Cartelising savings bank rate? - S.S.Tarapore

Whether or not the Competition Commission has issued a notice to banks, the issue of savings banks rates should act as a wake-up call for the RBI

.....In an ideal situation, the industry regulator (RBI) should first intervene and only if the issue is unresolved, the Competition Commission should intervene. In the present situation, the RBI is aware of the ground realities. If it felt that there were signs of cartelisation, it should have used strong moral suasion to ensure that banks do not cartelise. Its silence could indicate that the RBI does not see this as a case of cartelisation. It is not clear whether the CCI has issued a notice to banks. Even in the absence of a formal notice by the CCI, this should be a wake-up call to the RBI and alarm bells should be ringing for banks........

Read - HBL

A growing distance

The distance between North Block and Mint Road has been growing for quite some time. The latest evidence of tension is the finance ministry’s decision to introduce a clause in the Banking Amendment Bill allowing banks to trade in commodity futures, despite the central bank’s reservations on the issue. The ministry has argued that this will enable banks to hedge exposure to agricultural lending arising out of price fluctuations. While it is the ministry’s prerogative to submit to Parliament the laws under which regulators like the Reserve Bank of India (RBI) will have to work, it is possible that it has not listened closely enough to the regulator’s arguments, as a major stakeholder.........

Read - BS

No tangible development in RBI-adopted Bhadrak village

The Reserve Bank of India (RBI) Platinum Jubilee outreach activities seem to have remained ineffective in Bhadrak district. The tribal-dominated village Jalanga was selected by the RBI to be adopted under Samagra Gramin Vikas Yojna. The UCO Bank had adopted it. However, given the ground realities, the mission of adopting the village is yet to be achieved. The RBI in a response to one RTI application filed by rights activist Radhakanta Tripathy stated five villages namely Jalanga, Chandipur, Pokatunga, Chhatabara and Bhedabahal from Odisha had been adopted under the SamagraGramin Vikas Yojna, among the 115 villages adopted under the scheme across the country.........

Read - The Pioneer

Financial inclusion in J&K our target: RBI

Srinagar, Dec 12:Interactive meet organized by the Reserve Bank of India in association with J&K Bank concluded today. Speaking on the occasion, Regional Director (Jammu), RBI, K.K.Saraf expressed that financial literacy and financial inclusion are their focused targets in J&K. He said that in anticipation of increase in volume of foreign exchange business due to revival of tourism and handicraft sectors in J&K, need was felt to hold a session on FEMA, 1999 for general awareness of bankers and customers. Chief General Manager RBI Mumbai Rashmi Fauzdar, Executive President, J&K Bank, Parvez Ahmad, Presidents J&K Bank Shafat Ahmad, Nayeemullah, Vice President.P.K. Tickoo, DGM FED RBI Jammu A.K Mattu and DGM FED RBI Mumbai P K Kar were also present on the occasion..........

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Supervision beyond borders

...........It is true that complexity faced by supervisory colleges at the global level, along with the diversity of regulatory approaches only amplifies the challenges of effective cooperation and coordination. Nevertheless, supervisory colleges offer the right model for supervision and regulation of internationally active banking groups. Therefore, colleges established by the RBI will go a long way in achieving supervisory efficiency and effectiveness by building and nurturing relationships among supervisors beyond formal rules, regulations and geographical borders.

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ICICI Bank opens 101 gramin branches across six states

......"Financial inclusion is the bedrock on which the edifice for an inclusive social and economic ecosystem can be built. While the task of bringing the 1.2 billion population within the fold of banking is indeed daunting, it is as much an opportunity for the banks. I feel that brick and mortar branches, as delivery point for banking services, would continue to play a critical role for at least next 20 years," KC Chakrabarty, Deputy Governor of the Reserve Bank of India (RBI) said while inaugurating one of the bank's gramin branches at Khatwa, a village in Rajasthan........

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Industry must educate masses on economic reforms: HR Khan

......."There is a huge need for communication (as to) why reforms are necessary. It is not only to attract foreign investors...it is in the interest of the country," he said. "There is a vested interest in the country against business. They think business is a crime. (They say) any reforms and people will suffer. But nobody explains, starting from the top political leadership to the captains of the industry, academia. Nobody goes and talks to the general people,".......

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Beyond the politics of the banking law amendment

............... After Independence, the Forward Contracts (Regulation) Act was passed in 1952 to regulate this market and FMC was born. In the mid-1960s, the government banned futures trading of most commodities, believing this fuels inflation. The ban was lifted in 2003, leading to the birth of national electronic commodity exchanges but even a decade after this, FMC continues to remain a wing of the central ministry. In a free-market economy, futures trading is essential as it helps price discovery and price risk management and forward prices signal the imbalance between demand and supply. The entry of banks into this market will add depth to the market and they should be welcomed but not before the FMC becomes an independent, strong regulator. If the government is serious about reforms, it should move aggressively to amend both the banking laws and the securities contract law. Neither will work in isolation.

Read - Mint

Bank mergers to be kept out of competition watchdog purview

....Simply put, all mergers in the banking industry will come only under the ambit of RBI. One need not wait for any approval from the Competition Commission in the case of bank mergers if the Bill in the current form is enacted into law........

Read - HBL

RBI rejects FinMin proposal for interest on CRR

..........DK Mittal, secretary, department of financial services, wrote to the RBI, proposing payment of interest of CRR as currently, banks are not getting any interest on CRR . “The RBI has said no to the ministry’s proposal on payment of interest on their CRR holdings,” said a source. If the RBI accedes to the government proposal, it will have to shell out close to Rs 19,000-20,000 crore — assuming an interest rate of 7 per cent — every year as interest on CRR. As total deposits of the banks amounted to Rs 64,10,000 crore as of November 2012, banks have kept around Rs 2,72,000 crore with the RBI at the current CRR level of 4.25 per cent. A section of bankers, led by SBI chairman Pratip Chaudhuri, has even demanded total abolition of CRR. The RBI has argued that the annual transfer of surplus to the government will become negative if the central bank pays interest on CRR and subject the central bank to ‘reputational risk’..........

Read - IE

Cheque bouncing

It is unfortunate that the Finance Ministry is mulling over cheque-bounce cases and considering an alternative mechanism before launching prosecution. If the reason for this is due to the large pendency of cases, the remedy is to establish more courts to deal with such cases. Action under Section 138 of the Negotiable Instruments Act has been a real deterrent to persons issuing cheques without any intention to honour them or without adequate balance in their accounts. This action should not be diluted by bringing in a dispute resolution mechanism.

- G.V.Raman, Executive Chairman, Shriram Group Companies (HBL)

Cheque, Mate

The RBI move to compel banks to issue only CTS 2010-design cheques is welcome, but it is a pity most banks have failed in the initiative despite being informed in 2010. With D-Day looming, they have suddenly woken up and are putting pressure on customers. To avoid hardship to customers, a stay order has to be brought in suo moto by the apex court for deferring the rollout of new cheques to January 1, 2014. This will allow customers one year to be prepared and strict instruction must be given to banks to stop issuing cheque books from old stock.


- CHANDRASEKARAN T R (ET) 

Transactions using debit, credit cards to be encouraged: FM

Government will encourage net banking and financial transactions using debit and credit cards despite rise in number of cyber frauds as such transactions are recorded and leave an audit trail, Finance Minister P Chidambaram said today. He said during Question Hour in Rajya Sabha that frauds involving net banking and debit/credit cards is a small fraction of the total number of transactions in the country.......

Read - IE

New RBI norms likely to affect NBFCs' return on asset: Crisil

............"We believe that tightening in bad asset recognition norms to 90 days from 180 days and the increased standard provisioning requirement to 0.40% from 0.25% will adversely affect the profitability of NBFCs. As a result, the return on asset is expected to drop by 0.25% over the next two-three years,"............

Read - DNA

PLASTIC NOTES OF RS 10 SOON

New Delhi Don’t get scandalised if you get a plastic note of Rs 10 denomination in cities of Jaipur, Shimla, Bhubaneswar, Mysore and Cochin. It is not a counterfeit or fake note but a real money tender printed on polymer substrate to be circulated soon by the Reserve Bank of India in these five cities on a field trial basis. Any currency issued by the RBI is valid across the country, but not in this case, as the trial is limited to five cities......

Read - FPJ

Expect inflation to moderate in 2-3 months: RBI

The Reserve Bank expects inflation to moderate further in the next 2-3 months that may lead to cut in interest rates by the Central Bank, RBI Deputy Governor K C Chakrabarty said today. "We are trying to bring down inflation ... There is a probability that inflation would come down in the next few months. In the next 2-3 months inflation should come down," he said after inaugurating a rural branch of ICICI Bank here.........

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PFC has sought change in RBI draft guidelines on new banks

......as per the draft guidelines published by the RBI, PFC, as a government owned Bank could not seek licence to start a new Bank. The PFC had, however, in its comments to the RBI on the draft guidelines had sought the Apex bank to permit government institutions to have a equity stake in new banks ...........

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HSBC: How Simple Became Complicated, and costly

HSBC takes its name from its roots as the Hongkong and Shanghai Banking Corporation, but there has long been a joke inside and outside the firm that the name stands for "How Simple Became Complicated".............

Read - DNA

NBFCs well placed to comply with RBI’s latest norms

Mumbai: Most non-banking finance companies (NBFCs) are well placed to adjust to an increase in provisioning requirements, higher capital adequacy ratio and tighter norms on bad loan classification, analysts said, even as rating agency Crisil Ltd said the new norms, when implemented, will impact NBFCs’ profitability. The Reserve Bank of India (RBI) draft guidelines, released on Wednesday, propose to raise tier I capital or the core capital for all NBFCs. The guidelines propose to give NBFCs two years to arrange for the required capital..........

Read - Mint

Making NBFCs safer

RBI’s draft norms for NBFCs may come across as softer than those proposed by the Usha Thorat Committee last year, but it’s clear the regulator wants a tighter grip on these intermediaries. The general idea seems to be to keep a closer watch on the larger players, especially those that are mobilising money from the public, and not worry too much about the smaller lot. As the regulator points out, since many of the companies are highly leveraged—they borrow a fair amount from the banks—their well-being is important for the health of the financial system. The fact that they’re offering more ‘complex’ products also seems to be a matter of concern for RBI...........

Read - FE

ICICI, IDBI hit dirt tracks for growth

.....Private banks such as ICICI Bank have been gradually pushing their rural initiatives for want of customers and cost-effectiveness of the rural branches. Even the public sector banks, which are pioneers in rural banking, have been slow as the unbanked areas are too remote without a link of a road and other infrastructure facilities. To counter these problems, RBI allows banks to have business correspondents in rural areas. A business correspondent can be any resident of the village or neighbouring village, a company having operations in these locations. Only NBFCs are barred from being business correspondents......

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Taking steps to deal with fake notes: Chidambaram

.....The finance minister said steps have been taken to prevent entry and circulation of fake currency. Improving security features of bank notes and preventing entry of fake currency are ways to deal with the problem, he said. The National Investigation Agency (NIA) is the nodal agency to deal with the problem of the counterfeit notes and steps are also being taken to install note sorting machines at bank branches, he said. Chidambaram informed the House that with a view to increasing the life of bank notes, particularly in lower dominations, the RBI in consultation with government has been considering various options including printing of polymer bank notes. He said a decision had accordingly been taken to introduce one billion pieces of Rs. 10 bank notes on polymer in a field trial basis in five cities.........

Read - Hindustan Times

It's time to get an Aadhaar card

.....But its utility, at present, is limited to know-your-customer (KYC) norms. So, you can open a bank account easily but for any other financial transaction, you will still have to go through the KYC rigmarole and produce multiple documents. For instance, if you want a home loan, you will still have to produce other documents, such as utility bill or ration card as proof of residence. Even in the case of other financial products like insurance or mutual funds, while Aadhaar may be accepted as KYC proof, it is not sufficient for making transactions. And, many telecom companies do not accept it if you want to purchase a SIM.......

Read - BS

Next Aadhaar in financial inclusion: Saral prepaid card

Delhi government on Wednesday launched the ‘Saral Money Prepaid card’ to provide banking services to those people who are unable to open a bank account due to lack of supporting documents for their ‘know your customer’ (KYC) verification. Saral has been launched by five of India’s prominent banks namely Axis Bank, HDFC Bank, ICICI Bank, Indian Overseas Bank and State Bank of India in collaboration with the payment gateway provider, Visa and Aadhar. To open a bank account with the above five banks and to get a Saral Money Prepaid card, a person will now just have to produce the Aadhar card to fulfil the KYC norms. The limit of such accounts will be Rs 50,000 and the customer will be able to do cashless transactions with the help of the Saral card at the many authorised places in the city...........

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Illegal investment schemes spread as regulators play a waiting game

Local police and state government more effective than central regulators such as RBI, Sebi

....However, in the books of the companies fictitious entries have been made and in the name of sale and purchase by way of sham transactions and the companies have been receiving deposits from the citizens with a promise to give regular interest or returns on the deposits.” In doing so, the companies have not taken any permission from the Reserve Bank of India and also no registration is made under the provisions of the Companies Act and the Banking Regulation Act, 1949, the order said. Thus with absolute lack of know your customer and other prudential norms, there is no control over what kind of money comes into these schemes making them fertile breeding ground for political and unaccounted sums of money.....

Read - BS

Anchoring inflationary expectations

..........Supply shocks, not excess demand, have powered inflation in India in recent times, so the Reserve Bank of India (RBI), even while reducing demand, has aimed it more at anchoring inflationary expectations. But exactly how this works in the Indian context is not clear. A widely shared perspective, though, is that the RBI reducing its policy rates even marginally would amount to giving up the fight against inflation. But then, growth is also included among the RBI’s objectives. Therefore, giving some weight to growth shouldn’t really imply it is giving up on inflation........

Read - HBL

Reuters poll: RBI to hold rates on December 18

.......Respondents were almost evenly divided on expectations for a cut in CRR, a tool the Reserve Bank of India has been using to ease a cash crunch and prod banks to loosen lending rates. At 4.25 percent, CRR is at its lowest since 1976. Of the 33 respondents, 16 expect a CRR cut on Tuesday of either 25 or 50 basis points, while most also expect a further CRR cut in the March quarter. While expectations are near-unanimous for an interest rate cut in the March quarter, 20 of 36 respondents expect 50 basis points of cuts, which is deeper than the 25 basis point expected in the October pre-policy poll. The RBI is expected to review monetary policy in January and again in March...........

Read - BS

Private finance firms thrive under regulators' nose

BHUBANESWAR: Rule: Every non-banking financial company (NBFC) must obtain permission from the Reserve Bank of India (RBI) to provide financial services to people. Reality: Many of the financial management firms, including chit fund companies, are operating in Bhubaneswar and other parts of the state in contravention of RBI guidelines..........

Read - TOI

Banks to remain stressed next year too: Fitch

........"There is a risk that our initial gross NPA ratio forecast of 3.75 per cent could rise to 4.2 per cent this fiscal due to a more protracted downturn, the impact of which should be felt over the next three-four quarters," Fitch said in a report. "The stress is not yet completely visible in the reported NPAs, but is clear in the performing restructured loans,"..........

Read - IE

Is FM right in allowing banks to trade in commodity futures?

...... while allowing banks to speculate will certainly  add more depth to the market, it must not be forgotten that Indian banks do not have the product and market knowledge to trade in derivatives. Secondly, Indian banks lack market knowledge and expertise to benefit from trading in commodity futures and the RBI too has warned banks about risky trading instruments..........

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Banks lost Rs 4,448 crore to fraud in 2011-12

....Citing RBI, the statement said, major frauds included misuse of loans sanctioned for purposes other than those for which these are sanctioned, lack of proper due diligence by the banks and direct sales agents (DSA), fake title deeds submitted as collateral security and disposal of assets created by loans without the knowledge of the bank. In some cases, “ the banks had not carried out the pre sanction inspection of property for the acquisition of which the loan was being sanctioned to ascertain if the unit/ property really existed.”..................

Read - BS