Bank staff threaten to strike work

Bank employees and officers union threatened to go on all- India strike on July 7 to protest against proposed banking sector reforms and other wage related issues. The strike is against the anti- employees policies of the government, including the banking sector reforms, said United Forum of Bank Unions (UFBU) convener C H Vekatachalam. UFBU is an umbrella organisation of 5 workman unions and 4 officers unions of public sector and private sector banks in the country. " The strike will be participated by 10 lakh bank employees and officers working in public sector banks, private banks, foreign banks, Co- operative banks and regional rural banks," he claimed.  The other issues are privatisation of banking and outsourcing of bank jobs and attempts to impose anti-employee recommendations of Khandelwal Committee, he said.

CHEAP LIQUIDIT ON ITS WAY OUT

The Reserve Bank said it will discontinue special liquidity window from tomorrow and replace it with marginal standing facility ( MSF). " In the light of modified operating procedure of monetary policy introduced from May 3 and introduction of the marginal standing facility ( MSF), it has been decided to discontinue the second liquidity adjustment facility ( SLAF) on reporting Friday effective May 20, 2011," RBI said. Under the MSF facility, a bank can borrow up to 1 % of its total deposits from RBI to tide over liquidity problem. However, interest rate under the facility would be 100 basis points higher than the short- term lending ( repo) rate. The repo rate, which was increased this month by 50 basis points, stands at 7.25 %. As such, the rate charged under the MSF would be 8.25 %.

RBI tightens norms for bad loans

Strong hands of RBI : RBI Governor D.Subbarao and Deputy Governor Shyamala Gopinath at a function in Agartala on Wednesday.  Late evening, the RBI notified tighter provisioning norms for bad loans

The Reserve Bank of India (RBI) tightened the prudential norms for banks and raised provisioning requirement for bad loans by up to 10 per cent, a development that will protect the lenders against delinquency but would impact the bottom line of banks.This comes a day after the country's largest lender State Bank of India (SBI) reported a sharp fall in net profit at Rs 21 crore for the fourth quarter. The lender had set aside more funds against bad debts and made a one- time provision of Rs 500 crore for its teaser home loan scheme. Banks' bad loans are classified into three categories -- sub- standard, doubtful and loss. As per the new norms, advances classified as substandard will attract a provision of 15 per cent against the existing 10 per cent, RBI said in a notification. An asset would be classified as sub- standard asset, if it remains nonperforming for a period of 12 months. Thus, for an example, a sub- standard loan in secured category of Rs 100 would now attract provision of Rs 15 against the earlier provision of Rs 10, said an analyst. " At the same time, the unsecured exposures classified as sub- standard assets will attract an additional provision of 10 per cent that is a total of 25 per cent as against the existing 20 per cent," it said. Unsecured loans are those where no collateral is involved. These loans would include education loans. In case of doubtful loans which remains non- performing for 24 months, the provision requirement varies from 25 per cent to 100 per cent. An asset would be classified as doubtful if it has remained in the sub- standard category for a period of 12 months. If asset has remained doubtful for one year, it would attract a provision of 25 per cent against 20 per cent. Provision for doubtful loans up to three years has been enhance from 30 to 40 per cent. It is 100 per cent in case of such assets remained in doubtful category beyond three years, it said. In cases of restructured accounts classified as standard advances, in the first two years from the date of restructuring would attract loan provisioning of 2 per cent as compared to up to 1 per cent. " While the " counter- cyclical buffer" so created would be available to banks for making specific provisions during economic downturns, there is a need for banks to make higher specific provisions also as part of the prudential provisioning framework," the RBI said. In December, 2009, banks were told to maintain a provisioning coverage ratio ( PCR) of 70 per cent for their non- performing advances by September- end, 2010. This coverage ratio was intended to achieve a ' counter- cyclical' objective by ensuring that banks build up a good cushion of provisions to protect them from any macroeconomic shock in the future. However, last month, banks were asked to segregate the surplus of provisions under the PCR vis- avis as required as per the prudential norms as on September 30, 2010, into an account called countercyclical buffer. This is in addition to the earlier norms wherein banks were told to maintain a Provisioning Coverage Ratio ( PCR) of 70% for their non- performing advances by end- September 2010. This coverage ratio was intended to achieve a " counter- cyclical" objective by ensuring that banks build up a good cushion of provisions to protect them from any macroeconomic shock in the future. The increase in provisioning requirement would have direct bearing on the net profit of the banks and the profitability is expected to be hit by 15- 20 basis points, a senior official of a public sector bank said. High provisioning would reduce the operating profit of banks and eventually the net profit would be impacted. SBI is one of the few banks to have less than 70% provision coverage ratio.

Freeing the SB deposit rate

There has been much talk and debate about the Reserve Bank of India monetary policy that increased the key policy rate by half a percentage point. That headline grabber hogged so much limelight that the other significant prescription on increasing the savings bank accounts rate from 3.5 percent to 4 per cent almost went buried under the anti- inflationary hammer of the RBI. The monetary policy of last week marked a significant shift from drawing a balance between growth and inflation to fighting inflation and sacrificing growth. But no less significant was the RBI action on savings deposit rates which have remained unmoved for more than eight years. The increase in the rate of savings deposits has gone without due recognition that the RBI has used its mandate for the first time in many years to bring direct and immediate relief to the common depositors. It is pertinent to point out that in our country, the term “savings bank” is more of a misnomer: it brings access to the banking system but is not a tool to building savings. As such, the rate of 3.5 per cent has remained unchanged since as far back in time as March 1, 2003. The rate of interest on savings deposits was stipulated at 6 per cent in 1992. The rate has been progressively reduced by the RBI until we have arrived at this stage of 3.5 percent, and now 4 per cent with effect from last week. It is remarkable that in the period that saw the biggest and most successful push for liberalisation, a time when our leaders and policy makers repeatedly spoke of opening up the system to take our country on the road to a much touted economic stardom, the one rate that remained pegged and fixed at a ridiculously low level was for the money of the smallest of depositors who would add up to be the largest base of ordinary Indians in the banking system. As much as 84 per cent of the total savings deposits come from the household sector, according to the RBI. This is only typical of the Indian manner of governance where the one with the weakest voice is heard the least, and last. So it would be now in order to congratulate the RBI Governor for taking a step in favour of small depositors, embedded right within the monetary policy and for doing so at a time when the RBI has already put out a discussion paper on the deregulation of the savings bank deposit rate. There will be those who will argue that there was no need for the RBI to act on the savings bank rate even before the voice of the various participants on the discussion paper is heard. Indeed, there are already those who argue that the time is not right for freeing the savings rate, that the banks could suffer asset- liability mismatches and the net interest margins of banks would be badly hit. We have heard all of this before. As the RBI discussion paper itself points out, the central bank weighedin on the subject in 2002- 03 but held back the time was not considered right. It again came up in 2006- 07, when, interestingly, the Indian Banks’ Association (IBA) favoured deregulation “in the long run” but not just yet! The IBA wanted status quo; the RBI delivered it. It would be heartening to see the RBI not succumb this time. Already, the discussion paper has been praised for the quality of its inputs as well as its clear approach in favour of deregulation. This is the approach that sends out the right signals, that sets the ball rolling for change and will deliver the one message that the RBI must and needs to deliver -- that the marble white headquarters building is not an ivory tower for bureaucratic economists, that the RBI is an institution that will stand up for the common man. This is something that the RBI rightly aspires to. And it is the Governor, no less, who spelled out this aspiration earlier this year when speaking to graduate students at the University in Orissa. Here, Dr. D Subbarao candidly admitted that most people, even educated Indians, did not know much about what the RBI does. “ Many people think of the Reserve Bank as a mysterious institution, a sort of monolith doing obscure things that have no real relevance for the everyday lives of people,” the Governor told the audience at the University of Sambalpur. The perception needs to change. And it will change faster when the RBI stands up for the common man, the ordinary Indian and that faceless depositor whose money and trust is the real power behind all that the banking system delivers.

Monetary Policy, Inflation and Depositors – S.S.Tarapore

The Common Person could live with the current inflation rate if it were a 'true' indicator of inflation which is commonly known to be much higher than what the official indices show. The Reserve Bank of India ( RBI) is scheduled to announce its first quarterly monetary policy review of 2011- 12 on May 3, 2011. There would be considerable interest as each set of players would evaluate it from their own viewpoint. What then should the Common Person look for in the monetary policy? The central anxiety, for quite some time, has been the acceleration of inflation. Inflation is hurting the vulnerable sections the most. What is the extent of inflation? There are various ways of measuring inflation but the official focus in India is on the year- on- year change in the Wholesale Price Index ( WPI). This index does not correctly reflect the impact on consumers. The authorities are making efforts to have a comprehensive Consumer Price Index ( CPI) and although this has been undertaken there is need for the new index to stabilize before it becomes relevant for policy purposes. The RBI has many constraints in dealing with inflation. The RBI does not have a single inflation target while the issue of growth predominates and quite often inflation becomes a secondary objective to overall growth. Policymakers have repeatedly said that monetary policy should not do anything which would jeopardize growth. This has blunted the efficiency of monetary policy. RBI's comfort zone was all along meant to be around a 5 per cent inflation and higher inflation rates would invite monetary policy action. In this context, the present episode of a prolonged high inflation rate has made a dent into RBI's credibility. The RBI's cherished goal of a medium- term inflation rate of 3 per cent is no The kind of inflation we now have is generalized and not restricted to a few sectors and it no longer makes sense to go on talking about supply side inflation. It is heartening to see that the government is somewhat subdued on the issue of growth and now concedes that some sacrifice of growth would be necessary if inflation is to be brought under control. The Common Person could live with the current inflation rate if it were a ' true' indicator of inflation which is commonly known to be much higher than what the official indices show. Moreover, what hurts the Common Person is not the rate of inflation but its level. Illustratively, when mong dal prices rise from Rs 60 per kilo to Rs 100 per kilo the increase is 66.6 per cent, but when it rises further to 120 per kilo, we are told that the rate of increase has come down from 66.6 per cent to 20 per cent. Now when the price comes down to Rs 105 per kilo we are expected to rejoice and forget that a price of Rs 105 per kilo is historically very high causing great distress to the Common Person. It is time the Common Person is not deceived by these numbers and told the true story which would then push monetary policy to take stronger action to tackle inflation. It would be unfair to only blame the RBI as the problem lies elsewhere. The government wants its borrowing programme to go through smoothly without unduly high interests and at the same time expects that adequate credit is made available to the commercial sector. To meet these conflicting objectives, the RBI keeps the system sloshing with liquidity. This also enables banks to keep lending What the RBI has done is to fix its current policy repo rate at 6.75 per cent ( the repo rate is the rate at which RBI provides liquidity to banks against the security of government securities). The RBI has, over the past year or so, undertaken eight increase of the repo rate, each of ' baby' steps of 0.25 per cent. The current policy rate is totally ineffective. Given the present inflation rate, what is required is a full one percentage point increase in the repo rate but the present philosophy of the RBI would not permit it. The May 3, 2011 increase in the repo rate should be, at least, 0.50 per cent. The RBI would do well to take a leaf out of the Chinese central bank's policy which prefers strong monetary policy action. The other powerful instrument is the cash reserve ratio ( CRR) under which the RBI presently impounds 6 per cent of deposits of banks. An increase in the CRR by 0.50 per cent, which would impound Rs 25,000 crore of liquidity, would be appropriate. But the RBI has been shy of using this instrument during the past two and a half years. Here again, the RBI needs to closely study the active Chinese CRR policy. A victim of the present monetary policy has been the depositor who faces negative real rates of interest as the return to depositors is less than the inflation rate. It is true that, in the February- March 2011 period, some banks offered rates as high as 10 per cent. This was largely to swell the balance sheet numbers for March 31, 2011. Predictably, these banks have, in early April 2011, cut back deposit rates by one percentage point. Depositors are the mainstay of banks but they are not fairly remunerated. All that depositors can pray for is that the RBI, on May 3, 2011, shifts gears to undertaking a strong tightening of monetary policy. The RBI is at the cross roads. If it chooses the path of tightening monetary policy it would be criticized by vested interests, but if it does not it will be condemned by history for not alleviating the suffering of the masses.

NABARD appoints new ED

Mr. B S Shekhawat has been appointed as Executive Director of the National Bank for Agriculture and Rural Development (NABARD). Earlier, Shekhawat headed the NABARD State Projects Department as Chief General Manager. Shekhawat has over 33 years of experience in various roles with the RBI and NABARD. He has headed NABARD's regional offices in Kerala and Gujarat and has worked in areas of foreign exchange and currency management, watershed development, microfinance, cooperatives and rural Infrastructure development. As Executive Director, Shekhawat will handle departments dealing with economic analysis and research, institutional development and technical services.

I Can Do Financial Planning - Book Review by P. P. Ramachandran

Swapna Mirashi is a Financial Literacy Consultant and author of two books. She was a member of the Steering Committee of Financial Literacy of the Reserve Bank of India. Mirashi developed a comprehensive rural financial literacy manual for ICOCI Bank and is a regular contributor to financial journals. The book under review is a manual of financial planning. Financial planning is a process of planning and managing your current finances to meet your goals. Income, expenses, savings, assets and liabilities have to be so organised as to secure your aims - buying of a house, provide for education and wedding of your children and plan your retirement. This is a well- organised step by step manual enriched with smart worksheets and checklists. It encourages you to design your own personal financial plan. Almost every page contains a box that highlights important concepts. The first step is to set clearly your goals - with a time frame. If your start planning early in your career you have to set aside less money each month. A basic need is to assess clearly your financial position. It is advisable to have realistic goals commensurate with your assets and income. A cogent analysis of your financial needs is a must. Set reasonable goals and take firm steps to achieve them. The next subject tackled is ' investment'. Seek out profitable avenues like provident fund, fixed deposits and ensure a good balance between growth and steady income. Acquire a thorough knowledge of avenues of investment. Arrive at an ideal portfolio. Due to inflation you have to invest in such a way that the value of your money is retained. A wise management cycle is to save regularly - invest wisely - spend intelligently and at the same time ensure your security. ou have to master the process of investing, gauging risks and taking right decisions. There are various investment channels - some riddled with risks and some high yielding. Study stocks and shares and available exemptions. ou can arrange your investment portfolio and review periodically your holdings. Another crucial area is planning and managing your debt portfolio. ou have to be aware of risks involved. Risk is the possibility of a loss or negative out come. Vulnerability to risks varies from individual to individual. You have to be aware of certain practices that inevitably lead to risk. This manual offers guidance on methods of managing and overcoming risks. Information is offered on briefly on regulators like RBI, SEBI and those who regulate insurance market and pension fund market. It is safe and essential to build an emergency fund to combat risks, Different types of risks are analysed. The manual provides sample planning steps to achieve common financial goals. The volume has a valuable glossary, a tiny list of books ( why no books by India analysts are included is not clear) and a number of useful websites. The Governor of the Reserve Bank of India Dr. D. Subbarao, who contributes a " Foreword" rightly, hails the book as: " A rewarding learning experience." Surely this manual is very valuable and offers an easy- to- implement advice to wise financial planning. The Reserve Bank deserves warm praise for bringing out this book as part of its efforts to encourage financial literacy. THIS BOOK IS AN ATTEMPT TOWARDS EQUIPPING THE READERS WITH THE SKILLS OF PLANNING AND BUDGETING FOR A FINANCIALL SECURE FUTURE.

Prolonged inflation is dehumanizing - S.S.Tarapore

There is a strongly articulated viewpoint that inflation is a necessary concomitant of growth. The Indian economy has now been in the throes of inflation for the second year. In the ultimate crunch, proponents of growth have prevailed over the Common Persons fear of inflation. There have been many instances, in the past, when inflation has spun out of control but on each occasion decisive action has been taken to curb inflation, irrespective of the fall out of these anti- inflationary policies. In the recent period, however, there are strong underlying political economy pressures to ensure that nothing be done which would slowdown growth. The longer we defer slaying the dragon of inflation, the worse would be the eventual price which has to be paid for reining in inflation. Among the emerging market economies, ( EMEs), India was known for one of the lowest inflation rates. It is disconcerting that now India has one of the highest inflation rates among the EMEs. In contrast, those countries with historically high inflation rates have brought down their inflation rates. In India there is, at present, a powerful lobby that sees great merit in not countenancing any deceleration in growth, notwithstanding the devastation caused by inflation. Anyone advocating a conscious slowdown in growth is treated as a renegade who should be ostracized. We seem to be moving towards a society which upholds the Thrsymachus Principle that " justice is the interest of the stronger"( a viewpoint which is rejected in Plato's Republic) There is a strongly articulated viewpoint that inflation is a necessary concomitant of growth. Policymakers with impeccable credentials cogently argue that the objective is growth with price stability but many of these policymakers are not willing to recognize that some growth has to be sacrificed in the control of inflation. When a couple of years ago, the then US President George Bush attributed the world commodity inflation to the poor eating too much, there was an uproar. It is amazing how attitudes have changed. International Monetary Fund ( IMF) officials have argued that consumers should get used to paying more for food as demand is rising faster than output and that it will take years before production can be expanded to keep up with increased demand. Nearer home, in India, it is being argued, in official documents, that the policy of " financial inclusion" is the cause of inflation. For instance, it is argued that because of the Mahatma Gandhi National Rural Employment Guarantee Act ( MGNREGA) consumption has gone up thereby causing inflation. Inflation is attributable to the Common Person putting his money into circulation! There is also a viewpoint that inflation in primary articles, particularly food, is because the standard of living of the poorest segments going up. There is the ingenious argument that inflation is healthy as it reflects the improvement in the standard of living of the masses. It is now becoming the conventional wisdom that inflation is caused by the poor eating better. In this context it is argued that only vibrant growth can ensure that inflation would abate and any slowing down of growth would worsen the inflationary situation. This is like advocating sinning for a good cause! While Indian macroeconomic policy is not formally committed to " inflation targeting", traditionally, monetary- fiscal policy has all along emphasized the importance of a low " acceptable" rate of inflation. In policy pronouncements the " acceptable" rate of inflation for March 2011 has moved up from 5.5 per cent in April 2010 ( when the inflation rate was 11 per cent) to 8 per cent as we approach the end of March 2011. One recognizes the difficulties in conducting macroeconomic policies as extraneous developments in the global economy ( particularly crude oil) are contributing to the inflationary pressures. While there are no soft policy options, what the present policies portend is an acceleration and not a deceleration of inflation. It is unfortunate that the weakest segments, particularly in the interiors of the country, are unable to strongly articulate the imperative need to undertake a significant and enduring reduction in inflation. What is also of concern is that the urban and semi- urban poor are being hit by the all pervasive effects of inflation. Inflation is even hurting the articulate middle class and there are dangers of a serious social backlash. Now, what should be the response of the small saver in a scenario where inflation shows no sign of abating? There are two policy signals which need to be taken note of. First, policymakers have expressed the hope that lending rates will drop as inflation eases. Secondly, banks are temporarily offering relatively high rates of interest on fixed deposits, which for senior citizens is currently as high as 10 per cent for periods of 555 days. Small depositors would do well to quickly lock themselves into these relatively high deposit rates as these deposit rates are unlikely to continue beyond the end of March 2011. There would be strong pressures to reduce lending rates well before a significant reduction in inflation rates which will imply that deposit rates would fall in the very near future. In the present milieu, the small depositors would do well to immediately storm the deposit desks of banks. As the sage economist the late Professor P. R. Brahmananda has poignantly said: " Not caring about inflation is like going into battle not caring about the wounded, the dying and the dead." Such an approach is dehumanising.

9.5% interest on PF gets nod

New Delhi The finance ministry approved higher interest rate of 9.5 per cent to over 4.7 crore depositors with the Employees Provident Fund Organisation ( EPFO) for 2010- 11. The EPFO had been paying 8.5 % interest on PF deposits since 2005- 06. In September last year, it had recommended an increase in interest rate to 9.5 % for 2010- 11 after discovering Rs 1,731 crore surplus in their books of accounts. " The finance ministry has ratified 9.5 % rate of return on PF deposits for 2010- 11. We have received a notification in this regard," Central Provident Fund Commissioner Samirendra Chatterjee told PTI. Chatterjee further added that " our calculations regarding Rs 1,731 crore surplus in the interest suspense account were found correct by the finance ministry and so they approved this higher rate of return". The finance ministry's approval is subject to the condition that any shortfall on account of payment of 9.5 % rate of return would be met by making adjustments in the interest rate in 2011- 12. Chatterjee, however, said that there would be no need for making any adjustment in the next fiscal as " EPFO calculations are correct regarding the discovery of a surplus of Rs 1,731 crore in the interest suspense account." The finance ministry has also asked the EPFO to update its subscriber accounts within the next six months.

THE MICRO FINANCE MESS - DR. N. A. MUJUMDAR

Recent revelations of forprofit Micro Finance Institutions ( MFIs) have exposed naked exploitation by these institutions in the name of financial inclusion. Dr. . V. Reddy, former Governor, Reserve Bank of India ( RBI), recently said that these MFIs are worse than money- lenders. A money- lender lends out of his own money, whereas here, MFIs were actually borrowing money from depositors and banks and then further lending the money. In retrospect, the government of Andhra Pradesh deserves to be congratulated on its 2010 ordinance which spelt out clearly the malpractices of such MFIs. Whereas these Self Help Groups ( SHGs) are being exploited by private MFIs through usurious interest rates and coercive means of recovery resulting in their impoverishment and in some cases leading to suicides..., the ordinance said. This triggered a crisis which almost paralysed for- profit MFIs, with banks reluctant to lend, repayments dwindling and depositors tending to withdraw their money. It is this shock therapy which led to subsequent soul- searching on the part of those MFIs, the promoters of which were fattening themselves off the sweat of poor borrowers. The Microfinance Institutions Network ( MFIN), a grouping of for- profit micro lenders, has now set up a Committee to look into these deficiencies. In fact the clout of these MFIs seems to be so strong that in spite of all that has been now exposed, some influential papers plead: Dont Kill Microfinance. The short answer to such pleas is: We do not want to kill these MFIs but we certainly want to prevent them from killing their poor borrowers. No doubt the for- profit MFIs represent the predatory face of financial capitalism. But this was compounded by the institutional support which was extended to these MFIs. Such support came from the RBI, the public sector banks ( PSBs), NABARD and SIDBI. For instance, during 2008- 09, banks extended loans of something like Rs. 3,700 crore. Why should PSBs extend loans to MFIs at something like 12 per cent, when they were fully aware that these funds would be on- lent by MFIs at 25 to 30 per cent? The answer is that such loans by PSBs to MFIs were treated as riority sector lending. So this had the blessings of RBI. Similarly, some equity or quasi- equity support came from SIDBI and NABARD, of course, at concessional rates. RBI could have stipulated that PSBs should lend only to not- for- profit category of MFIs. PSBs could have also stipulated, on their part, that the on- lending rate of beneficiary MFIs should not exceed say 17 or 18 per cent. This was not done. This systemic support perhaps also lent some respectability to for- profit MFIs. Thus public sector financial resources were used to perpetuate usurious lending practices of MFIs. It is one thing to say that RBI had no stautory powers to regulate MFIs. But was it obliged to support for- profit MFIs? These questions must be answered by Dr. Reddy, during whose tenure the MFI party began. RBI could have stipulated that PSBs should lend only to not- for- profit MFIs, fixing a ceiling on their on- lending rates. This support made the system, in a manner of speaking, a co- conspirator in this business of exploiting poor rural borrowers. Public funds were allowed to generate private profits. RBI has not covered itself in glory in this episode. Because of obscenely high returns, stemming from exorbitant lending rates, for- profit MFIs have become attractive investment destinations for Private Equity and Venture Capitalists. The recent success of the IPO of SKS Microfinance is a case in point. It attracted high profile investors like billionaire George Soros, venture capitalists Vinod Khosala and Infosys Founder Narayan Murthy. Alluding to this transformation of the humble animal microfinance, Muhammad unus, the father of microfinance movement said: “ It is a complete detour and nothing but a quitting of microfinance mission.” Basically, lending to the rural poor at 30 or 40 per cent defies all economic logic. Our small rural borrowers are not Schumpeterian mini- heroes, who can make the project or activity for financing what they have borrowed, financially viable. In fact, by inflating interest cost, we are building ‘ ab initio’ non- viability into the project. Secondly, the engagement of for- profit MFIs with borrowers has been shallow based on touch and move on business models shorn of any development content. The average loans per client in both MFIs and SHGs have been low, between Rs. 3,500 and Rs. 5,000. The duration of the loan is short, typically one year or less. The small loan size and short duration do not enable most borrowers to do much except to ease liquidity problems.

(Dr. Mujumdar is editor of the Indian Journal of Agricultural Economics.He has worked for the RBI and has advised the central banks of Zambia, Mauritius, Tanzania, Belize and Cambodia.He was consultant to the World Bank, the FAO and ESCAP)

Beyond Core Banking

Seen in the photograph is Dr. K. C. Chakrabarty, Dy. Governor, Reserve Bank of India, along with M. V. Nair, Chairman & Managing Director, Union Bank of India, S. S. Mundra, Executive Director, Union Bank and B. Sambamurthy, Director, IDRBT during the Executive Round Table on ‘ Beyond Core Banking’ organised by Union Bank and IDRBT in Mumbai. This was a unique effort for benefit of the banking community to draw a road map for better customer services and business growth by leveraging investment already made in Core Banking System.

9.5% interest on EPFO may get nod

The Employees Provident Fund Organisation ( EPFO) stood its ground on offering 9.5% interest to over 4.71 crore subscribers with Labour and Employment Minister Mallikarjun Kharge expressing hope that the finance ministry will shortly give its concurrence to the proposal. The Finance Ministry has to give concurrence to the rate of return decided by CBT and notify allowing tax exemption on the entire such earnings on PF deposits.  Downplaying the ongoing tussle between the two ministries over hiking the interest rates on PF deposits, Kharge said there was " no tussle between the two ministries over giving 9.5 per cent interest rate." Following discovery of Rs 1,731.57 crore in suspense account, the EPFO trustees favoured raising the rate of interest on provident fund deposits to 9.5 per cent for its 4.71 crore subscribers from 8.5 per cent which is being paid by EPFO since 2005- 06.