RBI's interface with banks on speeding up clearing operations

State Bank of India, Tiruchi, in coordination with its MICR Centre and Centralised Clearing Processing Centre, Tiruchi, arranged an interface between Reserve Bank of India and member banks of the Tiruchi Clearing House here recently. P.Vijaykumar, General Manager (DPSS & NCC), RBI, Chennai, spoke in detail about the functioning of clearing operations and the payment systems such as RTGS / NEFT and Speed Clearing. He explained the advantages of truncation of clearing instruments to be introduced soon wherein the clearing process would be undertaken based on the images of instruments. This initiative by the RBI would further speed up the processing of clearing, he added.  Various queries raised by member banks during the interactive session were clarified by Mr.Vijaykumar and C.Saravanan, Assistant General Manager, RBI, Chennai. Officials from State Bank of India and around 40 member banks of Tiruchi Clearing House participated, a press release from the SBI here said.

HBL

RBI to tell banks to follow cops' advice

CHENNAI: Growing concern over the increase in number of complaints from ATM users on credit card fraud will now see the Reserve Bank of India issuing a strict directive to private and nationalised banks, asking them to adhere to police instructions on security guidelines.  In the backdrop of about 60 complaints received from bank customers by the Central Crime Branch (CCB) over the last one and half months, Commissioner of Police J K Tripathy, ADGP (Crime) Abhay Kumar Singh and CCB officials - DCP A Radhika, ADC Dr M Sudhakar and ACP John Rose, held a meeting with the RBI Regional Director N S Viswanathan and 22 representatives of commercial banks on Tuesday to chalk out a strategy to tackle the menace of credit card fraud. On the sudden spurt in the number of cases, a senior CCB official told Express that a five-member gang, including three Sri Lankans, was arrested in the first week of October on charges of printing fake credit cards. The gang had stolen the data of several customers and was probably operating from behind bars in a bid to show that they were not involved in the racket. The kingpin of the gang, Manoj Kumar, a native of Pattukottai, was also still at large, he said. The CCB official said the meeting discussed ways by which banks could tighten both system and infrastructure security. The arrest of another gang on Sunday showed that courier companies, which dispatched the credit cards to bank customers, were turning out to be a weak link in the ATM system. “Since the credit card data had been stolen by employees of a courier firm and used even before it reached the customer, we suggested that the card remain ‘dummy’ till it reaches the hands of the customer,” he said. “After ascertaining his/her identity through a set of questions over the phone, it could be activated.” The top police brass also insisted on frequent inspection of the ATM centres by bank officials to see if any skimmers had been inserted in the machines by fraudsters. “At present, the banks do not conduct any inspection,” the CCB officer said. “It was suggested that they maintain a roster for each ATM centre.”  Another suggestion was that banks educate their customers to change their PIN number frequently. Besides, they could implement the ‘One-Time Password’ (OTP) method. “Inserting the card activates a call and the customer receives a new password over the cellphone from the bank for that transaction,” the official said. The police also took exception to the banks directing their customers straight away to them in the event of any fraud detection. Banks must accept the complaints, analyse the loopholes that led to the fraud and submit a progressive report to the police, which would help them in the investigation, they told the bankers. Since chip-based credit cards offered better security than those with magnetic stripes, they must also think in terms of switching over to them. The police suggested a ‘Know your customer’ plan under which credit and debit cards will carry photographs of customers. ADGP Abhay Kumar Singh suggested that all banks have a main account of the customer and an add-on-account, which will have a minimum balance, and the loss in the event of a fraud would not be much. The RBI chief said that a circular would be issued to all private and nationalised banks in the city, stipulating that the guidelines set by the police were mandatory.

Expressbuzz

We did what was warranted RBI Governor

Find a fake note? Fear not to report it

If you come into possession of a fake currency note inadvertently, don't be afraid to report it. No more will you face the threat of a police case or be treated with suspicion, thanks to new norms of the Reserve Bank of India. As per the existing norms, banks are required to file a first information report (FIR) immediately upon detection of a fake note.  However, hesitation among customers as well as bank officials in taking the matter to police has led to under-reporting of the detection of fake notes.  To address this, the apex bank now has instructed banks that there is no need to register a case with police unless five or more pieces of fake notes are detected in a single transaction.  In all other cases where one or up to four fake notes are detected, a consolidated report can be sent to the police at the end of every month, the RBI said. This decision was taken on the recommendations of the High Level Group on Systems and Procedures for Currency Distribution Chaired by Usha Thorat, former Deputy Governor, RBI. From the police perspective, there are still some more gaps to address. Amit Garg, Additional Commissioner of Police (Crimes), Hyderabad, said a compliant should be scientific.  ``I have recently suggested to some banks that they should segregate huge amounts deposited by different customers with some kind of identification. This helps proper mapping of source and region while we investigate,'' he said.  There is a greater need for banks and people to come forward with complaints if fake notes are detected, he added. The RBI Governor, D.Subbarao, while addressing the press during the policy review, agreed that there was under-reporting of the matter. Pointing out that detecting counterfeit notes was the responsibility of both the central bank as well as commercial banks, he said: “The reporting was skewed because we found that only one or two banks were reporting counterfeit notes. The others were probably not paying enough attention.” He said that the RBI was in discussion with banks on the subject. As a first step, at least 20 per cent of frontline staff – both officers and clerks – would be trained in the detection and reporting of fake notes during 2012. According to the RBI, 45,235 pieces of counterfeit notes were detected by it, while 3,90,372 pieces were detected by various commercial banks in 2010-11. 

HBL

RBI becoming too predictable - K. KANAGASABAPATHY

Unlike earlier, RBI's statements now provide a forward guidance to policy stance. As a result, almost every change was anticipated and discounted by markets even before the announcements

The Reserve Bank of India's monetary policy statements ever since the framework was changed from monetary targeting approach to multiple indicator approach since April 1998 contained three important elements. First, was an assessment of macroeconomic and monetary developments in India in the backdrop of global developments.  The second is the stance of monetary policy which clearly presented whether the policy's thrust was biased towards the price stability or inflation control objective or more attuned towards supporting growth by stimulating investment and export demand; and third was policy action in terms of monetary measures using instruments such as cash reserve ratio, repo rate and reverse repo rate.  The policy statements provided base line projections for growth and inflation, besides some monetary and banking indicators. Another important element of policy had been the strategy towards exchange rate and the closely related reserves management which practically did not undergo any change till late 2009. The exchange rate policy was guided by the broad principles of careful monitoring and management of exchange rates with flexibility, without a fixed target or a pre-announced target or a band, coupled with the ability to intervene, if and when necessary.  The management of reserves took into account the changing composition of the balance of payments and endeavoured to reflect the ‘liquidity risks' associated with different types of flows and other requirements.T his strand of policy presentation and prescription by and large continued through the tenures of Dr. Bimal Jalan and Dr. Y.V. Reddy till about end of 2008 and extended through the tenure of present Governor Dr Duvvuri Subbarao till about the end of 2009.

Some Recent Departures

Three broad departures are evident since about late 2009. First, while the macro and monetary projections continue, the upside and downside risks are elaborated in the statement.  Second, over a period, the policy statements now provide a forward guidance to policy stance. Earlier, there was no policy guidance for the immediate future except stating broadly that the RBI would act swiftly and decisively as and when evolving external and domestic conditions so warrant. Third, while the reserves management strategy did not seem to have undergone a change, the exchange rate management had become more and more fully market-oriented and the RBI has been following practically a hands-off policy. Two implications are evident because of the recent changes. First, the surprise element has been taken out of policy to a great extent. Apparently, almost every policy change was anticipated and discounted invariably by markets even before the announcements. One exception was a 50 bps hike in the repo rate last July when the anticipation was only for a hike of 25 bps.  Second, the exchange rate movements are now in a wider range, particularly under global uncertainty. Third, in the absence of exchange market intervention, the extent of reserves accumulation has been limited.

Implications of guidance

In the mid-year review, the forward guidance of a pause by December seems to have virtually negated the policy action of raising the policy rate.  The market seemed to have cheered the guidance. The stock prices moved up and the government securities yields have softened, soon after the policy announcement. In corporate bond market also, yields are reported to have fallen sharply as some buying emerged. Given the easy liquidity scenario, the transmission of the rate hike on base rate and effective bank lending rate is also likely to be muted. The second risk is about inflation. Even assuming oil prices rule stable, a currency depreciation has serious downside risk to inflation forecast.  Added to this is the fiscal risk that may put added pressure. Late 2009, both government and the RBI anticipated the inflation rate to come down significantly by end of fiscal and this was belied later. If for some reason, the inflation rate does not subside by December, there would be a loss of credibility. Third, once the market knows about hands-off policy of RBI on exchange market intervention, any intervention when really warranted by RBI may not be taken seriously and may prove to be excessively costly even for moderating volatility in rupee exchange rate. Dr. Reddy, who was known to have taken the market often by surprise, mentioned in an important speech on communication in 2008 that surprise element in the decisions and timing of the communication were more effective, and particularly when the public policy preferences and the market preferences were in virtually opposite directions. He added that the emphasis of communication was on presenting information and analyses, while the RBI desisted from giving any explicit forward guidance. A transparent signal for stabilising expectations in tune with policy stance would enhance policy transmission.  But, such signals are better given through actions from time to time, but not by declaring in so many words about the actions that would be taken or not taken in the future. As such, when policy action is hawkish, a dovish forward guidance on policy may negate the very objective of current policy action.

HBL 

Multi-level parking cleared; hits code hurdle

CHANDIGARH: The Sector-17 multi-level parking project has finally got the green signal from the architect wing of Chandigarh administration, but it will take another six months before it can start. The likelihood of implementing the model code of conduct for municipal polls next week is the reason for further delay. The multi-level parking lot, which is coming up near RBI building in Sector 17, will be able to accommodate around 1,000 vehicles.

TOI

Rate hike playing havoc with SMEs: FISME

BANGALORE : An increase in 375 basis point in the repo rate by the Reserve Bank of India (RBI) over the last 20 months or so and the consequent sharp increase in the cost of credit is playing havoc with micro, small and medium enterprises, feels Federation of Indian Micro and Small & Medium Enterprises (FISME). This is the 13th such hike in the basic interest rate since early 2010 and since then the repo rate has gone up by a whopping 375 basis points. “The indecisiveness of the central government on supply side reforms coupled with its fiscal profligacy has rendered the RBI’s interest-rate hikes more or less ineffective in containing inflation,” said FISME President Shri V.K. Agarwal. “Under the circumstances,” he said, “we would like to bring to the RBI’s notice that out of the top 200 items produced by MSMEs, the demand for nearly 60 per cent of these items are critically dependent on the healthy growth of three sectors – buildings and construction, transportation, and the white goods sector.”  He added that while the rate hikes have adversely impacted investment decisions in all three areas and thereby the top line growth of MSMEs producing items meant for final consumption in these sectors, the increased cost of credit has become quite unbearable for many MSMEs as this is also eroding their margins and rapidly pushing them towards insolvency. “In view of this situation, and the fact that interest rate hikes have adversely impacted investment in housing, automobiles and white goods due to a sharp weakening of demand as higher financing costs are forcing consumers to defer their purchase decisions, FISME would like the RBI to consider an interest subvention scheme for the MSME sector so that they can survive even as RBI continues to maintain its anti-inflationary stance.”

http://www.ciol.com/SMB/SMB/News-Reports/Rate-hike-playing-havoc-with-SMEs-FISME/155850/0/

A Clarity of Vision - Concerted Efforts

The 25 bps repo rate hike announced by the RBI in its Second Quarter Review of Monetary Policy was along expected lines given the stubbornness of inflation. The RBI is well aware that the cumulative past policy actions are yet to play their full course. As such, the rate hike is to be seen more as an exercise in managing inflationary expectations than curbing demand. The more important takeaway is the guidance on the peaking of the interest rate cycle and the possibility of a muted response on the rate front from RBI going forward. By laying down clearly that the RBI looks forward to contain demand in the short run, which will lower inflation and inflationary expectations and thus aid in improving supply response in the medium term, Dr D. Subbarao has clearly brought out the policy imperatives. Deregulation of interest rates on savings bank deposits might have some implication for the cost of funds but the Indian banking system is mature enough to handle this transition. The relaxation in branch authoristaion policy in Tier-2 cities is a welcome move and will help in expanding the reach of banking.

Alok K.Misra,  CMD, Bank of India. (HBL)

Equal focus on monetary, structural measures

India's war against inflation continues. With headline inflation at 9.7 per cent in September 2011 and food inflation at 10.6 per cent for the latest reported week, the RBI could not lower its guard against inflation in the current policy review despite rising growth concerns. A moderate hike of 25 bps each in the policy rates was an inevitable response to India's stubborn inflationary pressures. However, the policy review has also given a dose of comfort to investors by stating clearly that inflation would start moderating from December 2011 and the possibility of another rate action in December 2011 is relatively low. The deregulation of savings bank rate is a crucial policy decision as it would not just limit the depletion of real interest earnings of depositors but also improve the transmission of monetary policy impulses. The exact impact of this move on a specific bank's profitability would, however, depend upon several factors like low-cost deposit share, operating efficiency and liquidity management of that particular bank. The structural measures such as proposals to set up the groups to study non-discriminatory loan pricing and to review norms on loan restructuring and a warning to banks to manage carefully the foreign exchange risks from un-hedged exposures of companies would substantially improve the credit underwriting standards. On the whole, the policy has achieved an optimum balance between monetary and structural measures. 

M.D.Mallya - Chairman, Indian Bankers' Association (HBL)

Inflation continues to be top policy challenge: RBI

New Delhi: Food inflation quickened in mid-October as prices of vegetables soared, sustaining the pressure on overall inflation and the Reserve Bank of India.  The RBI has identified inflation as the top policy challenge. “Inflation continues to be a major macroeconomic concern. The headline WPI inflation has remained stubbornly high, averaging 9.6% during the financial year so far. Inflation has been broadbased, and driven by all the three major groups, primary articles, fuel and power and manufactured products,” RBI said in its monetary policy review.  “As indicated in the first quarter review, both the level and persistence of inflation remain a cause for concern. Of larger concern is the fact that even with the visible moderation in growth, inflation has persisted,” the central bank said.  The RBI has raised interest rates 13 times since March 2010 and has indicated that it may be over with its current tightening cycle if overall inflation eases to 7% by end-March. It has said further rate hikes “may not be warranted if the inflation trajectory conforms to projections”. But economists say inflation is unlikely to ease to 7% by March and could still hover around 8-9% putting pressure on RBI to maintain its tight policy stance.

TOI

Food inflation spurts to 11.43%

Having breached the psychological barrier, food inflation raced ahead to 11.43 per cent for the week ended October 15 from 10.60 per cent in the previous week owing to a relentless surge in prices of vegetables, fruits, milk and protein-rich items. The WPI (Wholesale Price Index) on food inflation released here on Thursday shows that while vegetables were 25 per cent dearer on a year-on-year basis, fruits turned more expensive by 11.96 per cent and milk by 10.85 per cent. Alongside, eggs, meat and fish were also costlier by 12.82 per cent.  What is hurting the common man all the more is that this fresh bout of double-digit inflation is over and above the 14.20 per cent spurt witnessed during the same week in October, 2010. In effect, there is no statistical anomaly of base effect in play in the current surge in prices which is very close to the high of 11.53 per cent recorded for the week ended April 9 this year.

More disconcerting for the authorities is the fact that edibles such as pulses and cereals — prices of which had eased in recent months — have started to become more expensive and turned dearer by 9.06 per cent and 4.62 per cent, respectively, on a yearly basis. Items which tended to cost less on an annual basis, however, were onions with their prices declining by 18.93 per cent while wheat and potatoes also turned cheaper by 0.95 per cent and 0.45 per cent, respectively. In a way, the spurt in food inflation, which has a significant share in the overall price spiral, vindicates the rate hike and the policy stance taken by the Reserve Bank of India (RBI). In its annual review, the apex bank had estimated headline inflation to remain high till December this year before tapering down to about 7 per cent by the end of the fiscal year in March, 2012.  Noting that real wage inflation has extended into the first quarter of the current fiscal, the RBI, in its second quarter review said: “Food inflation is likely to stay elevated due to demand-supply mismatches in non-cereals and large MSP [Minimum Support Price] revisions.” Significantly, headline inflation, which also accounts for the price surge in manufactured items, has hovered above 9 per cent since December, 2010 and stood pegged at 9.72 per cent in September this year. 

HBL

Loose fiscal policy main culprit behind high inflationary pressures says study

The RBI has already hiked the repo rate by 375 basis points (bps) from the bottom, and it is loose fiscal policy that is the main culprit behind high inflationary pressures, says Macquarie.........

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Freeing up of branch licensing is welcome

The mid-year review has initiated a smooth transition in the monetary policy stance. The RBI has continued with monetary tightening to take the anti-inflationary measures to their logical conclusion. At the same time, it has signalled a transition in the stance by indicating that the likelihood of another rate hike is low given the likely moderation in inflation.  The policy statement also outlines several other measures, most notably the deregulation of savings account interest rates. Banks will work out their product strategies to ensure stability of liability franchises and appropriate management of the overall cost of intermediating savings and providing banking services. The freeing up of branch licensing in Tier-II centres is also a welcome measure that will give greater flexibility to banks in expanding their networks across the country. Going forward, the moderation in inflation could provide room for monetary policy to address growth risks.

. Chanda Kochhar, Managing Director, and CEO, ICICI Bank (HBL)

Savings rate deregulation will soon result in competitive equilibrium

...Retail deposit customers do shop around; they do have more than one banking relationship. But to expect all of them to dance to interest rate movements is myopic. If at all, there would be a small section of customers who may have such behaviour. ....

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Banks fear high interest rates will dent profits

Even as Reserve Bank of India’s (RBI) deregulation of savings deposit interest rate will benefit depositors, the move will put pressure on banks due to higher cost of funds compounded by slowing growth in credit offtake.........

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Freeing SB rates

The Reserve Bank of India has deregulated savings bank interest with the caveat that banks must offer uniform rates on deposits up to Rs 1 lakh; and can offer differential rates for those above Rs 1 lakh. But there are finer points. The average CASA deposits of banks are of the order of about 35 per cent; Of these, about 60 per cent are below the Rs 1 lakh category.Secondly, the SB rates are 4 per cent. Suppose one bank decides to offer say 5 per cent and other banks decide to follow suit, it will push up cost of deposits. Banks with large SB deposits will suffer the most as they have to put up with higher cost of deposits. The differential rate on high value deposits has the potential to substantially increase the cost for banks as customers, especially the ‘High Networth Individuals will start demanding high interest rates , higher than what prudential ALM practices may permit them.  If banks try to offset the pressure on margins by hiking base rates, borrowers will suffer and more delinquencies may happen.

-  G.K.Murthy, Bangalore (HBL)

Holding firm for all PSU banks in offing

... the Reserve Bank of India (RBI) pointed to urgency need for capital infusion into public sector banks in view of rising bad assets. ...

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Tirupur exporters concern over RBI rate hike

The time has come for the RBI to provide for a separate chapter for exporters to insulate them from fluctuations in interest rates, according to the Tirupur Exporters' Assn (TEA)......

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Paypal in charge of revenge against RBI strictness

After the revelation regarding the latest rip off from Paypal in yesterday’s report published PayPal RIP OFF tracked by Times of Assam, it has come to light that over 2000 accounts of Indian PayPal users have been suddenly made permanently limited, which means all these Indian accounts are permanently frozen and can’t be appealled against this act of PayPal. The same story applies to all these 2000+ Indian users; – they have been suddenly notified about their accounts getting permanently limited without an exact or strong reasoning except few possibilities thrown at them. It is strange and uncanny that such a high number of Indian user accounts were frozen suddenly with some illogical mail which doesn’t have any explanation why the accounts were permanently limited. It is to be mentioned that this recent dictatorship or bias from Paypal is the company’s reply to the strictness shown by the Reserve Bank of India (RBI) against the modus-operandi of Paypal. The Paypal services were always questioned as the Organisation tried to become a virtual or online bank, without following banking norms. As such the RBI had enforced strict rules and regulations which Paypal had followed, but adding their own spices to cook further inconvenience to the Indian users. The closure of over 2000 Indian user accounts without proper reasoning seems to be Paypal’s stubborn reply to the strict Indian policy implemented by the RBI.

Times of Assam

Maharashtra makes way for e-payment of stamp duty

To bring in more transparency, the Maharashtra government will launch e-payment gateways for stamp duty and registration charges. The government would also facilitate payment of stamp duty for leave and license deals through the internet by applying digital signatures. These initiatives are part of the 32 key resource areas (KRA) fixed by the state to increase the pace of development and revenue collection. "The Central government and the Reserve Bank of India have given their approval for the introduction of e-payment for the collection of stamps and registration, which is the second highest after value added tax and sales tax in the state. The idea is to make payment possible through credit and debit cards. The government had mobilised Rs 12,500 crore through stamp duty and registration in 2010-11 and it has set a target of Rs 15,000 crore for 2011-12. So far, in view of the current economic slowdown, especially in the realty sector, the state could mobilise Rs 5,000 crore during April-September, which is 32 per cent of the target," said a senior government official. The launch of e-payment aims at creating a hassle-free environment for the recovery of stamp duty and registration charges. The official admitted that the e-payment initiative would reduce interface between the government employees and tax payer and thereby curb corrupt practices.

BS

Dhanlaxmi Bank shrugs off charges of misdemeanour

....The Indian banking system in general and the private sector banks in particular, including Dhanlaxmi Bank, are subject to healthy supervision in the form of regulations from the Reserve Bank of India. .....

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