RBI to test plastic currency plan with Rs 10 note

ROHTAK: If the proposal of the Reserve Bank of India (RBI) gets through, plastic currency notes of Rs 10 denomination would be in the market soon. The RBI is in the process of testing the effects of different climatic conditions on the plastic note, after which it could be a reality, subject to approval by the Centre. RBI's Assistant General Manager (AGM) at Chandigarh, J B Mangla, told TOI on Friday that this would ensure longer life of currency notes. "RBI has proposed to print Rs 10 denomination currency notes in plastic as a pilot project. These are being tested for different climatic conditions like extreme hot, cold and moist areas along the seashore". The official said there was no timeframe for introducing the notes and if found successful, it would be replicated for other denominations also. "There is too much tampering and misuse of currency notes in our country like using it in garlands, throwing the notes in the air on occasions like wedding, stapling or writing on it. We don't have any penal provisions to check this misuse. It shortens the life of a note. The plastic note will have longer life", he added. Mangla was in Rohtak to attend a coin distribution programme organised by the Oriental Bank of Commerce here. He said the programme was organised in view of the feedback from the town about shortage of coins. "There is no shortage of coins with RBI but it seems to have been created by people who has a habit of storing coins, instead of keeping it in circulation,'' said Mangla.  

TOI

CRR cut not a decisive stance reversal: Subir Gokarn

The Reserve Bank of India cut the CRR or the cash reserve ratio to 5.5 per cent in its credit policy review on Tuesday, injecting Rs 32,000 crore into the system. However, the central bank has kept the short-term lending rate (repo) unchanged. "CRR is not a substitute for open market operations (OMOs)," said RBI Deputy Governor Subir Gokarn in an exclusive interview to NDTV

RBI to act against banks not beefing up cyber security

.... "The banking regulator expects reasonable compliance. RBI will take a serious action against banks that do not implement the recommendations of the committee. By October 2012, banks will have to implement the recommendations,"....

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Banks to be held responsible for fake notes in ATMs

CHENNAI: Banks are responsible for any fake notes dispensed by their automatic teller machines (ATMs) and should compensate customers for the loss when fraudsters withdraw money from their accounts using stolen data. This was the view that emerged at a seminar on security of banking operations held here Friday. "Banks cannot wash off their hands on the issue of fake notes dispensed by their ATMs and they are liable to compensate their customers. The customers should lodge a police complaint immediately on coming to know about the fake notes from an ATM," S.N. Ravichandran, joint secretary, Cyber Society of India, said. While it is common to hear complaints of bank customers getting fake notes from ATMs, banks conveniently wash their hands off, saying that the cash is filled in the machines by third party agencies. "The police should book the chief executive of the bank as well as that of the third party agency that refills the machine with cash. If that happens, fake currency in ATMs would vanish," Ravichandran said, adding that banks should not issue ATM cards indiscriminately. Reserve Bank of India Executive Director G. Gopalakrishna said the central bank had told the banks not to circulate notes obtained from the currency chest immediately.

ET

New Rs.5 coin soon

The Reserve Bank of India (RBI) will shortly put into circulation coins of Rs. 5 denomination to mark the centenary year of Indian Council of Medical Research (ICMR). In a press release, RBI said that one side of the coin would have the image of Lion Capital of Ashoka Pillar, while the other side would have the emblem of ICMR. There will be three growing lines on the left and right side of the emblem and the year ‘1911-2011' will be shown below the logo, press release from RBI added.

HBL

RBI to conduct financial outreach camp at Changki

Mokokchung, January 27 (DIPR): Reserve Bank of India (RBI) has embarked on organizing Financial Outreach camps in various villages of the North East States as a part of its Platinum Jubilee celebration since 2009-2010. The outreach camp aims at bringing awareness among people in remote villages about RBI and banking system. Encouraged by the response received, RBI has launched second phase of financial outreach camps in the North East States. In its series RBI has selected Changki village in Mokokchung district of Nagaland State to hold the outreach camp on February 8. Besides RBI, other financial institutions such SBI, NABARD, NEDFI, KVIC, NSIC, SIDBI, Nagaland Rural Bank, Nagaland State Co-operative Bank etc. will be involved in the proposed outreach camp for sharing information on various financial products and services with the public. In addition, agriculture, horticulture and other allied departments of State government will open stalls during the camp for the benefit of villagers. According to RBI official sources, Executive Director, RBI, V.S. Das will attend the camp as guest of honour. To facilitate the proposed camp, Deputy Commissioner, Mokokchung Lithrongla G. Chishi had a meeting with officers of concerned departments at her office chamber on January 27 and discussed with the officers to make the camp beneficial for the villagers.

Morung Express

RBI may intervene in forward market: source

.... RBI Deputy Governor H.R. Khan said that any central bank intervention, as and when it happens, will be a combination of both cash as well as forward basis. “But there is a limit upto which you can do forward because then the premiums will disturb other rates,” he said, adding the amount is decided based on the market condition.....

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Banking licences: Ministry, RBI step up shadow-boxing

Regulator wants all eligible applicants to get licences, finance ministry says not a good idea

The central bank seems to be in an unusually generous mood on new banking licences. In a sharp departure from its earlier cautious stance, the Reserve Bank of India (RBI) is now in favour of giving banking licences to all the applicants that meet the eligibility criteria mentioned in the guidelines issued for this purpose. But, the finance ministry is not in sync with RBI’s generosity on the ground that it would be difficult to regulate and supervise a large number of banks. This new round of difference of opinion would extend the long wait for the banking hopefuls.

LICENSING NORMS IN THE WORKS 1993: First guidelines since the financial sector reforms of the early 1990s released for new banks 2001: Revised norms released, two banks given permission in 2003-04 Feb 2009: Finance Minister says in Budget speech RBI to consider giving licences to new entities Aug 2010: Discussion paper on new bank licences released Aug 2011: Draft guidelines on new bank licences out

RBI’s approach so far has been to restrict licences to only a few entities. According to central bank sources, the banking regulator has written to the finance ministry that banking licences should be given to all those entities that meet the ‘fit and proper criteria’ mentioned in the guidelines. More importantly, the view in Mint Road is some of these banks can be allowed to fail. This is significant, as no banks have been allowed to fail in the country since the guidelines of 1993. “If some banks are allowed to fail, others will be more cautious and prudent in their operations,” said a person close to the developments. RBI has always followed an ultra-cautious approach on private bank licences. Since the financial sector reform in the early 1990s, the first set of guidelines was issued in 1993 and then revised in 2001. The 2001 guidelines were cautious and large industrial houses were not permitted to set up banks. Ten new banks were set up in the private sector after the 1993 guidelines and two after the 2001 guidelines. Sources said the ghost of the 2G scam played a big role in the central bank’s decision, as RBI wanted to minimise the role of subjectivity. The central bank is now open to the idea to allowing large business houses in banking. Almost all the big industrial houses, including the Tata Group, the Aditya Birla and RADAG groups, are keen to set up banks. Nearly 18 months after the government announced RBI would consider issuing fresh banking licences, in August last year, draft norms were issued. Among the criteria suggested in the draft norms was diversified ownership of promoters with a minimum 10 years of experience in business and a minimum Rs 500-crore capital. It was also said firms having 10 per cent of their income from real estate and broking activity would not be considered. RBI has also made a case to the government to amend the Banking Laws (Amendment) Bill, introduced in Parliament in March last year, which will give more power to it before fresh banking licences are issued. At present, RBI does not have certain powers, such as supersession of bank boards.

BS

RBI guidelines on bank CEOs’ compensation—Are they missing the woods for the trees?

..... the RBI appears to have missed the woods for the trees as a few areas of executive compensation, which have a great relevance in the Indian context, are conspicuous by their absence. More so because, the compensation structure of CEOs of public sector banks is not even being attempted to be covered under the new dispensation without any rhyme or reason. .......

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TNEB mulls bill payment through mobile phones

.... “The RBI is studying certain (accounting) modules for fund transfer. Since the amount involved will be huge, we want a robust system (software and technicalities) in place,”....

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Budget should provide roadmap to contain deficit: Rangarajan

............"It (rate cut) all depends on how the inflation behaves in the coming months. The reduction in the policy rate will come about only when the there are definite signs of decline in the non-food manufacturing inflation,".......

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Non-bank finance cos are a boon if they don't fall through regulatory cracks

.... A recent RBI paper looks at NBFCs in India and offers suggestions. As the paper points out, NBFCs fulfil a need that banks are unable to meet. They have the ability and flexibility to take quicker decisions, assume greater risks and customise services and charges according to the needs of the clients. At the same time, the strong and growing links between banks and NBFCs means that NBFCs could pose a threat to the safety and stability of the financial system........
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Cash reserve ratio

This is regarding the latest policy announcement of the RBI reducing the cash reserve ratio by 50 bps. The intention appears to be to make lendable cash available with the banks. But keeping the loan interest rates as they are, the reduction in CRR may not yield much improvement in boosting lending. With the lending rates untouched, the industries may not be able to perform in a profitable way, and hence credit outgo may not be boosted. The interest rates need to be re-examined to raise credit outgo and, thus, create a rise in industrial production. This may also help in improving the GDP.

- T. R. Anandan, Coimbatore (HBL)

A good balancing act

Apropos of the editorial “RBI lobs ball to Pranab” (FE, January 25), in the kind of situation that we are in and the growing uncertainties faced with monetary policy actions alone cannot achieve the desired purpose unless the central government, on its part, comes out with credible policy initiatives and steps up fiscal consolidation programme. In the context, a cut in the CRR by 50 bps is an intelligent move to infuse liquidity into the system and make banks comfortable to operate so that the growth aspect is equally taken care of without diluting the key policy rates and not letting the inflation go out of control again. Rightly so, the question the RBI Governor has posed—is investment being held back by unfriendly government policy or by high interest rates—doesn’t need answering.

- Srinivasan Umashankar, Nagpur (FE)

Monetary policy

Apropos the editorial “Beyond a baby step” (Business Line, January 25), the reduction in cash reserve ratio doesn't signal changes in the monetary stance of the central bank. It only alleviates strained inter-bank liquidity. In the past, CRR was used to convey changes in the monetary stance. Continuing the policy rates at the existing level (repo and reverse repo rates) implies that the central bank still isn't comfortable with the patterns in inflation. Credit demand won't change during 2012 due to a complex business environment prevailing at present, and so changes in CRR wouldn't improve the investment sentiment. At best, the RBI has taken care of the supply side of funds. Has the RBI utilised the opportunity to merely infuse liquidity into the banking system? As monetary easing isn't desirable due to continuing inflation on the manufacturing front, the central bank is in an unenviable place.

- K. V. Rao,  Bangalore (HBL)