RBI asks banks to issue Cheque Truncation System 2010 standard cheques from April 1

MUMBAI: The Reserve Bank today directed all banks to issue cheques conforming to Cheque Truncation System (CTS) 2010 standard with uniform features from April 1, 2012, onwards. The new cheque standard 'CTS 2010' with set of minimum security features would ensure uniformity across all cheque forms issued by banks in the country and also help presenting banks while scrutinising and recognising cheques of drawee banks in an image-based processing scenario, RBI said in a notification. The homogeneity in security features is expected to act as a deterrent against cheque frauds, while the standardisation of field placements on cheque forms would enable straight-through-processing both under CTS and MICR clearing, it said.  It has been decided to prescribe a cut-off date for implement the 'CTS-2010 standards' across the country, it said.  All banks providing cheque facility to their customers, are, therefore, advised to issue only 'CTS-2010' standard cheques not later than April 1, 2012 on priority basis in northern and southern region which will be part of the northern and southern CTS grids respectively and across the country by September 30, 2012 through a time bound action plan, it said.  The introduction of new cheque standards 'CTS 2010' was warranted on account of several developments in the cheque clearing namely growing use of multi-city and payable-at-par cheques at any branch of a bank, increasing popularity of Speed Clearing for local processing of outstation cheques and implementation of grid based Cheque Truncation System (CTS) for image-based cheque processing etc, it said.

ET

RBI to issue special coins on century of civil aviation

NEW DELHI: The Reserve Bank of India Tuesday said it will shortly circulate coins of Rs.5 denomination to commemorate 100 years of civil aviation in the country. The apex bank in a statement said the commemorative coins will be a legal tender under the provisions of the Indian Coinage Act, 1906. According to the bank, the reverse side of the coin will bear the picture of an aircraft and 100 years. It will also have 'civil aviation' on the top and the years 1911-2011 at the bottom. "The face of the coin shall bear the picture of an aircraft and figure '100' with words 'years' in the centre flanked by words on the upper periphery and 'Civil Aviation' followed by 'India' below the figure '100'," the statement said. The country is celebrating 2011 as the centenary year of the first commercial flight in the country which took place on Feb 18, 1911, between Allahabad and Naini. The existing RS.5 coins will also continue to be legal tender, said the RBI.

ET

B'lore: NABARD Pegs State's Credit Potential at Rs 51,168 Cr for 2012-13

Bangalore, Dec 27: The National Bank for Agriculture and Rural Development (NABARD) has estimated Karnataka’s credit flow potential for 2012-13 to be of the order of Rs. 52,168 crore, marking an increase of 27 per cent over the previous year. The projected a credit potential was Rs. 41,085 crore for the farm and non-farm activities in the State in 2011-12. Karnataka’s Chief Secretary S V Ranganath released the State Focus Paper 2012-13 brought out by NABARD at a state credit seminar here on Tuesday. The State Focus Paper estimated a credit flow potential of Rs. 52,168 crore in the State for the year 2012-13, an increase of 27 per cent over the previous year. The projected share of crop loan is Rs 24,290.13 crore, formed 47 per cent of the total potential estimated, followed by other priority sector – Rs 14,228.27 crore (27 per cent), agricultural term loan – Rs 9848.58crore (19 per cent) and non-farm sector – Rs 3801.14 crore (7 per cent). The credit flow to crop loan sector for the year 2010-11 was Rs 17,982.25 crore and the target is Rs 17,440.67 crore in 2011-12. The State government has declared the decade 2011-20 as the `Irrigation decade’ and set a target to mobilise Rs. 50,000 crore for creation of irrigation potential to enhance agricultural operations. The credit flow to water resources sector in 2010-11 was Rs 1054.59 crore and the target for 2011-12 is Rs 1088.05 crore. The potential assessed for financing during 2012-13 is Rs 1096.02 crore. In his keynote address at the seminar, NABARD Executive Director B S Shekhawat highlighted the need for improving the per hectare credit in the State from the present level of around Rs. 23,000. Shekhawat said increased flow of agriculture term loans would facilitate capital formation in farm sector. He told bankers to exploit the full potential of around Rs. 3750 crore in the micro-finance sector as compared to the ground level credit flow of around Rs. 1400 crore at present. CEOs of public and private sector banks attended the seminar. Agrarian distress could be effectively addressed by ensuring enhanced credit flow to three lakh hectare of dry land developed on watershed basis in the State. He suggested that the state government may consider strengthening investment in areas of drinking water, setting up technical universities, post harvest management, and processing infrastructure. Uma Shankar, Regional Director, RBI, Bangalore, Syndicate Bank Chairman and Managing Director Basant Seth, CEOs of public and private sector banks, principal secretaries and secretaries of various departments and representatives of NGOs participated in the seminar.

http://www.daijiworld.com/news/news_disp.asp?n_id=125847

PSU banks'credit panel can now approve loans up to 400 crore

The government has directed banks to set up a credit approval committee - comprising chairman, executive directors and three chief general managers who handle credit, finance and risk management functions. This group can approve credit proposals up to 400 crore.............

"Though a credit approval committee has replaced the board's management committee, the two are significantly different. The MCB has outside members such as RBI nominee and independent directors; the new committee comprises two EDs and chief general managers, who report to the CMD," said another retired chief of a nationalised bank.......

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Capital infusion in banks linked to targets

NEW DELHI: The government has put in place a mechanism for statement of intent (SoI) signed with public sector banks that sets out new targets for three years besides linking future capital infusion to meeting these yardsticks.  Sources said that banks are in the process of getting their boards to agree to the targets set by their managements and the finance ministry. In October, the revised SoIs with new parameters such as employee productivity were finalized.  SoIs were started more than five-years ago with chiefs of banks that meet the targets entitled to a year-end bonus. Although the practice did force banks to plan, annual targets were seen to be short-term planning. This prompted the finance ministry to review the system and put in place a mechanism spread over three years. "At least, medium term goals are required. Short-term issues such as strategy for particular sectors would be dealt with separately on a quarterly basis," said a government official. The move to tweak the parameters was also prompted by the change in the environment. For instance, the clause relating to productivity was the result of the enhanced use of technology and the sharp increase in wage bill in recent years. In fact, even the RBI has expressed concern over the issue. "There used to be a gap between new generation banks and public sector banks. That gap has disappeared. Today, salary per employee in a public sector bank is not that different from a private bank but productivity level is very different. So, that means that the governance standard is deteriorating. If public sector does not follow governance standards, the burden is borne more by the society. There is a moral hazard since the state has to bail them out in period of crisis," RBI deputy governor KC Chakrabarty told ToI. As a result, at least three staff-related criteria have been bundled in. These include net profit per employee, employees' cost-to-income ratio and staff ratio at branches.

TOI

Rash of banking reforms: Move aimed at improving solvency

...........“Off-balance sheet exposures of NBFCs have increased with the increased participation in currency options and futures and interest rate futures. It is therefore necessary that NBFCs move over to modern techniques of risk measurement to strengthen their capital framework,” RBI said in a notification. The decision is expected to improve solvency of the NBFCs though it might put additional financial burden on them. NBFCs will have to assign adequate weights to both on and off-balance sheet items while maintaining the mandatory CRAR (Capital to Risk Asset Ratio).............

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Mirwaiz urges RBI to facilitate Islamic Banking

....... “We will not refrain from meeting RBI and other government agencies if needed for establishing Islamic Banking. We have to make serious efforts for it and soon we will constitute a team of economists to come up with the contours of establishing the system................

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RBI asks banks to set aside more capital for investing in financial entities

.... "The performance of the subsidiaries affects the balance sheet of the bank,'' RBI deputy governor Anand Sinha said recently. "On account of varied activities carried on by the entities in the group which fall within the regulatory jurisdiction of multiple regulators, the risk to the system as a whole posed by such financial conglomerates is difficult to assess.''

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RBI cautions against fraudulent fund offers

GUWAHATI, Dec 27 – The Reserve Bank of India (RBI) has cautioned the public in general against falling prey to fictitious offers of cheap funds that are rampant in recent times. Often the fraudsters lure the public in the form of lottery prize money through letters, emails, SMS, etc., an official release stated. The RBI has observed that such fraudulent communications were even sent on fake letterheads of the Reserve Bank of India or other reputed organisations, purportedly signed by their top executives/ senior officials. It has also been noticed that many residents have fallen victims to such teasing and tempting offers and in the process, have lost huge sums of money. The fraudsters seeks money from people under different heads, such as processing fees, transaction fees, tax clearance charges, conversion charges, clearing fees, etc. They open multiple accounts in banks in the name of individuals or proprietary concerns in different bank branches for receiving such payments. The amount so remitted is withdrawn immediately, leaving the victims in the lurch. Evidently, the fraudsters’ strategy is to play upon the credulity of unsuspicious victims, the release added.

The Assam Tribune

Odisha cautions public against hoax banking, fraudulent offers

Bhubaneswar, Dec 27 (PTI) With hoax banking instances regularly hitting the gullible people in the state, Odisha government today cautioned the general public not to entertain fraudulent offers by e-mail, SMS and other modes, official sources said. "It is seen that fraudulent offers by e-mail, SMS and others pertaining to lottery/windfall payment, purported to have been sent with fabricated signature of high officials of Reserve Bank of India should not be entertained," finance secretary J K Mohapatra said in a statement. Stating that the RBI has on several occasions in the past have cautioned the members of the public not to fall prey to fictitious offers/lottery winnings/remittance of cheap funds in foreign currency from abroad by certain foreign entities, Mohapatra said certain individuals including Indian residents were also acting as representatives of such entities. "These offers are generally made though letters, e-mail, mobile phones, SMSs and other modes," Mohapatra said suggesting the people to read the ticker on the RBI's website (www.rbi.org.in) for details.  

IBN Live

Govt proposes unitary team to prevent financial crises

The Union Government aims to develop an early-warning system for the financial market. This has become important in view of the increased volatility in the currency and equity markets. Mr R. Gopalan, Secretary in the Department of Economic Affairs, chaired a high-level meeting on Monday to discuss structural issues of setting in place a Crisis Management Team for the financial sector. The meeting was attended by the Financial Service Secretary, Mr D.K. Mittal, the Disinvestment Secretary, Mr Mohammad Haleem Khan, and the Chief Economic Advisor, Mr Kaushik Basu, among others. A senior Finance Ministry official said, “The team will see, analyse and suggest measures to tackle any development which can stress the financial system.” This team will consist of five-six persons and will be a part of the Financial Stability and Development Council. The Government does not want to be taken by surprise, so early detection and co-ordinated efforts will help to carry over the crisis in most effective way, the official added. The Deputy Governor of the Reserve Bank of India has been proposed to serve as the Chairman along with senior officials from the market regulator, Securities and Exchange Board of India, the insurance regulator, Insurance Regulatory and Development Authority, the pension regulator, Pension Fund Regulatory and Development Authority, and senior officials from the Ministry of Finance as members. A senior Government official familiar with the development said the effort was to bring a “sufficiently high level of representation, so that prompt decisions could be taken for effective crisis management”. The official added that though every segment of the financial sector has crisis-prevention systems in place, still an integrated system was needed to avoid shocks which can quickly spread across market segments and institutions. The genesis of the crisis may be different from time to time, but the manifestation is similar. Timely management of the crisis requires early detection of fault lines based on information on diverse institutions and markets, the official explained.

HBL

Led by SBI banks hike NRI rates: Aim to attract US dollars from NRIs

....... "The current weakness in the rupee is majorly speculative in nature and may not continue for long. The RBI measures combined with India's relatively better fundamentals should stabilise the currency soon,"........

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The impact of rate cuts

.... Will the interest rate cuts lead to a rebound in the economy? If so, how long does it take for the cuts to take effect? Will banks start making more profits and will markets start to go up as monetary easing takes effect? History should provide a guide..................

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Fearing financial feedback

Its own report should remind the RBI there’s no room for complacency about the stability of India’s financial system

If the real economy is not doing well then the financial system will reflect it. What is important is that the financial system should not add to the problems of the real world by generating volatility of its own making. The regulatory system should be alert to the downside created by the real economy, and take steps to maintain the stability of the financial system. If it does this, market players will be confident about the ability of the system to handle the downside and go about their work in a non-speculative manner. The latest half-yearly financial stability report of the Reserve Bank of India (RBI) has done this — both identified the downside and measured the sentiments of players to find them self-assured. Over half the players in the financial system, an RBI survey finds, are either “confident” or “very confident” about the stability of the Indian financial system. So the message is that there is absolutely no cause for any kind of systemic concern. Yet, given the stresses on the financial system that the report outlines, the RBI and the government have no room for complacency. A good example of how adverse fundamentals create negative sentiments as well as expectations and lead to speculative put-down is the manner in which the deteriorating balance of payments situation led to a steep decline in the external value of the rupee. The RBI’s action in coming down sharply on speculation that was accelerating the decline is an equally good example of how the regulator has to act with firmness so as to rein in volatility and restore market stability. But it should be clear that this is good only so far as it goes. Ultimate deliverance from problems created in the real world cannot come from firm financial management. The latter in fact slows down already slowing economic activity —and points to an inevitable period of grimness. Deliverance has to come from hard decisions taken to set the real world right. All the self-indulgence that India can allow itself is the thought that its financial system and its regulation are superior to those of China and so the pain of sharp, abrupt and somewhat draconian adjustment can be avoided. But the bad news from the real economy is real. Weakening growth is affecting the asset quality of banks and lowering capital adequacy, though it is claimed that this remains above regulatory levels. Continuing high inflation has been exacerbated by a depreciating rupee. Domestic firms’ reliance on foreign currency finance to take advantage of interest rate differentials is now coming home to roost with the rupee depreciation raising the cost of servicing such finance. The feedback loop from the real world to the financial world has taken down the stock market and, what is more worrisome, has lately been accompanied by derivatives volumes surging ahead of cash volumes, fuelled by proprietary trading. As the RBI itself acknowledges, this needs close watching.

BS

Reserve Bank, refocus

When the world economy faced a crisis in 2008, India prided itself on escaping relatively unhurt. Now that the Indian economy is slowing down, owing to the impact of both the global slowdown and uncertainty, and the policy framework in the domestic economy, a part of the blame is being put on monetary policy...............

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2012 could see lot more evolving regulations, better supervision for banks: Prabhat Gupta

..............The Reserve Bank of India (RBI) and other banks will be estimating the capital requirements under Basel III once the guidelines for implementation are released by Dec. 31, 2011. While implementing Basel III, the RBI`s main questions will be if they should continue with more stringent capital regulations and if should they adhere to the extended timetable or step up the implementation schedule, given the fact that the banking system would be comfortable at the starting point, i.e. at transition?...........

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Exchange blow

........................ In the first week of December, a surge in demand for capital and consumer goods led to higher imports, eating up $12 billion of India's foreign currency. The RBI reacted quickly and allowed banks to pay prevailing deposit rates on NRI accounts. This would create a natural arbitrage for those receiving dollar loans abroad and making bank deposits in Indian banks to earn higher interest returns, thus ensuring higher dollar inflows. Rating agency Moody's says the rupee would stabilise below 050 against the dollar in six months. But till then, the RBI will keep a close watch on it.

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2011: a year of positive regulations

..........Recommendations made by the Shyamala Gopinath committee to make small savings scheme market linked got accepted and implemented from December this year. The rate of interest on various small savings instruments is now pegged to the government securities (G-sec) rates of similar maturities. But don’t worry, you don’t have to track G-secs or ................

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