RBI cancels registration of two NBFCs

MUMBAI: The Reserve Bank of India (RBI) has cancelled registration of S K Capsec Pvt Ltd , and Sansun Leasing and Finance Private Ltd for carrying on the business of a non-banking financial institution after their exit from the business.  The RBI on April 19, 2011 cancelled the certificate of registation to S K Capsec Private Ltd for carrying on the business of a non-banking financial institution as the company has voluntarily exited from the business, the apex bank said in statement.  It cancelled the certificate Sansun Leasing and Finance Private citing the same reason, it said in another statement. Samsun Leasing and Finance Private Ltd is a Dehradun- based company while S K Capsec Private Ltd is based in Varanasi. After the cancellation of the registration certificate, the company cannot transact the business of a non-banking financial institution, the central bank stated.

ET

Bank of Maharashtra plans opening branches in N-E

KOLKATA: Bank of Maharashtra has decided to spread wings in every northeastern state by September this year to help its western clients develop business contacts in the hitherto untapped region, which is now recipient of special development packages from the central government.  The Pune-based bank plans to open a total of 60 branches during 2011-12 and one-sixth of these will be in the seven northeastern states, where it has skeletal presence, bank chairman AS Bhattacharya told ET. "The northeast economy is growing and we don't have presence in the northeast, except in Assam. Beside that, there is another reason why we are targeting the region: my clients in the western states also want to develop business contacts there," Mr Bhattacharya said. The bank will have branches in every state capital in northeast by September. In addition, in plans three new branches in Assam. Banks do not need Reserve Bank of India's clearance for opening branches in this hilly and economically backward terrain. It has 1,517 branches now, mostly in Maharashtra. The CMD said a majority of the 60 new branches proposed will be opened outside the home state. The bank also plans to enhance the number of ATMs to 500 by this month from 413 now.

ET

Blind-sided : T N Ninan

Policy makers are supposed to be better at assessing trends than mere flacks, since they have better access to information and (presumably) better judgement. So it has been a mystery as to why virtually all the wise economists in the government, starting with the prime minister, have been unable these last few months to see what has been staring everyone else in the face, namely the economic slowdown. Not just Manmohan Singh but also C Rangarajan, Kaushik Basu and others have all been growth optimists when the growth indicators have pointed downwards. Now, with the fourth quarter GDP numbers confirming the slowdown, they are all scrambling to lower expectations.The slowdown which government spokesmen have woken up to belatedly was no hidden mystery weeks and even months ago. Private sector economists said on Budget day itself that 9 per cent growth this year would be difficult to pull off. And while it’s not wise to say “I told you so” (readers might point to the times when one has been wrong!), I did write in these columns in January that “If this year’s GDP growth ends up at 8.5 per cent, it would be unrealistic to expect more than 8 per cent next year — especially since there will be no agricultural kicker, and no advantage of a set of low base-year figures. Even 8 per cent … wouldn’t be bad going, but it is not the 9-10 per cent growth for 2011-12 that the prime minister forecast earlier this month…”It wasn’t just the prime minister who was talking of 9 per cent and more for 2011-12. The chief economic advisor talked of 9 per cent in his Economic Survey in late February, and the finance minister built that into his Budget assumptions. Dr Rangarajan, as chair of the Prime Minister’s Economic Advisory Council, was talking in February of 9 per cent for both 2010-11 and 2011-12, and even now he does not rule out 9 per cent for this year. It was left to D Subbarao at the Reserve Bank of India (RBI) to provide the cold shower. After saying mistakenly in January that “the risk to growth was on the upside”, it trimmed its sails in March and signalled that there was a threat to the “current growth trajectory” (which, bear in mind, was already below 9 per cent). The RBI followed that up last month with its 8 per cent forecast for this year, and the Planning Commission quickly dropped its own talk of 9 per cent.  As it happens, it required no great skill to read the storm signals. CII’s Business Confidence Index had dipped in the October-December quarter, investment demand was tapering off, and rising interest rates were bound to curb credit-driven demand for cars and housing — as is now evident. Indeed, the chief economic advisor himself was forecasting in December that the industrial production numbers would henceforth show slower growth — which they did. Why, if you take away the boost provided by the agriculture bounce-back after two flat years, the non-agriculture GDP growth for the last year as a whole (at about 8.8 per cent) was slower than the 9.6 per cent non-agriculture growth of 2009-10. The problem with pushing for faster growth in today’s environment is that the government is struggling to control the fiscal deficit, even as the RBI battles inflation. Both policy goals are GDP-contracting in orientation, and it does not help that the government has a cupboard that looks like Mother Hubbard’s when it comes to economic reform. The economy retains its capacity to surprise on the upside (just look at the export surge), but the over-all odds are quite long.

BS

Card transactions lack security measures :RBI

Mumbai: A working group constitued by the Reserve Bank of India (RBI) to prepare to suggest measures for securing card transaction has found flaw in the way currently information flow between the acquiring host, issuer host and switch are encrypted. This exposes the payment infrastructure to possible data compromise through wire tapping and and it is critical to build adequate controls to safeguard customer and transaction information during the transaction life cycle, said the report. If magnetic stripe card and PIN is to be mandated for all point of sales (POS) transactions, then terminals will have to be modified to read the full service code on the card and prompt for PIN, suggested the report. `` If the service code on the card does not support PIN prompt, then terminals will have to be updated,’’ said the report. This has to be done by updating the application software loaded on the POS terminal. The first step prior to implementing additional controls and authentication would be strengthening the existing payment infrastructure by securing the technology infrastructure, improving fraud risk management practices across all stakeholders, and strengthening merchant sourcing process. Towards this, the some important technical and process changes for the industry to be made over the next 24 months, said the report: The industry size (defined as total credit and debit card spends value) is approximately R1,13,000 crores (includes ecommerce,IVR, MOTO transactions from Mar 2010 10 to Feb „2011. The total credit and debit card POS spends value is R88,000 crores. ATM cash withdrawals are R10,91,115 crores.  The number of debit cards is 24 crores and the number of credit cards is 1.8 crores. The total number of POS terminals is 5.6 lakhs and the number of ATMs is 70,000. The total industry lost and stolen and counterfeit card fraud is Rs. 13 crores. The fraud to sales ratio is approximately 1.4 basis points (bps). However, a trend in counterfeit card fraud is that counterfeiting typically happens when customers travel internationally. Over 99% of the total cards issued in India are magnetic stripe cards. Currently, few large issuing banks like Citibank, ICICI Bank, HDFC Bank and SBI are issuing EMV chip cards. These banks are issuing chip cards typically to customers who frequently travel internationally and to customers who have high credit limits. All these cards are used as chip and signature. None of the issuing banks have started issuing chip and pin cards.

FE

Urban co-op banks allowed to lend to self help groups

The Reserve Bank of India (RBI) today allowed urban cooperative banks (UCBs) to give loans to self help groups (SHGs), a move that will help in promoting financial inclusion in the country. "With a view to further expanding the outreach of UCBs and opening an additional channel for promoting financial inclusion, it has been decided to allow UCBs to lend to SHGs and Joint Liability Groups (JLGs)," an RBI notification said.  The central bank in its recent monetary policy had proposed to allow UCBs to lend to the two segments. Lending to SHGs and JLGs would be considered as normal business activity of the bank. UCBs will be required to frame a comprehensive policy on lending to SHGs and JLGs. The maximum amount of loan to SHGs should not exceed four times of the savings of the group, the RBI said. It further said JLGs were not obliged to keep deposits with the bank and hence the amount of loan granted to them would be based on their credit needs and the bank's assessment of the credit requirement. SHGs are micro entrepreneurs having homogeneous social and economic background who voluntarily come together to save small amounts regularly and mutually agree to contribute to a common fund to meet their emergency needs. The main purpose of JLG is to facilitate mutual loan guaranteeing and execution of joint liability agreement, making them severally and jointly liable for payment of interest and repayment of loans obtained from the bank.

BS

Growth moderates

Are the RBI and North Block ignoring the ghost of a slowdown lurking round the corner?  

A GDP growth of 8.5 per cent for 2010-11 — as against 8 per cent and 6.8 per cent in the preceding two fiscals — makes the global economic slowdown that dragged the Indian economy along in its wake seem like a distant memory. Juxtaposed with an annual wholesale price inflation of 8.7 per cent in April, an 18.5 per cent year-on-year rise in non-food advances by banks and a credit-deposit ratio touching 75 per cent, it would provide some ground for the policymakers' current focus on reining in prices even at the expense of growth. This stance is further reinforced by the fact that the Reserve Bank of India's (RBI) repo or short-term lending rate of 7.25 per cent now — for all its recent measures at monetary tightening — is still well below the August 2008 peak of nine per cent. And that was just before the collapse of Lehman Brothers happened, when high inflation rates and skyrocketing global commodity prices were threatening to derail growth itself. A similar situation exists today, making the case for according priority to inflation control quite compelling, even if it entails some moderation of growth. Critics of the above view, however, argue that the growth moderation has already set in. This would be apparent if one looks not at the 8.5 per cent GDP growth for the whole of 2010-11, but at the year-on-year increases over successive quarters. These have, indeed, ‘moderated' from 9.4 per cent during January-March 2010 to 9.3 per cent, 8.9 per cent, 8.3 per cent and 7.8 per cent in the subsequent quarters. Moreover, manufacturing growth stood even lower at six per cent and 5.5 per cent in the last two quarters, while gross fixed capital formation — an indicator of investment activity — rose by a measly 0.4 per cent during January-March 2011 over the corresponding period of 2010. Seen with other industry-specific data — a 1.1 per cent year-on-year decline in cement output in April, sluggish car sales and rising stock of unsold built-up homes across major cities — the latest national income estimates would appear to vindicate the critics' fears. That raises the fundamental issue of timing: Till a year ago, if not less, the RBI and the Finance Ministry were clearly behind the curve in addressing inflationary concerns, attributing them to temporary supply-side factors. Now, the danger is of their being behind the curve on growth and ignoring the ghost of a slowdown lurking around the corner. If the past is any guide, rebuilding investor confidence once dented is never easy and policymakers must, hence, be wary of a mid-1990s-like monetary tightening that could choke growth. The right strategy is to persist with moderate policy rate hikes (which will signal the RBI's continued alertness on inflation) and with no let-up on fiscal prudence (which will help maintain confidence among investors).

Business Line

Banks can debit salary a/cs for credit card dues

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International banks in emerging markets

The presence and growth of foreign banks in emerging markets pose important challenges, both for these countries and the international financial system. Yet, the debate on banking re-regulation ignores the implications of developments in the emerging economies......

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RBI sets new rules to prevent fraud

Money can corrupt a man's mind. If he sees too much of it floating around, he'd probably want to grab a handful of it. Take for instance the banking business. It's a place that's constantly dealing with huge sums of money. Think about the huge risks associated with it. It is no wonder that time and again banking frauds by rogue employees have led to major bank collapses. In India, just a few months back, the relationship manager at the Gurgaon branch of Citibank India was found to be involved in a multi-crore fraud. The risks will never go away. What one can do is build robust systems with effective controls and checks. Our esteemed central bank, the Reserve Bank of India (RBI) has chalked out new set of rules for banks that would help prevent frauds and irregularities. The RBI has directed banks to frame staff rotation and leave policies for employees working in sensitive areas of the banks such as the treasury department and also relationship managers handling the accounts of high-value clients. Staff rotation and leave policies are popular international practices that enable banks to keep a tab on the decisions taken and work handled by their employees. Such practices help create proper checks and act as deterrents against any wrongdoing that employees may be tempted to be part of. According to a notification by the RBI, these new rules have been introduced on the back of certain forensic studies at some banks due to the "occurrence of large value frauds or sharp increase in number of frauds at such banks". Additionally, the central bank has asked private and foreign banks to appoint chief of internal vigilance (CIV) officers. The responsibilities of these officers would be akin to those of chief vigilance officers in public sector banks. We believe that the RBI's move has been timely and will go a long way in strengthening the Indian banking system. By Equitymaster – India's leading 'independent' equity research initiative. Trusted by over a million members all over the world, Equitymaster is known for its well-researched, unbiased and honest opinions on the Indian stock markets.

http://in.finance.yahoo.com/news/RBI-sets-new-rules-prevent-equitymaster-136379224.html?x=0