48 villages in Himachal to have banks by March

Shimla : All villages with a population of 2,000 and above in Himachal Pradesh will have banks by March next year , a top Reserve Bank Of India (RBI) official said here. “We have identified 48 villages without banks , each will have a bank branch by early next year,” said R Gurumurthy General Manager RBI Shimla office. “In the second phase, 500 villages having 1,000 population will be covered ,” he said. “Even though the penetration of banks was much better than the national average which was 14,000 people per branch and 4,500 people per branch in Himachal, credit raising was a concern in the hill state ,” Gurumurthy said. He said there was an RBI plan to spread bio-metric banking in Himachal through business correspondents (BC) by March 2012. “This high tech scheme will have the facility of mobile banking, besides BCs will go to the doorstep of customers to collect money among other banking activities,” he explained.  Gurumurthy said the RBI was receiving many complaints from individuals, trusts and other entities regarding fraudulent communication by phone, email and snail mail. These offers relate to fictitous offers, lottery offers, lottery prizes, remittance of cheap funds in foreign currency, overseas jobs and scholarships . Such cases were on the rise across India and Himachal Pradesh . A lawyer from Rampur Bushahr had recently fallen into a trap of winning a lottery of Rs 7.8 crore and was asked to deposit Rs 38,000 online which he did and in the process lost his money. The RBI has appealed to the public to be wary of such fraudulent offers and report such cases to the RBI and the police.

BS

Don't believe in 'rumours' on VRS, Nabard tells employees

National Bank for Agriculture and Rural Development (Nabard) has asked its employees not to believe in “rumours” by “black sheep” and a “self-appointed saviour” on the launch of a voluntary retirement scheme (VRS) in the country’s apex development bank. Bank chairman Prakash Bakshi sent out a communication last week to 5,000-plus colleagues, appealing them not to be “misled” by such “misinformation campaign”, instead stay together for Nabard’s growth. The hard-hitting communication dated October 5 said the management was “seriously concerned and pained” over the “rumour mongering” in Nabard and its possible negative impact. “Immediately after our last board meeting held on September 22, almost all executive directors, chief general managers and other office-bearers were flooded with telephone calls by staff members across the country that the Board has approved VRS and people will be sent home. Who spread these rumours?” he asked. “Let me say with authority that ever since I took over the role of team leader of Nabard, the word VRS has not been even uttered by me or by any directors or executive directors, or other office bearers. Even the thought of having VRS has not arisen in our minds.” Further, Bakshi wanted to locate the black sheep “desperately trying to disrupt” the Nabard family. “Let us remember that such black sheep are capable of spreading rumours. I appeal to all team members not to be misled by such rumours...” Instead, Bakshi assured the employees that the board of directors would continue to take decisions which are in the bank’s interests as well as its members. The Nabard boss said the bank had, in fact, decided to create supernumerary vacancies to promote people at the earliest. From 2012, staff members eligible for promotion in the first half of the calendar year would be promoted on January 1 itself. July 1 will be the pertinent date for such case in the second half of any year — even if it required creating temporary supernumerary vacancies. Bakshi said 1982-founded Nabard required new ideas to solve old problems. “We need to join hands with other entities and convert them into willing partners. We need to set almost impossible deadlines and resolve to adhere to them. And the fact is that Team Nabard is capable of all this.”

BS 

New classification norms for NBFC NPAs opposed

Bangalore :  Industry body ASSOCHAM has opposed the government’s classification of non-performing assets (NPAs) belonging to non-banking financial companies (NBFCs) which provides for secured and unsecured advances if the overdue period exceeds 90 days. Under the existing norms, an unsecured asset overdue beyond 90 days and a secured asset overdue beyond 180 days are treated as NPAs. "NBFCs are a major source of funding for unorganised sector of the economy. The revised classification will eventually increase capital requirements of NBFCs and their cost of lending," said the Associated Chambers of Commerce and Industry of India (ASSOCHAM) in response to draft recommendations of the Reserve Bank of India (RBI) Working Group. It also suggested an enhanced time frame of five years due to difficult and uncertain economic conditions for tier one capital for capital to risk weighted assets ratio (CRAR) at 12 per cent – instead of within three years as proposed by the group. 

IBN Live

8 cooperative banks go belly up

New Delhi: As many as 8 cooperative banks failed in this fiscal so far, resulting in credit insurance company DICGC paying a little over Rs 143 crore to depositors. Among the eight cooperative banks, which failed to repay deposits to customers, four are from Maharashtra, three from Karnataka and one from Gujarat. In the last financial year, 26 cooperative banks had closed operations. Under the norms of Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly-owned subsidiary of the Reserve Bank of India (RBI), a maximum of Rs 1 lakh is paid to a depositor in case a bank goes insolvent. The Reserve Bank's credit insurance arm has paid over Rs 143.5 crore to depositors of eight cooperative banks which went bankrupt till July in 2011-12, according to DICGC. The DICGC paid the maximum amount of Rs 48.7 crore to Ichalkaranji Cooperative Bank of Maharashtra. This was followed by another Maharashtra-based lender Samata Sahakari Bank whose depositors were paid Rs 38.83 crore. Besides, the credit insurance company paid Rs 31.9 crore to depositors of Anyonya Cooperative Bank of Gujarat and also Rs 15.37 crore to the account holders of Vidharbha Cooperative Bank of Maharashtra. At the same time, the insurer paid Rs 2.5 crore each to Laxmi Sahakari Bank of Maharashtra and Chadchan Sree Sangamehwar Urban Cooperative Bank of Karnataka.

FE

Finance ministry pushes for increase in PPF, post office rates

NEW DELHI: Faced with a cash crunch, the finance ministry is moving a proposal to increase interest rates on small savings schemes such as Public Provident Fund and post office deposits but politics may play spoilsport. Official sources told TOI that finance minister  Pranab Mukherjee will decide on the proposal over the next few days as small savings instruments have lost out to bank deposits that earn higher interest. As a result, the government has been forced to borrow Rs 53,000 crore more from the market by issuing bonds, a move that can increase interest rates further and also upset budgetary calculations. If Mukherjee approves an increase in interest rates on small savings, your PPF will fetch you at least 8.2%, instead of 8% now, while senior citizens can hope to earn around 9%. In addition, individuals will be permitted to park Rs 1 lakh in PPF accounts instead of Rs 70,000 at present. Similarly, post office deposits will fetch 50-70 basis points higher (100 basis points = one percentage point). But politics over two schemes are holding back a green light from the finance minister. Sources said the finance ministry has received several representations from individuals urging not to abolish the Kisan Vikas Patra (KVP), while nearly 5 lakh agents have opposed the move to cut the commission on Mahila Pradhan Kshetriya Bachat Yojana (MPKBY) to 1% from 4%. Officials in the tax department have complained that KVP has become one of the biggest instruments of money laundering, a concern which was even shared by a high-level committee headed by former RBI deputy governor Shyamala Gopinath. In fact, maximum instances of misuse of KVP have been found around Amritsar, pointing to the possibility of Pakistani funds entering India. So, it hasn't come as a surprise that a significant number of petitions for the scheme's continuation have come from Punjab and Haryana. 

TOI

Government's apathy to small savings schemes

...The Shyamala Gopinath Committee on Comprehensive Review of National Small Savings Fund recommended to the government a positive spread of 25 basis points, vis-à-vis government securities of similar maturities with a few exceptions, “taking into account the interests of small savers, and in view of the absence of social security among the unorganised sections of the society, as also the liquidity augmenting measures for various instruments”. ....

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RBI unlikely to halt its rate hike cycle

With the recent economic data pointing to a looming economic slowdown, some economists and analysts had inferred that the Reserve Bank of India may not increase policy rates in its October meeting, and rather watch the growth and inflation trajectory over the next few weeks. Such hopes may be short-lived. Last week, in a meeting with primary dealers—who deal in government securities, T-bills—some of the top RBI officials reiterated that the central bank’s hands were tied as long as inflation was at an uncomfortably elevated level, and it had no other option but to raise policy rates. The central bank also ruled out any open market operation (OMO) in the next few months, a step that could have infused some liquidity into the system.

TOI

Just 3.3% of urban Indian population gets home loans

...In India, there are no figures from the government agencies — Reserve Bank of India (RBI) included— about how many Indians get housing loans, especially in urban areas......

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IIP, inflation to decide RBI move

Two sets of data to be released this week - industrial output growth for August and consolidated monthly inflation for September - would largely determine the Reserve Bank of India's (RBI's) next move on interest rate hikes. Policy makers are facing a harsh dilemma: a slew of fiscal and monetary measures to cure inflation has not tamed prices but cast side effects on growth. The government will announce the factory output growth figures for August on Wednesday and release wholesale prices based inflation data for September two days later. With India's inflation rate racing towards worrisome double-digit levels, all eyes are on the RBI, on whether it may announce a pause in its interest rates hike cycle later this month when it presents the quarterly monetary policy review on October 25. The wholesale price index (WPI)-based inflation stood at 9.78% in August, the highest in 13 months, fuelled by costlier food, fuel and manufactured products. "Amidst mounting global uncertainties, it is unlikely for the RBI to hike repo rates at this juncture," said a recent research report by BNP Paribas. India's factory output growth in July grew by 3.3%, the slowest in 21 months, latest data showed on Monday, mirroring signs of an imminent industrial slowdown as rising input costs and costlier borrowing squeeze corporate profitability, forcing them to defer investments. The RBI has raised the repo rate by 12 times in the past 18 months to cool prices. A higher repo raises banks' borrowing costs, which in turn would raise interest rate on final home, auto and corporate loans.

HT

Need for credible fiscal plan

....Excessive government borrowings put the Reserve Bank of India in a difficult position with no option but to raise interest rates frequently to control money supply and inflation without slowing growth. ....

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The Institute of Chartered Accountants of India (Icai), the apex body of accounting professionals, wants the Reserve Bank of India (RBI) to appoint statutory auditors in state-run banks

The accountants’ body has sought the government intervention on this. Till 2005, RBI was directly involved in the appointment of auditors, but now the boards of public sector banks (PSBs) appoints auditors in consultation with the central bank. The Icai move assumes significance in the backdrop of the recent spat between the auditors’ body and the nation’s largest lender, State Bank of India (SBI), on a sharp rise in the lender’s provisions in the March quarter. During the quarter, SBI had set aside Rs.6,059 crore as provisions towards pension liabilities, 82% higher than what it had provided for in the year-ago quarter. Icai had sought clarifications from SBI on the sudden rise in its provisions and the role of auditors. “If appointments are left to bank managements, there may be a tendency to take short-cuts in these regards with possible ultimate deleterious effects on the financial health of the PSBs,” Icai president G. Ramaswamy said. “This process compromises the independence of auditors and gives an incentive for promotion of vested interest in the appointment of auditors.” Icai, however, did not respond to a specific question on why it is silent on the appointment of auditors in private sector banks. Queries sent to RBI seeking its view on the matter remained unanswered. Bankers, experts and consultants criticized Icai’s move, saying this is unlikely to make any major difference in the quality of auditing. Also, any changes in these aspects should equally apply to private and foreign banks as well, as they also deal with public money, they said. “Icai should question the entire banking sector,” Santosh Singh, an analyst with Espirito Santo Securities, said. “After all, it is not the regulator’s job (to appoint auditors). Also, whoever is compensating auditors is bound to do that in future, also.” Until 2005, the appointment of auditors in state-run banks was overseen by an appointments committee with representation from RBI, Icai and the Comptroller and Auditor General of India. In December 2005, the finance ministry offered all PSBs an option to appoint statutory auditors by their boards though the norms of empanelment, and remuneration of these auditors continues to be prescribed by RBI. Those who did not opt for this started doing so from December 2008 when RBI to a large extent dissociated itself from the appointment process. “In many cases, auditors do not see eye-to-eye with bank managements (on issues such as) like NPA (non-performing assets) provisioning, implementation of prudential norms, etc., and this is the reason auditors are at all appointed. There must always be somebody who will not look at the business from the point of view of the management, and who will look and act at it from the point of view of good governance,” Ramaswamy said. SBI had questioned Icai’s standing to question the banking major. “If they feel that something is wrong with the bank’s auditing, Icai should ask their own members,” a senior SBI official had said in August. Senior bankers express a similar view, saying the regulator-appointing auditors for PSBs were not effective in the past and the current practice should be retained. “That (RBI appointing auditors) was done earlier and the power was later given back to banks. It obviously didn’t have the desired effect,” said P.K. Anand, executive director at Punjab and Sind Bank. “The real issue is not independence, but the quality of auditing, which has seen deterioration in many cases in the recent past,” said the partner at a global consultant, who did not want to be named.
Mint

More cash into banks likely for PSU sell-off

...There could be one-off deal between RBI and government in which the central bank may cut CRR or SLR to inject liquidity in the banking system to help carry forward the disinvestment programme, a government official said......

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SBI and Bhatt

Now that State Bank of India has been downgraded somewhat by Moody's, the time has come to revaluate the tenure of its last chairman, Mr O. P. Bhatt. Four questions need answering. First, to what extent are decisions taken by him responsible for SBI's ignominy; second, what was the RBI doing about these decisions; third, why did the Government, which owns SBI, not rein him in; and fourth, what was the Board doing? The first question has an obvious answer but it doesn't solve the problem. The answer is that had it not been for decisions taken by him, the SBI would not have been looking at so many loans that will not be repaid. But he can always plead contextual judgement. We will have to leave it at that. As to the RBI, it got into a running battle with SBI from Mr Bhatt's second year as chairman. It did its best to restrain him but failed. Its representative on the SBI board would have a few stories to tell. Someone should ask her. The third question is about the Government. It is not as if the Finance Ministry didn't know of the too-clever-by-half approach of Mr Bhatt. So why did it not have a quiet word with him to do things by the book? This brings up the fourth and most important question: what role did the Board play and what role was it assigned by Mr Bhatt? What was the Executive Committee through which he operated and who were on it? Everyone in the banking circles knows the answer. It's the public's turn now, to be told. Lest someone think that I am, as they say, going after Mr Bhatt, let me say this: a downgrade of the SBI is no small matter nationally, and Mr Bhatt needs to answer some questions. Any former chairman under whom the bank took such decisions would have to do as much. 

HBL

DOWN THE HILL

The government, which includes the RBI, has put off a decision to license new banks for many months. It is presumably worried that competition would be bad for its own banks. But even without competition, the banks are running short of competent staff, and have failed for years to extend their services to rural areas. Its paternal concern for its banks has led the government to ignore national interest.....

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Reconstructing asset reconstruction firms

... There are many other issues that RBI should look into to make the asset reconstruction industry work well, such as allowing the transfer of assets among ARCs and permitting them to offer working capital support to industrial units under revival; but no model will work unless the banks themselves appreciate the importance of selling bad assets and stay away from financial incest.....

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RBI has to manage huge govt borrowing and sell govt bonds at zero fee to investors

The worst investment banking assignment is the one that RBI is saddled with. It has to sell Government of India bonds, at a zero fee, to investors whose cost of money may be more than the return from the bonds. It's a lemon from Day 1, and at some point investors will run away.....

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