Inflation is big concern for RBI: RBI Deputy Governor K C Chakrabarty

NEW DELHI: With food inflation entering the double digit level at 10.05 per cent after a gap of five months, the Reserve Bank today said its main priority is to combat rising prices.  "I am again telling monetary authority anywhere in the world, inflation is the bigger concern," RBI Deputy Governor K C Chakrabarty said on the sidelines of Skoch summit here.  "Growth is always government's concern because government collects revenue. But then we (RBI) have to look at everything. We have to look at inflation. We have to balance the growth, we have to do everything," he said.  Food inflation rose to 10.05 per cent for the week ended August 20.  "Food inflation has gone up...This is really disturbing. We shall have to ensure and remove the supply constraints on food items," Finance Minister Pranab Mukherjee said after the weekly inflation data was released.  Attributing the jump in food inflation to seasonal factors, experts said it could again force the Reserve Bank to hike interest rates during its mid-quarter monetary policy review scheduled on September 16.  In its bid to anchor inflationary expectations, the RBI has raised policy rates 11 times since March 2010. In its July policy review, the central bank increased rates by a hefty 50 basis points. The short-term lending (repo) rate of RBI now stands at 8 per cent and the short-term borrowing (reverse repo) rate at 7 per cent.  Subsequently, the interest rate under the Marginal Standing Facility, an additional borrowing window, has gone up to 9 per cent from the earlier level of 8.5 per cent.

ET

Service to the nation

To educate people about financial products and services, debt management and help indebted people to come out of their problems, United Bank of India in collaboration with Ramakrishna Mission Samaj Sevak Sikshan Mandir (RKMSSSM), Belur Math, Howrah set up a Financial Literacy and Credit Counselling Centre (FLCC) on the premises of RKMSSSM, Belur Math, Howrah recently. The FLCC will provide these services free of cost.

Swami Divyanandaji Maharaj, secretary, Ramakrishna Mission, Saradapith, Belur Math inaugurated the programme in the presence of Bhaskar Sen, CMD, United Bank Of India; PK Roy, General Manager, United Bank of India; Anindita Bhattacherjee, Deputy General Manager, RBI and other senior dignitaries from Nabard and government.

Speaking on the occasion, Bhaskar Sen, informed that United Bank of India with 81 per cent of its branches located in eastern and northeastern states has been playing a significant role in financial inclusion of eastern and northeastern parts of the country having sizeable number of excluded people from the banking fold.  Sen expressed is gratitude to the Ramakrishna Mission for providing all logistic supports to set up the FLCC. He further informed that the bank has set up eight FLCCs of which four are in West Bengal. Besides, UBI has set up 10 rural self-employment training institutions to impart free training to the unemployed rural youth, women and the weaker sections of the society to enable them to be self-employed.  Swami Divyanandaji Maharaj said poverty and unemployment are the main reasons for rise of insurgency in different parts of the country. “Though our economy has been growing fast, the benefits of the growth are not equitably distributed among all sections of the society,” he observed. Swamiji opined that creating employment opportunities and linking the excluded people with the formal banking channel are the needs of the hour and that FLCC should play an important role in this direction. He further informed that Ramakrishna Mission Samaj Sevak Sikhan Mandir has been running a RUDSETI type institute jointly with United Bank of India and NABARD for creating employment opportunities by providing skill and entrepreneurship development training to the rural unemployed youth. He appreciated United Bank of India for extending loan to the trainees on completion of training to set up their own venture. PK Roy, in his deliberation, informed that the bank will set up more Rural Self-Employment Training Institutions and FLCCs in eastern and northeastern parts of the country.

The Pioneer

Conned by get-crores SMS - Student responds to phishing text, loses Rs 19000

Patna : He dreamt of becoming a crorepati overnight, but 20-year-old Akshay Kumar got gypped of a few thousands as he fell prey to a con text message doing the rounds. Akshay, a student preparing for his engineering examinations, lost at least Rs 19,000, courtesy a phishing text message — which seek out a person’s sensitive information — that he took seriously.  The message, claiming to be from a multinational cola company, was sent last Friday to the cellphone of Akshay’s brother Mukesh Kumar.  “The phone call came from an Indian number, but the person had a British accent. He said he would land at the Indira Gandhi International Airport in New Delhi that very day and would then take a flight to Patna to deliver the cheque to me. The same afternoon I again got a call from him informing me that he had reached Delhi. The man said he was in the airport customs and that I had to pay Rs 19,000 to ‘release’ the cheque,” Akshay said. Akshay said he then smelt a rat, but his reasoning got clouded by the crores he had counted as his winnings.  “I initially refused to pay up. At this, he made me talk to a lady who claimed to be from the customs wing. She told me it was a regulation and that the man was waiting with the cheque. I had calculated the prize amount in Indian currency and it came to around Rs 6 crore. I agreed to pay up and the man gave me an SBI, New Delhi, branch account number belonging to one A. Sharma. Without thinking, I deposited the money in the account. After doing so, I received a mail in the form of a scanned copy from the ‘Indian Customs Office’,” Akshay said.  After a while, Piterson called up again.  “He said he was now going to the Reserve Bank of India (RBI) for money conversion and that I now needed to pay up Rs 49,000. This got me thinking hard and I refused. To this, he handed the phone to the same lady, who now had turned into an RBI official. I could easily recognise her voice. She told me to deposit the money immediately and mailed me a guarantee letter of the RBI which stated that they were responsible and assured me the prize money would reach me,” Akshay said. By then, Akshay knew that he had been duped. “I disconnected the call but the man kept calling me saying that if I didn’t pay up, he would be stuck in the airport. I didn’t listen to him and came to the police today. I have also met RBI officials and they told me that I had been duped,” he said.  

The Telegraph

Your post office wants to become a bank. Lousy idea

Suddenly, India might have a surfeit of banks. The Reserve Bank of India recently announced draft guidelines for the entry of new private sector players even though there is no shortage of banks in the country: we have seven banks in the State Bank group, 20 nationalised banks, 21 private banks and 19 foreign banks with nearly 80,000 bank branches between them spread all over. And that’s not all. Over and above this, we have innumerable regional rural banks, and private and state cooperative banks, not to speak of non-bank financial companies and financial institutions. Now, many non-banks want to become banks......

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Now withdraw cash at an ATM without using your card

Mobile phones have already become a multi-purpose banking gateway. You can buy movie tickets, transfer funds to others’ bank account and pay utility bills, all from your cellphone. Mobile banking has just taken another step to make your life easier and wallet lighter.

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FINO: Doorstep banking for the poor

Financial Inclusion Network and Operations (FINO), based in the financial capital of India, is an integrated technology platform and delivery channel, enabling sourcing and servicing micro customers on a large scale. It operates through a network of 20,000 field force — also called Bandhu (friend in Hindi). This field force serves as a doorstep bank and electronic teller machines in areas where banks are yet to reach or have any ATM. FINO works with 24 banks, several of the state government bodies and insurance firms like LIC, ICICI Prudential and ICICI Lombard. Each of the bandhus is equipped with handheld biometric devices that have GPRS connectivity. Every time a customer is enrolled, she is provided with a smart card. For any future banking activity like depositing, checking balance or withdrawals, they are done through the system. The data is automatically updated to the systems. In case a connection does not work, the handheld can store transactions, which are then updated to the system by visiting the nearest branch of that bank. So far FINO has enrolled 36 million customers and plans to double this base in the next few years. It has presence in 26 states and 386 districts. “Technology is playing and will continue to play a vital role in taking banking products and services to the customers at the base of the pyramid. We have developed the entire technology in-house which is having a meaningful impact on the lives of people. Out of India’s estimated 60 million below-poverty-line people, our technology solutions already reach out to over 30 million. We are proud to be a part of the Technology Pioneers. It is a true recognition of the efforts of our team and I would like to express gratitude to our technology team for this award-winning effort,” says Manish Khera, chief executive officer, FINO. FINO also partners with government agencies. For instance, it is part of payment disbursement for National Rural Employment Guarantee Act. It is also working with the Uttar Pradesh government for payments made to tendu patta collectors. The company is also foraying into mobile payment segment. The services called m-Rupya will soon be tested on a pilot basis with 20,000 customers. This service will be launched by the end of the next quarter. The company has developed the software platform for its mobile payment service through its in-house research and development team. The company plans to offer this service to its 36 million customers in India. At a time when the micro-finance industry has been shrouded in controversy, FINO has been successful in showing an alternative mode of achieving financial inclusion. FINO was formed by ICICI Bank. The idea was to create a technology firm that could provide solution catering to the financial inclusion space. However, Manish Khera, the CEO, and his team realised there was opportunity to become business correspondents. This also received a boost when the Reserve Bank of India allowed business correspondents to work as agents of banks. Since its inception in 2006, FINO has managed to attract big investors. Some of these include, Intel Capital, International Finance Corporation, some of the Indian public sector banks, LIC and more recently Blackstone Private Equity.

BS

SC issues notice to Citibank on petition filed by I-T dept

The Supreme Court has issued notice to US-based Citibank on a petition filed by the income tax department alleging that the bank was liable to pay more than R59.19 crore as tax during 1991-92 for violating the RBI guidelines on Portfolio Management Scheme (PMS). As per the RBI guidelines, certain maximum amount of interest was only permitted on the deposits. Any excess payment has not legally been permitted and, therefore, all the income of the company from portfolio management has to be treated as the income of the company against which payment of interest to the various so-called PAH was to be allowed subject to the maximum of the right permitted by RBI,” the petition stated. According to the revenue department, the bank had collected substantial amounts from corporate under PMS in violation of the RBI guidelines. 

FE

Time to come clean

The charge of government interference in the functioning of the Securities and Exchange Board of India made by its former member K M Abraham is serious and he deserves a fairer hearing from the powers that be in New Delhi than has been the case so far. To paint him as a disgruntled and corrupt element, because he was denied an extension of term and had invested in an apartment in Mumbai built by someone who had business dealings with the National Stock Exchange, as the Union finance ministry has done, is both unfair and unconvincing. It is shocking that when Mr Abraham approached the then Union Cabinet secretary and the principal secretary to the prime minister for help, the correct thing to do by a member of the Indian Administrative Service, he was asked to beseech the very person against whom he was complaining, namely Omita Paul, advisor to Union Finance Minister Pranab Mukherjee. Whatever the facts of the case, and both the charges and counter-charges require further investigation and clarification on the part of the government, the unseemly spat between the capital market regulator and the Union finance ministry was uncalled for and was a highly retrograde development. At a time when there is so much public concern about good governance and transparency in government functioning, and worries are being expressed about the independence of regulators and autonomous organisations, this kind of interference and attack is regrettable.

If the charges levelled against Mr Abraham by the finance ministry through a press release earlier this week are true, then the ministry itself owes an explanation as to what action it took before Mr Abraham went public with his criticism. The entire episode raises two important questions about public policy and the functioning of the finance ministry. First, there is the larger issue of whether appointments of regulators and heads of autonomous institutions should be made on the basis of a “three plus two” principle, under which an initial appointment for three years is followed by an extension of two years. Former finance minister Jaswant Singh did the right thing when he discontinued this principle in the case of the Reserve Bank of India Governor and gave Y V Reddy a full five-year term. If governments are uncomfortable granting a five-year term to one person, then the appointment should be made for a fixed period of only three years. To use the “three plus two” principle as a way of keeping regulators on a short leash and rewarding them for “good behaviour” with an additional two years is not a healthy practice. Second, l’affaire Abraham once again draws attention to the role and functions of an “advisor” in the finance ministry. Mr Mukherjee would do well to clarify the role of an advisor and her administrative jurisdiction in dealing with officials of the ministry, of agencies under the ministry and regulatory institutions. In the absence of such a clarification, vested interests could make a mountain out of a molehill. The finance ministry is a key instrument of central government policy and functioning. If the ministry adopts good governance practices, it would inspire the rest of the government to emulate it.

BS

RBI declares M/s Forex Achievements a fraud outfit

MUMBAI: The Reserve Bank of India on Thursday issued a clarification in which it stated that there was no company going by the name of M/s Forex Achievements registered under the Companies Act, 1956.  In a press release, the RBI clarified and cautioned the general public that M/s Forex Achievements and its website was fabricated entity, and not to deposit money with such unincorporated bodies. It said that anyone depositing money with such unincorporated bodies as M/s Forex Achievements, would be doing so at their own risk.

ET

Inclusion targets will delay breakeven for new banks

The draft guidelines issued by the Reserve Bank of India (RBI) clarify some issues such as eligible promoters, corporate structure, minimum capital requirement, corporate governance and business model. While the paper lays stress on promoter shareholding and milestones to achieve a diversified ownership in fixed timeframe, it is also very focused on the purpose of the new banks, which is financial inclusion (FI) and the related business model. The new banks will have to focus on the unbanked geographies. The regulator has been urging banks to open rural branches and has incentivised the existing banks to open 25% of branches in the rural areas. The regulator has also mentioned strict action against new banks not following the stated business model. The impact of financial inclusion on the business model is immense as the model needs to answer questions like market size, cost of funds, viability, use of technology and efficiency in operating structure for the new banks to succeed.  Banks have been working towards FI for the last five years or so. As on March 2011, a sample of 19 large and small sized domestic banks had an average of Rs600 crore credit outstanding for FI accounts. More importantly, of the total FI accounts opened, only 40% were found to be active for the last one year.  Also, given the challenge that domestic banks would have had a head-start on FI initiatives, reaching the next delta of FI customer would become that much more difficult for the new banks. Assuming that the margin for FI business is currently zero and equal split in FI and other business and a conservative 200 basis points margin for other business, the overall margin for a new bank will be approximately 100/120 basis points.  Including operating costs and technology investments will take the new banks longer to break even. Another aspect is the source and cost of funds, the new banks will face multiple challenges in sourcing low-cost deposits and will definitely have a higher cost of funds than the existing public sector and private banks. Could this lead to a situation where new banks have to issue securities to fund their business is question that every aspirant looks to need into.  A lean, low-cost and efficient operating structure is almost a prerequisite and technology will have to be optimised to achieve success. Reengineering the business model might even lead to something very innovative emerging. Non-banking finance companies (NBFCs) operating in Tier 3 to 6 centres will find it much easier to face these challenges than a completely newly set up bank.  However, they, too, would require RBI’s prior permission to convert branches to bank branches and comply with branch setup norms, as NBFC branches are very different from bank branches.  Banking is a critical and important economic sector and rightly so the regulator is taking utmost care to make sure that the new banks are used for no other purpose than banking with a FI focus.  Diversified ownership and exercise of regulatory control are essential conditions which will need to be fulfilled and seem to be the major concern of the regulator.  The safeguards in terms of promoter shareholding, divestment milestones and corporate structure and restriction on NOHC from setting up a financial services entity for at least three years from the date of licensing send out a very strong message that only very serious players with well-thought out strategy will be allowed. It seems the new bank licences will be a staggered process and it may be 2-3 years before we see a new bank becoming operational and perhaps rightly so considering that banking is a responsibility as well as an opportunity.

DNA

Govt in a bind on inflation

As India's food inflation rate breached double-digit levels again, touching 10.05% for the week-ended August 20, the government and the Reserve Bank of India (RBI) are facing a major challenge: policy options appear to be fast running out on a win-win solution in the trade-off between growth and prices. The central bank has maintained that sustainable solutions to lower inflation and higher trend growth warrant adequate supply-side response from the government.  The government can consider duty cuts in essential commodities to shore up supplies, but that will entail forgoing tax revenues, which in turn,will likely upset the fiscal deficit targets. Finance minister Pranab Mukherjee on Thursday termed the inflation rate as "disturbing," obliquely hinting that the government may not be averse to taking measures to boost supplies. The RBI, which will present its mid-quarter monetary policy review in September, has raised interest rates by 11 times in the past 16 months. "The latest GDP details are supportive of another rate hike by the RBI in September," said Rajeev Malik, senior economist at brokerage CLSA, Singapore.

HT

RBI may hike rates as food inflation surges to 10.05%

"With headline inflation remaining well above 9 per cent, we expect RBI to raise key policy rates by 25 basis points at its next mid-quarterly review," Crisil chief economist D K Joshi said.

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PSU NBFCs’ banking plans may hit RBI wall

The Reserve Bank of India is unlikely to issue banking licences to public sector non-banking finance companies (NBFCs). This could put brakes on the banking ambitions of NBFCs such as Power Finance Corporation and Rural Electrification Corporation, which have shown interest in acquisitions in the banking space or securing a new licence..........

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Gold loan NBFCs cheer panel report

At a time when most non-banking finance companies (NBFCs) are complaining about higher tier-I capital reserve requirement as recommended by the RBI-appointed working group, one section of NBFCs is pleased about it. Gold loan NBFCs, one of the fastest growing financial services businesses in the country, are pleased about the recommendations, whi-ch put gold loan NBFCs on par with banks. The top three gold loans companies, Muthoot Finance, Manappuram Finance and Muthoot Fincorp, together have an outstanding gold loan portfolio of over Rs 30,000 crore. Though the RBI working group recommends a higher tier-I capital of 12 per cent for NBFCs, industry experts pointed out that in Section 6.1.11 of the report, the panel states that in view of the growing importance of NBFCs in financing-sensitive sectors, “whenever RBI raises/lowers risk weights and provisioning norms for banks to address systemic risk, such measures should also be applicable to similar assets of NBFCs.” “Our risk weightage would become lower if the recommendations are implemented and we are treated on par with banks having a gold loan portfolio,” I Unnikrishnan, managing director of Manappuram Finance, said. For gold loans with a ticket size of less than Rs 1,00,000, banks generally have to apply a risk weight of 50 per cent of the loan size, while NBFCs have to apply a uniform risk weight of 100 per cent for the entire portfolio, he said. For gold loan NBFCs, at least 60 per cent of loans are of the ticket size of less than Rs 1,00,000. So, on an Rs 10,000 crore loan book, about Rs 6,000 crore loans would be of ticket size less than Rs 1,00,000. If NBFCs get to apply 50 per cent risk weightage, like in case of banks, then on the Rs 6,000 crore loans, only Rs 3,000 crore would be considered for risk weightage. That combined with the Rs 4,000 crore loans with a ticket size of over Rs 1,00,000 would make only Rs 7,000 crore worth loans being considered for risk weightage, against the entire Rs 10,000 crore earlier. “So, even if the tier-I capital is increased to 12 per cent, we only have to maintain Rs 840 crore reserves against Rs 1,000 crore earlier, assuming the loan book size is Rs 10,000 crore,” Unnikrishnan reasoned. The move to put capital adequacy ratio (CAR) requirements for NBFCs at par with banks will reduce pressure on bringing more capital, said Thomas Muthoot, executive director of Muthoot Fincorp. “This reduced pressure to enhance capital will ensure a level playing ground for NBFCs, which were so far at a disadvantageous position compared with banks,” Muthoot says

Financial Chronicle

President to give awards to banks, MSMEs for excellence

New Delhi : The country''s largest lender SBI and few other banks will be given awards by President Pratibha Devisingh Patil for their performance in extending loans to micro and small enterprises (MSEs). As per the Reserve Bank of India guidelines, banks have to achieve 20 per cent year-on-year growth in providing credit to MSEs. Under the annual National Awards Scheme, the government recognises the efforts and contributions of the micro, small and medium enterprises (MSMEs) to the economy as well as of the banks who lend to the sector. "The SBI''s total advances increased by 82.7 per cent to Rs 77,061 crore, which is the highest among major public sector banks, in 2010-11 from Rs 42,714 crore in 2009-10," the MSME ministry said in a statement.  Others awardees include Indian Overseas Bank and State Bank of Mysore. Corporation Bank lending to micro enterprises increased by 315.2 per cent to Rs 5,011.58 crore in 2010-11, from Rs 1,207.01 crore in the previous fiscal. The banks have been asked to enhance their credit flow to the sector, which contributes about 8 per cent to the country''s GDP. Besides banks, awards would be given to various (MSMEs) for their performance in categories like R&D, entrepreneurship and quality of products.

MSN News