The finance ministry plans to phase out the varied looks of Indian currency notes by giving them a makeover. A committee appointed by the finance minister Pranab Mukherjee will soon give green signal to RBI for approving a new design for currency notes. It follows the introduction of the rupee symbol that got Cabinet approval last year. The catch in the plan is it will involve a gradual recall of the old currency notes without creating a panic in the market. The recall is where black money can be tracked very effectively. The finance ministry officials are clear this should not be seen as demonetisation. But they acknowledge that a plan to replace the old currency, will definitely impact those who have stashed away currency in high denomination notes. The reason to upgrade and make uniform the look of the Indian currency has been felt for a long time. For instance, two kinds of ten rupee notes are in circulation at present. These are the older white series and the more current orange coloured ones. Since both are valid, though the latter has improved security features, it has been possible for counterfeiters to push through the older ones and get away with it. The introduction of the new design, officials feel, will not solve the counterfeiting problem unless all notes from the older series is phased out and a date set for them to cease as legal tenders. This will not be the first time the Indian government will recall a set of currency notes. The last time it was done as a clear anti-black money operation in the seventies. While the problem of counterfeiting has been there over the years, it is now that the RBI and the finance ministry feels that they have got a grasp over the solution. The possibility of using it to track black money too has made the plan more attractive. It has also been helped by the incorporation of the new public sector company, SPMCIL, that has taken over and modernised all currency notes and mints across the country, in 2008.
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Thursday, March 3, 2011
MoF consults Sebi, RBI for shaping infra debt fund
The government today kick-started discussions on the proposed Infrastructure Debt Fund (IDF), holding meetings with banking and market regulators to discuss the broad contours of the proposed fund. Sources told The Indian Express that the proposed fund would become a part of the Direct Taxes Code, which is currently being vetted by the Parliamentary Standing Committee on Finance and would be implemented from April 1, 2012. A source said the officials of the Reserve Bank of India, and market regulator, Sebi, met finance ministry officials to discuss the structure and the regulator of the fund. The terms of borrowing, minimum corpus requirement, among other things, would be worked out soon. The official added that the income of the fund would be exempt from tax because the intent of the fund is not to generate income but to mobilise the same in infrastructure. However, it will have to file return.
RBI to issue new Rs. 5 coin
Hyderabad: The Reserve Bank of India (RBI) will shortly put into circulation new coins of Rs. 5 with the ‘C. Subramaniam Birth Centenary' theme. RBI Assistant General Manager Vinod P. Appa Rao said the face of the coin will bear the Lion Capitol of Ashoka Pillar in the centre with the legend ‘Satyameva Jayate' inscribed below The reverse of the coin will bear the portrait of C. Subramaniam in the centre.
Coin Mela held in Kochi
The Coin Mela organized by HDFC Bank at Kochi was inaugurated by K V Viswanathan, DGM, RBI, Issue Dept, Thiruvananthapuram on 23rd Feb, 2011. The initiative was in conjunction with RBIs Clean Note Policy to provide fresh notes in exchange for solid ones, a release said.
Banks lost Rs 2,289 crore to scamsters
The recent Rs 300- crore scam in the Gurgaon branch of Citi Bank is a pointer to a disturbing trend: the steady rise in the number of banks falling prey to such frauds. According to the data compiled by the Reserve Bank of India (RBI), the money lost to such scams has doubled in the past four years. In the current fiscal year, banks lost Rs 2,289 crore (till December), while the loss was Rs 1,057 crore in 2007- 08. It's the state-of-the-art private banks, including foreign banks, that appear to be more prone to such frauds. The public sector banks, with their massive presence across the country, also reported an annual average of more than 3,000 cases of frauds and cheating during the past four years. Their better equipped counterparts in the private sector reported almost five times the number of cases. ICICI Bank alone accounted for almost half of the total scams reported to the RBI. Of the total 21,244 cases reported in 2007-08, a whopping 10,976 were from ICICI. Similarly, in 2008- 09, ICICI reported 13,221 of the total 23,579 cases. The bank reported 15,074 of the total 24,788 fraud cases in 2009- 10. The second highest number of cases were reported by HSBC (3,770, 3,481, 2,741, 2028); followed by Citi Bank (1,647, 1,182, 1,277, 666); American Express banking (499, 703, 817, 637) and the distant fourth was State Bank of India (561, 745, 545, 615) during the past four financial years - 2007-08, 2008-09, 2009-10, 2010-11 respectively. The figures for the current fiscal are till December, 2010. Maharashtra, with Mumbai being the country's financial capital, reported the maximum number of fraud cases: (1,006 in 2009- 10 and 1,045 in 2010- 11). Delhi was second with 349 cases in 2009- 10 and 338 in 2010- 11. Union minister of state for finance Namo Narain Meena presented these figures in the Lok Sabha on Friday. The data has thrown up interesting trends in not just scams and frauds but also the way banks were being targeted by robbers and thieves. Punjab reported the maximum number of dacoity and ATM thefts, followed by Uttar Pradesh and Haryana. State Bank of India appeared to be the favourite for thieves and burglars. SBI reported 114 such cases in 2009-10 and 79 this year, followed by State bank of Patiala - 41 and 39 respectively.
Deficit goal viable with oil pass-through – Dr, Subir Gokarn
The deficit cutting target, criticised by many economists as unrealistic, is viable if New Delhi is willing to pass along higher crude oil prices to consumers, the Reserve Bank of India (RBI) deputy governor said on Wednesday. On Monday, the Finance Minister Pranab Mukherjee unveiled a budget for the year starting April 1 that targets a decrease in the fiscal deficit to 4.6 percent of GDP, from an expected 5.1 percent in the current year, a goal many economists have said underestimates the government's energy subsidy burden in the face of high global crude prices. "I think the judgement about subsidies indicated that, if you are committed to lower subsidies, the implication is that if crude prices go up you are willing to pass it on," RBI's Deputy Governor Subir Gokarn told reporters. "Given those assumptions, the budget numbers (on the fiscal deficit) are realistic, because they have pegged the subsidies at whatever limit they have," Gokarn said on the sidelines of an Institute of International Finance meeting.
Allahabad Bank to launch mobile banking in April
Public sector Allahabad Bank will launch mobile banking in April 2011, enabling its customers to avail banking services on their cellphones. Currently, the bank is collecting the mobile phone numbers of its customers. “The software platform for providing the mobile banking facility has already been tested and we will launch the services in April,” bank CMD J P Dua told Business Standard here. He informed, the Reserve Bank of India (RBI) had already permitted the bank to launch its mobile banking platform.
Second identification detail for ATM transactions soon
Bank customers will soon have to use a second identification detail for ATM and debit card transactions, according to a Reserve Bank of India official. The move will help curb card frauds. Currently, customers use only PIN number for ATM transactions. G Gopalakrishna, executive director, RBI, while talking on the sidelines of a technology summit organised by Indian Banks Association, said dynamic numbers could be generated and ATMs could have an arrangement to create such dynamic numbers.With the exponential rise in the use of debit cards and ATM cards for cash withdrawal, instances of card frauds have also gone up. Taking a leaf out of the use of a second identification for online transactions involving credit cards, RBI will extend this practice to ATM operations as well. After a second identification, generally a randomly generated dynamic number, was introduced, a sharp decline in online card frauds was seen, the official said. Talking about the IT Vision Document 2011-2017 rollout, Gopalakrishna said banks will have to form a panel at the board level and appoint chief technology\information officers to oversee IT security and operations.These recommendations will be implemented within three months.The Vision Document sets priorities for commercial banks to move forward from their core banking solutions to enhanced use of IT in areas like management information systems, regulatory reporting, overall risk management, financial inclusion and customer relationship management.
PSU staff pay increased over 100% in last 4 yrs: survey
A PSU employee on an average received an annual salary of Rs 6.09 lakh in 2009-10, with total emoluments increasing more than 100% in the last four years. According to a Public Enterprises Survey of the government, it was thanks to the pay hike which was effected in 2008-09 following the implementation of the Wage Commission CommitteeDespite the salary increase, PSUs have managed to increase their net profit by 10.40% to a combined Rs 92,593 crore in 2009-10. Of the 249 Central Public Sector Undertakings (CPUs), as many as 217 make profit. However, in 2009-10, salaries and wages in all PSUs went up by 9.41% to Rs 90,863 crore in 2009-10 for the period under review. The CPSUs have also trimmed their workforce by 43,000 during the period covered in the survey. The number of people employed in the state-owned companies came down to 14.91 lakh (excluding casual workers) in 2009-10 from 15.34 lakh in the previous year, it said. About 3.54 lakh people have opted for voluntary retirement scheme till March 2010, since it was introduced in 1988. Of the total workforce in 249 Central PSUs, about one fourth of the manpower was in managerial and supervisory cadres.
Aadhaar sets stage for cash transfers
New Delhi: In line with finance minister Pranab Mukherjee’s budget announcement on Monday that the government is looking at direct cash transfers as an alternative to the current subsidy on kerosene and fertilizers and to prevent leakages, the Unique Identification Authority of India (UIDAI) is planning to open Aadhaar-linked bank accounts for the purpose. These can be used for other financial transactions as well. The authority is in the process of empanelling banks that will open “no-frills accounts” or link existing ones, during enrolments for Aadhaar, as the unique ID programme is called. So far, UIDAI has enrolled around three million people and around 80% of them seek bank accounts. UIDAI’s tender document states that the bank opening the account should have the capability to “provide electronic interface to facilitate disbursal of government benefits... Government may provide a list of Aadhaar numbers and amounts to the bank, and bank should be capable of routing payments to the linked bank account through an interoperable network”. While the banks will be empanelled by April, the accounts are likely to be opened by May. UIDAI chairman Nandan Nilekani also heads a task force that’s working out the modalities for the proposed direct transfer of subsidy for kerosene and fertilizers, apart from liquefied petroleum gas (LPG).
India: come doomsday, come foreign exchange intervention - James Lamont
If a stable currency is the measure of a central bank’s success, the Reserve Bank of India has done a stand out job with its restrained foreign exchange management. Asia’s third largest economy – where officials are proud of setting the country apart from other emerging markets – is in no hurry to go the Brazil route and grasp at tougher capital controls to boost the competitiveness of its economy. Subir Gokarn, the Deputy Governor of the Reserve Bank of India, is never one for overstatement. Yet, he underlined the “Indian difference” on Wednesday when he said that only a “doomsday scenario” would persuade the central bank to return to the days of heavy currency intervention to weaken the rupee. India remains a highly regulated economy, but that option has been firmly shelved unless needed “in extremis” to fend against disruptive, rapid exchange rate movements. Speaking at the Institute of International Finance’s spring meeting in New Delhi, Mr Gokarn explained that the central bank had stuck to its exchange rate policy of “a float with some smoothing” in spite of the global economic turbulence of recent years. The floating rupee is strikingly robust, and its recent strength has not got in the way of India’s improving export performance. Amid the turbulence 2011 has brought to emerging markets, the rupee has held its ground when local equity markets haven’t. It has weathered a pronounced sell-off of equities on the Bombay Stock Exchange, swirling corruption scandals and the imminent pain of higher oil prices in an economy notoriously dependent on oil imports. It has similarly ridden out a slew of economic policy announcements, including the national budget, undisturbed. This week it coasted at a near two month high against the US dollar at a little below Rs45 to the dollar. The rupee, alongside other currencies in the region, is likely to strengthen further in the medium term. US dollar weakness, aggressive monetary tightening and an economy growing at 9 per cent will likely ensure that is so. Mr Gokarn is plainly of a mind for such a rise to pass unimpeded.
Cabinet may consider banking bill today
NEW DELHI: Following up on its Budget promise, the finance ministry has put up a proposal to introduce the Banking Laws (Amendment) Bill 2011 before the Union Cabinet on Thursday. This bill seeks to address the capital raising capacity of banks and strengthen the regulatory powers of the Reserve Bank of India. After Cabinet's approval, the bill will be introduced in the current session of the Parliament.
Finance Minister Pranab Mukherjee, in his Budget speech, had said the UPA government was committed to taking financial sector reforms further. He said the government planned to move on the Insurance Laws (Amendment) Bill 2008, Life Insurance Corporation (Amendment) Bill 2009, the revised Pension Fund Regulatory and Development Authority bill, first introduced in 2005 and the Banking Laws (Amendment) Bill among others. Commercial banks, especially those in the private sector, are likely to get a boost with government reviving plans to increase their voting rights through changes in the law. The bill will give shareholders voting rights in proportion to their holding. As of now, the voting rights of a shareholder in a PSU bank is limited to 1% of their holding while in the case of private banks, it is 10%. Many banks and investors have been demanding these changes for a long time now. However, there was resistance from the RBI on grounds that an entity or an individual would corner a chunk of shares in the bank without regulatory approval. The RBI restricts bulk purchases now but that is only in the form of a directive. To prevent this, the bill has proposed that an individual or entity can hold more than 5% stake in a bank only after receiving approval from RBI.
Finance Minister Pranab Mukherjee, in his Budget speech, had said the UPA government was committed to taking financial sector reforms further. He said the government planned to move on the Insurance Laws (Amendment) Bill 2008, Life Insurance Corporation (Amendment) Bill 2009, the revised Pension Fund Regulatory and Development Authority bill, first introduced in 2005 and the Banking Laws (Amendment) Bill among others. Commercial banks, especially those in the private sector, are likely to get a boost with government reviving plans to increase their voting rights through changes in the law. The bill will give shareholders voting rights in proportion to their holding. As of now, the voting rights of a shareholder in a PSU bank is limited to 1% of their holding while in the case of private banks, it is 10%. Many banks and investors have been demanding these changes for a long time now. However, there was resistance from the RBI on grounds that an entity or an individual would corner a chunk of shares in the bank without regulatory approval. The RBI restricts bulk purchases now but that is only in the form of a directive. To prevent this, the bill has proposed that an individual or entity can hold more than 5% stake in a bank only after receiving approval from RBI.
Did You know ?
The National Electronic Funds Transfer (Neft) is a cheap and fast way of transferring money electronically to anywhere in the country. The person who initiates the transfer, that is the one who remits money, does not even need to have a bank account to avail the facility, although the beneficiary must have a bank account to which the money can be transferred. Customers can simply walk into a bank, with or without an account there, and use the facility to send money. They would, however, have to provide contact details and some other information. Though the system was developed to facilitate domestic fund transfers, it can also be used to transfer funds to Nepal from India, subject to the procedures prescribed by the Reserve Bank of India (RBI). The money is remitted in Indian rupees and withdrawn in Nepalese rupees. The conversion from Indian to Nepalese rupees is done at the Nepal SBI Bank Ltd (NSBL) while making payments to the beneficiaries. But you cannot use the system to transfer money the other way round, that is to India from Nepal.
Govt may have to look at diesel decontrol: Basu
NEW DELHI: The government's chief economic advisor Kaushik Basu on Wednesday once again revived the issue of diesel price deregulation against the backdrop of soaring global crude oil prices. Speaking at a global conference of bankers and economists, Basu said the government may have to confront the issue of deregulating diesel prices if global crude prices continued to rise and remained high for a long time. Reserve Bank of India Deputy Governor Subir Gokarn also expressed concern over rising crude and commodity prices and said they posed a risk to the central bank's efforts to control prices which have started moderating. "It (inflation) is moving downwards... it is a reflection of our monetary actions. But the risk of it turning around because of energy and food remains," Gokarn told reporters
YUNUS REMOVED AS GRAMEEN BANK’S MD
Nobel laureate Muhammad Yunus has been removed from his position as head of microlender Grameen Bank, Bangladesh’s central bank said on Wednesday, following allegations of irregularities in its operations. Yunus, 70, set up Grameen Bank and has been its managing director since 2000. Lauded abroad by politicians and financiers, he has been under attack from Prime Minister Sheikh Hasina’s government since late last year, after a Norwegian documentary alleged Grameen Bank was dodging taxes. Yunus has denied any financial irregularities and his supporters say he is being discredited by the government because of a feud with Hasina dating back to 2007, when he tried to set up a political party while Bangladesh was ruled by an interim military government. “We have delivered a letter to the Grameen Bank that Muhammad Yunus has been removed,” said the central bank governor’s spokesman, A F MAsaduzzaman. On Tuesday, a central bank official said a letter had been sent to the Finance Ministry demanding Yunus retire immediately because he had been in his post at Grameen for nearly a decade longer than the law allowed. The official retirement age of managing directors at commercial banks is 60. Yunus has said the bank’s board, which is mainly made up of borrowers, allows him to stay on as long as he is able to perform his duties. In a sign of a rift within the microlender, Grameen Bank said Yunus was staying on while a government-appointed chairman said the order had been implemented. It was unclear how the deadlock would be resolved. “This is a legal issue. Grameen Bank is taking legal advice. It is also examining all the legal aspects of this issue,” Grameen Bank said in a statement. “Grameen Bank has been duly complying with all applicable laws. It has also complied with the law in respect of appointment of the managing director,” the statement added. “According to the Bank’s legal advisors, the founder of Grameen Bank, Nobel Laureate Professor Muhammad Yunus, is accordingly continuing in his office.” Separately, Grameen’s government-appointed chairman Muzammel Huq told Reuters : “Today I received the letter from the central bank and I was directed to implement the decision.” “The decision has been implemented with immediate effect,” Huq added. Last month, Finance Minister Abul Maal Abdul Muhith said Yunus should step down, as he was now “old and we need to define the bank’s role and bring it under close regulation”.
CONDITIONS APPLY - RBI ready to let big firms set up banks
The Reserve Bank of India (RBI) is ready to allow big industrial houses to set up banks, but only after it gets the power to supersede boards of banks that are not being run properly. RBI also wants the right to oversee the operations of the promoting company and any affiliates that will have business relationships with the bank. The central bank will issue guidelines on new banking li- cences by 31 March, finance minister Pranab Mukherjee said in his budget speech on Monday, but no banking li- cences will be issued until the Act that governs banking is changed and the regulator gets the powers mentioned above. “RBI has proposed some amendments in the Banking Regulation Act,“ Mukherjee said in his budget speech. “I propose to bring suitable legislative amendments in this regard in this session.“ Mukherjee had first an- nounced that the banking reg- ulator would consider giving new banking licences to companies in his last budget. “The central bank and the fi- nance ministry have reached an understanding that issuance of licences to new players is contingent on changes in the banking law,“ said a government officer familiar with the development, who did not want to be named considering the sensitivity of the issue. Currently, RBI does not have the power to dismiss a bank board, but under section 45 of the Banking Regulation Act, 1949, it can force amalgamation or merger of a bank with another, and force a recon struction of the board to pro- tect the interests of depositors, shareholders and employees.
RBI to upgrade fund transfer system
The Reserve Bank of India (RBI) plans to upgrade its high value online fund transfer system, RTGS, to enable handling of up to five million transactions a day and incorporate various new facilities for the bank customers. The RTGS (real time gross settlement) system facilitates online transfer of highvalue funds between bank customers of different banks on realtime basis and currently handles about 300,000 transactions per day. Keeping in view of the ever rising usage of the system, RBI has decided to replace the existing RTGS system with a next generation real time gross settlement system, a senior official said.
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