‘Strike a balance between growth, financial inclusion'



PROUD MOMENT

Deputy Governor of Reserve Bank of India H.R. Khan is being felicitated at CYSD in Bhubaneswar on Saturday

H.R.Khan says................

If financial inclusion is a charity, then it will fizzle out

When there is a major crisis government has to step in

Unregulated lending can lead to instability

Bhubaneswar : Deputy Governor of Reserve Bank of India H. R. Khan here on Saturday said there was a need of proper balance between growth and financial inclusion for a healthy economy. Mr. Khan, who hails from Orissa, was being felicitated by city-based CYSD, a non-voluntary organisation, for being appointed as the Deputy Governor of RBI. “There are no two views that both rate of growth and pattern of growth are important. Growth is facilitating revenue generation. Without revenue you cannot do social justice. But there is need for a balance between growth and distribution aspect,” he said while dwelling on the issue of financial inclusion. Financial inclusion was no charity, but it made tremendous amount of business sense, Mr. Khan said, adding that, “if it is a charity, it would fizzle out.” The RBI Deputy Governor said there was a danger in financial inclusion too.  “If financial inclusion is not handled properly, it could create financial instability.” He cited example of American society, in which financial inclusion went wrong due to unregulated lending.  If people were supplied excess credit without ensuring that to be a source of income generation, development of economy would become unsustainable, Mr. Khan said.  Commenting on role of Financial Stability and Development Council, he said, “RBI is of course not comfortable with constitution of the body. We have already made our stance clear on the issue.” “When there is a major crisis, ultimately government has to step in. The government should interfere during the crisis period. The FSDC should be a wartime affair, but not peacetime affair. If government gives space to regulator, it will work well,” RBI Deputy Governor said. Among other Chief Information Commissioner Jagadananda, former State Election Commissioner Sanjib Hota and Member Secretary of CYSD Professor Anup Dash were present .

HBL

RBI conducts outreach programme



Children of Manamedu village staging a drama on the occasion of the financial inclusion programme in Puducherry on Saturday



Puducherry, Aug 20 : Reserve Bank of India conducted an outreach programme at Manamedu village near here last evening As part of the financial inclusion programme. Reserve Bank Executive Director R Gandhi and CMD of Indian Bank T M Bhasin participated in the function and disbursed loan and financial assistance to the tune of Rs 21 lakhs to 128 beneficieries,. according to a RBI press release here today. The objective of the programme was to ensure inclusive and equitable growth of the selected model villages and the growth. The developments noticed in the model villages should be replicated in other villages with the active participation of villagers, administration and banks operating in the area. All the 551 residents of Manmedu village have bank accounts now, the release said.

http://news.chennaionline.com/

Learning with a difference

ChildRaise Trust is committed to the empowerment of children with special needs and adults with disabilities

In 1984, Kavita Shanbhag, a Reserve Bank of India (RBI) employee, suffered a fit of epilepsy on the delivery table. Two years later, when she conceived her second child, it happened again. With a third attack in 1992, she enrolled with an epilepsy support group called Sanman. Meanwhile, she realised that her son had a muscle motor coordination problem. Wanting to help him, she took a year’s leave and studied for a BEd in special education. The experience opened up a new world altogether. She had to run from pillar to post to find information on epilepsy and dysgraphia. But her efforts paid off, enabling her to help her son at the initial stage. This hardship motivated her to start an NGO, ChildRaise Trust (CRT). On 3 December 2001, the International Day of Persons with Disabilities, she launched CRT’s website with funding from Unity Infraprojects Pvt Ltd. Running its operations from home, the information she had collected over the years on cross disability was uploaded on this portal. To reach housewives, she compiled and published a book “Journey to Empowerment: A Roadmap for Special Children” in 2004, with the help of English Edition Publishers. Today, CRT provides information on epilepsy, cerebral palsy, autism and physical disabilities. It is a roadmap committed to the empowerment of children with special needs, adults with disabilities and parents. “My focus is on providing information to parents for early intervention,” says Ms Shanbhag, who is also a managing trustee of CRT. She says, “Many children who come to me are in class one or two and they have such acute problems of cross disability that they can’t decode alphabets or even three-letter words.” Making parents aware that there is a website on multiple disabilities was a task because the usage of the Internet was limited back then. Ms Shanbhag took voluntary retirement from RBI in 2007 to devote her time to CRT. Since therapists can’t provide life-long support and the cost of treatment is high, CRT aims at providing subsidised help. Liaising with other NGOs as its knowledge partners, CRT provides remedial education. “When we feel a child needs advanced help, we guide the parents to our knowledge partners since being independent in daily activities is important,” Ms Shanbhag says. CRT provides an area-wise list of schools and therapists and informs parents about workshops. Funding is a still a problem for CRT; people donate money, books, toys and craft materials. Ms Shanbhag wants to reach out to more schools to provide training to parents and teachers on effective learning skills. To deal with special needs and disability issues for children and elders, she conducts a one-on-one session of an hour. She uses programmes like the visual auditory kinaesthetic tactile method, functional academics and life-scale training for special children. She charges parents according to their financial status. Psychology students can work as volunteers after undergoing training with Ms Shanbhag. She has a team of psychologists and para-professionals who assist her on a regular basis. To reach out to more people, CRT is registered with Just Dial, so disability queries are forwarded to them. One day, she received a call from an aged male who, while expressing his grief, started crying; this is when she realised the importance of a human voice. With this incident in mind, she has started a helpline called DISHA-Disability Helpline and Action with the corporate social responsibility centre of Unity Infraprojects. Every year, to spread knowledge, CRT organises seminars on World Autism Day, Purple Day and Disability Day. Speaking about CRT’s future plans, Ms Shanbhag says, “I want to translate and print all the material available in Marathi and other vernacular languages so that I can reach out to more people locally.” She also wants to provide facilities like day-care centres, respite homes, gymnasiums and recreational activities for children with disabilities. 

ChildRaise Trust
B/9, Jaldevi Niwas, New Karnatak Buildings,
Mogul Lane, Mahim,Mumbai 400 016
Helpline: 18002 21203 www.childraise.com
childraisetrust@gmail.com

RBI surplus for government

This refers to the report “RBI surplus profit dips 20%” (August 12). It is taken from the Bank’s press release. “Surplus profit” is a misnomer. Apart from the fact that “surplus” is redundant in the expression, the Bank’s balance sheet refers to the transaction only as a “transfer of surplus to the government”. It also refers to net income, not profit. The term profit is seen only in the context of the sales of shares and securities. It was used by the Bank for its transfer to the government in the past but was given up since it gave a commercial flavour to the activities of the central bank, which manufactures money. Now, much of its earnings are derived from foreign assets. But for a long time the income came from domestic assets mainly due to the monetising of the government debt raising money supply to high levels resulting in inflation. Under such circumstances profits were as undesirable as losses.

A Seshan, Mumbai (BS)

Strong capital base, technological backup must for healthy growth of MFIs: ASSOCHAM

New Delhi: Apex chamber ASSOCHAM today called for raising the minimum capital requirement for micro finance institutions (MFIs) to at least Rs 25 lakh backed with a strong technology intervention for adequate reporting, supervision and regulation. The Micro Finance Institutions (Development and Regulation) Bill 2011 which is awaiting Parliament’s approval pegs the minimum capital and extent of assets deployment at Rs 5 lakh initially. This should be raised so that weaker and smaller players are discouraged. The product model with capped annual percentage rate (APR) and margin proposed do not support viability unless funds are made available at affordable costs, said The Associated Chambers of Commerce and Industry of India (ASSOCHAM). It is important that the regulator defines expression ‘micro finance’ in monetary terms as it is linked to prevailing inflation. “This will provide a singular approach towards defining financial inclusion also which is a prime agenda of the government,” said secretary general D.S. Rawat. There is also a strong need to cover government-led programmes to ease out various overlaps between the state and central government schemes. The Bill covers thrift schemes only for self-help groups while it should also cover individuals to encourage savings among the micro-finance community with adequate safeguards. The proposed law is silent on percentage of profits to be set aside to form a fund for taking care of financial eventualities. There is a need to specify a percentage and also define the term ‘profit.’ The RBI should spell out minimum benchmarks for healthy growth of MFIs so that inflow of funds from banks can increase substantially. “In fact, the RBI can delegate regulatory powers with respect to any class of MFI to an independent agency like NABARD which has the knowledge and understanding of their development needs,” said Mr Rawat. Products offered by MFIs need to be based on proper research with clarity on APR as well as margin caps. The cap on interest and margin does not address the cost of funds. This remains an area of concern over which MFIs have no control. The role of credit rating agencies may be explored for transparency and good governance to assist pricing of resources for the sector, said Mr Rawat. The proposed Micro Finance Development Council to address grievances of various stakeholders should have representations from industry bodies like MFIs themselves or Sa-Dhan – the association of community development finance institutions – and independent practitioners. Micro finance loans serve as the last-mile bridge to low-income population estimated at 600 million which is excluded from traditional financial services system and seeks to fill the gap. Bigger financial institutions with huge funds do not find commercially feasible to lend to the poor as they cannot offer anything as collateral security. India is one of the largest micro finance loan market in the world with the sector having potential to grow at an annual average of 50 per cent, and attracting domestic and foreign investors hoping to practice profitable philanthropy. The financial needs of MFIs are estimated at 200 billion dollars in the long-term. The recent RBI intervention by constituting Malegaon Committee is a progressive step to regulate the sector and tackle issues like cost of raising funds, interest rates, loan ticket size, repayment options and high operating costs due to door-to-door step facilities.

http://www.orissadiary.com/ShowBussinessNews.asp?id=28660

Beggars can be choosers

MFIs in India are not allowed by the Reserve Bank of India to collect deposits, but as NGOs of certain category they can collect savings, say MFIs. “NGOs can mobilise deposits. It is not done with any motive to make a profit, but to inculcate a discipline to have savings among the borrowers,” said Chandra Shekhar Ghosh, Bandhan’s founder......

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Corporation Bank CMD counters CVC charges

Corporation Bank Chairman and Managing Director Ramnath Pradeep today refuted charges of inappropriately sanctioning big-ticket loans, saying if the allegations were true, the bank's net non-performing assets (NPAs) would not have been below one per cent of the total advances. When asked about the charge of misappropriated funds, Pradeep asked, "How is it possible, with the net NPAs of the bank at just 0.47 per cent?" The finance ministry had called for explanation from the chairman and managing director on the basis of a report by the Chief Vigilance Commission (CVC) on irregularities in disbursing loans. The CVC, after complaints of irregularities in the disbursement of loans from the bank, had sent a special team in May to the bank's headquarters to investigate the irregularities.  "The ministry has just asked for a clarification, we have prepared our response and we would give it soon," he said on the sidelines of an event organised by the PHD Chamber of Commerce. Pradeep said the Mangalore-based bank was aiming to eliminate NPAs by the end of this financial year. He said though there were fears of an economic slowdown, these would not hit India in a big way. "Banks in India are sufficiently strong to withstand shocks because of the best practices adopted by our regulator," he said. He added though banks were affected by the Reserve Banks of India's rate rise spree, one should also look at the fact that inflation was a major concern.

BS

Avenues to invest in demat form of gold

Uncertainty in the global markets, slow recovery of developed nations, volatility in the stock market and sub-optimal economic policies across the countries has forced people to find safer havens for investment. This is where gold scores over other options. Not only people, nations are also reposing their faith in gold. Gold has been making waves ever since S&P downgraded credit rating of USA from AAA to AA+. It crossed the 26,000 mark in three trading sessions. We are not going to predict the price of gold here, but we will provide some avenues for investing in gold for people who do not want to own physical gold.

Gold can be bought by many other ways. Some of these ways include:

Gold ETFs are exchange-traded funds which are equivalent to mutual fund units. Each unit is equivalent to 1 gm of gold, but some fund houses have 0.5 gm of gold as one unit. The price is almost half per unit for these fund houses’ gold ETFs. Gold ETF can be bought and sold just like mutual funds using your regular demat account. The NAV is displayed periodically for gold ETF just like mutual funds. The gold behind the ETF has a quality of 99.9%. This means you do not have to worry about the quality aspect. Buying gold from outside is fraught with risk as you have to rely on the goodwill of the seller. The advantage of gold ETF is that you do not need to worry about the safety and storage. This is also liquid when compared with physical gold. The other advantage is that you do not need a lot of money to invest in a gold ETF. It is also more tax efficient compared with physical gold. You need to keep physical gold for three years to claim long term benefit s while the tenure is just one year in case of gold ETFs. National Spot Exchange (NSEL) allows investors to buy gold, silver and copper in electronic form, also known as e-Gold, e-Silver, and e-Copper. This facility allows investors to buy gold in a dematerialised form. The trading session is from 10 am to 11:30 pm, and hence, investors can trade at their convenience. Investors can buy in the lot in 1 unit of e-Gold which is equivalent to 1 gm of gold. The purity is 995. You have to open a separate demat account from a list of depositories. The list of depositories can be taken from the NSEL website. Investors may choose to sell the e-Gold any time and get cash or take delivery in physical form from a NSEL designated centre. At present, dematerialisation centres are there in Mumbai, Delhi, and Ahmedabad and will soon be opened in major cities across India. Gold funds are just like mutual funds run by a fund house. The advantage of a gold fund is that investors do not need a demat account to invest. The NAV of the fund will be benchmarked against the price of gold. Since there is low penetration of demat account in India, gold fund is a good option. This gives you all the benefit of virtual gold such as no storage cost and safety concern. However, keep it mind costs and advantages before you decide which is best way to invest for your needs. There is another option called gold fund-of-funds (FoF). These funds invest in various gold ETFs. The NAV is determined by the weighted average of the NAV values of various ETF that the fund of funds consists of. While the world is bullish on gold, you have to consider your own situation before you invest in gold. Remember that the returns from gold don’t come by dividends and bonuses, but purely by price appreciation. Price appreciation is a function of market sentiments in the case of gold as there is no fundamental income projection in future unlike that of a company. Treat gold as a great way to store value.  

FE

Gold comfort for India as prices rise

As stocks continue to fall on catching the global flu from nervous US and European markets and a slumping dollar, India's decision to buy itself some glitter two Diwalis ago has turned out to be a wise one. Between November 2009, when the Reserve Bank of India (RBI) purchased 200 tonnes of gold from the International Monetary Fund (IMF), and August this year, the value of India's official gold reserves has surged by Rs 29,759 crore or 37% — all in a matter of 20 months.  This rise in the value of the RBI's gold assets would be nearly sufficient to fund three-quarters of the government's flagship national rural employment guarantee scheme for this year. India purchased the gold at an average price of about $1,045 per troy ounce (31.10 grams). International gold struck a record of $1,877 an ounce on Friday. Finance minister Pranab Mukherjee and RBI governor D Subbarao piloted India's decision to strengthen the official yellow metal reserves to 560 tonnes amid growing interest of central banks across the world to diversify their holdings to assets other than the dollar. The symbolism is inescapable in a country that worships the bullion and that pawned gold not too long ago. In 1991, India had to pledge 67 tonnes of gold to the Union Bank of Switzerland and Bank of England to raise $605 million (Rs 2,843.5 crore today) to shore up its dwindling foreign exchange reserves, which stood at $1.2 billion.  Currently, India's foreign exchange reserves, which consist of foreign currency assets, gold, special drawing rights — an international reserve currency floated by IMF — and RBI funds kept with IMF, stand at $316.6 billion or Rs 14,33,372 crore.  With Standard & Poor's downgrade of US sovereign bonds, returns from foreign currency assets deployed by the RBI could dip further because of near-zero interest rates in these countries. RBI's foreign currency assets consist mainly of US sovereign bonds. So, buying more gold will help the central bank diversify its assets and hedge it against a weakening dollar.  "Gold is a very secure and safe asset," said NR Bhanumurthy, professor at the National Institute of Public Finance and Policy in Delhi.  "Strengthening India's official gold reserves should be a long term strategy, but it should not be done explicitly for it might create volatility in the foreign exchange markets," Bhanumurthy said.  "In an uncertain situation in the past, the safe haven was the US and entities moved into dollar. But now, since the dollar is under attack, gold becomes the most attractive asset,"  C Rangarajan, chairman of the PM's Economic Advisory Council, said.

HT

Banks, NBFCs see unsatisfied demand for gold loans

With frequent hikes in key rates by the Reserve Bank of India and subsequent upward revisions in interest rates by banks and financial institutions, personal loans have become costlier. Individuals going for personal loans have to shell out more money towards interest cost depending on the loan amount and the risk profile. Small traders and borrowers in the middle income group prefer taking loans by pledging their gold jewellery with banks to meet their funding requirements.  As pawn-brokers charge exorbitant rates of interest, people seeking loan turn their attention to banks and finance companies in the organised sector to meet their funding needs. The organised gold loan market in India is estimated at Rs. 40,000-45,000 crore with South India accounting for more than 85 per cent. At this level, gold loan portfolio translates into 1.2 per cent of the value of total gold stock in India, indicating that the market is under-penetrated. With Indian households possessing a significant amount of gold in the form of ornaments and jewellery, finance companies find gold loan business lucrative. The gold loan market is largely concentrated between two categories of lenders, namely, the south-based NBFCs specialised in gold loans accounting for 32 per cent of total market and scheduled commercial banks holding 58 per cent. The balance portfolio is constituted by several small state and central co-operative banks. With gold prices hitting the roof, borrowers are also able to get more loan amount by pledging their ornaments. They also feel safe to keep the ornaments with such loan companies to save charges if these are kept in safe deposit lockers of banks. Of course, these loans are for shorter time ranging from 6 months to 12 months. Some borrowers redeem the jewellery and re-pledge the same to enjoy the loans for an extended period.  Some borrowers use the loan amount to buy ornaments again as they see some gain in one year with the sharp upswing in gold prices. While banks offer up to Rs.10 lakh as gold loan, non-banking finance companies offer even upto Rs. 1 crore depending on the creditworthiness of borrowers. The interest rate depends on the loan-to-weight ratio. For example, for 60 per cent of the value of gold, NBFCs charge 12-13.5 per cent per annum.  Besides scheduled commercial banks and co-operative banks, non-banking finance companies such as Muthoot Finance, Manappuram Finance play a key role in disbursing loans against gold jewellery.  These Kerala-based finance companies are expanding their presence by opening a large number of branches, especially in the South, and creating employment opportunities.  These NBFCs lend only against household jewellery. The average size of the loan is between Rs. 25,000 and Rs. 33,000 and the average period is 75-90 days.  In fiscal year 2010-11, Muthoot Finance and Manappuram Finance have collectively paid Rs. 408 crore as tax to the Exchequer.  

HBL

RBI slaps fines on 2 urban co-op banks

The Reserve Bank of India (RBI) has imposed monetary penalties on two urban cooperative banks of Gujarat this week. The violations related to advances and KYC (know your customer) norms, according to an RBI release. In the first instance, RBI imposed a penalty of Rs 2 lakh on Rajkot Commercial Co-operative Bank Ltd for violation of instructions regarding grant of unsecured advances in excess of prescribed ceiling. In the second case, the apex bank imposed a penalty of Rs 1 lakh on the Becharaji Nagarik Sahakari Bank Limited based at Becharaji in Mehsana district for violation of RBI instructions relating to know your customer (KYC) norms and anti-money laundering guidelines.

IE

Manmohan pitches for push to reforms programme

....Evidently, among the decisions that need to be taken are financial sector reforms, which are long overdue. In fact, several major Bills on the insurance sector and the GST are yet to get parliamentary approval. Alongside is industry's worry over the high interest rate regime being followed by the Reserve Bank of India to douse inflation......

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Balancing rates and costs

The first to feel the impact of the rising rates is the consumer with a home loan who would have to battle higher EMIs, longer loan tenures while dealing with daily inflationary pressures. For the consumers planning to make a purchase, the increase will impact purchasing decision. .....

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Canara Bank announces opening of its 3333rd branch

EFCAI urges RBI to allow post offices function as banks

BHUBANESWAR: Entrepreneurs and Finance Customer Association of India (EFCAI) has urged Reserve Bank of India (RBI) to allow post offices function as Banks. In a memorandum submitted to RBI Deputy Governor, H R Khan here, the EFCAI has pointed out that India has the world's largest postal network in India with over 1.55 lakhs post offices, out of which 1.40 lakhs are in the rural areas. If the RBI allows Indian Posts to start their own banking operations it will have the potential to emerge as one of the biggest banks in the country and also ensure inclusive growth.  The Indian Posts have 23.70 crore savings accounts having deposits worth of Rs. 56,369 crore.  Access to both banking as well as credit facilities remains a far cry with only 10% population avail credit facilities.  "Against this backdrop, in order to improve the banking system the Govt. of India has plans to seek approval from RBI to enable the Post Offices to start banking operations. Not only will this help the growth of the primary sector but will also ease the pressure on the existing commercial banks to a large extent. The recent expert committee report makes a strong case for harnessing the post office savings bank for achieving financial inclusion as the reach of post offices is twice as extensive as that of all commercial banks put together", the memorandum said.  Referring to Orissa situation, the memorandum said, financial inclusion is a major challenge for the state government with over 60% of the people of the state having no access to the banking systems at all.  The primary sector in the state which supports more than 70% of population has a growth rate of only 2% as against the overall state growth of 9% over last 5 years. "The situation is of poor inclusive and equitable growth. Banking programs and products should be formulated in such a way that it suits and benefits the un-banked category. Needless to say that system needs immediate revamping", it observed.  Incidentally, Orissa has 8159 post offices in the rural sector and 603 in the urban area as against only 2900 commercial banks across the state. If RBI accepts the union government proposal to allow post offices function as banks, the state will immensely stand benefitted. "Post offices have infrastructure in remote places where banks just can never have a base. The rural poor will be the net gainer if post offices are allowed to carry on banking operation as it would eliminate private money lenders, MFIs and other exploitative institutions", EFCAI secretary general H K Mohanty on Friday told "The ET".

ET 

Bankers meet on customer service

GUWAHATI, Aug 19: “There has been great improvement in the financial sector and the predominant part of the financial sector is the banking sector,” said Rajesh Verma, Chief General Manager, Customer Service Department, Central Office Reserve Bank of India, Mumbai in the Town Hall Meeting organized in District Library, Guwahati with a sole purpose to demystify the grievances pertaining to customer service in banks. Discussing about the arrangement for redressal of grievances, a State Bank of India official told about the progress in the customer service in dealing with their grievances. He also discussed about their plans to set up another 800 ATMs in this year which would facilitate the customer in a more promising manner. Mentioning about the introduction of the Point of Sale (POS) machines in large areas, he said: “Through this machine one can withdraw a maximum of Rs 1,000 and then people would not have to walk up to the ATMs.” Making a commitment to improve the service, the SBI official also mentioned about their plan to tie up with Doordarshan to spread financial literacy through a programme where they would take up customers’ problems and resolve them. Similarly, HDFC, ICICI bank officials also discussed about the measures they have taken up to resolve customer’s grievances. The HDFC official announced: “Apart from the 80 ATMs in the Northeast, this year we would double the number to 155 along with 21 more branches after which we will have a total of 80 branches.” Officials of the RBI, K.Chandrachoodan, CGM, Branch Office RBI, Ahmedabad, M Rajeshwar Rao, CGM BO RBI New Delhi and N Raja, Chief Executive Officer, BCSBI, Mumbai delivered their lectures on Banking Ombudsman Scheme 2006, Conciliation, Resolution, Compensation under BO scheme and Banking Codes and Standards respectively. The interaction session was facilitated by B.B.Sangma, BO RBI, Guwahati where various questions of the public were discussed.

The Sentinel

Impossible possibility?

.... there was one internal working group of RBI which was supposed to examine the feasibility of Islamic banking business in India. The group concluded that Islamic Banking in India is not possible unless the Banking Regulation Act is amended. Even as implementation of full-fledged Islamic banking needs some amendments in the Act, an objective study would have found scope of recommending at least interest-free banking. There is no need to amend any Act to allow interest-free banking and our prevailing Acts already have provisions for interest free based transactions.......

Existing legal provisions have scope to allow interest-free banking

 

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Over 50 lakh expected to apply for vacancies in 19 public sector banks

Hyderabad, Aug. 19: The first-ever Common Written Exam (CWE) for clerical positions in 19 public sector banks will be conducted by the Institute of Banking Personnel Selection (IBPS) in November this year. The online registration for the exam would commence from August 25, 2011, Mr M. Balachandran, Director, IBPS, told Business Line. The interested candidates would have to register themselves with IBPS before September 25, 2011. The score achieved by a candidate (to be valid for one year) would be used by banks while filling up vacant clerical positions to be announced in due course. “The job-seekers need not attend any written test for jobs in participating banks again. They will be called for interview/personality test directly based on their score,” Mr Balachandran said. The candidates should the complete registration process early to avoid last-minute problems, he added. The pattern of the exam is almost similar to existing clerical recruitment tests with questions in reasoning and numerical aptitude, among others. Clerical recruitment in public sector banks has been significant, with vacancies ranging from 30,000 to 40,000 for the last three years as per the hiring figures of various banks. In response to the CWE for probationary officer posts notified last month, about 14.5 lakh candidates had applied. “We expected 10 lakh applicants,” the Director said. IBPS is gearing up to conduct the exam on September 18, 2011. All the participating banks would share the responsibility of conducting the exam.  “Each participating bank is being entrusted with responsibility for at least one State,” he said. Except State Bank of India, almost all other major banks are part of the common exam.

HBL

RBI report on software export by September-end

Panel to come up with ‘viable solutions' for exporters

A committee set up to look into issues related to software exports is expected to come out with its recommendations by the end of September, said Reserve Bank of India (RBI) Executive Director, G. Padmanabhan. Speaking at an exhibition on ‘Foreign exchange for you' and an interface with bankers on foreign exchange here on Thursday, he said: “We will come out with viable solutions that will make things easy for software exporters.” Mr. Padmanabhan said there was a need to take another look at various rules and regulations on foreign exchange in the light of developments in the last 10 years. “We are aware that we should not make rules and regulations impossible to comply with,” he said. The RBI, on its part, has opened a helpdesk, updating FAQs, conducting awareness programmes on foreign exchange, said Mr. Padmanabhan.  He urged banks to train their front-line staff adequately on matters relating to foreign exchange. Mr. Padmanabhan also emphasised the need for people to apply caution with regard to e-mails on various schemes and said that the RBI was taking adequate measures to create awareness on such activities. “No system can take care of people if they don't exercise basic care themselves,” he added. The banks also should take enough care to keep a check on accounts. “There is a concerted effort that is required to educate people,” he said. “It becomes a bigger issue when the country is looking at bringing six lakh villagers into the banking fold,” he added.

HBL

RBI may regulate jewellers’ gold saving schemes

Ahmedabad, Aug 19: The Reserve Bank of India (RBI) is likely to bring some regulation to protect those people who save money with the jewellers in monthly saving schemes for buying gold. Almost all jewellers in major cities such as Mumbai, Ahmedbad, Chennai, and Bangalore are virtually working like non-banking financial companies (NBFCs), without permission from the RBI. They have launched various gold saving schemes, encouraging the people to buy gold at the end of their saving term. In some instances, the jewellers have disappeared with the people’s savings. “Now the RBI is looking at it and we expect it to bring some regulation in this regard,” said Mr Ajay Mitra, Managing Director, India and Middle East, World Gold Council (WGC), said here on Friday.

HBL

UCBs make efforts to revive Madhavpura Mercantile Bank in Ahmedabad

Depositors and Urban Cooperative Banks (UCBs) have taken the initiative to sacrifice some portion of their deposits with the Madhavpura Mercantile Cooperative Bank (MMCB) in an attempt to revive the bank which is on its death throes. On the other hand, no major decision was taken at the meeting convened by the Central government's department of agriculture and cooperative at New Delhi on Thursday. The fate of the MMCB is likely to be decided at another meeting of the board of nominees to take place next week. Meanwhile, the depositors and UCBs have taken the initiative to sacrifice their dues up to 50% so that the bank's negative network can turn positive and it can fulfil Reserve Bank of India's criteria for revival. The bank currently owes around Rs617 crore to 268 UCBs in the state. "We have decided to sacrifice 50% of our dues," said Jyotindra Mehta, chairman of Gujarat Urban Cooperative Banks Federation. Similarly, Gujarat Investors Protection Council has also written a letter to the board of nominees of the MMCB expressing their willingness to let go not more than 40% of their dues in line with the Urban Cooperative Banks' proposal. "If the bank goes into liquidation, the investors are not likely to get anything. Moreover, the revival of MMCB will boost people's confidence in the cooperative sector," said Jitu Shah, president of Investors Protection Council. The depositors have received 50% amount of their deposits in two instalments. However, they have not received any repayment or any interest for five years. The bank is yet to pay more than Rs100 crore plus interest to around 13,000 depositors. If sources are to be believed, MMCB needs nearly Rs500 crore for revival. The central registrar had also asked the state government whether it was willing to lend the bank to come out of crisis.  However, the state government refused to bail out the bank.  Interestingly, neither the chairperson of the board of nominees of the MMCB Radha Singh nor the representatives of RBI were present in the meeting held at New Delhi on Thursday, said sources. Now, the central registrar will decide the future course of action.

DNA

New system to track NPAs to put pressure on profitability

Banks are getting ready to put in place a new system to track the non-performing assets (NPAs) which may affect their profitability in the short term. The new system will keep a watch on bank’s NPAs and it wouldn’t be possible for banks to have any manual intervention while reporting their sticky assets. While the finance ministry has asked all the government-owned banks to migrate to the new regime by the end of September, the Reserve Bank of India (RBI) has asked banks to shift to the new system by October 31. Some big banks, including State Bank of India (SBI) and Bank of Baroda (BoB), have already shifted to the new regime. But a large number of other banks are yet to make the shift. Though the banks have already migrated to the new system, when it comes to the smaller accounts, now they have been asked to shift their retail loans, which are huge in numbers. Moreover, banks are devising various ways to strengthen their NPA monitoring systems to minimise impact of the new system on their profitability.

FE

Mukherjee reviews economic situation with RBI Governor, PMEAC Chairman

New Delhi, Aug 19 (ANI): Finance Minister Pranab Mukherjee today reviewed the global economic situation with Reserve Bank of India (RBI) Governor Dr. Subba Rao, and Prime Minister’s Economic Advisory Council (PMEAC) Chairman Dr. C Rangarajan. The discussions focused on the slow economic growth in the US and debt worries in the Euro zone. Europe’s debt problem and worries about the world economy had resulted in sharp fall in the US and European markets. Stocks that were particularly affected in the US were those of companies that have global presence. In comparison to the sharp fall in the indices in US and Europe yesterday, the Indian indices have weathered any contagion effect. Today, Indian markets contracted by 1.9 percent, which is only around 1/3rd of the fall seen in the US and European markets. In comparison to Asian markets also, our performance has been better. Some of the major Asian markets saw four to six percent losses. The effect of the market sentiments in the US and Europe has a bearing on our markets as well in the short-term. As the advanced economies grapple with their problems, India is better positioned than most other nations to meet its problems.  India has already been upgraded to market weight by some global investment banks from underweight and this is a testimony to the strength of the Indian economy. The present crisis can, however, be expected to encourage increase in the equity exposure by foreign pension funds and other long-term institutional investors. India is well positioned to capture this flow.  Mukherjee expressed the view that India’s economy is robust and its growth story intact. Its fundamentals are strong and they look more attractive in a world confronting problems. Mukherjee also expressed confidence in India’s ability to emerge stronger from the present situation.

http://truthdive.com/2011/08/19/Mukherjee-reviews-economic-situation-with-RBI-Governor-PMEAC-Chairman.html

RBI grants state’s request for cheap home loans for BPL applicants

Gandhinagar : The Reserve Bank of India (RBI) has agreed to a request proposal by the state government to instruct various banks working in the state to provide housing loan under the differential rate of interest scheme (DRI) to home loan applicants below the Below Poverty Line (BPL).  The apex bank has instructed the State Level Banking Committee (SLBC) to ask all banks under its jurisdiction to extend benefits of DRI scheme to BPL home loan applicants in the state. Early this year, the state’s Rural Development department had requested the RBI for the same, saying many BPL families did not have money for even paying the minimum amount for the central/state housing schemes.  “The SLBC, in a meeting attended by the chief secretary on Thursday, informed the state government that the BPL families will start getting housing loan under DRI schemes soon,” sources said.

IE

Corruption and Inflation

It takes the likes of Anna to point out that inflation may not be simply a fiscal or monetary policy problem

India has been struggling with high inflation for almost three years. In our entire post independent history, we have not witnessed such sustained prevalence of broad based inflation which has been so persistent. It seemed initially confined to food products, especially pulses, eggs and poultry (the so called “protein inflation”), but very soon it spread to everything from industrial commodities, to fuel, sugar, and even to services like tuition fees, doctor’s bills or taxi fares.  The RBI has been trying vainly to contain inflationaryn expectations by tightening money supply, in the hope that less money in circulation will cause prices to dampen. But no such luck, as yet. The global recession, the downgrade of U.S. bonds, continuing unemployment in Europe and America, doesn’t seem to be reducing inflation in India. It took Anna Hazare to point out something obvious. If bribery is rampant, then the cash economy is not only flourishing, but expanding. It cannot be completely hidden or inscrutable, because the notes are printed by the RBI. The RBI’s own data shows that cash in circulation grew at an alarming rate which was 300 percent more than in previous years. This is called “cash leakage” by monetary economists. Cash leakage peaks whenever elections take place. The EC now insists that separate bank accounts be opened, to track candidate expenses. More than 8000 candidates stood for elections in 2009, for the fifteenth Lok Sabha. If you believe their filed expense statements, except for just four of them, nobody breached the expense ceiling of Rupees 40 lakhs. Most of them did not spend even half the permitted limit. But anecdotally, we know that a lot of illegal cash was flowing, nay overflowing, in the system.

Pune Mirror

Peerless seeks RBI nod to continue financial products distribution biz

Kolkata, Aug. 19:  To offset the slowdown in its financial products distribution business, Peerless General Finance and Investment Company Ltd has sought for a special dispensation of the Reserve Bank of India to allow it to continue its Residuary Non-Banking Company (RNBC) business for some more time. Mr S. K. Roy, Managing Director, Peerless, said that the financial products distribution business had suffered a set back due to recent changes in regulations announced by the IRDA (Insurance Regulatory and Development Authority).  “The change has necessitated evolving a new model of distribution and this requires reworking of workflows, IT systems and training.  “As a result, there has been a considerable slowdown in the growth of the business in the second half of last fiscal.  “In view of this setback in distribution business we have sought RBI's special dispensation to allow us to continue RNBC deposit taking business,” he said during his speech at the company's 78^th annual general meeting here on Friday. During 2010-11, the company's first year premium declined by about eight per cent to Rs 133 crore. The renewal business, however, grew by 52 per cent to Rs 302 crore.

HBL

Reserve Bank invests 51.8% forex assets in US treasuries

Mumbai: The RBI in its latest report on its investment pattern and earnings of the foreign currency assets has said that out of the total foreign currency assets of $274.3 billion it had invested $142.1 billion in securities and $126.9 billion was deposited with the other central banks, BIS and IMF, in March.  $5.3 billion was placed with the External Asset Managers with an objective of gaining access to and deriving benefits from their expertise and market research, RBI said. Total foreign currency assets grew 3.43 per cent over September 2010, the last reporting date.  RBI held a total of 557.75 tonnes of gold which is about 7.5 per cent of total foreign exchange reserves in the term of its value as of March, 2011. The RBI added that there was no pre-payment of any debt during the half year October 2010 to March, 2011.  It further added, the ratio of short-term debt to the foreign exchange reserves was 18.8per cent at end-March 2010 and it increased to 21.3 per cent at end-March, 2011. The High Level Committee on Balance of Payments, which was chaired by C Rangarajan, erstwhile governor of the Reserve Bank of India, had suggested that, while determining the adequacy of reserves, due attention should be paid to payment obligations in addition to the traditional measure of import cover of 3 to 4 months.

FE

Shadow of global recession may fall on India

....Unfortunately, the RBI has been fighting a lone battle against inflation for more than a year without any help from the government, either by way of reining in the burgeoning fiscal and revenue deficits or by improving the supply management. .....

Continue reading................. 

When RBI chiefs speak their mind - K. KANAGASABAPATHY



Speeches of RBI Governors have at times been path-breaking, confronting the public policy environment to bring about desired changes. Clear communication helps in providing forward guidance to market players.



The Reserve Bank of India (RBI) has enhanced and strengthened its transparency and disclosure practices considerably in the post-reform period after the mid-1990s and, thereby, enlarged the open area of two-way communication with the market.

First, the RBI publishes extensive data and information on the central bank's operations periodically. Second, the policy statements have detailed pronouncements and clear statements of stance. Third, the interventions have become more frequent — the two half-yearly statements have now increased to twice a quarter. Finally, such assessments bring out both the upside and downside biases and risks to the RBI's own outlook and projections as also the policy dilemmas.

Speeches by Top Management

One key element of the RBI communication has always been the speeches delivered by top management in different fora. The media eagerly looks forward to such speeches and pick up insights into policy-making. Many a time, such speeches were path-breaking, at times, confronting the public policy environment to bring about desired changes, and establishing the credibility and autonomy of central bank's operations.

The former RBI Governor, Dr C. Rangarajan, in 1993, came out forcefully in favour of procuring greater autonomy for the central bank in his Kutty Memorial Lecture. This paved the way for setting the limit for net issue of ad hoc treasury bills, putting an end to automatic monetisation of government deficits.

Dr Y. V. Reddy, while talking on dilemmas in exchange rate management on August 15, 1997, in Goa, subtly raised the issue of whether the rupee was overvalued or not and pronounced that, as per the Real Effective Exchange Rate (REER), it would certainly appear so, irrespective of the base chosen. This paved the way for a much-needed correction in the rupee exchange rate which helped to tide over the impact of Asian financial crisis shortly afterwards.

Dr Bimal Jalan, spoke less compared to others, but made his strategic thoughts on exchange rate and reserves management policies from time to time. While speaking at the symposium of central bank governors in London on July 5, 2002, with considerable foresight, he enunciated three fundamental requirements, quite unconventional at that time, for a country to prevent a financial crisis: First, careful monitoring and management of exchange rates without a fixed target or a pre-announced target or a band with ability to intervene, if and when necessary; second, a policy to build a high level of foreign exchange reserves which takes into account not only anticipated current account deficits but also “liquidity at risk” arising from unanticipated capital movements; and third, a judicious policy for management of the capital account, discouraging short-term capital for financing investments and encouraging foreign direct investment and portfolio investment. It is now history that these home-grown principles stood the test of time and entrenched in Indian policy-making since then.

Dr Y. V. Reddy, as Governor from 2003 to 2008, had brought out the risk of global imbalances and mispricing of risks in global markets that enabled him to keep a tight leash on monetary policy stance throughout this period.

Dr Duvvuri Subbarao, with his forthright views expressed on several occasions on the role of the RBI in financial stability, promoted amendments to government's intervention on financial stability issues and helped reconstitution of the Financial Stability and Development Council.

Who Spoke on What

The RBI, in the archives section of its Web site, provides a complete list of speeches by top management, at least from 1997. Governors have delivered in all 172 speeches since 1997 and Deputy Governors as many as 322 speeches. A subject-wise distribution of speeches shows that in order of priority, banking, with 122 speeches, topped the list. Monetary policy attracted only 33 speeches, perhaps because there are regular policy statements issued on the subject. The other major subject areas were Indian economy (65), financial markets (55) and financial sector reform (33)

Functional Delegation

There has been a welcome functional diversification in communication in the recent period. The Communications Policy of the RBI has enunciated the following broad principles: The Governor and Deputy Governor in charge of monetary policy are the only spokespersons on issues relating to monetary policy and the exchange rate; Deputy Governors are the spokespersons in their respective areas of responsibility; and the Executive Directors (EDs) and heads of departments speak only with explicit authority from the Governor/Deputy Governors.

Speeches by EDs were obviously rare till 2009 and, thanks to some activism of Mr Deepak Mohanty and, of late, Mr. G. Padmanabhan, there were as many as 23 speeches by EDs in the last about two years.

Mr Mohanty has been the key architect of the recent changes in operating procedures of monetary policy and has, appropriately, brought out the rationale behind the new operating procedures and the main challenges that need to be recognised. He has observed that the transmission of policy signals is most effective under deficit liquidity conditions and the challenge is to keep the systemic liquidity in a deficit mode consistently.

Any prolonged phases of autonomous liquidity infusion due to sustained capital inflows or liquidity drain due to persistent surplus of government cash balances would call for creating the capacity to conduct operations through instruments such as outright open market operations, market stabilisation scheme and cash reserve ratio, besides a scheme of auctioning government cash balances. There is a need for further deepening of financial markets by removing structural rigidities coming in the way of market determination of interest rates. Drawing attention to the debate on internationalisation of rupee, Mr Padmanabhan has observed that international interest in the Indian rupee and emerging off-shore markets are consistent with progressive globalisation of the Indian economy and the efforts must be to bring all genuine users seeking to hedge underlying exposures on-shore. Such speeches have further strengthened the Communication Policy of the Reserve bank and help in providing forward guidance to market participants.

HBL

Trust the gatekeeper

RBI can be relied upon for a fit and proper policy

The news of a meeting of minds between the Union finance ministry and the Reserve Bank of India (RBI) on the government’s policy on issuing licences to new private sector banks has been widely welcomed. India needs new banks and a transparent and robust policy framework will boost public confidence in the licensing process. Given the heightened public concern about transparent licensing procedures, it is most unlikely that the government and the central bank would do anything to invite criticism. Although the final policy framework will be made public next week, information suggests that the minimum capital requirement for a new bank would be Rs 1,000 crore, of which the promoters’ contribution is expected to be fixed at 40 per cent, to be brought down over a 10-year period to half that. As several analysts have noted, the guiding principle for both minimum capital required and the ceiling on promoters’ quota should be that they are consistent with existing and widely acceptable risk management norms. The new policy framework is also expected to limit foreign shareholding in new banks to 49 per cent. In defining policy on this issue, the central bank may consider the suggestion made by some analysts that the definition of “foreign shareholding” should include, rather than exclude, the category of non-resident Indians. In other words, anyone permanently residing outside India should be classified into one category of “foreign investors”, for both investment and taxation purposes. The most contentious and controversial issue relating to the policy on new private banks remains the question of whether “large industrial houses” should be allowed to own new banks. The existing policy, defined at the time of bank nationalisation in 1969 and subsequently tweaked, disallows it. There is neither global uniformity on the issue nor an accepted “best practice”. Global experience does not establish that there is anything inherently right or wrong about permitting industrial houses to own banks. However, there is no pressing reason for the government to revisit the existing policy at this point in time. It has been reported that the Union finance ministry would like to liberalise the policy, with riders and caveats that would disallow companies in areas like real estate from investing in banking. It is best to leave the matter to the central bank’s judgement, which is capable of defining who is a “fit and proper” applicant and what constitutes a “fit and proper” criterion for granting bank licences. The central bank would naturally consider issues like concentration of business power, the need for checks and balances even in the private sector, and the need to identify credible private sector entities that have the resources to set up and run a bank. There are ways in which the power and control that can be exercised by private owners over banks can be restricted and RBI has pointed to this in its original discussion paper. The central bank is the best judge of its capability to regulate, monitor and punish large private sector entities, and should base its policy on an objective assessment of its own capabilities to regulate the private sector.

BS

RBI asks Orissa to examine its Debt Recovery Act

Bhubaneswar, Aug 18 (PTI) Not satisfied with the rate of recovery under different government schemes in Orissa, the RBI today asked the state administration to examine Orissa Public Debt Recovery Act for stepping up the rate of recovery. "The provisions of the Orissa Public Debt Recovery Act need to be examined," Reserve Bank of India Deputy Governor H R Khan said, while attending a meeting of State Level Bankers'' Committee (SLBC) here. Stating that recovery under government schemes was "far from satisfactory", Khan said that bad recovery of loans occurred mostly due to under financing and excess interest rates. The state government need to analyse why the rate of recovery was so low, he said adding that banks too have to ensure that the rate of interest should be within the payable limit of the loanee. Raising concern over the stagnant growth in bank accounts of farmers, Khan urged the sector to include more farmers into the ambit of banking. Lending to farmers adds to increase in productivity, he said suggesting the state government to set up a sub-committee under the SLBC to look into the areas of extension support for agriculture sector, he said. About 84 per cent of the farmers in the state come under the small or marginal category, Khan said though the crop loan ratio had increased, term financing rate was low. "The state government need to create facility so that term loan rate can increase," he said. "Twenty-five per cent of all new bank branches would now be opened in rural areas," he said, adding that financial closure was not an obligation but an opportunity for the banks.

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