Retirement Expo comes to an end

Sudhir Gokarn, Deputy Governor, Reserve Bank of India and Dr Sheilu Sreenivasan, Founder President of Dignity Foundation at the concluding session of three- day Retirement Expo, organised by Dignity Foundation, for senior citizens in Mumbai. Gokarn, presided over the celebrations and emphasised the importance of retirement years by inducting its retiring employees into Dignity Foundation productive ageing schemes. Senior citizens, who thronged the venue were wooed by Banks, insurance companies, pharma, fitness centres, spas, senior citizens housing societies, assisted living device manufacturers, health professionals and multi- professional gurus of active living.

FPJ

Workshop on forex concepts held at Kochi

Kochi, Oct. 11: A one-week orientation workshop on foreign exchange was inaugurated here by Mr C.V George, General Manager, Reserve Bank of India, Kochi. The brief meeting was presided over by Mr Abraham Chacko, Executive Director of Federal Bank.  The programme, intended to improve expertise and capabilities of bank officials, is organised by the Federal Bank under the auspices of the Reserve Bank of India and the Foreign Exchange Dealers Association.  In his inaugural speech, Mr George stressed the need to improve knowledge of foreign exchange among bank officials, at a branch level.  Mr Chacko said exporter/importer and NRI clients could benefit if bank officials were more skilful at handling forex operations.  Mr Madhavan, AGM welcomed the participants and guests. Mr P. M. Pethe, Officer on special duty (Training), FEDAI, Mumbai, offered felicitations and Mr R. Pradeep Kumar, Chief Manager,proposed vote of thanks. The workshop will conclude on October 15. 

HBL

You have got (fake) mail from RBI

MUMBAI: A recent email doing the rounds, purportedly from the Reserve Bank of India (RBI), informs account-holders that they are in for a windfall as the central bank has decided to release unclaimed deposits to the beneficiary. The email, the latest version of online frauds, is full of errors. It states that RBI governor D Subbarao met with the senate committee on finance, although there is no such committee. RBI spokesperson Alpana Kilawala said the mail was fraudulent, there was no such communication, and Subbarao had not attended any such meeting. "We lodge police complaints when such fraudulent mails are brought to our notice. We have put up two advisory notes on our website asking people not to pay money to receive funds from abroad. RBI never asks for your bank account details." Scams employed by fraudsters include one where the recipient is told to send funds to cover the cost of remitting proceeds of a lottery he has won. In another phishing scam, account-holders are sent a link to a website that looks like the genuine homepage of a bank site, but is a trap to record the useras password. International scamsters seek account details of individuals whom them entrap into acting as a money mulesa as a conduit for transferring funds stolen from other accounts. The fake RBI email states that the recipient is listed as a beneficiary in the recent schedule for payment. "We are writing this email to inform you that 750,000 GBP {Seven Hundred Fifty Thousand Great British Pounds Sterling} will be release to you, as it was committed for (RBI) Governor that Beneficiary will have to pay crediting fees only. So you are therefore required to pay 24,500 INR ONLY. To credit your account immediately making a decline for 2 working day after date of receiving this mail. Also reconfirm/provide your bank account details-for crediting." An earlier statement by RBI advised the general public against responding to offers of moneys from abroad. It stated that they are fraudulent and advised people to immediately register a complaint with the local police or cyber crime authorities when they receive such offers or become a victim of such fraud.

TOI

Sudoku for RBI

.....RBI has inadvertently compromised the effectiveness of its own tight monetary stance by the way it signals and complements it. This is unfortunate since RBI has undertaken some welcome initiatives to enhance its communication. But when it comes to central banks, effective but less frequent communication is always better than more frequent but less effective communication......

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The problem with government cash balances

... The Deepak Mohanty committee, which was set up by RBI to study the operating procedure of monetary policy, has recommended an auction of excess government cash balances, to stop the uncertainty in liquidity conditions. The group also suggested that data on government cash balances be made public on a daily basis, to improve the assessments made by market participants.....

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JK Bank, RBI hold financial literacy programmes

Srinagar, Oct 11: With a view to make the students and teachers aware about banking and its contemporary functioning, J&K Bank organized awareness programmes in collaboration with Reserve Bank of India (RBI) at Ganderbal Higher Secondary School and Government Degree College Kulgam. The programmes registered a good presence of teachers, commerce and management students of the institutions besides Cluster Heads Ganderbal and Kulgam. Raj Kumar Meena, Assistant General Manager RBI, who was Chief Guest on the occasion gave a brief lecture to students and informed them about Banking, RBI, Fake Note Currency identification, ATM operations, Financial Inclusion, Fake Lotteries, impact of recession, deficit finance, Monetary & Fiscal policies, Role and functions of Non Banking Finance Companies (NBFC) & Banks Ombudsman, etc. Speaking at Kulgam Degree College, AGM (RBI) R K Meena also spoke in length about the role, functions and activities of RBI. He replied and responded to various queries raised by the students of the College while interacting in a post-lecture session.  A quiz was also held in which various participating students were presented gifts by the RBI official. Some informative literature from RBI was also distributed among the participants on the event. The lectures were followed by question answer/sessions wherein all the queries of the students were answered.  Quiz was organized and prizes distributed among students who answered the questions about the awareness programme. School authorities at Ganderbal thanked the Bank and RBI for conducting such type of programme and requested that such type of programmes should be conducted in future also.

Greater Kashmir

For exporters, borrowing from bank will be 2% cheaper

The Reserve Bank of India (RBI) today announced 2% interest subsidy on Rupee export credit to the labour-oriented and small scale sectors to cushion them from slowdown in the major markets like the US and Europe. Exporters of handicrafts, handlooms and carpets will be eligible for the interest subvention to be available up to March 31, 2012, the RBI said. The exporters in the small and medium enterprises across all the sectors would also be entitled for cheaper bank credit, subject to a minimum interest rate of 7%. In a direction to the banks, the RBI said that the government has decided to extend the scheme from April 2011 to March 2012, for the four category of exporters. "Banks may ensure to pass on the benefit completely to the eligible exporters," it said. The decision to help exporters was announced on a day when the high-level Board of Trade (BoT) reviewed the situation arising out of renewed worries about the US economy and the debt crisis in Europe. The BoT, headed by Commerce and Industry Minister Anand Sharma and comprising well-known industrialists, discussed issues like currency volatility, availability of dollar credit and high cost of credit. Although India's exports grew by 54% in April-August period, the time ahead is viewed as full of challenges. "I am apprehensive about the roll-out of next seven months. I hope we should be able to achieve $280 billion exports this fiscal," Minister of State for Commerce and Industry Jyotiraditya Scindia said. Exporters' body FIEO welcomed the interest subsidy but wanted more. "We were expecting 3% and also for sectors like textile, gems and jewellery and engineering," it said in a statement.

BS

SBI and Bhatt (11/10/2011) – Eye View................

"I agree with the author that Shri Bhatt would have to be asked a few inconvenient questions and should not be allowed to go scot free. In fact, in the case of every former Chairman of a Public Sector bank, this has to be done since there has been a lot of temptation on their part to paint a rosy picture of the bank by adopting dubious methods including even blatant violations of the regulations of the RBI. RBI nominees have not been able to do much to reign in the bank chairmen as they are not sure of the kind of support they would receive from the top management of Bank. In the case of SBI, Deputy Governors of the Bank have been invariably the nominees and they should be able to do on their own what they consider appropriate and if necessary warn and take action against the Chairman. Government should not be allowed to interfere in the actions of the Bank. They would have absolutely no excuse for doing what they are expected to do. The reason perhaps as why even the Deputy Governors have not been tough while performing their role on the board of SBI is that as an institution Reserve Bank has been a weak regulator in terms of taking deterrent action for irregularities/ violations. It is high time the Bank instilled fear in the minds of the top executives of commercial banks. I am not suggesting for a moment that the Bank has to be arbitrary. When the wrong doing has been proved with out any trace of doubt, after reasonable opportunity has been given to the aggrieved party, extremely deterrent action has to be taken. We have to take a leaf from other central banks and see how they have been able to instill fear in the commercial banks operating in their countries."

A.Chandramouliswaran, Former Executive Director (via e-mail)

RBI's PNB auditor action illegal: HC

New Delhi : The Delhi High Court has held as illegal the decision of RBI to discontinue the services of a Statutory Central Auditor (SCA) of Punjab National Bank (PNB) without fair and proper enquiry into the allegations against the firm. "The Court holds that the impugned decision of the RBI, as communicated in its letter on June 24, 2009 to the PNB, to discontinue the Petitioner as an SCA, even for the limited extended period ending 30th June 2009, was violative of the principles of natural justice and was, therefore, illegal," Justice S Muralidhar said. The observations came on the plea of accounting firm, Gupta and Gupta Chartered Accountants, alleging arbitrariness on the part of RBI in asking PNB to discontinue it (firm) as an SCA without fair and proper enquiry. RBI, in a letter written on June 24, 2009, permitted PNB to discontinue the firm as an SCA on the allegations of the bank that it was delaying the audit of accounts. \"RBI ought not to have unilaterally accepted the complaint by the PNB without seeking explanation from the Petitioner (Gupta & Gupta Chartered Accountants) on PNB\'s specific allegations,\" the court said. Allowing plea of the firm, the court said \"there is merit in the contention of the Petitioner that the discontinuance of an SCA, selected through such a rigorous process, is likely to have adverse consequences for its reputation and goodwill if such discontinuance is as a result of a complaint about its competence or integrity," it said. SCAs are appointed by RBI on the recommendations of statutory auditor CAG for a period of four years to audit the accounts of public sector banks. In 2005, five SCAs had been appointed to audit the accounts of PNB.  "The greater the power to appoint and remove an SCA, the higher the responsibility on the RBI as the holder of such power to exercise it in a fair and reasonable manner after following a just procedure which comports with the principles of natural justice,\" the court said. The firm had alleged that it was discontinued as an SCA by PNB apprehending that it can detect some irregularities by the bank in granting loan to some real estate companies. The firm also contended that it was singled out for being discontinued as SCA and that this amounted to blacklisting of the petitioner firm apart from being mala fide. It also submitted that it was even not served any show cause notice.

Expressindia

There is scope to increase gold holding: RBI working paper

The Reserve Bank which bought a whopping 200 ton gold for USD 6.7 billion from IMF in 2009, can go in for more purchase of the precious metal, a central bank working paper said. "India's purchase of gold as a diversification strategy is fully justified and is in line with the global trend and still there is scope to increase its holding," it said. The gold holding of the Reserve Bank of India increased to 557.7 ton after accretion of 200 ton in 2009. In India's case, it said, while foreign reserves increased substantially over the years, the physical stock of gold as part of official reserves, however, remained stable.  Eventually, gold's proportion in the total foreign reserves came down sharply. In fact, even with the latest purchase of gold by the Reserve Bank, gold accounted for just around 7.9% of the forex reserves. The findings of the study show that central banks in most of the emerging market economies (EMEs) and advanced economies had either bought fresh stock of gold or stopped selling their existing stock of gold in the wake of the recent global crisis. Further, it stated that India's purchase of gold apparently did not have any impact on the gold price trend and hence the stock of gold is in line with the global accumulation trend. India's recent purchase of 200 tonnes of gold, apparently, did not cause any aberration on the international gold price trend, probably as gold was not bought from the open market, it added. It is difficult to address the 'optimum level of gold' for India, though there is a strong economic rationale to hold sufficient quantity of gold as part of official reserves, especially during uncertain periods like global financial crisis, the study added.

Moneycontrol

PPI can address RBI’s criterion on microfinance clients’ income limit

The Grameen Foundation, India has presented an alternative proposal to meet the Reserve Bank of India’s criterion on income limits for eligible clients of microfinance institutions. In a concept note, Grameen Foundation says that inexpensive, objective tool like Progress out of Poverty Index (PPI) can enable MFIs to find out what percentage of their total clients fall below recommended ceilings, based on poverty lines mapped to income level........

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RBI’s wasteful plan to fly notes to Chhattisgarh

NAGPUR: The Reserve Bank of India's (RBI) strategy to dodge the Naxals in Chhattisgarh seems to end precisely at the point where the danger actually begins. RBI office in Nagpur, which is supposed to supply currency notes to banks in Chhattisgarh, has been airlifting the consignment to this trouble-torn state since about a year. The aircraft for the purpose is supplied by Chhattisgarh Government. RBI felt this was a smart move to avoid Naxals who may be lurking to loot the cash on the ground. However, the exercise is actually quite silly and a waste of public money. The aircraft flies the notes from Nagpur to Chhattisgarh capital Raipur or, at the most, to Jagdalpur, which is also a town well-connected with a highway.  Up to this point there is hardly any danger from Naxals. From there, the notes are transported to the bank branches in interior Bastar region where the real Naxal strongholds are. But this part is being done by road as has always been the case. The cash is carried in guarded vehicles.  Perhaps after realization of futility of this plan, there was a change recently. Now notes are taken by train to Raipur and then flown to Jagdalpur. This also is quite redundant as Raipur-Jagdalpur road is considered safe with civilian vehicles including passengers buses plying night and day. Naxals do not carry out operations on such roads as traffic piles up within minutes on either side. RBI thus ended up pushing up cost of exercise without minimizing any risk. The really perilous areas begin after Jagdalpur and there the notes continue to be taken as it was before. The consignment is either lifted by the banks' representatives or RBI officials take it to respective banks or currency chests (store-houses for currencies commonly used by the banks) in vehicles having armed escorts.  Chhattisgarh is facing Naxal problem for long. All this while, notes have been supplied by road in escorted vehicles after reaching them to Raipur by train, said an insider. The bank's regional director at Nagpur Phulan Kumar preferred not to divulge much details. He said a different route is used each time. A senior official in Chhattisgarh police said there were plans to develop helipads in interiors so that helicopters could land there.  RBI officials are provided routes on the basis of intelligence inputs on Naxal presence. "Although the road up to Jagdalpur is considered safe, the Naxals may even strike there. So it is better to fly at least till this town," said the official. A system under which RBI will supply notes up to Raipur or Jagdalpur from where the respective banks will lift the supplies is also being considered, informed a source.  The earlier plan of airlifting the consignment from Nagpur itself was proving cumbersome as only a limited quantity could be flown. Notes can be transported in bulk through trains.  For state government aircraft, RBI work is low priority and it is assigned after other engagements are fulfilled. This often holds up the notes' remittance. Taken by train, the notes remain at Raipur until airlifted according to the plane availability, said a source. 

TOI

RBI's automated data reporting norms to create Rs 500-cr mkt for IT firms

The Reserve Bank of India’s decision to automate the process of filing regulatory reports appears to have opened a door of opportunities for technology firms. Industry players expect banks to invest over Rs 500 crore over the next one year to migrate to the new system of automated data flow. Mid-sized software companies are also sensing an opportunity to cross-sell their other banking software products along with the automated data flow solution. For instance, iCreate Software, a Bangalore-based information technology firm, has already secured contracts from HDFC Bank, IndusInd Bank and Dhanlaxmi Bank within three months of launching their automated data flow solution Biz$core ADF. IndusInd Bank has decided to use iCreate’s enterprise business intelligence solution along with the automated data flow software. While the latter will help the bank in meeting compliance needs, the business intelligence solution will aid in managing information effectively for business requirements. Vivek Subramanyam, chief executive officer of iCreate, stressed the need for a technology solution to remove manual intervention in regulatory reporting. “Automated reporting increases the level of confidence on data, and decision-making becomes more accurate,” he told Business Standard. “There are 150 to 250 types of regulatory reports that banks have submit to RBI at periodic intervals. We are completely focussed on this opportunity and are engaging with the entire banking fraternity to position our Biz$core ADF solution.” He said the company’s automated data flow solution cost “single to early double digits” crore of rupees. In August, Ramco Systems, a software firm in Chennai, launched an automated data flow solution to help banks adhere to RBI guidelines on submission of regulatory reports without manual intervention. “Our ADF solution,” says Kamesh Ramamoorthy, chief operating officer of the Chennai-bases software firm, “can be deployed on any database management system. It can go live within weeks.” However, some banks are likely to rely on their in-house teams to develop this software instead of outsourcing it to a technology firm. According to a senior official of a Mumbai-based private sector bank, if the in-house technology team of a bank is strong, then developing the software makes more sense as the lender can customise the solution according to its requirements. Another option is that the bank will build the software on its own, but will seek assistance of a technology firm for integrating it with the main system. But most banks are expected to use third-party software as they have to comply with RBI’s guidelines within a specified time period. “It is not their core operations,” says an industry expert. “Hence, they will choose products of software companies to meet the guidelines.” The new guidelines on automated regulatory report filing were released after the central bank was alarmed by the trend of eroding profitability of state-run banks soon after the retirement of the chairman. The move is aimed at minimising the scope of errors and manipulation in reports that are submitted to RBI at periodic intervals by banks.

BS

Nobel lessons for RBI

...Sargent and Sims’s work on rational expectations show that policymakers cannot depend on information asymmetry to tame inflation. But it also makes clear that government policies that change incentives like those meant for the social sector programmes suffer no such problem. A clear prescription for keeping hands off the rate tools and hands on the outreach programmes......

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Sargent, Sims and RBI

...These economists have used a lot of econometric modelling to prove their theories and, given the nebulous and symbiotic relation between the two sets of factors, RBI should probably build a strong theoretical basis for its policy actions based on empirical evidence. This will explain, if not resolve, the ongoing debate of the tenuous relationship between interest rates and inflation, where the majority view is gravitating towards the school that given the lags involved, we may just about be shooting in the dark.....

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Dhanlaxmi bank hits 52-wk low on union allegation

... Our representatives have already met RBI in Thiruvananthapuram last week,” G.D.Nadaf, general secretary, AIBOC, told Moneycontrol.com. “We briefed RBI about Dhanlaxmi’s current financial strength and sought for its immediate intervention............

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Maha CM offers support to MSC Bank in appointing new board

Mumbai : In a bid to revive the Maharashtra State Co-operative Bank Ltd (MSC), whose board of directors were dismissed by the Reserve Bank of India (RBI) in May this year, the Chief Minister Prithviraj Chavan today said that the bank should follow the guidelines of the apex bank strictly while conducting its operations. He also said the state government would support the bank in appointing a new board of directors. "If the bank has to function properly it should follow the guidelines laid down by the RBI strictly," Chavan said speaking at the concluding function of the Centenary year of the MSC bank at YB Chavan centre here. The RBI after dismantling the MSC board had appointed state government’s agriculture secretary Sudhir Goel and planning secretary Sudhir Shrivastav as administrators. Chavan also said, "the government would lend its support to the bank to appoint a new board of directors. Whatever errors were committed should be accepted and rectified."

Moneycontrol

Maharashtra co-op bank may miss March deadline

Maharashtra State Cooperative Bank (MSCB), whose board of directors was dissolved five months ago, is expected to miss the deadline of March 2012 to get the banking licence. For 1906-founded institution has to meet crucial criteria of four per cent capital-to-risk (weighted) assets ratio (CRAR).

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Banks can't arbitrate

Some banks may agree to a particular interest rate during negotiation, but increase it at the time of sanction. The Reserve Bank of India does not bother to regulate such practices, but the national commission has given a landmark ruling that will help those in similar situations.....

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Customer first, RBI tells banks

.....To create awareness about the ombudsman scheme, the RBI has suggested that the ombudsmen should annually share with the local media information on complaints received and resolved, including important cases and awards given. The banks will organise a series of town hall events to create awareness about customer service. The system will attempt to reach out to the customer, impart knowledge, and empower them….

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RuPay may Open the Gateway to Inclusion

The new local card payment service provider will reduce the overall transaction cost for banks by introducing competition to international card schemes and is likely to charge a lower processing fee. It is being seen as a tool to reach out to the rural unbanked, reports Sangita Mehta

A few years ago, an arm of the Reserve Bank of India had launched the inter-bank ATM switch, a device that allows automated teller machines to talk to each other. This prompted the RBI to waive off an additional transaction fee that debit card holders incurred on using ATMs of other banks. The move, which initially faced the flak of the banking industry, led to an explosion in ATM usage across the country. Another such flare-up looks imminent with the upcoming launch of RuPay, a domestic payment gateway akin to global networks such as Visa and MasterCards. Though industry experts are once again skeptical on the government playing the role of a service provider, if the ATM experience is anything to go by, creation of a domestic payment network will widen the role of credit providers, giving a boost to financial inclusion in the country’s vast rural hinterland. Coming at an opportune time, when electronic payments are being seen as a tool to reach out to the unbanked, the RuPay card system — an initiative of the RBI-promoted National Payments Corporation of India — is creating unease among global card associations as it will reduce overall transaction cost for banks by introducing competition to international card schemes. Recently, Visa invited some 50 Indian urban co-operative banks to make a presentation on its products with an aim to lure local lenders to join the global payments network. Visa’s efforts to connect with urban cooperative lenders, hitherto not a priority for card associations such as Visa and MasterCard, just five months ahead of the RuPay launch is being viewed by experts as prompted by fear of impending competition. Currently, Indian banks pay . 200-300 crore to Visa and MasterCard for processing debit and credit cards. This cost is expected to come down after the launch of RuPay card system, which is likely to charge a lower processing fee. The benefit of a lower fee will be reaped by customers as well to whom the banks pass on the cost. The RuPay system will also lower the cost of transactions for shops that are reluctant to use the electronic mode of payment on which they currently lose 1.5% of their margin. “Currently, the merchant fee is significantly high and there is room to bring it down,” says AP Hota, chief executive officer, NPCI. China already has its domestic payment network Union Pay, a benchmark against which RuPay may be compared. Union Pay has 200 member banks, including 30 outside China, and is accepted in 104 countries. The European Union has also been talking about a region-wide payments network.  The RuPay system also aims to build an environment in which payment information remains within the country. “Why should the transaction go international and expose itself to various risks,” says Hota.

Highlighting the high cost of creating a payment network, Visa and MasterCard feel that payment networks work better when there are fewer of them. Ajay Banga, chief executive officer, MasterCard, in his maiden visit to India, after taking charge, pointed out that the launch of a local card system will not dilute the relevance of global card networks. Several countries where domestic proprietary networks were set up had turned to MasterCard to ensure that banks have the latest technologies, including fraud management, sophisticated scoring, fast transaction approvals, among others, he said. If every country strives to set up its own payment network, it would not only be very expensive, but also lead to systemic inefficiencies, he added. Amex and Visa also feel that they will continue to remain relevant in a market where growth opportunity is immense. Of the total bank consumer transactions in India, less than 5%, or nearly . 1.14 lakh crore, are in the electronic form. While the urban middle class is slowly migrating to electronic payments for bills, millions of man hours are still wasted by people standing in queues. Uttam Nayak, India head of Visa, says that the country has a long way to go in electronification of payments. “But where I look for answers is in the kind of investments they (NPCI) will bring in. Secondly, they will have to convince customers that it is the most secure, reliable and convenient mode of payment,” he says.

ROAD MAP

In the first stage, NPCI has launched the RuPay debit card. The first such card was issued by Gopinath Patil Parsik Janata Sahakari Bank. Although, not a debit card, the RuPay ATM card allows customers of rural banks and small cooperatives to access a wider ATM network. According to Hota of NPCI, which has PSU banks as its stakeholders — the roadmap for RuPay is ready. The company plans to start with a RuPay debit card by the end of this fiscal, which will be accepted in 50,000 domestic merchant establishments. In the initial phase, RuPay will not have an international reach and can be used only for domestic transactions. “But, currently, over 94% of all transactions by Indian cardholders are within India,” says Hota. “However, we will have a leeway from the RBI to talk to international players about the acceptance of this card outside India.” Subsequently, NPCI will roll out credit cards, but that would be three years from now.

CHALLENGES
The immediate test for the RuPay payment system will be to strike a chord with rural merchant associations and shops in order to build a payment network where the poorest customer has access to electronic fund transfer. Also, such a network would require an investment of more than . 1,000 crore by the banking industry without immediate returns. The Unique Identification Authority of India and Indian Banks Association have identified the need for 12-14 lakh micro-ATMs, which are point of sale machines given to business correspondents.  Moreover, an increasing usage of mobile transactions, which enable direct debit through mobile phones, could pose a major challenge to the RuPay.

ET

Safety cover for deposits

...The least that the Government and the Reserve Bank of India could do is revise upwards the current Rs 1 lakh insurance limit on retail deposits, which was fixed in 1993. The Damodaran Committee on Customer Service in Banks had recommended that this be raised to Rs 5 lakh....

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