In the continuing debate on whether over regulation has the potential to throttle the corporate sector or if businesses will always manage to beat the regulator at ways to skirt the rule book, a perspective from inside the Reserve Bank of India offers an insight into how tough it is to enforce financial regulations in the country. Speaking at a recent conference on corporate governance in Mumbai, G Padmanabhan, Executive Director, RBI recounted how companies responded to attempts by the central bank in 2007-08 to tweak the regulatory framework to discourage foreign currency borrowings by companies as a means to contain the rupee volatility......
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Tuesday, July 8, 2014
Sahara - an untold episode - B.K.Kamath
First there was Peerless, a life insurance co. When life insurance business was nationalised In 1956, the co. continued its endowment policy schemes sans life cover in the guise of small savings schemes spread over 5 to 25 years. In essence the schemes were nothing but long term recurring deposit schemes. In late 1960s RBI issued directions to non banking financial cos. putting a cap on their public deposit acceptance. The co applied to RBI for exemption from the ceiling provisions of the directions which was granted with certain conditions. The rest is history. The cos business grew exponentially over the years.
Here is the secret of the phenomenal success or Peerless and scores of similar cos culminating with Sahara. The co. pays 70% of the first years subscription as commission to the agents. The schemes provided for forfeiture of the entire subscription if the depositor discontinues within three years. The agents had incentive and strict instructions not to approach subscribers after the first year with the result most of the certificates lapsed and subscriptions forfeited. This is the source of thousands of chores rupees assets of such cos. The agents of these cos. were those who could persuade gullible people who had no access to banking facilities to part with their small savings. Some of the Peerless agents started their own cos. collected the loot as long as possible and disappeared.
Coming to Sahara, I was then attached to Central Office of the then DNBC at Calcutta. Subrata Roy approached me some time in 1978 - 79 seeking my advice on starting a co. on the lines Peerless. I explained to him that both RBI and GOI considered the type of business unethical and against public interest and a Bill to ban such schemes was already in the Parliament. Roy must have realised the ineffectiveness of Indian legal system and taken full advantage.by establishing SAHARA. To make it more acceptable to the gullible public he roped in celebrities like FM Sam Manekshaw and Kapil Dev and scores of others as directors. He also resorted to cheap gimmicks like clamping himself and other office bearers as "workers": This is the inside untold of multi billionaire Subrata Roy and his Sahara Pariwar.
If only the RBI had rejected Peerless's application for exemption, millions of innocent people would not have lost their hard earned life's savings.
- B. K. Kamath, CGM Retd
A Study on Analyzing the Trend of NPA Level in Private Sector Banks and Public Sector Banks
.............The basic purpose the study is to understand and analyze the NPA level of private and public sector Banks by considering few public and private sector Banks. To understand what are the factors that contribute to NPA. To suggest some measures in order to reduce the level of NPA. This study would also in turn influence the Banks to identify the problems pertaining to the account and to avoid the occurrence of any account turning into NPA. Statement of the Problem: The substance of the Banks will be threatened depending upon the level of NPA. If banks have many accounts that are turning out to NPA, the existence of the bank would be difficult. The banks which have higher NPA can lose the confidence............
Data And Banks Go Hand In Hand
.........While financial institutions have talked about "relationship banking" for years, too many continue to offer across-the-board pricing, or treat customers the same regardless of who they are, how long they've been with the bank, or how many accounts they have with an institution. Smart banks are using big data to act differently, to create a 360-degree view of each customer based on how each and every one individually uses mobile or online banking, ATMs, branch banking or other channels. Instead of remaining product centric or segment centric, these firms are becoming truly customer centric for the first time. Take for example IndusInd Bank which is mapping out a new model of banking which transcends across 380 locations and brings together client insights and interactions with advanced technologies. The bank decided..........
Towards a new dawn in banking
..............The first and foremost issue, is that the government, in conjunction with the regulator, must announce some clear enablers to be put in place to control the bulge in bad assets. While banks can continue to make all-out efforts to clean up their balance sheet, the government can do its bit here. Take the example of asset reconstruction companies (ARCs) in this case. ARCs’ is a clear case of “damned if you do and damned if you don’t” for the banks! For example, ...........
On RBI push, private banks widen reach in rural areas
............RBI has asked banks to prioritise opening of branches in unbanked rural centres (Tier-V and VI) over a three-year cycle of 2013-16. It has asked them to allocate at least 25% of the total number of new branches to these areas. Also, the central bank will give credit for the branches opened in excess of the 25% for a year, which would be carried forward for achieving the criteria in the next year....
Officer Unions Need to Launch War Against Humiliation by Top Management
.........“Although, a number of readers may not agree with us, but we are of the strong view that to start with, the Board of each Bank should form a Committee at Head Office level to deal with the abusive behavior by regional heads / zonal heads / circle heads / GMs / EDs / CMDs in open forums like Manager's review meetings.The Committee should have at least two Directors (except CMDs / EDs ) as its members, one official from association / union, one member from Ministry of Finance, one member from RBI. All complaints of abuse during the meeting should be dealt by this Committee. ............
CAFRAL - Program on Use of Social Media by Banks
..........Facebook, the world's largest social network has crossed 100 million users in India. Twitter, Google+, LinkedIn, Instagram, Blogspot, Pinterest, and many more social media network are increasingly becoming the preferred communication mode for customers. What are the implications of this emerging trend for banks in India? How can banks prepare and embrace the use of social media to enhance their brand and improve customer engagement?............
Read..........
National Conference on Urban Co-operative Banks
Committee for Co-operatives & NPO Sectors jointly with the Urban Banks Department, RBI is organizing a National Conference on Urban Co-operative Banks on 8th and 9th August, 2014 at ICAI Tower, BKC, Mumbai. The Conference is hosted by WIRC of the Institute of Chartered Accountants of India. Regulators and leaders of UCBs and seasoned speakers from professional field have been invited to address the burning issues pertaining to Urban Co-operative Banks.........
Ratnakar Bank’s part-time Chairman retires
............Kutte had joined Ratnakar Bank in June 1980 and served the bank for thirty-four years, initially in an executive capacity across various departments, including MD & CEO, and in the last four years as its non-executive Chairman, the bank said in a statement............
Recruitment for admission to the IDBI Manipal School of Banking,
..............IDBI Bank has entered into a MoU with Manipal Global Education Services Private Limited, to provide training in Banking and Finance to prospective candidates aspiring to join IDBI bank as Assistant Manager Grade „A‟. The Bank invites applications from young, dynamic graduates for admissions in IDBI Manipal School of Banking, Bangalore for 1 year Post Graduate Diploma in Banking and Finance (PGDBF). After the successful completion of the course, the candidates will be awarded PGDBF from Manipal University and will be inducted into IDBI Bank as Assistant Manager Grade „A‟. .............
Using an ATM? First tap it to see if you are being duped!
Next time you go to an ATM, just tap it mildly before inserting your card. It might be having a skimmer to steal your card data. There has been sharp rise in the inter-state tech-crime gangs which are targeting ATMs in different cities from time to time, warn police. One such major gang was nabbed by the police here recently which brought a frightening modus operandi into light. "Our investigation revealed that..........
Centre likely to raise tax exemption beyond Rs 1L
......In addition, there have been discussions around raising the tax-free allowance available to salaried individuals. As TOI has argued in the past, these tax-free allowances have little relevance now. For instance, the tax-free annual medical reimbursement is fixed at Rs 15,000, while transport allowance is pegged at Rs 800 a month. While there have been suggestions to hike the 80C limit to Rs 5 lakh, government sources dismissed the demand arguing that there is little headroom given the tight fiscal situation............
Indexing tax slabs: an idea whose time has come
.........Inflation acts as a faithful ally of the ruling dispensation in extracting extra taxes from the working population. Indexation of tax slabs, as suggested by Nobel Prize winning economist Milton Friedman, can work as an effective antidote and save the hapless taxpayer. Let me explain the phenomena with the help of a simple example:.................
Five-rupee coins being melted for commercial purposes
.........RBI should sue-motto declare on its website, number of coin-bags in different denominations and new packs of currency-notes supplied for public-distribution to various bank-branches in different cities mentioning also dates of their supply. Rather different bank-branches should be directed to maintain complete record of distribution of coin-bags for an effective check to prevent ‘black-marketing’ of coin-bags.
Coin exhibition throws light on heritage
..............Every piece of coin unravels important history. In addition to history lovers, research scholars and a large number of students make a beeline to the venue to have a glimpse of the ancient coins made of silver, gold, aluminium and copper. The coins stand as a mirror of the hoary past, describing vital information. Some coins throw a surprise given their small size..........
ICICI Bank coin exchange mela
KOLKATA, JULY 7:
The country’s largest private sector bank, ICICI Bank, had in June organised coin exchange melas across 20-odd branches in the city. The mela was held within the guidelines of the Reserve Bank of India (RBI). According to a release issued by the bank, more than 500 customers participated in the programme, and coins worth nearly Rs 7 lakh – having denominations of Rs 10, Rs 5, Rs 2 and Rs 1 – were exchanged..........
Banks look at expanding digital branch footprint
The increase in online transactions had prompted banks to give customers more options to transact via online platforms such as social media. Now, lenders are taking the digital route a step further and are focusing on digital branches to cater to the more technologically advanced customers. These digital branches not only convenient for the consumers but are also helpful for the banks. "We think "smart branches" are the way to go in the future. ...........
An Investor’s Perspective
...........While it is understandable for regulators to be nervous of fraudulent transactions/ money laundering etc., there are separate regulations to take care of such situations and the RBI and other regulators have other powers with them to regulate such transactions. In any case, the DCF regulation too effectively operates on “self-certification” since based on the valuation certificates filed with bankers the transaction can go through without any prior RBI approval. In case of transactions with related parties, Indian tax authorities, through transfer pricing and other corporate tax provisions also have powers to scrutinize such share transactions. Therefore, while we wait for guidance from RBI on this issue, it would be interesting to observe whether RBI would completely leave the discretion on pricing to corporates or would go for valuations norms which provide some more flexibility on methodology............
Rangarajan panel report faces flak
The Rangarajan Committee, which has suggested a new benchmark for describing poverty, came under attack from political parties, which said it amounted to "mocking at the poor" and makes neither "common sense" nor "economic sense". However, C Rangarajan defended his panel's report...........
Even Rangarajan couldn't bring India's poor to BRICS standard
.......India has another dubious distinction – one of the highest poverty ratios among developing countries. While the Rangarajan committee estimates India's poverty ratio at 29.6% for 2011-12, the same for Brazil is 9% and for Russia 10.7%, according to data on country-specific official estimates available with the World Bank. A better picture on comparison emerges on.................
Government lies about inflation
...........Moreover, successive governments would have us believe that rising prices are caused by supply-side shocks well beyond their control. Then, the government, projects itself as actively fighting the problem of price rise through emergency measures. This, while such price rise was caused by aggressive monetizing of government debt by the RBI and a policy of easy credit in general. As far as monetizing of government debt goes, the RBI has run India’s very own quantitative easing programme by funding over one-fourths of the government’s gross market borrowing in fiscal years 2011-12 and 2012-13. In such a scenario,..............
Food inflation and the paradox of growth
...........Arguments such as that the Reserve Bank of India (RBI)'s policy of maintaining high interest rate hurts growth but does not bring down inflation or that the fiscal deficit needs to be lowered miss the point. Lower GDP growth is actually needed. And reducing the fiscal deficit will hurt GDP growth just as maintenance of a high interest rate will. However, the maintenance of high interest rate has disadvantages. It encourages inflow of foreign institutional investment, which causes exchange-rate appreciation and forces RBI to sterilise much of the inflow and thus accumulate foreign currency reserves. For this reason, a combination of lower interest rate and a lower fiscal deficit is a better policy mix.............
BIFR hearings reach dead end
State Bank of India’s refusal to follow the Reserve Bank of India guidelines in extending reliefs and concessions to sick public sector units before the Board for Industrial and Financial Reconstruction (BIFR) is beginning to have a cascading effect with other banks also inclined to toe the line of the ‘big-brother’. Sources in the banking industry say that the SBI stance has put the other banks in a fix, since many of them are also having to backtrack on their commitments at the hearings of the BIFR. They point out that the SBI group is involved in almost all public sector units of the country as one of the banks in the consortium. With other banks finding it hard to take a view at variance with the SBI stance, there is a stalemate at the BIFR hearings, with the board being unable to finalise rehabilitation packages for PSUs in which SBI is involved.
HBL
ICICI Bank chief Chanda Kochhar eyes 'right-value' bank for takeover
............"Earlier we took over banks of the size of 300-400 branches as they were relevant to our size at that time. But, today the size would have to be different. And with addition of 650 branches last year, it is like adding one full bank in a year,".......
Chargesheet in GSCB fraud within a month
..........The petitioners had prayed for the constitution of a committee of financial experts from the Reserve Bank of India/ NABARD to inquire into the financial accounts of the bank from 2001 onwards and fix the civil liability and recover misappropriated money from the guilty persons. During the hearing of the case, M Amonkar, additional public prosecutor, stated that the investigation is nearing completion and a chargesheet would be filed within a month in court. Amonkar, also submitted a status report............
RBI eases lending norms for import of diamonds
............The relaxation came following representations received from Gems and Jewellery Export Promotion Council (GJEPC), RBI said in a notification on Monday. The new rule is effective immediately. The central bank cautioned that banks should ensure.....................
RBI decision on rescheduling of crop loans this week likely
Quite hopeful that the Reserve Bank of India will give a green signal to the rescheduling of crop loans in the 575 mandals hit by natural calamities last year, Andhra Pradesh government is exploring all options to fulfil its loan waiver commitment in the rest of about 80 mandals. “We are examining different options. Securitisation of assets such as land, properties, revenue of government organisations and raise loans against them to fulfil our commitments. .......
AP banks see sharp rise in loan dues from SMEs
..........In line with the guidelines of the Reserve Bank of India banks were also supposed to adopt a "sympathetic" attitude towards sick enterprises and help in rehabilitation especially in cases where the sickness is on account of circumstances beyond the control of the enterprises. According to a senior banker, the overdues had also cast a shadow over the performance of banks in implementing the prime minister’s task force recommendation on ensuring proper credit flow to micro, small and medium enterprises in some aspects......
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