High fiscal deficit will add to inflation: RBI Deputy Governor

Mumbai : Reserve Bank Deputy Governor HR Khan on Monday said fiscal deficit target of 4.6 per cent of GDP could be breached in 2011-12, raising implications for domestic inflation. “The moderation in private demand resulting from anti-inflationary monetary policy stance of the RBI will be partly offset by the expansion in public sector demand in terms of the size of the fiscal deficit,” Khan said while addressing the National Management Seminar. While shrinking value of money on account of high price rise called for a tight monetary policy, there is also a need to maintain a balance between controlling inflation and boosting growth, he said. “Shrinking value of money because of persistent high inflation explains the importance of anti-inflationary monetary policy. For a country with large percentage of population still living below the poverty line, inflation works as a regressive tax,” Khan said. “Economic welfare of the population at large could be enhanced primarily through higher growth, that too in a low and stable inflation environment. That suggests why balancing growth and inflation becomes so important to monetary policy.” Khan said the Indian rupee has depreciated by about 15 per cent against the US dollar since July 2011, and this has more than offset the beneficial impact of modest softening of global commodity prices on domestic inflation. “Thus exchange rate depreciation has emerged as a new shock,” he said. According to Khan, it is a much more complex task than what may appear in any public discussions. To ensure that the grease effect of modest inflation allows economic growth and investment activities to materialise, inflation would have to be positive. A positive inflation within the threshold level would not mean erosion in purchasing power since higher growth would also raise the income levels, and as a result net purchasing power would increase. “Unless the benefits of growth get equitably distributed, this net increase in purchasing power may not happen to all. At the aggregate level, some positive inflation that coexists with high growth could be welfare maximising. At high inflation, particularly above threshold level, growth may however, moderate, and both inflation and low growth could erode welfare,” he said.

IE 

Credit cards: RBI keen on ‘zero liability' to customer

Banks have not done enough to extend mobile banking: RBI ED Mr. G. Padmanabhan



Mr G. Padmanabhan, Executive Director, RBI (left); along with Mr A. K. Jagannathan, MD and CEO, Tamilnad Mercantile Bank, and Mr M. Balakrishnan, COO, National Payment Corporation of India, at the launch of Mobile Banking in TMB, in Chennai on Monday



Chennai, Jan. 9: The Reserve Bank of India on Monday indicated that it would like to bring in a system under which a credit card holder is not liable for transactions done fraudulently using his card. Speaking at a the launch of the mobile banking facilities of Tamilnad Mercantile Bank, Mr G. Padmanabhan, Executive Director, RBI, posed a question as to whether it the time was not ripe “to implement a zero liability policy”. While leaving it to the industry to debate and discuss the issue, Mr Padmanabhan compared the situation as obtains in India and the developed world, and noted that countries such as the US have adopted a ‘zero liability policy'. However, in India, the liability is on the customers. Generally the credit card issuers are not liable for fraudulent transactions unless the customer reports the unauthorised transactions immediately. So the shift in liability from customers to banks comes into effect only after the customer informs the bank. Banks argue that they take adequate steps to ensure safety of card transactions, and the least they expect from the customer is to report the card loss immediately. While “this is understandable and logical” a consequence of this is that if a customer has adhered to all the risk measures prescribed by the bank, but yet unauthorised transactions have taken place in his account, “should the responsibility then not be with the card issuing bank?” Observing the huge mobile phone penetration in India, which is more than the penetration of banking services, Mr Padmanabhan asked if it was not time for banks to embrace mobile banking. Giving a data-point, he said that in October 2011, 22.45 lakh transactions worth Rs 161 crore happened over mobile phones. Close to 10 million customers have registered themselves for mobile banking. Yet, these numbers are “a drop in the ocean,” Mr Padmanabhan said.  “What this means is that banks have not really made a significant penetration even amongst their existing customers to extend mobile banking services,” he said. Mr Padmanabhan said that often questions such as ‘who owns the customer?' and ‘who controls the transaction' keep cropping up. “Has there been any worthwhile attempt to resolve them in a mature way? Or like sulking infants, is each one trying to wear out the other, including the regulator? “Let me say that if the latter is true, it can be a painfully long and expensive process benefiting none and does not help in our efforts to achieve true financial inclusion,” he said, assuring everyone that RBI was committed to the success of mobile banking.

HBL  

Read the full speech............

Cash retraction system in ATMs may be removed

Mumbai, Jan. 9:  The cash retraction system in ATM machines may soon be a thing of the past. The Reserve Bank of India has agreed to the National Payments Corporation of India's proposal to remove this functionality from all machines after a pilot proved extremely effective in curbing misuse. The central bank is taking this step as it has come across cases of people forcibly trying to defraud the banking system by holding on to a few pieces of notes in ATM machines that has cash retraction system (that is, cash getting sucked back by the machine, if not removed within a specified time, often seconds), and then claiming non-receipt of cash. “Of course due notice will be given to all customers. So remember, hereafter if you are careless to walk away from an ATM forgetting to collect your cash, it is lottery for the next user!,” said Mr G. Padmanabhan, Executive Director, RBI, at a function to launch the Tamilnadu Mercantile Bank's mobile banking service in Chennai.

HBL

Government to have two nominees on RBI board

Move to increase coordination with central bank

The government has amended its laws to have a bigger say in the decision making of the Reserve Bank of India (RBI) by having two members on the central bank’s board as compared to one now. At a time when the entire country was busy tracking the Lok Pal Bill debate in December, the Lok Sabha and Rajya Sabha passed the Factoring Regulation Bill, 2011. The law, which aims at addressing problems faced by small and medium enterprises, also amends the RBI Act, 1934, to have two government officials on the board on the central bank. At present, economic affairs secretary R Gopalan is the government nominee on the 17-member RBI board. “In clause (d) of sub-section (1) of section 8, for the words ‘one Government official’, the words ‘two Government officials’ shall be substituted,” the Schedule of the Bill said. Section 8 (1) (d) of the RBI Act, gives the power to the government to nominate directors on the board. The government has justified the move to increase its officials in the board to improve coordination with the central bank. But what has surprised many RBI officials is the manner in which the amendment was made. Sources said the amendment was done in last minute and was not in the agenda earlier. The Bill had mooted amendment of acts like the Indian Stamp Act, 1899, and The Code of Civil Procedure, 1908, since the beginning of the deliberations. But the amendment to the RBI Act was introduced at the last moment. The Factoring Regulation Bill stipulates all companies engaged in factoring activity to take prior approval of RBI to commence business. The act also gives power to RBI to penalize or cancel licence for violating norms. The central board of RBI consists of official directors and non-official directors, and 10 non-official directors and one government official is nominated by the government. Directors are nominated for a period of four years. The RBI Governor and four deputy governors are official directors in the central board. The move to increase government’s say in RBI matters was being contemplated by the government in recent times. Earlier, a Financial Stability and Development Council (FSDC) was operationalised which is chaired by the finance minister and the subcommittee is headed by RBI Governor. Along with the introduction of FSDC, the High Level Coordination Committee on Financial and Capital Markets was scrapped which was headed by the RBI Governor.

BS 

RBI sets up currency literacy cell

Chennai : To educate the common man, the Reserve Bank of India (RBI) has come out with special television commercials, a micro website called paisa bolta hai listing features of genuine notes (http://www.paisaboltahai.rbi.org.in/), and even set up an exclusive currency literacy cell. “Apart from banks and enforcement authorities, we train individual retail establishments dealing with huge cash, free of cost,” said an RBI official. Recently, the Chennai cell trained the staff of Tasmac outlets in all 32 districts of the state to identify fake notes, he added. While 4,35,607 fake currency notes were detected by RBI during last year, the figure, just within five months of 2011, crossed half that number. From April to September 2011 alone, RBI detected 2,64,282 FICN notes in circulation. Keen to address the growing FICN menace, RBI is working in tandem with ministries and intelligence agencies to thwart activities that aim to destabilise the country’s economy. While the government has constituted a terror-funding and fake currency cell to focus on such cases and has empowered the national investigating agency to take up such cases, RBI is in the process of upgrading the security features in the high-value currency notes and strengthening the mechanism for detection of counterfeit notes by banks. Considering that there were 64,577 million pieces of banknotes (worth Rs 9,35,856 crore) in circulation as on March 31, 2011, the detection of forged notes last year was 6.74 pieces per million pieces of banknotes in circulation. Of the 4 lakh counterfeit notes identified last year, about 90 per cent were detected at bank branches, says a senior RBI official.  In view of this, RBI has directed banks to process notes in the denomination of Rs 100 and above only through machines conforming to ‘note authentication and fitness sorting parameters’ prescribed by it. RBI is even trying to introduce polymer/plastic bank notes on a ‘field trial’ in select locations of the country. Detecting fake notes, mostly in the denominations of Rs 1,000 and Rs 500, is becoming difficult as Pakistan and India procure the paper for currency from the same supplier in London, say intelligence officials.

DC

Pay for inoperative a/cs, cash deposits

You will now have to pay if you don't operate your savings or current account for a year. HDFC Bank, the second largest private sector lender in the country, has decided to charge Rs 50 per month if a customer's savings or current account has remained inoperative for a year. Brace yourself for more. The bank will also charge its "non-managed" customer if he deposits over Rs 100,000 in cash during a day in their savings account at the home branch. Non-managed customers are typically those clients who do not have a private banking or wealth management relationship with the bank. The customer will have to pay Rs 25 for every Rs 50,000 cash deposit in a day over Rs 100,000 in their home branch. These fees are part of the new set of service charges introduced by HDFC Bank from January 1, 2012. According to senior officials at HDFC Bank, the bank introduced these charges after reviewing and benchmarking them with its peers in the public sector, private sector and foreign banking space. "These charges are not something new. Many of the public sector, private and foreign banks already charge their clients on these grounds. We found some of these charges logical and hence decided to introduce them. For instance, we don't want our savings account clients to use these accounts for business purpose. Hence, we decided to levy a charge on cash deposit at the home branch beyond Rs 100,000 a day" said an official. The official added that the "managed clients" mostly do large ticket transactions, and hence are excluded from this charge. The new service charges also include penalty if a standing instruction is rejected, fees on regeneration and physical dispatch of personal identification number (PIN) for phone-banking and internet banking, charges on any deliverable returned due to change in consignee's address."Some of these charges are introduced keeping in mind the customers' interest. We want to encourage our customers to generate their net banking PIN online because the scope for fraud increases if there is a physical dispatch. Hence, this charge was introduced. Similarly, we have decided to charge only if a consignment is not delivered because of negative reasons like the consignee has changed the address. There is again a scope for fraud there," said another official of the bank. HDFC Bank is the first large private banks to introduce new charges and revise existing fees on savings and current account this calendar year. HDFC Bank has so far not increased the interest rate on savings deposit accounts after the rate was deregulated by the Reserve Bank of India (RBI) late October, 2011. Some of the mid-sized private lenders including YES Bank, Kotak Mahindra Bank, IndusInd Bank, Ratnakar Bank, and Karnataka Bank have already announced a hike in their savings deposit rates. The bank has also decided to levy a penalty for non-maintenance of minimum balance on monthly basis instead of quarterly basis. So, a regular savings deposit account holder in one of HDFC Bank's metro or urban branch will have to pay Rs 250 per month if his average monthly balance in between Rs 5,000 and Rs 10,000. If the average monthly balance is less than Rs 5,000 then the charge will be Rs 350 per month. Earlier, the bank used to charge Rs 750 per quarter for non-maintenance of minimum balance. The bank has also discontinued the option of maintaining a fixed deposit of Rs 50,000 and Rs 100,000 in lieu of average quarterly balance in the savings accounts. If the average monthly balance is not maintained, customers will be permitted only three branch transactions through cheques and two cash transactions free of cost in a month. For every additional branch transaction there will be a charge of Rs 75 and the customer will have to pay Rs 100 for every additional cash transaction. The private lender also said a customer will have to pay Rs 500 if he closes his savings account within a year. The client, however, will not be charged if the account is closed within 14 days. Earlier, the account closure charge was only Rs 100 but only if the account is closed after 14 days and before six months. The charges on cheques deposited but returned unpaid, photo and signature attestation, address confirmation have been doubled to Rs 100 per instance.

BS

Delayed payments by large companies add to SME sickness

........ To mitigate problems arising out of delayed payments, the PHD Chamber has suggested large corporations report to the Reserve Bank of India (RBI) with details of payments not made to MSMEs within the stipulated 45 days. Companies which falter in settling dues to MSMEs should have their names put up on the RBI website.........

Read......... 

Missing fiscal deficit target of 4.6% will have implications: RBI

The government has already admitted that adhering to the 4.6 per cent fiscal deficit target would be a challenge on account of lower than expected revenue mop-up and the global financial crisis.The fiscal deficit target of 4.6 per cent of GDP in 2011-12 could be missed and this will have serious implications on inflation, according to the Reserve Bank of India (RBI). "In 2011-12, developments so far indicate that the fiscal deficit target of 4.6 per cent of GDP could be breached which will have implications for domestic inflation. "The moderation in private demand resulting from anti-inflationary monetary policy stance of the RBI will be partly offset by the expansion in public sector demand in terms of the size of the fiscal deficit," RBI Deputy Governor H R Khan said. Speaking at the 10th National Management Seminar in Bhubaneswar recently, Khan said while shrinking value of money on account of high price rise called for a tight monetary policy, there is also a need to maintain a balance between controlling inflation and boosting growth. The transcript of Khan's speech was made available in the RBI's website. The government has already admitted that adhering to the 4.6 per cent fiscal deficit target would be a challenge on account of lower than expected revenue mop-up and the global financial crisis. "Shrinking value of money because of persistent high inflation explains the importance of anti-inflationary monetary policy," the RBI Deputy Governor said. Khan said for a country like India with a large percentage of population still living below the poverty line, inflation works as a regressive tax. "Economic welfare of the population at large could be enhanced primarily through higher growth, that too in a low and stable inflation environment. That suggests why balancing growth and inflation becomes so important to monetary policy," he said. Khan said inflation within the threshold level would not mean erosion in purchasing power since higher growth would also raise the income levels, resulting in increased net purchasing power. "Unless the benefits of growth get equitably distributed, this net increase in purchasing power may not happen to all. At the aggregate level, some inflation that coexists with high growth could be welfare maximising. "At high inflation, particularly above threshold level, growth may, however, moderate, and both high inflation and low growth could erode welfare," he said. According to Khan, while the global commodity price index has gone up by more than 85 per cent between February 2009 to October 2011, India's Wholesale Price Index (WPI) during that period has risen by about 27.6 per cent. 

NDTV Profit

Basel III: RBI norms more stringent than BIS', says Moody's

Mumbai, Jan. 9: The Reserve Bank of India's draft guidelines for the implementation of Basel III norms are credit positive for the banking sector as they are more conservative than the Bank for International Settlements norms, according to global credit rating agency Moody's Investors Service. Basel III is a global regulatory standard on bank capital adequacy, liquidity and leverage agreed upon by members of the Basel Committee on Banking Supervision. Moody's said the key differences between the RBI's Basel III guidelines and the BIS' Basel III norms are: a more stringent minimum common equity Tier 1 capital of 5.5 per cent (versus BIS's 4.5 per cent); and an earlier deadline for the implementation of a 2.5 per cent capital conservation buffer at March 2017 (BIS' deadline is January 2019).  Further, the RBI has prescribed a more aggressive schedule for minimum total capital ratio, targeting 11.5 per cent by March 2017, versus BIS' 10.5 per cent by January 2019. The rating agency said the RBI's timetable implies an extra capital buffer for Indian banks of 2.25 per cent during 2015-17, which is clearly credit positive for the sector. Moody's observed that it expects the effect on individual banks to vary, with Central Bank of India and IDBI Bank likely to be the most affected because both currently have core equity capital significantly below 8 per cent. Thus, these two banks would face the difficult choice of either raising fresh equity capital or reducing business growth and risk-weighted assets. The rating agency also expects Indian Overseas Bank, Yes Bank, and State Bank of India, all of which rely heavily on Tier-2 debt capital instruments to support their total capital levels, to face pressure to strengthen their capital under the new regime.

HBL

Time to act - RBI must not lose yet another year to wait-and-watch

After clearly stating that the interest rate cycle had peaked, the Reserve Bank of India (RBI) has been tight-lipped about timing a trend reversal. The official stand has been one of wait-and-watch, particularly on the inflation front. There are good enough reasons for RBI to maintain that stance because inflation still remains a concern; whatever decline we are witnessing in food prices is on account of the base effect. Noises are still being raised that overall inflation numbers are going remain in the problem zone, especially, given the fact that the rupee has declined in the past couple of weeks. So, it is argued that RBI should be in no hurry to slash rates. This, we believe, is a fallacious argument. Growth numbers have been falling for some time now, and the prime minister’s latest forecast that GDP growth will come down to 7 per cent from 8.5 per cent a year ago is cause for serious concern. Worse, estimates by some research houses indicate a free fall to even below the 6 per cent mark; in the past, their predictions have often been more accurate than the government’s projections. The results season kicking off this week does not indicate healthy tidings. In addition to infrastructure firms, which have been lagging for a long time now, companies focused on domestic consumption are likely to witness contraction this time around. We are of the opinion that RBI should take urgent note of the fact that growth is slowing at a much faster clip than most policymakers had anticipated. If corrective measures are not initiated now, then things are going to turn worse from here on, making economic revival a difficult task to manage. Rather than follow textbook remedies that argue against administering interest rate cuts till inflation is tamed over a consistently long and stable period of time, it would make sense for the central bank to adopt out-of-the-box prescriptions at its forthcoming review without waiting for number signals on the health of the economy. Though, at first instance, that may seem a bitter pill to swallow on part of RBI, considering that it continued to raise rates till as late as October, if that is what is required to save the economy, so be it. In our issue dated Monday, FC published an exhaustive report on how retailers were being forced into discount sales in peak season. This is indication that, on the ground, the economic slowdown has started taking roots and it is time for policymakers to act. Peak festival sales have traditionally been high in north India, and much of the rest of the country, in winter, adding significantly to corporate bottom lines. Weak sales this season by both large-format corporate retailers and medium-sized companies will soon reflect in government numbers, dragging down an entire chain of small suppliers and vendors. This makes it imperative on part of policymakers to create a robust economic climate that can revive demand. Already, the economy has lost a valuable year to tight money policy measures adopted by the central bank in deciding between growth and high prices. Also, the government seems trapped in a state of policy paralysis, with economic decision making grinding to a halt. If timely measures are not initiated by the central bank to kick-start the economy and get production and employment opportunities moving, yet another year may be lost in the wait-and-watch game in a year that is globally predicted to be worse than the year just gone by. The time to act is now.

FC

Legislating immorality

.... The country still enjoys a savings rate of 30% and the central bank has been increasing interest rates. Last I heard, no member of its monetary policy committee has been proposing any quantitative easing programme.......

Read..........

'Need to remove structural bottlenecks for sustained growth –

Bhalchandra Mungekar, Indian Economic Association

.... I had sought in the Rajya Sabha RBI intervention in the forex market by selling some dollars. The RBI did it for some time that somewhat contained depreciation. Since we don’t have real forex surplus, the RBI cannot do that infinitely. But I appreciate the balanced and cautious approach that the RBI has all along adopted.....

Read.......... 

India needs a currency stability fund

.... Ideally RBI should work within a band and intervene directly to stabilize the rupee. The central bank’s judgment can be used when looking at, say, the real effective rate that also adjusts the exchange rate with relative inflation......

Read...........

A perfect storm

.... I am one of the few commentators who would endorse the RBI’s logic in remaining on the sidelines in the recent plunge of the rupee. Irrespective of the proximate cause of the depreciation, it has been effective in signalling that, in a turbulent global and domestic environment, the RBI is willing to allow the nominal exchange rate to take the burden of adjustment.A harder question is whether it can now afford to ease up on interest rates given the slowing economy. Other things being equal, a depreciating rupee calls for monetary tightening rather than loosening, as does the need to reaffirm the role of the RBI’s inflation target as a credible nominal anchor for the system. The contribution we can expect of monetary policy this time round will be less than in the past....

Read...........

Bankers may seek policy rate cut at RBI meet

MUMBAI: Bank chiefs are likely to suggest that the Reserve Bank of India (RBI) should cut policy rates in view of the slowdown in the demand for loan, at a meeting to be chaired by Deputy Governor Subir Gokarn on Tuesday. The customary pre-policy meeting will help the RBI gauge bankers' assessment of the economic growth and liquidity conditions ahead of its next monetary policy review on January 24. The meeting assumes significance in the context of the current debate on whether the RBI should give importance to growth over inflation. The economy grew by 6.9% in the September quarter, lower than the 8.5% a year ago. At the same time, headline inflation is around 9.11%, higher than the 7% the central bank had targeted for March 2012. "A 25 bps rate cut could make a lot of difference to improve the sentiments in the economy, which has been low for quiet some time now," S Raman, the chairman and managing director (CMD) of Canara Bank, told ET. The CMD of Punjab National Bank, KR Kamath, also aired similar views. "A rate cut is one of the measures that will help revive sentiments in the economy. It may be a signal of other things to follow," he said. The RBI raised interest rates since March 2010 to tame inflation and paused for the first time in its last policy statement in December. Every quarter, RBI holds an interactive session with the chiefs of select banks to understand their views on various issues like credit growth, liquidity conditions and interest rates. Bankers are expected to urge the RBI to cut policy rate as they witness a slowdown in the demand for loan. Credit has grown 17% on a year-on-year basis as on December 16, as against 23% a year ago. Bankers have attributed the slowdown in demand to rising interest rates and input costs, promoting corporates to delay their expansion plans. Aggregate deposits has risen 18% on a y-o-y basis .

ET

Possible interest rate reduction to spurt economy: Kochhar

"Interest rates are likely to be reduced in the near future which will support the growth prospects during this year,"

Read.............

Limited space in the room

....The central bank will be loath to see the gains from a series of interest rate hikes being squandered by undue haste in reversing them. Policy headroom in 2012 is so much smaller than it was in 2009. The climb will be longer this time around.

Read............

Clean up RBI’s mess

....The RBI believes the only way to combat inflation is through rate hikes. Milton Friedman must be happy with the conservative monetarists who follow textbook undergraduate macroeconomic theory. The simple Friedman logic is: the only reason for inflation is over-supply of money. According to Friedman’s k-per cent rule, if the money supply is squeezed, prices will come down. It is fallacious on many counts, just two of which are: nobody has succeeded in fighting food inflation or fuel inflation through monetary policy. Demand-side controls will not succeed in a country like India. It has to be dealt with on the supply side, which means good governance. Inflation, driven by cost-push factors and supply-side constraints, cannot be fought through rate hikes......

Read...........

Banks told to rejig officers holding key posts

Concerned with instances of alleged irregularities in public sector banks, the Central Vigilance Commission has directed them to ensure timely rotation of officials working in sensitive posts to check corruption and avoid " vested interest"..............

Read...........

‘Farmers can get interest subsidy on loans for another six mths’

Mumbai: The Reserve Bank on Monday said farmers will get loan at concessional rates for an additional period of up to six months post-harvest, a step aimed at encouraging storage of farm produce in warehouses. "In order to discourage distress by farmers and to encourage them to store their produce in warehousing against warehouse receipts, the benefits of interest subvention will be available to small and marginal farmers having Kisan Credit Card for a further period of up to six months post harvest ...," it said. At present, concessional crop loan at 7 percent with interest rate subsidy is available to farmers as pre-harvest loan. The RBI also asked banks to "immediately" submit their estimates of short-term production credit to farmers for up to Rs 3 lakh during the year 2011-12, to enable it to provide government with an estimate of the likely amount of subsidy. The government has raised the subsidy for timely repayment of crop loans to 3 percent for 2011-12, thus making the effective rate of interest for such farmers to 4 percent per annum.

Zee News

Two-week breather for Noida banks

A month after the Supreme Court cracked the whip on banks operating illegally from residential colonies in Noida, the rule was relaxed temporarily with the Court suspending sealing of banks for next two weeks. On an application moved by the banks’ association, many of whom are operating within Noida’s residential colonies, the bench of Justices Swatanter Kumar and Rajana Desai stayed operation of its December 5 judgment for two weeks. The bench summoned Chief Executive Officer of Noida to remain personally present on the next date of hearing to detail the steps taken to provide alternate locations to the displaced banks. The order had affected the operations of 22 banks and 21 ATMs involving nationalized banks that affected lakhs of customers in Noida. Appearing for the banks, senior advocate Mukul Rohatgi submitted that the banks were yet to get alternate land. In this connection, he added, they approached the Noida CEO and even advertised in newspapers for rented accommodation. Further, Rohatgi said that setting up banks required strict adherence to guidelines of Reserve Bank of India and Central Vigilance Commission.

The Pioneer

Banks to cough up penalty on delayed transactions

Next time your online transaction or money transfers get delayed, you will be entitled to get penalty and interest on the delay, thanks to a new Reserve Bank of India (RBI) circular. The circular issued last week said that in cases of delayed credits, banks resort to value-dating of the credit in the customer’s account to avoid payment of penalty, which is not in accordance with the instruction issued by RBI in this regard. This is being viewed seriously and is in violation of our instructions, the circular said, adding penal interest of 10.5 per cent would have to be paid for such delays. “RBI will invoke penal action against banks that do not implement the new National Electronic Fund Transfer (NEFT) guidelines in the next 15 days,” said RBI executive director, G Padmanabhan. As per the guidelines, banks are supposed to pay penal interest at the current RBI repo rate (which is at present at 8.5 per cent) plus 2 per cent for the period of delay. So for example, if you are transferring Rs 50,000, and it gets delayed by two days, you will be entitled to penal interest of 10.5 per cent of Rs 50,000 for two days. Padmanabhan said that it was found that banks were not following the NEFT guidelines properly. “Banks may forthwith put up a stop to this practice and strictly adhere to the extant instructions of paying penal interest at the stipulated rate to the customers suo-moto, without waiting for a claim from the customers,” said RBI in a circular. “Many banks were not providing confirmation receipts of fund transfer to the sender. Only the receivers received confirmations against both concerned parties receiving messages and that was a problem,” he said. Padmanabhan was in Chennai for launch of Tamilnad Mercantile Bank’s mobile banking services. Stating mobile banking as an example, he said, banks have not made an attempt to familiarise mobile banking services to customers and have not done all the required rules to meet customer protection. As on October 2011, of the 52 banks, which got a nod from the RBI to provide mobile banking services, only 44 banks were providing the service, he observed. There were 22.45 lakh transactions worth Rs 161 crore, which is 9 per cent growth on a month-on-month basis. “The numbers are impressive, but not heartening,” said Padmanabhan.

FC

Banking frauds

Apropos of ‘Pvt. banks see more fraud cases than public ones’ (January 9), the information obtained from RBI under RTI Act on banking frauds is astonishing. It is unbelievable that private banks, known for their perfection and prompt services, are more prone to such frauds. Thus, it will be convenient to conclude that security level at public sector banks is better. But is it really so? It is well known that with internet and mobile banking services, cases of cyber crimes are on rise. The customer’s ignorance about functioning of e-banking facilities lands him in the clutches of frauds, resulting in financial losses. Less number of frauds in public sector banks does not necessarily mean that customers of public sector banks are more careful/computer literate. A careful study of banks’ records and scrutiny of fraud cases will throw light in this matter.

— Kishorkumar J Ved (DNA)

Nominate to avert trouble

Have you filled the nomination form for your bank accounts and safe deposit locker? If so, have you got an acknowledgement from the bank, confirming registration of the nomination? If your answer to either or both of these questions is in the negative, I would suggest that you complete these essential formalities without any delay and also take your bank to task for not reminding you of it. The banking regulator has been asking banks to comply with these legal formalities, but banks often ignore this important advisory. In some cases, they might get the new customers to fill up the form, but not bother to ensure that old customers also follow suit. In fact, in its latest master circular on customer service released in July this year, the Reserve Bank refers to an observation made by Allahabad High Court, wherein it said, “It will be most appropriate that the Reserve Bank of India (RBI) issues guidelines to the effect that no savings account or fixed deposit in single name be accepted unless name of the nominee is given by the depositors. It will go a long way to serve the purpose of the innocent widows and children, who are dragged on long drawn proceedings in the court for claiming the amount, which lawfully belongs to them.” The regulator also points out that some banks do not have a system of acknowledging the receipt of the duly completed nomination form. Saying that this did not meet with the legal requirements, the RBI says that “banks should strictly comply with the provisions of the Banking Regulation Act, 1949, and the Banking Companies (Nomination) Rules, 1985, and devise a system of acknowledging the receipt of the duly completed form of nomination, cancellation and even changes in the nomination. Such acknowledgement should be given to customers irrespective of whether the same is demanded by them.” The regulator also emphasises that banks are required to register in their books, the nominations and alterations (if any) made by the customers.  The RBI also advises banks to indicate on the passbook, whether the account holder has availed of the nomination facility and whether it has been duly registered by stamping the inscription “nomination registered”. The regulator has also asked banks to educate customers on the importance of nomination and give the subject wide publicity — even put reminders in cheque books. So if your bank is not following this mandate, get them to do it. Complain, if necessary, to the RBI.

The Telegraph

Plea to write IIT entrance in Tamil

A woman has approached the Madras high court seeking direction to the Union government to include regional languages listed under the VIII Schedule of the Constitution, preferably Tamil in Tamil Nadu, as a mode of writing answers in the IIT joint entrance examinations (JEE) scheduled on April 8. A division bench of Chief Justice M.Y. Eqbal and Justice T.S. Sivagnanam ordered notice to the chairman, IIT council and the Union government on a public interest litigation by R. Ovia of Chennai. The petitioner said that in 2010-11 about three lakh students in Tamil Nadu took the higher secondary examination in Tamil and several students were from a rural background. The information broucher for the JEE, Ovia pointed out, said that candidates can opt to take the test in English or Hindi but would have to exercise the choice while applying.  The Union Public Service Commission and the Railway Recruitment Board conduct examinations for recruitment in various categories in regional languages, she said. The RBI Young Scholars Award Scheme is also being conducted in 12 regional languages by the RBI and National Council of Education, Research and Training, she said. Hence, the Centre not including regional languages as a mode of examination is violative of Article 14 of the Constitution, she said.

DC