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Saturday, March 26, 2011
Financial inclusion programme held
VISAKHAPATNAM: A ‘Financial inclusion and literacy programme' was held as part of the platinum jubilee celebrations of Reserve Bank of India (RBI) at Chintalaveedhi village of Paderu mandal in the district on Thursday. The village was adopted by the RBI and attached to Union Bank of India, Paderu branch, to cater to all the banking needs of the villagers of that village. The objective of adopting the village was to save the villagers from the clutches of money lenders and micro financiers, according to a statement issued by the bank. Regional Director of RBI, Hyderabad, A.S. Rao inaugurated the programme. General Manager of State Bank of India T.S. Ramaswamy, Assistant General Manager of UBI, Visakhapatnam region, D.V. Gupta and Project Officer of ITDA, Paderu, S. Satyanarayana participated in the inaugural programme. In his report, the Branch Manager of UBI Paderu N. Subba Rao said that there were 210 households in Chintalaveedhi and ‘no frills' accounts were opened in the names of the householder and his wife. They were given an ATM card, cheque book and passbook. He said that SMART cards were issued to 50 per cent of the eligible beneficiaries. The speakers stressed the need for timely repayment of the loans taken for availing more facilities from the banks. Assistant General Manager, RBI, Hyderabad, Krishna Kumar proposed a vote of thanks.
Issue of new bank lincences
The finance ministry is correct when it says that the Reserve Bank of India (RBI) should not curb foreign investments in new banks at 49%. Today, foreign investors can hold up to 74% stake in established banks; so, a lower ceiling for new banks will make no sense. Instead of making sectoral rules simpler and more transparent, the RBI's suggestion, if turned into policy, will create extra clutter with two different caps on overseas investments in the same sector. The government is also correct to specify that real estate companies should not be allowed into banking. The world over, real estate markets are subject to long-duration business cycles, which on the downturn have been known to destabilise entire economies. This happened in Japan in the 1990s and more recently in Europe and the US. Besides, India's real estate market is notorious because it is a sink of cash transactions and there's a very real fear that realtors could turn banks owned by them into money laundering machines. So, allowing real estate companies to start banks will be a recipe for the perfect economic storm and the RBI and the government are correct to be wary of such a possibility. Less than half of all Indians have access to a bank account. This is a shame, in the second-fastest growing big economy in the world. For many years, inclusive banking has been talked about, but little has happened to push banking deeper into India's hinterland. Low levels of literacy combined with the mass of paperwork that all banks need to open and operate accounts contribute to the low penetration of banking. The lack of urgency demonstrated by commercial banks to open branches and services in rural India adds to the problem. To push banks to the hinterland, the RBI correctly specified that at least 25% of all branches of new banks must be in towns with populations of 10,000; the finance ministry should not dilute this by raising the population bar to 50,000. If it is serious about inclusive banking, the rules for all banks and not just new ones, should say that a quarter of all branches must be in towns where at least 10,000 people live.
Seven years jail for melting, destroying coins
New Delhi: The Lok Sabha on Friday passed the bill making melting or destruction of currency coins punishable by a maximum jail term of seven years. The Coinage Bill, first introduced in the house in December 2009, was given the nod without a discussion after Finance Minister Pranab Mukherjee moved it. The laws amalgamated under this comprehensive legislation are the Indian Coinage Act of 1906, the Small Coins (Offences) Act of 1971; the Metal Token Act of 1889 and the Bronze Coin (Legal Tender) Act of 1918. The parliamentary standing committee of the finance ministry sought a jail term of 10 years for those destroying coins. But the union cabinet settled for seven years imprisonment. The bill broadened the definition of "coin" to include one rupee currency notes which are virtually out of circulation. As coins made of silver, nickel, copper and bronze are no longer in circulation, the legislation proposed to bring under its cover the use of any other material besides metals or mixed metals, informed sources said. According to the Reserve Bank of India, coins with denomination of 25 paise and below will cease to be legal tender from June 30. Now, coins of 50 paise, Re 1, Rs 2, Rs 5 and Rs 10 are in circulation.
Rangarajan for monetary tightening
New Delhi: The Reserve Bank of India will have to continue with its monetary tightening policy to curb the inflation that continues to remain in the uncomfortable zone, Prime Minister's Economic Advisory Council (PMEAC) chairman C Rangarajan said on Friday while forecasting that headline inflation may come down in coming months falling from a level of 8% in February to 7.5% in March and further down to more confortable level of 6% in the next financial year. “The inflation rate continues to remain high and therefore, monetary policy will have to remain tight in order to ensure that the inflation rate is brought down,” Rangarajan said on the sidelines of the Skoch summit in the Capital. The apex bank has already revised key policy rates eight times this year to squeeze liquidity from the system and put a check on rising inflation on a the short term. The measures have helped in bringing down headline inflation from double digit mark earlier to 8.3% in February. Rangarajan said that while there were positive indications that inflation may fall further in coming months, concerns remained on high crude prices that may get rise furtrher in wake of ther Libyan crisis and act as deterrant for checking inflation. “If the crude oil prices remains at a high level, this could impact government finances and price level,” he said. On growth, Rangarajan said that the Indian economy may grow by 8.6% in the current fiscal and 9% in the next financial year. However, inflation and deficits are constraints to 9% sustainable growth, he added. Rangarajan also exudede confidence that capital inflows of around $60 billion in the year will keep the current account deficit in check during 2010/11 and finance the deficit levels of just over 2.5%.
RBI okay with banks profiting from arbitrage
MUMBAI: The Reserve Bank of India does not find anything wrong with banks borrowing from its liquidity facility and on-lending to the rest that leads to profiting from arbitrage which during times of liquidity crunch raises issues of correct practices. "We have to look at our press release of 2007 which says that if banks borrow from the repo, there is really no view or restraint on on-lending that," RBI deputy governor Subir Gokarn said. There have been talks among bankers whether those banks having excess liquidity are right in borrowing from the central bank at cheap rates and lend in overnight markets, leading to a straight profit of 50-75 basis points, which for a few traditional bankers does not count as banking activity. RBI in 2009 had issued an advisory to banks directing them to limit their exposure to mutual funds, since there was always a concern for circularity of money. "There is a second concern that there could be a regulatory arbitrage in the sense that mutual funds are lending to companies, which banks could not directly lend to," Governor Duvvuri Subarao had said in a media interview back then. That was, however in a different time when the credit growth had plunged to 9%. Banks which had excess government bonds than the prescribed 24%, borrowed funds against it at the repo rate of 6.50% (before the 0.25% increase), on-lending it in call money markets at close to 7%, as the repo rates were almost 0.50% (or 50 basis points) lower than the call rates.
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