The Swami and the economist

Anyone who doesn’t know what Reserve Bank of India Deputy Governor Subir Gokarn looks like may mistake him for a spiritual guru. At least that is what the wife of Bank of Maharashtra Executive Director C V R Rajendran initially thought. Gokarn’s special address at a banking conference hosted by the bank last week was followed by a special discourse from spiritual leader Sri Sri Ravi Shankar. In his inauguration speech, Rajendran said, “When we were going through the profiles and photographs of the invitees, my wife asked why there were two Swamijis at the conference.” When Rajendran told her Gokarn is an economist, his wife asked whether there is a relationship between the two. There is, he replied. “One is the cause of my problem and the other is the solution; one decides how many sleeping tablets I take in a day and the other tells me how to relieve this stress.”

BS

Lock and stock

Gokarn got some mild revenge soon after over the issue of curbing gold demand. He suggested several financial instruments as an alternative to physical investment in gold, but Rajendran countered with a novel idea — increase locker rents 10 times to discourage people from buying gold. The idea would work because women don’t feel safe wearing gold in public these days and store all of it in banks. “Locker charges are not regulated, so no one stops you from doing that,” came Gokarn’s quick response.

BS

RBI drags MS University to court

VADODARA: In a biggest setback to its repute, the Reserve Bank of India (RBI) has filed a civil suit against M S University (MSU) demanding recovery of Rs 97,63,000. Country's central bank has moved Ahmedabad court demanding recovery of the corpus fund worth Rs 50 lakh which it had given to the state university in 2002 to constitute a RBI Chair at the department of banking and insurance at faculty of commerce. It is worth mentioning here that having a RBI Chair is a matter of prestige for all academic institutes. MSU was the only state university in Gujarat and among other few universities across the country which was selected by the RBI for financial assistance for promoting external research............

Read - TOI

'MSMEs in Bihar need support from all corners'

.......Also present on the occasion was RBI General Manager C S Azad, who informed the participants about the customer-friendly "Application Tracking System" by the Union government, where loan applications and their status tracking could be done online and the banks would have to give reasons if they decline finance. "However, only a few banks have started it and it is still in pipeline at most banks," said Azad. He added that RBI had altered the definition of "sickness" on November 1 to recognize sick MSME units early and take necessary action to revive them..................

Read - TOI

Time running out as Chidu battles against odds

......Chidambaram has expressed the hope that with inflation declining, RBI may get an opportunity to reduce rates now. RBI itself had talked about such a possibility beginning January. That could be one rare silver lining for the beleaguered finance minister.

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‘Less-cash’ society for better cash handling, says RBI dy guv

India must become a ‘less-cash’ society for better efficiency in cash management, Deputy Governor Reserve Bank of India (RBI) H R Khan said here, on Sunday. “Handling loads of cash leads to not only tremendous inconvenience in terms of carrying but also involves high costs. Despite the presence of debit cards, the cash transaction volume is still very high. We are third in the world in terms of cash to Gross Domestic Product ratio at 14 per cent. This must change,” Khan said. He was speaking at the ‘Bancon 2012’ organised by Bank of Maharashtra in association with the Indian Banking Association (IBA).......

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An 'optimistic' mistake - A.Seshan

....The Reserve Bank should examine whether the depreciation of the rupee has anything to do with the large-scale forex transactions in the recent period. The heavy repo transactions need to be examined to find out their destinations. Treasury earnings can be sizeable on large transactions, even if the margins are small. The excess SLR (statutory liquidity ratio) investments and large bid-cover ratios at the Treasury Bill auctions do not support the claim of any shortage of liquidity in the market......

Read - BS

My View on "A CASE FOR PAYING INTEREST ON CRR BALANCES"

There is a fundamental flaw in the argument that the Reserve Bank should make it attractive for banks to place funds under the CRR requirement. Banks are already keeping securities in excess of the SLR requirement at the cost of lending to various sectors which is the primary function of banks. The skill and efficiency of banks are seen in managing risk in their lending operations and earning income even while keeping a check on the NPAs. It is difficult to accept the comparison made with the interest paid by the RBI on Market Stabilisation bonds when the excess liquidity caused by the inflow of foreign exchange is withdrawn. It would be interesting to know the response of Shri A. Seshan to this article as he has a wealth of knowledge on the subject.

- A.Chandramouliswaran (via e-mail)

Bank licences

.....The RBI seems to have sidelined its guidelines because of its reluctance to issue new banking licences. India survived the financial and banking crises in recent years because of the bitter lessons that it had learnt in banking in the 1950s. Reducing the number of banks almost to a fifth of its original number paved the way for better control over the system. Hence, the RBI is well-advised to issue new licences with adequate preparatory steps.......

Read - HBL

Daddy, can I have a bank?

...... However, there are two sets of objections to letting industrial houses in even after the regulatory lacunae are plugged. The first arises out of a genuine apprehension that large industrial houses, already entrenched in several spheres of the financial sector, might, after getting a bank licence, indulge in regulatory arbitrage and even attempt regulatory capture. There is, besides, no reason to fundamentally alter the ownership structure of Indian banking by letting big business groups in. With the right policy measures and incentives, existing banks will be able to better achieve objectives such as financial inclusion.

Read - The Hindu

Tackle Inflation

RBI Deputy Governor Subir Gokarn’s announcement that the central bank is considering allowing alternative ‘gold-like’ instruments must be seen in the light of two factors. One, our failure to quell the growing appetite for gold and, two, the threat that rising gold imports pose to an already precarious balance of payments position. As the country’s monetary authority and banking sector regulator, the RBI is understandably keen to dissuade people from buying gold........ 

Read - ET

If FM has courage, he’ll give us inflation-indexed bonds

.....rate of consumer inflation (or even 1.5 percent) instead of a bank fixed deposit at 9 percent (the highest available with good banks right now). This means one would get 11 percent this year on indexed bonds. The fact that government is not offering such a safety net against inflation means it has no intention of preventing the debauchery of the rupee through high-inflation policies. High inflation boosts gold even more since gold imports worsen the current account deficit and weaken the rupee —artificially bloating the returns on gold in rupees. The finance minister and even the central bank are barking up yet another wrong tree by pretending gold is the problem, when the problem is inflation.......

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Finance minister P Chidambaram asks CEOs of PSU banks to cut margins

MUMBAI: Finance minister P Chidambaram has told the chief executives of state-owned banks not to be obsessed with higher margins and instead attract borrowers with lower interest rates. Bank managements, according to him, should be happy with a 3% margin - a suggestion that has not gone down too well with bankers........

Read - ET

Unseating gold

.....RBI would be up against the formidable challenge of unseating gold from the pedestal that the yellow metal enjoys in the collective psyche of Indians. Even if that could be assumed as somehow capable of being overcome, a far greater challenge awaits the RBI. This has to do with a more fundamental aspect of financial intermediation that banks are grappling with: How to generate a profit from operations that promises a fair ‘real’ rate of return on deposits and yet keeps interest rates on borrowings affordable enough for fresh investments to take place in the economy.........

Read - HBL

Striking gold

.....The RBI’s K.U.B. Rao committee is examining how to mutate gold properties into financial savings instruments. While inflation kills the value of all financial instruments, those for gold retain their value. So the key element to build into the gold-backed papers will be inflation indexing. Successive governments have asked the RBI to independently consider this suggestion, but the bank has been reluctant so far.........

Read - Indian Express

RBI allows Indusind Bank to raise FII limit to 49%

The Reserve Bank Monday allowed Indusind Bank to increase its FII investment limit to 49 percent but asked it to ensure that the aggregate foreign investment in the bank does not exceed 74 percent. "The Reserve Bank...Advise that its approval to the Induslnd Bank for raising FII investment limit to 49 percent is subject to the condition that aggregate foreign investment in the bank should also not exceed the composite sectoral cap of 74 percent," the apex bank said in a statement.............

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आरबीआई चौक बना संविधान चौक

नागपुर. मनपा प्रशासन द्वारा रिजर्व बैंक चौक को संविधान चौक नाम देने में हो रहे विलंब से नाराज सामाजिक संगठनों ने रविवार की देर रात चौक का नामकरण खुद ही कर डाला। आरबीआई चौक का नामकरण कर उसे संविधान चौक नाम दिया गया। समूह के रूप में जमे लोगों ने देर रात 20 फीट ऊंचा और 55 किलो वजनी लोहे का नामफलक ठीक डॉ. बाबासाहब आंबेडकर की प्रतिमा के समक्ष डिवाइडर पर खड़ा कर दिया.........

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RBI relaxes borrowing rules for mobile auction winner

The Reserve Bank of India (RBI) has relaxed overseas borrowing rules for successful bidders in the country’s cellphone airwaves auction, making it easier for them to raise money to pay the cash-strapped government. The RBI said on Monday the winning bidders could use short-term foreign currency loans as bridge finance, without seeking approval from regulators..........

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RBI to Sun, Rustomjee: End PE pact or resort to compounding

There is a new twist in the ongoing battle between Mumbai-based developer Rustomjee and private equity player Sun Apollo. According to sources, the RBI has intervened in the case and stated that both parties have violated ECB guidelines. For the first time in a real estate transaction, the central bank has opened the option of compounding or paying a fine for the violation. ..........

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New cheque books

....But they all maintained that the new cheque books would not be sent to the customers directly. They needed to duly fill the required slips. The Reserve Bank or the Indian Banks’ Association should publish ads to clarify these doubts. They should ensure that the new cheques are sent to the account holders’ addresses with a formal request.

Read - BS

Flouting RBI norms, bank agents harass 81-year old for son’s dues

Mumbai: Flouting the norms and guidelines by Reserve Bank of India regarding practicing ethical business standards while handling the credit card customers, some recovery agents allegedly harassed and threatened 81-year old woman of kidnapping if she failed to pay Rs 96,000 as credit card dues of her son........

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Take public sector bank staff out of CVC purview

......Unlike other categories of banks, PSBs come under the purview of the Central Vigilance Commission (CVC). Each PSB has a vigilance department headed by a Chief Vigilance Officer (CVO). The CVO is appointed after an interview conducted by the Banking Department, with officers drawn from PSBs and the RBI.........

Read - HBL

RBI to Work on Pact to Counter US Law Impact

The government has asked the Reserve Bank of India to draft an agreement that Delhi can sign with Washington to shield Indian financial institutions from a controversial US legislation, which seeks to penalise entities that fail to report dealings of American residents to the US revenue authority. The Foreign Account Tax Compliance Act, due to come into force from January 1, proposes a 30% withholding tax on any payment made to a foreign financial institution by a US firm if it does not comply with the regulation. “We are examining as to how we need to deal with it...RBI will prepare a draft of an enabling domestic legislation,” a finance ministry official told ET.......

Read - ET

Bank did not try to ‘know the customer’

CHANDIGARH: In the multi-crore bank fraud at the Punjab and Sind Bank in Sector 24, "Know Your Customer" (KYC)', a mandatory provision for every bank while sanctioning loans to any customer or client, was completely ignored while sanctioning around 131 bank loans to the tune of Rs 20 crore. The fraud amount is expected to go much higher according to investigators. KYC requires the applicants to update the bank with their residential addresses, PAN numbers, names, contact numbers and other details going by mandatory guidelines of Reserve Bank of India (RBI).........

Read - TOI

Fraud e-mails in name of Governor, RBI says beware

It’s a simple trap: A “confidential” e-mail notifies the recipient of a large sum that has been set aside for him. The e-mail declares itself to have been sent by the Foreign Exchange Transfer Department of Reserve Bank of India (RBI) and bears the signature of RBI Governor, D Subbarao. It demands a small amount for release of money. The catch is simple too: “RBI never contacts the public via unsolicited phone calls or e-mails asking for money or any other type of personal information.” The sender of the e-mail demands what seems to be a small amount of Rs 15,500 to release a massive sum of Rs 4,38,57,443.75 to the recipient’s bank account. Also requested are details of PAN card, bank account, payment receipt and passport size photos. The e-mail tells the recipient that he or she is listed as a beneficiary in the recent schedule for payment of outstanding debts incurred by the British government, pending for 2012. Spokesperson of RBI Alpana Killawala told Newsline that such “fraud” e-mails have been doing the rounds and clarified that the RBI has not sent out any such mails......

Read - Indian Express

Government panel suggests campaign against MLM, pyramid and ponzi schemes

....The recommendation has been made by the inter-ministerial committee, headed by Consumer Affairs Secretary and comprising of members from Reserve Bank of India (RBI), Finance Ministry, Corporate Affairs Ministry and Law Ministry among others, sources said. The panel has suggested that this consumer awareness programme can be used to make the public aware about pitfalls of ponzi schemes, which typically involves collection of money from public in different layers with promise of rising returns with every new investors added to the scheme......

Read - Moneylife

Bank penalised

The Reserve Bank of India has penalised Bharathiya Sahakara Bank Niyamitha, Chamarajanagar, with Rs. 1 lakh for violating provisions of Banking Regulation Act, 1949. A RBI release said that the Sahakara Bank had violated the RBI directions on know your customer guidelines.

HBL

RBI applauds Kangra Co-op bank

Delhi’s Kangra Co-op bank took a team of RBI to show the difference the bank’s loan has made to lives of its customers. According to a bank release RBI was impressed.........

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Muthoot Finance applies for white label ATM licence

.....In June, RBI had issued the detailed guidelines for WLAs. Suresh Kumar, joint general manager of Muthoot Finance, told Business Standard, “We want to leverage our presence in rural markets, as RBI wants most WLAs in tier-II to tier-VI centres, and most of our branches are located in these centres.”.....

Read - BS

Seriously, can you really trust your documents with your bank

.....The IDBI customers mentioned above is to get Rs 3.5 lakh as compensation from the bank for losing his title deed. As per, the RBI Banking Ombudsman (BO) Annual report:

A complainant approached the BO alleging that the bank was not returning original title deed kept as a security for housing loan availed, even though the loan had been fully paid.

The bank replied that they were not able to trace the documents and had arranged for a certified copy of the documents and handed over the same to the complainant. The BO observed that loosing of original Title Deed was a serious lapse and the certified copies can never substitute the originals. The bank was directed to pay compensation of Rs 25,000 to the complainant for deficiency in service........

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Nabard raises concern over rising NPAs in SHG lending

n the one hand, the number of self-help groups (SHGs) obtaining a loan from banks has been coming down over the years, indicating weakening of the movement in India. On the other, increasing bad loans from SHG portfolios are keeping commercial banks from lending to them. The National Bank for Agriculture and Rural Development (Nabard) has already raised an alarm over rising non-performing assets (NPAs) in SHG lending, in its recent report called Status of Microfinance in India, 2011-12............

Read - BS

JK Bank disburses Rs 1,566 cr to priority sector in 6 months

.....The Chief Secretary impressed upon the banks and other concerned functionaries to take concrete steps to ensure that the Credit Deposit Ratio of 40 per cent is achieved by the end of March, 2013 as advised by the Governor, RBI during his visit to the State......

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