RBI undertakes programmes on financial literacy

New Delhi : As part of its financial literacy campaign, the Reserve Bank organised an interface on policy decisions relating to foreign exchange here. During the event yesterday, RBI's Chief General Manager-in-charge of Foreign Exchange Department (Central Office) Salim Gangadharan presented an overview of systems under the Foreign Exchange Management Act (FEMA) since 1999, and explained major initiatives taken towards liberalisation, the central bank said in a statement. The event was attended by students, money changers and people engaged in export-import business, it added. Reserve Bank personnel also visited Kendriya Vidyalayas in the city to provide information on the role and functions of the apex bank and issues such as security features of genuine currency notes, complaints redressal mechanism through Banking Ombudsman Scheme and its initiatives on financial inclusion and literacy, the statement said.

NBFCs told to drive up CAR to 15%

Finance companies which raise public deposits will have to bring in more capital to do business. The new rule, laid down by the Reserve Bank of India , will apply to large non-banking finance companies such as Mahindra Finance , Shriram Transport Finance and Sundaram Finance , among others.  This is in response to an RBI directive, which asks finance companies taking deposits from the public to maintain higher capital adequacy ratio (CAR) of 15% by March 2012. CAR is the ratio of capital (comprising equity, free reserves and long-tenure debt) to risk-weighted assets.  At present, finance companies are required to maintain a CAR of 12%.  RBI report has noted that as on March 2010, 212 NBFCs had a capital adequacy ratio of more than 12% against 221 NBFCs a year ago. "It may be highlighted that the NBFC sector is witnessing a consolidation process in the last few years, wherein the weaker NBFCs are gradually making an exit, paving the way for a stronger NBFC sector," it said. There are as many as 12,630 NBFCs registered with RBI as on end-June 2010, slightly lower than 12,740 a year ago.

RGB becomes first rural bank to achieve CBS

The Rushikulya Gramya Bank (RGB), a regional rural bank (RRB) operating in south Orissa, has become the first RRB in the state to have placed all its branches on the Core Banking Solutions (CBS) platform. Presently, five RRBs including RGB are functioning in the state.  All the 81 branches of the RGB located in Ganjam (71) and Gajapati (10) districts migrated to CBS on Monday. The day coincided with the Foundation day of the Berhampur based bank, which completed 31 years of its service. The bank was established on February 14, 1981.  “Our bank is the first RRB in the state to have fully implemented CBS, much before the stipulated time set by the Reserve Bank of India (RBI)”, said RGB's chairman PVSTR Seshagiri Rao. The Central government had directed the RRBs across the country to implement CBS before the end of September 2011.  The bank has planned to issue debit cards to its customers and explore the possibilities to utilise the ATMs of its sponsoring bank- Andhra Bank.

Sebi looks at cash settlement in IRF

As part of efforts to boost volumes in exchange-traded interest rate futures (IRF), the Securities and Exchange Board of India (Sebi) is evaluating the option of introducing cash settlement in the segment. If approved, it could come as a shot in the arm for the niche market that has been witnessing almost nil volumes for months.  IRF is an exchange-traded derivatives product for hedging interest rate risks. Only the National Stock Exchange (NSE) offers IRFs, which were launched for the first time in 2003. According to people familiar with the development, the joint technical committee reviewing the guidelines and contract specifications for IRFs is looking at cash settlement as one of the ways to attract more market participants. The committee comprises representatives of Sebi and the Reserve Bank of India (RBI).  With U K Sinha, the new chairman of Sebi assuming office from Friday (February 18), it is expected that the revised guidelines for IRFs will be unveiled soon.

MFIs demand bank funding resumption

Microfinance institutions, or MFIs, plan to approach banking regulator, Reserve Bank of India (RBI) and banking lobby Indian Banks’ Association (IBA) to demand the resumption of bank finance to the industry.  Commercial banks have been slow in releasing loans and considering new loan requests from microlenders since October, when Andhra Pradesh, the hub of the Indian microlending industry, imposed curbs on how MFIs recover money from borrowers—putting their ability to repay bank loans in question. “At an industry level, we are going to take up the issue with the Reserve Bank and IBA as survival of MFIs without adequate bank finance is difficult,” said Alok Prasad, chief executive of Microfinance Institutions Network (MFIN), an industry lobby.  MFIN is likely to approach RBI by next week, Prasad said. Microlenders said banks were unwilling to comply despite an RBI notice last month asking them to recycle loans to the sector—or channel money received as payment of earlier loans back to MFIs. “Banks are advised that they should endeavour to recycle the collections to MFIs,” RBI had said.

Foreign travel made easier with prepaid cards

As per the Reserve Bank of India guidelines, a tourist can carry foreign exchange up to $10,000 per fiscal, of which only $3,000 can be carried in the form of foreign currency notes and coins.  For the rest, one has to resort to traveller’s cheques or banker’s draft. What if the cheque or draft was misplaced or stolen, or got stuck in baggage that was delayed?  Prepaid travel cards are available in different currencies and can be bought even on the day of travel. The exchange rate for a particular currency is based on what is prevalent on the day the card is loaded.  Though one can get multiple travel cards for different currencies, only one card will be issued for a single currency. One can load up to $7,000 on such cards and carry up to $3,000 in notes and coins. There are three types of prepaid cards —- closed-ended, semi-closed and open-ended. Closed-ended prepaid cards are used for payments meant for a single purpose. For example, the card will be issued to the holder to make payments towards DTH TV bills. Semi-closed prepaid cards are available in physical and virtual forms. A physical card is like a normal debit or credit card and has an account number and password. A virtual card only has an account number and password and can be used for online payments. Open-ended cards combine foreign exchange, travel and gift cards. These cards are issued by banks, travelling agencies and are accepted by all current point of sale (POS) terminals.