RBI holds district-level quarterly meet

The Reserve Bank of India General Manager Vikram S Bajwa presided over the quarterly meeting of the District level review committee. The District advisory committee was held in the Punjab National Bank zonal training centre in Dehradun on Friday. Addressing senior bank officials,  Bajwa said that banks should work to further improve customer services and ensure their full contribution towards facilitating financial inclusion. He said that banking services should be provided through POS machine/BC module in villages with a population of more than 2,000 and Atal Adarsh villages.  The PNB circle head V.K.Srivastav, officials of various banks in the District, heads and representatives of different departments concerned were also among those present.  

India’s ATM market is set to grow more than three-fold by 2015

In 1987, HSBC set up the country’s first automated teller machine (ATM) in Mumbai’s Andheri East. Soon, almost all banks followed suit. By end March 2010, India had 59,737 ATMs. And the number is set to grow manifold in the future, too. There will be about 175,000 ATMs by 2015, according to the latest forecast by Retail Banking Research (RBR), a strategic research and consulting company based in the UK. That is an expected growth rate of 193 per cent in ATMs. And it is this lucrative prospect that makes the big two ATM vendors in the world — Diebold and NCR — drool. “We are pretty overwhelmed with the prospects for 2015. The installed ATM base is growing at more than 20 per cent year-on-year,” says Naresh Hosangady, South Asia vice-president and managing director of Diebold. “There are only 51 ATMs out here for a million heads,” points out Jaivinder Gill, who runs the show at NCR India. The comparative ATM numbers per million for Brazil, Russia and China are higher — 704, 536 and 155, respectively.  According to RBR, ATM growth in the first half of this decade was driven by private banks. State-run banks have since taken charge, with the State Bank of India and its eight associate banks leading the pack. The SBI Group set up 18,000 ATMs in the past seven years. Its share of installed ATM terminals went up from 32 per cent to 36 per cent during this period. The group created a world record in ATM shipments when it set up 10,000 terminals in 2009-10. It was the key reason why the share of state-run banks in ATMs now stands at 70 per cent, up from 50 per cent in 2003. Six others — private players such as ICICI Bank, HDFC Bank and Axis Bank, and the state-run Punjab National Bank, Union Bank of India and Canara Bank — have together set up more than 2,000 ATMs. They account for a combined market share of 34 per cent. ATM numbers will move up sharply.  “The places where you have ATMs are also going up. Take malls, for instance,” says Gill, referring to the retail boom — you have many more places to swipe when you shop, eat and play. Then you have debit cards, which are to reach 450 million by 2015, double the current base. Of course, it remains to be seen if point-of-sale swipes will mean that many less number of people will flock to ATMs. If so, it can technically act as a brake on ATM installations. But the counter point is that with cheque-truncation, ATMs are now more than just cash dispensers. The shared-ATM networks of banks have dramatically changed the story. Currently, there are five of them — the National Financial Switch (NFS), Cashnet, Cashtree, Mitr and BANCS. NFS is the leader. In March 2010, NFS had 56,711  ATMs of 38 banks — 95 per cent of the country’s ATMs were on it. And ATM usage got a huge boost when the Reserve Bank of India (RBI) asked banks not to charge cardholders of their rivals. Users can now make five free transactions a month on an ATM of other banks. You pay for more of such usage.         

MBGB branches placed under CBS

All the branches of Madhya Bihar Gramin Bank (MBGB) have been put under the central banking system ( CBS) and, therefore, all the customers of a particular branch of the bank have been linked to its all other branches.  MBGB chairman P N Singh said this on Thursday at a function held here to celebrate the foundation of the bank.  RBI Regional Director G Mahalingam inaugurated the cultural function. Singh also received a trophy and award for the best Gramin Bank from NABARD General Manager V Mohan Doss. He was also given a personal award for being the best chairman among all the chairmen of the various gramin banks in the state. Among others, Punjab National Bank General Manager V Sriniwasan also praised the performance of MBGB.

95% households in NE do not have access to banking – Shyamala Gopinath, Deputy Governor, RBI

Altogether 95 per cent households in North East do not have access to banking services against the national average of 43 per cent, RBI Deputy Governor Shyamala Gopinath said. "Despite efforts by RBI during the last 75 years, there are as many as 145 million households in the country not having access to banking", she said while speaking at the RBI's Financial Outreach camp at Karsingsa near. She said RBI has been launching such programmes in all the states of the region to extend banking services to every unbanked village. "Our institution has taken a conscious decision to bring the households into the banking fold which will not only result in making available the affordable banking services to everyone but will inculcate savings and investment habits among the people", she said.  "The challenge is enormous, but necessary, because financial inclusion is what will give people an opportunity to build better lives for themselves and their children", she added. Karsingsa, a village within the vicinity of the state's capital, having a population of over 2000 does not have banking facilities. The camp has served as a boon for the denizens as 203 No Frill Account (Zero Balance Account) with zero deposits were opened with SBI branches at Nirjuli and Naharlagun.

Central banks must respond in real time, says Subbarao

When Duvvuri Subbarao took charge as the twenty-second governor of the Reserve Bank of India (RBI) in September, 2008, he had to act swiftly to counter the impact of the global economic slowdown on the Indian economy.  Subbarao’s first eight months in office saw RBI reducing its repo rate six times and reverse repo rate four times, to support a slowing domestic economy. Repo rate was reduced 475 basis points and reverse repo rate 275 basis points during this period.  “When asked what he thought of the French Revolution, Mao Zedong had famously replied: It is too early to tell. People who take a long view of history, like Mao, take the position that it is just too soon to draw the lessons of the crisis,” Subbarao said on Friday in his welcome remarks at the start of the third PR Brahmananda Memorial Lecture by Stanley Fischer, governor of the Bank of Israel.  “Policy practitioners do not have the luxury of historians; they have to respond to unfolding developments in real time,” Subbarao added.  It appears that RBI’s efforts to pull the domestic economy out of slumber have succeeded, as India’s gross domestic product (GDP) growth is seen accelerating to 8.6 per cent in the current financial year. The country’s economy had expanded 8 per cent in 2009-10 and 6.8 per cent in 2008-09.  However, inflation appears to be playing the spoilsport, with the headline number climbing to 8.4 per cent in December, driven by high food prices. The central bank has also revised its inflation forecast for March to 7 per cent from 5.5 per cent earlier.  Rising prices have prompted RBI to raise its key policy rates seven times since March 2010. The repo rate has been raised 175 basis points to 6.5 per cent, while the reverse repo rate was raised 225 basis points to 5.5 per cent during this period. Things have become complicated, as the growth in India’s industrial output in December slid to a 20-month low of 1.6 per cent. Earlier this week, in Bhopal, Subbarao had admitted that balancing growth and inflation was a tough act.  “We want to set interest rates in a way that inflation can be contained without hampering the growth rate. But, this is not going to be an easy balancing act to resort to,” he had told reporters.  Most analysts reckon slow growth in industrial production is unlikely to convince RBI to keep rates unchanged in its next policy met, due on March 17, as inflation continues to remain a major concern.  “While there is a deceleration in growth, inflation is a bigger problem... we thus maintain our view of the RBI raising (rates) by an additional 50 basis points in 2011 and 2012,” Rohini Malkani and Anushka Shah, analysts with Citigroup Global Markets, said in a note.  Goldman Sachs expects RBI to increase rates 25 basis points in March and another 50 basis points in this calendar year. Some analysts, who did not wish to be named, however, said it was too early to take a long-term view on the direction of interest rates, with food inflation cooling to a seven-week low of 13 per cent for the week ended January 29 and growth in industrial production faltering.  A further slowdown in investment activities, coupled with easing food prices, might encourage RBI to take a pause before raising rates again, they said.  Subbarao, himself, believes that the central bank’s policy should take into consideration the present macroeconomic challenges.  “The central bankers were a triumphant lot in the years before the crisis.... The crisis then came as a serious blow to the credibility of central banks... the challenge for central banks, as indeed for all policy makers, is to learn the lessons of the crisis and reflect them in their policies,” Subbarao said. 

Cap likely on home loan pre-payment penalty

Home loan borrowers may get a piece of good news soon. Pre-payment penalties, which are 2 per cent or above of the outstanding loan for most banks at present, may be brought down to 0.5-1 per cent.  The Reserve Bank of India (RBI) is in talks with banks to bring down pre-payment penalty charges and has sought their views on how much the cap should be. People in the banking industry say a consensus has emerged among lenders that a penalty within 1 per cent of the outstanding loan will be feasible.  “There are two reasons why banks charge pre-payment penalty. First, from the asset-liability management perspective, when a bank lends for a longer tenure, it also needs to raise funds accordingly. So, there are liabilities to be paid off over a period of time. This becomes difficult when loans are paid before time. Second, in view of the administration and processing costs, banks may tend to charge less in the initial years in the hope that charging more in future would make up for it,” IDBI Bank Executive Director R K Bansal said.  The regulator’s objection to high charges is with respect to fair treatment to customers.

Lifting FDI curbs will help India trigger fund inflows: Locke

Reducing tariff and non-tariff barriers and lifting restrictions on foreign direct investment ( FDI )) could help India trigger fund inflows, crucial to help fix the country's creaking infrastructure, US Commerce Secretary Gary Locke said here Friday.  Earlier Friday, Locke met with the famed Dabbawalas of Mumbai and appreciated their management skills and strategising abilities.  Locke also met the Reserve Bank of India Governor D.Subbarao.

SBI's loan mela inaugurated by G.Mahalingam, Regional Director, RBI

A large number of prospective loan seekers thronged the SBI's three-day-long 'Vasant Rin Utsav' which was inaugurated by Reserve Bank of India's Regional Director G Mahalingam at S K Memorial Hall here on Friday.  After the inauguration, keys of six cars and sanction letters of five loans were given away to borrowers by the chief general manager, SBI, Jeevandas Narayan, who was present as chief guest.  The main attraction of the fair is 50 % concession in processing fee for car loans and 0.25% concession in interest rate from 37th month till the tenure of the home loans. About 12 car dealers and 20 builders have put up their stalls at the fair.

Star TV Talent Leadership and HR Awards at the World HRD Congress

Sandip Ghose, Regional Director, RBI, New Delhi distributing Star TV Talent Leadership and HR Awards at the World HRD Congress

RBI Governor holds talks with CS

Reserve Bank of India Governor D Subbarao and senior RBI officials held talks with the Chief Secretary Awani Vaish and senior officials of the State Government at Bhopal on Thursday. They expressed concern over the ratio reduction in loan deposit in tribal-dominated districts. It was informed at the meeting that there was 40 per cent depletion in loan deposit in eight tribal districts. The Reserve Bank of India Governor instructed the banks to come up with improvement in this regard. There should be 65 per cent loan deposit in the state and 40 per cent in tribal districts. The banks assured that they would extend the figure in next financial year. Welcoming the visit of Reserve Bank of India Governor to Madhya Pradesh, the Chief Secretary said that the regional office of Reserve Bank of India was working actively. The Reserve Bank of India Governor said that he was very much impressed with the State Government for designing joint agenda, which could not be seen in other States. At the meeting, the State Government drew the attention of the Reserve Bank of India Governor to State Government grant to set up hand held device, smart card and bio metric ATM by banks. Subbarao was informed that banking facility at the village more than 2000 population needed in Madhya Pradesh. Subbarao appreciated this initiative and said it would be decided only after positive results of financial audit in next financial year. E-kiosk is being used by State Bank of India that should be conducted by other banks too. The RBI Governor was apprised of education loan for the education of poor children under Government guarantee. Subbarao asked the banks to provide educational loan of Rs 4 lakh without guarantee so as to benefit maximum people. The security to banks was also discussed at the meeting. 

BOB opens its all Ladies staff Branch at Pune

Bank of Baroda has opened its all women staff branch at Sinhgad Road,Pune.The branch was inaugurated at the hands of Shri R K Bakshi,ED of Bank of Baroda,in the presence of Ms Kamala Rajan, CGM & Principal, College of Agriculture Banking, RBI, Pune. N Ramani,Corporate General Manager and C D Kalkar,GM-Maharashtra & Goa Zone of the Bank.Speaking on the occasion,R K Bakshi said that women are making mark in all walks of life and banking is no exception.He assured the customers that the branch will be providing advisory services to the customers in addition to normal banking products and services.

RBI again raps banks on teaser loans

The Reserve Bank of India (RBI) has once again expressed its discomfort over teaser loan rates and questioned banks’ business model for offering such schemes.  “Some banks are taking deposits at an interest rate of 9 per cent and giving long-term loans, especially home loans, at 8.5 per cent. I don’t know what type of accounting is needed to show that this is not a very profitable business,” RBI Deputy Governor K C Chakrabarty said, while addressing a seminar on International Financial Reporting Standards.  October, RBI had raised the standard provisioning requirement for teaser loans five-fold, to two per cent, to discourage banks from offering such schemes. Teaser loans are those which charge lower interest rates in the initial period and a higher one in later years. State Bank of India (SBI), the country’s largest bank, has been running such a scheme for the past two years. SBI tweaked the scheme following the increase in provisioning requirement. It has since written to RBI to exempt these from the requirement.    Its defense of the scheme is that it has helped the common man. SBI chairman O P Bhatt recently said, at the World Economic Forum in Davos, that almost 80 per cent of the home loans given by SBI were below Rs 10 lakh, which meant the ‘aam admi’ was being empowered. He said the bank had given home loans to nearly 300,000 people in India. “I am not fighting with RBI, but only clarifying. We only gave a discount on the rate for the first two to three years and the rate is higher than the cost of my funds. So, what is wrong in what SBI does?” Bhatt had said. However, the banking regulator believes such schemes expose banks to the risk of defaults in future, as the borrower might not be aware of the scale of increase in monthly installments as interest rates rise. Most lenders which had offered such home loan schemes had then withdrawn these, such as HDFC and ICICI banks, following the regulator’s expressed concern.   

Flexible inflation targeting best, says Bank of Israel Governor

Bank of Israel Governor and a former official of International Monetary Fund (IMF) Stanley Fischer has argued that "flexible inflation targeting is the best way of conducting money policy". "The tripartite set of goals of money policy set out in modern central bank laws provide the best understanding of what a central bank should try to achieve.  Among other issues a central bank should aim to maintain price stability, to support the other goals of economic policy, particularly growth and employment, so long as medium term price stability ­over the course of a year or two or even three ­is preserved, and to support and promote the stability and efficiency of the financial system," Fischer said while delivering the third PR Brahmananda Memorial Lecture on `Central Bank Lessons from the GlobalCrisis'.  "But 'flexible' does not mean that a country should not intervene in the foreign exchange market, or that the capital account should be completely open. Rather, it means that the country should not draw an exchange rate line in the sand and declare 'thus far, and no further'. Countries should not commit themselves to defending a particular exchange rate," he said.

RBI Board meets at Bhopal

The Central Board of the Reserve Bank of India met today in Bhopal. The meeting reviewed key economic, monetary and financial developments. Dr D. Subbarao, Governor, Reserve Bank of India chaired the meeting. Shri Y.H. Malegam, Prof. Suresh Tendulkar, Prof. U.R. Rao, Shri Lakshmi Chand, Shri H.P. Ranina, Smt. Shashi Rajagopalan, Shri Suresh Neotia, Dr. A. Vaidyanathan, Prof M. M. Sharma and Shri Sanjay Labroo were present at the meeting of the Central Board. Deputy Governors of the Reserve Bank, Smt. Shyamala Gopinath, Dr. K.C. Chakrabarty, Dr. Subir Gokarn and Shri Anand Sinha were also present.  The Central Board of Directors of the Reserve Bank meets at least once every quarter. The Board has scheduled meetings in Mumbai, Chennai and Kolkata each year. The post-budget meeting of the Board, traditionally held in New Delhi, is addressed by the Union Finance Minister. The other meetings of the Board are held in the remaining state capitals by rotation. The main function of the Central Board of the Reserve Bank is to provide overall direction to its affairs.  The Governor had a meeting today with the senior State Government and bank officials. The banks agreed to achieve a overall target of 65% CD ratio and target of 40% CD ratio in the 8 low CD ratio districts, mostly tribal by 2011-12. It was decided that a team of officers from Reserve Bank of India, Commercial Banks and State Government would  visit villages to make assessment of the work done, prepare a financial inclusion plan and ensure that by end of March 2012 all 2736 villages with population of above 2000 are covered in Madhya Pradesh. The banks may also draw up a special plan to include nearby villages below 2000 population. The State Government has also assured to include financial education in the curriculum of schools at higher secondary level by the academic year 2012-13. The other issues discussed at the meeting included higher credit flow for education loans, issues relating to urban co-operative banks and security of bank branches.   Earlier, on February 7 and 8, 2011, Dr. Subbarao visited Chhattisgarh. The Governor visited Khadma Village in Dharmatri district of Chhattisgarh for an outreach programme, where he interacted with the villagers, school children and SHGs, etc. The Governor called on the Chief Minister Dr. Raman Singh and discussed issues of mutual interest. Along with the Chief Minister, he laid the foundation stone of office building for RBI Office at Naya Raipur.  The Governor also interacted with students of IIM, Raipur. 

RBI Governor highlights five dilemmas in regulatory role

Reserve Bank of India (RBI) Governor D Subbarao and four Deputy Governors addressed a gathering of bankers in a meeting organised by Bankers' Club, Bhopal on Wednesday at Hotel Noor-us-Sabah Palace. Executive Director of Central Bank of India RK Dubey was also present on the occasion.  Speaking on the occasion, Subbarao highlighted the five dilemmas being faced by the RBI in its regulatory role. He also underlined the fact that unless the commercial banks, which are the conduit to implement various policy decisions, do not understand the underlying concerns, such policies will not be effective.  Elaborating on the five dilemmas, he stated that the first issue is how to balance the demands of growth and inflation management. Food inflation and commodity price inflation, as is well known, are the two main drivers of inflation. Changing food habits, especially in rural areas, due to increased consumption capacity, is causing structural inflation. Rise in commodity prices, such as oil, is resulting in commodity price inflation. Credit growth is another factor contributing to inflation. The challenge before the RBI is to balance the demands of growth and inflation, and ensure that the relevant policies result in expected outcomes. Deputy Governor Shyamala Gopinath explained the importance of financial stability reports which enable Reserve Bank of India to foresee different scenarios and undertake remedial measures. Developments in the recent past show that even in developed financial economies having well developed market, systemic risk is significantly higher than under adverse market conditions. Deputy Governor KC Chakrabarty exhorted banks to activate all their field controlling offices and branch offices so that banking facilities reach the entire population. At present, bank credit is not available to a majority of the population and almost a half of the population is bereft of banking services. Thus the need for activating the field units, Chakrabarty explained. Deputy Governor Subir Gokarn made an assessment of the state of the economy and the rapidly changing global environment. It is difficult to predict about emerging scenarios. Rising oil prices is causing greater concern. Deputy Governor Anand Sinha explained the need for collective behaviour of the system. He also underlined the need for bringing non-banking system under some kind of regulation, similar to the banking system. Executive Director of Central Bank of India RK Dubey spoke about the declining CD ratio in the State and pointed out that financial tie ups for big industrial units are mostly finalised outside the State and do not get reflected in the CD ratio of the State. 

Hope govt adopts fiscal consolidation plan: D Subbarao

The government should adopt a plan of fiscal consolidation in the coming financial year to April 2012 and beyond, the Reserve Bank of India Governor Duvvuri Subbarao said on Thursday. Subbarao's comments come just over two weeks before Finance Minister Pranab Mukherjee releases his budget for the next financial year on Feb. 28. Persistently high food prices have been a bugbear for the Reserve Bank. The central bank at its January 25 credit policy had warned of food inflation spilling over to the general inflation process as it raised the reverse repo and repo rates by 25 bps. Today, Governor D Subbarao has said that it is difficult to balance growth and inflation. Recent spurt in oil prices and the crisis in Egypt would add to India's domestic woes. Subbarao said, "Spurt in oil prices on Egypt crisis will hurt India," adding,"we have to be prepared for a further spurt in oil prices." He said structural rigidity and rising commodity prices are pushing inflation higher. He also does not see much movement in prices of wheat and rice, adding that it is difficult to say that the government's welfare schemes are feeding inflation. Food inflation eased in late January to just over 13% after having reached a one-year high of more than 18% on December 25, due to soaring prices of onions and potatoes.  The RBI chief also urged for a consolidation in the Indian banking system. He said it is up to banks to come forward with merger proposals. He added that the size of Indian banks was smaller compared to their global peers. His advice to banks was to "set interest rates in a way that they do not hurt growth." He further said that the central bank would evaluate the business models of applicants looking to setup new banks. The Malegam Committee had recently recommended a 24% interest rate cap on loans paid by microfinance institutions. He said he would meet representatives of states and MFIs to discuss the Malegam report and work out modalities to implement the panel's recommendations. He also revealed that plans are in the works to form a panel to study a slowdown in foreign direct investment. Subbarao said that the panel would suggest ways to encourage FDI.

RBI must understand factors responsible for decline in FDI: Subbarao

The Reserve Bank of India would conduct an internal study on practices responsible for the decline in the direct foreign investment (FDI) flows in the country. Talking to media in Bhopal after the meeting of the central board of Reserve Bank of India, Governor D. Subbarao said that RBI must understand the factors responsible for the decline in the FDI.

Bank unions suggest ‘Banking Ombudsman’ be changed to ‘Banking Lokpal’

Bank employee unions insist name of grievances cell should be easily understood by common citizens; also push for a special counter for senior citizens. A committee set up by the Reserve Bank of India (RBI) to look into the issues of customer services has agreed to change the name of the Banking Ombudsman to something simpler like the 'Banking Lokpal', which is less of a tongue-twister.  This suggestion was made by the Indian National Bank Employees' Federation (INBEF) to the committee headed by M Damodaran as many customers from rural areas were not familiar with the term ombudsman and would therefore not be forthcoming with their complaints on banking services to the department.   Subhash Sawant, general secretary, INBEF, said, "Many bank customers mainly from rural customers do not understand what ombudsman is all about. When we ask them to file a complaint with the ombudsman, they simply ask us, 'What is ombudsman?'  The Federation has also suggested that the number of offices of the banking ombudsman be increased. Currently there is only one office that is based in Mumbai and it covers mainly Maharashtra and Goa. It has also asked that a special counter should cater to senior citizens at the branches of all banks, during the first 10 days of every month, as the number of pensioners has increased sharply.  In its reply to IBNEF with respect to its suggestions, the committee said, "The title of the RBI Banking Ombudsman may be changed to a simpler, easily understandable one. The area of operations of the Ombudsman may also be enlarged." In a letter to the Federation the committee also said, "The number of pensioners is increasing. Special counters for pensioners may be considered especially during the first week of every month."   "The committee has agreed in principle to our recommendations. We welcome the response on the matter of senior citizens. About the matter of changing the name of the banking ombudsman, we will know when the report is out," Mr Sawant said.  Other bank unions were also represented along with the IBNEF at the meeting with the Damodaran committee which also discussed issues like clean currency notes, shortage of banking staff and banking-related security.

Panel to oversee Presidency faculty

The state government has formed a committee to oversee faculty recruitment at Presidency University to ensure quality. Former RBI governor Bimal Jalan, economist Amiya Bagchi, chairman of West Bengal Council for Higher Education, Subimal Sen and vice- chancellor of the university, Amita Chatterjee,  have been named by the state higher education department as members of the committee. Advertisements will be published in newspapers and applications invited from candidates across the country and abroad. "Presidency University has a long tradition of excellence. Every recruitment made will be done keeping in mind that this tradition has to be furthered," said state higher education secretary, Satish Tewari.

Unhappy about poor show, chief secy asks banks to set target

Unhappy with poor credit-deposit (CD) ratio in Jharkhand, chief secretary A K singh on Wednesday asked the bankers in the state to pull their socks up by setting monthly targets and conducting day-to-day monitoring. Singh's comments came at a time when the Reserve Bank of India is monitoring the financial inclusion drive of the banks all over the country. The chief secretary was addressing the 32nd state level bankers' committee (SLBC) meet on Wednesday. The chief secretary was irked to find that the CD ratio in the state by December 2010 was 43.99 per cent which was not only below the national benchmark of 60 per cent but also lower than the December 2009 figure of 45.22 per cent. 

It is up to government to deal with black money issue: RBI

Reserve Bank of India (RBI) today said it had limited powers to deal with the issue of black money as confidentiality clause came in the way of handling the problem of money kept in bank lockers.  Current rules do not allow banks to find out what had been kept in their lockers, RBI Governor D Subbarao said at a press conference here. "All this is governed by a confidentiality clause about which nothing can be done at the moment," he said, answering a query on unaccounted money in the lockers of Indian banks. Answering another question, Subbarao, who was on a two -day visit to the city, said although the RBI had no role to play in the Union Budget, it stood for fiscal consolidation of the banks. Subbarao said maintaining a balance between financial growth and controlling inflation was a tough task, but the apex bank was competent enough to handle this scenario.  

India to face challenge of inclusive growth

Reserve Bank of India (RBI) Governor D. Subbarao said India would face the challenges of inclusive growth in the coming days as the country would move on a higher growth trajectory.  Inaugurating an exhibition named Newsibition here on Wednesday, Subbarao said: ""In the second decade of the new millennium we are going to face challenges of inclusive growth and of meeting the challenges of transcending to higher growth rate."  Newsibition traces the journey of the Reserve Bank down 75 years through photographs, documents and visuals. The exhibition has been divided into nine sections representing different phases of Reserve Bank's evolution.  "Last year, the Reserve Bank of India (RBI) completed its 75th year. Since the time RBI was established 75 years back, how it grew and the area in which RBI worked, the governors of RBI, the security features of the currency notes, this is all we want to show through this exhibition," said Alpana Killewala, Spokesperson of RBI.  The exhibition is part of the Bank's outreach and financial literacy efforts, which commenced with the setting up of the Reserve Bank's Monetary Museum in Mumbai.

GOVT BANKS OPT FOR FASTER PROMOTIONS

It is now possible for public sector bank employees to climb the career ladder faster. Keeping in mind the shortfall that is expected at the top in the coming years, banks are tweaking their human resource policies. According to studies conducted by different banks, around 340,000 lakh employees will retire in the next 10 years. To compensate for this and support expansion, banks have to look at employing 500,000 to 700,000 people in the next 10 years.  To start with, some banks have introduced a fast-track promotion channel through which a deserving employee can rise much faster as compared to the traditional route.  Union Bank of India’s fast track channel can promote a scale-1 employee to scale-5 in 11 years.  “Thus, if a person joins our bank at the age of 23-25 years, he/she can be an assistant general manager by the age of 35-40,” said Chairman and Managing Director M V Nair.  The bank has promoted 548 employees through this system in the last four financial years. “This amounts to 11 per cent of total promotions in the period,” said Nair.  To take the shorter route, an employee must clear written tests, group discussions and personal interviews. promotion channel. “Currently, the average age at the general managyears,” said to look into issues related to human resources in public sector banks had pointed out that in the next five years, 80 per cent general managers, 65 per cent deputy general managers, 58 per cent assistant general managers and 44 per cent chief managers would retire. To address the issue, the committee had proposed a comprehensive strategy for succession planning and leadership development.  

Subbarao keen to retain his signature’s weight

The privileges of being the Governor of the Reserve Bank of India are many. One of them is having one’s signature stamped across the millions of currency notes of various denominations churned out from the country’s mints. Governor D Subbarao, however, indicated a governor may not always swell with pride when he stares down at his signature plastered on currency notes. “The value I attach to my sign is not just about the validity of the currency, but to ensure the purchasing power was preserved,” Subbarao told students of the Indian Institute of Management yesterday, on being asked how he felt looking at the wad of currency notes bearing his name.  Inflation has emerged as a difficult problem for Subbarao and he has been forced to revise upwards the forecast for March inflation to seven per cent from the earlier 5.5 per cent. The headline number, at 8.4 per cent, is way above the perceived comfort zone of 4-4.5 per cent. At a felicitation function for the Governor in his ancestral town of Eluru in Andhra Pradesh, a speaker had said Subbarao was very close to the hearts of people. He had reckoned that Subbarao was close to the hearts as people put the currency notes signed by him in the upper pockets of their shirts. Subbarao knows that soaring food prices are now giving heartaches to many.  Perhaps more comfortable with the grilling by students rather than the press corps, Subbarao was full of anecdotes and wise cracks. When asked by reporters what went into monetary policy formulation, the stock answer remains the central bank looked at a plethora of domestic and international economic and banking data to get the inflation growth mix right. Subbarao had a different answer when the question was asked by the students. “There is no substitute for good judgment,” said Subbarao. Central banking works the best with a strong gut feeling, believes the governor. That, perhaps, explains why Subbarao has adopted a gradualist approach to the rise in interest rates — 175 basis points in the repo rate and 225 bps in the reverse repo rate, in seven rounds since March 2010.   He also believed in transparency, Subbarao emphasised. That is why, under Subbarao, RBI has added a new paragraph in monetary policy statements that indicates the expectations of the central bank.  “For a long time, we were nontransparent...we had our own expectations but would not tell that to markets,” Subbarao said. The data on prices, one, however, fears, is putting paid to that gut feel as well as the ‘expectations’ down the line. While he was at the microphone, Subbarao wasn’t sure he would get rapt attention from those assembled in the IIM auditorium that morning.  The RBI governor has to deal with rather dreary and esoteric subjects that have a sedative impact on an average individual. Ironically, Subbarao’s wife Urmila is no different. “Usually when I start talking, my wife goes off to sleep. So please stay awake,” Subbarao said, pointing to Urmila, his wife, who was among the audience.  Acknowledging the central bank’s vast canvas of operations that deal with swanky treasury rooms of multinational banks to humble dwelling of a farmer in forlorn parts of the country, the governor had another candid admission to make.  “Two-and-a-half years as the RBI governor, I am not sure what RBI does,” he said. Subbarao’s term ends this September. One hopes he gets a longer run, especially because his three immediate predecessors had a minimum five-year tenure.

Inauguration of the exhibition ‘Mint Road Milestones’

Reserve Bank of India Governor D Subbarao looking at a photo after the inauguration of the exhibition ‘Mint Road Milestones,’ based on the 75-year journey of the RBI, in Bhopal.     

Hard to ease liquidity amid high inflation, says Subbarao

The Reserve Bank of India faces a challenge in easing liquidity without signalling that it is loosening its anti-inflationary monetary policy stance, Duvvuri Subbarao, governor of the central bank said today.  Liquidity in India’s financial system has been tight over the last few months, largely due to lower-than-expected government spending, forcing banks to borrow on average a net of around `850 billion ($18.72 billion) a day from the central bank at its repo window from November through January. The figure has in February dropped to around `720 billion on the back of some pickup in the government spending but advance tax outflows in March are expected again to tighten cash conditions.  India is also battling stubbornly high inflation, standing at 8.43 per cent in December, and easy cash conditions could aggravate the inflationary pressures.  “The dilemma is how to manage liquidity, ease liquidity without giving the message, indication, impression that we are loosening our anti-inflationary stance,” Subbarao said.  “We do it either by CRR (cash reserve ratio) or by OMO (open market operation) but the question is if we reduce the CRR or do OMO in a situation, in acontext when we are trying to signal an anti-inflationary stance, the fear is the market gets mixed signals,” he said while speaking in central India.  CRR is the percentage of deposits that banks must set aside with the central bank as cash, and some market participants have been expecting a cut in this ratio to help ease the tight cash.  In a bid to help ease the severe liquidity crunch in the market, the central bank in its December monetary policy statement announced a four stage open market operation programme, offering to buy up to `480 billion from the market. The RBI has said it wants to keep liquidity in the banking system in a range between a `500 billion shortfall and a `500 billion surplus, or more generally a deficit or surplus of 1 per cent of banks’ total deposits.  However, the central bank may have to move cautiously on any liquidity easing measures, as inflationary pressures are expected to persist in the current calendar year.  Inflationary pressures from domestic sources as well as global commodity prices may intensify in some cases, RBI Deputy Governor Subir Gokarn said today, making the RBI’s job of balancing fighting inflation and easing liquidity that much more difficult.  

Bank credit offtake up 23.4%: RBI

Credit offtake from public and private sector banks in the country grew by 23.4% for the one-year period ended January 28, indicating an upswing in industrial activity, says the Reserve Bank of India (RBI).  For the one-year ended January 28 credit offtake stood at Rs 38.47 lakh crore as against Rs 31.18 lakh crore during the year ago period.  During the period, deposits went up to Rs 51.28 lakh crore from Rs 44.39 lakh crore as on January, 2010, according to latest data from the RBI.  In its annual monetary policy at the beginning of the fiscal, the RBI had estimated that credit offtake would grow by 20% this fiscal.

RBI Allows State-Run Banks To Amortize Pension Expenditure

India's central bank Wednesday let state-run banks provide extra expenditure on staff pensions and gratuities in installments over the next five years. India's nationalized banks recently re-opened the option of a pension for staff who had not opted for it earlier. The Indian Banks' Association, the representative body of the banking sector, had asked the Reserve Bank of India to let them amortize the additional expenditure. The RBI has let the state-run banks amortize the amount over the next five years, starting from the fiscal ending March 31. The banks will have to provide a minimum of one fifth of the total amount involved every year, it said.

Muthoot to revise offer document after RBI circular

Muthoot Finance, the largest gold loan non-banking finance company (NBFC) in the country, is set to tweak its business model while filing the draft red herring prospectus (DRHP) after factoring in the Reserve Bank of India’s (RBI’s) recent directive on gold loans.Recently, RBI notified that bank credit to NBFCs giving loans to individuals and other entities against gold jewellery would not be treated as exposure to the priority sector. The move is expected to impact the borrowing cost of these companies, which account for more than 32 per cent of the Rs 80,000-crore gold loan market in India, as regular loans are costlier than priority sector loans.  Moreover, as these loans will not enjoy priority sector status, the pace of securitisation or assignment to other banks will also fall, which may hit these NBFCs. Selling receivables was one of the main source of capital for these NBFCs. It also helped banks meet priority sector taragets.                                           

Nabard kicks off infrastructure lending on a commercial basis

The National Bank for Agriculture and Rural Development (Nabard) regulator for regional rural banks and cooperative banks since 1982, has begun lending directly to infrastructure projects at commercial rates as part of a transformation and pitting it against traditional lenders to the sector.  Nabard, which had a balance sheet of more than Rs.1.53 trillion as of December-end, will lend Rs. 42 crore to Karnataka State Warehousing Corporation (KSWC) to set up 1,06,000 tonnes storage capacity at nine different locations in the southern state. The loan is being given at an interest rate of around 10% and a maturity of 12 years, Nabard's Executive Director, Prakash Bakshi told Mint. This forms part of the total Rs. 173 crore loan that KSWC is seeking and which Nabard is considering. “We are considering other infrastructure projects as well,“ Bakshi said. “The idea is to support the development of rural infrastructure besides increasing the revenue of Nabard.“ Nabard is setting about changing its business model by funding infrastructure projects in the power and agricultural sectors on a commercial basis and expanding its role in financing state-government sponsored projects as Mint reported on 28 November. Its balance sheet comprises total funds received and loans disbursed. The entry of Nabard into direct infrastructure lending brings it in competition with commercial banks and specialized infrastructure lending companies, which have so far been dominating the space, analysts said.

No FIR’s on depositing fake currency, businessmen ask RBI

The Chattisgarh Chamber of Commerce and Industries has asked the Reserve Bank of India Governor D Subbarao to change certain rules pertaining to administration of banking regulations. The office bearers of the chamber have asked for an appointment with the RBI Governor in this regard. The president of the chamber Shrichand Sundrani, general secretary Jitendra Baralta, treasurer U N Agrawal and others demanded that the no FIR (First Information Report) should be lodged on submission of fake currency notes in banks as businessmen do not always check every currency note before accepting it. They should be instead destroyed instead of filing FIR. Presently, an FIR is obligatory if bank receives fake currency. The president of the chamber said that another regulation which needs to be looked into is that of automatic closure of any account from which there is no transaction for a period of 6 month. He said that opening of accounts of every group-member of a business venture is compulsory as per the orders of the Income Tax department. These accounts are not in regular use. The office bearers also made several other demands like clearing loan applications in time, standardisation of amount necessary for opening bank account etc.                                                                 

RBI Governor in Bhopal on Feb 9

The Governor of the Reserve Bank of India Dr D Subbarao will be in Bhopal on February 9. He will preside over a meeting of RBI’s central board in the capital. He will also inaugurate an exhibition depicting the 75 year history of the bank.

NE lags in electronic clearing system: RBI

Ruling that the Northeast was yet to pick up the electronic clearing system (ECS), a senior Reserve Bank official today said Clearances through the ECS in the region is only one per cent of the national average. "More awareness in required to refine the payment and settlement systems in the region. Of late, Manipur has started payment of salaries through this system. In Meghalaya some debit clearing (like BSNL bills) is done through ECS," RBI Regional Director Surekha Marandi said. Addressing a workshop on popularizing ECS for payment of salaries and pension, she said the electronic transfer of payments were safe, efficient, time saving time and it helped better fund management. "Clearances through cheques take three days time, while through ECS it is done in one day. The ECS also ensures better customer satisfaction," she said.Meghalaya Chief Minister Mukul Sangma said all state government employees will be brought in the loop."The beneficiaries of government schemes and other weekly payments will be done through this system in near future," Sangma said. Meghalaya additional chief secretary (in charge finance) BK Dev Verma said the ECS reduces the paper work and the exercise of going to banks. "The possibility of fraud is also nil," he said. Meghalaya government is in the process of starting e-payment of pension. "Next, we will start the payment of salaries through ECS. The banks have to gear up to handle the tasks, because gradually all government transactions will be done through electronic payment," Verma said.                                                 

Banking access to all villages with 2,000 people: RBI

The Reserve Bank of India (RBI) has planned to make banking accessible to all villages with population more than 2,000 by March 2012, bank governor D. Subbarao said Tuesday. " RBI has planned that all villages with population more than 2,000 must have access to banking such as through ATMs, business correspondents and rural mobile banking ," Subbarao told students of the Indian Institute of Management-Raipur (IIM-Raipur) while making a presentation on the working of RBI.  "It is a challenge before the RBI to maintain growth and control inflation," he said. He explained in detail about several functions of the RBI - from printing and distributing currency to acting as monetary authority, regulatory and supervisory body for banks. The RBI chief also sought to correct people's 'wrong perception' regarding RBI as a regulatory body for interest rates, saying RBI doesn't regulate interest rates on borrowing and lending except for NRI deposits and savings bank accounts. He also explained how RBI acts as an 'external sector gatekeeper' by managing current account deficit

Kamath worried over inflation impeding growth

ICICI Bank Chairman K V Kamath today sounded alarm bells on rising inflation saying price rise numbers at the current level are not at all comfortable. "Current inflation numbers are not at comfortable levels. If we need to make growth sustainable, we need to control inflation and interest rates," Kamath told reporters on the sidelines of the Nasscom India Leadership Forum 2011 here.  On the impact of the successive interest rate hikes by the Reserve Bank of India (RBI), he said, if interest rates are hiked further, it can play a spoilsport for the present high level of growth.  On whether high interest regime is here to stay, Kamath said, till inflation does not come under control, it will remain high. He further said, it is difficult to foresee an easy money regime now as inflation so far has not been responding to the efforts of the central bank. "For the past one-and-a-half years, inflation has not been responding to the traditional monetary and fiscal instruments," Kamath said.    

Two-year FDs fetch more than 5-yr deposits

Banks are offering their highest returns in the one to two-year category of deposits, an indication that they expect interest rates to come down in the medium term. A host of banks have revised their lending and deposit rates but are reserving the most-attractive returns on the medium-term fixed deposits.  The highest rate offered by the country's largest lender, State Bank of India, is 9% and this is the return on its 555-day and 1,000-day deposits. But those who decide to keep their money for a longer term will less. A five-year deposit with SBI will fetch only 8.25% while the return on 10-year deposits is 8.75%. Conventional economics says that rates rise along with tenure, and the current pricing of deposits appears to be an anomaly. But bankers have an explanation for this.  They say there are two reasons for why medium-term rates are higher. The first is that they believe that inflation would come down which would make lower fixed deposit rates more acceptable in the next year. Secondly, they say that it is impossible to predict future rates and since most of their loans are extended on floating rates, they would rather have the option to reprice deposits after a year.  Meanwhile, more banks have increased their lending rates. in the wake of the 0.25% increase in policy rates by the Reserve Bank of India even as the liquidity position eased marginally in the money markets.                               

NABARD asks bankers to implement government sponsored schemes in Himachal

NABARD has asked regional rural banks (RRB), leading commercial banks, cooperative banks to play a proactive role in implementing government sponsored schemes formulated for weaker sections of society. Speaking a day long workshop here today, AD Ratnoo, CGM NABARD Shimla asked the participating banks to action plan for the coming year, which needed to be submitted to NABARD so that targets set out could be monitored. The branch managers of banks were asked to ensure that they were equipped with the guidelines and instructions of RBI, NABARD and central government sponsored schemes such as Dairy Entrepreneurship Development Scheme, Integrated Development of Small Ruminants, Rabbits Self-Help Groups and Joint Liability Groups.

RBI snubs NRIs, says not eligible for interest sops on home loans

The Reserve Bank today said non-resident Indians would not be eligible for incentives on interest on home loans of up to Rs 10 lakh.  Banks provide one per cent interest subsidy for home loans of up to Rs 10 lakh. "Housing loans extended to NRIs for construction of farm houses, and to staff members of the banks are not eligible for subsidy under the scheme," it said in a notification.   The central bank said the notification follows the recent clarifications issued by the government.  The government, in the Budget of 2009-10, announced a scheme of one per cent interest subvention in respect of individual housing loans up to Rs 10 lakh, provided the cost of unit does not exceed Rs 20 lakh.  The scheme was valid till September 30, 2010, with an initial allocation of Rs 1,000 crore. During the last Budget, the scheme was extended till March 31, 2011, with an additional provision of Rs 700 crore.  Further, RBI directed the banks to use their own funds for upfront credit of subsidy under the scheme till government makes reimbursement and added that loans sanctioned prior to October 1, 2009 would not qualify for reimbursement under it.  "While calculating the interest subsidy, each disbursement may be treated as a separate loan and for each disbursement, subsidy claim may be made for twelve instalments," RBI said.  The apex bank also asked all the lenders to submit their claims on a monthly basis in respect of all housing loans eligible for subsidy under the scheme.

Experts solve forex riddle for students

With a view to provide basic information about foreign exchange (forex) facilities available for students/ researchers going abroad, the Reserve Bank of India (RBI) in association with Indian Institute of Technology (IIT), Patna organised an interactive session programme titled “Forex for you”. Students from IIT, NIT and other engineering colleges attended the session. A panel of experts comprising G. Mahalingam, Regional Director, RBI Patna, S. Maurya, Deputy General Manager, RBI, Shrimohan Yadav, General Manager, RBI, Naveen Chandra, AGM, SBI, and A. Saha, GM, Thomas Cook answered students queries over financial issue.  Students were inquisitive about a number of things such as how to unravel black money, how to control inflation, how monetary value is determined, what will be the future of the economy, implications of artificial depreciation of Chinese yuan, what quantum of forex could be taken away to a foreign country and how much of it could be remitted back, whether an engineering graduate can undergo training in RBI, can banks be asked to reduce the interest rate on education loans etc. “The experts broadly spoke about the various facilities relating to foreign exchange available to students and to the general public for different purposes such as travel, study, employment, business, medical needs etc,”  In response to a question regarding the future of Indian economy, Mahalingam said: “India is managing its affairs pretty well. Fiscal deficit is well managed, the only concern is the inflation which is because of supply side problem and RBI can interfere to control it only when it is a demand driven.” “Please don’t worry about India’s economy. You (students) go abroad for study and comeback as we want you to be in the country,” Mahalingam told students.

S K Kotian, Ex-DGM, RBI passes away

S K Kotian, the director of Bharat Co-operative Bank Limited passed away on Sunday February 6 owing to brief illness.  Kotian basically hails from Kallamundkoor in Moodbidri taluk of Dakshina Kannada district.  He retired as Deputy General Manager with Reserve Bank of India and continued to serve the Board of directors in Bharat Co-operative Bank. He was the active member of Billavar Association at the suburban Borivali.  He is survived by his wife and two daughters

RBI to open sub-offices in NE capitals – Surekha Marandi, Regional Director

Reserve Bank of India will open sub-offices in all the capital states of North-East, starting with Agartala.  RBI Regional Director Surekha Marandi told PTI today the process of setting up the first sub-office in Tripura capital of Agartala is on. "We are waiting for Tripura government''s offer. As soon as the state government allots a building, we will start the process," she said. The RBI official said the sub-office at Agartala should be ready by the end of this year. Sub-offices will be set up in other capitals as well in a phased manner, Marandi said, adding that RBI was trying to increase the outreach of banks in the region.                                            

New cheque clearance system to begin in Chennai by mid-2011

Rejection of cheques with over-writing or other corrections, currently limited to the national capital, will begin in Chennai by the middle of the year, but the pan-Indian implementation of this new cheque clearance system by RBI may take a few years more. The new Cheque Truncation System, under which cheques are cleared through their digital image being passed through the banking system and without their physical presentation, will be implemented in Chennai in its second phase by Newgen Software. The system was introduced in Delhi by the company in December 2010, marking the first phase of the new system, proposed by RBI earlier last year.                          

Andhra Bank submits financial inclusion roadmap to RBI

Andhra Bank, one of the leading public sector banks in the country has submitted a roadmap to the Reserve Bank of India (RBI) to provide banking services to 1144 unbanked villages in the country with a population of over 2000 by March 2012. The Hyderabad-based bank has also fixed an interim target to cover around 500 villages by the end of the current financial year under the Financial Inclusion Plan . The RBI has asked the public sector banks to extend their banking services to the unbanked villages having a population of over 2000 by March 2012.  Andhra Bank would offer banking services trough the Business Correspondents (BCs) model by leveraging technology. The bank has already covered 195 villages under FIP, sources said.  In order to strengthen the FIP, the bank has opened 8.60 lakh “No Frill Accounts” under branch banking. With its pan-India presence, the bank has 2615 delivery channels consisting of 1587 branches, 36 extension counters, 38 satellite offices and 954 ATMs.  Out of the total target of 1144 villages to be covered under the FIP, 101 villages are in the bank’s Berhampur zone, that covers seven districts in the south Orissa and Srikakulam district in Andhra Pradesh. The districts in Orissa to be covered under FIP are Ganjam, Gajapati, Nabaranagapur, Kandhamal, Kalahandi, Koraput and Rayagada. Before the end of the current financial year, we will cover at least 30 villages under the FIP, said Regidi Appadu, Deputy General Manager (DGM) of the bank’s Berhampur zone. All the 30 villages are located in Srikakulam district in Andhra Pradesh. Under the FIP, the bank has already undertaken the Andhra Bank Gramina Kranti Patakam, a Smart Card based project for payment of the wages for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) and the social service schemes like the old-age pensions at the panchayat  level. “Out of 7.45 lakh beneficiaries in Srikakuam district in Andhra Pradesh, the bank has already issued the smart cards to 3.40 lakh people”, Appadu said. The same scheme would be launched in Orissa after signing memorandum of understanding (MoU) with the state government. “The scheme is likely to the implemented in Orissa after March this year”, he added.                      

RBI directive will not affect us, says Manappuram chief

The Reserve Bank of India's directive that loans given against jewellery as collateral would no longer be eligible for priority sector lending will not have much of an impact on NBFC Manappuram General Finance and Leasing, according to a top official of the company.