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The very purpose of VITALINFO is to provide a platform for wider dissemination of updated information related to and happening of events in and around RBI.
Thursday, November 17, 2011
Rising e-commerce leading to frauds: H R Khan
Third National Seminar on Microfinance: Issues and Challenges: 02 – 03 December 2011
One of the mandates of the Centre for Microfinance Research is to organize annual conference/Seminar on microfinance in order to disseminate the knowledge generated from the work done by the researchers in the field of microfinance. The first National Seminar on Microfinance was organized on 25-26 July 2009 and inaugurated by Dr.C.Rangarajan, Ex-Governor, RBI & Hon'ble Member of Parliament, Rajya Sabha. CMR has now scheduled the third seminar to be held on 02 and 03 December 2011. Shri Jairam Ramesh, Hon'ble Minister for Rural Development, Govt of India has given his kind consent to be the Chief Guest during the inaugural session (02.12.2011) of the seminar and Shri H.R. Khan, Deputy Governor, Reserve Bank of India has given his kind consent to be the Chief Guest during the valediction session of the seminar (03.12.2011). This Seminar will focus on the following themes:-
1. Regulatory challenges for client protection in microfinance.
2. Enhancing outreach of microfinance: Role of Technology.
3. Microfinance through co-operatives: Performance and Prospects
4. Revival of rural artisans, handloom and handicraft cluster bases: Potential role of microfinance
The programme would commence at 9.00 AM on 02 December 2011 at BIRD, Lucknow and will conclude at 05.30 PM on 03 December 2011.
RBI needs more powers to help banks overcome insolvency: Chakrabarty
IT exemption
About half of the Corporation's premium income, which is its main source of funds, is paid as income-tax to the Government. In this regard, Dr Chakrabarty observed that since DICGC is a non-profit organisation serving social obligations of protection of small depositors, it should be exempted from payment of tax, as is done globally. The tax exemption would enable the DICGC build up its fund base, provide higher coverage to depositors and even pass on the benefits to insured banks by reducing the rate of premium. The Deputy Governor said it is surprising that in India, there is inadequate awareness about deposit insurance. One reason for this could be that in India banks are perceived to be either too-big-to-fail or impossible to fail on account of the Government or RBI backing. While this may be true for the public sector banks, it certainly does not hold good in the case of private sector banks, foreign banks operating in India and the large number of cooperative banks, added Dr Chakrabarty.
HBL
Shell out more to use your safety lockers in banks
These are tough times for the common man: After interest rates for home loans were increased, now bank rates for safety lockers, too, have gone up. Annual charges and security deposits for safety lockers in public sector banks will see a significant hike. Syndicate Bank is the first to revise rates for all categories of lockers. Notices have been sent to its branches, directing that customers be informed to pay money as deposits to avail the locker facility. All public sector banks will follow suit. Banks have different rates for different locker dimensions and customer categories. Customers in metros will end up paying Rs3,000 to Rs10,000 for small lockers, while for large lockers, they have to pay at least Rs15,000 to Rs19,000 as deposits. Customers in semi-urban and rural areas will be charged lower rates depending on the locker size. Furthermore, even the annual rent has been hiked from Rs300 to Rs600 for small lockers; Rs500 to Rs1,110 for medium lockers; Rs900 to Rs1,900 for large lockers; and Rs1,500 to Rs2,500 for very large lockers. According to Syndicate Bank officials, the rates have been increased following a directive from the RBI with an advice to the Indian Banks Association. This means all public sector banks will increase the charges. Corporation Bank general manager BR Bhat told DNA that all bank services are reviewed once in six months and this exercise was a part of it. “The locker rates had not been revised for a long time,” he added. Expectedly, customers are not a happy lot. “There are no recurring expenses for this service. Lockers are installed and they need very little annual servicing. Strong rooms are built for maintenance-free operations for a lifetime. Why are banks hiking the security deposit and rent?” asked Kusuma Shenoy, a locker holder in Syndicate Bank, Mangalore.
Some customers have decided to appeal to the Banking Ombudsmen and to RBI Regional Director in Bangalore to seek a clarification. “But when we called Banking Ombudsman Palanisamy in Bangalore, nobody answered the line. We wanted to complain to him for over-charging for a service that did not warrant such steep hike,” said consumer activists.
DNA
Interest subsidy to farm sector not viable: RBI
The Reserve Bank of India (RBI) on Wednesday said the government should do away with subsidised farm loans, as the proposition was not viable. “If banks are able to give loans to big corporate bodies at nine per cent, why can’t they give loans for agriculture at 13 per cent? The problem is it (the government) wants credit to be available at seven per cent, when inflation is nine per cent. That is our objection,” said RBI Deputy Governor K C Chakrabarty, while addressing a banking seminar organised by YES Bank. He said banks could not provide subsidy to all farmers when the deposit rate was nine per cent. Banks extend loans of up to Rs 3 lakh to the farm sector at seven per cent, and get 1.5 per cent interest subvention from the central government. The rate of interest is fixed and not related to the base rate, or the benchmark lending rate. The interest rate has risen in the last one and half years, and has exerted an upward pressure on the banks’ cost of funds. Since the interest rate is fixed for farm sector loans, banks are unable to pass on the rise in the cost of funds to borrowers. Chakrabarty said financial inclusion could only be led by banks, and not by micro-finance institutions (MFIs) or technology providers. While financial inclusion would be brought about by regulated financial institutions, others could only facilitate it, he said. He said an entity needed to provide savings and payments systems apart from credit facility for financial inclusion. “MFIs provide only credit, hence they cannot bring about financial inclusion,” said Chakrabarty. Within the banking fold, financial inclusion initiatives have to come from private sector banks, he said. “Public sector banks would not bring financial inclusion in this country. It would be brought by private sector banks,” he said. This would be visible in the next two-three years, he said, adding banks needed to work out viable business models, since financial inclusion was not possible through charity. Under new norms, banks have been mandated to open one-fourth of their new branches in unbanked, or under-banked, areas to expand the reach of financial services. The banking regulator has also liberalised branch opening in unbanked areas. Chakrabarty said if banks wanted to grow in a planned manner, this was the time to build a customer base.
BS
Karnataka Bank opens financial literacy centre
Mangalore : Karnataka Bank Ltd, in association with the Manipal-based Jnana Jyothi Financial Literacy and Credit Counselling Trust, opened its first financial literacy and credit counselling centre at B.C. Road town in Bantwal taluk of Dakshina Kannada district on Wednesday. Speaking at the inauguration of the centre, Mr P. Jayarama Bhat, Managing Director of Karnataka Bank, highlighted the centre's functions and its use especially for the rural public. The centre is meant to serve the interest of customers of all banks, he said.
Inaugurating the centre, Mr A.K. Bhattacharyya, General Manager of Reserve Bank of India, spoke on the initiatives taken by the RBI and the need for financial literacy as well as financial inclusion. By this initiative, the level of knowledge among the general public could increase resulting in availing of more banking services. The Managing Trustee of Jnana Jyothi Financial Literacy and Credit Counselling Trust, Mr D.T. Pai, laid out the objectives of the trust and the functions of the centre. He said Karnataka Bank is the first private sector bank to sponsor the opening of such a centre at block level, and reiterated the desire of the Trust to open more such centres at taluk and block levels.
HBL
AIBEA employees oppose Kingfisher Airlines bailout; urges RBI to recover loans
MUMBAI: Opposing the bailout of Kingfisher Airlines, the All India Bank Employees Association (AIBEA) Wednesday urged the Reserve Bank of India ( RBI) to first recover loans given to the airline. "Already 13 banks have extended a total credit of more than Rs.7,000 crore. Twice these loans have been restructured in order to avoid the loan being defined as bad loans," said AIBEA general secretary Vishwas Utagi. AIBEA has also advised all its nominee workman directors on the boards of the banks to oppose any further bailout or credit facility to the airline. "Big corporates are squeezing the public deposit in (state-run) banks by frequently going for Corporate Debt Restructuring," Utagi said. "Kingfisher Airlines is one such glaring example. AIBEA has been opposing such bail-out packages.
ET
SISCO net profit boosts but fall in deposit rates
Gangtok : The 12th Annual General Body Meeting of Sikkim State Co-operative Bank (SISCO) limited was held on November, 15, 2011 to discuss and review the financial position of the bank for the financial year 2010-11 at Denzong Regency here in the capital. The meeting of the bank was graced by RBI, AGM, Anil Yadav, NABARD General Manager P.C.Choudhary and Board of Directors amongst a good strength of shareholders.
G Padmanabhan: Getting "IT" right
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RBI told to disclose top 100 loan defaulters
The Central Information Commission has directed the Reserve Bank of India to make public the names and other details of top 100 industrialists of the country who have defaulted on loans from public sector banks. The commission also directed the bankers' bank to post on its website complete information on all such industrialists as part of suo-motu disclosure mandated under section four of the RTI Act before December 31 and asked it to update it every year. The RBI had objected to making this information public saying it is held by it in fiduciary capacity and disclosing it would adversely affect economic interest of the State. Information Commissioner Shailesh Gandhi agreed that information is fiduciary in nature but said that such exemption does not stand when there is larger public interest in the disclosure. Mr Kapoor had sought to know from the RBI the details of default in loans taken from public sector banks by various industrialists besides list of defaulters, top 100 defaulters, name of the businessman, address, firm name, principal amount, interest amount, date of default and date of availing loan. During the hearing, Gandhi asked the RBI if the information about loan defaulters is held by it as part of statutory requirements. The Public Information Officer admitted that the Banks were providing the information in fulfilment of statutory requirements. Mr Gandhi, in his detailed order, said, "In fact, information about industrialists who are loan defaulters of the country may put pressure on such persons to pay their dues. This would have the impact of alerting citizens about those who are defaulting in payments and could also have some impact in shaming them." He said there is no doubt that details of top industrialists who have defaulted in repayment of loans must be brought to the citizens' knowledge and there is certainly a larger public interest that would be served on disclosure of the same, hence clause of fiduciary information does not stand. "This (disclosure) could lead to safeguarding the economic and moral interests of the nation. The commission is convinced that the benefits accruing to the economic and moral fibre of the country, far outweigh any damage to the fiduciary relationship of bankers and their customers if the details of the top defaulters are disclosed," he said. Mr Gandhi said the commission is aware that information on defaulters is being shared by Reserve Bank with an organisation called CIBIL adding that "it is difficult to understand the reluctance to share this information with citizens using RTI". The commission also rejected the contention that disclosure would adversely affect economic interest of the state saying "if it means that such borrowers would not bank with public sector banks for fear of exposure, it would in fact be in the economic interest of the nation. "It is also unlikely that the economic wellbeing of the nation could get affected adversely by disclosing the names and details of defaulters. The Indian economy is dependent on far stronger footings," he said.
NDTV
Nigerian arrested for cheating engineer
A Nigerian national has been arrested for allegedly cheating a mechanical engineer of Rs 15 lakh through a fake lottery, police said today. Evan Tony alias Franklyn (38), resident of Ubiaja in Nigeria who is presently residing in Mumbai, was arrested yesterday as soon as he arrived from Mumbai to IGI airport here last afternoon to collect more money from the victim, a senior police official said. "He had already duped Ravi Mogra of Rs 15 lakh on the pretext of giving him the lottery amount of Rs 12 crore. Mogra deposited the amount in various bank accounts provided by the accused. He even sold his house in Kondli to get the amount," Chhaya Sharma, DCP South district said. Police has recovered two passports including a fake one reportedly issued from Congo, three cell phones, several SIM cards, fake chemical coated black dollars and an iron safe containing black Pounds. The accused even provided Mogra the letters purportedly issued from RBI to convince him to make these payments, who credited Rs 5 lakh in various accounts of the accused and had paid Rs 10 lakh in cash. Mogra was once called by him in a hotel in Bangalore where he and his associates handed him over an iron safe containing black pounds worth Rs 12 crore to be encashed in Indian currency through RBI account, the official said. When the accused demanded Rs 23 lakh more, Mogra become suspicious and broke open the safe to find several bundles of black powder coated plastic feeling paper. The gang was operating at interstate level and remains most of the time in Bombay and Bangalore.
IBN Live
Hike in small savings return a sweet pill
If you had planned for your future corpus thinking that your Public Provident Fund (PPF) and other small savings options would give almost fixed returns, be ready to make fresh calculations. From December 1, the small savings returns would become market-linked, aligned with the G-Sec rates (government securities). To address the issue of asset-liability mismatch in the National Small Savings Fund (NSSF), the central government has moved towards making returns from small savings instruments benchmarked against the government securities of similar maturities. Being market linked, the rate of return would come down whenever there is a downward revision of interest rates, making it difficult for you to work towards a long term financial goal, like building retirement corpus, through instruments like PPF.
Why market linked
The Thirteenth Finance Commission in its report had recommended that all aspects of the design and administration of the NSSF be examined with the aim of bringing transparency, market linked rates and other much needed reforms to the scheme. As a follow- up to this recommendation, the central government had constituted a “Committee on Comprehensive Review of NSSF” on July 8, 2010, headed by Shyamala Gopinath, the then deputy governor, Reserve Bank of India.
IE
Countercyclical policies needed for financial stability: BIS
Countercyclical policies undertaken by monetary authorities, more capital requirements for banks and effective liquidity management are the most important measures needed for financial stability and growth, Mr Jaime Caruana, General Manager, Bank for International Settlements, said on Wednesday. He was briefing the media at the end of the first international conference conducted by CAFRAL (Centre for Advanced Financial Research and Learning) on ‘Financial sector regulation for growth, equity and stability in the post-crisis world'. In response to a question, Mr Caruana said fiscal authorities must create enough space and be ready to build buffers during good times. He said it was easy to overestimate the health of the Budget during a credit boom, and cited the example of his own country, Spain, which moved dramatically from a surplus Budget to a deficit when the credit boom ended. Mr Caruana was Governor of the Central Bank of Spain till 2006. Briefing media persons on the conference deliberations, Ms Usha Thorat, Director, CAFRAL and main organiser of the conference, said there was greater appreciation among western nations about the need for equity as one of the objectives of financial regulation. The focus was always on growth and deregulation earlier, but this had begun to change after the crisis of 2008, she said.
HBL
RBI cancels licence of Charminar Co-op Bank
The Reserve Bank of India has cancelled the licence of Hyderabad-based Charminar Co-operative Urban Bank as all efforts to turnaround it had failed. In a press release issued on Wednesday, the RBI said that depositors were being inconveniences by the continued uncertainty. The Registrar of Co-operative Societies, Andhra Pradesh State has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank, RBI said. Consequent to the cancellation of its licence, the bank is prohibited from carrying on ‘banking business' including acceptance and repayment of deposits. On liquidation, every depositor is entitled to repayment of deposits up to a ceiling of Rs 1 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC). The problems with Charminar Bank started in February 2002 when the RBI discovered that the bank was not in a position to meet the demand of its depositors. To protect the interests of the depositors, the RBI restricted the bank from accepting and repaying deposits to a maximum of Rs 1,000 per depositor. With a view to restructure and revive the bank, the Government of Andhra Pradesh notified a Scheme of Reconstruction in consultation with RBI which came into force with effect from March 3, 2003. The Scheme, however, failed to yield the desired results. The subsequent inspections of the bank also revealed no improvement in its financial position, said RBI. In terms of a revised restructuring scheme, all depositors of the bank having deposits above Rs 10 lakh were to be paid the balance amount in eight equal half-yearly instalments starting from March 2009. It was observed that the last instalment (fifth) was paid not out of the cash generated from recovery of non-performing assets but by disposing of the fixed deposits maintained with other banks. The bank itself accepted that any further recovery in NPA accounts were not possible. Without any further recovery in NPA accounts, the bank can hardly make repayment of the next instalments, said the RBI. Further, the Charminar Bank is not in a position to pay its depositors in full, the affairs of the bank are being conducted in a manner detrimental to the interests of its depositors, the financial position of the bank leaves no scope for revival and public interest will be adversely affected if the bank is allowed to carry on banking business, the RBI said.
BS
Sharp drop in rupee alarms government - ‘RBI may intervene if needed’
On a day when rupee hit a new low of 50.74 to a dollar, Finance Minister Pranab Mukherjee on Wednesday said, the Reserve Bank of India is monitoring the situation and will intervene if necessary. The rupee dropped as worries about Europe's debt crisis and a worsening domestic economy raised demand for the US currency. "As RBI has already mentioned, it is watching the situation. As and when it is necessary, they will intervene," Mukherjee told reporters here. RBI Deputy Governor Subir Gokarn had said on Tuesday that the bank would intervene in the forex market only in case of extreme volatility. Market participants are agog with the question whether the RBI should intervene in the foreign exchange market, but analysts say, central bank’s intervention in the forex market at this juncture could raise concerns over liquidity as bank’s dollar purchase could potentially suck out rupee liquidity from the market. RBI intervention in the forex market is also not recommended at the time when the commodity prices have again started reigning high and there is an increasing domestic demand pressure. The rupee is already Asia's worst performing major currency this year, having tumbled by close to 12 per cent against the dollar so far in 2011. The falling rupee has already pushed up the cost of country’s imports, particularly oil, in the past as many months.
DH
Banks can't penalise for prepayment of loan
One of the biggest problems faced by banks and financial institutions is the failure of borrowers to repay loans. So, defaulters are offered incentives such as partial waiver of interest or a scheme for one-time settlement. Yet, surprisingly, banks often penalise a customer by levying charges for pre-payment of a loan account. S Krupanidhi Educational Trust runs several educational institutions in Bangalore. It required finance to expand its activities. So, it applied to Union Bank of India, which sanctioned a loan of Rs 21.6 crore, to be repaid over seven years in monthly instalments of Rs 30,000. The interest was 11.25 per cent per annum.As there was escalation in the cost of the project, the trust wanted a further loan. Union Bank agreed to consider the request, but later refused. The trust then approached Axis Bank, which agreed to cover the entire project. So, the trust decided on closing the loan account with Union Bank. The latter demanded Rs 64.8 lakh as closure charges. The trust was compelled to pay this, under protest. More surprisingly, although the account was being closed via pre-payment, the bank charged Rs 169,299 as loan renewal charges. The trust then filed a consumer complaint before the Karnataka State Commission. It said the loan sanction letter didn’t mention pre-payment charges. Even the loan agreement didn’t mention, but later a rubber stamp endorsement about charges was affixed on it . The trust contended these were never agreed to. On the other hand, the bank argued the charges were payable according to the agreement. The bank pointed to the guidelines issued by the Reserve Bank of India (RBI) permitting pre-payment charges, as also its circulars. The state commission observed the rubber stamp endorsement in respect of the charges looked like a subsequent insertion, but it would not be possible to decide this under the summary procedure followed by consumer fora. The endorsement stated that pre-closure would attract a pre-payment penalty. However, neither the RBI's guidelines nor the bank's circulars could be termed as rules. The agreement also provided that in case of a default, the bank would be entitled to recall the entire loan without payment of any pre-closure charges. When no charges are levied here, it wouldn’t be correct to levy these when the borrower voluntarily pre-pays. The commission held levying of the charges as not justified. The commission also noted the observation of the Delhi State Commission in the case of State Bank of India v/s Dr Usha Vaid [ II (2008) CPJ 166 ], wherein it had been observed that no bank or finance company could be allowed the restrictive trade practice by binding the consumer to go on availing a loan even if the interest charged by the bank was higher, and any clause which operates adversely to the interest of the consumer would be void and unenforceable. A similar view had been taken by the Karnataka State Commission in the case of UR Rehman & Ors v/s Kashmir Bank Ltd & Ors. Accordingly, it was held that it would be incorrect to levy pre-payment charges. Also, loan renewal charges could not have been levied when the loan was pre-paid. Hence, the commission ordered Union Bank of India to refund the pre-payment penalty and the loan renewal charges, aggregating to Rs 66,49,299, along with 12 per cent interest and costs of Rs 10,000. Banks must learn to appreciate and give incentives to persons who make prompt or early repayment, rather than giving these to defaulters. This twisted logic must change.
BS
RBI wants to bring down bank profits; draws attention to bad loans
... RBI says if the banks have to increase or maintain profitability, it must come from other income and not from increasing the cost of capital per say......
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RBI directs RRBs not to pay on over 3-month old cheques/DD
Mumbai: The RBI on Wednesday directed the regional rural banks not to make payments on cheques and other financial papers which are more than three months old. "RRBs should not make payment of cheques/drafts/pay orders/banker's cheques bearing that date or any subsequent date, if they are presented beyond the period of three months from the date of such instrument," the Reserve Bank said in a statement. The direction came a few days after the central bank said that payments on such papers will not be valid if they are over three months old. "In India, it has been the usual practice among bankers to make payment of only such cheques and drafts as are presented for payment within a period of six months from the date of the instrument. "RBI is satisfied that in public interest and in the interest of banking policy it is necessary to reduce the period within which cheques/drafts/pay orders/banker’s cheques are presented for payment from six months to three months from the date of such instrument," it said.
Zee News
My Mobile Payments receives RBI’s approval to issue mobile wallet
Money on Mobile offers mobile phone users the flexibility and convenience to top up their talk time, DTH account, buy air, bus or movie tickets anytime, anywhere using the mobile platform. My Mobile Payments Ltd (MMPL), a Mumbai-based mobile payment service provider, has received the Reserve Bank of India’s (RBI) go-ahead to launch financial services on mobile phones. “Money on Mobile” (MoM), an electronic prepaid payment instrument for the mobile phone is set to launch its services for the Indian market this December. Shashank M Joshi, MD of MMPL said, “We’ve been granted the licence to offer the semi-closed m-wallet by the RBI. This means that by December, consumers can load their mobile phones with prepaid cash and use this virtual money to purchase goods and services at retail outlets. Retailers and kirana stores across the country will act as a loading point for MoM.” MMPL has already tied up with over 36,000 retailers pan-India and has a presence in over 200 cities. MoM offers mobile phone users the flexibility and convenience to top up their talk time, DTH account, buy air, bus or movie tickets anytime, anywhere using the mobile platform. MoM service operates independent of the consumer’s mobile operator or bank, and hence any mobile subscriber can avail of its services. “Started in India over a year ago, MMPL is determined to turn RBI’s desire into reality of converting 70% of the country’s financial transactions to electronic by 2012,” he added.
Moneylife
Private banks should play pro-active role in financial inclusion: RBI
The Reserve Bank today called upon the private sector lenders to play a proactive role in promoting financial inclusion as state-owned banks cannot do the job by themselves. "Public sector banks will not bring financial inclusion in this country (alone), it will be brought by private sector banks," RBI Deputy Governor K C Chakrabarty said, while speaking at the Financial Times-YES Bank banking summit here. Commending the work done by private sector banks on financial inclusion in the country, he said the lead taken by private sector banks towards financial inclusion would be visible in the next one to two years. Chakrabarty also called bankers to view financial inclusion as a profitable proposition than merely looking at it from the compliance point of view. As per the financial inclusion agenda of the government, the banks will have opportunity to open branches in 72,000 villages with a population of 2,000 by March, 2012. This will take banking to over 90 million customers. On the role played by MFIs (Micro-Finance Institutions), Chakrabarty said they would never be able to promote financial inclusion, as they only disburse credit and do not help generate savings. Chakrabarty further said technology would be the biggest enabler in achieving the financial inclusion by drastically bringing down costs.
NDTV
Real truths about monetary tightening
...Questions have also been raised about the ability of monetary policy to fight inflation, thanks to this perceived dismal performance. However, before condemning monetary policy for being ineffective, there is a need to verify the facts. ....
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Banks ride high on interest margins
...“Interest rate on deposits have already peaked. At this point of time, fixed deposits are offering highest returns. We won’t be increasing interest on long-term deposits in the near future...
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