"Short Term Cooperative Credit Structure and Financial Inclusion”

The Keynote Address delivered by Mr. V.K. Sharma, Executive Director, Reserve Bank of India, at Central Zone Cooperative Conference at Raipur, Chhattisgarh State, India, organized by National Cooperative Union of India in collaboration with Chhattisgarh State Cooperative Union Ltd. on 11^th December, 2011 on "Short Term Cooperative Credit Structure and Financial Inclusion”.   

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Bank of Maharashtra goes to doorsteps of villagers

Mumbai, Dec. 26: Bank of Maharashtra has launched a financial inclusion service as an alternative model to the Business Correspondents format. Under this model, bank staff will visit villages and offer banking services at the homes of the villagers. The bank has launched six of these Mahabank Gram Seva Kendras (MGSKs) in villages in Raigad, Thane, Ahmednagar, Aurangabad, Pune and Satara districts on a pilot basis, said a press release issued by the bank.  The MGSKs were inaugurated by the RBI Deputy Governor, Dr K.C. Chakrabarty, in Raigad district. The bank's permanent staff member of the nearest parent branch, equipped with a laptop will go to these villages to render banking services on specified days every month. Mr A.S. Bhattacharya, Chairman and Managing Director, Bank of Maharashtra, said the bank has covered all the 1,215 villages allotted to it and is in the process of stabilising services through the Business Correspondents and MGSKs. 

HBL

Need to review and recast legislations in banking sector: RBI

MUMBAI: Absence of a uniform law governing various lenders has led to an uneven playing field, necessitating the need to review and recast the legislations governing the banking sector, says the Reserve Bank. Speaking at the 'Financial Planning Congress 2011' here RBI Deputy Governor Anand Sinha said each of the statutes was crafted in a contemporaneous setting, reflecting the needs and concerns of the time. "Since the origins of the banks have been historically different, they continue to be governed by the respective statutes as well as other general laws... However, the fact that different banks are governed by different laws has resulted in an uneven playing field which needs to be addressed," he said. The senior RBI official's recent speech here was released by the apex bank today in its website. "A single, harmonised and uniform legislation applicable to all banks will provide transparency, comprehensiveness and clarity and provide ease of regulation and supervision to the RBI... there is also a need to sort out the conflicts and overlaps between the primary laws governing the banking sector and other applicable laws," Sinha said. Banks are regulated and supervised under the Banking Regulation Act, 1949. Public sector banks like the State Bank of India (SBI), SBI's subsidiary banks and the nationalised banks, which are constituted under different statutes, are governed by their respective statutes. The provisions relating to the ownership and management of banking companies as contained in the Banking Regulation Act are not applicable to the public sector banks, he said. Similarly, cooperative banks are constituted by the respective state Cooperative Societies Acts and other legislations. Regarding the issue of management of banks, Sinha said RBI currently does not have the power to supersede the Board of Directors of a banking company and amendments for conferring such a power has been proposed in the Banking Laws Amendment Bill, 2011, which is now before Parliament.  "RBI should have the power to direct, by order, at any time that persons who are not fit and proper to hold equity or voting power in contravention of... provisions, shall not have voting power. The 2011 Bill proposes to confer such power on RBI. This will help prevent unscrupulous persons from exercising control over banks," Sinha said.  He said RBI should have the discretion to determine the level and intensity of regulation and supervision depending upon the risk to the system from entities like cooperative societies.

ET

Cash kept in bank locker eaten away by termites

Raipur: Little did he know that the hard-earned money that he was saving for his daughter's wedding would meet such a drastic fate. Ashok Agarwal, a resident of Mahavir Nagar, had kept Rs 1.5 lakh in cash and some gold ornaments in the locker of Uco Bank's Shailendra Nagar branch. To his horror, termites are believed to have chewed his money in the bank locker. A few days ago, when Agarwal opened the locker, he was bolt from the blue after he saw his cash was eaten away by termites. Agarwal said he had saved the money for his daugher's marriage and kept it in the bank locker about four months ago for safety reasons. He was paying Rs 885 per month for using the bank locker. Agarwal said he has sought compensation from the bank, but the management has not yet responded. The bank's Chief Manager, Dasrathi Sahu, said this was first such incident reported in the branch and he has apprised his seniors about the matter. Sahu said there was no provision for compensation in such cases, but the demand made by Agarwal is being considered.

Daily Bhaskar

Govt to interview 10 EDs for banks CMD post on January 4

MUMBAI: The appointments committee will interview executive directors of ten public sector banks on January 4, 2012 for CMD post in six banks. The ten candidates called for the interview include S.S. Mundra from Union Bank of India, R V Iyer and Rajiv Dubey from Central Bank of India, Ashwini Kumar of Corporation Bank, Archana Bhargava from Canara Bank, V Kannan from Oriental bank of Commerce, Ravi Chatterjee from Syndicate Bank, Rajeev Rishi from Indian Bank, Ashwani Kumar from Corporation Bank and Rakesh Sethi from Punjab National Bank. The candidates are being selected to fill vacancies in fiscal year 2012-13 in Bank of Baroda, Bank of India, Canara Bank, Dena Bank, Allahabad Bank and United bank of India. Meanwhile, the government has yet to issue notification for the post of executive director in bank like Indian Overseas Bank and Andhra Bank, Even as the candidates names have been cleared.

ET

Subbarao to play Santa 2 weeks late; CRR cut in early Jan?

 ............. Tighter than expected liquidity conditions will force the Reserve Bank of India to cut CRR (cash reserve ratio) even before the third quarter policy review scheduled for 24 January 2012.....................

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Banks can't charge for account closure, directs RBI

MUMBAI: Banks have been told not to charge fees from customers who are closing their accounts as RBI moves to make modern banking accessible to millions of ordinary people, including pensioners and the poor. In a recent meeting between the banking regulator and heads of various banks, the central bank has told the banks not to charge any fee if a customer desires to opt out of a bank either due to a change in employment or a transfer to another city. "How can you penalise a customer for not offering a service. Secondly, how can a bank have the authority to debit money from their customers account and credit it to their own P&L?" RBI deputy governor KC Chakrabarty told bankers who resisted the move to waive the fee, a banker present in the meeting said on condition of anonymity. Coming just weeks after freeing savings rates, this diktat by RBI is likely to increase costs for all banks. But the worst-affected are likely to be the the private sector and foreign banks who charge high fees for account closures. The savings rate deregulation has already kicked off a rate war in the industry with aggressive new banks such as YES Bank and Kotak Mahindra increasing their rates to 7% and 6%, respectively. Account closures by people tempted by these high rates are likely to increase and banks are unlikely to have the freedom to impose any costs on such customers. But customers are likely to feel happy as it would make it easier for them when they move jobs or cities. "Waiver of fee for closing a deposit account is a natural corollary to waiver of pre-payment fee on floating rate home loans. The customer should have right to freely exit from their loan or deposit account and this should not attract any charge," is the message from RBI, a banker present in the meeting told ET. The central bank recently persuaded most banks to waive pre-payment penalty for customers who wish to prepay their home loans. Fees on closure of accounts is now on top of its agenda, especially after the Damodaran Committee report on improving customer service advocated that the customer should have a right to a basic savings account with cheque book and ATM card facilities. The committee was formed to look into banking services rendered to retail and small customers and pensioners. The committee was also mandated to look into the grievance redressed mechanism practiced by banks and suggest measures for expeditious resolution of complaints. It submitted its report in August this year. All banks charge customers for closing their accounts. In some cases, it is as low Rs 100, but private sector and foreign banks are known to charge anywhere between Rs 500 and Rs 1,000. Recently, HDFC Bank quadrupled its fee to Rs 500 from January 1, 2012.  The meeting with RBI was attended by CMDs of some PSU banks and the CEOs of ICICI Bank, Chanda Kochhar, and HDFC Bank's Aditya Puri. Officials said the private and foreign banks conveyed to RBI that there is cost involved in close an account which is being levied on the customers. 

ET

Banks mull consensus on troubled sectors’ lending

In a bid to pacify the rising concerns over bad debts of four major sectors — aviation, power, telecom and textiles — the Government convened a meeting of all the State-run banks to draw a strategy on lending and debt recast plans. Financial services secretary DK Mittal met the heads of top public sector banks in Bangalore last week to chalk out a plan amid the worsening situation in these major sectors due to grim economic outlook and activity. The Bank executives, however, did not confirm the development and said that it was a usual meeting. The plan, according to a Government official, was to reach a consensus among public sector players, who control nearly three quarters of the lending in the country. Sources said that the Finance Ministry was also planning to hold quarterly meetings with the bankers for a better consensus among banks. The move comes at a time when several banks have either restructured their loans to power companies and State utilities or have stopped lending at all. A debt recast for the textiles sector is already in the process. The Finance Ministry is considering a proposal of loan restructuring for the textile sector and a decision in this regard is expected soon. The Textiles Ministry has been following the matter with the Reserve Bank of India and the Finance Ministry after considering the industry’s demand for re-setting of bank loans worth Rs 1 lakh crore. The industry has been hit by a sharp fall in cotton yarn prices, poor domestic demands and curbs on cotton yarn exports in last December. Now, the textile units are facing difficulty to repay term loans and financing working capital. Similarly in the aviation sector, the Kingfisher Airlines, which is in a financial mess struggling to service its loans that have run up to over Rs 6,000 crore, has submitted a request for fresh funding assistance to the lenders led by State Bank of India. Loans given to Air India have already been restructured. The State-run carrier has an outstanding debt of Rs 43,000 crore, half of which is guaranteed by the Government. SBI Capital Markets (SBI Caps), the investment bank hired by Air India, has prepared a restructuring package for the balance of Rs 22,450 crore. For the already beleaguered telecom sector, Indian banks seem to be heading for a rough ride due to their perceived huge exposure in the sector. State Bank of India, for instance, has a total exposure of Rs 23,000 crore in the telecom segment, of which, Rs 15,000 crore is direct funding and the balance is non-fund based. The operators paid nearly Rs 1 lakh crore to the Government last year to acquire 3G and broadband spectrum. The gross credit exposure of the Indian banking industry to the telecom sector stood at Rs 94,319 crore as on June, 2011. The banks have already reached the brink of exceeding their lending exposure to the power sector which is suffering the most due to various issues like coal supply issues. The Reserve Bank of India, in its Financial Stability Report (FSR) last week, said, “The risk that banks face on account of their exposure to power sector is due to two reasons: rising losses and debt levels in SEBs (State Electricity Boards) and shortage of fuel availability for power sector.” The central bank has already warned of a further rise in bad loans in the banking system on the back of the slowing economy and fall in credit growth. The growth rate (year-on-year) of NPAs at 30.5 per cent as of end September 2011has outpaced credit growth of 19.2 per cent. On top of this, the RBI has expressed apprehension about underestimation in NPAs. “In RBI’s view, in certain cases, the statutory auditors have underestimated the extent of NPAs and the required provisioning. Since the RBI, as the supervisor of the banking system, relies and leverages on the work done by auditors, the profession should effectively address this issue,” RBI Governor D Subbarao said last week.

The Pioneer

Financial inclusion to soon fetch tax benefits for banks, institutions

....Banks and financial institutions may get tax benefits on profits made through activities leading to financial inclusion. Further, any losses these institutions incur, as a result, may also be allowed to be carried over for a longer period......

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RRBs move ahead with technology and consolidation

.......According to Dr N.K. Thingalaya, a regional rural banker who headed an RBI working group on RRBs in 1995, the expansion of service area after amalgamation has helped increase net profits of these banks. Earlier, RRBs were confined to one or two districts. The amalgamation of different RRBs of the same sponsor bank in a State helped the new entity increase business and profits............

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Risk-averse banks in a time of slowdown

....The fear of mounting NPAs (which as the RBI informs us exceeded credit growth between March and September 2011) would be a powerful deterrent for bankers; and if they do not lend business suffers. So even if interest rates begin their slow descent, rising risk aversion will offset any beneficial advantages of cheaper credit............

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Tighter norms for NBFCs

Even the as they are readying to ring in the new year with quite optimism, the Reserve Bank of India (RBI) has dampened their spirits by tightening rules for the non-banking finance companies. For one, the apex bank has made it clear that the NBFCs could participate in the credit default swap market only as users. “As users, they (NBFCs) would be permitted only to hedge their credit risk on corporate bonds they hold,'' the RBI said. However, they are not permitted to sell protection. Hence, “they are not permitted to enter into short positions in the credit default contracts,'' it made it clear. But they “are permitted to exit their bought CDS positions by unwinding them with the original counter-party or by assigning them in favour of buyer of the underlying bond,'' the apex bank said. For another, the RBI also has tightened the capital adequacy norms for all NBFCs. The rule tightening exercise comes in the wake of their stepped-up exposure to off- balance sheet items. The RBI has tightened the off-balance sheet regulatory framework by prescribing that the total risk weighted off-balance sheet credit exposure be calculated as the sum of the risk weighted amount of the market-related and non-market related off-balance sheet items. For the off-balance sheet items already contracted by NBFCs, the risk weight shall be applicable with effect from the financial year beginning April 1, 2012. “Off-balance sheet exposures of NBFCs have increased with the increased participation in the designated currency options and futures and interest rate futures as clients for the purpose of hedging their underlying exposures,'' the RBI said.

HBL

Implement Recommendations of Rangarajan Committee: Mufti

Ramban, Dec 26 : Reiterating resolve of his party to make Jammu and Kashmir an economically self-reliant state, former Chief Minister and patron of Peoples Democratic Party (PDP) Mufti Mohammad Sayeed today demanded implementation of the recommendations of the working group headed by former RBI Governor C Rangarajan. Rangarajan, who headed the Working Group on Economic Reconstruction, has recommended that two NHPC projects namely Dulhasti and Salal hydro electric projects should be handed over to Jammu and Kashmir. “For making Jammu and Kashmir an economic viable State it is necessary to implement recommendations of C Rangarajan,” said Mufti while addressing a public meeting at Ramban. He regretted that despite having huge water resources Jammu and Kashmir has to depend upon Government of India for economic development.

Kashmir Observer

RBI frees interest on co-op banks savings accounts

....The Reserve Bank on Monday deregulated interest rate on savings accounts in all State and Central Co-operative Banks, a move that will fetch better returns for depositors......

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Interest payable to claimants on deposits made by a deceased person may vary

For balances in current accounts, RBI has mandated banks to pay interest to the tune of savings deposit rate, from the date of death of the depositor till the date of repayment to the claimant..............

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RBI sop to AI augurs well for Kingfisher

...... Air India’s proposal for a financial restructuring got another shot in the arm last week when the Reserve Bank of India (RBI) agreed to increase the period of provisioning of earnings from its cumulative preference share (CPS) issue to banks..............

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RBI bars MMLF from accepting deposits for 6 months

The Reserve Bank of India (RBI) today barred non-banking financial company Money Masters Leasing & Finance (MMLF) from accepting public deposits and selling its assets for six months for violation of directions on deposit acceptance. "The RBI has prohibited with immediate effect Money Masters Leasing & Finance from accepting public deposits from any person in any form whether by way of fresh deposits or renewal of the deposits or otherwise as well as from selling, transferring, creating charge or mortgage or deal in any manner with its property and assets...," the apex bank said in a statement. The RBI said that the NBCF has been barred from undertaking such operations without prior permission of the RBI for a period of six months. "It was observed during inspection of the books of account of MMLF with reference to its financial position as on March 31, 2010, that the company has violated extant directions on the deposit acceptance," the statement said. Besides, the city-based MMLF has been directed to repay existing deposits as and when they mature. It, however, has been allowed to carry on other business activities in accordance with law. The company, which specialises in hire-purchase and leasing, is also engaged in consumer finance and public vehicle finance. The firm had secured NBFC registration in 1998.

BS

Non-resident gamble

...From a macro perspective, it may not be a bad idea for India to tap NRI fund sources at this juncture, when foreign investment inflows have dried up and the current account deficit cannot be brought down overnight. Their money certainly proved useful during the difficult sanctions period following the 1998 Pokhran nuclear tests, when some $ 4.2 billion was mobilised through Resurgent India Bonds...........

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Sebi prescribes fewer, simpler MF products

.Sebi, in association with banking regulator, the Reserve Bank of India (RBI), and the insurance regulator, the Insurance Regulatory and Development Authority (Irda), is working on a national strategy for investor regulations, which would be cohesive and comprehensive norms that serve investor education and awareness purposes.........

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