Faced with the recent guidelines skewed in favour of nationalised banks, private gold loan companies (non-banking financial companies or NBFCs) have urged the Reserve Bank of India (RBI) to provide a level playing field. Through the Association of Gold Loan Companies (AGLC), headed by George Alexander Muthoot, managing director of Muthoot Finance, NBFCs have submitted a representation to RBI to reconsider its recent decision with regard to loan-to-value (LTV) and lending against gold coins.................
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.
Monday, May 7, 2012
Why NRI deposit rates are rising
.......2012 is not 1991. So, the government mandarins and the Reserve Bank of India say every time one asks about the deteriorating macro-picture. ‘Our position is not that precarious', is the message they want to convey. But the steps being taken to address various problems only heighten the eerie similarities in the macroeconomic situation. Certainly, we seem to need foreign exchange now as we did then.......
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Saturday, May 5, 2012
The inspiring story of women's empowerment in rural India
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| Chetna Sinha |
..........In 1994, when officers at Reserve Bank of India rejected our idea of running a bank with illiterate women, I felt let down. But when I came back to my village and told the women that our idea was rejected by the RBI, they were not willing to accept failure. They said, 'We will learn to read and write'. They said, after their basic training, they will come with me and talk to the officers. I was surprised and agreed. This time, the women challenged the officers that they organise a test to calculate interest for a given principal amount. "Let's see if your officers can match our speed and accuracy of our women without the electronic calculator." The officers were impressed by the courage and confidence of women and agreed to induct them for the training process where they learnt the basics of how to run a bank, manage finances, process loans, etc. Most of the employees in my bank are not even graduates, but they know how to run the bank...............................
RBI organises literacy camps
KANPUR: Student Financial Literacy Week was celebrated by RBI during, which bank organised financial literacy camps from April 25 to April 27 at three prominent schools of the city -- Mother Teresa School, Kidwai Nagar, Saraswati Gyan Mandir, Indira Nagar and Dr Virendra Education Centre, Shyam Nagar. This was the first time when RBI instead of conducting such sessions in its premises directly reached out to the students in their schools so as to have a closer interaction with the targeted audience. Vijay Kumar Somdeve, Manager (Personnel), RBI informed that in the camp, officials from RBI Kanpur office briefed the schoolchildren on topics relating to RBI functioning, commercial banking, Indian economy as well as the monetary and fiscal policies.
TOI
The scenario, post credit policy by RBI
Many of us went gaga over the half per cent reduction in repo rate announced by the Governor, Reserve Bank, in his exposition of Annual Credit Policy for 2012-13, on the 17th April. Not because a half per cent will make a huge difference in the borrowing cost on housing finance, but because it was after two years of consistent increase in interest rates by the RBI in the name of monetary control and taming of inflationary pressures in the economy...............
Read - The Hindu
Extend Financial Inclusion to Urban Areas, FinMin tells Banks : SANGITA MEHTA MUMBAI
Asks banks to open accounts for migrant labourers and street vendors within 500 m of a branch
The finance ministry has asked state-run banks to expand their financial inclusion drive to urban India so that migrant labourers too are able derive its benefit. In a note to bank chiefs, the ministry has urged lenders to open savings bank accounts for migrant labourers, street vendors and hawkers in urban areas. To begin with, banks are directed to open accounts for those labourers located within 500 metres of a bank’s branch. So far the financial inclusion drive — to provide formal banking service — was targeted at those residing in rural India. This is the first initiative by the finance ministry to provide inclusive banking in urban India. In a letter to banks, the finance ministry said, “A drive to open their account needs to be initiated,” in urban area also “to inculcate savings habit and extend banking facilities to them.” “Government desires to begin with accounts of all migrant labourers, street vendors and hawkers, who are working within 500 metres of banks branches... an account for them should be opened,” says a note from the ministry to bank chiefs. “Thereafter, branches should extend this process beyond 500 metres. To achieve this, marketing staff of bank also need to be involved,” the note said.
Currently, banks are focusing mainly on rural areas to provide formal banking service. Banking service is made available in 74,000 of the six lakh Indian villages. This point was highlighted by KC Chakrabarty, Deputy Governor of RBI, at a seminar in June 2010. “Financial inclusion is sometimes erroneously treated as synonymous with rural poverty. Concerns of urban poverty also need to be factored in and the needs of various groups such as rickshaw-pullers, construction workers, migrant
workers, etc, must be factored in and products and services crafted as per their needs by the banking system to address urban financial inclusion,” he had said. In a note to banks, the ministry said, “Financial inclusion is high on the agenda for the government.” The ministry has asked banks to launch a special campaign to attract migrants to the formal banking services. The ministry has even asked banks to monitor and update them about the progress on the accounts opened. Bankers said the biggest challenge in opening bank accounts for migrant labourers is to get them fulfil the KYC, or know your customer, norms. “While active involvement of the government in the identification process by issuing unique identity number (UID) has helped in rural India, it remains a challenge in urban India as most migrants do not have necessary documents to support their identity,” a senior bank official said. “Banks will now have to a draw a strategy with the government to nudge them to open accounts for hawkers, vendors and migrants.”
ET
DNA investigation: Nabard’s lies on restructuring process
...... Dr KG Karmakar, former MD of Nabard, said the chairman and other top management officials are afraid of being exposed. “It has restructured the organisation violating Parliament’s mandate and paid close to Rs 21 crore (Rs13 crore at the time of contract and Rs8 crore later) to BCG. They desperately want to hide this fact,” he said.Karmakar, who retired recently, told DNA that he was opposed to involving BCG and had recommended Nabard to hire the services of the Indian Institute of Management, Ahmedabad, instead. “IIM-A was responsible for creating Nabard and their model has evolved in 28 years and worked brilliantly for the country, so they should have been approached,” he said ......
DNA investigation: Rules violated in Nabard chairman’s appointment
......“While Sarangi is part of the strong IAS lobby and has good friends in political parties, Bakshi was made chairman because he was Sarangi’s man,” said a top official of Nabard who was close to both. The RBI did not object to the appointments. According to its eligibility criteria, the chairman of Nabard, “should have 25 years of executive experience… of which at least 3 years should be at board/apex/top management level”. When Bakshi applied for the post chairman in December 2010, he had just over two years experience in top management.............
Agricultural Credit: Why are the government funds to boost agriculture not reaching small farmers
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RBI raises interest rates on NRI deposits in foreign currencies by up to 3%
.............With regard to foreign currency deposits, the RBI said, "interest rate ceiling on Foreign Currency Non-Resident FCNR (B) deposits of banks has been raised from 125 basis points (bps) (1.25 per cent) above the corresponding LIBOR or Swap rates to 200 bps for maturity period of 1 year to less than 3 years, and to 300 bps for maturity period of 3 to 5 years." .............
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RBI to issue fresh guidelines for UCBs in June
.....YH Malegam Committee constituted for bringing UCBs under the ambit of RBI has submitted its report to the central bank. When asked about any recommendation made by the Committee and the follow-up action taken by the government thereon, Meena said that there should be entry point norms for UCBs with adequate capital and geographical spreads............
Read...............New scheme to mobilise forex deposits from NRIs on cards
After a gap of more than a decade, the government may turn to India’s diaspora to boost foreign exchange reserves. The government and the Reserve Bank of India (RBI) have started discussing the possibility of unveiling a scheme to mobilise deposits from non-resident Indians, similar to the hugely successful India Millennium Deposit (IMD) launched by the State Bank of India (SBI) in 2000...........
Govt banks may have to sacrifice growth due to Basel III norms
Public sector banks (PSBs) risk sacrificing growth and return on equity as they brace for higher capital requirements under the new Basel III guidelines issued by the Reserve Bank of India (RBI) that will require a big increase in equity capital that the government will be hard pressed to come up with, analysts said a day after the more stringent norms were unveiled.............
New Rs. 5 coin
The Reserve Bank of India will shortly put into circulation a new Rs. 5 coin to commemorate “Shahid Bhagat Singh Birth Centenary”. According to a RBI release, the nickel brass coin will bear the portrait of Shahid Bhagat Singh with words “Shahid Bhagat Singh Birth Centenary” in English.
The Hindu
The Hindu
Islamic NBFC to Move Court against RBI
Kerala-based AICL, which was stripped of its NBFC status, to also take up its case with finance ministry
The cold tussle between advocates of Islamic finance, which forbids the use of interest rate, and the Indian banking regulator, which is adamant that local laws prohibit such funding, is headed for a climax. Alternative Investments and Credits (AICL), the Kerala-based firm that has been stripped of its licence to carry out non-banking finance activities by the Reserve Bank of India, is planning to move court against the central bank. AICL, which is among the very few Islamic finance entities in the country, will also take up its case with the finance ministry. A director of the company told ET that the board is weighing legal options to obtain a stay on the regulator’s decision to cancel the certificate of registration.
Till now there was a widely shared perception that while commercial banks planning to offer Islamic banking products will run into legal hurdles, non-banking finance companies will face no restrictions. That has now changed, with RBI directing AICL to stop financing business almost a decade after it was founded. Earlier, the central bank had pointed out that the NBFC was not complying with the fair practices code under which the financier has to lay down the terms and conditions of funding, including the interest charged. “Basically, the Indian banking and finance system runs on the interest concept and Islamic finance is based on profitsharing,” said an RBI spokesperson on Thursday, a day after the regulator revoked AICL’s registration. As a genre of financial services, Islamic finance abhors the idea of making money out of money and upholds the belief that wealth is generated through actual trade and investment. Across markets, funding structures of Islamic finance institutions have to be compliant with Sharia’h, the sacred law of Islam. While RBI’s directions will have to be complied with by all NBFCs — irrespective of whether or not it’s operating as per Sharia’h — the question is what constitutes “interest” for the purpose of RBI guidelines especially in the present context of RBI guidelines on NBFC Fair Practice Code. “In our view, there are no stipulations under the regulations issued by the RBI which prevents a non-deposit accepting NBFC from carrying out interest-free or participative financing,” said Suprio Bose of the law firm JurisCorp, which has advised AICL in the past. In the conventional sense, “interest” means a fixed rate of return on the principal loan amount or a floating rate linked to a pre-specified benchmark. But commercially, various financing structures operate on the model of expected or internal rate of return, which would qualify as “interest” for the purpose of the RBI guidelines. Bose and his colleagues at JurisCorp think it should be possible for NBFCs looking at Sharia’h-based financing to take a middle path. NBFCs, they feel, can consider utilising the concept of net return and disclose the same to ensure compliance with the RBI directions on Fair Practice Code and the Sharia’h principles. But it now appears that the regulator is unwilling to accept this.
If the matter reaches the court, the outcome would decide the fate of Islamic finance in India. The AICL director said in the meanwhile the company may pursue other Sharia’h-compliant businesses that are outside the purview of the central bank. RBI’s recent reaction could be partly driven by the turn of events following a petition moved by Janata Party president Subramanian Swamy a year and a half ago, challenging the Kerala government’s decision to support another state-based group carrying out Islamic finance. In the course of the hearing, it was mentioned that RBI had permitted registration of a few NBFCs carrying out Islamic finance. This, some feel, could have driven RBI to cancel AICL’s registration. With a paid-up capital of . 7.5 crore, AICL’s liability comprises shareholder funds, while the assets are various non-loan funding in the form of participative finance. As per this, the ‘borrower’ shares the profits of the business with AICL in proportion to the equity capital of the borrower and the amount provided by AICL; and the profits are shared only if the borrower has earned them. In case of losses in any year, no outstanding is fixed for future recovery. In the past, RBI has been reticent in spelling out its stand on Islamic finance. Some years ago, it had constituted a committee to look into the possibilities of Islamic finance in India. The report, which surprisingly was not put on the official website, had said that neither banks in India nor offshore offices of Indian banks can practice Islamic banking. “It’s unfortunate that RBI has taken such a stand with regard to AICL. We have to plan the next course of action,” said Abdur Raqeeb, general secretary, Indian Centre for Islamic Finance. According to him, Islamic finance has taken off in many markets and Sukuk bonds have emerged as an option in infrastructure finance. “Even financial centres like Hong Kong have tied up with authorities of other countries to initiate Islamic finance. RBI, I feel, should take a more liberal view,” said Raqeeb.
ET
RBI gets HC notice to explain gold deposits with Bank of England
According to Raghunath Kelkar, the Reserve Bank of India is bound to keep excess gold in its reserves, not deposit outside the country; despite summons, RBI rep fails to appear in court
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Rupee rebounds; RBI intervention debated
............"It seems that RBI came in to supply the market at around 53.65 levels. But the rupee's recovery was largely due to squaring off of positions by foreign banks ahead of U.S. non-farm payrolls and selling by a large corporate,"...................
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A corrupt elite is slowing India - P.V.Indiresan
..........The Reserve Bank of India bears much of the responsibility for India's slowdown. Using the classic cure against inflation, it made the price of money high and hence, made it costly to acquire capital. It has barely cured inflation and instead penalised heavily honest savers in the country. The RBI failed to see that the culprits were mainly property developers and politicians; it has punished everyone, the good ones and the bad ones alike and, thereby, has indirectly promoted corruption......
Private banks turn focus on gold-related biz for growth
........As on date, there are over 35 banks that have been given permission by the Reserve Bank of India (RBI) to import gold for trading in bullion at the wholesale and retail level. “There is clearly retail interest in buying gold, and banks may not want to miss out on this opportunity. The opportunities of cross-selling is also higher by offering such diverse products and services. So, it is clearly a demand driven effort,” ...............
Friday, May 4, 2012
Rate cut done, time for govt follow-up
At the press conference held to announce the Reserve Bank of India (RBI) decision to reduce the repo rate - the rate at which it lends money to banks - by 50 basis points, RBI Governor Duvvuri Subbarao faced a tricky question. Did he feel RBI had done its bit, and it was now up to the government to respond adequately to revive the economy? At this, the other senior RBI officials sitting alongside Subbarao burst into knowing laughter. It was apparent the answer was in the affirmative. But obviously Subbarao could not say so. The RBI Governor lost none of his cool. "A monetary easing is a necessary condition, but may not be sufficient for investment sentiments to revive," he said....................
When death visits a bank depositor : S S Tarapore
......It would be best if, on the term deposit receipt itself, there is a stamped and signed endorsement by the bank that “in the event of death of a depositor premature termination would be permitted.” The RBI circular of June 2005 softened the blow on the family of the deceased depositor and this circular was finalised after intense scrutiny by the then Governor, Dr Reddy; the Deputy Governor, Ms K.J. Udeshi, the Executive Director, Ms Usha Thorat; and the Chief General Manager, Department of Banking Operations and Development, Mr Anand Sinha. The present top management of the RBI should review the November circular. How many families should suffer before the RBI realises that too many have suffered?
Business Line : Columns / S S Tarapore : When death visits a bank depositor
Nine in race to be Sebi board members
......Sebi traditionally appoints at least one of its members from the banking sector. Saran comes from RBI. On a few occasions, Sebi has also had two members from the banking sector. The finance ministry official said besides suitability for the job, aspects to be considered for selecting the candidates would be knowledge of work, experience and understanding of the financial system. “Market-related exposure will play the most crucial role,” the official said. This time, too, some chairmen of public sector banks are understood to have applied for the post. They include Allahabad Bank CMD J P Dua, whose term ends in August; Canara Bank CMD S Raman; Bank of India CMD Alok Kumar Misra; and RBI CGM Chandan Sinha. Sebi’s existing executive director, Usha Narayanan, and even Saran, are said to have been shortlisted for the posts..............
AIBEA to go on strike against decision to close rural branches
The All India Bank Employees’ Association AIBEA has threatened to go on a strike against the government’s proposal to close down ‘non-viable and loss-making’ rural branches. The association said that closing down the rural branches meant defeating the purpose of social banking.............
Running low on offs? Leave-pooling is here
.....Car pooling is passe. The latest on the sharing front is something called leave-pooling that one can, quite literally, bank on. An innovation by a corporate, the scheme allows employees to donate their excess leave to their colleagues who may need it in times of crisis. ..........
Fake currency notes from ATMs: What needs to be done
..................A bank is not doing a customer a big favour by providing an ATM; it is actually doing itself a favour primarily by reducing the cost and effort of human interaction. In exchange, a customer must know what level of service to expect, and RBI needs to enforce this. Today's customer is very aware of what is going on and is willing to pay a premium for better and more reliable service. The earlier this is done, and certainly before the introduction of "white ATMs", the better.
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Public banks face cap on costly year-end deposits
.......The latest RBI data shows that scheduled commercial banks raised nearly 61,950 crore bulk deposits in the fortnight to March 9, against 38,800 crore raise in the preceding fortnight. Banks sometimes resort to this year end rush to show better performance. The banking regulator, the Reserve Bank of India, or RBI, has taken note of the wide divergence in the retail and bulk deposit rates. A senior RBI official had said late March that the practice was wrong. State run banks are not enthused by the dictate, which they say could impact their business........
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New rules make it easier for NRIs to use Right to Information Act
.............In a major victory for transparency seekers and ordinary Indians living abroad, the centre has given its in-principle nod to allow the sale of Indian Postal Orders (IPOs) through the internet to citizens living abroad. While the details are still being worked out, the decision follows the RBI giving its nod to allowing Indian citizens to purchase IPOs through the net using their credit cards. If things stay on track then soon Indians abroad would be able to log on to the department of posts website and register themselves. After doing so, they would need to upload a copy of their passports as proof of citizenship and then make the payment for the RTI online.............
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Who's spending?
Apropos the edit “They are spending” (May 3), your conclusion that consumer sentiment seems to contradict any sense that the India story is stuttering despite the gloom about macroeconomic fundamentals is inconclusive and wrong. The improved performance of the fast-moving consumer goods (FMCG) sector only indicates that the class of people who can afford to buy FMCG products has been on the rise thanks to the widening income gap and increasing purchasing power. This only proves that the demand for such goods is inelastic and that there are people who can afford these goods and much more irrespective of price rise. This does not in any way reflect the economy’s performance in terms of price rise, productivity, employment, poverty levels, infrastructural development, GDP growth, exports, imports and so on. The government’s economic policies help only the rich and the middle class and this has been validated by the better performance of FMCG products. The general theory that increase in commodity prices will reduce demand does not hold true for goods produced by FMCG companies and automobile industries in India since the demand for such goods has always been inelastic thanks to wrong taxation policies and black money.
- T V Gopalakrishnan Mumbai (BS)
How RBI intervention, strong global risk appetite can save the rupee
.....However, he explained that if the RBI and the government shows willingness to at least slow the pace of weakness in the rupee, and those measures take place at a time when global risk sentiment is a little bit stronger, then the two factors together could ultimately pull the rupee back.
Parliamentary panel pitches for Rs 1k crore marketing fund for MSMEs
......"The Committee is of the considered opinion that the Department of Commerce takes up the matter with the Ministry of Finance/RBI to ensure that the interest subvention scheme is continued,"..........
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Banks may not hit priority sector lending target for FY12
....Priority sector includes loans to agriculture and allied activities, small-scale industries, poultry and other core economic activities in rural areas, including loans to microfinance institutions. According to RBI mandate, domestic banks have to lend at least 40 per cent of their total loans to the priority sector. For foreign banks, the target is set at 32 per cent of net bank credit..........
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Salutary show, but miles to go
......It is also sad that after the RBI raised the interest rate on dollar loan from 2 to 3.5 per cent, the banks are reluctant to provide dollar credit to exporters. RBI guidelines to banks to provide 12 per cent for export finance has not been fulfilled as banks exposure to export industry is hardly 8 to 8.2 per cent today, he justifiably cribbed...............
Read - The Hindu
Basel I, II, III…
…and, perhaps, we should be prepared for Basel IV some years down the line!
The new Basel III norms announced by the Reserve Bank of India (RBI) on Wednesday will trigger a huge chase for capital by banks. Conservative estimates place the additional capital required at about . 1.5 trillion. Fortunately, the new norms come into effect in a phased manner over January 1, 2013-March 31, 2018, so that banks have a little over five years to find the required capital. That is small consolation, especially for public sector banks (PSBs). For, while both private and public sector banks will need to tap the market to raise funds, Basle III has wider implications for the latter and, by extension, for taxpayers. The reason is the government is neither willing to relax its stranglehold on PSBs (read, reduce its stake to less than 51% by allowing them to tap the market), nor does it have the funds to infuse capital of this order. What does that mean for the hapless PSBs? It means they will not be able to keep pace with the credit demands of a growing economy if the government does not budge from its position that it wants to retain majority ownership. In the alternative, PSBs will get the money but at the expense of the hapless taxpayer. With the fiscal deficit, already at 5.9% of GDP, and inflation, as measured by the consumer price index, still hovering near 9%, that’s not a fate we would wish on the people of this country. The sensible thing for the government to do is to bring down its stake in PSBs to, say, 26% (enough to block a special resolution) while ensuring that shareholding is widely diversified and the RBI, as the banking regulator, remains the final arbiter of who is ‘fit-and-proper’ to hold bank shares in excess of 5%. The reality is that the best of prudential norms like capital adequacy are only a buffer. They cannot, and will not, eliminate crises brought on by human greed and folly. So, stringent norms must be backed by an alert regulator, strong and competent supervision and a proper incentive system to rein in the present system that allows banks to privatise profits and socialise losses. Even then, the incidence of frauds and crises can only be reduced, not eliminated in any foolproof manner. So here’s Basel III, till the next crisis and Basel IV!
ET
Banks seen in no rush for capital despite Basel III rules
...............The Reserve Bank of India (RBI)'s guidelines on Basel-III capital regulations are unlikely to make domestic lenders scramble for funds, at least in the near term, say industry analysts and bankers.
“There is no desperation among Indian banks to raise capital,” said Rohit Bammi, partner, financial risk management at KPMG in India. “Most banks are well capitalised and do not have any immediate need for funds. Also, the banking story in India is still attractive for investors. This strengthens banks’ ability to access markets. So, even if they need to raise capital over the medium term due to growth in their businesses, there will not be any shortage of funds.”.................
Banks need Rs 5 lakh cr capital to meet Basel norms: ICRA
......." Banks will need Rs 3.9- 5 trillion capital over the next six years, out of which common equity requirements will be Rs 1.3- 2 trillion; Rs 1.9 trillion for additional tier I; and Rs 1 trillion for tier II," an ICRA note said. This is achievable, " so long as banks can find investors for the riskier additional tier I capital," it said. The Reserve Bank on Wednesday issued final guidelines for Basel III beginning January 1, 2013 and to be implemented by March 31, 2018.........
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‘Banks have ample time to comply with Basel III requirements’
......Indian banks are within a “comfortable” range to meet Basel III requirements and will have ample time to comply with the RBI’s core capital ratio requirements, said Goldman Sachs. Goldman says private banks are already “well above” the capital requirements, while public lenders are “close to or have crossed the core 8 percent Tier 1 hurdle.”.............
Road to Basel
RBI’s new Basel III guidelines, notified on Wednesday, pose a challenge not just in terms of how banks are going to find the R1.5-2 lakh crore of fresh capital, but also in terms of their ownership structure. Indeed, since the focus is more on Tier 1 capital which has been redefined to include mainly common equity-equity capital and reserves, this implies that banks will be further challenged going ahead. The issue of where the capital is going to come from is more pertinent for the public sector banks which have so far been dependent on the Budget for funding............
Read - FE
Basel 3 norms: RBI asks banks to set aside more risk capital
........In its Basel 3 notification on Wednesday, the RBI said that Indian banks are required to set aside minimum common equity of 5.5 per cent (Tier–I) capital for its risky assets (loans). Banks also have to bring in additional equity at a minimum of 1.5 per cent of its risky assets (loans)...........
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Western Union may start domestic money transfers
......In India, local money transfers are mainly conducted through 155,000 post offices. Banks also provide remittance services with the help of business correspondents (BCs) to get rural penetration. In March, the Reserve Bank of India (RBI) allowed interoperability at retail outlets or sub-agents of BCs, which means they can cater to more than one bank at a time. The central bank had also allowed banks to appoint companies as BCs, to achieve the broader goal of financial inclusion. These measures have made the local payments space more remunerative for new players..........
Riches-to-rags story of the gold loan industry
........The microfinance business has taken a beating. The hype created around the initial public offering, and thereafter, of SKS Microfinance, is still fresh in the minds of investors. Gold prices have touched lifetime highs in India, thanks to a depreciating rupee. However, RBI is concerned about the future of GLCs if gold prices were to soften in India. Gold prices are softer abroad by about 12 per cent.........
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Hilly districts in Uttarakhand show low CDR
Dehradun: The credit deposit ratio (CDR) which is around 51 percent in Uttarakhand has failed to show improvement, particularly in hilly districts, a big cause for worry for the state government. As per the RBI stipulation, at least 60 percent of the CDR should be achieved by the banks.......
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Thursday, May 3, 2012
This is how RBI wants banks to reach smaller villages
...... RBI Deputy Governor K C Chakrabarty has been advocating for a profitable branch model of financial inclusion. According to a rough estimate, 50% of Indian populations still remain either under-banked or unbanked. "While all the efforts made for financial inclusion have expanded the access to banking services, it is important that quality services are provided through the newly set-up information and communication-based delivery model," RBI had said.
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RBI Monetary Policy for 2012-2013: Policy on deposit rates requires change
.....The Reserve Bank of India (RBI) has been de-regulating interest rates on bank deposits in bits and pieces over the last several years. While doing so, it has created an artificial divide between the rich and poor by taking an arbitrary decision in allowing banks to offer differential interest rates on deposits. In the case of fixed deposits, RBI had allowed banks to offer higher or lower than the normal interest rates for single-term deposits of Rs15 lakh and above. Again while de-regulating interest rates on SB (savings bank) accounts, the RBI once again created an arbitrary divide by stipulating that banks are free to offer different rates for SB depositors maintaining a balance in excess of Rs1 lakh in the account. The RBI has never given any rational explanation for allowing such discrimination......
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SEBI & RBI: Aren’t regulators accountable for the use mess
....An investigation began only after a change of guard at USE. As always, several directors of the USE including two former CEOs, have quit in quick succession. Meanwhile, Shyamala Gopinath, the RBI deputy governor in charge, who inaugurated all four forex-derivatives bourses, has moved on to a nice post-retirement directorship at the NSE. We believe that these openly capricious rules were all designed to help the NSE.......
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On The Turnpike - Book review by P.P.Ramchandran
THOSE LOOKING FOR A QUICK AND COMPREHENSIBLE INSIGHTS INTO THE WISDOM AND FOLLIES OF INDIAN ECONOMIC POLICY OVER THE LAST 60 YEARS WILL FIND THIS BOOK INSTRUCTIVE AND AMUSING.
TCA Srinivasa- Raghavan is a well known analyst whose columns have adorned several financial dailies. He had a role to play in Third volume of RBI History. The book under review is a ‘Coffee- Table book’ brought out by the Finance Ministry on the occasion of the Indian Economic Service completing fifty years. One must say the Ministry of Finance has put no restraint on the author......
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RBI lays down road map to make banks safer, avoid crisis repeat under Basel Committee recommendations
MUMBAI: The Reserve Bank of India has laid out a six-year road map to make Indian banks safer and avoid recurrence of the 2008 crisis, but it will need an estimated Rs 1.5 lakh crore in capital at a time it is scarce................
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Banks must maintain 7% core capital: RBI's Basel III norms
........ Reserve Bank of India (RBI) on Wednesday directed Indian banks to maintain a minimum tier I capital or core capital which is equity and reserve under the final guidelines on Basel-III capital regulations. Moreover, the regulator, for the first time, asked lenders to keep a capital conservation buffer of 2.50%. "These guidelines would become effective from January 1, 2013 in a phased manner," RBI said in a statement........
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Bank deposits, advances fall through April
Bank deposits and advances fell through April, after rising sharply towards the end of the previous financial year. The growth in deposits over the year was 13.3 per cent while loans grew 17.6 per cent, as on April 20, showed data released by the Reserve Bank of India (RBI) on Wednesday............
Forget twin deficits, India has quadruplet deficits to worry about
...............Already, the latest purchasing managers’ index (PMI) print indicates that while the economy is still expanding, there are major input and output cost pressures, indicating that while the RBI did stick its neck out and cut the repo rate by a deep 50 basis points (something critics have frowned upon), there are risks associated with it since inflationary pressures are still intense. Clearly, RBI has put growth concerns above inflation this time round, and the results will have to be assessed in detail over the next few months...........................
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Kerala suicide figures in RS; action sought against bank
.....a medical college student in seventh semester in Cochin had to discontinue education after being denied loan by State Bank of India. The loan was denied under an RBI directive to banks to not to sanction loans to students admitted under management quota..................
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Wednesday, May 2, 2012
Are NPAs really bottoming out?
The Reserve Bank of India has hinted that non-performing assets (NPAs) of the banking system have almost bottomed out. In an interview with Mint, Anand Sinha, Reserve Bank of India’s deputy governor, has said that he expects NPAs should have bottomed out by now as world economies have shown signs of improvement. As far as India is concerned, he says that despite the potential upside risk, inflation has subsided now and there has been a rate cut, which can result in lesser NPAs.......
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We’re closely watching forex market, says RBI
The Reserve Bank of India on Monday said it is closely watching the forex market and will intervene only if there is excess volatility in rupee, even as the domestic currency fell to a nearly four-month low against the US dollar. “The RBI doesn’t look for a fixed level of rupee. We will only intervene if there is excess volatility,”.......
Read - Indian Express
Read - Indian Express
Importance of bank account stressed
Hyderabad : The second phase of the Urban Financial Inclusion programme was held here on Monday, as part of the Reserve Bank of India's Financial Inclusion Programme. Senior officials from RBI including Chief General Manager Rose Mary Sebastian, General Manager R. N. Dash, and Deputy General Manager of the lead bank State Bank of Hyderabad Jasbir Singh Aneja spoke about the necessity of maintaining a bank account. All the districts in Andhra Pradesh have been fully covered under the programme which envisages at least one bank account per family, either for savings or for loans. For extending the programme to the slum dwellers in Hyderabad, already one such event was conducted a few months ago in Charminar.
The Hindu
Oline fraudsters use RBI name to con public
......The fraudsters copy and use the name and logo of the RBI to such perfection that even highly educated people are becoming easy victims to it. What's more, even certificates are issued with impersonated signatures and stamping of RBI's top officials. There have also been attempts to contact the victims, circulate fake mail ids and also to duplicate the RBI website.............
Read - The Hindu
RBI may set up fixed rate loan committee
Mumbai: The Reserve Bank of India (RBI) is planning to set up a committee to look into the issue of facilitating the development of fixed rate loan products in the banking system, RBI Deputy Governor, Anand Sinha said. “We will set up a committee soon to facilitate the development of fixed rate loan products in the market, which are presently absent in the system,” Sinha told reporters on the sidelines of an Assocham event here.......
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Bad loans may have peaked: RBI DG
....Given the current situation...looks like there would not be undue alarm in the near future. So, assuming that things do not deteriorate in a very significant way, the NPAs might have peaked or the asset quality might have bottomed out. The expectation is that from here on the asset quality should improve,” ........
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Agricultural Credit: Why are the government funds to boost agriculture not reaching small farmers
..........There are several such anomalies in farm-sector lending. For instance, between 2000 and 2010, according to the Reserve Bank of India, farm loans increased 755% to Rs 3,90,000 crore. And Budget 2012 has increased the agri-lending target for 2012-13 to Rs 5,75,000 crore, from Rs 4,75,000 crore in the previous year. But productivity gains during the same period-18% growth in farm yields between 2000 and 2010-don't suggest an increase remotely close to that. Neither do sales of inputs like seeds, fertilisers and tractors. "For every unit of nominal GDP growth, there is 1.3-1.5 units of credit growth," says former RBI deputy governor Usha Thorat. By that principle, a three-fold rise in agri credit should double output. But we are not seeing anything like that......................
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Govt, RBI working on changing rules to give India Inc more leeway in repaying FCCBs
MUMBAI: The government and Reserve Bank of India are working on changing rules to give corporates more leeway in repaying foreign currency convertible bonds (FCCBs) that have turned into millstones in a dismal market..............
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RBI and falling rupee: Battle just keeps getting tougher
The Reserve Bank of India’s battle to contain a falling rupee just got tougher. The current account deficit is widening and a weak global investment climate coupled with policy paralysis in New Delhi, sticky inflation and slowing growth have increased the aversion of foreign investors to India, pushing the capital account into the red. Last week’s move by rating agency Standard & Poor’s to cut the country’s credit rating outlook to “negative” has complicated matters further for the RBI, which has few options other than intervention and tinkering with rules on export credit to encourage inflows, RBI officials say..............
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Agents of change
.......Ananya Roy, also doing an internship with the RBI, has been assigned a project on FDI in retail. She has to assess the current scenario of the Indian retail sector and then evaluate the benefits (if any) of introducing FDI to the sector. Roy has so far become aware of some of the consequences of FDI in the Indian scenario on the face of infrastructure, policy and supply chain issues. “Since regulation of FDI has been a debatable issue, the perspectives of RBI and its working methods have provided me with immense takeaways. It has also helped me get better clarity on the issues of employment, food price volatility and in understanding the condition of current retailers and farmers as well,” says Roy...........
Read - Hindustan Times
Visually-challenged demand ATM cards
........“As per the Reserve Bank of India’s directive, all commercial banks should provide talking-facility with� Braille keypads at one-third of the newly installed ATMs and place them strategically in consultation with other banks,” .................
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'IDBI Bank to open taluk, village-level branches for farmers'
....... the bank plans to open around 150 branches during this year. Apart from expanding the regular branch network, the bank plans to open smaller branches at the taluk level and larger banks at the village level with limited staff strength, to take care of the financial needs of the farmers. RBI has permitted the bank to open such branches without any formal licence where the population was less than one lakh, and the bank was gearing to open them in coming weeks.............
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Saturday, April 28, 2012
Weak rupee good for economy, to make industry competitive: Rakesh Mohan, former RBI Deputy Governor
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| In an interview ET Now, Rakesh Mohan, former RBI Deputy Governor, shares his views on the weak rupee, government policies and economy......................... |
Jayalalithaa opposes RBI's revision of interest rates on RIDF
..... "I understand that the RBI has revised the interest rate for RIDF loan to eight per cent per annum. Such a high rate will make RIDF loans unviable and the States will be forced to cut down on investment in rural infrastructure which is vital for inclusive development,".......
Read..........Financial inclusion
This is with reference to “Banks have to play the ‘central' role in financial inclusion” (Business Line, April 27). Dr K. C. Chakrabarty, Deputy Governor, RBI, has rightly emphasised the need for brick and mortar branches in rural areas to achieve inclusive growth. I remember his revelation that in one of the districts of Tamil Nadu, nearly 90 per cent of the farm produce was routed through non-banking channels, indicating a poor contribution of PSBs even after four decades of bank nationalisation. The National Rural Financial Inclusion Plan aims at providing financial services, including credit, to at least 50 per cent of financially-excluded households by 2012 through rural or semi-urban branches. Unless concerted efforts are made to implement plans, financial inclusion will remain an ‘illusion'.
- L.Rangarajan, Nagpur (HBL)Effects of deregulation
It is interesting to see the way banks are reacting to RBI's April 17 credit policy announcement. A few banks have cut both the lending and deposit rates for select maturities. Some others have preferred to cut the lending rates by a specified percentage points, keeping the deposit rates unchanged. It is an era of deregulation that helps banks make their own assessment of market needs, keeping in mind the resources available with them. For sure, deregulation is achieving the intended purpose.
- S. Umashankar, Nagpur (HBL)Stage set for debut of new private banks
......Decks have been cleared for the Reserve Bank of India (RBI) to issue new bank licences to private sector players, with the Union Cabinet on Thursday approving amendments to the Banking Regulations Bill which clarifies regulatory issues in this respect. The government hopes the Banking Laws (Amendment) Bill will be passed in the Budget session of Parliament......
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RBI allows account portability within bank
The Reserve Bank of India on Friday asked banks to allow intra-bank account portability in cases where full KYC (know your customer) details of the concerned account have been ascertained. The facility would enable the customers to shift their account to any of the desired branch any number of times, without any change in the account number..................
Read - Business Today
Separate policy by RBI for curbing misuse of credit cards: Govt
The Reserve Bank has framed a separate policy to prevent credit card misuse, the government said on Friday. "This includes the requirement of additional factor of authentication for online transactions, online alerts to the customers for all types of card transaction at all channels..."..........
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NPCI Wants To Make Mobile Payment Platforms Inter-Operable
With the aim of integrating all mobile payment systems under one umbrella, the National Payments Corporation of India (NPCI) has sought for an approval from the Reserve Bank of India (RBI) to make the mobile payments services by telecom companies like Airtel Money and m-wallet services offered by banks,…………
Read........Banks report over 100 home loan frauds in three months
.......In a written answer on home loans, the Minister of State for Finance, Mr Namo Narain Meena, said the Reserve Bank of India had no specific information about home loan scams at any public sector bank. To curb incidents of frauds, the RBI had advised banks to introduce a system of concurrent audit, he said.
The Central Bank had also asked banks to review the working of internal inspection and audit machinery by the audit committee of the Board of Directors. Banks were also advised to constitute a special committee of the board exclusively to monitor frauds of Rs 1 crore and above..........
IRDA advised to study, relax norms for rural branches
....... Insurance firms need prior approval from the Insurance Regulatory and Development Authority, or IRDA, before opening any branch. In a letter to Insurance Regulatory and Development Authority or IRDA, the finance ministry has argued that banking sector regulator the Reserve Bank of India has also eased the norms on branch opening and the IRDA needs to do the same. "Our opinion is that it (relaxed norms) will give the much required impetus to financial inclusion," said a finance ministry official. While opening the branch policy for tier-II cities in 2011, RBI had also reasoned that the earlier initiatives to relax the norms had lead to an increase in the pace of number of branches opened. Private insurers also believe that the move may give a push to rural plans of insurance firms........
Read.............Ensuring microfinance’s future prospects
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Banks will bring in the much-required transparency, holistic customer service and robust governance in the MFI sector while providing the much-required funding support at the same time. The Reserve Bank of India will also find it easy to let banks-led MFIs offer thrift and other products than private sectors MFIs fuelled by private equity firms..............
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Banks will bring in the much-required transparency, holistic customer service and robust governance in the MFI sector while providing the much-required funding support at the same time. The Reserve Bank of India will also find it easy to let banks-led MFIs offer thrift and other products than private sectors MFIs fuelled by private equity firms..............
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Global cues, slowdown in economy putting pressure on rupee
.............CEO of India Forex, Abhishek Goenka believes that the RBI is not in a position to intervene in the market because the forex reserves are still not at satisfactory levels. As well with growing imports, current account deficit is under lots of pressure. Hence, there is no chance that rupee will become strong in comparison to dollar.
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Little-known benefits of a savings bank account
For most of us, the first association with a bank is through a savings account. There was a time not long ago when you needed an existing account holder's endorsement to open the account, whose only aim was keeping liquid money. The account, like the banking system, has evolved a lot since...............
Read - Business Today
Read - Business Today
Fitch, Moody's should stop romancing India: CLSA
.......... "I think it justifies given some of the cross currents that India is facing. Quite frankly, I think Fitch and Moody's need to also shed a bit of their romantic image of India and become a bit more realistic as S&P has,"..................
Read...............Thank you, S&P: Why the rating agency did us a favour
..... But an investor who came to India one year ago on hopes of seeing 8-9 percent growth will shy away as he hears of 7 percent while he may add to investments in countries which are moving from 0 percent to 1 percent GDP growth. In this context, the Reserve Bank of India (RBI) is in a Catch 22 situation. Ideally, the deteriorating CAD is an indication that the currency in overvalued and hence must be allowed to depreciate. But a steady depreciation................
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Friday, April 27, 2012
RBI advice helped States, not Centre : K Kanagasabapathy
......The Reserve Bank of India has been bringing out a study of State finances ever since 1950-51, a unique contribution from any central bank. The quality of the publication in terms of its analytical contents has been constantly improving. In its latest publication released at the end of March 2012, it has also incorporated a theme chapter on the ‘‘Role of the Reserve Bank in State Finances'', which traces the growing responsibilities that the RBI took upon itself, beyond its mandated roles of serving as a banker and debt manager of the State governments. This thematic chapter is a must-read for anyone focusing on..........
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Now, time for an SLR cut
…………….The reduction in SLR does not affect money supply. Will it not affect banks’ subscription to fresh issues of securities in a year when massive borrowing is planned? The answer is “no”. We have seen excess SLR investments in the past even when growth of non-food credit was good. It was because, both for maintaining prudential ratios and for avoiding the rising trend in non-performing assets, banks prefer investment in gilt-edged securities. A deputy governor of RBI once characterised this tendency as “lazy banking”. Second, with the massive limit of Ways and Means Advances from RBI to the government at Rs 50,000 crore and the possibility of conducting buybacks, the central bank can always ensure that the government’s needs are met. Since there is no release of impounded funds, there is no relaxation of the central bank’s basic stance of tightness. At the same time, from the point of view of public relations, reducing the SLR by two percentage points will give the impression of improving liquidity. It will be a win-win situation for RBI.
Continue reading...........- A Seshan, Economic consultant and a former officer-in-charge in the Department of Economic Analysis and Policy at the Reserve Bank of India
Govt appoints U S Paliwal as RBI nominee director on Corporation Bank's board
New Delhi: The Government of India has appointed U S Paliwal as the Reserve Bank of India nominee director on the board of state-run lender Corporation Bank with effect from April 25, 2012, the bank said.
The new director will hold office until further orders, Corporation Bank said in a filing to the stock exchanges Wednesday.
The new director will hold office until further orders, Corporation Bank said in a filing to the stock exchanges Wednesday.
Soiled note business thrives in Ranchi
RANCHI: Have you ever thought that the currency notes which get mutilated can become somebody's bread and butter? Yes, the business of exchanging good currency notes by returning the soiled ones is thriving lucratively but illegally in the city beside the Reserve Bank of India's (RBI) office..................
Read.............Shortage of coins in city, Madan seeks RBI help
KOLKATA: State transport minister Madan Mitra said on Thursday that the state government was making a daily loss to the tune of Rs 25 lakh due to shortage of coins. Mitra said he was going to discuss the issue with the Reserve Bank of India (RBI)…………………
RBI to issue Rs. 20 and Rs. 50 notes
The Reserve Bank of India will shortly issue Rs. 20 and Rs. 50 denomination banknotes without inset letter and with the rupee symbol in the Mahatma Gandhi 2005 series, bearing the signature of D. Subbarao, Governor of RBI, and the year of printing on the reverse of the banknote, a release said. All banknotes in the denomination Rs. 20 and Rs 50 issued by the bank in the past will continue to be legal tender.
HBL
Deregulation works
It is interesting to see the way in which banks are reacting to the Reserve Bank of India’s credit policy announcement. Some banks have cut the lending and deposit rates for select maturities. Others have preferred to cut the lending rates by specified percentage points, keeping the deposit rates unchanged. This is an era of deregulation — which helps banks make their own assessment of market needs, keeping in mind the resources available to them. For sure, deregulation is achieving the intended purpose.
- Srinivasan Umashankar Nagpur (BS)
Focus on transactions in no frills accounts: RBI
Banks need to focus on transactions in accounts opened under financial inclusion, according to Dr K.C. Chakrabarty, Deputy Governor of RBI......
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‘Financial system is strong'
.....In the light of credit rating agency S&P cutting India's outlook to “negative”, Reserve Bank of India Deputy Governor K. C. Chakrabarty said the RBI would intervene in the forex market only when there was high volatility in the currency market and not just because of the ratings. “India's financial system is strong and that is what is our internal assessment. The RBI will intervene if there is volatility because of the rating and if there is need to intervene,” Mr. Chakrabarty said.................
Read - The Hindu
Read - The Hindu
Banks have to play the ‘central role' in financial inclusion
Hyderabad, April 26: Appropriate delivery models are vital for achieving financial inclusion, according to Dr K. C. Chakrabarty, Deputy Governor, Reserve Bank of India. Speaking on developing a framework for financial inclusion at a national seminar here on Thursday, he said financial inclusion had become fashionable of late. “But this fashion has to become a passion,” he added. The seminar was organised by Crux Management Services in association with State Bank of India's Institute of Rural Development and Nabard. Stating that banks had “great reluctance” to open brick and mortar branches in un-banked area, he said a combination of traditional branch model and business correspondent model should be adopted. Banks should open intermediary structures between base branch and customer locations..........
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Access to banking is a right, says RBI
.........“Banking services should now be made a fundamental right, with financial inclusion drive turning from fashion to a passion for the country. But, just opening a bank account is not enough. There have to be transactions in it. Our approach now is with a minimum bouquet of products and services which include a pure savings facility with recurring deposit and a facility of entrepreneurial credit too,” said K C Chakrabarty, Deputy Governor, Reserve Bank of India....................
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RBI not to interfere in bank service charges
HYDERABAD: The Reserve Bank of India (RBI) will not stop banks from collecting charges for various services or insist on a minimum balance, as it is the choice of the customer where to open account, Deputy Governor K.C. Chakrabarty said here Thursday. "This is business. We can't interfere. We are not here to control business. We can only bring more competition," Chakrabarty told reporters on the sidelines of a national seminar on financial inclusion...............
Read.............When a quiet change in RBI Act led to a giant scam
...... “Never in the history of India had these kinds of derivatives sold by banks,” he added. “The insertion of a new clause in the RBI master circular was the real devil, and we have internal notes of the central bank,” .................
Story
Story
Govt Clears Banking Bill, Retains 10% Voting Right
.....The proposed amendments as regards the RBI's role would enhance the regulatory powers of the apex bank and increase the access of the nationalised banks to the capital market for expansion of the banking business, the draft had said............
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Give home loan up to Rs 25 lakh in priority sector: RBI to UCBs
Mumbai: In order to facilitate enhanced lending, Reserve Bank on Thursday allowed Urban Co-operative Banks (UCBs) to provide housing loans up to Rs 25 lakh under the priority sector lending schemes. "UCBs would, henceforth, be permitted to utilise the additional limit of 5 per cent of total assets for grant of housing loans to individuals upto Rs 25 lakh, which is covered under the priority sector," RBI said in a notification. At present, it said, UCBs are permitted to assume aggregate exposure on real estate, commercial real estate and housing loans up to a maximum of 10 per cent of their total assets with an additional limit of 5 per cent of their total assets for housing loans up to Rs 15 lakh. On its second quarter monetary policy review in November 2010, the RBI permitted all UCBs to lend up to 10 per cent of their total assets to housing, real estate and commercial real estate and an additional 5 per cent for purchase and construction of dwelling units, costing up to Rs 10 lakh. "Due to the high cost of dwelling units, UCBs found it difficult to use the additional limit of 5 per cent of total assets," the central bank said. In May 2011, the RBI hence allowed UCBs to utilise the additional 5 per cent of their total assets permitted earlier, for housing loans up to Rs 15 lakh.
Zee News
Look before you leak data online
…………..“The Indian Banks Association is planning to put this point across before the Reserve Bank of India that banks should not be liable for paying compensations to customers. That’s because if we compensate for a few genuine cases, then others may also claim tomorrow something on these lines and start asking the bank for compensation,” said a senior official at the IBA……………
Read...........Indian market for banking technology set to grow: Frost & Sullivan
……"IT investments in the sector will be driven by multiple forces. These include, the need to comply with RBI norms, support changing business models and leverage cloud computing and mobility solutions, which will result in comprehensive transformation in the IT landscape of large, cooperative and rural banks".
SBH designs recurring-term deposit scheme
In what it claims to be a first-of-its-kind from the Indian banking industry, the State Bank of Hyderabad (SBH) is thinking about launching a new product, which will combine the features of recurring deposit (RD) and term deposit schemes.................
Read............Earn less, pay more
After months of expectations that a rate cut was on the anvil, the Reserve Bank of India (RBI) finally took the plunge last week by cutting the repo rate by 50 basis points — quite a pleasant surprise for the market. However, the rate cuts that followed have not been too convincing. Some banks have cut deposit rates across tenures, while certain others have chosen to cut the base rate — implying there will be some relief on the lending front as well................
Read......YES Bank reduces ATM target; to focus on core retail space
With the RBI permitting white label ATMs, that is, those that are owned and operated by non-bank entities, our job becomes easier,....................
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