RBI Board Member expires‎

Smt Shashi Rekha Rajagopalan RBI Board Member expires‎

Smt. Shashi Rekha Rajagopalan, a member of the Central Board of Directors of the Reserve Bank of India, and a member of the Board for Financial Services constituted by the Reserve Bank Board expired this morning in Hyderabad. She was 60 and leaves behind her mother and other family members.Condoling the sad demise of Smt. Rajagopalan, Dr. D Subbarao, Governor, Reserve Bank of India said, “Shashi's death is an irreplaceable loss for the entire RBI family. The RBI Board benefitted enormously from her deep knowledge of the frontline credit delivery systems of the country, her strong sense of conviction and above all her compassion for the less privileged. She is truly one of the millions of unsung heroes of our country.” Smt. Rajagopalan was a freelance consultant with special interests in organisational design, structuring and development of user-based and voluntary development organisations, planning/envisioning in user-based and voluntary development organisations, accounts and financial systems, user-owned and controlled financial and other business development and cooperative legislation. She was also a member of the Board of Directors of NABARD and Chairperson of the Audit Committee constituted by its Board.

Born on July 21, 1951 in Madurai, Tamil Nadu, Smt. Rajagopalan was a B.Sc. (Hons) in Mathematics from Calcutta University. She categorised her work in four broad phases. In the first phase, between 1970 and 1975 she served as a volunteer with Service Civil International, an international pacifist organisation working against conscription. She worked closely with disadvantaged communities, living in conditions and with income similar to them. During the second phase between 1975 and 1977, she served Hyderabad Archdiocese Social Service Society and worked on maternal and child health centres. In the third phase between 1978 and 1998, Smt. Rajagopalan worked with Cooperative Development Foundation and its associate organisations and worked on advocacy for change in cooperative law, management of a revolving fund for the promotion of cooperative (non-financial) businesses and design and promotion of new types of cooperatives. The fourth phase of her worklife as a freelance consultant started in January 1999 when she took various assignments focussing on studies, training and drafting manuscripts for publication on the subject of savings and credit cooperatives. Smt. Rajagopalan was a member on the Brahm Perkash Committee constituted by the Planning Commission in 1989, the first of a series of initiatives that led to reforms in cooperative law. She also worked closely with the Government in Andhra Pradesh on the AP Mutually Aided Cooperative Societies Act, 1995. The Governments of Bihar, Punjab, Karnataka, Jammu and Kashmir, and Orissa, too, had invited her to help reform cooperative law. The International Labour Organisation had invited her to Geneva, to participate as a member of an Expert Committee to review Recommendation 127 on cooperatives.

RBI

Shashi Rajagopalan passes away as India's co-operative movement loses one of its strongest advocates

DELHI: Shashi Rajagopalan, one of the pillars of India's cooperative movement, passed away on Friday morning. She was 60. For people outside the co-operative movement, Ms Rajagopalan will be more familiar as a board member at the Reserve Bank of India (RBI) and the National Bank for Agriculture and Rural Development (Nabard). At the RBI, she was a member of the Malegam Committee set up to study how microfinance institutions should be regulated. At Nabard, she was a member of the UC Sarangi committee set up to study farmer indebtedness.  Commenting on her death, D Subbarao, Governor, Reserve Bank of India, said, "Shashi's death is an irreplaceable loss for the entire RBI family. The RBI Board benefitted enormously from her deep knowledge of the frontline credit delivery systems of the country, her strong sense of conviction and above all her compassion for the less privileged. She is truly one of the millions of unsung heroes of our country."  However, it was in co-operatives that she did much of her life's work. In the mid-seventies, as a twenty-something, Rajagopalan joined the Cooperative Development Foundation (CDF), a society set up in 1975 to promote cooperatives in India. It was a time when this country was wondering -- much as it does today -- how to extend financial services to the poor and hitherto unbanked.  At CDF, Rajagopalan and her colleagues developed thrift and credit cooperatives. Offering both savings and credit, these were run by the villagers themselves. Says Trilochan Sastry, professor and dean (academic), IIM-Bangalore, "The idea of Thrift and Credit Cooperatives and the way she implemented and designed them when with CDF was and continues to be pioneering."  In an interview to the Economic Times last year, Rajagopalan had recalled the days when co-operatives were being set up. It was an idealistic time. "A Co-op Central bank was set up in Vishakapatnam district. Its leaders went village to village in an open cart saying, 'Look, we want to set up a Cooperative Central Bank, will you put in some money in as share capital?' And there are stories of women coming out with their jewels, ten rupees, twenty rupees. People would come forward and give that and that is how many of these banks were set up across the country."  Her stories -- and stories about her -- from this period are legion. Rajagopalan, a small, slender woman who was fond of driving, would routinely drive off in CDF's jeep to check on her co-operatives. Once at a co-operative, she would not interfere in the decisions the members made. That was non-negotiable. Every decision was best made by the locals. Years later, she would recall with great amusement, incidents when village women demolished her critiques of their decisions. Later, as political meddling hobbled co-operatives, forcing several to shut down, she became one of their most ardent defenders. She fought for the creation of new co-operative laws -- first in Andhra Pradesh and then in other states like Karnataka, Orissa, Bihar, Jharkhand, MP, Chattisgarh and Uttarakhand. Next, as times changed some more and co-operatives began to be seen in larger policy circles as an outmoded idea, she kept fighting -- first from CDF, and then as an independent consultant.  It was a matter of great pride for her that the co-operatives set up by CDF continued to function well even after she left CDF. And even after CDF itself withdrew.  Cooperatives are needed, she told ET in an interview last year. Partly because, she said, "All businesses (in the marketplace) are formed on the basis that the person who puts in the capital is a risk-taker and must be rewarded. Here, you say, there is another way of conducting business where those who have common needs come together and fulfill those needs through a joint enterprise... unless user-owned businesses are also given the same space in the marketplace, capital owned businesses will be irresponsible." That, she said, is the basic theory. "If the market is to behave, there must be enough user-owned institutions in the marketplace using different paradigms and therefore forcing the market to think differently."  And partly because, as institutions run by locals, they are more responsive to local needs. When the Sarangi Committee on Farmer Indebtedness was going around, she said, it met several co-operatives. "We saw their average age is about 10 years. On savings of Rs 25-40 a month, the men's thrift co-ops, had an average loan outstanding of Rs 5,000. The very fact is that the thrift and credit co-ops have shown that from day one they are profitable, that within 10-20 years, they are giving Rs 10,000-20,000 loans to tenant farmers and marginal farmers and oral lessees. Others won't even be willing to lend to them."  It was also a matter of some frustration that the rest of the country did not see what she did. That India was still dithering instead of getting into a mission mode on promoting co-ops in the right spirit.  This is only just starting to change. The RBI is now making noises about reviving co-operatives. Nabard has already begun.  It's a process that others will have to now keep an eagle eye on now.

ET

Extension to Subbarao?

Is Duvvuri Subbarao staying on as RBI Governor after September? Pranab Mukherjee is taking his time to tell the world, but meanwhile a little bird tells us that Subbarao has accepted an invite to speak as Governor at the India Economic Summit in Mumbai that the World Economic Forum and Confederation of Indian Industry organises. The speaking assignment date is in November.

FE 

RBI Deputy Governor says current inflation level unacceptable

NEW DELHI: The global economic situation was becoming more complex and volatile, K.C. Chakrabarty,  Deputy Governor of the Reserve Bank of India said on Friday, a day when the BSE Sensex touched its lowest level since June 2010, tailing a global equities market rout.  European shares plunged to 14-month lows on Friday after a steep sell-off in global markets on growing concerns the U.S. economy could be heading towards another recession and on jitters the euro zone debt crisis could spread to Italy and Spain as well. He also said India's current level of inflation was unacceptable. The central bank last week surprised markets with a steeper-than-expected interest rate increase of 50 basis points, the 11th rate hike since March 2010, to combat high inflation which quickened to 9.44 percent in June.  The Governor of the Reserve Bank of India, Duvvuri Subbarao on Thursday said he thinks there is no change in the acceptable level of inflation and there is "no new normal to inflation".

ET

Sensex nosedives, live with it says Reserve Bank

It was a black Friday as bears created mayhem on the Dalal Street in India after Dow fell over 500 points on Thursday on fear of double dip recession in the US. As fears of another recsssion in the US and Euro zone debt problem loomed large, investors across the globe went into selling mode. So bearish was the sentiemt at home that Sensex crashed by over 700 points to slip below 17,000 level later it recovered and closed at 17,306, down 387 points. Nifty plunged 120.55 points to close at 5,211.25, the level not seen since June 14, 2010, when it had closed at 5,197.70. This is despite the fact that we are currently the second fastest growing economy after China and we should not be worried much about what is happening in the US and Europe. But it is still a situation like US sneezing and India getting a cold. Experts say we are into this kind of a situation because of a varitey of factors like - inflation of over 9 per cent, RBI raising policy rates for 12th time in a short span of 18 months and consequent high interest rates leading to a moderation in growth. With this kind of steps we have rendered our economic edifice so weak that any kind of spark can crash our system. This is exactly what has happened on Friday. So, Government claiming economy is perfectly fine and can withstand recession and thing like that is not that true, they added. Poor investors lost around 1.33 lakh crore after Friday’s stock market crash but SEBI said it was watching and claimed that everything was perfect and right in our market, while adding insult to the injury of investors’ loss Reserve Bank said that India will have to learn to live with volatility in the global economy. “Markets go up and down because of various factors. We don’t go into this. Situation is becoming more complex and volatile by the day. So you have to live with that,” said RBI Deputy Governor KC Chakrabarty at a function in Greater Noida. But Finance Minister Pranab Mukherjee sought to calm market nerves saying, “This is nothing domestic. It is substantially due to external factors. Stock markets fell due to global factors like weak recovery in US and spread of debt burden in Eurozone. Current volatility is temporary.” All the 13 sectoral indices recorded major losses with stocks of IT, metals, realty, financials, oil and gas and capital goods leading the fall. Sensex blue chips RIL, Infosys, ICICI Bank, ITC and Sterlite lost 3-7 per cent.  While anlysing the market situation, Sanlam Investments & Advisors CMD DK Aggarwal, said: “The high liquidity in the capital and commodity markets because of fiscal and monetary stimulus seems to be moving in reverse direction. Also the earlier perceived economic growth is actually not happening and is resulting into lower commodity demand.  Things are getting worse from better now.”  “The investors’ confidence in the equity markets looks to be somewhat on the lower side in view of the global happenings. I see markets getting comfort in the zone of 17600-17800 in the longer term,” Aggarwal opined. Investors have been selling stocks since RBI hiked its key interest rates last week for the 11th time since March, 2010 to tame stubbornly high inflation. Worries over global economies going into the slow mode added to investor woes the world over.  Asian stocks tumbled after a meltdown on Wall Street, triggered by concerns that the US economy might slip into recession. Key indices in China, Hong Kong, Japan, Singapore, South Korea and Taiwan ended down by 2.15 per cent to 5.58 per cent. European markets too were down in afternoon deals. The CAC was down by 0.34 per cent, the DAX by 1.73 per cent and the FTSE by 2.18 per cent. In the US, Dow Jones and Nasdaq had slumped by 4.31 per cent and 5.08 per cent yesterday, biggest falls in over last two years. Back home, FIIs sold shares worth Rs 254.55 crore yesterday as per provisional data, after pulling out Rs 801.10 crore on August 3, affected market sentiment.

The Pioneer

India will have to learn to live with volatility: RBI

GREATER NOIDA (U.P): With the stock markets plunging by over 700 points on overseas cues, the Reserve Bank today said India will have to learn to live with volatility in the global economy. "Markets go up and down because of various factors. We don't go into this. Situation is becoming more complex and volatile by the day. So you have to live with that," RBI Deputy Governor K C Chakrabarty told reporters on the sidelines of a function organised by JRE Group of Institutes here. The stock benchmark BSE Sensex had crashed by over 700 points to slip below 17,000-point level for the first time since June 2010 though it recovered later. The sharp plunge on Indian bourses followed an overnight meltdown in the US market amid concerns that the American economy might slip into recession.Negative trends in Asian and European markets further added to the selling pressure on Indian bourses.  Asked if RBI is looking at any measures in wake of the crash, the Deputy Governor said the situation requires an analysis.  "We don't take day to day market reaction. May be after 45-days the RBI Governor will articulate about the policy. It is a matter of worry if something is happening. It requires detailed analysis," he said.  On reports of China diversifying its assets from the US treasury, Chakrabarty said "diversification is always there. People who have lend to the US cannot divert so easily. It is in the entire world interest that US economy should survive".

ET

Govt orders security audit for banks

MUMBAI: The state government will conduct a fresh security audit of all banks in the state, home minister R R Patil announced on Friday.  The move comes following a rise in cases of bank robberies. During a discussion in the legislative assembly, Patil said that it was observed that several banks were not observing security norms as prescribed by the Reserve Bank of India (RBI). A circular issued by the RBI requires banks to install closed circuit television (CCTV) cameras, set up special phone lines and alerts and deploy armed security guards, among other norms. "Many banks are not implementing these. We will conduct a survey to identify such banks. The list will be forwarded to the RBI, which will be asked to force these banks to observe security norms," Patil announced. Congress legislator Gopaldas Agarwal had moved a calling attention motion against an increase in bank robberies and thefts in his elected constituency-Gondia in Nagpur. Agarwal complained that there had been a spate of robberies in this region in the past two months. He added that robbers usually struck during weekends. The legislator complained of the police's failure to catch the culprits. Patil, however, contested the claim that the police were not serious about solving the cases. He said that efforts were on to nab those involved in the robberies. He added that the police have beefed up security and patrolling in the region. With legislators from other areas also participating in the discussion, incidents of bank robbery across the state were discussed. Patil admitted to an increase in incidents of inter-state robberies. "We have decided to beef up patrolling along entry points to keep a tab on the movement of criminals," he said.

TOI

RBI not to intervene in forex market

Hyderabad : The Reserve Bank of India has no plans to intervene to prevent the movement of the rupee at the moment. “The rupee is essentially a market determined currency. So there is no policy position in terms of intervening to prevent the movement of the rupee,” the RBI Deputy Governor, Dr Subir Gokarn, told media persons on the sidelines of a lecture here on Friday. His comment assumes significance against the backdrop of the weakening of the Indian rupee today following global fears of another recession. Intervention by the central bank could raise concerns over liquidity as the bank’s dollar purchases could suck out rupee liquidity.  Dr Gokarn said the immediate concern was one of liquidity. “We do not want the market to be disrupted by constraints of liquidity. We are watching the (liquidity) situation,” he said. He said the two factors that would “shape our stance” in the months ahead are domestic demand pressure and commodity prices. “We saw commodity prices soften a bit in May-June. But the trend did not persist and by the time we started out July process, they had stabilised. Now if this is the beginning of a softening trend, it clearly will have some impact on our thinking in terms of our stance,” he said.

HBL

Recession: Global fears, easing prices to impact RBI stance, says Deputy Governor

HYDERABAD: A softening trend in world commodity prices and emergence of global recession concerns could have an impact on the Reserve Bank of India's policy stance, a Deputy Governor said on Friday.  "Fears of global recession have just re-emerged. I suspect that when we next meet in September, it will be an issue," Subir Gokarn, who handles monetary policy at the central bank, told reporters on the sidelines of an event in the southern city of Hyderabad.  "So far there have been concerns about the extent of the recovery not being strong. Second recession was not in realm of probability till very recently," he said, referring to fears about the US economy.  His comments followed a massive sell-off across world stock markets on renewed concerns over the global economic health and heavy demand for safe-haven government securities.  The 30-share BSE index tumbled more than 3 per cent on Friday morning to a near 14-month low and the rupee slumped to a 5-week low at 44.8550 per dollar, joining a slide across Asian markets.  The benchmark overnight indexed five-year swap rate slid to a more than 8-month low and the 10-year benchmark federal bond yield fell to a near two-week low of 8.29 per cent.  The Reserve Bank of India (RBI), which raised rates by a steeper-than-expected 50 basis points last week, has been one of the world's most aggressive central banks to fight high inflation by tightening policy.  It has raised rates 11 times since mid-March 2010 and bond traders had been pricing in another increase in September.  Gokarn said the RBI takes into account demand pressures and commodity prices for formulating its policy stance. "We saw some softening of commodity prices in May-June but that trend did not persist and by the time we started July (policy) process they had stabilised," he said. "Now, if this is a beginning of softening trend, it will have some impact on our thinking in terms of our stance," he added. US crude fell below $83 on Friday, heading for its biggest weekly drop since early May. Brent has dropped nearly 11 per cent and US oil by about 12 per cent this week. Foreign exchange dealers were expecting the RBI to step in and arrest a sharp fall in the rupee, but Gokarn said that an intervention could tighten liquidity in a banking system which is already running a negative cash condition. "There is no policy position in terms of intervening to prevent movement of rupee. The concern will be with liquidity. We don't want market to be disrupted by constraints of liquidity," Gokarn said.  At a separate event, another deputy governor of the RBI, K.C. Chakrabarty, said while it is not easy to move away from investing in U.S. Treasury, the central bank is attempting to diversify its foreign exchange reserves to prevent any devaluation of its dollar assets.

ET

Inflation Can be Reduced 4-4.5%: Subbarao

Reserve Bank Governor D Subbarao today said inflation can be brought down to 4-4.5 per cent in the medium term while admitting that the economic expansion is being sacrificed to ensure sustainable growth in the long run. "I believe that there is no new normal to inflation. We can bring it down to 5 per cent, and then further down to 4-4.5 per cent in the medium term," Subbarao said. Taking on the criticism that the monetary authority is ignoring slowdown warnings across sectors in its fight against inflation, he said, "Yes. We are sacrificing growth... In the short-term. But it is only to ensure sustainable growth in the medium term." The Governor was speaking at an event to launch a book, 'Growth With Financial Stability: Central Banking in an Emerging Market' by former RBI Deputy Governor Rakesh Mohan. "Our experience shows that when inflation is low, may be you can raise it somewhat and get high growth, but up to a threshold level. Beyond that threshold level, if you try to raise growth, by raising inflation, you actually end up with higher inflation and lower growth," he noted. Pointing out limitations of the monetary measures to tame inflation, he said, "With one instrument,that is interest rate, you cannot at the same time restrain consumption and support investment. So, in the short-term you may have to sacrifice growth to generate an environment of rapid growth and steady inflation in the medium term." As inflation remained elevated, over the past 16 months RBI upped its key policy rates a record 11 times or 325 basis points.  Core inflation for June stood at 9.44 per cent while food inflation for the week ended July 23, inched up to 8.04 per cent, after dropping to a 20-month low in mid-July. He also set the desired threshold level for inflation at 5 per cent. "The question is what is the threshold of inflation level for a country like ours? Some RBI report shows that it is 5 per cent, may be that number has changed, but at 9.44 per cent inflation, possibly even higher, we are far above the threshold," said Subbarao. In the July 26 policy review, the central bank had said that monetary policy alone cannot be expected to batten down prices.

The Outlook

Prophesying the past

At a function in Mumbai to launch a book written by former Deputy Governor of the Reserve Bank of India Rakesh Mohan, a question was posed to former Governor YV Reddy. “Why is it that RBI banks on historical data to draw up monetary policy, why doesn’t it take into account trends that could emerge in the future?” someone from the audience wanted to know. “The future is uncertain and, therefore, it wouldn’t always be prudent to base policies on that,” Reddy explained, before adding, “But for Governors like Subbarao, the task is even more difficult because even the past is uncertain with the data constantly being revised!”

FE

RBI Committee calls for national switch to EMV

The Reserve Bank of India has published a host of recommendations for improving bank customer services, including the establishment of a shared Know-Your Customer database, the introduction of multi-factor authentication for Internet transactions and a nationwide switch to Chip and PIN-based EMV cards. The recommendations come from an RBI-convened 'Committee on Customer Services in Banks', chaired by the former chairman of the Securities and Exchange Board of India, Shri M. Damodaran. On Internet banking, it suggests that banks implement multi-factor authentication and establish sophisticated pattern recognition systems to detect suspect transactions. To clamp down on card fraud, it calls for a move to EMV-based chip cards and suggests the introduction of SMS fraud alerts to warn customers of unusual spending activity. It also says the onus on proving fraud in disputed ATM transactions should rest with the bank, and not the customer. To ease account opening procedures, the Committee says the Indian Banks' Association (IBA) should consider setting up a trusted third party KYC data bank which can be shared and hosted under the UID number of the customer. The RBI is calling for feedback on the report's recommendations by the end of the month. 

http://www.finextra.com/news/fullstory.aspx?newsitemid=22842

Damodaran Committee underlines need for zero-liability online banking

The RBI panel on banking customer services list various measures to enhance convenience for customers and safety of electronic transactions

The Damodaran Committee on banking customer services says there should be zero-liability on customers for any loss in electronic transactions. "Internet banking should be so designed as to encourage consumers to feel safe about electronic transactions," the committee, appointed by the Reserve Bank of India, said in its report that was published on Wednesday. The committee has said, "There should be a secure total protection policy/zero-liability against loss for any customer induced transaction, utilising technology through ATMs (automated teller machines)/PoS (point of sales)/online banking, etc. A customer should not be made to be out of funds when any loss is suffered on account of Net (Internet)/ATM banking transactions."  The panel, headed by M Damodaran, former chairman of the Securities and Exchange Board, has dwelt extensively with the use of technology in its report. It has suggested that banks introduce a mechanism where customers have the choice to restrict account-to-account transfers from IP (Internet protocol) addresses of their choice. "A customer should also have the option of requesting blocking the transaction if the IP address is from a different country. In fact, this should be the default option. Any change of option should be possible with ease through the call centre or online," the report said.  The committee has also recommended that banks introduce a fund transfer facility which can be activated by the call centre on a need basis and deactivated once the transfer is completed; facilitating a system based on the customer's behaviour/ purchase and pattern analysis to block any attempt from an unspecified address / suspicious outlier debit transaction and to inform the customer by SMS.  It described the need to also put in place systems like multi-factor authentication to minimise instances of fraud and to restrict the amounts that can be transferred online by prescribing a day cap, or a ceiling amount per transfer.  On the matter of cash not delivered at ATMs, withdrawals through cloned cards, credit card debits not authorised by customers and Internet banking fraud, the committee said that international best practises should be followed and that the customer should be afforded temporary credit immediately, after taking a suitable undertaking. "The banks should facilitate early reporting of the above (offences), by prescribing appropriate rules that will allow/provide a temporary credit which refunds the full amount, pending detailed investigation. The reporting timelines can also be linked with an amount which would act as the maximum customer liability," the panel has said.  The committee said that in the case of frauds not committed by the customer, the transactions cannot be valid as they are not authorised by the customer. "Instead of the bank putting the onus on the customer to prove that he has not done the transaction or caused it to happen, the onus should be on the bank to prove that the customer has done the transaction. Negligence, if any, on the part of the customer does not deprive him of customer/consumer rights," the committee said.  On mobile banking, the committee recommended that there should be tiered security for different parameters such as transaction value, destination of transaction (two-level authorisation for non-routine destinations), security based on hand-sets, and the frequency of payments. All the grievances of mobile banking should be addressed by the banks only, without referring the customer to the service providers. The agreements of the banks with the telecom service providers should incorporate suitable provisions to address mobile banking grievances.  The report also suggested installing a cash bin in ATMs so that the money withdrawn falls into this container from where it is picked up by the customer and all this is recorded by a small camera, which would be helpful in the event of a complaint over ATM withdrawal.  The committee has also suggested providing a reply-back SMS facility to intimate that the card has not been used. It says that a customer should be allowed to block the ATM card if he finds it is misused, by simply sending an SMS with the word 'BLOCK' to prevent further withdrawal, as considerable time is otherwise lost in locating the numbers of accounts, phone numbers, etc, giving the fraudsters more time to get away with the fraud.

Moneylife

Damodaran Committee: Need to differentiate between settlements in credit reports

According to the RBI-appointed panel, there are a number of complaints about wrong reporting by banks to credit bureaus, which has serious implications on the credibility of a borrower

The Damodaran Committee appointed by the Reserve Bank of India (RBI) has said that there is a need to differentiate various settlements reported in the credit information reports (CIRs) of credit bureaus. The committee has pointed out, customers have complained that banks tend to view negatively a credit report indicating a 'settled' remark, when the intention of such a remark is merely to state that an account has been settled between a customer and a bank.  The committee, which was headed by M Damodaran, former chairman of the Securities and Exchange Board of India, has recommended that rules of credit bureaus should clearly differentiate the settlements done at a huge loss to the bank, from the routine settlements, where customers dispute fees and commissions.  "Evolving clarity in data reporting is an essential part of maturity in credit bureaus around the world and we believe that the recommendations are a positive step in this direction. Taken in conjunction with specific stipulations around the responses by banks and credit information companies (CICs) to consumer complaints and queries, in the CIC Regulation Act of 2005, the recommendations will go a long way in building a stronger and consumer-friendly credit reporting system in the country," said Mohan Jayaraman, chief operating officer, Experian Credit Information Co of India.  According to the Damodaran Committee report, there are a number of complaints by customers against wrong reporting by banks to the CICs, which have serious implications on the credit rating of the borrower. Customers want banks to ensure that any representation from customers in this matter is processed expeditiously. Customers have said that since inaccurate credit information reports vitiate loan sanctions, it would be appropriate for that aspect to be checked first and any adverse remark to be informed to the customer for necessary clarification upfront itself, so that errors can be corrected, the committee said.  Arun Thukral, managing director, Credit Information Bureau (India) (CIBIL), said, "Our system and date formats have been revised recently to be able to differentiate the amounts written off due to settlements. Banks now have the provision to report 'principal write-off' and 'total write-off' separately. Further, there is an additional field to report the 'settlement amount' as well. In addition to this the 'written off' and 'settled' fields also encapsulate various options or sub-fields for reporting, like restructured loans written-off, settled and part written-off settled. This provides an in-depth and clear picture of the status of the account on the CIR." At present, CICs report data as submitted to them by member banks and financial institutions in their CIR, the interpretation of which depends on the policy and practices of the bank drawing such reports. "The recommendations (of the Damodaran Committee) require banks to differentiate in their reporting to CICs between large settlements made at a huge loss to the banks and routine settlements made, which can then be indicated as such by the CICs in their CIR, resulting in fewer discretionary interpretations by individual banks," said Mr Jayaraman. Currently, CIBIL provides an online dispute resolution service. Any customer who has issues with his or her CIR can fill the online dispute form on CIBIL's website. After analysing the form, CIBIL sends it to the relevant lender. After receiving confirmation from the lender, CIBIL updates its records and informs the customer as well, Mr Thukral explained.

Moneylife

Damodaran Committee: Experts believe that an internal ombudsman for every bank will not be helpful

They believe that most of the problems customers suffer are due to the unhelpful attitude of banking staff and that putting them in charge will not help

The recommendation by the Damodaran Committee on banking customer services to set up an internal ombudsman system for every bank could complicate the grievances redressal system and increase the time to resolve the issues, according to customers and experts.  Most of the problems that banking customers suffer is largely due to the uncooperative attitude of bank employees. Therefore, experts say, placing the overall authority for the resolution of customer grievances with the banks would hardly be beneficial. If banks were keen to provide good services there would have been no need for an ombudsman system in the first place, they say. In its report, which was published by the Reserve Bank of India on Wednesday, the committee headed by M Damodaran, former chairman of the Securities and Exchange Board of India, said, "There is a need for the banks in developing their internal grievance redressal mechanism, to ensure only the minimum number of cases get escalated to the Banking Ombudsman (BO) and the scheme is strictly utilised only as an appellate mechanism." The committee has recommended that every bank should appoint a chief customer service officer (CCSO), not less than the rank of a retired general manager of a scheduled commercial bank and preferably from outside the bank (under the advice of the RBI), who should also have necessary exposure in the working of the operational side of banking. The audit committee of the bank board would oversee the CCSO and the appointed officer should directly report to the bank's chairman, managing director or chief executive (CEO).  This, in other words, means that a person who wants to file a complaint about poor banking services would have to knock on the doors of the bank first, then appeal to the CCSO, and finally to the BO. At present, the customer can directly approach the BO, if he does not receive any satisfactory answer from the bank, or if the lender rejects his complaint.  The committee has recommended that "a person aggrieved with a banking service as hitherto will first complain to the bank, and if within a month does not receive a reply or is unsatisfied with the reply, will appeal to the CCSO of the bank. In view of CBS environment and latest technology available in communication, it is expected that the bank's CCSO would resolve the grievance within 30 days of the receipt of complaint, including the period required for conciliation meeting. On the failure to get a reply within a month from the CCSO, or if unsatisfied with the reply of the CCSO, the complainant can appeal to the BO of the relevant jurisdiction. The decision of the BO shall be final and no further appeal will be allowed."  Industry experts say such a move will only make the redressal mechanism time-consuming for customers. Also, there is not much guarantee that the bank will comply with the recommended rules, as most banks are known for the unhelpful behaviour of the staff towards customers. If these recommendations are implemented, the role of the BO would be of an Appellate Authority. Those customers who are dissatisfied with the decision of the BO can approach formal institutions like consumer courts, civil courts, while the banks could seek the advice of the customer service department  before approaching the courts. The committee has also suggested amendments to the BO scheme, such as the complaint or appeal made to the BO should be within two years from the date of transaction, as against the current one year.  On the compensation issue, the committee suggested that it should be restricted to the actual loss only, as the BO not being a judicial forum, may not be able to award compensation for any mental harassment which cannot be easily computed. The Damodaran Committee has also recommended that the ombudsman scheme be extended to co-operative banks as well, as they are not covered yet. It also pointed out to the need to educate and make people aware of the ombudsman system through the help of the media.

Moneylife

Andheri bank in trouble

MUMBAI: Over 3,000 depositors gathered outside the Veershaiva Credit Co-operative Bank at Nagardas Road at Andheri east early on Thursday after the Reserve Bank of India (RBI) took over the bank's administration.  Within half an hour of the bank opening on Thursday morning, and after few account holders were denied payments, the crowd started abusing the bank officials. By 11 am, more than 3,000 depositors , among them housewives, senior citizens, labourers and domestic servants, were seen waiting in queue. An RBI notice pasted in the bank stated that the bank could not carry out any transactions. "Today morning, when I went to withdraw Rs 25,000 for my son's college admission, they gave me only Rs 1,000 saying the bank is under the RBI administrator and its accounts have been frozen. Now I don't know what I will do. Where will I arrange money," asked Ravina Chavan.  Sources said that the angry mob then abused the bank officials and tried to force their way into the bank. "Fearing being attacked by the crowd, some of the bank officials sneaked out through the rear door," a source said. By 12 pm, the police arrived. A depositor, Ranjana Baria said, "I had saved Rs 2.5 lakh in the last five years by washing vessels in other people's houses. My life is ruined. I have small children to take care of. Where will I go now?"  Sources said that the bank collapsed due to various reasons , including overtrading, non-performing assets and sanctioning loans to various companies without any securities. Two groups have been fighting for control over the bank, a source said.  It appears that the RBI will appoint an administrator and carry out an audit. "There are around two dozen companies which were given huge loans without any security," said a source.

TOI

SBI went past RBI limit in sanctioning corporate loans

Exceeding RBI's limit on exposure to single borrower, State Bank of India sanctioned loans to corporates such as RIL , IOC , Tatas and HDFC in the past three financial years, the Lok Sabha was informed today. Bank of India also went past the Reserve Bank limit in the last two fiscals and sanctioned Rs 2,819 crore to HDFC, over the prescribed limit of Rs 2,730 crore in 2009-10. Besides, it gave Rs 405 crore above the limit to SIDBI.  In a written reply, Minister of State of Finance Namo Narain Meena said the country's largest lender SBI inched past the limit to Reliance Industries and Indian Oil Corporation in all the years starting 2008-09; to BHEL in 2009-10 and 2010-11 and to the Tata Group in 2009-10. However, Meena said, "As part of financial sector liberalisation, all the credit related matters of banks have been deregulated by the RBI and are governed by the bank's own lending policies."  Banks have to consider different loan proposals as per their commercial judgement and merits of each case keeping in view the loan policies approved by the Board of Directors, he added. Meena said SBI has informed that in exceptional circumstances RBI permitted banks to consider enhancement of the exposure to a borrower/group up to a further five per cent of capital funds with the approval of the Board.

Moneycontrol

Damodaran Committee: More talk, less substance

Instead of intelligently reviewing the existing mechanism of customer services, the Damodaran Committee only wants to add to it

The release of the Damodaran Committee report has to be among the strangest in recent times. After 13 months of deliberation, the report was released without M Damodaran (former Chairman of the Securities & Exchange Board of India, SEBI) being anywhere in the picture. As Moneylife has reported, he did not even provide the transmittal letter for the report. This dissonance, which is probably the result of a disinterested chairman, is reflected in the report itself, which is major letdown. The report makes all the right noises and is correctly and overtly pro-investor. But what was expected from the committee was "a review of the existing system", including the many pointless circulars issued by the Reserve Bank of India (RBI) seeking many layers of committees and meetings, starting at the branch level and extending to the board. Instead of reviewing the existing mechanism, the Damodaran Committee only wants to add to it. For instance, it wants each bank to have its own Ombudsman, over and above the Banking Ombudsman system, which works reasonably well.  Interestingly, after the Talwar Committee of 1975, the Goiporia Committee of 1990 and the Tarapore Committee of 2004, the Damodaran Committee on customer services was supposed to take us to the next level of review and recommendations to improve service delivery to bank customers. But that hasn't really happened, mainly because there is no indication of a thorough review of the existing customer-protection mechanism. The committee claims to have met a broad swathe of stakeholders from bankers to customers, NGOs, micro-financers and pensioners. Yet, it has few concrete solutions to offer. In fact, large chunks of the report that cover issues such as pass books, KYC (Know Your Customer) norms, inoperative accounts and issues with TDS (Tax Deduction at Source) certificates (especially banks' refusal to rectify faulty TDS certificates) and remittances could easily have been set right by the RBI's own customer services department without waiting for a customer services committee to make recommendations. Some recommendations are downright amusing. For instance, the committee says, "Branches should be provided with dedicated phones/computers with Internet connection so that customers can avail themselves of the facilities such as Call Centre, Internet Banking and Phone Banking in the branch itself." Surely, customers can avail of all banking services at a branch and Internet and phone banking is provided, precisely to enable to them to access their account from remote locations?  One of the biggest omissions is the absence of a detailed discussion on the rampant mis-selling of financial products-including insurance, mutual funds and derivatives or structured products by target-driven Relationship Managers and Wealth Managers. For instance, Osian Art Fund, the collective investment scheme, which SEBI failed to regulate, was hard-sold by wealth managers of a foreign bank. Importantly, the high attrition rates among this category of officers ensure that they never carry the can when their false promises and fake guarantees come to light.  Let's look at a few areas where we expected concrete proposals. Consider the simple example of bank lockers. The committee merely notes the views of banks and customers and calls for the RBI to revisit guidelines "to ensure that the activity itself is not dis-incentivised and the customers continue to have availability of lockers at an affordable charge." In fact, Moneylife alone had done better. In February this year, we polled 458 persons and flagged many more issues. The overwhelming feedback was that people wanted more lockers and they weren't available. Surely, the Damodaran Committee could have explored the issue of locker rentals in more detail to come up with a specific workable recommendation? The same goes for recommendations on bank service charges. While reporting customers' desires with regard to service quality, it ought to have been weighed against cost and feasibility. After all, as a customer, I too desire the service standards of a foreign bank's priority customer while paying what nationalised banks charge! We would have liked the report to consider banks' perspectives on these, instead of making unilateral recommendations that will be debated and negotiated by the IBA (Indian Banks' Association) until RBI closes the debate by issuing an order. This applies to many of its recommendations regarding electronic payments as well as account number portability. Another half-way recommendation is that insurance cover for deposits should be expanded to Rs5 lakh in order to "encourage individuals to keep all their deposits in a bank". It also wants to explore the possibility of full insurance cover for bank deposits. This is a seemingly good suggestion. But consider this. A deposit insurance cover is unnecessary for nationalised banks; even large private banks are most unlikely to be allowed to fail. The global financial crisis of 2008 has plenty of evidence of governments bailing out the banking system. In India, RBI didn't allow Global Trust Bank (GTB) to fail because it exposed its own failed supervision. The increased cover makes sense only for politically-manipulated cooperative banks or tiny private banks. Couldn't the committee have spoken to the Deposit Insurance & Credit Guarantee Corporation (DICGI), which is an RBI affiliate and headed by an RBI Deputy Governor, to come up with a more reasoned recommendation based on the actual payouts over the last decade? In fact, if most of the payouts under insurance guarantee are made on account of cooperative banks (as we suspect they are), then we must strongly oppose the move to enhance insurance cover and press for better supervision of these banks instead. In fact, Moneylife Foundation's financial literacy initiatives make a big effort to educate savers about the dangers of faulty supervision of (largely) politically-controlled cooperative banks. Given that the report is largely a bunch of general statements, a great opportunity to create the right approach for customer services has been lost.

Moneylife

Kudumbasree to carry out survey of bank accounts in 3 villages

Kochi : The District Committee for Meaningful Financial Inclusion has entrusted Kudumbasree to carry out a survey in three villages of Ernakulam district about details of bank accounts among households.  The Lead District Manager, Mr A.R.Jayaprakash, said that the volunteers of Kudumbasree will be visiting 7-lakh households in the villages of Vengoor West, Eramalloor and Kadamakkudy to find out the holding of bank accounts and whether banking schemes are being  properly used. The survey will enquire about an operating bank account for every family where regular credits and withdrawals are taking place; availing credit facilities from the banks wherever required; getting micro insurance facility; availing other kinds of banking services such as remittance facilities etc. The survey will begin in Vengoor on Monday and he requested the villagers to cooperate with the survey by sharing the required information.

100% financial inclusion

According to Mr Jayaprakash, Ernakulam was one among the first districts that declared 100 per cent financial inclusion. But in the revised conditions, though the district has a very strong network of bank branches, three of the aforesaid villages were identified as having no branches of any commercial banks. Under the process of financial inclusion, the responsibilities to take care of the villages were entrusted to Federal Bank, State Bank of Travancore and Union Bank of India respectively, he said. The RBI Governor, Dr D.Subbarao, during his recent interaction with villagers in Vengoor, had observed that the level of financial inclusion in the district is satisfactory and advised that it should go for “meaningful financial inclusion” now. As a first step towards this, a baseline survey will be conducted by Kudumbasree, Mr Jayaprakash added.

HBL

Sa-Dhan to conduct workshop on Compliance with RBI guidelines, Code of Conduct and Credit Bureau

Sa-Dhan has announced that it will be conducting a workshop on Code of Conduct, Social Performance Indicators, Credit Information Bureau and compliance with recent RBI Guidelines on 25th August 2011 in Chennai.

Workshops on the following three important topics will be held :

Workshop 1: Workshop on Compliance with recent RBI guidelines
Workshop 2: Code of Conduct, Social Performance indicators and reporting
Workshop 3: Credit Information Bureaus: The need and challenges for the Microfinance sector

Time: 09:30 AM

Venue: Comfort Inn Marina Towers, 2A Pooniamman Koil St, Egmore, Chennai – 600 008.

Date : 25th August 2011

For registration and more information on the workshop visit the Sa-Dhan Website.