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Wednesday, September 7, 2011
Wall collapse: BMC writes to MPT, RBI
The Sewri incident on Saturday that crushed 5 children to death has started alarm bells ringing and woken- up government agencies from their slumber. BMC has now written not only to MHADA asking to survey the same site, but also to Mumbai Port Trust ( MPT) and Reserve Bank Of India ( RBI) citing dangerous buildings in their areas. " MPT has many godowns around areas like Sewri, Haji Bunder and Kolsa Bunder that are dilapidated and dangerous. We have written to them to survey these properties and take preventive action. The RBI has one building at Chaar Raasta, opposite Fatima High School. We have written to engineers and estate departments of these agencies. It is the duty of local authority to alert the property owners, private or otherwise, to survey their properties to avoid incidents like the one that happened at Sewri," said Harshad Kale, ward officer, F/ South ward. This letter is sent only because we are the concerned local authority" Kale added.
FPJ
Moneylife Foundation sends memorandum on TDS to the FM RBI
...The memorandum has been sent to the Pranab Mukherjee, Finance Minister, RS Gujral, Finance Secretary, DK Mittal, Banking Secretary, Dr D Subbarao, Governor, RBI, Kishori Udeshi, chairperson, Banking Codes and Standards Board of India (BCSBI), Dr KC Chakrabarty, Deputy Governor, RBI and MD Mallya, chairman, Indian Banks' Association (IBA).......
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TDS certificates should be sent to customers: RBI to banks
The banking regulator today announced 10 points that banks must work on to improve services for customers
The Reserve Bank of India (RBI) today announced that banks must issue certificates for tax deduction at source (TDS) duly completed, for account holders, and dispatch to their mailing addresses. This was one of the decisions taken at its annual conference on banking ombudsman that was held on Monday. The RBI also listed nine other action points to improve bank customer services, which includes pre-payment charges on floating rate mortgages, providing customers a view of account using technology and creating awareness of the banking ombudsman scheme. TDS has been a big harassment for customers and not too long ago Moneylife Foundation had sent a memorandum on the TDS matter to the finance ministry and the RBI on the issue. The memorandum to the RBI highlights the TDS problem for bank depositors and suggests that income from fixed deposits should be exempt from tax. It also proposes that banks found to be deficient in services, wrongful deduction of tax, not providing accurate tax certificates, or uploading inadequate or wrong information, should be awarded exemplary punishment either by the banking ombudsman or the RBI. Among the other issues that have been listed is the need to provide a long-term fixed rate housing loan, compensation for loss due to unauthorised transactions through ATM/Internet and proper monetary compensation for mental harassment suffered by the customer. The RBI stated that "banks must not recover pre-payment charges in floating rate loans. Banks may offer long-term fixed rate housing loans to their customers and address their asset liability mismatch (ALM) issues by recourse to the interest rate swaps market. Floating rate loans pass on the interest rate risk from banks which are much better placed to manage it, to borrowers and, thus, banks only substitute interest rate risk with potential credit risk. The bank will, however, be free to recover / charge appropriate pre-payment penalties in the case of fixed-rate loans." The Indian Banks' Association (IBA) has been asked to standardise the most important terms and conditions of at least 10 important banking transactions and circulate among banks for adaptation. It also said that banks should initiate the process of providing one view of the bank account, including deposits, loans, etc, using technology such as core-banking solutions and complete this within a year. The RBI said that "under the Banking Ombudsman Scheme, banking ombudsmen will annually share with the local media, information regarding complaints received and resolved, including important cases and awards given," towards creating awareness. On disputes in ATM/Internet-based transactions, the RBI said, "In the event of any monetary dispute involving the customer and the bank, the onus should be on the bank to prove the customer's negligence or mistake. The customer must be compensated for losses arising out of customers' non-authorised transactions." The action points lists the need for creating awareness of customer services in banks through a series of events to be conducted by the RBI, in which bank customers, bank officials and banking ombudsmen will participate. The RBI also highlighted the issue of monetary compensation for mental harassment suffered by bank customers and it is examining the issue along with the IBA. "Issues that may receive attention in the analysis would be whether only actual loss should be considered for compensation, whether mental harassment issues can be codified for compensation, and whether compensation should be capped, or whether the policies of the banks' boards on compensation should include mental harassment as a ground for compensation," the RBI stated. It has also asked banks to initiate steps to incorporate in their code of 'Fair Practices to Customers', insurance of some reasonable amount on their customers' credit and debit card transactions, providing periodical loan statements to small borrowers, and conveying to borrowers information on the annualised all-in cost (annual effective rate) on their loan accounts. The RBI has also asked banks to give their views on the recommendations of the Damodaran Committee for immediate implementation. Moneylife
RBI Special Investigation Cell To Deal With Bank Corruption
Special investigation cell in the banking supervision department of RBI has been set up to deal with complaints of corruption in the public sector banks. Replying supplementaries in the Lok Sabha on 26th August, the Finance Minister Mr. Pranab Mukherjee said apart from this officer in the Cabinet Secretariat will also examine the complaints received against Board level appointees of public sector banks. Mr. Mukherjee explained that the nature of complaints against Board level appointees include allegations of writing of loans, taking over of accounts, other banks and irregularities in grant of advances. He said the abuse of official position and possessing disproportionate assets by them are also being investigated. He informed the House that Central Vigilance Commission took up 235 anonymous complaints for verification in the last four years.
http://www.currenteventsworld.com/categories/details/business-and-economy/rbi-special-investigation-cell-to-deal-with-bank-corruption.htmlChinese bank ICBC gets licence to operate in India
The Reserve Bank of India (RBI) on Monday granted license to Industrial and Commercial Bank of China (ICBC) to set up commercial operations in India. ICBC is the world's largest lender by market capitalisation. The licence to ICBC comes just ahead of proposed discussions between the two countries on "strategic economic dialogue". ICBC could be just the first of four Chinese banks to enter the Indian markets. China has been pressing for regulatory approval to start commercial operations on the grounds of the "reciprocity principle". Four Indian banks -- State Bank of India, Bank of Baroda, Bank of India and Canara Bank -- have a branch each in China. ICBC is one of China's big four, which includes Bank of China, China Construction Bank and Agricultural Bank of China. India and China had signed a memorandum of understanding (MoU) during Chinese Premier Wen Jiabao's visit, which would allow Chinese banks to set up branches in India.
India Today
Current SLR, CRR still considered high - RBI chief
The minimum mandatory amount of deposits that banks need to set aside to invest in government bonds need to come down gradually, said Indian central bank Governor Duvvuri Subbarao on Tuesday, sparking concerns of excess supply of gilts in the secondary market. The Reserve Bank of India (RBI) has mandated banks to set aside a portion of their deposits as statutory liquidity ratio (SLR) or the minimum amount it must hold in gold, cash or government bonds. In addition, banks have to set aside a portion of their deposits as cash with the central bank, a requirement called the cash reserve ratio. These reserves can act as a liquidity buffer for banks during crisis time. "SLR at 24 percent, CRR at 6 percent is still considered high. At some point it (CRR, SLR combined) was 65 percent and now it is 30 percent," said RBI Governor Duvvuri Subbarao in his address at the National Finance Symposium organised by the Indian Institute of Foreign Trade. "It is our objective in RBI to bring it down but in a calibrated way." Government bond yields rose after Subbarao's comments on the need to lower SLR on concerns that such a move could prompt banks to offload some of their bond holdings. The minimum regulatory requirement acts a captive demand for government bonds. The 10-year benchmark bond yield rose by one basis point to 8.29 percent after the comment. It closed at 8.28 percent on Monday. "Though it is RBI's medium term goal to reduce SLR and CRR, in a knee-jerk reaction, yields went up as they (traders) were worried that RBI may cut SLR to infuse liquidity," said a dealer at a foreign bank. Currently banks' overall holding of SLR bonds is around 29 percent, according to analysts. The central bank had last reduced the SLR by one percentage point to 24 percent, effective Dec. 18, 2010, to ease acute tightness in liquidity. Subbarao said that the SLR requirement had help protect Indian banks during the global credit crisis and the new global banking rules under Basel III have a provision which mimics the SLR rule. Yet, the central bank chief said that some reduction in the ratio may be needed. "We should bring it (SLR) down so that credit is available and so that private sector is not crowded out," Subbarao said on the sidelines of the event. The RBI has also not tinkered with CRR since April 2010, when it had last raised the reserve ratio by 25 basis points to 6 percent. The RBI governor also said that the central bank is looking at relaunching inflation indexed bonds. "We are looking at reintroducing inflation indexed bonds. One concern of course is, in a period of relatively high inflation that we now have, whether it will be successful. We will think through this, but we will certainly introduce it." Inflation indexed bonds are floating rate bonds linked to the inflation rate and such bonds help investors to shield their investments from mark-to-market volatility. However, an investor will be interested in buying such bonds only when they expect inflation to rise further going ahead unlike now, when most expect prices to cool off in next few months.
Moneycontrol
‘CRR, SLR must be reduced in a calibrated manner’
HBL
FIEO, GNI launch international trade management course in Gujarat
In a bid to boost the buoyant export industry in the state, the Federation of Indian Export Organisations (FIEO) has partnered with Ahmedabad-based Global Network Institute (GNI) to launch a short duration course on International Trade Management Course at Ahmedabad. The course titled 'Certified International trade expert' (CITE) is an outcome of an Memorandum of Understanding (MOU) signed between the the apex body for exports, FIEO and Global Network institute, that was signed in July earlier this year. Some of the broad areas that will be covered in the short duration course are as processes involved in import- export, documentation for the same, the custom excise guidelines to follow, the role of RBI and its pertinent guidelines, technology transfer and also on how to develop the export market.
BS TEASER LOANS TO ATTRACT ADDITIONAL PROVISIONING: RBI
The Reserve Bank of India (RBI) said today loans that are fixed in the initial years and become floating later would be considered as teaser loans and banks must make provisions as mandated by the regulator. “Interest rates that are a mixture of these two (fixed and floating) are called teaser rates,” said K C Chakrabarty, deputy governor, RBI. “If there are rules, they (teaser loan products) will attract additional provisioning,” he added. He, however, clarified that such products are legitimate and the regulator has not banned such products but only laid down rules to provide for such loans. RBI had in October 2010, increased the standard provisioning requirement by five times to two per cent for teaser or dual loan products, as compared to other categories. Following this mandate, State Bank of India and Housing Development and Finance Corp had to withdraw their dual-rate home loan schemes. However, last month, India’s largest private sector bank, ICICI Bank introduced two home loan products, with interest rates fixed for one and two years respectively. The country’s largest mortgage finance company, HDFC followed suit which announced a dual-rate scheme on Monday, offering home loans at a fixed rate for the initial three or five years and at a floating rate thereafter. While increasing the provisioning on such products, RBI has defined the teaser products as loans, offered at a comparatively lower rate of interest in the first few years, after which rates are reset at higher rates. Bankers argue that in the recent schemes the fixed rate offered in the initial years are at par with the current market rates. They also said the floating rates on these products are linked to the base rate and any cut in the minimum lending rate will also reduce the floating rates in coming years. Hence, the new products will not require higher provisioning. A mixture of fixed and floating interest rates is called teasing. Such loan products are legitimate and the regulator has not banned them, but only laid down rules to provide for such loans.
BS
Banks mustn't levy pre-payment fee for floating loans: RBI
... In the Ombudsman conference, RBI Governor D Subbarao said, "Prevention is better than cure. So, rendering good customer service is like 'prevention' and is better than the 'cure' which is the various grievances redressal mechanisms."......
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'No pre-payment charge on floating rate bank loans'
Mumbai: To help common people better manage their borrowing costs in view of fluctuating interest rates, banking ombudsmen have asked all banks not to levy any fee for pre-payment of floating rate loans. "Banks must not recover pre-payment charges in floating rate loans," said an action plan prepared by the ombudsmen at a meeting here Monday. Most banks levy pre-payment charges on loans, including floating rate loans. The banking ombudsmen, after their annual conference here at the Reserve Bank of India (RBI), said banks should not levy pre-payment charges because they were better placed to manage interest rate risks than customers. "Floating rate loans pass on the interest rate risk from banks, which are much better placed to manage it, to borrowers and, thus, banks only substitute interest rate risk with potential credit risk," according to a statement released by the RBI Tuesday. The banks will, however, be free to charge appropriate pre-payment penalties in the case of fixed rate loans, it said. The banking ombudsmen's conference, chaired by RBI Deputy Governor K.C. Chakrabarty, suggested 10 action points to improve customer service. It said in the event of any monetary dispute involving the customer and the bank, in case of ATM or Internet-based banking transactions, the onus should be on the bank to prove the customer's negligence or mistake. "The customers must be compensated for the losses arising out of transactions not authorised by them," it said.
http://twocircles.net/2011sep06/no_prepayment_charge_floating_rate_bank_loans.htmlRBI asks banks to strictly follow SCSS instructions
The Reserve Bank of India (RBI) has directed all banks to strictly follow instructions under the Senior Citizens Savings Scheme (SCSS) and ensure that benefits reach retired army personnel, Parliament was informed today. "RBI has issued instructions to all agency banks on June 9, 2011, for strictly adhering to existing instructions and ensuring extension of benefits of the scheme to the retired army personnel," Finance Minister Pranab Mukherjee said in a written reply to the Rajya Sabha. In May 2011, the government received a complaint from a retired defence officer regarding non-implementation of the SCSS by banks, due to non-receipt of relevant instructions from RBI on the eligibility criteria of investment by ex-service men. Mukherjee said in response to the complaint, the government had written to RBI on May 20 this year for issuing necessary instructions to all banks operating SCSS. RBI has, however, informed that all instructions received from the government pertaining to the Scheme, from time to time, have been circulated to all banks for implementation, he added.
Moneycontrol
New teaser home loans will benefit banks more than you
When the State Bank of India launched its so-called teaser loans – called teasers because they carried low fixed-rates in the initial one or two years, and adjusted upwards later – the Reserve Bank of India frowned. .......
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Insurance for your bank deposits
Deposits held in joint accounts in more than one branches of a bank will also be treated as single holding if the names of the holders appear in the same order in all these accounts. Interestingly, if the order is changed, then they will be considered as held in a different capacity and different right. Therefore, the protection cover will be applied separately......
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Minimum support price? It’s all wishful thinking, says RBI
Clearly, agriculture has been plagued by several problems. K C Chakrabarty, RBI Deputy Governor, says the sector suffers from four major problems: declining yields, low productivity, regional disparities and inappropriate food stock management...........
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High bank interest rates dent small savings corpus
...A committee constituted under former RBI Deputy Governor, Ms Shayamala Gopinath, recommended revising the interest rate on various small saving schemes. Now with the RBI raising interest rate on saving bank account from 3.5 per cent to 4.0 per cent, effective May 3, 2011, the spread between the bank savings deposit and term deposit rates had widened significantly.....
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Banking licences
RBI issued draft guidelines on new bank licences to business houses recently saying it was a move to increase competition in the sector and for inclusive growth. There is enough competition already, and no more competition is rightly envisaged in policy. The state of PSBs needs to be relooked. They should be provided sufficient capital and should address the HR problems on an urgent basis. The number of branches are to be increased and unbanked areas are to be narrowed down. As far as the inclusive growth factor is concerned, the manner in which PSBs are involved in rural areas, that is not the case with other private players and hence the factor needs more effective redressal than in its current form. The Indian banking industry, with its more conservative approach, has stood tough in sailing through many odds in recent times. We need to maintain it rather dissolve the same.
Sreeram Puppala, Chandigarh (FE)
India's GDP growth: Real or Statistical?
The Reserve Bank of India (RBI) has tried, in vain, to reign over the rising inflation. The Indian central bank has raised key lending rates 11 times since March 2010. But that has only arrested economic growth. And the evidence is beginning to show clearly.....
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Abandon idea of allowing corporates to open banks: CPI to govt
New Delhi: The CPI Tuesday asked the government to "abandon" its idea of allowing the corporates to open banks saying the decision was a "naked step to appease" big business and surrendering to the "pressures" of IMF and World Bank. The RBI's recent draft guidelines on the proposed New Bank Licensing Policy is "an open surrender to the pressures of IMF and World Bank and a naked step to appease the industrial houses and big business companies in India", the CPI Central Secretariat said in a statement here. It said the government had "not learnt lessons from the recent global economic crisis in which hundreds of private banks collapsed. World over, the experience of industrial houses running banks has been bitter". But the UPA government was "so keen to hand over banking business to these industrial houses with a meagre capital of Rs 500 crore unmindful of its implications and consequences", it said. Opposing the "retrograde" policy, the CPI asked the government to "abandon this idea in national interest", noting that over 10 lakh bank employees recently struck work in protest against this policy. The CPI-M also has opposed the government's decision, saying it was a "completely irrational and retrograde" move that would cause "incalculable damage" to national economy. Referring to the "bold decision" of Indira Gandhi to nationalise banks, CPI said the private-run banks then "never contributed to basic economic development and were confined to using the banks to build their own empires. There was so much of abuse and misuse of people's money". Maintaining that the party and its trade union had in the 1960s conducted powerful struggles to demand nationalisation, it said since then, public sector banks have played a significant role in catering to the needs of the economy and the common man.
zeebiz.com
RBI Plans to Reintroduce Inflation-Indexed Bonds
MUMBAI -- The Reserve Bank of India plans to reintroduce inflation-indexed bonds that aim to shield investors from chronic pricing pressures, Governor Duvvuri Subbarao said Tuesday. He, however, didn't say by when the central bank would do so. "One cause of concern is that in a period of relatively high inflation, which we are in now, whether they would be successful," Mr. Subbarao said at a conference. "So we will think through this but we will certainly reintroduce them." Inflation-indexed bonds are linked to the price index and help insulate their coupon payments from inflation. Such bonds were introduced some years ago but weren't successful due to feeble market interest. Moses Harding, head of global markets group at IndusInd Bank, said the issuances at this juncture won't appeal to investors as inflation may not accelerate much higher. "These kind of products will have demand when there is a fear of runaway inflation," Mr. Harding said. But expectations are that inflation may peak during October-December, which may cull demand for such securities, he added. Inflation in July was 9.22% from a year earlier, and is likely to remain between 9% and 10% until around December before easing to 7% by March. RBI Gov. Subbarao also reiterated that the central bank aims to gradually reduce the statutory liquidity ratio, or banks' mandatory bond holding requirement. "SLR at 24% and CRR (banks' cash reserve ratio) at 6% are still considered to be high," he said. "There is an objective to bring it down in a calibrated manner." Growth in Asia's third-largest economy has been moderating due to the sustained monetary tightening by the RBI to control uncomfortably high inflation. Economists worry the central bank's aggressive anti-inflationary stance could badly crimp credit growth and lead to a sharper slowdown in the economy. "It's not that SLR should be thrown away but certainly we should bring it down so that there is credit availability and the private sector [borrowing] is not crowded out," Mr. Subbarao said. The central bank would also continue to move gradually on achieving full capital account convertibility, he said. The Indian rupee is fully convertible on the current account but only partially convertible on the capital account to protect against sudden outflows of foreign capital in times of crisis that can destabilize the economy.
WSJ
The future of microfinance looks pretty good: Vijay Mahajan
...The future is pretty good. The guidelines from the Reserve Bank of India (RBI) announced in May and subsequent draft MFI Bill by the Government of India are good signs. If you read them together, the possibility of extreme profits are eliminated. At the same time, the need for microfinance is protected.....
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