The vice chair of India's fledgling Financial Stability & Development Council has helped to stabilise country's banking system

The new vice chair of India's fledgling Financial Stability & Development Council has helped to stabilise his country's banking system and comes 29th in the GFS Power 50. Despite being two thirds owned by the public sector and generally regarded as well capitalised, Indian banks did not escape the financial storm of 2007-2008, much to the alarm of the country's public and state officials. Dr Duvvuri Subbarao took over as governor of the Reserve Bank of India at the heart of the crisis in September 2008 and, following stints as a leading World Bank economist and secretary to the Prime Minister's Economic Advisory Council, was well equipped to minimise the fallout. Subbarao's influence in government in 2010 was underlined when he was offered the vice chairmanship of the Financial Stability & Development Council, a new body set up by finance minister Pranab Mukherjee, which will oversee the Insurance Regulatory and Development Authority (Irda), Securities and Exchange Board of India (Sebi) and Pension Fund Regulatory and Development Authority. The governor had previously expressed concerns that the autonomy of regulators would be undermined by the Council and, after effective lobbying, was offered the role chairing its only sub-committee. The governor has argued in favour of a review of the country's disparate and at times inconsistent banking laws to open up competition between financial institutions. Subbarao has also worked to restrain bank executive pay, with the Reserve Bank issuing draft compensation guidelines in July. Indian banks must now submit an annual declaration confirming that compensation structures are in line with Financial Stability Board standards. Subbarao set up a Financial Stability Unit within the central bank to make regular and systematic assessments of the stability of the Indian financial system and has worked with the Institute of Chartered Accountants of India to ensure that its banks comply with international accounting standards. Respected on the world stage and a regular speaker at the Bank of International Settlements, the 61-year-old has heavily criticised the "euphoria of financial alchemy" that preceded that crisis, insisting that the "real sector" should drive the financial sector and not the other way around. But he has also claimed that making banking boring - as advocated by the likes of economist Paul Krugman - is not necessarily a cure to the "ills" of the financial world. Banking, he believes, must still evolve, grow and innovate.

Reserve Bank of India releases Second Financial Stability Report

The Reserve Bank of India presented its assessment of the health of India’s financial sector in the second Financial Stability Report (FSR), released here today. The report reflects the Reserve Bank’s continuing endeavour to communicate its assessment of the incipient risks to financial sector stability. The first FSR was released in March 2010. The second FSR holistically assesses, from a systemic risk perspective, disparate elements of the financial sector eco-structure – the macroeconomic setting, policies, markets, institutions. The movements of various vulnerabilities between March and December 2010 and assessment of the resilience of the financial system have been presented in this Report. It also reflects the considerable efforts made within the Reserve Bank to upgrade the methods and techniques for assessing the health of the financial system in identifying and analysing potential risks to systemic stability.

State Bank of India reshuffles portfolios of senior executives

State Bank of India (SBI), the nation’s largest lender, has reshuffled the portfolios of senior executives even as Pratip Chaudhuri, one of its deputy managing directors (DMD), emerged as the front-runner for the chairman’s position, which will fall vacant after O.P. Bhatt retires in March. The SBI group, which controls a quarter of the total banking assets in the country, has promoted some chief general managers as DMDs and reshuffled the portfolios of some of its existing DMDs, particularly at the risk and human resource divisions. In early December, the finance ministry had interviewed State Bank’s four DMDs—Chaudhuri, Hemant Contractor, Diwakar Gupta and A. Krishnakumar—to identify the successor of current chairman Bhatt. Before that they were interviewed for a post of managing director (MD) too. Chaudhuri, the front-runner for the post of chairman after Bhatt’s retirement, now oversees the bank’s foreign operations.  Traditionally, SBI has had two MDs and close to a dozen DMDs. Currently, it has only one MD; a successor to S.K. Bhattacharya, who retired in October, has not yet been named. R. Sridharan, the lone managing director, is in charge of associates and subsidiaries. Unlike other public sector banks, SBI has split the position of chairman and managing director. Both its chairman and two managing directors are generally selected from within the group. The retirement age of top officials in SBI, including the chairman is 60. The bank has named DMD Contractor, who was earlier in charge of corporate banking, chief financial officer in place of S.S. Ranjan. The five new DMDs are Santhosh Nair, Shyamal Acharya, Arundhati Bhattacharya, R. Venkatachalam and Shivkumar. Among the new DMDs, Nair will take charge of corporate banking, a portfolio that was earlier handled by Contractor.  Acharya, who was chief general manager of Mumbai circle, is taking over as DMD, mid-corporate group, replacing A.P. Verma, who has been named chief credit and risk officer.  Among the remaining new DMDs, Bhattacharya, who was CGM, Banglore circle, has been appointed corporate development officer, replacing N. Raja, who is set to retire on 31 December. Shivkumar, who was a CGM in Hyderabad, has been promoted to DMD but is yet be given a portfolio. Ranjan is also waiting to be assigned a new portfolio. Lack of adequate talent among public sector banks has been a subject of debate among policymakers for quite sometime now. The compensation offered by state-run banks is far less than what the executives of private and foreign banks earn. In September, Reserve Bank of India governor D. Subbarao said that in the absence of a suitable compensation package, state-run banks would lose talent to private sector lenders. “The executive compensation in the public sector, as is well known, is lower than that in the private sector... If public sector banks are required to compete with private sector banks on a level playing field, there is a good case for compensating them too on a competitive basis,” Subbarao said.

Retail investors back Jalan committee report

25 paise and below coins not acceptable from June 30

Come June 30, 50 paise will be the minimum coin accepted in the markets as all denominations below it will cease to be legal currency.  "From this date, these coins (denomination of 25 paise and below) shall cease to be a legal tender for payment as well as on account," the Finance Ministry said in a statement today.  It further said that the minimum denomination coin acceptable for transaction will be 50 paise from that date.  Also, the entries in books of accounts, pricing of products, services and taxes should be rounded off to 50 paise or whole rupee from that date.  "The procedure for call in shall be notified separately by the Reserve Bank of India," it added.

Allahabad Bank launches mobile banks in Jharkhand

Allahabad Bank Thursday launched mobile bank van services in Jharkhand to target villagers. J.P. Dua, CMD of Allahabad Bank, flagged off a mobile bank van from the bank's Ranchi zonal office. It is the first bank to start such a service in the state. 'It will function like a full bank where people could deposit and withdraw cash. It will function in 12 villages of Dumka district,' a bank official told IANS. Reserve Bank of India Governor D. Subba Rao was in Jharkhand early this month and during his visit he assured the state government about expanding bank facilities.

We have no solution for MFIs who have been hit: RBI

The Reserve Bank of India (RBI) on Thursday made it clear that it has no solution for Micro finance Institutions that have been hit, but said the Malegam Committee may look at "grey areas" in their regulation.  RBI Deputy Governor K C Chakrabarty said MFIs are in the business of taking money and giving loans and if people do not pay back, RBI has no solution for it. "People have to pay back money to the lender who has given the money.If they don't pay back, we have no solution," he told reporters in response to questions after inaugurating "Grameena Vikas Kendra" (branchless banking unit) of Corporation Bank at Mallohalli in the Bangalore district.

No RBI approval needed for bank branches in North-East: Tripura minister

The Reserve Bank of India (RBI) has relaxed norms for setting up bank branches in North-East India and no prior approval of the apex regulatory body is required in this regard, a senior Tripura minister said on Thursday. The clarification came during a meeting between RBI Governor D Subbarao and Tripura's Finance Minister Badal Choudhury in Mumbai on Wednesday. Worry was expressed over the gradual fall in the credit-to-deposit ratio in the region. 

SEED bags Indian Bank FI mandate

SEED, India’s largest Banking Correspondent has bagged one of Tamil Nadu’s biggest Financial Inclusion projects from Indian Bank. The smart card based project will reach around 5500 villages earmarked under the Indian Bank’s Financial Inclusion project to offer banking services to the rural population.  The project will help bring an estimated 11.92 lakh households, equaling to around 23 lakh people under the fold of banking services, thus leading to inclusive growth. Tata Consultancy Services (TCS) is the technology partner in the project. he project was inaugurated at Venthoni village near Paramakudi in Ramanathpuram district of Tamil Nadu by Dr. K C Chakrabarty, Deputy Governor Reserve Bank of India. Other dignitaries present at the function were Shri T.M. Bhasin, Chairman & Managing Director of Indian Bank, Shri V Rama Gopal, Executive Director of Indian Bank, and Shri Rajeev Rishi, Executive Director of Indian Bank. 

Inflation always a concern: Deputy Governor K.C.Chakrabarty

The Reserve Bank of India (RBI) Deputy Governor K.C.Chakrabarty said on Thursday that inflation was always a concern, and a pause in rate hikes does not mean a halt.  India's food inflation accelerated to a ten-week high in mid-December on rising prices of vegetables, while the fuel index also rose, adding to inflationary worries in Asia's third-largest economy.

New managers for economy

You could call it a big change of guard in the government’s “econocracy” – or the economic administration. A new set of experts is set to take charge of the macro-economic management next year, touching the central bank, regulatory agencies and a clutch of state-controlled banks that lord over the economy. Finance secretary Ashok Chawla is set to retire on January 31 and Securities Exchange Board of India chairman CB Bhave, will retire a month later. UTI’s asset management company’s chairman and managing director UK Sinha, is set to succeed Bhave. Later, RBI governor D Subbarao’s three-year tenure ends in September but it is not yet known whether he will get an extension. His predecessor YV Reddy had got a five-year term at one go. Bimal Jalan, on other hand, got a two-year extension as RBI governor after his initial three-year tenure had ended before Reddy took over. Government sources, who did not wish to be identified, indicated that commerce secretary Rahul Khullar is tipped to take over as the next finance secretary ahead of the presentation of budget in February. “This would mark a departure from the normal practice of having a same person as the finance secretary through the budget cycle of drafting to presentation,” said an official. Two new RBI deputy governors are set to take charge next year to fill in for Usha Thorat, who retired recently, and Shymala Gopinath who is due to retire in May. OP Bhatt, chairman of State Bank of India, the country’s largest bank, will retire in March. Deputy managing director Pratip Chaudhuri is tipped to take over in his place. This apart, chairmen and managing directors of at least seven more public sector banks  will retire during 2011. HSU Kamath will join Vijaya Bank as chairman on April 1, 2011, replacing Albert Tauro, while Nagesh Pyadh will replace TY Prabhu as the new CMD of Oriental Bank of Commerce. Besides, Dena Bank CMD D L Rawal is due to retire in October and Ramnath Pradeep’s term as  CMD of Corporation Bank, ends on September 30.

Bankers' Committee asked to prepare annual meeting calendar

With an aim to better supervise the development efforts of Government agencies and banks, the Reserve Bank of India on Wednesday asked State Level Bankers' Committee (SLBC) to prepare a yearly calendar of their meetings by January 15 every year. SLBC and Union Territory Level Bankers' Committee (UTLBC) are required to meet at quarterly intervals. In a notification issued on Wednesday, the apex bank said in recent times these meetings have become irregular and many a times the agenda was not circulated in advance.

NHB wants housing finance cos to take stock of their portfolio

The National Housing Bank has asked housing financing companies (HFCs) to take stock of their portfolio and examine the involvement of intermediaries.  National Housing Bank chairman and head RV Verma said: “We met the CEOs of housing finance companies some time ago. These meetings are part of the internal process, wherein we take in details of the quality of loan book disbursed by the company and also to make sure that there are no intermediaries.”

U.S. praises Reserve Bank of India in Iran dispute

The United States Wednesday praised the Reserve Bank of India for reducing its dealings with Iran's central bank, saying the Islamic Republic misuses its financial relationships to support its nuclear program.

Advertise with care

Now a days commercials seem better than TV programmes but ad makers should not take too much liberty with their subjects.  A bank that wants to show that its ATMs offer a choice of currency denominations uses a wedding procession as a backdrop, with the bridegroom wearing a garland of currency notes. It is irresponsible of a bank commercial to feature a situation that clearly violates the Reserve Bank of India’s Clean Note Policy. - K R Vaikuntam, Thrissur

RBI definition of Financial Inclusion

The Reserve Bank of India (RBI) in December 2009 changed the definition of financial inclusion by stating that financial inclusion is not restricted merely to opening of bank accounts but must also include the provision of all financial services like credit, remittance and overdraft facilities for the rural poor.

Overhaul for foreign banks

The Reserve Bank of India (RBI) is set to open the doors for foreign banks to expand in the country, but is likely to link it to the policies of the country from which the bank desiring to expand in India hails. Government sources told Hindustan Times that the central bank is likely to take into consideration the principle of “reciprocity” while allowing foreign banks to set up branches or subsidiaries in India.

Regulators test their autonomy

The standout regulator controversy was the turf war between the Insurance Regulatory and Development Authority (Irda) and the Securities and Exchange Board of India (Sebi) over the unit-linked insurance plans (Ulips), the popular hybrid mutual-fund-cum-insurance products. It was a battle that was avidly followed as much for its significance as the personalities of J Harinarayan of Irda and C B Bhave of Sebi, both former bureaucrats. In some ways, it also demonstrated the point that in India, the question of regulator “autonomy” is ephemeral at best. The Union finance ministry set a cat among the pigeons by using the Sebi-Irda tussle to pass an ordinance increasing its own regulatory powers over the Reserve Bank of India. A non-plussed and beleaguered RBI regained ground when former RBI governors cried foul and came to the central bank’s support. The soft spoken RBI Governor Duvvuri Subbarao voiced widely-shared fears about central bank autonomy and North Block backed off a bit, but not fully. The RBI-FinMin saga is yet to fully play out.

Pratip Chaudhuri set to head SBI

State Bank of India Deputy Managing Director Pratip Chaudhuri is likely to replace incumbent Chairman O P Bhatt when he retires in March 2011 after completing his five-year term. The finance ministry has cleared Chaudhuri for the top job at the country’s largest bank. The selection is subject to approval by the appointments committee of the Cabinet and the Prime Minister. Chaudhuri, who is also group executive of international banking at the staterun lender, was actually interviewed for the managing director’s post earlier this month, along with three other deputy managing directors: Hemant Contractor (head of corporate & wholesale banking), K Krishna Kumar (head of IT), and Diwakar Gupta (head of rural & national banking). The four were also candidates to the top job at SBI. A search committee headed by Reserve Bank of India Governor D Subbarao shortlisted the names of Chaudhuri and Contractor for the post. With the selection of Chaudhuri as SBI chairman, Contractor, Gupta and Kumar will be made managing directors. SBI will have four managing directors, following a recent amendment to the SBI Act, which increased the number of posts. At present, SBI has only one Managing Director, R Sridharan, after S K Bhattacharya retired in October. Sridharan is due to retire in June. Sources said the government wanted to select a person with at least two years of residual service for the chairman’s post. Chaudhuri, 56, with his rich experience in banking, fit the eligibility criteria. Just like Bhatt, he also joined SBI as a probationary officer in 1974. He took charge as deputy managing director & group executive (international banking) of SBI in April 2009.

Mobile user verification will be based on UID Number

The Unique Identification (UID) Number project, which is poised to use the vast 700 million plus mobile subscriber database and distribution network to help complete the project, will in turn become the basis of issuing mobile connections in the future. UID Number will be the definitive proof for subscriber verification.

Noted cardiac surgeon R K Panda hurt in road mishap

The internationally renowned cardio-vascular and thoracic surgeon and director of the Mumbai based Asian Heart Institute, Dr Ramakant Panda, was injured in a road mishap in Nagaon district in Assam when his car collided head-on with a speeding truck.  Dr Panda sustained injuries on his head. His son Saswat (20) also sustained some injuries, Nagaon deputy commissioner M Angamuthu said.  The incident took place at around 1:45 pm at Samaguri, about 200 km east of Guwahati.  The renowned surgeon, who had successfully conducted multiple heart surgeries on Assam Chief Minister Tarun Gogoi, is a state guest and was travelling along with his wife, son and daughter to the Kaziranga National Park from Guwahati. He was first admitted to the Nagaon Civil Hospital and was later airlifted to Guwahati.

Sebi, RBI to discuss global indices futures

Sebi will be meeting RBI officials shortly to discuss the proposal on introduction of futures trading on overseas indices at the local exchanges.The National Stock Exchange (NSE) had approached Sebi seeking approval for launching futures trading on popular global indices like S&P 500 and Dow Jones Index of US, denominated in rupees.

Vidyadhar Anaskar’s 4th term on RBI task force

Vidya Sahakari Bank Ltd chairman, Vidyadhar Anaskar, has been appointed member of the task force for urban co-operative banks set up by the Reserve Bank of India (RBI). This is the fourth consecutive year that Anaskar will serve on it. Anaskar is director of the Pune District Urban Co-operative Banks Association and the Maharashtra State Urban Co-operative Banks Federation. The task force has been formed on the basis of a memorandum of understanding between the Centre and the state government. The panel will take decisions relating to urban co-operative banks in the state. According to a press release, Anaskar has been representing the urban co-operative banks since January 2008 on the task force. He has represented over 170 urban co-operative banks in the state and has also conducted special sessions for over 265 banks for free to guide their employees on technical and legal issues. He works as a visiting lecturer in various reputed institutes, including the College of Banking run by the RBI, the Yashwantrao Chavan Academy of Development Administration. He is a also tax consultant.

RBI buildings found eligible for issue of Star Label for energy conservation

Sebi awaits public view on Jalan panel report

The Securities and Exchange Board of India (Sebi) executive director JN Gupta on Monday said the regulator has not yet formed a view on the recommendation submitted by the Bimal Jalan committee. Sebi has given time till December 31 for market participants to send their suggestions and comments. "Once the public comments are received, Sebi will follow its normal process of actions," he said. But Gupta, who was also a member of the Jalan Committee, which reviewed the ownership structure and corporate governance of the market infrastructure institutions (MII),said the committee had tried to suggest measures that could keep pace with fast changing market practices and are capable of handling the outcome of a potential risk posed by these institutions. Other panelist who had come against the committee's key recommendations stated that globally stock exchanges remained stable even as big banks and financial institutions collapsed and hence there was no need for imposing stringent restrictions on stock exchange's operations.

...Rangarajan pegs it lower at 5.5%, sees growth at 9%

Inflation is expected to come down to 5.5% by March 2011, Prime Minister’s EconomicAdvisoryCouncilchairman C Rangarajan said on Monday. Besides,the PM panel also sees the country to achieve a GDP growth rate between 8.5-9% in the current fiscal. “I think by March (2011), we can expect (WPI) inflation to come down to 5.5%,” Rangarajan said on the sidelines of the 93rd annual conference of Indian Economic Association. “I think any level of inflation beyond 5% (threshold level of inflation) is uncomfortable,”he asserted.

BSE launches Shariah 50 index

The Bombay Stock Exchange today launched India's first Shariah-compliant index, to promote financial inclusion among Muslims. The `BSE Tasis  "The introduction of the BSE Tasis Shariah Index will give Islamic and other socially responsible investors another means to access the Indian market and will help attract pools of capital to India from the Gulf, Europe, and Southeast Asia," said Madhu Kannan, managing director and CEO of BSE. "This index will create increased awareness on financial investments amongst the masses and help enhance financial inclusion. It will also build a base for licensing for the construction of Shariah-compliant financial products, including mutual funds, ETFs, and structured products," Kannan added. Prime Minister Manmohan Singh, during his visit to Kuala Lumpur in October, had said he would ask the Reserve Bank of India to learn more about Islamic financial products from Malaysia.

RBI set to moot apex holding co for bank groups - Deputy Governor Shyamala Gopinath

An internal working group of the Reserve Bank of India (RBI) is likely to propose the model of an apex holding company (AHC) for banking conglomerates. It is veering to the view that this structure, as opposed to that of intermediate holding company, would ensure that nonbanking entities within a banking group are directly owned by the AHC. This would reduce contagion risk and protect the relevant bank's reputation. The group headed by Deputy Governor Shyamala Gopinath is working on a draft paper which examines several global models of structuring of banking groups and lists the pros and cons.The group reckons that in the Indian context the model of apex holding company might be preferable, said a source in the know of the development. Listing out the advantages of the AHC model, the source said, “This company will be an investment company which will have control over group companies.According to this model, the bank and the non-bank subsidiaries in a banking group would be owned by the holding firm. The proposed apex holding company model is different from the intermediate holding company that banks like ICICI Bank and SBI planned to set up in 2007. "The proposed apex banking model would require amendments to existing laws and the committee is examining this aspect also," said another source. Additionally, considering that the RBI is in the process of examining granting banking license to new entrants including industrial houses the committee is examining if this structure should be made mandatory for the new entrants.

Pawar bats for urban co-op banks, seeks RBI support

Union Agriculture Minister Sharad Pawar on Saturday asked the Reserve Bank of India (RBI) to adopt a more supportive attitude toward urban cooperative banks (UCBs) while admitting that the wrongdoers did not deserve any sympathy. He said UCBs needed financial support in adopting core banking solutions (CBS) to achieve better efficiency of operations and transparency of transactions. Speaking at the national launch of CBS in UCBs here, the minister said though the cooperative sector’s share in the banking industry was just four per cent, it catered to the poor and the middle class for whom private banks were still out of reach. Pawar said it was possible that the money needed for CBS implementation could come from NABARD. “We will discuss this with NABARD and ensure that small banks do not lack support... small banks should consolidate themselves by forming strategic groups,” he said, adding change was needed in UCBs through integration of technology.

REGULATORY FAILURES

Governments in India have for long regulated many economic and other activities within the framework of the Constitution and the laws passed by the Central or state legislatures. Since no law can be so detailed that it covers all the complexities of implementation, rules and regulations are framed to enable governments to give flesh to the skeletons of overall policies. During the four decades or so when India was committed to a “socialistic pattern” of society, ministers and their bureaucrats developed regulations that controlled almost every aspect of economic activity. There was much abuse of these powers; favours were given to some, bribes smoothed the way for many, nepotism was common, financial and other support to political mentors was the price for some. This continues despite liberalization and the withdrawal of government from many areas of control. This is because decisions that could enable large profits were taken in an opaque manner. There was considerable discretion given to ministers and bureaucrats, easily subject to misuse.  Independent regulators were created to get over this difficulty. The first regulator who took over many of the government’s powers was the Reserve Bank of India, though it remained ultimately subservient to the finance minister and his office. The RBI determined monetary policy. Though there is no legislation that gives it the mandate, it uses monetary policy (money supply, interest rates) to keep inflation within limits. It also manages the external value of the rupee by buying and selling foreign currencies and increasing and decreasing the flow of rupees. It also regulates the different financial institutions.

Make phonebanking more secure: RBI

Banks will ask for an additional password from their credit card customers from the new year for any transactions conducted over phone, subsequent to a Reserve Bank of India (RBI) direction for making phone banking more secure. According to the RBI guideline, all banks will mandatorily decline any telephonic banking transactions, including the automated IVR (interactive voice response) services where customers do not have a onetime password (OTP) for such services with effect from 1 January. However, the OTP will be valid for a single use and would remain in effect for a period of two hours. Customers would need to generate a separate OTP for each IVR transaction.

RBI joins bribes-for-loans scam probe

The Reserve Bank of India has joined the Central Bureau of Investigation in probing the ‘bribes-for-loans’ scandal involving at least 15 companies, in an attempt to prevent loans given to them from burning a hole in lenders’ books.  The central bank has written to all banks seeking details of their lending to firms named by the CBI in an investigation into violations in sanctioning of loans by executives in return for bribes.
“The RBI is trying to assess the extent of exposure, the quality of these assets, and whether banks followed norms while lending to these firms.” Officials at the RBI could not be reached for comment during the weekend.

Festival of coins

A lesson in Indian history, a tour around the world, tips on how to spot fake currency — all this and more are on offer at Mudra Utsav being held at Haldiram Banquet Hall in Ballygunge Park. The event is on till December 26. The Numismatic Society of Calcutta is holding the exhibition as part of its silver jubilee celebrations.  “Individual dealers usually interact directly with collectors and charge them whatever they fancy. Here there are many dealers under one roof, so one has the option of comparing prices,” says Sandip Jain, the president of the society.  Individual collections are also on display. Basant Kumar Rathi’s British India coins date from 1835 when uniform coinage was introduced. “The double mohur was equivalent to 30 pieces of silver rupee. Few people know that till 1969 our mint used to strike these William IV mohurs as personal souvenirs,” he said.  Also on display were Saibal Basu’s collection on Mughal India, especially the Nisar coins, which were issued since Jehangir’s rule for the express purpose of showering them on subjects on occasions like the emperor’s birthday.  Kunal Chatterjee’s collection of Republic of India coins shows how the mint, from where a coin is issued, leaves its mark. “If you find a dot under the year of issue, it is from Noida, a diamond indicates Bombay, a star Hyderabad. If there is no mark, it is from Calcutta,” says Ravi Shankar Sharma, the society’s secretary.  The Reserve Bank of India (RBI) has set up a stall, from where leaflets are being distributed on how to detect fake notes.  Many had lined up before a grading agency where international coins and bank notes were being graded for a charge.

Disclose meetings agenda, RBI told

An order passed by Chief Information Commissioner Satyananda Mishra makes it mandatory for the Reserve Bank of India (RBI) to disclose pre-board meeting agenda notes and minutes. RBI has been told to draft a “disclosure policy” by February 2011 to bring about greater transparency in the bank’s functioning. The Commission said such a move “will also set the trend for other banks to follow”. The decision came on an application filed by one Kishan Lal Mittal, a resident of Mumbai, who had asked from RBI the copies of the minutes of the meetings of governing board, board of directors, committee of directors of the central bank from April 2007 and information regarding the complaint handling procedures followed by it against banking/non-banking companies.  RBI’s Public Information Officer said the information was “voluminous” and would take a long time to furnish, which would result in wasting public money. What is more, RBI argued that providing the information “would amount to disclosure of information that could prejudicially affect the economic interests of India since RBI and its committees often deliberated on economically and financially strategic matters”. “We direct the CPIO to bring it to the notice of the competent authority in RBI to prepare its disclosure policy in respect of not only the minutes of the board and other meetings, but also in respect of all other information held by it in tune with the provisions of the Right to Information (RTI) Act and post this policy on its website,” Mishra said, while asking RBI to comply with the order by February 2011. “Once RBI makes it clear which information it would not disclose under the exemption provisions of the RTI Act, it would be clear to everyone what all information can be expected to be disclosed,” he said. “Such clear enunciation of the negative list of items/classes of information in conformity with the exemption provisions of the RTI Act would remove all doubts in the minds of the officers of the bank about what they must disclose and which they must not. This would minimise the use of the appellate mechanism and bring in much greater transparency in the functioning of the apex bank. It will also set a trend for other banks to follow,” Mishra added. RBI had argued initially that it be placed on the list of authorities exempt from the RTI Act. The government turned down the request.

Banking Laws – Need to change

There are several legislations that cover India’s financial sector. The Banking Regulation Act 1949, The Bank Nationalisation Act, 1970, The State Bank of India Act, 1955, The Reserve Bank of India Act, 1934, all regulate different segments of the sector, making regulation unwieldy. A comprehensive overhaul is long overdue. Nine months ago, the government announced its intent to form a Financial Sector Legislative Reforms Commission but nothing concrete has happened yet. The urgency to overhaul these laws cannot be overstated as India integrates with the global economy and complex products are introduced.

More than onion hike, pricey protein items are the problem – Dr.Gokarn

The Reserve Bank of In dia is seriously worried about the enduring nature of high prices of protein items, which it fears, carries a risk of spilling over to more generalised inflation. This, together with a rise in the prices of commodities globally, may force its hands to hike key policy rates in its quarterly review in January 2011. "Prices of protein items, specially milk, fish, eggs and meat that are not sensitive to monsoon, have been rising steadily. When this happens, and there is a trend, it carries a risk of spilling over to generalised inflation,"  said Subir Gokarn, Deputy Governor, Reserve Bank of India.

Third Quarter Review of Monetary Policy 2010-11 on January 25, 2011

Dr. D. Subbarao, Governor, Reserve Bank of India will announce the Third Quarter Review of Monetary Policy 2010-11 on Tuesday, January 25, 2011.  This will be done in a meeting with the chief executives of major scheduled commercial banks at 11.00 a.m. on January 25, 2011 at the Central Office, Reserve Bank of India, Mumbai.

RBI fines Rupee Co-op Bank

RBI has imposed a monetary penalty of Rs 5 lakh on Rupee Cooperative Bank, Pune, Maharashtra for violation of RBI guidelines. The bank had violated RBI directives by purchasing cheques beyond the ceiling of Rs 0.25 lakh in current accounts.

Bank staff oppose HR policies' recast

All India Bank Employees Association has termed the recommendations of Khandelwal Committee on recast of HR policies for PSBs detrimental to the interest of bank employees. The association will protest march to Parliament on February 23.

FM to have last word in FSDC

First meeting scheduled around month-end. The Finance Mnistry is going ahead with its plan to be the final authority in the proposed Financial Stability Development Council (FSDC) structure despite Reserve Bank of India’s (RBI’s) objections.  Though the final guidelines for the proposed council are yet to be formulated, it has been decided that issues which elude consensus within the FSDC sub-committee – headed by the RBI governor – will be automatically referred to the finance minister, who will chair FSDC.  Industry sources say this translates into the finance minister’s intervention on most issues as there is hardly any consensus at such meetings. Even the High Level Co-ordination Committee (HLCC) was unable to agree on most issues, they said. The first meeting of FSDC has been scheduled around the end of this month and will be attended by the heads of the four regulators, the finance secretary, the banking secretary, the director general (department of currencies) and the finance minister. Interestingly, RBI deputy governors are not included in the sub-committee, though they are invitees to the present HLCC. With FSDC in place, HLCC will die a natural death. In response to the draft guidelines, RBI had suggested that the governor-chaired sub-committee be given the authority to sort out regulatory disputes and the matter be referred to a higher authority only if the chairman was unable to resolve any issue. In the initial proposal for FSDC, two sub-committees were envisaged. The one on regulatory coordination was proposed to be chaired by the RBI governor, with the finance secretary heading the sub-committee on financial stability. RBI objected on the grounds that the functioning of FSDC was likely to impinge on regulatory autonomy and flexibility. “This may affect the ability of the sectoral regulators to act in a timely manner, taking into consideration the specific compulsions and circumstances of the sector concerned,” the central bank had said. Following RBI’s observations, the government and the regulator reached a compromise formula, under which it was agreed that while the finance minister would head the proposed body, the governor would head the only sub-committee of FSDC. The terms of reference of FSDC include inter-regulatory co-ordination, financial stability, financial literacy and inclusion, and sector development. Interestingly, they also mention that “any other issue” deemed fit by the chairman or the council could be taken up. The government also differs with RBI on financial stability being the exclusive mandate of the latter. Sources said the government was of the view that RBI would not be able to ensure fiscal or social stability as well as the government. The finance ministry also cited the recent global financial crisis where governments played a more critical role to restore normalcy.

Finance ministry doubts EPFO’s 9.5 per cent math

The finance ministry has raised doubts over how the Employees’ Provident Fund Organisation (EPFO) managed to extract an extra Rs 1,731 crore from its accounts to reward subscribers with an additional 1 per cent interest rate this year. The Central Board of Trustees had in September declared a 9.5 per cent rate for 2010-11 after discovering a surplus in its interest suspense account. In 2009-10, it had paid 8.5 per cent to its subscribers. Although the interest rate is declared by the labour ministry, it is the finance ministry that notifies it. Without an official notification, subscribers who withdraw money from the PF would not be able to earn the 9.5 per cent rate applicable for this year. The finance ministry fears that once a high rate for EPFO is set, it might be politically difficult to lower it in the coming years. It had recently appointed a panel chaired by the Reserve Bank of India deputy governor Usha Thorat (who has retired since) to review the current system of fixed returns on all small savings schemes. While the panel will most likely suggest a shift to market aligned rates, the sources said it would be a tricky affair given the EPF’s new 9.5 per cent return benchmark.

Prepaid payment instruments come in various options; choose the one that suits your needs

Think of prepaid and the first thing that will come to your mind is the scratch card you would have bought to recharge your cellphone. But prepaid has since acquired a whole new meaning with prepaid payment instruments coming into existence. These include not just the traditional scratch cards, but also smart cards, virtual cards, Internet wallets, mobile wallets and mobile and your Internet account. You can use these to pay bills while on the move, your driver could use it to remit money back home and your child won’t have to rely on your credit card to make purchases online.

What are prepaid payment instruments

The Reserve Bank of India (RBI) guidelines define them as payment instruments that allow you to purchase goods and services against the value stored in them. A customer can purchase the value and store it on the instrument. The transaction can be done through cash, debit or credit card. Such payment instruments include paper vouchers, magnetic cards and smart cards, Internet and mobile accounts and wallets. There are three types of payment instruments—closed, semi-closed and open instruments. The last two enable mobile transactions.  These instruments work best for those who may not have a credit or debit card, but would want ease in bill and ticketing payments. Moreover, they can be a huge advantage and can provide much ease to the section that does not have access to formal channels. Says Vivek Saxena, co-founder and CEO, ZipCash, “Apart from teenagers who shop online but may not have a credit card, this is also meant for working people who are looking for a safe and easy way to make their payments. You could also use this if you don’t want to use your credit card for small transactions.” These are safer bets compared with a credit or debit card since your liability is limited to the value you store in cases of fraud.

RBI holds meeting with Bankers on resuming credit to Microfinance Institutions

The Reserve Bank of India yesterday met select banks and SIDBI to get an assessment regarding the ground level situation in the microfinance sector in Andhra Pradesh and other states and the need for any interim measures. The RBI sensitized the banks to the need to maintain funding lines to MFIs on merits to prevent contagion. The Indian Banks Association will shortly come up with concrete proposals for the measures to be taken in the interim, for consideration of Reserve Bank of India.

Who will float new banks?

The Reserve Bank of India (RBI) on Thursday put up on its website comments of industrial houses, banks, non-banking financial companies (NBFCs), microfinance institutions (MFIs), industry associations and public on its discussion paper on the entry of new banks, released in August. The range of comments varies and there is no consensus on the profile of new entrants.

Second password to be must for mobile banking

If you use a credit or a debit card for any transaction by phone, then you need a second password starting from 1 January, 2011. The Reserve Bank of India has made second password mandatory for all transactions based on interactive voice response (IVR). The cardholder has to send an SMS to a particular number . The bank will SMS back a password to the cardholder. This password will be the second authentication, which would be required to complete the transaction.

RBI may allow recast of loans to MFIs

Microfinance institutions (MFIs) may finally have something to cheer about. The Reserve Bank of India (RBI) on Wednesday said it is considering a proposal from banks to allow them to restructure loans to the sector, without classifying the assets as non-performing. According to RBI norms, banks can restructure standard assets, but they have to be treated as sub-standard and require provisioning.

A decision will be taken as soon as the Indian Banks’ Association comes up with a detailed proposal. Restructuring the loans is expected to help avert defaults, which could turn loans into non-performing assets. At a meeting here on Wednesday with top banks, RBI also advised them not to choke funds to MFIs.

RBI disallows foreign investment in IndusInd Bank

The Reserve Bank of India today said it will no more allow foreign investors to purchase shares of IndusInd Bank as their investment in the private lender has reached the trigger limit. "The RBI has today notified that the aggregate net purchases of equity shares in Indusind Bank by FIIs/NRIs/PIOs under Portfolio Investment Scheme (PIS) in the primary/secondary markets have reached the trigger limit. "Hence, the company has been included in the ban list of RBI (for purchase of equity shares by FIIs/NRIs/PIOs)," the central bank said in statement.

Banks want RBI to watch MFIs

Fearing a default from Andhra Pradesh-based microfinance institutions (MFIs), whose cash flows have been disrupted by new laws, lenders have asked RBI to ensure stability by bringing the sector under its purview. In a meeting called by the Reserve Bank to discuss funding of MFIs, it asked banks whether the institutions were repaying loans on time and if the end-borrower was suffering because of the credit crunch faced by them. RBI had recently collected data from banks on their exposure to the MFI industry.  Bankers told RBI that although there has not been any major default, lenders are worried about the impact of the new law introduced by Andhra Pradesh that bars them from weekly debt recovery. The state has introduced its own laws even as the central government dithers over a new legislation. The finance ministry has now said it will introduce the bill after taking into account recommendations of an RBI committee headed by Y.H.Malegam, a director on the its board. Bankers fear that in the absence of any regulation, each state government may decide to take matters in its own hands through legislation.

Stubborn prices strengthen case for a rate hike in Jan

The pace of fall in food prices is not exactly in line with the expectations of the Reserve Bank of India (RBI). This signals that there is an increased likelihood of a rate hike in the next monetary policy in January 2011.  “Food inflation is not easing as we would like it to be. Upside risks to inflation are still high,” said RBI Deputy Governor Subir Gokarn, speaking on the sidelines of a seminar on debt market organised by credit rating agency CARE. He added that global commodity prices are on the upside, which is a concern.  The central bank had taken a pause on rate hike in its mid-policy review on December 16 and left the policy rates unchanged. About the rising onion prices, Mr Gokarn termed it as a temporary spike, which would normalise as “the government is doing everything it can to manage supply-side pressures”.

Sebi, govt may trash Jalan report

Govt Fears That Panel’s Suggestions May Hit Competition, Fund Raising - The Securities and Exchange Board of India and the government are expected to reject some of the contentious recommendations of the Bimal Jalan committee on the grounds that they could restrict competition and also affect companies that depend on the securities market for fund-raising.  Amid hectic lobbying by various stakeholders –– including exchanges depositories and clearing houses ––sources involved with regulatory decision-making said that several players have voiced their concerns over the inability to list exchanges, something that the committee, which also had representatives from the finance ministry and Sebi, has recommended.

MFIN CEO to meet RBI to discuss lending issues today

Microfinance Institutions Network (MFIN) CEO Alok Prasad will meet the Reserve Bank of India officials and the Malegam Committee today to discuss the bank lending issues. MFIN wants resumption of bank lending to MFIs, which were badly hit due to the freeze on lending. Banks have stopped lending to all MFIs across India.

Anand Sinha as Deputy Governor - Final decision soon

With a bit delay the proposal to elevate RBI’s executive director Anand Sinha as one of the Deputy Governors of the central bank has started moving ahead for the final decision. Finance ministry sources said Sinha’s name after being accorded vigilance clearance had now been sent to appointment committee on Cabinet (ACC) for its approval. “After ACC’s approval, it will go to Prime minister office PMO for the final nod,’’ said a senior official. Though Sinha was selected to succeed Usha Thorat who retired as a Deputy Governor, RBI almost one and half month back, the concerned file hadn’t moved fast because of some technical reasons giving rise to speculation whether Sinha still remained in the race. However, the finance ministry while clarifying that Sinha’s appointment letter will soon be issued, said the ministry is yet to initiate step to find a successor to another Deputy Governor Shyamala Gopinath, who will be retiring in June 2011.

Banks plan consortium loans to MFIs

Worried over microfinance institutions’ future profitability, banks want to diversify their risks by lending to the sector in a consortium.  Leading bankers are meeting Reserve Bank of India Deputy Governor Shyamala Gopinath on Wednesday to make a case for consortium lending.  Banks have discussed the proposal informally with the finance ministry. “Several issues, including debt restructuring of microfinance institutions, are to be discussed,” said a senior finance ministry official involved in the discussions. “RBI has so far supported the stance on consortium lending.”

No threat to asset quality of banks: Rangarajan

There is no threat to the asset quality of Indian banks in the immediate future due to huge exposure to crisis-hit sectors such as microfinance, aviation, real estate and telecom, Chairman of Economic Advisory Council to the Prime Minister, C Rangarajan said on Tuesday.  He said presently the asset quality is well within limits and under norms set by the RBI.

Jalan panel report sparks off hectic lobbying

Stakeholders’ meeting sees sharp exchanges over proposal to disallow the public listing of exchanges. Vicious lobbying, including open letters, advertisements and personal attacks, is underway among different stakeholders in the capital market over the recommendations of the Bimal Jalan committee on ownership and governance of market institutions such as stock exchanges. The Confederation of Indian Industry (CII), an industry lobby, on Tuesday organized a meeting between former Reserve Bank of India (RBI) governor Jalan, two of his committee members, and stakeholders in the capital market to exchange views. The only stakeholder not represented was the retail investor. The meeting was marked by some sharp exchanges between stakeholders and committee members over a recommendation to disallow the public listing of exchanges, a personal attack by one of the stakeholders on Jalan, which resulted in an intervention from the moderator with a request to restrict conversation to issues and not personalities and veiled suggestions that the report did not reflect the majority view of the 29 stakeholders who deposed before it. The committee was constituted by the Securities and Exchange Board of India (Sebi) to review the ownership structure and governance of market infrastructure institutions (MIIs) such as stock exchanges.

Unique ID will be enough to open account

RBI talking to states on financial literacy – V.S.Das, Executive Director

After Karnataka, the Reserve Bank of India (RBI) is in talks with other state governments to include financial literacy in school curriculum. While Karnataka launched chapters on financial literacy in school syllabus in March 2010, Punjab and Haryana have also agreed to do the same. RBI Executive Director V.S.Das today said the central bank was in talks with Uttar Pradesh, Madhya Pradesh and few other states as well to take financial literacy to school children.

Beware of cyber jobs offering easy money

Beware of people offering commissions for monetary transactions from your bank account. They could be acting on behalf of a terrorist organization and using you as a 'money mule'. The Reserve Bank of India (RBI) has alerted banks and customers about transactions through dormant accounts since this could be a case of the account holder being used as a "money mule" for laundering. "Of late, it has been brought to our notice that money mules can be used to launder the proceeds of fraud by criminals who gain illegal access to deposit accounts by recruiting third parties," said an RBI official. "The third parties may be innocent or they could be complicit in the crimes."

‘BANK ACCESS TO ALL VILLAGES IN 5 YRS’

RBIs outreach programme under financial inclusion would be implemented in villages across India and all people would be covered in the next five years, the apex banks Deputy Governor K C Chakraborty said on Monday. "All the banks have been asked to bring the technology to link up the Unique Identification Number (UIDs)”, he said.

Pune shivers at 6.5 degrees Celsius

Monday Was Decade’s Second Coldest Day - The mercury plunged to 6.5 degrees Celsius on Monday, making it the second lowest temperature for the month of December in the last decade. In 2005, the temperature had gone down to 6.3 degrees. The India Meteorological Department (IMD) here said Pune was colder than Delhi (7.5 degrees Celsius) and even Mahabaleshwar (10.4 degrees Celsius). However, Nashik recorded the lowest temperature at 5.9 degrees Celsius.  Pune experienced its lowest temperature ever in 1968, at 3.3 degrees Celsius.  Over the last five days, the minimum temperature in Pune has reduced by more than five degrees Celsius.Monday’s temperature was more than three degrees less than the average minimum temperature for December — 10 degrees Celsius. The minimum temperature is expected to remain around 7 degrees Celsius over the next two days,said said Medha Khole, Director (Weather Forecasting), IMD, Pune.

Dr.D.Subbarao at Bankers’ Club, Kolkata

Indian Bank to open branch in Jaffna

Indian Bank would soon open a branch in Jaffna in northern Sri Lanka, its second in the island nation, a top bank official said today. The Reserve Bank of India and the Central Bank of Sri Lanka had given their approval for opening the overseas branch of the Chennai-headquartered bank, Indian Bank Executive Director Rajeev Rishi told reporters.

Digital inclusion for rural empowerment

India needs to develop its own model of how to utilize information and communication technology (ICT) to benefit the masses, said Sam Pitroda, adviser to the Prime Minister on public information infrastructure and innovations. “We need to create an Indi- an model of information sys- tem suited to our needs,“ Pitroda said at the 7th Man- than Award South Asia 2010, hosted in New Delhi on Saturday. Organized by the Digital Empowerment Foundation (DEF); One 97, a provider of mobile value-added services; Internet Society; and the Indi- an government's department of information technology (DIT), the theme of the awards this year was “empowering rural masses through wireless, 3G and broadband“. Mint is a strategic partner of The Manthan Awards.

Microfinance: The Worst Kept Secret

The Y.H.Malegam Committee is expected to tour Andhra Pradesh in the next one month, while the Andhra Pradesh Government has passed a bill that formalises the Ordinance that it had promulgated to protect borrowers. Close on the heels Dr.Y.V.Reddy forcefully arguing for strict regulation of the sector, another former Governor of the Reserve Bank of India, Dr.C.Rangarajan, has called for a cap on the margins of the microfinance institutions (after similar demands by the AP Government). He has also called for a complete revamp of the business model of the MFIs. Muhammad Yunus has called for a regulatory agency for the Microfinance sector so as to avoid creating a new set of loan sharks in place of the old loan sharks (moneylenders).The AP government has suggested that the margins should not exceed more than 12-13 over and above their cost of funds - a very reasonable margin considering the fact that the banking sector operates on a Net Interest rate margin of about three percent.  All this comes at a time when it is clear that the MFIs were themselves contemplating a change in their business model - one that would have made them no different from the Non-bank Finance Companies (NBFCs). They were contemplating a shift to monthly repayments ("MFIs shift to monthly repayments", Business Standard, 31 August 2010, p.7). There were a number of MFIs that are already gradually shifting as they have reached a critical mass (volume wise) and their growth can now expand only by making every larger loans to credit worthy customers.

One wonders why we need the MFI sector when we already have a dynamic NBFC sector, as the MFIs are now seem to be keen on evolving a business model that is akin to the NBFC sector. One wonders why there is a need to subsidise the MFIs when they are no different from NBFCs. Level playing field  and transparency of government actions has been one of the important claims and the supposed underlying logic in the aftermath of liberalisation. If the government can subsidise the MFI sector, then it is high time they do the same to NBFCs. After all, what is the difference between the two: both are keen on overcharging borrowers, even if they it is usurious rates, and NBFCs too are very keen to attract private equity and list shares on the stock exchanges. This probably the reason why former governors of RBI seem to believe there is a need for the MFIs to change their business model.

UNDER PRESSURE - LPG cylinder may leave your wallet lighter by 100

Oil Ministry Weighs Hike Of 50-100 After 66% Rise In International Price Of LPG -  The oil ministry plans to raise cooking gas prices by 50-100 per cylinder as the international price of liquefied petroleum gas has jumped by almost 66% since August. The rise in global prices is hurting state-run oil firms as India imports 3 million tonnes of LPG a year.   The government will, however, take a decision on Wednesday only after weighing the political implications of a hike against the need to shore up the finances of companies such as Indian Oil Corp, which plans to raise 20,000 crore from a public issue in 2011.

Bank of Maharashtra conducted workshop on “Cyber security in banking”

Let the RBI have more disclosure: Satyananda Mishra

In a recent judgement, information commissioner Satyananda Mishra asked the Reserve Bank of India to change its disclosure norms and share with common men at least some information regarding its board meeting proceedings. Mishra who disposes off 250 odd RTI appeal cases every month says that there has been a perceptible change of government departments’ disclosure procedures thanks to the implementation of Right to Information Act. Sunday ET’s Shantanu Nandan Sharma caught up with this former DoPT secretary who is set to take oath as India’s new Chief Information Commissioner on Monday.

IDRBT signs MoU with IIT-Kanpur for research collaboration

There is a need to integrate knowledge, business and technology to benefit the common man, says K C Chakrabarty. Hyderabad: Institute for Development and Research in Banking Technology (IDRBT), a Reserve Bank of India arm, on Friday signed a MoU with IIT, Kanpur for research and academic collaboration. K C Chakrabarty, Deputy Governor RBI and chairman of IDRBT, said there is a need to integrate knowledge, business and technology to benefit the common man. “There is need to exploit banking technology and take it to the people. We alone cannot do it. Institutions have to work together and leverage each other’s expertise to drive the benefits of research, academics and technology to drive critical initiatives like financial inclusion and take it to masses. Therefore the MoU with IIT-Kanpur has tremendous potential and is great beginning for two key institutions to work together in several areas of common interest,” Chakrabarty said. Prof. Sanjay G Dhande, Director IIT-K said there is an urgent requirement to marry the domain expertise in the banking sector with the new technologies and this MoU will provide a framework to forge productive relationship to make this happen. According to the MoU IDRBT and IIT-K will undertake joint projects, create centre of excellence in information security, cyber security and business intelligence, besides many other programmes.

Dams before cash in bank - RBI governor visit earns sops for Doba

Doba (Lohardaga), Dec. 18: What is life like at a water-strapped village, after its 15 minutes of fame? The hitherto nondescript Doba under Kudu block of Lohardaga district, with a population of less than 1,500, was thrust into flashbulbs during Wednesday’s high-profile visit of Reserve Bank of India (RBI) Governor D. Subbarao, who came with a team comprising Chief Secretary A.K. Singh and senior officials of nationalised banks. Not surprisingly, a hasty whitewash preceded the celebrity visit. The administration morphed into Santa and came to this tribal hamlet laden with goodies such as a revamped connecting road, water supply (restored after 20 years) and promise of 25 wells and a series of check dams.  Villager Bandi Oraon applauded the role of RBI and nationalised banks in adopting the village for the ambitious 100 per cent financial inclusion scheme. But he wondered: “How will villagers get money to put in banks, if there’s no water and if MGNREGS schemes pay so little?”  Villagers appealed to the chief secretary during his visit that the government should ensure the construction of a series of check dams by the banks of the Koel river that flows by the picturesque village dotted with sakhua trees. .

'Banks to play bigger role in MSME sector'

The role of banks to nurture the micro, small and medium enterprises (MSME) sector by going beyond just providing finance was underscored at a meeting organised by the Federation of Andhra Pradesh Chambers of Commerce and Industry as part of the nationwide India Corporate Week-2010 celebrations on Saturday.

Currency notes get a makeover to check forgery

Security Features Include Invisible Fibre,Colour Shift Ink & Machine-Readable Micro Text

A slew of new security features such as invisible fibre, colour shift ink and machine-readable micro text are on their way to prevent counterfeiting of currency notes.   The move comes amid a sharp surge in recovery of 1,000 counterfeit notes this year.  The government fears that counterfeit currency could be used to fund terror groups.  The security features have been selected by an inter-ministerial committee comprising representatives form RBI, finance ministry, security agencies and ministry of home affairs, a government official told ET.  “The menace of circulation of counterfeit currency in the country has been assuming alarming proportions,” a Parliamentary committee said in a recent report.  The government has now made a global request for qualification from manufacturers to incorporate the new security features in the currency.  Among the measures proposed by the panel are security thread with magnetic properties, variation in colour when viewed from different angles, foil or stripe with magnetic properties and micro text for currency notes.  These features were selected from responses received by the finance ministry to its request for security information in September. According to some estimates, eight in a million notes circulated in the country are fake.  The value of fake currency seized and recovered has increased from 8.39 crore in 2006 to 23 crore in 2008. As on October 31, 21.1 crore worth of fake currency has been found. India produces 18 billion pieces of bank notes of which about 50% is high denomination notes ( 100, 500 and 1,000).  Interestingly, the most popularly faked 500 note seems to be falling out of favour though it still is by far the biggest. The higher denomination 1,000 note seems to be the new favourite. In the first ten months of the current year more 1,000 counterfeits have been seized or recovered against that for entire 2009.  “..RBI should introduce easily recognisable and yet scoring high anticounterfeiting security features in the design of currency notes on the lines of advanced international practices,” the parliamentary committee had said.   The government has also constituted a high-level committee with the Union home secretary as its head to prepare a strategy to combat circulation of fake currency notes in the country. Parallel bodies have also been set up in the states. A directorate of currency has also been created in the finance ministry to coordinate and oversee acquisition and research and development of security features for currency notes. This followed recommendations of an expert panel chaired by Shilabhadra Banerjee, a former secretary to the government.