RBI frees savings bank interest rates

Dr D. Subbarao, RBI Governor, and Dr Subir Gokarn, Deputy Governor, during the announcement of half yearly review of its monetary policy in Mumbai on Tuesday

In a move that could bring cheer to bank depositors, the Reserve Bank of India on Tuesday announced deregulation of the interest rate on savings bank deposits with immediate effect. In its second quarter review of the monetary policy for 2011-12, the RBI also upped the short-term interest rate at which it lends (repo rate) to banks from 8.25 per cent to 8.50 per cent to curb persistent inflation, which continues to be above its comfort zone. In the run-up to the deregulation of savings bank rates, the central bank had directed banks to pay interest on these deposits on a daily product basis with effect from April 1, 2010. Banks currently pay 4 per cent on SB deposits. The RBI said that henceforth each bank will have to offer a uniform interest rate on SB deposits up to Rs 1 lakh. In the case of SB deposits over Rs 1 lakh, banks may provide differential rates of interest.  YES Bank responded to the RBI deregulation move by increasing the interest rate on all SB deposits by 200 basis points (1 per cent change is equal to 100 basis points) to 6 per cent. The bank also upped the Base Rate (the minimum lending rate) by 25 basis points to 10.5 per cent. “Most banks are not in a hurry to hike the interest rates on SB deposits as liquidity is comfortable. So they would not be very keen or desperate to raise the rates and lose the cost advantage. In any case, depositors looking for higher yields have moved into fixed deposits or into liquid mutual funds,” said Mr Pratip Chaudhuri, Chairman, State Bank of India.

Even as it upped the repo rate, the RBI held out the hope that the current cycle of monetary tightening may be coming to an end. Immediate transmission of the repo rate hike to lending and deposit rates is unlikely, say bankers. They fear that raising lending rates further could jeopardise credit growth. “Our compulsion to raise the lending rates would happen only if deposit costs go up. As of today, all the banks are seeing good inflow of retail deposits and liquidity is plentiful. And credit demand is not very strong. So, if deposit costs don't go up, there is no immediate need to raise lending rates,'' said Mr Chaudhuri. “Changing the policy stance when inflation is still far above the tolerance level entails risks to the credibility of the RBI's commitment to low and stable inflation. However, growth risks are undoubtedly significant in the current scenario, and these need to be given due consideration,” the Governor, Dr D. Subbarao, said at a press meet. Pointing out that the year-on-year headline wholesale price index based inflation has remained stubbornly high during the financial year so far, averaging 9.6 per cent, the RBI expects high inflation levels to persist for two more months.  The likelihood of a rate action in the December mid-quarter review is relatively low due to the expected outcomes of inflation moderating to 7 per cent by March 2012 and even further in the first half of 2012-13. Beyond December, if the inflation trajectory conforms to projections, further rate hikes may not be warranted, the RBI said. The GDP growth projection for 2011-12 has been revised downwards from 8 per cent to 7.6 per cent.

HBL

Subbarao blinks in growth vs inflation debate with finmin

The 25 basis points increase in the repo rate by Reserve Bank Governor Duvvuri Subbarao on Tuesday is a politico-economic compromise. Combined with his “guidance” that rate hikes are now likely to be paused, especially from the December review, it means that the RBI is effectively risking the loss of its anti-inflationary credentials in the hope that falling growth will anyway reduce demand and contain prices. This can work only if two other factors kick in to contain demand pressures: the government acts decisively on the fiscal deficit front either by reining in spending on subsidies or by raising taxes, or both; and global growth and commodity inflation slow down, easing imported inflation. Pranab Mukherjee will have to deliver his part of the bargain for the promised pause in rates. What we don’t know is whether he will do it (raise taxes, that is) before the budget in February or earlier. The spending cuts can, of course, happen this year itself. But cutting the wrong kind of spending – capital investment – will end up worsening the growth scenario that Subbarao is now trying to rescue. Did last week’s meeting between Prime Minister Manmohan Singh, Subbarao, Planning Commission chief Montek Singh Ahluwalia, and the PM’s Economic Advisory Council Chairman C Rangarajan, yield a new compromise where the fiscal side will take up some of the burden of handling inflation? Or did Subbarao simply succumb to political pressure from the PMO to moderate his stance before further political damage is done by falling growth and investment? The Economic Times quoted the PM as saying that “the purpose of that meeting was to explore ways and means of how we can bring about a moderation in the rate of inflation.” Whatever the answer, Subbarao is clearly taking a gamble with inflation. Given that food inflation is already in double-digits and wholesale prices index (WPI) inflation is just under 10 percent, he needed to maintain his hawkish stance. But he has, instead, opted for a fudge. What he has effectively done is to raise rates by the expected 25 basis points this time (100 basis points make 1 percent), and then made a dove-like promise that this may well be the last of the rate hikes. He has predicted that inflation will start falling from December, and will reach 7 percent by March. Clearly, the balance of monetary policy is shifting away from worries over inflation to concerns about slowing growth. Subbarao is now lowering his GDP growth forecast to 7.6 percent his year, and this is what has shaken his faith in retaining a singular focus on inflation. In his eyeball-to-eyeball with the finance ministry over monetary policy, Subbarao has blinked. He has now bought, at least partly, their line that raising rates is more of a risk than not raising it. But the statements of the governor do not indicate a convincing shift in Subbarao’s stand. For even while indicating a pause in rate hikes, he has done other things to make money costlier for banks. A key reform measure is the partial deregulation of savings rates. What Subbarao has done is ask banks to create a two-tier savings rate regime where there is a fixed rate for deposits upto Rs 1 lakh, and a variable one for deposits above Rs 1 lakh. This rate, of course, could be higher or even lower than the basic savings rate for deposits upto Rs 1 lakh. In the short term, given tight liquidity conditions, it is more than likely that savings rates will be raised by many banks – and this is Subbarao’s way of getting banks to raise rates without the RBI having to do it through the policy rate. Put another way, Subbarao is trying to regain by way of the roundabout the anti-inflationary stance he has bartered away by giving up his hawkish stance. It is not clear whether Subbarao himself is convinced his policy will work, for he has underlined the risks involved. Apart from the global risks of a meltdown due to the eurozone debt crisis, global commodity prices remain high, food inflation continues to be under pressure in protein-based items like eggs, fish and meat, and the government has announced a higher borrowing programme of Rs 53,000 crore. The bottomline is that an unconvinced Subbarao has sent mixed signals with his October policy, as his various statements show. This is how he laid the groundwork for a policy shift from inflation to growth. He said: “Of larger concern is the fact that even with the visible moderation in growth, inflation has persisted. Reassuringly, momentum indicators are turning down, consistent with the Reserve Bank’s projections that inflation rate will decline significantly in December and continue on that trajectory into 2012-13.” He is saying that since inflation will slow down in future, he is changing his goalposts. In his own words, he now wants to “balance concerns about persistent inflation and moderating growth.” This is what explains his final guidance: “Notwithstanding current rates of inflation persisting till November (December WPI release), the likelihood of a rate action in the December mid-quarter review is relatively low. Beyond that, if the inflation trajectory conforms to projections, further rate hikes may not be warranted. However, as always, actions will depend on evolving macroeconomic conditions.”

Effectively, Subbarao has gone out on a limb to accommodate the growth-wallahs. Now, it’s all over to Pranab Mukherjee to deliver the fiscal end of the bargain. If he doesn’t, Subbarao would have gambled and lost.

Firstpost 

India’s Subbarao ‘Reasonably Confident’ of Meeting 7% Inflation Forecast

Indian central bank Governor Duvvuri Subbarao said he’s “reasonably confident” of meeting a target of reducing inflation to 7 percent by the end of March, a level that still won’t be sufficient to justify interest-rate cuts. “Inflation seems to be trending down,” he said in an interview with Bloomberg UTV in Mumbai today. Still, “we have to look at inflation carefully, look at a number of other indicators including the growth performance in deciding on when and how we should reverse the interest rate stance.”  An inflation rate of 7 percent isn’t within the central bank’s “comfort range,” Subbarao said. The threshold is between 4 percent and 6 percent, he said. The Reserve Bank of India yesterday raised interest ratesfor a 13th time since the start of 2010 and signaled it’s nearing the end of its tightening. It raised the repurchase rate to 8.5 percent from 8.25 percent and said the likelihood of a rate action in December is “relatively low” as it expects inflation to slow by the end of the year.  “Given that we’ve done so much hiking already and given that we see inflation coming down December onwards, we thought that we must give greater certainty to potential investors,”Subbarao said. “The way of giving greater certainty as far as we are concerned is to give guidance about how we might calibrate the interest rate trajectory in the way forward so that they can make informed decisions.”  On whether interest-rate reversals will happen in the next fiscal year, Subbarao said that “it will be difficult to look that far ahead but you know that we all have an optimistic view of the world and an optimistic view of India and I hope that it remains in the optimistic way and that the rate cycle can be brought down sooner rather than later.” The rupee has weakened about 10 percent against the dollar this year as investors sold stocks in emerging markets because of risks to global growth, making the currency the worst performer in Asia and threatening to boost import costs.  “Of course, an exchange rate movement affects our domestic situation but in the first place the driver has been the external situation,” Subbarao said. “When the externals have started settling, I hope there will be some reversal.” “I don’t believe we’ve used exchange rate as an anti-inflationary tool in the past and we don’t intend to use it as an anti-inflationary tool,” he added. 

Bloomberg

Banking on hope

Hopes of fall in inflation seem optimistic

While increasing the repo rate by another 0.25 percentage point to 8.5 per cent, the Reserve Bank of India has stuck to its harsh monetary stance for the 13th time since March 2010, but has indicated that this is possibly the last of the hikes. It expects inflation to start declining by December this year and reach 7 per cent by March next. The full impact of the bank’s efforts to curb inflation will be seen only in the coming few months because monetary impulses travel very slowly through the economy. But the negative impact on growth has already been clear and the RBI seems to be defensive about this. In earlier policy explanations the bank was unapologetic about its hawkish stance but this time it has said that it is aware of the cost in terms of slowing economic growth. In defence of its consistent policy, it has the argument that a premature withdrawal might have been counter-productive. It had to stay the course for lack of a better option and because inaction would have meant worse for the economy. Even now its hopes of moderation of inflation in the December-March period seem to be too optimistic. There are favourable factors like the good monsoon and the fall in prices of commodities due to the problems in the Eurozone, though the positive effect of the latter may somewhat be lost by the depreciation of the rupee. The bank also probably took a cue from the actions of apex banks in countries like Brazil, Russia and China which have either stopped increasing or even started cutting rates. Monetary measures can work best in a congenial policy environment created by the government. The bank has drawn attention, as in the past, to the responsibility of the government in containing inflation. The runaway fiscal deficit, the government’s tendency to overspend and borrow, failure to deal with supply side factors that cause inflation and inaction on the reform front have been major factors in keeping the inflation rate high. The bank has lowered its growth estimates from 8 per cent to 7.6 per cent for the current year. The latest data on factory output and the slowdown in investment and corporate spending are clear signs of that. If inflation starts coming down, it may have to reverse its monetary stance quickly. The next two months will be a transitional period which will be crucial in the inflation versus growth debate. 

DH

RBI TO DEVELOP FRAMEWORK TO REGULATE MFIS

The Reserve Bank of India on Tuesday reaffirmed the need for regulations of the micro-finance industry by way of setting a separate category of NBFC-MFIs, in a move that may clear air on regulatory concerns, which the industry was facing so far, especially after the Andhra crisis. The regulatory framework for this category will now be based broadly on the Malegam committee recommendations, which were earlier in May accepted by the apex bank with a tweak. “By way of allowing a separate category for NBFC MFIs, the RBI has agreed to develop a framework of regulations that are designed to meet the specific needs of the industry, rather than addressing in the general umbrella. This had been a long-standing demand of the industry,” said Alok Prasad, chief executive officer of Microfinance Institutions Network. Since May, NBFC MFIs followed the broad guidelines of RBI based on the Malegam Committee recommendations which included parameters like capping the interest rate at 26 per cent, margin cap at 12 per cent and also increasing the annual income limits for eligible households. Disallowing an individual to borrow from more than two MFIs, the credit limit now stands at Rs 60,000 for rural, Rs 1,20,000 for urban and semi-urban households. Meanwhile, the Andhra Pradesh Government observes that the move may not bring about any change in the AP MFI Act. “There will be no change in the state government’s role at least as of now, in protecting the borrowers from the fleecing MFIs. Any changes in the present MFI Act will happen only if the Assembly takes it up,” said R Subramanyam, Rural Development principal secretary. The Andhra Pradesh government is of the opinion that Malegam recommendations are short of putting in a place an effective protection mechanism for the borrowers.

http://microfinanceafrica.net/microfinance-around-the-world/india-rbi-to-develop-framework-to-regulate-mfis/

Market unimpressed by RBI's language

Reserve Bank of India governor Duvvuri Subbarao said he wanted to give some comfort to market participants, particularly investors, so that they could manage their expectations. The market, however, was not very impressed by the language. ICICI Securities economists A Prasanna and Anurag Jha said the RBI has possibly jumped the gun in taking this call. “Apart from the fact that growth in the near-term (say 1-2 quarters ahead) will likely be unaffected by Tuesday’s monetary policy, the emphasis on the short run may prove to be harmful to the long running objective of containing inflation expectations,” they said in a post-policy note. The apex bank stated that it expects major downward pressure on growth due to a deteriorating global environment. “We believe that it is the prospect of weaker-than-expected domestic demand, especially investment growth that is sensitive to interest rate movements — that titled the scale in favour of a more dovish policy stance,” HDFC Bank economists Abheek Barua, Shivom Chakravarti and Jyotinder Kaur wrote in another note. Also, Indranil Sen Gupta, economist, Merrill Lynch, said he expects the RBI to announce open market operations of around Rs100,000 crore in December-January, once inflation peaks off. The RBI said that it expects inflation according to the wholesale price index to start easing from December and to reach the 7% mark by March. But the street, however, is not expecting it to moderate unless there is a demand shock.

DNA

RBI to ease tightening only if inflation falls below 7%

The Reserve Bank of India will only consider easing monetary policy if inflation falls below 7 percent, its governor said on Wednesday, a day after signalling that a 13th interest rate hike in 19 months was likely to be its last. “Inflation has to come down below 7 percent before we contemplate reversing our policy stance,” Duvvuri Subbarao told a conference call with analysts. The central bank lifted its policy lending rate, the repo rate, by 25 basis points to 8.5 percent on Tuesday, continuing a fight against inflation that has put it at odds with some global peers more concerned about weak growth. The Reserve Bank of India expects annual inflation to fall to 7 percent by March, and said during its second-quarter review this week that further rate hikes were unlikely if price pressures moderate in line with the bank’s projections. Headline inflation has been stubbornly high in Asia’s third-largest economy, despite the RBI’s tightening cycle that has seen interest rates rise 375 basis points since March 2010. Wholesale annual inflation in India was 9.72 percent in September, its 10th straight month above 9 percent and the highest among the BRIC grouping that also includes Brazil, Russia and China.

Firstpost

Don't anticipate intervention as liquidity is comfortable: RBI

Unlucky thirteen

A policy decision is good either because it is substantial in its output or symbolic in its intent. Taking this into consideration, the Reserve Bank of India's 13th interest rate hike is unsubstantially symbolic.  The RBI's interest rate weaponry in its combat against inflation (symbolising sound economic decision-making) has kept inflation unsubstantially high, the highest among BRIC (Brazil, Russia, China and India group) nations. The present headline inflation of more than 9 per cent is still in the uncomfortable zone.  Addressing headline inflation through frequent rate hikes will reduce the confidence level of long-term quality investments and curb India's growth. The good news from RBI is that this will be its last monetary prescription to cure the malaise and the nation hopes that strong fiscal measures are being adopted.  It is time that substance overtakes symbolism, and this 13th rate hike is RBI's unsubstantial symbolism at its last best.

S. Vaidhyasubramaniam Thanjavur (HBL)

RBI sounds unsure of inflation trend - Arjun Parthasarathy

The Reserve Bank of India (RBI) said its rate hiking spree is over for now, never mind continuing inflationary pressure. It maintained its forecast of 7% inflation at the end of March next, even as it raised the benchmark repo rate by 25 basis points (bps) to quell rising inflation expectations. The central bank said it may not need to raise policy rates in the December review as inflation will start trending down from 9% and above now. It seems more confident of inflation being contained on the back of falling demand. Aggregate demand, a key demand-side inflation factor, is expected to come off on the back of past policy actions and global economic slowdown affecting investment and private consumption demand. Investment intentions have fallen sharply in the first quarter of 2011-12 with Rs80,300 crore of projects sanctioned against Rs142,800 crore of projects sanctioned in the first quarter of 2010-11. Private final consumption expenditure growth fell from 9.5% in first quarter 2010-11 to 6.3% in first quarter of 2011-12. The RBI expects export growth to slow down from 51.8% levels in April-September on the back of slowing global economic growth. The RBI is not confident of inflation coming off due to uncertainties on the supply side. The central bank has highlighted inflation risks in the form of oil prices, food prices and administered fuel prices including coal. Rising oil prices are an ever present threat to inflation expectations. The administered prices of fuel in the country lead to non-passthrough of commodity prices to the end user and reflects latent inflation. Food prices, especially protein-rich-food prices, where there are structural imbalances, will pose problems for inflation down the line. The markets are already cheering the RBI guidance on policy rates, leading to strong rally in equities. Bond yields, too, fell by around 6 bps post the policy announcement, while the rupee gained over half a percent against the dollar. The interest rate swap curve has started flattening with the five over one OIS (overnight index swap) spread flattening by 9 bps to close at a negative 78 bps spread. In all likelihood, the markets will look to embrace the positive sentiment of the last of the rate hikes, until there is a real threat to inflation that surprises the markets and the RBI. The RBI, on its part, will hope that its inflation forecasts come out right as it has given a guidance to the market on its expected future course of action. RBI is still not fully confident of its take on inflation as seen from the inflation dynamics presented in the policy, but it does look as if policy rate hikes are on their last legs given the rate hike spree of 175 bps over the last five months.

 Arjun Parthasarathy is the editor of www.investorsareidiots.com, a web site for investors

Target inflation': RBI hits the bull's eye

...The inexorable anti-inflation strategy of the apex bank since March 2010 is understandable because inflation is aptly deemed the cruellest form of taxation to all those living on the margins in a country where precise estimates of absolute poor remain a polemical point......

Read............. 

RBI Policy: Gov Subbarao expects banks to transmit 25 bps policy rate to customers

New Delhi: The Reserve Bank of India (RBI) Governor D Subbarao Tuesday said he expects banks to respond to the 25 basis point key policy rate hike announced earlier in the day, and transmit the rate hike to their customers. Following the governor's announcement, private sector lender Yes Bank became the the first bank to transmit the rate hike, increasing its base rate -- the yardstick for pricing all loans -- by 25 basis points to 10.5%, while other banks may follow suit. Earlier Tuesday, the RBI raised its short term lending rate (repo) by another 25 basis points -- the 13th sequential hike since March 2010 -- to tame stubbornly high inflation despite visible signs of moderation in economic growth. However, in contrast to its earlier monetary policy reviews when it kept inflation as its sole target, the central bank said it will consider the tight monetary policy's impact on the country's economic growth as well going forward. The RBI also said that the likelihood of a rate hike in the mid-quarter review in December is relatively low provided inflation starts easing from December to the projected 7% by March 31, 2012. Headline inflation was at 9.72% in September, moderating marginally from 9.78% in August, but way above the RBI's comfort level of 5%-6%.

http://banking.contify.com /story/rbi-policy-rbi-gov-subbarao-expects-banks-to-transmit-25-bps-policy-rate-to-customers-2011-10-25

RBI’s Diwali gift to bank depositors

The Reserve Bank of India, in a landmark policy announcement on Diwali eve, deregulated savings bank deposit interest rates with immediate effect even as it raised the policy repo rate by a quarter per cent for the 13th time on Tuesday. For deposits of up to `1 lakh banks will have to have uniform interest rates, which the RBI governor, Dr D. Subbarao, said “would be friendly to low-income households” and support financial inclusion. He, however, refused to say whether there would be a floor rate so that interest rates would not go below a certain level in times of surplus liquidity as this would hurt the poor most. Another welcome pro-people move, which is not in the policy but which the RBI governor discussed with the bank chiefs when releasing the Second Quarter Review of Monetary Policy 2011-12 on Tuesday morning, was waiving the penalty that used to be imposed by banks on pre-payment of loans. He said he has asked the banks to do this as soon as possible. The policy also increased the individual housing loan that urban cooperative banks can give and enhanced the maximum repayment period of housing loans from 15 to 20 years. The RBI is also setting up a working group to look into principles governing proper, transparent and non-discriminatory pricing of credit. The biggest relief in this policy was an indication that there could be a pause in interest rate hikes as the RBI sees inflation beginning to decline from December 2011. This should be music to the ears of captains of industry who were very critical of what they felt was the strangulation of growth by the RBI’s relentless interest rate hikes. The stock market shot up over 300 points in a thumbs-up to the credit policy. In today’s unstable and uncertain financial global scenario anything could happen by December to interrupt the RBI’s trajectory of inflation beginning to taper off to reach seven per cent by March 2012. Besides, it has also revised GDP growth downwards to 7.6 per cent for 2011-12 from eight per cent. Domestically, the biggest risk comes from the non-performance and policy paralysis of the government. The governor highlighted facts like structural imbalances in agriculture, particularly in protein items like milk, eggs, fish and meat, which the government needs to focus on, infrastructure, distorted administered prices of several key commodities, hidden inflation as actual costs, fuel and coal prices not reflected in prices to the end consumer, and the burgeoning fiscal borrowings of the government, which the governor said could see a surge in inflation if there is moderate growth recovery. On the happy note of the possibility of this being the last rate hike, we wish our readers a happy and prosperous Diwali.

Asian Age

High savings deposit rate likely to dent banks' profits

Fears of banks’ earnings plummeting in a deregulated savings deposit rate regime appear to have gripped investors, with most analysts hinting that profitability may come under pressure due to higher cost of funds amid slowing growth in advances. “The rise in the savings deposit rate will increase pressures on banks’ profitability,” Suman Chowdhury, head of Crisil Ratings, said. The rating agency expects the lenders’ return on asset ratio to shrink by five basis points (bps) because of higher savings deposit rate, even if banks increase their transaction and service charges on such deposits. The Reserve Bank of India yesterday allowed banks to decide on their own the interest rate on savings deposits. The central bank, however, asked banks to pay a uniform rate on savings deposits up to Rs 100,000 irrespective of the amount in the account. Lenders may offer differential rates on deposits above Rs 100,000, but there should not be any discrimination between customers on interest rates for similar deposit amounts. Banks have been paying four per cent interest on savings deposits. The move was not well received by investors, as bank shares plunged yesterday in an otherwise strong broader market. The 12-share Bank Nifty closed 1.41 per cent down, though the benchmark 50-share S&P CNX Nifty ended 1.83 per cent higher. “We think this is a positive move for the economy, even though it is a negative for banks, as it will increase their funding costs,” Tushar Poddar and Prakriti Shukla, economists with Goldman Sachs, said in a note. Economists and analysts fear in the short term, the deregulation may lead to a rate war, with small and medium-sized banks looking to strengthen their retail deposit bases will hike their savings deposit rates aggressively. It took no time for YES Bank, the youngest lender in the country, to increase its savings deposit rate by 200 bps to six per cent. The private lender’s share of low-cost deposit was only 11 per cent at the end of September. Other lenders such as IDBI Bank, Canara Bank, Bank of India, Federal Bank and Union Bank of India that have relatively lower share of the savings deposit base, are expected to raise rates soon. “This change (deregulation of the savings deposit rate) is likely to result in an upward pressure on the deposit and interest rate trajectory in the near term, given the ongoing tightness in liquidity,” Siddhartha Sanyal, chief economist of Barclays Capital in India, said. Industry experts said some bank stocks that were enjoying a premium over their peers because of strong retail deposit base, may be re-rated. SMC Global Securities estimates if the savings deposit rate rises by 100 bps, banks profitability could be reduced by 12.9 per cent. “In the short term, it can be said the deregulation of interest rates on savings accounts is a real game-changer,” Jagannadham Thunuguntla, strategist and head of research at SMC, said.

BS

One-time Password for IVR Transactions

One-time password, or OTP, is a password issued by banks on request for carrying out IVR (Interactive Voice Response) transactions. The Reserve Bank of India (RBI) had said that from February 1, all merchants in India have to collect an OTP in addition to information written on credit cards for transactions done over phone (IVR). The logic being that there has to be some detail that is not present on the card to carry out the transaction over phone. Earlier, any financial transaction could be carried out over phone by using details on the card, such as the 16-digit card number, expiry date and the CVV number. This clearly was not ‘safe’ as anybody could have misused your credit card if they had the details. Now, just like you require an extra password to authenticate an online transaction, you require an extra password to carry out financial transactions over phone. The only difference being the password generated by the bank for IVR transactions, unlike the one issued for online transactions, has one-time validity.

IVR TRANSACTIONS

These are financial transactions, such as payment of mobile bills, booking of flight tickets or movie tickets, carried out over phone. Any telephonic conversation intended to do a financial transaction over phone requires an OTP.

HOW TO GENERATE OTP

You have to SMS the bank or the credit card company from the registered mobile number asking for an OTP. Therefore, ensure your mobile number is registered with the bank. The bank will immediately generate the numeric password to carry out the IVR transaction. The password expires after the financial transaction is completed. Also, it is essential you carry out the transaction as soon as the password is generated. These passwords are usually valid for 2-24 hours depending upon the bank/credit card company.

ET 

RBI tells ICICI Bank to refund money fraudulently withdrawn

PUNE: The Reserve Bank of India (RBI) recently directed ICICI Bank to refund Rs 96,000 to a man from who’s account money was illegally withdrawn by someone else through net banking even after adhering to the bank’s guidelines. The RBI found that the ICICI Bank had erred on ‘know your customer’ norms and the three-layer security measures.  Earlier, the ICICI Bank had refused to pay the victim, Manoj Moday (35), a resident of Erandwane who works with a multinational telecom company, prompting him to lodge a complaint with RBI. Modak has savings account with the bank’s Bund Garden branch and he often used the net banking facility for money transactions. He was shocked when bank officials called him on March 24 saying that money was withdrawn from his account from different cities. Modak lodged a complaint with the bank which did not yield a satifactory response. On July 12, the bank gave him replied saying it would not pay the amount back. Modak then approached the RBI’s banking ombudsman. He followed up the matter for six months and the RBI ruled in his favour on September 30.  A jubilant Modak said, “Earlier, the ICICI bank rejected my claim saying that they follow all safety measures against fraudsters. The RBI held that the ICICI Bank has erred on ‘know your customer’ norms. Anyone cheated through net banking can approach the RBI for grievance redressal if the concerned bank refuses to entertain the complaint.” Anyone having complaint against banks can complain to RBI’s banking ombudsman by sending email on bomumbai@rbi.org.in 

Sakaal Times