All banks to have CIOs soon: RBI

A senior official of the Reserve Bank on Wednesday said all banks would have to create a position of chief information officers (CIOs) as well as steering committees on information security at the board level at the earliest, as envisaged under its IT Vision 2011-17 released the other day.  Reserve Bank Executive Director G Gopalakrishna, speaking to reporters on the sidelines of a banking technology conference here, further said the banks will have to implement the facility of "second factor verification" at merchant establishments and ATMs shortly.  "Many small banks do not have a designated CTO and also do not have a clear framework on information sharing...Over a period of time we want to access all the information from the main server of the bank once the RBI's IT Vision is implemented. Those banks having no CTOs and a steering committee will have to have these positions implemented at the earliest," he said.  "Against the current practice of seeking the password, banks will have to ensure that ATMs and points of sale (Poses) will have the second factor verification soon to avoid any room for fraud," The second factor verification is a facility that helps prevent fraudulent transactions during online purchases, by asking the buyer or payee to give a second password which is not the three-digit CVC number in the case of a credit card and the ATM password in the case of a debit card. Currently this is not mandatory at the Poses and ATMs. It can be noted that the RBI on February 28 had released its IT Vision 2011-17 document, which seeks to make the use of information technology beyond core banking and into newer areas like management of information systems (MIS) and better regulatory reporting.  A senior official of the Reserve Bank on Wednesday said all banks would have to create a position of chief information officers (CIOs) as well as steering committees on information security at the board level at the earliest, as envisaged under its IT Vision 2011-17 released the other day.  Reserve Bank Executive Director G Gopalakrishna, speaking to reporters on the sidelines of a banking technology conference here, further said the banks will have to implement the facility of "second factor verification" at merchant establishments and ATMs shortly.  "Many small banks do not have a designated CIO and also do not have a clear framework on information sharing...Over a period of time we want to access all the information from the main server of the bank once the RBI's IT Vision is implemented. Those banks having no CIOs and a steering committee will have to have these positions implemented at the earliest," he said.  "Against the current practice of seeking the password, banks will have to ensure that ATMs and points of sale (Poses) will have the second factor verification soon to avoid any room for fraud," Gopalakrishna added.  The second factor verification is a facility that helps prevent fraudulent transactions during online purchases, by asking the buyer or payee to give a second password which is not the three-digit CVC number in the case of a credit card and the ATM password in the case of a debit card. Currently this is not mandatory at the Poses and ATMs. 
It can be noted that the RBI on February 28 had released its IT Vision 2011-17 document, which seeks to make the use of information technology beyond core banking and into newer areas like management of information systems (MIS) and better regulatory reporting.  The document calls up on commercial banks to use IT in areas like MIS, regulatory reporting, overall risk management, financial inclusion and customer relationship management.  The document, prepared by a high-level committee chaired by deputy governor KC Chakrabarty, also dwells on the possible operational risks arising out of adopting technology in the banking sector, which could affect financial stability.  Gopalakrishna informed that due to the strict implementation of the second factor verification, credit card frauds have almost become non-existent now.  On the implementation of the core banking facility, he said, all the commercial banks will have to implement the core banking facility by the end of this month.  Gopalakrishna further said the IT vision document, once fully implemented will ensure that the RBI gets access to the servers of all banks, including foreign banks so that it has access to all the banking transactions.  The IT vision document emphasises on the need for internal controls, risk mitigation systems, fraud detection/prevention and business continuity plans, the document added.  The vision document notes the use of technology for analytical processing by banks is still at a nascent stage.  "Banks have to work towards reaping benefits of technology in terms of cost reduction of small value transactions, improved customer services and effective flow of information within the banks and to the regulator," the RBI statement had said.  The vision document stresses on transforming RBI into an information intensive knowledge organisation and adopting appropriate business process re-engineering.

HDFC Bank conducted a ‘Coin Mela’ in Jaipur

HDFC Bank, second largest private bank in the country, organized a ‘Coin Mela’ at Ashok Marg Branch in Jaipur. The Coin mela was inaugurated by Mr. B.P. Kanungo, Regional Director and Mr. Praveen Kumar, DGM, Issue Dept. RBI, Jaipur. The initiative was in conjunction with RBI’s Clean Note Policy to provide fresh notes in exchange for solid ones.  The Bank exchanged over ` 30.00Lakh worth of coins and currency notes during this exercise in Jaipur. Speaking on the occasion Mr. Pallava Rathore, State Head, Wholesale Banking Operations, Rajasthan said, “With the support of RBI the Coin Mela was organized at the Jaipur branch. The response to the ‘Coin Mela’ was positive and people expressed their appreciation.

Employment plan rolled out for job-starved Kashmiri youth

New Delhi/Srinagar, March 3 (IANS) An expert group headed by former Reserve Bank of India (RBI) governor C. Rangarajan Thursday rolled out an employment plan for the youth in job-starved Jammu and Kashmir, envisaging vocational training for up to 100,000 of them in the next five years. The Rangarajan committee report, which was released simultaneously in Srinagar and New Delhi, assumes significance because the state, according to official findings, has some 500,000 jobless youth who are often targeted for recruitment by militant outfits to be their overground workers.  The six-member Rangarajan committee was set up in August 2010 by Prime Minister Manmohan Singh and was to submit its report within three months. Manmohan Singh had last week in parliament said the government would do everything to provide avenues for gainful employment to the youth in state. 'If we can create jobs for a lakh of students from the (Kashmir) Valley and other parts of Kashmir, I dare say it will change the mental make-up or the mindset of the Kashmiri people,' he said in his address to parliament.

Cabinet nod for Banking laws amendment Bill

The Union Cabinet on Thursday gave its approval for introduction of a Banking Laws Amendment Bill 2011 in Parliament. This Bill seeks to among other things lift the 10 per cent voting rights cap in private sector banks and pave the way for the Reserve Bank of India to give some additional banking licences to private sector players. The proposed Bill will seek to amend the Banking Regulation Act, 1949, so as to remove the voting rights cap for private sector banks. The legislative intent will be to make voting rights commensurate with economic ownership. Indications are that the Banking Regulation Act, 1949, will be amended to prescribe a minimum capital of Rs 1,000 crore for every private sector bank. The current capital requirement is Rs 300 crore. Based on the feedback from a discussion paper issued in August 2010, the RBI has proposed some amendments to the Banking Regulation Act including a change in the minimum capital requirement.

Computerisation to help RBI better monitor NPAs: Dr.K.C.Chakrabarty

The Reserve Bank of India's Deputy Governor Dr.K.C.Chakrabarty said that once the core banking solution (CBS) was complete the central bank would be in a better position to monitor non-performing assets (NPA) of banks.  "Data coming from the origin without any manual intervention will bring the reliability and integrity of the data. RBI has detected enough discrepancies in data in the bank branches," Chakrabarty revealed. The deputy governor also suggested that increasing working hours in bank branches by dividing them into shifts would not only lessen the burden on the branches, but also help banks to bring down the cost of transactions by the maximum utilisation of technology. "When the transaction cost comes down, bank can offer more interest rate on deposits and charging less interest rate on lending. When more and more people start taking use of technology, its cost comes down," he said.  On rising frauds in banks, Chakrbarty said that there are normally 20-25 lakh transactions happening in the banking industry everyday. “If any fraud is happening at any point of time in a bank, then the bank itself is supposed to examine it. All that we are trying to see if bank has got a system in place to keep a track of these frauds. In fact, it was one of the main purposes of having the supervisory mechanism in place,.'' he said. On financial inclusion, he said, "The commercial banks will be able to achieve the financial inclusion goal by March 2012 whereas the RRBs will be able to achieve it by September this year itself. Many of them, which may include Maharashtra Grameen Bank sponsored by Bank of Maharashtra have already completed it." On increasing reliance on Rural Infrastructure Development Fund(RIDF) by the banks, Chakrbarty clarified that if the banks are not able to meet the priority sector targets, then only the RIDF comes into the picture.  “The objective of RIDF is not that banks should not achieve their priority sector lending targets and give the money to RIDF. There ways to fulfill the demands of priority sector lending,” he said.

Financial inclusion key rider for bank licence: Subbarao

Aspirants for new bank licences will need to show their commitment to financial inclusion, according to Reserve Bank of India (RBI) governor D. Subbarao. “One of the criteria for evaluating the applications (for a banking licence), which we will receive in due course of time, will be the business plan for financial inclusion,” Subbarao said at a Delhi seminar on Thursday. Finance minister Pranab Mukherjee said in his budget speech on Monday RBI will issue guidelines for banking licences before the end of the current fiscal. Mukherjee had announced in his 2010 budget that RBI would consider giving banking licences to the private sector, following which the central bank had issued a discussion paper in August 2010, inviting feedback from the public.  RBI has been contemplating whether to make it mandatory for new entrants to have a rural presence or to leave it to the competition in the market to force them to look for newer markets. As part of its financial inclusion agenda, RBI has also been prodding existing banks to cover unbanked areas and those who have been traditionally perceived to be unbankable. “Banks continue to see financial inclusion as an obligation and not as a viable opportunity,” he said.  RBI has asked existing commercial banks including foreign lenders to come out with their own financial inclusion plan. “We want the commercial banks to leverage their own business model,” he said. Subbarao said financial inclusion is important for sustaining double-digit growth, increasing savings, reducing leakage and corruption and giving the banking system leverage to manage asset-liability mismatches.  Out of 600,000 habitations in the country, only about 5% have a commercial bank branch. Only 40% of the population across the country has bank accounts.  RBI has asked banks to provide banking facilities to areas having a population of over 2,000 by March 2012. There are currently around 73,000 such habitations. While banks will cover 20,000 villages this year, the remaining 53,000 will be covered in 2011-12. Jayati Ghosh, professor at the Jawaharlal Nehru University, said financial inclusion should be the dominant criteria while issuing banking licences to new players. “This has been the major weakness of our banking system as two third of the economic agents are excluded from banking services. RBI should clearly specify how many rural branches the new banks should open,” she added.

Change at the till

A generation that enjoyed the value of paisa coins will feel a tinge of nostalgia as they shed their hoard of small change over the next four months. The call-in of coins with a face value of 25 paise and less and their planned demonetisation with effect from July 1, 2011 only reflects the changed currency use pattern across all sections of society today. With rupee losing its purchasing power, commerce was already beginning to cold-shoulder the paisa; for the government, the cost-benefit factors involved in minting and keeping them in circulation were strong enough to push for their demonetisation. It is unclear how many of the coins are still actually around. According to the Reserve Bank of India's books, at the end of March 2010, there were 54,738 million “small coins” (which, by definition, include the 50 paisa), adding up to Rs.1,455 crore. The demonetisation of what is virtually “dead money” will enable the RBI to issue currency notes or coins for an equivalent amount as replacement in the monetary system. Should a significant amount of the coins tumble out of jars and piggy banks, the handling of the mountain of small change will turn out to be a challenge for the banking system. But how much of it will surface is a moot question.  There has been concern over whether the consequent rounding off of bills to 50 paise or a rupee at the till would add to inflationary pressures. It will, but its effect can only be marginal. It is for the first time since India shifted to the decimal system in 1957 that coins are being demonetised on such a scale. In the past decades, the worth of the metal content in coins has often surpassed their face value, encouraging their melting for other uses. The ferritic stainless steel coinage of contemporary issue and the aluminium-magnesium coinage introduced in 1964, in place of the nickel and cupro-nickel ‘naya paisa' series introduced in 1957, faced the same risk eventually. The minting of 1, 2, 3 and 5 paise coins was phased out in the 1970s, and they have virtually disappeared from currency — even as 10, 20 and 25 paisa coins have become scarce. And rupee coins of 1, 2, 5 and 10 denominations have come since the 1990s in growing numbers. So, time is finally running out for small change. Only four months are left for people to rustle up their coins and take them to the bank for exchange. It is possible that the exercise will excite more interest among coin collectors than the general public.

RBI REMINDER TO BANKS: INCREASE DEPOSIT RATES, CUT LENDING RATES

The Reserve Bank today again prodded banks to raise deposit rates to encourage people to save more and put the Indian economy on sustained double-digit growth and lower lending rates by cutting on salaries, wages and transactions costs.  At a meeting of the Institute of International Finance (IIF), a global association of financial institutions, RBI Governor D Subbarao also said that the central bank will come out with its views on the Malegam Committee report on micro financial institutions (MFIs) that favours a 24 per cent cap on interest rates charged by these entities, by April-end.  The central bank governor further said that the RBI will see business plans on financial inclusion of those interested in banking license.  “For double-digit growth that we aspire to, we need to save so that we can invest more and for that to happen, we need to encourage savings, which means that banks will have to increase the interest rates that they offer to depositors and they have to reduce the interest rates that they charge to borrowers,” Subbarao said.  In technical terms, he said banks have to bring down their net interest margin (NIM). This is not the first time that the RBI is asking banks to increase deposit rates. It has been asking banks to do so to retain their depositors, since rising inflation sees net earnings from deposits going into the negative zone.  Subbarao said to cut lending rates, banks have to reduce non-interest expenses like wages and salaries, transaction costs, provision costs, NPAs and enhance productivity by leveraging on technology.  He said Indian banks need to do lots of catching up with their counterparts in peer group countries.