IMPS is free now, may cost up to Rs 5 in future



                A.P.Hota, MD & CEO, National Payment Corp. of India                     



IMPS is at present confined to person-to-person payment.  We have just got RBI’s approval for merchant payments person-to-merchant and merchant-to-merchant payment

What does National Payment Corp. of India do and what’s the future of payment system in India—cellphone, Internet or ATM?

This institution was set up on a vision of the Reserve Bank of India (RBI) to have an umbrella organization for all retail payments. Umbrella organization means being the central infrastructure for all retail payments other than RTGS (real time gross settlement)—be it cheque clearing, money transfer, electronic clearing service, electronic funds transfer, card payment system, cellphone payment system and the like. The cellphone as a payment system will be the future.

Could you tell us about inter-bank mobile payment system (IMPS) in short?

IMPS is available 24x7 and (fund transfer through the cellphone) happens real time. Both the beneficiary and the sender get an SMS as confirmation of the transaction immediately. IMPS works on the existing infrastructure; therefore, the cost is minimal. Suppose you want to send funds to someone urgently in another city, you can send it immediately using IMPS and the receiver can go and withdraw the money at an ATM. Real-time money transfer is used by large business houses and companies through RTGS. Through IMPS, it’s like taking RTGS to retail customers.

Currently IMPS service is free of cost by banks. Will there be a cost in the future?

We charge 10 paise per transaction to the sending bank. For National Electronic Fund Transfer, banks charge a minimum of Rs5 for up to Rs25,000. With IMPS, the maximum limit (of money transfer) is Rs50,000, so the amount that banks may charge should be Rs2-3. For the first six to seven months, banks would like to offer the service free. How much the banks will charge has not been decided. But if they charge more than Rs5, it will not take off and the banks know it very well. So, it will definitely be less than Rs5.

How long will it be before we can use IMPS for retail payments and through multiple channels?

IMPS is at present confined to person-to-person payment. We have just got RBI’s approval for merchant payments— person-to-merchant and merchant-to-merchant payment. Person-to-person is relatively easy, but person-to-merchant will involve a good deal of work since it has to be integrated with the merchant system also. We will soon start with six pilot banks for person-to-merchant payments.  RBI has given us permission for channel integration too. That’s from cellphone to ATM and from ATM to Internet. Currently, if you want to send money through the Internet or ATM, you will have to punch in a whole lot of details such as bank name, branch name, account number and the like. Now we have permission to use the ATM or Internet channel to use MMID (Mobile Money Identity, a unique number you get when you register for IMPS) and mobile phone number as the identifier of the customer. This facility is yet to be rolled out.

How would it work?

When you go to an ATM, you will see a menu which will have an IMPS option. When you choose the IMPS option, you will have to punch in the mobile phone number, MMID and the amount of the sender, once you press enter, your account will get debited and the receivers’ account credited for the amount. So, (in the near future) you can send money through an ATM, if you do not want to send it using your cellphone through IMPS. This service is for those who are more comfortable with using an ATM instead of a cellphone. Even with Internet banking, you can use IMPS.

Banks are issuing MMIDs to every new customer, but very few of these are active. Will IMPS meet the same fate as no-frills account of not taking off, only active on paper?

Let me not compare IMPS with no-frills accounts. IMPS has been introduced to 10 million customers. You are right in saying that accordingly the volumes should pick up. But you may not have seen any advertisements. Most banks are waiting for a sizeable number of banks to join the system. Once that happens, they would go for an advertisement campaign. At present, 22 banks already offer this service and three more will go live in a week’s time; this will be a critical number for them to start the publicity campaign. Here customer education is the key.

What if there’s a grievance regarding IMPS?

The customer should approach his bank directly.

Mint 

Canara Bank organise CBI officers training

Bosskey adds flavour to humour meet



Encouraging talent:

A young participant Akash (grandson of S.Venugopalan, Ex-AGM, RBI, Chennai) regales the audience at the Besant Nagar Humour Club meet with his jokes as actor Bosskey watches



Besant Nagar Humour Club, in association with the Reserve Bank of India Staff Quarters Residents Welfare Association, conducted its monthly meeting on June 5. The chief guest on the occasion was comedian and TV personality Bosskey. The meeting began with a prayer by Kruthika. Club chairman A. Kumar, in his welcome address, said the club is being run successfully for the past 10 years with the motto "Laughter is the Best Medicine" aimed to provide a platform for people in and around Besant Nagar to relax and enjoy an evening of laughter. He requested the members to attend the meeting in large numbers and also asked them to help in getting more membership by popularising the activities among their friends and relatives. The annual subscription is only Rs.150, which is very nominal, he added. G. Swaminathan, secretary of the club conducted the open Joke Session, in which children and other members participated in large numbers. The children cracked jokes with spontaneity which was well received by the members with loud cheers. While addressing the audience, Mr. Bosskey endeared himself to one and all by asking them to suggest a topic on which he could speak. The members came up with various topics such as cinema, Nagesh comedy, cricket, TV seriels, etc. Mr. Bosskey spoke spontaneously with a humorous touch on all the topics given by the members proving his extempore skill that was well appreciated by the gathering. For membership and other details, contact Mr. Kumar at 9444755430.   

Taming inflation, protecting growth - Hari Shankar Singhania

The central banker of an emerging economy has the unenviable task of striking a balance between growth and inflation. They must not kill growth in the war on inflation. RBI Governor D Subbarao is one such governor. He represents the central bank of a leading emerging economy, where inflation is crawling up while growth is decelerating. On June 16, he made his mind clear when he had observed, “some short-term deceleration in growth may be unavoidable in bringing inflation under control and the RBI needs to persist with its anti-inflationary stance.” What is noteworthy, however, about his ‘anti-inflationary stance’ is the small steps he takes, so that growth is not hurt. For this, he has earned criticism. According to critics of the baby steps, in the last 15 months the repo rate has been increased 10 times, by a cumulative 2.75 percentage points, but with little effect on inflation. There is, accordingly, a suggestion that RBI needs to re-think its strategy. However, such an assessment is misplaced. So far, inflation was being driven largely by food and commodity prices, and RBI action could have had very little effect. Naturally, inflation was inching up, in spite of many hikes in the policy rate. Like central banks everywhere, the RBI had to take small steps to express its concern and readiness to act. While big steps could be damaging, baby steps could be intimidating. Further, so long as inflation was seen as a supply side constraint, there was no point in RBI displaying its killing spirit. The context has changed now. Commodity price inflation has spread to manufactured products and is pushing core inflation. Couple this with food price inflation, and there is the risk of a wage-price spiral. Further, oil prices are posing a serious threat. If the government allows a full pass-through of the rise in oil prices, headline inflation would hover around the double-digit level and seriously cripple growth. Given this, it is time to declare war on inflation, before it spins out of control. It is rightly felt that in the war on inflation, growth can wait. The RBI governor has once again increased the rate by only 25 basis points, but at 7.5 per cent the repo rate is sufficiently growth-constraining. Further hikes will follow if the present action is not seen to be effective enough. However, the question of trade-off between inflation and growth still remains. We cannot ignore the interests of growth, as otherwise there is the risk of stagflation. Growth must wait at a level the economy can live with. What is that level where we can ask growth to wait and not fall further? What is the degree of freedom for the RBI with regard to rate hikes? What is the limit beyond which the rate should not be pushed further? It is difficult to answer such questions, but a realistic assessment of the current situation may be useful. The global economy is once again in crisis, with the advanced economies standing on the precipice of stagnation. We, in India, cannot escape the effect of the crisis. The RBI governor is right in pointing out that “recent global macro economic developments pose some risks to domestic growth.” What he means is that our GDP growth will be affected in any case, and the situation may be worse if inflationary trends remain unabated. The question is, to what extent we can sacrifice growth and still retain the growth momentum? During the crisis of 2008-09, our GDP growth had fallen to 6.8 per cent, but then, with the onset of recovery, it went up to 8 per cent in 2009-10 and 8.5 per cent in 2010-11. The slowdown fever had, however, started, beginning in the second half of the last fiscal. In the fourth quarter of 2010-11, GDP growth declined to 7.8 per cent, from 8.3 per cent in the previous quarter. In the current year, no one, including the RBI, expects growth to be above 8 per cent. But it is imperative that we halt the deceleration, as we also try to contain inflation. It is important that we also provide a cover for the economy to achieve the minimal expectation of 8 per cent growth, or around 8.5 per cent. Take this as the benchmark for the current year. Will this be difficult to achieve, if the RBI goes in for a further rate hike of, say, 25 or 50 basis points? In my view, the RBI can have this leverage in controlling inflation and we can still have more than 8 per cent growth, provided some care is taken to ensure that the business environment is not disturbed and business confidence is boosted. At this moment, when the RBI has to perform its role, the government must ensure that the economy runs smoothly in spite of various anti-corruption drives and civil society movements. All centrally sponsored schemes need to be carried through in earnest so that resources allocated for the purpose are fully utilised. Intelligent fiscal consolidation also helps. It is also important to ensure that infrastructure projects are not hampered due to lack of clarity and uncertainty on matters relating to land, environment, forests, rehabilitation, etc. Such matters have been seriously hurting the investment climate in the country, and are contributing to the slowdown. On their part, commercial banks should be judicious in credit allocations. They may pursue a discretionary policy on supply of credit and lending rates. They have a critical role to play in this moment of crisis. Interest-sensitive but employment-intensive sectors (such as small and medium enterprises) can be spared the full rigours of the credit squeeze and the burden of high lending rates. In the war on inflation, the RBI and commercial banks can work in partnership. While the former controls inflation, the latter can protect growth.

The author is President, JK Organisation, New Delhi BS

“Education, skill development must be integral to growth process”



High growth : Reserve Bank of India Deputy Governor K.C. Chakrabarty addressing ‘Voice of Tomorrow'

COIMBATORE: Education and skill development should be an integral process of the growth process in the country, according to Deputy Governor of the Reserve Bank of India K.C. Chakrabarty. Speaking at ‘Voice of Tomorrow – Fuel to Excel,' organised by the Indian Chamber of Commerce and Industry, Coimbatore, and The Hindu here on Saturday, he said that youth and entrepreneurs would be the voice of the future. It should be a collective aim for all to enable the country register 10 per cent growth for the next 20 years. India is the only country where the working population will increase for the next 20 years. In such a scenario, education and skill development should be an integral part of the growth process. “If we are not able to create skills of global standards, the demographic dividend will be a demographic disaster,” he said. The education process should be vocation oriented and industry-institute interaction was important for this. Skill gap would be costly for the economy. Infrastructure was another important sector. Energy security and alternative clean energy were needed for the manufacturing sector to grow. Innovation was needed in food and energy. Successful models in a State should be replicated by other States too. Technology should be used more effectively to bring down the cost of production. As the economy grows and with a huge young population, more would aspire for high quality education. After their education and getting employment, the next requirement would be quality shelter. On the lines of food and education for all, the endeavour should be towards shelter for all. There would be tremendous credit demand for education and housing. And education and shelter should be available at affordable costs. “Inclusive growth should be the goal of the entire society,” he said. The RBI plan was to ensure that in the next five years, every individual and household in the country should have access to banking services. This would enable people to participate more effectively in the economy and society. Millions of micro and small-scale entrepreneurs should be created. “High growth is not sustainable with high inflation,” he said. M. Narendra, Chairman and Managing Director of Indian Overseas Bank, said India now offered several opportunities. Hence, it was important to not just prepare for the present but for the future too. The country should be able to achieve the current rate of growth for the next three or four decades. It should address issues such as development of human resource, infrastructure, urban and rural areas and economic reforms. The country had a large youth population and they were the greatest strength. He urged the participants to work hard, aim high, have a broader vision of their endeavours, and break boundaries. Industries should focus on the customer and follow the best management practices. It was important to reach out to every one. Economic inclusion would be a co-ordinated effort. Former presidents of the chamber K.G. Balakrishnan and D. Balasundaram, chairman of the Bharatiya Vidya Bhavan, Coimbatore, B.K. Krishnaraj Vanvarayar, and vice-president of the chamber P.R. Vittal also spoke. M. Krishnan, President of the Indian Chamber of Commerce and Industry, Coimbatore, said in an effort to commemorate 82 years of the chamber's activities here, it was organising 82 programmes with different concepts. The objective was to ensure economic development here and provide a forum for the youth and entrepreneurs to interact with industrial leaders. D. Raj Kumar, Regional General Manager of The Hindu, Coimbatore, said this was the second programme in the ‘Voice of Tomorrow' series. The aim was to enable future leaders to emerge from this platform. D. Nandakumar, secretary of the association, spoke.

Hindu 

Flat of RBI official burgled at Ultadanga Quarters

Cash and ornaments worth Rs 7 lakh have been stolen from the Ultadanga quarters of a senior official of the Reserve Bank of India who has recently been transferred to CAB, Pune.  “One of the residents of the RBI quarters at Ultadanga saw the door of Assistant General Manager Jawahar Lal Sau’s flat ajar around eight last night. We rushed in to find the flat burgled,” a police officer said.  Sau had left for Pune with his family a few days ago. But he was yet to shift his belongings from his fifth-floor Ultadanga flat. He flew down to Calcutta this morning after being informed about the theft.  Sau has said in his police complaint that gold jewellery weighing 300 grams, some silver utensils and Rs 30,000 in cash had been stolen.  “The lock on the flat’s main door had been broken open. The cupboard had also been broken and the flat ransacked,” the officer said.  “There are no CCTVs in the building. We are trying to prepare a list of people who visited the building in the past three-four days,” said an officer of the anti-burglary cell of the city police. The house of a group-D staff of the RBI in Narkeldanga, around 2km from Ultadanga, was also burgled yesterday evening.  Gold ornaments weighing 180 grams and Rs 20,000 in cash were stolen.

The Telegraph 

Mukherjee to pay three-day visit to United States from June 27

Union Finance Minister Pranab Mukherjee will leave on June 27 for a three-day visit to the United States during which he will hold bilateral meetings wth US Secretary of Treasury Timothy Geithner and interact with business and industry. On Monday evening, Mr Mukherjee will deliver in the keynote address, along with Mr Geithner, at a conference on the theme "US Indian Economic and Financial Parternership". The conference is being organized by the Confederation of Indian Industry (CII) in collaboration with Brookings Institute of US.  The different sessions of this day-long event will also be addressed by Mr R.Gopalan, Secretary, Department of Economic Affairs, Dr Kaushik Basu, Chief Economic Adviser, Ministry of Finance, Mr Subhir Gokarn, Deputy Governor of the Reserve Bank of India (RBI) and Mr U.K.Sinha, Chairman, Securities and Exchange Board of India (SEBI), among others.

http://netindian.in/news/2011/06/25/00014026/mukherjee-pay-three-day-visit-united-states-june-27

BOB convenes meeting of State Level Bankers Committee

The 109th meeting of State Level Bankers Committee functioning under the convenorship of Bank of Baroda was held on 20th June 2011 at Jaipur. Namonarayan Meena, Minister of State for Finance in Govt of India presided over the meeting, which was attended by Rajendra Parikh, Minister of Industries and Economic Affairs, Government of Rajasthan State, M.D. Mallya, CMD, Bank of Baroda, N.S Srinath, ED, R.V Verma, Chairman of National Housing Bank, Deepali Pant Joshi, CGM-I-C, RBI, Shiv Kumar, MD, SBBJ besides other dignitaries of various Public Sector Banks and state government. The committee discussed various aspects of financial Inclusion Policy of Govt. of India and RBI for implementation by Public Sector Banks.

TOI

25 paise coins to go off circulation from June 30

KANPUR: Coins of 25 paise and lesser denominations will be withdrawn from circulation from June 30. They will not be accepted for exchange at bank branches and RBI issue offices.  The Reserve Bank of India has, therefore, appealed to the public to exchange these coins at branches maintaining small coin depots or at offices of the Reserve Bank. Assistant General Manager of the bank J.P.Singh informed that the exchange facility at bank branches or the Reserve Bank offices would be available till June 29.  It is important to mention here that in the exercise of powers conferred by Section 15A of the Coinage Act, 1906, the Government of India has decided to withdraw the coins of denomination of 25 paise and below from circulation with effect from June 30. From this date, these coins shall cease to be the legal tender for payment as well as on account.

TOI

Fuel price hike to add 30 bps to WPI inflation - Oil Secretary

The government's decision to hike fuel prices is expected to add 30 basis points to the country's headline inflation, Oil secretary G. C. Chaturvedi told reporters on Friday.Persistently high inflation, which hovered above 9 percent in May, had prompted the Reserve Bank of India (RBI) to raise key interest rates 10 times in just over a year. The RBI last week signalled more increases to come even as growth in Asia's third-largest economy is slowing down.

Reuters

Growth in banks' earnings may drop: Analysts

Dwindling demand for loans, shrinking margins and higher provisioning requirements are likely to drag the earnings of banks in the coming quarters, industry analysts said, giving more credence to concerns of a slowdown.........

Read more..........

‘Growth can wait, not inflation’

Bimal Jalan is a former Governor of the Reserve Bank of India (RBI), a former member of the Rajya Sabha and a well-known author on policy regimes. In this interview with Olga Tellis, he urges that inflation be tackled on a priority basis through a coordinated approach in the whole of the government and believes that drop in investment is a cyclical issue that can be dealt with as we have sufficient resilience.

Q. There is a lot of concern about dwindling investments, both domestic and foreign. How do you see these things?

A. Any dip in investment, or in buoyancy in the market is a concern. But the greater concern is that of inflation, and the perception of lack of governance in the wake of the 2G spectrum and other scams. There is a feeling that the government is not as effective as it should be and that there is lack of co-ordination between different parts of the government. These are more fundamental issues. Issues like drop in investment are cyclical issues and can be dealt with. India has the resources with a 35 per cent domestic savings rate and investment at 37 per cent of the gross domestic product (GDP) that is one of the highest in the world. This short-term dip doesn’t mean much. The growth in quarter on quarter terms is not so worrying as the medium-term worries about corruption and non-governance. These are very fundamental issues that are affecting the country and the economy.

Q. What about fall in portfolio and foreign direct investment?

A. I am not worried about fall in portfolio investment as that concerns the stock markets. If the markets go down, it will affect some people. But it is not a priority as we already had excess inflows and added them to our reserves. Direct investment is more important, as also is the climate in the country and whether we will generate a unified voice on issues that affect governance.

Q. There is also concern that government is not going ahead with reforms like the Land Acquisition Act.

A. Land acquisition has been a problem since our Independence. And despite all this India has been recognised as an emerging global power. So, these are not immediate issues. The real question is the confidence, ability and political will of the government to tackle rising corruption at the political level. Now the Supreme Court has entered in the picture with the 2G scam.

Q. Do you feel that the RBI and the government are playing a losing game in tackling inflation? Despite all the rate hikes, inflation is still at over nine per cent.

A. It cannot be a losing game unless you make it so. Inflation should be tackled effectively as it affects people at large. What is worse is “inflationary expectations”. If people expect inflation to go up, they will automatically buy more than they need if they have the liquidity. The problem is that there are too many voices saying things like “after the monsoon, food prices will come down”, or “after the harvest, prices will come down”, and then non-food prices go up. If RBI measures do not lead to a fall in food inflation, we have the resources to do what we want. We can import.

Q. So far, it is growth that has been going down and inflation has been rising. What does this indicate?

A. How do digits matter — 8.7 or 8.5 per cent etc? We are still a country with high growth rate. If there is a conflict between growth and inflation, there should be a concerted approach to tackling inflation and there should be definitive action, no matter what happens to growth in the short run. India’s resources are much greater than ever. We are adding to our reserves but not using them. There are tradeoffs in the economy. It is not so simple as people think and there must be a concerted effort to tackle what we consider to be the priorities. These are certainly inflation and corruption at the moment. Oil prices are high but we have controls, and we have not raised domestic prices as much as the rest of the world. They should be raised so that there is a one-time effect. There has to be a coordinated approach and action rather than just relying on rain clouds.

Q. Would you say that there is limitation to monetary policy tackling inflation?

A. There has to be a unified view that inflation needs to be tackled and that whatever needs to be done in monetary, fiscal and trade areas will be done. Some dip in growth may be the cost, that if tackling inflation means taking unpopular actions we are willing, we are willing to do whatever is necessary even if it displeases specific interests.

Q. Does this mean that the government is not doing its bit on the fiscal front?

A. I don’t want to blame anyone. In a political system there are multiple centres of power and different ministries have their own focus points. But if there is a national problem, say inflation, we need a consolidated effort and policy overriding the specific interests of different ministries.

Q. So, are you optimistic about the future, or pessimistic? Do you see government taking action where necessary?

A. I am optimistic, but not about the immediate future. I am sort of disappointed with the drift in policy and decision-making. But we have the ability and the capability. Responses are coming in as people are fed up with corruption and inaction on priority issues such as inflation and corruption and priority governance issues. To take a longer-term perspective, we have passed through various crises in the ’70s, ’80s, ’90s and I have no doubt we will overcome the present problems.

Deccan Chronicle

Markets can digest only one more RBI rate hike: Analysts

The stock markets indicate the collective opinion of investors, and they are now indicating nervousness. The markets are reflecting the investor's nervousness on the growth story, and on the inability to control the macroeconomic environment.  The markets are ringing alarm bells that inflation continues to be higher than expected despite a hefty cumulative increase of 325 basis percentage points in the policy rates since early 2010. Also, there are increasing indications of a moderation in growth. The Reserve Bank of India (RBI) embarked on a rate hike programme to control the inflation rate and maintain growth. Interest rates systematically went up throughout 2010 and 2011 but inflation too continued to rise unabatedly . The rates have been hiked to such an extent that now the interest rates are beginning to hurt growth, but the inflation rate is still showing no signs of slowing down.  This is a double whammy, as the stock markets, the basic fabric of the growth story, is being threatened. On the one hand, the RBI is increasing rates but this is not supported by fiscal measures. The government, through its various guarantee schemes, is indirectly introducing a stimulus in the economy which is supporting the demand for goods and services.

ET

RBI fines co-op bank in Bengal

The Reserve Bank of India (RBI) has imposed a penalty of Rs 2 lakh on the Suri Friends' Union Co-operative Bank Ltd located in the Birbhum district of West Bengal for violation of provisions relating to sanctioning of loans. According to a release by the RBI, the co-operative bank was penalised following a show-cause notice issued by the central bank.

Business Line

India's long-term equity story good: Analysts

Analysts believe the long-term market fundamentals are intact, based on the strong prospects of economic growth here. However, investors should remain cautious.......

Read more................

SBI chairman to attend bankers’ meet

Top French honour for Maharashtra economist



VITALINFO extends best wishes to Dr. Narendra Jadhav, former Principal Adviser & Chief Economist, RBI



Mumbai, June 24 (IANS) Renowned economist and Planning Commission member Narendra Jadhav has been honoured with the “Commander dans l’Ordre des Palmes Academiques” (Commander of the Order of Academic Palms) award — one of the oldest French civil distinctions, a statement said Friday. The honour will be formally conferred on Jadhav July 14, the French National Day. A former vice chancellor of Pune University, Jadhav is also a member of the National Advisory Council, an academician and a writer. He is the first Indian to be accorded the honour originally founded by Napoleon Bonaparte in 1808 to honour members of the University of France. In 1955, it was established as an order and awarded to eminent acdemicians, authors, artists, scientists and professionals for their contribution in various fields like social movement, culture and education. The Ordre des Palmes Academiques comprises three grades and commander is the highest among them, the statement said. The honour recognises Jadhav’s fight against prevalent discriminations and inequalities in India. In the past few years, he has been actively involved in democratic struggles against caste-based discriminations and socio-economic inequalities in India.

http://www.thaindian.com/newsportal/uncategorized/top-french-honour-for-maharashtra-economist_100545278.html 

Inflation expectations

...........It is highly significant that even when the RBI lowered the growth estimates and increased those of inflation thereby differing sharply from the official position, the government has backed the central bank. More realistic growth and inflation estimates, and greater cohesion between the government and the RBI are all vital ingredients in a well thought ....................

Continue reading.................. 

India to tell Pak to stop fake currency

The Finance Ministry has created a separate directorate of currency ( DoC) to deal with the problem. The directorate is examining incorporation of additional security features in the currency notes to make counterfeiting very difficult.Sources said the new security features will be incorporated in the new series of the bank notes to be issued in 2012........

Details 

BANKING FOR THE MASSES

RBI has mandated that 40 percent loans must be to preferential sectors sector out of total loans. However, our bank distributes more than this i.e. 45 percent loans are to the preferential and weaker sectors. This consists of loans taken by customers from the low income group for starting small businesses....

Read more.............

India's Growth- Inflation Dynamics

The so- called growth inflation dynamics is a reflection of our policy maker's sensitiveness to corporate sector concerns. The same RBI had no qualms about endorsing an interest rate of 26 per cent for micro finance institutions ( MFIs). The gensis of this growth- inflation dilemma may be traced to the accommodative monetary policy pursued by the Reserve Bank of India ( RBI) beginning September 2008. This policy, as the RBI.......

Read.................. 

Aadhar will reach target: Nilekani

Bangalore: One of independent India's most ambitious endeavours, Aadhar, (the Unique Identification Number-UID), seems to be on course in achieving its target as Aadhar cards have been issued to over one crore people.  Speaking at a seminar organised by NASSCOM on Aadhar and its functioning, Chairman of the Unique Identification Authority of India (UIDAI) Nandan Nilekani said they were in talks with NASSCOM on whether they could provide a platform for their services.  He stated that they are working closely with the Finance Ministry and the Reserve Bank of India (RBI) to ensure that they facilitate financial inclusion. "This ID would reduce entry barriers for people," he said and added that many had enrolled in UID but were yet to be issued the numbers. "This process would leap frog from an environment of no identity to one of online identity," he said.  Pointing out that there were many people in the country with no government documented proof of their existence, he said that the transition from "no identification to online identification" would be achieved. Confident of reaching their set target of issuing Aadhar cards to 600 million people within five years, Nilekani said that the IDs would also provide for a National Portable Identity.  He said that the facility (UID) could also be used for procuring LPG connection, mobile sim cards and opening bank accounts among others.  He said UID is being used as a proof of address and identity in Sikkim and Tripura states.

IBN Live

Banks Deputy Manager held for cheating

BHUBANESWAR: A deputy manager of a private bank was arrested by police for allegedly bungling a whopping Rs 1.3 crore from the bank over the last several years. Purna Sarkar, Deputy Manager (Clearance) with Kotak Mahindra Bank, located at Kharavel Nagar, was arrested on charges of cheating and forgery after the bank lodged a complaint with the police. Sarkar, who was in charge of cheque clearance at the bank, used to bungle with the instruments since 2009, bank sources said. Instead of getting the cheques passed through the RBI clearing house, he would cleverly park the instruments in Kotak Mahindra Security Ltd, another arm of the company which dealt with shares and equities. Most of the investments were made in the names of his family members.  Since he was head of the clearance, he knew of methods to evade attention of the bank. Sources informed that the matter came to light once RBI sent details of the cheque clearances electronically to the bank’s corporate offices in Delhi and Mumbai. Earlier, soft copies were being sent and Sarkar used to manipulate them. Once the matter caught the attention of bank’s big wigs, an internal investigation started and the North Eastern head of the bank Sanjiv Upal was given the charge of the probe. He apparently found huge discrepancies and the responsibility was fixed on Sarkar, who confessed to the bungling of Rs 1.3 crore. However, instead of cooperating he tried to evade action and a complaint was lodged with the police. He has been booked under Sections 420, 467, 468 and 471 of the IPC.

IBN Live

The Prerana Co-operative Bank Ltd., Pune – Penalised

The Reserve Bank of India has imposed a monetary penalty of ` 1.00 lakh (Rupees one lakh only) on The Prerana Co-operative Bank Ltd., Pune, Maharashtra in exercise of powers vested in it under the provisions of Section 47(A)(1)(b) read with Section 46(4) of the Banking Regulation Act, 1949 (AACS) for violation of Reserve Bank of India's directives on unsecured advances. The Reserve Bank of India had issued a show cause notice to the bank, in response to which the bank submitted a written reply. The bank was also called for a personal hearing. Based on the reply and submissions made by the bank during the personal hearing, the Reserve Bank came to the conclusion that the violations were substantiated and warranted imposition of the penalty.

India relaxes banking norms for foreign nationals

BANGALORE: Authorities have decided to allow foreign nationals employed in India, holding valid visas, to maintain resident accounts with authorized banks here even after they leave the country. The new regulation, announced by the Reserve Bank of India (RBI), would benefit scores of foreign nationals in India — working in areas such as IT, banking and multinational firms.  Earlier, their resident accounts were closed immediately once they left the Indian shores and their assets were transferred to their accounts maintained abroad.  According to Dr. Sujatha Elizabeth Prasad, Chief General Manager-in-Charge of RBI, when such people leave India for a country other than Nepal or Bhutan for employment, business or for any other reasons for an uncertain period, their existing account would now be designated as a Non-Resident Ordinary (NRO) account. This is being introduced to facilitate the foreign nationals to collect their pending dues in India, she adds. The account would be closed immediately after all the dues are received and repatriated as per the declaration made by the account holder. The banks have been directed to repatriate the funds credited to the NRO account immediately to the foreign national after verifying whether the account holder has paid applicable income and other taxes in India. However, the amount repatriated abroad cannot exceed $1 million in a financial year.

http://arabnews.com/economy/article461028.ece

Bhutan Central Bank Governor visits BoM

Governor of Royal Monetary Authority of Bhutan H.E. Daw Tenzin visited the Bank of Maharashtra (BoM) head office in Pune on Friday. M G Sanghvi, executive director, BoM, received him at Lokmangal, the bank’s headquarters in Shivajinagar.  Addressing the senior management of the bank, Tenzin expressed happiness over the Indian economy’s growth, on which Bhutan’s economy is also fully dependent. He pointed out the Indian Rupee only used in Bhutan also for more than 80 percent of its monetary transactions. He acknowledged the Indian banking system had shown its resilience in the recent economic slowdown. India has the potential to grow further as it has huge human capital and the younger generation constitutes most of it. "In terms of fundamentals, Indian banks are strong and Bhutan is able to make its domestic payment systems more efficient with the help of RBI," the Governor said, maintaining the growth while containing the inflation is the present challenge to any economy and RBI has been ably doing so. He desired that as India is contributing to world economy, though as a large importer, a day should come for the Rupee to earn its place in global economic system.  Tenzin later visited the bank’s Rural Development Centre in Hadapsar and Mahabank Self Employment Training Institute , Hadapsar and interacted with its staff.

IE

A Study the Strategies Issue in Indian Banking Sector

Functioning of a Bank is among the more complicated of corporate operations. Since Banking involves dealing directly with money, governments in most countries regulate this sector rather stringently. In India, the regulation traditionally has been very strict and in the opinion of certain quarters, responsible for the present condition of banks, where NPAs are of a very high order. The process of financial reforms, which started in 1991, has cleared the cobwebs somewhat but a lot remains…………..

Read...........

The emerging new monetarism: gold convertibility to save the Euro

Many economists are already considering restoring the classical gold standard. From the rising economies known as the BRICS, S.S. Tarapore, former deputy governor of the Reserve Bank of India, has publicly articulated the virtues of the gold standard……………………….

Click to read............

ICRA`s view on Indian Banking Sector

Click to read.....

Get set for higher inflation

The government just increased the headache for households, itself and the Reserve Bank of India by increasing fuel prices as inflation is set to cross the double digit mark.........

Read more..........

When RBI smuggled out the gold

This is the 20th anniversary of that week when the central bank had to sneak out 47 tonnes of gold to England

Elections for the tenth Lok Sabha were to be held beginning May 20, 1991. But after the first phase was over, the very next day, on the campaign trail in Sriperembudur, former Prime Minister Rajiv Gandhi was assassinated. Hence elections had to be rescheduled and completed by June 15. Gandhi had been PM for five years from 1984 to 1989, but his government could not get re-elected. The next Lok Sabha unfortunately lasted only for 16 months, instead of full five years, and was marked by instability, and worsening economic situation. Inflation was running at above 15 per cent, industrial growth was negative, and foreign exchange reserves had fallen below one billion dollars, barely enough to pay for three week’s worth of imports. The situation was so bad that even Indian Oil Corporation was unable to import crude oil, since no foreign supplier could trust its creditworthiness. They all wanted a bank guarantee from IOC. But the total stock of dollars in the country was near zero, so it wasn’t easy for IOC to show those requisite dollars. Dollars continued to decline since even the non-resident desis (the NRI’s) pulled out more than 1 billion dollars in a few months. Meanwhile, crude oil prices were rising, because Iraq was about to invade Kuwait, and Americans would surely retaliate. In this precarious situation, there was no choice for India but to sell some gold. The government initially decided to sell 20 tonnes. This was done somewhat surreptitiously using State Bank of India as an intermediary (i.e. gold was first transferred to SBI from RBI and then sold). But that wasn’t enough. We needed an emergency loan. Who’s the money-lender to distressed economies? That “money lender” was the International Monetary Fund. But IMF loan came with lots of strings and conditions. It wanted the fiscal deficit reduced. (Greece today is in similar distress, but IMF cannot act tough with Greece, and hence cannot impose any conditions. Greek default will hurt Europe much more than itself. In case of India in 1991, IMF had the stronger hand.) It also wanted the rupee to be drastically devalued. But this too had to be done without any advance warning to the markets, else there would be all round panic and huge political backlash. The newly elected minority government of Narasimha Rao was really in a fix. They decided that there was no choice but to pledge additional gold from their lockers. But foreign lenders were so skeptical, that they would not lend to India without physical possession of the gold. Which meant that the 47 tonnes of gold had to be airlifted from Mumbai to be stored in the vaults of Bank of London. Hence on the evening of July 3, 1991 the first consignment was loaded on to a truck by the Reserve Bank of India to be taken to the airport. Unfortunately the truck had a flat tyre. It was as if the gold didn’t want to go out of India. The RBI must have really sweated its maiden attempt at gold “smuggling” (for all this was done very quietly)! The next day the RBI also announced its second installment of a massive devaluation. In three weeks, on July 24, the finance minister presented his first budget in the evening at 5 pm. The devaluation, the emergency gold loan and the landmark budget speech which dismantled the Licence Raj and brought eventual glory to India. That same FM, could proudly announce to Parliament in November that year, that all the loan against gold was repaid, and even the earlier gold sold was repurchased! Twenty years later India has become a net lender to IMF, and also recently injected 7 billion dollars into IMF by buying their gold!

Mumbai Mirror

Get reforms back on track – Rajiv Kumar

Instead of relying on monetary policy to beat back inflation, the government should push long-pending reforms to ease supply constraints, such as allowing FDI in multi-brand retail and paving the way for GST.

The recent 25 basis point hike in interest rates by the RBI, about which there was a sense of inevitability, has further strengthened the perception that India is faced with some difficult macroeconomic options in the coming months. Inflation does not seem to be headed downward, despite the RBI having raised interest rates 10 times by 275 basis points during the last one year.  In May 2011, the WPI, which the RBI apparently continues to use as the basis for its policy decisions, stood at 9.1 per cent year-on-year (all figures on inflation refer to the year-on-year) which was higher than the 8.6 per cent in April 2011. Core inflation (minus food and fuel) was also higher in May, having risen to 8.6 per cent, as compared with 8 per cent in the previous month. Global oil prices are still not showing any significant downward trend and global commodity prices, including food prices, also remain firm and volatile. Domestically, signs of any relief from a strong supply-side response are also not yet visible. The news on the monsoon front is not too good, with the Meteorological Department revising its monsoon forecast downwards. Capacity expansion has nearly stalled, with growth in gross fixed capital formation (investments) having declined from 17.4 per cent in the first quarter of 2010-11 to a mere 0.4 per cent in the fourth quarter of 2010-11.  Resources locked up in stalled projects are currently three times the level in 2007-08. Thus, it does seem that the RBI, committed to bringing down the inflation to within its comfort zone of between 5-6 per cent, and egged on this direction by the Prime Minister's Economic Advisory Committee, will continue raising rates for the next few months.  This could well imply further reduction in growth forecasts which are now already firmly below the 8 per cent level. Is it not time therefore to lower expectations and focus more on the reforms that are required to put growth back on the 9-10 per cent trajectory that seemed to be well within our grasp not so long ago? The purists will argue that with growth still above 7 per cent, this is the time to redress macroeconomic imbalances and not be distracted by short-term weakening of the growth momentum. There is, of course, merit in this argument. But the catch is in the recipe to be used for restoring the macro-balance. If we continue to rely almost exclusively on monetary policy for achieving this balance, I am afraid we are destined to not only fail in our objective but also end up causing serious damage to medium-term growth prospects and inflict considerable pain on the people.  Over-reliance on monetary policy would imply pushing up rates to squeeze out inflationary expectations even if it implies a major slowdown in GDP growth, as was experienced in the latter half of the nineties.  Given the higher aspiration levels now, this could generate serious social stress and further vitiate the political atmosphere. This is not the advisable way forward. Instead, the government will hopefully find the will and the political acumen to push forward with the reform agenda that will remove some of the supply-side constraints and improve the investment climate. There are several steps that the government could take that do not require any legislative action. These include the finalisation of the manufacturing policy; announcing a policy on FDI in multi-brand retail; the delisting of perishables from the APMC Act; permitting the actual dismantling of the administered oil price mechanism; and bringing down fertiliser subsidies. These measures should be announced as soon as possible as any further delay could make these decisions hostage to the next round of elections — polls in UP are less than 10 months away.  The news that the Ministry of Fertilisers is opposed to the recommendations of the Saumitra Choudhary committee on hiking urea prices does not augur well and, if true, the Ministry should be directed to let the greater national welfare prevail over sectoral considerations. A serious effort is, however, required to ensure that even the major reforms currently stalled due to lack of sufficient political support are pushed forward. These include the GST, which has the potential to raise growth rates by a couple of percentage points on its own; and the financial sector and education sector reforms, for which Bills are now pending in Parliament. These reforms are critical for achieving the adequate supply-side response.  Education sector reforms are specially critical as these are key to accelerating skill formation and expanding training and education capacities in the economy. Without such capacity expansion and improvement in the regulatory framework in the education sector, the demographic advantage that the country possesses will be lost.  The implementation of these reforms, however, requires broader political consensus that can only happen if political parties set aside opportunistic considerations in deference to national welfare.  I am not sure if the gravity of the economic situation and the need to push forward the reform agenda is still sufficiently clear to our leaders across the political spectrum. I hope it is. I am afraid, India's economic story may not be able to bear the cost of another wasted Parliamentary session and the paralysis in governance.

(The author is Secretary-General, FICCI)  

Banks must make business correspondent model more viable: RBI

Chennai : Banks have to innovate their organisational structures and support systems to increase the viability and the sustainability of the business correspondent model, said Dr Subir Gokarn, Deputy Governor, Reserve Bank of India. He was addressing the175th annual general meeting of the Madras Chamber of Commerce here on Thursday. “It is reasonably clear that the business correspondent model is not infinitely scalable,” he said. However, even with all these concerns, it is a good beginning and a generic model. With appropriate adaptations to local conditions it is the most likely way to achieve at least minimal access to the financial system through a basic or no-frills bank account.  Dr Gokarn said this while speaking on financial inclusion, and to what extent the banking correspondent model could help. He noted that the fundamental problem in financial inclusion is the challenge of managing costs of a large number of small-ticket transactions in far-flung areas. What is needed here, said Mr Gokarn, is to develop last-mile delivery mechanisms that can take these products from the large providers in the formal sector to this vast pool of new customers.  Quoting a study, Dr Gokarn said that social obligations, old-age security, children's education and providing for emergencies are the four biggest motivations for households to save.  Noting this, he said that there was a role for the insurance industry in this area. Insurance penetration in India is still very low — 10 per cent in the case of life insurance and 0.6 per cent in the case of non-life.

Business Line

Now, file tax returns from mobile phone

New Delhi Online income tax return filing company TaxSpanner today announced launch of mobile version of its solution that will enable users to file income tax returns from their handset. "After introducing the eFile by eMail option where customers need to just send us an email with a few details, e-filing of taxes through mobile is the next obvious step for the company," Ankur Sharma, CEO, TaxSpanner said in a statement. "Our new mobile site will make it easy for the taxpayer to file his ITR using the mobile phone," he added. This new solution from the company will offer taxpayers service to file income tax returns (ITR) through their mobile phones from the first week of July, 2011. TaxSpanner has developed eFile by mobile solution using open source technologies namely Linux, apache, postgres, python, django which it has used for the service from its website. To access the service, a mobile user will have to visit TaxSpanner site on his handset from the browser present on the device. After this he will be automatically directed to "eFile by eMail" application page of the TaxSpanner mobile site. The user is not required to be registered for this. Only he will need to fill up a form with some personal details and upload Form 16 on the same page. Thereafter, the ITR will be filled and generated automatically, the statement said.

IE

Will Subrata Roy’s friends shield him from RBI & Sebi?

In the coming weeks, we will know whether the political heft of Subrata Roy of the Sahara Group can save him from the combined might of two of India’s most powerful regulators – the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi)......

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

Zzzzzz! With govt asleep, India’s growth story falters

Sleep now...... Oh, No.........Read now.......

'Financial inclusion is more than access to microfinance'



Usha Thorat, Director, Centre for Advanced Financial Research and Learning



Hyderabad : Access to microfinance by itself cannot be taken as financial inclusion, as the latter idea requires having an individual bank account which brings the account holder into the national payment system and insures her deposit, according to Usha Thorat, director, Centre for Advanced Financial Research and Learning. Addressing the valedictory of a three-day summit on microfinance here on Thursday, Thorat, who was a deputy governor of the Reserve Bank of India, said, “Financial inclusion has become a global buzz word, figuring on the agenda of G-20 meetings. We need to convince banks about the profitability of serving the poor.” Referring to a comment that the focus has been more on providing credit services rather than on savings, she said the original RBI rules required a six-month savings record by the groups before they could take loans under the SHG-bank linkage programme. She said her organisation would take up research on how to utilise the social capital built by SHGs for financial inclusion, called for more attention to the issue of urban poverty too. B Rajsekhar, CEO, Society for Elimination of Rural Poverty (SERP), said the notion that the SHG movement in the state was successful because of funds from the World Bank was incorrect. According to him, the World Bank assistance during 2000-2011 was Rs 2,200 crore, while the cumulative bank lending to SHGs was Rs 34,316 crore. The Centre’s contribution under the Swarna Jayanti Swarojgar Yojna was Rs 500 crore, the SHGs’ own corpus was Rs 5,070 crore, and the state government contributed Rs 1,099 crore as incentive for prompt repayment. On the suggestion that SHGs were evolving as a parallel structure to the Panchayat system, Rajsekhar said that with the participation of SHG women, the dysfunctional institution of Gram Sabha had actually been revitalised. Earlier, Sarpanches and ward members used to run the system on their own without any participation of Gram Sabhas in the decision making. At the end of the summit on Microfinance and Inclusive Development, the organisers issued a declaration with 12 points, including one calling for integration of microfinance interventions into sub-sectors like agriculture, dairy, fisheries, etc. Another said self-regulation of microfinance programmes would promote growth with equality. MP Vasimalai, president, International Network of Alternative Financial Institutions (Asia), said there were many different models of SHGs being followed in different areas, and these experiments leading to a diversity of models needs to be encouraged. According to him, microfinance is not an alternative to mainstream systems and it was too early to talk about the derivatives of microfinance such as micro-insurance.

BS

Return of the prodigal; Vijayan may be reinstated as CMD, LIC

Reportedly given clean chit by the CBI, the former chairman of Life Insurance Corporation of India, T S Vijayan may be reinstated to his original position, authoritative sources have said. Vijayan was demoted to the position of managing director in May this following a cash-for loans scam which engulfed the corporation's investment department in November last year. But now his name has been cleared by the investigating agencies. An indication that decks are being cleared for Vijayan to take over the reins as CMD looked clear after authorities decided to postpone the interview for the new CMD abruptly on Wednesday.  Those who were summoned for interview included D K Malhotra Acting CMD, Tomas Mathew MD, and also T T Mathew K Sahoo and K B Saha, all ED.  Since Vijayan has been given a clean chit, he may have to wait for the CVC clearance to get back in the grooves.  It may be mentioned that Vijayan demotion had come within weeks of the finance ministry setting up a committee led by former Deputy Governor of the Reserve Bank of India (RBI) Vepa Kamesam to probe the investments made by the LIC in the last three years... The LIC's investment corpus is worth 9 lakh crore. Also to be mentioned that Vijayan had earlier earned laurels for his innovative ideas and presently has two years of service before reaching the age of superannuation.

http://www.powerbuzz.in/frontstory.php?id=211