The very purpose of VITALINFO is to provide a platform for wider dissemination of updated information related to and happening of events in and around RBI.
Tuesday, January 17, 2012
RBI happy with liquidity situation, says Chakrabarty
Hyderabad, Jan. 16: In what could be an indication to the policy stance of the Reserve Bank of India to be announced next week, the Deputy Governor, Dr K.C. Chakrabarty, said the apex bank is happy with the prevailing liquidity situation. He was responding to queries of newspersons after delivering a lecture at the Jawaharlal Nehru Institute for Development Banking here on Monday. Dr Chakrabarty, however, parried all other questions relating to inflation and policy-related issues by saying they would be answered in the policy review scheduled for January 24. After hiking key policy rates consecutively for 13 times since March 2010, the RBI had softened its stance last month and took a pause from hiking policy rates as inflation started decreasing. On the global economic scenario, Mr Chakrabarty said the cost of capital and the savings of the rich to facilitate borrowings by the poor should be properly handled for financial stability. Earlier, while delivering a talk on ‘Crisis Management in Interconnected Markets', he said there were important lessons to be learnt from each crisis, adding: “We can but be alert and flexible to evolving risks.” In India, an early intervention system based on monitoring of capital adequacy, non-performing assets and return on assets had existed for a long time, he added.
HBL
Return on capital may slide, says RBI
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Importance of getting product design right to begin with
..... National Stock Exchange of India Ltd’s (NSE) decision to appoint Shyamala Gopinath on its board as an independent director has created the proverbial storm in a teacup. Gopinath retired as the Deputy Governor of RBI in June, and the allegation appears to be that a regulatory watchdog is now joining the ranks of a regulated entity......
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Why the rupee’s ride may only get rougher from now on
..... With the European crisis far from over, the RBI will have to retain ammunition for the first half of the year or more till foreign investors regain their risk-appetite and start investing in India. We also have to give our exporters enough time to rejig their operations to take advantage of the currency’s depreciation. In view of all this, it would be foolhardy to believe that the worst is over for the rupee. The macro numbers don’t support that view.
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Look at mfg goods inflation before reducing rates: PMEAC to RBI
New Delhi: Sounding a note of caution, the Prime Minister's economic advisory panel on Monday said RBI should take into account inflation of manufactured goods, which has shown only marginal decline, while deciding to lower policy rates at its monetary review next week. "The Reserve Bank, while framing its monetary policy, will have to take into account not only the decline in food inflation and the headline inflation, but also factor in the manufactured inflation," Chairman of the Prime Minister's Economic Advisory Council, C Rangarajan said. His comments came after headline inflation, as measured by Wholesale Price Index (WPI), fell to a two-year low of 7.47 percent in December, from 9.11 percent in the previous month. Rangarajan said more steps are required to further moderate the inflation. "The decline in headline inflation is mainly on account of the fall in food inflation. However, the decline is very small ... Further steps will be required (to control inflation)," he said, without giving more details. As per the official data, prices of food items rose at a lower rate of 0.74 percent in December, compared to 8.54 percent expansion in the previous month. However, inflationary pressure continued in manufactured items, which which have a weight of around 65 percent in the WPI basket. Prices of manufactured products, went up by 7.41 percent year-on-year in December, as against 7.70 percent in the previous month. Earlier in the day, Finance Minister Pranab Mukherjee also said that inflation of manufactured goods continued to be a matter of concern but hoped that overall inflation would come down to 6-7 percent by March end. "The manufactured inflation and inflation in the power group of items have also declined though only marginally, therefore, continued to be a cause of concern," Mukherjee said. RBI is scheduled to announce its third quarterly economic policy review on January 24. Barring December 2011, headline inflation had been above the 8 percent mark since January 2010, while it was above 9 percent since December of the same year. The apex bank has already hiked key policy rates 13 times since March, 2010, to tame inflation. However, it went for a pause in rate hikes in November and hinted at loosening the tight monetary policy in future if inflation moderates. India Inc has said the string of rate hikes, which have raised the cost of borrowing, has acted as a dampener to fresh investment and hindered growth.
Zee News
Lower inflation to give RBI leeway for relaxing tight policy: Montek
New Delhi: Declining inflation will provide more flexibility to the Reserve Bank to ease tight monetary stance for stimulating economic growth, said Planning Commission Deputy Chairman Montek Singh Ahluwalia. "..people were earlier saying inflation was a big problem and was the reason for tightening of monetary policy. Now (with easing of inflation) RBI will have more flexibility for stimulating Gross Domestic Product (GDP) growth," Ahluwalia told reporters here. Headline inflation fell to a two-year low of 7.47 percent in December 2011 on cheaper food items, a factor which may prompt RBI to cut policy rates in the upcoming review on January 24. Inflation, as measured by Wholesale Price Index (WPI), had stood at 9.11 per cent in November. It was 9.45 percent in the December 2010. The inflation has been above the 8 percent mark since January 2010, while it has remained above 9 percent since December of the same year. The apex bank has hiked key policy rates 13 times since March, 2010, to tame inflation. RBI has, however, paused rate hikes since November and has hinted that it may start easing its tight monetary policy if inflation falls. It had projected inflation to fall to 7 percent by March this year. India Inc has said the string of rate hikes, which have raised the cost of borrowing, have acted as a dampener to fresh investment and hindered growth. The economic growth in July-September period of 2011-12 stood at 6.9 percent, the lowest in over two years. Ahluwalia said there was some pressure on inflation but it would further come down by March.
Zee News
The RBI should not wait; it must cut CRR and rates now
As inflation shows signs of easing, the Reserve Bank of India will have to have a very strong reason to tread cautiously on rate cuts. The economy is still slowing, and if the RBI does not act quickly the danger of a free fall is not ruled out.............
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Stubborn core inflation may defer rate cut
.... “Excessive usage of OMOs to infuse liquidity into the system can be construed as monetisation of the deficit. We feel RBI should go for a judicious mix of a CRR cut and OMOs. We expect a cut of 50 basis points in the CRR in the January policy review,”.....
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stagflation risks again
..... In India, too, the central bank is unlikely to engage in any significant and early monetary policy easing, given ever-present inflation risks from global factors and unproductive and wasteful government spending locally. Expectations that economic growth would hold above 7% this year and next in India are more likely to be disappointed than met. Much rejoicing over recent buoyant data is too premature.......
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With 7.47% inflation, Subbarao shouldn’t miss the bus on rate cuts
........ If the RBI waits for a more sustained drop in inflation, it might never be able to cut rates. This is probably as good as it gets on the inflation front — and the RBI shouldn’t lose this opportunity............
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IDBI Bank launches India's first online Retail G-Sec Portal
.....RBI during various policy pronouncements has been emphasizing the need for banks to take necessary steps for providing the infrastructure for retail investors to make investments in Government bonds....
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Banks stop giving term loans to poor women-members of self-help groups
....The circular has also asked the National Bank for Agriculture and Rural Development (Nabard) to convey the new guidelines on stopping term loans to SHGs to all bank branches immediately.......
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Monday, January 16, 2012
A spirited marathon for myriad causes
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The RBI Governor, Dr D. Subbarao, at the Mumbai Marathon on Sunday |
Mumbai, Jan.15: “Run, Mumbai run,” echoed on the streets of Mumbai as hundreds of onlookers cheered the spirited runners at the Standard Chartered Mumbai Marathon 2012. January 15 was not just another lazy Sunday in Mumbai. Thousands of people left their homes at wee hours all geared up to participate in the marathon. Warm-up sessions had started one hour ahead of the run. If it was a rigorous exercise for the serious runner, it meant rehearsals and make-up sessions for the participants strolling along the route promoting their beliefs. Except the serious runners, most participants dressed up in colourful, funny yet symbolic outfits to promote causes that were close to their heart. We were a part of this crowd, panting and puffing our way through the runners trying to get a glimpse of their outfits. Matching their pace and spirit was not difficult as we got sucked right in the middle of their campaigns protecting causes such as the girl child and Mother Earth, to name a few. While some were dressed as Anna Hazare, many had embarked on a patriotic voyage. Twenty-seven-year old Anshul Jain, an advocate by profession, was dressed up in a Gandhi topi, with two steel glasses covering his ears and other utensils strung together. “This look signifies my support to the Anna Hazare cause. I want his approach to be considered by the Government,” said Jain, who has been winning a costume ‘run-in' prize since the last three years. This year he won a sum of Rs 30,000. To promote rural banking services, employees of Union Bank of India had dressed up as carrots, leaves and mobile phones. “We want to spread awareness about the reach of rural banking. It has been a great experience,” said Ms Richa Dodhi, from the bank. Among the hundreds of NGOs, Toybank had a large number of participants. Dressed in clown outfits and a train costume, the participants were handing out square yellow paper boxes to the onlookers encouraging them to donate toys. Celebrities like John Abraham, Milind Soman, Anil Ambani, Anand Mahindra and many more were also seen running at the marathon. Kenya's Laban Moiben and Ethiopian Netsanet Abeyo bagged the top honours in men's and women's categories respectively. Moiben completed the marathon with a timing of 2 hours-10 minutes-48 seconds while Abeyo finished the run in 2:26:12.
HBL
Twists & turns in policy changes – S.S.Tarapore
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Banks stepping up presence on social networking sites
With almost half of the country's population below 30 years of age, banks are gradually stepping up their presence in the virtual world, connecting with current and potential customers through social networking Web sites, especially Facebook.........................
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Accounts can not be closed for non-compliance of KYC norms without notice
NEW DELHI: A Delhi consumer forum has ruled that a bank closing its customer's account without serving him notice seeking his various particulars as per the banking sector's Know-Your-Customer (KYC) norms, is liable to be held guilty of rendering deficient service. Delhi's Central District Consumer Disputes Redressal Forum, headed by its president B B Chaudhary gave the ruling while holding Karol Bagh branch of the State Bank of Bikaner and Jaipur guilty of rendering deficient service to one of its customers, whose bank account it had closed without serving a due notice to him, seeking his particulars. It also asked the bank to pay Rs 15,000 as compensation within 30 days to complainant R N Prabhakar, a lawyer, for causing "harassment, pain and mental agony" to him. "We hold that the act of the bank amounts deficiency in service. It led to harassment, pain and mental agony to the complainant," the forum said. The forum said the bank, itself, did not follow the RBI guidelines, published in a news daily, on the KYC by closing the account of the lawyer on its own. Rather, it cleared two cheques of the complainant before closing his accounts without giving him a notice, it said. "It was not appropriate on its part to close the account or not to honour the cheque of the complainant by taking shelter under the public notice," it said. Prabhakar, in his complaint, had alleged that the bank dishonoured a cheque issued by him in favour of Airtel without any valid reason. He also also sought that his complaint be treated as a public interest litigation.
ET
CAs lobby against RBI plan to reduce audits
RBI may allow state-run banks to stop branch audits, a move that could save costs
New Delhi: Chartered accountants (CAs) are lobbying hard to protect a source of income that’s at risk of drying up as the Reserve Bank of India (RBI) may allow state-run banks to stop branch audits, a move that could save costs. Banks are looking for savings as a slowing economy acts as a dampener on business. Such branch audits are a routine stream of revenue for small firms and individual accountants. RBI governor D. Subbarao told CAs on 16 December that they should not rely on work that doesn’t add value. “With concepts like core banking system and centralized record keeping, the relevance of the audit of branches of public sector banks (PSBs) has significantly declined,” he told the Institute of Chartered Accountants of India (Icai) in Mumbai. “These banks have represented to RBI that the audit of banks’ branches should be reduced. There is merit in this suggestion, since currently the cost of audit of PSBs is significantly higher than the cost of audit of comparable private sector banks.” Subbarao also acknowledged that Icai has been “resisting this because it would mean a reduction in work for its members”. RBI has asked PSBs to reduce branch audits by at least 25% and constituted a working group of bank officials toward this end. CAs are trying to persuade RBI against imposing such a directive. In late December, they even asked the central bank to allow them to carry out branch audits of private sector banks as well. The Icai central council held an emergency meeting on Wednesday to discuss the matter, said G. Ramaswamy, president of the body. Icai representatives will meet RBI officials on 16 January to make a case for auditing all branches and advances. “Although core banking solutions for public sector banks are sophisticated and technologically sound, there are issues such as maintenance of records, human interventions, etc., which will need auditors’ involvement, and that is what Icai will represent itself on in the meeting with the working group formed by RBI for this purpose,” Ramaswamy said. Core banking refers to retail and small business customers handled through centralized data centres and, therefore, more automated than earlier. The move, if implemented, may come as the second blow that India’s 180,000 CAs have faced in the past month. On 23 December, the finance ministry directed each state-run bank to create a credit approval panel comprising only of bank officials for approving large-value loans, thereby bypassing CAs. Currently, any loan above Rs. 100 crore has to be approved by a management panel, which comprises bank officials, CAs, government and RBI representatives.“ So far, all credit proposals that are beyond the sanctioning power of the chairman go to the management committee. We have asked banks to create a level of credit approval committee, which comprises only officials of banks,” said a senior finance ministry official, who did not wish to be identified. An Icai council member who did not want to be identified, said, “Icai will make a representation to RBI that in the larger interest of corporate governance, larger number of advances sanctioned by PSBs should be audited. The move to limit branch auditing may keep advances up to several thousand crore rupees out of the ambit of auditing.” Another senior Icai member who did not want to be identified, said, “RBI is taking this step in the name of cost saving, but this may trigger frauds and fudging of data.” RBI officials were not immediately available for comment.
Mint
Adopting Basel III
The editorial “Bankrolling the banks” (Business Line, January 14), makes a cautious assessment of the state of affairs prevailing in Indian banks, and their preparedness for the proposed Basel III, to be implemented in a specified timeframe from January 1, 2013, to March 31, 2017. By and large, banks were least affected even in the most adverse conditions due to sound fundamentals, and yet, when it comes to critical issues such as raising capital for business expansion, ensuring regulatory compliance and containing non-performing assets, they have always found it challenging. No business is without risks, and obviously banks, as commercial entities, cannot be an exception. But a high quantum of NPAs is worrying. Capital has become an increasingly scarce commodity; raising capital, especially for public sector banks, will become the biggest challenge. It is estimated that PSBs will need an additional capital of Rs 5 lakh crore in the next five years for implementation of new norms and to sustain a growth of 20 per cent per annum. This is an uphill task for the government. The RBI, as a market regulator, cannot ignore concerns regarding the proposed implementation schedule for Basel III. Given the background that the banks are in, the RBI has a greater role to play in ensuring their smooth migration to Basel III. The idea of having a capital conservation buffer proposed in Basel III is a welcome move, aimed at maintaining renewed stability of the financial system.
S. Umashankar, Nagpur (HBL)
Banks pay interest for delayed credit/refunds of NEFT transactions
.... the Reserve Bank of India (RBI) had issued some guidelines for banks in 2010. According to these, banks are required to pay a penal interest at the current RBI’s repo rate plus 2% for the delayed period, or until the date of refund, as per the case. At present, the repo rate is 8.5%, so you should get 10.50% as penal interest on any delay.....
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Why RBI is not in a hurry to issue new bank licences
In the Union Budget 0f 2010- 11 the Honorable Finance Minister had announced that additional banking licenses would be given by RBI to private sector players inclusive of NBFCs. This was ostensibly to further financial inclusion and also to improve Indian Banking systems size & sophistication. This had set the capital markets on fire with a lot of conjecturing as to who would be the lucky few. The access to low cost current account & savings accounts ( CASA) and ability to offer all financial products under one roof (Universal Banking) attractions for NBFCs to rush to seek banking licenses. It was also expected that RBI would give new licenses to private players very soon. However the scenario on the ground reveals a totally different picture. Neither is RBI in a hurry to issue fresh licenses nor is there a mad rush by many NBFCs to get into commercial banking. The reasons are as outlined below: Restricted Freedom Due To Banking Regulations: RBI rules are stringent for commercial banks as they are the visible face of the Indian Financial system. Another reason is the fact that commercial banks are primarily custodians of public money. RBI places restrictions on commercial banks in their lending operations. Out of Rs. 100 taken in as deposits approximately Rs. 30 has to be set apart as statutory requirements towards Cash Reserve Ratio ( CRR) and Statutory Liquidity Ratio (SLR). This leaves the Banks Rs. 70/- to lend. Out of this Rs. 70/- forty percent has to be statutorily lent towards priority sector as defined by RBI. That essentially leaves banks with Rs. 42/- to lend as per their own discretion. Many NBFCs would definitely restrictive to say the least. NBFCs seeking a banking license are expected to have huge capital requirements. Further Banks have to invest large funds in fixed assets and information technology primarily to facilitate financial inclusion, risk management anti money laundering, etc. These huge capital expenditures increase the payback period for the investments made. Also banking as a business model is far more people, process and product driven than a simple NBFC model. For example in order to adopt Universal banking the staff needs to be multi skilled in banking functions. Thus the operating expenses would be substantially higher, which in turn would reduce the profitability of operations. Also there ownership and voting rights. Current stipulations cap voting rights at 10% unless with specific approval of RBI. Thus in light of all these restrictions, it is clear that commercial banking is a far more regulated and complicated business model. This explains the lukewarm response of many NBFCs. Past Experience explains RBI's cautious approach At the same time it is clear that RBI is in no hurry to issue new licenses. The last license was given in 2004. However since then, India has changed a lot and the world has changed a lot. More importantly the world view on Banks has changed a lot. Also RBI has to take into account the past experience of giving licenses to new private players. licenses to nine players. Post 2001, RBI further gave banking licenses to Kotak Mahindra and es bank Of these four do not survive today. Global Trust Bank ( GTB) has been merged with Oriental bank of Commerce (OBC), Times Bank was merged with HDFC, Bank Of Punjab with Centurion Bank which itself has been merged with HDFC Bank. Thus out of eleven new banks, four have failed ( a failure ratio of above 35%). A key lesson of the recent financial crisis is that each time a bank fails it erodes the faith in the system which might eventually lead to a systemic collapse. This explains RBI’s reluctance in handing over licenses liberally. In particular the comment on the current world view of the Banks is telling. To say the particular are viewed with suspicion due to their ownership. The last thing that RBI would want is banking failures which would undermine the stability of our financial system. It is thus clear those only serious NBFCs with deep pockets and who have a differential operating model would seek banking licenses. Also RBI would be in no hurry to issue these licenses.In the context of new branch licenses baby steps are far better than giant leaps. This is because it is better for RBI to prepare & prevent than repair and repent.
FPJ
‘Fake note circulation up 300%’
New Delhi: There has been a 300% increase in fake currency transactions in India’s financial channels, a report compiled by the financial intelligence unit (FIU) under the Union finance ministry has said. The report states that during financial year 2011, the agency detected “4,23,539 incidents of fake Indian currency notes with a face value of over Rs 35 crore”. The FIU is notified about such detections, called counterfeit currency transactions (CCRs), by public and private sector banks under provisions of the Prevention of Money laundering Act and these numbered 1,27,781 in the fiscal 2010. The FIU report also revealed that notes of Rs 500 denomination bear the maximum brunt of counterfeiting in the country. “Rs 500 denomination notes constituted the bulk of CCRs at 60.74%,” the report said.
TOI
Fake notes found, man arrested
Officials of the Fort branch of the Reserve Bank of India (RBI) carrying out an audit of old and worn-out currency notes were a surprised lot when they found fake currency notes totalling over Rs3.88 lakh had been deposited with the bank between September 2010 and June 2011. Following the incident, the MRA Marg police on Sunday arrested a man, Said-ul alias Aslam Suratali Shaikh, a Jharkhand native living at Pydhonie. Another significant fact was that small denomination notes were also deposited in the bank, which is very rare, said the police. According to the police, it was during an audit of the currency notes that the RBI officials learnt of the high number of fake notes being deposited in the bank, which the vigilance department confirmed were deposited on various occasions between September 2010 and June last. Interestingly, the fake notes were deposited in the department that checks and exchanges torn and unusable notes.
DNA
Police, ED asked to take RBI help in checking terror funding
Intensifying its drive to curb terror funding, the Government has asked the Jammu and Kashmir Police as well as the Enforcement Directorate to seek help from the RBI in monitoring transfer of funds meant for separatist groups for alleged anti-national activities, including disturbing peace in the state. With Union Home Minister P Chidambaram giving a clear direction to choke the funding of terror groups, the Union Home Ministry recently convened a meeting chaired by Home Secretary RK Singh in the national capital where broad contours of terror financing were discussed, official sources said today. The sources said that during the meeting, Enforcement Directorate officials indicated that terror groups were adopting a smart approach of transferring money in small amounts to avoid suspicious transaction by the security agencies and bank authorities. The other modus operandi used by the terror groups and separatists was that of using credit cards where they had to withdraw money once they get clearance from terror groups across the border in Pakistan, the sources said, adding some funds were even transferred through authorised money transfer agents in small amounts. At the meeting, it was decided that the police as well as the ED would seek help of Reserve Bank of India which monitors gateways of credit cards and money transfer agents, the sources said. While it would be an enormous task of monitoring the transactions, the officers were asked to detect suspicious transactions through their intelligence mechanism and later verify the same with the RBI, the sources said. The ED has in the meanwhile served summons to several people who have been booked by the police for terror financing and the process was underway to attach their properties, if any, after proving that the same was brought from the proceeds of terror funding. The ED has been talking to various security agencies and the police to gather more details about the cases and would decide as to in how many cases Prevention of Money Laundering Act could be invoked, the sources said. The Centre has been paying special attention to check illegal funding of separatists and terror groups in Kashmir and had constituted Combating of Funding of Terrorist (CFT) cell within the Union Home Ministry to monitor it. The cell works with organisations like the Department of Revenue Intelligence, Income Tax, ED, CBI and Directorate General of Customs and Central Excise Intelligence and later scrutinise information collected from central police organisations and the Financial Intelligence Unit.
DNA
Reforms far more important than cutting rates
..... I think there is a very strong case. Inflation is under control, global commodity prices are coming down, except for crude oil, all commodity prices are coming down. Inflation will be contained strongly, inflationary expectations are low and GDP growth has been affected. So this is the right time to cut rates and to cut CRR.......
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Rural banks told to shift to new system
... “There will be two advantages. The first is that RRBs will be forced to clean up their books, and second, they will look at the accounts more carefully,” said a finance ministry official, who did not want to be identified. “We know it will throw up some huge unpalatable numbers. But it is better to clean up the books in one shot.”....
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Why not a joint review of monetary, fiscal policies?
The economy needs a morale boost and this can come only if the Government and the RBI jointly initiate measures to revive the confidence of the investors. .............
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Government plans white paper on wrong export numbers soon
.... While the two sets of data may not be strictly comparable on a month-to-month basis because payment flows for exports take time, it is possible to match payments to shipments on the basis of RBI code issued to exporters.....
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Can india’s MFI industry be saved?
The government and RBI must draw an MFI survival strategy before it’s too late. We need them at least till such time the banks are ready to reach out to the masses
.... The death of the MFI industry will push the poor into the grip of moneylenders and deal a blow to the government’s financial inclusion drive. The government and RBI must draw an MFI survival strategy before it’s too late. We need them at least till such time the banks are ready to reach out to the masses. At the same time, the industry needs to get rid of its obsession for growth and learn from the Bandhan and Janalakshmi experiments to reorient its business models......
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SBI to expand microfinance portfolio by 50% in Q4
State Bank of India plans to grow its microfinance portfolio by 50% in the fourth quarter, drawing comfort from the Reserve Bank of India's (RBI) move to frame guidelines for microfinance institutions...........
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Sunday, January 15, 2012
It’s goodbye for fancy salaries in foreign banks
RBI urges those operating in India to set up remuneration panel to fix pay
In what could change the career landscape in private and foreign banks as a lucarative option, given that they lured the best banking brains with fancy paychecks, the Reserve Bank of India (RBI) has now drawn the laxman rekha on “excessive” salary their staff can get and the management can dole out. Among bankers drawing an annual salary in excess of Rs 1 crore include ICICI Bank CEO Chanda Kochhar, Axis Bank CEO Shikha Sharma, ICICI Bank top executives directors K Ramkumar, N S Kannan, Rajiv Sabharwal. The government fixes the remuneration for key executives of public sector banks RBI’s top officials, including the governor.While neither succinctly specifying what constitued “excessive remuneration” nor putting a specific ceiling on it, the RBI, has, however, made it mandatory for private and foreign banks to obtain prior permission from RBI while fixing the salaries of their staff and CEOs and wholetime directors. Stipulating the series of dos and don’ts in this regard through fresh guidelines for them to follow, the RBI has said they should strictly go as per the Banking Regulation Act, 1949, which prohibits excessive remuneration. Incidentally, according to information available from RBI under Right to Information Act, Governor D Subbarao got a gross salary of Rs 1,28,500 in the month of June 2010. This corresponds to an annual package of little over Rs 15 lakh for RBI Governor, who is a signatory to all the currency notes in the country. In RBI’s view, these banks are required to fix reasonable compensation, taking into account all relevant factors, including the industry practice and a proper balance ensured between fixed pay and variable pay. Variable pay, however, should not exceed 70 per cent of the fixed pay in a year, it noted.The guidelines would be implemented from 2012-13. The approval process, RBI said, will involve an assessment whether the compensation policies and practices are in accordance with the Financial Stability Board (FSB) Principles. The principles are intended to reduce incentives towards excessive risk taking that may arise from the structure of compensation schemes. The principles call for effective governance of compensation, alignment of compensation with prudent risk taking, effective supervisory oversight and stakeholder engagement, it said. The principles have been endorsed by the G-20 countries and the Basel Committee on Banking Supervision and are under implementation across jurisdictions, it added. Banks, the RBI guidelines stipulated, should formulate and adopt comprehensive compensation policy covering all their employees and conduct annual review. The guidelines directed private sector banks to constitute a remuneration committee (RC) of the Board to oversee the framing, review and implementation of compensation policy of the bank on behalf of the board. The RC should have a minimum of three members and should include at least one member from Risk Management Committee of the Board. The majority of members of the RC should be independent non-executive directors, it said. The RC should also ensure that the cost/income ratio of the bank supports the remuneration package consistent with maintenance of sound capital adequacy ratio, it said. Banks are required to make disclosure on remuneration on an annual basis at the minimum, in their annual financial statements, it added. As regards salary of foreign bank executives, the RBI guideline said it is expected that Head Offices of most of these banks would align their compensation policies in line with the FSB principles. Foreign banks operating in India will, therefore, be required to submit a declaration to Reserve Bank annually from their Head Offices to the effect that their compensation structure in India, including that of CEOs’, is in conformity with the FSB principles and standards, it said. RBI would take this into account while according approval of CEOs’ compensation, it said, adding, the compensation proposals for CEOs and other staff of foreign banks operating in India which have not adopted the FSB principles in their home country are required to implement the compensation guidelines as prescribed for private sector banks in India.
DHWatch the video.............
‘Fake notes have 11 security features’
....The fake currency notes recovered by the special cell on Thursday from southwest Delhi had 11 out of 15 security features embedded in Indian currency which would have made it “almost impossible” for a common man to discern them from the original ones...............
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ATMs may accept cash directly
If the recommendations of a government-appointed committee on automated teller machines (ATMs) are accepted, besides dispensing notes, the machines may soon start accepting cash directly. The ATMs to be deployed by the banks will come equipped with a cash acceptor, which will accept currency notes of denominations between Rs 50 and Rs 1,000. At present, ATMs accept cash in an envelope, which is manually credited into the depositor's account. Therefore, it takes a day or more for the money to appear in the bank account. The new cash deposit feature will speed up the process. Moreover, the machines will be programmed to automatically retract the notes left behind by customers. The committee, which was led by Ashok Jhunjhunwala, professor, Indian Institute of Technology Madras, has also suggested that these ATMs have solar powered back-up and a surveillance mechanism in place for better safety. The committee has suggested that ATMs must have an internal camera, which should store digital images of the users and be able to stamp the transaction information on these images. When we contacted Jhunjhunwala, he confirmed that the initiative came from the finance ministry and the recommendations are with the financial services department of the ministry.
Business Today
Mindset change necessary in Kerala, says planning panel vice-chairman
.... During economic downturn we acted in both monetary and fiscal fronts. On monetary front, we worked closely with the Reserve Bank of India (RBI), which.....
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Interest rates set for downtrend in medium term
.... The interest rates are expected to remain firm in the short term and will gradually come down in the medium term as the RBI implements monetary policy softening based on developments in various macroeconomic parameters....
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Indian economy endures after its darkest hour
India may not be out of the woods yet, but global investors are trekking back to the country, seeing value in stocks trading at multi-year lows and a glimmer of hope for a recovery in factory output.....................
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'By second quarter, rates should start coming down': J P dua
.... We are now getting the first signs that food inflation is coming down. Once it starts coming down, it would impact on interest rate. By the second quarter, rates should start coming down. Right now, costs have not come down, so there is no reason to cut rates.
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Give the middle class a break
.....Today, apart from the destructive policies of the RBI, a key factor behind the continuing fall in the value of the rupee is the slew of expensive purchases from abroad made by the Ministry of Defence, when the strongest defence is a growing economy. .........
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NRIs send more money back home in 2011
...The rupee's depreciation against many other currencies could be one reason for the higher remittances. Currencies such as the US dollar, Bahraini dinar or the Saudi riyal, for instance, all appreciated sharply against the rupee in the last six months.....
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Jaypee Wish Town flat owners to approach RBI, SEBI
.... The RBI should put a check on such malpractices where the banks and builders apparently in connivance are diverting the investors’ money somewhere else at the cost of the project over which investments were sought.....
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Saturday, January 14, 2012
‘Banks must leverage tech for official language implementation'
Mangalore : There is a need for banks to leverage the use of technology in the implementation of official languages, according to Mr Ajai Kumar, Chairman and Managing Director of Corporation Bank. He was speaking at the 131st meeting of the Official Language Implementation Committee (OLIC) of the Department of Financial Services (DFS) of the Union Finance Ministry, and the 128th meeting of the Official Language Implementation of Committee of Department of Banking Operations and Development (DBOD) of the Reserve Bank of India, which were hosted by Corporation Bank here on Friday. He also emphasised the need for exchange of terminologies between Hindi and other Indian languages as envisaged in the Article 351 of the Constitution of India. Mr V.P. Bhardwaj, Joint Secretary, DFS, said that use of simple Hindi should be encouraged for official work. He also urged the delegates to discuss the issue of making available the facility to work in Hindi in core banking solution.
Mr Deepak Singhal, Chief General Manager of RBI, said that at a time when the banks are focusing on financial inclusion, the emphasis should be on reaching out to the masses in their own language. Executives in charge of Official Language Division of all public sector banks attended the meetings.
HBL
RBI to sensitise residents on fake currency
CHENNAI: Following a report published in Express about a panchayat which sought police help to sensitise the residents on fake currency, officials of the RBI have announced that they would train residents of Kovilambakkam village in Pallikaranai to create awareness on counterfeit notes. On Sunday, three labourers, Habibul Rahaman (26), Abdul Mutalik (25) and Prashant Mondal (23) from Malda, West Bengal, who were living in labour camps in Pallikaranai, were picked up by sleuths of the National Investigation Agency for circulating fake currencies. The Express report, ‘Fake Notes in Circulation has Pallikaranai Residents Worried,’ highlighted how residents of Sunnambu Kolathur were shocked over the arrest and also feared circulation of fake notes in their area as the fraudsters had circulated currency notes of higher denomination that are hard to detect.RBI officials said they would conduct the programme free of cost once the panchayat decides on a venue and date. “We will show samples of counterfeit and genuine currency to the residents. Anyone can come and be a part of our programme and we will also give them pamphlets. Why should the residents approach the local police for this? It is our job to do it and we do not want the people to be despondent,” an official said. Kovilambakkam panchayat officials, who were approached by the RBI to conduct the programme, informed that they would conduct the workshop next week after the Pongal holidays. Panchayat president A Ranganathan said, “We have decided on two venues. We will show it to the RBI officials and once the holidays are over, we will have the meeting.”
Express News
Selection on for top jobs in government banks
With nearly half a dozen chief executives of government banks set to retire in 2012-13, the finance ministry has interviewed 11 candidates to fill up the vacancies. Chairmen and managing directors of large public sector lenders such as Bank of Baroda, Bank of India, Canara Bank and midsized lenders Allahabad Bank and United Bank of India will retire in the next financial year. According to banking sources, a five-member selection panel headed by Banking Secretary D K Mittal interviewed 10 executive directors from public sector banks and one deputy managing director of the Small Industries Development Bank of India for the posts. Reserve Bank of India Deputy Governor Anand Sinha and former RBI Deputy Governor Jagdish Capoor were also on the selection panel. According to norms, executive directors who have completed a year in a bank, with two years of residual service, are eligible for promotion to chairman and managing director. However, the government has relaxed the residual period to 21 months. The government follows the process of lateral transfer for CMD appointments in large government banks, though there have been exceptions. This will mean CMDs of smaller banks will be given charge of Bank of Baroda, Bank of India and Canara Bank. In the case of Allahabad Bank and United Bank of India’s top jobs, executive directors will be promoted. Executive directors from Central Bank of India, Canara Bank, Punjab National Bank, Union Bank of India, Indian Bank, Corporation Bank, Dena Bank, Oriental Bank of Commerce and Vijaya Bank were interviewed.
BS
Maharashtra seeks more time for co-op banks to get RBI licence
The Maharashtra government has written to the Union Finance Ministry seeking an extension of the March 31 deadline set by the Reserve Bank of India for 11 District Central Co-operative Banks and the State Co-operative Bank to obtain banking licence. In an interaction with media persons at a State credit seminar organised by the National Bank for Agriculture and Rural Development (Nabard), the Chief Minister, Mr Prithviraj Chavan, said the deadline for obtaining banking licence should be extended by a few months. The Rakesh Mohan Committee recommendations, which have been accepted by the Union Finance Ministry makes it mandatory for all the cooperative banks to get a licence before the March deadline. Across the country, there are 134 banks which have not received the licences from RBI. If the banks are unable to get a licence, then they have to either become a cooperative credit society or merge with another bank. In the State, the Maharashtra State Co-operative (MSC) Bank and 11 district central cooperative banks are functioning without banking licences. These banks either have a negative net worth or their Capital to Risk Assets Ratio (CRAR), is lower than four per cent. Mr Pramod Karnad, Managing Director of MSC Bank, said that the bank could have a CRAR of more than 4 per cent by March 31 but it would require more time, so that it gets reflected in the balance sheet. It already has an adequate Cash Reserve Ratio and Statutory Liquidity Ratio, which are pre-conditions for getting the licence, he said. He said that the bank has also started the process of selling assets of 18 sick sugar co-operatives, which have defaulted on loan repayments. From the sale of their assets about Rs 300 to 400 crore would be recovered. The bank has also raised a fresh demand of Rs 275 crore from Maharashtra government, so that the CRAR level reaches four per cent.
HBL
Guidelines for private, foreign banks’ CEOs’ pay
The Reserve Bank of India on Friday said CEOs and staff of private and foreign banks cannot draw "excessive" salary, but it did not impose any cap on their remuneration. Issuing guidelines on compensation of CEOs and staff of private and foreign banks, RBI said all private and foreign lender will have to obtain prior approval from it for renumeration of CEOs and whole time directors as per the Banking Regulation Act, 1949 which prohibits excessive renumeration. However, the guideline did not specify what would constitute excessive renumeration. Banks are required to ensure that the fixed portion of compensation is reasonable, taking into account all relevant factors, including the industry practice, it said. While designing the compensation arrangements it should be ensured that there is a proper balance between fixed pay and variable pay, it said. Variable pay, however, should not exceed 70 per cent of the fixed pay in a year. The guidelines would be implemented from 2012-13. "As hitherto, private sector and foreign banks operating in India would be required to obtain regulatory approval for grant of remuneration to whole time directors or chief executive officers in terms of Section 35B of the Banking Regulation Act, 1949," RBI said in a notification. "The approval process will involve an assessment whether the compensation policies and practices are in accordance with the Financial Stability Board (FSB) Principles," it said. The principles are intended to reduce incentives towards excessive risk taking that may arise from the structure of compensation schemes. The principles call for effective governance of compensation, alignment of compensation with prudent risk taking, effective supervisory oversight and stakeholder engagement, it said. The principles have been endorsed by the G-20 countries and the Basel Committee on Banking Supervision and are under implementation across jurisdictions, it added.
Express News
Tone up multi-tasking skills, women bank employees told
Women bank officers have been asked to equip themselves to deal with any situation that might crop at the work place. ........
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The fourth branch
.... You can make a regulatory organisation as autonomous on paper as is imaginable, but will fail unless you ensure its members have incentives to stay independent, too. There’s currently much comment about former RBI deputy governor Shyamala Gopinath joining board of the National Stock Exchange. Yet Ms Gopinath’s new job is hardly unusual. Unfortunately, former regulators frequently join those they were regulating. And, similarly, many new regulators are IAS officers pronouncing on policies that they themselves had helped draft.......
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The Indian state needs more regulatory capacity. But that demands autonomy not just for institutions, but for the people in them
RBI notifies change in single brand retail FDI policy
The Reserve Bank of India (RBI) today operationalised the change in FDI policy by removing restrictions on foreign investment limit in single brand retail. "...it has now been decided that FDI up to 100% would be permitted in single brand product trading under the government route..., the RBI said in a circular. The Department of Industrial Policy and Promotion (DIPP) had earlier increased the limit of foreign direct investment (FDI) in single brand retail from 51% to 100%. "Necessary amendments to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000...are being notified separately," RBI added. Removal of the investment cap is likely to help global fashion brands, especially from Italy and France, to strengthen their interest in the growing Indian market. The government had said the move was aimed at enhancing competitiveness of Indian enterprises through access to global design, technologies and management practices. Though 51% FDI in single brand was allowed in February 2006, not much investment has come in the sector. During last three-and-a-half years, FDI worth only Rs 196 crore was received in the sector.
Moneycontrol
Bankrolling the banks
A fiscally challenged government would have to infuse large sums of money into PSU banks, leading inevitably to doubts about its ability to do so.
The Reserve Bank of India's (RBI) recently released draft guidelines on the proposed implementation of international norms of capital adequacy (Basel–III) would require Indian banks to mobilise huge sums of capital during the next five years. Under the existing Basel-II norms, the Indian banking industry has to maintain total capital — drawn from a combination of equity and preference shares plus long-term debt, both accorded lower priority to monies belonging to depositors — amounting to 9 per cent of their assets calibrated suitably for riskiness (‘risk-weighted assets' or RWA). While the overall ratio has been retained under the proposed new norms, a minor reshuffle has been attempted between equity/preference stock holders and long-term bond holders in the event of a bank failure, with the former having to contribute an additional one percentage point capital to their existing 6 per cent of the total 9 per cent. Further, equity/preference share holders have to come up with an additional 2.5 percentage points in capital as a buffer for any unforeseen contingencies. That takes the aggregate capital adequacy ratio (CAR) to 11.5 per cent, of which common equity alone would make up 8 per cent. The emphasis is clearly not just on meeting a broadly defined overall CAR of 8 per cent (as it was two decades ago), but also on improving the transparency and quality of the capital base. The implementation period for all these is from January 1, 2013 to March 31, 2017. The rationale behind fashioning a tighter capital (especially core equity) regulatory regime for banks stems largely from the banking crises that followed the global recession of 2008 and also the ongoing European sovereign debt troubles. These have created renewed concerns over the banking sector's ability to withstand financial shocks and minimise risks of spill-over to the real economy. But implementation will be a huge challenge, with the estimates of fresh capital needed to be raised by all Indian banks ranging anywhere from Rs 1.4 lakh to Rs 3 lakh crore. Given the dominance of public sector banks, it would necessitate large government infusion of funds. Where this money is going to come from, if the Centre would not even be prepared to dilute its stake below 51 per cent, is a huge question mark. This issue came to the fore not too long back, when Moody's downgraded the State Bank of India's credit rating, after its Tier-1 CAR fell below the Government's own 8 per cent prescription. Related to this is the more immediate problem of rising non-performing assets (NPA) on account of loans to a host of troubled sectors from telecom and airlines to power. As these mount – under pressure from high interest rates and the general economic slowdown – banks would have to find resources to maintain even existing capital adequacy levels. The RBI, under the circumstances, cannot be totally oblivious to concerns over the proposed implementation schedule for Basel-III, which is seen to be rather frontloaded.
HBL
None yet celebrating rise in numbers
... “If IIP numbers continue to go up consistently, one could say the economy was on a recovery path. I doubt that RBI will begin reducing rate immediately,”.....
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Policies hinder realty sector
.... The Reserve Bank of India (RBI) believes that financing real estate is highly risky. Banks have to keep 1.25 times of the loan amount in bonds as security to the RBI. This gives rise to higher interest rates for the developers. Eventually, these high interest rates are pushing the costs of the property up. “The RBI has to change its perception and has to offer at reasonable interest rates,”.....
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Basel-III norms may hit banks' credit growth
.... The stringent norms by the Reserve Bank of India to implement BASEL III standards will bridge the gap between India and its Asian peers for the risk-adjusted capital criterion. But, it will also pose a challenge of constant capital infusion......
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Embracing Basel III
It is good on the part of RBI to make sure that Indian banks are ready to embrace Basel III, two years ahead, by 2017. Capital is going to become an increasingly scarce commodity in the coming times and especially for public sector banks (PSB) raising capital would be a big challenge (“Core Banking solutions”, FE, January 3). If PSBs are to need an additional capital of R5 lakh crore in the next five years to sustain the growth of 20% per annum, the government is quite unlikely to make this huge budgetary allocation. If the past experience regarding the global financial meltdown is anything to be believed, then the idea of having capital conservation buffer proposed in Basel III is a welcome move aimed at maintaining renewed stability of the financial system.
Srinivasan Umashankar, Nagpur (FE)
TEXT-S&P reports says RBI's basel III norms will benefit banks
......According to the report, the RBI's conservative approach should enhance capitalization in a country where Standard & Poor's views economic risks to be relatively high. The RBI's stringent capitalization requirements will also help improve Indian banks' risk-adjusted capital ratios, which are currently lower than those of many Asian peers....
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Why print rupee notes here when Pakistan is doing it for free?
On Thursday, the Delhi Police seized fake currency notes of the face value of over Rs 6 crore from two tempos – the largest haul in five years. That’s more than three-quarters of the Rs 8.4 crore seized in the previous five years. There are no prizes for guessing where these notes—all bundles of Rs 500 and Rs 1,000 notes—came from.....
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Counterfeit currency—the new pandemic
The “funny money” problem in India is no longer a minor bump; it is severe, it is suspected to be much more than the readiness to blame ISI of Pakistan, and requires a total overhaul of the laws pertaining to counterfeit currency...............
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Cash seized from ATM vans in UP
.... The EC has written to RBI to instruct the two large private banks, for which the ATM vans were transporting the cash, to produce bank scrolls explaining the cash movement.....
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