RBI’s ' honeymoon' with micro finance

.....Dr Y.V Reddy, former RBI Governor, later confessed that many financial experts believed, but did not have the courage to admit publicly, that micro finance is India's sub- prime. In fact MFIs are worse than money- lenders. Money lender lends out of his own money, whereas here, MFIs are actually borrowing money from depositors and banks and on- lending the money. So, " MFIs is essentially a leveraged money lender". The studied silence of experts, including RBI, has cost, as the post- 2010 crisis shows, the economy, particularly small borrowers a great deal. RBI seeks to take shelter under the fact that it had no power to regulate the MFIs. But the argument is specious. If RBI today regards MFI lending as subprime lending, surely it could have egged on the Government of India to take appropriate steps and take them immediately. In fact, RBI's guilt runs much deeper. We are tempted to ask Dr. Reddy: It is one thing to say that RBI had no statutory powers to regulate to MFIs; but was it obliged to support MFIs? This support came not only from RBI but also from public sector banks ( PSBs), NABARD and SIDBI, RBI could have stipulated that PSBs should lend only to non- profit MFIs.......

Read - FPJ

MFIs as BCs: Game changers in financial inclusion

......On the flip side, concerns of aggressive bidding have come from the central bank. Harun R Khan, Deputy Governor, RBI, had said during the course of a speech on June 30, 2012 at the Indian Institute of Public Administration, Bhubaneswar.  “Pursuit of higher volume of business for revenue maximisation may dilute prudential requirements exposing the banks concerned to whole host of risks like reputation risk, strategic risk, compliance risk, operations risk besides the risk of contaminated asset portfolio,” Khan had said. With financial inclusion slated to be extended to 3,50,000 more villages in the coming months, this space is set to witness many changes and could see forays into insurance also, an almost neglected area. This holds out opportunities for many players. As A K Bhattacharya, General Manager, RBI, Bangalore says, “The coverage is abysmal.”.............

Read - Deccan Herald 

Can’t compare gold loans with microfinance

....For all their superficial similarities, the worlds of microfinance and gold loans are as apart as chalk and cheese. Microfinance caters to those at the bottom of the pyramid. By definition, gold loans cannot be about the bottom of the pyramid because it presumes ownership of some measure of gold, which is a form of savings in India. At the same time, given the way that gold loans and microfinance emerged from the backwaters almost simultaneously, analysts would certainly feel tempted to draw parallels......

Read - HBL

A more customer-friendly approach to banking needed - Dr.T.V. GOPALAKRISHNAN

.....The concept of Know Your Customer has unfortunately become very handy to keep away the customers instead of understanding the customers, helping them to improve their banking habits, provide them the dignity that they deserve. The objective of KYC is to eliminate undesirable customers from the point of view of their possible indulgence in illegal and anti-social activities but unfortunately all prospective customers are suspected and kept away by citing some deficiencies in some documents which they provide to banks.......

Read - HBL

For the record

....Having discussed the need for KYC, let me now speak a propos a complaint that will elucidate on how banks harass consumers despite them submitting the necessary KYC documents........

Read - The Hindu

Lok Sabha to decide on Banking Act changes; more powers for RBI likely

.... It proposes to confer upon the Reserve Bank the power to call for information and returns from the associate enterprises of banking companies, and also to inspect the same, if necessary.The Bill also proposes to empower the Reserve Bank to supersede the board of directors of a banking company for a total period not exceeding 12 months, and appoint an administrator to manage the banking company during the said period. The RBI feels that such power will help it in regulating new as well as existing entities in a better manner.......

Read - HBL

Govt has higher stakes than RBI, says Chandy

THIRUVANANTHAPURAM, AUG. 19: 

The Government has even higher stakes than the Reserve Bank with respect to implications from growth versus inflation dilemma. This is what Chief Minister Oommen Chandy had to say at a function hosting an invited lecture featuring the Reserve Bank Governor D. Subbarao here recently.....

Red - HBL

Coin shortage likely to aggravate in state

Jaipur : .... "RBI has been taking proactive steps to monitor and meet the demand for coins in different parts of the Rajasthan. Coin melas are being frequently organized by the office directly or through the banks concerned whenever any requirement is felt. If the need arises, we will continue doing so," the RBI official said.

Read - TOI

Coin shortage makes everyday life difficult in West Bengal

.....The Reserve Bank of India (RBI), however, claims that the "demand-supply mismatch" is a problem of perception. "It is not a rule," said a RBI official. "Much effort has been made in the last two months to strengthen (coin) distribution channels. Now we are taking steps to see that even this isolated phenomenon does not happen." The official said the RBI had pumped in Re.1, Rs.2 and Rs.5 coins in Kolkata. The central bank distributed 1.78 billion coins last fiscal. It has issued more than 800 million coins in the first four months of this fiscal (April to July). It has organised about 150 coin melas in the state, where the public, small traders and shop owners exchanged currency for coins. The RBI, which operates 13 coin vending machines at its Kolkata office, is distributing 500,000 coins daily. It has also opened two distribution counters, especially for meeting the demands of transport organisations. The country's largest lender, the State Bank of India (SBI), echoed the RBI's view....... 

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RBI forms committee to reduce gold import

......“RBI has formed a committee which will come out with its report in two to three months recommending how to contain the gold demand,” said RBI Deputy Governor Harun Rashid Khan here. While the oil import is 70 per cent of the domestic requirement, the gold import is 100 per cent, he said. However, he added that the gold import has now come down. On the volatility of the rupee-dollar exchange rate, Khan said, “We don’t target any exchange rate. Our approach is that there should be orderly movements and no volatility.”...... 

Read - The Pioneeer

India Central Banker Says Rates Will Follow Inflation

........We have to balance growth and inflation risks, and when we see the inflation risk being the dominant one, as we have seen now, we cannot afford to ignore that risk, especially since pressure points on food and oil prices are re-emerging," Subir Gokarn said at a conference of foreign-exchange dealers. His comments echo those of fellow Reserve Bank of India Deputy Governor K.C. Chakrabarty, who Thursday pointed to the risks from rising food and oil prices that could weigh on the RBI's rate decision when it next meets in September........ 

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Chidambaram hints at a less intrusive approach on banks

.....Reserve Bank of India (RBI) Governor D. Subbarao had expressed his displeasure over the frequent diktats by the ministry and said the government should influence decisions through bank boards instead. Chidambaram has proposed a less intrusive approach and said all advisories issued by the secretary, department of financial services, will be vetted by the finance minister, according to bankers who attended the meeting. D.K. Mittal, secretary, financial services, did not respond to a call or message left on his mobile phone......

Read - Mint 

We aren’t totally machine-centric

....One of the Deputy Governors of RBI pointed out that why should banks restructure only corporate loans and why not other loans? 

We are doing it. In March this year, we found there were lot of NPAs in education loans. So a policy was formulated and strategy evolved under which we got in touch with the parents. We contacted the students. Wherever we found they are not getting jobs, we restructured the loan. Similarly for agriculture, if there is some drought, flood or crop failure, there is a provision in the RBI policy and we are making full use of that and doing restructuring...... 

Red - The Hindu

Dhanlaxmi seeks RBI nod for new auditor

Kerala-based Dhanlaxmi Bank Ltd has approached the Reserve Bank of India (RBI) to appoint new auditors after Walker Chandiok and Co. and audit consultancy Grant Thornton Advisory Pvt. Ltdwalked out in early August, a month before the completion of their three-year tenure, following major differences with the management of the old generation private lender..................

Read - Mint

Banks rush to raise money where companies fear to tread

....The banks are raising money when the global economic outlook is uncertain and credit rating agencies Standard and Poor’s and Fitch Ratings Inc. have revised India’s outlook to negative from stable, making overseas money potentially more expensive for Indian entities. The Reserve Bank of India (RBI) data shows corporate borrowings from abroad have slowed in the last one year.....

Read - Mint

More Without Frills

Rural banking has spread less than what the RBI would like to believe, and cannot be improved unless the bank leaves dogma behind and faces reality

..... Rural banking can be made profitable, but it requires a different business model: low-cost local staff close to villagers, and continuous effort to make banks useful. The public sector model is quite inappropriate for rural banking. That is why it has progressed so slowly in India and, more importantly, why it has been reported to be more successful than it actually is. The RBI wakes up every few years, exhibits a few statistics, and likes everyone to believe that banks are penetrating villages. The first thing it needs to do is honest, objective surveys into the real state of financial transactions in rural areas. And rural banking will wake up only when the RBI allows new forms of enterprise into it.

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Rupee Co-operative Bank Ltd., Pune (Maharashtra)- Penalised

.......In the statutory inspection of the bank under Section 35 of the Act with reference to its financial position as on March 31, 2011, RBI observed that the bank had violated RBI instructions by granting term loans to some borrowers much in excess of the limit of Rs.10.00 lakh prescribed vide the operational instructions. On top of that, the bank had also sanctioned fresh Cash Credit limit to the existing borrowers in excess of Rs10.00 lakh, in 4 cases, again in violation of the operational instructions..............

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United Bank of India to open new branches

....the bank plans to add 84 new branches across India in urban and semi-urban locations. He added that an approval for 34 branches has been sought by the Reserve Bank of India and rest were in the pipeline. Twenty branches would be opened in rural area for which permission was not required. Narang said that in the current situation of subdued economic growth and lackluster credit demand, the bank was aiming the retail sector to push the credit offtake....... 

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Depositors untraced

.....The bank has wrongly declared his account inoperative. As per RBI clarification, since the interest on Fixed Deposit account is credited to the savings bank account as per the mandate of the customer, the same should be treated as a customer induced transaction. As such, the account should be treated as operative account as long as the interest on Fixed Deposit account is credited to the Savings Bank account. However, this kind of savings bank account can be treated as inoperative account after two years from the date of the last credit entry of the interest on Fixed Deposit account.  The issue of unclaimed and inoperative deposit accounts came to lime light, when a few days back, the Reserve Bank of India told banks to spruce up their act in dealing with deposit accounts which have remained inoperative and are unclaimed so far....... 

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Canara Bank to launch life insurance cover scheme

Canara Bank is launching "Canara Freedom Suraksha", a life insurance cover of Rs one lakh for all its savings bank customers as a value-added service at a very nominal premium, the bank said in a statement........

Read - Indian Express