As talent war looms, banks offer fat pay hikes

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Fake bank accounts on sale for Rs 8,000

The Economic Offences Wing (EOW) of the Gurgaon police stumbled upon 26 fake bank accounts while investigating various fraud cases reported in the city recently. The accounts, opened on the basis of forged documents, were used for dubious transactions across the country, especially for fraudulent property deals, the police have found. But what comes as a shocker is that the accused sold these accounts to fraudsters for Rs 8,000-10,000 each. Among these, 21 accounts were found in various private banks while five were in two national banks. During investigation of various economic offences registered in the city, the Gurgaon police found fake accounts and prepared a list.  “It has become a business for many unscrupulous elements to open fake accounts and sell them for a big amount. Most buyers who ‘purchased’ these accounts used it with a wrong motive to dupe innocent people,” said SS Deswal, Gurgaon police commissioner. Sale and purchase of property on basis of fake documents, financial scams, job rackets, lottery scam and other crimes were committed using these accounts.  “The criminals used it as a shield against the law to keep their identity secret with the help of fake accounts.” The scamsters have a vast network in Delhi-NCR and various parts of the country. Among the list of 26 accounts, nine accounts were found in Gurgaon banks, four in Delhi and four in Ghaziabad. The rest are spread across various banks of the country. “The fraudsters take benefit of the negligence of bank employees who often ignore the Reserve Bank of India (RBI) guidelines to open accounts. And the private banks are on the top,” added Deswal.  “We have written to all banks where fake accounts were found in our probe. They have been warned to follow all necessary steps before roping in any new customer so that such incidents can be prevented,” he said.

Now, Sangli bank gets notice from NABARD

Days after the board of directors of Maharashtra State Cooperative Bank was superseded by the Reserve Bank of India (RBI), yet another bank — Sangli District Central Cooperative Bank (SDCCB) — has come under a cloud. The National Bank for Agriculture and Rural Development (NABARD), on Monday sent a notice to SDCCB seeking clarification on wrong loans leading to the bank’s negative net worth.  In its audit report for 2008-09 and 2009-10, NABARD observed that SDCCB’s credit had exceeded its deposits. The bank had offered loans worth Rs 168 crore to three cooperative sugar factories — Vasantdada, Manganga and Mahankali — even though these institutions had their loan accounts in “short margins”, meaning default.  Action against SDCCB came four days after RBI appointed administrators over MSC bank, which is the principal funding agency for all district cooperative banks in the state. Instead of showing those loans as non-performing assets (NPA), the SDCCB showed them as ‘profit making’ in its accounts. The NABARD in its notice under section 11 (1) asked bank directors to reply within 30 days. The bank and the three sugar factories, to whom it has given loans, are largely controlled by NCP and Congress leaders. NABARD has also observed that the bank wrongly allotted 5% dividend to its member credit societies. SDCCB chairman Dilip Vagyani termed NABARD’s action “politically motivated”. Vagyani and other SDCCB directors said NABARD should have referred to bank accounts of 2010-11 instead of the previous two years.  “Accounts of the latest year show that our bank has recorded profit worth Rs 18 crore. NABARD’s hasty action only suggests it was done on other grounds,” Vagyani said. The bank directors have decided to appeal against the notice before the central finance secretary. Meanwhile, deputy chief minister Ajit Pawar said, “When I go to Mumbai I will check all account related documents of the bank and will talk to chairman Manikrao Patil as there have been contradictory reports about its condition.”  Pawar and his party criticised the Congress for the RBI’s decision to supersede the bank, terming it a “political move”. Responding to allegations, chief minister Prithviraj Chavan said in Solapur that the state cooperative bank does not belong to any particular party.

The wait for new private banks might just get longer

The Reserve Bank of India (RBI) and the government are unlikely to push through with the final guidelines for issuing licences to new banks until the Parliament approves the Banking Laws (Amendment) Bill 2011. "The passing of the Bill is a necessary condition that will have to be fulfilled before guidelines for new bank licences are finalised," said a finance ministry official on the condition of anonymity. A Parliamentary standing committee is examining the Bill, which was introduced in the Lok Sabha in March. The Bill may come up for approval in Parliament only in the winter session, said sources. The Bill, when legislated, will empower the RBI to dismiss a bank's board and force a reconstruction to protect interests of depositors, shareholders and employees. Conferring the RBI with such powers will allow the central bank to take swift action if it suspects that the board is not functioning objectively or pushing for decisions favouring promoters of the bank. At present, the RBI is not empowered to supersede a bank's board, but can force an amalgamation or a merger among banks. The Bill will also allow the RBI to seek details of associate enterprises of banking companies. The RBI has prepared draft guidelines to allow private players in the banking sector and is awaiting comments from the finance ministry. "It has become necessary for the RBI to be aware of the financial impact of the business of such enterprises on the financial position of the banking companies," the Bill stipulated in is statement of objects and reasons. "This is necessary before allowing industrial houses to set up banks," the official said. The Adiyta Birla Group, Religare Enterprises, the Tatas and Reliance have shown interest in entering the banking sector.

New licences set to drive bank job boom

As many as half a million jobs are likely to emerge across the banking sector as the economy rebounds on the growth path and the Reserve Bank of India (RBI) gets set to issue new banking licences. In a huge turnaround for a sector that was the worst hit in the global financial crisis, RBI has also started giving its approval to foreign banks to set up shop in India.  Industry experts said the job rush could begin as early as in the next 12 to 18 months.  Rabo Bank and Goldman Sachs have got the central bank's approval, while several others such as Morgan Stanley, JP Morgan are waiting. Human resource firms said that banks wishing to set up shop in India have initiated a preliminary talent hunt already. The existing foreign players in the sector such as Citibank and HSBC have chalked out their expansion plans.  "The broad strategy of banks that wish to set up shop here would determine their recruitment strategies,"  Deepak Verma, chairman, Sheffield Haworth, a financial services executive search major told Hindustan Times. Verma said that the high growth prospects of the domestic market are driving the banks and other financial sector firms to embark on a major recruitment drive. Verma said the large scale hiring would begin from end of the year.

RBI to take new anti-inflation steps

The Reserve Bank of India (RBI) is likely to come out with a new policy measure to rein in inflation in its annual monetary policy review as high inflation remains a "matter of concern" for the apex bank. "We will have our own policy very soon. Inflation remains a matter of concern and we need to evaluate and underline the inflationary pressures," RBI deputy governor Shyamala Gopinath told reporters on the sidelines of a programme organised by the apex bank on Monday. She said that monetary policies required about 12 to 18 months to have an impact on inflation. "Once a policy is in place, it will take around 12 to 18 months to work. It is better that different mechanisms work in a calibrated manner," she stated. Gopinath said that the current inflationary pressure had been a result of high inflation from the food and the non-food manufacturing sector. "We will have to mark these trends and then ensure that there is no demand and supply mismatch," she added.

RBI admits to ‘new normal’ inflation tangle

Acceptance of higher inflation rate as the new normal will raise risks of accelerating inflation,” Subir Gokarn, Deputy Governor, Reserve Bank of India (RBI), said on Tuesday, adding the economy has to  avoid the vicious circle of high inflation, low investment and slow growth. The economy should get into a virtuous cycle of low inflation, high investment and fiscal consolidation accompanying high growth, he said. Headline inflation stood at 8.31% in February after a gruelling year in which food inflation hovered close to double-digits.  “Despite significant actions on policy rates and liquidity by the Reserve Bank of India, inflation remains high, giving rise to some very fundamental questions,” said Gokarn while speaking at the meeting of the national executive committee of FICCI.  Highlighting on the need to tackle inflation Gokarn said, “India’s central bank cannot afford to be slack on inflation.”  The current rate of inflation raises concerns about the risks of spiralling and may slow down the growth momentum, he said. “In essence, the trade-off is more between inflation now and growth in the future. The only way to keep food prices in check is to produce more than what people want to consume.”  The RBI has already raised interest rates eight times since March 2010.

No more fights with BEST bus conductors over change

Now, you won’t have to fight over change with the bus conductor. The Reserve Bank of India (RBI) has agreed to give Rs25 lakh in coins every month to the Brihanmumbai Electric Supply and Transport (BEST) undertaking. Earlier, the RBI used to give Rs16 lakh in coins every month to the undertaking.  “Passengers have been complaining about the lack of change. Often arguments take place between the conductor and passengers. So, we had requested the RBI to give us more money in coins and they agreed to give us Rs 25 lakh a month,” said Sanjay Potnis, BEST committee chairman.   The Siddhivinayak Mandir Trust in Prabhadevi has also agreed to give Rs 2 lakh in coins, whenever the public undertaking wants.“Now, we are getting more than enough from the RBI so there is no need take coins from anyone else,” said a BEST official on condition of anonymity because of protocol issues. Commuters are very happy with RBI’s decision.  Versova resident Nikita Dalal, who travels by bus every day to Bandra, said, “This news is a big relief. I often face this problem. Now, I will demand change from the conductor.

Govt to unveil borrowing calendar on Friday

Officials of the finance ministry and Reserve Bank of India (RBI) would decide on the borrowing calendar for April-September on Friday, March 25. The Centre would conduct borrowing for the coming fiscal year in a “non-disruptive manner,” leaving enough space for private sector's investment needs.

RBI step to hike key rates in 'right' direction: Montek

The Planning Commission on Thursday said the Reserve Bank has taken the "right" step in hiking key policy rates by 25 basis points as inflation is above the comfort level. "I think it is on long expected lines. I don't think markets would be surprised by (RBI key rate hike) given that inflation is not in the comfort level, I think it has done the right thing, " Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters here. The central bank raised its short term lending and borrowing rates by 25 basis points each in a bid to contain inflation. About RBI increasing its March-end inflation forecast to 8 per cent from 7 per cent, Ahluwalia said, "I don't disagree with the (RBI's revision of inflation) forecast of 8 per cent inflation by March end." He said, "We are hoping that it would go down to 7 per cent level by March end. We have to admit that inflation rate in February is higher than what we wanted it to be." The overall inflation increased marginally in February to 8.31 per cent from 8.23 per cent a month ago. "If the fiscal deficit projections presented in the budget are maintained and (with) gentle tightening of monetary policy, I assume (that) with a normal production year, inflation during 2011-12 will definitely below 7 per cent," he said. Dismissing the contention that RBI's monetary tightening would hurt the economic growth, Ahluwalia said, "longer term economic growth rate is function of many things. "I don't agree with the view that in order to keep the long-term interest rate modest (lenders rates), you should keep the short-term interest rate (key policy rates of RBI) low," he added. Ahluwalia suggested that it does not make sense to keep RBI policy rates at low level and let inflation rise, for ensuring cheaper long-term credit from lenders.

HDFC Bank sees another rate hike in May

With the Reserve Bank of India revising upward its inflation estimate for FY 11 to eight% from the earlier 7%, the rate hiking cycle in FY 12 is now likely to be more extended than initially anticipated and far more front-loaded, a leading economist said. "We expect inflation to print in at 8.1% in March and move close to nine% by August," HDFC Bank's chief economist, Abheek Barua, said in a statement in Mumbai on Thursday. In his reaction to the Reserve Bank hiking its repo and reverse repo rates by 0.25% each in its mid-quarter monetary policy review on Thursday, Barua said that with inflation in February at a high of 8.3% instead of the sub-8% as expected, the apex bank's move was expected. "Indeed, with inflation for the month of February coming in as a rude shock to the market (the reading came in at 8.3% against expectations of 7.8% and on top of an upwardly revised estimate of 9.4% for December) at the start of the week, this is the very least the central bank could have done to assuage concerns on price pressures," he said.

Too early to assess impact of Japanese disaster on India: RBI

The Reserve Bank on Tuesday said it is "too early" to assess the financial impact of the Japanese disaster on India and it is in constant touch with Bank of Japan (BoJ). "It is too early to make an assessment of the financial impact of the
Japanese disaster (on India)," Reserve Bank of India Deputy Governor K C Chakrabarty said. He further said RBI is in regular touch with the Bank of Japan. He further added that "they (BoJ) tell us that the financial markets will
stabilize in the next few days".

Over Rs 1360 cr unclaimed money with Indian banks

Indian banks have over Rs 1,360 crore unclaimed amount, enough to run Central government hospitals and dispensaries for a year or provide funds to farmers under the National Horticulture Mission. Any bank account, not been operated for a decade, turns inoperative and the money is transferred to the bank’s suspense account. There are over one lakh inoperative accounts with Indian banks, each having on average Rs 1,350, the RBI said in a RTI reply. Over 75 % of these accounts are of savings.  Although the Reserve Bank of India has asked banks to issue notices to account holders to take back the money back along with the interest, the banking regulatory is not willing to transfer the money to the government as done in case of unclaimed dividend from the companies. "There is no scheme under consideration of RBI whereby such unclaimed deposits in banks including those in inoperative accounts may be transferred to some government account after a specified period," said D Mahapatra, RBI’s Central Public Information Officer. After the RTI applicant Subhash Aggarwal sought information on money in suspense accounts, the RBI woke up and issued a new circular in July 2010 asking the banks to review the accounts where there have been no operations for more than a year and inform the account holder about the same in writing. "Banks are taking every step to ensure that unclaimed money lying with them is safe and not misused," T M Bhasin, chairman and managing director, Indian Bank told Hindustan Times. Chairman of a public sector bank said in case of any transaction, which may happen after that period, will be monitored closely to ensure that there is no fraudulent activity. The RBI has admitted that it has received complaints of customers facing problems in operating the accounts termed as inoperative and unwillingness of the banks to pay interest on the money in these accounts. The country top-banking regulator has asked the banks to make all efforts to locate the customer and in case, it fails to find the person, the bank should contact the person who introduced the account holder. "Banks can consider a special drive to find the whereabouts of the customers," the RBI had said. The nationalized banks have around Rs 988 crore in inoperative banks followed by State Bank of India and Associate banks, private sector banks and foreign banks.

Be aware of benefits of nomination facility

In June 2005, the banking regulator issued detailed instructions to banks on how to simplify and expedite claim settlement, following the death of a depositor. The Reserve Bank of India in its circular said: "Banks are advised to adopt a simplified procedure for repayment to legal heir(s) of the depositors, keeping in view the imperative need to avoid inconvenience and undue hardship to the common person."  Six years hence, 'expeditious and hassle-free procedures' continue to elude claimants. The RBI circular says in the event of the death of the depositor, banks should allow premature termination of deposit accounts without any penal charges and this should be stated in the account opening form itself.  It also states that where the account holder had made use of the nomination facility or where the account was opened with the survivorship clause ('either or survivor' or' anyone or survivor' or 'former or survivor' or 'latter or survivor'), insistence on production of legal representation is superfluous and unwarranted and only serves to cause avoidable inconvenience to the survivors and would invite supervisory disapproval.  It also reiterates that banks should desist, in such cases, from insisting on production of succession certificate, letter of administration or probate, etc, or obtain any bond of indemnity or surety from the survivor or nominee. Even where the deceased depositor has not made any nomination, banks should adopt a simple procedure that eliminates harassment to the claimant. The circular advises banks to provide guidance to depositors on the benefits of nomination facility and also the survivorship clause. Depositors should also be made aware of the fact that in the event of the death of one of the joint account holders, the right to the deposit proceeds does not automatically devolve on the surviving joint deposit account holder unless there is a survivorship clause, the regulator says.

Here's a case showing how banks are violating these guidelines.

Anju: My father and I had two Fixed Deposits (FDs) and a savings account with a public sector bank, with instructions "as payable to former or survivor". In November 1991, my 72-year old father went missing and could not be traced despite our best efforts. When informed of it, the bank said I had to wait for seven years for liquidation of the accounts and renewed the deposits in 1994 for a further period of five years. In 1999, when I deposited the certificates and asked for transfer of the money into my account, I was told to bring the 'death certificate' and the succession certificate and till now the money has not been transferred to my account.  Kindly advise. 

Answer: If you see the five-page circular of the RBI (dated June 9, 2005), titled "Settlement of  claims in respect of  deceased depositors-simplification of procedure" from which I  have quoted above, you will see that the bank has violated the regulator's instructions with impunity. Please write to the nodal officer of the bank quoting the RBI circular and demanding immediate transfer of the money to your account, along with penal interest and compensation. If there is no positive response, please file a complaint before the consumer court. Even if, on the receipt of your letter, the money is transferred to your account, I would still suggest that you lodge a complaint with the consumer court asking for punitive damages. The letters (and the response-whether positive or negative) will ensure that the case does not become time-barred in so far as consumer courts are concerned. This is a fit case for award of exemplary damages by the consumer court as the bank's action (or inaction) deserves to be condemned in the strongest of terms.

50,300 defaulters of bank loans of Rs. 1 cr or more: RBI

There are 50,300 defaulters across India who have not repaid loans amounting to Rs1 crore and more each in the last 15 years. The Reserve Bank of India (RBI) has mentioned this in response to a query under the Right to Information (RTI) Act. Though the RBI has not mentioned the amount of the defaulted loans, it is easily more than Rs 50,000 crore even if the minimum default figure of Rs1 crore is considered. The RTI query filed by one Manoranjan Roy had sought details of loan defaulters from the year 1995. However, figures available with the All India Bank Employees’ Association (AIBEA), which publishes reports on wilful defaulters, shows the defaulted loan amount figure is more than Rs 75 lakh crore in the last 20 years. The AIBEA is coming out with a fresh report by the end of next month, which will have the latest default figures (of Rs 75 lakh crore). “This includes those defaulting on amounts of Rs 25 lakh or more,” said Vishwas Utagi, secretary, AIBEA. Utagi said of the total defaulted amount, around 40% would be in Maharashtra alone. So, the amount of loans defaulted on in the state works out to Rs 30 lakh crore.

RBI Working Group to clear up NBFC issues

The Reserve Bank of India (RBI) has formed a working group to look into the various issues related to the Non Banking Finance Companies (NBFCs). "We have formed a working group that is headed by Usha Thorat, former Deputy Governor, RBI which will look into various issues and problems faced by NBFC," said Shyamala Gopinath, deputy governor, RBI while addressing the seminar organised by Indian Merchants' Chambers on issues and challenges faced by NBFC sector. The working group also includes members of NBFC sector.