Scamsters offer $7.5 lakh and iPad2 in a lottery on the Tata Motors name

Scamsters are on the prowl once again. This time they have used the name of Tata Motors to offer a lottery of $7.5 lakh and an Apple iPad2, similar to the BMW lottery scam last year.  After using the Reserve Bank of India's
name for awarding booty, this time the scamsters are using the Tata Motors name
to offer money and Apple's new iPad2 in a lottery. However, this time the
scamsters have used an old method while sending e-mails, like using the same
content with minor corrections (adjustments!) in the mailer. This latest e-mail
in the name of Tata Motors is a clear case of a 419 scam. But more on 419 scams later.  The scamsters have used two names in the e-mail, 'MR. Alfonso. M. Alejandro' and 'Prince Dr. Maria Jose Mayors'. Both these names have been used in an earlier instance also in lottery e-mails. The scamsters have also used the name of BMW earlier and have now chosen to use the Tata Motors' name to offer the lottery.  Here's what the e-mail says. "From TATA Automobile Company UK is here by congratulate you as one of our FIVE (5) Star Prize Winner, in our 2011 International Awareness Promotion Online Draw (IAPOD) host in INDIA. This makes you the owner of this Email an owner of a New Apple iPad 2 WI -Fi + 3G classic Model and cash prize of ($750,000.00 US Dollars)." For the BMW lottery mails the scamsters used the line, "The BMW Automobile Company, congratulate you as one of our Ten (10) Star Prize Winner in our 2010 International Awareness Promotion (IAP) held in Madrid. This makes owner of a brand new BMW 5 Series car and a cash prize of €850,000.00 EUROS." The mail asks the recipient to send personal details like name, age, address, sex, annual income etc, or contact on some numbers from the UK. The funny part is the scamsters have used Tata Nano images as well as a number of images from different manufacturers and their logos, like Nokia, Apple, Intel, Mozilla Firefox, Acer, Compaq, CSE and so on. The mail also has a copyright assigned to Tata Motors and a standard disclaimer! This mail is sent by Tata multipurpose group India from tatagroupautoindia@geeks.ms with a
subject line that reads 'TATA 2011 GLOBAL FINANCIAL AWARD PROMO'. The question to ask is why would the Tata group send an e-mail using an unknown e-mail service provider like geeks.ms? In addition, there is no entity called 'Tata
group auto India' and the group uses simple names like Tata Motors Ltd or Tata
group. There are more discrepancies that regular Moneylife readers would be
able to identify easily as there are plenty of 'red' signals in the e-mail.
Even if one assumes that all else is true, why on earth would the Tata group
offer money to an individual, and that too in US dollars? Tata Motors officials
were not immediately available for comment. Clearly, this is yet another fraud
in progress. So, if you receive such a message delete it immediately. Here are
some points to keep in mind to help identify such fake messages. The scams are
widespread, so governments and websites like www.truthorfiction.com,
www.fraudwatchers.org, or www.scambaits.com give special attention to this
matter, to help potential victims and to catch scamsters. The website of the
Nigerian Central Bank has a warning on the home page that says, "If it
looks too good to be true, it usually is." The US Secret Service and the
British National Criminal Intelligence Service undertake regular investigations
and issue regular warnings to people. The so-called '419' scam is a type of
fraud commonly committed by criminals from Nigeria and other African countries.
Victims of the scam are promised a large amount of money, such as a lottery
prize, inheritance, or money sitting in some bank account. Victims never
receive the non-existent fortune, but they are tricked into sending their money
to the criminals, who remain anonymous. They hide their real identity and
location by using fake names and fake postal addresses, as well as communicating via anonymous free e-mail accounts and mobile phones.  Here is advice from 419.org: "Keep in mind that scammers do not use their real names when defrauding people. The criminals either abuse names of real people, or companies, or invent names or addresses. Any real people or companies mentioned below have no connection to the scammers!

RBI submits new banking draft to FinMin

New Delhi, Mar 15 (PTI) Finance Ministry has received draft guidelines on the new
banking licence from the Reserve Bank, which is expected to make it public by
the end of this month.  The Finance Ministry has got draft guidelines on new banking license, official sources said.  The guidelines are at a draft stage and no firm view on the paid-up capital and other issues has been taken, sources said.  The Reserve Bank of India
(RBI) is likely to issue guidelines for new banking licences by the end of the
current fiscal.  "RBI is planning to issue the guidelines for banking licences before the close of this financial year," Finance Minister Pranab Mukherjee had said in the Budget speech last month.   After the Finance Minister's announcement in 2010-11 Budget, the Reserve Bank had brought out a discussion paper in August 2010 on dispensing banking licences to business houses and non-banking finance companies, besides regulations for the same to foster greater competition.   The RBI also sought to know "whether industrial and business houses could be allowed to promote banks." Further, it sought stakeholders' views on whether NBFCs should be allowed to convert into or promote banks. The apex bank
has received comments on its discussion paper from all the stakeholders.  Various entities like Reliance Capital, IndiaBulls, Religare, IL&FS, IFCI and Aditya Birla Financial Services are reported to be mulling entering the banking space.  At present, India has 27 public sector banks, seven new private sector banks, 15 old private sector banks, 31 foreign banks, 86 regional rural banks, 4 local area banks, 1,721 urban cooperative banks, 31
state cooperative banks and 371 district central cooperative banks.

CM’s Universal Financial Inclusion Scheme kick starts at Ranka

The Chief Minister’s Universal Financial Inclusion Scheme kicks started at Ranka as a pilot project which is being carried out by Central Bank of India (CBI). The Central Bank of India is given the responsibility to carry out the project of financial inclusion in north and east districts of state by the government. The process of starting the scheme were being planned since a year and on 14^th March the scheme has been made fully operational in Ranka on pilot basis. Addressing
the gathering general manager, CBI, R Mishra said that the financial inclusion
scheme is the program started by the Ministry of Finance to link every person
from the grass root to the banking sectors across the nation and to provide the
beneficiaries with every scheme, plans available which will enhance the economic condition of the community. Mr. Mishra added that it is only in Sikkim state that the Chief Minister has planned and started this unique programme of financial inclusion of the citizens of the State. Under this scheme the account holders are provided with Rs.1000/-as financial assistant along with Rs. 500/- as insurance policy. The General Manager Reserve Bank of India, Sikkim Mr. E.E.Karthak in his address said that the inclusion policy is very necessary to develop individual economy along with availing other benefits from the banks. He even appealed the people not to get involved in any kind of fraud messages that is being circulated in mobiles or in emails and informed that if any problem takes place in respect to smart card that is being provided by the CBI then they can approach the concerned bank for help or assistance. As this scheme is being initiated for the first time there might be some teething problem which will soon be solved asserted officials. Under the pilot project of financial inclusion a total of sixteen hundred beneficiaries of Ranka Block were
identified and till date a total of 1390 smart cards have also been distributed
and today about 6 bank account passbook and 8 Smart cards were distributed
during the program along with a demonstration on withdrawal of money from the
card was also presented. The program was also attended by General Manager,
NABARD, Gangtok Mr. BK Dey along with assistant general manager (RBI) Gangtok, chief branch manager(CBI) Gangtok, Mr. YP Saha, District Development Officer, East Mr. MN Dhakal, Block Development Officer( Ranka) Ms. Urvashi Poudyal, Panchayat members of Ranka GPU along with the beneficiaries.

RBI fines 11 state co-op banks in last 40 days

AHMEDABAD: A small but increasing number of co-operative banks in the state are indulging in a risky game. Reserve Bank of India (RBI) has cracked the whip on several such Gujarat co-operative banks in the last few days. Only this year, between January 24 and March 4, 11 state co-operative banks have been penalized by imposing of fines between Rs 1 lakh and Rs 5 lakh for flouting RBI`s know your customer (KYC) and anti-money laundering (AML) guidelines.  Cooperative banks have been often accused of allowing a person or company to open several accounts in their banks` transactions which are not monitored. RBI had in 2002 have made it mandatory for banks to share monthly details of all accounts where cash transaction of more than Rs 10 lakh has taken place with Financial Intelligene Unit (FIU), India. But on several occasions, state co-operative banks have fallen short of complying with the RBI guidelines.   However, co-operative bank officials said that there is not much to read in the RBI`s strict stand as mistakes by the
co-operative banks were done out of ignorance. "The bank officials some times forget to send the details on time and also not many are aware of the AML and KYC norms, and find themselves on the wrong side without any malafide intention," said Jyotindra Mehta, chairman of Gujarat Urban Co-operative Banks Federation (GUCBF).   RBI has issued show cause notices to all the 11 co-operative banks and after considering the facts, all of them were found flouting the norms and were penalized. 

NPCI to charge banks for mobile transactions

The National Payments Corporation of India (NPCI) will charge 10 paise to remitting banks for every mobile transaction on the Inter Bank Mobile Payment Service IMPS) from April 1, 2011. "To provide momentum and impetus to mobile-based financial transactions, the charge has been brought down from 25 paise as planned earlier, &" said A.P.Hota, Managing Director and Chief Executive Officer, NPCI. The fee was fully waived for the current financial year to promote the product. However, banks are free to charge their respective customers according to their policies. Currently, 14 banks, including nine private and 5 public sector banks are using IMPS. 12 others are in the process of joining this service. IDBI Bank may launch the service in the next 3-4 months. "We may pass the cost to the customer if we are being charged for it, but the final call will be taken on the launch,&" said a senior official from IDBI Bank. Corporation Bank is already live on the system.
"We will take a call on whether or not to charge the customer on mobile
transactions. It depends on the use of this channel by the customer,&"
said CMD Ramnath Pradeep.  To receive payments, one would just need an identification proof. However, to make payments, the user should have a particular software on his/her mobile phone, which will be provided by the respective banks.

JK Govt rules out ''compromise'' on state''s fiscal autonomy

Jammu, Mar 15 (PTI) Dispelling assertions that state''s fiscal autonomy has been compromised by signing Ways and Means Advance (WMA) agreement with RBI, the J&K government today said due to non-payment, the overdraft (OD) of Rs 2300 crore from J&K Bank had become a structured deficit.  "We dispel assertions made by various sections that state''s fiscal autonomy has been compromised by signing WMA agreement with RBI," Minister for Finance Abdul Rahim Rather said while
winding up discussion on motion of thanks on J&K budget 2011-12 in Legislative ouncil here today. Due to non-payment, the OD of Rs 2300 crore from Jammu & Kashmir Bank had become a structured deficit and government was left without any option to arrange over draft in case of emergencies, Rather said. Rather said OD is temporary arrangement to overcome mismatch between receipts and expenditures "I also dispel apprehensions that the government has severed its ties with J&K Bank. Bank would continue to be the Banker of the state government", he said.  In fact, the agreement with RBI is a bold step to get rid of chronic outstanding of Rs 2300 crores overdraft from J&K and to make the J&K a clean state to begin with, he said. He said the state government''s WMA arrangement with the RBI is in the interest of the state government, J&K Bank and people of J&K.

25 paise coins to become history from June 30

HYDERABAD: The Reserve Bank of India will withdraw  25 paise coins and those of lower denomination from the market starting June 30. These coins will not be in circulation and can't be used as legal tender for payment.  RBI in a press statement said that those who have these coins can exchange them for their worth at 41 banks across the country.

Mithola Singh (USA)  comments -

Have you ever read US or UK not mint pennies? You will not read that becasue 1 US penny means 50 paise.Soon RBI may withdraw RS 100 note too. Thanks to Dr MMS economic policy where people will have bags full of notes and still poor. A real economist will do other way.I remember the year many retired from jobs and Dr MMS took over as Finance Minister, those who retired will tell you that with their life savings in PF/retirement will not buy them a single room DDA flat. The economist devalued Rs those year and poors were left in cold !

RBI panel for one policy rate to tame inflation

A Reserve Bank of India (RBI) working group today suggested that the short-term lending rate (repo) be made the single policy rate to signal the monetary policy stance, to effectively deal with inflation without hurting growth. At present, there are
three rates -- repo, reverse repo and bank rate -- through which RBI injects or
absorbs liquidity from the system.  The proposal is aimed at aligning the Indian monetary system with international best practices. The RBI has invited comments from the stakeholders till March-end on the proposal.  "The repo rate should be
the single policy rate to unambiguously signal the stance of monetary policy to
achieve macroeconomic objectives of growth with price stability," the RBI
working group said.  Under the proposed system, reverse repo and bank rate would adjust automatically with change in the repo rate, which would be announced by the RBI with a view to tame inflation and promote growth.  All the rates will operate within a corridor of 150 basis points, said the working group which was headed by RBI Executive Director Deepak Mohanty.  While the bank rate would be 50 basis points above the single policy rate (repo rate), reverse repo rate would be 100 basis points below it, the report said.  The panel further said that bank rate, which has remained dormant since April 2003, should be re-activitated as a monetary management instrument.  "The bank rate be activated as a discount rate with a spread over the repo rate. Once the policy rate changes, the bank rate should change automatically with a fixed spread over the repo rate," it added.  Bank rate is the rate at which banks can borrow long-term funds from the RBI to overcome
liquidity shortage. Banks, however, have been borrowing mainly from repo
window, which is a short-term instrument.  Currently, the repo rate is 6.5%, reverse repo (short-term borrowing) rate 5.5% and bank rate 6%. Although the RBI has raised key policy rates seven times since March 2010 to tame inflation, it has kept the bank rate unchanged since April 2003.

FinMin, RBI officials to decide on Apr-Sep borrowing by Mar 25

The Ministry of Finance and Reserve Bank of India (RBI) officials would decide on the borrowing calendar for April-September on March 25, a senior finance ministry official said on Tuesday. Finance Minister Pranab Mukherjee, in his post-Budget interaction on February 28, had said the government would conduct borrowing for the coming financial year in a non-disruptive manner, leaving enough space for the private sector’s investment needs.  Government borrowing is typically frontloaded, with 60-65 per cent of the plan completed in the first half of the financial year itself, as tax proceeds are poor in this period.  The government’s gross borrowing for 2011-12 has been pegged at Rs 4.17 lakh crore, as against Rs 4.47 lakh crore this financial year. The net borrowing is pegged at Rs 3.43 lakh crore, as against Rs 3.35 lakh crore for 2010-11. About the borrowing plan for this year, the official said the government was unlikely to borrow the last tranche of Rs 10,000 crore due this month.  “We will allow it to lapse as we are comfortably placed,” the official said. In that case, this year’s borrowing will settle at Rs 4.37 lakh crore on a gross level and Rs 3.25 lakh crore on a net basis.

Malegam views on MFIs leave banks uneasy

The Malegam Committee’s report on microfinance institutions (MFIs) was being seen as bringing relief to low-income borrowers. However, it has made banks apprehensive about the proposed framework. The functioning of MFIs might be affected if the stringent norms suggested by the committee were implemented, bankers said.  Set up by the Reserve Bank of India (RBI) to look into the issues concerning the MFI industry, the committee had suggested caps on interest rates and margins. While it suggested an average margin cap of 10 per cent for MFIs with a loan portfolio of Rs 100 crore, a cap of 12 per cent was recommended for smaller players. Also, it suggested capping the interest on individual loans at 24 per cent. MFIs are allowed to levy only three charges — processing fee, interest,
and insurance charge. The committee also suggested that loans extended to a
single borrower be capped at Rs 25,000.  According to bankers, MFIs — especially the smaller ones — will come under pressure in terms of profitability if the committee’s suggestions are made mandatory. On March 17, leading bankers will meet the RBI brass and give their feedback.  MFIs raise 75-80 per cent of their funds via bank borrowings, 15 per cent from equity and 10 per cent from sources like cash securities. As of now, interest rates charged by them hover around 18-32 per cent, bankers say. Bank finance to MFIs is categorised as priority-sector
lending.  To hedge risks, MFIs have been asked to replace weak collateral with better-quality assets, as banks are worried about the deteriorating quality of the loan portfolio of some MFIs, particularly those operating in Andhra Pradesh. Banks are seeking booked business (loans to borrowers) as primary security before approving a fresh line of credit to MFIs.  Following the events in Andhra Pradesh (political controversy on lending practices, new rules to curb functioning), since October, standard loans have been converted into non-performing assets for banks, leading to a sharp dip in the repayments from MFI borrowers.  The main critics of the Malegam committee report are of the opinion that smaller MFIs will cease to exist since the report favours capping margins and interest rates. However, the committee
argued that consolidation was necessary as too many smaller MFIs might put the
banking system at risk, since two-thirds of their funding requirements are met
by banks.  “The main reason we need an optimum size is that costs fall when you achieve a certain size. Thus, you can afford offering a lower interest rate. Also, 75 per cent of MFI funding is through the banking system. So, if all MFIs remain small, the risk to the banking system would become very large. If this leads to some consolidation, that is unavoidable,” Y H Malegam had said.

Financial inclusion has the potential to add to banking income

Mumbai: Financial inclusion is still not profitable but over a time it has the potential to add to banking income, provided lenders collaborate with technology providers and offer more products to customers, bankers said at the Mint Annual Banking Conclave in Mumbai on Tuesday.  Neeraj Swaroop, regional chief executive officer, India and South Asia, Standard Chartered Bank, said a large number of accounts the bank has opened as part of financial inclusion remain unused. Financial inclusion does not work if there is no access to basic needs like food, he said. “Only partnership, collaboration and technology will drive our plans,” Swaroop said.  O. P. Bhatt, chairman of the State Bank of India, the largest bank in the country, said banks will have to look for alternative channels.  “We have already reached 1,25,000 under banked villages through point of sale terminals, kiosks and more than 100 partners. Now we have signed an MoU with Airtel to use their 1.5 million outlets,” he said.  “Airtel has people in those outlets and they can handle cash and we have banking services. The application is pending with the RBI (Reserve Bank of India) and if they give us a go-ahead, we can roll it out by 31 March. We need partnerships of all types to succeed,” Bhatt said.  Chanda Kochhar, managing director and chief executive officer at ICICI Bank Ltd, said the bank is focusing on ensuring a “comprehensive model” and using “every bit of technology.”  “We have to improve revenues by selling more products to the same customer and cut costs by using technology. We have already reached 1 million customers and are progressing well. But you cannot roll out all six products at one go,” she said.

Indian banks will need to tap overseas markets for capital

Mumbai: Indian banks will have to tap global markets to face the challenge of rising capital requirements, besides managing liquidity effectively to meet long-term funding
requirements, Reserve Bank of India (RBI) Deputy Governor K.C. Chakrabarty said
on Tuesday.  “Not only the increased capital, the cost of capital is also going to increase. How banks are going face is this is a challenge,” Chakrabarty said at the Mint Annual Banking Conclave in Mumbai on Tuesday.  Chakrabarty also stressed that management of liquidity is set to become a key issue for banks to finance long-term funding requirements.  “Banks usually borrow at very short and lend long-term. Banks have to raise different type of long-term resources to meet the liquidity requirement. More funds have to be raised by the banks,” Chakrabarty said.  RBI is currently in the process of formulating guidelines on anti-money laundering that will deal with issues like tax avoidance and cross-border capital flows, he said.  Noting that central banks globally are facing various challenges in the current uncertain global environment to safeguard their respective economies, Chakrabarty said apex banks can operate more effectively when insulated from external interference.  Also, in the face of increasing interference among global financial financial markets, banks are more “susceptible” to development in financial markets, Chakrabarty said.  It is not possible to achieve financial stability without achieving financial inclusion or giving access to the poor to basic banking services, Chakrabarty said, adding that banks have to utilize technology in a cost-effective way to achieve this goal.  “Using technology for reducing the cost of transactions and improve reporting standards is going to another challenge for banks,” Chakrabarty said.  Further, the
implementation of International Financial Reporting Standards or IFRS is also crucial for the Indian banking system in view of the increasing integration of global markets, Chakrabarty said.

Auction, publicise govt cash balances, says Mohanty report

The high government cash balance, which  has often created uncertainty in liquidity conditions, could now be auctioned  to reduce cash volatility, says the Deepak Mohanty committee set up by the Reserve Bank of India to study the operating procedure of monetary policy.  According to the report, a major source of
uncertainty in liquidity was the sudden rise in government cash balances. To
manage the liquidity arising out of this, the report said RBI did not have any
corresponding instrument.  The issue of auctioning of government cash balances is under consideration of the government and RBI, said the report. “If this happens,
huge cash balances with the government will not create a liquidity crunch.
Government will be able to auction the money temporarily and, hence, will not
be forced to spend to maintain liquidity in the system,” said a treasury
official with a public sector bank.  To help market participants make a better calculation of liquidity in the system, the group suggested the data on government cash balances be made public daily, with a minimum time lag. “As government cash balances have been a major source of uncertainty in liquidity, the dissemination of this information will help improve the assessment by market participants,” said the report. “We will be able to understand the temporary gap in the system, thereby easing pressure on short-term interest rates,” said the treasury official.  The existing liquidity forecasting model needs to be re-examined and the weekly forecasting model should be improved, the working group also said.  “The
predictive power of the model has not been satisfactory for the system in a
deficit mode,” said the report. Currently, RBI’s liquidity forecast is made
weekly, for up to four weeks ahead.  If these recommendations are accepted by the RBI, the data will be a part of the Money Market Operations released daily and also be published in the Weekly Statistical Supplement of the RBI Bulletin. At present, the RBI publishes the information on banks’ cash balances with itself after a lag of three days.

Prepaid travel card

It allows conversion of foreign currency notes or travellers’ cheques into Indian currency and is then loaded onto the card. 


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Q&A: K C Chakrabarty, Deputy Governor of RBI

At a time when banks are facing a situation of rising interest
rates threatening loan growth, managing the growth-inflation dynamics has
became one of the main challenges of the Reserve Bank of India (RBI). K C Chakrabarty, Deputy Governor of RBI, speaks to Manojit Saha on this and a host of other issues. Edited
excerpts:

Banks are saying high interest rates are  hurting credit growth. How will RBI balance the growth-inflation trade-off?

If the inflation is high, interest rates will remain high. That is  why RBI insists on having low inflation so that interest rates can be low. All  efforts are to be diverted in that direction. You cannot have a situation where  inflation is high and interest rates are low.

RBI had expressed concern on the practice of lending money that was
borrowed from RBI under the liquidity adjustment facility (LAF). But banks say,
since the funds borrowed from LAF are against government securities, that is
not a problem.

Why don’t banks liquidate the security and lend that money? The LAF money is not meant for lending purpose on a continuous basis. The system cannot run like that. The LAF facility is for meeting liquidity needs arising out of mismatches of temporary nature.

New players are set to enter the banking system. What modifications RBI expects in the Banking Regulation Act to have more power?

I am not fully aware of the developments.  However, one aspect which stands out very clearly is the fact that orderly conduct of financial market with wider participation presupposes the ability of regulator to change the management and
board of the institution when they are not functioning within the regulatory and contractual framework. Legal provisions must support that stand.

The Malegam Committee has proposed RBI to be the regulator of microfinance institutions. How will you ensure that MFIs treat their customers fairly?

Any business entity, if you consider MFI as business entity, must treat its customers fairly and properly for the benefit of the company. So MFIs must treat their customers fairly for their own survival.  Until now, RBI was not regulating the MFIs, or you can say, it was a soft touch regulation. We have come to the conclusion that at this stage of development, MFIs are relevant but they need to be regulated more stringently. But one should appreciate the fact that the entire cross-section of the society also wanted the same.

Will the central bank ask all MFIs to register with RBI?

If there is somebody left out of the regulatory framework then we have to see whether it is creating a regulatory arbitrage or not and how do we tackle them.

Some recent developments, like the loan-for-bribe scam or the fraud that happened at a branch of a foreign bank, point to lack of proper risk management practices in banks. Do you think that banks have to re-look at the risk management practices?

Absolutely, no doubt about that. We are at a very nascent stage of risk management. It has to mature, it has to perfect itself and we must understand that as and when business becomes more complex and global, the need for better and sophisticated risk management will arise. This is one area where we cannot be complacent, neither the banks, nor the regulator.

Can you highlight any specific areas in risk management which need to be looked at?

First, we have to understand the risk philosophy. Risk management is not to avoid the risk. It is about how much risk we should take for a given profit, while keeping the system stable. That understanding has to come. We have to understand, wherever return is higher, risk is much higher. Banks should measure the risk and price it appropriately.

At present, there are no norms on relationship managers who offer portfolio management services in banks. Will the regulator consider norms for such activities?

Banks which are in that business must have proper norms for identifying the people for this job.

What we are saying is that banks should have a proper risk management framework which is approved by the board. Banks must understand the risks of the business and also have the responsibility of making customers aware of the same.

Many of these wealth management products are in the purview of various regulatory agencies. That is why a combined approach is necessary. But the cardinal principle, that don’t sell the product to people who don’t understand the product and the risks associated with it, stands.

The stance of RBI was not to prescribe or cap interest rate or charges of banks. It was left to the market forces. But there seems to a departure from that practice. What has prompted this shift in stance?

We have not capped any charges as yet, it is pre-mature. However, we must understand any market functions based on the availability of information. If there is an asymmetry of information, no market can function efficiently. Now-a-days, we observe that there is too much of asymmetry of information between the provider of the services and the one who is availing the services. In any regulated activity, the issue of protecting the interest of the consumer is paramount. Hence, this type of thinking crops up. This is relevant not only in India, but this trend is also felt across the globe. Those who fail to read this trend will be left behind. When the competition is not able to take care of the price, regulatory process has to intervene to protect the most vulnerable section of the society.

Why is RBI repeatedly saying banks must cut interest margins. Interest margin is the very key operating and profitability variable. Almost all the banks are listed entities. Isn’t this direction misplaced from a minority shareholder perspective?

What we are saying is that technology should bring down the operating costs of banks significantly. It has happened in various sectors like telecommunications, aviation etc. We are urging the banks to bring down the costs of operation and pass on the benefit to both depositors and borrowers without sacrificing return on asset and return on equity.

Banks have started implementing the financial inclusion plan during the financial year. How has been the progress so far? Is the regulator happy with the banks’ efforts?

Banks have started and they have a long way to go. It is a difficult journey. Banks are trying, they need to try harder and every segment of the society needs to support them then only financial inclusion will become a reality.  Delivery model for financial inclusion is still a problem. We are yet to evolve a cost effective delivery model.

The current phase of economic growth is largely driven by infrastructure. However, banks are having asset liability mismatch problems from infrastructure lending and some of the banks have also reached sectoral caps. What can RBI do to strengthen bank’s infrastructure financing capabilities?
Infrastructure financing requirements are huge and only banks will not be able to finance those. Other types of institutions are also necessary. All relaxations, whatever demanded and what is necessary, feasible and prudent have been given to the banks to ensure that funding to infrastructure does not suffer.

Too early to assess impact of Japanese disaster on India: RBI

The Reserve Bank on Tuesday said it is "too early" to assess the financial impact of the Japanese disaster on India and it is in constant touch with Bank of Japan (BoJ). "It is too early to make an assessment of the financial impact of the
Japanese disaster (on India)," Reserve Bank of India Deputy Governor K C Chakrabarty said. He further said RBI is in regular touch with the Bank of Japan. He further added that "they (BoJ) tell us that the financial markets will
stabilize in the next few days".

'Banks taking longer to clear MFI loan applications'

Witnessing slowdown in business, the microfinance industry has said banks were shying away from advancing loans to them.  “Bank lending for fresh loans has
been very selective. The entire process of considering loan applications from
microfinance institutions (MFIs) is moving very slowly,” Alok Prasad, chief
executive, Microfinance Institutions Network (MFIN), said.  In January, the
Reserve Bank of India (RBI) had relaxed the debt restructuring norms for MFIs
to enable banks to provide them liquidity support. These norms allowed banks to
classify unsecured loans extended to MFIs as good assets, allowing them to
restructure MFI loans without much difficulty. “We had approached RBI for debt restructuring in December last year. We have time till March 31 to approach banks,” Prasad said.  Some major banks like State Bank of India, ICICI and Axis Bank are estimated to have lent over Rs 15,000 crore to MFIs. While ICICI has lent around Rs 2,000 crore, SBI has loaned Rs 1,000 crore. Small Industries Development Bank of India (Sidbi) has an MFI exposure of around Rs 4,000 crore.

Decks cleared for bank licences to business houses

New Delhi, Mar 15: The government and the Reserve Bank of India
(RBI) are set to allow financial conglomerates and large industrial houses to
enter the banking industry.A bout half a dozen fresh banking licences are
expected to be given at one go to ensure that new entrants have a level playing
field, government sources said. The RBI recently submitted a set of proposals
on banking licences to the government. The final guidelines will be issued
after the finance ministry endorses the central bank’s draft.   Sources said that the new private sector entrants would be asked to open around 30% of their total branches in rural areas, as the government tries to calibrate commercial viability with financial inclusion.