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The Suvikas People's Co-operative Bank Ltd., Ahmedabad – Penalised

The Reserve Bank of India has imposed a monetary penalty of Rs. 1.00 lakh (Rupees one lakh only) on The Suvikas Co-operative Bank Ltd., Ahmedabad, Gujarat in exercise of powers vested in it under the provisions of Section 47(A)(1)(b) read with Section 46(4) of the Banking Regulation Act, 1949 (AACS) for violation of Reserve Bank of India instructions on Know Your Customers (KYC). 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, bank's reply and personal submissions in the matter, the Reserve Bank came to the conclusion that the violations were substantiated and warranted imposition of the penalty.

Efforts on to minimise cheque transactions

VARANASI: Deputy Governor of the Reserve Bank of India (RBI) Shyamala Gopinath said efforts were being made to encourage electronic transaction of money to minimise transactions through cash and cheques.  Talking to reporters on Saturday, she said it was not possible to stop the use of cheques for money transactions in one go, but efforts were on to encourage maximum use of ATM and electronic transaction of money. For the purpose, money transactions through cheque would be made costly, she said and added efforts were also being made to expand the reach of banking system in rural areas of the country.   She further stated that RBI had undertaken financial literacy and financial inclusion campaign in rural areas to bring rural populace into banking fold. Through this campaign, rural masses are educated about the banking system and they are mobilised to open their accounts in banks. She said positive response was being received and efforts were being made to develop proper infrastructure and link the government schemes to banks. "It is just a beginning, a lot has to be done yet," she said and added technological upgradation of the system was being done to provide maximum benefits to people.  Replying to a query regarding the operation on non-banking financial institutions, she said RBI had got a suggestion that it should regulate the functioning of non-banking financial institutions for small borrowers. She said financial inclusion in rural areas was needed for proper growth and  development.  Gopinath was in the city to attend programme on financial inclusion and financial literacy organised by the Lucknow unit of RBI at Nagepur village in Raja Talab area on Saturday. The programme was organised under RBI's programme to conduct outreach visits and develop certain identified villages as model villages. Addressing the programme, she highlighted various activities of RBI and expressed her hope that rural development was possible if banks and state governments worked together. Addressing the function, the executive director of Union Bank of India SC Kalia said efforts were being made to upgrade the Kisan Credit Cards to draw money from ATM without going the the bank branch. The function was also addressed by RBI Regional Director Amrendra Sahoo and others. The RBI personnel also distributed smart cards among the villagers, school bags to children and cricket kit for the students of Shiv Narayan Memorial Inter College on the occasion.

Over 50% population without bank account: RBI Deputy Governor

Inspite of 40 years of nationalisation of banks, over 50% of the country's population is without a bank account, deputy governor of Reserve Bank of India (RBI) Shyamala Gopinath said today. "We have started an innovative programme to educate such people. A 'financial literacy mission' has been launched to make people aware of the schemes they can avail," said Gopinath while addressing a function in Varanasi. "There is a need to get villagers out of clutches of local money lenders who are exploiting them and charging humongous interest rates," Gopinath said. After this programme common man would become aware and benefit from government loans, mutual funds and banking services, she said. To lessen the pressure on banks and facilitate an easy transaction of money for those working under Mahatma Gandhi NREGA a plan of payment through their biometric cards is also on anvil, Gopinath added.

Ethics, governance step into the murky real estate world

Good governance’ is fast becoming a buzzword in the murky world of the country’s real estate. At a time when the realty sector is facing a credibility crisis, following its links with the 2G telecom scam, regulators, government, non-profit bodies and stakeholders are working on measures that might bring a semblance of order in the chaotic industry. The National Housing Bank (NHB) and the Indian Banks Association (IBA), for instance, are learnt to have finalised guidelines for property valuation that can be used as yardstick for bank lending. Valuation of property is extremely disorganised in India and lacks uniformity of any kind, while it is a streamlined business the world over, points out a real estate expert. Sachin Sandhir, managing director and country head (India), Royal Institution of Chartered Surveyors (RICS), told Business Standard that initially banks and financial institutions would use the property valuation guidelines as recommendation, but these might become mandatory for the industry over a period of time. The project is being carried out under the guidance of the Reserve Bank of India (RBI).

Union Bank chief expects rate hike by central bank

Mumbai: State-owned lender Union Bank of India may revise its lending rates in case there is any hike in the key policy rates in the annual monetary and credit policy by Reserve Bank of India(RBI), due on May 3.  However, the bank is not looking at revising its deposit rates even after the revision in the key policy rates said MV Nair, CMD, Union Bank.  The bank crossed a total business of R3,55,000 crore as of March 2011 and has recorded growth of 19.1% in deposits and 26.3% in advances.  “We do expect that the RBI might increase its key policy rates when it announces its annual monetary policy early next month as it was during inflation. So, we will wait for the policy before revising our lending rates. However, in any case, we may not revise our deposit rates,” he said.  Commenting on the recent RBI regulation on provision coverage ratio (PCR) where RBI has said banks need not provide beyond 70% of their gross non perfoming assets, Nair said the bank has already reached the regulatory requirement level of 70%. “Now we will start creating a buffer,” he added.  Replying to a query that what would be the hit on his bank out of the second option of pension for the bank’s retired employees, which banks have been asked to do within last year’s balancesheet, Nair said the bank will have to take a hit of R480 crore. “We are ready for it. The bank expects to achieve credit growth of 23% and deposit growth of 20-21% during the current fiscal. In any case, we want to be above the industry level by about 2-3% when it comes to credit and deposit growth for the current fiscal,” said Nair.  Nair said his bank was looking at an NIM of 3-3.1% for the current fiscal, as against the currently existing mark of 3.25%.  At present, the bank is focused on implementing two key initiatives with the support of consultants. One is on the HR front and another in the area of customer service excellence.  As a part of its relationship value to customers, the bank is aggressively promoting various online payments to government and its agencies and to the integrated services under government schemes, by leveraging on technology.

Credit Policy review around the corner; inflation a major concern

The monetary policy makers will meet in the first week of next month to review the various factors influencing the macroeconomic conditions, and to make the necessary changes in the monetary policy. The domestic economy is at a crucial juncture with respect to the balance between inflation, industrial growth and the monetary policy tightening. The Reserve Bank of India (RBI) has already tightened the monetary policy several times since last year and the interest rates have gone up to a level where they threaten to impact industrial growth.  However, the headline inflation rate is still ruling quite high and is not under control . Due to several domestic as well as international factors the inflation rate calls for more measures and close monitoring by the policymakers.  These are some of the major factors that will be under consideration during the forthcoming monetary policy review in the beginning of next month:  The headline inflation rate in food articles has come down significantly over the last few weeks. However, the broader inflation rate is still ruling high. The Wholesale Price Index (WPI) based inflation rate stood at 8.98 percent for the month of March. This is much higher than the upward revised projection given by the RBI. Analysts believe there are several domestic as well as international factors fuelling the inflation rate. On the domestic front, demand is quite robust and as a result the price rise has spread to broader items that are fuelling the headline inflation rate. On the other hand, the soft monetary policy and other ongoing issues in the international markets are constantly pushing the prices of international commodities up. This is another significant factor contributing to the headline inflation rate. Analysts expect the RBI to maintain its hawkish stance in the forthcoming monetary policy review.  The monsoon is another factor that can influence various macroeconomic parameters and investors should track the developments around it. Since the agriculture sector depends a lot on the monsoon, it's very important for the economy to have a normal and timely monsoon.  A good monsoon can keep a check on food prices and helps the policymakers in fighting the headline inflation.

Provisioning norms for banks relaxed by RBI

In a move seen as a major relief for all commercial banks, the Reserve Bank of India (RBI) has tweaked its provisioning norms to enable banks as to how much they should set aside to cover bad debt and thereafter excess provisions made after September 2010 be used to cushion shocks 'during periods of system-wide downturn.'  Currently, banks are required to set aside 70 per cent of their bad debt as per the provision of coverage ratio (PCR).  Simply put, for instance, if a Rs 100 loan has turned bad, setting aside 70 per cent as PCR means that the bank has to set aside Rs 70 as provision as it expects to recover Rs 30 of the loan. The notification issued by RBI on Friday wants the cushion -- known as “counter cyclical provisioning buffer” — to be set up out of any surplus available after complying with the stipulated 70 per cent PCR of the gross non-performing assets as of September 2010. The banking regulator made it clear that the surplus provisions under PCR should be segregated into an account, computation of which may be undertaken as per the format prescribed by it (RBI). However, to dip into this, banks will require approval from the regulator, it added. September 2010 onwards, RBI said, on incremental NPAs banks would have to set aside money based on the income recognition norms. This ranges from 10 per cent in the initial months when the asset is classified as substandard to 100 per cent when it is classified as a loss asset after a few years. Bankers have welcomed the RBI move.  In this context, Indian Banks' Association (IBA) Chairman and also CMD of Bank of Baroda, M D Mallya said “Balance sheet planning will become easier. If a bank earns windfall profit, say from treasury operations, it can be set aside as a buffer and subsequently used during bad times.”  It may be recalled that many banks including the country's premier lender State Bank of India have had complained in the past that this regulatory compliance is high and dented their profitability, while RBI was insisting that this is a part of prudential norms in tune with international banking practice.