RAMPACHODAVARAM: Reserve Bank of India Regional Director A.S. Rao has said that Financial Inclusion is the only method to reach out to interior villages and clear the disparities in the society. He said that with the help of lead banks in the districts, RBI wants to bridge the gap between banker and villager and see that all the banking services will reach to all villages. Participating in assets distribution camp under Financial Inclusion Literacy programme in Devarapalli in the Agency on Saturday along with ITDA project officer Ronald Rose Mr. Rao said that in East Godavari with the support of Andhra Bank they could reach out to interior villages in extending banking services to tribal people. He said that the concept of Financial Inclusion includes opening of bank accounts to all villagers in a selected village and explain about the operations to the youth in that particular village through literacy programme. Mr. Rao said that they would avail the services of unemployed youth . He explained the concept that there are 2,700 villages in the State where there are no banks in which by March 2012 they want to start these correspondence services. Mr. Ronald Rose, Project Officer ITDA said that tribal women should make use of the loans offered by the banks and repay them on time. The villagers asked the Project Officer to open Andhra Bank branch in Maredumilli for which he said that he would forward the representation to the CMD of the bank. The Project Officer asked the RBI officials to arrange loans to tribal people in Agency area. Mr. Rao distributed Bolero vehicle worth Rs.7 lakhs, to a tribal man, Rs.14 lakh bank linkage, and Rs.13 lakh to small scale industries . Andhra Bank DGM Mr. Doraiswami, Lead Bank Manager Mr. Jagannatha Raju, RBI AGM Mr. Kiran Kumar and others participated.
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Monday, March 28, 2011
No differences with RBI on new bank licence norms: Pranab
MUMBAI: Finance Minister Pranab Mukherjee today termed as "conjectures and media speculations" the reported differences between him and the Reserve Bank of India on capping FDI at 49 per cent in new commercial banks, the licences for which are likely to be issued soon. "These are all conjectures. There is no question of happiness or unhappiness. We have just received the draft guidelines from the RBI and it is being examined. These are the two wings of the government; we work together and do not indulge in these kinds of speculations," Mukherjee said as he rubbished his reported differences with the central bank on the draft proposals. The Finance Minister was interacting with the media after addressing a post-budget meet organised by the Assocham. The norms seek a cap on foreign direct investment in new private sector banks at 49 per cent. Earlier in the day, Mukherjee said: "We are studying the Reserve Bank's final draft proposals (on new private bank licences). We would take a call on it soon." He was said on the sidelines of Sir Sorabji Pochkhanawala (founder of Central Bank of India) Memorial Lecture 2011 as part of the bank's centenary year celebrations here. There were reports in a section of the media that the Finance Ministry was opposed to the RBI suggestion to restrict FDI in new banks to 49 per cent as the change in norms would hurt investor sentiment. The Ministry reportedly asked RBI to reconsider the same. The move will help the government and the RBI to discourage flow of hot money, which has crossed over USD 60 billion this fiscal, in the country. The ministry has also reportedly asked the RBI to ensure the guidelines clearly say that the new banks would be exempted from Press Notes 2, 3 and 4. Without such exemptions, these banks would become foreign banks if overseas investment in them crosses 50 per cent, which in turn would lead to imposition of the same restrictions on them that apply on foreign companies. Already the country's largest two private sector banks -- ICICI and HDFC's nationality is under cloud as over 50 per cent of their stake are owned by FIIs. Earlier this month, the RBI had submitted its final draft proposal on new private bank licences to the finance ministry in which it called for a holding company structure for promoters of new banks besides capping the FDI at 49 percent.
Udhna Bank case may be handed over to CID
SURAT: Police commissioner Shivanand Jha has suggested to the director general of police of Gujarat that the investigation into the Udhana Citizens’ Cooperative Bank case may be handed over to the economic cell of the CID. The first criminal complaint in the case was registered against the bank's chairman and general manager 10 days ago. Primary investigation into the case has revealed that ad hoc withdrawal of about Rs 13.60 lakh had been made and the public money was misused. The Reserve Bank of India (RBI) had about four and half months ago imposed restrictions on the functioning of Udhna Citizens Cooperative Bank under Section 35 (A) of the Banking Regulation Act. An administrator for the bank, which has about 51,339 account holders and depositors, was also appointed later. The bank has on paper assets and deposits worth Rs 93 crore and made advances to the tune of Rs 68 crore. A large portion of the industrial lending, housing loan and mortgage loans recoveries have not been realized putting the bank to the risk of liquidation.
India May Get its 1st Foreign Islamic Bank in Bank Asya
India may soon get its first foreign Islamic bank with the Reserve Bank of India (RBI) seeking government approval to allow Turkey’s Bank Asya to offer Shariah-compliant lending in the country. Shariah, or the Islamic law, bans interest on financing. Bank Asya is keen to start its Indian operations through a representative office in Mumbai. “So far the bank has only sought permission to open a representative office,” a finance ministry official said. “We are considering their application.” RBI has requested the government to consider the Turkish bank’s application within 45 days. Launched in 1996, Bank Asya aims to develop interest-free banking products, according to its charter. It has 179 branches in Turkey. The current statutory and regulatory framework in India does not allow banks to undertake Islamic banking activities. But the Committee on Financial Sector Reforms, constituted by the Planning Commission, had in a report in 2008 recommended delivery of interest-free finance on a larger scale, including through the banking system. Last year during a visit to Indonesia, the country with the world’s largest Muslim population, Prime Minister Manmohan Singh had said that he would ask RBI to look into the demand for establishing Islamic banking in India. Bank Asya had in 2009 received clearance from Turkey’s banking regulator to open a representative office in India. Its proposal has been pending with RBI for over a year. “After the global economic crisis, RBI has been stringent with allowing foreign banks in the country,” the finance ministry official said. “As a part of its liberalised policy for foreign banks, it has now granted permission to Bank Asya.” Global financial centers, such as Singapore, Hong Kong, Geneva, Zurich and London, have made changes in their regulations to accommodate Islamic finance industry that is now worth about $1 trillion. The case for Islamic banking got a boost in India last month when the Kerala high court dismissed writ petitions challenging the government sanction for starting a nonbanking finance company by the Kerala State Industrial Development Corporation, based on the Shariah. The petitioners had argued that the government sanction amounted to favouring Islam, and that setting up such a company with co-ownership of the state was antithetical to equal treatment for all religions. But the court said the petitioners could not demonstrate how the sanction had the effect of directly promoting a particular religion. India had committed to the World Trade Organization in 1997 to issue 12 new branch licenses to foreign banks every year, a number it has exceeded almost every year since. The finance ministry has said that there are 18 foreign banks, which are looking to set up their branches or representative offices in the country and their applications are at various stages of progress. At present, there are 32 foreign banks in the country.
Govt, RBI working to lower banking costs, expand reach: Pranab
Expressing concern over high costs and limited reach of banking services, Finance Minister Pranab Mukherjee today said that the government was working in collaboration with RBI to address these concerns. “The cost of banking intermediaries in India is high and bank penetration is limited to only a few customer segments and geographies,” Mr. Mukherjee said here today. “We are trying to address this in collaboration with the Reserve Bank of India, and with the active participation of the banking and non—banking financial entities,” he added. Mr. Mukherjee also said that there was a need to “reflect upon possible flaws in our system and address them to withstand adversities. We need to make our financial sector more competitive by enhancing efficiency and transparency.” “While greater competition is welcome, we have to guard against the competitive race to the bottom,” he said, while expressing hope that this perspective would guide the growth of Indian banking system in the coming years. Mr. Mukherjee was speaking at Sir Sorabji Pochkhanawala Memorial Lecture 2011 as part of the centenary celebrations of Central Bank of India. The PSU bank was set up by Sir Sorabji Pochkhanawala. The Finance Minister said that PSU banks were playing a very important role in India’s economic growth and they constitute over 72 per cent of the banking sector assets in the country. “While they are expected to improve their outreach and scalability for sustaining high growth of the economy, they are second to none in retail banking practices and profitability. “There are, however, several concerns that need to be fully addressed,” Mr. Mukherjee said, in reference to the issues like high costs and need to expand the banks’ reach to more customer segments and geographies. The minister said that most of the financial sector policies in the past few decades were aimed at accelerating the penetration of the banking and financial services. “However, as I said, the outcomes of these efforts are yet to show the desired results. Newer perspectives and approaches towards financial inclusion are the need of the hour. “There is a case for the policy makers and other stake holders to re—strategize the financial policies that are meant to reach the un—reached and the unbanked sections of our country,” he added. To address the issue of capital constraints faced by the PSU banks, Mr. Mukherjee said the government had provided over Rs 20,000 crore towards recapitalisation of public sector banks during 2010—11. “An additional amount of Rs 6,000 crore is also being provided for 2011—12. This will enable the PSBs to meet the credit requirements of the growing economy,” he added.
Symantec favours more security for online transactions
With consumers using variety of mobile devices like smartphones, tablets and netbooks, banks need to ensure security features like two-level authentication to safeguard online transactions, says security software firm Symantec."Today's threat landscape requires a multi-layered approach where user identities are authenticated on at least two levels. "Two-factor authentication is a type of authentication that is based on something a user knows (factor one) plus something the user has (factor two)," Symantec Director (Development) Suhas Prakashkumar told PTI. In order to access a network, the user must have both factors to retrieve money from a bank account, making the transaction safer, he added. Recently, the Reserve Bank of India (RBI) said banks need to put in place an additional layer of security for credit and debit card transactions over IVR (phone) in India. This is further to its instructions in April 2009 to provide additional authentication beyond data available physically on the card for all internet banking transactions. Two-factor authentication often includes a one-time password (OTP), which is sent to the user to his/her registered mobile phone number. This OTP is refreshed after every 30 seconds to ensure further security. Therefore, even if a hacker has someone's card details, he/she doesn't have access to the handset/ device where OTP is sent, and the transaction will not be completed. "The RBI has taken cognizance of the continued growth in sophistication of the threat landscape, where attackers are looking to steal confidential information for financial gains," Prakashkumar said. According to a Symantec report (July-September 2010), 23 per cent of global goods and services advertised on the online underground economy -- worth over $5.3 billion -- involved stolen credit card details. "As more Indians transact online, it is imperative for businesses -- both banking institutions as well as online retailers using digital medium -- to ensure a level of trust and confidence that customer/user accounts are secure and their data is not exploited," Prakashkumar said. It is particularly important not only to ensure security, but also demonstrate security since customers first need to trust the site before parting with their information and money, he added. "This can be done through keeping the consumer informed of the various security measures taking by the bank, providing tips on securing transactions etc," he said. With banks enabling users to conduct transactions through mobile devices, security of financial information becomes crucial, especially when there are over 700 million mobile subscribers (according to TRAI), Prakashkumar added.
GOVT YET TO DECIDE ON NEW SBI CHIEF
The government is yet to take a final decision on who will be the next chairman of State Bank of India (SBI), the country’s biggest lender. Present chairman O P Bhatt’s term ends on Thursday. When Business Standard asked Bhatt if his successor had been decided by the government, he replied: “Not to my knowledge.” Earlier media reports claimed four deputy managing directors – Pratip Chaudhuri, Hemant Contractor, Diwakar Gupta and A Krishna Kumar – were in the race for the top post. Finance minister Pranab Mukherjee, present here today at an event organised by the Central Bank of India, refused to comment. “As and when it takes place, you will come to know. We don’t make premature announcements,” he told reporters. Special rate home loan. Separately, Bhatt said SBI would decide on extending its special rate housing loan schemes on Thursday. The schemes are set to expire at the end of this month. “We will see on March 31 (if there’s an extension), as we always do. Of course, there is a scope that the deadline can be extended,” Bhatt said, without detailing. Under the scheme, SBI’s interest rate on home loans up to `30 lakh is 150 basis points over its Base Rate and for housing loans between `30-75 lakh, it is 175 basis points over the minimum loan rate. SBI’s minimum loan rate or Base Rate is now at 8.25 per cent. The bank has been extending its low interest housing loan schemes despite Reserve Bank of India’s concerns over these. The regulator fears that low-rate loan products are likely to deteriorate a bank’s asset quality in the long run. Bhatt, however, said SBI had not witnessed significant slippages in its special rate home loan portfolio.
Prolonged inflation is dehumanizing - S.S.Tarapore
There is a strongly articulated viewpoint that inflation is a necessary concomitant of growth. The Indian economy has now been in the throes of inflation for the second year. In the ultimate crunch, proponents of growth have prevailed over the Common Persons fear of inflation. There have been many instances, in the past, when inflation has spun out of control but on each occasion decisive action has been taken to curb inflation, irrespective of the fall out of these anti- inflationary policies. In the recent period, however, there are strong underlying political economy pressures to ensure that nothing be done which would slowdown growth. The longer we defer slaying the dragon of inflation, the worse would be the eventual price which has to be paid for reining in inflation. Among the emerging market economies, ( EMEs), India was known for one of the lowest inflation rates. It is disconcerting that now India has one of the highest inflation rates among the EMEs. In contrast, those countries with historically high inflation rates have brought down their inflation rates. In India there is, at present, a powerful lobby that sees great merit in not countenancing any deceleration in growth, notwithstanding the devastation caused by inflation. Anyone advocating a conscious slowdown in growth is treated as a renegade who should be ostracized. We seem to be moving towards a society which upholds the Thrsymachus Principle that " justice is the interest of the stronger"( a viewpoint which is rejected in Plato's Republic) There is a strongly articulated viewpoint that inflation is a necessary concomitant of growth. Policymakers with impeccable credentials cogently argue that the objective is growth with price stability but many of these policymakers are not willing to recognize that some growth has to be sacrificed in the control of inflation. When a couple of years ago, the then US President George Bush attributed the world commodity inflation to the poor eating too much, there was an uproar. It is amazing how attitudes have changed. International Monetary Fund ( IMF) officials have argued that consumers should get used to paying more for food as demand is rising faster than output and that it will take years before production can be expanded to keep up with increased demand. Nearer home, in India, it is being argued, in official documents, that the policy of " financial inclusion" is the cause of inflation. For instance, it is argued that because of the Mahatma Gandhi National Rural Employment Guarantee Act ( MGNREGA) consumption has gone up thereby causing inflation. Inflation is attributable to the Common Person putting his money into circulation! There is also a viewpoint that inflation in primary articles, particularly food, is because the standard of living of the poorest segments going up. There is the ingenious argument that inflation is healthy as it reflects the improvement in the standard of living of the masses. It is now becoming the conventional wisdom that inflation is caused by the poor eating better. In this context it is argued that only vibrant growth can ensure that inflation would abate and any slowing down of growth would worsen the inflationary situation. This is like advocating sinning for a good cause! While Indian macroeconomic policy is not formally committed to " inflation targeting", traditionally, monetary- fiscal policy has all along emphasized the importance of a low " acceptable" rate of inflation. In policy pronouncements the " acceptable" rate of inflation for March 2011 has moved up from 5.5 per cent in April 2010 ( when the inflation rate was 11 per cent) to 8 per cent as we approach the end of March 2011. One recognizes the difficulties in conducting macroeconomic policies as extraneous developments in the global economy ( particularly crude oil) are contributing to the inflationary pressures. While there are no soft policy options, what the present policies portend is an acceleration and not a deceleration of inflation. It is unfortunate that the weakest segments, particularly in the interiors of the country, are unable to strongly articulate the imperative need to undertake a significant and enduring reduction in inflation. What is also of concern is that the urban and semi- urban poor are being hit by the all pervasive effects of inflation. Inflation is even hurting the articulate middle class and there are dangers of a serious social backlash. Now, what should be the response of the small saver in a scenario where inflation shows no sign of abating? There are two policy signals which need to be taken note of. First, policymakers have expressed the hope that lending rates will drop as inflation eases. Secondly, banks are temporarily offering relatively high rates of interest on fixed deposits, which for senior citizens is currently as high as 10 per cent for periods of 555 days. Small depositors would do well to quickly lock themselves into these relatively high deposit rates as these deposit rates are unlikely to continue beyond the end of March 2011. There would be strong pressures to reduce lending rates well before a significant reduction in inflation rates which will imply that deposit rates would fall in the very near future. In the present milieu, the small depositors would do well to immediately storm the deposit desks of banks. As the sage economist the late Professor P. R. Brahmananda has poignantly said: " Not caring about inflation is like going into battle not caring about the wounded, the dying and the dead." Such an approach is dehumanising.
Banana plants hold key to hidden treasure, literally
If everything goes well, it could be a jackpot for the research scientists at Navsari Agricultural University (NAU), who are engaged into making high-quality paper from banana plant that can meet the specific standards used to make currency notes in India. The research scientists have already prepared specimen and sent it to the Research and Development wing of the Reserve Bank of India in Mumbai, which has been in touch with the university authorities for the last few days to make the research viable on a large scale. At present, RBI uses imported pulp to make currency notes. Banana plantation is high in Gujarat and farmers reap handsome profits. Research scientists from the NAU have been working for years to find ways to make use of wastes of banana plants. The pseudostem of banana plant is stocked as waste by farmers, who find it difficult to dispose it. The NAU team carrying out research on pseudostems have found these useful in making edible candy, high-quality paper, yarn, organic manure and its medicinal properties. Besides scientists from the NAU, the 12-member team of researchers also included scientists from J K Paper mill at Songadh in Surat, Indian Council of Agricultural Research in Mumbai and Mantra, a Surat-based private organisation engaged in research into man-made textiles and textile education. R G Patil, who is heading the team, said: “We are working hard to make high-quality paper used to make currency notes, cheque books and other important government stationery. We have taken this project on a pilot basis and have sent our findings to RBI a few days ago. We hope an RBI team will visit NAU soon. If our project is approved, we expect that the cost of making currency notes will be cut.” Patil said the high-grade paper that they have made from pseudostems of banana plants could be stored for hundreds of years. From one pseudostem of banana plant, 1.5 per cent of its fibre content can be extracted in a mechanised way while remaining waste can be used in liquid fertilisers and organic manure, he added. “Even farmers will get good returns by selling wastes of banana plant,” Patil said.
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