Banks may charge for mobile transactions from April – A.P.Hota

The Reserve Bank of India had set up the National Payments Corporation of India (NPCI) as an umbrella institution to devise an affordable payment mechanism and help in the financial inclusion process. A.P.Hota, Chief Executive Officer of NPCI explains how the organisation is working towards consolidating the multiple payment systems into a nation-wide uniform and standard business process for all retail payment systems. The mandate of RBI is that NPCI should be the umbrella organization for all retail payment systems in the country. Loosely speaking, NPCI can play an operator's role in al lretail payment systems and can act as the central processing organizations for various retail payment system, if need be, for inter-operability. Retail payments system are cheque clearing, Electronic Clearing Service (ECS), Electronic FundsTransfer (EFT), ATM Switching, POS Switching, card payment schemes and mobile payments. Currently, NPCI has been authorised only for three activities -ATM switching, inter-bank mobile payments and Cheque Truncation. In-principle approval has also been received for building a card network, 24x7 remittance system and Automated Clearing House. The central bank will accord specific approval as and when NPCI gets ready technically, procedurally and organisationally to handle new activities. Experts are of the view that NPCI's mobile payment initiative is a game-changer. For mobile payment, we are in the news for the last couple of months. You know that, the number of mobile subscribers in the country is now more than 600million, which is substantially larger than the number of bank accounts. Quite likely, almost all bank account holders are mobile subscribers. If banks can deliver banking services on mobile, the cost of banking services would be considerably reduced. Banks would be able to process various transactions including the money transfer transactions in a straight manner without the use of cash or cheques. It would be a game-changer because of its 24x7 nature of operation. Money transfer can happen on a real time and as per the latest data, about 40 lakh customers have been registered for mobile payments. Currently , banks as well as NPCI are providing the service free of charges. These are only promotional offers. From April 1, 2011, NPCI would be charging 25 paise per transaction. The remitting banks may also start charging from April 1. But the charges are likely to be very nominal. Banks know very well that unless, the charges are much lower than the National Electronic FundsTransfer (NEFT) charges, it would not take off.  We have already launched the 24x7 remittance system on the mobile channel. We propose to use the same core infrastructure for handling remittances received by banks through other channels like internet, ATM and bank branches. We are discussing with banks as to how the same can be done. Once the blue print is ready, we would approach RBI with a request to enlarge the scope of the remittance system they have approved. It is just a few months away. Payment systems has been evolving on a continuous basis. Mandate therefore is, not a fixed one.  NPCI's role would be to keep approaching the Reserve Bank of India with new ideas and new products on a continuous basis. But I can say that for next three years we have a number of projects at hand. Mobile payment was not a specific mandate of RBI. We approached the central bank with a blue print and it approved the same.
Currently, our primary data centre is in Hyderabad with the disaster recovery centre in Mumbai. We have already taken third party data centre space at Chennai for our CTS project . Also, we are setting up a new communications network. Currently, we are using the INFINET of IDRBT for banks to connect to us. If banks can deliver banking services on mobile, the cost of banking services would be considerably reduced. Banks would be able to process various transactions including the money transfer transactions in a straight manner without the use of cash or cheques.

Banks’ business correspondents may get higher pay

Business correspondents, who work mainly in rural areas and urban slums on behalf of nationalised and commercial banks to extend benefits of banking to the economically weaker sections, are likely to get higher remuneration.  Reserve Bank of India (RBI) officials said on Monday that in comparison to the efforts put in by these correspondents, their income is very low. This,in turn, does not help widen the reach of banking facilities to economically weaker sections. “A circular hiking their remuneration will be issued by the RBI shortly,” sources said. The correspondents are appointed to get new customers for banks from poor families, introduce them to various banking services, and assist them in understanding the banking process. A correspondent visits the villages on regular intervals, collects whatever amount the persons want to deposit in their accounts and process the deposits with a handy electronic machine. The machine immediately informs the main server of the bank about the transactions. The customers can withdraw money and check the account balance through the machine. The correspondents also answer all queries of the customers.“The RBI has recognised the efforts involved in the job and is thinking of revising the remuneration,” sources said. Business correspondents are part of financial inclusion,a policy mooted by the Reserve Bank of India in 2005. The policy has compelled nationalised as well as commercial banks to implement it by enrolling account holders from economically weaker sections of society. The current payment of these correspondents is around Rs 1,000 to Rs 1,500 per month. After the RBI circular, it could go up to Rs 5,000 per month. RBI officials discussed the payment issues of correspondents during a meeting held in Pune in the last week of November 2010 where business correspondents from various parts of the state had gathered along with the villagers who are now customers of nationalised banks.

‘Don’t put onus of fin inclusion on banks alone’

The government’s financial inclusion agenda is desirable but that should not be discriminatory and lead to unmanageable burden on banks with specified lending targets for the poor, said Aditya Puri, Managing Director and Chief Executive at HDFC Bank. “We cannot have two worlds,” said Mr Puri, winner of The Economic Times Business Leader of the Year Award. “We cannot have the haves and have-nots. I think financial inclusion is a political, economical and social necessity. That opening a banking account or giving a loan without creating a repayment capability is not the solution, so please do not have this priority sector targets only for banks.”

RESERVE BANK ‘OVERSIGHT’ FUNCTIONING

The Bank for International Settlements defines oversight as “central bank function, whereby the objectives of safety and efficiency are promoted by monitoring existing and planned systems, assessing them against these objectives and, where necessary, inducing change”. The three key ways in which oversight activity is carried out are through (i) monitoring existing and planned systems; (ii) assessment and (iii) inducing change. In India, the Payment and Settlement Systems Act, 2007, and the Payment and Settlement Systems Regulations, 2008, provide the necessary statutory backing to the Reserve Bank of India for undertaking the oversight function. The central bank manages the various settlements system, including cash, through currency chest and clears cheques, besides various electronic clearing services.

Proposals invited for taking Residential Flats on "Lease/Leave and License basis

The Reserve Bank of India (RBI), Belapur, Navi Mumbai urgently requires 25 nos.; residential flats having carpet area (exclusive of balcony/ sleeping-out terrace, staircase, lift, lift/staircase lobby, common passages, service shafts, etc.) between 71 to 79 sq. m., 20 nos.; having carpet area between 91 to 95 sq. m. and 10 nos.; having carpet area between 117 to 118 sq. m on lease for its officers in different Grades. The flats should be located in and around 2/3 km from Belapur/ Kharghar Railway Station.  All flats should have minimum 2BHK accommodation. The complex in which the flats are situated should have at least one car-parking per flat.

Interest on bank fixed deposits likely to go up

Banking experts believe sharp rise in food inflation and in the overall inflation rate in December may prompt Reserve Bank of India (RBI) to go for an interest rate hike by at least 50 basis points (bps) at its review meet on January 25.  This in turn may lead to another round of rate hike in fixed deposits, experts believe.
Contrast this with the crash in the stock markets. The BSE Sensex, the leading benchmark index for stock prices, has lost almost 1,400 points in just five trading sessions. No wonder that risk-averse investors are flocking to safe havens and parking money with banks. Already the rates have gone up significantly. The country’s premier lender, State Bank of India (SBI), recently came up with the second round of rate hikes in less than a month. This has made the rate of interest very attractive for retail depositors.  It has hiked interest on its 555-day special deposit scheme by 175 basis points in the last four months to 9 per cent, even better for senior citizens who earn 0.5 percentage points more in bank deposits. Such high rates in term deposits by banks were last seen 22 months ago in March 2009. Last year, around this time deposit rate by leading banks was around 7 per cent. Following SBI’s example, Bank of India raised interest rates on select term deposits of maturities of one to three years. On deposits for a tenure of one year to less than two years, the new rate was 8.25 per cent against 7.5 per cent earlier. Others like ICICI Bank, HDFC Bank, IDBI Bank and State Bank of Patiala hiked their rates to protect their deposit base. Some private sector banks, which had pre-empted the deposit rate hikes, may have to come up with another round of hikes to attract retail depositors as their rates are only marginally higher than that of SBI.The interest rates started rising because RBI in 2010 continued with its monetary tightening in order to rein in inflation and in the process the effective policy rate has gone up by around 300 basis points.

India seeks financial sector audit by IMF, World Bank

After carrying out a comprehensive health check-up of the financial sector in 2009, India has sought an assessment under the Financial Sector Assessment Programme (FSAP) of the International Monetary Fund (IMF) and the World Bank. “India did a self-assessment (by the Committee on Financial Sector Assessment, or CFSA) of its financial sector in 2009. This has given us the confidence to get our financial sector evaluated by international financial institutions like IMF and the World Bank. We have voluntarily sought a full-fledged Financial Sector Assessment Programme,” Finance Minister Pranab Mukherjee said at the second International Finance Conference at the Indian Institute of Management, Calcutta.  Referring to the Financial Stability and Development Council (FSDC), Mukherjee said the government would set up a Financial Sector Legislative Reforms Commission to rewrite and clean up financial sector laws.  “Without prejudice to the autonomy of market regulators, FSDC will undertake macro-prudential supervision of the economy, including functioning of large financial conglomerates, and address inter-regulatory coordination issues,” he said. FSAP, established in 1999, is a comprehensive analysis of a country’s financial sector. In developing and emerging market countries, FSAP assessments are conducted jointly with the World Bank. In these countries, FSAP assessments include two components: a financial stability assessment, which is the responsibility of the Fund, and a financial development assessment, the responsibility of the World Bank.

Interest rates may rise by 25-50 basis points: SBI

Liquidity pressures to top agenda of RBI’s meeting with bankers.

With inflation remaining at elevated levels, banks are bracing for an up to 50-basis-point increase in key policy rates. State Bank of India (SBI) Chairman O P Bhatt said the Reserve Bank of India (RBI) might raise interest rates by 25 basis points soon. Banks are waiting for the monetary policy review on January 25 for further indication. Seconding the SBI chairman’s outlook, Crisil Chief Executive and Managing Director Roopa Kudva said there was a general expectation that the rates would be raised considering the current rate of inflation. RBI was likely to raise the repo and reverse repo rates by 50 basis points in the next six to nine months, she added. RBI has been in the rate hardening mode since the fourth quarter of 2009-10. So far in the current financial year, the central bank has increased policy rates by 125-175 basis points to check inflationary pressures. RBI has said policy transmission improves if liquidity in the banking system is in the deficit mode. Tight liquidity has prompted several banks to raise deposit rates many times. They have also increased lending rates, but at a slower pace.

Mahabank opens special branch for SHGs

Lending institutions should try to create capacity to use credit in a responsible manner among the self help groups (SHGs), help them produce goods or services that are needed by the society and also guide them in marketing such goods or services, Reserve Bank of India deputy governor Subir Gokarn said on Sunday. Gokarn was speaking at the inaugural ceremony of a specialized SHG branch of the public sector Bank of Maharashtra.  "This three-pronged approach would help the very purpose of any initiative for financial inclusion of the unbanked," Gokarn said. He said financial inclusion for different groups will have unique challenges, hence unique solutions. Gokarn underlined the importance of SHGs as a channel for women's empowerment in the country. Asish Saha, Director, National Institute of Bank Management, said of the Rs 6,198 crore savings by SHGs, women SHGs accounted for nearly 73 per cent and of the Rs 14,453 crore loan approved to SHGs by the banks, Rs 12,429 crore went to women SHGs. This has proved beyond doubt that women SHGs were an important factor in the country's economy, he said. The new SHG branch will take care of the formation of new SHGs, opening of their accounts with the branches, their credit linkage, monitoring, guiding and assisting them in marketing of their products.  Chairman and managing director of the bank, A S Bhattacharya, said the new branch would cater to around 1,500 SHGs and would be able to sanction loans worth Rs 150 crores by March 2012. The branch will sanction loans of Rs 10 crore to around 1,000 SHGs by the financial year end, said Ratna Galoans Ganapathy, manager of the branch. Ganapathy said the bank will work with Nabard and NGOs to identify SHGs needing assistance. The bank will offer training and guidance to the SHGs for maintaining accounts and completion of other documentation, Ganapathy said.

GLPC’s Mission Mangalam MoUs to connect govt, poor and scholar

On the occasion of the Golden Jubilee Year celebration of Gujarat State, Hon. Chief Minister Shri. Narendra Modi launched an ambitious campaign by the name MISSION MANGALAM. The objective is to organize the poor into Self Help Groups / Sakhi Mandals, link them with banks, build capacities in them and lead them towards sustainable livelihoods. To implement this mission a company was formed in April 2010 by the name Gujarat Livelihood Promotion Company Limited (GLPC). This company has initiated a major program of Corporate-Business Partnerships to conceptualize and implement projects in rural areas which would generate more than a MILLION LIVELIHOODS, to be realized in the next 3 to 5 years. This initiative has got overwhelming response from some of the biggest industries and business houses in the country. Till now more than 32 companies have expressed their commitment to sign MoUs with GLPC during the Vibrant Gujarat Summit, 2011, held this week. It is estimated that these MoUs would trigger projects which would generate and augment livelihoods in the rural areas of Gujarat to the tune of 12 lakhs i.e. 1.2 million in the next 3-5 years. The total financial commitments to enable the above would be exceeding Rs. 20,000 Crores. These MoUs would be signed during a seminar organized under the aegis of Rural Development Department by GLPC upon the theme INCLUSIVE DEVELOPMENT THROUGH SOCIAL BUSINESS ENTERPRISES. This seminar would be addressed by eminent thinkers and practitioners. Smt. Usha Thorat, former Deputy Governor, RBI would give the financial perspective and Dr. Bibek Debroy, eminent economist and academician would present the economist’s perspective during the Seminar. Mr. B.K. Sinha, IAS, Secretary, Rural Development, Government of India would be the Chief Guest in the Inaugural session.

Licensing new banks — the feedback mirrors the sharp differences

The Reserve Bank of India has received huge responses to its discussion paper on ‘Entry of new banks in the private sector'. The subject — licensing new private banks — is extremely sensitive. No matter how cautiously the central bank frames the policy, the final selection will be controversial for many reasons. It is just as well that the RBI has already decided than an independent expert group will vet and recommend eligible applications to the RBI.

RBI to plug regulatory gaps in NBFC biz

The Reserve Bank of India plans to strengthen the regulatory framework for non-deposit taking systemically important non-banking finance companies as tightening of the regulation for the banking sector has increased the incentives for regulatory arbitrage by moving business to NBFCs. Pointing out that setting up an NBFC is a more attractive option as entry point norm for them (at present net owned funds of Rs 2 crore) is low as compared to that for banks (Rs 300 crore) and that they are subject to relatively lighter touch regulation, the RBI, in its second financial stability report said “some concerns remain especially in the context of the rapidly expanding NBFC sector.” Referring to the fact that certain NBFCs, coming under the purview of other regulators, have been exempted from the regulatory purview of the RBI subject to certain conditions, the central bank said this has given rise to instances of certain functional activities of some exempted NBFCs (for example merchant banks) remaining unregulated.

ICAI cautions RBI on bank branch audits

Accounting regulator ICAI on Sunday cautioned the Reserve Bank of India against over-reliance on a centralised audit system for banks that have completed computerisation of their operations in view of the Rs 400 crore fraud unearthed at Citibank's Gurgaon branch. "The Citibank fraud has brought to forefront that audits need to be more vigorously followed at the branch level,rather than relying upon the audit of the information generated at the central/regional or zonal level alone," ICAI President Amarjit Chopra said.  The RBI, he said, is contemplating to do away with the branch audit system for banks that have opted for core banking solutions.H e said that deliberations are being held within the banking division of the finance ministry and in the RBI to replace branch audits with a centralised auditing system at such banks.

Dr.Subir Gokarn to inaugurate Bank of Maharashtra Specialised branch exclusively for Self Help Groups

Not keen on banks guaranteeing corporate bonds, says Gopinath

Reserve Bank of India (RBI) Deputy Governor Shyamala Gopinath today said the central bank was not keen on allowing banks to guarantee corporate bonds. “RBI has been of the view that while this may increase the attractiveness of the bonds in the short run, the underlying objective of de-risking banks’ balance sheets and the true price discovery for credit risk in the market can never be developed,” she said on the sidelines of the Fixed Income Money Market Derivatives Association of India-Primary Dealers Association conference here. She also said if India could have a term-CD market, it could be a surrogate for a term money market. An RBI and Securities and Exchange Board of India (Sebi) team was studying how other markets were handling interest rate futures, she said. “Other than the US and the UK, which have physical delivery, most emerging markets have not been able to mandate physical delivery,” said Gopinath. She said that 90 per cent of such trades were cash-settled, so we know that if it is cash-settled, then there is no perfect connect. “The issue for us is should we leave the market in such a limbo or should we try cash-settled to improve liquidity in the bond markets. If we try cash settled, then clearly there are two-three issues. One of the main issues was a realistic reference price for doing settlement,” Gopinath said. She said RBI was keen on developing the two-year and five-year market as banks were more interested in investing in these tenures than in the 10-year one. “The 10-year is okay but probably shorter term IRFs will move faster than the longer terms,” Gopinath said.

Awaiting Report In Citi Fraud Case To Decide Action – Shyamala Gopinath

India's central bank will await the report of its team looking into the alleged 3-billion-rupee ($70 million) fraud involving an employee of Citigroup Inc.'s Indian wealth management operations before deciding the course of action, central bank Deputy Governor Shyamala Gopinath said on Saturday. "Any such thing makes the regulator think whether we need to reiterate certain things or we ensure that systems are in place. Because this is a reputation risk and fiduciary risk," Shyamala Gopinath told reporters on the sidelines of an annual fixed income conference.

THE CHRONICLES OF STATE BANK OF INDIA

Frequent policy reviews reduce need for off-cycle actions: RBI

Reserve Bank of India governor D Subbarao has said that more frequent scheduling of policy reviews reduces the need for off-cycle action and thereby minimises the surprise element. “Both on the way up to the crisis and on the way down, we had to make several ‘off-cycle’ policy adjustments. There was wide agreement that these measures were expedient; nevertheless they did not go down well with the market because of the surprise element,” Subbarao said at an event in New Delhi. “This has prompted us to revise our communication strategy by introducing, with effect from September 2010, more structured scheduled mid-quarter reviews. While we have not surrendered our flexibility to take policy action as and when warranted, more frequent scheduling of policy reviews reduces the need for off-cycle action and thereby minimises the surprise element,” he said. “In calibrating the exit from the expansionary monetary stance of the crisis period, RBI has been struggling with growth-inflation dynamics over last one year. By the time of second quarter review in early November 2010, we had already raised policy interest rates five times,” he said, adding, “the central issue before this policy review was whether we should continue on the tightening spree.”

Freeing savings rate needs crowd's wisdom: Subbarao

Reserve Bank of India Governor D Subbarao on Friday said there were persuasive arguments both for and against deregulating the interest rate on savings accounts, which incidentally is one of the very few interest rates that remains administered. “The RBI has thrown open the issue of whether we should deregulate the savings rate. In the RBI, we realized that this is, like all big decisions, a judgment call and that we needed the ‘wisdom of the crowds’ in reaching a judgment,’’ said Subbaro in an address on ‘ Dilemmas in Central Bank Communication: Some Reflections on Recent Experience, in New Delhi.

Subbarao dishes out recipe for effective communication

Reserve Bank of India (RBI) Governor D Subbarao today outlined for the central bank a comprehensive communication strategy aimed at achieving clarity, effectiveness, honesty and consistency. “Open and transparent communication enhances policy effectiveness,” Subbarao said, adding that frequent announcements on the monetary policy stance prevented surprise to the markets and allowed RBI to get feedback from market players and the media. Subbarao was delivering the second Business Standard Lecture here, immediately after releasing Business Standard India 2011, the fourth volume of the annual India series published by BS Books, a division of Business Standard Limited. The first BS Lecture was delivered by noted economist Jagadish Bhagawati last year. In his hour-long lecture, Subbarao outlined 10 dilemmas in central bank communication. Barring two, all of these underlined the need for careful thinking while deciding how the central bank should transparently communicate its policy stance to the markets. One of the two dilemmas which raised doubts about the need for a completely transparent communication policy pertained to sharing of security features in currency notes with the people. The other one pertained to disclosing the composition of the central bank’s foreign exchange reserves, as he said such information was market-sensitive, could affect the country’s international relations, while holding back the information would not erode market efficiency. Subbarao concluded by saying that communication at RBI was not just a matter of openness and transparency but also of education, guidance, persuasion and dialogue, besides listening and learning. The RBI Governor appreciated the role of the media in analysing the central bank’s policy announcements, but expressed hope that it would be more responsible in its assessments and opinions.

FSDC guidelines to define Finance Ministry role

Guidelines being prepared on functioning of the Financial Stability and Development Council (FSDC), a high-level body set up to sort out inter-regulatory issues, will define the role of the finance ministry and how member regulators’ autonomy is not compromised. FSDC was formed to bring greater coordination among financial market regulators. The council is headed by the finance minister and has the Reserve Bank of India (RBI) governor and chairpersons of the Securities and Exchange Board of India, Insurance Regulatory and Development Authority and Pension Fund Regulatory and Development Authority as other members along with finance ministry officials. RBI and other regulators had earlier feared that their autonomy was at stake as FSDC was headed by the finance minister himself. After the assurance of FM, this fear was set to rest but functional guidelines was supposed to address this issue. According to information, the finance ministry’s role could be confined to an improving level of financial literacy and inclusion as well as devise means for doing this job, apart from being the lender of the last resort. A broad thrust of the guideline will also on FSDC handling only broader issues and ensuring that sectoral regulators continue to play their role as regulating and developing respective markets. In the first meeting of the council on last Friday in New Delhi, discussion took place regarding the formation of guidelines. A source close to the development said while the finance ministry could play a meaningful role, regulators enjoy certain autonomy and there was a thin line between the developmental role and interference which guidelines would take care. The guidelines should seek to draw a line between developmental role (that finance ministry can play) and interference, unless there is insoluble dispute between regulators. There will be a committee under the council headed by the RBI governor that will be first-level moderator of regulatory coordination. Guidelines will also decide that the council should hold minimum meetings during the year. However, the notification issued regarding FSDC suggests that the council should meet as frequent as possible. A sub-committee or a steering committee headed by the governor can meet more frequently. This sub-committee is in lieu of a high-level coordination committee, which is now dismantled.

Citibank fraud: Sebi, RBI coordinating efforts

The Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI) are working in close association in investigating the Rs 300-crore Citibank fraud. The capital markets regulator is already probing the role of brokerages in the matter. “The co-ordination has been happening between RBI and Sebi and the regulators are working jointly to understand what went wrong,” said Dr K M Abraham, a whole time member at Sebi. On the Bimal Jalan committee report, he said “the regulator will take stock of the reactions that have come and eventually the board” will take a decision. “We will need to put little more work into it,” he added.

RBI has headroom for rate hike

The Planning Commission said on Friday that the Reserve Bank of India has some headroom for rate hike of around 50 basis points. "There is some headroom left for rate hike by RBI of about 50 basis points, if we consider the interest rates of pre-crisis period," principal advisor to the Planning Commission Pronab Sen said on the sidelines of Intaglio, 2011 organised by students of Indian Institute of Management, Calcutta. There has been six rate hikes in calendar year 2010, but even then the rates are yet to reach to the levels before the global meltdown, he said. Asked whether the interest rate was high during the boom period prior to the meltdown, Sen said the economy grew by 9 per cent at the then prevailing interest rates. Speaking on inflationary pressure, primarily on food articles, Sen said there are no short-term measures to the problem as there are not enough tools with the government to tackle them. "Monetary policy measures can be used to tame inflation but at the very high price of sacrificing growth," he said. Sen said the Planning Commission is debating on reaching enough credit to 18 million micro enterprises to boost employment as the current policy is not helping them.

Blank checks

Even as the planning authorities have said there has been no regulatory failure (“Fraud at Citibank not a regulatory failure” January 6), there is a need for a quick review of the performance of not only all the branches of the financial sector but the regulatory efficacy to protect customer’s interests and access to service providers, supervisory and audit. There are other apprehensions too. Take the banks’ new “one service for one pin” rule for ATM operations. This is not to be viewed in isolation. There is a clear pattern. For three years now, the banking regulator has been trying to persuade the new-generation private banks to issue pass books. But the banks have not fallen in line and continue to post monthly accounts to customers. Private insurers have closed 400 branches owing to cost considerations as if there are no other avenues to achieve this.  Mutual funds have gone a step ahead. They have cautioned even old investors that their investments would be redeemed if they do not fulfil the know-your customer (KYC) requirements. This is authoritarian and arbitrary. They send emails and SMSs but do not send by post the requisite form for fulfilling the KYC requirements. For this, the customer has to go to some other place, stand in queue to obtain it and fill in the form with requisite proof, and then wait in another queue to file it. The respective regulators seem either helpless or have not appreciated the full implications of these restrictive practices. 

Gokarn Says India’s Food Inflation Rate Is ‘Worryingly High’

Reserve Bank of India Deputy Governor Subir Gokarn comments on the nation’s food inflation rate. He was speaking in the Indian city of Indore today. India’s food inflation, measured by wholesale prices, surged 18.32 percent in the week ended Dec. 25 from a year earlier, the highest since July, according to a commerce ministry statement in New Delhi today. “Food inflation level has been worryingly high despite good monsoon this year. “The new wholesale-price index, which has higher weight for protein sources, reflects the changing consumption pattern because prices of these items are rising steadily. “On the other hand, the consumer-price index basket still gives predominant weight to cereals, reflecting consumption pattern of many years ago. “Because, cereal prices have been favorably impacted by good monsoon, the overall inflation measured by the consumer- price index presents a relatively more optimistic picture. The prices are high but falling rapidly. “This difference adds another dimension to the problem of choosing between indices.”

RBI proposes timelines for Basel II norms

The Reserve Bank today proposed timelines for banks to migrate to advanced risk norms under Basel II, which entails improved standards for banks worldwide to assess their risks. I has proposed that banks can apply to the central bank for migrating to these norms earliest by April 1, 2012, while it may give approvals for that by March 31, 2014. The Reserve Bank said banks are advised to undertake an internal assessment of their preparedness for migration to the advanced norms and decide whether to migrate to them. Already, basic approach for three kinds of risks relating to credit, operation and markets -- have been implemented for banks in India.
Basel II norms are improved version of Basel I, for preparing banks to assess different kinds of risks. These norms assume significance after the global financial crisis. Basel I required banks to calculate a minimum level of capital that has to be kept aside by assigning risk weight for each of a limited number of asset classes like mortgages, consumer lending, corporate loans etc. Basel II goes beyond this, allowing banks to use their own risk measurement models to calculate the capital that has to be kept aside.

SBI to set up 600 financial inclusion centres

In a bid to give back-end support to business correspondents operating in rural areas and also exercise administrative control on them, State Bank of India has decided to set up 600 financial inclusion centres across the country. The move to set up FICs is aimed at powering the bank's drive to reach basic and affordable banking services to 12,421 out of the 72,315 unbanked villages (identified according to 2001 census) having a population of over 2,000 by March-end 2012. According to the Government and the Reserve Bank of India's directive, banks, especially from the public sector, between them have to ensure that all identified villages have appropriate banking services by March-end 2012. These services have to be provided using the business correspondent (BC) and other models with appropriate technology back-up. As the FICs have been envisaged by SBI, each centre will provide the BCs back-end support services for opening ‘no frills account', processing applications for micro-credit (up to Rs 25,000) sourced by them, and cash management. Further, the centre will also keep tabs on the progress made by the BC in furthering the bank's financial inclusion plan.

Five ways to impress your boss.....

Exceed your boss’ expectations

The easiest way to impress your boss is to be competent in the area where you work. “Be disciplined, be proactive, and help your boss in all situations, especially the more challenging assignments. Making sure you have your facts right, being well-prepared, delivering and then communicating to your boss about the good work you've done. “Always be around to take responsibility and go beyond his/her expectations,” says Rahul Kulkarni, head — HR, Kale Consultants.

Punctuality goes a long way

Another no-brainer, but it’s often ignored. “Whether it’s attending meetings on schedule, finishing projects on time or meeting timelines and time commitments, this is something that gets you into your boss’ good books,” says TeamLease Services MD Ashok Reddy.

Give credit and earn goodwill

When you complete a project, thank your boss for his inputs and support. At the same time, show that you genuinely value them, rather than just trying to massage his ego. If your boss gives you an assignment, treat it as top priority, even if it means pushing yourself to complete it. “It’ll earn you loads of brownie points,” says Ritesh Bhatia, who put in late nights at work for over a month to complete a job. At the end of the year, it bagged him a substantial bonus.

Show initiative

“Take ownership and responsibility of your own tasks. Put timelines and find solutions,” says Team-Lease’s Reddy. “The use of initiative is very important for a boss to realise your full potential,” he adds.

Never bad-mouth your boss

Don’t talk behind your boss’ back. If you have something you don’t like about him/her, keep it to yourself. Otherwise, it might end up reaching his/her ears one day. So save your criticisms, and say good things about your boss.

One transaction per PIN entry at ATM

Next time you go to an auto mated teller machine (ATM), of any bank, be ready to reenter your personal identification number (PIN) afresh for every transaction you wish to conduct, such as money withdrawal, balance enquiry and checking account details. In order to check misuse of ATM cards by unauthorized people, the Reserve Bank of India (RBI) has asked banks to allow only one transaction at ATM machines for one entry of PIN, which acts like a password for ATM transactions). Previously, customers were allowed to conduct multiple transactions through the ATM by punching in their PIN only once in a single session.

RBI may raise rates by 25 bps in Jan: Poll

The Reserve Bank of India (RBI) is expected to raise key rates by at least 25 basis points (bps) this month to tackle rising inflationary pressures. Analysts expect a total rise of 75 bps in 2011. As food and fuel prices push up inflation, median forecasts for January have been upwardly revised by 25 bps since the last poll in mid-December.  Of 17 economists surveyed, 12 expect RBI to increase rates by 25 bps in January, while one expects a 50 bps increase. The other four expect RBI to keep rates steady in January. RBI’s next policy review is on January 25. Currently at 6.25 per cent, RBI’s key lending rate or repo rate is seen at 6.5 per cent by January-end and seven per cent by year-end. The reverse repo or borrowing rate, which stands at 5.25 per cent, is seen at 5.5 per cent by January-end and six per cent by year-end.

NHB to start mortgage guarantee company by June

The National Housing Bank (NHB) will roll out its mortgage guarantee company by June this year. The firm is being set up to compensate banks and housing finance companies (HFCs) in case of defaults by home loan borrowers. For technical assistance, NHB has roped in a US-based mortgage guarantee firm as its fourth partner. The other two partners are the Asian Development Bank (ADB) and International Finance Corporation (IFC), both having a 10 per cent stake in the company. Declining to give out the name, NHB Chairman R V Verma said the international partner would provide the technical expertise required to run the proposed company. “They (the US-based company) are an experienced international player in mortgage guarantee business and also our strategic partner,” said Verma.

Keep hiking rates to cool inflation: IMF

The International Monetary Fund (IMF) says the Reserve Bank of India (RBI) should maintain a tight monetary policy stance and keep raising interest rates to tame inflation, which it sees as the key macroeconomic challenge. In its annual advisory to the Indian government, IMF has projected inflation at 6.5% by the end of this fiscal year, one percentage point higher than RBI’s own forecast, although the central bank has conceded that the rate could exceed its projection.

Rajnikant Patel appointed director of ICEX

Rajnikant Patel is back in the limelight. He has been appointed whole-time director at commodity futures exchange ICEX, in which his parent company, Reliance Capital, has assumed the role of anchor investor after acquiring the 26 per cent stake of original promoter India Bulls Financial Services. Patel spent the early years of his career with Reserve Bank of India. He joined Bombay Stock Exchange as executive director and was asked to demutualise and corporatise Asia’s oldest bourse. To his credit, BSE attracted good investors, including Frankfurt’s Deutsche Börse and Singapore’s SGX, who hold 5 per cent each. BSE, which was known as a brokers’ cartel, has cut them down to size. Brokers together hold less than 49 per cent now.

Citi effect: CVC may snoop more

The Central Vigilance Commission (CVC) is likely to increase its snooping on public sector banks in the wake of the R300-crore fraud in Citibank’s Gurgaon branch and the housing loan scam involving LIC Housing Finance that came to light last month. Both incidents have caused serious embarrassment to the country’s banking industry, which was largely congratulating itself on its prudence after it withstood the brunt of the global financial crisis. Sources in state-owned banks said Central vigilance officers (CVOs) are likely to monitor high value bank transactions to ensure that incidents of fraud are reduced. Transactions involving more than R1 million are currently considered as high value.

Corporation Bank Bags SKOCH Financial Inclusion Award 2011

Corporation Bank has bagged SKOCH Financial Inclusion Award 2011 - "Inclusion Champion of the Year" instituted by SKOCH Consultancy Services Pvt. Ltd. Shri Ramnath Pradeep, Chairman & Managing Director of the Bank received the Award from Dr. K C Chakrabarty, Deputy Governor, Reserve Bank of India in the presence of Dr. C Rangarajan, Chairman, Economic Advisory Council to the Prime Minister of India at an Award Function held in New Delhi, today.  Corporation Bank has received this Award for completion of its financial inclusion outreach at all the villages having population of above 2000 allotted to the Bank by various State Level Bankers’ Committees (SLBC) in December 2010 way ahead of the given deadline of March 2012. Corporation Bank was allotted 333 villages. Out of total of 333 villages allotted to the Bank, the Bank has branches in 14 villages and in other 319 locations the Bank has established Grameen Vikas Kendras (Branchless Banking Units). SKOCH Consultancy Services has instituted several of the oldest, most prestigious independent civilian awards in the field of financial inclusion, economy, industry, governance, capacity building, empowerment, inclusive growth, citizen services delivery, technology, academics and change management. Skoch Awards identify and salute best practices and comprehensively document, publish and put in public domain for the knowledge of others. The Awardees are selected by an eminent Jury of industry leaders, domain experts, economists and academicians. The Bank has been consistently receiving awards from organizations of repute like IDRBT, IBA, SKOCH etc. on various facets of implementation of technology, customer relationship management etc., over the last many years.

RBI modifies guidelines for core investment companies

The Reserve Bank of India (RBI) has modified the definitions in the guidelines to core investment companies that it considers as systemically important. In its directive issued in August 2010, RBI had advised all systemically important CICs to get a certificate of registration within a period of six months from the date of the notification. It has now further advised such CICs that the term "adjusted net worth" in the guidelines meant the aggregate, as appearing in the last audited balance sheet as at the end of the financial year, of owned funds as defined in non-banking financial (non-deposit accepting or holding) companies prudential norms issued in 2007. These should include 50 per cent of the unrealised appreciation in the book value of quoted investments as at the date of the last audited balance sheet as also at the end of the financial year, which are in excess of the aggregate market value of such investments over the book value of such investments and the increase, if any, in the equity share capital since the date of the last audited balance sheet. It may also include any decline or diminution in the aggregate book value of quoted investments (such diminution being calculated as the excess of the book value of such investments over the aggregate market value of such investments) and the reduction, if any, in the equity share capital since the date of the last audited balance sheet. Investments should include investment in shares, stocks, bonds, debentures or securities issued by the government or local authority or other marketable securities of a like nature.

2011: Lords Of Finance - D SUBBARAO GOVERNOR, RBI

People in the financial services sector make or break an economy. These are the most secretive of the people who make it impossible for anyone to forecast as to what they would do. Now into the penultimate phase of his three-year tenure as the Governor of the Reserve Bank of India, Duvvuri Subbarao has surprised a lot of people not just in Mint Street but also in New Delhi. Once seen as the finance ministry’s man in India’s central bank, Mr Subbarao appears to have come into his own, pitching for greater autonomy. This year, it is not only his inflation management that will be watched but also whether the government would be comfortable, approving a second term for him.

RBI asks banks to fix staff accountability to prevent frauds

The Rs 300 crore Citibank fraud has woken up the central bank to the reality of insiders' role in banking frauds. A concerned Reserve Bank of India (RBI) has asked banks to fix staff accountability to prevent such frauds from happening. The RBI has asked banks to ensure that the reporting system was suitably streamlined so that frauds were reported without any delay. Following the RBI guidelines, banks have already begun setting up a robust real-time system of checks and balances that will include monitoring all transactions over Rs 10 lakh on a daily basis. Now, all transactions of more than Rs 1 crore are being monitored by the banks' top management.  In response to a Right to Information Act (RTI) application, most public sector banks admitted that their employees have been found to be involved in encashment of fake cheques. What concerns the RBI is not just the recent fraud of Citibank, but many others in the past. Employees of many banks have been found involved in a wide range of frauds from counterfeiting to forging documents for loan approvals.

Integra bags contract from Allahabad Bank

Integra Micro Systems (P) Ltd, the Bangalore-based information technology (IT) services provider, has bagged a financial inclusion contract from Kolkata-based public sector lender Allahabad Bank. The five-year contract is estimated to be around Rs 100 crore, according to industry experts. Allahabad Bank has identified 1,850 villages to be covered under the financial inclusion programme by March 2012. These villages are spread across 147 districts in 12 states. All villages have been clubbed into three clusters, namely cluster I, II and III, which will be covered by the bank in phases. Recently, the Reserve Bank of India asked commercial banks to provide basic banking services in villages with a population of 2,000 and above, by 2012. Banks have also been asked to plan to cover villages with a population of less than 2,000 in an integrated manner over the next three to five years. Similarly, TCS, Bartronics and Little World are also in fray to bag a five-year financial inclusion contract from Bank of Maharashtra. The value of this deal is around Rs 120 crore, according to industry experts.

Bank of Maharashtra opens FLCCs in Pune

As a gift to the nation, on the eve of New Year on 31st December, 2010, Bank of Maharashtra has opened three Financial Literacy and Credit Counselling Centres (FLCCs) in Pune, Nasik and Aurangabad through its Mahabank Agricultural Research & Rural Development Foundation (MARDEF), a Trust sponsored by the Bank. These three FLCCs have been opened following a decision taken by the Chairman & Managing Director of the Bank, Shri.A.S.Bhattacharya in the State Level Bankers Committee (SLBC) meeting held on 23rd December 2010 in Mumbai. Bank of Maharashtra is convener of SLBC in the State of Maharashtra and holds the responsibility of six lead districts. The FLCCs will make General Public, farmers, inhabitants of rural & semi urban areas and poor people financially literate and will guide them in credit-related matters. The FLCCs will provide free financial literacy, education and credit counselling.

RADICAL CHANGE - Panel proposes makeover for sugar economy

A high-level government panel has recommended a radical overhaul of the sugar market, including partial indexing of cane prices to the retail price of the sweetener and relaxing restrictions on setting up of sugar factories. If implemented, the measures will reduce government intervention, usher in competition and make at least a section of the farmers happy with the ruling United Progressive Alliance. The panel, headed by former Reserve Bank of India governor C. Rangarajan, was constituted in September and is expected to submit its report to the Prime Minister next month. It was set up to provide a road map for addressing structural problems underlying volatility in sugar prices, a politically sensitive issue. At present, the sugar market is controlled, with the government deciding several factors from the price of cane to the quantum of offtake of sugar from the mills. To be sure, cane prices vary across the country as individual states fix the procurement price. The committee is now proposing that to begin with, the government should move to a uniform pricing regime that will prevent state governments from determining the sugar cane price. This has often been a politically contentious issue with the strong farmer lobby in states such as Uttar Pradesh, which is due to go to polls in 2012.

Bankers, RBI to discuss liquidity on January 11

Bankers are meeting Subir Gokarn, Deputy Governor of Reserve Bank of India (RBI) on January 11 to discuss the liquidity situation and interest rates ahead of the monetary policy on January 25.

RBI makes Public the Engagement Schedule of its Top Executives

From January 3, 2011, the Reserve Bank of India will place on its website, the public engagement schedule of the Governor and the Deputy Governors. The engagement schedule will include public speeches and outreach activities undertaken by the executives. The initiative is one more step towards demystifying the central bank and the offices of the Governor and the Deputy Governors.

Reserve Bank of India appoints M Sarkar Deb as director of State Bank of Mysore

State Bank of Mysore has announced that Reserve Bank of India has appointed M Sarkar Deb, Chief General Manager, Reserve Bank of India, Department of External Investments and Operations, Central Office, Mumbai as a director on the board of State Bank of Mysore in place of Ratna K Makhija with effect from 03 January 2011 until further orders.

Moneylenders should be out of the system: Dr K.C. Charabarty, Deputy Governor, RBI

The Reserve Bank of India's broad goal for financial inclusion is to ensure that there are only two players in the money-lending spectrum – banks and non-banking financial companies (NBFCs) – in the long term, Dr K.C. Chakrabarty, Deputy Governor, RBI, told Business Line, indicating that moneylenders should be out of the system. “Our broad goal is that NBFCs must capture the moneylenders' customers, and banks should capture NBFCs' customers,” he said. Banks must look at financial inclusion as a viable business, and should cover the six lakh villages that are still un-banked. Though banks have not made a spectacular progress, “there is a definite progress; every day something is happening,” he pointed out. The RBI is working out the eco-system, and “there is still a long way to go,” he added. According to him, 72,000 villages will be covered in the first phase of the financial inclusion, and the rest in the next phase. This will be done through brick and mortar branches and business correspondents (BCs) with the help of technology. “Through BCs, banks should provide four services — savings bank, pure deposit product, immediate/emergency credit and entrepreneurship credit. Each household must be given a kisan credit card or a general credit card. For those who do not deserve credit, start a financial educational programme, involve the society and the State governments and make them creditworthy so that everybody links with the bank,” said Dr Chakrabarty. Explaining the role of microfinance institutions (MFIs), he said though they were intermediaries, their role was important as they bring in people going to the moneylenders to the banks, he said. “Our focus is to bring in real competition. MFIs should reduce their interest rate, and commercial banks and RRBs must enter this field. That is the purpose of financial inclusion. On the present crisis in the MFI sector, Dr Chakrabarty said that there are some MFIs with good practices. “We have to identify good MFIs and encourage them, and also those who are not good and penalise them.” The Malegam Committee is already examining the grey areas, and “we will come out with the recommendations,” he said.

HC orders notice to RBI, bank on donations

The Karnataka High Court on Monday ordered emergent notice to the Reserve Bank of India (RBI) and Karnataka Bank in connection with a petition challenging the collection of donations by Karnataka Banks Employees’ Association (KBEA) from bank customers. The petitioners, the share holders of Karnataka Bank had moved the High Court over the collection of donation illegally by KBEA. They claimed that about Rs six crore was illegally collected.  The petitioners also submitted that the KBEA also owns a building worth Rs two crore in Mangalore. Mentioning that the KBEA also possess movable assets worth lakhs of rupees, they said the collection of donation is a violation of RBI directive and Apex Court order dated August 6, 1985.  The petitioners further submitted that despite the complaint no action has been taken by RBI or Karnataka Bank and sought directions to freeze the funds and prosecute the officers involved. The Division Bench comprising Chief Justice J S Khehar and Justice A S Bopanna ordered emergent notice.

Credit, debit card services hit in UP

LUCKNOW: Credit and debit card users had a tough time here on Monday as swiping machines at a number of outlets refused transactions. Apparently, the reason for the day-long snag was the ongoing upgradation work for meeting the deadline to implement the Reserve Bank of India (RBI) guidelines on card transactions. According to sources, the services remained affected throughout the state. As per the guidelines, banks should have a system for providing an additional authentication and validation of transactions made online or through interactive voice response (IVR) service. The step was taken in 2009 to enhance security of the online card transaction. The deadline to implement such a system was January 1, 2011 which the banks failed to meet. ''January 31, 2011 has been fixed as the new deadline for this,'' said Amarendra Sahoo, Regional Director, RBI.

The other side of the coin

Given inflationary conditions in India, withdrawing smalldenomination coins will only aggravate inflation in the economy. Consider this. If each one of the 1 billion Indians carries out an average of five transactions involving small change, it is rounded off to the nearest rupee. Assuming a minimum change of 20 paise per person for each transaction, this would amount to a loss of `1per person on five transactions every day. Add to this a loss of `500 crore owing to the rounding-off of amounts issued by bank cheques. So `1,000 crore is in hidden circulation, which will push up inflation by at least 5 percentage points. This can be avoided by reintroducing small-denomination coins irrespective of the cost, which is far lower than the inflation effect.  - Abhay Ekbote, Hyderabad

UID to replace PF account number

The Employees’ Provident Fund Organisation (EPFO) plans to replace the provident fund (PF) account number with a unique identification (UID) number, a move that would enable speedy transfer of subscribers’ funds in case of a job change and allow them to track their accounts online.  At present, if a subscriber changes his job, it takes months to transfer PF money from one account to another, as a transfer of records from one office to the other is required. Under these circumstances, alarge number of subscribers often withdraw the entire money in their account and go for a fresh account with the new employer. The replacement of PF account number with the UID number will be done after interconnecting all regional and suboffices of EPFO by March 2012.

BONGIRWAR NEW MD AND CEO OF IDBI CAPITAL

Abhay L Bongirwar, chief general manager, IDBI Bank, has been appointed as the managing director & CEO of IDBI Capital Market Services. He has taken over the charge from Nagendra Bhatnagar, with effect from December 31. A distinguished banker, Bongirwar has an experience of around three decades with IDBI Bank. He has been associated with project appraisals, investment banking and corporate banking, and has particular experience in infrastructure, retail banking, corporate debt restructuring and HRD/Training.

Discontinuing 25 paise coins is the right decision

RBI has notified discontinuing coins of 25 (and below) from June 30, 2011. It is time that RBI may plan for reducing sizes of other coins of 50-paise and one rupee to reduce minting-cost and to ease burden on pockets. However, two-rupee coins need to be discontinued because usually consumers have either to pay two-rupee coins in place of one-rupee coins, or shopkeepers gives unwanted items like candies etc in place of balance one-rupee coin to be returned. This is because of the fact that currency-chests often forces two-rupee coin-bags because of usual short supply one one-rupee coins. Most people in practice try to get rid of two-rupee coins. Design of bi-colour 10-rupee coins is not proper, and needs to be rectified. It will be better if it may also be attractively designed in a bigger size like single yellow-coloured five-rupee coins. It is time to discontinue printing of currency-notes of rupees five and 10 with more coins of these denominations put in circulation. It will not only save high printing-cost of low denomination notes with much lower life, but also will pave for further saving on currency-printing by reducing sizes of currency-notes of other denominations. It is not understood how and why RBI re-introduced five-rupee notes after they were once discontinued to be printed some decades ago! However, to practically check currency-related crimes like fake currency, black money, cash-loot etc, RBI should follow advanced countries by discontinuing printing of higher denomination currency of rupees 500 and 1000.

RBI fines Bombay Mercantile Rs 5 lakh

The Reserve Bank of India has imposed a penalty of Rs 5 lakh on Bombay Mercantile Co-operative Bank, Mumbai, for violation of instructions and guidelines of the RBI. The bank had violated the group exposure norms prescribed by the RBI by sanctioning 21 loans aggregating Rs 96.20 crore to Shah group of companies between November 17, 2008 and July 18, 2009, as against permitted ceiling of Rs 14.11 crore, the RBI said. The RBI had issued a show cause notice to the bank, in response to which the bank submitted a written reply. “After considering the facts of the case and the bank’s reply in the matter, the RBI came to the conclusion that the violations were substantiated and warranted imposition of the penalty,” the RBI said.

RBI mulls new ways for direct information flow from banks

Amid a surge in the number of bank scams, including the recent `400crore Citibank fraud, the Reserve Bank of India (RBI) is considering putting in place a system that will allow it to directly monitor all transactions at various banks. Once in place, the new system will enable complete automation for submission of transaction returns filed by banks to RBI, doing away with the need for manual intervention. RBI has begun the consultation process for implementing the new system, which could require banks to upgrade their computer hardware and software solutions, according to asenior official. Although the submission of transaction reports is already an automated process, it involves at least four steps that involve manual interventions. Currently, banks receive information from their various branches, then integrate the data and store it, followed by data conversion and then data submission to RBI. According to the proposed move, the entire data flow will be completely automated and will help banks in terms of enhanced data quality, timeliness, and reduced costs, besides a direct oversight by RBI for any possible fraud. Frauds in the banking sector had hit a record high of `2,017 crore in 2009-10. A fraud case, reportedly involving `400 crore, came to light last week. The police arrested a senior official at aCitibank branch in Gurgaon.  The new system will enable complete automation for submission of transaction returns filed by banks to RBI.

Extension for LIC chief? A test case for govt

When TS Vijayan, now the longest serving chairman of LIC, was appointed to the post in May 2006, he was given a five-year term till May 2011. At 53 then, he still had seven years to retire from the government-owned life insurer. Now very soon the government will have to take a call whether to give him another two years at LIC, make some other arrangement or let him retire two years before the prescribed age for superannuation. On Vijayan’s part, he has to overcome the taints from the recent scam that hit LIC as well as LIC Housing Finance, a subsidiary of the insurance major. For the government, Vijayan’s case will also be a test case since chiefs of two other PSU banks—MV Nair at Union Bank and KR Kamath at PNB—are also in a similar situation.

Bank account number is sole criteria for e-fund transfers now

Looking to speed up the transfer of funds electronically, banks will henceforth only take into account customers' account numbers for such transactions, ignoring other details like names. The new mechanism is intended to reduce the possibility of any errors and comes into effect from today (January 1, 2011). This is in line with a Reserve Bank directive under which customers would need to mention their account numbers twice for every electronic fund transfer request made through the Internet, as well as at bank branches. The central bank had directed the banks to put in place the appropriate systems and procedures to comply with the directive from the New Year. As per the RBI guidelines, the banks would need to process all inward electronic transactions solely on the basis of the account number of the customer. The new system would be applicable for all electronic payment gateways, such as RTGS, NEFT, NECS and ECS, besides fund transfers initiated by customers at bank branches or over the Internet. Although electronic payment methods are aimed at achieving expeditious fund transfers through a computerised system, the earlier practice involved manual intervention too, on account of the tedious process of matching various details such as customers' names and branch details.

Postal dept to join hands with banks for pre-paid cash cards

The Department of Post will collaborate with leading banks -- IDBI, HSBC and ICICI Bank--to provide cards (on the line of credit cards) to rural people in order to facilitate non-cash transactions for purchase of products and services. The card will come with pre-determined amount in rupees and could be operated at merchant locations, ATMs and designated post offices subject to approval by the Reserve Bank of India.  Disclosing his Department's 100-day agenda, Telecom and IT Minister Kapil Sibal on Saturday said his ministry will offer 'White label Pre-paid Cards' to the rural people. The objective of launching this card is to leverage cash handling expertise and the network of India Post in order to facilitate non-cash based transactions for purchase of products and services at retail outlets across the country and to earn revenue through value added service.

Need to stop all premature PF withdrawals: Finance to EPFO

The Finance Ministry has asked the Employees’ Provident Fund Organisation (EPFO) to stop all premature withdrawals and adhere to the “one instrument-one policy objective” principle. Though the EPF is meant for oldage income security, subscribers are currently allowed liberal advances and withdrawals for a variety of needs such as illness, education, house-building, marriage and education. “The distortion created by not adhering to the stated principle is that most of the employees, say 75 per cent, of the EPF retire with as little as less than Rs 35,000 in their accounts,” wrote R Gopalan, Secretary, Department of Financial Services, Ministry of Finance, to his Labour Ministry counterpart, Prabhat Chaturvedi on December 10. In fact, Gopalan has suggested that subscribers must take medical insurance to take care of their medical needs, home loans for house-building and educational loans for meeting educational expenses.

Wishing you a very happy new year....

RBI to stop NBFCs from raising surrogate deposits

The Reserve Bank of India is in the process of formulating guidelines in conjunction with the ministry of corporate affairs, to plug a regulatory gap that permits surrogate raising of deposits by NBFCs (Non Banking Financial Companies).  RBI said in its second Financial Stability Report, released on Thursday. NBFCs are exempt from the provisions of Section 67 of the Companies Act, 1956, in terms of which the issuance of shares or debentures to more than 49 investors needs to be through public issuance. This means that NBFCs, particularly those not regulated by the Reserve Bank, could issue debt or quasi-debt instruments to a large number of retail or institutional investors on a private placement basis. This would be tantamount to raising public deposits outside the extant regulatory framework. Specific concerns in this regard have arisen in the past in the context of private placement of Convertible Preference Shares.

PNB to develop Chandigarh village as model village

Punjab National Bank (PNB) has adopted one village in Chandigarh, which will be developed as a model village in terms of banking infrastructure and baking services.  PNB, which is a leading bank here, would provide banking services through ICT-enabled Business Correspondent model in its adopted village Kishangarh. A survey of village has been completed jointly by the Reserve Bank of India and PNB to ensure 100 per cent financial inclusion in the village. All those households that are disconnected from banking services would be issued biometric cards, said an official of RBI here. Speaking on this occasion, RBI Executive Director, G Gopalakrishna said that RBI had asked banks to cover unbanked villages by year 2012 as part of financial inclusion programme. "RBI has asked banks to cover villages that have not been covered yet and they have to complete this task by 2012," he said. He stressed the need to use technology like mobile technology, ICT model besides banking correspondents and brick and mortar model in reaching out to ruralites. “Still 50 per cent of the total population is not covered by banks. There are 32,000 bank branches across the country, while there are about 600,000 villages in the country, there is still a long way to go. Only by leveraging technology can we bridge this gap. We should ensure every person has a bank account, so that he can avail of various financial services offered by the government and other agencies,” he added.

The vice chair of India's fledgling Financial Stability & Development Council has helped to stabilise country's banking system

The new vice chair of India's fledgling Financial Stability & Development Council has helped to stabilise his country's banking system and comes 29th in the GFS Power 50. Despite being two thirds owned by the public sector and generally regarded as well capitalised, Indian banks did not escape the financial storm of 2007-2008, much to the alarm of the country's public and state officials. Dr Duvvuri Subbarao took over as governor of the Reserve Bank of India at the heart of the crisis in September 2008 and, following stints as a leading World Bank economist and secretary to the Prime Minister's Economic Advisory Council, was well equipped to minimise the fallout. Subbarao's influence in government in 2010 was underlined when he was offered the vice chairmanship of the Financial Stability & Development Council, a new body set up by finance minister Pranab Mukherjee, which will oversee the Insurance Regulatory and Development Authority (Irda), Securities and Exchange Board of India (Sebi) and Pension Fund Regulatory and Development Authority. The governor had previously expressed concerns that the autonomy of regulators would be undermined by the Council and, after effective lobbying, was offered the role chairing its only sub-committee. The governor has argued in favour of a review of the country's disparate and at times inconsistent banking laws to open up competition between financial institutions. Subbarao has also worked to restrain bank executive pay, with the Reserve Bank issuing draft compensation guidelines in July. Indian banks must now submit an annual declaration confirming that compensation structures are in line with Financial Stability Board standards. Subbarao set up a Financial Stability Unit within the central bank to make regular and systematic assessments of the stability of the Indian financial system and has worked with the Institute of Chartered Accountants of India to ensure that its banks comply with international accounting standards. Respected on the world stage and a regular speaker at the Bank of International Settlements, the 61-year-old has heavily criticised the "euphoria of financial alchemy" that preceded that crisis, insisting that the "real sector" should drive the financial sector and not the other way around. But he has also claimed that making banking boring - as advocated by the likes of economist Paul Krugman - is not necessarily a cure to the "ills" of the financial world. Banking, he believes, must still evolve, grow and innovate.