The National Payments Corporation of India (NPCI) has finalized the commercial launch of the proposed India card which would be a domestic alternative to the global payment processing firms. MasterCard, the second largest global payment solutions company, provides a variety of services to support the credit, debit and related card payments of over 24,000 financial institutions. Given the size of India, this could have an impact on MasterCard's international transactions growth. Its main competitors are Visa, American Express and Discover Financial. Transaction processing, the major revenue source for MasterCard, constitutes about 32% of the $293 Trefis price estimate for MasterCard's stock. The Reserve Bank of India (RBI) in 2009, had asked the Indian Bank Association to launch a non-profit payment solutions company to meet the requirements of domestic banks. After almost two years of planning, NPCI has finalized the name of the proposed card as Rupay, which will launch later this year. The Rupay will resemble China's Union Pay, the domestic real-time payment processing firm for Chinese banks. RBI, in its vision paper on payment systems in India, said that the need for such a system arises from two major considerations: (1) the absence of a domestic price setter has caused the Indian banks to bear the high cost for affiliation with international card associations; and (2) the connection with international card associations resulting in the need for routing even domestic transactions, which account for more than 90% of the total, through a switch located outside the country.
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Thursday, April 7, 2011
Apex court notice to Centre, RBI in money laundering case against Lilawati Hospital
The Supreme Court today issued notices to the Centre and the RBI on a petition seeking probe into the alleged money laundering by the trustees of Mumbai’s Lilawati Hospital. A Bench comprising Justices Mr B. Sudershan Reddy and Mr S.S. Nijjar also sought response from the the Ministry of Corporate Affairs, Enforcement Directorate, Central Board of Direct Taxes and SEBI on a plea seeking investigation by appropriate agencies into the alleged tax evasion and money laundering by the trustees of the Lilawati Hospital. The petition filed by Delhi resident Harsh Raghuvanshi has sought investigation into the alleged siphoning of funds by the trustees – Mr Prabodh Mehta, Ms Rashmi Mehta, Mr Chetan Mehta and Mr Bhavin Mehta. Senior advocate, Mr Ram Jethmalani, appearing for Raghuvanshi submitted that the notice should be issued and all the respondents should be called upon to disclose facts which have come to their knowledge and steps taken by them against the trustees. The Bench tagged the petition with that of a petition filed by Mr Ram Jethmalani and others in which direction has been sought for bringing back the black money stashed by Indians in banks abroad. In the present petition also it has been alleged that the Mehtas have siphoned out money from the hospital and through the hawala route it has been deposited in banks abroad including Mauritius. It has been alleged that the money has been deposited in Liechtenstein Bank.
HC asks RBI report on banks’ malpractice
BANGALORE: Karnataka High Court on Tuesday directed the Reserve Bank of India (RBI) to submit the report on some of the banks deducting Rs 750 from customers' accounts for not maintaining quarterly balance.A petition had been filed in the court that some banks were wrongfully deducting Rs 750 from the accounts of customers who failed to maintain quarterly balance. The petition stated the bank was exempting those who draw more than Rs 1 lakh at a time if their quarterly balance was not maintained. The petition said only the poor found it difficult to maintain the minimum balance. The petition also said that some banks were charging penalty to customers even though they were repaying their loans in time. According to the RBI's report dated November 15, 2010, two banks have collected more than Rs 100 crore as penalty. On Tuesday, Karnataka High Court's division bench headed by Chief Justice J S Khehar directed the RBI to submit its report on the issue before the next hearing, which is on July 5. This came after the RBI requested the court for more time to submit the report. Earlier the RBI had submitted before the court that it had set up a special committee to study the issue and would submit the report in the court.
Govt clears name of Chaudhuri for the post of SBI chief
NEW DELHI: The government is believed to have cleared the name of Pratip Chaudhuri for appointment as SBI Chairman. Managing Director R Sridharan is officiating as the bank chairman now after O P Bhatt retired last month. Sridharan is due to retire in June, 2011. Chaudhuri joined State Bank of India (SBI) as a probationary officer in 1974. He became the deputy managing director (international banking) in April 2009. According to sources, the government has also cleared the names Hemant G Contractor, Diwakar Gupta and A Krishna Kumar for promotion as managing directors (MDs) in the bank. The three are now deputy managing directors. The search panel, headed by Reserve Bank of India Governor D Subbarao, had interviewed 4-5 candidates in December 2010. The SBI board comprises an executive chairman and two managing directors. After amendments to the SBI Act, the Government of India, which holds about 59 per cent stake in the bank, can appoint two more MDs. There is only one MD now in the bank against the provision of four. SBI commands about 25 per cent market share.
De-regulate interest rates on savings bank deposits
In a move reminiscent of the Bombay Club of industrialists who opposed the opening up of the economy in the early 1990s, bankers have almost unanimously opposed de-regulation of interest rates on savings bank deposits. They are, doubtless, wary of introducing yet an added element of uncertainty. However, administered interest rates are an anachronism when interest rates are essentially market-determined . There can be no justification for continuing with regulated interest rates whether on saving bank deposits or small savings like provident funds and national savings certificates. Despite this, successive governments and governors of the Reserve Bank of India have hesitated to pull the plug. More than eight years ago, the RBI had raised the issue in its April 2002 monetary policy statement. Only to defer the move! In its April 2006 policy, the central bank returned to the subject but once again opted to maintain the status quo; though it accepted that 'in principle, deregulation of interest rates is essential for product innovation and price discovery in the long run' .The need to reward savers (high household savings have been the prime driver of investment) and provide them with some stability in an environment where they have no social security is only part of the reason for the desire to maintain status quo. The main reason is the higher cost of funds that de-regulation is bound to bring in its wake. Savings bank deposits provide banks with a stable deposit base. Hence the mad scramble among banks for CASA or current and savings accounts. Once rates are de-regulated , it is quite possible competition will drive interest rates up; especially in a situation where there is a huge unsatiated demand for funds. Public sector banks , that have traditionally had a larger share of savings bank accounts thanks to their wider branch network, would be particularly hard hit. But to the extent deregulation will give individual banks flexibility to decide on savings bank interest rates even as greater competition could result in newer customised products being introduced , it is a goal we must work towards.
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