RBI deputy: inflation should decelerate in H2

Inflation in India should start decelerating in the second half of the current fiscal year, deputy governor of the Reserve Bank of India (RBI), Subir Gokarn, said at Citi investor conference on Wednesday. Gokarn also told television channel CNBC-TV18 at the conference it was inevitable that high interest rates would at some point affect growth but the RBI would look to keep that impact small.

Yahoo News

Chip-based cards will cut the risk of fraud when you go shopping

Your card-related retail transactions will soon become safer. Alarmed by the increase in card-related fauds, the Reserve Bank of India (RBI) last week suggested the industry shifts to chip-based cards as against the more commonly used magnetic strip ones. Chip-based cards come with encrypted information, which makes then safer. But, the apex bank wants new credit and debit cards to provide greater security by asking for a second-level authentication by way of a personal identification number (PIN ). Most credit and debit card frauds take place at point of sales (PoS) terminals. According to RBI’s report, the banking industry saw frauds worth Rs 13 crore due to lost, stolen and counterfeited cards in 2010-2011. At Rs 8.2 crore, loss due to counterfeited cards was the highest. Currently, all transaction data from the PoS terminals or automated teller machines (ATMs) to the host system are sent in a clear text format. The transaction data travels through public-switched telephone networks and General Packet Radio Service (GPRS). Any data compromise, due to wire tapping at the merchant establishment or during the communication carriage can lead to fraud. Fraudsters who get hold of a card can copy the information in case of magnetic stripe cards. However, this is not possible with chip-based ones. There are around 240 million debit cards and around 18 million credit cards. The total spending at PoS terminals is worth Rs 88,000 crore. According to RBI, the number of such terminals in the country is about 5.6 lakh. There are around 70,000 ATMs. Bankers say though the move is expected to bring the level of card frauds down, it will increase the cost for banks, which means the cardholders will have to shell out more money for the card. Presently, chip-based cards cost around Rs 80-90, as against Rs 15-20 for magnetic strip cards. This will also increase the time taken for retail transactions at PoS terminals because of the second level authentication needed. If chip-based cards with PIN are to be mandated for all transactions, the PoS terminals will also have to be modified to read the new type of card code. In its report, the panel says if the service code on the card does not support the PIN, the terminals will have to be updated with bank identification numbers of all the issuing banks in the country. Banks like State Bank of India (SBI), ICICI Bank, Citibank and HDFC Bank have started replacing plain magnetic swipe high-end cards with dual cards having both the chip and the magnetic swipe. The RBI panel has also suggested that an alternative to PIN, which is used for ATM for cash withdrawals, could be a biometric verification, using data from the Unique Identification Authority of India’s ‘Aadhar’ number.

BS

Saraswat first co-op bank to get pan-India license

Saraswat Bank has been granted a pan-India operation license by the Reserve Bank, making it the first co-operative bank in the country to be accorded this permission, it said today. The bank's chairman, Eknath Thakur, said, "The 93-year-old bank will be concentrating first on opening branches in the southern Indian states of Kerala, Andhra Pradesh and Tamil Nadu, to be followed up by national capital region and northern states." By end-FY16, Thakur said, the bank is targetting to expand its network to five hundred branches from the present 216, with the uncovered region getting increased attention. Thakur said that the bank's total business mix has crossed Rs 28,000 crore today, to make it the undisputed leader amongst cooperative banks in the country. It overtook the Maharashtra State Cooperative Bank which had a business mix of Rs 27,800 crore before its board was dissolved last month, Thakur said.

IBN Live

Banking On A Machine

ATMs are on their way to becoming a one-stop shop for most banking services. Here's what your ATM can do for you...........

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New MFI bill to make RBI sole regulator, supersede old laws - Watch the video

Milestone Of Sorts

The working group constituted by the Reserve Bank of India (RBI) on the introduction of financial holding company (FHC) structure in India has come up with its recommendations in a report. In India, all non-banking activities, such as insurance, mutual funds and broking, are undertaken by banks through a subsidiary route. Banks usually float separate subsidiaries to manage these businesses. The working group in its report says: “One of the key risks posed by the bank-subsidiary model is that the parent bank is directly exposed to the functioning of various subsidiaries and any losses incurred by the subsidiaries inevitably impact the bank’s balance sheet. It, therefore, becomes imperative that the bank regulator [RBI in this case] has an interest in the health of all subsidiaries under the banks, even as each subsidiary is under the jurisdiction of the respective sectoral regulators (IRDA, Sebi, and so on)”. This increases the complexity of the supervision process. The working group felt that the FHC structure may enable better supervision from a systemic perspective. The report states: “A holding company model would provide the requisite differentiation in regulatory approach for the holding company vis-a-vis the individual entities.” The working group also suggested that the FHC model can be extended to all large financial groups, irrespective of whether they contain a bank or not. The global economic slowdown saw many banks and financial institutions suffering huge losses and reaching the brink of collapse, which forced many governments to use taxpayers’ money to bail out these institutions in order to safeguard public money. Taking a cue from this crisis, the RBI had constituted a working group in June 2010 to examine the feasibility of introducing an FHC structure in India under the chairpersonship of Shyamala Gopinath, deputy governor, RBI. The group has recommended that the implementation of the FHC model should be done in a gradual and phased manner, which will free up banks from the risk and the extra burden of managing their subsidiaries—these things would be taken care of by the FHC so the bank can concentrate on its own activities. This means that the money lying in your bank account will be more secure in the future.

Outlook

Kisan Patra may go on money laundering threat

NEW DELHI: Concerns over misuse of the popular small savings scheme Kisan Vikas Patra (KVP) for money laundering may prompt the government to wind up the scheme. A panel headed by Reserve Bank of India Deputy Governor  Shyamala Gopinath has recommended an end of the scheme as KVP is prone to misuse.  It also said the continued popularity of both KVP and NSC among the urban population, who are not small savers, could be prompted by an incentive to avoid tax. NSC and KVP are the two most popular savings schemes and together accounted for nearly half of the total small savings corpus as on March 2010.  The UPA government is facing criticism for its inability to check generation of black and has taken several steps to strengthen and streamline laws and procedures to check proliferation of black money. It has set up several panels to investigate and estimate the extent of black money in the system.  An official said KVP was more popular as it was a bearer-like instrument and possibility of misuse is very high. "While there is no evidence to suggest that KVP was being used for money laundering purposes, it was found that often some investors made bulk purchases and later on transferred them to others," said the official, who did not wish to be identified.  The panel said it had noted the observations made on KVP and national savings certificate by the Rakesh Mohan committee that both these instruments were quite expensive in terms of the effective cost to the government and should be discontinued. "In view of recent developments on Anti Money-Laundering (AML)/Combating the Financing Terrorism (CFT) front, the committee recommends that KVP should be discontinued," the panel said.  The panel has also called for enforcing strict Know Your Customer (KYC) norms for all small savings to prevent money laundering and generation of black money.

TOI

Can UID help to make card payment systems more secure and future proof?

According to a report published by the RBI, technically this is possible, but the acceptance of biometrics in payment authentication has not been proved anywhere else yet .......

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Now, get UID online.....

In the first initiative of its kind in the country, the state government is launching an online process to fast-track registration of Unique Identification Number (also known as Adhaar) in Mumbai and Pune, in the.....

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Bankers against Ramdev’s call to ban 500, 1,000 notes

Mumbai: Baba Ramdev’s call to ban Rs 500 and Rs 1000 notes to curb black money is not finding any support among bankers who feel that such a ban is not feasible. However, no senior banker is willing to comment on the issue as they feel it is a political hot potato to talk about the impact of such a ban.  According to RBI data of the Rs 7,88,299cr currency in circulation, 76% is in Rs 500 and Rs 1000 notes. However, when it comes to number, these two denominations represent 17% of currency notes. Despite the presence of high denominations RBI had spent Rs 2754cr in printing notes. Bankers say that if these two denominations are withdrawn cost of handling cash would zoom and there would be complete chaos.  Operators of automated teller machines say that it will throw up huge challenges as these machines will hold less than a fifth of their current capacity. “An ATM machine typically holds 10,000 bills if these were to comprise only notes of Rs 100 the rate of replinshment would go up. This will increase costs and inconvenience customers” said Mani Mamallan, chief marketing office, C-Edge Technologies a joint venture between SBI and TCS.  Besides, transaction time at machines would also rise because the maximum amount that can be withdrawn at a stretch would be Rs 5,000 since machines are designed to dispense only 50 notes at a time. The cost of printing notes for RBI would also multiply several times. “A high transaction ATM which runs out of cash once a day will run out of money several times. Because cash replenishment agencies will take a couple of hours to respond, customers will be affected because of the down-time” said Sunil Udupa, CEO, AGS Infotech another company that supplies machines and maintains bank ATM networks.  According to Udupa the only solution for a bank would be to increase the number of machines in a location. “Taking such measures will increase their cost, but that is the only way that they can ensure that cash is consistently available to customers if high value notes are withdrawn” said Udupa.  Besides, the costs involved, banks feel that while such a measure would indeed inconvenience those dealing in black money it might simply shift black money into other assets such as gold or US dollars. “Electronic payments account for only five percent of all transactions. One reason for this is the absence of financial inclusion as a result of which daily wage earners receive payment in cash” said a banker. “It is only when everyone has a bank account and a payment card that electronic transactions will gain popularity”. But some card companies say that the presence of unaccounted money could be the reason why customers choose to make bigticket payments in cash despite cards being available.

TOI

RBI Mustn’t Dictate Bank Margins - T T RAM MOHAN PROFESSOR, IIM AHMEDABAD

The central bank should desist from talking down the net interest margin of banks

The net interest margin (NIM) — the difference between interest income and income expense as a proportion of assets — is a key driver of bank profitability. The RBI thinks it is too high in India and has been trying hard to talk it down. Is the RBI right to be worried about the NIM? If yes, what is the appropriate response to high margins? Let us begin by looking at the trend in NIM of Indian banks as a whole and of public sector banks (PSBs). Two facts are clear from the accompanying table. One, the NIM remained steady for a long period after deregulation. Two, it fell to a lower level in 2007-08 and 2008-09. The decline in NIM for banks as a whole was the result of a decline in margins at PSBs which account for 70% of assets in the Indian banking system.  One would expect deregulation to result in a decline in bank margins. This has happened in other banking systems but not in India until recently. Why? Deregulation leads to greater competition amongst banks. It is also accompanied by disintermediation, that is, deposits and loans move out of the banking sector and into financial markets. As competition hots up, deposit rates rise and loan rates decline. Banks’ NIMs get squeezed. India does not conform to this trend because, at the time of deregulation, we had a low level of bank penetration. In 1991-95, the credit to GDP ratio averaged 29%. The ratio has since risen to 60% but remains below that in many emerging markets. We are still an under-banked economy. Any economic system needs a minimum level of banking services. Only thereafter will savers and borrowers migrate in a big way to the financial markets. It will be a while before banks feel the full blast of disintermediation.  The decline in NIM in the recent past is good news for borrowers. However, it is not as if banks need to start worrying. Despite a decline in NIM in 2007-08 and 2008-09, PSBs’ return on assets was around 1% in both the years. This was higher than in many of the previous years. PSBs seem to have made up for the decline in margin by an increase in fee income. This highlights a second factor underlying the level of bank margins, namely, the proportion of fee income in relation to interest income. Banks with a high proportion of fees can afford a lower NIM; those with a lower proportion will need a higher NIM. A third factor driving the NIM is the bank’s business model. In a branchintensive model, such as India’s, operational costs will be high. The NIM needs to be commensurately higher.  The composition of loans and the risk profile of borrowers is another important factor determining the NIM. A bank that has a higher proportion of SMEs in its portfolio will require a higher NIM in order to offset risk. So will banks with more of certain retail loans, such as consumer loans, credit cards, two-wheeler and three-wheeler loans. Mandating a lower NIM across the board does not make sense.  We want banks to practise financial inclusion. That means investing in distribution, higher operational costs on low ticket loans and deposits and lending to riskier borrowers. All this will be reflected in higher lending rates and a higher NIM. If we want banks to be serious about financial inclusion, we must be willing to tolerate higher NIMs on that portion of their portfolio.  Comparing NIMs across countries is not meaningful either because the factors listed above will vary from one country to another. The NIM for US banks in 2008 was just under 3.8%; at its peak in 1993, it was close to 5%. In the period 1994-01, banks in Western Europe had an average margin of 2.7%, higher than what Indian banks enjoy today; the margin in banks in Eastern Europe in that period was twice that in Western Europe. No worthwhile conclusions can be drawn from cross-country comparisons. How do we respond to a situation where NIMs do not decline appreciably with deregulation? The regulator’s job is to ensure adequate competition — and leave it at that. One way to measure competition is to look at the market share of the top five banks. The figure of 38% for India looks right; it places India somewhere in the middle of a range of developed and emerging markets.  The RBI is welcome to usher in greater competition by licensing new banks. However, in the present situation, a policy bias towards higher NIMs would be appropriate. Under Basel 3, capital requirements for banks will go up and banks’ return on equity will come under pressure. Indian banks will need capital from abroad in order to finance an economy growing at the present rate. Higher NIMs will enable Indian banks to maintain their return on equity and attract capital.  For all these reasons, talking down NIMs is not correct policy. It is a matter of concern on another account. Since April 2009, the policy rate has gone up by 250 basis points. However, the prime lending rate of PSBs remained unchanged. The base rate, which came into effect from July 1, 2010, has increased only by 75-100 bps at PSBs.  It does appear that moral suasion on the part of the central bank has kept PSBs from increasing their lending rates. As a result, the pass-through of policy rates to borrowers has not happened. It cannot be that the RBI professes to be tough on inflation but does not allow the logic of its policy to work through the banking system.

ET

Unidirectional Graph – Naveen Kumar

Banks up lending rates, more in the offing

The upward movement of interest rate continues unabated. Most of the banks have increased their lending rates following the 50-basis point (bps) hike in key policy rates and saving accounts interest rate by the Reserve Bank of India (RBI) on 3 May 2011. (A basis point is one-hundredth of 1 per cent.) Base rate is the minimum rate at which a bank can lend to its customers and interest rates on all loans (home loan, auto loan, personal loan, and so on) are linked to the base rate. Any increase in base rate directly affects existing as well as new borrowers as the EMI outflow is bound to go up. The RBI, in its effort to lower inflation, increases key rates to suck liquidity from the banking system—as a result, banks are left with less money to lend and so they increase their lending rates. India’s largest bank, State Bank of India, upped its base rate by 75 bps from 8.50 per cent per annum (p.a.) to 9.25 per cent p.a. with effect from 12 May 2011. Other public sector banks such as Punjab National Bank and Canara Bank have already raised their lending rates by increasing their base rate by 50 bps to 10 per cent, with effect from 5 May 2011. Bank of Baroda and Union Bank of India followed suit, increasing their base rates to 10 per cent effective 6 May 2011. Among private sector banks, ICICI Bank, Kotak Mahindra Bank and HDFC Bank hiked their base rates to 9.25 per cent. Existing auto loan borrowers are suffering the double whammy of rising fuel prices and interest rate hikes. In fact, these factors have made many people postpone their car purchase decision. The impact is visible as auto sales have slowed down—domestic car sales grew just 13 per cent in the month of April, the least in the last two years. Many experts are of the opinion that there may be another 25-50 bps hike in key rates in the coming months, after which rates may stabilise or start coming down. So, if you have been waiting for interest rates to come down to take a home, auto or personal loan, it’s quite likely that you might have to wait for a little longer.

Outlook  

PACs to work as business correspondents in Maharashtra

The Reserve Bank of India (RBI) and the National Bank for Agriculture & Rural Development (Nabard) have given their in-principle approvals to commercial banks roping in more primary agriculture cooperative societies (PACs) to disburse crop loans in Maharashtra. Under such an arrangement, Nabard would provide refinance to commercial banks and the crop loan to farmers would be routed through PACs, which would play the role of business correspondents. The decision was taken by the state-level banker's committee of Maharashtra, chaired by Chief Minister Prithviraj Chavan. The meeting was also attended by RBI Deputy Governor K C Chakrabarty and Nabard Chairman Prakash Bakshi. The decision follows the state government's move to supersede Maharashtra State Cooperative Bank's 44-member board of directors for procedural lapses and huge exposure to cooperative sugar and spinning mills.  Speaking to Business Standard, Prithviraj Chavan said, "At Wednes'day's meeting, a comprehensive plan was finalised for the disbursement of crop loans of Rs 23,180.66 crore for 2011-12, compared with Rs 13,150.88 crore in 2010-11. The government wants commercial banks to play a pro-active role to increase their share. The government would provide all the necessary help." Nabard Chairman Bakshi said, "The primary objective is timely availability of crop loans to farmers and Nabard would provide the necessary refinance to commercial banks which lend to farmers through PACS"  M D Mallya, chairman and managing director, Bank of Baroda said, "The apex co-operative bank has been in some sort of a difficulty and therefore, the banking system needs to ensure that the credit flow is not curtailed."

BS

Tainted players unlikely to get banking licences

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H.R.Khan likely to succeed Gopinath as RBI deputy guv

Reserve Bank of India (RBI) Executive Director H R Khan has emerged as the front runner for the post of Deputy Governor in the central bank.

Shri Khan would replace Shyamala Gopinath who retires on June 20, after a seven-year stint as Deputy Governor.  According to sources, the finance ministry has cleared Khan's appointment for the Deputy Governor’s post. The proposal would now be referred to the Appointments Committee of the Cabinet (ACC), which is headed by the prime minister. A search committee to select a new Deputy Governor, headed by RBI Governor D Subbarao, had suggested two candidates — H R Khan and G Gopalakrishna — for the Deputy Governor's post, after interviewing seven RBI executive directors last month.  If appointed a Deputy Governor, Khan would supersede three executive directors — V K Sharma, V S Das and G Gopalakrishna. An RBI Deputy Governor can be appointed for a maximum of five years and the retirement age for a Deputy Governor is 62. To be eligible for the Deputy Governor’s post, a candidate must have at least two years of service left. As an Executive Director, Khan looks after four portfolios — the Foreign Exchange Department, External Investment and Operations, Government and Bank Accounts and Internal Debt Management. Gopinath, who looks after the Foreign Exchange Department, is also in charge of Payments and Settlement, Non-Banking Supervision, the Financial Stability Unit and External Investment and Operations. The other RBI Deputy Governors are K C Chakrabarty, Subir Gokarn and Anand Sinha. RBI is also increasing the number of Executive Directors from seven to nine.

BS

Report on Review of National Small Savings Fund

The Union Finance Minister, Shri Pranab Mukherjee receiving the Report of the Committee on Comprehensive Review of National Small Savings Fund from the Deputy Governor of Reserve Bank of India (RBI), Ms. Shyamala Gopinath, in New Delhi on June 07, 2011

CAB facilitates Aadhar……..

Kamala Rajan inaugurated the camp by registering her fingerprints

Ms. Kamala Rajan, Chief General Manager & Principal is always open to good suggestions and ideas received from the staff.  She quickly acted upon one such suggestion received from Shri Nitin Desai, Manager (Rajbhasha) for facilitating issuing of Aadhar cards to the CAB staff and their family members. Accordingly, a three days’ camp from May 23 to 25, 2011 was organized in the College of Agricultural Banking in collaboration with Bank of Maharashtra for the registration of "Aadhar Cards", a drive initiated by the Unique Identification Authority of India under the auspices of the Planning Commission of the Government of India.  Nearly 500 people, which included the staff members and their families registered their names. The cards will be sent to them by post.

Post office savings account interest be hiked, says panel

New Delhi : A committee headed by Reserve Bank of India (RBI) Deputy Governor Shyamala Gopinath has recommended that the interest rates on post office savings accounts be increased to four percent from the existing 3.5 percent in a bid to promote small savings. The committee submitted its report to Finance Minister Pranab Mukherjee Tuesday, and has recommended hiking the post office savings account interest rate from 3.5 percent to four percent, benchmarking interest rates on other small savings schemes, the finance ministry said in a statement.  The committee, set up for comprehensive review of the National Small Savings Fund, also recommended that the mandatory component of investment of net small savings collections in state government securities should be reduced from 80 percent to 50 percent.  'The balance amount could either be invested in central government securities or could be on-lent to other states on basis of requirement, or could be lent for financing infrastructure projects requiring long-term finance,' it said.

MSN News

Give higher returns on PPF, post office savings: Panel

NEW DELHI: There is some good news for millions of investors who depend on small savings instruments such as post office savings and public provident fund scheme.  A committee set up by the finance ministry has recommended that the annual PPF limit be enhanced from the present level of Rs 70,000 to Rs 1 lakh besides changing the interest rate structure. Unlike the present system where rates have not changed during the UPA regime, the panel headed by RBI deputy governor Shyamala Gopinath has suggested the return on all small saving schemes, other than post office savings account, be linked to the rate paid on government securities.  So, in a rising interest rate environment like at present, investors would benefit and would not merely have to pay higher EMIs.  The committee, which submitted its report to finance minister Pranak Mukherjee, has recommended that the rate of interest be at least 25 basis points higher than the g-sec yield. For senior citizens the spread should be at least 100 basis points higher. If the proposal is accepted, based on the present interest rate, PPF accounts would be close to 8.5%, instead of 8%. In case of senior citizens, the returns would be 9.25%. In both cases, it would be tax free.  For post office savings accounts, the interest rate is proposed to be enhanced from 3.5% to 4% to bring it in line with the returns on savings bank accounts with banks. The panel has recommended that these rates may be notified by the government at the start of the financial year based on the average yields on government securities in the previous calendar year.  Along with higher returns, the committee has also recommended the abolition of commission payment to agents on PPF and Senior Citizens' Savings Scheme. The standardized agency commission is proposed to be halved to 0.5% as part of a plan to reduce the overall cost of the small savings fund run by the government.  There is, however, bad news for those investing in Kisan Vikas Patras, as the instrument is proposed to be discontinued.  For those parking funds in National Savings Certificates there is good news as well as bad news. First the bad news, the tenure of the standard product is proposed to be cut from six years to five. The good news is there will be a new product with 10 year maturity with interest rate which is 50 basis points higher than g-sec with a similar maturity. So, the interest rate on offer would be 8.3% based on the 10-year benchmark government bond.  In addition, the committee has also suggested that states be burdened with only half the funds they raise under small savings schemes instead of 80% at present. While there have been several committees that have looked at restructuring the small savings schemes, the recommendations were rejected as they would have upset popular sentiment. But unlike the previous reports, the present one actually recommends a market-linked interest rate regime, which would be more palatable for the investors as well as the government.

TOI

What are chip-based and magnetic strip cards?

Chip-based cards have a small chip which stores the account information in an encrypted format and provides an additional level of security by asking for a personal......

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Ramdev effect: Trader converts Rs. 24 lakh into 100-rupee notes

Mumbai:  Besides throwing the ruling Congress party into a political quagmire, Baba Ramdev's abruptly-terminated fast-unto-death seems to have had a series of unintended consequences as well. One of the more bizarre ones relates to a metal trader in Pydhonie, who was so afraid of currency notes of 500 and 1,000-rupee deno-minations going out of circulation that he onverted his savings amounting to Rs. 24 lakh to notes of Rs. 100. He even paid an agent Rs. 24,000 to help him do so. It may be recalled that one of the yogi's demands was the withdrawal of Rs. 500 and Rs. 1,000 notes from circulation to make bribery more difficult.  The incident took place on Saturday evening, when, according to sources from Pydhonie, the metal trader panicked on hearing the list of Baba Ramdev's threats and demands. "He thought the government would accede to this demand immediately and he would lose Rs. 24 lakh out of the money he kept stashed away in cash as savings, because it was in denominations of Rs. 500 and Rs. 1,000.  Ramdev effect: Trader converts Rs. 24 lakh into 100-rupee notes. Besides throwing the ruling Congress party into a political quagmire, Baba Ramdev's abruptly-terminated fast-unto-death seems to have had a series of unintended consequences as well. One of the more bizarre ones relates to a metal trader in Pydhonie, who was so afraid of currency notes of 500 and 1,000-rupee deno-minations going out of circulation that he converted his savings amounting to Rs. 24 lakh to notes of Rs.100. He even paid an agent Rs. 24,000 to help him do so. It may be recalled that one of the yogi's demands was the withdrawal of Rs. 500 and Rs. 1,000 notes from circulation to make bribery more difficult.  The incident took place on Saturday evening, when, according to sources from Pydhonie, the metal trader panicked on hearing the list of Baba Ramdev's threats and demands. "He thought the government would accede to this demand immediately and he would lose Rs. 24 lakh out of the money he kept stashed away in cash as savings, because it was in denominations of Rs. 500 and Rs. 1,000.  He approached an agent to get it converted to notes of Rs. 100 and smaller, who charged Rs. 1,000 for every lakh," said a person close to the trader. Alpana Killawala, spokesperson for the Reserve Bank of India, said these kinds of transactions aren't illegal and even banks offer the facility of exchanging notes of higher denominations for those of smaller ones. "There is no irregularity till the time only currency notes are being exchanged. There are many banks that offer this facility as well.  But, for higher amounts, the banks are supposed to note down PAN card numbers and also deposit the money," she said. A source said many people prefer to get this done via agents instead of banks, to avoid the Income Tax glare. Mahindra Angara, president, Metal Traders' Association, said, "I haven't heard of anything of this sort. This must be a one-off case."  Baba Ramdev had called for the abolition of currency notes of higher denominations, claiming that the move would reduce corruption. He had stated that when the notes are of higher denominations, the bundles made out of them are thinner and easier to hide.  He had contended that the exchange of bigger bundles and in greater numbers would attract attention and dissuade people from giving and accepting bribes. Ramdev had, however, stated at the beginning of the strike that he was putting this particular demand on the backburner. 

NDTV Profit  

Coins in memory of Bhagat Singh remain a distant dream

It was in September 2006 that the Union Government decided to issue commemorative coins in memory of Shaheed Bhagat Singh to honour the sacrifices made by him to help the country attain freedom. Even after four and half years of the same, the coins have still not become a reality. An RTI query by social activist PP Kapoor has revealed that the Union Government was unaware of the number of coins produced thus far to be put into circulation. In reply to the query which was put up to the PMO, the Security Printing and Minting Corporation of India (SPAMCI) stated that commemorative coins of Rs 5 and Rs 100 denomination were produced by the India Government Mint (IGM), Kolkata only for the release function held at the martyr’s native village Khatkar Kalan in Bhagat Singh Nagar district in Punjab in September, 2008. After which, the general public did not get to see the coins in circulation. Though the SPAMCI stated that birth centenary coins of Rs 5 denomination were to be produced in ferritic stainless steel having a quality of 25 million pieces, it had no information about the number of coins produced till date. In the reply dated May 13, 2011, the corporation said that the dies for the same were being provided by IGM, Kolkata to IMG Hyderabad, which was assigned the task of producing these coins and work was under progress. The corporation also mentioned that dies and punches were being arranged by IGM and blanks were being done by IGM Hyderabad. It stated that after minting the coins, these would be handed over to the RBI for distribution. However, there was no mention of the coin of Rs 100 denomination in the reply. Social organisations led by the All-India Shaheed Bhagat Singh Brigade have already appealed to the Centre to introduce the commemorative coins of Rs 100 and Rs 5 denominations announced by it on the birth centenary of Bhagat Singh. Chairman of the brigade Yadavinder Singh Sandhu wrote a letter to the PM last year, urging him to bring the coins into daily.

The Tribune

Top urban co-op banks set to expand area of operations

India's top three urban co-operative banks — Saraswat Co-operative Bank, Cosmos Co-operative Bank and Shamrao Vithal Co-operative Bank — may soon spread their wings across the country and give private sector banks tough competition.  Following the Reserve Bank of India's nod for expanding its area of operations, the Mumbai-headquartered Saraswat Bank is drawing up plans for an all-India footprint.  Currently, the area of operation of India's largest UCB is restricted to six States — Maharashtra, Goa, Karnataka, Gujarat, Madhya Pradesh and Delhi. It has a network of 217 branches. “We have already applied to the RBI for issuing licences at 96 locations. Our target is to reach a business (deposits plus advances) level of Rs 50,000 crore by March-end 2016 from Rs 27,313 crore as on March-end 2011,” said Mr Eknath Thakur, Chairman, Saraswat Bank. The RBI is amenable to granting permission to well-managed and financially sound UCBs to expand their area of operation. Hitherto, UCBs could not expand their operations beyond a few States. Cosmos Bank (as on March-end 2011, total business, Rs 15,521 crore; and branches, 119) and Shamrao Vithal Bank (total business, Rs 10,512 crore; and branches,105) have sought the regulator's permission to expand their area of operations.

The conditions

The RBI will allow an urban co-operative bank to become a pan-India bank provided it has, among others, a minimum capital-to-risk-weighted assets ratio of 9 per cent, a minimum Grade II classification, net worth of Rs 500 crore or more, according to Mr Shashikant Bugde, Chairman, Cosmos Bank. “We have applied to the RBI to have a pan-India presence. Currently, we have branches in Maharashtra, Gujarat, Madhya Pradesh, Karnataka and Andhra Pradesh.  “Once the regulator gives us permission, we will expand our operations to Delhi, Goa, Tamil Nadu, Rajasthan and Tripura,” he said. Shamrao Vithal Bank plans to open branches in all States once the central bank's permission comes through, said Ms Himangee Nadkarni, Chief Financial Officer.

Business Line

Co-operative sector banks sinking, says HC

Raising concerns over the deteriorating state of co-operative sector banks in Maharashtra, the Bombay High Court on Tuesday said the General Manager of the Rural Co-operative Banking Cell of the Reserve Bank of India (RBI) be made a party to a litigation seeking action against the pathetic condition of the Kolhapur District Central Co-operative (KDCC) Bank.  The court felt the scope of the litigation could be widened to all co-operative sector banks instead of restricting it to the KDCC Bank.  “Many co-operative sector banks are virtually sinking, this is very serious and we cannot keep our eyes closed in such a situation,” the court remarked. “Tell us if there is any co-operative sector bank which is earning profit because of its operations,” Justice BH Marlapalle asked the state government.  Kolhapur-based activist Sunil Modi had filed the petition through his lawyer Uday Warunjikar stating that despite several inspections and audits indicating rampant malpractices in KDCC Bank, no criminal action had been initiated so far. Justice Marlapalle and Justice UD Salvi have asked the Registrar to file an affidavit stating measures taken by him against erring directors and officers of KDCC Bank.  Warunjikar told the court that many directors of KDCC Bank happen to be influential politicians, either sitting or former ministers.  “Probably, that is the reason why no action has been taken,” the court said.  According to Modi’s petition, the liabilities of the bank had exceeded the value of its assets. The net worth of the bank was minus Rs 22.08 crore as on March 31, 2007. In 2008, the net worth of the bank had plummeted to minus Rs 157.79 crore. The case will be heard further on June 22.

IE

The End May Be Nigh for Microfinance in India

The likes of the Andhra Pradesh law–and the inability of the RBI to counter it by asserting that it is the ultimate regulator of non-bank financial companies– creates “regulatory uncertainty that has a negative impact on the investment climate......


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Better planning for longevity risk is essential

The third component concerns commercial type organisations, whether in the private or in the public sector. The PFRDA should be given the powers to require these organisations to project organization-specific longevity risks, to subject them to stress tests, and to prepare plans for meeting such risks. They should include public sector financial institutions, including the Reserve Bank of India; private corporations with DB plans; public organisations such as the Indian Railways, Indian Post, public sector banks and others.

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Bank borrowings from RBI signal rate hike

Banks' rising borrowings from the Reserve Bank of India indicate that lenders foresee a spike in interest rates next week as the advance tax....

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Government of India appoints P K Panda as director of Bank of India

Bank of India has announced that Government of India, Ministry of Finance, Department of Financial Services, vide their notification dated 30 May 2011 has nominated P K Panda, Regional Director, Reserve Bank of India, Bhopal as director of the bank in place of G Mahalingam with immediate effect and until further orders. 

Face Value - A Whole Heap More to do for the Nabard Man

Unlike his three immediate predecessors, the new chairman of National Bank for Agriculture & Rural Development (Nabard) has an advantage. Prakash Bakshi, who assumed the reins last week is out and out a Nabard man. This gives him an edge at a time when the bank is facing challenges in channeling loans to boost capital formation in agriculture, strengthening the rural cooperative credit structure and empowering regional rural banks for successful execution of the government’s financial inclusion agenda by 2012. The past three chairpersons — Ranjana Kumar (2003-2005), YSP Thorat (2006-2008) and UC Sarangi (2008-2010) — all very distinguished professionals, joined the bank from outside and had to spent months to understand the functioning of Nabard. Before assuming charge at Nabard, Mr Kumar was the chairperson of Indian Bank and Mr Sarangi was the principal secretary to the Maharashtra chief minister. Mr Thorat was executive director with RBI and joined Nabard as MD before elevated to the chairman’s position.  In contrast, Mr Bakshi, a doctorate in Economics, has risen through the ranks and having spearheaded key departments like cooperative revival, farm sector, micro credit and financial inclusion, is readily abreast with the emerging demands of these verticals. Before being picked as the head of the institution, Mr Bakshi was at the vanguard of the 29-year-old entity’s first-ever organisational and business restructuring drive and many expects his elevation will add momentum to this initiative. He started his career as a lecturer at Ravishankar University, Raipur, before joining the Reserve Bank of India in 1979. He was part of Nabard since its inception on July 12, 1982. It’s now widely accepted that the country needs to look beyond traditional areas of farming and focus more on allied activities such as dairy, poultry or fisheries to clock a 4% agricultural growth, which is reckoned as a must for a sustained GDP growth of 9% or above. In this light, Nabard needed an overhaul so that it can adjust to the changing scene and make worthy contribution to boost the more or less-stagnated capital formation in agriculture. Another significant agenda before Nabard now is to create an enabling environment for the country's financial inclusion effort. For this, rural cooperative banks and regional rural banks (RRBs) need to be revamped fast and being the regulator, Nabard has to find ways to put them on modern banking technology platform. Under Mr Bakshi’s direction, it has already taken steps to this direction and as the chairman, he has to ensure proper execution of the efforts taken.  “He is very focused and will not mince words,” said a senior Nabard official. His colleagues find him accessible and business oriented. Earlier in his career, he was associated with the Vaidyanathan Committee for cooperative revival, member-secretary for the committee to examine the capital structure of RRBs. Such experience will certainly guide him in strengthening these two key agencies. Mr Bakshi will also have to take efforts to graduate the self help group-bank linkage programme to the next level. The scheme, immensely successful in empowering the rural women in a country where women do not get rights so easily, has reached saturation in several pockets and there are signs that many groups are disintegrating. He was part of the team that designed the world’s largest micro-credit programme, and now he needs to devise ways to hold the groups together and increase the extent of bank loans to them. His skills will also be put to test as Nabard is now busy drafting the revised microfinance bill, which is expected to give a direction to the country’s fledgling MFI sector.

ET

Inflation over the decades

The Reserve Bank's repeated rate hikes point to its concern over inflation. Consumer price inflation has been in double digits for the two consecutive years......


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Impersonal Numbers

Reserve Bank of India (RBI) Deputy Governor K C Chakrabarty does not mince his words. He has taken issue with what has been an age-old practice among banks: of freshly-minted..............

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