Women's bank to extend Rs 1100 cr micro loans

Sri Nidhi, the cooperative bank being launched tomorrow exclusively for women self-help groups (SHGs) and as an alternative to microfinance institutions in Andhra Pradesh, will be extending Rs 1,100 crore micro loans to its members in the first year. This is in addition to Rs 900 crore microcredit budgeted for the current financial year by commercial banks under the SHG-bank linkage programme in the state. Over 1.4 million SHG groups with close to 10 million women members, federated into mandal (MMS) and district samakhyas, are now members of this new bank. Interestingly, these organised women groups had been the primary target of MFIs prior to state government's intervention that brought MFI operations to a standstill resulting in Rs 7,000 crore of unrecovered loans since last year. The launch of the new bank for and by these SHGs under the aegis of the state rural development department is likely to make things more difficult for MFIs as Sri Nidhi will take only 48 hours to grant loan, which will effectively carry just 3 per cent rate of interest. It will also collect deposits from the members. Sri Nidhi has been created with a Rs 300 crore share capital — Rs 100 crore from the state government and Rs 200 crore from the members. The bank is mobilising the remaining funds largely by way of debt from banks and also through deposits, according to Reddy Subrahmanyam, principal secretary, department of rural development. The target of Rs 1,100 crore loan disbursement in the first year itself would mean a minimum of Rs 1 crore to be made available to each of the 1,100 mandal samakyas for sanctioning loans to individual SHGs under their jurisdiction. “We have categorised the existing mandal samakyas into four groups based on their previous performance and the credit limit available to them would be determined accordingly,” Subrahmanyam, the brain behind Sri Nidhi, told Business Standard. Many of these samakhyas are eligible for a credit limit of up to Rs 3 crore, he said. The organisation and the functioning of this bank is also unique. For, all the transactions will be made through regular mobile phones of these women groups. The technology platform used by the bank completely minimises human interface in the sanctioning process. “This is going to be the most efficient organisation functioning in the micro lending space,” he said, adding it would have minimal staff for running its day-to-day operations. While the state government will extend the interest subvention scheme under the existing Pavala Vaddi programme (3 per cent effective interest) to Sri Nidhi loans, the mandal samakhyas (MMS), the lending arms of the bank, is expected to earn income on these transactions from loan charges. 

BS

Monetary policy review: Dissent between government & RBI on further rate hike to curb inflation?

NEW DELHI: The central bank's monetary tightening has harmed growth instead of taming inflation, the country's chief economic advisor has said, sending an unequivocal signal three days before a crucial RBI rate-setting meeting that the government wants no more hikes......

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You can reject the final compensation that the banking ombudsman awards you

You can approach the ombudsman within a year of receiving a reply from the bank. In case your bank doesn’t bother to reply to you at all, you have 13 months to approach the ombudsman from the date of filing the complaint

If you take your complaint to the banking ombudsman and are not happy with the final compensation settlement it decrees on your complaint, you can reject it. If you accept the settlement, the ombudsman will pass an order. Once you accept the order, you and the bank are bound by it.

When do you go to an ombudsman?

If you complain to your bank about any dispute and the bank rejects it or doesn’t respond within a month, or you are not satisfied with its reply, you can take your complaint to the banking ombudsman. You can approach the ombudsman within a year of receiving a reply from the bank. In case your bank doesn’t bother to reply to you at all, you have 13 months to approach the ombudsman from the date of filing the complaint.

What does the ombudsman do?

The ombudsman will give an opportunity to you as well as the bank to present the case. The ombudsman will look into the case and try and bring about a settlement by agreement between you and the bank. If there is no settlement by agreement within a month, the ombudsman may fix an award. The compensation amount varies from case to case. For credit card issues, the maximum awards can go up to Rs. 1 lakh, depending on the case.

What happens if you reject ombudsman’s compensation?

If you are not happy with the compensation amount, you as well as the bank can approach the appellate authority. You will have to approach the authority within 30 days of the date of receipt of the award. You may get another 30 days, but that depends on the appellate authority. The authority can either dismiss or allow the appeal and set an award.

Things to keep in mind

Ombudsman can reject complaint: Don’t assume that the ombudsman will accept your compliant without a thought. The ombudsman can reject the complaint if it thinks there is no loss or damage or inconvenience caused to you.

Supporting documents a must: You must attach all relevant documents with the complaint you send to the ombudsman. For instance, if you are consistently getting your credit card bill after the due date and the bank is charging you a late payment fee, support your compliant with a copy of your credit card statement, the courier delivery receipt and other relevant documents.

Others: In case you have incurred a loss, mention the nature and extent of the loss in the application. You can also mention the kind of relief you are seeking. You must give a declaration that you will comply with the required conditions. 

Find the address for the ombudsman in your area at the Reserve Bank of India’s website, www.rbi.org.in

Mint 

State to have at least 40 new UCBs after changed norms

The Malegam Committee's report published by the Reserve Bank of India on Monday, seems to have opened doors for Gujarat's cooperative credit societies, which had been waiting for long to get a status of cooperative banks. Experts anticipate about 40-50 cooperative credit societies from Gujarat may opt for becoming an urban cooperative bank (UCB) after the newly issued norms recommended by the Committee. The recommendations of the committee, appointed by the RBI on licensing of new UCBs under the chairmanship of Y H Malegam said, 'the existing well managed cooperative credit societies, which would meet financial criteria like profits, capital adequacy and NPAs' proportion should be given priority for granting licenses as UCBs mainly in the unbanked or inadequately banked districts of the country. Experts from the cooperative banking circles in Gujarat informed that the state's credit societies are likely to get a boost from this recommendation. "This will restore confidence in the cooperative banking sector. Of the 5200 credit cooperative societies in Gujarat, over 100 are capable to meet entry point norms set up by the panel for becoming a UCB. But at least 40-50 credit societies are likely to become UCBs after the enforcement of the recommendations," said Ghanshyambhai Amin, chairman, Cooperative Credit Societies' Federation. He further added, "The deposits with credit societies are not insured, while those with UCBs are insured up to Rs 1 lakh. So more credit societies would try to get a status of UCB to improve their trust-worthiness and bring more customers." Gujarat has about 5,200 cooperative credit societies with a total estimated advances of over Rs 700 crore. Gujarat has witnessed one of the worst cooperative banking crisis in the past. Industry insiders maintained that it was mainly after the serious scams unearthed from Madhavpura Mercantile Co-operative Bank (MMCB) that the confidence on the UCBs started shaking. Industry estimates suggest that about ten years back the state had over 350 UCBs operating in different parts of the state, But over 100 UCBs downed their shutters after the MMCB scam. Currently, the state has 249 UCBs, which recorded a total business in excess to Rs 31,000 crore during financial year 2010. The apex body of state's UCBs. Gujarat Urban Co-operative Banks Federation (GUCBF) has welcomed the recommendations. "Some of the districts like the Dangs, Valsad and Surendranagar in Gujarat are either don't have a cooperative society or have inadequate infrastructure of UCBs. Even in the Ahmedabad district, some talukas are still unbanked. The new norms for UCBs would definitely help for the financial inclusion and strengthen cooperative banking sector," said Jyotindra Mehta, chairman, GUCBF. Uttar Pradesh, Bihar and Uttaranchal are some of the state which may see a large number of credit societies becoming UCBs. "UP has only 70 UCBs, while Uttaranchal has five. Even Bihar has poor UCB penetration. The new norms would help increase number of UCBs in these states," said Subhash Gupta, chief executive, National Federation of Urban Cooperative Banks and Credit Societies Ltd (NAFCUB). He further said that Maharashtra, which has a cooperative societies act similar to the UCBs, would see a large number of credit societies becoming UCBs in due course of time.

BS

RBI panel for turning well-run credit societies into UCBs

A panel set up by the Reserve Bank of India has proposed that the existing well managed co-operative credit societies meeting certain financial criteria like profits, capital adequacy and NPA proportion should be given priority for granting licences as urban co-operative banks (UCBs) particularly in unbanked or inadequately banked centres. Acknowledging the importance of urban co-operative banks for financial inclusion, the RBI panel suggested that new entrants should be encouraged to open banks and branches in unbanked or inadequately banked area. UCBs play a useful role and there is need for a greater presence of UCBs in unbanked districts and in centres having population less than 5 lakh, the RBI panel headed by YH Malegam said in the report.  “It is necessary to encourage new entrants to open banks and branches in states and districts which are unbanked or inadequately banked,” it said. It is equally necessary to discourage new entrants from opening branches in districts and population centres which are already adequately banked, it said. As far as capital requirement is concerned, the panel suggested minimum paid up capital of from Rs 50 lakh to Rs 5 crore depending on the area of operation.

IE

Dwindling faith in RBI

This refers to the edit “Tougher choices for RBI” (September 13). The statement “...RBI is not the only agency that is tasked with controlling inflation…” has not come a day too soon but what can be done when the Reserve Bank of India itself does not think so? Ever since inflation has reared its ugly head the Indian economic environment has only worsened, despite frequent interventions by RBI through several policy rate hikes. With all the wisdom at its command, RBI could have at least counselled the mandarins at the finance ministry on the need for fiscal discipline. Since it is not evident that RBI did so, even monetarists who firmly believed in the Bank’s strength to control inflation have been disappointed. They, too, have joined the group that believes that inflation is a non-monetary phenomenon. Supply bottlenecks and fiscal indiscipline (despite the one-time bonanza the Centre got through telecom licence auctions) are at the root of inflation in India. There is a general consensus among all experts (monetary and non-monetary) on this point, but who will bell the cat?

K V Rao, Bangalore (BS)

CISF Man Killed in Road Mishap

A CISF jawan, accompanying currency-laden trucks bound for the RBI office in Chennai, died in a road mishap in the wee hours of Tuesday. The cash from Mysore was being transported in two container lorries to the RBI in Chennai. CISF personnel accompanied the lorries in two cars. When the crew reached near Vellore at around 2.45 am, a car that was behind the lorries lost track of the vehicles due to heavy traffic. When the car reached near Vellore new bus stand, it collided with an unidentified lorry. CISF jawan Amaladoss (50) died on the spot.

IBN Live

Monitor loans to SMEs, states told

At time when growth in loans is showing signs of moderating, the Union government has asked states to closely track the flow of bank credit to micro, small and medium enterprises (MSMEs). In a communication to banks and state governments in the western region, the finance ministry said governments should closely monitor the progress of credit flow to the MSME sector. Finance minister Pranab Mukherjee would review the state-wise flow of bank credit to agriculture, housing and the MSME sector with chief ministers of western states, including Maharashtra and Gujarat, in Mumbai on Saturday. According to Reserve Bank of India (RBI) data, bank credit to the MSME sector rose 33.7 per cent, touching Rs 484,473 crore at the end of March. At Rs 362,291 crore, it had grown 41.4 per cent in 2009-10. The ministry said states should be actively involved in securing more MSME loans under the Credit Guarantee Fund Trust for Micro and Small Enterprises' credit guarantee scheme. They, together with banks, should also devise schemes for cluster/location specific industry groups to ensure greater credit flow, it said. 

BS

Capex fall seen as pvt sector ceases investing

Needless to mention that the RBI has been tightening domestic liquidity since February 2010, resulting in rising loan rates. While a slowdown in spending was to be expected, a decline in investment spends is so far not visible in related indicators.

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REC opposes NBFC norms

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Rural Electrification Corporation (REC), a government-controlled non-banking finance company (NBFC) for the power sector, has opposed the central bank’s new discussion paper on draft guidelines for NBFCs. Seeking that the status quo on NBFC norms be maintained, the lender has asked the ministry of power to intervene on its behalf on the crucial issues of higher capital adequacy ratio for Tier-I capital and on tightening the exposure limit......

Why another rate hike is needed

We believe that Subbarao should go ahead with one more rate hike of 25 basis points this week, and then watch three parameters before making his next move: whether the European sovereign debt crisis worsens, whether a global recession takes pressure off commodity prices and whether corporate margins shrink in the current fiscal year. The domestic growth slowdown right now is still a mild one......

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Another rate hike is required

... The pressure is already building up on RBI to hold its fire on Friday. Finance minister Pranab Mukherjee, his chief economic adviser Kaushik Basu and Planning Commission deputy chairman Montek Singh Ahluwalia have all separately indicated that Subbarao should not increase the policy rate on Friday.....

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High cost of holding forex reserves

...The broad conclusion (reflected even in RBI's reports) suggests that India has accumulated more excess reserves than necessary to avoid any unforeseen financial calamity in the near future. The opportunity cost of reserves holding is high for the Indian central bank, as returns from the foreign currency asset (FCA) deposits are too low, whereas the domestic interest rate is comparatively very high. This poses a couple of relevant questions: what is the adequate level of international reserves for India, and what is the opportunity cost of excess reserves?.....

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FM to review banks’ capacity to meet region-specific needs

Finance Minister Pranab Mukherjee, on September 17, will take stock of the performance of select banks and this exercise will not just be limited to financial indicators.  Re-instituting a practice he initiated during his first stint as finance minister some 25 years ago, Mukherjee will also review the banks’ capacity towards meeting region-specific needs. In the first out of a series of zone-wise meetings to be held this fiscal, the ministry has invited only the banks based in the western zone. This meeting will be attended by the chief ministers and finance ministers of six states and the administrators of two union territories located in the western part of the country.  “The idea is to assess whether region-specific credit needs are being met by the banks in these states and we have invited the states to come up with what they specifically need from the banking sector. The FM had taken a review of the overall banking sector about two months ago but this time round the agenda will be focused more on state-wise issues,” a senior financial ministry official told The Indian Express.

IE

Best Banks gear up to put best foot forward

If there’s one trophy that banks in India would give anything for, it’s an FE Best Banks Award. Over the years, FE Best Banks Awards have recognised the achievements of banks, not simply by the profits they have turned in.  Speaking about the awards, Shikha Sharma, CEO & MD, Axis Bank, whose bank has frequently been on the podium, said: “I would like to congratulate FE...for the ‘Best Banks Awards’ which has grown in reputation and stature.” In a year when new banks are around the corner waiting for an RBI nod, the FE Best Banks awards evening creates even more of a buzz among the informed. It also gives an indication of which ones will be the toughest in their pack that the new banks will have to watch out for. Banks are recognised for the quality of their balance sheets, how fast they have grown, how efficient they have been with their funds and how robust their business model is.  

IE

Rally in sight if RBI takes a breather: PN Vijay

Watch the video.......... 

Real truths about interest rates

...The natural rate of interest is an important benchmark for monetary policy. It helps the central bank to understand the impact of monetary policy on economic activity. For example, if the actual real rate is equal to the natural rate of interest, the monetary policy is more or less neutral. An upward deviation of the real rate of interest from the natural rate tends to have contractionary effect on economic activity and will have downward pressure on inflation. ...

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No black and white answers in economics: Kaushik Basu

NEW DELHI: Terming near double-digit inflation as "uncomfortable", Chief Economic Adviser Kaushik Basu today said there is no black and white answer in economics and RBI will have to balance containing price rise and promoting growth at its review of credit policy on Friday. "There is no black and white answer... RBI will have to balance out these two -- controlling inflation and not dampening growth too much," Base who is Chief Economic Adviser to the finance ministry said. He said inflation is likely to remain elevated till end of the calender year and only start moderating after December.  "I do expect December inflation to be a fairly reasonable decline. But till then it will remain choppy," he said. His comments came after inflation climbed to 13-month high of 9.78 per cent in August, from 9.22 per cent in July, on the back of expensive food and manufactured items.  The Reserve Bank of India (RBI) has already hiked its key-policy rates 11 times since March, 2010 to curb demand side inflation. It is scheduled to announce its mid-quarterly review of credit policy on September 16. Department of Economic Affairs Secretary R Gopalan said the RBI's monetary tightening had had only a limited success. The central bank has to "change from being accommodative to one of aggressively combating inflation", he added.  "The benchmark short-term policy rate was raised in quick succession from March, 2010. While this tightening has been able to anchor inflationary expectation up to a point it has had limited success in lowering inflation rates to acceptable levels," Gopalan said.  This is also the ninth consecutive month when inflation has remained above the 9 per cent mark.  While the sustained inflation is likely to put pressure on the central bank to continue with its tight monetary policy, there is concern on the growth front.  Industrial production fell to a 21-month low of 3.3 per cent in July. Besides, GDP growth also moderated to 7.7 per cent in April-June period, the lowest in six quarters.  India Inc and experts have blamed the high interest rates for increasing the cost of borrowing and said this has put pressure on fresh investments and hindered growth.  Most economists, however, said that as inflation remain at an elevated level the central bank is likely to go for another rate hike at its mid-quarterly review of credit policy on September 16. "No doubt the RBI is in a dilemma but inflation control remain its prime agenda and so we expect it to go for another hike of 25 basis points on September 16," Crisil Chief Economist D K Joshi said.

ET

RBI has had limited success in lowering inflation

The finance ministry today said the Reserve Bank's monetary tightening has had only a limited success in lowering inflation, which is hovering near the doubledigit mark by moving up to 13- month high of 9.78 % in August. " In India, the policy stance has had to change from being accommodative to one of aggressively combating inflation. The benchmark short- term policy rate was raised in quick succession from March, 2010," Department of Economic Affairs Secretary R Gopalan said." While this tightening has been able to anchor inflationary expectation up to a point, it has had limited success in lowering inflation rates to acceptable levels," he added. RBI has raised interest rates 11 times in the last 18 months to tame inflation. In July, it raised the shortterm lending ( repo) rate by 50 basis points to 8 % and the short- term borrowing ( reverse repo) rate by a same margin to 7 % to anchor inflationary expectations. Subsequently, the interest rate under the Marginal Standing Facility, an additional borrowing window, has gone up to 9 % from the earlier level of 8.5 %. There is no doubt that there are supply side constraints within the Indian economy, Gopalan said, adding that the issue of development -- particularly in the area of infrastructure and in poverty alleviation, health and education -- remain critical challenges. 

FPJ

Major Misread: Kaushik Basu, India is not Brazil

...While Basu does acknowledge that other fiscal and monetary measures must also be used, he has to know that fiscal measures from the Indian government cannot be depended on. At most, the government is likely to cut down capital spending (spending on creating viable economic assets) while keeping up revenue spending (spending on salaries and interest payments). That certainly won’t help. Trust the government to always throw the onus of growth on the RBI, while trying to escape from its own responsibility.....

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Centre, RBI to tackle rising inflation: Pranab

...Just a couple of days ahead of the Reserve Bank's monetary policy, Finance Minister Pranab Mukherjee on Wednesday said the government and the RBI together will be able to tackle soaring inflation, which he attributed to global price pressures. “It (inflation) is perilously close to double digit...RBI is also watching the situation like the government and collectively it would be possible for us to tackle the problem,” Mr. Mukherjee told reporters....

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With 9.78% inflation, RBI is boxed in; over to Pranab

...This is why Subbarao should tell the finance ministry boys to take a walk. In recent days, the ministry has been mounting pressure on Subbarao to either pause the rate hikes or even cut them. The ministry’s Chief Economic Advisor, Kaushik Basu – who has repeatedly got his inflation numbers wrong in the past – asked Subbarao to “think out of the box”......

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Inflation ‘perilously’ close to double digits, puts RBI in dilemma

Putting the Reserve Bank of India in a dilemma and adding to the worries of the government caught between a dampening growth rate and spiralling prices, headline inflation has soared to 9.78 per cent in August as against 9.22 per cent during the last month. The RBI which is scheduled to announce its mid-quarter monetary policy review on September 16, is caught in a bind as to whether it should raise interest rates further — that has hurt the growth rate — or adopt a wait-and-watch policy for tackling inflation. In the last 18 months, the RBI has raised rates 11 times. Analysts who were expecting a pause in rate hikes after the index for industrial production (IIP) dipped to 3.3 per cent in July from 9.9 per cent previously are now talking about a 25 basis points hike in the repo rate on Friday. With rising prices of food, fuel and manufactured items fuelling the headline inflation, the wholesale price index (WPI) for the month of August is at a 13-month high since July 2010, when it stood at 9.97 per cent. A worried government said that the headline inflation is “perilously close to double digit”. “The RBI is also watching the situation like the government, and collectively it would be possible for us to tackle the problem,” Finance Minister Pranab Mukherjee said. While Chief Economic Advisor in the finance ministry Kaushik Basu cautioned that “there is no black and white answer... and the RBI will have to balance between controlling inflation and dampening growth.”

IE

August inflation at 13-month high of 9.78 per cent

Inflation soared to its highest level in more than a year at 9.78 per cent. The Reserve Bank of India (RBI) is now grappling with the twin issues of controlling inflation as well as reviving falling industrial growth.  However, RBI’s balancing act between inflation and growth received a further setback this week, with industrial growth in July slipping to 3.3 per cent, a 21-month low.  Bankers expect the RBI to raise interest rates again by 25 basis points in its monetary policy review on Friday.  The Federation of Indian Chambers of Commerce and Industry (FICCI) said that the latest inflation data released by the government hides more than it reveals. Inflation has begun to taper, it said and called for the RBI to pause rate hikes.  Associated Chambers of Commerce and Industry (ASSOCHAM) said that any rate hike by RBI at this juncture will impact growth. 

The Tribune

IHC asks RBI to stop World Cup payment to FIH

...MUMBAI: Alleging breach of contract and an intended violation of the Foreign Exchange Act, the Indian Hockey Confederation (IHC) has requested Reserve Bank of India to stop payment of $500,000 by the 2010 World Hockey Cup organisers to the International Hockey Federation (FIH).IHC, claiming they had signed the original MOU for the World Cup to be held as a joint venture with FIH on November 6, 2007 before the mega event was organised in New Delhi by the Hero Honda World Cup Society, said that releasing the amount would also amount to violation of the provisions of the Foreign Exchange Act 1973......

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