With a view to provide basic information about foreign exchange (forex) facilities available for students/ researchers going abroad, the Reserve Bank of India (RBI) in association with Indian Institute of Technology (IIT), Patna organised an interactive session programme titled “Forex for you”. Students from IIT, NIT and other engineering colleges attended the session. A panel of experts comprising G. Mahalingam, Regional Director, RBI Patna, S. Maurya, Deputy General Manager, RBI, Shrimohan Yadav, General Manager, RBI, Naveen Chandra, AGM, SBI, and A. Saha, GM, Thomas Cook answered students queries over financial issue. Students were inquisitive about a number of things such as how to unravel black money, how to control inflation, how monetary value is determined, what will be the future of the economy, implications of artificial depreciation of Chinese yuan, what quantum of forex could be taken away to a foreign country and how much of it could be remitted back, whether an engineering graduate can undergo training in RBI, can banks be asked to reduce the interest rate on education loans etc. “The experts broadly spoke about the various facilities relating to foreign exchange available to students and to the general public for different purposes such as travel, study, employment, business, medical needs etc,” In response to a question regarding the future of Indian economy, Mahalingam said: “India is managing its affairs pretty well. Fiscal deficit is well managed, the only concern is the inflation which is because of supply side problem and RBI can interfere to control it only when it is a demand driven.” “Please don’t worry about India’s economy. You (students) go abroad for study and comeback as we want you to be in the country,” Mahalingam told students.
The very purpose of VITALINFO is to provide a platform for wider dissemination of updated information related to and happening of events in and around RBI.
Tuesday, February 8, 2011
S K Kotian, Ex-DGM, RBI passes away
S K Kotian, the director of Bharat Co-operative Bank Limited passed away on Sunday February 6 owing to brief illness. Kotian basically hails from Kallamundkoor in Moodbidri taluk of Dakshina Kannada district. He retired as Deputy General Manager with Reserve Bank of India and continued to serve the Board of directors in Bharat Co-operative Bank. He was the active member of Billavar Association at the suburban Borivali. He is survived by his wife and two daughters
RBI to open sub-offices in NE capitals – Surekha Marandi, Regional Director
Reserve Bank of India will open sub-offices in all the capital states of North-East, starting with Agartala. RBI Regional Director Surekha Marandi told PTI today the process of setting up the first sub-office in Tripura capital of Agartala is on. "We are waiting for Tripura government''s offer. As soon as the state government allots a building, we will start the process," she said. The RBI official said the sub-office at Agartala should be ready by the end of this year. Sub-offices will be set up in other capitals as well in a phased manner, Marandi said, adding that RBI was trying to increase the outreach of banks in the region.
New cheque clearance system to begin in Chennai by mid-2011
Rejection of cheques with over-writing or other corrections, currently limited to the national capital, will begin in Chennai by the middle of the year, but the pan-Indian implementation of this new cheque clearance system by RBI may take a few years more. The new Cheque Truncation System, under which cheques are cleared through their digital image being passed through the banking system and without their physical presentation, will be implemented in Chennai in its second phase by Newgen Software. The system was introduced in Delhi by the company in December 2010, marking the first phase of the new system, proposed by RBI earlier last year.
Andhra Bank submits financial inclusion roadmap to RBI
Andhra Bank, one of the leading public sector banks in the country has submitted a roadmap to the Reserve Bank of India (RBI) to provide banking services to 1144 unbanked villages in the country with a population of over 2000 by March 2012. The Hyderabad-based bank has also fixed an interim target to cover around 500 villages by the end of the current financial year under the Financial Inclusion Plan . The RBI has asked the public sector banks to extend their banking services to the unbanked villages having a population of over 2000 by March 2012. Andhra Bank would offer banking services trough the Business Correspondents (BCs) model by leveraging technology. The bank has already covered 195 villages under FIP, sources said. In order to strengthen the FIP, the bank has opened 8.60 lakh “No Frill Accounts” under branch banking. With its pan-India presence, the bank has 2615 delivery channels consisting of 1587 branches, 36 extension counters, 38 satellite offices and 954 ATMs. Out of the total target of 1144 villages to be covered under the FIP, 101 villages are in the bank’s Berhampur zone, that covers seven districts in the south Orissa and Srikakulam district in Andhra Pradesh. The districts in Orissa to be covered under FIP are Ganjam, Gajapati, Nabaranagapur, Kandhamal, Kalahandi, Koraput and Rayagada. Before the end of the current financial year, we will cover at least 30 villages under the FIP, said Regidi Appadu, Deputy General Manager (DGM) of the bank’s Berhampur zone. All the 30 villages are located in Srikakulam district in Andhra Pradesh. Under the FIP, the bank has already undertaken the Andhra Bank Gramina Kranti Patakam, a Smart Card based project for payment of the wages for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) and the social service schemes like the old-age pensions at the panchayat level. “Out of 7.45 lakh beneficiaries in Srikakuam district in Andhra Pradesh, the bank has already issued the smart cards to 3.40 lakh people”, Appadu said. The same scheme would be launched in Orissa after signing memorandum of understanding (MoU) with the state government. “The scheme is likely to the implemented in Orissa after March this year”, he added.
RBI directive will not affect us, says Manappuram chief
The Reserve Bank of India's directive that loans given against jewellery as collateral would no longer be eligible for priority sector lending will not have much of an impact on NBFC Manappuram General Finance and Leasing, according to a top official of the company.
Finmin, RBI should join hands on inflation
Last year’s Budget had two surprises for the Indian financial sector. First, finance minister Pranab Mukherjee’s announcement that the Reserve Bank of India (RBI) would soon issue licensing norms for new private firms in the banking space and, second, the formation of the Financial Stability and Development Council (FSDC). On both issues, I am told RBI was consulted only a few days ahead of the budget. And, on both, the Indian central bank had reservations. It had been talking about consolidation in the banking sector, and not entry of new companies, till Mukherjee said this in his budget speech in February 2010. Even though the stated objective of FSDC is to “strengthen and institutionalize the mechanism for maintaining financial stability” and it plans to monitor macro-prudential supervision of the economy, including the functioning of large financial conglomerates, and address inter-regulatory coordination issues “without prejudice to the autonomy of regulators”, both RBI and the capital market regulator are distinctly unhappy and they see it as a dent on their autonomy. The first draft on FSDC, circulated by the ministry, evoked strong reactions from RBI. It was circulated just before the promulgation of an ordinance by the President of India that sought to resolve the face-off between the stock market and insurance regulators. The 18 June ordinance, the Securities and Insurance Laws (Amendment and Validation) Ordinance, 2010, which later became a law, empowers the finance ministry to resolve all future regulatory disputes, including those involving RBI. Faced with stiff resistance from RBI, the ministry made cosmetic changes in the structure of FSDC and the regulatory dispute resolving law, but it did not budge an inch from its resolve to push through these issues. One wishes that it shows same resolve to address other financial sector related issues, some of them are a decade old. The biggest threat to growth is high inflation and it can be contained only when the finance ministry and RBI mount a joint offensive, through fiscal and monetary measures. Mukherjee can make a beginning, using the budget 2012 as a platform.
Are our banks lending more than they get as deposits
Indian banks are lending more than what they get as deposits — this is what was Reserve Bank of India (RBI) Governor Duvvuri Subbarao’s concern during the third quarterly review of the monetary policy. The governor said the incremental credit-deposit (C/D) ratio of the banking sector was 102 per cent at the end of December 2010, up from 58 per cent in the corresponding period of the previous year. Incremental C/D ratio indicates how much a bank has lent for every additional rupee it has received as deposit. Ideally, banks cannot lend, for example, more than Rs 70 for every Rs 100 they mobilised as deposits, because they need to set aside Rs 30 in the form of cash reserve ratio (CRR) and statutory liquidity ratio (SLR). But, RBI says, for every additional Rs 100 deposit, banks are lending Rs 102, even after meeting CRR and SLR obligations.
After SKS, more MFIs to cut exposure to Andhra
Many microfinance institutions (MFIs) are considering reducing their business in Andhra Pradesh after the state government decided to continue with the Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending) Act. State-based Share Microfinance and Spandana Spoorthy said they would reduce their exposure to the state from 40 per cent to 5-10 per cent if the state government continued with the Act. Last week, SKS Microfinance, the only listed MFI in the country, had threatened to pull out of the state if the government did not revoke the Act. Last year, the Assembly enacted the Act and imposed stringent regulations in response to complaints over high interest rates and coercive loan recovery practices adopted by MFIs. “Operations have come to a standstill in the last three months. Fund-raising has become an issue and banks are yet to disburse loans,” said Uday Kumar, chairman and managing director of Share Microfinance.
RBI to issue new Rs 10 coin
The Reserve Bank of India will soon put new coins of Rs 10 denomination into circulation to felicitate its Platinum Jubilee. The front face of the coins will have the Ashoka Pillar embossed in their centre, an RBI release said. The reverse will bear the emblem of the Reserve Bank of India, a palm tree tiger, along with the year "1935-2010" below the emblem, it said.
Pvt banks, NBFCs may be hit on RBI's take on gold loans
The last quarter before the closure of financial year, private banks are busy buying loans from non-banking finance companies to meet their 40 per cent priority sector lending target set by the banking regulator. The Reserve Bank of India on Friday said that banks cannot show loan given against gold jewellery under priority sector lending. This news comes as a thunderbolt for both private banks and NBFCs specialising in loans against gold. The move by RBI is due to the high interest rate charged on these loans – 18 to 24 per cent – and end-use of funds by the NBFC got from banks may not be for priority sector lending. These loans given against gold jewellery are called ‘bridge loans' as they for a short duration of three months usually taken by small traders and businessmen. Mr S.K. Mishra, General Manager (priority sector), Indian Overseas Bank, said the impact would be greater on private banks compared with public sector banks. Public sector banks have a large network of branches in the rural areas and therefore easier to meet the priority sector lending.
Bank on decentralisation
The changes that have been taking place in State Bank of India (SBI) since July 2006 coincide with the chairmanship of O P Bhatt who took over in July 2006, ending his five-year term in March 2011. There is no doubt that the bank’s performance data in the last five years has improved. Despite the handicaps that the bank faced in the form of highly unionised staff at the branch level, and the demerits associated with public ownership, the bank has done well, surpassing its peers on various business indices. SBI’s excellent track record can be attributed to Bhatt’s leadership. Bhatt introduced certain changes to achieve the stated objectives. However, these changes have made branch managers the weakest link in the whole system. It may be recalled that former SBI chairman R K Talwar said every branch manager represents the chairman of the bank. Accordingly, Talwar strove to decentralise the decision-making process to strengthen the branch manager’s position. Since then, SBI has come full circle with Bhatt weakening the branch manager’s position. Bhatt and his team believed that centralising management would speed up the decision-making process. If the bank were to take an independent survey of customer satisfaction at branches, the data would speak for itself. The computerisation of SBI branches has done little to improve service levels. Also, one does not see or experience the performance celebration at branch levels for reasons best known to the branch staff. However, having taken the lead in all business parameters, it is for SBI’s next leadership to sustain the bank’s performance in the years to come —this would be the best tribute to Bhatt’s leadership. This is on the assumption that the government (and the Reserve Bank of India) does not renew his tenure, although he deserves it. K.V.Rao, Bangalore
GOVT TO WAIT FOR RBI STAND BEFORE DECIDING ON FDI CAP
The government will wait for the Reserve Bank of India (RBI to take the first step before deciding on whether to reduce the foreign investment cap on private sector banks to below 50 per cent from the current 74 per cent. Currently, the government is not in amood to cut the cap, a proposal mooted in a discussion paper on entry of new banks, released by the RBI last year. The finance ministry said it would wait for RBI guidelines, a development which will provide much relief to ICICI Bank and HDFC Bank. Both are already known as Foreign Owned Indians Controlled entities, after foreign investment in them rose much above 50 per cent, following new norms of calculations by the commerce ministry. “We are not thinking in terms of cutting the cap on foreign investment in private sector banks. The proposal is not under consideration. We will wait for RBI norms on new banks before taking any decision in this regard,” a key official with the financial services department of finance ministry told.
Interest-free Islamic banking a boon for poor
Proponents of Islamic banking have welcomed the Kerala high court’s move to dismiss a petition challenging the state government’s support to an Islamic financial institution. Rooting for India to include interestfree windows in conventional banks, Abdur Raqeeb, general secretary of the Indian Centre for Islamic Finance said nations around the world were looking seriously at Islamic banking. “If the UK, Hong Kong, Singapore, France can incorporate Islamic banking, India too can look at it,” he said, adding that they had given the RBI and the finance ministry a report to start an interest-free window in conventional banks within the existing Indian banking regulation act. “We are hopeful,” he said. Conventional banks have started testing the waters, making inroads into the new format. In 2008, Malaysia’s Securities Commission, which aims to make the country a hub for global Islamic banking, approved Reliance Asset Management as an Islamic fund manager. Banks like ICICI and Kotak have shariacompliant windows in their Gulf operations. Asset management firms offer such services, too. But they are at a nascent stage and may grow with Gulf funds and NRIs as potential investors.
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