Udupi: Chairman and Managing Director of Syndicate Bank Basant Seth inaugurated the Financial Inclusion Resource Centre at the founder's branch premises of the bank, here on Saturday. The Financial Inclusion Resource Centre gives the public all the necessary information about the importance of financial inclusion. It tells them why they should open bank accounts, various types of banks accounts, loan provisions and details of other banking services. The resource centre is like a museum. All the information is available in a pictorial format in three rooms of the centre. It is manned by a counsellor, who will answer any question people might have about the banking services. He said that financial inclusion was of utmost importance. The Centre and the Reserve Bank of India (RBI) were giving priority to financial inclusion. “We would like children to visit this place so that competitions could later be held on the topics depicted here,” he said. Executive Director of Syndicate Bank Ravi Chatterjee said that besides the Centre, a van would be pressed into service to propagate the importance of financial inclusion in villages. The bank would open two more Financial Inclusion Resource Centre at Kumta in Uttara Kannada and Mangalore. The Financial Inclusion Resource Centre in Mangalore would be opened by the end of this month, he said. A.S. Rao, Regional Director of RBI, Hyderabad and D.T. Pai, former Chairman and Managing Director of Syndicate Bank, were present.
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Monday, March 21, 2011
How do you like this?
The Reserve Bank of India insiders have come up with new names for the Department of Banking Operations and Development and Nabard. Thus DBOD stands for Department of Banking Obstruction and Destruction and Nabard for Not at All Bothered About Rural Development.
The fine art of doing nothing
Most commentators and analysts have tended to view the Reserve Bank of India's mid-quarter monetary policy review of March 17 as a statement of the central bank's intentions and views on the economy. But the review, like many previous such reviews, can also be read as an indictment of public policy's failure to do anything meaningful to combat the problems faced by the nation — be it inflation, the lacklustre growth of capital goods and, of course, the pitiful state of our infrastructure and agriculture. One way of ‘reading' the abysmal passivity of New Delhi policy planners is to cast an eye over the string of endorsements of the RBI's actions from the chairman of the Prime Minister's Economic Advisory Council to the ever-articulate Deputy Chief of Planning Commission and, of course, Finance Minister, Mr Pranab Mukherjee himself. According to the latter, the RBI's repo rate hikes of 25 basis points would moderate prices, though inflation could be “marginally” higher than earlier projections for the end of the fiscal. What the Finance Minister meant by this mind-bending logic is unclear, but what is not is the sorry state of the projections themselves that have emanated from New Delhi with unceasing regularity since last June.
WRONG LIMITS
There are signs that the Reserve Bank of India has decided to ignore the criticism of its Malegam report and enforce its recommendations. It is expected to introduce price control on interest that microfinance institutions may charge rural borrowers. Price control gives those subjected to it an incentive to increase costs. To prevent it, the RBI will also introduce a cap on their profit margins. That will also control what they can pay for the funds they borrow. Here, the RBI is principally thinking of banks, of which it is the prime regulator. In essence, it is going to tell the banks that they cannot earn more than a certain limit on small loans to villagers. The rate being bandied about is 12 per cent. Since the average interest earned by public sector banks on their bills and advances in 2009-10 was only 8.3 per cent, the RBI must feel that it is doing banks a favour if it lets them earn 12 per cent on rural loans. But a high proportion of government banks’ loans goes to politically favoured borrowers such as farmers, small industrialists and government enterprises; if they are excluded, the interest rate earned is considerably higher. So the RBI is likely to make banks’ rural credit no more paying than their urban commercial loans. It will thus deprive banks of all incentive to lend to villagers, who are dispersed and more expensive to service. That will perpetuate the malaise that has pervaded till now: villagers will continue to be under-served by banks. Those banks that still try out the rural market will have their costs further increased by maximum limits on the size of loans. They will also be forbidden to lend to villagers whose income exceeds a minimum; in other words, they will not be allowed to reduce their average risk by lending to more substantial farmers and traders. The net effect of these well-intentioned and ill-thought-out measures would be to leave the rural credit market to moneylenders at whose mercy villagers have been all these centuries. The RBI prides itself on being a conservative institution, but this is surely taking conservatism too far. More importantly, the RBI is a nervous regulator which puts protection of its reputation above development; it therefore prefers oligopolistic markets in which a few banks make comfortable profits. That is the market structure it has created in cities; it is determined to replicate it in villages. Viewed in this fashion, it is not just its approach to rural credit that is inimical to development; it is its stranglehold on the banks that is harmful. The country would benefit, whether in towns or in villages, from vigorous competition among a larger number of banks. If that makes the bank regulator’s job more difficult, that is an argument for redesigning the regulator.
People suffer, banks get richer- Rakesh Bhatnagar
For a self-proclaimed welfare state such as India, enrichment at the cost of the tax-payer and the millions of ordinary people who have parked their savings in banks and other financial institutions is anathema. Yet, there were unclaimed deposits to the tune of Rs13,603,159,647 in a variety of banks — Rs4,731,67,698 in foreign, Rs1,503,23,106 in other private and the remaining in public sector — for more than 10 years till December 2009. Moreover, Reserve Bank of India (RBI) says at the end of March 2010, there were 54,738 million small coins (which, by definition, include the 50 paisa), adding up to Rs1, 455 crore. Ironically, neither the government nor any bank has shown concern for welfare of the depositors. Whatever the case, the cash-rich, top-heavy banks, which have been using public money the way they want to, can’t be allowed to swallow the deposits. Isn’t it RBI’s sovereign duty to protect the interests of unidentified depositors by putting up notices across the country inviting attention of the unknown and unheard of millions who might have found it hard to get their money back for a variety of reasons. Owners of the assets must be identified and paid with interest.They should not be made to suffer for no fault for theirs as a friend of mine suffered. His wife had Rs50,000 in her bank account when she died over a decade ago. He approached the nationalised bank with her death certificate and other relevant papers to prove that she was his legally-wedded wife and claim the money, but was denied. The bank wouldn’t verify the facts, either, and instead asked him to move court. The friend calculated the legal exercise would cost him Rs30,000, apart from the hassles and man hours, and decided against it. The money that belonged to his wife and her child must have doubled by now and the bank enriched.For whose welfare the state is working? Not the people, at least.
RBI SLAMS BANKS FOR LAF MISUSE
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. LAF funds are meant to meet banks’ reserve requirement. At least twice last week, RBI officials told bank managements about their discomfort with lending of LAF funds in the overnight money market. “The liquidity deficit, which shot up last week, made the regulator enquire about the reason. When it came to know that banks were doing arbitrage by lending the borrowed funds in the call money market, it reminded us that LAF funds should not be used for lending,” 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 Thursday’s first LAF. 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, respectively. According to banking industry officials, some foreign banks and small private sector banks did not have excess government paper to get LAF funds and so they were dependent on the overnight market. Banks that had government bonds in excess of the regulatory requirement of 24 per cent seized the opportunity to make a 5075-basis-points margin in the call money market. “RBI was unable to accept the fact that the liquidity deficit was so high even when the government had started spending, despite advance tax outflows,” said another executive of a government-owned bank. During the November-January period, when a liquidity shortage was acute, banks were borrowing around `1lakh crore from RBI on a daily basis. However, from February, the quantum of deficit came down to the central bank’s comfort level of +/- 1 per cent of banks’ net demand and time liabilities, or `50,000 crore. The deficit has come down since because the government has started spending, reflected in the fact that government balances with RBI fell from a high of `1lakh crore in the middle of December to `100 crore — the minimum level the government should keep with RBI — in March. Bankers said the liquidity strain last week was due to corporate advance tax outflow, estimated in the region of `50,000 crore.
Dena Bank CMD at RBI Outreach Program
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