83 % complaints against banks rejected due to procedural errors

PATNA: Because of the procedural mistakes, 83 per cent of the complaints made against bank officials to the Office of Banking Ombudsman, Bihar and Jharkhand, fail to withstand the scrutiny of law, according to the annual report of the Office of the Banking Ombudsman released on Monday. According to banking ombudsman, Patna, A F Naqvi, during 2010-11, as many as 2,201 complaints were settled, disposed and closed of which 1,838 complaints were rejected which comes to about 83.51 percent of the total complaints filed. On the other hand, as many as 363 cases were disposed of by mutual settlement/award, he said, adding percent-wise it comes to just 16.49 per cent. Segment-wise analysis of the annual report indicate that as many as 789 complaints against the banks came from urban areas, 588 from semi-urban areas, 504 from rural areas and 402 from Metropolitan areas. Maximum number of complaints were received against the State Bank of India (SBI), Naqvi said. According to the report, 1,004 complaints were received against the SBI followed by 866 against other nationalized banks. Private Banks fared better in this regard as only 205 complaints were filed against them, Naqvi added. Only 68 complaints were received against the Regional Rural Banks (RRBs), according to the report. According to the report, pensioners seem to be the worst victims of the banks as majority of the complaints was related to pension. According to the report, 423 complaints related to pension. According to the report, 1,529 complaints were received from Bihar, 582 from Jharkhand and 172 from other places. The report was released by Naqvi at a press conference. RBI DGM Swaroop Singh was also present on the occasion.
TOI

Why the 'historic' loan waiver is actually hurting small farmers

The government’s inability to promote more warehouses (under the Warehousing Development Regulations Act), and the state governments’ unwillingness to modify laws that could make such warehouses catalysts for rural prosperity and agricultural growth, is obviously going to hurt small farmers terribly in the coming years. It is possible that this is what K C Chakrabarty, Deputy Governor of the RBI, was hinting at in his address at the National Seminar on Productivity in Indian Agriculture, College of Agricultural Banking (CAB) earlier this month.

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RBI Board Reconstituted

The Government of India has reconstituted the Central Board of Directors of the Reserve Bank of India. In a notification issued on Friday, the Government of India has appointed seven new Directors on the Central Board of the Reserve Bank for a period of four years from the date indicated. The new Directors are:

1. Shri Dipankar Gupta, Sociologist, former Professor, Jawaharlal Nehru University, New Delhi (w.e.f. September 20, 2011).
2. Shri Najeeb Jung, Vice Chancellor, Jamia Millia Islamia, New Delhi (w.e.f. September 22, 2011).
3. Shri G. M. Rao, Chairman, GMR Group, Bengaluru (w.e.f. September 23, 2011).
4. Smt. Ela Bhatt, founder and General Secretary, of SEWA, the Self-Employed Women's Association, Ahmedabad (w.e.f. September 23, 2011).
5. Smt. Indira Rajaraman, Professor Emeritus, National Institute of Public Finance & Policy, New Delhi (w.e.f. September 23, 2011).
6. Shri Anil Kakodkar, Former Chairman, Atomic Energy Commission (Also Chairman, Northern Area Local Board) (w.e.f. September 23, 2011).
7. Shri Kiran Karnik, Former Chairman, NASSCOM, (Also, Chairman, Western Area Local Board) (w.e.f. September 23, 2011).

Apart from these new members, four existing members continue to be on the Reserve Bank Board for the present.

They are:

1. Shri K. M. Birla, Chairman, Aditya Birla Group of Companies
2. Shri Azim Premji, Chairman, WIPRO
3. Shri H. P. Ranina, Supreme Court Advocate, and
4. Shri Lakshmi Chand, IAS (Retd).

Prof. M.M. Sharma, Shri Sanjay Labroo, Shri Suresh Kumar Neotia, Dr. A. Vaidyanathan, Prof. U. R. Rao and Shri Y.H. Malegam retired as Directors of the Central Board of the Bank.

Moneycontrol

RBI to Issue New Rs 10 Notes with Rupee symbol

New Delhi, Sept, 25: The Reserve Bank of India, central bank of the country, has announced that it will issue Rs 10/- denomination banknotes with its symbol very soon. According to RBI, it will shortly issue Rs 10/- denomination banknotes without inset letter, in the Mahatma Gandhi Series with the signature of Dr. D. Subbarao, Governor, Reserve Bank of India. On the back of the Banknote, the year of printing (2011) would be printed with incorporation of rupee symbol. The design of these notes to be issued now is similar in all respects to the Banknotes issued in Mahatma Gandhi Series 2005 earlier except for the symbol. The Indian rupee symbol was officially adopted in 2010by the government, which is derived from the Devanagari consonant (Ra) with an added horizontal bar.  The symbol can also be derived from the Latin consonant "R" by removing the vertical line, and adding two horizontal bars (similar to the symbols for the Japanese Yen and the Euro are using).  The first series of coins with the rupee symbol was launched on 8 July 2011. Now, RBI is moving further by issuing Rs 10/- notes with this symbol. Slowly, all the denomination notes have Rupees symbol instead of Rs. RBI also mentioned that all the banknotes in the denomination of Rs 10/- issued by the Reserve Bank of India in the past will continue to be legal tender.

http://goindocal.com/india-%BB-general--rbi-to-issue-new-rs-10-notes-with-rupee-symbol-go-2666.htm

RBI eases overseas borrowing norms for infra companies

The Reserve Bank relaxed norms for infrastructure companies with direct foreign equity up to 25 % to raise fund overseas without government permission. On a review, it has been decided, to further liberalise the External Commercial Borrowings (ECBs) policy in respect of the infrastructure sector, RBI said in a statement. Direct foreign equity holder (holding minimum 25 % of the paid- up capital) and indirect foreign equity holder holding at least 51 % of the paid- up capital, will be permitted to provide credit enhancement for the domestic debt raised by Indian companies engaged exclusively in the development of infrastructure through issue of capital market instruments, it said. It includes Infrastructure Finance Companies ( IFCs) and no prior approval will be required from the Reserve Bank for providing such credit enhancements, it said. The company fulfilling foreign equity criteria does not require permission for raising ECB up to USD 5 million. Now onwards the term debt in the debt- equity ratio will be replaced with ECB liability and the ratio will be known as ECB liability- equity ratio to make the term signify true position as other borrowings or debt are not considered in working out this ratio, it said. Service sector units, in addition to those in hotels, hospitals and software, could also be considered as eligible borrowers if the loan is obtained from foreign equity holders, it said.

FPJ

The Long and Short of Microfinance

India’s Inflation ‘Fairly Stubborn,’ Central Bank Governor Subbarao Says

India’s inflation rate has been“fairly stubborn” and price pressures beyond a threshold are unacceptable, central bank Governor Duvvuri Subbarao said. “Inflation has been fairly stubborn,” Subbarao said in New York today. “Above a threshold, you can’t accept high inflation to have higher growth,” he said, adding that the price-rise limit is as much as 6 percent for the nation.  The Reserve Bank of India on Sept. 16 extended its record-interest rate increases to tame the fastest inflation among the so-called BRICS economies. India’s benchmark wholesale-price inflation accelerated to a 13-month high of 9.78 percent in August from a year earlier. Higher food and fuel costs and weakness in the rupee may keep boosting price pressures.  Subbarao today reiterated the upward pressure on prices. A rate of “4 to 6 percent is the short term comfort range” for inflation, he said. “We expect inflation to slow by March 2012, but more slowly than initially expected.” He has raised borrowing costs by a total of 350 basis points starting mid-March 2010, the fastest round of increases since the Reserve Bank of India was established in 1935, Bloomberg data show. “We are having structural supply shocks,”Subbarao said today in remarks at New York University’s Stern School of Business.  India needs to control rising prices to protect purchasing power and sustain growth, the Reserve Bank has said.   “Inflation remains high, generalized and much above the comfort zone of the Reserve Bank,” the RBI had said in its September 16 statement. “A premature change in the policy stance could harden inflationary expectations, thereby diluting the impact of past policy actions. It is therefore imperative to persist with the current anti-inflationary stance.”  The task of mitigating inflation also may be complicated by the weakening in the rupee. India’s rupee fell today for the fifth time in six days as concern that Europe’s debt crisis will escalate deterred risk-taking, spurring sales of emerging-market assets by overseas investors.  The currency extended this quarter’s loss to 9.7 percent, the most since 1992, and was at 49.46 per dollar at the 5 p.m. close in Mumbai. The rupee pared declines today on speculation the central bank will seek to slow the currency’s slide.  “Intervention in forex markets brings unexpected consequences,” Subbarao said today. Policy makers will monitor exchange-rate movements and will consider intervening in the currency market “as and when”required, Finance Minister Pranab Mukherjee said in Washington on Sept. 23. Central bank Deputy Governor Subir Gokarn said yesterday that while the rupee’s rapid drop is a concern, it has to be seen as part of “a global phenomenon,” and “there is nothing specific in the country that is driving this process.”  

http://www.bloomberg.com/news/2011-09-26/inflation-in-india-has-been-fairly-stubborn-rbi-governor-subbarao-says.html

RBI's Subbarao: Central Bank Have No `Template Solutions'

NEW YORK (Dow Jones)--India is not decoupled from whatever happens in Europe, said the country's top central banker on Monday. "Whatever happens in Europe will affect us" said Duvvuri Subbarao, governor of the Reserve Bank of India, speaking in New York. "If the crisis deepens, it will influence trade demand and commodity prices." Central banks have to be cautious in balancing between policies that affect growth and inflation he said. India's inflation is high--around 9%--but he estimates it could go down to a more comfortable 4 to 6% range by March 2012. Central banks don't have "template solutions," he said, adding that they have to be careful about communicating policies because they cannot be too transparent. If they provide caveats, markets invariably ignore these conditionalities. The financial crisis of 2008 has changed the thinking of some in the emerging markets. Before it, deploying capital controls was not considered positive but after the crisis, it is considered more viable. That said, a flood of capital would create instability so India prefers long-term investments. "No country gets enough capital at the time it wants," Subbarao said. There is a need for apolitical central banks in democracies because the fear is that monetary policy could become hostage to fiscal compulsion, he said. In India, monetary policy is carrying the burden of fiscal expansion, he added. The improvement of productivity in banking in India is a challenge, he said. The demand for credit is going up at a time when the cost of credit is going up so banks have to reduce their costs. Asked about capital adequacy at banks, he said Indian banks at aggregate levels have reached the norms required by the Basel III rules. The challenge though is that 70% of Indian banks are owned by the government so it is the government that would have to raise the capital.  Comparing the current crisis with the 2008 crisis, he said this time, central banks seem to have exhausted their firepower. The markets also feel there is less coordination this time around.

WSJ

Power to fight global slowdown lacking - Duvvuri Subbarao

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Policymakers around the world lack the monetary and fiscal fire power they possessed in 2008 to fight a renewed global slowdown, Reserve Bank of India governor Duvvuri Subbarao said on Monday. Central banks and governments today "have no fire power left: governments cannot raise fiscal stimulus and central banks have exhausted most conventional and unconventional" policies," Subbarao said during a question-and-answer session following a speech at New York University's Stern School of Business. Complicating matters further, Subbarao said, is the different stages of the business cycle seen in major world economies. Emerging markets such as India are still growing at a healthy clip while Europe, Japan and the United States are growing more slowly.

Subbarao’s view of the crisis

The crisis we are seeing in the markets today is a crisis of confidence. In a short but very sharp speech at the International Monetary Fund meeting on 23 September, Reserve Bank of India (RBI) governor D. Subbarao said precisely that. His insights were: one, everyone knows what needs to be done, the problem is political gridlock. Two, there’s no such thing as decoupling. Three, emerging market economies have been affected by the crisis in the euro zone, the slowdown in the US through risk aversion, slowing exports and lack of confidence, which could hurt investment and growth, which in turn could lead to bad loans at banks. He then, rather ominously, compared the current crisis with the Lehman one and said the situation was better then, because there was global co-ordination between policymakers, aggressive fiscal policy was an option, emerging market and developed economies were at the same stage of the business cycle, and while the public sector rescued the private in 2008 in the advanced economies, the public sector is now the focus of the crisis. But will the crisis force a change of monetary stance by RBI? The speech shows Subbarao is not underplaying the magnitude of the crisis and recognizes that it will affect growth in India. At the same time, he also thinks accommodative monetary policy in the developed world was keeping commodity prices unduly high. He says, “The negative outlook on growth should have driven down prices, but that has not been evident so far to any significant extent.” In other words, the slowdown in global growth may not lead to lower commodity prices and lower inflation. His remark that emerging countries are at a different stage of the business cycle hints at a restrictive monetary stance by emerging market central banks.

There’s also another issue the governor didn’t touch upon in his speech—the impact of rupee depreciation. This factor may offset the impact of lower global commodity prices. Further, it’s very likely the government’s disinvestment programme will be hit and that, combined with the slowdown, could affect the fiscal deficit. That would be another reason for RBI to not change its stance. Nevertheless, recent events have fanned hopes that RBI may decide to pause at its next meeting. Indranil Pan, chief economist at Kotak Mahindra Bank Ltd, says that in the past, the central bank has always paused when the inflation trajectory started coming down. Pan also expects that European policymakers will tie up funding for Greece in October, which could result in a rebound in the risk appetite. While that may be fleeting, it’s significant that while Subbarao mentions that policymakers do not have the luxury of using expansionary fiscal policy today, he remains silent about the monetary policy, implying that if things get sticky, there’s plenty of room to cut interest rates fast. That will provide support to the downside in the markets. But the trouble today, as it was after the Lehman crisis, is the threat of forced liquidation, as funds raise cash to meet redemption by selling assets. That has driven down prices of all assets in which investors were long. Look, for example, at gold. Look also how overweight markets such as Indonesia, Russia and China have been affected much more than the underweight Indian market this month.

Mint

Why the RBI will not mess with the rupee

....We tend to do wrong by focusing too much on the bilateral INR/USD rate. In the recent days of distress, as fear has resurged, people have taken money out of everything under the sun and put it into US Treasury bills. This has given a strong dollar at the expense of essentially every other currency.....

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Plan panel approves Post Bank concept with ATM facility

Soon, post offices in remote areas of the country will serve as banks and offer automated teller machine (ATM) facility. The Planning Commission of India has agreed to allow the Department of Postal Services to install ATMs in post offices. The postal department has a network of  1.44 lakh post offices across India with deposits worth Rs 5,60,000 crore. Minister of State for Telecom Sachin Pilot said the department proposed the Post Bank scheme in an attempt to use the huge network of post offices to foster inclusive growth and ensure people in far-flung areas get benefit from the government’s welfare schemes. Post offices have 25 crore accounts apart from five crore MGNREGA workers. The postal department has identified over 830 post offices where the ATMs will be installed. The department’s ATMs will be linked with other public sector banks too. “Their (post office) saving account will be just like any other bank account,” a senior government official said. The department provides various financial services, including a post office savings bank, postal life insurance, pension payments and money transfer services.The plan panel recently agreed to the department’s proposal and decided to sanction funds in the 12th five-year plan for installing ATMs in each post office. The panel had sanctioned Rs five crore in the 11th five year plan to conduct a study on the setting up Post Bank of India on lines of the ones in New Zealand and Japan. The decision is aimed at making the post offices as an important catalyst in improving the delivery of welfare schemes, for which the Central government allocated over Rs 1,80,000 crore in the budget of 2011-12. Already, a large number of people enrolled under Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGA) have their accounts in post offices where their wages get credited. But the limitation of being able to access their accounts during working hours of the post offices was a cause of inconvenience. 

HT

RBI: Foreign PE funds can guarantee infra debt

To enhance the creditworthiness of infrastructure projects, the Reserve Bank of India (RBI) has allowed foreign equity investors to issue guarantees for debt raised by companies involved in these. Such credit enhancement by investors reduces credit and default risks and helps secure funds at lower rates. Besides guarantees, credit enhancement can also be extended through additional collateral and insurance. Credit enhancement by non-resident entities would be permitted under the automatic route and these decisions would not require the prior approval of the central bank, RBI said on Monday. Credit enhancement is a method through which a company can improve its debt or credit worthiness. It provides reassurance that the borrower would honour the obligation. Those holding a direct stake of at least 25 per cent (for indirect foreign equity holders, the figure stands at a minimum of 51 per cent of the paid-up capital) can provide credit enhancement to Indian companies. The companies must exclusively be devoted to the development of infrastructure. Till date, only multilateral financial institutions and government-owned development financial institutions could offer credit enhancement for domestic debt raised through debentures and bonds. RBI has also rationalised the policy for extra commercial borrowings (ECBs). Instead of conventional debt-equity ratio, RBI would now look at the ECB liability, calculate ratio of ECB obligation to equity and excluding other borrowings and debt. The ECB liability would factor in the proposed borrowing, as well the outstanding ECB, from the same foreign equity holder lending the money. The ECB proposals from foreign equity holders and group companies would be taken up under the approval route. Service sector units, in addition to those in hotels, hospitals and software, could also be considered eligible borrowers if the loan is obtained from foreign equity holders. This would facilitate borrowing by training institutions, research and development companies and miscellaneous service companies.

BS

RBI must intervene

...RBI’s concern as a regulator is to intervene in any market when there is too much volatility. Bond price volatility is addressed through some large banks while stock prices are addressed by the insurance companies. For the forex market, when sentiment is quite adverse, direct intervention could be justified. The depreciation that we are witnessing has some important implications that can justify intervention if RBI is convinced that it is not being driven by only fundamentals....

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CBI got Rs 31,000 cr 2G loss from Subbarao; RBI chief may be key witness

...The Central Bureau of Investigation (CBI), which has put the loss from selling 2G spectrum at 2001 prices in 2008 at close to Rs 31,000 crore, did not pull this number out of thin air. It got this number from former Finance Secretary and present Reserve Bank Governor Duvvuri Subbarao. In his six-page submission, which is listed as a ‘relied-upon document’ with the serial number 106, Subbarao has applied a methodology and ...

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Wrong path

The article titled “Wrong approach to inflation” (Business Line, September 24) rightly explained how the RBI is pursuing a wrong path in the matter of containing inflation. At present we find declining growth alongside mounting inflation. The reason for this is the RBI's attempt to contain demand and consumption by adopting measures that curb production in different sectors, which again brings about shortages and higher prices.  Producers and manufacturers have been compelled to defer their expansion plans in view high cost of production due to rate hikes by the RBI. While it is in order to contain demand and consumption it will be suicidal to curb production as we have shortages of various products and manufactured articles. The latest rate hike by 25 basis points was uncalled for. Instead, the RBI should have taken a pause to assess the efficacy of the eleven earlier rate hikes. A positive move would have been to encourage production and capacity expansion, thereby making for greater employment generation, so necessary in an economy like India.

K.K.Ammannaya, Udupi (HBL)

RBI may allow banks to buy back gold from domestic market

Reserve Bank of India (RBI) may allow banks to buy back gold from domestic market. Preliminary discussions have ensued between the banks, finance ministry and the central bank to thrash out the modalities for making this process work. Senior bankers told Financial Chronicle that if RBI gives a nod to banks to buy back gold, it will help the country save foreign exchange as India imports about 800 tonnes of gold through the state-owned trading company Minerals and Metals Trading Corporation (MMTC) and other government-licenced age ncies such as banks and jewellers. It may also help in bringing unaccounted gold into the formal channels. At present, banks are allowed to sell gold, but barred from buying back gold from the local market. “RBI is open to allowing banks to buy back gold but final guidelines on this are still being worked out. We have had a few rounds of meetings with the RBI,” said a senior banker who was one of the participants in the meeting. The key challenge for the banks would be to establish a uniform purity of the gold when they buy it back and to provide storage facilities for the gold bought back. Besides they have to commit capital by purchasing it back. At present, banks import gold on a commission basis for jewellers. Banks are now only allowed to sell gold to retail and bulk customers. The only exception is the State Bank of India that can buy back gold but the minimum quantity is 500 gram.

China Business News

Riding out the storm

Following the 11.4 per cent decline in the dollar value of the rupee over barely a quarter, the sharp slump of last week has further complicated an already tricky situation for the Reserve Bank of India (RBI). Not surprisingly, RBI Deputy Governor Subir Gokarn has expressed “concern” about the sharp depreciation within “such a short period of time”. It is hard to predict what the ramifications will be, given that the depreciation has varying implications for different economic actors. While RBI has been slow to intervene in the foreign exchange market, and it had reasons for being slow, it may have no option but to act with greater alacrity in days to come. The depreciation in the dollar value of the rupee is evidently owing to foreign capital seeking a safe haven in the US dollar, in response to the volatility currently roiling global financial markets, especially the euro area. The immediate concern is whether delayed intervention by RBI would lead to a surge in “imported” inflation. If so, how would RBI respond? Raising interest rates has not proved effective so far and another round of interest rate hike will dampen business sentiment further. Since RBI has the required foreign exchange reserves, should it intervene more forcefully to pull the rupee up a bit? The jury is out on that question. On a positive note, it is likely that capital flows would reverse direction once volatility settles resulting in investors returning to emerging markets such as India, to leverage interest rate differentials between developed and emerging markets, in a replay of what happened two years ago. The rupee’s depreciation is, ceteris paribus, likely to benefit domestic exports, currently enjoying an unprecedented boom. It could potentially provide a shot in the arm to the software sector, which is currently languishing owing to deflated demand in the West. However, this optimism needs to be tempered given that economic conditions in India’s leading export markets – the United States, the euro zone and Japan – are unlikely to improve anytime soon! On the other hand, importers across the board will be adversely impacted. It is unfortunate that developments on the foreign exchange front have not enabled India to fully leverage the fall in commodity prices, particularly oil. Thus, any gains from a fall in commodity prices will be largely neutralised because India will have to pay more for the dollar at least in the short run. The same applies to imports of copper, nickel and other non-ferrous metals that India has been importing in significant amounts. In the case of coal, India is faced with the double whammy of escalating prices and a falling rupee. All things considered, India’s trade deficit is likely to widen, at least in the short term. India may be able to absorb these outflows into its current account deficit, which has been declining in recent quarters as a result of higher export earnings and remittances. However, alarm bells would start ringing as the current account-to-GDP ratio moves towards four per cent. It is difficult to hedge one’s bets on the duration of the current situation. If the previous episode of global volatility in 2008-09 is any indicator, the reversal of capital flows could take place just as suddenly. RBI would then be faced with the unedifying prospect of handling unbridled capital flows, which comes with its own set of problems. The dominant policy challenge for India remains finding the most efficient way to regain a high growth trajectory at the earliest. While it is impossible to remain impervious to external influences, the key to sustained growth lies in unleashing domestic productive capacities.

BS

Plea for panel to study impact of forex rates volatility

The Kerala Chamber of Commerce and Industry has urged the RBI to constitute a high level committee to study the impact of the frequent volatile fluctuation in the foreign exchange rates and to come out with suitable relief packages to entrepreneurs who has suffered considerable losses.

HBL

Aadhaar alone isn’t enough for a full-fledged bank account

... Aadhaar is one of the additional means we are giving people to open bank accounts; however, in itself not sufficient for large bank accounts,” said a finance ministry official who did not want to be identified.....

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