This auction has a banknote that even RBI will vie for

Walk into the Expo Center at Cuffe Parade's World Trade Centre and, if you are lucky, you may be able to pick up a gold coin weighing 1 tola (11.6 grams) for around Rs 50,000. We know the market price for a gold coin is close to Rs 24,000. But this ain't an ordinary coin. It's a rare piece of Indian history that will be yours to keep and cherish. Starting today, the World Trade Centre is hosting an exhibition that will be followed by an auction conducted by a leading numismatic firm, Todywalla Auctions. Among the collectibles that will be up for auction are a silver-punched coin belonging to Magadha Janapada, which flourished in central India 2,500 years ago. There are also 1,700-year-old gold coins from the Gupta and the Kushan empires.  What should excite most history buffs is that the collection also includes coins from the era of one of India’s most well-known emperors - Jalal-ud-din Akbar. Malcolm Todywalla, of Todywalla Auctions, said, “Most of the Akbar gold mohurs weigh approximately 11.6 grams (1 tola). These used to have the name of the emperor, the place where it was minted and the date, etched in Urdu. Likewise, the square-shaped coins were typical of Akbar’s time… These rare artefacts are priced at nearly Rs 50, 000 each.” Perhaps in a sign of the deteriorating conditions of the Mughal dynasty, there are also coins in silver (a less valuable metal) on display from lesser-known emperors such as Jahandar Shah and Farukhsiyar. However, what sets Todywalla’s heartbeats racing is a not metal but paper. Neverthless do not underestimate it. This British Oriental Banknote from the 1840s is so rare that even the Reserve Bank of India’s museum doesn’t have one of its own.  The bank note, expected to fetch anything between Rs 6 lakh to Rs 8 lakh, was printed only for the Indian market. In the centre of the note is Mumbai’s Town Hall (now the Asiatic Library), surrounded by open expanses of greenery and medieval Gothic buildings. But will Indians actually spend good money on such items? Todywalla believes so. “There’s a great demand for the Indian numismatics in the market. People are very keen to buy them because apart from its monitory value, these rare items speak volumes of India’s rich culture and heritage,” Todywalla said.

Baby steps cannot curb inflation - S. S. TARAPORE

In its first monetary policy review this fiscal, the RBI should jettison half-hearted measures and go for an unequivocal anti-inflationary thrust. There is scope to increase the cash reserve ratio and place limits on credit growth. The Reserve Bank of India (RBI) will, on May 3, 2011, announce its first Review of Monetary Policy for 2011-12. For the past two years, the spectre of inflation has loomed large, but RBI has consciously opted for ‘baby' steps in its monetary policy, ostensibly on the premise that nothing should be done to slow down economic growth.  The year-on-year Wholesale Price Index (WPI) at the end of March 2011 is close to 9 per cent. The average WPI showed an increase of 9.4 per cent in 2010-11, as against 3.6 per cent in the previous year. The average food inflation in 2010-11 is uncomfortably high at 11 per cent.  The government's policy was clearly tilted towards accelerating growth, and inflation was considered as an inevitable price for growth. The government now recognises that inflation is now strongly wedged into all sectors; there are strong compulsions to control inflation as it is impacting not only the poor, but also the vocal middle class.  The Finance Minister, Mr Pranab Mukherjee, has, more recently, referred to a clear choice between controlling inflation and sacrificing some growth. The Deputy Chairman of the Planning Commission has admitted that a 9 per cent growth in 2011-12 is no longer in the realm of possibility and that we would have to settle for 8.5 per cent. While the RBI will be berated for not taking effective action to squelch inflation, it must, in fairness, be stressed that the overbearing tilt of the government towards growth has made life for the RBI rather difficult.  The window of opportunity for strong monetary policy action is invariably short and the RBI would, in the current milieu, be well advised to jettison its ‘baby' steps and opt for stronger measures. It is the job of industry to shout from the roof-tops that any increase in interest rates would jeopardise growth. Banks will also argue that any increase in interest rates would reduce their net interest margins. The RBI should not be swayed by these seductive sirens.  The RBI has to take a call on the monetary policy on May 3, 2011, and it would be best if its stance was in the nature of a strong, unequivocal and unswerving anti-inflationary policy.  The present repo policy of 6.75 per cent is out of kilter and ‘baby' steps would not be in consonance with the difficult inflationary situation. The central bank would need to take note of its own Inflation Expectations Survey of Households which reflects an anticipated inflation rate of 13 per cent.  The RBI should, on May 3, 2011, shift gears and move over to at least a one-half of one percentage point increase in the repo rate to 7.25 per cent; in actual fact the need of the hour is a full one percentage point increase, but this would not fit in with the prevailing RBI philosophy.  The apex bank has rightly indicated that it would prefer the banking system to be in deficit mode, which would make the monetary transmission process more effective.  It been reluctant to wield the cash reserve ratio (CRR) instrument lest it result in a cessation of credit. Banks are clearly over-extended with a year–on-year incremental credit deposit ratio of 99 per cent and as such there is no likelihood of any cessation of credit. The RBI should, therefore, increase the CRR by 0.50 percentage point which would impound Rs 25,000 crore and move banks into a deficit mode.  The RBI should set a prudential limit of an incremental credit-deposit ratio of say 70 per cent; any bank exceeding the 70 per cent limit should be subject to a penal interest of 3 percentage points above the prevailing rate at which it seeks access under any RBI facility.  Anticipating pressures on their net interest margins, banks have already started reducing their deposit rates, instead of increasing their lending rates. This reflects the clear bias of banks against depositors. The Discussion Paper on the Savings Bank Deposit Rate is showing no signs of life. Pending the comprehensive Discussion Paper, the least the RBI could do, in the present situation, is to immediately increase the Savings Bank Deposit rate from a fixed rate of 3.5 per cent to a fixed rate of 4.0 per cent.  It is unconscionable that banks should borrow from the RBI and place these funds with mutual funds. Banks should not be allowed to pass on their funds management duties to mutual funds.If the RBI is committed to developing the gilt-edged securities market it should progressively increase the proportion of banks' holdings of these securities which should be marked-to-market. The draft guidelines for licensing of new private sector banks have been inordinately delayed and the RBI would be well advised to release these draft guidelines on May 3, 2011.

Court to Centre: are you sleeping?

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Termites eat up Rs 1 crore at SBI branch in Uttar Pradesh

Currency notes worth over Rs 1 crore were reduced to dust in the chest of State Bank of India (SBI) in Uttar Pradesh's Barabanki district, officials said on Thursday. The mutilated notes were found in the chest on Wednesday. Apparently, termites ate the stacks of notes. An SBI chest normally contains Rs 50 crore cash for disbursement. The officials at the bank remained non-committal about the amount of cash destroyed. However they estimated that the loss of currencies could be worth over Rs 1 crore. The Reserve Bank of India (RBI) has been informed about the incident and anti-termite treatment was underway at the branch. Branch Manager Sunil Dwivedi said, "I am not sure where the termites came from, but as you can see this building is quite old. Anti-termite treatment is now underway."

JK Bank to establish Financial Literacy Centres: Chairman

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Fake currency worth Rs 2.8L detected at RBI

CHANDIGARH: The Reserve Bank of India (RBI) in Sector 17 is being haunted by fake currency notes. Fake currency totalling Rs 2.80 lakh, which includes notes in the denomination of Rs 50, Rs 100, Rs 500 and Rs 1,000 was detected by RBI officials in the last six months. The RBI officials have submitted the fake notes at the sector 17 police station for further investigation.  Police sources said the maximum fake currency was detected on March 16, this year. It comprised 406 notes, including 7 notes of Rs 1,000 and 352 of Rs 100. The fake currency was detected while checking the notes through special machines installed at the RBI in sector 17. The latest tranche of fake currency was detected on April 19 and comprised 284 notes including 7 of Rs 1,000, 29 of Rs 500 and 219 of Rs 100. This fake currency has been submitted with the police station in sector 17 and a detailed development report (DDR) has also been lodged in this regard. A senior RBI official on condition of anonymity told TOI, 'It is very difficult to ascertain who is depositing the fake currency with the bank because money at the bank is received from different parts of India, especially from different branches situated in northern India'.   The RBI official said, 'We can't destroy the seized fake currency without informing the area police and we have also sought help from cops to detect the source of these fake notes'.  Inspector Hardeet Singh, SHO of the police station in sector 17 said, 'It is very difficult to ascertain the source of the fake currency because the RBI branch in sector 17 has a huge jurisdiction and currency is received from different parts of India'. He said after completing the formalities, the fake notes will be returned to the RBI authority, which is authorized to destroy it.

Got lottery mail? Report it: DM

NOIDA: If you get an email from the Reserve Bank of India (RBI) congratulating you on winning an international lottery prize worth several hundred dollars, beware! It's a fraud, delete it, ignore it and don't get tempted by it.  This is the message conveyed by the district administration of Gautam Budh Nagar to warn its citizens regarding the menace of email fraud. Says Deepak Agarwal, District Magistrate, "The RBI has circulated a notice to create awareness amongst the public about this fraud. People should be careful and not believe these emails." He adds, "This is a good initiative by the RBI, as it will help save many an innocent from losing hard-earned money."   In the last few years, there has been an increase in such instances of banking fraud through 'phishing'. Phishing is a fraud where criminals create emails and websites that closely resemble those of legitimate companies. Generally, the fraudsters lure people through these e-mails by promising an astronomical amount either for wining a lottery or for helping to secure a deceased person's wealth, or promising a job in a big corporate or even securing admission in a prestigious educational institute.  "Unfortunately, not many people complain or even register a case on receiving such fraud emails," says Alok Kumar Singh, in-charge of the surveillance and cyber cell in Gautam Budh Nagar. He adds, "It is a cause for concern and needs to be addressed. Anyone who needs to register a complaint regarding cyber fraud can contact us at the senior superintendent of police's camp office, located at sector 27."  As per the circular received by the administration, the RBI has clarified that remittance in any form towards participation in lottery schemes is prohibited under the Foreign Exchange Management Act, 1999. Further, these restrictions are applicable also to remittances for participation in lottery-like schemes functioning under different names, such as, money circulation scheme or remittances for the purpose of securing prize money or awards. Moreover, the RBI has clarified that it neither maintains any account in the name of individuals, companies or trusts in India to hold funds for disbursal nor does it allow individuals to open an account to deposit money with the Reserve Bank. It also does not issue any certificates or advices or confirmations, evidencing receipt and holding of money in these accounts.

Hit-a-jackpot offers may leave you cashless

ALLAHABAD: Have you recently received an email or a SMS declaring that you have won a prize or lottery and must send some security money to a particular address in some foreign destination. Well, beware of such offers as they are nothing but a new trick adopted by frauds to dupe people of their money.  In fact, the Reserve Bank of India has launched a drive to make citizens aware of such fraudulent schemes and thus, protect them from being duped. The RBI officials explained the modus operandi of the tricksters.  One may receive a phone call or congratulatory message relating to winning a lottery or remittance of cheap funds in foreign currency from abroad or a job\scholarship or easy ways to get emigration visas\admissions to reputed overseas universities etc. One may be issued certificates, letters, circulars etc that may look like authentic papers of the RBI and would be supposedly signed by its top executives. At times, the tricksters convince the victims by even impersonating as senior RBI officials and hand out wrong telephone numbers or fictitious email IDs.  The fraudsters seek money from the gullible parties under different heads, such as processing fees, transaction fees, tax clearance charges, conversion charges, clearing fees etc. The potential victims of the fraud are persuaded to deposit the amount in accounts with various banks in the country. Once the initial amount demanded is deposited, the money is withdrawn immediately from the account and fresh demand is made for an even higher amount in the name of transaction tax, registration money, etc.  Most of the times, the caller or mailer says that the money is held in RBI in an account in the name of an individual\company\trust and that RBI will disburse the fund only when the amount asked for is deposited in the bank. But, the fact is that the RBI does not maintain any accounts in these categories. Further, RBI does not open accounts for individuals to deposit money with the bank. It also does not issue certificates or confirmations or receipts evidencing the holding of money in these accounts. The RBI does not authorise any of its officials for such disbursals.  If a person deposits the money in the account number mentioned in their mail, the amount is immediately withdrawn, thus the money is lost forever. However, more importantly, sending money abroad for lottery is a violation of the provisions of the Foreign Exchange Management Act, 1999.  In terms of the current account rules framed under the FEMA, remittances in any form towards participation in lottery schemes or lottery-like schemes, functioning under different names like money circulation scheme or remittances for the purpose of securing prize money\awards etc, are prohibited. Accordingly, action can be taken against any resident of the country for collecting and effecting or remitting such payments directly or indirectly outside India.

RBI asks banks to implement 1% interest subsidy on home loans

The Reserve Bank on Thursday directed banks to implement the 1 per cent interest subsidy scheme on housing loans up to Rs 15 lakh announced in the Budget with immediate effect.  To help increase the demand for low-cost housing, the Finance Minister, Mr Pranab Mukherjee, liberalised the existing scheme of 1 per cent interest subvention on housing loans up to Rs 15 lakh, where the cost of house does not exceed Rs 25 lakh. The RBI directed banks to issue necessary instructions to the controlling offices and branch offices to ensure that these guidelines are implemented immediately, it said. The other terms and conditions of the housing subvention scheme remain unchanged, it added. The implementation of the subvention scheme comes close on the heels of the country's largest bank SBI's withdrawal of teaser rates following a hike in its lending rate by 25 basis points, making loans across segments costlier.

RBI outlines initial brief of Central Registry

Mumbai, April 21:  The Reserve Bank of India on Thursday said the newly established Central Registry will initially register transactions relating to mortgage by deposit of title deeds to secure any loan or advance from banks and financial institutions. It will also register transactions arising from securitisation and reconstruction of financial assets entered into by banks and financial institutions, as defined under the Securitisation Asset Reconstruction of Financial Assets and Security Interest Act, 2002. The records maintained by the Central Registry will be available for search by any lender or any other person desirous of dealing with the property.  Availability of such records from the Registry would prevent frauds involving multiple lending against the security of same property as well as fraudulent sale of property without disclosing the security interest over such property, the RBI said in a notification. The Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI), a Government company licensed under Section 25 of the Companies Act 1956, became operational on March 31, 2011.

RBI sets up cell to monitor 12 large banks

The Reserve Bank of India has formed a conglomerate cell within its supervisory set-up to keep a constant vigil on 12 large domestic and foreign banks. This is to prevent any systemic fallout in case one of them falters. The banks that have been identified for consolidated supervision are: State Bank of India, Punjab National Bank, Canara Bank, Bank of India, and Bank of Baroda (public sector banks); ICICI Bank, HDFC Bank, Axis Bank and Kotak Mahindra Bank (private sector banks); and Standard Chartered Bank, Citibank and HSBC (foreign banks). The cell will assess the risks that non-banking activities — insurance, asset/wealth management, broking, investment banking, housing finance, and primary dealership — could pose to the parent bank. It will also keep a watchful eye to prevent regulatory arbitrage, said a senior official with one of the conglomerate banks. To ensure that the safety and soundness of the banking system is not compromised, the cell will actively monitor these banks' exposure to financial markets — such as call money, foreign exchange (including currency futures), government securities (including interest rate futures), corporate bonds and equities — to pick up possible smoke signals. Onsite inspection and offsite surveillance have been streamlined to gather, among others, information on compliance with credit exposure limits, and assess risks (credit, operational, market, interest rate, liquidity, and country) and compliance with corrective actions suggested by the RBI, the official said. Further, quantitative and qualitative disclosures in balance-sheets, ownership structure, adherence to accounting policies and principles, compliance with anti-money laundering guidelines, and adherence to prudential prescriptions on capital adequacy will be taken into account to create a profile of each bank.  Collectively, the 12 conglomerate banks are estimated to account for about half of the total assets of the banking system. They are considered systemically important as they have grown so large and are so interconnected that even if one bank goes belly up, the other banks will feel the adverse ripple effects and the stability of the financial system could get undermined. Besides the conglomerate cell, the central bank's supervisory architecture for banks now has three other verticals, each dedicated to the supervision of ‘other public sector banks', ‘other private sector banks' and ‘other foreign banks'.

RBI cancels Nashik ‘s Shri Balaji Co-operative Bank Licence on Bankruptcy

The Reserve Bank of India on Thursday cancelled licence issued to Shri Balaji Co-operative Bank Ltd, Nashik, Maharashtra. Information and confirmation to this effect was made by Ajit Prasad , Assistant General Manager through  Press Release : 2010-2011/1532. The RBI has taken the decision in view of the fact that had ceased to be bankrupt, Shri Balaji Co-operative Bank Ltd, Nashik, Maharashtra all efforts to revive it in close consultation with the Government of Maharashtra had failed and the depositors were being inconvenienced by continued uncertainty, the Reserve Bank of India delivered the order cancelling its licence to the bank before commencement of business on April 07, 2011. The Registrar of Co-operative Societies, Maharashtra has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank. It may be highlighted that on liquidation, every depositor is entitled to repayment of his/her deposits up to a monetary ceiling of ` 1,00,000/- (Rupees One lakh only) from the Deposit Insurance and Credit Guarantee Corporation (DICGC) under usual terms and conditions. The bank was granted a licence by Reserve Bank on October 14, 1996 to commence banking business. The statutory inspection of the bank with reference to its financial position as on March 31, 2009 assessed the CRAR at (-) 3.0%, negative networth of (-) ` 2.84 lakh and erosion in deposits to the extent of 1.6%.  Gross and Net NPAs were 91.5% and 81.5% of Gross and Net Advances respectively on that date. The bank was also advised on January 22, 2010 to step up its recovery efforts and submit a concrete proposal for merger latest by March 31, 2010. The bank’s financial position deteriorated sharply with reference to its financial position as on March 31, 2010 wiping off not only owned funds of the bank but also eroding deposits to the extent of 31.4%.  The CRAR of the bank was (-) 88.5% as against the prescribed minimum of 9%.  The bank had also defaulted in maintaining of CRR and SLR.  Inspite of giving sufficient time and opportunity, the bank had not been able to improve its financials or submit any concrete proposal for merger. Due to its precarious financial position, the bank was placed under directions under Section 35 A of the Banking Regulation Act, 1949 (AACS) vide Directive UBD CO BSD-I No. D- 19/12.22.378/2010-11 dated October 18, 2010. Serious deficiencies as mentioned above revealed that the affairs of the bank were being conducted in a manner detrimental to the interests of the depositors. The bank did not comply with the provisions of Sections 11(1), 18, 22(3)(a) & (b) and 24 of the Banking Regulation Act, 1949 (As Applicable to Co-operative Societies). The bank had also not taken any initiative towards recovery of NPAs. In view of the aforesaid serious deficiencies/irregularities and the deteriorating financial position of the bank, it was issued a notice on December 03, 2010 to show cause (SCN) as to why the licence granted to the bank on October 14, 1996 to conduct banking business should not be cancelled.  The bank submitted its reply to the SCN vide its letter dated December 30, 2010. The reply to the SCN was considered and examined but not found satisfactory.  Further, no concrete proposal was received from the bank for merger. Therefore, Reserve Bank of India took the extreme measure of cancelling licence of the bank in the interest of bank's depositors. With the cancellation of licence and commencement of liquidation proceedings, the process of paying the depositors of the Shri Balaji Co-operative Bank Ltd, Nashik, Maharashtra will be set in motion subject to the terms and conditions of the Deposit Insurance Scheme. Consequent to the cancellation of its licence, Shri Balaji Co-operative Bank Ltd, Nashik, Maharashtra is prohibited from carrying on ‘banking business’ as defined in Section 5(b) of the Banking Regulation Act, 1949 (AACS) including acceptance and repayment of deposits. For any clarifications, depositors may approach Smt. K.S. Jyotsna, Deputy General Manager, Urban Banks Department, Mumbai Regional Office, Reserve Bank of India, Mumbai.

RuPay likely to be rolled out in 18 months

RuPay, an Indian payment gateway akin to Visa and MasterCard, is likely to be ready for rollout within 18 months. National Payments Corporation of India (NPCI), the umbrella organisation overseeing the project, has already started garnering global acceptance for the national card system. “Our consultant has just started working. It would review the strategy document that we had prepared internally, and is expected to take six-eight weeks. Much would depend on the timeline that it suggests and discuss with us and we will freeze that. But we would like it to happen as quickly as possible...it should not take more than 18 months for at least the debit and prepaid (cards) to come up,” NPCI Managing Director and Chief Executive Officer AP Hota told Business Standard. Creating a domestic payment gateway was spurred by the Reserve Bank of India’s (RBI), underlining the need for such a system. This , RBI said, was due to “the high cost borne by Indian banks for affiliation with international card associations, in the absence of a domestic price setter”.  Affiliation with international card associations resulted “in the need for routing even domestic transactions, which account for more than 90 per cent of the total, through a switch located outside the country,” RBI had said in its Vision Document on Payment and Settlement Systems.  China already has a payment gateway system in place, a benchmark against which RuPay may well be compared, although taking into account India’s banking environment, a different model would have to be adopted, said Hota. China UnionPay, a payment gateway for Chinese banks, was introduced in 2002 and is accepted in over 100 countries worldwide. However, in spite of its impressive growth, it experienced friction with global payment majors, notably Visa. With international acceptance of the card being a vital factor, NPCI too, is planning to work with global card associations. “We have expressed our intention of building international acceptance of the RuPay card. Obviously, for international acceptance, we need partners who can make it happen. The card associations can do this and it would be quicker this way. We can also talk to different large acquiring companies, but that would be a slow process. We are evaluating which is the right way. Aligning ourselves or working with international card associations would definitely be a simpler route,” Hota said. However, this may be easier said than done. After being scathed by China UnionPay, global payment firms may be wary of the Indian gateway. “International associations would definitely be on the guard, when dealing with the RuPay. In the long run, I feel there would have to be collaboration across associations. But in the short run, it would be a market-share grab,” said Nirmal Palaparthi, chief architect of Fractal Analytics. On the domestic front, NPCI claimed it had all the required tools at its disposal. “If the card is to be accepted only in the country, we don’t need anything, since we have a block of 500 IINs (issuer identification numbers). We can populate the IINs in over 550,000 POS (points of sale) terminals and can get going,” said Hota. “The real issue is how would this card be accepted abroad. Aspirations in the country are so high that if we give a purely domestic card, people might not accept it,” he said. The final decision would, however, be taken by the banks. “The banks would choose. If they feel there is a customer segment which would not use the global card, or the likelihood of using it is limited, they might issue a card which is domestic. It would also be cost-effective, since the assessment fee of an international card would definitely be higher than a domestic card,” he said. “The biggest benefit for banks is this would be cost-effective. Instead of many types of service charges, we would make it very simple. We would also make the dispute management more simple and straight-forward. Banks would have a bigger role in the governance of the (RuPay) scheme --- much more than what they have in international schemes,” Hota said.

RBI Quashes Banks’ SLR Plan

Bankers urged the Reserve Bank of India (RBI) to allow them to dip into 2% of their SLR, or statutory liquidity ratio, of the mandated 24% to meet short-term asset liability mismatch. This was conveyed by treasury heads of select banks at a meeting with senior RBI officials early this week.  The meeting was called to discuss the Deepak Mohanty report on the operating procedure of the monetary policy, which was released last month. However, senior RBI officials turned it down on the grounds that banks had not even availed of 1% of the standing facility of net demand and time liabilities (NDTL) of the total SLR in the past.  Bankers also discussed issues regarding RBI’s preference to maintain liquidity in a deficit mode of 1% of the NDTL.  “During the meeting, RBI officials agreed that at times it would be difficult to maintain the liquidity deficit of 1% of NDTL, but efforts have to be made in that direction,” said a treasury head present in the meeting.  RBI felt that the transmission of the monetary policy hinged on regulating the liquidity in the system, and liquidity in excess of 1% could thwart the process of policy transmission. “I do not see the possibility of liquidity getting into a surplus, but certainly we wanted to be less in a deficit than it is now because the deficit now is about 2% of NDTL and we thought that the more appropriate level would be 1%. That is where we would like to see it,” Subir Gokran had told research analysts soon after the January policy. However, bankers are sceptical on RBI’s desire to keep liquidity in a preferentially deficit mode. The meeting was also attended by primary dealers and mutual funds. RBI made a presentation on the report to market players. The objective was to place the report before them for their feedback and have an inclusive discussion there on the possible points of contention. The report proposes a single operational rate, which would be the repo rate and the reverse repo. It also suggests the repo-reverse repo rate corridor to be maintained at 100 bps and the base rate to be maintained at 50 bps below the repo rate.  The banker also discussed how the base rate was no more operational, and therefore, needed to be scrapped.