SBI to introduce green-channel banking soon

The State Bank of India is set to introduce green-channel banking to promote paperless work and reduce footfall of customers in the already over-burdened ATMs and branches.  SBI General Manager for network-I D Mozumdar said that apart from regular counters, a new counter was being opened in which customers could swipe their ATM cards and enter the pin code to receive cash from the person manning the counter. "In this way, there will be no requirement for paperwork and the process of money withdrawal will be fast," he said. 
Under the financial inclusion scheme of the Reserve Bank of India, SBI has been asked to take up responsibilities in 43 of the 156 "under-banked" blocks of the state, besides extending banking facilities to 408 villages having a population of over 2,000 people. Mozumdar said SBI would connect 200 villages by March this year through different banking techniques. "We do not require brick and mortar branches these days to extend banking facilities because technology has made the work easier and SBI is fortunate to have all the modern banking technology," he said.  All 200 villages where SBI is planning to launch services by March will be on technology platform that includes micro-ATM or mobile-based banking in which the customers having a mobile phone can access his or her account through the cellphone and bio-metric smart cards by which an user is identified on a hand-held machine through finger prints. Business correspondents appointed by bank will also disburse cash along with printed receipts and through kiosk-mode in which the bank provides a laptop with face-reading and voice-recognition software to enable transactions. 

Pension option: Banks face 12k cr liability

Banks are awaiting clarity on accounting for a liability of around Rs 12,000 crore due to nearly 2.75 lakh serving and retired employees opting for a second pension option.
Bankers said they had approached the Reserve Bank of India, seeking a longer duration to provide for the amount. Although banks have started providing for a higher pension bill, setting aside the fund to meet the liability that arises over the next few years in one shot would dent their balance sheets. Around 3.3 lakh public sector bank employees are estimated to be eligible to get pension post-superannuation as part of a second option being given to them. A second pension option was part of the wage settlement agreed upon by banks and unions, which had capped the average pay increase at 17.5%. Earlier, they could only get provident fund. Among the public sector lenders, only the SBI group had the provision of giving pension to all its employees before the wage settlement. As per the pact , bank managements will provide 70% of the deficit, while the remaining will have to be borne by the employee. The United Forum of Bank Unions, which negotiated the wage pact and pension with Indian Banks' Association, had said that employees had to pay 2.8 times of their Nov 2007 salary from the arrears of the wage settlement. Banks are in various stages of getting a firm idea on the number of employees as several of them had given time until December for employees to opt for the scheme. Bankers, however, expected over 90% of serving and retired employees to opt in favour of pension. Lenders had taken up the issue with RBI last year, which in turn is discussing it with Institute of Chartered Accountants of India that sets accounting standards. Under existing norms, at the end of their financial year in March, banks have to set aside funds to meet any actuarial shortfall. The deficit or surplus for pension is done through a technical exercise conducted by actuaries.

Govt should start spending this qtr: RBI

The Reserve Bank of India (RBI) today said the government should start spending to ease the liquidity situation that has significantly tightened towards the end of 2010. "It is expected that the government would spend in order to meet its committed expenditure for the year during the ongoing quarter, which is the last quarter of the financial year," the apex bank said in its macroeconomic review released today. The liquidity conditions tightened significantly to the point of imposing constraints on growth in the terminal months of 2010, it said. As of December, the government surplus increased at Rs 1,44,437 crore compared to Rs 93,425 crore in November, 2010. With government cash surplus beginning to flow back into the system, the liquidity position would improve, it said. The policy noted that liquidity conditions remained tight during the third quarter of 2010-11, warranting liquidity easing measures by the RBI.  Recognising the need to firmly anchor inflationary expectations and contain inflation, the RBI has raised policy rates six times since March 2010, it said. The RBI injected large primary liquidity through repo and open market operations, which was reflected in the high growth of base money, it said. Besides, it reduced the Statutory Liquidity Ratio (SLR) requirement from 25 per cent to 24 per cent with effect from December 18, 2010. This was necessary to avoid the risk of liquidity stress adversely impacting the real economy, even though the overall anti-inflationary stance was sustained throughout, it added.

High current account deficit cannot be sustained: RBI

Cautioning that high current account deficit cannot be sustained in the long run, the Reserve Bank of India (RBI) today said it would monitor closely the external sector as well as the global developments. India's current account deficit (CAD), representing the difference of inflows and outflows of foreign exchange barring capital movements, surged 72 per cent to $15.8 billion in the July-September quarter over $9.2 billion in the same period last year due to higher imports.  "...The external sector needs to be monitored closely. The economy is very well poised to absorb a higher current account deficit for a couple of years but this cannot remain a persisting trend," the RBI said in its macroeconomic review released today.  The RBI said that the widening of CAD is a result of factors like lower growth in services receipts reflecting uneven pace of global recovery; significant rise in imports relative to exports reflecting steep rise in international crude oil prices, moderation in FDI inflows reportedly because of environment sensitive policies, land acquisition issues and availability of quality infrastructure.

Taming Inflation a Predominant Objective: RBI

Indicating a hike in key policy rates tomorrow, the Reserve Bank of India has said containing inflation would be its top priority as rising prices could derail growth.
The RBI would announce its third quarter monetary policy tomorrow amid speculation that it may increase short-term lending (repo) and borrowing (reverse repo) rates ranging between 25-50 basis points. Even as the economy grew by 8.9 per cent in the first half of the current fiscal, inflation, which increased to 8.43 per cent in December, has remained an area of concern.
"While downside risks to growth have receded, upside risks to inflation have increased," the RBI said adding containing inflation will have to be the predominant objective of monetary policy in the near term. RBI, in its macroeconomic and monetary development report ahead of quarterly review of monetary policy, also warned that persistent high inflation could endanger the growth objective and also increases risks to inclusive growth. RBI, since March 2010, has increased the policy rates six times to anchor inflationary expectation and check rate of price rise. "Conventional wisdom says that there should be at least 25 basis point hike in interest rate," State Bank of India Chairman O P Bhatt had said last week. Despite moderating for two weeks, food inflation is still very high at 15.52 per cent on account of rising prices of essential items like vegetables, particularly onion and tomato, fruits, milk and eggs. A day before he met RBI Governor D Subbarao on January 20, Finance Minister Pranab Mukherjee had expressed concern over food inflation saying, "some of the vegetable prices are still high." Though analysts are not sure whether any further tightening of interest rate can check the price rise, the central bank seems to have few options but hike rates. Endorsing the widespread view, HDFC Chairman Deepak Parekh had said RBI is expected to raise key short-term rates by 25-50 basis points. "The RBI may be looking at an increase (of short-term rates) at 25-50 basis points... But I personally feel that interest rates are already high and it will impact the growth of retail loans and housing." Industry chambers, including FICCI and CII, had expressed apprehensions that RBI tightening the monetary policy could hit the growth, especially considering that industrial growth plunged to an 18-month low of 2.7 per cent in November, 2010.

Private sector banks march ahead in credit growth

Private sector banks have recorded higher credit growth than their state-owned counterparts on a year-on-year basis. According to latest data by the Reserve Bank of India (RBI), private banks saw 28 per cent growth in bank credit at the end of December 31, while public sector banks recorded a rise of 24.1 per cent. During the same period last year, private banks had registered 8.4 per cent growth whereas public banks had seen 16.9 per cent increase in credit growth. Foreign banks witnessed an 19.8 per cent increase compared to a decline of eight per cent in the same period last year. Public sector lenders, however, accounted for around three-fourth of the incremental year-on-year credit off-take at the end of the third quarter. ICICI Bank, the largest private sector lender which was shrinking its balance sheet for the last few quarters, registered an increase in advances in the third quarter. The bank’s advances rose 15.3 per cent to Rs 2,06,692 crore on December 31, from Rs 179,269 crore on December 31, 2009. Most private sector banks which have declared third-quarter results have seen a substantial increase in loan offtake.

Economy to grow 8.7% in 2010-11, finds survey

India’s gross domestic product (GDP) is expected to grow 8.7 per cent in the year, according to the Reserve Bank of India’s professional forecasters’ survey conducted in December. The previous survey showed a growth rate of 8.5 per cent. Improvement in exports, buoyant demand, a rise in volume of sales and new orders were factors that provided a boost to overall expectations. But persistently high rate of inflation can dent growth.  “The outlook for growth remains buoyant. The inflation persistence, led by stubbornly high food inflation, in double digits for close to two years, however, remains a major concern,” said RBI in its macroeconomic outlook, released a day before the third quarter review of the monetary and credit policy. On the brighter side, the survey results suggest manufacturers expect selling prices and profit margins to increase despite expectations of rising input costs, which reflect their pricing power. The survey says better agricultural production is expected on the back of satisfactory monsoon and reservoir levels. The survey revised growth estimate for the agricultural sector from 4.6 per cent to five per cent.

Rate hike to hamper industrial growth: Sharma

A day prior to the Reserve Bank of India's (RBI) third-quarter monetary policy review scheduled for tomorrow, Union Commerce and Industry Minister Anand Sharma said any rise in interest rates would hinder industrial growth. "Inflation is definitely a cause of concern. But it cannot be curbed by increasing interest rates. Instead, for the development of industry and growth of the economy, there is a need to provide easy credit to the industrial sector," Sharma told reporters on the sidelines of an event organised by the CII here today.   The RBI is widely expected to raise key short-term rates tomorrow to rein-in inflation.  There is a need to allow capital inflows and easy credit flow for the growth of economy, he said. "For a clear growth of the economy, there is a need for capacity addition. Foreign capital inflows and making credit easily available for the industrial sector by public sector banks will ensure robust industrial production," Sharma said. Cutting exports would only lead to cutting economic growth and not inflation. "This will result in job loss," he said.  On the government's policy on foreign direct investment (FDI) in retail, Sharma said, "We are actively considering allowing FDI in the retail sector. We have received inputs from stakeholders and investors and (now) have to formally finalise the issue."

RBI signals series of rate hikes to tackle inflation

The Reserve Bank of India (RBI) today set the stage for a series of rate hikes to tackle inflation, which the central bank believes is likely to remain above the comfort zone in the near term. Though RBI expressed satisfaction on growth prospects, it said higher growth is expected to coexist with high inflation. “The inflation outlook, which is being conditioned by both demand-side and supply-side factors, suggests slow-paced moderation in inflation, with the possibility of rigidity at above the comfort level in the near term,” RBI said in its macroeconomic and monetary developments report today.   Inflation based on the wholesale price index was at 8.43 per cent in December. RBI, which has projected March-end inflation at 5.5 per cent, is expected to revise its projection upward.  The central bank said sectoral imbalances in several non-cereal food items may not be addressed by higher policy rates, but aggregate demand-side pressures on inflation would have to be contained in a forward-looking manner. “The anti-inflationary focus of the monetary policy would have to continue, recognising the limits of monetary policy in dealing with structural pressures on inflation, and the need for forward-looking response to demand-side pressures. Since a lower inflation regime is essential for sustainable high growth, containing inflation becomes the dominant policy objective in the current environment,” RBI said.

Arrangement with RBI in the Interest of All: J&K Govt

The Jammu & Kashmir government today defended the new cash management arrangement with the RBI -- which restricts J&K Bank from extending overdraft facility to Jammu & Kashmir directly -- saying it is in the overall interest and benefit of the state, people and the lender. "The new cash management agreement with RBI as a supplementary agreement, necessitated to check continued financial indiscipline. The new arrangement is a major structural reform measure which is in the overall interest and benefit of the government people and the J&K Bank," Minister for Finance and Ladakh Affairs A B Rahim Rather said while addressing a press conference in Civil Secretariat today. Jammu & Kashmir enjoyed a special provision under which it could receive overdraft facility directly from J&K Bank instead of the way and means advances from the Reserve Bank of India (RBI). Overdraft is a facility extended by banks to obtain funds in excess than balance available from time to time. Rather said the overdraft facility with J&K Bank was meant for meeting a temporary miss-match between revenue and expenditures for only a few days. But, he added, due to continued financial constraints, the overdraft facility had become a permanent structural liability deficit in the state finances.

SMEs low on priority of banks, says study

The small and medium enterprises (SME) sector is low on the agenda of the country’s banks as a study by ratings agency Crisil Ltd has found that the bulk of the expansion in these companies had to be funded by the promoters themselves. The report also dispels the notion that SMEs are over-leveraged. While credit facilities by banks to the SME sector rose continuously from Rs.127,000 crore in 2006-07 to Rs.369,866 crore in February 2010, according to the Reserve Bank of India (RBI), the Crisil study, which looked at a sample of 2,000 SMEs between the financial years 2006-07 and 2008-09, presented a slightly unexpected picture.  It estimated that Indian banks funded on an average around 60% of the sector’s incremental working capital and long-term borrowing needs, representing a gap of Rs.50,000 crore of untapped opportunity.  This shortfall was funded, overwhelmingly, by the promoters’ own funds, apart from internal accrual, which was the next most oft-resorted avenue to financing. The third route was to lean on suppliers to extend short term—and often informal—credit agreements, the data revealed.

Foreign bankers hope RBI plan won't up tax burden

Although appreciative of the Reserve Bank of India's stance that foreign banks should operate in India as wholly-owned subsidiary (WOS) rather than as a branch of the parent, foreign bankers are hoping the conversion would not mean too much of a tax liability. Moreover, the RBI's proposal that the WOS become a listed entity over time, resulting in a dilution of the parent bank's holding, has not gone down too well with the fraternity. A dilution of the parent bank's stake would mean it would have to give up total control and also some share of the profits. A local listing, foreign banks fear, would restrict their ability to capitalise on the parent bank's balance sheet.