One transaction per PIN entry at ATM

Next time you go to an auto mated teller machine (ATM), of any bank, be ready to reenter your personal identification number (PIN) afresh for every transaction you wish to conduct, such as money withdrawal, balance enquiry and checking account details. In order to check misuse of ATM cards by unauthorized people, the Reserve Bank of India (RBI) has asked banks to allow only one transaction at ATM machines for one entry of PIN, which acts like a password for ATM transactions). Previously, customers were allowed to conduct multiple transactions through the ATM by punching in their PIN only once in a single session.

RBI may raise rates by 25 bps in Jan: Poll

The Reserve Bank of India (RBI) is expected to raise key rates by at least 25 basis points (bps) this month to tackle rising inflationary pressures. Analysts expect a total rise of 75 bps in 2011. As food and fuel prices push up inflation, median forecasts for January have been upwardly revised by 25 bps since the last poll in mid-December.  Of 17 economists surveyed, 12 expect RBI to increase rates by 25 bps in January, while one expects a 50 bps increase. The other four expect RBI to keep rates steady in January. RBI’s next policy review is on January 25. Currently at 6.25 per cent, RBI’s key lending rate or repo rate is seen at 6.5 per cent by January-end and seven per cent by year-end. The reverse repo or borrowing rate, which stands at 5.25 per cent, is seen at 5.5 per cent by January-end and six per cent by year-end.

NHB to start mortgage guarantee company by June

The National Housing Bank (NHB) will roll out its mortgage guarantee company by June this year. The firm is being set up to compensate banks and housing finance companies (HFCs) in case of defaults by home loan borrowers. For technical assistance, NHB has roped in a US-based mortgage guarantee firm as its fourth partner. The other two partners are the Asian Development Bank (ADB) and International Finance Corporation (IFC), both having a 10 per cent stake in the company. Declining to give out the name, NHB Chairman R V Verma said the international partner would provide the technical expertise required to run the proposed company. “They (the US-based company) are an experienced international player in mortgage guarantee business and also our strategic partner,” said Verma.

Keep hiking rates to cool inflation: IMF

The International Monetary Fund (IMF) says the Reserve Bank of India (RBI) should maintain a tight monetary policy stance and keep raising interest rates to tame inflation, which it sees as the key macroeconomic challenge. In its annual advisory to the Indian government, IMF has projected inflation at 6.5% by the end of this fiscal year, one percentage point higher than RBI’s own forecast, although the central bank has conceded that the rate could exceed its projection.

Rajnikant Patel appointed director of ICEX

Rajnikant Patel is back in the limelight. He has been appointed whole-time director at commodity futures exchange ICEX, in which his parent company, Reliance Capital, has assumed the role of anchor investor after acquiring the 26 per cent stake of original promoter India Bulls Financial Services. Patel spent the early years of his career with Reserve Bank of India. He joined Bombay Stock Exchange as executive director and was asked to demutualise and corporatise Asia’s oldest bourse. To his credit, BSE attracted good investors, including Frankfurt’s Deutsche Börse and Singapore’s SGX, who hold 5 per cent each. BSE, which was known as a brokers’ cartel, has cut them down to size. Brokers together hold less than 49 per cent now.

Citi effect: CVC may snoop more

The Central Vigilance Commission (CVC) is likely to increase its snooping on public sector banks in the wake of the R300-crore fraud in Citibank’s Gurgaon branch and the housing loan scam involving LIC Housing Finance that came to light last month. Both incidents have caused serious embarrassment to the country’s banking industry, which was largely congratulating itself on its prudence after it withstood the brunt of the global financial crisis. Sources in state-owned banks said Central vigilance officers (CVOs) are likely to monitor high value bank transactions to ensure that incidents of fraud are reduced. Transactions involving more than R1 million are currently considered as high value.

Corporation Bank Bags SKOCH Financial Inclusion Award 2011

Corporation Bank has bagged SKOCH Financial Inclusion Award 2011 - "Inclusion Champion of the Year" instituted by SKOCH Consultancy Services Pvt. Ltd. Shri Ramnath Pradeep, Chairman & Managing Director of the Bank received the Award from Dr. K C Chakrabarty, Deputy Governor, Reserve Bank of India in the presence of Dr. C Rangarajan, Chairman, Economic Advisory Council to the Prime Minister of India at an Award Function held in New Delhi, today.  Corporation Bank has received this Award for completion of its financial inclusion outreach at all the villages having population of above 2000 allotted to the Bank by various State Level Bankers’ Committees (SLBC) in December 2010 way ahead of the given deadline of March 2012. Corporation Bank was allotted 333 villages. Out of total of 333 villages allotted to the Bank, the Bank has branches in 14 villages and in other 319 locations the Bank has established Grameen Vikas Kendras (Branchless Banking Units). SKOCH Consultancy Services has instituted several of the oldest, most prestigious independent civilian awards in the field of financial inclusion, economy, industry, governance, capacity building, empowerment, inclusive growth, citizen services delivery, technology, academics and change management. Skoch Awards identify and salute best practices and comprehensively document, publish and put in public domain for the knowledge of others. The Awardees are selected by an eminent Jury of industry leaders, domain experts, economists and academicians. The Bank has been consistently receiving awards from organizations of repute like IDRBT, IBA, SKOCH etc. on various facets of implementation of technology, customer relationship management etc., over the last many years.

RBI modifies guidelines for core investment companies

The Reserve Bank of India (RBI) has modified the definitions in the guidelines to core investment companies that it considers as systemically important. In its directive issued in August 2010, RBI had advised all systemically important CICs to get a certificate of registration within a period of six months from the date of the notification. It has now further advised such CICs that the term "adjusted net worth" in the guidelines meant the aggregate, as appearing in the last audited balance sheet as at the end of the financial year, of owned funds as defined in non-banking financial (non-deposit accepting or holding) companies prudential norms issued in 2007. These should include 50 per cent of the unrealised appreciation in the book value of quoted investments as at the date of the last audited balance sheet as also at the end of the financial year, which are in excess of the aggregate market value of such investments over the book value of such investments and the increase, if any, in the equity share capital since the date of the last audited balance sheet. It may also include any decline or diminution in the aggregate book value of quoted investments (such diminution being calculated as the excess of the book value of such investments over the aggregate market value of such investments) and the reduction, if any, in the equity share capital since the date of the last audited balance sheet. Investments should include investment in shares, stocks, bonds, debentures or securities issued by the government or local authority or other marketable securities of a like nature.

2011: Lords Of Finance - D SUBBARAO GOVERNOR, RBI

People in the financial services sector make or break an economy. These are the most secretive of the people who make it impossible for anyone to forecast as to what they would do. Now into the penultimate phase of his three-year tenure as the Governor of the Reserve Bank of India, Duvvuri Subbarao has surprised a lot of people not just in Mint Street but also in New Delhi. Once seen as the finance ministry’s man in India’s central bank, Mr Subbarao appears to have come into his own, pitching for greater autonomy. This year, it is not only his inflation management that will be watched but also whether the government would be comfortable, approving a second term for him.

RBI asks banks to fix staff accountability to prevent frauds

The Rs 300 crore Citibank fraud has woken up the central bank to the reality of insiders' role in banking frauds. A concerned Reserve Bank of India (RBI) has asked banks to fix staff accountability to prevent such frauds from happening. The RBI has asked banks to ensure that the reporting system was suitably streamlined so that frauds were reported without any delay. Following the RBI guidelines, banks have already begun setting up a robust real-time system of checks and balances that will include monitoring all transactions over Rs 10 lakh on a daily basis. Now, all transactions of more than Rs 1 crore are being monitored by the banks' top management.  In response to a Right to Information Act (RTI) application, most public sector banks admitted that their employees have been found to be involved in encashment of fake cheques. What concerns the RBI is not just the recent fraud of Citibank, but many others in the past. Employees of many banks have been found involved in a wide range of frauds from counterfeiting to forging documents for loan approvals.

Integra bags contract from Allahabad Bank

Integra Micro Systems (P) Ltd, the Bangalore-based information technology (IT) services provider, has bagged a financial inclusion contract from Kolkata-based public sector lender Allahabad Bank. The five-year contract is estimated to be around Rs 100 crore, according to industry experts. Allahabad Bank has identified 1,850 villages to be covered under the financial inclusion programme by March 2012. These villages are spread across 147 districts in 12 states. All villages have been clubbed into three clusters, namely cluster I, II and III, which will be covered by the bank in phases. Recently, the Reserve Bank of India asked commercial banks to provide basic banking services in villages with a population of 2,000 and above, by 2012. Banks have also been asked to plan to cover villages with a population of less than 2,000 in an integrated manner over the next three to five years. Similarly, TCS, Bartronics and Little World are also in fray to bag a five-year financial inclusion contract from Bank of Maharashtra. The value of this deal is around Rs 120 crore, according to industry experts.

Bank of Maharashtra opens FLCCs in Pune

As a gift to the nation, on the eve of New Year on 31st December, 2010, Bank of Maharashtra has opened three Financial Literacy and Credit Counselling Centres (FLCCs) in Pune, Nasik and Aurangabad through its Mahabank Agricultural Research & Rural Development Foundation (MARDEF), a Trust sponsored by the Bank. These three FLCCs have been opened following a decision taken by the Chairman & Managing Director of the Bank, Shri.A.S.Bhattacharya in the State Level Bankers Committee (SLBC) meeting held on 23rd December 2010 in Mumbai. Bank of Maharashtra is convener of SLBC in the State of Maharashtra and holds the responsibility of six lead districts. The FLCCs will make General Public, farmers, inhabitants of rural & semi urban areas and poor people financially literate and will guide them in credit-related matters. The FLCCs will provide free financial literacy, education and credit counselling.

RADICAL CHANGE - Panel proposes makeover for sugar economy

A high-level government panel has recommended a radical overhaul of the sugar market, including partial indexing of cane prices to the retail price of the sweetener and relaxing restrictions on setting up of sugar factories. If implemented, the measures will reduce government intervention, usher in competition and make at least a section of the farmers happy with the ruling United Progressive Alliance. The panel, headed by former Reserve Bank of India governor C. Rangarajan, was constituted in September and is expected to submit its report to the Prime Minister next month. It was set up to provide a road map for addressing structural problems underlying volatility in sugar prices, a politically sensitive issue. At present, the sugar market is controlled, with the government deciding several factors from the price of cane to the quantum of offtake of sugar from the mills. To be sure, cane prices vary across the country as individual states fix the procurement price. The committee is now proposing that to begin with, the government should move to a uniform pricing regime that will prevent state governments from determining the sugar cane price. This has often been a politically contentious issue with the strong farmer lobby in states such as Uttar Pradesh, which is due to go to polls in 2012.

Bankers, RBI to discuss liquidity on January 11

Bankers are meeting Subir Gokarn, Deputy Governor of Reserve Bank of India (RBI) on January 11 to discuss the liquidity situation and interest rates ahead of the monetary policy on January 25.

RBI makes Public the Engagement Schedule of its Top Executives

From January 3, 2011, the Reserve Bank of India will place on its website, the public engagement schedule of the Governor and the Deputy Governors. The engagement schedule will include public speeches and outreach activities undertaken by the executives. The initiative is one more step towards demystifying the central bank and the offices of the Governor and the Deputy Governors.

Reserve Bank of India appoints M Sarkar Deb as director of State Bank of Mysore

State Bank of Mysore has announced that Reserve Bank of India has appointed M Sarkar Deb, Chief General Manager, Reserve Bank of India, Department of External Investments and Operations, Central Office, Mumbai as a director on the board of State Bank of Mysore in place of Ratna K Makhija with effect from 03 January 2011 until further orders.

Moneylenders should be out of the system: Dr K.C. Charabarty, Deputy Governor, RBI

The Reserve Bank of India's broad goal for financial inclusion is to ensure that there are only two players in the money-lending spectrum – banks and non-banking financial companies (NBFCs) – in the long term, Dr K.C. Chakrabarty, Deputy Governor, RBI, told Business Line, indicating that moneylenders should be out of the system. “Our broad goal is that NBFCs must capture the moneylenders' customers, and banks should capture NBFCs' customers,” he said. Banks must look at financial inclusion as a viable business, and should cover the six lakh villages that are still un-banked. Though banks have not made a spectacular progress, “there is a definite progress; every day something is happening,” he pointed out. The RBI is working out the eco-system, and “there is still a long way to go,” he added. According to him, 72,000 villages will be covered in the first phase of the financial inclusion, and the rest in the next phase. This will be done through brick and mortar branches and business correspondents (BCs) with the help of technology. “Through BCs, banks should provide four services — savings bank, pure deposit product, immediate/emergency credit and entrepreneurship credit. Each household must be given a kisan credit card or a general credit card. For those who do not deserve credit, start a financial educational programme, involve the society and the State governments and make them creditworthy so that everybody links with the bank,” said Dr Chakrabarty. Explaining the role of microfinance institutions (MFIs), he said though they were intermediaries, their role was important as they bring in people going to the moneylenders to the banks, he said. “Our focus is to bring in real competition. MFIs should reduce their interest rate, and commercial banks and RRBs must enter this field. That is the purpose of financial inclusion. On the present crisis in the MFI sector, Dr Chakrabarty said that there are some MFIs with good practices. “We have to identify good MFIs and encourage them, and also those who are not good and penalise them.” The Malegam Committee is already examining the grey areas, and “we will come out with the recommendations,” he said.

HC orders notice to RBI, bank on donations

The Karnataka High Court on Monday ordered emergent notice to the Reserve Bank of India (RBI) and Karnataka Bank in connection with a petition challenging the collection of donations by Karnataka Banks Employees’ Association (KBEA) from bank customers. The petitioners, the share holders of Karnataka Bank had moved the High Court over the collection of donation illegally by KBEA. They claimed that about Rs six crore was illegally collected.  The petitioners also submitted that the KBEA also owns a building worth Rs two crore in Mangalore. Mentioning that the KBEA also possess movable assets worth lakhs of rupees, they said the collection of donation is a violation of RBI directive and Apex Court order dated August 6, 1985.  The petitioners further submitted that despite the complaint no action has been taken by RBI or Karnataka Bank and sought directions to freeze the funds and prosecute the officers involved. The Division Bench comprising Chief Justice J S Khehar and Justice A S Bopanna ordered emergent notice.

Credit, debit card services hit in UP

LUCKNOW: Credit and debit card users had a tough time here on Monday as swiping machines at a number of outlets refused transactions. Apparently, the reason for the day-long snag was the ongoing upgradation work for meeting the deadline to implement the Reserve Bank of India (RBI) guidelines on card transactions. According to sources, the services remained affected throughout the state. As per the guidelines, banks should have a system for providing an additional authentication and validation of transactions made online or through interactive voice response (IVR) service. The step was taken in 2009 to enhance security of the online card transaction. The deadline to implement such a system was January 1, 2011 which the banks failed to meet. ''January 31, 2011 has been fixed as the new deadline for this,'' said Amarendra Sahoo, Regional Director, RBI.

The other side of the coin

Given inflationary conditions in India, withdrawing smalldenomination coins will only aggravate inflation in the economy. Consider this. If each one of the 1 billion Indians carries out an average of five transactions involving small change, it is rounded off to the nearest rupee. Assuming a minimum change of 20 paise per person for each transaction, this would amount to a loss of `1per person on five transactions every day. Add to this a loss of `500 crore owing to the rounding-off of amounts issued by bank cheques. So `1,000 crore is in hidden circulation, which will push up inflation by at least 5 percentage points. This can be avoided by reintroducing small-denomination coins irrespective of the cost, which is far lower than the inflation effect.  - Abhay Ekbote, Hyderabad