LOHARDAGA: The construction of an anganwadi centre at the RBI's model village Doba under Kuru block in Lohardaga, which was undertaken in December 2010, is yet to be completed. The Reserve Bank of India has adopted the village under its model village banking programme, while the district administration had promised to take special care on development work here. The construction of the anganwadi centre at Doba Bar Toli undertaken under the Backward Region Grant Fund (BRGF) scheme was scheduled to be completed by December 2010. Incidentally, the work began in early December when the administration was gearing up to welcome RBI governor D Subbarao. The work came to a halt as soon as the governor's programme concluded. Deputy commissioner Ratan Kumar said the delay in the work was due to a dispute between villagers over the selection of site, which ended in November before the work started. "I was informed about the problem by block level officials. I will look into the matter," he said. The DC said plans were ready to be implemented. "Soon the village road will be black-topped. This scheme is being taken under the Integrated Action Plan."
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Sunday, April 3, 2011
No more fights with BEST bus conductors over change
Now, you won’t have to fight over change with the bus conductor. The Reserve Bank of India (RBI) has agreed to give Rs25 lakh in coins every month to the Brihanmumbai Electric Supply and Transport (BEST) undertaking. Earlier, the RBI used to give Rs16 lakh in coins every month to the undertaking. “Passengers have been complaining about the lack of change. Often arguments take place between the conductor and passengers. So, we had requested the RBI to give us more money in coins and they agreed to give us Rs 25 lakh a month,” said Sanjay Potnis, BEST committee chairman. The Siddhivinayak Mandir Trust in Prabhadevi has also agreed to give Rs 2 lakh in coins, whenever the public undertaking wants.“Now, we are getting more than enough from the RBI so there is no need take coins from anyone else,” said a BEST official on condition of anonymity because of protocol issues. Commuters are very happy with RBI’s decision. Versova resident Nikita Dalal, who travels by bus every day to Bandra, said, “This news is a big relief. I often face this problem. Now, I will demand change from the conductor.
Saturday, April 2, 2011
Opening of Rural Planning and Credit Department at RBI, Panaji Office
Rural Planning and Credit Department has started functioning from today at the Reserve Bank of India office, Panaji. The Department, among other things, undertake financial inclusion and financial literacy initiatives as also look after implementation and monitoring of the Lead Bank Scheme. Its functional jurisdiction will cover the State of Goa. The address and contact details of the department are :
Reserve Bank of IndiaRural Planning and Credit Department
3A/3B, Third Floor, Sesa Ghor
Patto, Panaji-403001
Tel No.0832 2438656
Fax No.0832 2438657
The Reserve Bank of India started functioning in Goa in 1983 when Goa was still a Union Territory. It catered to the foreign exchange needs of the people and institutions in the Union Territory of Goa.
RBI introduces Working Paper Series
The Reserve Bank of India today released two Working Papers on its website. These are:
Working Paper 1: An Empirical Analysis of the Relationship between Currency Futures and Exchange Rates Volatility in India by Somnath Sharma; and Working Paper 2: The Implications of Renminbi Revaluation on India’s Trade – A Study by S. Arunachalaramanan and Ramesh Golait. The Reserve Bank of India has decided to introduce a ‘RBI Working Paper Series’ (RBI - WP) to provide a platform to the Reserve Bank Staff for presenting their research studies as well as to receive feedback from informed researchers. One of the hallmarks of research in central banks is to sense the relevant developments and emerging challenges and provide quality research inputs for policy making. To be able to do this, the research studies should be on subjects linked with the goals and objectives of the central bank and should be conducted in a scientific way. With proactive and strategic role of the central bank staff, the research inputs could serve as necessary tools for scientific policy-making and efficient functioning of the central bank. The initiative to publish the Working Papers comes in the wake of encouraging the Reserve Bank staff to contribute towards such efforts. The Reserve Bank has another research publication called the ‘Occasional Papers’. Research published in ‘Occasional Papers’ is work produced by the Staff of the Reserve Bank on a broad range of issues. Papers published under ‘Working Papers’ Series are quick analytical research papers on issues and challenges of contemporary relevance to the Reserve Bank. Unlike Occasional Papers, which are published with specific periodicity, RBI - WP Series will be published, as and when ready and in digitised form only. ‘DRG Studies’ is also another attempt to carry out an in-depth study on contemporaneous subjects. These are prepared under the auspices of Development Research Group (DRG) involving an outside expert leading an internal researchers’ team. The views expressed in all the research publications of the Reserve Bank, including the RBI Working Papers Series, do not necessarily reflect the views of the Reserve Bank and as such should not be reported as representing the views of the Reserve Bank of India. Feedback, if any, on the papers could be addressed to the respective authors of the research studies.
R Sridharan named Acting Chairman of SBI
Mumbai: R Sridharan will be taking over as Acting Chairman of the country's largest lender State Bank of India from O P Bhatt, who superannuated. Sridharan, who currently serves as the Managing Director and Group Executive (Associates and Subsidiaries) at the bank will take over as Acting Chairman from April 1, according to a source close to the development. He started his career in State Bank of India in 1972, the same year as Bhatt, and has been with the top lender throughout. Sridharan, a graduate from the University of Madras, had taken over his current position in December 2008. The Ministry of Finance has reportedly zeroed in on Deputy Managing Director Pratip Chaudhuri as Bhatt's successor, but with a formal announcement not yet made, it has appointed an Acting Chairman.
FSDC’s efficacy yet to be tested, says RBI’s Mohanty
Mumbai: By setting up the Financial Stability and Development Council (FSDC), under the chairmanship of finance minister, the coordination mechanisms within the financial sector have been strengthened, said Deepak Mohanty, executive director, Reserve Bank of India (RBI). But, Mohanty added, that it is yet early to assess their efficacy which will be tested by future developments. The recent experience of managing global financial crisis by central banks showed that conventional policy framework may not always be sufficient to deal with crisis, he said. “The central banks have to be flexible enough and innovative in their policy approach to respond promptly to the build-up of sectoral imbalances,” said Mohanty, while participating in the Central Banks Conference of the Bank of Israel, Jerusalem on Friday. He was speaking on ‘Lessons for Monetary Policy from the Global Financial Crisis : An Emerging Market Perspective’. According to Mohanty the monetary policy frameworks in EMEs, mostly based on multiple indicators (in China, India and Russia) and multiple instruments were found to be more effective in responding to the crisis situation without being confronted with zero lower bound. Liquidity management operations being an integral part of execution of monetary policy in EMEs, sequencing of policy measures in a combination of rate and quantity instruments proved to be more effective, he explained. While interest rate continues to be the dominant instrument for implementing monetary policy, supplementing it by other quantity or macro-prudential instruments even in normal times will not only enhance the flexibility of monetary policy to attain multiple objectives but also could obviate the risk of hitting the zero lower bound, he said. In the context of stability of the external sector, a key initiative could be to develop the local currency bond market.
5 crore special coins to mark 150 yrs of taxation
Five crore commemorative coins of Rs 5 denomination, unveiled recently to celebrate 150 years of taxation, will be minted for public distribution soon. The coins, released by Finance Minister Pranab Mukherjee on February 26, will be put in public domain and will be a collector's item. These will have no extra price, a senior Finance Ministry official said. The special coin was unveiled along with a coin in the denomination of Rs 150 on the occasion of completion of 150 years of taxation and also of the Income Tax department from 1860 to 2010. The Rs 5 coin, made of an alloy of Silver, Copper, Nickel and Zinc, has an international design with 'Satyameva Jayate' and 'India' on the front and a portrait of 'Chanakya and lotus with honeybee' on the reverse. The Rs 150 coins will also be minted in the same fashion but only about 200 coins will be minted and would be available on request at a special price, he said. Earlier only 100 coins of Rs 5 were planned to be issued but the Central Board of Direct Taxes (CBDT) and the Income Tax department impressed upon the government the need to mint more such coins in public interest, he said.
Procedural irregularities hold up SBI chief’s appointment
The formal appointment of the State Bank of India (SBI) chairman has been delayed due to procedural irregularities in selection of the candidate proposed by the finance ministry. The irregularities have been highlighted by Cabinet Secretary K M Chandrasekhar. He has written to the finance ministry, questioning Pratip Chaudhury’s selection for the top job at the country’s largest lender. A senior government official told Business Standard . that Hemant Contractor’s name was on the top of the list during the selection of managing directors (MDs). However, for the chairman’s post, Chaudhury’s name was sent to the Cabinet Secretariat, he said. He added the cabinet secretary had asked the ministry to explain the reason for this change. The official said usually the names proposed by the finance ministry for top posts at public sector banks were cleared. But this was an unusual situation, he said. “A final decision is likely to be taken after the finance ministry’s explanation,” he said. The panel to select the SBI chairman interviewed four deputy MDs – Hemant Contractor, Pratip Chaudhury, Diwakar Gupta and A Krishna Kumar. The government has handed over the interim charge of the bank to Managing Director R Sridharan. O P Bhatt retired from the post yesterday after a five-year tenure. Sridharan, whose is to retire four months from now, is likely to continue on the post till his term ends. Sridharan was appointed as an MD in December 2008 and was looking after SBI’s associate banks and subsidiaries. There have earlier instances of SBI being headed by an acting chairman. In 2006, when A K Purwar retired, one of the MDs, T S Bhattacharya, was given the interim charge.
Friday, April 1, 2011
SBH to extend financial aid to 1,102 villages
Following the Reserve Bank of India (RBI) directions, the State Bank of Hyderabad (SBH) said it would extend financial inclusion across 1,102 villages with above 2000 population spread across 36 districts in Andhra Pradesh, Maharashtra, Karnataka and Gujarat. hese districts together cover a rural population of about 42.69 lakh. Financial inclusion will provide banking products such as savings, loans and services like remittance and insurance in areas where there are no banking services. It caters to low income groups and offers services at an affordable cost. According to SBH, the proposed financial inclusion will be implemented in two phases. While the first phase will cover about 300 villages by March 2011, the remaining villages will be covered in the next fiscal. SBH said it has already commenced enrolment and opening of savings accounts in 261 villages covering AP and Karnataka. On Tuesday, the bank distributed biometric cards to customers in few villages in Mahaboobnagar district. As part of the project, the bank has launched overdraft products to meet the financial requirements of beneficiaries across all villages. Besides opening a savings account, customers can also opt for variable recurring deposit, term deposits, overdraft in recurring deposits and term deposits in loan category general purpose credit card will also be available to all villagers.
FSDC not meant to be a super regulator'
The Union finance ministry has again taken pains to emphasize that the newly formed Financial Stability and Development Council (FSDC) won’t be a ‘super regulator’. “That is out of the question,” a key ministry official told Business Standard. FSDC, he noted, was not a statutory body. The commission, to be chaired by the finance minister, is meant as a broad “regulatory collegium”. There has been renewed discussion recently, as at the time it was formed, on whether it would be grow into the role of a regulator of the existing regulators, something the Reserve Bank of India, for one, has been wary about. “The issue is whether there could be a super regulator to oversee and co-ordinate the other regulators,” Financial Sector Legislative Reforms Commission chairman B N Srikrishna had told Business Standard. The FSDC was constituted through a notification by the finance ministry, not by an act of Parliament. Its aims include inter-regulatory coordination and maintaining stability in the system, among other things. Its creation came as a turf war occurred between the regulators of the capital markets and the insurance sector on the policing of unit-linked insurance products. The RBI had said FSDC should not assume the role of a super regulator, but confine itself to financial literacy and financial inclusion, which are also the aims of the council. It had also expressed reservations over a proposed joint mechanism under the ministry to sort out a turf war between regulators. Later, the RBI governor was appointed as the vice-chairman of the joint mechanism, chaired by the finance minister. However, no such post was given to the RBI governor in FSDC, but he was made head of a sub-committee on the coordination of inter-regulators. Experts say RBI’s opposition to FSDC as a super regulator was probably because its prime role at the High Level Coordination Committee (HLCC) that had regulated the financial sector. RBI feared those would be diminished once FSDC came into being, as the latter was chaired by the finance minister. The sub-committee, chaired by RBI within FSDC had replaced HLCC.
Cheque payments to get costlier
NEW DELHI: Making payments through cheques may become a costlier affair from tomorrow, as RBI has allowed banks to levy higher service charges for their clearing, especially of high-value and outstation cheques. As per a RBI circular coming into effect from April 1, 2011, banks would be free to fix service charges on speed clearing of cheques of value above Rs 1 lakh. At present, RBI does not allow banks to charge more than Rs 150 per cheque for speed clearing of cheques worth over Rs 1 lakh, while there are no charges for value up to Rs 1 lakh. However, speed clearing of cheques with value up to Rs 1 lakh would continue to remain exempt of any service charges. Speed clearing refers to processing of outstation cheques electronically and without movement of cheques from the presentation centre (city where the cheque is presented) to drawee centre (city where the cheque is payable). For normal local clearing also, drawee bank can charge up to Rs 1.50 per cheque from tomorrow, as against Re 1 at present. For local clearing through cheque truncation system, which works electronically by processing the scanned image of the cheque, drawee bank can levy a service charge of Re 1 from tomorrow, up from 50 paise at present. Besides, RBI has also given a free hand to the banks to decide on the service charge on outstation cheques of over Rs one lakh, as against a maximum limit of Rs 150 per cheque allowed currently. However, RBI has decided to lower the service charge for outstation cheques up to Rs 5,000, by allowing a levy of Rs 25, as against Rs 50 currently. The outstation cheques between Rs 5,000 and Rs 10,000 would continue to attract a fee of Rs 50, while those between Rs 10,000 and Rs 1 lakh would also continue to be levied a charge of Rs 100. While fixing service charges not mandated herein, banks have been told to get approval from their boards for service charge structure. "Charges fixed should be reasonable and computed on a cost-plus-basis and not as an arbitrary percentage of the value of the instrument. The service charges-structure should not be open ended and should clearly specify the maximum charges that would be levied on customers including charges if any, payable to other banks," RBI has told the banks. The service charges by banks should be inclusive of all charges (postal, courier, handling, etc.) other than service tax, RBI said.
RBI misses deadline to issue banking licence guideline
The Reserve Bank has missed the deadline to issue the much-awaited guidelines for giving new banking licences. "I am sure we are not issuing it (licence) today," RBI Deputy Governor K C Chakrabarty said. In the Budget 2011-12, Finance Minister Pranab Mukherjee had said the RBI plans to issue guidelines for the grant of new banking licences before the close of this financial year. Recently, Department of Economic Affairs Secretary R Gopalan had said that RBI will come up with the guidelines by the end of this month. In the last Budget, it was announced that the Reserve Bank of India would consider giving traditional banking licences to private sector players, he had said. Following the announcement made by the Finance Minister, the Reserve Bank had brought out a discussion paper in August, 2010, on giving out new banking licences to business houses and non-banking finance companies, besides regulations for the same to foster greater competition. The RBI also sought to know "whether industrial and business houses could be allowed to promote banks." Furthermore, it sought stakeholders' views on whether NBFCs should be allowed to convert into or promote banks. The RBI has received comments on its discussion paper from all stakeholders. Various entities like Reliance Capital, IndiaBulls, Religare, IL&FS, IDFC, IFCI and Aditya Birla Financial Services are reported to be mulling an entry into the banking space. At present, India has 26 public sector banks, seven new private sector banks, 15 old private sector banks, 31 foreign banks, 86 regional rural banks, 4 local area banks, 1,721 urban cooperative banks, 31 state cooperative banks and 371 district central cooperative banks.
SBI opens 25,000th ATM and 9,000th semi-urban branch
Mumbai, Mar 31 (PTI) The State Bank today opened its 25,000th ATM and the 9,000th semi-urban branch, and said it will add 10,000 ATMs annually for the next three years. The outgoing Chairman Om Prakash Bhatt said SBI had plans to deploy 10,000 ATMs every year over the next three years. He inaugurated both these facilities at the SBI board room here through video conferencing, which was attended by the entire board of the bank, including RBI Deputy Governor Shyamala Gopinath. While the 25,000th ATM is located at south Mumbai''s Girgaon, the 9,000th rural, semi-urban (Rusu) branch is at Sundargarh in Orissa''s Bhubaneswar Circle. Speaking at the occasion, Gopinath said though ATM was the most innovative product in the banking space, there was a need for an optimal ratio of technology and physical branches as rural customers still preferred physical branches. Of the 13,500 plus branches, as much as 67 per cent are located in rural and semi-urban areas, Bhatt said, adding the State Bank Group has 25,000 ATMs, out of which SBI alone has 20,087. In the last two years alone, the SBI Group has put up as many as 13,596 ATMs. SBI''s ATM network processes over 7.5 million transactions a day, disbursing nearly Rs 1,500 crore in cash. The State Bank has issued over 90 million debit cards and enjoys a market share of over 38 percent. From June 2006 to March 2011, more than 3,400 branches were opened by SBI alone, Bhatt said. The State Bank Group now has 18,181 branches. In FY11, SBI opened 1,040 branches, including the merged branches of State Bank of Indore.
Thursday, March 31, 2011
Meet on urban coop banking held
Srinagar, March 29: The fifth meeting of the state level task force on Urban Co-operative Banks was held at RBI Jammu office under the Chairmanship of Arnab Roy, Regional Director for Jammu and Kashmir (Chairman of TAFCUB). The meeting was attended by Co-Chairman M Abbas Dar, IAS, Registrar, Co-operative Societies, Jammu and Kashmir, K.K.Saraf, General Manager, UBD, RBI, CO., Mumbai, H S Khitaulia, Deputy General Manager, UBD , RBI, Jammu. Chief Executive Officers of Citizen Cooperative Bank Ltd. Jammu, Devika Urban Cooperative Bank Ltd, Udhampur, Urban Co-operative Bank Ltd Islamabad and Kashmir Mercantile Co-operative Bank Ltd, Sopore also attended the meeting. The meeting reviewed the performance of the Urban Co-operative Banks in the Urban Banking Sector in the State. Opening of new branches by UCBs, imparting training to the staff of UCBs by RBI, complaints against CCBL and elections in CCBL along with latest policy developments were the major issues discussed in the meeting.
RBI Decides Not to Change NWMA Limits for States
Mumbai (ABC Live): the Reserve Bank of India has decided not to change the State-wise limits of Normal Ways and Means Advances for the year 2011-12. The aggregate Normal WMA limit for the State Governments inclusive of the Government of Jammu & Kashmir and the Union Territory of Puducherry is placed at Rs.10,240 crore for the year 2011-12 and other terms and conditions of the Scheme would remain unchanged.
RBI ticks off banks for rate reset violations
The Reserve Bank of India (RBI) has come down heavily on some banks which are violating agreements with borrowers while increasing interest rates. RBI has observed that some banks raise interest rates, particularly on term loans, every time the benchmark prime lending rate (BPLR) is changed. This is despite the loan contract clearly mentioning that banks can increase rates only after a gap of a certain number of years. This is known as the reset clause in bank parlance. In case of term loans, the common practice is to prescribe a specific reset period, which can be two years, three years or five years. This ensures that a particular rate, once fixed, is maintained for a particular period. Benchmark lending rates, both BPLR and base rate, can change anytime depending on the interest rate environment. Addressing a complaint from a company last week, the Appellate Authority of RBI rejected a public sector bank’s appeal and upheld the order passed by the banking ombudsman. The appellate authority had asked the bank to retain the rates fixed prior to the reset period. RBI has also ordered a scrutiny of all term loan accounts of the bank as it feels that some borrowers may be ‘suffering in silence’. Asking the Kolkata-based bank to rectify the rate, RBI said in a letter that the appellate authority had directed the bank to review the rate urgently and confirm that the rate was not changed during each reset period in cases of term loans sanctioned since April 1, 2006. “In cases where a discrepancy is observed, the same should be rectified immediately and the excess amount refunded to the borrower,” RBI said.
BOI falters at doorstep
LOHARDAGA: The doorstep service of Bank of India (BOI), being the lead bank in the district, has flopped at Doba, the village adopted by Reserve Bank of India (RBI) under its model village banking programme. Reserve Bank Governor D.Subbarao had visited the village on December 15 to announce the scheme in a bankers' show attended by many top bankers from the country. The BOI's doorstep banking service, launched in the function, was showcased by a business correspondent by inserting smart cards into a mobile machine before Subbarao. Three months later, the service is yet to start in the village. More than 1,200 villagers had opened their accounts to avail themselves of the service but no one, barring the one introduced to the RBI governor during the December 15 function, has been provided with the smart card which is to be used for activation of account through the machine connected to Internet. Reena Mariyana Lakra, the business correspondent, said she had the machine at home which could not be operated as none of the account holders had been given smart cards. "Some days back I was given some smart cards which were taken back by the block unit of the BOI. I had distributed some of the cards which I had to return to the bank," she said. She added that out of over 1,200 account holders only 150 had been provided passbooks. "This delay, however, is going against the RBI's motto of making Doba a 100 per cent banking aware village," said Punam Minz, an anganwari sevika at Doba. District lead bank manager John Kacchap said doorstep banking service was dead since the accounts had not been uploaded on Internet. He, however, claimed that pass books had been distributed. "I talked to the BOI Kuru branch officials, zonal office in Ranchi and the service implementing agency "Integra" in this connection and we are trying to start the service within a week's time," he added.
RBI never understood teaser loans: Bhatt
Outgoing State Bank of India (SBI) chairman Om Prakash Bhatt continued his defiance of the central bank on the teaser loan front saying "the Reserve Bank of India (RBI) never understood our special home loan product. "Obviously, they (RBI) have not understood our product (the special home loan product)," Bhatt, who is superannuating on Thursday from SBI after a five-year stint as chairman and a four-decade-old association, told reporters at the bank headquarters. Reiterating that RBI's stance that SBI's special home loans are similar to the sub-prime loans lent in the US in the run-up to the 2008 global financial meltdown, Bhatt said this view is beyond logic as his offering is sold to those who are "absolutely credit-worthy." However, he was quick to add that this is not a defiant stance with regard to the regulator but this is the view point of a bank that is the industry leader with a quarter of the entire banking business under its fold. "Being the industry thought-leader and market leader, it is the duty of SBI to articulate our views to the regulator. This has to be done in the interest of intellectual honesty and public discourse," he said. However, Bhatt was quick to add that "but if they still insist that this cannot be continued and is against its norms, then we will comply...that does not mean that we don't have a view point on this. Also, I would like to place it on record that so far, all through the five years of my tenure as the chairman, SBI has been 100 per cent compliant with all the RBI regulations."
Apex bank pep pill for states
Mumbai, March 30: The Reserve Bank of India (RBI) today said states should explore ways to raise non-tax revenue and review tariffs in highly subsidised sectors such as power and irrigation. Releasing its study on State Finances 2010-11, the central bank said the budgetary position of states during the year showed a turnaround from the expansionary fiscal stance in the previous two years. According to the study, an improvement in state finances is expected with a majority of the states budgeting either a revenue surplus or a lower deficit in 2010-11 (budgeted estimate) compared with 2009-10 (revised estimate). At a consolidated level, the revenue deficit is placed lower at 0.3 per cent of GDP (gross domestic product) during 2010-11 against 0.7 per cent in 2009-10 (revised estimate). “With an improvement in the consolidated revenue account of states, the gross fiscal deficit as a ratio to GDP (GFD-GDP) is estimated to decline to 2.5 per cent in 2010-11 (BE) from 3.3 per cent in 2009-10 (RE),’’ the study said. The central bank said there was an improvement in key fiscal indicators across states and a majority of them expected higher tax buoyancy. However, non-tax revenue is budgeted to decline in 18 states. The paper said factors such as the implementation of the goods and services tax (GST), the pace of economic recovery, the states’ own efforts towards mobilising non-tax revenues and rationalisation of expenditure will be some of the factors that could impact fiscal consolidation. However, to make progress towards fiscal consolidation, the study said, states should amend their fiscal responsibility and budget management acts and work out a fiscal reform path. “States also need to review their tariff policies, especially those relating to the power and irrigation sectors,’’ the study said. On GST, the apex bank said given the uncertain revenue implications of its introduction, states should undertake a careful management of their finances in the next few years. However, the introduction of GST can enhance the competitiveness of Indian industry and trade. The strengthening of state finance commissions is essential to ensure allocation of adequate resources to local bodies, the report added.
RBI allows co-op banks to collect account-payee cheques from credit co-operatives
The Reserve Bank of India (RBI) has authorised co-operative banks to collect account-payee cheques from co-operative credit societies provided the payees are constituents of the credit cooperatives. This is being done to ease the difficulties faced by co-operative credit societies that are not even sub-members of clearing houses, RBI said in a release today. Members of such co-operative credit societies who do not have bank accounts face difficulties in collection of account payee cheques drawn in their name. Cooperative banks may consider collecting account payee cheques drawn for an amount not exceeding Rs50,000 to the account of their customers who are co-operative credit societies, if the payees of such cheques are the constituents of such co-operative credit societies, RBI clarified today. While collecting the cheques, banks should, however, obtain a clear undertaking in writing from the co-operative credit societies concerned that, upon realistion, the proceeds of the cheques will be credited only to the account of the member of the co-operative credit society who is the payee named in the cheque. "This will be subject to the fulfillment of the requirements of the provisions of Negotiable Instruments Act, 1881, including Section 131 thereof," RBI noted. The collecting banks and the cooperatives should, however, strictly follow KYC (Know Your Customer) norms and enter into an agreement that the KYC documents in respect of the society's customers are preserved in the society's records and are available to the bank for scrutiny. This should not, in any way, affect the rights of the true owner of the cheque in any manner and banks should establish that they acted in good faith and without negligence while collecting the cheque in question, RBI added.
Who is to blame for inflation?
Mumbai: After two weeks, India’s food inflation is back again in double digits. Weekly fluctuations in food prices may not be always be very material but as last month’s WPI numbers show inflation has become generalized and is no longer restricted just to food articles. Doubtlessly, this will put the spotlight on the limited success of the Reserve Bank of India (RBI) in combating inflation for well over a year. Subbarao’s reluctance to deviate from a gradualist approach to tackling inflation led the Wall Street Journal to wonder aloud after the January policy review if he is a hawk, dove or chicken. This is indeed a dramatic shift in perception about RBI from the heydays of 2009, when India and its central bank were the toast of international policy makers, as a 23 March Economic Times article by MC Govardhana Rangan points out. Rangan argues that Subbarao’s policy stance has a Greenspan-like touch in its predictability. Comparisons with Greenspan would probably be the last thing any central banker would want to hear! But is it fair to judge monetary policy without taking into account the role of fiscal policy? In a recent post on iMFdirect, celebrated macro-economist David Romer writes that one of the key points of reasonable agreement among economists after the crisis is: The impact of a change in fiscal policy is extremely dependent on whether monetary policy is able to respond, and on how it responds if it can. We would like to invert the argument to point out that the success of monetary policy depends as much on its own stance as it does on fiscal policy. The fiscal deficit target for next year at 4.6% is by all counts commendable and if realized would be a big step to combat inflation. However, many doubt if the target is actually achievable as Jehangir Aziz puts it eloquently here. If oil prices stay at current levels, Pranabda would probably need Harry Potter’s wand to achieve that target. Now consider growth: a target of 9% is not exactly anti-inflationary. Supply-side bottlenecks may be partly responsible for inflation but faster growth without easing those constraints will cause only more, not less inflation. And if budget projections are to be believed, capital expenditure by the government is going to come down from 13.4% of total expenditure to 12.7%. It is like a car with a fraying engine that is trying to speed faster. So why does the government not acknowledge this and aim for a moderation in growth till it is able to ramp up investments? Kaushik Basu’s argument in this year’s Economic Survey was: In designing inflation control measures it is important to be aware that sudden, sharp policy induced contractions in demand can cause unemployment to rise. He goes on to argue that the trade-off between inflation and employment escapes public awareness as employment statistics come with long intervals unlike inflation numbers. Basu’s point that a hard landing would cause unemployment and misery is true but it actually makes the case for a moderation in growth to avoid a hard landing later. Besides, one can argue that the cost of unemployment has to be balanced against the cost of inflation to evaluate whether on balance the welfare loss of employment is still greater. Secondly, high inflation often leads to what is termed as ‘demand destruction’, exactly what oil prices are threatening to do to the global recovery. If high inflation erodes purchasing power and could slow down consumer demand as some surveys indicate, then inflation rather than policy tightening becomes a bigger threat to growth and employment. Basu also argues that prices tend to be higher in economies where growth is higher. Empirical evidence for such a simplistic relation (which economists term the Balassa-Samuelson effect) has been hard to come by. Casual empiricism also suggests otherwise — we need not even look beyond our immediate neighbourhood to find such evidence. Justin Yifu Lin, chief economist at the World Bank cites China’s example in a recent speech to illustrate how high growth is attainable with low inflation. A fiscal stimulus aimed at increasing railroads, port facilities and other infrastructure allowed China to raise its annual growth rate to 10.9% in 2003-10 from 9.6% in 1979-2002. They achieved it without raising inflation beyond 5% unlike earlier decades when 2-digit growth rate was always accompanied by a 2-digit inflation rate, said Lin. Basu’s contentions may be debatable but the elaborate justification of high inflation could perhaps be an indication that the fiscal stance would be tolerant of high inflation. One reason for this could be that though politically inflation is a problem for the government, financially it is not. As long as nominal GDP is going strong, tax revenues would grow. More importantly, the government being a net borrower would benefit from inflation, at least in the medium term. Not for nothing do they call inflation a tax! However, as the government’s stance is known only once a year unlike RBI’s policy reviews that have a six-weekly frequency, fiscal policy’s contribution to inflation might continue to escape public awareness, slanting discourse on the subject.
RBI BARS NBFC SFROM INVESTING IN PARTNERSHIP FIRMS
The Reserve Bank of India on Wednesday barred non-banking finance companies from investing in partnership firms. The ban on contributing capital to partnership firm has been clamped due to risks involved in associated with these firms, RBI said. It, however, did not elaborate on the nature of the risks.
Bhatt Against Freeing Up of Savings Rate
Echoing ex-governor of RBI YV Reddy, SBI chief says freeing up of deposits will defeat the purpose of financial inclusion - The State Bank of India’s outgoing chairman Om Prakash Bhatt joined former RBI governor YV Reddy, credited with saving the Indian financial system, in speaking against freeing up of savings deposit rates as it may defeat the very goal of financial inclusion and expose the poor to be cheated by banks. “It has done well for a large number of depositors who cannot have recurring deposits,” Mr Bhatt, whose bank controls a fifth of the deposits, said at his farewell press conference. “There are four million people in this country who earn less than . 50 a day and save about . 30 or . 40 a day and they can save the money in the form of fixed deposits or recurring deposits,” he said. Some of the government organisations may also be at the receiving end, if rates are liberalised. “There are large numbers of government organisations who cannot keep money in fixed deposits and so if they keep it in savings deposits they get some money out of it,” he said. RBI governor D Subbarao has set up a committee to study the consequences of freeing up of savings rate which is mandated at 3.5% a year now. All interest rates except rates on savings accounts are free now. Mr Bhatt is not alone in raising concerns over freeing up of deposit rates. Former RBI governor YV Reddy recently said in an interview it may be detrimental to the interests of a large number of people. “Many of the common people don’t have time to apply their mind and shift money from savings to deposits, etc. So, for heaven’s sake, give one banking instrument, one bank account where the man knows that this is the interest rate, this is the facility. This is required. I would even say, particularly, it is required for women in India whose money should be safe from their husbands,” Mr Reddy had said. Banks, which are keen on lowering their cost of funds, are lobbying with the central bank for freeing up of savings rates. Those with lower balances could be short changed for wealthy clients who anyway are paid higher rates for funds in the name of bulk deposits. Freeing up could lead to volatility. A bank may pay 1% or less for those account holders who have small deposits and 5% if they are willing to keep . 50,000 in a savings account. This in turn will impact small depositors. Even public sector banks which carry-out government programmes would get in to a disadvantage. “Deregulation of rates would be detrimental for PSU banks which control 72% of the banking market. We are the bank which does most of the real sector activity of the country in any case,” said Mr Bhatt. “So if we are weakened by the higher cost of deposits, our ability to do the kind of work will be affected,” he added.
Wednesday, March 30, 2011
RBI Governor bats for collective efforts to tackle economic issues
UNITED ACTION: Bank of Sri Lanka Governor Ajith Cabraal lighting the traditional lamp ahead of RBI Governor Subba Rao's (left) oration at the Central Bank of Sri Lanka, Colombo, on Tuesday. Photo: R. K. Radhakrishnan
More countries have begun to think on the problems of common economic concerns with a wider perspective despite there being no natural constituency for the global economy as such, Reserve Bank of India Governor D. Subbarao said here on Tuesday. Talking to this correspondent at the Central Bank of Sri Lanka, he said that he based his optimism on the proceedings of the Paris conference on global economic recovery held early this year. Though each country normally talks for itself in global fora, there was a sense of purpose to come together at this meeting. “I think this trend will continue,” he said. Delivering the 60th anniversary oration on ‘Frontier Issues on Global Agenda — emerging economy perspective,' Dr. Subbarao said that it was more than clear that every single financial crisis came from the same fundamental issues. If these issues were not addressed, then it would again repeat itself. “The global problems we are facing today are complex and not amenable to easy solutions. Many of them require significant and often painful adjustments at the national level, and in a world divided by nation-states, there is no natural constituency for global economy. At the same time, the global crisis has shown that the global economy as an entity is more important than ever,” he said. The adjustments that are required as part of the collective efforts to get out of the present crisis “will be painful for every country” but there was no easy way out. Steps had to be taken otherwise the global economy would be headed for another crisis sooner or later. “We should cooperate not only to firmly exit from the crisis, but also to ensure that in resolving the crisis, we do not sow the seeds of the next crisis,” he said. Dr. Subbarao warned that after the crisis, there would be a tendency for most developed nations to resort to protectionist policies. “Recent international developments mark an ‘ironic reversal' in the fears about globalisation,” he said and added that earlier the developing economies feared integration into global markets, but now the developed world was resisting because the electorate in those countries have been led to believe that, at one level, globalisation meant loss of jobs. In actual terms, for the low-end jobs shipped abroad, better paying jobs were being created in those countries. But if creation of this better paying job lags, as it sometimes does, then, people would find it difficult to accept shipping out of jobs to other countries, he added.
Reforms to prevent economic sector excesses needed
Central Bank Governor Ajith Nivard Cabraal presenting ‘Retrospect 2010’ as a token of appreciation to Reserve Bank of India Governor Dr Duvvuri Subbarao at the Central Bank yesterday. Central Bank of Sri Lanka has acquired a great reputation for professionalism, integrity and sense of purpose over the last 60 years. As Central Banks of emerging economies , both Central Bank and Reserve Bank of India have their tasks cut out for them, Reserve Bank of India Governor Dr Duvvuri Subbarao said . Speaking on “Frontier issues on the global agenda - Emerging economy perspective” at the Central Bank yesterday Subbarao said both countries need to learn from the best in the world, but adapt each one’s learning to the demands and culture of maturing emerging economies. “Both countries need to remain sensitive to the core concerns of an emerging economy all the time and be at the frontiers of domain knowledge,” he said. He said all the global crises have taken a devastating toll on global growth and welfare, and each time of crises experts have said that this time it is different claiming that the old rules do not apply and the new situation is dissimilar to the previous one. However, it would be too costly for the world to heed this lesson and everyone should cooperate not only to firmly exit from the crisis but also to ensure not to sow the seeds of the next crisis in resolving the crisis. He said emerging market economies have not completely decoupled from the advanced economies and their economic prospects remained linked to the prospects of advanced economies. However, all will be collectively better off if all segments of the world grow at a sustainable pace. Elaborating on the issue of global rebalancing he said it is necessary to address three inter-related issues namely, exchange rate flexibility, capital controls and an agreement on a framework for strong, sustainable and balanced growth. Dr Subbarao said protectionism is an important issue on the global agenda and protectionist pressures may arise again. But global welfare will be maximized when collectively resisting short-term pressures and put long-term interest ahead of narrow short-term advantage. Referring to financial sector reforms he said vigorous reforms in the sector are underway and the reform agenda is driven by the need to prevent the type of excesses in the financial sectors of advanced economies that led to the crisis. But emerging economies too will have to implement these reforms, he said.
ATM in your cellphone
Forgot your wallet at home? No worries. Book tickets, pay for groceries and settle your coffee bill with just a few clicks on your mobile phone. Money on your phone sets you free,” philosophizes 20-year-old business student Lalit Ramsisaria. “I don’t need to be in front of a computer to book train tickets or buy a gift for my girlfriend. All I need to do is to launch an application on my phone, make a few clicks and my shopping is done.” Ramsisaria, who has a Nokia E71, is an avid user of a mobile wallet service called ngpay (www.ngpay.com). “All I need is GPRS on my phone and my debit card details,” says Ramsisaria. Ngpay is one of the many applications launched over the last few years in the fast-growing sector of mobile wallet services. Also called m-banking, these services are an initial step towards a world where you can replace your wallet and credit cards completely with your phone. “Mobile banking is a form of cashless banking that enables you to access and use your bank account, debit or credit card through an application on the mobile phone,” says Gautam Shiknis, chief executive officer, mChek (www.mchek.com), another mobile wallet service. These services connect you to vendors—merchants, retailers, cinema halls, restaurants, etc—and allow you to make payments using debit or credit card details. All you need is either a GPRS-enabled phone or the ability to send simple SMSes. If you are not comfortable with third-party applications, you can take a wallet from your mobile phone operator. Recently, the Reserve Bank of India (RBI) cleared the way for a second kind of mobile wallet service—called the “semi-closed mobile wallet”. In this service, you can load money into your cellphone from a licensed company and make payments with it, but you can’t use it to withdraw money, which is what a full-fledged mobile wallet aims to do. In a pilot, Airtel has launched semi-closed mobile wallet services in Delhi, Gurgaon, Faridabad and Chennai. Called Airtel Money (www.airtelmoney.in), it is a free service that allows you to load up cash in your phone, making your SIM a prepaid account as it were, and use it with partnering vendors to pay bills. Airtel Money has, for instance, tied up with around 40 vendors in Haryana and Delhi, including coffee shops, restaurants and cinema halls. Some semi-closed mobile wallet services, such as Mobile Money Services from Nokia and Yes Bank, even allow you to withdraw cash from specified ATMs. Furnishing your bank account details to an unknown application when there’s so much fraud going on is never easy. But mobile wallets are as safe as any other online transaction. “The technology which drives the mobile wallet is quite secure and mostly works on two-way authentication,” says Ashish Sinha, founder of www.pluggd.in, a website on start-ups. It means that every time you make a transaction, the program will automatically ask you for your PIN, which only you know. “Transacting like this is as safe as an ATM transaction. You need to enter a six-digit PIN to complete the transaction,” says Sourabh Jain, CEO of ngpay. Though most of these services are at a nascent stage, especially when you look at their list of vendors, it’s a fast-growing market. After Airtel, Vodafone is in the process of tying up with ICICI Bank to launch a semi-closed mobile service called m-paisa, which it has floated successfully in countries such as Kenya and Japan. Services such as ngpay have over one million users across the country, while mChek boasts of over two million customers, with a network of more than 100 partners that offer a variety of products and services. This is tiny when compared with the number of mobile users in the country, which currently stands at around 650 million. “The system is very simple for the masses to adopt. I think Indians will adopt m-banking much more efficiently once they figure that with an SMS they can transfer money to their loved ones. It’s like a move from no phone to mobile phones which Indians did, skipping the landline completely,” says Shiknis.
Need for an alternative to dollar: Subbarao
Mumbai: Governor of Reserve Bank of India (RBI) D Subbarao has said though it is not feasible now to find an alternative to the problems arising from a single global reserve currency — US dollar — at a global level, countries need to explore other options for protecting themselves from the vulnerabilities that they confront as a consequence of a single reserve currency. “The problem with the world having only a single reserve currency came to the fore during the crisis as many countries faced dollar liquidity problems as a consequence of swift deleveraging by foreign creditors and foreign investors. Paradoxically, even as the US economy was in a downturn, the dollar strengthened as a result of flight to safety,’’ said Subbaro while speaking on ‘Frontier Issues on the Global Agenda Emerging Economy Perspective’ on the occasion of the 60th anniversary celebrations of Central Bank of Sri Lanka, in Colombo on Tuesday. Based on the experience of the crisis, several reform proposals have been put forward to address the problems arising from a single reserve currency, he hinted. “One is to have a menu of alternative reserve currencies. But this cannot happen by fiat. To be a serious contender as an alternative, a currency has to fulfill some exacting criteria. It has to be fully convertible and its exchange rate should be determined by market fundamentals and it should acquire a significant share in world trade,” he said. The currency issuing country should have liquid, open and large financial markets and also the policy credibility to inspire the confidence of potential investors. In short, the exorbitant privilege of a reserve currency comes with an exorbitant responsibility, he explained. Subbarao also drew attention to the fact that managing currency tensions will require a shared understanding on keeping exchange rates aligned to economic fundamentals, and an agreement that currency interventions should be resorted to not as an instrument of trade policy but only to manage disruptions to macroeconomic stability. However, he was vociferous about the fact that currency appreciation is not the only problem arising from the ultra loose monetary policy of advanced economies. Speculative flows on the lookout for quick returns can potentially lead to asset price build up. The assurance of advanced economies to keep interest rates ‘exceptionally low’ for ‘an extended period’ has also possibly triggered financialisation of commodities leading to a paradoxical situation of hardening of commodity prices even as advanced economies continue to face demand recession. “EMEs have been hit by hardened commodity prices through inflationary pressures, and in the case of net commodity importers, also through wider current account deficits,” he said. Managing capital flows should not be treated as an exclusive problem of EMEs. In as much as lumpy and volatile flows are a spillover from policy choices of advanced economies, the burden of adjustment has to be shared, suggested Subbarao. “How this burden has to be measured and shared raises both intellectual and practical policy challenges. Our current theory of external sector management draws from an outdated regime of fixed exchange rates and limited capital flows when the task was largely limited to managing the current account of the balance of payments. What we now need is a theory that reflects the changed situation of flexible exchange rates and large and volatile capital flows. The intellectual challenge is to build such a theory that encompasses both current and capital accounts and one that gives a better understanding of what type of capital controls work and in what situations,” Subbarao said. The practical challenge in these matter is that once such a theory is accepted, there is a need to reach a shared understanding on two specific aspects: first, to what extent are advanced economies responsible for the cross border spillover impact of their domestic policies, and second, what is the framework of rules that should govern currency interventions in the face of volatile capital flows.
Pressures for protectionism to rise in coming years: RBI
The Reserve Bank of India (RBI) today said there are chances that protectionism by the advanced countries would rise and will also take new forms in the post-crisis scenario. "In the years ahead, the pressures for protectionism will mount and protectionism will also take new forms," RBI Governor D Subbarao said at a conference here, a press release said. He further said there is concern in some quarters that even as open protectionism has been resisted relatively well during the current crisis, opaque protectionism has been on the rise. "Opaque protectionism takes the form of resorting to measures such as anti-dumping actions, safeguards, preferential treatment of domestic firms in bailout packages and discriminatory procurement practices," Subbarao added. During the global financial crisis in 2008, many advanced countries, including US, were hit by recession. Many fear that in the post-crisis scenario, developed countries would resort to protectionism measures to protect their domestic industry. He said the efforts of several countries around the world in recent times to resist currency appreciation is a manifestation of macroeconomic protectionism. Subbarao added that in the post-crisis world, there may not actually be 'deglobalisation', but the earlier orthodoxy that globalisation is an unmixed blessing is being increasingly challenged. He said the rationale behind globalisation was that even as advanced countries may see some low-end jobs being outsourced, they will still benefit from globalisation because for every low-end job gone, another high end job - that is more skill intensive, more productive - will be created. "If this does not happen rapidly enough or visibly enough, protectionist pressures will arise, and rapidly become vociferous and politically compelling," Subbarao added.
RBI asks Axis Bank to justify Enam deal price
MUMBAI: The Reserve Bank of India (RBI) has questioned the valuation and structure of the high-profile deal cut by private lender Axis Bank last November to buy Enam Securities - an influential Dalal Street brokerage and investment bank. The banking regulator, which has sweeping powers over lenders, has asked Axis to justify the valuation of the all-stock transaction worth Rs 2,067 crore. At the time of the deal, Axis, the country's third-largest private bank led by CEO Shikha Sharma-a former ICICI Bank director-was on the lookout for an i-bank, and Enam was up for sale. "There are no indications that the deal may fall through, but Axis will have to explain the pricing and nature of the deal, which is essentially issuing stocks to pay for something," said a person familiar with the issues raised by the central bank. The point is whether the proposed practice of issuing new shares should be the preferred mode for banks to acquire new businesses, particularly brokerages. Axis Bank officials declined comment on the matter. But bank insiders were hopeful the regulator would approve the deal. "Technically, the RBI can make certain observations on the deal or ask the bank to tweak the valuation," said the person. Axis senior officials have met the RBI to put across the bank's views on the pricing and structure, which have been cleared by the bank board as well as Enam's. Enam founders -Nemish Shah, Vallabh Bhanshali and Jagdish Master-will own 3.3% equity in Axis once the deal is executed. Interestingly, for Enam shareholders, swapping their unlisted stock for listed shares of Axis would help them avoid capital gains tax. As per the deal, Axis Bank would offer shares to stakeholders of Enam Securities , even though the company would be acquired by a subsidiary of the bank. The newly-formed subsidiary would be headed by Manish Chokani.
Tech shift set to send bank NPAs soaring next month
NEW DELHI: Public sector banks are set to report a spurt in bad loans beginning next month when they shift to a new technology platform to calculate their non-performing assets (NPAs). The platform, called the Core Banking System, automatically processes and updates transactions, helping identify NPAs on a daily basis, as against the current system where most transactions are managed manually, leaving scope for slippages. Bankers say as a result of the mandatory migration to the new system, NPAs of some banks may rise by as much as 150%. This will force the lenders to set aside more funds to cover losses from such loans, which in turn will impact their bottomlines, they said. Several bankers had met finance ministry officials on Monday to ask for an extension of the March 31 mandatory migration deadline. "The government has decided to extend the deadline to June 30 only for accounts up to 50 lakh, and complete the entire process by September 2011," a finance ministry official said. "We don't see a case for relaxation beyond this." According to latest data from the Reserve Bank of India, the gross non-performing assets of state-run banks touched 68,597 crore at the end of December 2010, an increase of 27% from a year ago. "Already there is concern over the rising NPAs," said the chairman of a public sector bank who attended Monday's meeting. "If we reflect an increase in this fiscal, it will have an impact on the banking system as a whole." A look at the loan book of the country's largest public sector lender, the State Bank of India (SBI), gives an indication of the impact. SBI's NPAs rose by about 1,000 crore every quarter in the last fiscal after it started the process of shifting its loan book on the new technology platform, its managing director Diwakar Gupta said. Gupta was also present in the meeting with finance ministry officials. SBI has completed the process, barring agricultural loan, which account for about 3% of its total loans. The bank is concerned that a substantial part of agricultural loans, which are not accounted as bad loans under the manual system, may become NPAs on being shifted to the new platform. Punjab National Bank chairman K R Kamath said the banks would require time to correct any data inconsistencies, which may arise while shifting to the new platform. "We are shifting from a legacy system and a lot of data needs to be aligned," Kamath said. "Undoubtedly, there will be some rise in NPAs." Indian Bank , which was one of the first banks to move to the new system, had reported a jump of 830 crore in bad loans to 1,340 crore. "Shifting to CBS will result in a jump in bad loans but it help in monitoring the system," said T A M Bhasin, chairman and managing director of Indian Bank. The banks would require additional time to further cleanse the data, said Ramnath Pradeep, CMD of Corporation Bank. "So far it has been done manually," he said. "We need to further fine tune the system to avoid any discrepancies."
BoB's Mallya to take over as IBA chairman
Bank of Baroda (BoB) Chairman and Managing Director M.D. Mallya will take over as chairman of the Indian Banks' Association (IBA) from 1 April. He will succeed O.P. Bhatt, who will be superannuating as chairman of State Bank of India on 31 March, an IBA release said here on Tuesday.
The 5 yrs that transformed State Bank of India
OP Bhatt will be most remembered for SBI's rights issue of Rs 20,000 crore, coupled with employee stock purchase scheme that no other PSU bank had ventured into. Besides, the bank also raised equity capital in 2008 when companies such as Wockhardt Hospitals and Emaar MGF pulled out their IPOs. It was a proof of shareholder faith in him. The merger of SBI's associate banks with the parent was talked about since mid-nineties when McKinsey first suggested it. Mr Bhatt recognised the need to build a huge organisation without working at cross purposes. Fortunately for Mr Bhatt, his predecessor, AK Purwar had set the ball rolling by creating a platform for mergers. Mr Purwar ensured a common technology platform and systems and procedures at SBI and its associate banks. Mr Bhatt took it forward. He pushed merger of State Bank of Saurashtra with SBI at a time when the ruling party had a coalition with the conservative Left. SBI's 8% fixed rate home loan scheme, in response to global crisis, gained enormous attention. Although, arch rival and HDFC chief, Deepak Parekh was quick to term it as a gimmick. Its humongous success forced rivals to launch similar schemes, which offered fixed rate in initial years and floating rate for the remaining term of the loan. RBI's then Deputy Governor Usha Thorat expressed concerns over such loans, calling them teaser loans. In response, most home loan providers decided to withdraw such schemes from the market, except SBI. To make a strong case, RBI asked banks to set aside higher capital on such loans, probably to dissuade banks from offering such loans. Mr Bhatt, who felt that the bank's special loans can no way be called teaser scheme, declined to make any provisions for such loans. "There is total transparency on it," said Mr Bhatt. "The customer is not taken by surprise. On the risk side, the eligibility is considered based on the highest interest charged at the time of giving loan. Neither is there opacity, nor is there risk." Mr Bhatt, in fact, felt SBI was not given due credit. "We brought the home loan market back. Lakhs of people own their homes because we kept rates down. It pushed up the economy. But this is something that is not recognised by many." But RBI remains worried about it - possibly relating it to the US sub-prime crisis that sank the global financial system. "Some of us have a strong apprehension that the motivation for introducing teaser loans was not product innovation, but to deprive existing floating rate home loan borrowers from the full benefit of declining interest rates, based on market realities," KC Chakrabarty, deputy governor at RBI, said in a recent interview. "A number of existing home loan borrowers did not get the benefit of lower interest rate." His another clash with the regulator was when he guaranteed bonds of Tata Steel worth Rs 4,200 crore. RBI claimed that regulations do not allow banks to guarantee corporate bonds, while SBI stood by its client - the Tata Group, which was unable to raise funds for the Corus Group purchase. Disputes with RBI does not seem to cease. The banking regulator downgraded SBI by one notch to B- on grounds that the bank has made lower-than-required provisions for bad loans. The rating, which is highly confidential and is not made public, had upset Mr Bhatt, who recently made a case to RBI to review its rating. The biggest challenge for his successor would be to retain the aggressive brand that Mr Bhatt has created for the once sleepy bank.
RBI and its offices in Mumbai and Navi Mumbai will function normally on April 01
The Reserve Bank of India and its offices in Mumbai and Navi Mumbai will function normally on April 01, 2011. The Government of Maharashtra has declared Friday, April 01, 2011 as a Bank Holiday under the Negotiable Instruments Act, 1881, to facilitate annual closing of banks’ accounts. Commercial banks will remain closed for public transactions on that day.
Now, alerts for all credit card payments
MUMBAI: The Reserve Bank of India has asked banks to put in place a system for providing online alerts for all card transactions irrespective of amount. Until now banks had to send online alerts to the cardholders for only 'Card Not present' (CNP) transactions which were for the value of Rs 5,000 and above. Taking note of unauthorized or fraudulent withdrawals from ATMs, RBI has said that banks must implement by June 30 a system of instant alerts for all types of transactions irrespective of the amount, involving usage of cards at various channels. "This measure is expected to encourage further usage of cards at various delivery channels" an RBI circular said. In a circular to all banks, RBI said that it has been informed of unauthorized or fraudulent withdrawals from ATMs. "It is important to arrest the incidents of such frauds in order to further encourage card based transactions in the country where the use of credit/debit cards plays an important role" the central banks said. RBI has said that banks must implement by June 30, 2011 a system of instant alerts for all types of transactions irrespective of the amount, involving usage of cards at various channels. "This measure is expected to encourage further usage of cards at various delivery channels" it said. February `09, RBI had asked banks to send online alerts to cardholders either through SMS or email where the card was used for transaction above Rs 5000. At that time these alerts were required for only those transactions where the card was not present such online purchases or over the telephone. "This measure has been generally welcomed by customers as it enabled them to take prompt action if the card is misused. This measure goes a long way in arresting further perpetration of such fraudulent transactions" RBI said in its circular. Earlier this year RBI sought to make `card not present' transactions more secure by insisting that banks ask for an additional password in addition to the credit card number and the CVV number printed on the back of the card. The additional security feature came into effect from last month.
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