Bank of Maharashtra – Awarding ceremony of Rolling Trophy

The awarding ceremony of Rolling Trophy to the best performing branch in extending banking services to SC/ST community during the F.Y. 2010-11 on the eve of the birth anniversary of Bharat Ratna Dr.B.R.Ambedkar is going to be held at 11.30 a.m. on 14^th April 2011, at Joag Hall, Lokmangal, Shivajinagar, Pune. The trophy will be awarded at the hands of Shri.Karuppasamy, Executive Director, Reserve Bank of India.

India Post to offer prepaid debit card

These cards can be loaded with amount ranging from Rs 1,000 to Rs 50,000. The department of post (DoP) will soon launch a pre-paid smart card that can be used like a debit card to pay bill at stores, make transactions on internet as well as on mobile. These cards will be issued at post offices and can be loaded with amount ranging from Rs 1,000 to Rs 50,000. DoP has partnered with HSBC, ICICI Bank and IDBI for this project.  The card can be operated at merchant establishments or ATMs where Master Cards are acceptable and in the respective post offices. DoP is awaiting approval from the Reserve Bank of India and hopes to launch it by May 15.

Vasco Optimistic About RBI OTP Guidelines

Two-factor authentication provider Vasco Data Security has said that the recent guidelines by the Reserve Bank of India (RBI) that mandates all merchants in India to collect an OTP (One Time Password) in addition to information written on the credit cards for all transactions done over phone (IVR) is a welcome policy move and would boost the security of online and offline banking transactions.  As per the new policy, Indian banks are required to provide OTP directly to their customers for a secure transaction over IVR. This can be done either through the card user's registered mobile number or email ID or both.   “This will require Indian banks to invest in a technology platform that integrates various communication channels like phone, email, SMS, Web and fax with the CRM and database applications. Now, with passwords being generated and sent for individual customers on request, a detailed and granular customer profile can be maintained and fetched whenever required. With a mandate of OTP added to other financial transactions-related regulations, merchants of e-commerce enabled businesses, banks and other financial institutions are facing a challenge of ensuring compliance. Both generation and distribution of the OTP requires a tight interoperability among the various underlying business applications,” said Jan Valcke, Vasco’s President and COO.   “With a user base of over two million consumers in financial services in India; Vasco is the largest authentication partner to Indian Banks. DIGIPASS for Mobile is our authentication solution which uses the capabilities of Internet enabled mobile phones for authentication purposes. Most phones also employ phone applications for using IVR which enables customers to access their bank using a touchtone telephone or voice recognition,” he added.   According to Vasco, India has 27 public sector banks, seven new private sector banks, 15 old private sector banks, 31 foreign banks, 86 regional rural banks, four local area banks, 1,721 urban cooperative banks, 31 state cooperative banks and 371 district central cooperative banks.  “Mobile phone users are becoming less hesitant towards the adoption of mobile applications as the security of these devices is enhanced. While RBI has taken a step in the right direction by mandating additional password, it is the authentication strategy adopted by banks which is of great importance. It should be based on enhancing security and providing convenience to the banking consumer,” he averred.

RBI penalizes two Co-operative Banks for Money Laundering Violations

Mumbai (ABC Live): The Reserve Bank of India has imposed a monetary penalty of one lakh Rupees on The Rander People's Co-operative Bank Limited, Rander and Shree Mahalaxmi Mercantile Co-operative Bank Limited, Dabhoi of Gujarat for certain violation of Reserve Bank of India instructions by non-adherence to Anti Money Laundering (AML) guidelines in regard to submission of reports of cash transactions above ` 10.00 lakh to Financial Intelligence Unit-India (FIU-IND), New Delhi.  Information to this effect was made by Ajit Prasad, Assistant General Manager through press releases 2010-2011/1473 and 2010-2011/1472. The Reserve Bank of India had issued a show cause notice to the bank, in response to which the bank submitted a written reply. After considering the facts of the case and the bank's reply and also personal submissions in the matter, the Reserve Bank came to the conclusion that the violations were substantiated and warranted imposition of the penalty.

Banks get more time on new NPA norm

After requests by public sector banks, the government has given a six-month extension for classifying non-performing assets (NPAs) using technology. Last year, the finance ministry had asked banks to have a system in place through which NPAs would be identified using technology, without human interference, by March 31. Now, the deadline has been extended by six months to September 30.  According to bankers, the ministry has allowed the banks to complete the task in a phased manner. In the revised scheme, for accounts of over Rs 1 crore, the new method was to be put in place by March 31. For accounts of Rs 50 lakh and Rs 1 crore, the deadline is June 30, and for others, the new deadline is the end of the first half of the current financial year.  Although most banks have adopted the core banking solution (CBS), a few are facing certain problems with the software. As a result, some banks are yet to bring all their operations under CBS.  Punjab & Sind Bank, which recently started the CBS rollout, has been kept out of the purview of the ministry circular. The New Delhi-based bank’s CBS implementation was delayed because of the Satyam fiasco. It initially appointed Satyam to implement CBS, but after the technology provider was charged with financial irregularities, the process had to be started afresh. The ministry will review the progress made by the banks in the area of classifying NPAs using technology, in a meeting scheduled for the end of the month. Financial services’ secretary S K Sharma will meet the chiefs of government-owned banks in New Delhi for the review. In the meeting, banks’ financial performance for the year will also be reviewed. In addition, banks will present targets on various parameters such as credit growth, low cost deposit, net interest margin, etc. The government had introduced targets for financial inclusion from 2010-11 and banks were asked for their financial inclusion plans. The ministry is also expected to have views from banks on the macroeconomic environment and on interest rates. “With the annual policy of the Reserve Bank of India scheduled a few days after the meeting, it is quite likely the ministry will like the banks’ views on interest rates. Lending rates have already hardened significantly over the last six months, and a further increase will put pressure on credit growth and asset quality,” said a senior executive of a government-owned bank.

Banks quarrel over MFI debt recast

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Indian Bank 's e-banking lounge

Indian Bank has set up its first e-banking lounge, launched here by C Rangarajan, chairman, Prime Minister’s Economic Advisory Council. The lounge, which includes an ATM, and offers all kinds of services like cash deposit, cash withdrawal, cheque deposit with acknowle-dgement, internet banking and touch screen banking. Bank’s CMD TM Bhasin said they aims to set up 10 such lounges all over the country in another year. It has also launched Inter Bank Mobile Payment services and an exclusive debit card for senior citizens.

Playing favourites

The government has tweaked the eligibility rules for those aspiring to the posts of chairman-cum-managing director (CMD) and executive director (ED) of nationalised banks. There’s nothing wrong with that since these rules are arbitrary beyond a point. But look at the nature of changes made. You need to have at least 18 months of residual service – and not two years, which was the rule last year – to be considered for the post of CMD. But in the case of EDs, there has been no such change. Why is it that what is good for CMDs is not good for EDs? The absence of a rational explanation will give the impression that such tinkering is aimed at accommodating one or more candidates with high-powered connections. The last thing a government that is under a cloud over pervasive corruption should do is give cause for speculative allegations to be made, particularly when public-sector banking circles have long lived with the notion that large corporate borrowers with political clout make good godfathers for top management aspirants. In fact, there is every reason to raise, not lower, the period of residual service left for an aspirant to be in the running. No leader can make a mark in less than three to five years in an organisation and the best-run private- sector organisations typically have CEOs who serve for five years or more. Having a three-year cut-off will be unkind to many managers who have served the sector well in careers spanning decades but frequent changes at the top of an organisation can only do it serious harm. And if there is anything worse than tinkering with the cut-off, it is the failure to fill a top post in time and allowing it to remain vacant – as is the case with one bank at present. This can cause serious damage to the direction and morale of the organisation. What the government urgently needs to do if it wants to win back a certain degree of public faith in its ability to govern is publish a discussion paper on the policy for selecting top public-sector positions. The paper must pay attention to smooth succession, reasonable tenure and the nurturing of organisational ethos. Exceptions will need to be made – say, when a particularly capable manager has less than three years to go – but they should not become the rule, and a public explanation should be given every time an exception is made. An appropriate management policy for public-sector institutions has to balance between two seemingly opposing considerations. Organisations should develop their individual ethos, a strong management cadre and the certainty among all bright people that they have an equal right to go up to the top if merit and health or age permit. Simultaneously, there should be a small quota, say 20 per cent, for lateral entries — the controlled induction of talent will prevent the development of a closed shop and, thus, discourage complacency and cronyism. Perhaps the worst of all possible worlds is what currently prevails among nationalised banks — a game of musical chairs is conducted by the government, in which EDs and CMDs are periodically switched around so that it is impossible to figure out if a bank is doing well or not because of those who lead it.

An inflationary fire in the mind

The question posed by RBI deputy governor Subir Gokarn earlier this month no longer seems rhetorical: is a high rate of inflation the new normal?  High inflation expectations are getting embedded into the Indian economy—a danger that is not been given its due in discussions about economic policy.  The Reserve Bank of India (RBI) on Monday released its latest inflation expectations survey of households. The average Indian now expects prices a year down the line to be 13.1% higher than their current level. Inflation expectations have been climbing for quite some time now.  Why is this a problem? Families fearing the ravages of inflation on their purchasing power will push for higher wages and could set off a price spiral. Companies could find it difficult to assess the profitability of new projects when prices are bouncing around.  The new inflation expectations number comes a day after the International Monetary Fund asked whether India is in danger of overheating, even as it cut the country’s growth forecasts for 2011 and 2012. The question posed by RBI deputy governor Subir Gokarn earlier this month no longer seems rhetorical: is a high rate of inflation the new normal? Ordinarily, this might be interpreted as posing a dilemma for a central bank. Any further hikes in policy rates may “kill” growth while not raising them may lead to higher inflation in the months ahead as inflationary expectations appeared to have been unhinged. The assumption behind this dilemma is the usual trade-off between unemployment and inflation in the short-run. In reality, such a trade-off is illusory at the moment: the possibility that at higher rates of inflation, investment growth may be hit is very real.  Even a cursory look at components of gross domestic product figures from 2003-04 to 2010-11 shows this clearly. Barring 2008-09, when the global financial and economic crisis hit India and 2010-11, investment demand has often outstripped consumption as a source of growth. If care is not taken to ensure the right conditions for fuelling this source of growth—and they are not right at the moment—it will surely hit the overall rate of growth. RBI must avoid this.  The growth-inflation trade-off has been overstated for too long. If anything, evidence from China and India (the latter especially after 2002-03) shows that low inflation and high growth are not mutually exclusive. To say that Indians must learn to live with high inflation if they want to enjoy the fruits of growth is a cruel argument.

Government to issue biometric PAN cards

The government has decided to issue biometric PAN cards to taxpayers across the country to weed out the duplicate and fake ones. The decision was recently taken by the finance ministry and it comes in the wake of a Comptroller and Auditor General report that asked the Income Tax department to ensure a single tax payer was not issued multiple cards.  The proposed new biometric Permanent Account Number (PAN) cards would bear the I-T assessee’ fingerprints (two from each hand) and the face. There could be an option to existing PAN card holders to opt for the biometric cards, but it may not be mandatory, a senior official in the I-T department said.  The Finance Ministry and the I-T department had put on hold the biometric PAN card project last year to avoid duplication with the UID numbers, to be issued by Nandan Nilekani’s Unique Identity Authority of India.  “The bioemetric PAN card project is on again. The step will be very important when it comes to stopping the misuse of this vital identity document,” top finance ministry sources said. The biometric PAN card was proposed in 2006 by the then Finance Minister P Chidambaram to counter the problem of duplicate PAN cards uncovered during I-T searches and raids by police and other enforcement agencies. The CAG report on direct taxes for 2010-11, tabled in Parliament recently, has revealed that 95.8 million PANs were issued till March 2010 but I-T returns filed in the last financial year were only 34.09 million. The gap between PAN holders and the number of returns filed was 61.7 million, the CAG has said.

RBI set to hike key rates by 25 bps

MUMBAI: The Reserve Bank of India is expected to raise interest rates while announcing its monetary policy for 2011 in early May although the index of industrial production (IIP) points to a slowdown in investments.   Economists across the board are betting on at least a 25 basis points increase in key interest rates by RBI. "The IIP reading was weaker than expected, but the consumer goods component and readings from other indicators suggest that the economic growth is holding up well. This means that inflation is still the dominant concern, not growth. This calls for continued tightening by RBI," said Leif Lybecker Eskesen, chief economist for India & Asean, HSBC Global Markets, in a report. "This means that the RBI will have to continue to tighten monetary policy, at least by 75 bps in 2011 and with 25 bps expected at the next policy meeting," he said.  Following 4% growth in January (revised up from 3.7% earlier), IIP slowed to 3.6% year-on-year in February, lower than market expectations of a growth of around 5%. According to Rohini Malkani, chief economist with Citi, there is likely to be an uptrend in consumption due to wage increases and households raising money against gold holdings, which is no longer a 'dead asset'. "With inflation likely to stay sticky at Ëœ7.5% through FY12, we expect the RBI to raise rates by 75 bps through early 2012," she said in a report.   Also, consumption demand is expected to remain strong because of an improvement on the agriculture front. Advance estimates released by the ministry of agriculture peg foodgrain production in the previous fiscal at 236 million tones—an increase of over 8% over the previous year following normal monsoons. According to a Deutsche Bank report, rural income in India is likely to witness a meaningful jump in FY11 driven by the sharper-than-anticipated growth in agricultural production, coupled with a continuing—albeit modest—increase in minimum support prices.  "RBI has accorded less significance to IIP data in framing policy decisions. However, incrementally the information content in IIP data has only improved especially in terms of sequential trend. Nevertheless, we expect RBI to maintain a hawkish stance on inflation in response to accentuating inflationary pressure in core," said A Prasanna and Anurag Jha, ICICI Securities Primary Dealership, in a report on Monday.   According to Arun Singh, senior economist at Dun & Bradstreet, moderation in the investment activity on one hand and the building up of inflationary pressures, especially on manufactured products, on the other would add to the monetary policy dilemma for the RBI. "RBI is expected to increase repo and reverse repo rates by another 25 bps during the forthcoming policy review," he said.

NBFC licence seekers will have to wait longer

MUMBAI: Toyota Kirloskar , and Daimler, the maker of Mercedes cars, will have to wait a few more months to begin their business of lending for car and equipment purchases as the Reserve Bank of India put on hold new licences awaiting new guidelines, said two people familiar with the decision.  The central bank, which is in the midst of tightening rules for lenders who don't fall under the 'banks' category, has told some of the applicants for the finance company licence that it may not issue one till the new rules come into force, said those people who did not want to be identified. It might take RBI two to three months to come out with its new guidelines.  Jain Irrigation and German electrical equipment-maker Siemens are the other companies planning to set up a finance company that would fund purchases of their own product, helping their businesses grow. Europe's biggest automobile company, Volkswagen , recently got the licence for such a company. It will invest 120 crore to expand the business.  Manufacturing companies such as General Electric and others across the globe do fund equipment purchase that has helped them grow. Even state-run Bharat Heavy Electricals plans to set up a non-banking finance company. However, reckless funding could result in the collapse of even the parent company. GE, the top manufacturing company in the world, had to seek the help of US authorities during the 2008 crisis as there were few takers for its commercial paper.  Because of these companies' role in the financial markets, the RBI set up a committee under deputy chairman Usha Thorat to finalise a new set of guidelines after raising their capital requirements recently. RBI believes that there is a need to strengthen the supervision of the 12,500 NBFCs in the country due to the high exposure of banks to NBFCs at over 15 lakh crore.  "The recent global financial crisis has highlighted the regulatory imperatives concerning the non-banking financial sector and the risks arising from regulatory gaps, arbitrage and systemic inter-connectedness," said the RBI statement. "A need was, therefore, felt to reflect on the broad principles that underpin the regulatory architecture for NBFCs keeping in view the economic role and heterogeneity of this sector and the recent international experience."  The RBI has taken some measures in that direction. In the last four months, it has reduced the arbitrage opportunities of NBFCs. It has also increased the capital adequacy ratio of NBFCs to 15 % and removed the priority sector status of gold-loan companies.   But NBFCs are also seeing a growth in retail lending. NBFCs presently have a 26% market share, which is expected to go up to 47% in the next three years, says a report by rating agency CRISIL. The profitability of NBFCs has also peaked to the 2007 levels. Hence, in the next three years, NBFCs' non-mortgage lending is expected to match the levels of a commercial bank, provided there are no regulatory challenges.

With Mukesh Ambani on board, Bank of America wants RBI nod for loans to Reliance Industries

MUMBAI: Bank of America is trying to figure out the regulatory barriers in doing business with India's largest private company Reliance Industries (RIL) whose chairman Mukesh Ambani has joined the board of the parent, Bank of America Corporation. According to Indian regulations, a bank in India is not permitted to lend to any of its directors and companies where directors have board presence.  BankAm India officials have discussed the matter once with the Reserve Bank of India and are likely to seek further clarifications soon. A bank spokesperson declined to comment on the matter.

J&K Bank-RBI pact a sellout, says Drabu

Sacked chairman of Jammu and Kashmir Bank Haseeb Drabu has termed the State Government's decision to shift banking operations with the Reserve Bank of India (RBI) as an act of demolishing the only vital pillar from under the edifice of autonomy of Jammu and Kashmir. The agreement signed last fall, came into effect from April 1, 2011.  He has predicted that the Jammu and Kashmir Bank would be nationalised in near future and the State would be at the mercy of North Blockbased bureaucrats.  Drabu was asked to resign on August 26, 2010 by Omar Abdullah-led coalition Government after heading the State's lone listed company for five years. After his resignation, the State Government entered into agreement with the RBI. Describing the agreement as “Machiavellian politics and Shylockian economics“, Drabu has first time gone public on the impact and outcome of the agreement that the State Government has described as “win-win situation“ for the State Government, the J&K Bank and the people of the State. The Finance Ministry and the J&K Bank have not reacted to Drabu's observations.  In an article in prominent monthly magazine The Honour, Drabu has said that the J&K Bank has ceased to be State's banker. “It (J&K Bank) will cease to be lender of last resort to the Government, which it has been since its inception,“ he says.  He says that the RBI's previous role in J&K was related to the Government's securities market involving floatation of Government loans and preparation of calendar for issuance of dated securities. The new agreement has, however, brought the RBI on centre-stage of fiscal management of the State and prmoted its status from “regulatory oversight“ to “operational control“.  “For the purpose of the Government finances, J&K Bank is nothing more than branch of the RBI,“ he said. He says that the new agreement is benef icial to Government of India but neither to the State nor to the J&K Bank.  He says that the State has lost its financial independence.  “A financial crisis can be created by even an un-biased but stickler of a bureaucrat sitting in North Block. Not to speak of what a hostile political party at the helm can do,“ he writes.  “The decisions will now be taken on Mint Street in Mumbai instead of Maulana Azad Road in Srinagar,“ he says.  Referring to the agreement as “disempowerment of the J&K Bank“, Drabu states that it is akin to the political disenfranchising of the institution of the Head of the State.  “When the position of Sadar-e-Riyasat was converted into that of a Governor it was more than the name that changed,“ he says.  Drabu was economic adviser to Mufti Muhammad Sayeed during the latter tenure as Chief Minister in 20022005. He was shown the door by the Omar Abdullah Government a few days after Mufti's People's Democratic Party blamed Abdullah for financial misappropriation and leaked some confidential details on the Government's financial transactions.

High deficit may stunt India’s growth story

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Field staff of microfinance firms turn money-lenders!

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Co-operative banks are in terrible shape; account-holders will be at the receiving end. RBI should act decisively and soon

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