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Friday, April 26, 2013
Why govt may shift cash holdings from RBI to commercial bank
Fund transfer unlikely in a hurry: banks
......So far RBI has been acting as the banker to the government. But such transfers will mean banks will now have to act as lenders to the government, requiring an amendment to the law. In 2011, the Deepak Mohanty committee set up by RBI to study the operating procedure of monetary policy had recommended auction of the government’s cash balances. Its report also acknowledged that this was under the consideration of the government and RBI. Bankers, who also met the finance minister on this matter, said, “He was open to it, but RBI had reservations, as they said that a subsection of the RBI Act would have to be amended before any auction of the government money could take place.”............
Too Careful Regulation Breeds Too Many Crooks
......The
regulator is more concerned about risk management and prevention of
scams than about the sector’s growth. Therefore, nobody is responsible
for the large scams happening outside the regulatory ambit. Allow the
regulated sector to grow faster — and be prepared
for the small problems that come up with it. That is any day more
financially prudent than allowing a fast-growing economy’s needs to be
met by an unregulated sector.............
Needed, Unified Financial Regulation
...... At present, the RBI bears the regulatory responsibility for non-banking finance companies, and Sebi, for collective investment schemes. In the wake of the Bengal crisis, Sebi wants to regulate some of the schemes, while both failed to pre-empt the failure. What is needed is not a turf war among regulators but a unified regulatory structure for finance that heeds the mandate of a macroprudential regulator and is institutionally accountable to a committee of Parliament. We need to subsume the present multiplicity of financial regulators under a common authority that sees neither turf boundaries nor turf overlaps...............
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Building liability, organization key to be a bank: L&T Finance
..........“For liabilities, it is important to put the branch network and the right people to mobilise deposits. The transition of our human resources to a banking mindset is also important,”..........
New banking licence or old banks with new names?
..............Finally, even before the issue of new banking licences is settled, it is time Dr Subbarao recognizes the urgent need to review and increase the deposit insurance cover of Rs1 lakh (as at present) to a realistic figure of say Rs25 lakh for an individual or Rs50 lakh for a couple, if held in joint names. While savings are encouraged, the insurance cover of Rs1 lakh necessitates the account holder to open in accounts in number of banks to protect his savings. This ludicrous coverage must be revised immediately............
‘Getting Bank Licence Will Not be a Cakewalk’
Bagging a banking licence is going to become tough for corporates and finance firms with the Reserve Bank of India bent on pushing the financial inclusion goal. “It (getting a banking licence) will not be a cakewalk as it was in 1993-94,” said RBI deputy governor KC Chakrabarty. “This time, the opening of (new) banks is not so easy because we have got PSL (priority sector lending) norms, which are mandatory, and 25% of the branches have to be opened in unbanked sectors,” he said at a conference this week. ..........
Read - ET
Read - ET
How to serve the unbanked!
.............As private banks cannot justify on commercial grounds the business model that allows them to deal with the triple whammy of low savings balances, small transaction sizes and a large number of customers, they will typically pull back their physical presence in rural areas to discourage the custom of poor. But to ensure that the objective of financial inclusion is met, it is essential that poor people are ensured of low-cost ways of transacting.......
Most viable option: Cut repo rate, CRR by 50 bps each
Bloodletting was a popular treatment for hypertension in the 19th century. In most cases, this did more harm than good. The singular focus on restricting money supply, keeping interest rates high and thereby squeezing demand as a panacea for treating inflation requires some serious rethinking...........
Low inflation may ensure an easy money regime
Rarely does a central bank feel happy when its prediction goes wrong, but the latest release of wholesale price inflation data, on 15 April, was such an occasion for the Reserve Bank of India (RBI). The data showed that the genie of wholesale inflation had finally been bottled in India, Asia’s third largest economy, and it may remain so at least for the time being with global commodity prices increasingly moving south.............
Fake I-T official dupes job aspirant
NAGPUR: Job aspirant Dhanraj Dange (34) was allegedly duped by Arun Sontakke who posed as an income tax commissioner, to the tune of Rs 50,000. Dange was promised a job with the Reserve Bank of India..........
COBRAPOST
The Sting operation by COBRAPOST on three high profile and successful private sector banks has clearly revealed that their officials were prepared to indulge in a Money laundering operation. The officials involved, the conversations have all been brought out with out any doubt. I am told ( I had not listened to all the conversations in the website of Cobrapost) that one official of a bank was prepared to open thousands of accounts in benami names! As far as I have understood, it was not the case of COBRAPOST that money-laundering operation had indeed taken place in these cases. If officials have indicated their willingness to open benami accounts and resort to money laundering operations, it is a reasonable deduction that they might have done in some cases in the past which had not come to public knowledge or knowledge of the authorities. In these circumstances, it is most unfortunate that a statement has again been made ( as reported in the newspapers) by a top ranking official of RBI that no money laundering operation had taken place in these cases.
The officials of the three banks who have been caught on camera in the sting operation deserve very severe punishment not excluding even dismissal. This can only confirm the seriousness and sincerity of the statements of these banks that the conduct of the concerned officials is out of step with the policy of the banks. If the banks hesitate to award severe punishment to the concerned officials, RBI would have to insist on this if they wish to effectively enforce their regulations.
- A. Chandramouliswaran, Former Executive Director
It’s all About that Rate
This refers to ‘Chits are not Cheats’ (ET, Apr 25). The article makes the RBI the villain of the piece. Spreading banking through physical branches and mobile technology cannot be an insurance against people falling victims to Ponzi schemes. When banks offer low rates of interest on savings, people will be attracted to schemes that offer higher rates. The 2008 financial turmoil in the West was also caused by low interest offered by banks on deposits and investors looking for higher yields in unregulated markets.
- S SOLOMON RAJ (ET)
- S SOLOMON RAJ (ET)
Mamata Banerjee under attack for asking people to smoke more
...........After declaring the 10 percent additional tax on cigarettes, Banerjee with a smile had said: "Smoke a little more to help the investors". Congress MP and spokesperson Renuka Chowdhury described Banerjee's suggestion as "alarming and destructive"............
Saradha Chit Fund Scam: Why Mamata Reacts, not RBI?
.........Ironic but not rational. The society or tax-payer at large cannot always foot the bill of fraudulent players in society. Though chits come under the state list, the Centre and the RBI cannot wait for scams. When microfinance players can be curbed with an iron hand, why not the street-corner chit fund organisers? The question should be how soon than when?...........
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Smoke ‘n’ mirrors
...........The larger point, as our lead story brings out, is that the process for tackling such frauds is riddled with problems. The fact is that Saradha did not happen while no one was watching. Sebi had been investigating the company for three years. That Saradha continued to raise money from investors speaks volumes about how inefficient the regulatory process is............
Saradha fraud: Blame the RBI for the repressed formal financial sector
.....The relationship between the regulated and the unregulated parts of finance is not that between night and day, where the one is the obverse of the other. The RBI's regulation is more like a tourniquet tied too long: it staunches the bleeding, all right, but it also cuts off blood supply to another part of the body, killing tissue and nerve. .......
Saradha investors queue up at Ratu
...............Taking a cue from this huge racket, the Jharkhand government has brought over 100 non banking finance companies (NFBCs), operating in different districts of the state, under the scanner. These NFBCs have been booked in the past couple of months for violating the public deposit norms of the Reserve Bank of India (RBI) and the Security and Exchange Board of India ( SEBI). Over 20,000 people who had invested in these companies now feel cheated..........
SEBI digs deeper, chit scam gets bigger
.........For SEBI, it has been a long, lonely and frustrating battle against not just the Rose Valley group, but five more companies, including Saradha, where lakhs of investors have deposited money in various schemes. At the regulator's instance, the Union Finance Ministry wrote to the West Bengal government almost a year back to rein in such companies that are defrauding investors. But little or no action has been forthcoming so far, said sources in regulatory agencies............
Chit fund cheats
.........Punishment for fraud is rare. RBI and SEBI rules and regulations on investments apply to banks, mutual funds or other structured financial bodies. There is need to fill this regulatory vacuum and to bring the chit funds and other similar money-raising schemes under effective scrutiny..........
Lazy Bones and Ponzi Dreams
‘Create More Banks, Chit Funds will Die’ (ET, Apr 23) rightly stated that the lack of sufficient financial inclusion is responsible for the proliferation of Ponzi schemes. Even existing public sector banks have failed to attract rural customers. Banks even drive out people stating they have reached the target in savings accounts. Even when achieving financial inclusion targets, banking efforts have been directed towards opening deposit accounts and loans. These accounts also become dormant since account holders are not motivated to continue the banking relationship. So, Ponzi schemes and moneylenders benefit.
- KV RAO, Bangalore (ET)
- KV RAO, Bangalore (ET)
Mamata drags Chidambaram’s wife into chit fund scandal
........Moving aggressively to contain the political fallout from the unravelling of Saradha, in which thousands have put in their money, Mamata's Trinamool asked Chidambaram to clarify the links of his wife, Chennai-based senior lawyer Nalini Chidambaram, with the Saradha chief...........
Bengal govt ignored investors’ complaints
........One complaint was lodged by a women from Nadia. She had deposited Rs 50,000 in one of the investment schemes of Saradha. She sent a letter to the RBI on February 1, requesting it to give details on whether the investment scheme was registered or not. The RBI replied that it does not look after this matter and asked her to lodge a complaint with the Economic Offence Wing of the Finance department. But no action was taken..........
Banks plan to introduce certificate of deposit curve
.........However, few experts are of the view that the proposed idea may not be a success as it cannot be compared with the government securities curve. “There is no credit risk for government securities. Here this curve does not take into account the credit risk involved and the demand and supply factors,” ...............
United Bank to apply for overseas licences to RBI
............"We will apply for overseas licences to RBI as bank's capital adequacy is good coupled with robust risk management practices," Archana Bhargava, the bank's newly-appointed chairman and managing director Bhargava told reporters in Kolkata on Thursday..................
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