A spirited marathon for myriad causes



The RBI Governor, Dr D. Subbarao, at the Mumbai Marathon on Sunday  



Mumbai, Jan.15: “Run, Mumbai run,” echoed on the streets of Mumbai as hundreds of onlookers cheered the spirited runners at the Standard Chartered Mumbai Marathon 2012. January 15 was not just another lazy Sunday in Mumbai. Thousands of people left their homes at wee hours all geared up to participate in the marathon. Warm-up sessions had started one hour ahead of the run. If it was a rigorous exercise for the serious runner, it meant rehearsals and make-up sessions for the participants strolling along the route promoting their beliefs. Except the serious runners, most participants dressed up in colourful, funny yet symbolic outfits to promote causes that were close to their heart. We were a part of this crowd, panting and puffing our way through the runners trying to get a glimpse of their outfits. Matching their pace and spirit was not difficult as we got sucked right in the middle of their campaigns protecting causes such as the girl child and Mother Earth, to name a few.  While some were dressed as Anna Hazare, many had embarked on a patriotic voyage. Twenty-seven-year old Anshul Jain, an advocate by profession, was dressed up in a Gandhi topi, with two steel glasses covering his ears and other utensils strung together. “This look signifies my support to the Anna Hazare cause. I want his approach to be considered by the Government,” said Jain, who has been winning a costume ‘run-in' prize since the last three years. This year he won a sum of Rs 30,000. To promote rural banking services, employees of Union Bank of India had dressed up as carrots, leaves and mobile phones. “We want to spread awareness about the reach of rural banking. It has been a great experience,” said Ms Richa Dodhi, from the bank.  Among the hundreds of NGOs, Toybank had a large number of participants. Dressed in clown outfits and a train costume, the participants were handing out square yellow paper boxes to the onlookers encouraging them to donate toys. Celebrities like John Abraham, Milind Soman, Anil Ambani, Anand Mahindra and many more were also seen running at the marathon.  Kenya's Laban Moiben and Ethiopian Netsanet Abeyo bagged the top honours in men's and women's categories respectively. Moiben completed the marathon with a timing of 2 hours-10 minutes-48 seconds while Abeyo finished the run in 2:26:12. 

HBL

Twists & turns in policy changes – S.S.Tarapore

.....The lack of distinction between interest rates on rupee and foreign currency deposits was so deeply ingrained in the system that it took Dr Rangarajan more than three years to correct this aberration. In 1985, different interest rates were prescribed for each foreign currency with a small premium above interest rates in international markets............

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VITALINFO - Information highway...........

Banks stepping up presence on social networking sites

With almost half of the country's population below 30 years of age, banks are gradually stepping up their presence in the virtual world, connecting with current and potential customers through social networking Web sites, especially Facebook.........................

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Accounts can not be closed for non-compliance of KYC norms without notice

NEW DELHI: A Delhi consumer forum has ruled that a bank closing its customer's account without serving him notice seeking his various particulars as per the banking sector's Know-Your-Customer (KYC) norms, is liable to be held guilty of rendering deficient service. Delhi's Central District Consumer Disputes Redressal Forum, headed by its president B B Chaudhary gave the ruling while holding Karol Bagh branch of the State Bank of Bikaner and Jaipur guilty of rendering deficient service to one of its customers, whose bank account it had closed without serving a due notice to him, seeking his particulars. It also asked the bank to pay Rs 15,000 as compensation within 30 days to complainant R N Prabhakar, a lawyer, for causing "harassment, pain and mental agony" to him. "We hold that the act of the bank amounts deficiency in service. It led to harassment, pain and mental agony to the complainant," the forum said. The forum said the bank, itself, did not follow the RBI guidelines, published in a news daily, on the KYC by closing the account of the lawyer on its own. Rather, it cleared two cheques of the complainant before closing his accounts without giving him a notice, it said. "It was not appropriate on its part to close the account or not to honour the cheque of the complainant by taking shelter under the public notice," it said. Prabhakar, in his complaint, had alleged that the bank dishonoured a cheque issued by him in favour of Airtel without any valid reason. He also also sought that his complaint be treated as a public interest litigation.

ET

CAs lobby against RBI plan to reduce audits

RBI may allow state-run banks to stop branch audits, a move that could save costs

New Delhi: Chartered accountants (CAs) are lobbying hard to protect a source of income that’s at risk of drying up as the Reserve Bank of India (RBI) may allow state-run banks to stop branch audits, a move that could save costs. Banks are looking for savings as a slowing economy acts as a dampener on business. Such branch audits are a routine stream of revenue for small firms and individual accountants. RBI governor D. Subbarao told CAs on 16 December that they should not rely on work that doesn’t add value. “With concepts like core banking system and centralized record keeping, the relevance of the audit of branches of public sector banks (PSBs) has significantly declined,” he told the Institute of Chartered Accountants of India (Icai) in Mumbai. “These banks have represented to RBI that the audit of banks’ branches should be reduced. There is merit in this suggestion, since currently the cost of audit of PSBs is significantly higher than the cost of audit of comparable private sector banks.”  Subbarao also acknowledged that Icai has been “resisting this because it would mean a reduction in work for its members”. RBI has asked PSBs to reduce branch audits by at least 25% and constituted a working group of bank officials toward this end. CAs are trying to persuade RBI against imposing such a directive. In late December, they even asked the central bank to allow them to carry out branch audits of private sector banks as well. The Icai central council held an emergency meeting on Wednesday to discuss the matter, said G. Ramaswamy, president of the body. Icai representatives will meet RBI officials on 16 January to make a case for auditing all branches and advances. “Although core banking solutions for public sector banks are sophisticated and technologically sound, there are issues such as maintenance of records, human interventions, etc., which will need auditors’ involvement, and that is what Icai will represent itself on in the meeting with the working group formed by RBI for this purpose,” Ramaswamy said. Core banking refers to retail and small business customers handled through centralized data centres and, therefore, more automated than earlier. The move, if implemented, may come as the second blow that India’s 180,000 CAs have faced in the past month. On 23 December, the finance ministry directed each state-run bank to create a credit approval panel comprising only of bank officials for approving large-value loans, thereby bypassing CAs. Currently, any loan above Rs. 100 crore has to be approved by a management panel, which comprises bank officials, CAs, government  and  RBI  representatives.“ So far, all credit proposals that are beyond the sanctioning power of the chairman go to the management committee. We have asked banks to create a level of credit approval committee, which comprises only officials of banks,” said a senior finance ministry official, who did not wish to be identified.  An Icai council member who did not want to be identified, said, “Icai will make a representation to RBI that in the larger interest of corporate governance, larger number of advances sanctioned by PSBs should be audited. The move to limit branch auditing may keep advances up to several thousand crore rupees out of the ambit of auditing.” Another senior Icai member who did not want to be identified, said, “RBI is taking this step in the name of cost saving, but this may trigger frauds and fudging of data.” RBI officials were not immediately available for comment.

Mint

Adopting Basel III

The editorial “Bankrolling the banks” (Business Line, January 14), makes a cautious assessment of the state of affairs prevailing in Indian banks, and their preparedness for the proposed Basel III, to be implemented in a specified timeframe from January 1, 2013, to March 31, 2017. By and large, banks were least affected even in the most adverse conditions due to sound fundamentals, and yet, when it comes to critical issues such as raising capital for business expansion, ensuring regulatory compliance and containing non-performing assets, they have always found it challenging. No business is without risks, and obviously banks, as commercial entities, cannot be an exception. But a high quantum of NPAs is worrying. Capital has become an increasingly scarce commodity; raising capital, especially for public sector banks, will become the biggest challenge. It is estimated that PSBs will need an additional capital of Rs 5 lakh crore in the next five years for implementation of new norms and to sustain a growth of 20 per cent per annum. This is an uphill task for the government. The RBI, as a market regulator, cannot ignore concerns regarding the proposed implementation schedule for Basel III. Given the background that the banks are in, the RBI has a greater role to play in ensuring their smooth migration to Basel III. The idea of having a capital conservation buffer proposed in Basel III is a welcome move, aimed at maintaining renewed stability of the financial system.

S. Umashankar, Nagpur (HBL)

Banks pay interest for delayed credit/refunds of NEFT transactions

.... the Reserve Bank of India (RBI) had issued some guidelines for banks in 2010. According to these, banks are required to pay a penal interest at the current RBI’s repo rate plus 2% for the delayed period, or until the date of refund, as per the case. At present, the repo rate is 8.5%, so you should get 10.50% as penal interest on any delay.....

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Why RBI is not in a hurry to issue new bank licences

In the Union Budget 0f 2010- 11 the Honorable Finance Minister had announced that additional banking licenses would be given by RBI to private sector players inclusive of NBFCs. This was ostensibly to further financial inclusion and also to improve Indian Banking systems size & sophistication. This had set the capital markets on fire with a lot of conjecturing as to who would be the lucky few. The access to low cost current account & savings accounts ( CASA) and ability to offer all financial products under one roof (Universal Banking) attractions for NBFCs to rush to seek banking licenses. It was also expected that RBI would give new licenses to private players very soon. However the scenario on the ground reveals a totally different picture. Neither is RBI in a hurry to issue fresh licenses nor is there a mad rush by many NBFCs to get into commercial banking. The reasons are as outlined below: Restricted Freedom Due To Banking Regulations: RBI rules are stringent for commercial banks as they are the visible face of the Indian Financial system. Another reason is the fact that commercial banks are primarily custodians of public money. RBI places restrictions on commercial banks in their lending operations. Out of Rs. 100 taken in as deposits approximately Rs. 30 has to be set apart as statutory requirements towards Cash Reserve Ratio ( CRR) and Statutory Liquidity Ratio (SLR). This leaves the Banks Rs. 70/- to lend. Out of this Rs. 70/- forty percent has to be statutorily lent towards priority sector as defined by RBI. That essentially leaves banks with Rs. 42/- to lend as per their own discretion. Many NBFCs would definitely restrictive to say the least. NBFCs seeking a banking license are expected to have huge capital requirements. Further Banks have to invest large funds in fixed assets and information technology primarily to facilitate financial inclusion, risk management anti money laundering, etc. These huge capital expenditures increase the payback period for the investments made. Also banking as a business model is far more people, process and product driven than a simple NBFC model. For example in order to adopt Universal banking the staff needs to be multi skilled in banking functions. Thus the operating expenses would be substantially higher, which in turn would reduce the profitability of operations. Also there ownership and voting rights. Current stipulations cap voting rights at 10% unless with specific approval of RBI. Thus in light of all these restrictions, it is clear that commercial banking is a far more regulated and complicated business model. This explains the lukewarm response of many NBFCs. Past Experience explains RBI's cautious approach At the same time it is clear that RBI is in no hurry to issue new licenses. The last license was given in 2004. However since then, India has changed a lot and the world has changed a lot. More importantly the world view on Banks has changed a lot. Also RBI has to take into account the past experience of giving licenses to new private players. licenses to nine players. Post 2001, RBI further gave banking licenses to Kotak Mahindra and es bank Of these four do not survive today. Global Trust Bank ( GTB) has been merged with Oriental bank of Commerce (OBC), Times Bank was merged with HDFC, Bank Of Punjab with Centurion Bank which itself has been merged with HDFC Bank. Thus out of eleven new banks, four have failed ( a failure ratio of above 35%). A key lesson of the recent financial crisis is that each time a bank fails it erodes the faith in the system which might eventually lead to a systemic collapse. This explains RBI’s reluctance in handing over licenses liberally. In particular the comment on the current world view of the Banks is telling. To say the particular are viewed with suspicion due to their ownership. The last thing that RBI would want is banking failures which would undermine the stability of our financial system. It is thus clear those only serious NBFCs with deep pockets and who have a differential operating model would seek banking licenses. Also RBI would be in no hurry to issue these licenses.In the context of new branch licenses baby steps are far better than giant leaps. This is because it is better for RBI to prepare & prevent than repair and repent.

FPJ

‘Fake note circulation up 300%’

New Delhi: There has been a 300% increase in fake currency transactions in India’s financial channels, a report compiled by the financial intelligence unit (FIU) under the Union finance ministry has said. The report states that during financial year 2011, the agency detected “4,23,539 incidents of fake Indian currency notes with a face value of over Rs 35 crore”. The FIU is notified about such detections, called counterfeit currency transactions (CCRs), by public and private sector banks under provisions of the Prevention of Money laundering Act and these numbered 1,27,781 in the fiscal 2010. The FIU report also revealed that notes of Rs 500 denomination bear the maximum brunt of counterfeiting in the country. “Rs 500 denomination notes constituted the bulk of CCRs at 60.74%,” the report said.

TOI

Fake notes found, man arrested

Officials of the Fort branch of the Reserve Bank of India (RBI) carrying out an audit of old and worn-out currency notes were a surprised lot when they found fake currency notes totalling over Rs3.88 lakh had been deposited with the bank between September 2010 and June 2011. Following the incident, the MRA Marg police on Sunday arrested a man, Said-ul alias Aslam Suratali Shaikh, a Jharkhand native living at Pydhonie. Another significant fact was that small denomination notes were also deposited in the bank, which is very rare, said the police. According to the police, it was during an audit of the currency notes that the RBI officials learnt of the high number of fake notes being deposited in the bank, which the vigilance department confirmed were deposited on various occasions between September 2010 and June last. Interestingly, the fake notes were deposited in the department that checks and exchanges torn and unusable notes.

DNA

Police, ED asked to take RBI help in checking terror funding

Intensifying its drive to curb terror funding, the Government has asked the Jammu and Kashmir Police as well as the Enforcement Directorate to seek help from the RBI in monitoring transfer of funds meant for separatist groups for alleged anti-national activities, including disturbing peace in the state. With Union Home Minister P Chidambaram giving a clear direction to choke the funding of terror groups, the Union Home Ministry recently convened a meeting chaired by Home Secretary RK Singh in the national capital where broad contours of terror financing were discussed, official sources said today. The sources said that during the meeting, Enforcement Directorate officials indicated that terror groups were adopting a smart approach of transferring money in small amounts to avoid suspicious transaction by the security agencies and bank authorities. The other modus operandi used by the terror groups and separatists was that of using credit cards where they had to withdraw money once they get clearance from terror groups across the border in Pakistan, the sources said, adding some funds were even transferred through authorised money transfer agents in small amounts. At the meeting, it was decided that the police as well as the ED would seek help of Reserve Bank of India which monitors gateways of credit cards and money transfer agents, the sources said. While it would be an enormous task of monitoring the transactions, the officers were asked to detect suspicious transactions through their intelligence mechanism and later verify the same with the RBI, the sources said.  The ED has in the meanwhile served summons to several people who have been booked by the police for terror financing and the process was underway to attach their properties, if any, after proving that the same was brought from the proceeds of terror funding. The ED has been talking to various security agencies and the police to gather more details about the cases and would decide as to in how many cases Prevention of Money Laundering Act could be invoked, the sources said. The Centre has been paying special attention to check illegal funding of separatists and terror groups in Kashmir and had constituted Combating of Funding of Terrorist (CFT) cell within the Union Home Ministry to monitor it. The cell works with organisations like the Department of Revenue Intelligence, Income Tax, ED, CBI and Directorate General of Customs and Central Excise Intelligence and later scrutinise information collected from central police organisations and the Financial Intelligence Unit.

DNA

Reforms far more important than cutting rates

..... I think there is a very strong case. Inflation is under control, global commodity prices are coming down, except for crude oil, all commodity prices are coming down. Inflation will be contained strongly, inflationary expectations are low and GDP growth has been affected. So this is the right time to cut rates and to cut CRR.......

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Rural banks told to shift to new system

... “There will be two advantages. The first is that RRBs will be forced to clean up their books, and second, they will look at the accounts more carefully,” said a finance ministry official, who did not want to be identified. “We know it will throw up some huge unpalatable numbers. But it is better to clean up the books in one shot.”....

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Why not a joint review of monetary, fiscal policies?

The economy needs a morale boost and this can come only if the Government and the RBI jointly initiate measures to revive the confidence of the investors. .............

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Government plans white paper on wrong export numbers soon

.... While the two sets of data may not be strictly comparable on a month-to-month basis because payment flows for exports take time, it is possible to match payments to shipments on the basis of RBI code issued to exporters.....

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Can india’s MFI industry be saved?

The government and RBI must draw an MFI survival strategy before it’s too late. We need them at least till such time the banks are ready to reach out to the masses

 .... The death of the MFI industry will push the poor into the grip of moneylenders and deal a blow to the government’s financial inclusion drive. The government and RBI must draw an MFI survival strategy before it’s too late. We need them at least till such time the banks are ready to reach out to the masses. At the same time, the industry needs to get rid of its obsession for growth and learn from the Bandhan and Janalakshmi experiments to reorient its business models......

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SBI to expand microfinance portfolio by 50% in Q4

State Bank of India plans to grow its microfinance portfolio by 50% in the fourth quarter, drawing comfort from the Reserve Bank of India's (RBI) move to frame guidelines for microfinance institutions...........

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