RBI meet on currency management held

PATNA: The 19th high-powered meeting of the standing committee on currency management for Bihar was held at the Reserve Bank of India, Patna, on Thursday to discuss issues relating to implementation of clean note policy, customer services, and availability and retail distribution of notes and coins. The meeting also deliberated on detection-impounding-reporting of fake Indian currency notes, security arrangement at the currency chests and movement of treasure among the banks across the state. RBI Regional Director for Bihar and Jharkhand Mohit Kumar Singh chaired the meeting attended by IG, CID, Praveen Vashishtha, other police officials and senior railway officials, BSNL and department of posts and controlling heads of major banks, an RBI release said.
TOI

Credit, debit card complaints dip 26% in AP

Credit card and debit card-related complaints in Andhra Pradesh have come down to 26 per cent this year, from 38 per cent last year, according to a report on the working of the Banking Ombudsman Scheme in AP for the year 2010-11. “The claims were related to the charges, finances and disputed transactions,” M Sebastian, Banking Ombudsman (AP), Reserve Bank of India, told mediapersons here on Friday. The Reserve Bank of India (RBI)’s ombudsman scheme (2006) provides a forum to bank customers for expeditious and inexpensive resolution of complaints relating to deficiency in specified banking services. The state has received a total of 5,012 complaints this year through the banking ombudsman, as against 5,622 complaints received last year. The inflow of the complaints moderated during the year after persistent surge during the previous two years, he said. Of the total, complaints relating to loans and advances accounted for 15.22 per cent, while complaints relating to delay in disbursement of railways and defence services pension formed 11.41 per cent. The number of complaints from metropolitan areas constituted 44.03 per cent of the total complaints, followed by urban areas at 26.12 per cent, semi-urban areas at 18.6 per cent and rural areas at 11.79 per cent. “More than 30 per cent of the complaints are from rural and semi-urban areas, whereas the volume of bank transactions was more in metropolitan cities. We are putting our efforts in taking the ombudsman scheme to the remotest of villages to reach the customers,” he said. The RBI has a CTS system to help the customers in filing online complaints. The banks have taken initiatives and made arrangements to reduce the grievances. Of the total complaints, around 61.25 per cent of them had been settled, Sebastian said.

BS

Over 95% home loans are floating: RBI

With floating interest rates encompassing over 95 per cent of home loans, the Reserve Bank appointed banking ombudsman has been receiving a number of complaints from borrowers on the mounting credit risks as a result of increasing interest rates. The Reserve Bank of India, taking cognisance of the situation, is likely to instruct banks to not recover pre-payment charges on floating rate home loans and has asked the Indian Banks Association (IBA) to suggest measures that can be taken to address the issue. “Only 2-3 per cent of the loans are fixed rate loans today. Even though interest risk is managed by banks, the risk is ultimately forced on the customer in a rising interest rate scenario,” Rajeshwar Rao, Chief General Manager, RBI and Banking Ombudsman New Delhi area said on Tuesday. 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.  If a decision on this comes through it will be for both own source funds and borrowed source funds of banks.  The IBA has sought time to respond and is expected to give its view by month end.  Towards providing relief to customers facing problems with credit card transactions, the RBI has asked the ombudsman to place the onus of proving customer negligence on the banks and also to compensate the customers for losses arising out of unauthorised transactions. Some of the other measures being taken under the banking ombudsman scheme of the RBI include providing compensation of up to Rs 1 lakh for mental harassment due to inflated or wrongly computed credit card bills by banks. However, clear guidelines on this are yet to emerge on account of the subjectivity of the matter and the RBI and IBA are both working on it. According to data released by the RBI for the Delhi region (including New Delhi, Ghaziabad, Noida, Jammu & Kashmir and Haryana), over 10,500 complaints have been registered between July 2010 and July 2011. Maximum number of complaints in the region relate to the State Bank of India followed by ICICI Bank and HDFC Bank that are the three major banks operating in this region, said Rao. “Majority of the complaints (32 per cent) were credit card related issues. Deposit account were 18 per cent and remittance glitches 9 per cent,” said Rao.

ExpressIndia

MFIN's initiative in reviving microfinance sector

The micro finance sector has started witnessing some positive developments after the Reserve Bank of India (RBI) allowed the continuance of priority sector lending (PSL) status for bank loans to micro finance institutions in May this year providing a clear sense of direction to the sector. The regulatory framework outlined in the draft micro finance bill released to the public in July, which is likely to be introduced during the winter session of Parliament, would help faster recovery of the sector, according to Alok Prasad, Chief Executive, Micro Finance Institutions Network (MFIN). In an interaction with this correspondent, Mr. Alok Prasad said only in Andhra Pradesh there was no activity in lending and repayment and in other States there was significant recovery, following a number of measures announced by the Malegam Committee. He said MFIN was the premier industry association engaged in an intensive process of dialogue with the RBI for providing additional inputs and clarifications from time to time. After the crisis in Andhra Pradesh, several measures have been announced to improve the condition of the microfinance industry and the only new regulation in place since the Andhra Pradesh Government's ordinance in October last year was the circular issued by the RBI in May this year. Mr. Alok Prasad said many microfinance organisations especially in Andhra Pradesh have adopted corporate debt restructuring (CDR) to restructure their bank loans. MFIN was in discussion with the state government and was hopeful of reviving the microfinance activity in the state, he said. According to him there would be consolidation in the industry through mergers as smaller microfinance institutions were finding it difficult to go alone due to regulatory caps on margins and the prevailing high interest rates. As for the initiatives taken by MFIN, Mr. Alok Prasad said the organisation would work closely with the regulators and other key stakeholders to achieve larger financial inclusion goals through microfinance. MFIN has formulated and implemented a well-defined code of conduct for its members numbering 49 through an intensive process of consultation with them and other stake holders.

HBL

Kerala becomes first ‘total banking State'

Kerala was declared the first State in the country to achieve total financial inclusion. The achievement means that each household in the State has at least one bank account and the facility for need-based credit. At a meeting of bankers here on Friday, Chief Minister Oommen Chandy distributed certificates to the banks that had participated in a drive to take banking services to every corner of the State. Mr. Chandy said banks had a lot more to do for the State and its people. Lending to the agriculture sector should go up from the present 22 per cent of the total lending to priority sector (Reserve Bank of India's norm is 18 per cent).  The lending classified as lending to agriculture included the loans to the plantation sector that absorbed large credit. The other areas of farm sector could do with more credit support than at present. The Chief Minister drew the banks' attention to the need for extending credit support to the Clean Kerala Mission, a programme to make the State live up to its nickname of ‘God's Own Country.' Growth in sectors such as tourism and healthcare could be further accelerated with the help of banks. Banks could also think of schemes to encourage institutions of excellence in education.  He said there was no reason why Kerala could not achieve a double-digit growth rate. S. Raman, Chairman and Managing Director of Canara Bank, in his capacity as the convener of the State Level Bankers' Committee (SLBC), said at the meeting that Palakkad district had become the first district in the country to achieve total financial inclusion four years ago. Among others, Minister for Rural Development K.C. Joseph; Regional Director of RBI Suma Varma; Chief Secretary P. Prabhakaran; Executive Director of Canara Bank Archna S. Bhargava also addressed the function.

HBL

'Suit'able suggestion................

U.S. Banks Listen Up, India Has Something To Say

An amazing New York Times story on the State Bank of India’s outreach efforts to India’s poor offers insight into what it looks like when a bank serves its least likely customers. Perhaps American banks could learn a thing or two.The story follows Swati Yashwant, a sort of freelance banker who helps India’s rural poor set up bank accounts with the State Bank of India, which is India’s biggest bank, and which is owned by the government. She is not an employee of the State Bank of India, but she works for commission based on the number of transactions she completes for her client bank. This system was actually set up by India’s central bank, the Reserve Bank of India, to deal with the severe lack of bank branches in the developing nation. The New York Times explains “about 70 percent of India’s population is dispersed among more than 600,000 villages [but] the entire country has only 33,500 bank branches.” Because of this, only half of all of India’s households have bank accounts. And presumably because so few people have accounts in rural villages, and little money to save anyway, banks are hesitant to open branches. The Reserve Bank, according to the Times, assigns certain villages to certain banks, and ordered banks to serve them. So their low-cost solution to this mandate is to hire “business correspondents,” armed only with laptops, fingerprint scanners, and wireless modems, to expand their banking services to the country’s poor. As a result of the poverty in rural India, the account balances are minuscule by our standards: on average 160 rupees, or about $3.30. That’s paltry, but keep in mind that the going rate for a savings account in India is 4%. In five years that account will be worth $4. Can you imagine savings rates like that in the States?  The article closes on an interesting note. State Bank claims they lose money on most of the accounts people like Swati open, but that they see it as a “social obligation,” which might become profitable in the coming years. Now the United States is nowhere near as poor as India. And only 7% of our population — or 21 million — are unbanked, compared to 500 billion in India. Poverty and banking are quite different here and in India. But just as striking are the differences between bankers’ attitudes towards the poor, and towards their social mission. Namely, Indian bankers who work at big banks think they have a social mission, and can think in the long term to make their social mission profitable. Big American bankers, save for their low- or no-interest lending to CDFIs, don’t seem to feel similarly compelled. 

http://www.mybanktracker.com/bank-news/2011/09/30/state-bank-of-india-reaches-out-to-an-unlikely-demographic/

Cooperative leaders should introspect

While the whole world is complaining against Urban Cooperative banks style of functioning, NAFCUB Chairman H K Patil has words of encouragement for them and compares them better than commercial bank in terms of financial inclusion. Talking on the eve of Federation’s 35^th Annual General Meeting in New Delhi Mr Patil said that in the year 2010-2011 the deposits of urban cooperative banks increased at the rate of 14.8% while the advances grew at 22.4%. These figures compare well with the corresponding figures of commercial banks at 15.4% and 20.1% respectively. He said that CRAR of 91% of the Urban Cooperative Banks is more than 9%, making the sector well capitalized by and large. Mr Patil observed that NAFCUB’ s interactions with the Reserve Bank of India during the year under report had been very fruitful. As a result, RBI had issued a number of circulars, particularly to augment urban banks’ role in financial inclusion and had also made favourable policy announcements. The Report of the Malegam Committee on licensing of new Urban Cooperative Banks, constituted on the demand of NAFCUB, Shri Patil informed has been put in the public domain for comments. The Report, he said, has also made very important recommendations on the issue of Umbrella Organization for providing financial and other support to small urban cooperative banks. The Government’s approach to the sector, however, he said has remained at best indifferent. Despite repeated memorandums on the adverse impact of Direct Tax Code on Urban Cooperative Banks and even small urban cooperative credit societies, the Government has not taken cognizance of the problem that the new Tax Code would create for the sector. The sector, he said, was also worried on account of the sweeping powers proposed to be given to the Registrar of Cooperative Societies under Multi State Cooperative Societies Act Amendment Bill, without due consultation with the sector. He said that RBI has recognized the fact that urban cooperative banks have been the earliest purveyors of financial inclusion as the very foundation of cooperative credit movement was based on the concept of support to less privileged sections of society. In this context, NAFCUB, in December last, had launched a nationwide scheme for providing CBS on ASP model to small urban cooperative banks at affordable cost so that these banks are able to provide the same services to their clients as large commercial banks are providing and are able to increase their thrust towards financial inclusion. NAFCUB has also launched a Research Scheme for promoting research on Urban Cooperative Banks and to involve youth in the movement. Under this scheme Research Scholars enrolled for Ph.D/M.Phil with UGC recognized Universities are provided scholarship for their research work. He termed cooperative credit societies as very important financial intermediaries that were doing important work of providing financial services to unorganized sector and they had great potential to do more given proper support from the authorities.

http://indiancooperative.com/ncui/cooperative-leaders-should-introspect-nabard-chairman/

Kumar Mangalam Birla latest victim of credit card fraud

Whoever thought credit card scams were only limited to the regular citizens should think again. The latest to join the list of credit card fraud victims is none other than Mr. Kumar Mangalam Birla, the Chairman of the multi-billion-dollar Aditya Birla group. The leading industrialist’s card was reportedly cloned and used to make purchases worth Rs. 286,000 in Bangalore while Birla was in Mumbai. He learned of the fraudulent transactions when he received his monthly account statement. An FIR filed with the Mumbai police says that Birla's credit card was used to buy electronics items. The Mumbai Police is reportedly investigating the matter in coordination with the Bangalore Police. They are also taking help of cyber experts. Card cloning is a practice wherein all the card details are fraudulently obtained through a pager sized scanner and copied on to a counterfeit card.  In order to minimise fraud cases and ensure security of transactions, the RBI had earlier this month asked banks to implement various safety measures related to credit card and debit card usage over the next two years. The central bank directed banks to strengthen the existing payment infrastructure and future proofing system along with adoption of fraud risk management practices within a period of next 12-24 months, RBI said. 

IIFL

Remove entry bar for new banks: PMEAC

New Delhi: Even as Reserve Bank of India (RBI) is planning to issue just a couple of licences after it finalises the norms for the entry of new banks, C Rangarajan, chairman, economic advisory council to the Prime Minister, has suggested that there should be no bar on entry of new banks. “If the banking system is to remain competitive, there should be no bar on entry of new banks .” 

FE

RBI to Take Second Quarter Monetary Policy Review

Reserve Bank of India (RBI), the apex banking regulator of India, has announced that it will meet to take call on second quarter review of monetary policy on October 25. RBI has scheduled the meeting with the chief executives of major scheduled commercial banks at 11.00 a.m. on October 25, 2011 at the Central Office, Reserve Bank of India, Mumbai.  After the meeting Dr. D. Subbarao, Governor, Reserve Bank of India will announce the Second Quarter Review of Monetary Policy 2011-12 on same day. RBI has announced the first quarter review of monetary policy on July. Amid spiraling inflation, the central Bank of India has hiked key policy rates by 25 basis points while announcing the mid-quarter monetary policy review, September 2011. According to this report, RBI had hiked the repo rate by 25 bps to 8.25% from 8%, and reverse-repo rate stands adjusted to 100 bps below the repo rate at 7.25% and the marginal standing facility (MSF) rate to 9.25%. Despite the strong monetary policy stance it failed to tame inflation. In last 18 months RBI has increased the key policy rate 12 times. RBI has raised the key policy rates by 350 percentage points to control inflation, which is sharpest upper movement in interest rate around the world. Even though, India is facing sharpest inflation rate amongst the emerging economies. Till now rain is normal within the country, although flood is affecting the production of wheat in Bihar. The production of food grain is expected to increase this year. RBI is alert and watchful on the problem of inflation and depreciating currency. Upcoming month is crucial for the RBI to intact the momentum of growth in adverse condition.

http://goindocal.com/rbi-to-take-second-quarter-monetary-policy-review--go-2662.htm

A Conversation With Ela R. Bhatt

Ela Bhatt, a Gandhian and a lawyer who founded the Self Employed Women’s Association in Gujarat, is sometimes referred to as the mother of microfinance. She helped start Mahila Sewa Co-operative Bank in 1974, two years before Muhammad Yunus began the project that would later become Grameen Bank. Ms. Bhatt, who is also a member of The Elders, was recently appointed to the board of the Reserve Bank of India, the country’s central bank....

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Rate hike seen

The Reserve Bank of India is seen hiking key rates by a further 25 basis points next month as food prices continue to be at elevated levels despite a decent monsoon and good agricultural performance. The apex bank is scheduled to meet on October 25 for the second quarter review of monetary policy. inflation bias,” said Pan. In a report on Thursday, Hemindra Hazari and Manuj Oberoi of Nirmal Bang Institutional Equities noted the key takeaways from a meeting with RBI’s deputy governor K C Chakrabarty: “RBI to maintain its hawkish stance on inflation and is willing to sacrifice economic growth in the short term for its broader objective of sustained  development in the long run.” The RBI has already hiked interest rates 12 times since March 2010 to control inflation.  “Unless we see the global situation worsening, we are expecting a rate hike by the RBI by 25 basis points,” said Chakrabarty.

DNA

Higher gold loan rates will affect customers, says Muthoot Finance MD

... RBI has recently appointed a committee to study whether banks should be permitted to buy out from NBFCs, based on which there could be a re-think on the earlier directive, he said. The committee will be headed by Mr M.V. Nair, Chairman, Indian Banks' Association. ....

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Onus of job creation on industry

...Good physical infrastructure, a progressive exit policy, structures to support clean and green technologies, appropriate investment incentives, and business friendly approval mechanisms will be the cornerstones of this new initiative.........

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Banks may incur MTM losses as yields shoot on higher borrowing

A surge in the yields on government securities in the last two working days of the current quarter will mean that the banks will now face the possibility of incurring mark-to-market losses on their investment, experts said on Friday. The government had yesterday announced a higher-than-planned borrowing programme for the second half of the current financial year. As a result, the yield on the 10-year benchmark government bond shot up 10 bps to close at 8.4 per cent, while yields on the second-most liquid security, the 11-year paper, went up by 8 bps. The market was not anticipating Rs 53,000 crore of extra borrowing by the government, which pulled the bond prices down. According to dealers, the most hit will be the banks that bought papers in the expectation that yields will cool off. This is because the government has been maintaining that it would stick to the budgeted borrowing target of Rs 4.17 lakh-crore this financial year. According to the issuance calendar, government borrowings will be at Rs 4.7 lakh crore this financial year. "There may be an MTM hit, as yields have hardened over the last quarter," says T S Srinivasan, general manager, Indian Overseas Bank. This is the third quarter in line when hardening yields will hurt banks' treasury. "Yields may cross 8.5 per cent unless RBI opts for a buyback in coming months. The yield curve will steepen now, as there are more issuances in 10-14 years' category than smaller durations," he adds. As mandated by the RBI, banks cannot hold more than 25 per cent worth of demand and time liabilities in held-to-maturity category. Banks need to provide mark-to-market for securities held in available-for-sale and held-for-trade categories and not for HTM category.

On Wednesday, RBI Deputy Governor Subir Gokarn issued a hawkish statement, pushing the yields go up, as the country's central bank declined to indicate any signal of pause in the rate hikes. RBI has hiked the key policy rate 12 times in the last 18 months – a total of 350 bps in the repo rate though effective tightening was 550 bps – to tackle inflation that hovered around the double digit mark for nearly 18 months. RBI will meet again on 25 October to review the monetary policy. According to treasury officials, banks that had recently acquired government bonds will feel the pinch more. "The extent of the mark-to-market loss will depend on the composition of the available for sale portfolio. The bank that had recently acquired government securities will be impacted more,&" notes a senior official from a public sector bank. However, banks tend to reduce the holding in AFS and held for trade categories in rising interest rate scenario. In such case, the extent of depreciation will be limited. "Depreciation," Pawan Bajaj, general manager, Bank of India, "may not be significant as most banks are not holding many securities in AFS category. The average tenor in AFS category is around 2.25 years." Going ahead, some of the bankers expect yields to come down, as the present level of yield will make government borrowing expensive.

BS

National Housing Bank to seek nod for raising funds thru ECBs

..NHB will soon approach the Finance Ministry and the Reserve Bank of India (RBI) to allow it to raise ECBs, Mr R.V. Verma, Chairman and Managing Director, NHB, told Business Line in an interview here....

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Sasan Power gets RBI nod to raise $2.2 billion

Reliance Power said it has received approval from the Reserve Bank of India to raise about $2.2 billion from the US Exim and Chinese banks for its 3,960-MW Sasan ultra-mega power project in Madhya Pradesh. The estimated cost of the project is about Rs 19,500 crore. RPower had signed memorandums of understanding with the US Exim for $5 billion in October last year and the Chinese banks for $12 billion in November. The interest rate for the US Exim loan is about 3.5 per cent and from the Chinese banks close to 5.5 per cent, with tenures of 12 years with a moratorium of four to five years during the construction period.

HBL

Whose ID is it anyway? Chidu’s or Nilekani’s? And RBI says no

....It seems as if Nandan Nilekani’s grandiose Aadhaar Unique ID project will not be all that it is cracked up to be: a simple 12-digit number that will serve as both identity and authentication for all 1.2 billion-and-odd resident Indians......

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