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Wednesday, March 23, 2011
Teaser loans deny old customers benefit of lower rates
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Emmett J. Rice, Former Fed Governor, Is Dead at 91
Emmett J. Rice, a former Federal Reserve governor, World Bank executive and adviser on economic development who helped Nigeria set up its banking system in the 1960s, died on March 10 at his home in Camas, Wash. He was 91. In the early 1950s, while an assistant in the economics department at the University of California, Berkeley, Dr. Rice received a Fulbright fellowship that took him to India, where he became a research associate at the Reserve Bank of India. His studies of economic development there became the basis for his doctoral dissertation.
Meet of Supreme Audit Institutions begins
KOCHI: The Global Working Group of Supreme Audit Institutions (SAIs)from 19 countries is meeting at Kumarakom from March 21 to March 23. Organised by the Office of the Comptroller and Auditor-General of India, the global group meets annually in different member-countries, with the last meeting held in Sydney in March 2010. The conference addresses issues of contemporary relevance and include topics such as ‘Improving communication between SAIs and their stakeholders, capacity-building of SAIs, auditing third-party service providers and fallout of the global financial crisis. The RBI Governor will speak on ‘India and the Global financial crisis- collateral damage and response’.
Beware that tax refund is scam!
NEW DELHI: Cyber crooks are on the prowl this financial year closing and are using phishing attacks and hoax-alerts to gain access to account details of individuals who have filed their Income Tax returns online, warn experts. "It is the season of income tax returns. Many people file them online. Cyber criminals use this time to launch phishing attacks through emails as many people are not aware of these things," says Vinoo Thomas, Technical Product Manager, McAfee Labs. "An email is sent to a number of people, saying IT refund is available. Once it is clicked, the user is directed to a website that looks like that of IT dept. And there, they ask you to disclose your personal financial details in a form. That information will end up with a scammer who can empty your credit card or bank account in no time ," he adds. For the financial year 2010-11, the Income Tax department has processed over 38 lakh e-filed returns. According to cyberlaw expert, Pavan Duggal, unawareness among public and technical sophistication of the cybercrooks has led to increase in phishing attacks in recent years in India. "People do not know that their financial details can be targeted and misused through Internet. Also, they seem unaware of the policies of financial institutions and government departments to contact their customers," says Duggal. What further complicates the matter, according to him is the technical sophistication of such crooks. "If users are becoming aware of such frauds, these criminals are developing techniques to counter this awareness. The phishing emails and web sites are made to appear exactly same as that of the original one which confuses the users," says Duggal. The recent examples of phishing attacks include RBI phishing scam, ICC World Cup 2011 scam and Valentine Day scams. "Collecting e-mail addresses from spam mail vendors is not a big deal. People still mention their e-mail address openly on forums and social media networks that makes life easier for online fraudsters. People still don't use spam filters," says Thomas.
Primary aim is price stability: RBI Governor
KOCHI: Reserve Bank of India primary concern is to maintain price stability, Governor Duvvuri Subbarao said on Tuesday. RBI raised interest rates last week for the eighth time in 12 months, in line with expectations, and warned both of inflationary pressures and emerging risks to growth. The fight to contain the relentless march of inflation, especially in food prices, has become the focus of RBI and the central government in past few months. India's wholesale price index rose an annual 8.31 per cent in February on higher fuel and manufactured product prices, well above Reuters forecast of 7.79 per cent and higher than January reading of 8.23 per cent.
K. R. Ananda, Regional Director, RBI addressing presspersons
K. R. Ananda, Regional Director, RBI (Tamil Nadu and Puducherry), addressing presspersons in Chennai on Monday. Sumam Jyothi (left), DGM, RBI and G. P. Borah, General Manager, Issue Department
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Banks never sleep, but RBI does - Monika Halan
I wonder why the Reserve Bank of India (RBI) has got its head buried in sand over the extent of lies that bankers tell their customers in their attempt to hit them with inappropriate financial products to earn their bonuses and meet their targets. And I wonder how banks can calmly tell angry customers who protest that the products recommended and promises made by their staff (relationship managers) are not the responsibility of the bank. “The person who sold this to you has moved from our bank, what can we do?” is the most commonly heard excuse to the customer. I recently met an artist at a do. As I tanked up about art, a subject I know nothing about, she reciprocated by asking me questions about financial products. Her story turned out to be the story that I hear over and over again. The average story goes like this: The trusted bank sends its “relationship manager” who knows how much money there is in the account. He usually comes with an insurance company guy. They both sell inappropriate products by lying about product features and what they will return. And when the customer complains some years later, the bank coolly talks about that person having moved on. “And can we sell what you bought and put you in something new now?” And hit the customer with another harmful product. The artist’s story goes like this: She tells the relationship manager that she is an artist (a pretty famous one at that) and does not have regular income flows. Has a son she is funding through college. Needs cash in two years’ time. She wants a one-time bullet investment as she cannot make regular annual contributions. This was last year. Guess what is sold? Yup. A 20-year premium paying unit-linked insurance policy. He sold it saying it is a three-year product. That the Rs3 lakh put in over three years will become Rs5 lakh. When the policy reaches her and she sees it (yes finally found a person who looks at documents, she had actually orange-highlighted the premium paying term till 2029) and calls up the “relationship manager” to ask how he could sell her something that was so long-term, he says: “I am there. Don’t worry, you will not have to pay after three years.” Now, after the new rules post September 2010, he comes back and tells her that it is actually five years premium-paying term. And that he is there. Don’t worry. This is where she calls me and says “I’ve been cheated”. When I looked at the policy document, I see worse signs of the crime. He has put her in a conservative fund and had circled the 10% growth fund value to show what her return will be. Cheating at every step. She now recalls that he would carry away every bit of paper he wrote on to explain the product to her. She only has the notes she made. The problem with this story is that it is not a story in isolation and rampant cheating by the banks continues. Why it is taking RBI so long to put in basic suitability guidelines is something that is beyond reason. What can you do till some rules come into the country? Do not trust what your bank relationship manager tells you. Do not buy products they recommend. The only recourse you have is to search for information and ask the right questions. Don’t have any other place to buy from? OK, do this: For every product that the banker suggests, get him to write the key features on a piece of paper and sign it. That should have details of: How long do I need to invest in this product for it to work for me? If I invest Rs100, how much of this will be invested? Each year, how much is taken out as costs? Am I investing in equity, debt or a balanced fund? If the banker refuses to do this, you know that he is lying about the product he wants to sell. Keep the money in a fixed deposit. Don’t buy the product he recommends. End note: Another investor alert (if I blow any more whistles, my cheeks will explode, I think): Don’t buy medical insurance to soak up the Rs15,000 deduction. They’re selling it saying that there is a new tax break. There isn’t. We already get a Rs15,000 deduction on the premium paid on medical insurance, but we don’t use the entire limit because we don’t need to. A basic cover does not cost that much and a budget of about Rs10,000 a year is usually enough for a good medical cover. For a family of four (with dad at about age 40), a total cover of Rs5 lakh should cost you between Rs8,000 and Rs12,000. Don’t discontinue your old policies to buy new ones.
Monika Halan works in the area of financial literacy and financial intermediation policy and is a certified financial planner. She is editor, Mint Money and can be reached at expenseaccount@livemint.com
Call for financial inclusion in State
KOCHI: Reserve Bank of India (RBI) Governor D. Subbarao has urged people to strive to convert Kerala into a model State in terms of banking and financial services. He was addressing a meeting of villagers and representatives of various non-government organisations at a function organised at the government school at Vengoor west village, near Perumbavoor, in Ernakulam district, on Tuesday. The visit was part of the financial inclusion initiative of the RBI. The village had been identified as unbanked as per RBI norms. Mr. Subbarao visited the Financial Literacy and Credit Counselling Centre and the Rural Development and Self-Employment Training Centre, set up by the lead district bank, Union Bank of India, at Perumbavoor. He addressed a meeting there. Earlier, he visited Sree Sankaracharya University of Sanskrit, Kalady, and addressed students and teachers there. Vice-Chancellor J. Prasad, Pro-Vice-Chancellor S. Rajasekharan, Registrar K. Ramachandran and others received him. He gave away prizes to winners in quiz programme. The RBI Governor will address the Global Working Group of Supreme Audit Institutions, a forum of Auditors General of 19 countries, at Kumarakom on Wednesday.
DSC needs Rs 4cr in coins for April
GURGAON: With the revised toll rates for the Delhi-Gurgaon Expressway set be executed from April 1 midnight, the concessionaire, DSC Ltd, is literally gearing up for change. It has requested the National Highways Authority of India (NHAI) to communicate to the Reserve Bank of India to provide Rs 4 crore in coin denominations for the first month.
Banking Bill could draw investors to old private banks
The proposed Banking Amendment Bill, if approved by in the Parliament, could trigger investor interest in some of the old private sector banks, say market participants. Among other things, the Amendment Bill seeks to remove the restriction on voting rights. Currently, voting rights for a single investor are restricted to 10% of the total, even if that investor owns more than 10% in the bank. “Old private sector banks stand to benefit from the amendment bill,” said Chokkalingam G, ED—CIO, Centrum Wealth Managers. “If the existing cap on voting rights goes, many foreign investors will be keen to buy sizeable stakes in banks,” he said. The Reserve Bank of India is finalising guidelines for allowing corporates to enter the banking sector. Analysts feel non-banking finance companies (NBFCs) too would be interested in picking up stakes in existing banks to foray into banking business. Removal of 10% voting rights would encourage higher shareholding in a bank, by a single investor. The intention is to increase voting rights limit in proportion to shareholding. It is some kind of prelude to the new banking license,” said Bipin Karba, chief financial officer, at Dhanlaxmi Bank. However, Reserve Bank nod is needed for acquiring 5% or more share in banks.. “This move will certainly increase interest of NBFCs to get into banking business. They will try to acquire old private sector banks to kick-start banking business with an existing set-up,” said a head of an old generation private sector bank adding that his bank is ready to be acquired if the acquirer has a sound management background. Old generation private sector banks are currently run by individuals, not by any anchor investors with majority stake holding. For example, Kotak Bank and IndusInd bank (new generation private sector banks) are promoted by Kotak group and Hinduja group respectively. However, there is no single promoter for banks like Karur Vysya or Lakshmi Vilas or Dhanlaxmi. The amendment bill also proposes to allow banks to issue preference shares subject to RBI’s regulatory guidelines. “This is another avenue to raise capital other than plain equity or debt options. It is helpful to maintain higher capital adequacy ratio in times of rapid expansion in the loan book,” said Dhanlaxmi’s Karba. Meanwhile, analysts look for further cues from the Amendment Bill once it is fully passed by the parliament.
Mobile banking vans to speed up financial inclusion: BoB
Under the financial inclusion plan, Bank of Baroda (BOB) has decided to harness the mobile banking van (MBV) route to provide banking services in remote areas of the country. In the next one year, BOB plans to launch 25 new MBV units all over the country. The model has already been successfully tested by the bank in Gujarat and Bihar, while two such units were today launched in Uttar Pradesh by BOB Chairman and Managing Director M D Mallya. He was in town to chair the UP State Level Bankers’ Committee (SLBC) meeting to review the progress of financial inclusion programme as mandated by the Reserve Bank of India (RBI). BOB is the Uttar Pradesh convenor of SLBC and has 17 lead districts here, including two in Uttarakhand.
RBI Sets Holding Co Rider for Bank Licence
The Reserve Bank of India will allow a promoter or a promoter group to establish new banks if they set up a holding company, which will own the bank and all other financial services companies regulated by the central bank or other financial sector regulators. The holding company structure is described in the draft guidelines that the central bank has sent to the finance ministry last week. The guidelines are not final but provide a clue to its thinking. The norms governing new banks will be made public once the finance ministry responds. Such a structure is aimed to ring fence the regulated financial services activities of an industrial house, including the new bank, from other activities such as manufacturing and trading that are not regulated by financial sector regulators. In his Budget speech, the finance minister had said the Reserve Bank of India would release a set of rules governing new banks before March 31. The rules will come into force only after a public discussion.
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