Banks told to open rural branches

Thiruvananthapuram : A. Sampath, MP, said here on Tuesday that banks in the district must ensure better services to people in rural and semi-urban areas by opening more branches in these areas.  Inaugurating the second District Level Review Committee (DLRC) meeting on banking, Mr. Sampath said that even though Kerala had achieved the status of ‘total banking State,' there were many regions in the State, including in the capital district, where there was still a dearth of banking facilities. “The need of banking facilities is increasing even in rural areas. Banks should be in a position to meet this demand,'' he said. He added that banks should device schemes to encourage savings habit among students and to increase credit flow to women. Mr. Sampath released the Potential Linked Credit Plan (PLP) for the district for the year 2012-13. The PLP projection for the priority sector for the next fiscal is Rs.6,478.96 crore. RBI Assistant General Manager P. Thomas presided.

Lead Bank convenor Indira Padmini presented the banking performance report for the quarter at the meeting.  Financial institutions in the district disbursed Rs.1,006 crore under three major categories of priority sector in the first quarter of the financial year recording an achievement of 19 per cent against a total target of Rs.5,393 crores. Banks disbursed Rs.611 crore to the agriculture sector in the first quarter of 2011-12 against a total target of Rs.2,176 crore. An amount of Rs.364 crore was disbursed under the service sector against a target of Rs.2,865 crore. In the non-farm sector the disbursement was Rs.31 crore. Total bank deposits in the district stood at Rs.32,327 crore and advances at Rs.26,704 crore. The credit deposit (C/D) ratio for the district is 83 per cent. Around Rs.917 crore was disbursed as education loan till June 30. The bank loan outstanding for Micro, Small and Medium Enterprises (MSME) in the priority sector is Rs.2,224 crore.

HBL

6,000 villages in AP to have BCs by Dec

Banks in Andhra Pradesh are expected to complete the appointment of business correspondents to over 6,000 villages with a population of 2,000 and more where no bank branch exists, by the end of this calendar year, a state finance department official said here on Tuesday. The Reserve Bank of India Regional Director on Tuesday reviewed the progress of the financial inclusion initiatives in the state as the banking regulator had mandated the banks across the country to appoint business correspondents in those villages with a population of 2,000 and more in the first phase by March next year. So far, the banks have completed the appointment of business correspondents in 60 per cent of such villages in the state and informed the RBI regional head that they would be able to cover the rest of the villages by December this year. These business correspondents will act as an extension of the nearest branch of their respective banks to offer banking services, including opening an account for people at their doorsteps. Opening of savings accounts for all the families in rural households is also necessary because the financial benefits under various social welfare schemes will be directly transferred to the accounts of eligible beneficiaries in future, the official said. The banking connectivity to the rural habitations with less than 2,000 people will be taken up after the completion of the present round. 

BS

George no more.................

I regret to advise the demise on 18th August, 2011 of Shri.M.B.George, in Kerala, at the age of 88. He retired as A.C.O in the Credit Planning Cell on 30th June 1982. He has worked earlier in Department of Statistics and A C D. He was a jolly good person, hugely popular and always sporting a smile.  His wife pre-deceased him and the couple had no children. After his wife's death he shifted from Bombay to Kerala.

I append below a report I got from a close friend.

George (Vackachan) retired from Credit Planning Cell (Now MPD) on the 30th June 1982 (the last day of the existence of ACD--The very next day on the 1st of July 1982 NABARD came into existence) in the grade of ACO (now AGM)
I was also in CPC at that time. Wearing white dress, he was always ready to help anybody with pleasure. During those days, after lunch, we some malayalees used to meet at the entrance of Amar Building with him as "Chairman". Late Krishna Iyer, Vivekanandan and Elayadi also used to be there. It was the time when IG Patel was Governor and a Pension Scheme, which did not see the light of the day used to be the main topic of Gossip. I always found him very cheerful. He used to visit us and we used to visit him in Kalina. After the death of his wife, when we visited him, he as entirely a different man. Before leaving Kalina, he asked me to see him. When I went to him, he asked both of us to come out (his one or two nephews were inside) and in a sad voice said that since he did not have any children, he had no alternative but to go with nephews in Kerala and he EXPRESSED a fear whether his decision would be the right one. After that I used to call him during Christmas/ New Year eve. Last time when I called he, though recognised my voice, he was finding it difficult to talk and told me he was very weak. To me he was like a guru and used to advise whenever necessary.

May his soul rest in peace.

As reported by Shri P.P.Ramachandran (via e-mail)

'Rhetoric spells RBI's discomfort in pausing now'

The Reserve Bank of India's (RBI) action in the upcoming policy review remains a close call between a pause and a rise of 25 basis points in the repo rate. We expect it to eventually deliver a final 25-basis point rise next week. The choice for RBI is not easy. Even its own technical advisory committee had recommended a pause in July (RBI has already raised the rate by 75 basis points since then). Industry lobbies are vocal against tightening. Still, recent rhetoric from RBI clearly spells out its discomfort in pausing now. Indeed, inflation is stubborn, at near double-digits for almost two years, with wide-spread pressures across sectors. The headline print is just 50 basis points lower compared to March 2010, when the tightening cycle began. ‘Core’ inflation remains sticky—7.5 per cent, markedly above historical levels. The increasingly complicated global backdrop and slowing growth have induced several central banks to tone down their hawkishness. RBI, however, has repeatedly reiterated its focus on domestic developments and the explicit policy priority in containing inflation, even at the cost of near-term growth, if required. So far, RBI stood vindicated on its cautious view of commodities—key commodity prices have remained fairly sticky despite renewed global fears of a slowdown. The weakening rupee has actually increased import costs for several commodities. The fiscal dynamics seem to be hurting, rather than helping, on the inflation front, thereby inducing RBI to maintain an extra-vigilant monetary stance. RBI can enter into a pause mode from the policy review in December, as inflation would likely roll off to an average seven per cent in the next quarter. However, given the recent history of overshooting inflation, it would possibly prefer to maintain a hawkish stance even then, and would not risk prematurely signalling any easing, barring severe systemic growth risks. Rate rises are neither costless, nor the remedy of all evils. Inflation in India is far more structural than what can be contained with cyclical tools like rate increases alone. However, RBI is currently fire-fighting inflation, without many options to experiment with.

BS

Is RBI just an inflation-targeter?

.....Going by the book, the RBI Governor D Subbarao may have to resort to a few more rate hikes to signal that he wants to break the back of inflationary pressures. However, six months down the line, one may still face a situation where inflation levels remain elevated at around 8% and quarterly GDP growth falls closer to 7%. Is this what RBI would want? ............

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Reserve Bank of India warns of another global financial crisis

MUMBAI: Reserve Bank of India (RBI) has warned of another financial crisis brewing, as global liquidity becomes a concern amidst central banks pegging their lending rates at near zero levels, leaving scope for another asset bubble to take down the global financial system.  "There is, thus, incontrovertible evidence that there is yet again a huge under-pricing of risks in the financial system and, therefore, it is not a question of if, but when, the generic asset bubble caused by manifold increases in balance sheets of central banks will burst," said RBI, Executive Director, V.K.Sharma in his address in Singapore on 'Identifying Systemic Risks in the Global Markets - Lessons Learnt from the Crisis'. He spoke about what has been done by Asian central bankers in detecting and mitigating risks of future crises similar to the one in 2008-09.  One of the major worries this time around, which did not exist back then, is global liquidity, Sharma said. Balance sheets of major banks have grown by almost three times from pre-2007 levels, while near-zero policy rates have added $4 trillion in incremental central bank liquidity. Sharma mentioned that the US has been keeping excess reserves of about $1.5 trillion with the Federal Reserve rather than lending it to small businesses and households.  "Alongside, non-financial corporations in the US are reportedly sitting on cash and liquid assets worth $2 trillion which they do not know what to do with it. In this background of huge deluge of global liquidity, there are unmistakable signs of asset bubble inflating again in almost a replay of the last global financial crisis." Sharma said.  "In India, we have had remarkable financial stability, not fortuitously, but thanks to pre-emptively and pro-actively delivered prudential measures like increase in risk weights for exposures to commercial real estate, capital market, venture capital funds and systemically important non-deposit accepting NBFCs.

ET

Pause in rate hikes is in order

Since the RBI has done enough on the monetary front, it can afford a pause in further rate hikes until the next review, allowing the lagged effects of its earlier hikes to play themselves out through the system...........

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SAD STATE OF INCLUSION - Government banks are not right for developing rural finance

.... The Reserve Bankers talk ponderously about new technologies such as mobile banking and mini-ATMs and cost-saving innovations like business correspondents. But despite their goading, government banks have not developed a profitable model of rural banking; so they will do as little as they can to expand into villages. And the RBI will continue to boast about their modest achievement.....

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‘Growth to dip, but still be a reason for celebration’

Finance Minister Pranab Mukherjee today said that the uncertain global economic situation will impact India’s growth in the current fiscal. The growth may be lower than the earlier estimation of 9 per cent but “it will still be a reason for celebrations”, he said. “Most observers are expecting India’s growth to go down to below 8 per cent. This is disappointing but at the same time we must not lose perspective of the global situation...” Mukherjee said while addressing the economic editors’ conference here. “A number of policy measures are being taken and the long-run indicators look robust ... In this climate, even if India’s growth rate this year goes down to below our earlier expectation, we will still be among the 10 or so fastest growing nations in the world,” he said. The economy recorded a growth of 7.7 per cent during April-June, 2011-12 — the lowest in 18 months. “Let me not hide the fact that I have been disappointed by growth performance over the last few months. It is evident that India’s growth rate in 2011-12 will be less than what we were expecting in February when I presented the Budget,” he said.

IE

RBI norms for new bank licences likely by Nov-end: FinMin

The Reserve Bank of India (RBI) is likely to come out with guidelines on allowing new private banks by November end, Financial Services Secretary DK Mittal said today. "The RBI is actively working on the guidelines...And is likely to come out with the final licencing norms by November," he told reporters on the sidelines of the Economic Editors conference here. The RBI had in August released the draft guidelines on allowing industrial houses to promote banks. As per the draft norms, private sector entities or groups owned and controlled by Indian promoters, with diversified ownership, sound credentials and integrity, and having successful track record of at least 10 years, would be eligible to promote banks. Earlier this week some Members of Parliament (MPs) had expressed reservations at a meeting of Standing Committee over the RBI's proposal to grant banking licences to industrial houses arguing that it would not promote financial inclusion. The draft norms on bank licences have pegged the minimum required capital for promoting bank at Rs 500 crore and restrict foreign shareholding at 49% for the first five years. On implementation of the Shyamala Gopinath committee report on small savings scheme, Economic Affairs Secretary R Gopalan said,"final decision will be taken shortly." The Committee had suggested that the returns on small savings scheme be aligned the market rates and post office savings scheme interest rate be raised to 4%. According to government estimates, small savings during the first quarter (April-June) of the current fiscal declined by Rs 26,542 crore. They had increased by Rs 13,250 crore in the same period last year. 

BS

Did You Know | The difference between RTGS and Neft?

Like RTGS, Neft also transfers funds from one bank, but unlike RTGS the settlement takes place in batches (that may include transfers from various individuals) rather than individually....

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Tight money hurts: Pranab

Ahead of the Reserve Bank’s credit policy review later this month, finance minister Pranab Mukherjee on Wednesday did not hide his disappointment over sluggish economic growth, blaming it on the tight monetary policy and an uncertain global environment. Though he did not directly say growth would fall below eight per cent for the year, he referred to “most observers” pegging economic expansion at that rate. He, however, called for an analysis of the number in the global context, as all major economies were witnessing low growth — the US grew 1.6 per cent in the first quarter and the European Union 1.7 per cent. Addressing the annual Economic Editors’ Conference, Mukherjee admitted meeting the Budget target to rein in the fiscal deficit at 4.6 per cent of GDP would be a great challenge due to high crude prices. He still exuded confidence the target would be met. Already, till August, the fiscal deficit stood at 66 per cent of the target for the entire fiscal. When asked if the RBI should pause monetary tightening, Mukherjee said, “I have the opportunity of discussing with the governor before he announces the rates. So, it would not be proper on my part to make any comment.” He refused to buy the “so-called popular perception” the government was suffering from a policy paralysis, citing a number of initiatives such as the draft telecom policy, the proposed manufacturing policy, the proposed mining Bill, the land acquisition Bill, and finalisation of the infrastructure debt fund guidelines. 

BS

JK in fiscal fix - Govt Coffers Run Dry, Liabilities Mount As RBI Tightens Noose

Jammu, Oct 19: Having piled up huge fiscal liabilities, the Jammu and Kashmir government is confronted with unprecedented financial crunch, particularly in the backdrop of the Rs 1,500 crore cap imposed by Reserve Bank of India (RBI) on overdraft facility. Sources said with its coffers almost running dry, the state government is unable to deal with immediate cash liabilities of around Rs 100 crore, besides meeting the expenditure on account of annual Durbar move and festival season of Diwali and Eid as it has been strictly barred from taking recourse to liberal overdraft facility, especially after the shifting of OD arrangement from JK Bank to RBI, sources in the government said. Pertinently, Chief Minister Omar Abdullah and Finance Minister Abdul Rahim Rather were the biggest proponents of the state’s new financial arrangement with RBI. “As RBI has taken over from JK Bank granting of OD facility after the agreement signed last year, the state government is caught in catch -22 situation—the biggest problem being the failure to meet the financial liabilities, which have crossed Rs 100 crore” said a highly placed source in the finance department. Under the agreement RBI was allowed to carry on the general banking business of the Jammu and Kashmir and is acting as the sole agent for investment of government’s funds. If sources are to be believed, the treasuries across the state are empty with bills worth crores of rupees pending for last many months. Even the contractors who have completed various development projects are not able to get their bills cleared. Officials said that liability of Rs 100 crore has become a great burden on the government as out of which 75 percent bills belong to the contractors, who had recently threatened agitation. “Even the employees are not able to get their GPF from the treasures as they have been asked to wait till funds are released by the government”, said a source. The biggest problem for the government is that Durbar is shifting from Srinagar to Jammu and salaries of move employees have to be cleared by October 22 alongwith move allowance”, sources said. Officials said that earlier state government would immediately take OD from J&K Bank in such pressing circumstances, but the RBI has strict with OD facility and seeks even minutest details before release of funds. “There is a severe financial crisis. The treasuries are out of money, while government is unable to utilize OD option as everything is now under the control of RBI and its approval is necessary”, sources said. Important to note that shifting of OD facility to RBI had political storm in the state with the main opposition Peoples Democratic Party terming it a fiscal sell-out. Though the state’s Finance Minister had later cleared that it will not have any affect on JK’s control over the J&K bank, but in recent past, RBI has become more strict against the unending financial mess in the state. However, a senior government functionary, on the condition of anonymity said that RBI is doing debt management in J&K from 1972 and there is nothing new in the present crisis. “It is short term crisis and liabilities will be cleared soon. This is not for the first time that such things have happened. We had pleaded with the 13th Finance Commission to grant us one time financial assistance of Rs 2300 crores to remove the structural deficit and that is being pumped slowly in the financial system”, he claimed. 

Greater Kashmir

RBI guidelines on new banks to promote financial inclusion, say experts

Banking and finance experts today said that draft guidelines issued by the Reserve Bank of India (RBI) for new licenses to operate commercial banks in the private sector will allow only serious players, promote financial inclusion and encourage high level of corporate governance..........

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No unscheduled power cuts from Nov 1

JAIPUR: Reviewing the power situation in the state, the cabinet on Wednesday decided to prepare an action plan report to be submitted to the Reserve Bank of India, to ensure that the Discoms become eligible for bank loans again.  Moreover, the government is expecting a positive response over its action plan from RBI, which in the first place directed the banks to discontinue the loans.

TOI

Now, NRIs can hold accounts in any currency

The Reserve Bank today said Indians who have non-resident accounts in the country can now hold them in any currency which is fully convertible. The move is likely to help NRIs/Persons of India Origin as it will give them more options in the holding of accounts, and lessen the risk from fluctuations in major currencies. Earlier, FCNR(B) account holders were allowed to hold accounts in only certain currencies such as the Pound Sterling, US dollar, Japanese yen, euro, Canadian dollar and Australian dollar. "It has been decided that Authorised Dealer banks in India may be permitted to accept Foreign Currency (Non-Resident) Account (Banks) deposits in any permitted currency. It may be noted that 'Permitted currency' for this purpose would mean a foreign currency which is freely convertible," RBI said in a notification.

IE

Corporates turn to MFs as banks cut bulk deposit exposure

...It is noteworthy that the RBI has hiked interest rates 12 times – 325 basis points on a cumulative basis - since March 2010 According to data sourced from the Association of Mutual Funds in India, for the period September 2010-March 2011, the average monthly contribution of liquid schemes to the total assets under management (AUM) of the industry was about 17 per cent and that of the income schemes was about 48 per cent....

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Pick-up in bank loan disbursements

Signs of credit pick-up are gradually emerging in the so-called ‘busy season' for banks, going by Reserve Bank of India's latest data. .............

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