizations/ associations should undertake that they will utilize the money received from the Fund only for the activities permitted by the Reserve Bank/Fund and expenses incidental thereto, and not for any other purpose.
3. The institutions/ organizations/ associations should undertake to make available to the Fund/Reserve Bank/representative of the Reserve Bank all books and accounts kept by them with regard to the grants received from the Fund and the method of expenditure of the same.
4. The institutions/ organizations/ associations, who have received financial assistance from the Fund, shall submit a report certified by a Chartered Accountant regarding the expenditure made by them for depositor education and awareness activities.

7. Monitoring

The activity of the institutions/ organisations/ associations shall be monitored, post-registration. If the activities of the registered institutions/ organisations/ associations are not in conformity with the activities permitted by the Reserve Bank, then the Committee will deregister the institution/ organisation/ association and the decision of the Committee in this regard will be final. In respect of the funds granted, the Committee may take such action as it deems fit in the interests of the Fund, including legal action, as and when considered necessary.

8. Procedure for application

An application has to be made in the prescribed format which has been placed at Annex. In addition, the applicants would be required to furnish the requisite document/ information in support of their shareholding pattern, membership, financial statements, list of sanctions/grants received from State/Central Govt. during the last five years, etc., as per the list of documents indicated in the application form. Applications for registration along with other details should be addressed to:

The Chief General Manager,
Department of Banking Regulation,
Reserve Bank of India, Central Office,
12th Floor, Central Office Building,
Shahid Bhagat Singh Road,
Mumbai – 400001

In the first tranche, applications will be received at the above address till the close of business as on February 27, 2015. After gaining experience in dealing with registration, applications will be received on a continuous basis. However, these guidelines are subject to periodic review and revision.

9. Procedure for decision of the Committee

A. The Committee at the time of Registration:

1. Will initially be screening the applications to ensure prima facie eligibility of the applicants and may apply additional criteria to determine the suitability of applications.
2. Will take into account the audited accounts and the annual reports of the last 5 years of the institution/ organization/ association seeking assistance from the Fund to evaluate the eligibility of such applicants and carry out a check on the other activities of such applicants.
3. May make such enquiries, as deem fit, with other authorities, including the Regional Offices of the Reserve Bank to determine whether the applicant is fit and proper for registration or not.
4. May entrust the preliminary screening of the applications to a Screening Committee, which may inter alia comprise members who are not members of the Committee.

B. The Committee at the time of granting financial assistance:

1. Will examine the proposals and the proposed end use of grants and assistance before authorizing release of funds.
2. May call for information in respect of or verify in any manner, the end use of funds already granted to such institutions/ organisations/ associations.
3. The Committee may make such enquiries, as deem fit, with other authorities, including the Regional Offices of the Reserve Bank to satisfy itself that the proposed project is in furtherance of the objectives of the Scheme.

10. Registration and Grant of Financial Assistance

1. The registration of institutions/ organisations/ associations and consequently disbursal of funds will be a two-stage process and should be treated separately. After registration, funds will be disbursed on project basis, which will be a separate process.
2. A registered institution/ organisation/ association, having a viable project /proposal on Depositors’ Education and Awareness, may be eligible for assistance from the Fund. However, mere registration should not make any registered institution/ organization/ association automatically eligible for claiming financial assistance from the Fund.
3. In order to ensure transparency, the names of registered institutions/ organisations/ associations will be placed on the RBI website.