INVITATION TO JOIN EXRBITES

Dear friends,

You will be happy to know that I have provided a link on http://in.groups.yahoo.com/group/exrbites today to the blog of Shri Mangesh Tarambale of RBI titled "VITALINFO". The VITALINFO site provides a platform for wider dissemination of updated information related to and happenings of events in and around RBI. I can assure you that there will not be any need for you to go through various financial newspapers for getting latest updates. We are very thankful to Shri S.S.Didolkar, our member, for sending us this link.

You will be happy to know that we have formed an internet Group "EXRBITES" of all past or present employees of Reserve Bank of India including Associate Institutions under Yahoo groups. The name of the group signifies that all of us will have to be "Ex" today or tomorrow. The main aim of the group is to promote goodwill and maintain database to enable members to share any information/material/photos including their experiences/aspirations/views with other members. The membership is absolutely free. To know more about the group and for becoming  member please click at the link below or go to the website/home page of the group by typing following in your browser:-

http://in.groups.yahoo.com/group/exrbites  

Once the page opens please click “JOIN THIS GROUP”. Follow the instructions and click "Send". You must have an yahoo ID for becoming a member. If you don't have one please click at "Create an account" instead of "Sign in" when the yahoo page opens to get new ID before proceeding further. For any further information/ assistance please feel free to contact undersigned at any time.

With regards

Madan Gauria, AGM (Retd)

Moderator

1234, Sec. 44 B, Chandigarh-160047

Tel. 0172-2666780,  09915106631,  09316471887 

Economic resilience

The book, Global Crisis Recession and Uneven Recovery, written by Y V Reddy, past governor of the Reserve Bank of India (RBI), contains his thoughts on the economic crisis and his views on the global financial system. It is the story of uneven recovery and prospects for India. The book contains 27 chapters, divided into five sections, where each chapter contains the edited versions of lectures delivered by Y V Reddy in different forums. There has been a number of books written on the global financial crisis. Central banks, which played a key role in the crisis management, did not express their views due to obvious constraints. Central bankers not holding official positions are in a better position to throw light on the subject. Emerging markets have shown remarkable resilience during the crisis and are presently poised for respectable growth. Since the crisis originated in advanced economies, the views of the emerging markets, which bore its brunt, have not been articulated.  The author has had the insider’s view of the crisis, and was closely associated with several international initiatives to understand the crisis and identify the measures needed in response to a unique globally emerged perspective. The author has penned his scholarly views on the economic crisis which engulfed the world, and which he, being at the helm of affairs in India, ensured that India largely escaped the fate that affected the world’s largest economies.  The author discusses the causes of the crisis, the influence of ideas, institutions, interests, individuals and integrity. At the global level, the International Monetary Fund (IMF), which is responsible for the surveillance of economic and financial policies of countries, did not predict the crisis. Some governments in advanced countries contributed to the crisis by pursuit of relentless deregulation in the financial sector and failure of the state, market, governance, intellect and morality.  There is a sense of relief that a total collapse of the financial markets and deep depression have been avoided by timely initiatives at the national level, which were co-ordinated globally. Almost all countries experienced recession and almost all are in a state of recovery, although it is uneven and there is multiple speed recovery in different countries. An impact of the crisis has been on the analytical framework governing economic management, which in most countries, proved to be less than adequate. India has undoubtedly emerged stronger and more resilient after the crisis. The author feels that the crisis happened before India went irrevocably in the direction of excesses in the financial sector. The book ends by discussing the challenges that are specific to policymakers in India, particularly the RBI. It is argued that excessive stimulus in the form of additional expenditure and consumption in the government was undertaken in the past and it was partly driven by electoral compulsions. As against the unique challenges, India has some unique strengths: India has a large economy, the financial sector has exhibited strength and resilience, the policy instruments in place can be calibrated by the RBI depending upon the situation, and RBI has considerable credibility. It is therefore reasonable to expect that policymakers will successfully manage India’s economy during challenges. The book contains perspectives and analyses presented in a lucid style and non-technical language, written by one of the leading authorities on banking and finance. It will be of interest to students, researchers and professionals working in banking, finance and economics.

Deccan Herald

Intel to sell products to boost RBI's fin inclusion

Global chip maker Intel sees big opportunity in RBI's financial inclusion programme and is all set to launch its Universal Handheld Device (UHD) for banking operations by the end of this year, according to a top company executive. "The UHD reference design has been developed in India for Indian market. We are taking to companies, who are willing take it up with their brand name," said R Ravichandran, director (sales), Intel South Asia. UHD is a compact instrument with seven inch screen and a biometric finger print readers along with a thermal printer, which can be used by business correspondents hired by banks to take banking to rural and remote areas of the country. As two-thirds of the Indian population doesn't have access to banking services, the RBI has come out with an initiative –Financial Inclusion-- in which banking will be taken to the doorsteps of rural masses. Most of state-owned banks have already announced their Financial Inclusion plans and targets and started recruiting business correspondents in large scale. UHD, which is an Atom-based embedded device has a printer, biometric capable. It has got a smartcard reader and is also GPRS integrated. Customers can pick and choose the functions they want to perform. According to Ravichandran, the pilot programme and device testing is currently underway and they anticipate huge demand for this device as the financial inclusion programme takes off at large scale. Ravichandran said the price of the UHD instrument will depend on the configuration and may start from Rs 30,000-35,000. "Various features of the device like Battery life, connectivity are being tested in rural conditions. Hopefully by the second half of this year we see some deployments happening. People are also happy with the product," he said. Replying to another question, he said Intel was also weighing options like exporting these products to Brazil and South Africa.  Further, according to a senior official of Intel, the chip maker entered in to an agreement with a Taiwanese ODM. As per the agreement Intel will get royalty for every piece that is sold.

BS

Mobile phones can be a popular medium of payment: Assocham

NEW DELHI: With the mobile telephone penetration expected to reach 100 percent by 2015, cell phones can emerge as a popular medium of payment, a survey said Sunday. While India has been among the fastest growing mobile markets, with 846 million subscribers, the country pre-dominantly remains a cash economy, Assocham said adding that as much as 67 percent of retail transactions are conducted in cash.  "While the ubiquitous mobile is surely the most promising channel, the need of the hour is to develop an innovative mobile payment system," the chamber's Secretary General DS Rawat said.  It said that the booming retail market with annual transactions worth USD 410 billion make phones a perfect medium for payments.  A growing middle class with over 300 million people and their increasing disposable income has led to the exponential growth of retail market, it said, adding that by 2015, mobile phone penetration stands to touch about 100 percent.  "But the country is pre-dominantly a cash economy with 67 percent of retail transactions being conducted in cash. All current non-cash payment modes like credit cards, debit cards and multiple mobile payment solutions appeal to a small section," it added.  Mobile payments are a must for India to retain its growth where most people do not have a bank account but have a mobile phone, it said.  "Stakeholders involved in the development of mobile payments ecosystems are the RBI, network operators, financial institutions and technology providers," it said.

TOI

India Inc confidence down in April-June: CII

NEW DELHI: Rising inflation and expectations of yet another hike in policy rates by the Reserve Bank has dampened the business confidence of Indian corporates for the April-June quarter, a survey today said.  According to CII's quarterly Business Outlook Survey, the Business Confidence Index (BCI) for April-June, 2011 declined to 62.5 from 66.7 in the previous quarter (January-March). It said the top three business concerns are high raw material cost, infrastructural shortages and high interest rates.  "Expectations appear to be relatively bleak due to uncertainties about international commodity prices, especially oil, expectations about further tightening of monetary policy and inflation which has been persistently high," it said.  The headline inflation in the country stood at 8.66 per cent in April. Inflation has been above the 8 per cent mark since January 2010, much above the government's comfort zone of around 5 per cent.  The RBI has increased its key policy rates nine times since March last year to curb inflation. Experts have said the central bank is likely to go for further rate hike during its next mid-quarterly review in June.  Majority of the 300 companies participated in the survey foresaw an increase in the company's spending on capacity expansion during April-June period as compared to the previous quarter.  Participants also said that there might be a slow down in consumer demand. Talking about the economic growth, CII President B Muthuraman yesterday said that the country's growth would slow down this year because of high inflation, rising oil prices and commodity prices. "I expect the growth this year will slow down, investments are slowing down, margins are getting squeezed over last six months. So we must expect slowing down of economy compared to last year. We will probably have growth in the region of 8 to 8.5 per cent this fiscal," he said.

ET

FHC model: safeguard against systemic failures

The fall of unfathomable financial institution Lehman Brothers in August 2007 as a prelude to deep financial crisis that gripped the world in the last few years was a wake-up call for central banks. In August 2007, the Reserve Bank of India (RBI) came out with a discussion paper on holding companies in the banking group, where the central bank suggested to have .........................

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Savings bank deregulation holds no fears

One way of protecting the interest of small savers would be to link the return on such deposits to a policy rate. The ideal policy rate for this purpose would be the reverse repo rate..........................................

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Islamic Banking : What in store for India?

India recently got a green signal from the Reserve Bank of India for Islamic banking in the country. This new development was most awaited and is expected to result in some exciting progress in the days to come. India with a 15% Muslim population, the highest in a non- Islamic country.....................


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Smart Cards for Villagers

Pune: The villagers of Khopi Village, Taluka Bhor, will be handed over Smart Cards by RBI and Central Bank of India today. The ceremony will be held at 10 am at the village and will be attended by Hemanti Kulkarni, chairperson, DSK Digital Technologies Pvt Ltd, Deepali Pant Joshi, Chief General Manager, RBI, Ms. Kamala Rajan, Chief General Manager & Principal and R L Sharma, General Manager/Vice Principal, College of Agricultural Banking, RBI, Pune, and Vinod Phillips, head, Business Operations, DSK Digital Technologies Pvt Ltd. This will be an occasion to experience the Mobilis device, discovered by DSK Technologies Pvt Ltd, which is being used for financial initiatives by RBI and Central Bank of India.

FE

Double benefit for salaried class - T. C. A. RAMANUJAM

Deduction for contribution to the National Pension Scheme in the hands of the employer and exclusion of such contributions in computing exemption for Sec 80C is a morale booster for employer and employee. The New Pension Scheme (NPS) was introduced by the Union Government in 2003. According to the new scheme, employees appointed on or after January 1, 1994 will contribute 10 per cent of their Pay and Dearness Allowance to the Pension Fund Regulatory and Development Authority under the Ministry of Finance. An equal amount will be contributed by the Centre. The scheme is mandatory for Government employees, but optional for other citizens of India. NPS merely declared that tax benefits would be applicable as per the Income Tax Act 1961 as amended from time to time.

The New Section 36(1)

The Finance Act, 2011 has inserted a new Section 36 (1)(iva) with effect from assessment year 2012-13 to provide that an assessee will get a deduction in respect of contribution towards a pension scheme referred in Section 80CCD of the Act on account of an employee up to 10 per cent of the salary of the employee in the previous year. For this purpose, ‘salary' includes DA, if the terms of ‘employment' so provide, but excludes all other allowances and perquisites. Currently, contribution made by an employer towards a recognised provident fund, an approved superannuation fund or an approved gratuity fund is allowable as a deduction from business income under Section 36, subject to certain limits. However contribution made by an employer to the NPS is not allowed as a deduction. The newly inserted clause provides that any sum paid by the assessee as an employer by way of contribution towards the pension scheme on account of an employee to the extent it does not exceed 10 per cent of the salary of the employee in the previous year, shall be allowed as deduction in computing the income under the head ‘Profits and gains of business or profession'.  No doubt, such deduction would have been available under Section 37. The matter, however, is placed beyond doubt by the new Section. It should, however, be noted that deduction would be available only upon actual payment. The term ‘employee' will include all employees including Director-employees. The limit of 10 per cent will apply to each employee individually. The Finance Act has also amended Section 40A (9) for this purpose.

Limits on Deduction

Section 80CCE provides that the aggregate amount of deduction under Section 80CCC and 80CCD shall not exceed Rs 1 lakh. The Finance Act, 2011 provides that contribution made by the Central Government or any other employer to NPS shall be excluded while computing the limit of Rs 1,00,000. The contribution by the employee to the NPS will be subject to the limit of Rs 1,00,000.  At the same time, deduction in respect of contributions by the Central Government or any other employer to NPS available under Section 80CCD (2) will not be subject to the limit specified in Section 80CCE. This provides a leeway for employees to seek a restructuring of the pay. Employers may be willing to include the contribution to the NPS in the pay package and claim 10 per cent of the salary as deduction. Depending on the pay scales, such restructuring may offer a benefit to both the employer and the employee. The Employees Provident Fund Organisation has within its fold 4.72 crore subscribers. They get interest income of 9.5 per cent on PF deposits for 2010-11. There is also a move to increase the rate of interest .

Waiver for PF interest

In this context, the decision of the Income-Tax Department to grant an exemption from tax on the interest income on PF deposits will come as double bonanza for the subscribers. Deduction for contribution to the NPS in the hands of the employer and the exclusion of such contributions in the hands of the employees in computing the exemption under Section 80C will mean a morale booster for the employer and the employee. A caveat will be in order. The NPS has been challenged before the Central Administration Tribunal, as unconstitutional and inequitable by the Dakshin Railway Employees Union. The challenge is to the mandatory nature of the NPS in the case of government employees. There is apparent discrimination between those who joined service before January 1, 1994 and those who joined later. The matter is pending before CAT.

(The author is a former Chief Commissioner of Income-Tax.)

Tech trauma for bad assets

PSU banks are shifting to a technology-based platform to calculate non-performing assets (NPAs) in the fourth quarter — a period the lenders reported fresh defaults and made higher provisioning for bad loans.  Bankers and analysts said the shift to the new platform was one of the main reasons for the rise in bad assets during the fourth quarter.  The new technology is part of the banks’ core banking solution (CBS), replacing the earlier practice of tracking bad loans manually. According to the Reserve Bank of India’s (RBI) norms, if either the interest or the principal on a loan is overdue for more than 90 days, the account becomes NPA.  Banks have to make provisions, or set aside funds, against such loans. Last year, the finance ministry had directed PSU banks to identify bad loans with the help of technology rather than manually. The ministry had asked the banks to migrate to such a system by March 31.  This deadline has now been extended till September because of software-related problems. Indian Bank began moving to the new system from April last year, while the Bank of India, Canara Bank, Andhra Bank are in various stages of implementation with agricultural loans and advances up to Rs 50 lakh yet to come under the platform.  Bankers say by September, the remaining loans will be covered. Under the technology-based platform, NPAs are tracked on a daily basis through the use of computers.  Bankers pointed out that the earlier practice gave some discretion to the officials, which might have led to lower NPAs.  However, in the system-generated method, NPAs are immediately identified. This is one of the reasons why PSU banks adopting the new system have shown a rise in bad loans. “It (the new method) certainly leads to transparency and prevents any form of manipulation. Moreover, it gives an accurate picture compared with the manual intervention,’’ says a senior official of the Bank of Baroda (BoB).  A significant part of BoB’s loans are now under the new method. Manish Karwa, M.B. Mahesh and Nischint Chawathe, banking analysts at Kotak Institutional Equities, recently said in a note that bulk of the slips in the fourth quarter was because of the efforts made by public sector banks towards a stringent recognition platform for non-performing loans that disallowed any manual intervention. The analysts warned of fresh defaults in the next two quarters. “We expect more slippages in the first half 2011-12 from this transition as most public sectors are yet to fully complete the transition of their overall loan portfolio.”

The Telegraph

'RBI doesn't want the system to get into a Lehman kind of situation'

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Andhra CM favours women's co-op as SHG nodal agency

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BANKER'S TRUST - ARE PSU BANK HEADS FEUDAL LORDS?

The chiefs here work under a lot of stress as they are not only answerable to their board, but also to officials of the ministry of finance and politicians, and they are not paid well, but when it comes to managing the bank, at least some of them behave like feudal lords.  What does the chairman of a public sector bank do if he can’t get into the car that is supposed to ferry him to the bank’s guest house from an airport? He will catch a taxi. Right? Well, partially. Indeed, he will catch a taxi, but he will also suspend the senior executive who is at the airport to receive him. I am not cooking up this story. It happened in Mumbai in the third week of May. On a Thursday evening, the chairman of a public sector bank took a flight from a southern city to Mumbai. The liaison officer of the bank was at the airport to receive him along with a general manager who heads the bank’s Mumbai operations. The liaison officer went inside the airport to greet his chairman and the general manager preferred to wait outside while the airconditioner was on to keep the car cool on a hot and humid evening. While the chairman’s suitcase was being loaded in the car’s boot by the driver, the doors got locked with the key in the ignition. As it was not possible to get another office car at that time (it was well past 9.30pm), the liaison officer first tried to arrange for a “cool cab”, but the queue at the airport counter was long. Finally, he hailed a Meru cab to take the chairman to the bank’s guest house in Cuffe Parade in south Mumbai, but by that time, the chairman lost a precious 45 minutes and his cool. The delivery of the suitcase at 1am to the guest house and the apology of the general manager next morning (he even touched the chairman’s feet, I am told) did cut no ice with the chairman, who suspended him on Friday. The suspension order was revoked after a national daily narrated the story graphically last week. I am not naming the bank and its chairman as more than individuals; this incident is probably symbolic of the culture in public sector banks that account for roughly 70% of the Indian banking industry. The chiefs here work under a lot of stress as they are not only answerable to their board, but also to officials of the ministry of finance and politicians, and they are not paid well, but when it comes to managing the bank, at least some of them behave like feudal lords. Using guest houses for personal purposes such as accommodating relatives when their children get married is not uncommon for the bosses. In the executive lunch room of one public sector bank, I have seen a particular table being reserved for the chairman where no one is allowed to sit. In yet another bank’s lunch room, I have seen the chairman eating green chillies till beads of sweat trickled down his bald head and somebody wipes it with a white towel before serving dessert. The suspension of a senior executive for being stranded at an airport for about an hour may be a little too much, but a few years back another senior executive of another bank got transferred to the North-East—traditionally seen as a punishment posting for a banker—after a guest house elevator got stuck with both the chairman and his wife inside. To pacify his wife, who was very upset, the chairman had to leave the guest house immediately and at night shifted to the guest house of another organization that he had previously headed. The general manager was handed his transfer letter the next morning. How do private sector bankers deal with such situations? Differently. This is not because they get higher compensation packages and have more patience and less stress in work. Most private banks have facility management divisions that look after logistics and other related issues, and normally the senior managers do not get involved in arranging the chief executive’s vehicle at the airport or food at the guest house. Only when it comes to fixing appointments in the finance ministry or the regulator in Mumbai do senior managers get involved. They attend such meetings with the chief executives, take notes, and oversee the follow-up actions. But greeting the boss at the airport, and arranging vehicles and flowers at the guest house are the responsibility of the facility management division. I spoke to a Mumbai-based psychiatrist to understand why such things happen in the public sector banking industry. Are the bosses a pampered lot? Is it outright feudalism? The psychiatrist—she doesn’t want to be named—blames both the culture as well as individuals for such incidents. According to her, one should not generalize such problems and instead focus on an individual’s behaviour. After all, everybody does not suffer from road rage. She also wants to know why the general manager went to the airport to receive his chairman. I am told the rulebook does not say that a senior executive needs to be present at the airport, but by tradition most go and there are bosses who actively discourage this practice as it’s a sheer waste of time that can be better utilized for soliciting business or recovering a bad asset. After discussing these episodes with the psychiatrist, I am feeling a bit relieved, as such incidents could be exceptions and not norms. Meanwhile, here is a piece of advice to the reinstated general manager. Next time he goes to receive the chairman at the airport, he can carry a tennis ball with a hole drilled in it. Apparently, if you place the tennis ball against the outside lock where you would normally insert your key and push as hard as you can, the air pressure will pop the inside lock open. Needless to say, I read this on the Internet and have not tried it yet.

Mint