Fake notes: RBI lodges FIR against 81

An FIR has been lodged at Gomti Nagar Police station against 81 persons for submitting Fake Indian Currency Notes (FICN) of Rs 46,800 by Reserve Bank of India (RBI), Lucknow. The complaint was lodged by Assistant General Manager of RBI Lucknow Shalini Sachan on Friday. The case has been lodged after the receipt of fake currency at RBI Lucknow, by the accused persons who came to change their old and torn currency notes with new ones, said PK Srivastava, spokesperson of DIG Lucknow. The RBI had lodged the last complaint for receiving FICN of Rs 98,900 at Gomti Nagar Police station on June 30. While the recovery of FICN is alarming, investigations into these cases often end up into final reports finding none of the accused involved in the making or transportation of FICN.

IE

Repo rate revision flayed

The recent revision of repo rate by the Reserve Bank of India would severely impact the already slipping industrial growth momentum and country's overall development, besides causing further escalation in prices of manufactured goods, the Tamil Nadu Chamber of Commerce and Industry has said. In a statement, chamber president N. Jegatheesan wondered whether the RBI move would have any impact in moderating inflation or bringing down prices of commodities. On the other hand, the enhancement of repo rates by 50 basis points and the resultant increase in bank interest rates would compound the woes of the industrial sector which saw a deceleration in output in April-May, he said.

HBL

HEED RBI’S WARNING - Fiscal and administrative measures are needed to reinforce monetary policy

The message from Tuesday’s monetary policy announcement by the Reserve Bank is that we will have to live with inflation and moderating growth for some more time due to a combination of domestic and global factors. The RBI has in fact revised its wholesale price index up to seven per cent for March 2012, against the six per cent it projected in May. This is due to rising crude prices, domestic demand-supply factors and the likely demand scenario in the months ahead. Commodity prices are unstable globally, and a constant source of inflationary pressures. But the nagging question that remains is whether the RBI’s monetary policy is the only weapon available to control inflation. It has been noted that since March 2010, the repo rate (that at which the RBI lends to banks) has been hiked by 2.25 per cent, while inflation has declined in this period by less than one per cent — from 10.3 per cent to 9.4 per cent. Inflation remains stubbornly high, but growth is decelerating. The RBI’s controlled exasperation over the government’s ineffectiveness in controlling inflation is spelt out clearly in the monetary policy document. It makes it clear that the RBI was forced to take harsher measures in “the absence of complementary policy responses on both the demand and supply sides”.  Sound policies are needed to keep the supply of various products — particularly essential items — in pace with demand. The RBI, for instance, has warned that if the rains are not even in different parts of the country, and crops like coarse grains and pulses and protein-rich items are affected, food inflation will rise further. One hopes the government is listening, and will arrange for imports if there is a shortfall in the production of these items. India has huge foreign exchange reserves, and such imports, done in time, can prevent spiralling food inflation. The government must act on several fronts — taking both fiscal and administrative decisions swiftly — if inflation is to be controlled. The other critical issue is the fiscal deficit, which could overshoot the government’s 4.6 per cent target. Fiscal consolidation is critical to managing inflation, the RBI noted, but the government is yet to cut down on frivolous and unproductive spending, which are inflationary, and invest in badly-needed infrastructure.

BS

RBI imposes Rs 5 lakh penalty on KCCB for violating norms

AHMEDABAD: The RBI today imposed apenalty of Rs 5 lakh on city-based Kalupur Commercial Co-operative Bank (KCCB) for its non-adherence to mandatory banking rules, an official statement said. A penalty of Rs 5 lakh has been imposed on KCCB for violation related to Know Your Customer (KYC) norms, membership to co-operative credit societies, displaying short name of the bank, extension of credit outside the area of operations, it said. The apex bank had served a show cause notice on the cooperative bank in response to which the bank submitted a written reply and made further submissions during the personal hearing by the regional director, the statement said.  On the bank's reply, the central bank came to the conclusion that the violations were substantiated and warranted imposition of the penalty, it said.  KCCB, is a multi-state scheduled bank with over 30 branches.  

ET

The inflation war begins

Lack of investment in the manufacturing space, besides the spill-over effect from primary products, has pushed inflation to alarming levels.

The RBI's unexpected 50 basis-point hike in repo rate to 8 per cent shocked the markets. But, then, the central bank may not have had any other option to counter inflation; the 10 rate hikes till June and two bumper crops have done little to curb prices. From an inflationary situation that was driven primarily by food prices, we now have a situation of a more broad-based inflation, as acknowledged by the RBI itself.  Even as the inflation worry raged across Asia , most countries in the region, barring India, have managed to curb pricing pressures reasonably well. So what has led to this persistent pressure in India that has pushed the RBI to a more aggressive monetary policy mode? And would this put an end to the rallying prices? Sadly, there are reasons to believe that the inflation scare may not fade any time soon.  Let us first look at the length and magnitude of the inflation problem. While the average inflation was 5.5 per cent between 2006 and 2009, we have now had a whopping 19 months of over 6 per cent growth in the Wholesale Price Index (WPI) on a year-on-year basis.  Seventeen of these months saw inflation in the 9-10 per cent range. Clearly, the time period over which the current high level of inflation has lasted is above normal and a little disconcerting.  Moving to the constituents of the WPI basket, primary products (of which food accounts for a good 70 per cent) index has been expanding in double-digits for 22 months now. While the drought in 2009 was believed to have driven grain and fodder prices to steep levels, that primary products inflation never returned to single-digit, post the bumper summer and winter crops in 2010, does little to explain the still-elevated levels of primary article prices.  Contrary to belief that the recent administered price hikes in fuel would aggravate inflation, this index has been on a high for quite a while. The fuel index, has been on a double-digit trajectory for 17 months now, far ahead of the average of 4 per cent between 2006 and 2009. The last, but most important component of the basket, manufactured products, may have been slow to register an increase, but their effect appears to be the most lethal of them all. With a 65 per cent weight in the WPI, a rise of a couple of percentage points in this index can cause damage. To understand the impact that manufactured non-food products (called core inflation) can have on the headline numbers, consider the following:  Way back in January 2010, headline inflation was 8.7 per cent, when food inflation was a frightening 19.8 per cent and core inflation at a sedate 3.7 per cent. Now, with the food inflation down to 8.3 per cent; core inflation, at 7.3 per cent, has been the key trigger to push headline numbers higher to 9.4 per cent.  The accompanying chart indicates that the WPI surge between December 2010 and June 2011 has been steeper than earlier periods as a result of core inflation contributing more to the inflation pie. While food and fuel inflation are known to be volatile it was the core inflation numbers that kept headline inflation under check or reined it back to comfortable levels on earlier occasions.  This was also made possible by the surge in investment as a proportion of GDP up to 2007-08. The supply from added capacities kept prices of manufactured products under check.  However, this time around, the RBI itself has expressed concerns over a soft patch in gross fixed capital formation (GFCF), visible from the second half of 2010-11. For instance, GFCF expanded by 19.2 per cent in the last quarter of FY-10 compared with a sluggish 0.4 per cent in the March 2011 quarter; this number being lower than any other March quarter since 2008.  Clearly, the spill-over effect of primary products inflation on manufactured goods, accentuated by lack of investment in the manufacturing space has pushed inflation to levels not easily reversible. The above sticky phenomenon of inflation clearly suggests that the RBI's baby steps of 25 basis point rate hike eight times between March 2010 and March 2011 did not help much.  With a steep 50 basis points in May 2011, on realising that demand-pull issues were fuelling inflation more than was anticipated, followed by another 50 basis point hike now, will the RBI be successful in curbing the more raging issue of demand? Easier said than done for the following reasons:

A moderation in manufactured non-food product inflation would be possible only if there is a softening of input costs and easing of demand. Let us take the first case. While commodity prices have shown signs of easing, fuel, a key input in most industries, would only now kick-start its journey upward.  While the direct impact of the recent administered fuel price hike on the WPI is only 0.7 per cent, the indirect impact, through user industries, could be much higher. Two, while electricity price inflation has remained moderate, it may be only a matter of time before the price increases in coal and mineral oils are felt in electricity prices.  Three, while it has to be acknowledged that demand has moderated as seen in auto sales, industrial production and purchasing managers index (PMI), it needs to be kept in mind that surging exports and non-oil import growth may not slow enough, especially the former, given the tight capacity globally. Fiscal risks arising from mounting subsidies too pose a threat to investments, keeping interest at elevated levels. If these are the challenges to curb demand, the food problem is no better. Even as a normal monsoon can be expected to soften food prices, the recent hike in minimum support prices (MSP) in some of the agri-commodities can set the index rolling northward again, as MSPs typically set the floor for market prices. Shortage of labour and steep hike in labour costs may also offset the price benefits of an otherwise good bounty. Permanent solutions to the food problem lie in addressing issues such as poor irrigation facilities, low yields, lack of proper storage and transportation facilities. These gather importance, more than ever, with consumption gaining ground.

HBL

This is Where it Really Hurts, Governor Subbarao - Malini Goyal and Tulika Raj

RBI’s surprise 50 basis points interest rate hike this week was met with dismay by consumers and India Inc. But while big companies and car/home buyers get all the headlines, the sharpest impact of the ultra hard monetary policy is felt by the relatively smaller companies. They expanded capacities in the past two years — now many are grappling with underutilisation of plant as consumer demand turns sluggish in many sectors. Investments are on hold, some have imposed hiring freeze and operational costs are being trimmed. Being small, not many have the size and access to cheaper foreign currency funds. The following stories from five firms with turnovers ranging from 186 crore to 2,881 crore, give an idea of the entrepreneurial battles being fought as the cost of capital rises.  We have a foreign currency loan $100 million, used to fund our Sylvannia buy in 2007. We take short-term loans ( 50-200 crore) to fund our working capital needs. There is no problem with our foreign currency loan. May be when we refinance it next year it might get a bit expensive but not like what it is in India. Our distributors and dealers are experiencing a rise in cost in their working capital. So to help them we have taken compensatory measures – we typically give them a cash discount of 2% but early this year we have increased it to 2.5%. This would have dented our bottomline by around 15 crore. But for us the bigger worry is that interest rate hike has impacted construction activities which in turn is affecting demands for our goods. We are pushing for internal efficiency. Today we maintain a 60-day inventory of about 400 crore. We want to reduce it to around 52 days this year. Most of us increased our capacities in the past few years. We doubled our capacity in the past three years. Our plants are operating at a suboptimal levels. We are setting up a 500-crore plant near Bhiwadi for which we need to take a bank loan. Also, our working capital (typically under 50 crore) is financed through short-term loans. We had tied up our 300-crore loan at a fixed rate of 9.5-10% beforehand. Hence, our project cost hasn’t gone up. If I had to go the market to tie up funds today, the interest rate cost would have gone up by 2-3% higher. But our working capital cost has gone up by 1.5-2% . The direct impact of interest rate hike is not much. If I had to take a fresh loan perhaps it would have hurt. But its the impact of interest rate hike on consumer demand that worries us. So far we were busy managing growth. Now the focus has shifted to managing costs. We are looking at low-cost automation like pick-and-place robots for low skilled jobs. But my biggest worry is slowing demand and government’s lack of concern for the manufacturing industry. Not a single announcement has been made which makes me feel good.

ET

Online banking poses challenges: RBI’s Padmanabhan



New Executive Director responsible for the IT, payment and settlement systems and foreign exchange department discusses challenges of online and telephone banking



At the Annual Conference on Secure Banking in Mumbai on Friday, G Padmanabhan, who became Executive Director of the IT, Payment and Settlement Systems and Foreign Exchange Departments at the Reserve Bank of India this month, spoke about online banking. "In the IT-enabled banking environment, it has to be recognised that fraud possibilities have assumed international dimensions," he said of the growing security fears. "Ranging from password hacking, card copying [and] cloning to data and identity theft at various levels of transaction, information storage as well as the transmission stage, managing security is more challenging in online and phone banking as compared to other delivery channels," he said. Padmanabhan warned of innovative methods of hacking and stealing coming to the fore regularly and warned that "the industry has to take prompt action to safeguard business and customer interest". He mentioned the reserve bank's new system of alerts for all card transactions. "Such a system will surely help in containing frauds," he said, and urged banks to make the system effective by "ensuring that the customers are persuaded to register their mobile phone numbers for receiving the alerts".

http://www.centralbanking.com/ 

Do the Subbarao-Gokarn duo know something we don’t? – Latha Venkatesh




The RBI has been focusing on core, or manufacturing, inflation?   

 

A few days after the credit policy was announced last Tuesday, the market is still scratching its head over what pushed the otherwise dovish Duvvuri Subbarao - Subir Gokarn combine to push interest rates up by 50 basis points (100 basis points make 1 percent). The RBI governor and deputy governor had gone with a 25 basis points hike on 16 June and the data since then has, if anything, shown non-food inflation to be a tad lower and growth to be a lot under strain. Gokarn has, in the past, frequently referred to the ease with which companies pass on input prices to customers as an indicator of pricing power – which is inflationary. However, an analysis of the first 43 company results by Morgan Stanley (i.e. the companies tracked by them), suggests otherwise. The data show that margins have compressed on an average by 200 basis points. In consumer staples, it is even more – by 633 basis points. Isn’t this an indication of pricing power or the lack of it? The RBI has been focusing on core, or manufacturing, inflation. This too showed a slight decline from 7.3 percent in May to 7.2 percent in June. Given these arguments, the market is wondering if the RBI knows something that it does not. The food inflation numbers released on Thursday may already have been known to the RBI. The newspaper headlines only noted the fall from the previous week to 7.33 percent from 7.58 percent. But this happened because the 7.33 percent rise came on top of the 18.56 percent jump in the corresponding week of 2010. So the RBI clearly is worried over inflation. It is probably expecting the July Wholesale Prices Index to be worse than in June, which came in at 9.44 percent. But even this does not appear to be a sufficient cause for it hawkish rate stance. There are clearly other worries down the line. The RBI probably is certain that electricity tariffs will be raised in a few months’ time. In fact it was the RBI which escalated to banks and the Union Finance Ministry the sorry state of State Electricity Board finances. Maybe that is why it has pencilled in double-digit inflation almost until October and a raise in forecasts for March 2012 to 7 percent. On the other hand, it is also possible that the RBI is genuinely incensed by the inability of the government to take tough fiscal decisions on disinvestment, foreign investment or even taxes and expenditure cuts. Hence the strongly worded message: “In the absence of complementary demand and supply side action from the government to curb inflation, monetary policy has had to do more.” But RBI on its own can’t possibly chase the headline WPI figures for long. It is eminently likely that headline inflation will continue to rise even after growth well and truly slows. That will be because of the relentless rise in global commodity prices on account of the cheapening of the dollar. What will the RBI do then? What’s puzzling about the Subbarao-Gokarn reaction pattern is that last year, despite numerous criticism, they ignored inflation to stoke a growth that was alright anyway. Now, when the ignored half of the equation is acting up (zooming inflation), they are focusing on it to the point of ignoring growth. Last year they were behind the curve on inflation. Now they appear to be behind the curve on growth.  Unless, of course, they know something we don’t know.

Latha Venkatesh is the Banking and Commodities Editor at CNBC TV-18. As a key anchor with the channel, Latha is a keen observer of the monetary policy space. She has kept close watch on the Reserve Bank of India’s policy formulations and developments in the banking industry. She also tracks money market and macroeconomic trends.

Firstpost

RBI officials reportedly face sexual harassment charges

The decision to raise interest rates by an unexpected 50 bps wasn't the only closely-guarded secret in the Reserve Bank of India. There is something else that the central bank may choose to keep it under wraps forever. But the word is out that two senior RBI officials  are battling charges of sexual harassment. One of the complainants, say insiders, is a trainee.  The fate of the two officers will possibly depend on the findings of an internal RBI panel that is expected to look into the matter. A year ago, a senior official in RBI was forced to resign when a friend and colleague for years turned hostile. Minor irritants, some say, for a staid, conservative organisation with the task to rein in inflation.

ET

RBI aiming to extend banking facility to all

As part of its plans to provide access to banking facilities to more people, the Reserve Bank of India (RBI) was working on a three-year financial inclusion plan, said Uma Shankar, Regional Director of the bank. Addressing a meeting of senior officials of the Karnataka Vikas Grameena Bank (KVGB) here on Wednesday, Ms. Uma pointed out that even 40 years after bank nationalisation, 60 per cent of the population had no bank accounts and many did not get loans.  The RBI aimed at including every citizen in the country's banking system, she said. “Where branches cannot be opened, RBI has asked banks to engage business correspondents, moving with biometric devices, to extend banking services to all adults,” she said. “The RBI plans to bring the entire population within the banking fold by 2015. Even villages with a population below 2,000 should get banking facilities,” she said. Vasudev Kalakundri, General Manager KVGB; G. Ramanathan, General Manager, SyndicateBank; A.K. Bhattacharya, General Manager, RBI; and Muralinath Gupta, General Manager, KVGB were present.

HBL

New series of Rs five, Rs two coins

Chennai, July 29 (PTI): The Reserve Bank of India will soon put into circulation new series of coins of Rs two and Rs five denominations. An RBI press release said The Rs two coin would have on the obverse side, the lion capitol of Ashoka Pillar with the legend 'Satyameva Jayathe' (in Hindi) flanked on the left periphery with the word Bharat (in Hindi) and on the right periphery flanked with the word INDIA in English. the face of the coin would have the denomination 2 in international numerals, flanked on the left and right periphery with the floral design. The upper periperhy would have the Rupee symbol and the year of minting in international numerals shall be on the lower periphery. It said the face of the Rs five coin on the obverse would have the lion capitol of Ashoka Pillar with the legend Satyameva Jayate (in Hindi) inscribed below, flanked on the left periphery with the word Bharat (in Hindi) and on the right periphery flanked with the word INDIA in English. the face of this coin on the reverse would bear the denominational value 5 in the international numerals flanked on the left and right periphery with the floral design. the upper periphery would bear the Rupee symbol and the year of minting in international numerals shall also be shown on the lower periphery. The existing Rs five and Rs two coins in circulation shall also continue to be legal tender, it said.

IBN Live

Raise minimum capital requirement for micro finance institutions say experts

New Delhi: Industry experts today called for raising the minimum capital requirement of Rs 5 lakh for micro finance institutions (MFIs) to avoid influx of operators. At the same time, definition of micro credit needs to be worked out clearly when the Micro Finance Institutions (Development and Regulation) Bill 2011 is placed in Parliament, they said at a roundtable discussion organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM). The new law should spell out prudential norms for deposit and thrift collections besides a firm and transparent regulatory framework. Experts said the bill on MFIs is a positive development as the industry has been clamouring for a technology-backed regulatory environment over the past many years. India is one of the largest micro finance loan market in the world with the sector having potential to grow at an annual average of 50 per cent, and attracting domestic and foreign investors hoping to practice profitable philanthropy. Once the new law is in place, said experts, inflow of funds from banks will increase. The recent RBI intervention by constituting Malegaon Committee is a progressive step to regulate the sector and tackle issues like cost of raising funds, interest rates, loan ticket size, repayment options and high operating costs due to door-to-door step facilities. Micro finance loans in the country serve as the last-mile bridge to low-income population estimated at 600 million which is excluded from traditional financial services system and seeks to fill the gap. Industry leaders said the introduction of multi-purpose national identity cards is expected to revolutionise the micro-finance sector by bringing down transaction costs. Bigger financial institutions with huge funds do not find commercially feasible to lend to the poor as they cannot offer anything as collateral security. Though micro-finance in the organised sector is still at nascent stages, it can metamorphose into a bigger activity if given the right fillip. The present quantum of micro-finance can be enhanced by sustained efforts on the part of financial institutions, self help groups and interested NGOs. The issues of alternate funding, reduction in operating costs, restricting indebtedness and income criteria need to be fine-tuned and supported for healthy and vibrant growth of micro-finance institutions, said the experts. The ultimate purpose of micro-finance has been to provide small ticket size credit to the most vulnerable sections of the society – more specifically to women. It has been able to generate employment as well as income to larger sections of the lowest strata of the pyramid. Among those present in the discussion were Mr P.K. Jain, chairman and managing director of The Malt & Company, Mr Samit Ghosh, managing director of Ujjivan Financial Services, Mr Suresh Krishna, managing director of Grameen Financial Services, and Mr Jyotirmoy Jain, advisor and head of ASSOCHAM’s banking and finance division. Some experts said the bill should have provisions to keep away objections from states.

orissadiary.com

A burst of energy

There seems to be a newfound urgency in government—at last. Consider the evidence. The ministry of rural development on Friday unveiled the draft Bill on land acquisitions, one of the most contentious issues in India right now. Earlier, we have seen a modest increase in fuel prices, clearances for two major deals involving multinational investment (Reliance-BP and Cairn-Vedanta), a fresh push towards foreign investment in modern retail, and getting in Bihar finance minister Sushil Modi to head the panel on the goods and services tax. There was also no public pushback from the finance ministry when the Reserve Bank of India raised interest rates by a stiff 50 basis points this week to fight high inflation. These are positive signals, but amount to tentative moves that kept getting postponed at various points of time since 2004. The policy paralysis is costing India dear.

Mint

Lending rates shoot up post RBI rate hike, FDs to shine

Within days of the stiff hike in key rates by the central bank, lenders pass on the burden to borrowers to protect their margins

Mumbai :  Countering the 50 bps hike in key rates by the Reserve Bank of India (RBI), about half a dozen banks, including Punjab National Bank (PNB), IDBI Bank and Central Bank of India raised their lending and deposit rates by up to 1.5%. Leading public sector lenders Central Bank of India, IDBI Bank, Punjab National Bank (PNB) and Oriental Bank of Commerce (OBC) raised their rates. While all loans, including home and auto will become expensive, depositors will get better returns on their savings. While Central Bank of India, IDBI Bank and PNB announced an increase of 75 basis point in their base rates, OBC hiked its base rate by 50 bps. Base rate is the minimum lending rate below which banks cannot lend to their best borrowers. Post the increase, the base rate of the four banks stand at 10.75%. An IDBI statement said, " the hikes have been undertaken " keeping in view the measures announced by RBI, inflation and liquidity scenario." IDBI also hiked its Benchmark Prime Lending Rate (BPLR) by 75 bps to 15.25%. The BPLR of PNB has been hiked by 75 bps to 14.25 per cent while OBC's BPLR stood at 15%. Both IDBI and Central Bank of India said the hikes are effective August 1. On July 26, RBI had increased its short- term lending and borrowing rates by a higher- than- expected 50 bps to 8 percent and 7 percent respectively, saying inflation is the biggest threat to the economy. The very same day private sector banks had raised its rates by 50 bps. Central Bank, which declared a 17 percent drop in Q1 results to Rs 281 crore today on higher provisioning, also increased its prime lending lending rate by 50 basis points to 15 per cent.

Deposit rates only reason to cheer

On deposit rates, a Central Bank of India official said they have increased their rates by 40 basis points in the short term category, leaving the rest unchanged. IDBI Bank increased its deposit rates by 25 to 150 basis points in different maturity buckets, a statement issued here said. The interest rate on term deposit between 91- 179 days of OBC will now earn 8 per cent from existing level of 7 per cent, an increase of 100 basis points. Earlier, Bangalore- based Canara Bank (50 basis points) and Bank of India (75 basis points) too had raised their base rates. Earlier this week, the RBI raised the short- term lending ( repo) rate by 50 basis points to 8 per cent and the short- term borrowing ( reverse repo) rate to 7 per cent in a bid to tame inflation. Subsequently, the interest rate under the Marginal Standing Facility, an additional borrowing window, has gone up to 9 per cent from the earlier level of 8.5 per cent. More banks are likely to announce interest rate hike in the next few days as cost of funds has gone up following increase in key lending rates by the central bank.

FPJ

Well-crafted monetary policy - S. S. Tarapore



Unswerving in their anti-inflationary stance…
The RBI Governor, Dr Subbarao, with his team

Expectations that inflation would taper off have been belied. Therefore, the RBI has rightly prioritised inflation control over other objectives. Both, industry and banks are unlikely to be hurt by the rate hike.

The RBI Governor, Dr D. Subbarao's Monetary Policy announcement on July 26, is one of the very best policy statements from the Reserve Bank of India in recent years. The policy is unswerving in its anti-inflationary stance and the guidance is unequivocal. The policy does not look for kudos but is focused on RBI's dharma of inflation control. Expectations that inflation would taper off have been belied and, therefore, the RBI has prioritised inflation control, overriding all other objectives. The GDP growth in 2010-11 is estimated at 8.5 per cent and, in all probability, this estimate would undergo an upward revision. Thus, growth is exploring its limits.

HIKE NOT EXCESSIVE

The current inflation rate is, however, a great worry and embarrassment to the RBI, with a year-on-year increase at the end of June 2011 of 9.4 per cent. The revised number could well end up in double digits.  As against the earlier projection of inflation at the end of March 2012 of 6.0 per cent, the RBI has now had to raise this to 7.0 per cent, and there are fears that if domestic and international conditions turn unfavourable, the inflation rate at the end of March 2012 could be much higher.  The current inflation rate is way above the RBI's comfort zone of 4.0-4.5 per cent. Furthermore, the inexorable integration with the world economy would require that in the medium-term, the RBI would need to work towards a much lower inflation rate of 3.0 per cent. The RBI has taken a bold step to raise the repo rate from 7.5 per cent to 8.0 per cent and the Marginal Standing Facility rate from 8.5 per cent to 9.0 per cent.  This measure would not go down well with India Inc. as well as banks. But while any borrower would like to get credit as cheaply as possible, it needs to be recognised that the 0.50 per cent increase in the repo rate would not be disruptive. The average interest cost in industry is around 10 per cent of total costs and an increase of 0.50 per cent in interest cost would raise overall costs by 0.05 per cent. In the case of interest-sensitive sectors, let us assume that interest cost is 20 per cent of total costs; a 0.50 per cent rise in interest cost would raise the overall cost by 0.10 per cent. Thus, the overall impact on total costs would be insignificant. As a general rule, banks are more comfortably placed when interest rates are rising than when they are falling. This is essentially because the increase in interest cost impacts faster on average effective lending rates than on average effective deposit rates; the reverse applies when policy rates fall. It is paradoxical that banks moan when policy rates rise and make merry when policy rates fall!

ENTRENCHED INFLATION

Many policy observers have pointed out that when deposit rates are higher than the RBI policy rate, the RBI becomes the lender of first resort rather than the lender of last resort, as it should be. Thus, in the current Indian context there was an obvious case for a rise in the policy rate. The RBI has indicated that it would review policies if the growth rate and the inflation rate fall precipitously. There is, however, only a remote possibility of the growth rate falling below 7.5 per cent in 2011-12 and the inflation rate falling below 5.0 per cent. The fear, if any, is that the inflation rate would be uncomfortably high as reflected in the RBI's projection for March 2012 of 7 per cent.  Market players need to appreciate that the present repo rate of 8.0 per cent cannot be the end of the policy rate increases.  Global uncertainties, the monsoon and other domestic uncertainties point to the fact that the policy interest rate would need further increases in September and October 2011, particularly as inflation is getting wedged in strongly, and the longer one waits the more difficult it is to eradicate inflation from the system. The policy statement makes an important point that in the last decade, the average inflation rate had moderated to around 5.5 per cent. Given the present unacceptable inflation rate, the RBI has reiterated its strong view that controlling inflation is imperative both for sustaining growth as also increasing the potential for growth in the medium-term.  While the policy measures and their articulation are par excellence, we need to give some thought to the use of a measure which would render the monetary policy more effective.  The RBI could have considered a moderate increase in the cash reserve ratio (CRR) which would then have eased the pressure on the interest rate instrument.  It is important for market participants to understand and appreciate the thrust of the July 26, 2011 policy, as it would be a watershed in the emergence of monetary policy as an effective tool of overall economic policy.

HBL

iCreate Software announces RBI guidelines-compliant automated data flow solution for banks

Bangalore: The RBI with a vision of ensuring accuracy and integrity of data flowing from the banking system to the regulator recently released an approach paper on Automated Data Flow (ADF-a straight through process) from various transactional systems of the banks to RBI. Bangalore-based, iCreate Software announced reporting solution BizScoreto enable banks comply with RBI's Automated Data Flow guidelines. A packaged BI/analytics solution built specifically for banks, Biz$corefeatures an Extraction Transaction Loading (ETL) layer integrates with core and transactional banking systems, and extracts data from these systems and loads into a Consolidated Data Repository (CDR) which is engineered for automated generation of RBI returns through pre-built reporting templates. Vivek Subramanyam, CEO, iCreate said, "We are extremely happy about the release of Biz$core's RBI ADF solution that in addition to helping banks become ADF compliant will provide a robust platform to build and deploy industry leading prebuilt Banking Business Intelligence & Analytics solutions to benefit their business stakeholders. At iCreate, given that we are India based, we are delighted to partner with Indian banks on our award winning Banking BI solutions while we continue to see significant traction globally as well." Banks accelerate their RBI's Automated Data Flow solution implementation, iCreate held a webinar on 5 July that focused on topics like 'highlights of RBI's Automated Data Flow requirements and the implications for banks', 'Complexity and intricacies around ensuring compliance', 'Solution options based on each bank's context',' Highlights of Biz$core RBI ADF solution'. 

Siliconindia News

Financial inclusion crucial to counter terrorist financing

.....Financial inclusion is so important to countering the financing of terrorism and it brings those who normally use cash or the black market into the formal financial system at an affordable cost......

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CIMP meet calls for financial inclusion of rural poor

PATNA: An international conference on 'Financial Inclusion and Economic Growth - Theory and Evidences' here on Thursday stressed on ensuring timely and adequate credit through microfinancing to the rural poor and low-income group people at affordable rate.  The conference was held under the aegis of Chandragupta Institute of Management (CIMP). The participants included the representatives of RBI, Nabard, microfinance institutions, NGOs, acamedicians, technology providers, government departments and universities, including those from the University of Central Lancashire, UK. Inaugurating the conference, development commissioner K C Saha said that most of the rural poor do not have accounts in banks. A large number of them are still in the clutches of moneylenders. He said that they should be linked to microfinance institutions through self-help groups (SHGs) for providing finance to them, so that they become productive and wriggle out of the clutches of moneylenders. He said that in Darbhanga and some other North Bihar districts, many SHG members had utilized the money received through microfinancing for paying back their loans to moneylenders. In his keynote address, professor, development finance and public policy, UCLAN, Lancashire, UK, T G Arun, mentioned the highlights of his research work 'Determinant of Access to Finance: An Intervention into the Mzansi Intervention in South Africa". He said that Mzansi accountholders viewed the account mainly as a vehicle for receiving payments. Even after becoming financially literate, they did not have the aspiration to move up the financial ladder.  The chief executive officer of Bihar Livelihoods Promotion Society, Arvind Chaudhary, stressed on the need for adequate and timely credit for the rural poor at affordable interest rate. He added that financial counselling to the beneficiaries was vital. He invited CIMP and other groups for their involvement in livelihood programmes.  CIMP director V Mukunda Das said that in Bihar, high financial inclusion was needed. He said that 62.5 lakh rural people have 'no-frill account' (account opened with zero balance) through microfinance in Bihar. He expressed hope that this success in financial inclusion would continue. DGM, Nabard, Pradip Kumar, stressed on harnessing microservice finance institutions for inclusive growth in the state.

TOI

Banker's Trust

Free market not good for small borrowers - K.C.Chakrabarty

RBI cautions RRBs on dealing with overseas entities

The Reserve Bank on Thursday asked all Regional Rural Banks to follow due diligence while dealing with transactions from persons and entities in eight countriers — Bolivia, Cuba, Ethiopia, Kenya, Myanmar, Sri Lanka, Syria and Turkey. The bank cited a 2011 statement from the Financial Action Task Force — the inter-governmental body working to develop national and international policies to combat money laundering and terrorist financing — which cautioned countries regarding the risks associated with these nations. “All RRBs are accordingly advised to take into account risks arising from the deficiencies in anti-money laundering /combating the financing of terrorism regime of these countries, while entering into business relationships and transactions with persons (including legal persons and other financial institutions) from or in these countries/ jurisdictions,” the RBI said in a notification. According to it, FATF has these eight countries as having not made sufficient progress in addressing the deficiencies associated with AML/CFT and they have not committed to an action plan developed with the FATF to address the issues. “The FATF calls on its members to consider the risks arising from the deficiencies associated with each jurisdiction as described in the statement: Bolivia, Cuba, Ethiopia, Kenya, Myanmar, Sri Lanka, Syria and Turkey,” it said. The FATF had also identified Iran and North Korea with regard to deficiencies in AML/CFT regime and the RBI had earlier cautioned RRBs in this regard.

HBL

Using third-party ATMs? Find out how customer-friendly they are!

Over the last couple of years, the way you carry out your banking transactions has changed a lot, particularly via the new-age, technology-enabled platforms. Be it making payments online, swiping your cards at shopping outlets or withdrawing cash from ATMs (automated teller machines) - all routine transactions have become more user-friendly and secure, if not foolproof.  This is thanks largely to the Reserve Bank of India's regulations to strengthen the safety infrastructure for such transactions and the steps taken by banks to encourage the use of such alternative channels instead of bank branches.

Islamic banks draw attention

THIRVANANTHAPURAM: The aggressive revision of interest rates by Reserve Bank of India, its eleventh upward hike since March 2010, could give an unintended boost to a fledgling business the central bank has never been enthusiastic about; Islamic banking. With interest rates threatening to go beyond the reach of the common man, the interest-free Islamic banks in the state are attempting to position themselves as an alternative source of finance. “Under the existing system, a customer is forced to bear a cost for which he is not responsible,’’ says Tanvir Mohidheen, the Chief Operating Officer of Alternative Investments and Credit Limited (AICL), a Shariat-compliant entity. Islamic banks, according to Tanvir, insulates the consumer from the frequent shocks administered by the RBI. Islamic banks primarily have two ways of providing home and auto loans. One is the ‘cost + margin model’, ‘murahaba’ in Shariat parlance. Here, the Islamic bank purchases the house or car for a costand then fixes a ‘negotiated’ margin. The customer will then have to pay the cost and the margin as monthly instalments. The margin never changes unlike in the case of the mainstream banking system where there are floating or market-sensitive interest rates. The second is the ‘musharaka’ model. The bank will provide 70 per cent of the finance to purchase a car or a home. This means, to purchase a car worth Rs. 6 lakh, the bank will provide Rs. 4.2 lakh. So, for a repayment period of five years, the consumer will have to pay a monthly instalment of `7,000. This is not all. The bank will fix a monthly rent, which will be half the existing market rent. “The best part of this model is that the liability comes down with every monthly payment,’’ Tanvir said. In contrast, for car loans in the mainstream banking sector the current interest rates hover between 12 and 13 per cent. So, for a `6-lakh loan for five years, the customer has to pay an EMI of over Rs 13,000 a month at 12 per cent. And now this is all set to shoot up with banks forced to revise their prime lending rate following the RBI’s higher-than-expected hike in repo rates. Economic experts predict a 16-18 per cent rise in interest rates. Former Finance Minister and economist T M Thomas Isaac, who was instrumental in starting the debate about Islamic banks in the state, says that in periods of rising interest rates, Islamic banks emerge as a cheaper alternative. “The finance is not market-driven and the repayment is fixed in moral terms,”Isaac said. However, economists such as Pulapre Balakrishnan and D Narayana are highly skeptical. Narayana says Islamic banking is just a drop in the ocean. “It cannot be of any purpose as long as it is just a miniscule part of our financial system,’’ he says. CDS director Pulapre Balakrishnan is even dismissive. ‘’Interest-free banking offers no solution whatsoever. It is simply not acceptable that certain banks, just because they don’t charge interest rates, are not amenable to RBI’s monetary actions which are generally carried out for public good,’’ Balakrishnan said.

IBN Live

Inflation and RBI’s role

This refers to the edit “No pain, no gain” (July 27). Your call for the central bank and the government to put their heads together to contain inflation is timely. The Reserve Bank of India (RBI) has been very active in changing monetary policy, but the government’s dormant role is quite regrettable. RBI has, for the first time, warned the central government about the absence of complementary measures — supplyside management and corrective fiscal policy. Considering that the monetary authority was forced to revise its inflation target to seven per cent (from six per cent announced in May) by March 2012, the central bank should persuade the government to revisit the issue of its responsibility to contain inflation. There is no point in continuing to use monetary tools to curb a trend that has more to do with fiscal and supply issues.

KV Rao, Bangalore (BS)

The Reserve Bank of India (RBI) seems bent on a single-point formula to beat inflation — which is to increase lending rates. For the past several months, RBI has been increasing the lending rates and this has had no effect on inflation. The manufacturing sector, which borrows from the market, is increasing prices to cover the financial cost. And traders will do the same thing leading to a vicious cycle that will ultimately affect the common man. RBI and the government seem to have run out of ideas. Can eminent economists in India suggest some useful and effective ideas?

V.Vedagiri, Chennai (BS)

RBI’s policy will affect the common man

This refers to the steep & more than expected increase in the policy rates by 0.5 bps by the RBI. RBI’s 11th Repo & Reverse Repo hike, since last 16 months is sure to suffocate the economy. The policy rates have been revised from 3.25 % to 8 % during the last 16 months. The upward revision will have cascading effect on the prices of food, fuel & products under the manufacturing sector. Still worse will be the immediate impact of the policy rates on the rate of interest on Housing Loans, Auto & Personal loans. RBI is repeating its mistakes without addressing the real issues on the supply chain & the lag effect of the data itself.  The knee jerk approach of the RBI will adversely impact the GDP at the macro level & the misery of the common man at the grass root level.

S Narendra, Bangalore (Deccan Herald)

Andhra Bank expects pressure on NIM after RBI rates hike

Hyderabad : City-based public sector lender Andhra Bank today said there could be some pressure on its Net Interest Margin (NIM) and credit off take in the short- term range, following a hike in key policy rates by RBI. The bank reported a net profit of Rs 386 crore for the quarter ended June 30 in FY 12, up 20.63 per cent over the same period last fiscal. The pressure on NIM could be in the range of 15-20 basis points for the present quarter, the bank's Chairman and Managing Director R Ramachandran said. "I presume that there will be an impact of 15 to 20 basis points during this quarter. Beyond that what will happen in the remaining quarters depend on how things will happen," Ramachandran told mediapersons here after announcing the first quarter results. The NIM stood at 3.77 per cent for the first quarter as against 3.72 during the Q1 of the previous fiscal. To a query, Ramachandran said the bank will take a call on increasing interest rates after a meeting with officials of assets and liability teams. On the demand for credit, he said there will be some slow down in the credit off take due to interest rate hike. "I anticipate a little bit slow down going forward and there is possibility that the credit growth in the remaining one or two quarters will be slower. Generally, the industry shows slow down in the credit growth," the banker said. The bank's total income stood at Rs 2,851 crore in the quarter, up 37.53 per cent over last year, while operating profits are at Rs 700 crore as against Rs 510 crore during the corresponding quarter in the last year.

IBN Live

2G: Yashwant Sinha wants to summon Chidambaram for probe

With A. Raja dragging Prime Minister Manmohan Singh and P. Chidambaram in the 2G case, BJP leader Yashwant Sinha has asked Joint Parliamentary Committee (JPC) Chairman P.C. Chacko to summon the Home Minister as a witness before the committee. Several other members of the Joint Parliamentary Committee have written to Mr. Chacko with requests to make various former Finance Ministers as witness before the panel looking into the 2G scam. Besides former Finance Ministers, at least four members have suggested that RBI Governor and former Finance Secretary D. Subbarao be made a witness. Mr. Sinha wrote to Mr. Chacko on Wednesday requesting him to include the name of Mr. Chidambaram as a witness. “I am collecting all the letters and the Committee will take a decision by consensus on whom to be called...the politicians which include former Telecom Ministers and former Finance Ministers will appear before the Committee at the end,” Mr. Chacko told reporters after the JPC meeting.

HBL

Govt must heed warning by RBI

The message from Tuesday’s monetary policy announcement by the Reserve Bank is that we will have to live with inflation and moderating growth for some more time due to a combination of domestic and global factors. The RBI has in fact revised its wholesale price index up to seven per cent for March 2012, against the six per cent it projected in May. This is due to rising crude prices, domestic demand-supply factors and the likely demand scenario in the months ahead. The fuel price hike in May/June this year will add 70 basis points to WPI inflation as a direct impact, and much more indirectly. There are also hidden inflationary factors like higher coal prices in future, which can lead to higher power tariffs. Commodity prices are unstable globally, and a constant source of inflationary pressures. But the nagging question that remains is whether the RBI’s monetary policy is the only weapon available to control inflation. It has been noted that since March 2010, the repo rate (that at which the RBI lends to banks) has been hiked by 2.25 per cent, while inflation has declined in this period by less than one per cent — from 10.3 per cent to 9.4 per cent. Inflation remains stubbornly high, but growth is decelerating. The RBI has said there is no evidence yet of a sharp or broad-based slowdown, but there are signs that growth is moderating, particularly in interest-sensitive sectors. The RBI’s controlled exasperation over the government’s ineffectiveness in controlling inflation is spelt out clearly in the monetary policy document. It makes it clear that the RBI was forced to take harsher measures in “the absence of complementary policy responses on both the demand and supply sides”. This is a reference to the absence of appropriate government action to deal with supply bottlenecks, specially in food and infrastructure, as a result of which inflation is going up.  Sound policies are needed to keep the supply of various products — particularly essential items — in pace with demand. We have only been hearing from the government about demand rising due to increased wages and earnings in rural India, but very little on what is being done to boost supply. The RBI, for instance, has warned that if the rains are not even in different parts of the country, and crops like coarse grains and pulses and protein-rich items are affected, food inflation will rise further.  One hopes the government is listening, and will arrange for imports if there is a shortfall in the production of these items. The agriculture and food and civil supplies ministers cannot say they have not been warned.  India has huge foreign exchange reserves, and such imports, done in time, can prevent spiralling food inflation. The government must act on several fronts — taking both fiscal and administrative decisions swiftly — if inflation is to be controlled. The other critical issue is the fiscal deficit, which could overshoot the government’s 4.6 per cent target.  Fiscal consolidation is critical to managing inflation, the RBI noted, but the government is yet to cut down on frivolous and unproductive spending, which are inflationary, and invest in badly-needed infrastructure. 

Deccan Chronicle

Multi-pronged strategy

This is with reference to “Record output, stubborn prices” (Business Line, July 28). It is pertinent to note that prices of perishable items, such as vegetables, are steadily increasing. The rate increase of RBI has had no effect on this. An acceptable argument is that a healthy GDP growth, together with benefits of socially-inclusive government schemes, is putting more money into the hands of the common man and thus consumers are migrating from low-income to middle-income groups and hence, the fast growing demand is outstripping the supply response.  Right at the time when the global economy is showing a nascent recovery, which could assist manufacturers, we are increasing the cost of capital to this sector. The RBI rate increase at this critical juncture could be a two-edged sword. No one step will be able to bring inflation under control. The government must adopt a multi-pronged strategy to contain inflation. Agricultural reform must go hand-in-hand with tuning up fiscal and monetary policies.

R. Narayanan, Ghaziabad (HB)

Anti-inflationary stance

A hike in the key policy rates by 50 basis points has certainly taken the markets by surprise. The central bank has retained the economic growth estimate at 8 per cent for the current fiscal but has raised its March-end inflation projection to 7 per cent from 6 per cent. The current level of inflation, at 9.44 per cent, is well above the RBI's comfort zone of 4 per cent. The monetary policy stance, therefore, continues to be anti-inflationary and it is clear that the RBI is prepared to sacrifice growth in the near-to-medium term for the sake of moderating inflation.  True, the frequent rate hikes aren't good for the country, as it will slowdown economic activities, but if the past is any indication, let's understand that the central bank is in the right position to judge things and make policy initiatives to take the economy forward.

S. Umashankar, Nagpur (HBL)

RBI bolt to elevate pain? Motilal AMC sees market slump

"The market is likely to fall and test the lower end again, as reforms from the government’s side would be incapable in offsetting the losses caused from RBI’s steeper-than-expected policy rate tightening,"

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Policymaking marred by incorrect data

....Dr. Subbarao has included in his critique not only the index of industrial production (IIP) numbers (which, he said, showed “counter-intuitive trends”), but also the data on unemployment and wages, growth and inflation – all of which, he regretted, “do not inspire confidence (and) on some instances led to off-the-mark estimates on the economy…(and) policy miscalculations”! .....

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RBI Extends Credit Relaxations in J&K by One Year

To encourage trade and industry in Jammu and Kashmir, the Reserve Bank today extended concessions to bank customers in the state till March 31, 2012......

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Former RBI guv Reddy backs Subbarao's rate hike decision

Former Reserve Bank of India (RBI) Governor Yaga Venugopal Reddy has termed the central bank’s repo rate rise decision an appropriate and balanced action. “He (RBI governor Duvvuri Subbarao) has explained the position. I think the Governor’s statement is very balanced, very appropriate as far as I could understand,” Reddy said. He, however, said since he was no longer involved in monetary policy making, it was not possible to have the same insight as the incumbent Governor. “As an academic, with some past understanding I would consider it a very very appropriate action and I can’t imagine any other appropriate solution. And, I think the approach is right under the current situation,” Reddy said on the sidelines of an Exim Bank event. Subbarao became the Governor of RBI in September 2008, after Reddy completed his five-year tenure. Subbarao was given a three-year tenure, which ends this September, and it’s still not clear whether the government will give him an extension. Reddy said RBI must have taken into account the effect of the past rises while taking the decision to go for a 50 basis points rise this time. “I am sure the governor has taken into account the transmission that had happened,” he said. On fiscal issues, Reddy, however, said the situation needed to be watched carefully. RBI has emphasized on the need for maintaining the government’s fiscal deficit target to keep inflation under check. On whether financial stability should be an explicit mandate of the central bank, Reddy said even if without being explicit, the central bank always assumes the role for maintaining financial stability. “Without being explicit, it’s been already been accepted, it’s been interpreted…For the last ten years, I have been saying so. Globally also, it’s also accepted in three-four countries. In others, whether it’s a mandate or not, the central bank has to de facto assume the responsibility of financial stability,” he said.

BS

Banks need to improve NPA mgmt: Chakrabarty

With lending rates rising, fears of banks’ asset quality deteriorating are gaining ground. In such conditions, banks should improve their bad loan management system, said K C Chakrabarty, deputy governor, Reserve Bank of India (RBI). Senior RBI officials were addressing analysts and researchers a day after increasing policy rates by 50 basis points to clamp on inflation. Chakrabarty said non-performing assets (NPAs) may increase, as interest rates rise. “We are only warning banks that their NPA monitoring system should be better. Risks can be mitigated if banks are able to identify them earlier,” he said. Pointing out the faults in outdated systems, he said there were enough gaps in the NPA monitoring process—from identification to follow-up to recovery. The process needed to be accelerated, he said. Lately, NPA accretion has been more evident in the case of public sector banks, as they move to a system that identifies bad loans without human intervention. Deputy governor Subir Gokarn said a rise in the cash reserve ratio would not have been beneficial. “It would disrupt normal business for banks. Since liquidity is already in deficit mode and policy transmission is better in such conditions, it was better to use a repo rate rise,” he said. Gokarn added the cumulative impact of past rate rise actions would bring down inflation from the November-December period. In the first quarter policy review, RBI increased the inflation projection for the end of this financial year from six per cent to seven per cent. Inflation, as measured by the wholesale price index, stood at 9.44 per cent in June. Economists say the figure may touch double digits on revision. Yesterday’s rate rise created an arbitrage opportunity for global players, which was reflected in the appreciation of the Indian rupee by 22 paise against the dollar. RBI said it did not intervene with the objective to set the exchange rate. “Exchange rates have to be market determined. If the rupee appreciates, it would have a positive impact on inflation, as imports would become cheaper,’’ said Gokarn.On the government’s borrowing plan, deputy governor H R Khan said RBI would take advantage of the flat yield curve and continue to sell more longer-dated papers. Higher government borrowing through cash management bills and treasury bills lifted yields at the shorter end, flattening the yield curve. RBI on Wednesday auctioned Rs 10,000 crore worth of treasury bills. It is set to auction Rs 12,000 crore of dated government securities on Friday.

BS  

An Economist's Miscellany - Book Review by P.P.Ramachandran

THIS BOOK BRINGS TOGETHER AN ECLECTIC COLLECTION OF WRITINGS ON THE WORLD OF ACADEME, POLITICS, AND POLICY. IT ALSO PUTS ON DISPLAY KAUSHIK BASU’S LITERARY FORAYS -TRANSLATIONS OF TWO BENGALI SHORT STORIES AND A FOUR- ACT PLAY.


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RBI in talks with banks for 3-year financial inclusion plan

Villages/hamlets with the least population even below 2,000 should also get banking facilities through banking facilitators.”

Hubli, July 27: The Reserve Bank of India is working on a three-year financial inclusion plan and is in talks with banks to see how to take this forward, said Ms Uma Shankar, Regional Director. Addressing the senior officials of Dharwad-based Karnataka Vikas Grameena Bank (KVGB) during her maiden visit to the bank's headquarters, Ms Shankar said RBI wants to connect every Indian to the country's banking system. Even after 40 years of bank nationalisation, 60 per cent of the population donot have bank accounts and many people do not get loans. “If banks are connected to people, the progress automatically starts and banks will also get more business. In the future, we want banks to go everywhere with simple banking products with technology”, she pointed out. “In this connection, where bank branches cannot be opened, RBI has asked all banks to engage business correspondents (moving with biometric and other devices)to extend the banking services to all the adult citizens,” she added. The Regional Director asked the banks to develop their own business models to achieve financial inclusion completely.  While appreciating the efforts of Karnataka Vikas Grameena Bank under financial inclusion, she said the regional rural banks could play a major role. “The RBI has clear vision and planning to bring the entire population within the banking fold by 2015. Villages/hamlets with the least population even below 2,000 should also get banking facilities through banking facilitators,” she said. “The Reserve Bank of India is celebrating its Platinum jubilee (75th year) and, on this occasion, has come out with several programmes to reach out to the common man,” Ms Shankar added. Mr Vasudev Kalakundri, General Manager KVGB, detailed the performance of the bank and its social involvement . Mr G Ramanathan, General Manager of Syndicate Bank and Convener, SLBC, Mr A.K.Bhattacharya, General Manager, RBI, also spoke and Mr Muralinath Gupta, General Manager of KVGB, proposed the vote of thanks.

HBL