Basu pitches for FDI in multi-brand retail to tame inflation

Describing the Indian retail sector as "primitive", the IMG on Friday suggested that foreign investments in the multi-brand retail should be allowed at the earliest to check rising prices. "India's retail sector continues to be primitive. It’s time for India to allow FDI in multi-product retail and IMG recommends that the government consider this at the earliest," Chief Economic Advisor and head of the Inter-ministerial Group (IMG) Kaushik Basu said. Besides opening the retail sector for FDI, the IMG also advocated reforms in agriculture marketing laws to reduce the gap between farm gate and retail prices and contain inflation "which has emerged as a major concern in the past few months". Headline inflation, stood at 8.66 per cent in April, much above the Reserve Bank's comfort level of 5-6 per cent. Food inflation was 8.55 per cent for the week ended on May 14. The IMG constituted in February by Prime Minister Manmohan Singh, however, said the FDI in multi-brand retail should be opened in a calibrated manner. "We are not saying just open the gates and let them (foreign investors) anywhere and everywhere," Basu said adding initially few foreign investors should be allowed and that too in specific areas away from cities. "We want to specify physical areas (for foreign retailers) so there is also lot of room for small traders," he added.  He said FDI in the sector will serve the interest of both farmers and consumers in long run. "This could provide remunerative prices to farmers and fare prices for consumers specially during the peak marketing season," the advisor said.

NDTV Profit

Refund failed ATM transactions in 7 days: RBI to banks

The Reserve Bank today directed banks to reimburse customers for amounts wrongfully debited from their accounts in failed ATM transactions within seven days of an account holder's complaint or else pay a Rs 100 per day compensation.  "The time limit for resolution of customer complaints by the issuing banks shall stand reduced from 12 working days to seven working days from the date of receipt of customer complaint," the RBI said in a notification.  Failure to re-credit the amount within seven working days will require the issuing bank to pay a compensation of Rs 100 per day, it said.  Earlier, banks were required to reimburse customers for amounts wrongfully debited from their accounts in failed ATM transactions within 12 days.  The RBI further said that all customers are entitled to receive such compensation for delays only if a claim is lodged with the issuing bank within 30 days of the date of transaction.  The directive shall be come into effect from July 1, 2011.  The central bank instructed the issuing bank and the acquiring bank to settle failed ATM transaction disputes through the ATM system provider only.  "No bilateral settlement arrangement outside the dispute resolution mechanism available with the system provided is possible," RBI said.  This measure is intended to reduce instances of disputes in payment of compensation between the issuing and acquiring banks, it added. The RBI said that the step has been taken to bring down the instances of disputes in payment of compensation between the issuing and acquiring banks.

BS

RBI slaps notices on several banks, asking them to pay crores of rupees as fine for dishonour of instruments under ECS beyond the acceptable limits

The Reserve Bank of India has written letters to several banks because they have crossed the limit of instruments dishonoured under the Electronic Clearing Service (ECS); 3%-5% is the acceptable apex bank norm—in a few cases, the percentage of dishonoured instruments under ECS has been as high as 30% to 40%. However, this move is a warning, and may not lead to punitive action  The RBI (Reserve Bank of India) keeps a track on the percentage of dishonoured instruments cleared under the ECS of all banks.  The ECS allows paperless direct credit and debit transactions for all banks. However, if a bank crosses the limit of instruments dishonoured under the ECS, the RBI asks the respective bank for an explanation.  According to the apex bank, "3%-5% is the tolerance level on a daily basis. At times when it goes up to 30%-40%, we ask the bank to find out about the particular accountholders whose instruments are not being honoured under ECS." Often, banks are not aware about the accountholders who are repeatedly dishonouring their financial instruments as ECS is transmitted in bulk to the clearing house. The main problem is that even if one of the ECS instruments bounces, then it affects two or three banks at a time. It affects the ECS user bank, the ECS beneficiary bank and the destination bank to which the amount has to finally get transferred. In a letter addressed to ICICI Bank, a copy of which is with Moneylife, the RBI has said: "Please refer to paragraph 2 of the Minutes of the General Body Meeting of the Chennai Bankers Clearing House (CBCH) held on August 2, 2010 and our letter dated October 28, 2010 relating to return clearing discipline. In pursuance of the instructions contained therein, it has been decided to invoke penalty @Rs. 1000.00 per return for the month of January. The number of MICR and as well as RECS (Dr) returns of your banks has since been generated from the system and the details are been given in annexure. After deducting the tolerance of 4% and 5% on MICR and RECS returns respectively, a penalty of Rs 39821000.00 (Rupees Three Crore Ninety Eight Lakh twenty One Thousand only) is proposed to be imposed on your bank for non-adherence to the return discipline. You are hereby advised to put forward your case as to why Rs 39821000.00 (Rupees Three Crore Ninety Eight Lakh twenty One Thousand only) shall not be imposed on your bank. Your response should reach this office on or before 15 days from the issue of this letter, failing which it shall construed that you have nothing to report and accordingly the Bank shall proceed with a suitable action."  We gather that several other banks have been pulled up in a similar fashion. Thus, the RBI has defined a definite tolerance level beyond which it would charge a bank a certain fine on each rejection. That is why the RBI has threatened to charge a Rs3.98 crore fine for ECS dishonour beyond acceptable limits on ICICI Bank. Moneylife spoke to the RBI for clarification. The central bank spokesperson said, "There were several banks that were not adhering to what we call 'return discipline' in Chennai and the notice was issued to all of them. The fine amount, though, varied. The purpose of the show-cause notice was to shake the banks out of complacence and to ensure that the rate of 'returns' fell within our comfort zone (and not really to collect fine amounts from them). There is significant improvement in the position now and we are not pursuing the penalties with the banks." It was only after receiving the letter from the central bank that banks started screening accounts and transactions and are stopping all ECS debits. ECS is a mode of electronic funds transfer from one bank account to another using the services of a clearing house. This is normally utilised for bulk transfers from one account to many accounts or vice-versa. This facility can be used both for making payments like distribution of dividend, interest, salary, pension, etc. by institutions or for collection of amounts for purposes such as payments to utility companies (telephone, electricity), or charges (house tax, water tax), etc or for loan instalments of financial institutions/banks or regular investments of individuals. The ECS user bank is called the 'sponsor' bank under the scheme and the ECS beneficiary accountholder is called the ECS 'beneficiary' bank. The destination account holder's bank or the beneficiary's bank is called the 'destination' bank. The beneficiaries of regular or repetitive payments can also request the paying institution to make use of the ECS (Credit) mechanism for effecting payment.

http://moneylife.in/

RBI sets up Central Registry to prevent property loan frauds

The records maintained by the Central Registry will be available for search by any lender or any other person desirous of dealing with the property. Availability of such records would prevent frauds involving multiple lending against the security of same property, the RBI said. The Reserve Bank of India (RBI) in a notification on Wednesday, announced the operationalisation of a central registry that will have details of all properties against which loans have been taken.  Towards this end-The Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI)-a government company licensed under the Companies Act.1956, has been incorporated to operate and maintain the Central Registry under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). Initially transactions relating to securitisation and reconstruction of financial assets and those relating to mortgage by deposit of title deeds to secure any loan or advances granted by banks and financial institutions, as defined under the SARFAESI Act, are to be registered in the Central Registry. The records maintained by the Central Registry will be available for search by any lender or any other person desirous of dealing with the property. Availability of such records would prevent frauds involving multiple lending against the security of same property as well as fraudulent sale of property without disclosing the security interest over such property, the RBI said in a statement. R.V.Verma, Chairman and Managing Director, National Housing Bank, has been given additional charge as the registrar of the Central Registry for three months, and he will also be the managing director and CEO of CERSAI.

BANKS ALSO COVERED UNDER CONSUMER PROTECTION

People have little idea of where to go if they have any dispute regarding consumer banking with commercial banks, although there are a couple of institutions which can come in very handy in this regard Commercial banks, despite orders by the RBI. The institutions that are meant to settle disputes between banks and consumers are little known to the public while banks have not taken any steps to create public awareness.  The best thing that has been done to strengthen the consumer movement in India is the Consumer Protection Act of 1986 (COPRA) which consists of 14 pieces with countless statutory notifications and orders to protect the rights of consumers.   The Consumer Protection Act, 1986 is a citizen-oriented social legislation intended to protect the large body of consumers from exploitation. It enables people to secure speedy and inexpensive redressal of their grievances. With the enactment of this law, consumers are in a position to declare "sellers be aware" whereas previously the consumers were at the receiving end and warned "buyers beware".  The Act postulates establishment of the Central and the State Consumer Protection Councils for spreading consumer awareness. To provide cheap, speedy and simple redressal to consumer disputes, quasi-judicial machinery is set up at each District, State and National levels called District Forum, State Consumer Disputes Redressal Commission and National Consumer Disputes Redressal Commission respectively. At present, there are 569 District Forums, 33 State Commissions with the apex body as the National Consumer Disputes Redressal Commission (NCDRC) at Janpath Bhawan, A Wing, 5th Floor, Janpath, New Delhi. The District Fora are headed by the person who is or has been eligible to be appointed as a District Judge and the State Commissions are headed by a person who is or has been a Judge of a High Court. The National Commission was constituted in 1988. It is headed by a sitting or retired Judge of the Supreme Court of India.  The provisions of this Act cover 'Products' as well as 'Services'. The products are those which are manufactured or produced and sold to consumers through wholesalers and retailers. The services are in the nature of transport, telephones, electricity, constructions, banking, insurance, medical treatment etc. The services, by and large, also include those provided by professionals such as doctors, engineers, architects, lawyers etc.  A written complaint can be filed before the District Consumer Forum (up to Rs. 5 lakhs), State Commission (up to Rs. 20 Lakhs), National Commission (above Rs. 20 Lakhs) in relation to a product or in respect of a service, but does not include rendering of any service free of cost or under a contract of personal service. The service can be of any description. In the complaint / appeal / petition submitted under the Act.  Proceedings are summary in nature and endeavour is made to grant relief to the parties in the quickest possible time (90 or 150 days with not more than one adjournment as far as possible) keeping in mind the spirit of the Act. If a consumer is not satisfied by the decision of the District Forum, he can challenge it before the State Commission. Against the order of the State Commission a consumer can come to the National Commission even National Commission order can be challenge or appeal can be filed in Supreme Court. Coming to the subject, Banking is an important sector in a persons daily life. During these days of liberisation, banks are coming out of their traditional role of money lending and leasing, factoring housing and finance have been added to the list of their activities. With globalization becoming a buzz word, our nationalized banks, nurtured under the earlier protective regime, are suddenly asked to complete on a international arena. However, the fact remains that the average consumer is far from satisfied with even their basic services. We are having a catena of cases where the National Forum has awarded compensation to the consumers, as the banks have failed to provide proper services to their customers. Hence, interaction and interdependence between the public and banks has increased and customers have not hesitated to approach consumer forums wherever they felt there was a deficiency in services rendered by a bank. The National Consumer Disputes Redressal Commission (NCDRC) and the State commission have delivered landmark judgements on banking and awarded huge compensation to the consumer.  The National commission has delivered an excellent judgement in Malti Bhat vs State Bank of India where the complainant obtained a demand draft from a bank for the examination fee. As an unsigned draft was issued by the bank which was returned to the student by the institution concerned, she was declared ineligible for the examination. The district forum awarded Rs. 35,000 as compensation and the National commission upheld its order.

http://www.centralchronicle.com/

India Inc gets RBI boost for global drive

In order to encourage Indian companies to expand their global footprint and showcase entrepreneurial skills, the Reserve Bank of India (RBI) today relaxed norms for overseas direct investments. The regulations relating to overseas direct investments, RBI said in a circular, are being liberalised "with a view to providing more operational flexibility to Indian corporates having investments abroad". The modified norms will provide greater freedom to domestic companies like Tatas, Bharti and Reliance to increase their commitments in overseas joint ventures and subsidiaries and also help them repatriate funds without seeking prior approval of the RBI. "The move is in recognition of entrepreneurial ability of India Inc by the Reserve Bank. It is a welcome step and will help companies grow on a global stage", said Ashvin Parekh, partner and national leader (financial services) Ernst & Young. Expressing similar views, Diljeet Titus, senior partner of law firm Titus & Co, said, "the relaxation of investment norms will encourage overseas acquisitions. It will be of great help to infrastructure companies which are looking for mining rights". The RBI's decision, according to Naresh Makhijani, executive director KPMG, "will substantially increase the operational flexibility of the Indian corporates for their overseas projects". Since the onset of the economic liberalisation, several Indian companies have acquired overseas companies and invested in new projects. Under the modified norms, only 50 per cent of the amount of performance guarantee provided by Indian companies to overseas ventures will be taken into account while computing the overall exposure limit. Indian companies are allowed financial commitments in overseas ventures upto 400 per cent of their net worth. Under the old norms, 100 per cent of the performance guarantee is taken into account while calculating the overall exposure limit of an Indian company. The Indian companies, RBI said, will also be permitted to increase their overseas exposure to beyond 400 per cent limit with the prior approval of the central bank. The modified norms will allow Indian companies greater headroom for overseas investments. In order to provide more operational flexibility to the Indian corporates, RBI has decided to allow them to write-off capital and other receivables like loans, royalty, technical know-how fees and management fees in respect to those joint ventures and wholly owned subsidiaries (WOS) in which they have more than 51 per cent stake. While the listed Indian companies are permitted to write off capital and other receivables upto 25 per cent of the equity investment under the automatic route, the unlisted companies can take advantage of the said provision after seeking approval of the Reserve Bank. The RBI has also relaxed norms for repatriation of funds in those cases where the amount of return is less than the original investment. The central bank has allowed listed Indian companies to write off investments under automatic route if the net worth of the entity is less than Rs 100 crore and overseas investment does not exceed USD 10 million. Earlier, only companies with a net worth of over Rs 100 crore were allowed to write off investments under the automatic route. The RBI has also decided to allow Indian companies to issue corporate guarantees to the second level of operating subsidiaries under the approval route, provided it holds more than 51 per cent equity in the overseas venture. The Indian company, according to the RBI, can also provide corporate guarantee to the first level of overseas subsidiary under the automatic route, irrespective of whether the entity is an operating company or a special purpose vehicle (SPV). Under the existing norms, Indian companies are allowed to give corporate guarantees only for operating subsidiaries or joint ventures under the automatic route. India's outward investments during the nine month period between April to December 2010-11 were recorded at USD 12.1 billion, as compared to a lower net outflow of USD 9.9 billion in the corresponding period of the previous year.

RBI clarifies norms for NBFCs entering insurance biz

The Reserve Bank of India (RBI) on Friday clarified norms relating to equity contribution by non-bank finance companies (NBFCs) wanting to enter insurance business. In case more than one company in the same group as an NFBC wants to take a stake in an insurance company, the contribution by all companies in the same group shall be counted for the prescribed limit of 50%, the central bank said. Earlier, the central bank had said the maximum equity contribution an NBFC can hold in a joint venture company is 50% of the insurance company. A subsidiary or company in the same group of an NBFC or of another NBFC engaged in the business of a non-banking financial institution or banking business shall not be allowed to join the insurance company on risk participation basis, it had said.

Moneycontrol

J-K advanced Rs 1,095 cr in FY'11 financial assistance

Srinagar: The Jammu and Kashmir government advanced Rs 1,095 crore as financial assistance to 32,241 units in the priority and non-priority sectors in the previous financial year under its annual action plan. This was stated at a meeting of the District Consultative Committee of banks operating in the district under the chairmanship of District Development Commissioner M A Kakroo, an official spokesman said. The Reserve Bank of India (RBI) was represented by S K Watal at the meeting, the spokesman said. Out of the total advances, Rs 148.96 crore was disbursed for setting up small enterprises, Rs 320 crore for the housing sector and Rs 13.62 crore for the education sector, he said.

Daily Bhaskar

Basu cites FDI in retail as weapon against inflation

" India's retail sector continues to be primitive... Its time for India to allow FDI in multi- product retail and IMG recommends that the government consider this at the earliest........

Continue reading....................

Finance ministry okays norms for new bank licences, with FDI rider

NEW DELHI: The finance ministry has cleared the Reserve Bank of India's draft guidelines on new bank licences with a rider that the existing 74% cap on foreign direct investment be retained.  The central bank, which had proposed capping FDI in new banks at 49% in the first 10 years, is likely to make the guidelines public and may seek comments from all stakeholders again. "We have given our final approval to the RBI and requested them to share the final guidelines after they incorporate comments from other stakeholders," said a senior finance ministry official. The ministry has asked the central bank to set up a special committee to vet proposals for banks through a three-stage process. First, the RBI will screen all applications. "In the second stage, a high-level advisory committee comprising experts in banking and finance will vet those applications," the official said. This committee will finally submit its recommendations to the RBI, which will decide whether licences should be given or not. "The RBI's decision will be final and will be valid for one year from the date of granting in-principle approval," he said.  If the RBI finds some irregularities regarding the promoter of the companies or their associated groups, it may impose additional conditions or withdraw the in-principle approval. "The RBI has built in enough safeguards to ensure that industrial houses getting banking licences maintain enough distance from promoter group entities," the official said.  Many firms, including Reliance Capital, Aditya Birla Financial Services and Religare , want to set up banks.

ET

RBI no to BASIX, Ratnakar marriage proposal

The Reserve Bank of India (RBI) has shot down a proposal for merger of an old generation private sector bank and a new-age microfinance institution. Kohlapur-based Ratnakar Bank and BASIX, promoted by social entrepreneur Vijay Mahajan, had sounded out RBI for merging their businesses. While no formal application was made, both discussed the possibility with senior RBI officials, sources said. The merger would have been the first of its kind, as it would have resulted in a bank buying a microfinance institution. Bhartiya Samruddhi Finance, a Hyderabad-based microfinance institution, is a group company of BASIX. However, with microfinance institutions facing a serious crisis due to a crackdown in Andhra Pradesh, their largest market, RBI rejected the proposal. Interestingly, Mahajan is an advisor to the board of Ratnakar Bank. He advises the bank on financial inclusion.  Mahajan was appointed after the private sector lender overhauled its board in July 2010 by roping in former chief executive of Bank of America’s India business, Vishwavir Ahuja, as managing director and chief executive. After the new board was formed, the bank, which had been quiet till then, said it would expand aggressively. “There was no formal proposal. It was a discussion on whether a merger could be worked out. This has been put on hold,” said a senior BASIX official. He requested anonymity because of the sensitivity of the issue. RBI sources confirmed the development and said the regulator did not want to risk the financial stability of Ratnakar Bank, as BASIX operated in a sector that had been facing uncertainty of late. This is despite Bhartiya Samruddhi Finance emerging out of the recent crisis in Andhra Pradesh relatively unscathed. It has opted out of the debt restructuring programme for microfinance institutions and is in the process of raising Rs 1,200 crore through debt instruments such as non-convertible debentures. Ratnakar Bank also has strong financials. Its capital adequacy ratio was 34.07 per cent according to Basel II norms on March 31, 2010. Its net non-performing assets were below 1 per cent in 2009-10. Deposits stood at Rs 1,585 crore and advances at Rs 1,186 crore. Earlier this year, it raised Rs 700 crore from investors, including Housing Development Finance Corporation, Cartica Capital and Norwest Venture Partners. Sources said RBI felt the merger might stress the bank's asset quality. Mahajan, who is currently abroad, was not available for comment. An e-mail sent to him went unanswered. Senior Ratnakar Bank officials, including Ahuja, were not immediately available for comment. “We are working with BASIX on capacity building. We are going to continue with it. Vijay Mahajan is an advisor to our board on financial inclusion activities. Beyond that I will not like to comment,” said a senior Ratnakar Bank official. Sources said the merger would have helped Ratnakar Bank extend its rural reach. It plans to double its network of 98 branches in the next two years. Most of the new branches will be in rural and semi-urban areas.

BS

Inflation: Over to you, sir..... A number of factors fuelling inflation: RBI governor D. Subbarao

Unlike central bank heads elsewhere, the Reserve Bank of India's governor is not elected. On May 3, the incumbent, Duvvuri Subbarao demonstrated the governor need not be popular either: in the annual monetary policy for 2011-12, the 62-year-old former Indian Administrative Services officer hiked interest rates for the ninth time since early 2010, this time by a bigger margin of 50 basis points, taking the repo rate - the rate at which it lends to banks - to 7.25 per cent. This rise in the cost of borrowings, the RBI acknowledges, will slow down the GDP growth rate for 2011/12 to eight per cent. Predictably, Dalal Street booed the decision. The Sensex slid by 463 points on the day of the announcement. The Confederation of Indian Industry warned: "The rate hike will have an adverse impact on investments and growth." But did the RBI have a choice? It had hiked policy rates eight times since early 2010. And yet, despite a good monsoon and a record harvest, the inflation rate in March 2011, the latest month for which figures are available, was nine per cent. It was one per cent in early 2010. A number of factors, many of which are beyond the RBI's control, are fuelling inflation. A significant one is demand, which Subbarao admitted in the policy statement was stronger than the RBI had imagined.Strong demand has fuelled inflation because consumers are able to afford higher prices. So companies have passed on rising input costs without having to cut margins. Evidence of the strong consumption demand and significant pricing power showed up in the first BT C fore Business Confidence Index Survey in early March too. Demand will dampen if money becomes more expensive. So the RBI is fighting inflation with interest rate hikes or "monetary tightening". Through 2008 and 2009 it had dropped interest rates to stoke demand that had been hit by the global economic downturn. The "monetary loosening" supported GDP growth in the crisis. As did New Delhi's loose fiscal policy that slashed taxes and kept up public spending. The money consumers did not have to pay out in taxes, as also the money they could borrow cheap, they spent, boosting GDP growth. The question, Subbarao's critics, especially those among them who would not like to see his tenure extended at the end of his three-year term this September, are asking is: did the Reserve bank delay the rollback of the monetary stimulus? Did it stoke demand too long and fuel inflation, as the supply side could not catch up? In a post-policy interview to BT, Subbarao clarified that monetary policy was not to be blamed. After bringing down interest rates to historic lows in 2008/09, he could not have raised them overnight. But did the UPA government dismantle its fiscal stimulus efficiently? For one, it did not decontrol retail prices of diesel, when the timing for it was apt and warnings aplenty. Rising crude prices have bloated its subsidy spending. The worsening fiscal deficit is feeding inflation while ill-targeted subsidies are preventing demand adjustments, a situation monetary policy cannot possibly fix. So the onus for tackling inflation now lies with Finance Minister Pranab Mukherjee. With elections in states over, will Mukherjee show the stomach for some unpopularity?

Business Today

Limits of monetary policy - VIDYA MAHAMBARE

Should RBI stick to its original inflation objective of around 5% in the medium term, which would require a further rise in interest rates and thus a significant demand slowdown, or should it alter its stance to accommodate higher inflationary expectations? With inflation remaining persistently high, the term `inflation expectations' is a buzzword today................................

Crack whip on chit funds, RBI to NE States

Worried about rising incidents of non-banking finance companies (NBFCs) hoodwinking the public, India's central bank has asked north eastern states to constitute a robust economic offence wing and enforce legislation like the Chit Fund Act. A large number of NBFCs have cropped up in the northeast, luring customers with promises of high returns on deposits, although they do not have a licence from any of the regulatory authorities to accept deposits from the public. "Setting up of economic offences wing, enactment of Protection of Interest of Depositors (in Financial Establishments) Act and framing rules under the Chit Fund Act are the urgent matters which should be looked into by the state governments to deal with such illegal entities," RBI Regional Director Surekha Marandi told IANS in an interview here. She said that none of the 116 NBFCs currently functioning in the north-eastern states is a deposit-taking company. States frame rules specific to their needs for some federal acts, which govern the activities of businesses in a particular sector. Tripura doesn't have an economic offences wing and has not framed state rules with regard to the Chit Funds Act. Marandi said that recently a network marketing company by the name of "Jainex International Trade" has duped thousands of gullible investors in Manipur to the extent of nearly Rs 40 crore and their network disappeared all of a sudden. Several other companies are also operating in the same line in Manipur and other northeastern states. "Framing state rules under the Chit Fund Act, Prize Chits and Money Circulation Schemes (Banking) Act 1978 and other related central acts are the only answers to check the menace posed by the NBFC and UIBs," the RBI official said. "The offences under these central acts are cognizable offences," she said. The NBFCs not recognised by financial sector regulators like the RBI, the Insurance Regulatory Development Authority (IRDA) or the Securities and Exchange Board of India (SEBI), cannot accept deposits from the public or do any monetary business. But the RBI or other regulators cannot take action on companies that are not registered with them. Hence the onus lies on state governments to monitor the activities of such firms as have mushroomed in the northeastern region in recent years, mobilising huge deposits from people by promising abnormally high rates of interest, at 25 to 30 percent. After collecting the money, they vanish overnight. "State governments should make efforts to arrest the people involved in the dubious activities of such companies," the RBI regional chief said. The Tripura government, during the recent budget session of the state assembly, moved a new bill amending the Tripura Protection of Interest of Depositors (in financial establishments) Act, 2000, for enhancing the level of protection of the depositors in monetary firms, including NBFCs and UIBs, by providing more teeth to the existing legislation. The new bill proposes to impose a fine of Rs.10,000 for every flawed provision and act by the NBFCs and UIBs and in addition Rs.1,000 per day for continuation from the date of default. Marandi said that the RBI, on its part, had decided to open its sub-offices in six northeastern states - Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura and Meghalaya - in a phased manner for better monitoring of the functioning of the nationalised, private banks and other financial institutions. The first such RBI sub-office in the series was inaugurated in Agartala by central bank Governor Duvvuri Subbarao last week. According to an RBI official, the next sub-office would be set up in the Meghalaya capital Shillong soon. Currently, RBI has a regional office in Assam's main city of Guwahati. "With the setting up of these sub-offices, RBI's mission to improve the banking services to the northeastern region and to ensure banking access to all people would be fulfilled to a large extent," Marandi said. 

SME Tiumes 

Seminar on Bank Fraud

Shimla: A one day Seminar on non banking Institutions and Companies that accept deposits and later vanish by duping the people was held in the Conference Hall of Police Hdqrs. by the Department of Non Banking Supervision of RBI.  The Seminar was inaugurated by Shri Somesh Goyal, ADG, AP&T. He appreciated the efforts of RBI in spreading awareness among the police officers about the role of law enforcing authorities on modus operandi and areas of frauds committed by unscrupulous non banking financial companies.  Almost 20 officers and investigators of H.P.Police drawn from various districts participated in the seminar. The RBI has circulated a list of 28 such vanishing companies that are registered under Himachali address.

RBI's research wing plans to play growth catalyst to financial sector, policy makers

MUMBAI: The Reserve Bank of India plans to position the Centre for Advanced Financial Research and Learning - or CAFRAL - promoted by it, as a top-rung research institute to cater to policy makers and the financial sector.  The centre, which is headed by former deputy governor of RBI Usha Thorat, will for the first time provide a platform for academics, researchers and practitioners to explore and carry out research on policy and regulatory issues in banking and finance.  Ms Thorat told ETthat besides research reports, the centre plans to conduct workshops, seminars and conferences regularly. The institute will flag off its initiative by hosting a conference with CEOs from commercial banks on May 28 on 'Business strategy in the emerging regulatory landscape'.  The new research centre hopes to sensitise banks on how to adopt a risk management framework for driving strategy and capital planning by hosting this meeting.  The centre will also partner with the Bank for International Settlements, or BIS, to host a conference in November this year on financial sector regulation and its implications for growth, equity and stability in the post-crisis world. The aim, according to Ms Thorat, is to provide a better perspective on emerging market economies.  For many emerging market economies, the challenges now revolve around maintaining a higher growth in the new regulatory framework. The BIS and CAFRAL meeting will flag off issues which could have an impact on emerging markets in terms of growth and stability.

ET 

RBI has no plan to conduct open market operation as of now: Sources

MUMBAI: The Reserve Bank of India has no plans as of now to buy government bonds from the secondary market to support the market or to ease tight liquidity condition given its anti-inflation stance, two central bank officials with direct knowledge told Reuters.  Some market participants are expecting the Reserve Bank of India (RBI) to conduct open market operations (OMO) by June to ease the expected liquidity stress due to advance tax outflows.  "There is a large redemption in July and this is only a temporary tightness. We would have done an OMO if liquidity tightness would have been beyond the plus/minus 1 percent (of deposits) comfort zone for a sustained period," said one official.  Advance tax payments are due by June 15 and dealers expect the liquidity in the banking system to turn into deficit of 1 trillion rupees, much above the RBI's comfort zone of 500 billion rupees shortfall. But around 370 billion rupees of 9.39 percent 2011 bond will mature on July 2.  "The main task now is to bring down inflation," said the second central bank official.  Buying government bonds from the open market will infuse liquidity and stoke inflation further, much against the central bank's stance.  RBI governor Duvvuri Subbarao also told participants at a meeting with state finance secretaries earlier this week, that there is no plan to conduct an OMO now, two sources who attended the meeting, told Reuters.  Subbarao said this whilst explaining why the pressure of raising money from the market was more stiff this year than last year's, one source said.  He said facilities such as liquidity adjustment facility should be able to tide over a temporary cash crunch, said another source who attended the meeting.  When contacted, RBI spokeswoman Alpana Killawala said, providing context to Subbarao's comments, "We have been maintaining that we have a number of instruments and we will use them as and when warranted."  Subbarao also acknowledged at the meeting that government bond yields are at high levels and added that inflation and high level of borrowing by the state and central governments were the other reasons why market borrowing was more difficult this fiscal, officials said.  Dousing bond market expectations that the RBI being the debt manager to the government may buy bonds to prevent any sharp rise in yields, the central bank officials said rising yields correctly reflect the underlying inflation pressures and the RBI's stance.  On Thursday, the 10-year benchmark 7.80 percent 2021 bond yield rose to its highest level of 8.40 percent since it was first issued on April 8 on inflation concerns.

ET

Difficult to assess risk premium on oil, says Nomura

When I was in India, I saw Subir Gokarn come out with a very strong statement warning on inflation. The risk being greater, I think he was absolutely right to do the policy rate hike. We are big fans of the RBI, we think it’s a very competent central bank; it is going to have to continue to make tough decisions............

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RBI to soon release guidelines on new bank branches

The Reserve Bank will soon release guidelines for implementing its proposal to locate at least a quarter of the new bank branches in the unbanked areas, which generally fall in the rural areas. "RBI will issue guidelines for 25% rural branches soon," said a banker present at the central bank's post-policy meeting today.  In its annual monetary policy announcement on May 3, RBI had asked banks to open 25% of their new branches in Tier-V and VI centres.The central bank held the customary post-policy meet here with bankers wherein it apprised them of the changes announced in the annual policy for FY12. Deputy Governors Shyamala Gopinath and Anand Sinha along with nine bankers, including Indian Overseas Bank Chairman and Managing M Narendra, were present at the meeting. Issues relating to Basel II and III norms were also discussed at the meeting, bankers said.

BS

RBI sets up Central Registry to prevent property loan frauds

The records maintained by the Central Registry will be available for search by any lender or any other person desirous of dealing with the property. Availability of such records would prevent frauds involving multiple lending against the security  of same property, the RBI said. The Reserve Bank of India (RBI) in a notification on Wednesday, announced the operationalisation of a central registry that will have details of all properties against which loans have been taken.  Towards this end-The Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI)-a government company licensed under the Companies Act.1956, has been incorporated to operate and maintain the Central Registry under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). Initially transactions relating to securitisation and reconstruction of financial assets and those relating to mortgage by deposit of title deeds to secure any loan or advances granted by banks and financial institutions, as defined under the SARFAESI Act, are to be registered in the Central Registry. The records maintained by the Central Registry will be available for search by any lender or any other person desirous of dealing with the property. Availability of such records would prevent frauds involving multiple lending against the security of same property as well as fraudulent sale of property without disclosing the security interest over such property, the RBI said in a statement. R.V.Verma, Chairman and Managing Director, National Housing Bank, has been given additional charge as the registrar of the Central Registry for three months, and he will also be the managing director and CEO of CERSAI.

Moneylife

JK Bank changeover political issue :Mehbooba

Srinagar: Rejecting the lame excuses forwarded by the state government to defend its decision to move away from JK Bank’s over draft facility to the RBI’s ways and means arrangement, Peoples Democratic Party today maintained that the decision was a serious blow to state’s dignity, self respect and self reliance.In a statement PDP president Mehbooba Mufti said it was unfortunate that the government had now deployed the Bank management to defend a decision that has serious political implications and disastrous consequences for governance in the state. “While the government itself has been unable to convince anyone on the subject it is ironical that the bank owned by it should call the decision to surrender state’s only financial mechanism to centre a win-win situation for all” she said and pointed out it was a political issue and not a management concern. Mehbooba said while the ‘benefits’ of the decision that the government. claimed to flow out of its dumping of JK Bank as its lender have been rejected by experts and the public opinion in the state it seems the fall out of it has already started being felt as even at the beginning of the fiscal year bills have been bouncing from the treasuries. She said the contractors executing government works have been on a war path and refusing to carry out works because of the inability of government to make timely payments. “In certain cases even the salaries are in default and daily wagers and seasonal workers hardly ever received their dues in months.” Reiterating that the decision had taken away from the state its last pillar of self reliance and source of fiscal management Mehbooba said the state governments would henceforth be completely dependant on central government and the RBI for even routine spending. Even as the National Conference made noises about its autonomy demand in practice it was conceding even the last remnants of it to stay in power, she said “notwithstanding the fact that JKB the icon of state’s pride and institutional capabilities was reduced to a mere disbursement branch of the RBI”. Mehbooba said the National Conference which had in a similar ‘brazen’ manner sold out state’s water resources had now resorted to ‘mythological sources’ to show itself as the savior of our interests.  On the one had it has started trumpeting ‘discovery’ of some 36 year old government order having not even archival value on the other it has not been telling the people why the government which is credited with issuing it had not implemented it for seven long years till it remained in power Mehbooba wondered. Even after that the National Conference ruled the state for more than two decades with huge legislative majority that was misused to further dis-empower the state.

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Banks want complete say in savings accounts

Banks should have the power to decide on their own structure, terms and conditions, and charges for opening and maintenance a savings account if the central bank decides to deregulate the savings deposit rate, top bank officials told the Reserve Bank of India (RBI) today. Top officials from public and private sector banks met RBI Deputy Governors Anand Sinha and Shyamala Gopinath to discuss the broad issues in the sector and analyse the impact of the latest policy rate increase on inflation. According to a banker, who attended the meeting, one of the points of discussion was deregulation of savings deposit rates, where lenders have asked RBI to allow them to decide on the maintenance and other charges for a savings account. Some of the banks have also sought RBI’s permission for offering differential rates on differential balances in a savings account. “We favour complete deregulation and not partial deregulation,” the official said. Earlier this month, RBI raised the savings deposit rate by 50 basis points. As a result, banks are now required to pay four per cent interest on savings deposits. The central bank started the process of deregulating the savings deposit rate by releasing a discussion paper on this issue late April. The rate is currently the only administered one, which is decided by the banking regulator. In the discussion paper, while RBI favoured deregulation as such a move would improve transmission of the monetary policy, it also expressed concerns over unhealthy competition and asset liability mismatches. However, the central bank seems to suggest that advantages outnumber worries and hence it was expected the savings deposit rate would be deregulated in a phased manner. Savings deposits account for 22 per cent of total bank deposits. Bankers said while an increase in savings deposit rate was unlikely to exert undue pressure on their margins, partial deregulation, however, might stress their profitability.

BS

Provide portfolio mgmt details, RBI tells banks

WHAT RBI WANTS TO KNOW

* Nomenclature of the scheme

* Details of products offered — whether they are bonds, FDs or debentures

* If there is any actual, perceived or potential conflict of interest in offering such products

* Disclosures to clients about risks and returns

* Obligation of the bank towards clients regarding products advised on

* Organisational structure for providing WMS

* Professional qualification and a proper criteria for officials handling WMS

* Code of conduct, if any, for officials handling WMS

* Number of branches where such schemes are operated

* Whether or not the services are free

* Amount of funds managed under each scheme

* Number of frauds, complaints and grievances addressed

The Reserve Bank of India (RBI) has asked banks to furnish details of the portfolio management services offered by them. The Financial Stability and Development Council (FSDC) had earlier mandated RBI and the Securities and Exchange Board of India (Sebi) to undertake a review of the existing practices followed by banks and brokerage houses in offering wealth management services. The regulators were also asked to to come up with fresh guidelines for wealth management services. RBI had, earlier this week, sent mails to various chief executive officers of banks, asking for the details of their operations. It sought to know under what name various products were sold — whether they came under portfolio management, wealth management, private banking or investment advisory. RBI guidelines pertain to portfolio management services. “RBI has asked us to furnish details of the various parameters of portfolio management services like nomenclature, the products offered and the disclosures we make to clients about risks and returns” said a senior official of a public sector bank. Most foreign and private banks, along with a few public sector banks, offer portfolio management services. RBI also wanted to know if there was any actual, perceived or potential conflict of interest in offering such products and a bank’s responsibility or obligation towards its clients. It also asked whether the people selling these products were qualified and whether there was a proper criterion for employees offering such services. Banks would also have to provide information on the number of complaints and the performance of their grievance-redressal mechanism. Portfolio management services offered by banks are classified into four categories — referral services, investment advisory, non-discretionary and discretionary. Sources said the current norms do not clearly distinguish between investment advisory and non-discretionary portfolio management services. Currently, to offer portfolio management services, banks need RBI’s approval. They also have to be registered with Sebi. Registration with Sebi is also required to offer investment advisory services, which are non-discretionary in nature (the client’s approval is required for investment). The RBI communique follows a fraud in Citibank’s branch in Gurgaon in December 2010. The fraud was allegedly committed by its employee, Shivraj Puri, who had siphoned off Rs 400 crore by selling financial products not authorised by the bank. The investment products were allegedly sold to high net-worth individuals, with a claim that these would generate very high returns.

BS

Less than 50% small villages have banking facility

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Priority sector advances to shoot up by 25.02 per cent

Action plan:Collector Mahesan Kasirajan, second from right, handing over the first copy of the annual credit plan for 2011-12 to R.Krishnamurthy, Chief Regional Manager, IOB, in the city on Wednesday. Solomon Paul Jayaraj, left, AGM, NABARD, and R. Gunalan, right, Assistant General Manager, RBI, Chennai, are in the picture.

TIRUCHI: Priority sector advances in Tiruchi district is set to increase by 25.02 per cent during 2011-12. The annual credit plan (ACP) envisages a total credit flow of Rs.2054.23 crore in the district during the current financial year, marking an increase of Rs.411.22 crore over 2010-11. The agriculture sector, as usual, would get the lion's share of Rs.1,158.08 crore as per the projections of ACP for the district, released here by Collector Mahesan Kasirajan on Wednesday. The credit flow envisaged for agriculture and allied activities accounts for 56.38 per cent of the total credit outlay. The allocation for the sector has been increased by 22.81 per cent, amounting to Rs.215.14 crore, over the previous financial year. A major portion of the allocation to agriculture sector would go towards short term crop loans. The ACP has earmarked Rs.950.61 crore, accounting for 82.08 per cent of the allocation for the sector, for being advanced as short term loans. Minor irrigation programmes would get Rs.26.03 crore. Farm mechanisation would also get a thrust with the credit advances under this head being projected at Rs.71.43 crore.The ACP has earmarked Rs.232.22 crore to the non-farm sector, accounting for 11.30 per cent of the credit plan. In non-farm sector, advances to small scale industries would take the major share of Rs.192.13 crore. The other priority sector advances would be to the tune of Rs.663.93 crore, constituting 32.32 per cent of the credit plan. Of this, Rs.153.44 crore would be advanced as educational loans to 11,890 students. Advances to non-farm sector would go up by Rs.40.16 crore, an increase of 20.92 per cent over the previous year. The credit flow to other priority sector has been hiked by Rs.155.92 crore, an increase of 30.69 per cent over the previous financial year. The non-priority sector advance is projected at Rs.904.65 crore. About 93.67 per cent (Rs.2054.23 crore) of the ACP would be disbursed through commercial and private sector banks in the district, while cooperative banks and other financial institutions would contribute about 6.33 per cent (Rs.130 crore).Mr.Kasirajan appealed to the bankers to extend their cooperation in achieving the targets set in the ACP. R.Krishnamurthy, Chief Regional Manager, IOB, said the deposits of banks in the district stood at Rs.10,656 crore and advances at Rs.8,221 crore. The credit deposit ratio in the district stood at 77.14 per cent. During the previous financial year, Rs.93.26 crore has been advanced to self help groups, he said. R.Gunalan, Assistant General Manager (AGM), Reserve Bank of India, Chennai, Solomon Paul Jayaraj, AGM, National Bank for Agriculture and Rural Development, M.Santosh Kumar, Project Director, District Rural Development Agency, and T.Ramados, Lead Bank Manager, spoke. 

Hindu 

Time to review inflation strategy

Over the past decade, the Reserve Bank of India (RBI) has claimed a victory of sorts by refusing to allow inflation to plunge too low or soar too high. But this is little consolation to most households. From 2002 to..........

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Govt doesn't favour holding company set up for PSU banks

NEW DELHI: The finance ministry is not in favour of pushing staterun banks into adopting the holding company structure proposed by the banking regulator.  The Reserve Bank of India (RBI) on Monday put out a report recommending a financial holding company model for the financial sector, which it says will protect banks from being destabilised by the activities of other firms controlled by the same promoter.  "We are not going to push them (public-sector banks). They can adopt the structure as and when they decide," the official said. In it report titled 'Introduction of Financial Holding Company Structure', put out for comments by stakeholders, the RBI has suggested two routes for migrating state-run banks to the holding company structure.  The first is to transfer government holding in the bank and other subsidiaries of the bank to a holding company.  In the other, the government continues to hold stake in the bank, but other stakeholders gets transferred to the holding company. In this case the government will be able to unlock its holding values in the subsidiaries. However, the ministry anticipates problems with both options. In the first, the government will not only have to meet the capital needs of the bank, but also that of non-bank subsidiaries.  Besides, if the holding company is listed and the bank is not, the government will be stuck with shares in an unlisted entity. "What purpose will it serve to hold majority stake in a bank that is controlled by an FHC (financial holding company) for all purposes," the official said.  In the other method, there will be valuation problems when holdings in diverse companies are transferred to a holding company.  The government has said it will maintain at least 51% stake in banks. A member of the working group that compiled the RBI report said, "The working group had representations from the government, IBA and private players. If some issues are still pending, they can be incorporated in the final guidelines."  The chairman of a leading staterun bank told ET that the finance ministry is yet to ask banks for their views. "It's too early and we would like to wait for further clarity," he said.  Sector experts say it will be difficult to convert public-sector banks into a financial holding structure quickly, unless some of legacy issues linked to the Banking Regulation Act are resolved.  "Most state-run banks have recently set up subsidiaries in insurance, asset management and other sectors through the joint venture route, and the long-term interests of their JV partners would need to be addressed adequately for a smooth transition," said Robin Roy, associate director, financial services, PwC India.  The RBI report says the structure may create challenges in governance. In the second case, for instance, the bank will have two large shareholders - the government and the holding company - each with differing interests.  The regulator had set up a working group in June last year to examine the feasibility of introducing a financial holding company structure in India. The working group, headed by RBI deputy governor Shyamala Gopinath, has members from the RBI, the finance ministry, the markets regulator (Sebi), the insurance regulator (IRDA), and the Indian Banks Association.

ET

The water wars

Why should we not have a policy that requires all new commercial and residential construction to build, at their cost, reservoirs that can be accessed for public distribution? Or insist that cooperative societies make arrangements for rainwater harvesting, at their cost, to supplement water supply? Consider what we are losing: harvesting rainwater off the roofs of the bungalows of the Municipal Commissioner, the Chief Minister, the RBI Governor, the Port Trust Chairman and the Mayor would probably yield over 5 lakh litres of water even assuming only 24 inches of rain. Think of the numbers without water who could be helped with that.........

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Finmin for ' middle path' on Jalan panel report on bourses

RBI may tweak norms to boost core sector funding

The Reserve Bank of India (RBI) might modify some of the existing rules to encourage insurance and pension funds to invest in the infrastructure sector, a senior government official said here on Thursday. "Participation of insurance and pension funds in the infrastructure sector in India is much lower when compared with the developed markets," said department of economic affairs secretary R Gopalan. Speaking at an Assocham seminaronThursday ,he said a number of discussions have taken place to encourage long-term investment in the infrastructure sector and the RBI is now close to bringing in some changes. He did not give further details. Gopalan added the government will launch the proposed Infrastructure Debt Fund within the next few months without having to change many of the regulations. "Regulators are working very hard and they are trying to see that they don't upset existing regulations and still try to come out with the infrastructure debt fund," he said.  The country would need investment of up to $1 trillion in five years between 2012 and 2017 in the sector. "There are two kinds of routes we are looking at—one is the bond route through debt fund and another is the unit route through the capital market," he said. Addressing the conference on capital markets, Gopalan said there is a need to develop the capital market. However,headed that any reform in this market will have to be gradual and stable. On the Bimal Jalan committee suggestions relating to market infrastructure institutions such as stock exchanges,depositories and clearing corporations, the secretary said there is a need to find a middle ground. "There are extreme views on both the sides. Sebi is seized of this. We need to find a middle path,"he said.Jalan committee submitted its report to Sebi last November.

FE

RBI to hold sensitisation programmes for villagers

Dehradun, : General Manager of Reserve Bank of India, Dehradun, Vikram Singh Bajwa said that the bank was committed to adding as many villages as it could to the banking networks and announced that a series of awareness programmes would be organised from 25 May. Six villages from six districts of Uttarakhand had been selected as venues for the programme, which would kick-start in Malari village in District Chamoli and then move to Almora district’s Chani village on 28 May. Later, the programme will be organised in the villages of Jeetpur (district Haridwar), Bada (district Pauri-Garhwal), Genwala (district Uttarkashi) and Sirtola (district Pithoragarh) in the month of June. The objective of the programme is to motivate rural people to join the banking system so that they could benefit from it and also contribute to India’s economy directly or indirectly. Bajwa said that there were more than 14 crore families in India that were not yet connected with banking. Only 10 per cent of the population had life insurance and 9.6 per cent had general insurance. Sharing figures from another study, he said that it was estimated that only half the villages in the country had branches of banks. The press conference was also attended by SBI’s Regional Manager SK Jain, Pramod Kumar from RBI and others.

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