RBI cautions investors against illegal finance companies

The Reserve Bank of India (RBI) Saturday asked people not to deposit their hard earned money in unauthorised non-banking financial companies (NBFCs) and institutions in the hope of getting hefty returns. "Please do not fall into the trap of hefty returns in quick succession," said RBI executive director S. Karuppasamy at a financial outreach camp at remote Bagmara village, 135 km north of Tripura capital Agartala. "The authorities are taking steps against the NBFCs and the unrecognised bodies. Simultaneously, people also must be aware about the nature and appropriateness of those institutions where they have been depositing their money," he said. The RBI as part of its platinum jubilee celebrations has been organising financial outreach camps in semi-urban, rural and remote areas since 2009 across the country to make people aware about the banking services, dubious activities of NBFCs and institutions, besides bringing all the people under the banking services. Since 2009, the RBI has held 17 outreach and financial literacy camps in seven northeastern states. Unauthorised NBFCs have mushroomed in the northeastern region in recent years. They mobilise deposits from people by promising abnormally high rates of interest, at 25 to 30 percent per annum. After collecting the money, they shut down their operations and leave the area. "The NBFCs not recognised by the RBI, the Insurance Regulatory Development Authority or the Securities and Exchange Board of India cannot do any monetary business or take deposits from people," Karuppasamy said. Top nationalised banks, NABARD (National Bank for Agriculture and Rural Development), regional rural bank officials attended an outreach and financial literacy camp at Bagmara, a village with mixed populattion in Tripura's Dhalai district. The RBI and top bank officials explained to the local people about opening a no-frill (zero balance) account, taking loans from the banks with trouble-free method, increasing credit-deposit ratio and safe deposit of their well-merited money. In a separate programme in western Tripura, United Bank of India (UBI) chairman-cum-managing director Bhaskar Sen said mainstream banking services would be provided to all unbanked semi-urban, rural and remote areas having population of 2,000 by March this year. "Of the 72,900 unbanked villages and human habitations, having population of 2,000 or more, across the country, over 65 percent such areas have already been covered by some form of banking services," Sen told reporters. "Banks in India will soon start cashless transactions in a big way to boost the market and economy," the UBI chief said.

SME Times

Is the SHG Bank lixnkage program version 2 to be rolled out from January 2012?

........The need for an objective evaluation is best exemplified in the words of Dr YSP Thorat, former chairperson of NABARD, who used to repeatedly argue during his tenure, "We need to introspect with integrity as far as the SHG Bank Linkage program is concerned"..........................

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India will indigenize bank note material, says Pranab

DEWAS: India is aiming to indigenize all material used for printing bank notes. Only a few countries in the world now manufacture the paper while others are importing these materials, said Finance Minister Pranab Mukherjee. He was speaking after inaugurating the automated bank note printing machine at Bank Note Press ( BNP) in Dewas on Saturday. Mukherjee said that the country was on its way to attaining self-sufficiency in materials used for printing bank notes. The idea for locally manufacturing the currency printing materials was to control the circulation of fake currency. "We are seriously working on the indigenisation of all materials used for the printing of bank notes within the country," said the finance minister. Mukherjee said that though countries importing such material took all security measures to prevent theft while manufacturing the papers and ink, leakages are often reported.  "To stop the menace, we have decided to gain self-sufficiency in the printing of bank notes," said Mukherjee. He reminded that "hostile countries'' were indulging in printing of fake currency and circulating them in India.  The minister added that India has already achieved the capacity of preparing bank note papers weighing 21,000 MT and it comprised 90% of the requirement. "We are working on to enhance it further," Pranab Mukherjee said.

HT

New currency security features to reduce counterfeiting : Pranab

Reforms for improving security features in notes and coins will ensure reduced incidence of counterfeit currency, Finance Minister Pranab Mukherjee said today. "I am confident that as a result of the comprehensive reforms being undertaken in the area of currency and coinage over the last two years, we will be self-reliant to a large extent," Mukherjee said here. "The reforms related to security features will also ensure that the incidences of fake currency are reduced considerably," he said. He was speaking on the occasion of commissioning of the new Bank Note Printing Line of the Security Printing and Minting Corporation of India Limited (SPMCIL) here. Mukherjee said operationalisation of the new line will contribute to the government and RBI efforts to increase security in currency notes. In his speech, the Finance Minister said a series of measures have taken to strengthen the security features of Indian currency notes. In addition, a high-level committee has been under the chairmanship of Directorate of Currency Director General Bimal Julka for acquiring security feature technologies through global competitive bidding. "This acquisition of new security features is being done in an efficient and transparent manner. I am hopeful that with the up-gradation of security features, the government will be able to check the menace of fake currency circulation in the country," Mukherjee said. As part of the efforts for modernisation of currency printing presses, a line of currency printing machines was commissioned today at the Bank Note Press, Dewas. Machines worth over Rs 233 crore were purchased for this line. "The online printing and finishing equipments are state-of-the-art with higher speed and shall have capability for incorporation of sophisticated print-based security features, which will help in reducing counterfeiting of currency notes," Mukherjee said. "I am informed that this machine will also result in improved productivity as well as optimisation in the consumption of raw materials, especially the ink and manpower requirement," he added. He also said the Coinage Act, 2011, which was enacted by Parliament recently, will simplify the laws governing coins and currencies by amalgamating the earlier existing four Acts and one ordinance relating to coinage. "This Act enables the central government to establish a new mint at any place based on the rising demand of coins. It also provides for stringent punishment with imprisonment which may extend up to seven years and with fine if a person is found to be making or melting or destroying the coins," Mukherjee said. The government had in 2009 constituted a committee under Shilabhadra Banerjee to suggest a roadmap for progressive indigenisation of various inputs. "Following the recommendations of this committee, the government has initiated steps to indigenise the production of banknote paper to meet our domestic requirements of banknote paper. A foundation stone of Bank Note Paper Line with annual capacity of 6,000 metric tonnes was laid on December, 2011, at SPM, Hoshangabad. This unit is likely to be commissioned by October, 2013," the Finance Minister said. Mukherjee added that the Bank Note Paper Mill at Mysore formed under a joint venture, with an annual capacity of 12,000 MT per annum, is also scheduled to commence commercial production by April, 2014. "These steps would make the country nearly self- sufficient in the production of banknote paper," he said. He also commended SPMCIL for its performance during the past few years. "SPMCIL has returned about Rs 1,000 crore of loans from the RBI and the Ministry of Finance and by this year-end, it is likely to be a zero debt company. SPMCIL has been granted Mini Ratna category-I status," he said. "SPMCIL is making coins and currency not only for India, but also for other countries.  The expertise gained by the company over the years should be harnessed further by developing products for other countries and assuming a leadership position in this domain," Mukherjee added. SPMCIL has a Rs 2,500 crore investment plan for 2009-14 and the minister said this is likely to give a big boost to the efforts for indigenisation of security products used in the creation of currency. "Steps to enhance the production of indigenous ink for security printing has been taken up through the modernisation and expansion of the ink factory at the Bank Note Press, Dewas," he said.

DH

The never-ending cyber chase

.....Calling the procedure of tracking down cyber criminals “a never-ending game”, where the modus operandi is constantly updated to evade systems used to track them, M. Palanisamy, RBI Banking Ombudsman, also lays the blame on banks and the unfiltered “distribution” of Internet banking options to customers. “Banks should allow Internet banking on a need-by-need basis, and the option should be activated only after educating the account holder on all steps involved,” he says...........

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Retailers refuse Sodexo passes

The most popular meal passes have started to fail. From the last week of December — at the peak of the shopping season — food retail chains stopped accepting Sodexo passes for the items bought by shoppers. Players like Pantaloon Retail, Reliance Retail, Spencer’s, Tata-run Trent and Aditya Birla Retail have joined hands to stop accepting these passes. The reason: Retailers think they cannot pay 2.9-3.4 per cent of the total bill that Sodexo charges as commission. Besides, handling of passes and a waiting period of almost a month to get their money are also a deterrent at a time when consumer spending is on a decline. “From December 28, we have decided to accept only cash, credit cards, gift cards, electronic credit, pre-paid credits and our own coupons. The cost of physically handling Sodexo passes is too high. If they have an e-credit or pre-paid card facility, we don’t have a problem,” said a spokesperson of Pantaloon Retail, which runs over 150 Big Bazaar and Food Bazaars stores in the country. Around two per cent of Big Bazaar’s sale is through Sodexo passes. Pantaloon has already informed its customers it will not accept Sodexo passes. “Besides the 3.5 per cent loss, it is becoming difficult to handle the passes, take them to collection centres and manage the security issues,” he added. Vineet Kapila, CEO of Spencer’s, which discontinued accepting Sodexo this week, asks: “Since retail is a low-margin business, why give such commissions?” He added that a “sizeable” portion of Spencer’s sales were though Sodexo. Food and grocery retail has a net margin of 2-3 per cent, while products like apparel and accessories carry higher margins. Kapila says such passes should be applicable only to non-food retail. When contacted, a Sodexo spokesperson said a reply would be possible only on Sunday. However, a leading news website quoted Sodexo as saying that it was entirely the decision of retailers and the company would not like to comment on the decision. Some retailers say handling credit and pre-paid cards is more viable, given the slowdown in consumer spending and lower revenues.“Banks charge 1.5-2 per cent and you get money within a couple of days. In the case of pre-paid cards, you get funds the same day. So, we prefer those,” said a senior executive of a Mumbai-based retail chain. Raheja-owned Hypercity is said to be talking to Sodexo on the issue and may take a call on its tie-up in a few months.Many companies give Sodexo passes to their employees as part of their compensation package. These passes became popular as these carried tax exemption of Rs 1,300 per month or Rs 50 per working day. Though retailers earlier redeemed these against all purchases, when income-tax authorities objected to it, they now accept the passes only for food and grocery items.

BS

What is role of RBI in controlling inflation from 1949 to till now?

...RBI believes that cause of inflation is high money supply in economy hence to try. to control inflation RBI usually increases rate of interest to make money costly ........

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Mumbai is number one for banking fraud in country

Mumbai tops the list of cities with the highest number of frauds reported by banks, with the money involved totalling Rs400 per year for the past five years. While for the financial year 2010-11, banks in Mumbai reported 787 fraud cases involving Rs 1,049 crore, the tally for the national capital was 335, with the net amount lost being Rs269 crore, according to the documents obtained under the Right to Information (RTI) Act from the Reserve Bank of India (RBI). Interestingly, the total number of banking frauds reported in Mumbai every year is more than those of Delhi, Chennai, Kolkata and Bangalore taken together. While a five year average figure for Mumbai is about 800 cases, the number for other cities is approximately 200.As per the report, of the 4,099 cases registered in Mumbai since 2006, only 564 cases (those where the amount involved is above Rs1 lakh) have been closed. The city lost Rs1,882 crore over these five years, of which only Rs 63 crore has been recovered, reveals the RTI response. Experts blame the low recovery rate on the lack of know-how in detecting and preventing frauds in the era of internet and mobile banking. Firstly, the banks do not even seem to have the required classification of internet-related frauds. According to the RBI, “there is no distinct category of ‘Phishing Complaints’’, and as such no separate data/information is classified/compiled in this regard.” But phishing is a common method of online identity theft where information such as usernames, password and other bank details are acquired.According to the internet banking guidelines issued by the RBI in 2001, banks need to assess the risks arising out of phishing, consider them as ‘operational risk’ and cover it with insurance. “Either they are ignoring the RBI mandate or are hiding the information,” said Na Vijayashankar, cyber law expert. Banks evade responsibility DNA also has found out that bank managements’ reluctance to own up to such frauds is also a factor causing a pile-up of banking fraud cases, and consequently, a low recovery rate. Sources in the banking industry confirm that banks do not follow up fraud cases and pass the buck to the customers despite RBI guidelines directing banks to take complete responsibility. A former top official of Indian Overseas Bank said that banks avoid owning up to such cases out of fear that it will damage their reputation, with a resultant loss of customer base. “Most of the time banks pass the responsibility of recovering the money to the customers themselves,” he said. There are several cases where banks have refused to take any responsibility for banking fraud. Gujarat Petrosynthese Ltd, a Mumbai-based company lost Rs.39, 00,550/ from its account with Axis Bank, Bangalore, on 20th June 2011 to hackers. “The police are investigating. But the banking sector has not been sympathetic,” said Urmi N Prasad, executive director with Gujarat Petrosynthese Ltd. Similarly, Pramod B Bauskar from Mumbai lost Rs 1,97,000 from ICICI bank to an internet fraud in mid-2011. “Bank officials rejected my plea outright, saying it was my fault and the bank will not do anything about it,” said Bauskar. Some Cases Not Registered Apart from the registered cases where the recovery rate has been pathetic, many fraud cases are not even registered. Several bankers told DNA that most internet banking frauds cases at the customer level itself, as banks bully the customers into believing that they themselves are responsible.

RBI guidelines for fraud cases

The RBI requires banks to pursue fraud cases vigorously with the CBI or police authorities, and in court. In the case of public sector banks, all fraud cases below Rs1 crore should be reported to the local police, except when the CVO and CMD consider it serious, and when the cases cannot be classified in monetary terms. In those cases, the frauds are referred to the CBI. Cases above Rs 1 crore must be referred to a different wing of the CBI depending on the category it falls into. In the case of private sector banks, frauds of Rs1 lakh and above committed by an outsider in connivance with a bank official should be referred to the local police. So should cases of fraud committed by a bank employee involving funds of Rs10,000/- and above. DNA found that in many of the cases the banks do not follow the RBI guidelines. 

DNA

Pranab asks banks to take belt tightening measures

Finance minister Pranab Mukherjee on Friday asked the banks to scale down their advances to risky businesses to protect their asset quality. "The non-performing assets (NPA) have grown faster than the credit. There is a need for banks to tighten their belt," Mukherjee said, inaugurating the platinum jubilee celebrations of the Indian Overseas Bank (IOB). According to the Reserve Bank of India's latest Financial Stability Report, the year-on-year growth rate of NPAs stood at 30.5% and slippages (fresh accretion to NPAs) grew at 92.8% as of September 2011, with the priority sector, retail, real estate and infrastructure being major contributors. He asked the banks to tread carefully as the sector is confronted with risks of global slowdown and market volatility. Mukherjee said the Basel III norms would be implemented in India from 2013 onwards so as to bring the Indian banks on par with global standards. Urging the banks to go for special drive for financial inclusion of the poor, Mukherjee said the exclusion of these people impacted social equity and economic growth. He said the government would soon introduce an electronic payment system for direct credit of subsidies to the beneficiaries which would apart from ushering in transparency would speed up the subsidy payments. Later, inaugurating Indian Bank's new corporate office, Mukherjee said the government is committed to adequately capitalise all the public sector banks so that they could compete with the international banks.

HT

The glass is half full

.......... While, the problems of high deficit and rupee depreciation are here to stay, the reversion of monetary tightening may give some respite to the corporate sector this year. Reserve Bank of India (RBI) Governor D. Subbarao said that policy interest rates have peaked and are set to ease from now onwards...................

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BEWARE BANKS BEARING MICRO- LOANS FOR POOR

How do bankers provide relief? Through loans, of course. Lending to weak, vulnerable, and very poor women is the rallying cry for those who argue that micro- credit empowers women. Micro- lenders from all over the world shout out for debt: “ Loans will set you free.” Or will they? Here’s a quick refresher.............

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Economists wanted

...... It is ironic that, just when the government has embarked on an elaborate programme to celebrate 50 years of the Indian Economic Service, its bench strength in terms of able economic advisors overseeing policymaking in different economic ministries appears particularly shallow, lacking firepower and depth. Today, the Indian Economic Service, which once produced eminent economic administrators like I G Patel, S R Sen and Sharad Marathe, faces an acute shortage of talent. Over the years, the Service, instead of producing a steady stream of economic advisors, has ended up meeting only the back-office requirements of the advisory wings of various economic ministries............

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Liquidity improves in banking system

......Traders said that the easing of liquidity was contributed by the return of cash paid out by corporates in the form of advance taxes back into the banking system. In the first half of December, the government had raised close to over Rs 70,000 crore through advance taxes. ........

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