Financial experts and bankers who assessed the status of consumer protection in the financial sector have termed access and affordability of financial services as still a dream in the country. In this modern era, when the global economy adds around 1.5 crore new consumers of financial services every year, awareness of their rights was awfully low, it was pointed out. Speaking on the occasion of World Consumer Rights Day, Jaipur circle Reserve Bank of India General Manager S.N. Panda conceded that the problem of poor awareness and lack of accessibility exists among consumers of the banking sector. “There is need for better terms and conditions in services for customers in the financial sector,” Mr. Panda said. The RBI has been taking various initiatives in creating financial literacy and better accessibility for consumers, he added. The event, “Consumers for Fair Financial Service”, was organised by consumer advocacy group CUTS. Calling for financial inclusion of poor, the migrants, disadvantaged and marginalised people, CUTS International director George Cheriyan said these segments often struggle even to open a bank account in the absence of proper identification or address proof. Mr. Cheriyan added that a study in 2009 had found that only 13 per cent people used ATM and debit cards in the country, and only 10 per cent possessed life insurance. Jaipur Office of Banking Ombudsman (BO) Deputy General Manager K. Sundari sought RBI intervention in cases of serious financial abuses. Talking about fairness in financial services, Ms. Sundari presented an overview of the BO and the mechanism of seeking redressal through it. The former Rajasthan State Consumer Dispute Redressal Commission chairman, Justice Vinod Shankar Dave, shared his personal and professional experience in the legal field and emphasised behavioural aspect of consumer and service-provider relationships and constraints due to ignorance. The banking sector needs to show more responsibility towards consumers, and digitalisation was taking away the personal touch from banking services, he noted. BO AGM S.N. Senapati said consumers should take advantage of the existence of many regulatory bodies like the Securities and Exchange Board of India, the Insurance Regulatory and Development Authority and the RBI existed. On the part of the banks and financial companies, they should ensure fairness and transparency in contracts, he felt. CUTS programme officer Deepak Saxena and project coordinator Amarjeet Singh threw light on consumer protection in the newly emerging financial areas.
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Sunday, March 20, 2011
SBI arms merger bill cleared
New Delhi: The government on Thursday cleared a bill to empower itself to effectively manage the affairs of subsidiary banks of State Bank of India. The move will also help facilitate the merger of the five subsidiaries with SBI, for which the government has indicate a timeframe of 12-18 months. While SBI executives said they were in favour of merging the remaining associate banks-State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore-the timing would depend on clearance from the government. SBI, the country's largest lender, has already merged two of its associate banks-State Bank of Saurashtra and State Bank of Indore-with itself to improve overall functioning and is ready with the template to merge the remaining five subsidiaries. Among other things, the bill that was supported by the parliamentary standing committee on finance seeks to empower the government to fix the authorised capital of associate banks and appoint managing directors. These amendments were necessitated as these powers were vested with the Reserve Bank of India from whom the ownership of these banks was transferred to the Centre a few years ago. The bill is among the six financial sector legislations being pushed by the government.
Pay tax dues early, says RBI
The Reserve Bank of India (RBI) has appealed to the income-tax assesses to remit the tax dues sufficiently in advance of the due date for avoiding last minute rush. In a release, the bank said that the remitting income tax dues at the RBI would be too heavy towards the due date and it would be difficult for the bank to cope with the pressure of receipts although additional counters to the maximum extent possible are provided. Further, the RBI also appealed to the assesses to take advantage of the facility available for payment of tax at the branches of public sector banks and designated private sector banks.
Macroeconomic indicators - RBI rate hike may hit factory output
Apex chamber ASSOCHAM said the Reserve Bank of India's calibrated approach with minimal risk to growth momentum by increasing its repurchase rate by a quarter point appears to be a fire fighting exercise with limited options. The Associated Chambers of Commerce and Industry of India The 25 basis points increase in short term lending and borrowing (reverse repo rate) in RBI's mid term policy review will hit the manufacturing sector which is already witnessing a slowdown due to rising input costs and wages. Mr Dilip Modi president of ASSOCHAM said that "This is the eighth time in 2010-11 that the central bank has raised key policy rates to cool prices. The demand-side inflationary pressures are a larger concern than risk to overall economic growth." He said Indian industry is already facing fluctuating crude oil prices due to Middle East crisis, threats of disruption in global supply chain because of the devastating earthquake and tsunami in Japan, besides uncertain recovery in the European Union and the United States after the economic meltdown. With inflation hovering at 8.31% in February and profit margins under squeeze, capacity expansion plans are being curbed, thereby restricting fresh investments. Mr Modi said the RBI should have waited till the new agriculture crop which is expected next month. He said that "The performance of capital goods sector is also a matter of concern as it has shown negative growth for the second consecutive month." Meanwhile, ASSOCHAM is advocating a single policy rate to improve monetary policy transmission. This will align the Indian monetary system with international best practices and swifter transmission of monetary policy instances. Mr Modi said that “We agree with the RBI panel recommendation that repo rate should be a single policy rate to unambiguously signal monetary policy stance to achieve macro-economic objectives of growth with price stability. This will also bring in more effectiveness and transparency in the banking system.”
RBI slams banks for arbitrage
Banks have come under fire from the Reserve Bank of India (RBI) for lending funds borrowed under the liquidity adjustment facility (LAF) in the overnight money market. The central bank has asked the banks not to engage in such a practice, as the purpose of LAF funds is to meet the reserve requirement only. At least twice last week, RBI officials communicated to banks’ top managements about their discomfort about lending liquidity adjustment facility funds to overnight money market. “Liquidity deficit, which had shot up last week had made the regulator start enquiring about the reason. When they came to know that banks were taking arbitrage opportunity by on-lending the borrowed funds in the call money market, they reminded us that LAF funds should be used for lending purposes,” said a top executive of a public sector bank. Last week, call rates went past 7 per cent on most days, while the repo rate — the rate at which banks borrow funds from RBI — was 6.5 per cent till the first liquidity adjustment facility of Thursday. On Thursday, RBI raised the reverse repo and the repo rate by 25 basis points each to 5.75 per cent and 6.75 per cent. According to banking industry officials, some of the foreign banks and small private sector banks were not having excess government paper to pledge funds from liquidity adjustment facility; so they were heavily dependent on the overnight market. Banks, which had excess government bonds, that was above the regulatory requirement of 24 per cent, seized the opportunity for making 50-75 bps margin in the call money market.“RBI was unable to accept the fact as to why the liquidity deficit should be so high when the government had started spending, despite advance tax outflows,” said another executive from a government-owned bank. During the November-January period when liquidity shortage was acute, banks were borrowing around Rs 1 lakh crore from RBI on a daily basis. However, from February the quantum of deficit came down to the central bank’s comfort level, which was +/- 1 per cent of banks’ net demand and time liabilities, or Rs 50,000 crore. The deficit, since, has come down because the government has stared spending which was reflected in the fact that government balances with RBI fell from a high of Rs 1 lakh crore in the middle of December to Rs 100 crore in the beginning of March — the minimum level that the government should keep with RBI. Bankers also said the strain in liquidity in the last week was moreover due to corporate advance tax outflow which was estimated in the region of Rs 50,000 crore.
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