Bank MF arms may get nod to sponsor infrastructure funds

New Delhi: The Reserve Bank of India (RBI) is likely to allow domestic banks to participate in the proposed infrastructure debt funds as sponsors through their mutual fund arms. The central bank's move is in the backdrop of series of consultations which the finance ministry has held with it on this subject. The ministry is also in discussions with market regulator Sebi and insurance regulator IRDA on the issue. A finance ministry official told FE that RBI had agreed to allow banks to be strategic sponsors of infrastructure debt funds through their mutual funds arms. Leading banks such as State Bank of India, ICICI and Bank of India have mutual fund arms through which infrastructure projects can be financed. The government is struggling to find long-term funds for infrastructure development, as banks cannot be exposed to the sector beyond a prudent limit. The maturity of bank deposits ranges from three to five years. Providing long-term loans from these medium-term funds creates a serious asset-liability mismatch for the banks. Experts believe that since the debt market in the country is not fully established, domestic banks remain the primary source of funds for these projects. Exploring options like making available bank funds through asset management companies and mutual fund arms will be beneficial for the cash starved infrastructure projects. “ The concept of extending line of funding through the mutual fund arm over and above the funding provided by banks on a project-to-project basis will be beneficial for the infrastructure sector. On the debt side, banks are the main source of finding apart from IDFC, IIFCL etc. Some of the banks have already crossed the sectoral cap for financing infrastructure projects. Financing through the mutual fund arm will compensate poor debt financing options available in the country,” said Sushi Shyamal, partner, infrastructure sector, Ernst & Young. Inadequate funding to the infrastructure funding has delayed the development of the sector. Under current regulations, Indian pension and insurance companies cannot invest directly in infrastructure projects, limiting a crucial source of finding. In the current Five-Year Plan that runs till March 31, 2012, such funds are likely to contribute less than 7% to total investment in projects. The finance ministry, along with the regulators, has been discussing whether the debt fund should take the form of a company or trust. The ministry will prepare the framework for both the structures and then let the promoters choose the model. It is expected that the debt fund as a company would raise funds through issuance of bonds. These could also be dollar denominated bonds. An official said, “It has been decided that maturity of these bonds will be 5-7 years.” The trust could raise money through tradeable financial instruments. The proposed debt funds can only be formed by an India registered company and the lead sponsors of the fund should be Indian. The fund can seek foreign investment from foreign pension and insurance funds through the external commercial borrowing route or foreign institutional investment route. The finance ministry has sought relaxation in the exposure limit and capital adequacy norms from the banking regulator for the proposed infrastructure debt fund, a senior official told FE. The modalities of the fund are expected to be finalised by June-end. Relaxation in exposure limit and capital adequacy norms would enable the debt fund to finance larger number of projects needing bigger funding. Under the RBI guidelines, an infrastructure finance company (IFC) can lend up to 25% of its net own funds to a single borrower and 40% to single group borrowers. “Our aim is to encourage maximum number of projects, so we are seeking relaxation in the exposure limits,” the official said. With regard to capital adequacy or Capital to Risk Asset Ratio (CRAR), RBI guidelines stipulate that NBFCs maintain 15% CRAR with a minimum Tier I capital of 10%.

FE

State lags in implementing financial inclusion plan

Commercial banks in Karnataka have been advised to speed up the efforts to achieve financial inclusion by the end of the present financial year. Presently, the banks in the state are lagging in meeting the deadline of March 2012 fixed by the Reserve Bank of India (RBI). The slow pace in meeting the financial inclusion deadline is mainly on account of the delays in selecting the technology provider and absence of core banking system amongst the regional rural banks (RRBs). As of December 2010, Karnataka-based banks stood only behind Uttar Pradesh in implementing financial inclusion programme. As against the target of achieving financial inclusion in 3,395 villages with a population of over 2,000 by the end of fiscal 2011-12, the banking sector in the state has been able to provide banking services to 1,571 villages, which is 46 per cent of the target, by March 2011. The financial inclusion programme was launched on April 1, 2010. The RBI had asked banks in Karnataka to complete the first phase of the financial inclusion by the end of March 2012 with an intermediate target of March, 2011. However, as of March this year, the banks have met less than half the target, according to data available with the State Level Bankers’ Committee (SLBC). The selection of technology provider through a detailed tendering process is said to have delayed the implementation. The banks had to select a technology and hardware provider based on the guidelines of the Institute for Development and Research in Banking Technology (IDRBT). “The main problem was integration of handheld machines with the servers of respective banks in a secured manner and this took long time,” banking sources said. The ministry of finance had asked the SLBC to furnish a roadmap for extending banking facilities to all villages with a population of over 2,000 and furnish district wise, block wise and branch wise details. It also advised banks to indicate the time schedule for providing banking facilities for a period of two years from 2010-11 and 2011-12. Subsequently, the banks provided their respective boards approved plans indicating that they would meet the target by March 2012. “The target is achievable by March 2012. However, some banks like RRBs had a huge target ahead of them as most RRBs were not fully-equipped with core banking solutions and technology to implement the programme,” banking sources said. Basant Seth, chairman of Syndicate Bank and convenor of SLBC, has advised banks in Karnataka to implement the roadmap for providing banking services in their respective villages by March 2012. “While we appreciate the efforts of the bankers in Karnataka for their good performance, banks are requested to provide banking services in the remaining 1,804 villages at the earliest,” he said. Meanwhile, the banks in Karnataka have also prepared the list of unbanked villages with population of less than 1,000 for implementating the financial inclusion plan simultaneously. There are 6,383 villages with a population of 1,000 to 2,000 based on the data obtained from the government of Karnataka. Of these, 297 villages already have banking services, 24 villages are now within the urban area and 33 villages could not be identified. About 6,029 villages have been identified as unbanked.

BS

Three-day microfinance summit begins today

Irrespective of what the Reserve Bank of India (RBI) thinks about the role of microfinance institutions (MFIs), the recent actions of the Andhra Pradesh government against these organisations for their alleged excesses in lending to the rural poor, have now assumed a pan-India significance..........

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It’s wise to keep tab on your bank’s concentration risk

The RBI disclosure rule requires the banks to calculate the amount of advances attributable to 20 largest borrowers on the basis of sanctioned lending limits and not the actual lended amount which.......

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RBI holds interface session on FEMA

CHENNAI: The Reserve Bank of India (RBI), in association with Foreign Exchange Dealers' Association of India (FEDAI), organised an event ‘Foreign exchange for you' in Chennai on June 18 and 19. It was an exhibition-cum-interface session on Foreign Exchange Management Act (FEMA), 1999. The objective was to familiarise the public with the rules and regulations under FEMA governing the current and capital account transactions, remittance and exchange facilities and to seek feedback on policies and procedures related to forex transactions, says a release from the RBI.

Hindu

Mobiles ring in economic growth for urban poor: IIMA study

Amid reports of the harmful effects of excessive cellphone use, here is something good to say about mobile phones. The poor in metro cities have gained financially by using cellphones, says a working paper by two researchers......

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Special allowance for SBI employees irks union

The National Union of Bank Employees (NUBE) has decided to disaffiliate itself from the National Confederation of Bank Employees (NCBE) due to differences on using the amount allocated for the benefit of bank retirees as a ‘special balancing allowance' for employees of State Bank of India. With the special balancing allowance, the salaries of State Bank of India employees are higher than other bank employees. Mr L. Balasubramanian, General Secretary, NUBE, told Business Line, “The union of State Bank of India has used Rs 277 crore, the amount allocated for employee's pension as special balancing allowance.” This works out to be a hike of 6.5 per cent in basic pay of SBI employees. According to the 9th Bipartite Settlement, the pension cost was estimated at Rs 6,000 crore of which 70 per cent will be borne by the management of banks and the remaining 30 per cent will be contributed by the employees. The Indian Banks Association (IBA), which represents the management of banks, offered Rs 4,201 crore as its contribution towards the cost of pension payment for employees. Mr Balasubramanian said, of the Rs 4,201 crore, about Rs 277 crore which was paid as pension to SBI employees, has been used as a ‘special balance allowance'. With the pension scheme already available for SBI employees (apart from provident fund and gratuity), the union of SBI did not sign the memorandum, he said. Such appropriation of pension amount for a special allowance is a “flagrant violation of the trade unions' cardinal principle, ‘same work same pay”, he said. Mr Balasubramanian said the All India State Bank of India Staff Federation has “betrayed” the other members of NCBE by getting more salary hike for SBI employees alone. NCBE largely comprises All India State Bank of India Staff Federation and has about 1.58 lakh employees as members. NCBE is the second largest union after All India Bank Employees Association which has about 2.1 lakh members as on March 31, 2010.

Business Line

Portfolios of DGs

Tighter but uniform KYC norms in offing

NEW DELHI: With the government facing heat on the issue of black money, the Finance Ministry has begun an exercise to make identification norms uniform and more stringent for capital market players like FIIs, mutual funds and brokerage customers.  In addition, market regulator SEBI is working on further tightening of its surveillance mechanism, an official in the Finance Ministry said.  The issue of making the 'know your customer' (KYC) norms more strict was taken up at the last meeting of a sub-committee of the Financial Stability Development Council (FSDC), headed by Reserve Bank Governor D Subbarao.  "We are working on a common KYC. It will be more strong and stringent," the official said.  At present, different market players follow different KYC norms.  As for the SEBI surveillance rules, he said, "We have enough safeguards to check inflow of illicit and unaccounted money into the capital market. The only possibility of such flows into the market is through foreign institutional investors and high net worth individuals. We will make the surveillance stricter."  The moves are part of the government's fight against the black money menace amid intense pressure from civil society, Opposition parties and the Supreme Court.  The RBI and SEBI have been tightening KYC norms from time-to-time. Furthermore, banks also required to update the information of their clients. Between January, 2010, and January, 2011, SEBI banned over 30 entities for engaging in circular trading for periods ranging from two months to two years.

ET

Low-cost banking on mobile

Two engineers from the country’s premier engineering institution decide to venture out on their own and create social impact. In the process, they create Eko, a service that fosters financial inclusion. The banking service leverages community relationships for increasing the reach of basic financial services. It provides a safe gateway for funds deposits and withdrawals. The service is meant especially for people from low-income backgrounds............

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Not talking shop

Reserve Bank of India (RBI) Deputy Governor K.C.Chakrabarty loves to talk as much as people love to listen to him. At a recent banking seminar he was the last speaker and he made the point that he was at a disadvantage since he ran the danger of being repetitive. He still spoke at length. But when it came to answering questions from reporters on inflation he was uncharacteristically brief. "I can't talk on inflation everyday. It's not a cricket match" he said. 

Father, Son and Holy RBI

In keeping with his established penchant for innovative ideas, RBI Deputy Governor K.C.Chakrabarty has argued for a ‘new trinity’ that can transform India into a $50-trillion economy over the years, from a little over $1 trillion at present. Inclusion, technology and education would be the new trinity, he told a gathering of bankers in the capital. He prescribes boosting the education sector to cut the current account deficit, as the billions of dollars that Indian students spend in the US will then be spent in India. Drivers for high-end Mercedes cars are trained in India, not in the Mercedes plants abroad, he says, stressing that India can build education capacity to provide requisite technical skills to its workforce at home.

FE

Increase loan monitoring mechanisms : Chakrabarty asks banks

Padgha (Maharashtra): Deputy Governor of Reserve Bank of India (RBI) K C Chakrabarty today asked banks to increase their loan monitoring mechanism in view of the rising interest rates, for an early detection of building up of stress. "We are telling the banks to improve their risk management capabilities to manage the possible deterioration in asset quality, because of high interest rates," Chakrabarty told reporters here on the sidelines of a Bank of India event. Chakrabarty said that the credit growth has been satisfactory till now and the RBI feels that as of now, "things have not gone out of hand" on the asset quality front. The Deputy Governor suggested that banks should not overexpose to a particular sector. "You (banks) don't do anything too much, (because) then, we will be in problem," he said. With an eye to tame the headline inflation number, the RBI has raised its key rates 10 times since March 2010, the last being a 25 basis points increase on June 16. In the last announcement, it has also hinted at going in for more hikes if the inflation--which stood at an uncomfortable 9.03 per cent in May--continues to be high. As the RBI's tightening gets passed on to the borrowers, who are forced to pay more to service their loans, there is a fear that bank's asset quality may be affected. .

IBN Live

ICICI, Kotak, Yes Bank swell up realty exposure

As India’s central bank continues its vigil on fund flow into the property market, banks have sharply increased their exposure to real estate firms. ICICI Bank has a whopping Rs 25,094 crore exposure to real estate firms in 2010-11, an increase of 85 per cent over the earlier financial year ended March 2010. This is followed by smaller players such as Yes Bank, Axis Bank, Kotak Mahindra Bank and Bank of Baroda. The cash-starved realty companies are agreeing to cough up higher rates of interest to repay old debts or raise fresh debt as they struggle to finish off incomplete projects. The option of equity financing is nearly dead in property market. Commercial real estate exposure in banking parlance means credit given to property developers for developing a project. Growing its exposure at a much slower pace is State Bank of India, with a 4.2 per cent rise to Rs 14,011 crore for the financial year ended March 2011. This excludes home loans, finance to housing finance companies, National Housing Bank and other mortgage-backed securities. Crippled by muted demand and an overhang of supply, real estate developers have defaulted to banks and contributed to higher non-performing assets, according to RBI. Of the total non-food bank credit of Rs 36,77,429 crore, about Rs 1,14,550 crore is to the real estate companies. This figure doesn’t include home loans and loans to housing finance companies and mortgage-backed securities and Rs 1,73,944 crore to NBFCs that is under RBI watch for possible diversion to the real estate indirectly from the banking sector. Explaining the gravity of the situation, a senior Axis Bank official told Financial Chronicle on the condition of anonymity, “The exposure to real estate is the offshoot of the rise in demand for finance from the sector as there are a lot of commercial places being developed for BPOs and for the IT sector.” “Though our NPAs are negligible, bad loans are fast forming as there are unsold capacities in Gurgaon, Hyderabad and Chennai,” said the official. An e-mail questionnaire sent to ICICI Bank went unanswered. Developers anticipated a bigger demand and also higher rental, both of which have not happened. JP Morgan said in a recent research report, “Developer loans increased by 85 per cent year-on-year, but management maintained that most developer exposure is to large developers, with low loan to value (LTV) and limited exposure to smaller developers.” According to RBI, the new private sector and foreign banks increased their commercial real estate exposure by 59 and 69 per cent respectively, a rate much higher than the single digit growth rate witnessed by the other two bank groups. The rate of growth of NPAs in this segment at 19.8 per cent was also higher than the overall NPA growth rate of 14.8 per cent. In particular, the NPAs in the commercial real estate segment grew at 70.3 per cent as at end March 2011, most of the impairment taking place in public sector banks. Rajat Monga, treasury group president (financial markets), CFO, Yes Bank, said, “We fund only special purpose vehicles (SPVs) of companies. The land is generally mortgaged to the SPV and we have customer advances coming into the SPV; the revenues flowing to the SPV are escrowed making it quite stable financing. We have hardly any NPAs from the sector.” While Unitech and DLF have the largest exposure to banks, a large number of unlisted developers have also managed to take out finance from the banks, particularly the public sector banks. A few other banks such as HDFC Bank and Punjab National Bank have consciously brought down their real estate exposure. A senior PNB official told FC, “We achieved this by asking the developers to prepay some of their loans for which we gave some interest rate concessions.” Among foreign banks, Standard Chartered Bank has been active in the real estate market, providing finance to project developers, say bankers.

http://www.mydigitalfc.com/news/icici-kotak-yes-bank-swell-realty-exposure-074

'India not to lift ban on high denomination IC for Nepal'

The Governor of Reserve Bank of India (RBI), Dr D Subbarao, said that India would not lift existing ban on the circulation of Rs 1000 and Rs 500 denomination Indian Currency (IC) notes in Nepal, stating that the threat of counterfeit notes is still high. "We can´t allow circulation of Rs 1000 and Rs 500 denomination IC notes in Nepal given the high chances of circulation of counterfeit currency to India from Nepal. One of the issues of discussion at our recent meeting with governor of Nepal Rastra Bank (NRB) was the problem of counterfeit currency," told Subbarao to visiting Nepali economic journalists.  He also stressed on the need to take joint measures to end the circulation of fake IC notes through the open border between the two countries.  Amid rising incidents of cross-border flow of fake IC notes, India imposed a ban on the circulation of Rs 1000 and Rs 500 denomination notes in Nepal about ten years ago. Back then, the decision was supposed to have been taken on political considerations. According to NRB sources, the RBI may be ready to change its decision but only if it is taken up and endorsed at the political level.  Stating that shooting fuel prices is the common factor behind rising inflation in both the countries, he said giving fuel subsidy would not help ful for sound economy for long run though it commonly taken as a easy measure to curb inflation in short run. "Fuel subsidy is bad in the long run for a sound economy," he added.  He said India has given high priority to bring down inflation stating that inflation dropped to 9.1 percent in 2011, down from 11 percent in 2011. "It has become a challenge to mange economic growth and inflation in India. So, we are laying focus on strengthening supply side to tame the rising inflation," he added. Meanwhile, joint-secretary in the Indian Ministry of External Affairs (MoEA) Satish C Mehta asked Nepali businessmen to focus on the vast market of bordering Indian states — Uttar Pradesh (UP) and Bihar — for the market of their products and bring down trade deficit. "Nepal has to tap the high potentials of UP and Bihar for the marketing of Nepali goods as these states are home to over 250 million people.  These states are far nearer to Nepal compared to other states of India," said Mehta at the concluding function of two-week long training program organized for 15 Nepali journalists at Indian Institute of Public Administration (IIPA) in New Delhi with the support of Indian MoEA. The program included a visit to capital and financial markets in New Delhi and Mumbai and interactions with senior officials.  He said export from Nepal to India has grown 11 times between 1996 and 2009. He advised Nepal to focus on medicinal herbs, high-value agriculture products, and generation of electricity by taping immense hydropower potential.  "Ongoing tarai roads, Integrated Customs Points, and railway links at major cities of Nepal with Indian bordering cities will not only facilitate the bilateral trade but also bring down the cost of doing business in Nepal," Mehta said.

http://www.myrepublica.com/portal/index.php?action=news_details&news_id=32562

India’s inflation dilemma

For RBI to engineer a soft landing it will need to update its understanding of the growth inflation trade-off. Given the long lags in monetary transmission, using.....

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Stable core inflation to end rate hikes

Gokarn pegs growth at 8%, says inflation will slow to 6% by end of this fiscal assuming no new shocks appear

Mumbai: The key to the Reserve Bank of India (RBI) ending the rate hike cycle is for non-food manufacturing, or core, inflation to stabilize around 4-4.5%, says deputy governor Subir Gokaran. Core inflation for May was at 7.3%. RBI will press the pause button only when it sees “particularly the non-food manufacturing inflation starting to stabilize, which is what we saw in the second half of 2010,” Gokarn said in an interview at Bloomberg-UTV’s Banker’s Trust programme, to be telecast this week. “We need to keep an eye on that.” According to Gokarn, the number and overall magnitude of interest rate increases have a bearing on both economic activity and inflation expectations, and RBI expects that over time its set of hikes will lower inflation. This will happen on account of two factors—one, economic activities will slow; and two, inflation expectations will moderate. This will then allow people to make their own planning and pricing decisions, based on lower inflation outlook. “It’s a process that takes time and we have to give it that time,” Gokarn said. Unfolding RBI’s plan for a “soft landing”, Gokarn said the central bank is projecting that inflation will remain high till at least the middle of the fiscal year, but expects the cumulative impact of the rate actions to show in both slower growth and lower inflation numbers over the second half of 2011-12. “Slower growth is something we accept as a price of managing inflation, but we don’t expect that slowdown to be dramatic... We expect that growth will move from 8.5% of last year to 8% this year but, along with that, inflation will come down from 9% to 6% by the end of the (fiscal) year assuming that no new shocks are to appear.” Stating that a “neutral zone” of policy rate is a nice idea “but it’s difficult to quantify”, the deputy governor said “conceptually”, the interest rate is in a zone where it is possible for RBI to reverse the policy “fairly quickly” if the circumstances demand so. In 2008, RBI’s policy rate was ruling at 9%, but within a few months it was brought down sharply when the world experienced an unprecedented credit crunch in the aftermath of the collapse of US investment bank Lehman Brothers. “If we are hit by a severe shock we do have the capacity to reverse,” Gokarn said. After hiking rates six times between March and November 2010, RBI chose to hold its policy rate at 6.25% in its mid-quarter review of monetary policy in December, which many believe was not the right measure to adopt at that time. Gokarn defended the lack of action, saying the pause in hikes in December followed a moderation in non-food manufacturing inflation. Manufacturing inflation, also known as core inflation, is essentially driven by demand and makes up the non-food basket of the wholesale price index. It spiked up to 8.5% in March after moderating at around 5.5% between June and October. The pause was also in the backdrop of an unprecedented tightness in liquidity with banks borrowing at least Rs. 1 trillion daily on an average from RBI to meet short-term cash requirements. RBI has hiked its policy rate 10 times since March 2010. The 50 basis points (bps) hike in May was the biggest increase in the current cycle. One basis point is one-hundredth of a percentage point. Gokarn said one of the factors that forced RBI to go back to the 25 bps hike in last week’s mid-quarter review was a possibility of higher rates impacting business performance. “Our readings of financial performance do not suggest that (the impact of higher rates) is broad-based yet, (but) it may become and that’s a possibility that we have accommodated because one of the factors against a 50 (bps hike) this time is that the slowdown we anticipated may gain some momentum... There is a consideration of the factor,” he said in reply to a question on whether rate hikes are hurting companies. Average inflation in the previous fiscal year was 9.57%, the highest since 1995, and much higher than RBI’s projection. RBI’s original projection for inflation was 5.5%; after two revisions, this was raised to 8%. Analysts are skeptical about RBI’s 9% inflation projection till September as it was 9.06% in May and a likely oil price hike and the food security Bill that promises subsidized food to 68% of India’s population will put pressure on inflation. Gokarn said 9% inflation till September is not a target but a projection; “it’s based on certain assumptions and if assumptions go wrong, projections will go wrong,” he said. “We have pointed to some factors that may cause inflation to increase but there are also factors that may cause inflation to decrease—like commodity prices may soften, economic activity may start to moderate, which will have an impact on pricing power.” Admitting that the central bank was in danger of losing its credibility after missing its inflation projections last year, Gokarn said the 50 bps rate hike in May was prompted by RBI’s desire to demonstrate that it has not “diluted” its “commitment to inflation control”. “We felt that we had to reclaim the position that we had not given up on inflation, that it was very much a priority, and if people, markets, investors intermediaries were not convinced, we needed to take stronger action.”

Freeing savings rate

During the interview, Gokarn dropped a hint that RBI may not push hard for freeing the savings bank rate. In May, RBI released a discussion paper on the pros and cons of deregulating the savings bank rate and is now gathering feedback on the paper. “We toyed with the idea of putting up a working group but we realized that the views on either side were so firm that the working group would not end up in a consensus. So we said let’s put out a discussion paper with the pros and cons and get feedback, which we are getting now.” His personal view is that “there is merit in it (the savings bank rate) being deregulated because it is consistent with the overall financial reform strategy”, but RBI has to “take into account the fact that a lot of people see this as a safe and reliable source of monthly income and that’s a viewpoint that has come out strongly from a variety of stakeholders”. “We can’t just say (that) we are not going to address your concerns. So, I would presume that the outcome would be either status quo, which is always a possibility, or some sort of a middle ground where these stakeholders’ interests are given some considerations.”

Mint

Are we close to end of rate tightening?

If corporate earnings in the July quarter continue to be robust, pricing power of companies remains intact and inflation continues to rule high, one can expect the eleventh rate hike in July.....

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RBI sends questionnaire to banks

Questions have been raised on the transparency of banks in dealing with wealth management clients and demands made that the RBI act against such practices by introducing checks and balances.

Recently the wealth management and private banking business of banks have come in for a lot of flak for cases of mis-selling. The case where a relationship manger with Citibank India, Shivraj Puri, allegedly duped investors of at least Rs350 crore added fuel to the fire.  Questions have been raised on the transparency of banks in dealing with wealth management clients and demands made that the Reserve Bank of India (RBI) act against such practices by introducing checks and balances.  RBI seems to have taken note and, to start with, has recently sent a letter to scheduled commercial banks asking them to clarify on certain aspects of their private banking and wealth management business. The letter has 29 questions. Even Securities and Exchange Board of India (Sebi) is involved in the exercise. “We are conducting a study jointly with Sebi and depending upon the responses, we will decide the future course,” says Alpana Killawala, chief general manager, RBI. Any formal guidelines on the subject will benefit you, the customer, in terms of transparent and services. With banks growing as a distribution channel for many products and large customer base, their client list is also expected to be the longest among all distributors. S. Raman, chairman and managing director, Canara Bank, said, “We have received the questionnaire from the regulator but as such most government-owned banks are not present in the space of wealth management and private banking.” The industry, however, is not too happy. “If RBI formalizes a broader framework, it will suit the interest of the mutual fund industry. But if each and every aspect of the business is regulated, it will adversely impact all stakeholders,” says Rajan Krishnan, chief executive officer, Baroda Pioneer Asset Management Co. Ltd.

Mint

You can do four kinds of financial transactions from your mobile phone

To avail the Mobile wallet facility, yours and the beneficiary’s bank accounts should be linked to IMPS. Currently, 21 banks are linked to IMPS

Your mobile phone can manage a part of your financial life. Here are four important financial matters that you can tackle on the go using your cellphone.

Mobile wallet

This prepaid semi-closed instrument facility allows you to load money on your cellphone to make certain payments. You can load up to Rs. 50,000; the limit was raised from Rs. 5,000 by the Reserve Bank of India (RBI) last month. You can pay utility bills, such as electricity, gas and water, mobile bills, cable or DTH subscription fee and insurance premiums. You can also purchase goods and services from registered vendors. However, this facility cannot be used to transfer money to another individual. You can download the application from your bank or service provider’s website and get the wallet enabled on your mobile. According to RBI data, 34 out of 39 banks that got approval for mobile banking have started the service. Airtel Money is the first telecom provider to launch this facility.

Transfer money to another account

The National Payments Corporation of India has an inter-bank mobile payment service (IMPS), which enables savings account holders to transfer money to another account within the country through their mobile. To avail the facility, yours and the beneficiary’s bank accounts should be linked to IMPS. Currently, 21 banks are linked to IMPS.

Tracking personal expenses

You can track your household expenditures on your mobile by using one of the many existing personal finance mobile applications. Most such applications come with predefined expense categories and payment method to make using it easy. Additionally, you can enter notes, date, place and currency information for a comprehensive overview. Most applications allow you to synchronize information with a portal. Some even have charts and graphs to compare expenses. Track Every Coin and iPersonal Expenses are two such applications.

Share trading on your phone

You can even trade in stocks while on the move. A number of brokerage firms provide this facility. Some basic things that customers can do are tracking live market levels, viewing intra-day charts, creating customized lists and viewing live stock quotes. Some brokerages also enable buying and selling stocks. If you have an online trading account with the brokerage, along with buying and selling stocks, you may also be able to view your day’s position, track your portfolio performance real time, check order and trade reports, modify pending orders and check margin account balance.

Mint

The percentage game

The RBI credit policy continued with its anti-inflationary stance, raising interest rates, and indicated that controlling inflation would be its priority. For a central bank to be able to prevent price shocks from becoming persistent inflation, its policy strategy has to go beyond episodic rate hikes to a full-blown strategy of commitment, communication and consistency.  While most people expected the rate hike, considering the increase in inflation as seen in the most recent data, others, such as industry lobbies, objected to the rate hike. It is argued that when inflation is being caused by factors that the central bank has no control over, such as food prices, global commodity price shocks or a large fiscal deficit, there is no role for monetary policy. It is true that the central bank cannot control an increase in onion prices if the harvest fails, and shocks to inflation will continue to be caused by such difficulties. The only thing monetary policy can do in this situation is to control the medium- or long-run inflation rate. It can ensure that owing to a credible commitment to a low inflation rate in the medium term, the rise in inflation owing to an episodic food price shock is seen by the public as a one-time temporary increase in inflation. That way it will not feed into inflationary expectations, into wage bargains and cost of production, and hence become generalised.

IE

India Inc bracing up for tough times

More galling than the failure of RBI’s measures to tame inflation is the abysmal lack of actions by the central government against the systemic weaknesses of the economy. It has to persuade the G20 to initiate action on reining in global commodity prices as they ride a wave of gushing liquidity.......

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Banks gear up to increase lending & deposit rates

Mumbai: Close on the heels of the Reserve Bank of India (RBI) raising its policy rates by 25 basis points in its mid-term monetary policy review last week, banks are gearing up to...

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Reserve Bank addresses inflationary tendencies

The rate hike in future is dependent upon the extent to which the current global uncertainties impact domestic growth. The RBI expects that this rate hike will result in “containing inflation and anchor inflationary expectations by reining in demand-side pressures and mitigate the risks to................

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Greece In India

Both Dr Singh and Dr Rangarajan knew that a half-hearted move would make matters worse. Global financial markets and the IMF expected more. Dr Singh pretended to get in touch with the Deputy Governor in Mumbai and claimed he was unable to get him. Mercifully, those were not the days of cell phones and SMS. Good old MTNL could be depended upon not to put a call through! A night of failed communication between North Block and Mint Road enabled the “jump” after the intervening “skip”.......

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The RBI’s got its sums all wrong, we’re not on an upward curve

With reference to the editorial Not a loan at home (Our Take, June 17), if the Reserve Bank of India (RBI) believes that increasing interest rates is the solution to our economic problems, then it is grossly mistaken. If it was so easy, why didn’t Argentina and Greece adopt a similar strategy to tackle their economic crises?  In fact, our economy is booming, but only on paper.

VN Kesavan (Hindustan Times)

Tax relief on health check-up

New Delhi, June 19: The government has said that employees will no longer have to pay income tax on money drawn from welfare funds for annual medical check-ups. The Central Board of Direct Taxes has issued a notification, according to which no income tax will be levied “to meet the cost of annual medical tests or medical check-ups of the member, his spouse and dependent children” if money is drawn from the welfare fund to meet the expenses.

The Telegraph

RBI chair in city to study regional economy

CHANDIGARH: A Reserve Bank of India (RBI) chair has been approved to be set up at Centre for Research in Rural and Industrial Development (CRRID) to carry out research in monetary, financial and real sectors. "A memorandum of understanding was signed between the two institutions this week," director general of CRRID, Dr Sucha Singh Gill revealed to The Times of India here.  CRRID is the only institution in entire northwest India to have a chair of RBI offering an opportunity to researchers to develop credible regional financial tools. RBI has already approved a grant of Rs 4 crore to the research institution. The grant will be released in several tranches as the work progresses. The institution has targeted to start the search for an RBI professor early July.  CRRID was the third national institution to have been offered such a chair across the country. Two such chairs this month went to Chennai and Kerala. Such chairs are already working in IIM Ahmedabad, IIM Bangalore, JNU and Delhi University, among others. The research will be used as policy input for RBI.  Dr Gill said though what needs to be researched has to be decided in consultation with the RBI professor to be appointed, yet studying the region itself offers great insight into monetary, financial and real sector issues of the region.  For example, the issue of commission agents in Punjab is a very peculiar model of financial transactions and there is a scope for the banking sector to closely understand it for planning growth and credit planning, he said.  Once a growth engine of the Indian economy due to progress in agriculture, the region is now growing slower than other states.  This phenomenon needs a lot of research for financial and economic planners to take corrective decisions.

TOI

A Pocketful of Data - Review by P.P.Ramachandran

.........Kanagasabhapathy, the Director of the Research Foundation, is a highly respected ex- official of RBI and the IMF and ...............

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'Interest rates to be raised, if we get uncomfortable' - Arun Kaul, CMD, UCO Bank

After the Reserve Bank of India (RBI) upped the repo rate by 25 basis points, which also means a 25 bps rise in reverse repo rate, most banks are yet to decide whether to pass on the increased interest rates to the consumers. UCO Bank Chief Managing Director Arun Kaul tells Malvika Joshi and Shaikh Zoaib they will do so only if the RBI's action results in making his bank uncomfortable. Edited excerpts:

The RBI revised the policy rates on June 16, will you increase the interest rates? If yes, when?

We have not decided anything yet, but in case the rise goes beyond our comfort level, we will have no other choice but to pass it on to the customers.

Non-performing assets have been a cause of concern in the quarterly results announced by the banks. Keeping in mind the moderated growth, how do you plan to manage the asset quality?

We are addressing the issue and trying to recover. Now on, we will be careful about our customer and product selections. We are confident of being able to do a good job this year. Just wait for the results.

There have been talks that non-banking financial companies (NBFCs) will be given banking licences in the near future. Do you think that will make competition tougher for the existing core banking industry?

India is a fairly large market. In a country of 1.12 billion, more than 50 per cent people do not have bank accounts. A large part of the market still remains untapped with several villages and towns not having even a single bank branch. In such a situation, I feel if NBFCs are given banking licences that wouldn't be a problem at all.

How is UCO bank planning to achieve financial inclusion and literacy?

Many people do not utilise the banking facilities as they are not aware of the products offered. Hence, for the purpose of financial literacy, we have set up some financial learning and counselling centres and are looking to set up more. We are supposed to identify the villages for setting up rural branches according to the Planning Commission. We have a target of covering 1,800 to 2,000 villages and have already covered between 1,000 and 1,200. Hopefully, we will meet our target by next March.

BS

Bank employees to strike work on July 7

About 10 lakh bank employees across the country will go on strike on July 7 to protest against the government's policies on public sector banks, the United Forum of Bank Unions has today. "The Centre is following a policy that will destroy public sector banks in the country," AK Ramesh, National President of Bank Employees Federation of India (BEFI) told reporters here. The striking employees are demanding no privatisation of public sector banks, non merger of banks and ban on outsourcing, he said.

BS

Small change, big memories

As yet another coin makes its exit from the Indian currency scene, the 25 paise or the char anna evoked nostalgia among old timers and even the not-so-old.

From June 30, the 25 paise coin will no longer be legal tender. It is being phased out because it is unviable to produce the coin, because of the rising metal costs. As yet another coin makes its exit from the Indian currency scene, the chavanni, the char-anna or the naal-anna evoked nostalgia among old timers and even the not-so-old. Tiruchi-based businessman, 50-year-old Mr Gopinath Aiyar recalls how four decades ago, he and his brother would earn 25 paise — a sum they considered princely — by fetching water for their mother.  “My father was a station master at Kodambakkam in Chennai. In those days there used to be acute shortage of drinking water in summer. We would walk some 2 km to fetch drinking water either in the thick of night or as early as 4 a.m. The incentive was the 25 paise,” he said.  With this 25 paise, the young Gopinath would hire a cycle for three hours and ride around. He also describes how 10 years later, in his first job at Lucas TVS in Chennai's suburban Padi, the coin would fetch him a sumptuous breakfast of idlis and vadas. For 49-year-old Mr Dony Kuriakose, the Delhi-based Director of Edge Executive Search, the chavanni brings back memories of a horrific accident, when he was just eight years old.  “In those days, 25 paise used to fetch an orange lolly and I had just bought one and was happily eating it and walking when I was hit by a motor-bike. I was laid up for 25 days and still have the scars,” he says.  Several 60-year-olds in the Capital described the cholley bhaturey they would get for 25 paise “in the good old days”. For image management guru Mr Dilip Cherian, the 25 paise instantly brings back memories of Coca-Cola, a rare treat those days. “I studied in Calcutta, and the big treat after Church on Sundays used to be money to buy a Coke. That used to cost 25 paise,” he says. He also remembers buying postal envelopes with 25 paise stamps — as opposed to inland letters — “to send letters to special friends”.  Eighty-year-old retired schoolteacher Mrs Yeshodhara Balakrishnan remembers visiting the beach in her home town Tellicherry in Kerala in the 1960s, just as fishermen would be returning with their catch.  “For four annas, we got about 50 sardines fresh from the sea,” she says. “And, we got a mackerel for one rupee,” she says, wistfully.  For the political movers and shakers in the Capital, chavanni takes them back to the days when for 25 paise, they could join the Congress party.  And, for avid film-goers, the chavanni immediately brings to mind sitting on the front row and passing colourful comments on the movie.  Now, the chavanni era has ended — yet another coin will soon become a collector's item.

Business Line

With 45% of deposits maturing within a year, banks may have to up rates

Nearly 45 per cent of bank deposits mature within one year — spread over different tenors from as short a period as one day to one year. This is visible from the deposit maturity pattern of a couple of top banks across both public and private sectors. The implication for all banks in the current scenario is that their cost of deposits is going to go up as they start re-pricing them at higher levels. Deposit growth has been moving up to about 18 per cent recently. Although a significant portion of deposits in the system is short-term, bank depositors seem to prefer putting their money in the 1-3 year deposits.

Tenure pattern

Five top public sector banks whose deposits account for a little over Rs 20 lakh crore (or about 40 per cent of the total banking deposits), had about 26 per cent of their deposits in the 1-3 year category. For four top private banks, the corresponding figure was nearly 40 per cent. The depositor preference for medium-term deposit has remained more or less similar during the last decade. As for long-term deposits, public sector banks seemed to enjoy a higher share with about 29 per cent of their deposits coming in the above-3-year category. For private banks that was relatively lower at 17 per cent. One explanation for this phenomenon is that private banks have generally steered clear of long-term exposures and, therefore, don't feel the need to raise long-term money. A slightly harsher view could be that the depositing public still hasn't developed the confidence to put their money in long-term deposits of private banks. The residual maturity pattern of deposits given by banks also throws up some more interesting nuggets. For instance, Bank of India had 5.4 per cent of its deposits maturing within a day of the balance-sheet date of March 31, 2011. This was significantly above the average for the sector. This could possibly be explained as a consequence of raising very short-term deposits from corporates, public sector undertakings and government departments.

Business Line

India's answer to Visa from today

Rupay, dubbed as India’s answer to MasterCard and Visa, is set to make its debut tomorrow. Bank of India will give the first batch of automated teller machines (ATM)-cum-debit cards to Unique Identification (UID) number holders in Pagdha village of Maharashtra’s Thane district. The card, which will be given to ‘no frills’ account holders, can be used to withdraw cash from ATMs as well as from micro-ATMs, the hand-held devices with the bank’s business correspondents. However, for swapping the card in point-of-sale terminals at merchant establishments, customers will have to wait till the year-end. RuPay card will have two identification features. The cardholder will have to provide the UID number for biometric identification for using micro-ATMs, while the PIN will be required for transactions via ATMs. “Since these cards are Aadhar-based, we will issue these cards to around 90-95 people in the village who have already been allotted the UID numbers,” said A P Ghugal, general manager, Bank of India. The bank plans to roll out these cards through each of its five sponsored regional rural banks by next month. Corporation Bank and Union Bank of India are next in line to issue the ATM-cum-debit RuPay cards. To start with, banks are targeting semi-urban areas. “To make these cards functional, one needs data connectivity which is not available in rural areas, so banks are starting out with semi-urban areas for now,” said A P Hota, managing director and chief executive officer, National Payments Corporation of India (NPCI). Backed by NPCI, RuPay card is a payment gateway and an alternative to the global real-time payment processing firms like Visa and MasterCard. “Premium payment service providers may not be interested in penetrating to the ground level. This is the value proposition that only RuPay offers. Initially, it will be helpful in filling up the gap and later on, it can be issued to matured customers in urban areas as well,” said Hota. Since these cards are being issued to 'no frills' account holders for now, the limits for withdrawal and transactions will be in line with terms and conditions laid down by the banks on their respective 'no frills' accounts. These cards cannot be used at point-of-sale terminals for now. "NPCI is working towards setting up the acceptance infrastructure for RuPay cards, which will be completed within six months. This will enable bank customers to use these cards at merchant establishments as well," said Hota. Debit card usage in India has grown rapidly. According to the Reserve Bank of India, the outstanding number of debit cards rose 25 per cent, while the volumes transacted jumped 46 per cent in 2010-11 compared to the previous year.

BS

RBI STAFFERS PROTEST WITHDRAWAL OF PENSION REVISION

Employees of the Reserve Bank of India (RBI) held a demonstration in front of the central office building on various pension-related issues including withdrawal of revision of pension. The pension updation scheme of 2002 for pre-1997 retirees was opposed by the government in 2008. As a result, RBI had to withdraw the updated pension scheme. “Despite promising that the matter will be sorted out by top RBI management, nothing was done. Now, they are not even responding to our request for discussions. As a protest we had the demonstration,” said a representative of the United Forum of Reserve Bank Officer and Employees. The central bank staffers have also protested the government’s proposal to make staff regulations statutory.

BS

The real picture on inflation

...With a single CPI, an investor may find it easier to benchmark his returns to inflation. Now all we need is an inflation indexed bond product that ....

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COSIA calls for ceiling on interest rates for SMEs

Chamber of Small Industry Associations (COSIA) has asked the Reserve Bank to put a ceiling on interest rates charged by banks on the small and medium enterprises. In a statement the COSIA said that RBI’s repeated rate hikes have failed to curb inflation even as the domestic investors are feeling the pinch. The Chamber President M.R. Khambete said that the base rate of banks between July 2010 and May 2011 has gone up by 150-300 basis points affecting the credit growth. The repeated hikes of the key policy rates has not brought out the desired results and hence the RBI must now look for some innovative measures to contain inflation, it added. The Chamber said the SMEs have suffered due to rise in interest rates and RBI could think of putting a ceiling on the rate of interest charged to SMEs, he said. Inflation, as measured by the Wholesale Price Index (WPI), was over 9 per cent in May. To check inflation RBI has raised its key policy rates 10 times in a year-and-a-half. The latest hike was of 25 basis points hike in short-term lending and borrowing rates which was announced on June 16.

The Hindu

Sectors with positive outlook in current market conditions

The rate hike was anticipated by the markets as the inflation rate is still ruling quite high. The interest rates have gone up quite significantly over.....

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Meeting of stakeholders soon on Bimal Jalan report

...The Centre is yet to firm up its views on the Bimal Jalan committee recommendations, which has created strong divergent views among stakeholders. This committee had gone into the ownership ........

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Symbiosis univ launches R K Laxman Chair

Pune: Symbiosis International University (SIU) on Saturday inaugurated a chair to honour renowned cartoonist R K Laxman. Called the R K Laxman Chair for research and studies in media and communication, it would focus on thought leadership, guiding research and policy formation in media and communication. Senior journalist Dileep Padgaonkar will be the Chair professor. “Eminent cartoonist R K Laxman has the rare gift and ability to please the entire country with a single stroke of his cartoon that brings out the common man’s problem in a polite and subtle way,” said Union agriculture minister Sharad Pawar, chief guest at a function to announce the chair. Laxman could not attend the ceremony. His wife and author Kamala Laxman read out a message on his behalf. “The Chair provides a deep sense of fulfilment to us,” she said. Photographer Gautam Rajadhyaksha, who attended the function, said, “Laxman brought in reality and social comment through his cartoons. They reflect a tongue-in-cheek, mature sense of humour devoid of any malice. Going through his cartoons, the reader at once gets a bird’s eye view of the happenings around.” Minister for higher and technical education Rajesh Tope, former union minister Mohan Dharia, SIU founder chief S B Mujumdar, principal director Vidya Yeravdekar, SIU vice chancellor Bhushan Patwardhan and media and communication faculty member Chandan Chatterjee were also present.  

TOI

Retail investor interest shifts to bank deposits from small-savings

...Data available on financial savings of the household sector (gross) in the RBI annual report also point to the waning interest in small-savings schemes. From about 19.6 per cent of total household financial savings in ...

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Training for journalists ends

NEW DELHI: Fifteen Nepali business and economic journalists returned today to Kathmandu after a two-week training in New Delhi and Mumbai. The journalists representing major print media took part in the training in Indian Institute of Public Administration, one of the leading education and training institutions of India. Securities Board of Nepal (Sebon) and Indian Embassy in Kathmandu has coordinated the training for the journalists. The journalists apart from interacting with prominent Indian economic journalists visited Bombay Stock Exchange too. In Mumbai, they interacted with RBI Governor.

The Himalayan Times, Nepal

Easy banking: above no-frills, below savings accounts - Hindustan Times

Life may became a bit easier for your domestic staff. According to a recent notification by the Reserve Bank of India, job cards issued by the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) duly signed by a state government officer and letters issued by the Unique Identification..........

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Check out the factors that forced RBI to hike rates again

According to the RBI, based on the current and evolving growth and inflation scenario, it will need to persist..........

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