Online banking poses challenges: RBI’s Padmanabhan



New Executive Director responsible for the IT, payment and settlement systems and foreign exchange department discusses challenges of online and telephone banking



At the Annual Conference on Secure Banking in Mumbai on Friday, G Padmanabhan, who became Executive Director of the IT, Payment and Settlement Systems and Foreign Exchange Departments at the Reserve Bank of India this month, spoke about online banking. "In the IT-enabled banking environment, it has to be recognised that fraud possibilities have assumed international dimensions," he said of the growing security fears. "Ranging from password hacking, card copying [and] cloning to data and identity theft at various levels of transaction, information storage as well as the transmission stage, managing security is more challenging in online and phone banking as compared to other delivery channels," he said. Padmanabhan warned of innovative methods of hacking and stealing coming to the fore regularly and warned that "the industry has to take prompt action to safeguard business and customer interest". He mentioned the reserve bank's new system of alerts for all card transactions. "Such a system will surely help in containing frauds," he said, and urged banks to make the system effective by "ensuring that the customers are persuaded to register their mobile phone numbers for receiving the alerts".

http://www.centralbanking.com/ 

Do the Subbarao-Gokarn duo know something we don’t? – Latha Venkatesh




The RBI has been focusing on core, or manufacturing, inflation?   

 

A few days after the credit policy was announced last Tuesday, the market is still scratching its head over what pushed the otherwise dovish Duvvuri Subbarao - Subir Gokarn combine to push interest rates up by 50 basis points (100 basis points make 1 percent). The RBI governor and deputy governor had gone with a 25 basis points hike on 16 June and the data since then has, if anything, shown non-food inflation to be a tad lower and growth to be a lot under strain. Gokarn has, in the past, frequently referred to the ease with which companies pass on input prices to customers as an indicator of pricing power – which is inflationary. However, an analysis of the first 43 company results by Morgan Stanley (i.e. the companies tracked by them), suggests otherwise. The data show that margins have compressed on an average by 200 basis points. In consumer staples, it is even more – by 633 basis points. Isn’t this an indication of pricing power or the lack of it? The RBI has been focusing on core, or manufacturing, inflation. This too showed a slight decline from 7.3 percent in May to 7.2 percent in June. Given these arguments, the market is wondering if the RBI knows something that it does not. The food inflation numbers released on Thursday may already have been known to the RBI. The newspaper headlines only noted the fall from the previous week to 7.33 percent from 7.58 percent. But this happened because the 7.33 percent rise came on top of the 18.56 percent jump in the corresponding week of 2010. So the RBI clearly is worried over inflation. It is probably expecting the July Wholesale Prices Index to be worse than in June, which came in at 9.44 percent. But even this does not appear to be a sufficient cause for it hawkish rate stance. There are clearly other worries down the line. The RBI probably is certain that electricity tariffs will be raised in a few months’ time. In fact it was the RBI which escalated to banks and the Union Finance Ministry the sorry state of State Electricity Board finances. Maybe that is why it has pencilled in double-digit inflation almost until October and a raise in forecasts for March 2012 to 7 percent. On the other hand, it is also possible that the RBI is genuinely incensed by the inability of the government to take tough fiscal decisions on disinvestment, foreign investment or even taxes and expenditure cuts. Hence the strongly worded message: “In the absence of complementary demand and supply side action from the government to curb inflation, monetary policy has had to do more.” But RBI on its own can’t possibly chase the headline WPI figures for long. It is eminently likely that headline inflation will continue to rise even after growth well and truly slows. That will be because of the relentless rise in global commodity prices on account of the cheapening of the dollar. What will the RBI do then? What’s puzzling about the Subbarao-Gokarn reaction pattern is that last year, despite numerous criticism, they ignored inflation to stoke a growth that was alright anyway. Now, when the ignored half of the equation is acting up (zooming inflation), they are focusing on it to the point of ignoring growth. Last year they were behind the curve on inflation. Now they appear to be behind the curve on growth.  Unless, of course, they know something we don’t know.

Latha Venkatesh is the Banking and Commodities Editor at CNBC TV-18. As a key anchor with the channel, Latha is a keen observer of the monetary policy space. She has kept close watch on the Reserve Bank of India’s policy formulations and developments in the banking industry. She also tracks money market and macroeconomic trends.

Firstpost

RBI officials reportedly face sexual harassment charges

The decision to raise interest rates by an unexpected 50 bps wasn't the only closely-guarded secret in the Reserve Bank of India. There is something else that the central bank may choose to keep it under wraps forever. But the word is out that two senior RBI officials  are battling charges of sexual harassment. One of the complainants, say insiders, is a trainee.  The fate of the two officers will possibly depend on the findings of an internal RBI panel that is expected to look into the matter. A year ago, a senior official in RBI was forced to resign when a friend and colleague for years turned hostile. Minor irritants, some say, for a staid, conservative organisation with the task to rein in inflation.

ET

RBI aiming to extend banking facility to all

As part of its plans to provide access to banking facilities to more people, the Reserve Bank of India (RBI) was working on a three-year financial inclusion plan, said Uma Shankar, Regional Director of the bank. Addressing a meeting of senior officials of the Karnataka Vikas Grameena Bank (KVGB) here on Wednesday, Ms. Uma pointed out that even 40 years after bank nationalisation, 60 per cent of the population had no bank accounts and many did not get loans.  The RBI aimed at including every citizen in the country's banking system, she said. “Where branches cannot be opened, RBI has asked banks to engage business correspondents, moving with biometric devices, to extend banking services to all adults,” she said. “The RBI plans to bring the entire population within the banking fold by 2015. Even villages with a population below 2,000 should get banking facilities,” she said. Vasudev Kalakundri, General Manager KVGB; G. Ramanathan, General Manager, SyndicateBank; A.K. Bhattacharya, General Manager, RBI; and Muralinath Gupta, General Manager, KVGB were present.

HBL

New series of Rs five, Rs two coins

Chennai, July 29 (PTI): The Reserve Bank of India will soon put into circulation new series of coins of Rs two and Rs five denominations. An RBI press release said The Rs two coin would have on the obverse side, the lion capitol of Ashoka Pillar with the legend 'Satyameva Jayathe' (in Hindi) flanked on the left periphery with the word Bharat (in Hindi) and on the right periphery flanked with the word INDIA in English. the face of the coin would have the denomination 2 in international numerals, flanked on the left and right periphery with the floral design. The upper periperhy would have the Rupee symbol and the year of minting in international numerals shall be on the lower periphery. It said the face of the Rs five coin on the obverse would have the lion capitol of Ashoka Pillar with the legend Satyameva Jayate (in Hindi) inscribed below, flanked on the left periphery with the word Bharat (in Hindi) and on the right periphery flanked with the word INDIA in English. the face of this coin on the reverse would bear the denominational value 5 in the international numerals flanked on the left and right periphery with the floral design. the upper periphery would bear the Rupee symbol and the year of minting in international numerals shall also be shown on the lower periphery. The existing Rs five and Rs two coins in circulation shall also continue to be legal tender, it said.

IBN Live

Raise minimum capital requirement for micro finance institutions say experts

New Delhi: Industry experts today called for raising the minimum capital requirement of Rs 5 lakh for micro finance institutions (MFIs) to avoid influx of operators. At the same time, definition of micro credit needs to be worked out clearly when the Micro Finance Institutions (Development and Regulation) Bill 2011 is placed in Parliament, they said at a roundtable discussion organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM). The new law should spell out prudential norms for deposit and thrift collections besides a firm and transparent regulatory framework. Experts said the bill on MFIs is a positive development as the industry has been clamouring for a technology-backed regulatory environment over the past many years. India is one of the largest micro finance loan market in the world with the sector having potential to grow at an annual average of 50 per cent, and attracting domestic and foreign investors hoping to practice profitable philanthropy. Once the new law is in place, said experts, inflow of funds from banks will increase. The recent RBI intervention by constituting Malegaon Committee is a progressive step to regulate the sector and tackle issues like cost of raising funds, interest rates, loan ticket size, repayment options and high operating costs due to door-to-door step facilities. Micro finance loans in the country serve as the last-mile bridge to low-income population estimated at 600 million which is excluded from traditional financial services system and seeks to fill the gap. Industry leaders said the introduction of multi-purpose national identity cards is expected to revolutionise the micro-finance sector by bringing down transaction costs. Bigger financial institutions with huge funds do not find commercially feasible to lend to the poor as they cannot offer anything as collateral security. Though micro-finance in the organised sector is still at nascent stages, it can metamorphose into a bigger activity if given the right fillip. The present quantum of micro-finance can be enhanced by sustained efforts on the part of financial institutions, self help groups and interested NGOs. The issues of alternate funding, reduction in operating costs, restricting indebtedness and income criteria need to be fine-tuned and supported for healthy and vibrant growth of micro-finance institutions, said the experts. The ultimate purpose of micro-finance has been to provide small ticket size credit to the most vulnerable sections of the society – more specifically to women. It has been able to generate employment as well as income to larger sections of the lowest strata of the pyramid. Among those present in the discussion were Mr P.K. Jain, chairman and managing director of The Malt & Company, Mr Samit Ghosh, managing director of Ujjivan Financial Services, Mr Suresh Krishna, managing director of Grameen Financial Services, and Mr Jyotirmoy Jain, advisor and head of ASSOCHAM’s banking and finance division. Some experts said the bill should have provisions to keep away objections from states.

orissadiary.com

A burst of energy

There seems to be a newfound urgency in government—at last. Consider the evidence. The ministry of rural development on Friday unveiled the draft Bill on land acquisitions, one of the most contentious issues in India right now. Earlier, we have seen a modest increase in fuel prices, clearances for two major deals involving multinational investment (Reliance-BP and Cairn-Vedanta), a fresh push towards foreign investment in modern retail, and getting in Bihar finance minister Sushil Modi to head the panel on the goods and services tax. There was also no public pushback from the finance ministry when the Reserve Bank of India raised interest rates by a stiff 50 basis points this week to fight high inflation. These are positive signals, but amount to tentative moves that kept getting postponed at various points of time since 2004. The policy paralysis is costing India dear.

Mint

Lending rates shoot up post RBI rate hike, FDs to shine

Within days of the stiff hike in key rates by the central bank, lenders pass on the burden to borrowers to protect their margins

Mumbai :  Countering the 50 bps hike in key rates by the Reserve Bank of India (RBI), about half a dozen banks, including Punjab National Bank (PNB), IDBI Bank and Central Bank of India raised their lending and deposit rates by up to 1.5%. Leading public sector lenders Central Bank of India, IDBI Bank, Punjab National Bank (PNB) and Oriental Bank of Commerce (OBC) raised their rates. While all loans, including home and auto will become expensive, depositors will get better returns on their savings. While Central Bank of India, IDBI Bank and PNB announced an increase of 75 basis point in their base rates, OBC hiked its base rate by 50 bps. Base rate is the minimum lending rate below which banks cannot lend to their best borrowers. Post the increase, the base rate of the four banks stand at 10.75%. An IDBI statement said, " the hikes have been undertaken " keeping in view the measures announced by RBI, inflation and liquidity scenario." IDBI also hiked its Benchmark Prime Lending Rate (BPLR) by 75 bps to 15.25%. The BPLR of PNB has been hiked by 75 bps to 14.25 per cent while OBC's BPLR stood at 15%. Both IDBI and Central Bank of India said the hikes are effective August 1. On July 26, RBI had increased its short- term lending and borrowing rates by a higher- than- expected 50 bps to 8 percent and 7 percent respectively, saying inflation is the biggest threat to the economy. The very same day private sector banks had raised its rates by 50 bps. Central Bank, which declared a 17 percent drop in Q1 results to Rs 281 crore today on higher provisioning, also increased its prime lending lending rate by 50 basis points to 15 per cent.

Deposit rates only reason to cheer

On deposit rates, a Central Bank of India official said they have increased their rates by 40 basis points in the short term category, leaving the rest unchanged. IDBI Bank increased its deposit rates by 25 to 150 basis points in different maturity buckets, a statement issued here said. The interest rate on term deposit between 91- 179 days of OBC will now earn 8 per cent from existing level of 7 per cent, an increase of 100 basis points. Earlier, Bangalore- based Canara Bank (50 basis points) and Bank of India (75 basis points) too had raised their base rates. Earlier this week, the RBI raised the short- term lending ( repo) rate by 50 basis points to 8 per cent and the short- term borrowing ( reverse repo) rate to 7 per cent in a bid to tame inflation. Subsequently, the interest rate under the Marginal Standing Facility, an additional borrowing window, has gone up to 9 per cent from the earlier level of 8.5 per cent. More banks are likely to announce interest rate hike in the next few days as cost of funds has gone up following increase in key lending rates by the central bank.

FPJ