Wednesday, December 12, 2012

Building trust in banking



We have just listened to the 12th Nurul Matin Memorial Lecture titled 'Trust in banking' delivered by eminent economist and illustrious former RBI Governor Dr. Y. V. Reddy. We are truly glad and gratified to get Dr. Reddy in the list of luminaries delivering the memorial lecture. At the outset Dr. Reddy very graciously underscored the special relationship he feels with us here at Bangladesh, which I can respond to only by asserting that the feeling is mutual, and that we look up to him as a trusted friend and mentor. The annual Nurul Matin memorial lectures of recent years have delved deep into issues and challenges in upholding of banking ethics, focusing mainly on our own local context. With 'trust in banking' as his lecture theme, Dr. Reddy has chosen to begin from the wider global context, where we saw severe erosion of trust in financial systems and their regulators since the global financial crisis of 2008-2009, particularly in leading advanced Western economies. Trust, according to Professor Reddy, has indeed close affinity with ethics, morals, values, sense of fairness  etc which he rightly claims to be country specific and  culture specific. As such he brings a lot of fresh air in the discussion  on a topic which is not only of immense significance to all of us, but provides......

Brave senior citizen, daughter-in-law nab thief

......According to Satellite police, Jagdish Shah, a retired RBI official, who lives with his family at Roopmadhuri Society in Satellite, was in his drawing room with his wife Ramila, 60, having their morning tea at 7.45 am. Roopal, Shah's daughter-in-law, had gone to drop her daughter at a nearby school. Shah's son has a bedroom on the first floor of the two-storey residence........

RBIQ : Telecast Schedule


The Zonal Finals & National Finals of RBIQ will be telecast on Zee Business as per the following schedule :

Original Telecast Dates :

·         East Zone Finals :     December 15th

·         North Zone Finals :   December 22nd

·         South Zone Finals :   December 29th

·         West Zone Finals :    January 5th

·         National Finals :        January 12th

The Telecast Time for all the above-mentioned days (all Saturdays) will be 8 pm to 9 pm.

Repeat Telecast Dates :

These episodes will also have Repeat Telecasts on the following day, i.e. Sunday (December 16th, December 23rd, December 30th, January 6th and January 13th). The telecast Time for all the Repeat Telecasts will be 11 am to 12 noon.

2.       Zee Business is available on all leading DTH/Cable networks. The Channel Nos. on which Zee Business is shown on some of these DTH/Cable networks are as under:  

·         Tata Sky : 506
·         Dish TV : 590
·         Airtel :   286
·         Videocon DTH : 343
·         Hathway :  906

3.       The Promos for these episodes are scheduled from 6 pm onwards today, i.e. December 11th on Zee Business.

4.       You, along with your family members, may please like to watch these exciting RBIQ episodes on the above dates

बैंककर्मियो का प्रदर्शन

Employees of RBI holding silent demonstration
कोलकाता मे वृहस्पतिवार को रिजर्व बैंक के कर्मचारियो ने विभिन्न मांगो को लेकर मूक प्रदर्शन किया। यह प्रदर्शन उस समय किया गया जब रिजर्व बैंक के गवर्नर डी. सुब्बाराव अपने सहयोगी अधिकारियो के साथ शहर मे ही मीटिंग कर रहे थे।

RBI,JK Bank hold interactive meet on FEMA 1999

RBI, J&K Bank hold interactive meet on FEMA 1999

Srinagar, Dec 11: In association with J&K Bank, Reserve Bank of India (RBI) today kicked off a two-day interactive meet with bankers on Foreign Exchange Management Act (FEMA)-1999 here at the Bank’s Corporate Headquarters.  The meeting was chaired by RBI Regional Director (Jammu), K K Saraf in presence of J&K Bank Executive President Parvez Ahmad, RBI Chief General Manger, (FED) Mumbai Rashmi Fauzdar, J&K Bank Presidents Shafat Ahmad,  Nayeemullah,, J&K Bank Vice President P K Tickoo , RBI,DGM FED (Jammu) A K Mattu and RBI DGM FED (Mumbai) P K Kar.........


Efforts afoot to free UCBs of duel control


A working group has been formed to remedy the confusion stemming from dual control over the urban cooperative banks by the state coop dept and the RBI, RBI’s General Manager Malbika Patel said..........

Aadhaar-based payments for beneficiaries in Prakasam dist.


........Chairing the meeting, the Collector urged bankers to popularise the comprehensive crop insurance scheme and ensure that the benefits reached the non-loanee farmers too. She asked them to provide institutional credit to more tenant farmers and expedite sanctioning and grounding of all government-sponsored welfare schemes with special focus on implementation of action plans for targeted groups from SCs, STs, BCs and minorities. She wanted bankers to realise their corporate social responsibility(CSR) and chip in with funds liberally for improving amenities in state-run schools and hostels. RBI AGM K. Hariharan, SBI Regional Manager K.S.R.Murthy, were among those who attended the meeting.


RBI to issue Rs 100 note with inset letter 'L'

....."The design of these notes to be issued now is similar in all respects to the Rs 100 bank notes in Mahatma Gandhi Series - 2005, issued earlier," ....

Swamy wants Subbarao to depose against Raja


Janata Party chief Subramanian Swamy has moved an application in a special court hearing the 2G spectrum scam for RBI Governor D Subbarao to be summoned as a witness in his private case filed against former Telecom Minister A Raja. Swamy, in his plea before Special CBI Judge OP Saini, has requested the court that Subbarao be asked to depose in the case since he was the Finance Secretary during the 2G scam period...........

3 NBFCs likely to get RBI nod for banking license: Antique

....."The guidelines do not specify the number of licenses but given the past record and the RBI's cautious approach, we believe a maximum of three or four licenses would be granted," the brokerage said in a note today. "The existing set of guidelines clearly eliminates chances of groups engaged in broking and real-estate activities as contenders - it offers adequate flexibility to RBI for 'choosing' the promoters of new banks.......

Bond yields rise on RBI's choice of OMO papers


MUMBAI: Benchmark central bond yields rose on Tuesday after the Reserve Bank of India bought less of the papers traders wanted to offload via open market operations. The RBI bought Rs 11603 crore of government bonds as against Rs 12000 crore scheduled. But dealers said the low acceptance of the 8.33 per cent 2026 and 8.07 per cent 2017 July bond, both well-traded papers, dented sentiment. .......


My View on "Hair raising Memo to RBI........................."


I think let the GUV pay attention to growth first.The interest rates must come down to give a boost to economy.Low interest rates will transfer into lower interest rate differential between us and other advanced countries,will stop any apprehension of sliding of Re, will bring stability in exchange rate, boost investor confidence etc. Concerned about fiscal deficit, inflation etc stop a few social sector schemes or PDS. The beneficiaries are in no way benefitted and money goes down the drain. RBI GUV retiring in Sept next. That's far away.Shri Mittal, Secy,Financial Affairs is retiring on 31 Jan, 2013. No chance of him replacing the GUV. One DG goes now in Dec end. Shri Gokurn is very good. He will be replaced by an economist. Before retiring on 31 Dec, 2012, Shri V.K.sharma has deciphered the Eurozone crisis.Only solution seems to be to abandon Greece or possibly Spain.

Sitendra Kumar, Ex-General Manager, Jaipur (via e-mail)

Talent deficit is the product of deliberate neglect of HR issues


8c8ac_Dec. 2012 Cover.jpgArticle published in Business Manager, December 2012 under Cover feature
The absence of talent in banks today is the product of a deliberate neglect of HR related issues. The ageing top level, problems in succession plans at various levels caused by, among other things a ‘recruitment holiday’, since circa 1991, during which period ‘outsourcing’ and adhocism forced distorted priorities in recruitment and skill development are all grave issues affecting the functioning of banks.

M G WARRIER
(Former General Manager, Reserve Bank of India)

The need of the hour is a thorough overhaul of HR policy and practices in banks, from Board Room to front desk. The casual approach to HR management is behind many of the problems being faced by the financial sector today.

Thanks to the strong legislative foundation provided through Banking regulation Act, 1949 and the efficient regulatory supervision and guidance by the Reserve bank of India, India can feel proud about the successful functioning of banks in the country, within the existing constraints.

Actually, the private-public sector divide in regard to meeting social responsibility obligations/commitments and a discriminatory approach between the two sectors, when it comes to government policy support is a legacy of the British Raj. Once it is accepted that the resources of the country belong to the people and irrespective of the nature of ownership (whether government or private individuals/groups/families/organisations), all are handling public funds/resources in a trusteeship sense, this divide can be bridged to a great extent. This approach is all the more relevant for banks, as after all, their resources come from public deposits and their major business comprises providing credit and services to the public.

If the financial sector has to rise to the expectations in regard to credit delivery, especially to agriculture and service sectors, the banking infrastructure will need structural reforms, skill development and a change in outlook on management of human resources and related issues. 

In July 2010, Reserve Bank of India came out with the idea of experimenting ‘executive interns’ in RBI, proposing contract employment of candidates for short periods with a consolidated salary. This writer responded to the report on the subject in a financial newspaper on the following lines:

“Although on the face of it, the proposal may seem like a normal HR initiative at infusing young blood with expertise and enthusiasm at a lower cost, no in-depth analysis may be needed to find that this is a short-term remedy being tried out for a long term problem.
Sooner than later, the RBI, government and public sector organisations will have to wake up to the reality that their recruitment, training, placement and compensation strategies need thorough overhaul and this they have to do taking their existing employees into confidence. A long-term solution may have to be found for the HR-related problems, including the inability to hire experts at market-related compensation. The Government and public sector organisations may have to consider how best the ‘cost-to-company' (C to C) principles can be integrated into their existing recruitment, training, placement and career progression policies. This may involve the following:
·         Taking the existing employees into confidence with an assurance that the changes will only improve the working results of the organisation and they will get an opportunity to share the benefits and new job opportunities and so long as they are prepared to learn new things/upgrade their skills, the infusion of ‘experts' will not eat into their career progression opportunities.
·         Inter-mobility of executives in all cadres among comparable organisations. For instance, a banking/financial sector service could be evolved for institutions including those in the private sector and regulatory bodies in the financial sector.
·         A transparent guidance for remuneration package based on paying capacity/need for skills for different sectors. Proposals like the present one by RBI of shifting to C to C to reduce costs will send wrong and unhealthy signals.”

Though aware about the oddity in quoting oneself, two and a half years down the line, the above observations gets relevance as it is gathered that the executive interns experiment in RBI did not meet with much success and the entire financial sector is slowly reconciling to the idea that HR in financial sector is different from say, managing mine workers or farm labour.  RBI has recently appointed a panel to review HR practices in the central bank. Adhoc recruitment of Executive Interns without planning their future deployment or absorption, succumbing to pressure on promotion policies, not being able to convince GOI on need to implement competitive remuneration packages for recruiting and retaining efficient officers, failure to decide on updation of retirement benefits at least on par with GOI are just some examples where even an organisation of the stature of RBI can go wrong when preoccupied with other priorities. When it comes to infusing professionalism in specialized areas like supervision and forex and debt management RBI is facing several constraints, many of them emanating from its failure to argue with North Block as Finance Ministry shows an attitude akin to master-servant relationship.

Now that RBI has woken up, we may expect other statutory bodies and public sector organisations followed by GOI (we can expect like that only) will follow suit and think of an overhaul in their Human Resources Development and Management (HRMD) practices. The absence of talent in banks today is the product of a deliberate neglect of HR related issues. The ageing top level, problems in succession plans at various levels caused by, among other things a ‘recruitment holiday’, since circa 1991, during which period ‘outsourcing’ and adhocism forced distorted priorities in recruitment and skill development are all grave issues affecting the functioning of banks.

HRD at the top across sectors should become a national priority, if professionalism is to be restored at lower layers which directly interact with the clientele. Guidance for an overhaul of HR practices in banks should come from GOI and RBI factoring in, among others, the following:
i)                    A long-term recruitment policy taking into account the skill and aptitude needs for rural, urban and metropolitan services
ii)                  Job security including social security to ensure that the employees develop a sense of belonging to the institution
iii)                An institution-specific wage structure up to junior management levels ensuring ‘living wage’ and incentives for performance, service in rural areas or tough terrains etc
iv)                GOI and IBA should provide overall guidance in HR management, but leave details to individual banks who should be made more responsible for in-house management
v)                  Ideally, from middle management level and upwards, easier inter-organizational mobility of staff should be thought of
vi)                An Institute for Financial Sector Management and an Indian Financial Sector Service could take care of further skill development needs at higher levels.

Telecom companies can facilitate select banking services but their call is not compelling

..........Thus, the telecom operator acts like a banking correspondent-as per rules set by the Reserve Bank of India (RBI), within a 30 km radius of a branch in rural areas and 5 km in urban areas. It's a symbiotic relationship. Telcos need banks for accounts; banks need telcos for reach- there are 90,000 bank branches, while Airtel alone has 1.6 million outlets.........

Inflation targeting hardly works

.......What comes out strongly is the effect of persisting inflation. Countries with high pre-existing inflation are more vulnerable to commodity price shocks. A plausible explanation is the effect of inflation expectations, with firms responding to cost increases by raising prices. What are the implications for India of these results? First, many of the identified structural characteristics shown to be factors in cost transmission, one of which is the extent of fiscal dominance, have been regularly flagged by RBI in its analytic underpinning of monetary policy. Imbalances in these characteristics will have to be mitigated.......

Back to basics


Apropos A Seshan’s article “India is suffering from inertial inflation” (December 10), experts have interpreted the inflation phenomenon in different ways. That has added to the confusion of policy makers. The inflation versus growth trade-off – relevant as it may be analytically – is not as constraining in policy formulation as it is made out to be. There cannot be a Reserve Bank of India (RBI) prescription for reviving growth at variance with what the finance ministry suggests. The monetary and the fiscal policy mix, or the public expenditure policy, cannot work in isolation. Both RBI and the finance ministry allowed inflation to acquire structural proportions................

RBI Plans to Push Export Lending

NEW DELHI: The RBI has mooted a separate carve-out for export credit within the overall priority sector lending target for banks to make funds available for exports amidst rising concern that the declining exports will keep current account deficit elevated and depreciate the rupee, undermining its efforts to rein in inflation..........

Bank for the buck

.....For starters, banks — a proxy for the economy – will see a rebound in credit growth next year, as gross domestic product growth revives. Typically, when interest rates come down, stock prices tend to go up. Citi is positive on the sector and sees “reasonable returns on improving macros and bottoming micros”. As for PSU banks, the broader perception in the market is that asset quality has started improving and once the Reserve Bank of India ( RBI) starts cutting rates, things would improve. The market is building in rate cuts and a consequent uptick in loan growth in FY14. Ambit Capital expects PSU banks to outperform in the near future, as it sees signs of these stocks bouncing back from their relative lows. The market expects PSU banks to end the year with earnings growth of 11 per cent.......

Banks get SC's backing on derivative defaults


The Supreme Court on Tuesday ruled that banks were entitled to declare as a wilful defaulter any person who did not repay his dues under a foreign exchange derivatives contract. This was legal and within the various circulars issued by the Reserve Bank of India (RBI) in dealing with derivative transactions, the apex court said. The judgment paves the way for banks to resume recovery proceedings, which were stalled as the matter was sub judice............

Mobile banking: A technology gradually permeating into the system

The question for mobile banking in India is not whether, but when. A string of parallel developments - greater bank innovation, broadband spread and user inclination - is providing new charge to mobile banking. There is still a long way to go before m-banking achieves mass acceptance, but it's on its way.........

Refreshing change in the attitude of a British bank; a lesson for Indian banks?

......It is to regain public confidence or to project a customer-friendly image; one of the banks in London recently went out of the way to satisfy an aggrieved customer, a refreshing change in attitude from a stiff upper lip British banker.......

Restore trust in governance

.... The goings-on in Parliament and in other legislative bodies, the open spats between “responsible” heads of organisations on the one side and the political leadership on the other, continuous strictures from courts and media reports on unethical and corrupt practices by the rich and powerful, are all agonising..........

FDI vote underlines regulatory power

......Permission for a certain level of FDI in retailing, or for that matter, in any sector, is essentially brought into effect by amending a schedule to regulations made under the Foreign Exchange Management Act (FEMA). Parliament enacted FEMA, and authorised the government to make rules, and the Reserve Bank of India to make regulations, to implement the law. When government changes its policy on introducing FDI, the RBI amends the regulations to implement the policy......

Left draws Governor’s attention on chit funds

......Pointing out that the chit funds are operating against the guidelines of the Reserve Bank of India ( RBI), he said that the RBI had also directed the government to take action in the case.

Kerala co-ops on deposit mobilisation drive

......Kerala has a three-tier system in the co-operative credit mechanism — State Co-operative Bank at the apex, 14 district co-operative banks in the middle and 2,502 primary co-operative credit societies at the base level. In addition, there are 85 urban co-operative banks and 1,013 employees credit societies, according to SLBC. The high NPA level is a major concern of this sector — the net NPA is 15.31 per cent and the quantum of amount has increased to Rs 414.55 crore. Kerala’s co-operative sector is now set to introduce the core banking facility across all the banks. CBS has already been implemented in State Co-operative Bank and most of the district co-operative banks......

Banking is too important to be held hostage to political expediency

.....The Bill seeks to do a number of things that are long overdue. These include raising the ceiling on voting rights in private banks from 10% to 26% and, most importantly, allowing the RBI to supersede the boards of banks. The latter is seen as an essential precondition for the grant of new bank licences. But the government is not without blame either. The Bill introduced in the Lok Sabha differs substantially from that cleared by the Standing Committee of Parliament, notably in that it allows banks to enter into futures trading in commodities. If the Banking Regulation Act, as it stands today, prohibits banks from trading in commodities, it does so for a very good reason. It exposes banks to excessive risks. It is best if such activities, if seen as desirable, are confined to a separate entity under a holding company that owns the bank as well......

Consolidation of PSBs

The finance minister has again pitched for consolidation among public sector banks (PSBs). It makes sense that in this increasingly globalised environment the country will need at least two to three global-size banks that can take on greater challenges. India is an emerging market economy and corporates are going for overseas acquisitions to expand their business. Barring perhaps one or two banks, again with limited capability, no other banks in India have the required resources and ability to finance corporates for their cross-border acquisitions.........

‘Stakeholders not consulted’

A TRADERS’ association that has consistently opposed foreign direct investment in multi-brand retail is the Confederation of All India Traders (CAIT). Praveen Khandelwal, secretary general of the CAIT, was the first person to highlight the fact that one of the prerequisites to the entry of FDI in retail trade precluded the amendment of the rules and regulations of the Foreign Exchange Management Act (FEMA) through the Reserve Bank of India (RBI). The amendment was proposed by the RBI after it was pointed out by him. He had also pointed out that any proposal to amend the rules of FEMA would have to be ratified, annulled or further amended only by both Houses of Parliament. It is this issue which came up for discussion in the ongoing session of Parliament and which now has been delinked from the discussion on FDI. Khandelwal has also been relentlessly trying to convince political parties about the pitfalls of FDI in the retail sector...........

Your savings will grow, thanks to PF

Your take-home salary is set to reduce significantly, though you might end up saving more. Putting to rest the confusion regarding calculation of provident fund, the Employees Provident Fund Organisation (EPFO) has said that all allowances which are ordinarily, necessarily and uniformly paid to the employees are to be treated as part of the basic wages. Take that to read transport, education, medical and any such special allowance which is payable in cash. All this would now be clubbed to the basic salary while calculating the PF.......

Home buyers vs builders: Whose side are you on, Mr FM

...Again, the government’s stand is diametrically opposite to that of the RBI. The banking regulator has time and again warned lenders against their exposure to the real estate sector. In 2009, the RBI had increased banks’ provisioning for standard assets to 1 percent from 0.4 percent after house prices crashed in 2008 and builders found it difficult to repay loans. The central bank’s move was aimed at mitigating any asset quality risks for banks. Recently, a media report said the RBI has asked banks not to restructure real estate loans and push for recoveries instead.......

Gold Deposit Scheme: What you need to know

....While the above scheme gives 5.75% rate of return for using your gold, these jeweller schemes are not approved by any regulator (RBI, SEBI, etc) even if some jewellers may like to give such a false impression. The website www.kotharijewelry.com gives details of its GDS, but it has no mention about it being approved by the RBI or any other regulatory body. The only approved gold deposit scheme is the one from State Bank of India, but it gives very low returns and hence it is not popular with consumers......

Options for elders: Book fixed deposits before rates dip if you are in base tax bracket

Axis Bank plans VRS to cut flab at top

Three years after Shikha Sharma took the corner room at Axis Bank, the country's third-largest private sector lender is making another attempt to cut flab. The bank plans to roll out an early retirement scheme for senior employees aged 40 or more, who have been with the lender for 10 years or longer...........

Why Growth is still Foreign to these MNC Banks Here


With parent banks facing a turmoil in their home countries and the Reserve Bank of India’s restrictive policy on opening new branches, it’s a challenging time for foreign banks in India. Adding to their troubles is the aggressive approach of local private banks.......


Customers banking on rival ATMs piques SBI


Having the largest ATM network in India can be an enviable position. But for the country’s largest bank, the State Bank of India (SBI), that seems to be hardly the case. For, SBI has found its customers prefer the ATMs of competing banks. This has implications for business strategy, including revenue and recovering the cost on investment made in this alternate channel, according to senior SBI officials..............