Why bad loans may be higher than what banks, RBI claim

......RBI had of late, regulated the process of recognizing NPAs. Instead of doing manually, most banks now identify bad loans through computer generated system. An asset turns into NPA when a loan account stops repaying interest for 90 days. Despite this core banking solution, many industry experts believe, banks still have a room for hiding NPAs. They resort to certain adjustments so that some NPAs do not reflect in their books of accounts especially at the quarter-end. For example, bank managers can coax borrowers to make some payment at the end of every quarter, which will then be reversed the next day............

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State Bank of India, Bank of India allowed to operate in Pakistan

...."We are ready to go tomorrow to India" to set up banking operations, Anwar said. Discussions have been held with RBI Governor D Subbarao to issue banking licences, he said, adding that the process will help normalise trade relations between India and Pakistan.......

Read - ET

Floating rate deposit scheme from IDBI Bank

IDBI Bank, on Wednesday, became the first lender to come out with a floating rate deposit product after the Reserve Bank of India nudged banks to switch to such mode of deposits in July.........

Read - The Hindu

MFI to grow 25% outside Andhra, says regulator

.....“In Andhra Pradesh, the logjam still continues. Due to the crisis, the employee base has been reduced by one-third from 60,000 to 37,000. Besides, the branch network of the companies also fell by 35%,” said Prasad. MFIN has approached RBI for restoring a cap of 12% on margins for large MFIs...........

Read.......

RBI scrutinising systems of HSBC and Standard Chartered bank

The Government today said the Reserve Bank is scrutinising the "systems" of HSBC Bank and Standard Chartered Bank related with anti-money laundering (AML) and KYC norms. "RBI is scrutinising the AML/ Know Your Customer (KYC) systems of two banks (HSBC Bank and Standard Chartered Bank)", Minister of State for Finance S S Palanimanickam said in a written reply to the Lok Sabha......... 

Read - BS

A Tale of Two Dips: Gold Demand in India and China

......The Reserve Bank of India (RBI) recently considered clamping down on gold coin sales by banks.

Edel Tully, precious metals strategist at UBS, said that ”coin demand is the smallest element in the demand pack,” and what is important is the message that will be transmitted if the RBI takes the action it has suggested; a move to stop banks from selling gold coins would signal that 2012 gold imports are still too high...... 

Read.....

Canara Bank awarded for tech use

Canara Bank has bagged the IDRBT Best Bank Award for its use of technology for financial inclusion. S. Raman, CMD of the bank, received the award in the large banks category from RBI Governor D. Subbarao at an event organised in Hyderabad by the Institute for Development & Research in Banking Technology, a bank release said..........

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MLMs now want to ‘invest’ money in India, really?

......Following reports of the FIPB meeting on 24^th August, EAS Sarma, former expenditure secretary, Government of India, has written to Arvind Mayaram, secretary for economic affairs warning, “I apprehend that the FIPB route will be sought to be misused to obtain cover for these MLM companies which are nothing but a way to swindle the public to raise illegal funds to enrich unethical and anti-social persons.” “Many of these (MLM) companies are not even registered under the Companies Act. Even those registered evade regulation. Those booked regroup under different names and continue to cheat the people. All these companies and those that promote them should be dealt with an iron hand and be prosecuted effectively,” he said. This follows several letters by him to the prime minister, ministry of corporate affairs, ministry of finance, Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and others, on the subject.......

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RBI advisors backed hold on rates in July

Most of the Reserve Bank of India's external advisors supported Governor Duvvuri Subbarao's decision to keep interest rates steady last month, in stark contrast to their opposition to the bank's surprise sharp cut in rates in April. Minutes from the quarterly review of policy released by the central bank on Tuesday showed five of the seven external members of the governor's advisory committee had favoured keeping rates on hold......... 

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Inflation concerns remain: RBI panel

The remedies to fix the economy, which is in a bind with slackening growth and elevated inflation, lie with the Government. This view was expressed by the members of a Reserve Bank of India panel on Monetary Policy..........

Read......

Retail inflation dips marginally to 9.86%

.....RBI Governor D. Subbarao said the headline inflation was “way above” the central bank’s threshold level. Typically, 5 per cent is considered as a threshold level of inflation in a high growth economy. RBI needs inflation to fall sharply if it plans to cut borrowing rates and stimulate growth in the economy. RBI will decide on any monetary action next on September 17............. 

Read.......

Back in the reckoning

After spending a nearly a year at the Deposit Insurance and Credit Guarantee Corporation, Reserve Bank of India’s Executive Director G Gopalakrishna is back at the central bank in the Department of Banking Supervision. Gopalakrishna had been a strong contender for the Deputy Governor’s post but dropped out of reckoning and was shifted to DICGC. Now that he is back and will become the senior-most ED when Deputy Governor Anand Sinha retires next February, he will be a strong contender to replace Sinha.  

BS

Obiturary

Kum Nalini Ambegaonkar passed away in Baroda on August 19^th 2012.  She was 89 years old. She retired from RBI as Adviser in Charge of the erstwhile Credit Planning Cell. She had worked for decades in the Economic Department and apart from Mumbai she had worked in Calcutta. A large number in our Groups have worked with her. May her soul rest in peace. 

 - P.P.Ramachandran (via e-mail)

RBI official to appear in court

A division bench headed by Chief Justice Vikramajit Sen directed a senior official of the Reserve Bank of India connected to non-banking financial companies (NBFCs) to appear in court and explain the policy in court on September 13. Earlier, during the hearing of a PIL over the exorbitant rate of interest charged by Manappuram Finance and Muthoot Finance companies, the counsel for RBI informed the court that except housing and agriculture loans which are considered a priority sector, other things are left to the market to decide and the RBI does not exercise any control.........

Read - TOI

Bank should tally signatures

The State Consumer Disputes Redressal Commission has observed that levying charges of shopping done through debit or credit cards, without checking the signature on the charge slip and specimen signatures maintained by the bank, is deficiency of service on the part of the bank...........

Read - DNA

Bank employees on two-day strike from today

......Employees of 27 public sector banks, 12 private lenders and eight foreign banks will stay off work to protest the government’s decision to pass an amendment to the banking laws bill, expected to come up for discussion in Parliament on Wednesday, according to C.H. Venkatachalam, convenor of UFBU.....

Read - Mint

Parliament may take up banking Bill

The government has listed the much awaited Banking Laws (amendment) Bill, which seeks to strengthen the regulatory powers of the Reserve Bank of India, for consideration and passage on Wednesday in the Lok Sabha............

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Corporates misused forex hedging instruments: RBI ED

Who is responsible for the instability in the currency market in the recent past? A Reserve Bank of India official has said forex hedging instruments became “weapons in the hands of corporates to trigger market instability” and they did not take a “well-deliberated and calculated call” while hedging the risk............

Read......

ED of RBI sees a rosy future ahead for the state

Stressing that Odisha’s economy needs to retain the growth momentum and a concerted effort made to raise its farm productivity in particular, Reserve Bank of India Executive Director Deepak Mohanty predicted a rosy picture ahead about the economic and financial developments of the state. Mohanty made the prediction in the backdrop of a disciplined fiscal position of the state which now ranks seventh among the all the states of the country.............. 

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Assocham asks RBI to set up rolling fund for rupee stability

NEW DELHI: The Reserve Bank should consider setting up a rolling fund for trading in foreign exchange or allow Indian firms to issue dollar-denominated shares to avoid rupee fluctuations, industry body Assocham said today......

Read - ET

RBI tightens norms for securitisation of loans by NBFCs

....Giving details of the guidelines, the RBI said a loan upto two years can be securitised only after payment of three monthly instalments by the borrower. The limit for loans between two and five years is six monthly instalments and above five years, 12 monthly instalments. With regard to minimum retention requirement (MRR) for securitisation, ......

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‘No blanket exemption from CCI oversight’

....Earlier this month, the Reserve Bank of India had written to the finance ministry saying that banking sector merger should not be under the purview of the CCI. The finance ministry had also opposed a Cabinet Note proposed by the corporate affairs ministry on bringing banking mergers under the Competition Commission of India (CCI) saying that the body was not equipped to handle the issue......

Read - Indian Express

NBFCs must retain 5% loan sold to another entity: RBI

...........Giving details of the guidelines, the RBI said a loan up to two years can be securitised only after payment of three monthly installments by the borrower. The limit for loans between two and five years is six monthly installments and above five years, 12 monthly installments........... 

Read......

Andhra mum, MFIs glum

REVIVAL ROADMAP

12% is the interest margin that Microfinance Institutions Network (MFIN) are looking at  MFIN wants the Reserve Bank India to restore the interest margin between MFI borrowings and lending.   Margin is the difference between the interest rate at which an MFI borrows and the rate of interest at which it lends  10% and 12% is margin cap for MFIs with a credit portfolio of less than Rs 100 crore and more than the above amount, respectively. RBI fixed this via a circular dated August 3  Rs 100 crore will be the credit portfolio of less than 12 MFIs out of the 47 members in MFIN, according to Trident Microfin MD Kishore Kumar Puli

Read - BS

Soon, a bank-wide portal that will allow you to shop for best service

How convenient it would be to compare at one place interest rates on deposits offered by various banks, their retail loan rates, margin amounts they require, the processing fees they charge, the add-on facilities they offer on deposits, and so on. Extremely. The Finance Ministry also thinks so, and wants public sector banks,a la travel portals such as cleartrip, makemytrip, yatra and expedia, to explore the feasibility of setting up a bank-wide portal......

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Banks told not to bid for bulk deposits

.....Bankers said RBI Deputy Governor K C Chakrabarty told them nowhere in the world such bidding for bulk deposits happened and Indian banks should also refrain from doing so. Bulk deposits are of 30 days to one-year maturity and of amounts varying from Rs 1 crore to Rs 1,000 crore or even more. The move comes after the finance ministry issued norms that required banks to reduce the proportion of bulk and certificate of deposits to 15 per cent of the total deposits by March 31, 2013........ 

Read - BS

PSBs may seek more time to comply with bulk deposit norms

....“Some of the public sector banks are likely to approach the Finance Ministry to seek more time for complying with the norm to reduce bulk deposits to 15 per cent of total deposits,”.......

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Is your child financial savvy?

.....Portals and websites launched by financial institutions can also help your children learn about finances in a fun way. The Reserve Bank of India's (RBI) website has a financial education section for kids, which explains the roles and functions of RBI and banking concepts like inflation, monetary policy through comic characters, puzzles and games......

Read - BS

Get locked into bank fixed deposits for 2-3 years

KEEPING IT SAFE Bank fixed deposit returns on investment of Rs1 lakh
Bank Name	Duration	interest (%)	amount (Rs)
The Catholic Syrian Bank	Above 2 years to 3 years	10	1,33,100
State Bank of Bikaner & Jaipur	3 years and up to 5 years	9.5	1,31,294
Dena Bank	3 years to less than 5 years	9.3	1,30,575
ICICI Bank	2 years to less than 5 years	9.25	1,30,396
HDFC Bank	2 years 17 days to 3 years	9.25	1,30,396
Bank of Baroda	1 year and above up to 3 years	9	1,29,502
State Bank  of India	2 years to less than 3 years	9	1,29,502
Punjab National Bank	1 year to 5 years (except 111 days)	8.75	1,28,613

Read - BS 

Top four PSU banks slip in asset quality

.....According to Reserve Bank of India data, public sector banks burnt their fingers most in terms of loan restructuring, while foreign banks have actually seen a dip in the ratio of restructured standard advances to gross advances, while private sector banks have seen a marginal increase.

Read - BS 

It’ll be tough for wilful defaulters

Banks have decided to get tough with wilful defaulters or borrowers who have not repaid bank loans despite having the capacity to do so. Saddled with rising bad debts, banks are pressing for imposition of stricter penalties, including a ban of up to five years on floating of new ventures by the promoters of such firms. Besides promoters, auditors, if found to have wrongly presented facts about borrowing companies, will be held accountable........

Read - Hindustan Times

Loan norms for roads to be reviewed

With many highway projects finding it difficult to reach financial closure, the government is seeking a review of guidelines for lending to such projects. The finance ministry and the Reserve Bank of India are considering a proposal under which banks could treat escrow accounts as collateral for projects where annuities are not backed by a government guarantee...... 

Read - BS

HC asks Centre, SEBI to reply to plea on automated trading

....Besides Sebi and Finance Ministry, Justice Rajiv Shakdher has also issued notices to Reserve Bank of India, BSE and NSE on the plea alleging algorithmic trading put small investors at a disadvantage in comparison to big brokers and FIIs. .....

Read - BS 

RBI Executive Director promotes financial inclusion

Speech by Deepak Mohanty focuses on need for more financial inclusion in rural areas; says the availability of credit is more important than the cost...... 

Deepak Mohanty, an Executive Director of the Reserve Bank of India, promoted financial inclusion throughout the country in a speech delivered at a Bhubaneswar conference on August 20. Mohanty believes achieving inclusive growth means bringing the poor and underprivileged sections of society within the banking fold "with a view to improving the well-being of our society". The number of banking outlets in villages with populations of more than 2,000 people trebled between March 2010 and March 2012 to 82,300, and Mohanty says the central bank will now tackle provision to smaller communities.  To make more credit available, banks have been given complete freedom to price their advances so that lending in the rural areas is a commercial proposition, Mohanty says. He adds that at this stage of development, the availability of credit is more important than the cost.

Click here to read the speech.

Goa to Goa – changed contours of the Indian Forex Markets – new realities and priorities - G Padmanabhan

Inaugural address by Mr G Padmanabhan, Executive Director of the Reserve Bank of India, at the 23rd Annual Forex Assembly of the Forex Association of India, Goa, 18 August 2012

....Volatility is an unavoidable feature of all financial markets and heightened volatility in the forex market that we witness today is neither unprecedented nor unexpected. All economic agents with currency risk will have to frame a conscious risk management policy to cope with the impact of the volatility on their cost, revenue and profit. Even as the Reserve Bank strives to maintain orderly conditions in the forex market, certain behavioral issues that tend to accentuate volatility have to be understood by all market participants and factored into their response and risk management strategy....

Read........

India Inc using hedging instruments to trigger instability: RBI

The Reserve Bank of India (RBI) has come down heavily on India Inc for not prudently using hedging tools available to them. Rather, the hedging instruments are often used to trigger instability in the market. Commenting on whether the corporate sector had failed to take a “well-deliberated and calculated call”, when it came to hedging, RBI’s Executive Director, G Padmanabhan, said the corporate sector had become complacent regarding the rupee’s stability, particularly during 2009-2011 when the Indian currency was range-bound between 44-46 a dollar............

Read - BS

SBI wins contest

Thiruvananthapuram : The State Bank of India (SBI) won the inter-bank ‘aththapookalam’ contest organised by the NABARD Recreation Club here on Sunday.  The State Bank of Travancore (SBT) and the Reserve Bank of India (RBI) won the second and third places respectively. Eight banks participated in the contest held at the Regional Office here. RBI Regional Director Salim Gangadharan distributed the prizes. NABARD general manager K R Rao was also present.

IBN Live

About 10 lakh bank employees to go on strike on 22-23 August

Employees from around 47 banks are planning to go on a two-day strike on 22nd-23rd August to protest the proposed reforms in the banking sector and outsourcing of jobs. Around 10 lakh bank employees and officers working in 27 public sector banks including State Bank of India (SBI) and 12 old generation private sector banks and eight foreign banks will resort to two days nationwide strike on 22nd and 23rd August, says United Forum of Bank Unions (UFBU)............

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Are Indian banks heading for a crisis?

.... all restructured assets turn bad, then gross NPAs as a percentage of loans assets jump from 2.94% to 7.61%. This will not happen. By the Reserve Bank of India’s estimate, about 20% of restructured assets generally turn bad. If indeed that happens, the gross NPA ratio rises to 3.87%, and if 30% of the restructured assets turn bad, it reaches 4.34%...........

Read - Mint

Banks game for disclosing names of those failing to pay up money raised from public

....Banking regulator Reserve Bank of India has similar information about defaulting companies categorised as bad, defaulting and non-performing assets. This information is also maintained by the credit information companies. But it is shared only among banks and is not in the public domain....... 

Read - BS

Capital emerges as hub of fake notes racket

NEW DELHI: The capital seems to have become the favorite haunt for counterfeiters. In the first six months of 2012, the security agencies have recovered fake currency with a face value of over Rs 4.15 crore against last year's Rs 4.08 crore. In 2009 and 2010, the recoveries amounted to Rs 3.27 crore and Rs 3.01 crore, states Reserve Bank of India ( RBI) while replying to an RTI application filed by activist S C Aggarwal. The data shows that since last year, Delhi has been emerging as the main hub of fake currency circulation, replacing earlier key areas like Maharashtra, Uttar Pradesh, Andhra Pradesh and West Bengal............

Read - TOI

'10 agents control coins flow in city'

........The Jaipur office of RBI claims that they have taken steps to monitor and meet the demand for coins in different parts of Rajasthan. "Entry of general public is regulated after verification of their identities. Monitoring of the exchange hall operations is also scrupulously undertaken to ensure that services are not utilized by frequent visitors," an RBI official said. To deal with the dearth of coins, RBI also organized coin mela recently apart from distributing it from the counters. "Currency chest holding banks have been advised to issue coins to public keeping in view their genuine requirements. These currency chests, at our instance, are functioning on Sundays as well to exchange notes and coins," the official added.

Read - TOI

Banks to be affected by RBI move on group exposure: Moody's

....."If the RBI adopts them, the new guidelines would be credit positive for India's banks, but credit negative for group companies that rely on parent banks for capital and brand support," Moody's Investors Service said in a report. It said the "affected banks" include ICICI Bank, State Bank of India, Bank of India, Bank of Baroda and Kotak Mahindra Bank.......  

Read - BS

Do PSU banks favour big firms?

RBI Deputy Governor’s assertion is borne out by the data, suggesting big gaps in RBI’s regulatory capacity

K.C.Chakrabarty, Deputy Governor of the Reserve Bank of India (RBI), has, in a recent lecture, more than hinted that all may not be well with the manner in which loans are being restructured. In fact, the deputy governor has gone so far as to say that neither is restructuring happening ‘in a transparent and objective manner’ nor is it ‘non-discriminatory’. These are serious charges that are being levelled at banks but the data on the ground suggests they might not be totally unjustified...

Read......

Restructuring loans driven by banks, not borrowers

....In a recent speech, deputy governor K.C. Chakrabarty said, “When it comes to restructuring, our banks have a substantial bias towards more privileged borrowers vis-à-vis small borrowers.” The second takeaway from this data is that recasting loans is being driven by banks themselves rather than borrowers. As Chakrabarty said, “It (the data) seems to suggest that restructuring of accounts is being resorted to avoid classification of accounts as NPA (non-performing assets).” That’s also borne out by his assertion that, “many unviable accounts were restructured by establishing viability only with some kind of financial engineering”........

Read - Mint

आरबीआइ गवर्नर बनना है रघुराम राजन को

......उन्होंने रिजर्व बैंक का डिप्टी गवर्नर बनाने की सरकार की पेशकश ठुकरा दी थी. वे रिजर्व बैंक के गवर्नर बनना चाहते थे. वे तब तक इस पद को नहीं पा सकते जब तक वे या तो रिजर्व बैंक के डिप्टी गवर्नर या वित्त मंत्रालय में किसी पद पर काम नहीं कर लेते..........

Read - आज तक

Men at work

Improve ratings

Projecting a realistic picture of the economy is a crucial step towards avoiding further rating downgrades. Though many of Chidambaram's predecessors have held the Reserve Bank's ruthless interest rate hikes in the past two years responsible for negative ratings, RBI Governor D. Subbarao has been unrelenting. The central bank is unlikely to ease the rates anytime soon. Sovereign rating methodologies put a lot of weight on the fiscal condition, which makes addressing the fiscal situation a priority. But with the inflation raging and investments dropping, the fiscal situation is on shaky knees. “The inflation in August is likely to remain high. Given the situation, the RBI, too, is not expected to offer much relief by cutting interest rates in its next evaluation,” said Dharmakirti Joshi, economist at CRISIL. Consumer inflation, which affects the lives of individuals more directly, has been in double digits for the past four months. So, the RBI wants the government to address reasons for a slowdown other than the rate cut. “We have come to a rough conclusion that about a third of the slowdown is due to interest rate hikes and the rest due to a combination of other domestic and some global factors,” said Subir Gokarn, RBI deputy governor, in a television interview.

Read - The Week

A push for pulse

The Reserve Bank of India Deputy Governor, Subir Gokarn, is worried about the spurt in prices of pulses that could be the precursor to a fresh ‘protein shock’. He has reasons to be so.......

Read.........

Centre plans new window for home loans

Home loan borrowers may no longer have to wait for the Reserve Bank of India to ease interest rates as government is planning to furnish cheap housing credit through another window.......... 

Read - Deccan Herald

The Chidambaram solution

...... To quote the Reserve Bank of India: ”Housing loans constitute around half of the total personal loans in India and as a result a boom and bust in the housing market can affect quality of assets. The build-up of systemic risk in this area in India was avoided mainly due to implementation of macroprudential policy by the Reserve Bank like changing the risk weights for loans to real estate. “.......

......it is a bit cynical to try and achieve the latter objective by making the banks take on excessive credit risk. He should stick by the view that bank managements, including those in public sector banks, must be given their autonomy when deciding on their lending practices and the task of regulating them and influencing their behaviour must be left to the central bank.

Read - The Hindu

Save a Thought for the Savers

........with the part that seems to suggest your concern for borrowers might, once again, outweigh your concern for savers and induce you to ‘direct’ the Reserve Bank of India (RBI) to lower interest rates. Yet, savers hugely outnumber borrowers ; any democraticallyelected government should be more concerned about savers rather than borrowers. Indeed , there can be no borrowers if we did not have savers willing to provide funds. But time and time again, policymakers have taken savers for granted.............

Read - ET

Retail-focused NBFCs face speed breakers

....Despite the stricter norms imposed by the Reserve Bank of India in April, curtailing the LTV of gold lenders, both Muthoot Finance and Shriram City Union Finance (gold loans form 40 per cent of its total assets) continued to post robust loan growth of 41 per cent and 23 per cent, respectively. Analysts though remain sceptical on the sustainability of Muthoot's loan growth for this fiscal in the wake of the new LTV norms and are factoring in an increase of just 1.9 per cent.......

Read - BS

Progress toward Improved Client Protection in the Indian Microfinance Sector

.....While acknowledging that numerous obstacles remain for the sector as a whole, Ms. Bansal praised specific improvements in the client protection environment: the Reserve Bank of India provision of a framework for regulating client protection; the development by industry associations of an industry Code of Conduct; and the influence of social investment funds.......... 

Read.......

AP crisis an eye opener for all stakeholders: SKS Microfin

....With regard to questionable recovery practices, the RBI had stipulated that all customer connectivity should happen at a public place. The representatives of the MFIs have the right to visit the work place or the house of the borrower only if she defaulted on payment of two consecutive instalments....... 

Read - BS

Practical tips to use RBI's Liberalised Remittance Scheme

....While the scheme looks attractive on paper, it is ridden with several practical roadblocks. Confusion exists on what is allowed under the scheme, what documents are needed to be submitted and so on. Let us try to throw light on these practical aspects........

Read - ET

Exporters bring back dollars as Re begins to rise

......RBI has now asked oil companies to source half of their dollar requirements from State Bank of India, so that there is a single bank raising dollars rather than getting quotes from many banks and creating a shortage in the market.

Read.........

MSME sector seeks panel to monitor credit flow

.....“There is an apprehension that since banks now operate in an environment of de-regulation, advisories such as the RBI’s often succumb to the pressures of profit and bottom lines. Hence in order to obviate such a situation, a monitoring committee must be put in place by the ministry of finance, to enable all MSMEs to benefit from the RBI’s directives,” said Ahmed...........

Read - BS

Karnataka among five States selected for issuing Aadhaar-enabled Kisan Credit Card

.............The Aadhar-enabled cards would help farmers in under-banked districts. Bidar, Chamarajanagar, Gulbarga, Bangalore Rural, Koppal and Raichur have been identified as under-banked districts in the State by the Reserve Bank of India (RBI). The RBI has directed State-level Bankers’ Committee to take steps to open bank branches in these districts.

Read - The Hindu

RBI’s ' honeymoon' with micro finance

.....Dr Y.V Reddy, former RBI Governor, later confessed that many financial experts believed, but did not have the courage to admit publicly, that micro finance is India's sub- prime. In fact MFIs are worse than money- lenders. Money lender lends out of his own money, whereas here, MFIs are actually borrowing money from depositors and banks and on- lending the money. So, " MFIs is essentially a leveraged money lender". The studied silence of experts, including RBI, has cost, as the post- 2010 crisis shows, the economy, particularly small borrowers a great deal. RBI seeks to take shelter under the fact that it had no power to regulate the MFIs. But the argument is specious. If RBI today regards MFI lending as subprime lending, surely it could have egged on the Government of India to take appropriate steps and take them immediately. In fact, RBI's guilt runs much deeper. We are tempted to ask Dr. Reddy: It is one thing to say that RBI had no statutory powers to regulate to MFIs; but was it obliged to support MFIs? This support came not only from RBI but also from public sector banks ( PSBs), NABARD and SIDBI, RBI could have stipulated that PSBs should lend only to non- profit MFIs.......

Read - FPJ

MFIs as BCs: Game changers in financial inclusion

......On the flip side, concerns of aggressive bidding have come from the central bank. Harun R Khan, Deputy Governor, RBI, had said during the course of a speech on June 30, 2012 at the Indian Institute of Public Administration, Bhubaneswar.  “Pursuit of higher volume of business for revenue maximisation may dilute prudential requirements exposing the banks concerned to whole host of risks like reputation risk, strategic risk, compliance risk, operations risk besides the risk of contaminated asset portfolio,” Khan had said. With financial inclusion slated to be extended to 3,50,000 more villages in the coming months, this space is set to witness many changes and could see forays into insurance also, an almost neglected area. This holds out opportunities for many players. As A K Bhattacharya, General Manager, RBI, Bangalore says, “The coverage is abysmal.”.............

Read - Deccan Herald 

Can’t compare gold loans with microfinance

....For all their superficial similarities, the worlds of microfinance and gold loans are as apart as chalk and cheese. Microfinance caters to those at the bottom of the pyramid. By definition, gold loans cannot be about the bottom of the pyramid because it presumes ownership of some measure of gold, which is a form of savings in India. At the same time, given the way that gold loans and microfinance emerged from the backwaters almost simultaneously, analysts would certainly feel tempted to draw parallels......

Read - HBL

A more customer-friendly approach to banking needed - Dr.T.V. GOPALAKRISHNAN

.....The concept of Know Your Customer has unfortunately become very handy to keep away the customers instead of understanding the customers, helping them to improve their banking habits, provide them the dignity that they deserve. The objective of KYC is to eliminate undesirable customers from the point of view of their possible indulgence in illegal and anti-social activities but unfortunately all prospective customers are suspected and kept away by citing some deficiencies in some documents which they provide to banks.......

Read - HBL

For the record

....Having discussed the need for KYC, let me now speak a propos a complaint that will elucidate on how banks harass consumers despite them submitting the necessary KYC documents........

Read - The Hindu

Lok Sabha to decide on Banking Act changes; more powers for RBI likely

.... It proposes to confer upon the Reserve Bank the power to call for information and returns from the associate enterprises of banking companies, and also to inspect the same, if necessary.The Bill also proposes to empower the Reserve Bank to supersede the board of directors of a banking company for a total period not exceeding 12 months, and appoint an administrator to manage the banking company during the said period. The RBI feels that such power will help it in regulating new as well as existing entities in a better manner.......

Read - HBL

Govt has higher stakes than RBI, says Chandy

THIRUVANANTHAPURAM, AUG. 19: 

The Government has even higher stakes than the Reserve Bank with respect to implications from growth versus inflation dilemma. This is what Chief Minister Oommen Chandy had to say at a function hosting an invited lecture featuring the Reserve Bank Governor D. Subbarao here recently.....

Red - HBL

Coin shortage likely to aggravate in state

Jaipur : .... "RBI has been taking proactive steps to monitor and meet the demand for coins in different parts of the Rajasthan. Coin melas are being frequently organized by the office directly or through the banks concerned whenever any requirement is felt. If the need arises, we will continue doing so," the RBI official said.

Read - TOI

Coin shortage makes everyday life difficult in West Bengal

.....The Reserve Bank of India (RBI), however, claims that the "demand-supply mismatch" is a problem of perception. "It is not a rule," said a RBI official. "Much effort has been made in the last two months to strengthen (coin) distribution channels. Now we are taking steps to see that even this isolated phenomenon does not happen." The official said the RBI had pumped in Re.1, Rs.2 and Rs.5 coins in Kolkata. The central bank distributed 1.78 billion coins last fiscal. It has issued more than 800 million coins in the first four months of this fiscal (April to July). It has organised about 150 coin melas in the state, where the public, small traders and shop owners exchanged currency for coins. The RBI, which operates 13 coin vending machines at its Kolkata office, is distributing 500,000 coins daily. It has also opened two distribution counters, especially for meeting the demands of transport organisations. The country's largest lender, the State Bank of India (SBI), echoed the RBI's view....... 

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RBI forms committee to reduce gold import

......“RBI has formed a committee which will come out with its report in two to three months recommending how to contain the gold demand,” said RBI Deputy Governor Harun Rashid Khan here. While the oil import is 70 per cent of the domestic requirement, the gold import is 100 per cent, he said. However, he added that the gold import has now come down. On the volatility of the rupee-dollar exchange rate, Khan said, “We don’t target any exchange rate. Our approach is that there should be orderly movements and no volatility.”...... 

Read - The Pioneeer

India Central Banker Says Rates Will Follow Inflation

........We have to balance growth and inflation risks, and when we see the inflation risk being the dominant one, as we have seen now, we cannot afford to ignore that risk, especially since pressure points on food and oil prices are re-emerging," Subir Gokarn said at a conference of foreign-exchange dealers. His comments echo those of fellow Reserve Bank of India Deputy Governor K.C. Chakrabarty, who Thursday pointed to the risks from rising food and oil prices that could weigh on the RBI's rate decision when it next meets in September........ 

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Chidambaram hints at a less intrusive approach on banks

.....Reserve Bank of India (RBI) Governor D. Subbarao had expressed his displeasure over the frequent diktats by the ministry and said the government should influence decisions through bank boards instead. Chidambaram has proposed a less intrusive approach and said all advisories issued by the secretary, department of financial services, will be vetted by the finance minister, according to bankers who attended the meeting. D.K. Mittal, secretary, financial services, did not respond to a call or message left on his mobile phone......

Read - Mint 

We aren’t totally machine-centric

....One of the Deputy Governors of RBI pointed out that why should banks restructure only corporate loans and why not other loans? 

We are doing it. In March this year, we found there were lot of NPAs in education loans. So a policy was formulated and strategy evolved under which we got in touch with the parents. We contacted the students. Wherever we found they are not getting jobs, we restructured the loan. Similarly for agriculture, if there is some drought, flood or crop failure, there is a provision in the RBI policy and we are making full use of that and doing restructuring...... 

Red - The Hindu

Dhanlaxmi seeks RBI nod for new auditor

Kerala-based Dhanlaxmi Bank Ltd has approached the Reserve Bank of India (RBI) to appoint new auditors after Walker Chandiok and Co. and audit consultancy Grant Thornton Advisory Pvt. Ltdwalked out in early August, a month before the completion of their three-year tenure, following major differences with the management of the old generation private lender..................

Read - Mint

Banks rush to raise money where companies fear to tread

....The banks are raising money when the global economic outlook is uncertain and credit rating agencies Standard and Poor’s and Fitch Ratings Inc. have revised India’s outlook to negative from stable, making overseas money potentially more expensive for Indian entities. The Reserve Bank of India (RBI) data shows corporate borrowings from abroad have slowed in the last one year.....

Read - Mint

More Without Frills

Rural banking has spread less than what the RBI would like to believe, and cannot be improved unless the bank leaves dogma behind and faces reality

..... Rural banking can be made profitable, but it requires a different business model: low-cost local staff close to villagers, and continuous effort to make banks useful. The public sector model is quite inappropriate for rural banking. That is why it has progressed so slowly in India and, more importantly, why it has been reported to be more successful than it actually is. The RBI wakes up every few years, exhibits a few statistics, and likes everyone to believe that banks are penetrating villages. The first thing it needs to do is honest, objective surveys into the real state of financial transactions in rural areas. And rural banking will wake up only when the RBI allows new forms of enterprise into it.

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Rupee Co-operative Bank Ltd., Pune (Maharashtra)- Penalised

.......In the statutory inspection of the bank under Section 35 of the Act with reference to its financial position as on March 31, 2011, RBI observed that the bank had violated RBI instructions by granting term loans to some borrowers much in excess of the limit of Rs.10.00 lakh prescribed vide the operational instructions. On top of that, the bank had also sanctioned fresh Cash Credit limit to the existing borrowers in excess of Rs10.00 lakh, in 4 cases, again in violation of the operational instructions..............

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United Bank of India to open new branches

....the bank plans to add 84 new branches across India in urban and semi-urban locations. He added that an approval for 34 branches has been sought by the Reserve Bank of India and rest were in the pipeline. Twenty branches would be opened in rural area for which permission was not required. Narang said that in the current situation of subdued economic growth and lackluster credit demand, the bank was aiming the retail sector to push the credit offtake....... 

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Depositors untraced

.....The bank has wrongly declared his account inoperative. As per RBI clarification, since the interest on Fixed Deposit account is credited to the savings bank account as per the mandate of the customer, the same should be treated as a customer induced transaction. As such, the account should be treated as operative account as long as the interest on Fixed Deposit account is credited to the Savings Bank account. However, this kind of savings bank account can be treated as inoperative account after two years from the date of the last credit entry of the interest on Fixed Deposit account.  The issue of unclaimed and inoperative deposit accounts came to lime light, when a few days back, the Reserve Bank of India told banks to spruce up their act in dealing with deposit accounts which have remained inoperative and are unclaimed so far....... 

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Canara Bank to launch life insurance cover scheme

Canara Bank is launching "Canara Freedom Suraksha", a life insurance cover of Rs one lakh for all its savings bank customers as a value-added service at a very nominal premium, the bank said in a statement........

Read - Indian Express

Poor monsoon portends ‘protein shock’: Gokarn

.....“We had a huge protein shock in 2009-10. That was mainly on account of a sharp increase in prices of pulses consequent to the monsoon performance of 2009. We are in a similar monsoon situation now and so the risk of pulses prices accelerating is high right now,” .......

Read - Indian Express

Amalgamation of regional rural banks: Is this unfair to sponsor banks?

.....The MOF has recently got the consent of the sponsor banks, state governments and consulted NABARD which looks after rural credit. As the sponsor banks are regulated by the Reserve Bank of India (RBI), it would have been appropriate to consult it as well. Be that as it may, DOF has directed sponsor banks in various states to transfer /take over RRBs of other banks as specified by the DOF.... 

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