Retailers refuse Sodexo passes

The most popular meal passes have started to fail. From the last week of December — at the peak of the shopping season — food retail chains stopped accepting Sodexo passes for the items bought by shoppers. Players like Pantaloon Retail, Reliance Retail, Spencer’s, Tata-run Trent and Aditya Birla Retail have joined hands to stop accepting these passes. The reason: Retailers think they cannot pay 2.9-3.4 per cent of the total bill that Sodexo charges as commission. Besides, handling of passes and a waiting period of almost a month to get their money are also a deterrent at a time when consumer spending is on a decline. “From December 28, we have decided to accept only cash, credit cards, gift cards, electronic credit, pre-paid credits and our own coupons. The cost of physically handling Sodexo passes is too high. If they have an e-credit or pre-paid card facility, we don’t have a problem,” said a spokesperson of Pantaloon Retail, which runs over 150 Big Bazaar and Food Bazaars stores in the country. Around two per cent of Big Bazaar’s sale is through Sodexo passes. Pantaloon has already informed its customers it will not accept Sodexo passes. “Besides the 3.5 per cent loss, it is becoming difficult to handle the passes, take them to collection centres and manage the security issues,” he added. Vineet Kapila, CEO of Spencer’s, which discontinued accepting Sodexo this week, asks: “Since retail is a low-margin business, why give such commissions?” He added that a “sizeable” portion of Spencer’s sales were though Sodexo. Food and grocery retail has a net margin of 2-3 per cent, while products like apparel and accessories carry higher margins. Kapila says such passes should be applicable only to non-food retail. When contacted, a Sodexo spokesperson said a reply would be possible only on Sunday. However, a leading news website quoted Sodexo as saying that it was entirely the decision of retailers and the company would not like to comment on the decision. Some retailers say handling credit and pre-paid cards is more viable, given the slowdown in consumer spending and lower revenues.“Banks charge 1.5-2 per cent and you get money within a couple of days. In the case of pre-paid cards, you get funds the same day. So, we prefer those,” said a senior executive of a Mumbai-based retail chain. Raheja-owned Hypercity is said to be talking to Sodexo on the issue and may take a call on its tie-up in a few months.Many companies give Sodexo passes to their employees as part of their compensation package. These passes became popular as these carried tax exemption of Rs 1,300 per month or Rs 50 per working day. Though retailers earlier redeemed these against all purchases, when income-tax authorities objected to it, they now accept the passes only for food and grocery items.

BS

What is role of RBI in controlling inflation from 1949 to till now?

...RBI believes that cause of inflation is high money supply in economy hence to try. to control inflation RBI usually increases rate of interest to make money costly ........

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Mumbai is number one for banking fraud in country

Mumbai tops the list of cities with the highest number of frauds reported by banks, with the money involved totalling Rs400 per year for the past five years. While for the financial year 2010-11, banks in Mumbai reported 787 fraud cases involving Rs 1,049 crore, the tally for the national capital was 335, with the net amount lost being Rs269 crore, according to the documents obtained under the Right to Information (RTI) Act from the Reserve Bank of India (RBI). Interestingly, the total number of banking frauds reported in Mumbai every year is more than those of Delhi, Chennai, Kolkata and Bangalore taken together. While a five year average figure for Mumbai is about 800 cases, the number for other cities is approximately 200.As per the report, of the 4,099 cases registered in Mumbai since 2006, only 564 cases (those where the amount involved is above Rs1 lakh) have been closed. The city lost Rs1,882 crore over these five years, of which only Rs 63 crore has been recovered, reveals the RTI response. Experts blame the low recovery rate on the lack of know-how in detecting and preventing frauds in the era of internet and mobile banking. Firstly, the banks do not even seem to have the required classification of internet-related frauds. According to the RBI, “there is no distinct category of ‘Phishing Complaints’’, and as such no separate data/information is classified/compiled in this regard.” But phishing is a common method of online identity theft where information such as usernames, password and other bank details are acquired.According to the internet banking guidelines issued by the RBI in 2001, banks need to assess the risks arising out of phishing, consider them as ‘operational risk’ and cover it with insurance. “Either they are ignoring the RBI mandate or are hiding the information,” said Na Vijayashankar, cyber law expert. Banks evade responsibility DNA also has found out that bank managements’ reluctance to own up to such frauds is also a factor causing a pile-up of banking fraud cases, and consequently, a low recovery rate. Sources in the banking industry confirm that banks do not follow up fraud cases and pass the buck to the customers despite RBI guidelines directing banks to take complete responsibility. A former top official of Indian Overseas Bank said that banks avoid owning up to such cases out of fear that it will damage their reputation, with a resultant loss of customer base. “Most of the time banks pass the responsibility of recovering the money to the customers themselves,” he said. There are several cases where banks have refused to take any responsibility for banking fraud. Gujarat Petrosynthese Ltd, a Mumbai-based company lost Rs.39, 00,550/ from its account with Axis Bank, Bangalore, on 20th June 2011 to hackers. “The police are investigating. But the banking sector has not been sympathetic,” said Urmi N Prasad, executive director with Gujarat Petrosynthese Ltd. Similarly, Pramod B Bauskar from Mumbai lost Rs 1,97,000 from ICICI bank to an internet fraud in mid-2011. “Bank officials rejected my plea outright, saying it was my fault and the bank will not do anything about it,” said Bauskar. Some Cases Not Registered Apart from the registered cases where the recovery rate has been pathetic, many fraud cases are not even registered. Several bankers told DNA that most internet banking frauds cases at the customer level itself, as banks bully the customers into believing that they themselves are responsible.

RBI guidelines for fraud cases

The RBI requires banks to pursue fraud cases vigorously with the CBI or police authorities, and in court. In the case of public sector banks, all fraud cases below Rs1 crore should be reported to the local police, except when the CVO and CMD consider it serious, and when the cases cannot be classified in monetary terms. In those cases, the frauds are referred to the CBI. Cases above Rs 1 crore must be referred to a different wing of the CBI depending on the category it falls into. In the case of private sector banks, frauds of Rs1 lakh and above committed by an outsider in connivance with a bank official should be referred to the local police. So should cases of fraud committed by a bank employee involving funds of Rs10,000/- and above. DNA found that in many of the cases the banks do not follow the RBI guidelines. 

DNA

Pranab asks banks to take belt tightening measures

Finance minister Pranab Mukherjee on Friday asked the banks to scale down their advances to risky businesses to protect their asset quality. "The non-performing assets (NPA) have grown faster than the credit. There is a need for banks to tighten their belt," Mukherjee said, inaugurating the platinum jubilee celebrations of the Indian Overseas Bank (IOB). According to the Reserve Bank of India's latest Financial Stability Report, the year-on-year growth rate of NPAs stood at 30.5% and slippages (fresh accretion to NPAs) grew at 92.8% as of September 2011, with the priority sector, retail, real estate and infrastructure being major contributors. He asked the banks to tread carefully as the sector is confronted with risks of global slowdown and market volatility. Mukherjee said the Basel III norms would be implemented in India from 2013 onwards so as to bring the Indian banks on par with global standards. Urging the banks to go for special drive for financial inclusion of the poor, Mukherjee said the exclusion of these people impacted social equity and economic growth. He said the government would soon introduce an electronic payment system for direct credit of subsidies to the beneficiaries which would apart from ushering in transparency would speed up the subsidy payments. Later, inaugurating Indian Bank's new corporate office, Mukherjee said the government is committed to adequately capitalise all the public sector banks so that they could compete with the international banks.

HT

The glass is half full

.......... While, the problems of high deficit and rupee depreciation are here to stay, the reversion of monetary tightening may give some respite to the corporate sector this year. Reserve Bank of India (RBI) Governor D. Subbarao said that policy interest rates have peaked and are set to ease from now onwards...................

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BEWARE BANKS BEARING MICRO- LOANS FOR POOR

How do bankers provide relief? Through loans, of course. Lending to weak, vulnerable, and very poor women is the rallying cry for those who argue that micro- credit empowers women. Micro- lenders from all over the world shout out for debt: “ Loans will set you free.” Or will they? Here’s a quick refresher.............

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Economists wanted

...... It is ironic that, just when the government has embarked on an elaborate programme to celebrate 50 years of the Indian Economic Service, its bench strength in terms of able economic advisors overseeing policymaking in different economic ministries appears particularly shallow, lacking firepower and depth. Today, the Indian Economic Service, which once produced eminent economic administrators like I G Patel, S R Sen and Sharad Marathe, faces an acute shortage of talent. Over the years, the Service, instead of producing a steady stream of economic advisors, has ended up meeting only the back-office requirements of the advisory wings of various economic ministries............

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Liquidity improves in banking system

......Traders said that the easing of liquidity was contributed by the return of cash paid out by corporates in the form of advance taxes back into the banking system. In the first half of December, the government had raised close to over Rs 70,000 crore through advance taxes. ........

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Banks facing more challenges in current environment: RBI

Banks worldwide are facing more challenges in the current economic environment and while macro-sustainability is a necessity, it is not sufficient for sustainable economic growth, according to a senior Reserve Bank official. Speaking here during the inauguration of a national seminar on 'Basel III: Implementation Challenges in Bank' organised by the Bank of Maharashtra, RBI Deputy Governor Anand Sinha said while regulation is important, so is implementation. "Banks globally are facing more challenges now and macro-sustainability is a necessity but not sufficient for sustainable economic growth. Therefore, putting regulations in place is only one part and their implementation is equally important for achieving growth and sustainability," Sinha said. Sinha, who is in charge of regulation of commercial banks, non-banking financial companies and urban cooperative banks in the RBI, also talked about the 2008 global economic crisis and how the Indian banking sector had withstood it. He also made an elaborate presentation on the genesis of the crisis, its causes, regulatory reforms following the crisis, implementation issues, structural issues and the impact on growth. The seminar was attended by RBI General Manager Ajay Chowdhary and Bank of Maharashtra Chairman & Managing Director AS Bhattacharya. The topic of the seminar assumes significance as the RBI earlier this week issued draft guidelines for implementation of Basel-III banking norms in India, which envisage that the equity capital of a bank should not be less than 5.5% of its risk-weighted loans. It also recommended that Tier-1 capital, comprising pure equity and statutory and capital reserves, must be at least 7% and total capital must be at least 9% of risk-weighted assets (RWAs). It has also suggested setting up a capital conservation buffer in the form of common equity of 2.5% of RWAs. It is proposed that the implementation period of minimum capital requirements and deductions from common equity will begin from January 1, 2013, and will be fully implemented by March 31, 2017, it said. The central bank had invited comments and feedback on the draft guidelines, including the implementation schedule, by February 15, 2012. RBI Governor D Subbarao had earlier said Indian banks will have to incur additional costs to build capital buffers to comply with Basel-III rules.

BS

Basel-III requires more time for implementation

The upcoming Basel III guidelines will require more time if it seeks to improve the ability of banks, said Anand Sinha, Deputy Governor, Reserve Bank of India.“Basel III guidelines seek to improve the ability of banks to withstand periods of economic and financial stress by prescribing more stringent capital and liquidity requirement, by raising minimum core capital stipulation. Introduction of counter cyclical measures will enhance banks’ ability to conserve core capital in the event of stress through a capital conservation buffer," said Sinha while speaking on "Basel III – Implementation Challenges In Banks" organised by Bank of Maharashtra in Pune. Last month, RBI has issued draft guidelines for implementation of Basel III norms. "Basel-III reforms should not be implemented for one or two years and if, the effect of this on the growth will be very limited. It requires at least five to six years for the proper implementation, then the impact will be stable and long-term. Private-sector banks in India may need to raise a few trillion rupees of capital to meet Basel III norms," Sinha added. Commenting on banking system, he said, "We need much larger banks rather than complex banks. Our supervision should be more effective. Indian banking system is relatively more fundamental. RBI has been always criticised for being conservative. But it has helped the banking system to become stronger even in the financial crisis. Globally, banks are facing more challenges and macro sustainability is necessary but not sufficient for sustainable economic growth. Therefore, putting regulations in place is only one part and their implementation is equally important for achieving growth and sustainability." According to Sinha, more capital is needed for economic development. India's credit GDP ratio is much lower than the other Asian countries.

BS

Indian Bank's Corporate Office Building Inaugurated by Hon'ble Union Finance Minister



The Finance Minister, Mr Pranab Mukherjee, after inaugurating Indian Bank’s corporate office in Chennai on Friday, along with Dr K. C. Chakrabarty, Deputy Governor, Reserve Bank of India, (extreme right), Mr T.M. Bhasin, CMD, Indian Bank, and Mr Rajeev Rishi, Executive Director (foreground)



Shri Pranab Mukherjee, Hon'ble Union Finance Minister inaugurated the New Corporate Office Building of Indian Bank at Lloyds Road, Royapettah, Chennai on 6th January 2012. Shri.Mukherjee also launched e-lounge, WAP enabled Mobile Banking Facility and Online Loan Application System for making online application for Education Loan and Home Loan Schemes of Indian Bank. The Union Finance Minister also announced completion of 100% Financial Inclusion by Indian Bank, the SLBC Convenor Bank for the Union Territory of Puducherry, with the cooperation of other Banks. Indian Bank also announced that financing of SHGs will now be done by Cash Credit System replacing the Term Loan System. Shri T M Bhasin, Chairman and Managing Director, Indian Bank in his welcome address said that the New Corporate Office Building is built in TRILOBULAR SHAPE, resembling the LOGO of the Bank. It is a GREEN & ENERGY EFFICIENT Building with modern and sophisticated facilities. Shri Bhasin said that the Bank has launched many innovative, customer friendly technology products from FMs hands which will increase the e-Business volume of Indian Bank. Stating that the total business of the Bank has crossed Rs.2.05 lakh crore mark, Shri Bhasin thanked the customers for their continued valuable support in making this achievement possible.

Dr K C Chakrabarty, Deputy Governor, Reserve Bank of India who was the CMD of the Bank and initialed the process of construction of the New Corporate Office building expressed his happiness over the completion of the building project and for creating a new landmark in Chennai City. He also appreciated the Bank for rendering various value added and technology leveraged banking services.Shri J M Garg, Vigilance Commissioner, Central Vigilance Commission expressed his happiness in participating in this eventful moment of the Bank from where he started his career. Shri.J.M.Garg said that Indian Bank has emerged as a strong, vibrant and dynamic Bank with state-of-the art technology platform.

http://www.4-traders.com/INDIAN-BANK-9059774/news/INDIAN-BANK-Inauguration-of-Corporate-Office-Building-Of-Indian-Bank-on-6th-Jan-2012-4-15-p-m-at-Che-13959132/

RBI, CMF to host ‘Microfinance: Translating Research into Practice’ Conference

The Reserve Bank of India’s College of Agricultural Banking, Pune together with the Centre for Micro Finance, IFMR Research will host their fifth annual conference, “Microfinance: Translating Research into Practice” on January 9th and 10th 2012 in Pune. The objective of the conference is to actively engage stakeholders and researchers in discussions relevant to current and future microfinance practice. This year renowned development economists Professor Rohini Pande (Harvard Kennedy School), Professor Erica Field (Duke University), Annie Duflo, Executive Director, IPA, Prof. Susan Thomas, IGIDR will be present to discuss results from a number of recent studies conducted in the area of financial services for the poor. The 5 thematic sessions of the conference include Government’s New Rural Employment Generating Initiatives and Programmes, Psychology behind mass default in joint liability loans, Future of Financial Services for the Poor, Financial Literacy to accelerate financial inclusion and help customers make rational decisions and Financing Microfinance: Scope and opportunities. During the conference, special address will be delivered on Self Help Programme II, Microinsurance and Micropension.

Microfinance Focus

Reserve Bank sensitive to voices of poor: Subbarao

The Reserve Bank of India Governor D Subbarao in his defence of the policy to hike rates in order to combat inflation said on Friday that the central bank is “also sensitive to the ‘voices of the poor’ about the burden of surging prices”. “The voices of the poor do not of course have the same opportunity of collective articulation, and we therefore have to make the extra effort to listen to this ‘silent constituency’,” he said while addressing the National Convention on Leadership at CII-Suresh Neotia Centre of Excellence for Leadership in Kolkata. In order to combat inflation, the Reserve Bank has had to gradually and continuously tighten monetary policy, he said. “This has led to criticism, especially from industry and business sections, that higher interest rates engendered by our policy have curtailed growth. This grievance is legitimate, and to some extent, understandable. The Reserve Bank is sensitive to that criticism,” Subbarao said.

IE

RBI – Reflections on Leaders and Leadership

….. The high esteem in which the Reserve Bank is held today owes a lot to the competence and professionalism of its staff, its institutional values and culture, and importantly, the outstanding leadership of former Governors – twenty-one to date. When applauded for the law of gravity, Sir Isaac Newton, not one known for humility, famously said in a letter to his friend and rival Robert Hooke that, “If I had seen a little further, it’s because I am standing on the shoulders of giants”. I can quite relate to that statement. As the Governor of the Reserve Bank in these exciting times, I am deeply humbled by the intellectual reputation of the lineage of the Reserve Bank’s Governors……

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Growth with Financial Stability by Rakesh Mohan – Book review by P.P.Ramachandran

The author of the book under review Dr.Rakesh Mohan was the Deputy Governor of the Reserve Bank of India twice and is presently  the Professor of International Economics of Finance, School of Management, and Senior Fellow, Jackson Institute of Global Affairs, Yale University.  He is also Senior Research Fellow of Stanford  University . We had reviewed his earlier book “Monetary Policy in a Globalized Economy”.  Over a hundred countries, advanced, emerging, and developing alike, have suffered from financial crisis over the past 30 years: India is among the few which have not. That was the motivation for this book which provides an understanding of Indian macroeconomic, fiscal, monetary and financial policies as they have evolved over the years, and as they have contributed to achievement of economic growth with financial stability. The book analyses the record of Indian economic growth since 1947; proceeds to deal with financial sector reforms, analyses monetary policy. We have an interpretation of the reasons for the global financial crisis and how it was contained in India. Critical reforms that are needed in other areas are also studied succinctly. Dr. Rakesh Mohan believes that the key to maintaining and accelerating economic growth is a reform of overall government functioning. He argues that RBI must be allowed to continue its practice of consistent and harmonious blending of monetary policy with prudential regulation. Monetary policy and financial sector reforms acquired paramount importance in our country in the background of the global financial crisis .The present book makes a sterling contribution on this vital topic. The author was a part of the policy group that dealt with this problem during a crucial period in the last decade. He had submitted a number of papers at different fora and has now revised and updated some of these. There are 12 essays in the book. The volume starts with a critical analysis of India’s growth since Independence, when public sector was  the engine of growth,  fiscal policy stood for  high levels of taxation to generate finance  for investment in that sector and budget deficits were monetized  to fund investments.  While it is undeniable that the RBI armoury was not well furnished measures were taken to employ  instruments like the SLR and CRR  to stem  excessive undue expansion of money supply. The country averted high levels of inflation which plagued several developing economies. Post-liberalisation, the financial sector reforms have served to enhance not just the competitiveness and efficiency of banks, but also ensured their stability. The RBI compelled banks to follow internationally acceptable prudential norms of capital adequacy while accepting risk weighting of their assets and provisioning requirements. This resulted in credit being extended towards sound investments and abjuring speculative transactions. Indian banks were unaffected by the global turbulence during the East Asian financial crisis and the North Atlantic countries' financial meltdown . With the practice of automatic monetisation of the Central government's deficits getting phased out in the early 1990s, the RBI's ability to use monetary instruments was greatly strengthened.  The Fiscal Responsibility and Budget Management Act guaranteed a substantial reduction in fiscal deficit at the Central and State levels. The private sector garnered more resources from the market and the interest rates dropped significantly during 2003-08. Since 2009, there has been a reversal. Safeguarding financial markets against volatility has acquired paramount importance in managing exchange rate and foreign capital inflow. A gradualist approach was adopted in respect of capital account. While risk capital was permitted to flow liberally in the form of FDI and portfolio investments, short term commercial borrowings were afforded only a limited scope. The impact of foreign capital volatility on portfolio investments was tempered through open market operations and ‘sterilization' measures. The author presents a strong, well-constructed defence of the monetary policy pursued by the RBI over the past two decades. Unlike the central banks of many other countries, which focussed exclusively on controlling inflation, the RBI targeted price stability, exchange rate management, and financial stability coupled with adequate credit supply to sustain growth. RBI  has maintained  price stability and developed a sound financial sector and without a shred of doubt  been successful in achieving financial stability. However recently  inflation has raised its ugly head and reached two-digit level, in spite of the RBI altering  policy rates a dozen times in about 18 months. The economist points out that the financial system has failed in providing adequate credit to the farm sector and the small and micro enterprises. The development strategy should focus much more on agriculture, urban infrastructure, and human resource to maintain a substantial growth rate.  We have a masterly review of the post-1991 monetary and financial policies by one who played a major role in policy formulation. The book is strongly commended to all students of economics, banking, planning as also the mandarins in Delhi.

FPJ

Watch the video of the book launch ceremony......

UIADI Launches Micro ATM for Daily Wagers

The Unique Identification Authority of India (UIADI) has launched a micro ATM device that would enable beneficiaries like MG-NREGA workers with Aadhaar to withdraw money near their doors through core banking system. "The beneficiary has to put his finger and Aadhaar number in to the micro ATM wireless device and get the money within 8 to 9 seconds from a business correspondent after verification about the beneficiary having that much amount deposited in the bank account shown through a receipt by the device," UIADI Director General R S Sharma said here today. With the device not carrying any money unlike the regular bank ATMs, the beneficiary would get the withdrawn amount from the business correspondent on the spot. "The (about a foot-long) device functions through any SIM and wherever there is a mobile tower. The device will be with a bank-appointed business correspondent," he said. The beneficiaries could choose their business correspondence to approach, he said adding the method would root out any role by middlemen. Besides the MG-NREGA workers, other beneficiaries under old-age pension, scholarship or any other welfare schemes could also benefit from the device.Praising Jharkhand Chief Minister Arjun Munda's keenness to cover the entire state under the new system, Sharma said Munda had told him that the state government would like to link all its socials security funds through the new system. As pilot projects, he said the micro ATM device has been introduced in three blocks in Jharkhand's Sareikela-Kharsawan, Hazaribagh and Ranchi districts and about 1000 transactions have taken places during the last few days. Once it is proved to be perfect, it would be introduced in other states. He said the ICCI, the Union Bank of India and the Bank of India were linked with the micro ATM devices in these three districts. "Using the device to withdraw money by beneficiaries will save travel-related difficulties, money and they can also have some savings in their accounts as one knows that one can withdraw any time as business correspondents are available at their villages," Sharma said. He cited a survey in Madhya Pradesh that had calculated that a beneficiary had to spend Rs 125 on conveyance to withdraw a week's wages of Rs 525. Stating that the communication device would cost less than Rs 10,000, Sharma said it was developed among others by the RBI and Indian Bankers Association. "This new system is a part of our financial inclusion initiatives to help the poor with no middle-men troubling them," he said. The UIADI, is also working to introduce the system in areas like telecom, public distribution system, LPG cylinder and fertiliser/kerosene.

The Outlook

Betting on RBI - T N Ninan

........ If gold is overpriced, real estate looks like a bubble, inflation-adjusted interest rates on debt are close to zero, and stocks look fully priced, there are no obvious options. Watch out then for the game-changers? On the negative side, these could be a euro collapse or an oil price surge, either of which would upset today’s calculations. On the positive side, lower interest rates are a near-certainty — or the RBI governor’s name isn’t Subbarao. Does that swing the argument in favour of stocks? Happy investing !

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RBI asks banks to issue fund transfer receipts

Taking note of non-adherence by some banks to rules on sending confirmation of payments made through the National Electronic Funds Transfer (NEFT) system, the Reserve Bank of India (RBI) has directed lenders to put in place a system for issue of such receipts. In a circular, the RBI has also asked banks to give a copy of their plan within 15 days. “All banks should put in place systems to ensure positive confirmation is sent to the originator (sender). While it is expected that such confirmation messages are sent as soon as the beneficiary account is credited, it should not exceed beyond the end-of-the-day under any circumstance,” the apex bank said. The RBI has asked the banks to send an immediate report on the existing procedure followed by them for sending such messages — both as originator and receiver. “Banks are advised to put in place suitable mechanisms immediately by which such confirmation will be sent for all inward/outward messages, if such systems are not already in place,” the RBI said.

BS

RBI says companies must provide for FCCB liabilities

Indian companies must make provisions to meet obligations arising out of foreign currency convertible bond (FCCB) liabilities, a senior Reserve Bank of India (RBI) official said, highlighting growing concerns about the ability of corporates to repay such debt. "I would urge business and industry to fully provide domestic rupee/foreign currency resources to meet potential liability under FCCBs," V.K. Sharma, an executive director at Reserve Bank of India, said in Bangalore on Thursday, in views he said were personal. More than two dozen companies on the BSE-500 index face FCCB redemption worth 330 billion rupees by the end of the next fiscal year in March 2013, according to research by Indian brokerage Edelweiss. He also said businesses should borrow overseas only if they find long-term foreign currency borrowing cost lower, on a fully-hedged basis than comparable rupee borrowing costs. Sharma said that companies should not be tempted by nominally low interest rates overseas and "rigorously" evaluate such borrowing options. He said that companies must treat fixed rate long term funding as a risk-neutral strategy.

Moneycontrol

Five more MFIs seek debt restructuring

...... Micro Finance Institutions Network (MFIN), the industry body of micro-lenders, has urged the Reserve Bank of India (RBI) to temporarily relax banks’ provisioning requirements for restructuring the debt of five microfinance companies that have not participate in the recast programme last year.......

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RBI tells banks to put system in place for National Electronic Funds Transfer confirmations

MUMBAI: Taking note of non-adherence by some banks to rules on sending confirmation of payments made through the National Electronic Funds Transfer (NEFT) system, the RBI has directed lenders to put in place a system for issue of such receipts. In a circular, the Reserve Bank has also asked banks to submit a copy of their plan for putting in place a system to generate confirmation of NEFT payments within 15 days.  "... All banks should put in place systems to ensure positive confirmation is sent to the originator (sender)... While it is expected that such confirmation messages are sent as soon as the beneficiary account is credited, it should not exceed beyond the end-of-the-day under any circumstance," the apex bank said. It has asked the banks to send an immediate report on the existing procedure followed by them for sending such messages, both as originator and receiver. "Banks are advised to put in place suitable mechanisms immediately by which such confirmation will be sent for all inward/outward messages if such systems are not already in place. A copy of your plan of action in this regard may please be sent to us within 15 days of receipt of this letter," the RBI said. The apex bank had issued guidelines in 2010 for banks to put in place a mechanism which would enable NEFT participating banks to provide a positive confirmation to the remittance originator confirming the successful credit of funds to the beneficiary's account.  Banks had been advised to confirm completion of necessary arrangements to ensure its implementation by March 1, 2010. " ... Even though banks have had sufficient time for making necessary changes in their systems, it is observed that not all banks are sending such confirmations," today's notification said. "In most cases, the bank that originated the remittance is unable to provide the confirmation to the originator/sending customer since they do not receive the corresponding confirmation message (N-10 message) from the beneficiary bank," it said. Citing a recent analysis, the RBI said in respect of a large number of banks, the percentage of positive confirmations sent vis-a-vis the inward messages received was lower than 10 per cent. "... Positive confirmation is a unique feature of NEFT and has played a major role in popularising the system amongst users. Non-adherence to instructions in this regard will undermine the customer service efficiency of the system," it said. Meanwhile, in another circular, the RBI directed banks to adhere to norms under which they have to pay penalty in case of a delay in crediting funds sent through the NEFT system to the beneficiary customer's account or in returning the uncredited amount to the remitter.

ET

RBI cancels licence of Veershaiva Co-operative Bank

MUMBAI: The Reserve Bank has cancelled the licence of city-based Veershaiva Co-operative Bank, as the lender has become insolvent. "In view of the fact that Veershaiva Co-operative Bank Ltd, Mumbai (Maharashtra), had ceased to be solvent... the Reserve Bank of India delivered the order cancelling its licence to the bank as on the close of business on December 30, 2011," the apex bank said in a statement. It said efforts to revive the bank in consultation with the Maharashtra government have failed and the depositors were being inconvenienced by continued uncertainty. Veershaiva Co-operative Bank's capital adequacy ratio stood at (-) 139.6 per cent at the end of March 2011, while its gross NPAs constituted 79.1 per cent of gross advances.  The Registrar of Cooperative Societies, Maharashtra, has been requested to issue an order for winding up the bank and appoint a liquidator for the bank. "On liquidation, every depositor is entitled to repayment of his/her deposits up to a monetary ceiling of Rs 1 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC) under the usual terms and conditions," the statement said.

ET

2nd Annual Summit Financial Markets–Time for Next Generation Reforms, 12th Jan’12 at New Delhi

Chief Guest

Shri D. K. Mittal, Secretary, Department of Financial Services, Ministry of Finance

Guest of Honour

Shri Hari Narayan, Chairman, IRDA

Shri Rajeev Kumar Agarwal, Whole Time Member, SEBI

Shri Anand Sinha, Dy. Governor, RBI

The visionary, foresight and watchful eyes of the Indian sectoral regulators- RBI, SEBI & IRDA – on the financial system ring-fenced it from getting contaminated by the global crisis. Amongst the global financial systems, the Indian financial system is perhaps the most closely regulated one, but there can be no doubt that this is one of the major factors contributing to the stability of the system. There is a strong need to evolve newer strategies, global cooperation and faster reforms to strengthen the Indian Financial markets to make them world class. In view of these imperative issues and developments in the Financial Markets in India, ASSOCHAM is organizing, 2^nd Annual Summit on “Financial Markets” .

Date:12^th January, 2012 / Venue:Hotel Le- Meridien, New Delhi.

TOI

‘The world sees India as a country without a government’

............Now if the RBI were to let the borrowing happen and accommodate it by having more liquidity in the economy, what you’d get back is inflation and that harms ordinary people. The high interest rate affects investments and through that, of course, employment, and that again affects the people. So you’re between the devil and the deep blue sea. What you really need is for the government to rein in its expenditures and achieve the same social outcomes with reduced expenditures..............

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Savings bank account number portability—will it work?

....A senior member of a bank employees’ association said, “It is a utopian idea”. On the other hand, the RBI opines that bank account number portability would be easy to implement once a bank customer is in the possession of a number given by the Unique Identification Authority of India ................

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A Pat Only for the RBI

While overall inflation may look bearable in the months ahead, pressure points in some items will continue

The new year begins on a bright note: inflation in some segments is falling dramatically and the latest PMI for manufacturing for December underlines what we have been saying for long now — growth momentum is strong in India. Despite the precipitous fall in the index of industrial production, the strong new business volume reported showed that industry is not doing as badly as is thought it is doing. The MSME Business Confidence Survey, conducted by Indicus Analytics in September, had reported expectations of higher sales in Q3 and these appear to have materialised now. While growth estimates will depend on IIP numbers and, therefore, still show less than 7% in Q3, it is time to go beyond the official statistics and look at multiple indicators to get a better sense of where we are headed. The Markit PMI reports a small uptick in employment, for the first time in five months, the MSME Business Confidence Survey reported a positive change, and the index for employment rose in December, reversing the two-quarter fall and returning to March levels. Investment and expansion plans have been maintained throughout the last two quarters at levels higher than the early two quarters of 2011. While this does not show yet in the official data, the survey results indicate intent that will translate into action as the rate hikes have now clearly come to halt. The PMI for services sector posted the sharpest rise for December since July and respondents were confident of better times in the year ahead. Clearly, the sparks of optimism that we sensed and spelt out two months ago are now slowly growing brighter. What about inflation, though? Unfortunately, despite the crash in inflation in primary articles, both food and non-food in December, there are some pockets that will continue to cause stress. The wholesale price index for November shows higher inflation for iron and semis, basic metal alloys, non-metallic mineral products, cement and lime, etc — in effect, inputs for industry have been under strain. Going ahead, while depressed growth in China and low projections of global growth will keep commodity price pressures down, the MSME survey indicates expectations of input price pressures easing in Q4. However, as volatility in these markets is a given, unexpected surges cannot be ruled out. With better business prospects for industry, the return of pricing power is once again on the cards. This will stave off any sharp decline in manufactured products inflation, making it much tougher for the RBI to call and plan rate cuts in the quarters to come. For the common man, however, inflation in most basic commodities is slowing. Yet, as the new Indicus Price Index that monitors prices of primary food and fuel in real time shows, pressures are building up in some essential items like oilseeds. Prices of especially groundnut have increased since early December, reflecting the impact of expectations of a low rabi output with sowing at less than half of its normal area by the month end. Further, with oils/fats being the sole item in the FAO Food Price Index to reverse a decline in November and the rupee at depressed levels, imports to make up the shortfall will not be coming cheap. The point is that while overall inflation may look bearable in the months ahead hitting 6-7% levels, pressure points in certain items will continue to plague both firms as well as consumers. Unfortunately, the pickup in growth and the moderation in inflation are all happening with little help from the government, and are definitely in no way close to what we should be achieving. In fact, the only active participant in trying to fix any problem, the RBI, has to now step back to watch the fallout of the polls and the Budget on further inflation levels. 

ET

State farm growth comes in for praise

BHOPAL: NABARD Chief General Manager S Akbar on Wednesday said 8% agriculture growth in the last fiscal in Madhya Pradesh is an encouraging development given that 70% people are dependent on agriculture in the state. "This financial year, the state government wants to rev up agriculture growth to 10%," Akbar said at a seminar on agriculture finance organised by the Bank of India in the city. The city should maintain the growth pace to scale new heights in agriculture production, he said. Underlining the need of investment credit in agriculture, he said, adding there is a lot of scope for it, he said. Akbar said there was a space to improve cattle milk production, poultry, horticulture and seed production for increasing income of rural populace.  "Increased investment credit can be put to improve post harvest infrastructure," he said, adding 40% agriculture produce get destroyed for want of preservation in the country. 

In his address, RBI Regional Director P.K.Panda said the state was the heart of India, adding that efforts are needed to turn it into the heart of agriculture.  In their address, state rural development principal secretary Aruna Sharma and horticulture principal secretary M M Upadhyay said the state government was working hard to turn agriculture farming into a profitable business. They praised the BOI endeavours to increase investment credit flow in rural areas.

TOI

Rural women turn bankers



Chetna Gala Sinha (right) helped set up the Mann Deshi Mahila Sahakari Bank in Satara, Maharashtra



Neglected by conventional banks, low-income women in Satara have set one up themselves. Not long after Chetna Gala Sinha came to the drought-stricken region of Mhaswad in western Maharashtra to marry a farmer and prominent local social activist, she began putting her university degree in finance into action. Local women, she observed, were wearing themselves out in subsistence livelihood such as growing grapes or selling vegetables. In 1992, Chetna, who grew up in a middle-class family in Mumbai, began organising the women into self-help and savings groups that helped them share technical knowledge, lower their costs through bulk buying and manage their money better. But she quickly realised that the women also needed business loans, but conventional banks wouldn't lend because of their low income. So in 1994, she applied for a licence to run a bank on behalf of 500 rural women. But the Reserve Bank of India rejected the application. Reason: Except for Chetna, all the women identified themselves with a thumb print and, according to an RBI official, directors of a bank had to know how to read and write. Not to be discouraged, Chetna, who is in her 40s, set up literacy classes that ended up going beyond simple word recognition. “Thanks to their keen interest, they were also taught how to calculate interest on principal,” she recalls, “We gave the proposal again three years later and at the office, the women boasted that they could calculate the interest of any principal amount without a calculator and challenged the officer to do the same.” The experience forged what has turned out to be this all-women-run bank's underlying premise: If rural women with little-to-no education are to break the cycle of poverty, they need more than a few small loans. The Mann Deshi Mahila Sahakari Bank (the Mann Land Women's Cooperative Bank) started with 500 women and $15,000 in their credit pool. There was no outside funding and it took three years for the bank to become completely sustainable and bring in profits. Today, it has more than 1.4 lakh clients and deposits of over Rs 3.78 crore. Entirely managed by rural women, the bank operates seven branches in Maharashtra and Karnataka. It charges an interest rate that is far lower than those demanded by local loan sharks and ploughs its earnings back into the community in many ways, including a low-fee trade school and low-cost insurance programmes. Moreover, it sustains the same kind of women's self-help groups among low-income borrowers in related enterprises such as dairy vending, tailoring and grape growing. One of the bank's major functions is to act as a buyers' collective for these groups, to help lower costs. Bank employees or members of the voluntary board of directors monitor the groups and help them get projects — such as dairies for milk vendors that guarantee members a better price — off the ground. Mann Deshi started a school in January 2007 for rural illiterate women that offers courses in their areas of work. The students, who are mainly vegetable vendors, milk vendors or casual labourers, are eligible for loans from the bank and have used the money to establish or expand businesses. The average loan amount ranges from Rs 1 lakh to Rs 1.5 lakh and is repaid over five years in weekly or monthly instalments. Some loans, however, are as small as Rs 250 and get repaid in a day. A woman might go to the bank to finance the purchase of food-storage containers or an umbrella to shelter her wares at the market. While some microfinance institutions in the country have run into scandals for mismanagement and fraud, Chetna says the bank is scrupulous about accountability, with internal audits every three months, a yearly audit by the government's cooperative department and an inspection by the central bank every four years. Other than loans and a savings account — which the bank requires all its borrowers to open to promote savings — there are other services as well. There's a pension scheme where clients aged 18-55 can save on a weekly, monthly, quarterly or yearly schedule. A one-of-its-kind ‘e-card' programme was launched last year for women who did not wish to share their account details with their husband for fear it might be misused. The plastic card displays the woman's name and photograph, while a micro-chip stores all her financial information. The card instantly allows the bank's field agents and clients to view savings account balance, loan account status and repayment history. For all its innovative approaches that enable rural women to increase their financial capabilities, the bank routinely gets official commendations. One depositor also received the equivalent of its 2006 ‘Woman of the Year' award from the Prime Minister. The recipient used a loan to start a tiny paper cup-making business that today supports her family of 19. Besides running her own business, she now helps train other women entrepreneurs. Another client, Aruna Gaikwad, is proof how a small bank loan can take the borrower a long way. Three years ago, as a labourer in other people's fields, Aruna used to earn less than Rs 25 a day. She got a loan of about Rs 1 lakh to start her own vegetable retail business. Her daily income doubled immediately and today she makes almost Rs 450 a day. Aruna says she had tried to get a loan from conventional banks but was turned down because she had no property as collateral. “When I finally got the loan, it was the first time I saw such a big amount and I haven't spent a single rupee unproductively.” In 2005, Aruna began to serve as a co-guarantor for 15 other vegetable vendors who have taken Mann Deshi loans. Now, she looks to the future of her 13-year-old daughter. “I would like my daughter to get a job where she can sit on a chair,” she says, “and not squat on the road, vending stuff.”

HBL 

Narendra Modi’s Rs 78,000 cr hi-tech city GIFT to try new concepts; may shape future city technologies

....... “Liberty to transact in foreign currency at the IFSC in GIFT will significantly raise foreign firms’ investment and participation in India,” says Shri S.S.Thakur, former Chairman of HDFC and former Controller of Foreign Exchange in the Reserve Bank of India……

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India Inc should hedge actual risk exposure as base case strategy: RBI

Executive Director of Reserve Bank of India V.K.Sharma, on Thursday said that corporate India should invariably hedge their actual risk exposures without exception as a base-case strategy. “To say the least this is by far the most conservative and prudent strategy. Indeed, against the background of the measures announced by the Reserve Bank of India (RBI) on December 15, withdrawal of the facility to cancel and rebook forward contracts leaves no other option, but to follow the base-case strategy,” he said in Bangalore at a meet on forex risk management organised by the Bangalore Chamber of Industry and Commerce (BCIC), adding that the excruciating and wrenching volatility, experienced recently, unquestionably attests to the credentials of such a base-case strategy of being fully hedged. “Of course, it does mean that risk is being completely eliminated and, hence, so is the financial return. But then, this is just as well because, as I said earlier, this is not the dharma of business and industry whose cardinal principle it must be to earn their market-competitive return-on-equity from their normal core business risks only to the complete exclusion of foreign exchange, interest rate and commodities price risks,” he said. He said, risk management is not about eliminating, or which is the same thing as completely hedging risk, but about first determining, like one’s pain threshold, risk tolerance threshold and then aligning an entity’s existing risk, be it currency, interest rate or commodity price risk, with its risk tolerance threshold. “Having said that it would also be in order to have a sense of how risk itself is defined and measured. Risk is uncertainty over future outcomes such as cash flows. In financial theory and practice, it is typically measured by annualised standard deviation of a time-series of percentage changes in asset prices. While courting financial risks in pursuit of financial returns is the staple and dharma of banking and finance industry, it is not so for industrial and manufacturing businesses! The staple and dharma of business and industry is courting their normal core business risk in pursuit of delivering a market-competitive return on equity to shareholders,” he said. He urged corporates not to be tempted and enticed by the nominally low interest rates in overseas borrowings and invariably rigorously evaluate such foreign currency borrowing options, benchmarking them against the comparable Rupee borrowings. “Only if business and industry find the long-term foreign currency borrowing costs lower, on a fully-hedged basis, than the comparable rupee borrowing costs, must they choose such borrowing options,” he stressed. He further clarified to industry representatives that the present popular, but uninformed and totally untenable, refrain has been that forward cover for foreign exchange for longer term such as five years, or so, is not available; what is available is up to one month, three months, six months and maximum one year and not beyond. “But I would state that a long-term forward foreign exchange hedging solution can be easily customised by banks by recourse to what is known as rolling hedging strategy which simply involves simultaneously cancelling, and rebooking, a short-term forward exchange contract until the desired long-term maturity. Incidentally, such simultaneous cancellation and rebooking of forward contracts for rollover is exempt from the RBI restrictions introduced on December 15, 2011. Of course, precisely the same strategy can be replicated in the exchange-traded foreign currency futures markets as well,” he explained.

BS

A boost for cooperatives

This refers to your edit “Board of political control” (January 4). Cooperatives have played a significant role not only in providing agricultural and rural credit, but also in ensuring other linkages like inputs for farming and marketing avenues for products. Since these were mainly operating in rural and semi-urban areas, it took a longer time for this sector to access modern skills and technology. Although the National Bank for Agriculture and Rural Development (Nabard) was established in 1982 with the specific mandate of supporting cooperatives and the rural sector in general, its initial enthusiasm faded away in the absence of legislative and administrative support from the central and state governments. The institution was, thus, satisfied with being an appendage of RBI doing some “safe” business through established and credit-worthy cooperative banks and commercial banks. Following up the constitutional amendment with quick and meaningful measures will help revitalise cooperatives — not just the district and central banking cooperatives but also thousands of agricultural credit societies. At a time when the government and regulatory and supervisory institutions are struggling to make a breakthrough in financial inclusion and improvement in productivity, the already available infrastructure and membership of cooperatives will make this work much simpler.

M G Warrier Thiruvananthapuram (BS)

Cabinet approves transfer of RBI's stake in NHB to govt

New Delhi: The Union Cabinet has approved the proposal for transfer of the Reserve Bank's stake in the National Housing Bank (NHB) to the government and the process is likely to be completed by March-end. "The Cabinet has approved the amendment to the National Housing Bank Act, 1987, for transferring Reserve Bank of India's (RBI) stake in the NHB to government," NHB Chairman and Managing Director R V Verma told reporters. The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Manmohan Singh, deliberated upon the proposal yesterday. "The process of stake transfer would be over within two months," sources in the finance ministry said. At present, the NHB is wholly-owned by the Reserve Bank of India (RBI) with a paid-up capital of Rs 450 crore. Verma said NHB is looking at increasing its capital base and would initiate discussion with the government soon. "We expect another Rs 250 crore from the government. We will raise the issue with them," Verma said. It is to be noted that the government has already acquired stake of State Bank of India and National Bank of Agriculture and Rural Development (NABARD) from RBI. In 2007, the government acquired the 59.73 percent stake held by RBI in the country's largest bank, SBI, for Rs 35,531.33 crore. However, NABARD stake transfer happened in 2010. It was the Narasimhan Committee that recommended the transfer of RBI's stake in State Bank of India, NABARD and NHB to the government to differentiate the central bank's role as the owner of banks and the sector regulator. After getting ownership of NHB, the government would also have a greater say in the boards of these institutions and the flexibility to issue directions to meet its credit objectives for the priority sector.

Zee News

SC notice to finmin & RBI on loan write-offs

New Delhi: Dissatisfied with the finance ministry reply on the steps to address rising NPAs, the Supreme Court sought RBI’s response on its role in regulating public sector banks on the non-recovery/ one-time settlement/write offs.  A bench headed by Justice DK Jain, while issuing notice to RBI, also asked MoF to file a fresh affidavit stating how it would enforce RBI circulars to monitor banks exercising discretion to enter into one-time settlements. Earlier, it had issued a notice to the ministry on a PIL filed by Shoaib Richie Sequeira, who runs an NGO, alleging that no guidelines are in place on writing off loans the debt recovery tribunal has failed to recover. Shoaib had earlier urged the Bombay HC to look into the public money foregone in write-offs and one-time settlements. Counsel R Chandrachud, appearing for the petitioner, argued that no vigil was maintained by the finance ministry and RBI while writing off loans. He pointed out that the absence of regulation had led boards of directors to misusing their powers. The petitioner also sought constitution of a high-powered panel to take steps to recover debts due to PSU banks, besides a panel of experts to formulate guidelines in this regard.The ministry had replied that RBI has framed norms and put in mechanisms to deal with recovery process so discretionary powers were kept in check. The affidavit filed by Rajiv Sharma, under secretary, MoF, had said that pursuant to the circular of July 28, 1995 prescribing guidelines in respect of compromise and negotiated settlement, each bank had framed its own loan recovery policy. Even other circular of October 2007 had stipulated that banks and FIs while entering into compromise should ensure that the net present value of the settlement amount should not be less than the net present value of the realisable value of the securities.  Even the Government of India had also prescribed the powers and limits of the CMDs and executive directors of nationalised banks for sanctioning write-offs, the affidavit had stated. Even RBI had framed a master circular dated July 1, 2011 defining willful defaulters, directing constitution of grievance redressal committees by banks and FIs, dealing with diversion and siphoning of funds and prescribing penal measures, the ministry said, adding that a scheme of corporate debt restructuring has been put in place and larger number of compromise settlements through lok adalats are being done. However, the ministry said that it was not feasible to micromanage and scrutinise every such settlement. It further said that out of the total reduction in NPA of R8,022 crore during 2009-10 by SBI, R2,059 crore was actually recovered, R 3,972 crore was on account of upgradation of accounts and R1,990 crore was on account of write-offs.

FE

The tough journey to Basel 3

Indian banks will have to raise a mountain of capital over the next few years if they have to maintain loan growth as well as meet new international norms. Can they do it? Last week, the Reserve Bank of India (RBI) issued draft guidelines for Indian banks to migrate to the so-called Basel 3 regulatory framework, which defines how much capital buffer banks need to protect themselves against sudden shocks to profitabililty. According to the RBI norms, local banks will need common equity Tier 1 capital equal to 5.5% of their risk-weighted assets (RWAs), up from the current 3.6%. The overall Tier 1 capital should be 7% of RWAs. Banks have to meet this target by 2017; banks in most other countries have time till 2019. According to a study done by rating agency Crisil, Indian banks will need to raise equity capital of Rs.1.4 trillion by March 2017 to raise their capital ratios based on current size of their loan books. This requirement can increase by another Rs.1.3 trillion in case investor appetite is low for non-equity Tier I capital instruments. According to a report on banks and financial institutions by Kotak Institutional Equities, Indian banks have delivered return on equity (RoE) of about 15% over the past few years, and it estimates that every additional 100-120 bps of increase in core equity is likely to impact RoEs by 150-180 bps.  Public sector banks are likely to account for the bulk of the requirement to raise the equity and, therefore, are likely to seek a capital infusion from the government, which is already struggling to keep its deficit within safe limits. An infusion of capital by the government goes against the recommendations of the two committees headed by former RBI Governor M.Narsimham, which submitted their reports on banking reforms in 1991 and 1998. The two reports had argued against recapitalization through budgetary provisions, and instead recommended the creation of asset reconstruction funds or companies to take over the bad debts of banks. There are growing fears in the financial markets about the declining asset quality of Indian banks and pressure on the capital adequacy of a few public sector lenders. This and the move to Basel 3 norms could be a tough challenge, especially if the Indian economic slowdown persists.

Mint

Basel III overlooks our growth needs

The Reserve Bank fulfilled its promise of releasing by 2011 the draft guidelines outlining proposed implementation of Basel III capital regulation in India. The guidelines require achievement by March 2017, of minimum capital requirements to risk weighted assets .............

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Fixed deposits may lose edge as RBI looks to whittle down rates

Fixed deposits (FDs) never looked so alluring, especially given the uncertainties in the current economic landscape. But the sting in the tale is it may be a different scenario post January 24, when the Reserve Bank of India reviews its monetary policy. And chances are that the apex bank may go in for a cut in the cash reserve ratio (CRR), which is the amount of funds that lenders need to keep with the central bank. A reduction in it means banks have to park less money with the RBI. This, experts say, will leave banks with more elbowroom to deploy funds and, more importantly, can afford to cut deposit rates. “If CRR is reduced, then there will be an immediate impact on money market rates. Money market rates will fall, with a lag getting transmitted to bank fixed deposit rates. If CRR is cut by 50 basis points, then deposit rates may fall by 25 basis points,” said Mohan Shenoi, head of treasury, Kotak Mahindra Bank. Analysts believe it’s the rates of fixed deposits with a tenure of up to two years that will see an instant decline. “Bank FD rates may not initially fall by more than 50 basis points. So, we can expect that by March, it may fall by 25-50 basis points in tenures of up to 2 years,” said Vaibhav Agrawal, vice-president (research), Angel Broking. But the fall in rates will not be as quick for longer tenure deposits, said Parthasarathi Mukherjee, president (treasury and international banking), Axis Bank. His prescription is clear: Before the expected CRR cut in January, this may be the last chance for customers to lock in funds in bank FDs. Last year, high deposit rates have been a handy tool for banks to woo customers. Even some FD products offer rates above 9% on a 1-year deposit. “A 1-year bank FD fetches about 9.25%. The post-tax returns are in the range of 7.1-8.3%, depending on the tax slab of the customer. It is not just bank FD, the returns of a few other investment instruments may also start falling with the fall in interest rates,” said Suresh Sadgopan, who runs Ladder 7, a financial advisory firm. During the fortnight ended December 16, bank deposits grew 18% year on year to `56,72,592.36 crore.

DNA

Little to bank on

Though the number of bank branches is growing by leaps and bounds and ATMs are mushrooming in cities and towns, the banking revolution has largely remained an urban phenomenon...................

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Inflation slowing, indicators suggest: RBI Deputy Governor

India's inflation is slowing, as suggested by momentum indicators, and the ceiling for interest rates has been reached, the Reserve Bank of India (RBI) Deputy Governor Subir Gokarn said on Thursday. Gokarn, who handles monetary policy, said the rupee appears to be stabilising as REER (real effective exchange rate) moves towards neutral. REER is the rupee's value against a basket of currencies of India's largest trading partners, adjusted for inflation. Gokarn was speaking at a conference in Singapore. The annual food inflation eased for a ninth straight week to its lowest in nearly six years in mid-December on improved supplies, bolstering hopes of a cooling in overall inflation which should allow the central bank to cut rates. The RBI, which has raised its interest rates 13 times since March 2010, left its key lending rate, the repo rate, steady at 8.50% last month.

Moneycontrol

Is food inflation over? Well, maybe. But we need more cows

....... In fact, the chairman of the PM’s Economic Advisory Council (PMEAC), C Rangarajan, considered by many to be an inflation hawk, has turned dove of late. He said the “environment appears to be in favour of the Reserve Bank reversing its monetary policy stance.” Governor Duvvuri Subbarao will surely agree........

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Food inflation turns negative but don’t expect a rate cut just yet

...........Food prices plunge to (-) 3.36 %, RBI Dy Guv Subir Gokarn says while monetary policy has " reached its peak", it does not mean a reversal in stance as " inflation risks are still high"...............

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Onion gives a smile, drives food inflation to negative

.....The current inflation situation is seen as an impetus to reversing the tight money policy of RBI. But if the tight money policy is reversed, it would not be because of declining inflation. “It would be because there is concern about GDP growth,”............

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RBI managing banks well: Raghavji

Bhopal : Better bank management plays a significant role in any country’s development and Reserve Bank of India is performing this role very well. This was stated by finance minister Raghavji, while addressing a programme held in village Gondarmau of the city, organised by Reserve Bank of India (RBI) on Monday. Raghavji in his address gave detailed information on banking extension and its benefits to common man. He said no nation can progress without better bank management. It is necessary that every person must understand banking system and bring them in practice. He said payment in several schemes of the government is being made through bank. Emphasising on safety of money he said bank is the only measure for protection from loot, theft and fraud.




Financial awareness needed, says H.R.Khan, RBI Deputy Governor



RBI Deputy Governor, H R Khan focusing on financial awareness said the main objective of this programme is to link more and more people with banking system. He said nearly 6,000 villages having more than 2000 population, are covered under this banking system. He appreciated the role of the state government in taking initiative in imparting of financial education in general education. Khan, explaining about various online facilities, said that banks are providing facilities of business facilitator and delivery banking. Small savings are being promoted. Banks through NGOs are working to develop womens interest towards banking. The facility of money transfer is being streamlined. Chief secretary Avani Vaish said students should be informed about banking system as they are the future. RBI Regional Director P K Panda spoke on smart card and other facilities. Bhopal divisional commissioner Pravin Garg, collector Nikunj Kumar Shrivastava, SSP Yogesh Chaudhary, Banking Lokpal Karunakaran were present on the occasion.

FPJ