Parliamentary panel wants RBI norms on farm credit followed effectively

NEW DELHI: A Parliamentary committee has directed the government agencies to ensure that RBI guidelines related to institutional credit for farmers during natural calamities are followed in letter and spirit. The Committee on Agriculture, headed by Basudeb Acharia, which presented its report in Parliament today called for more effective steps by the government to mitigate the impact on deficient monsoon on the farm sector. The panel expressed satisfaction over the RBI's scheme to provide relief to farmers in the event of occurrence of natural calamities, but it felt that the government needs to work more seriously on implementing the scheme.  "What perturbs the committee is that in spite of these RBI guidelines, their proper implementation leaves much to be desired. This is because farmers have to go through a myriad of processes and cumbersome procedures before they finally receive some financial support to help them tide over the crisis brought by natural calamities," it pointed out.  The committee is of the view that faulty implementation forces farmers to approach private moneylenders for debt.  "It is precisely these bottlenecks, which force farmers to knock at the doors of private moneylenders who by virtue of their informal and speedy disbursal of credit, force farmers into the vicious and never ending debt cycle from which they get no respite," it observed. In view of the difficult situations faced by the farmers in the event of a natural calamity, the committee has urged the concerned government agencies to follow the RBI guidelines "in letter and spirit".

ET

One lakh fake notes at ICICI

Dombivli : On December 16, the Manpada police station registered a case of a bank receiving fake currency notes by an unknown depositor.  ICICI Bank, Dombivli Branch lodged a complaint after it detected Rs 1,38,200 in fake currency that was deposited to the bank. A bank manager at ICICI-MIDC branch in Dombivli confirmed the news, on the condition of anonymity. "We have received fake notes earlier also but not such a big amount," he said. When contacted, Kalpesh Kunt, in charge of ICMC, the collection centre for banks in the MIDC area, said he would get in touch with us later since he was out of the area. ICICI officials examine the currency deposited in the bank by the public at Currency Chest of ICICI, which is located in the basement of the MIDC branch, for forged or damaged notes. The bank authorities do not know yet which account received the fake currency because the notes were discovered during an inspection of all the cash brought in from ICICI's city branches. Officials immediately lodged an FIR with the Manpada Police station.  P Bhalerao, assistant police inspector on duty from Manpada Police, said, "The case is being investigated. We have registered the case under sections 489 (a) (b) and 420 of Indian Penal Code for cheating and forgery. We will have to probe every account holder's cash deposits to get a lead." Preliminary submissions made by the bank to police reveal that the fake notes were in denominations of Rs 1,000 (54 notes), Rs 500 (165 notes), Rs 100 (14 notes) and Rs 50 (14 notes). According to the ICICI bank spokesperson, "Genuine notes are only put into circulation by us after processing is done in high-end note sorting machines in line with the RBI's note-sorting policy. Forged notes detected by these machines are again checked manually by highly experienced bank staff and reported to the RBI and National Crime Records Bureau. Post that, the bank lodges a FIR with the local police. The same process has been followed by the bank while lodging the FIR. This has been done in compliance with the RBI guidelines with regard to identification and reporting of such currencies."

Mid Day

RBI's pause on key rates worries SMEs

........ Even as the Reserve Bank of India (RBI) has decided to hold its monetary policy tightening measures by keeping the key rates unchanged, small and medium enterprises (SMEs) have raised concerns over the continued high cost of bank finances. In its mid-quarter monetary policy review last week, the RBI kept the cash reserve ratio (CRR) unchanged at 6 per cent, while repo rate and the reverse repo rate remained unchanged at 8.5 per cent and 7.5 per cent respectively. Meanwhile, banks have not shown any indication of modification in the current interest rate structure for loans.................

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Plan panel proposes liberal bank exposure regulations for fund-starved UMPPs

A high-level working group in the Planning Commission has proposed a special bank lending dispensation for ultra mega power projects (UMPPs), considering the high debt component of these capital-intensive projects. It has said the Reserve Bank of India's (RBI) prudential norms for UMPPs could be more liberal considering their relatively high fund requirements............

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MFIs can tap ECB

The Reserve Bank of India (RBI) on Monday allowed micro finance institutions (MFIs) to raise funds via external commercial borrowings (ECBs) up to $10 million or equivalent during a financial year for permitted end-uses under the automatic route. The MFIs eligible for the same will be: those registered under the Societies Registration Act, 1860; those registered under Indian Trust Act, 1882; MFIs registered either under the conventional state-level cooperative acts, the national level multi-state cooperative legislation or under the new state-level mutually aided cooperative acts and not being a co-operative bank; non-banking finance companies (NBFCs) categorised as ‘non-banking finance company-micro finance institutions' (NBFC-MFIs) and companies registered under Sec. 25 of the Companies Act, 1956, and involved in micro finance activity. Further, the MFIs registered as societies, trusts and co-operatives and engaged in micro finance activities should have a satisfactory borrowing relationship for at least three years with a scheduled commercial bank authorised to deal in foreign exchange; and would require a certificate of due diligence on ‘fit and proper' status of the board/committee of management of the borrowing entity from the designated authorized dealer (AD) bank.  ECB funds should be routed through normal banking channels. NBFC-MFIs will be permitted to avail themselves of ECBs from multilateral institutions such as IFC and ADB/ regional financial institutions/international banks / foreign equity holders and overseas organisations. Companies registered under Sec. 25 of the Companies Act and engaged in micro finance activities will be permitted to avail themselves of ECBs from international banks, multilateral financial institutions, export credit agencies, foreign equity holders, overseas organisations and individuals. Other MFIs will be permitted to raise funds via ECBs from international banks, multilateral financial institutions, export credit agencies, overseas organisations and individuals. However, overseas organisations and individuals complying with specific safeguards may lend.The RBI has also stipulated that the designated AD must ensure that the ECB proceeds are utilised for lending to self-help groups or for micro-credit or for bona fide micro finance activity, including capacity building. It has also been decided that non-government organisations engaged in micro finance activities can avail themselves of ECB up to $10 million or equivalent under the automatic route as against the present limit of $5 million or equivalent per financial year. The RBI has also said that these amendments to ECB policy would come into force with immediate effect and the framework with respect to MFIs would be reviewed after one year.

HBL

India's Finance Minister Lays the Foundation Stone of the Country's First Bank Note Paper Mill

.............The project is likely to be completed by October, 2013. The completion of the project will reduce our dependence on foreign supplier. This will also reduce the possibility of diversion of papers supplied by foreign supplier to other destinations for the purposes of generating fake currency. We have to take the drive of indigenization to a logical conclusion by becoming self reliant. Our long term goal should be to meet our domestic requirement related to currency and subsequently cater to the demand of the international market. Looking into the technological and scientific temperament of our younger generation, I am sure we can achieve it. 

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Follow KYC norms or face penalty, RBI tells banks

Mumbai: The Reserve Bank on Monday asked banks to strictly follow the Know Your Customer (KYC) norms or Anti- Money Laundering (AML) standards, failing which it will take penal action. "Any contravention thereof or non-compliance shall attract penalties under Banking Regulation Act, 1949," RBI said in a notification. Banks are required to strictly adhere to Know-Your- Customer (KYC) norms, Anti-Money Laundering (AML) standards, Combating of Financing of Terrorism (CFT), Obligation of banks under Prevention of Money Laundering Act (PMLA), 2002, it said. RBI said banks are required to prepare a risk profile of each customer and apply enhanced due diligence measures on higher risk customers. Banks and Financial Institutions should have policies, controls and procedures, duly approved by their boards, in place to effectively manage and mitigate their risk adopting a risk-based approach, it said. As a corollary, banks would be required to adopt enhanced measures for products, services and customers with a medium or high risk rating, it added. In this regard, it said, Indian Banks' Association (IBA) has taken initiative in assessment of money laundering and financial terror and risk in the banking sector. The IBA guidance also provides an indicative list of high risk customers, products, services and geographies. Banks may use the same as guidance in their own risk assessment, it added.

Zee News

State govt flays bankers for laxity

Senior officials say banks are indifferent towards funding development projects. For another time in a row, state government on Monday came down heavily on bankers for their being indolently indifferent towards funding developmental activities in the state. A slew of officers had an heated exchange with bankers to extent that a senior government official levelled charges, “Bankers just do paper work in the state”. Not only RBI, data available with Business Standard also reveal bankers are forming in the state in terms of farm loans, credit deposit ration, rural housing loans, farm loans and above all education loans. The credit deposit ratio, the officials complained, was very low even less than 40 per cent mainly in tribal-dominated area where bankers have no scarcity of government business. While holding a discussion with bankers in state-level bankers committee meet, state chief secretary, Avani Vaish warned the bankers, “We will take up the matter with RBI, if bankers do not sanction education loans and developmental activities.” On the other hand, bankers shifted blame to the students and the government by saying that the given targets are exaggerated and hard to achieve. “How can we fund 60,000 seats when state has only 30,000 seats in the professional colleges?” a banker asked. Earlier also KC Chakraborty, Deputy Governor of RBI had pulled up the state bankers for their lethargy in funding students for higher education and low credit deposit ratio and even farm loans. A senior official, Sanjay Shukla exposed a case to which many bankers were unaware and put a question mark how bankers are working in the state, “We have a Central government scheme to provide quality housing to urban poor. The Central and state government would extend 70 per cent of finance, construction work is in progress but bankers just simply turn down beneficiaries even for a loan of Rs 1-1.5 lakh despite the properties which the beneficiaries will own, will have at least Rs 10 lakh market value. All housing projects, under the scheme, are in posh areas. This reflects how bankers are working in the state.” The bankers committee is unaware of the scheme. Another official Ashok Shah, director institutional finance alleged, “Bankers just brushed away demands for loans and do paper work only.” Bankers had a rather poor reply. They either want a commission in financial inclusion from government or want properly-trained business correspondents for rural accounts operations. But, hardly have any answer why they have funded zero amount to students or to poor in urban and rural areas for housing activities. “There is a problem in communication and we will have to have a systematic approach to solve these issues,” said MV Tanksale, chairman of the Central Bank of India who is also the head of state level bankers committee, “It will take 4-5 years for us to reach all rural areas in terms of financial inclusion.” According to data available with the Business Standard, there are as many as 100,000 seats in professional colleges all over the state but bankers have a very lengthy documentation process. They also want heavy collateral. “I have felt it in three-four cases in which I am the guarantor and I have perception that bankers do not work, they have sanctioned loans to students residing outside the state and studying in colleges outside the state,” Shukla added. The data available with the Business Standard indicates that banks like Punjab National Bank, Indian Bank, IDBI Bank, Dena Bank, Axis Bank and Corporation Bank, Axis Bank and State Bank of Bikaner and Jaipur have not covered any villages under banking service in villages of 2000 population. In case of rural housing bankers, these have funded 6,033 cases against more than 2 lakh potential and 40,000 forwarded by state government. The Nabard has also revealed that per hectare funding by bankers is very poor and only 40 per cent orRs 8,000-9,000 per hectare against the national average of Rs 22,000 per hectare. The credit-deposit ratio in tribal district of Sidhi, Umaria, Shahdol, Rewa, Singrauli Mandla and Annuppur is not above 35 per cent since 2008.

BS

RBI offers new branch licences to StanChart, Deutsche Bank

............. “I think RBI held back on issuing new branch licences to large foreign banks primarily because of two reasons. First, there was some regulatory discomfort over governance and control in some of these banks. Second, RBI also wanted to link the new branch licensing process to the subsidiarisation model. It was probably waiting till the guidelines for this model were finalised,”.....................

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Arresting falling rupee; whose responsibility?

.......... Creating confidence among investors, both foreign and Indian, is an arduous task and is certain to take lot of time. On the other hand, it takes no time for reputation to go down the hill. The policy of drift followed by the Government must quickly make way for decisive actions and reforms. Even if Government sends signals that long awaited measures and legislations would be taken up after elections in UP, that will shore up some confidence and make the RBI’s task that much easier. This battle, of arresting falling rupee, will have to be jointly fought by the Government and the RBI.

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Hard Sell for RBI

In your editorial “Stance of silence” (December 19), you have said: “In the end, a central bank’s job is essentially to manage expectations; if it does merely what is expected of it, it may not be seen to be in control.” In this connection, the results of the two surveys of the central bank on inflation expectations and consumer confidence should be of interest. Around two-thirds of the households are aware of the Reserve Bank of India’s (RBI’s) monetary actions. Of them, only about one-fourth are convinced that the Bank is doing the needful. Of the latter respondents, less than 60 per cent feel that its policies have an impact on controlling inflation. The survey was restricted to selected urban areas, probably for operational reasons. One can expect the position to be no better, if not worse, in rural areas. How can the RBI manage expectations if a large segment of the population is either not aware of its actions or not convinced of their effectiveness? It needs to think of some innovative ways of reaching the masses. Could it consider appointing someone like Katrina Kaif or Karishma Kapoor as its brand ambassador?

A Seshan, Mumbai (BS)

Too early to expect a loosening of monetary policy

.Though the balance between growth and inflation seems to be tilting, inflation still continues to remain outside RBI's comfort zone, and while the regulator has taken a pause on rate hikes, it is too early to expect any loosening of the monetary policy............

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Why RBI’s hands are tied in checking Re fall

...........RBI has responded when pushed to the wall. Perhaps, next time around RBI will be more proactive in managing currency expectations.

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Deregulation sparks rate war to draw NRI deposits

........“The deregulation of the rate will help stop the flow of NRI funds to NRO accounts and divert them to NRE accounts. It will help banks like us from being burdened with more high-cost deposits in NRO accounts,” ............

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