International women's day: Seminar by RBI Kanpur

Women are participating in every field and now they are sharing the responsibility in office as well as in house. This was the opinion of Meeta Jamal, principal Dayanand Girls Degree College. She was speaking at a seminar convened by the Reserve Bank of India on International Women's Day. She said women were playing a lead role in the economic development and playing a significant role in the development of society. Sangeeta Sarswat, a senior gynaecologist, gave some very useful health tips to women participants.

Life turns tougher for the RBI Governor – Arjun Parthasarthy

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Jewellers, bullion dealers high-risk customers: RBI to NBFCs

Fearing possible involvement of illicit money in dealings by jewellers and bullion dealers, the Reserve Bank of India (RBI) has asked non-banking lenders to treat such entities as "high-risk" customers and be extra cautious while undertaking transactions with them. The RBI direction to non-banking financial companies (NBFCs) follows a similar guideline announced for the banks in January, wherein they were asked to treat jewellers and bullion dealers as high-risk customers.  The transactions by jewellers and bullion dealers are highly cash intensive in nature and it is feared that they could be used for flow of black money into the banking system. It is also feared that these entities prefer to do business with NBFCs, as the regulatory framework for non-banking lenders is considered less strict.  Now, NBFCs would also have to conduct a stricter than normal due diligence before opening accounts for such entities and subject their transactions to a strict monitoring process.  In a circular dated March 8, the RBI has said that it was modifying the master circular for KYC (Know Your Customer) norms and anti-money laundering standards/combating of financing of terrorism obligations of NBFCs to classify bullion dealers and jewellers as "high risk customers".  Both banks and NBFCs would also need to immediately inform enforcement agencies about any suspicious activities in the accounts of these entities and non-compliance to the guidelines would attract hefty penalties.  "In view of the risks involved in cash intensive businesses, accounts of bullion dealers and jewellers should also be categorised by NBFCs as 'high risk' requiring enhanced due diligence," the RBI circular said.  The central bank also asked NBFCs to subject these high risk accounts to intensified transaction monitoring and take the same into account while identifying suspicious transactions for filing Suspicious Transaction Reports to FIU-IND.  Financial Intelligence Unit – India (FIU-IND) is nodal agency for receiving, processing, analysing and disseminating information relating to suspected financial transactions.  Others being treated as high-risk customers by RBI include non­resident customers, HNIs, trusts, charities, NGOs and organisations receiving donations, companies having close family shareholding or beneficial ownership, politically exposed persons and those with dubious reputation.  On the other hand, salaried people, the government departments and the government-owned companies, regulators and statutory bodies are treated as low-risk customers.  The high-risk accounts need to be subjected to intensified monitoring for issues like background of the customer, sources of funds and high-value transactions.

Bank credit offtake up 23.3%, deposits up over 16%: RBI

Credit offtake from public and private sector banks in the country grew by over 23.3 per cent for the one-year period ended February 25, indicating an upswing in the industrial activity, says the RBI.  According to the apex bank, for the one-year period ended February 25, credit offtake stood at Rs. 39.26 lakh crore as against Rs. 31.83 lakh crore a year ago.   During the period, deposits rose to Rs. 52.29 lakh crore from Rs. 45.07 lakh crore as on February 26, 2010, the latest data from the Reserve Bank revealed.  This is a rise of over 16 per cent on an annual basis. RBI, in its annual monetary policy at the beginning of the fiscal, had estimated credit offtake to grow by 20 per cent this fiscal.  However, in December 2010 the apex bank expressed concern over the widening ratio between the credit and deposit rates of banks.  This has the potential to affect the supply of liquidity in the system due to higher lending by the banks vis-a-vis lower deposits.   In its recent third quarterly monetary policy review, RBI had noted that the deposit growth moderated during 2010.  Several banks raised their deposit rates after the Second Quarter Review of 2010-11, which led to a larger deposit mobilisation in December.  Consequently, deposit growth increased to 16.5 per cent by end-December 2010, close to the indicative projection of 17 per cent for the current financial year.  However, annual non-food credit growth has been above the Reserve Bank's indicative projection of 20 per cent since early October 2010, rising to 24 per cent by end-December 2010, the RBI said.  The wide gap between credit growth and deposit growth resulted in a sharp increase in the incremental non-food credit-deposit ratio to 102 per cent by end-December 2010, up from 58 per cent in the corresponding period of previous year, it added.  During the past few months, credit offtake has grown at the rate of 20 per cent on average.  Credit offtake has been higher this fiscal on account of large borrowings by telecom firms to pay for 3G spectrum licences.  The government realised over Rs. 1 lakh crore from the sale of spectrum of high speed mobile and broadband wireless services, much higher than the Budget estimate of Rs. 35,000 crore.  Credit rating agencies like Crisil had earlier said the country was likely to see credit offtake growth at the rate of around 20-22 per cent this fiscal.

RBI likely to raise repo rate to 7.5% in 2011: Expert

All eyes are on the monetary policy review by the Reserve Bank of India on March 17. However, there is a growing concern that RBI may further hike rates in this year.  In an interview to CNBC-TV18, Sameer Goel, Director, Head of Asia Rates Research of Deutsche Bank said the RBI may hike rates by 25 bps in March and subsequently increase it to 75 bps.   “There is more tightening to come from the RBI, starting including next week we think by 25 bps and probably by another 75 bps following that so take up the repo rate to 7.5%,” he said.  According to Goel, there are several structural factors which will keep liquidity still in deficit but an acute shortage of Rs 50,000-100,000 crore on a regular basis is unlikely.

Banks ready with MFI loan rejig plan

CHENNAI: Banks have prepared a blueprint for restructuring loans to microfinance institutions (MFIs). According to the proposal, institutions like SKS Microfinance, Spandana Spoorthy, Asmita, Basixs and Share Micro Finance would be given a maximum of 10 years to repay the loans at an interest rate of 12%. These microfinance lenders were originally sanctioned loans at interest rates between 10% and 15%. MFIs are in the throes of change wherein lending activities have come to a standstill in several parts of the country. The crisis set in after the the Andhra Pradesh government imposed tight restrictions on MFIs.  Andhra Pradesh, which is the biggest market for the MFI sector, has seen recoveries dipping to 10%. Besides banks have stopped lending to MFIs choking fund raising.  "We have worked out a tentative restructuring plan for the microfinance companies. Now the proposal has to be passed by the bank's respective boards. After which it will be conveyed to the core committee and the MFIs," S N Mishra, GM, priority banking, Indian Overseas Bank, said.  The Reserve Bank of India had permitted banks to restructure loans to the MFI sector in January this year. "The RBI has asked banks to extend the regulatory asset classification benefit to standard restructured MFI accounts, even if they were not fully secured. This relaxation was given considering the fact that the problems afflicting the MFI sector were not necessarily on account of any credit weakness per-se but were mainly due to environmental factors," RBI said.  The restructuring decision was taken by banks on Tuesday at a meeting in SIDBI's headquarters in Lucknow. However, the decision is not binding on the banks, sources said, adding it was only a proposal. For smaller MFIs, banks are taking it on a case to case basis. The total loans to be restructured by all the banks put together is estimated to be about Rs 13,000 crore. Banks had set up core committees of 10 lenders to look into the restructuring of loans to the MFIs. Besides, MFIs were asked to submit their projected cash flow for next three years. Banks are scheduled to meet RBI officials on March 17 to discuss the Malegam Committee report as well as restructuring of loans to MFIs.

Groups with financial biz exposure may need separate risk fund for bank licences

NEW DELHI: Industrial houses that run mutual funds, insurance companies and non-banking financial firms may have to create a separate contingency fund to be eligible for a banking licence, as the government seeks to reduce systemic risk to new lenders.  The contingency fund can be created from a capital surcharge that banks promoted by industrial houses will have to set aside and the fund will convert itself into equity capital in times of stress, said a finance ministry official.  "We are looking at all aspects of ring fencing any exposure that industrial houses may have on the banks where they are the promoters," the official said, requesting anonymity.  "An impact on the parent company can have a chain reaction leading to systemic issues for the whole financial system," he said. Recently some industrial houses were linked to various scams, resulting in sharp falls in their stock prices.  The government and RBI are discussing these issues as several industrial houses that already have some exposure in the financial services sector have expressed their interest in getting a banking licence. Reliance Capital, Mahindra & Mahindra Financial Services and SREI Infrastructure are among the companies interested in acquiring banking licences.  Earlier this week, the cabinet had approved the Banking Laws Amendment Bill 2011, which will soon be placed in Parliament. The bill seeks to empower the Reserve Bank of India to inspect mutual funds and insurance companies related to banks to ensure that their operations do not pose any systemic risk to lenders. "The contours are being discussed. There are some aspects such as what will be the surcharge amount, whether it should be deducted from the profits and, most importantly, what amount is safe that are still being debated," the official said.  "We are also looking into whether such a fund will be necessary at all if we restrict the new banks with the mandate of promoting financial inclusion," he said.  In a discussion paper on the entry of new private sector banks, RBI had mentioned that one of the arguments towards allowing industrial houses to get banking licences was that it will help financial inclusion.  The Finance Minister in his budget speech had said that RBI is planning to issue the guidelines for banking licences before the close of this financial year. The Banking Law Amendment Bill will also align the voting rights in banks in proportion with the equity holding and will give the central bank powers to vet mergers and acquisitions in the sector.

Sunder Rajan Raman is new Canara Bank chairman

Raman will remain the CMD of Canara Bank up to September 30, 2012 i.e., the last day of the month in which he would attain the age of superannuation or until further orders, whichever is earlier.  Canara Bank said that after consultation with the Reserve Bank of India (RBI), the Central Government has appointed Sunder Rajan Raman, as Chairman and Managing Director (CMD) of the bank. Raman will remain the CMD of Canara Bank up to September 30, 2012 i.e., the last day of the month in which he would attain the age of superannuation or until further orders, whichever is earlier.  Raman has taken charge as CMD of the Bank w.e.f. September 1, 2010.  Presently Raman is the Executive Director at Union Bank of India.