Financial inclusion – A reality check by the RBI top brass

Pune, March 11: Financial inclusion is something that the banking regulator wants. Top bankers at commercial banks take the cue and set targets for their underlings. Yet, ground level implementation of this agenda remains an unfinished challenge. Enthusiasm for such projects which involve a large part of the local branch manager's time is a problem. Even where customers are a trifle better organised under the aegis of a self-help group, there is not much difference.  Branch managers tend to adopt delaying tactics while opening ‘no frills' savings accounts, knowing that they don't contribute much to their deposits/advances or bottomline immediately. Even when branch managers are well-meaning and sincere, there are other issues. For instance, the processing of papers involving ‘know your customer' norms involves delay. And often that happens for as simple a reason as photos of customers not getting affixed. Why? Because villages have no photographers in the immediate vicinity! Sometimes, when banks do have the requisite infrastructure, there is a servicing issue. It takes a couple of weeks to get spare parts/ replacements of essential items in rural branches. Some times the servicing vendor doesn't have the wherewithal to discover immediately where the problem is – whether it is with the machines or it is with satellite connectivity. Sometimes there are technical issues such as the fingerprint scanner not being able to decipher the prints of older persons. These and a number of similar problems came up at a frontline managers' conference on financial inclusion at Pune last Friday. It was a reality check for the RBI Governor, Dr D.Subbarao, and his top team who listened to customers, self-help groups and branch managers voice their problems. The Governor wondered whether banks considered ‘no frills' accounts a nuisance and closely questioned individual branch managers about this. Urging them to speak frankly, he added, “We didn't invite chairmen and managing directors of your banks, so that you can speak frankly.” At the end of it, one asked Dr K.C.Chakraborty, Deputy Governor, RBI, whether he was surprised by anything he had heard. Conceding that a lot of it was familiar ground, he said banks need to find innovative solutions. If they don't, they will have to fight with other banks that do. “I have been saying we need 200 more banks,” he said.

HBL

MFIs revival: Responsible lending is key

Regulations need to be changed to facilitate provision of financial services to the poor and the overall architecture of financial services should be rebuilt, experts

.... The Malegam committee report largely says RBI does not have the machinery to control this growth and therefore this growth should be curbed. RBI is neither going to facilitate the growth and nor it is willing to find a solution to the problem of consumer protection......

Read..............

MFI body seeks clarity over regulations in Budget

........ According to MFIN, the problem is while the Andhra Pradesh legislation directs MFIs to get registration from state authorities, RBI regulations provide for registration from the central bank. The AP MFI Act says that no MFIs will grant any loans or recover any loans without obtaining registration under this Act from the registering authority, whereas the RBI Regulation says MFI is an NBFC and under the RBI Act 1934 an NBFC can do its business without any further permissions or registrations, according to MFIN........

Read....................

XLRI Jamshedpur to create a common research & action network for micro finance practitioners

..... The Reserve Bank of India has made efforts to increase the penetration of formal financial services in unbanked areas, while pushing its policy of ensuring adequate and viable credit flow to priority sectors of the economy………

Read................ 

Dark age of Indian telephony

Governor Subbarao talked of the rapid changes in the Indian economy at a National Institute of Bank Management (NIBM) convocation. He talked of the telecom revolution, and contrasted the situation that prevails today with what happened when he was a young sub-collector at Srikakulam District, Andhra Pradesh. Referring to that early period in a humorous manner as the ‘dark ages', he talked of how he would try to contact his boss, the collector, who lived just 35 miles or so away. But it would seem very far away because the only means of contact was through a ‘trunk call' — which would never come through. And it had to be done through a telephone instrument which didn't have direct dialling facilities. One had to go through an operator at the exchange, and depend on both the operator's whims and luck to get a call through. With a twinkle, the governor said, “There was no way you could even call a girl friend with that kind of system,” evoking roars from the assembled audience.

HBL

Risky vacant seats

RBI Governor, Dr Subbarao, describes himself as a shy, withdrawn and self-contained person. He prefers to keep to himself — especially on flights, and therefore requests a vacant seat next to him on such flights. But he has found that has its own downsides. Any one who thinks he can get the governor's ear for a few minutes ends up plonking on the vacant seat, and so the poor governor is forced to make conversation. Now, he prefers to have the next seat occupied and limit the damage. That's risk management for you.

HBL

Grit meets grace

..............way from the line of duty, of files and GOs (Government Order) Anna bided time to finally marry her colleague and sweetheart, R. N. Malhotra who became the RBI governor in 1985. “It was worth waiting for,” she says with fondness about a man in whom she found “exceptional humane qualities”. In distant Washington, where he was serving, they had a simple wedding but not during ‘rahukalam' as her orthodox mother would have been very upset! ......................

Read.............

Inter- play of monetary & fiscal policies – S.S.Tarapore

In the early 1970s, the then Governor of the Reserve Bank of India ( RBI), the late L K Jha, pithily summed up the inter- play between monetary and fiscal policies. He said that the government jams the accelerator and the RBI's job is to slam the brakes as hard as it can..................

Read....................

Deficient service: ICICI, Corp Bank fined

 A Delhi consumer forum has imposed a fine of Rs 15,000 on Corporation Bank for misplacing an account payee cheque worth Rs 45,220 of ICICI Bank, which was found to have cleared it as bearer cheque to a wrong person despite several changes made on it.................

Read...........

Industrial and Commercial Bank of China hits language wall

...... The bank has requested the Reserve Bank of India to allow more Chinese expatriates to be employed in its lone branch in India's financial centre, citing inability of the local hires to communicate with the headquarter. The RBI has now forwarded to the government seeking approval due to security concerns. "In most such cases we do provide limited exemptions but since this involves the Chinese, given the sensitivity, we have consulted the government," said an official with RBI, requesting anonymity.......

Read...............

Coop banks look at FM for tax deductions in Budget

..... "Taxing the cooperative banks proves as a deterrent for the growth of cooperative banking structure and the objective of financial inclusion. Hence, our primary demand is to restore income tax deduction for all the cooperative banks,".....

Read............

Banks must collaborate, not compete

Reaching out to the poorest of the poor is no longer a social obligation but a very viable business venture

Collaboration and not competition could help achieve financial inclusion in India. Collaboration among banks and between banks and technology firms and mobile service providers is imperative as the task is huge..................

Read............. 

SB interest rates

The news item “Public sector banks in no mood to hike savings account rates” (Business Line, March 7) confirms that banks aren't sensitive to genuine issues relating to savers. The way they deal with small farmers and businessmen points to that. The reasons given for not hiking rates for savings bank accounts — such as non-migration, savings bank rate is a basic rate, likely distortion in rate structure, possibility of charges for services — are unconvincing. Market-based rate of interest can attract large savings from low-income households. Banks should be advised by the RBI to review their stand, so that savings bank account holders get real interest rates, and the system gets increased financial savings.

- Subramania Thiagarajan (HBL)

RBI waits for FM

Monetary policy is most effective when it is unanticipated, and the Reserve Bank of India’s (RBI’s) decision to cut the cash reserve ratio, or CRR, for banks by 75 basis points on Friday was indeed unexpected. This is a pleasant change, for the central bank has in recent times chosen to focus on its regular schedule of reviews instead of responding to the needs of the market more spontaneously. This cut was welcome not just for its well-planned timing, but also for its relative size; the RBI has, too often, moved with baby steps when strides are called for. Now, by cutting CRR by 75 basis points to 4.75 per cent, Mint Road has acknowledged that there is something very wrong with the degree of liquidity in the system.........

Read.............

Treating the symptom

..... The RBI's OMOs and CRR reductions only address a symptom (‘tight liquidity conditions') rather than the real disease of a deepening slowdown. The right way to treat that is through aggressive interest rate cuts, which is what the monetary policy doctor ought to be doing today. One hopes the Governor, Dr D. Subbarao, initiates it at the central bank's next mid-quarter monetary policy review on March 15.

Read.................

'Good customer service key to banks growth'

.........."With enhanced competition amongst banks, customer service becomes the soul differentiating factor to be leveraged to stay relevant and to forge ahead in the business,"............

Read...............

‘The primary task in the Budget is to restore confidence in govt’

Dr Bimal Jalan, former RBI governor and author of the forthcoming book Emerging India: Politics, Economic and Reforms, talks to Olga Tellis about mis-governance on the eve of the Union Budget. Dr Jalan says that the heart of the problem is the waste of public resources because of corruption and diversion of resources............

Read............ 

Yawning gaps in access to financial resources

.....................The authors could also scale up the business correspondent model of the RBI, self-help groups and micro-finance institutions. While associated problems with these institutions are hot topics of discussion at present, one feels the authors could have drawn suggestions from international experience.

Overall, it is a book for hard-core economists, bankers and researchers. The others would need to do plenty of skimming to keep going till the end.

Read................

A ‘refill' exercise

.........The CRR cut is expected to release around Rs.48,000 crore into the system. In the end, the cut in CRR is more in the nature of a ‘refill' exercise. And, the liquidity position in the bank “will remain as it were prior to the latest CRR cut.” The coincidence of the CRR cut, which comes immediately after a meeting between the RBI Governor and the Finance Minister and a few days ahead of the mid-quarter review of the monetary policy, is not lost on the discerning observers of the economy.......

Read.............

CRR cut : What prompted RBI to act ?

Monetary Policy is formulated and announced by the Central Bank of a country. This policy aims at influencing interest rates and money supply in the economy. Reserve Bank of India ( RBI) is scheduled to announce its monetary policy on March 15th. However in a sudden move unanticipated by many, RBI cut CRR on 9th March six days before its monetary policy. An analysis of this move reveals some interesting insights. This article seeks to simplify the CRR cut & present an analysis of the future trends in interest rates in a logical manner........

Read...............

RBI signals a downward bias in interest rate cycle: S Raman, CMD of Canara Bank

A day after the Reserve Bank of India cut the cash reserve ratio for banks by 75 basis points, S Raman, CMD of Canara Bank, said the central bank has reinforced downward trend of interest rates. In an interview to ET, Raman said banks would not prefer to cut lending and deposit rates before March-end, unless the upcoming RBI policy announces a reduction in policy rates. Excerpts:.......

Read........... 

RBI policy rate cuts to depend on inflation scene: C Rangarajan

..... "I think that (policy rate cut) will depend very much upon how inflation behaves. But this present decision of cutting CRR by 75 basis points is an important step towards easing of the monetary policy,".......

Read............

A CRR cut in time saves big for banks

..... "The CRR cut was more to manage liquidity. But on interest rates, banks may cut rates in select products. But I don't expect banks to cut base rates immediately. Bankers would like to read the tone of RBI's policy on March 15 and a likely policy rate cut in April, before taking major rate action,".........

Read................ 

Mobile wallets to be opened to 100% FDI

..... The Reserve Bank of India has already given its conditional nod to the finance ministry's proposal to allow 100% foreign direct investment (FDI) through the automatic route in these payment services, but experts say the conditions are cumbersome.......

Read........ 

Finance Ministry looking at merging RRBs with sponsor banks

....... The number of RRBs has shrunk from 196 in the early 2000s to 82 now on account of restructuring and amalgamation of RRBs to improve their financial soundness. According to RBI figures, as of March-end 2011, the 82 RRBs collectively had deposits of Rs 1,66,232 crore (Rs 1,45,035 crore as of March-end 2010) and advances of Rs 94,715 crore (Rs 79,157 crore).

Read.................

Traffic survey ordered for metro project

Ahmedabad........ A surveyor who was roped in for the survey said the survey is being taken up at specific locations which includes Vasna, Paldi, Ellisbridge, Nehru Bridge, Old RBI office, Income Tax, Gujarat Vidyapith, Vadaj, RTO and Sabarmati in Ahmedabad city. Also survey is being ordered on similar lines in Gandhinagar city....... Read...........

Online banking security up a notch

Now you can do online banking at a shared terminal with peace of mind

..... Now, with the RBI mandating a very high level of security in case of online transactions, banks have been scrambling to find solutions........

Read............

Industry ministry in talks to start e-biz model

The Industry ministry will hold consultations with the representatives of the Controller General of Accounts (CGA) and Reserve Bank of India (RBI) to work out a payment mechanism to operationalise the e-biz project that seeks to improve business climate in the country..........

Read.................

Indian Rupee Shortage

As per recent media reports, the private sector has been concerned about the shortage in the Indian rupee component of the national foreign exchange reserves. The government hereby clarifies that, while there have been shortages in the Indian rupee component, the overall foreign exchange reserve is well within the threshold levels. Currently, as per the RMA, the foreign exchange reserve situation is US dollars 691.76 million. That is equivalent to 13.5 months of imports, which is favourable, compared to not less than 6 months in other countries...........

Read.....................