Content
In-depth analysis of RBI Circulars for April 2026
Annual Closing of Government Accounts – Transactions of Central / State Governments – Special Measures for the Current Financial Year (2024-25)
1. Branch Working Hours
- The Instruction: All agency banks must keep their branches dealing with Government business Open for over-the-counter transactions on March 31, 2025 (the last day of the financial year).
- Timing: They must remain open up to Normal Working Hours.
2. Special Cheque Clearing
- Date: A special clearing session will be conducted on March 31, 2025 specifically for collecting Government cheques.
- Authority: Instructions will be issued by DPSS (Department of Payment and Settlement Systems), RBI.
3. Reporting Window (The "Luggage File" Rule)
- Context: Banks have to upload data (luggage files) regarding GST, TIN 2.0, ICEGATE, etc., to the RBI.
- Extended Deadline: For transactions of March 31, 2025, the reporting window will remain open until 12:00 Noon on April 1, 2025.
- Why? To allow banks enough time to compile and upload all the last-minute tax collections from March 31st.
Summary Cheat Sheet for Exams
| Feature | Instruction |
|---|---|
| March 31 Branch Status | Open (Normal Hours) |
| Special Clearing Date | March 31, 2025 |
| Reporting Deadline to RBI | 12:00 Noon, April 1, 2025 |
| Applicability | Agency Banks dealing with Govt Business |
Practice Question
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Annual Closing of Government Accounts – Transactions of Central / State Governments – Special Measures for the Current Financial Year (2024-25)
1. Branch Working Hours
- The Instruction: All agency banks must keep their branches dealing with Government business Open for over-the-counter transactions on March 31, 2025 (the last day of the financial year).
- Timing: They must remain open up to Normal Working Hours.
2. Special Cheque Clearing
- Date: A special clearing session will be conducted on March 31, 2025 specifically for collecting Government cheques.
- Authority: Instructions will be issued by DPSS (Department of Payment and Settlement Systems), RBI.
3. Reporting Window (The "Luggage File" Rule)
- Context: Banks have to upload data (luggage files) regarding GST, TIN 2.0, ICEGATE, etc., to the RBI.
- Extended Deadline: For transactions of March 31, 2025, the reporting window will remain open until 12:00 Noon on April 1, 2025.
- Why? To allow banks enough time to compile and upload all the last-minute tax collections from March 31st.
Summary Cheat Sheet for Exams
| Feature | Instruction |
|---|---|
| March 31 Branch Status | Open (Normal Hours) |
| Special Clearing Date | March 31, 2025 |
| Reporting Deadline to RBI | 12:00 Noon, April 1, 2025 |
| Applicability | Agency Banks dealing with Govt Business |
Practice Question
Q. As per the RBI instructions for the Annual Closing of Government Accounts (2024-25), the reporting window for uploading Central and State Government transactions for March 31, 2025, will remain open till:
A) Midnight of March 31 B) 10:00 AM on April 1 C) 12:00 Noon on April 1 D) 5:00 PM on April 1 E) 12:00 Noon on April 10
Answer: C) 12:00 Noon on April 1
Asian Clearing Union (ACU) Mechanism – Indo Maldives trade
It marks a shift towards using local currencies instead of relying solely on the US Dollar.
1. The Big Update: Indo-Maldives Trade
The Old Rule: Trade between India and Maldives had to go through the Asian Clearing Union (ACU) mechanism. This usually meant settling payments in major foreign currencies like the US Dollar, Euro, or Yen.
The New Rule: The RBI has decided that trade with Maldives can now ALSO be settled in Local Currencies:
- Indian Rupee (INR)
- Maldivian Rufiyaa (MVR)
Why the change? This decision follows an MoU (Memorandum of Understanding) signed in November 2024 between the RBI and the Maldives Monetary Authority to promote the use of local currencies.
- Note: This does not replace the ACU mechanism. It is an additional option. Traders can choose to use ACU (Dollars) OR Local Currencies (INR/MVR).
2. Static Banking Awareness: What is the ACU?
The Asian Clearing Union (ACU) is a favorite topic for exam setters.
- What is it?: A regional payment arrangement where member countries settle payments for intra-regional transactions on a net basis (clearing the difference).
- Established: 1974.
- Settlement Currencies: US Dollar (USD), Euro (EUR), and Japanese Yen (JPY).
The Member Countries (Memorize the List!): There are 10 Members:
- Bangladesh
- Bhutan
- India
- Iran
- Maldives
- Myanmar
- Nepal
- Pakistan
- Sri Lanka
- Belarus (Note: Belarus is the only non-Asian country here, often asked as the "odd one out" in exams).
Summary Cheat Sheet for Exams
| Feature | Details |
|---|---|
| Partner Country | Maldives |
| New Permitted Currencies | INR & MVR |
| ACU Established | 1974 |
| ACU Members | 10 (Including Belarus) |
| ACU Settlement Currencies | USD, Euro, Yen |
Practice Question
Q. As per the RBI circular (March 2025), bilateral trade transactions between India and which ACU member country can now be settled in their local currencies (INR/MVR) in addition to the ACU mechanism?
A) Bangladesh B) Sri Lanka C) Maldives D) Myanmar E) Iran
Answer: C) Maldives
Amortisation of additional pension liability Implementation of Pension Scheme in Regional Rural Banks
This circular addresses a significant accounting adjustment for Regional Rural Banks (RRBs) regarding their employee pension schemes.
1. The Context (Backstory)
- 2018: RRBs introduced a pension scheme (RRB Employee Pension Scheme 2018). At that time, they were allowed to spread the cost (amortise) over 5 years starting from 2019.
- The Change: A court order or policy change now requires RRBs to implement this pension scheme retrospectively from November 1, 1993.
- The Problem: This creates a massive financial burden (liability) suddenly appearing on their balance sheets.
2. The Regulatory Treatment (The Solution)
To prevent RRBs from showing huge losses in a single year due to this sudden cost, the RBI has provided a "breathing space" (Regulatory Forbearance).
- Recognition: RRBs must recognize the full liability immediately.
- Amortisation (Spreading the Cost):
- If the RRB cannot pay for this entire extra cost from its Profit & Loss (P/L) account in FY 2024-25, it is allowed to Amortise (spread) the cost.
- Duration: Over a period not exceeding 5 years.
- Start Date: Beginning with the financial year ending March 31, 2025.
3. The "Minimum 20%" Rule (Exam Question)
- While spreading the cost, the bank cannot pay too little.
- Minimum Charge: The bank must charge at least 20% of the total pension liability to its P/L account every year.
Summary Cheat Sheet for Exams
| Feature | Details |
|---|---|
| Pension Scheme Effective Date | November 1, 1993 (Retrospective) |
| Max Amortisation Period | 5 Years |
| Amortisation Start Year | FY ending March 31, 2025 |
| Minimum Annual Charge | 20% of total liability |
Practice Question
Q. As per the recent RBI circular on pension liability for RRBs, banks are permitted to amortise the additional expenditure arising from the retrospective implementation of the pension scheme (w.e.f. Nov 1, 1993) over a period not exceeding:
A) 3 years B) 5 years C) 7 years D) 10 years E) 12 years
Answer: B) 5 years
Treatment of Right-of-Use (ROU) Asset for Regulatory Capital Purposes
This circular is a technical accounting clarification that is very important for the "NBFC Regulation" and "Capital Adequacy" modules.
1. What is a "Right-of-Use" (ROU) Asset?
- Simple English: When a company rents or leases an office building for 10 years, they don't own the building, but they have the Right to Use it.
- Accounting Rule: Under modern accounting rules, this "Right" is treated as an asset on the company's balance sheet (even though they don't own the brick and mortar).
2. The Confusion (Why this circular?)
NBFCs were confused: "Since this is an 'intangible' right to use a building, should we deduct it from our Core Capital (Owned Fund) like we do for other intangible assets (like Goodwill)?"
- Note: Deducting assets from capital is bad for banks/NBFCs because it lowers their Capital Adequacy Ratio.
3. The Clarification (The Rules)
Rule A: Deduction from Capital
- The Verdict: NO, you do not need to deduct the ROU asset from your Owned Fund / Tier 1 Capital.
- Condition: This applies only if the underlying asset is a Tangible Asset (e.g., a physical building, car, or machine).
- Exam Note: If the lease is for an intangible asset (like software), the rule might differ.
Rule B: Risk Weight (For CRAR Calculation)
- The Verdict: The ROU asset will attract a Risk Weight of 100%.
- Logic: This is consistent with the risk weight applied to tangible assets (like buildings) that the company actually owns. Whether you buy the office or lease it, the risk weight is treated the same.
Summary Cheat Sheet for Exams
| Feature | Rule |
|---|---|
| Deduction from Tier 1 Capital | Not Required (if asset is Tangible) |
| Risk Weight | 100% |
| Applicability | NBFCs / REs acting as Lessees |
Practice Question
Q. As per the RBI clarification on the treatment of Right-of-Use (ROU) Assets, such assets shall be risk-weighted at what percentage for the calculation of regulatory capital, provided the underlying asset is tangible?
A) 50% B) 75% C) 100% D) 125% E) 150%
Answer: C) 100%
Currency Chest operations on March 31, 2025 & PSL Target Review for UCBs
1. Currency Chest Operations
All branches of the banks dealing with Government receipts and payments are to be kept open for transactions on March 31, 2025 (Monday-Public Holiday), so as to account for the Government transactions in FY 2024-25 itself.
2. Review of Priority Sector Lending (PSL) Target – Urban Co-operative Banks (UCBs)
- Old: UCBs were required to achieve an overall PSL target of 75 per cent of ANBC or CEOBSE, whichever is higher, by FY2025-26, with interim targets of 60% (FY2023-24) and 65% (FY2024-25).
- New: On a review, it has been decided that the overall PSL target for UCBs shall stand revised, FY2024-25 onwards, to 60 per cent of ANBC or CEOBSE, whichever is higher.
Priority Sector Lending Certificates (PSLCs)
This circular introduces a significant operational change in how banks can meet their Priority Sector Lending (PSL) targets using certificates.
1. What is a PSLC? (The Concept)
- Full Form: Priority Sector Lending Certificate.
- The Problem: Some banks (like Small Finance Banks) lend a lot to poor farmers and exceed their targets. Other banks (like big City Banks) struggle to find enough farmers to lend to and miss their targets.
- The Solution (PSLC): The bank with excess lending can sell a "Certificate" (PSLC) to the bank with a shortfall.
- The Buyer: Gets to show this amount in their books to meet the RBI target.
- The Seller: Earns a fee (premium) for selling the certificate.
- Crucial Point: There is NO transfer of loan assets or risk. If the borrower defaults, the Seller bank still bears the loss, not the Buyer.
2. Trading Platform & Participants
- Trading Platform: RBI's e-Kuber portal (Core Banking Solution portal).
- Participants: SCBs, RRBs, LABs, Small Finance Banks (SFBs), Urban Co-operative Banks (UCBs).
3. The Big Update: PSLC - SF/MF (Memorize This!)
The RBI has expanded the "Counting Rules" for one specific certificate: PSLC - SF/MF (Small & Marginal Farmers).
The Master Key Effect: Now, buying a PSLC - SF/MF helps a bank meet 5 Targets simultaneously:
- SF/MF Sub-target.
- Weaker Sections Sub-target (New Addition).
- NCF (Non-Corporate Farmers) Sub-target (New Addition).
- Agriculture Target.
- Overall PSL Target.
Why is this important? Many banks struggle to meet the "Weaker Sections" target (usually 12%). Now, they can simply buy PSLC - SF/MF certificates to cover their Weaker Section shortfall.
4. Static Banking Awareness: Types of PSLCs
There are exactly 4 types of certificates available for trading:
| Type | What it counts for? |
|---|---|
| PSLC - Agriculture | Total Agriculture Target + Overall Target. |
| PSLC - SF/MF | SF/MF + Weaker Sections + NCF + Agri + Overall Target. |
| PSLC - Micro Enterprises | Micro Ent. Sub-target + Overall Target. |
| PSLC - General | Only the Overall PSL Target. |
Summary Cheat Sheet for Exams
| Feature | Details |
|---|---|
| Instrument | PSLC (No risk transfer) |
| Platform | e-Kuber |
| New Benefit of PSLC-SF/MF | Counts for Weaker Sections & NCF targets too. |
| Number of PSLC Types | 4 |
Practice Question
Q. As per the latest RBI guidelines, the purchase of "PSLC - SF/MF" can now be reckoned for the achievement of which of the following sub-targets, in addition to the SF/MF and Agriculture targets?
A) Micro Enterprises & Export Credit B) Weaker Sections & Non-Corporate Farmers (NCF) C) Housing & Education D) Renewable Energy & Social Infrastructure E) Only Overall PSL Target
Answer: B) Weaker Sections & Non-Corporate Farmers (NCF)
Master Direction – Prudential Norms on Capital Adequacy for Regional Rural Banks (RRBs), 2025
This Master Direction is a major update for the Regional Rural Bank (RRB) sector. It sets the new rules for how much "Capital" (safety money) RRBs must maintain to remain healthy.
1. The Golden Number: CRAR Limit
- Requirement: Every RRB must maintain a Capital to Risk Weighted Assets Ratio (CRAR) of minimum 9% on an ongoing basis.
- Effective Date: April 1, 2025.
2. Structure of Capital (Tier 1 vs Tier 2)
A. Tier 1 Capital (Core Capital)
- This is the highest quality money (Permanent & Loss Absorbent).
- Requirement: Tier 1 Capital should be at least 7% of RWAs.
- Components: Paid-up Share Capital, Statutory & Free Reserves, PDI (max 1.5% of RWAs).
- Revaluation Reserves: Can be counted in Tier 1 but at a 55% Discount.
B. Tier 2 Capital (Supplementary Capital)
- This is the secondary buffer.
- Requirement: Cannot exceed 100% of Tier 1 Capital.
- Components:
- General Provisions & Loss Reserves: Capped at 1.25% of Total Risk Weighted Assets (RWAs).
- Investment Fluctuation Reserve: Full amount allowed.
What are General Provisions? Because these provisions are just estimates for future losses, the "1.25% Rule" limits how much of them can count as capital.
- Example: If Risk Weighted Assets = ₹1,000 Cr, Maximum General Provisions in Tier 2 = ₹12.5 Cr.
3. Important Limits & Ratios (Memorize These!)
| Metric | Limit / Rule |
|---|---|
| Minimum Tier 1 Capital | 7% of RWAs |
| PDI Limit (within Tier 1) | Max 1.5% of RWAs |
| Maximum Tier 2 Capital | Cannot exceed 100% of Tier 1 Capital |
| General Provisions Cap | 1.25% of RWAs |
4. Perpetual Debt Instruments (PDIs) - The "Bond" Rules
- Call Option: Allowed, but only after 5 Years and with RBI Approval.
- Lock-in Clause: If RRB's CRAR falls below 9%, interest payments stop.
- Who CANNOT buy?: Retail investors, FPIs, NRIs. Also, RRBs cannot buy PDIs of other banks.
5. Deductions
- Pension Exception: While pension liabilities are deducted, the "Unamortised Pension Expenditure" (spread over 5 years) is NOT deducted. This is a special relief for RRBs.
Summary Cheat Sheet for Exams
| Feature | Details |
|---|---|
| Min CRAR | 9% |
| Min Tier 1 | 7% |
| Max Tier 2 | 100% of Tier 1 |
| Revaluation Reserve Discount | 55% |
| PDI Call Option | After 5 Years |
| Retail Investors in PDI | Banned |
| Reporting Authority | NABARD (Annual Return) |
Practice Question
Q. As per the RBI Prudential Norms for RRBs (2025), Revaluation Reserves arising from a change in the carrying amount of a bank's property can be reckoned as Tier 1 Capital at a discount of:
A) 25% B) 40% C) 50% D) 55% E) 75%
Answer: D) 55%
Gold Monetization Scheme (GMS), 2015 – Amendment
This circular announces a major structural change to the Gold Monetization Scheme (GMS), 2015.
1. The Big Update: Discontinuation
The Change: The Government of India has decided to stop accepting new deposits for the Medium and Long Term Government Deposit (MLTGD) component of the scheme.
- Effective Date: March 26, 2025.
- Existing Deposits: Proceed normally until maturity.
- Short Term Bank Deposit (STBD): Continues as usual.
2. Static Banking Awareness: GMS Features
- Objective: Mobilize idle gold.
- Deposits: Minimum 10 grams (No Maximum Limit).
- Eligible Banks: Scheduled Commercial Banks (excluding RRBs).
3. Types of Deposits (Difference)
| Feature | Short Term Bank Deposit (STBD) | Medium & Long Term Govt Deposit (MLTGD) |
|---|---|---|
| Status | Continuing | Discontinued (from March 26, 2025) |
| Tenure | 1 to 3 Years | Medium: 5-7 Years Long: 12-15 Years |
| Owner | The Bank | The Central Government |
| Interest Rate | Decided by the Bank | 2.25% (Medium) / 2.50% (Long) |
Summary Cheat Sheet for Exams
| Feature | Details |
|---|---|
| Discontinued Component | MLTGD (Medium & Long Term) |
| Discontinuation Date | March 26, 2025 |
| Continuing Component | STBD (Short Term) |
| Minimum Deposit | 10 grams |
| Maximum Deposit | No Limit |
Practice Question
Q. As per the recent amendment to the Gold Monetization Scheme (GMS), 2015, the government has decided to discontinue which of the following components with effect from March 26, 2025?
A) Short Term Bank Deposits (STBD) only B) Medium Term Government Deposits only C) Long Term Government Deposits only D) Medium and Long Term Government Deposits (MLTGD) E) The entire Gold Monetization Scheme
Answer: D) Medium and Long Term Government Deposits (MLTGD)
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