RBI defends policy action to check inflation

Amid criticism that frequent interest rate hikes are hurting economic expansion, RBI Governor D Subbarao said policy tightening was necessary to contain inflation and preserve medium-term growth prospects. "At this high level, inflation is unambiguously inimical to growth; it saps investor confidence and erodes medium-term growth prospects. The RBI's monetary tightening is accordingly geared towards safeguarding medium-term growth even if it means some sacrifice in near term growth," he said while speaking at the New York University. The central bank's decision to increase interest rate for the 12th time since March 2010 to check high inflation has evoked sharp reaction from industry. Even Chief Economic Adviser Kaushik Basu recently said that RBI should do some "out of box" thinking to deal with elevated inflation level in the country. Despite the short-term borrowing (repo) rate going up by 3.5% since March 2010, inflation has remained stubbornly high at near 10%, much above the Reserve Bank's comfort level of 4-5%. However, the tight monetary policy is affecting the economy. The data shows that GDP growth during the April-June quarter of 2011-12 moderated to a 18-month low of 7.7% from 8.8% in the corresponding period a year ago. Industrial output growth during July was at 3.3%, the lowest in 21 months. On the impact of monetary policy on growth, Subbarao said, "a much more nuanced evaluation of our policy stance is necessary. Evidence from empirical research suggests that the relationship between growth and inflation is non-linear... high inflation actually starts taking toll on growth." While pointing out that RBI's anti-inflationary stance was being criticised as hawkish by some and soft by others, Subbarao said, "both the critiques cannot obviously be right at the same time." Given the nature of inflation drivers, which includes rising wages in rural areas, he said that the monetary policy stance has been "aimed at restraining demand and anchoring inflation expectations." Defending the "baby step" approach to deal with inflation, the RBI chief said it was necessary "to allow time for the banks and the private sector to adjust to a higher interest rate environment." He further said, "our baby step approach during 2010 was... a delicate balancing act between supporting recovery at home amidst growing global uncertainty and containing inflation pressures." Baby steps refer to the calibrated approach followed by the RBI to combat inflation; it then hiked interest rates by 0.25% at a time. 

Moneycontrol

Maximum customer complaints against SBI, ICICI: Ombudsman

NEW DELHI: Maximum customer complaints were received against State Bank of India, ICICI Bank and HDFC Bank during 2010-11, said Banking Ombudsman of New Delhi region. Of the total 10,508 complaints received in 2010-11, about 4,500 cases were against SBI, ICICI Bank and HDFC Bank, RBI Chief General Manager and Banking Ombudsman (New Delhi) M Rajeshwar Rao said here today. "The reason for these many complaints against these banks is due to their large number of transactions because of their size," he said.  Pointing out the maximum customer complaints (32 per cent) are card related, Rao said 41 per cent are against the public sector banks in the New Delhi region, which includes Jammu and Kashmir, Haryana (excluding Panchkula, Ambala city and Yamunanagar) and Ghaziabad and Noida in Uttar Pradesh.  As much as 36 per cent of the complaints were against private sector lenders, followed by foreign banks at 15 per cent, he added. The number of complaints received during 2010-11 have come down by 13 per cent from 12,613 in the previous fiscal. Most complaints are received from Delhi, followed by Haryana. Banking Ombudsman Scheme, an alternate disputes resolution mechanism appointed by the RBI, deals with deficiency in the services by the bank and 27 services are part of the scheme. 

ET

Burden to combat double-dip recession on central banks : RBI

NEW YORK: Reserve Bank Governor D Subbarao has said that fears of double-dip recession have resurfaced and monetary authorities will have to deal with the global economic problems. The burden of combating recession through monetary stimulus will fall on central banks, Subbarao said while addressing the Stern School of Business, New York University here. "Over the last few months, fears of double-dip recession have resurfaced, and governments in advanced countries are locked in a policy logjam over the balance between short-term fiscal stimulus and long-term fiscal consolidation." "This has willy-nilly pushed central banks to the fore once again as monetary stimulus is having to bear the burden of being the first, and in some cases, possibly the only line of defence against recession," he said. Pointing out that the crisis has been an intellectual challenge in many ways, Subbarao said, "My own experience has been the real world problems are too complex to fit template solution of text books."  Earlier speaking at the IMF meeting, Subbarao had said that "we are rapidly running out of time, and may therefore be running out of solutions".  Fears of renewed economic crisis has been haunting the US, while in the eurozone the sovereign debt seems to be deepening, sending shock waves across the world economy.  He said that both were a big risk by themselves. If both the crises developed simultaneously, it could have a considerable impact through trade, finance and confidence channels. Subbarao is in the US to attend meetings World Bank and International Monetary Fund (IMF) meetings. 

ET

IBA likely to submit comments on pre-payment by Sep-end: RBI

The Reserve Bank (RBI) today said the Indian Banks' Association (IBA) is expected to submit comments by the end of this month on the proposal to do away with pre-payment charges on home loans. "IBA is expected to submit comments on pre-payment by the end of this month," RBI Chief General Manager and Banking Ombudsman (New Delhi) M Rajeshwar Rao said here. After receiving the comments, the RBI will go through it and take a final call on the pre-payment charges on loans taken under floating rates by customers, he said. Earlier this month, the Banking Ombudsmen Conference suggested banks should not impose pre-payment charges on loans with floating rate of interest. It had said banks may also offer long-term fixed rate housing loans to customers. The conference said lenders may address their asset liability mismatch (ALM) issues by taking recourse to the Interest Rate Swaps (IRS) market. "Floating rate loans pass on the interest rate risk from banks, which are much better placed to manage it, to borrowers and, thus, banks only substitute interest rate risk with potential credit risk," the Ombudsmen had noted. The banks will, however, be free to recover or charge appropriate pre-payment penalties in the case of fixed rate loans, it had suggested. Meanwhile, Rao pointed out that the maximum complaints received from customers were card related. He said as much as 41 per cent of total complaints by customers are against the public sector banks in the New Delhi region which includes Jammu and Kashmir besides Haryana. In the region, he said the Ombudsman received maximum complaints against State Bank of India followed by ICICI Bank and HDFC Bank. The total complaints received during 2010-11 stood at 10,508 which is 13 per cent less than in the previous fiscal (12,613). Most complaints are received from Delhi followed by Haryana. Banking Ombudsman Scheme of the RBI deals with any deficiency in the services by the bank and as many as 27 services are part of the scheme.

DH

That’s the Dedicated Spirit..................

RBI to release new series of coins

Chandigarh : The Reserve Bank of India (RBI) will shortly put in circulation new coins of 50 paise, one rupee, two rupees, five rupees and ten rupees denominations. The coins of these denominations shall conform to new dimensions, designs and compositions, an official release said here today. These coins will be legal tender as provided in the Indian Coinage Act, 1906. However, the existing coins in these denominations shall also continue to be legal tender, Vinod Kumar, Assistant General Manager, RBI, Chandigarh, said.

DH

What slowdown? Banks on a recruitment spree

Most banks appear to be on branch expansion overdrive

At a time when most other industries fear a grim future and possible recruitment freezes, banks in India appear to be on a branch expansion and recruitment spree. Most banks in the country, specifically public sector banks and small, private sector banks appear to be on a branch expansion overdrive. For large public sector banks, the expansion appears to be an effort to achieve financial inclusion by having branches in un-banked regions while for smaller banks it seems to be an attempt to move out of their region of origin and acquire a more pan-India presence. But why do banks want to expand at a time when there are signs of a possible slowdown and when costs are going up. “Any bank branch takes about two years to contribute to the growth of the bank and if banks want to be prepared for a higher rate of growth they need to start setting up new branches now. Also branch expansion is not as big a burden when compared to the benefit that they acquire. What is more important is, if the business from the new branch will help meet their capital adequacy ratio requirements,” says Vaibhav Agarwal, banking analyst at Angel Broking. The Reserve Bank of India (RBI) in its branch expansion regulation mandated that at least 25 per cent of the new branches opened by public sector banks should be in rural areas. For public sector banks, apart from meeting financial inclusion targets, the need to catch up in terms of branch addition is also another reason to expand aggressively. Over the past few years, public sector banks spent most of their time and funds on establishing core banking solutions in their branches. Now that the systems are in place, these banks had to do some catching up in terms of branch expansion, experts say. “Since most of these branches are in rural and semi-urban regions, they help the banks tap low cost deposits, while the urban branches could be used for lending services,” points out Rikesh Parikh, banking analyst at Motilal Oswal Securities. Small private sector banks too expand to shed their image of being a ‘regional bank’ and acquire a more pan-India presence. This explains why a Kumbakonam-based City Union Bank wants to expand to Varanasi and Khammam and Thrissur-based Dhanlaxmi Bank wants to expand to Ghaziabad and Bareilly.

WSJ 

To take on new banks, finmin to monitor PSB promotions

...Public sector bankers in their forties may soon begin moving across banks as a churn mechanism to make decisions faster and take on competition from new and foreign banks. This will mean the finance ministry will have a greater say in the promotion policy of these banks. The common promotion policy for all officers will begin from the grade of assistant general managers. Officers from this grade will be made to switch .....

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Bankers in a Fix Over RBI’s BCG Ruling

The finance ministry’s latest diktat that all public sector banks should adopt the Boston Consultancy Group’s banking report has come as a big surprise. The report talks about ways to improve efficiency and productivity. Top bankers are juxtaposing the latest development with an instruction issued by former finance secretary Arun Ramanathan. Back in 2007-08, Mr Ramanathan had told banks to steer clear of consultants. In fact, he had written to all bank chiefs saying that they have plenty of internal talent and, therefore, do not require advice from an external agency on how to run a bank. 

ET

RBI tightens norms on securitization deals

The practice common among finance companies and microlenders to originate loans and then quickly sell them off to commercial banks through securitization deals could take a hit, with the Reserve Bank of India (RBI) tightening the screws on such transactions. In its second draft guidelines announced on Tuesday, RBI said banks extending loans to clients should mandatorily keep them on their books for a minimum period and keep a portion of such loans, depending on their maturity. The public can submit comments for this draft till 14 October. Securitization was one of the villains of the global financial crisis, with lenders selling housing loans to subprime borrowers and then packaging these loans into marketable securities that were sold to investors around the world. “The recent crisis in the credit markets has called into question the desirability of certain aspects of securitization activity as well as of many elements of the ‘originate to distribute’ business model, because of their possible influence on originators’ incentives and the potential misalignment of interests of the originators and investors,” RBI said, announcing the guidelines. The central bank’s concern stems from the fact that some of the companies, especially non-banking financial companies (NBFCs), originate such loans and sell them off immediately to other institutions to make profits within a short period. This increases the risk of such transactions as many times the buyers are unable to ascertain the risk of the original investor. “While the securitization framework in India has been reasonably prudent, certain imprudent practices have reportedly developed, like origination of loans with the sole intention of immediate securitization and securitization of tranches of project loans even before the total disbursement is complete, thereby passing on the project implementation risk to investors,” RBI said. As per the new norms, for loans with a maturity of two years, the originator should hold the loans for a minimum period of one year. Also, the originating institution has to retain at least 10% of the loan portfolio in its books, which, according to the central bank, will ensure that the project implementation risk is not passed on to investors and a minimum recovery performance is demonstrated prior to securitization to ensure better underwriting standards. Banks are also required to carry out regular stress tests and monitor the portfolio on an ongoing basis, the central bank said. Experts say the new rules are intended to control securitization transactions primarily done by NBFCs, which have increased risk. “The entire guidelines have been framed to strengthen the securitization market from any kind of unhealthy practices, which had led to the 2008 global financial crisis,” said Vaibhav Agarwal, vice-president, research, at Angel Broking Ltd. According to the guidelines, originating firms need to hold loans below two years of maturity for a minimum period of nine months and need to retain 5% of the portfolio in its books. This could impact loan flow to microfinance institutions (MFIs), which are reeling under a crisis due to a state law enacted by Andhra Pradesh government, last year. “This would virtually mean that the securitization loan deals in the microlending space will take an immediate hit, as most of the MFI loans are for one-year maturity and holding it for a long period will be difficult,” an executive with an Andhra Pradesh-based MFI said, requesting anonymity. According to the apex bank, the total exposure of banks to the loans securitized in certain categories, such as in the form of investments in equities, should not exceed 20% of the total securitized instruments issued. If a bank exceeds this limit, the excess amount would be risk-weighted at 1,111%, RBI said.

Mint

PVNSB penalised for violating RBI guidelines

The Reserve Bank of India (RBI) today penalised Gujarat-based co-operative sector lender -Porbandar Vibhagiya Nagarik Sahakari Bank (PVNSB)- for violation of its guidelines. A penalty of Rs 1 lakh was imposed on PVNSB for violating RBI guidelines on 'Know Your Customer (KYC)' norms as well as Anti Money Laundering (AML). The RBI had issued a show-cause notice to the bank, in response to which, the bank had submitted a written reply. "After considering the facts and the bank's reply in the matter, the RBI came to the conclusion that the violation was substantiated and warranted the imposition of penalty," an official statement said. Over a dozen co-operative banks from Gujarat have been fined by RBI in the past for violating its guidelines on AML and KYC. 

Moneycontrol

RBS-HSBC deal likely to miss September 30 deadline

Royal Bank of Scotland’s (RBS) efforts to sell its retail and commercial banking businesses in India to Hongkong and Shanghai Banking Corporation (HSBC) is likely to miss its deadline of September 30, as the Reserve Bank of India (RBI) is yet to approve the deal. Sources said both the banks were reworking on the structure of the deal and, hence, it was unlikely to be closed by the end of this month. “We are working closely with HSBC and the regulators to complete the deal,” an RBS spokesperson in India said in an e-mailed response, without detailing further. The HSBC spokesperson was not available for comment. The deal, announced in July 2010, was part of RBS’ plan to retreat from some of its businesses in overseas markets. HSBC had said it would pay a premium of up to $95 million over the tangible net asset value of the businesses when the deal was completed. The actual price will depend on the quality of assets. According to sources, the banking regulator is not comfortable with the deal, as it involves part-selling of RBS’ businesses to HSBC. “The main issue is with the branch network. RBI is not convinced with the proposal of RBS selling its branches to HSBC and still continuing with wholesale banking operations in the country,” a source familiar with the development said. HSBC currently has 50 branches in India, the second-largest among foreign banks in the country. RBS has 31 branches. RBS has so far maintained that India would continue to remain a “core market”, even as it was exiting retail and commercial banking businesses. The principal businesses for RBS in India will be global banking and markets, global trade and transaction services and private banking. “It is a complex transaction, hence, it is taking time. RBI has raised some points with regard to the number of branches and priority sector requirements, and these have to be addressed before the deal is closed,” said another banker. In an earlier interview with Business Standard, Naina Lal Kidwai, country head for HSBC in India, said the nature of the deal was unprecedented. “RBI is looking at it cautiously, because anything it does would set precedence for the future. Frankly, we always thought it (securing approval from the RBI) would take time,” she said.

BS

Reliance Bank after RBI finalises guidelines: Anil Ambani

Reliance Capital, the financial services arm of the Anil Dhirubhai Ambani Group (ADAG), will consider setting up a bank after the necessary regulatory changes are made by the central bank, besides unlocking the value of other businesses. Anil Ambani, chairman, Reliance Capital, told shareholders at the annual general meeting of the company in Mumbai on Tuesday that it would consider making a foray into the banking sector, after the Reserve Bank of India (RBI) finalises the guidelines pertaining to licences to be issued to new banks. The new venture would be called Reliance Bank, he added.

http://www.domain-b.com/companies/companies_r/Reliance_Capital/20110927_anil_ambani.html

Banks Smell Profit on RBI Arbitrage Window

Banks borrow from central bank and invest in higher yielding short-term instruments

Banks are seeing an arbitraging opportunity by borrowing from the Reserve Bank of India and investing in higher yielding short-term instruments like one-month certificate of deposits and one-month commercial papers. In the current market, onemonth certificate of deposits are now traded at 9.20% while onemonth commercial papers are being traded at 9.50%. On the other hands, banks can borrow from RBI’s repo window at 8.25% on an overnight basis against government securities. The traded volumes in the CD market also jumped to . 12,434 crore on September 23 from . 6,480 crore on September 13. In the last few days, banks on an average have borrowed . 67,000 crore from the Reserve Bank of India’s repo window. This is despite the fact that the banking system is flush with incremental deposits worth . 3,14,000 crore (6%) so far this year, compared with a fresh loan disbursal of . 1,32,000 crore (3.4%). “Banks which hold surplus SLR of 2-3% can avail funds from the repo facility(8.25%) and utilise the funds for short-term investment in commercial paper or certificate of deposits and earn a clean spread of above 1%,” said Roy Paul, DGM, Federal Bank. The excess SLR, or statutory liquidity ratio — the portion of deposits that needs to be parked in government bonds, in the system is about 7%. The entire banking sector has invested about 31% of its deposits in bonds against the stipulated 24%. “As the quarter end approaches, money market instruments such as certificate of deposits factor in the quarter end in a premium because credit demand picks up and banks need to shore up their interest income,” said a senior treasury official with a private bank, requesting anonymity. The amount borrowed by banks from RBI’s repo window, indicates the liquidity situation in the banking system. The repo borrowing has risen steadily in the past one week, in spite of robust deposit mobilisation. Banks borrowed Rs. 78,565 crore on Tuesday from the central bank. This is partly because it is the beginning of the reporting fortnight. Another reason, traders point out is that banks, with excess holding of government securities, are using funds borrowed from RBI to invest in high-yielding certificate of deposits and commercial papers. 

ET

RBI cautions NBFCs on fake bank guarantees

Mumbai: The Reserve Bank of India (RBI) on Tuesday cautioned non-banking finance companies against dealing with about ten individuals and firms who have allegedly faked bank guarantees to do certain transactions. In a notification, the RBI said it has noticed instances of wherein bank guarantees purportedly issued by a couple of bank branches in favour of different entities were presented for confirmation by other commercial banks/individuals representing some beneficiary firms.  A scrutiny of the said BG revealed that these bank guarantees were fake and the signatures of the bank officials appearing on the BG were forged, the RBI said. According to the RBI notification, the beneficiaries of these transactions include SFT Exports, Sumsh Infrastructure Pvt Ltd, Tulip and Co and Alka Hotel Pvt Ltd amongst others.  

Mint

Spandana, Share Microfin, Asmita to seek merger nod

Microfinance institutions (MFIs) Spandana Spoorty, Share Microfin and Asmita are planning to approach the Reserve Bank of India with a merger proposal. “There is in-principle consensus among the three of us that the merger will be a win-win situation in the present context of challenging environment of microfinance,” Ms Padmaja Reddy, Managing Director of Spandana Spoorty Financial Ltd, told Business Line here. The three MFIs are among the top five such institutions in the country, along with SKS Microfinance and Bharatiya Samruddhi Financials Ltd of Basix Group. “We are planning to make a presentation before the Reserve Bank of India as its permission is needed for merger as a regulator of non-banking finance companies,” Ms Reddy said. The merger will create a mega conglomerate with a portfolio of over Rs 6,000 crore, making it the largest NBFC group in the country with around 30,000 employees. According to the plan, three NBFCs would be created, including one for Andhra Pradesh portfolio which is under “complete stress now”. “The remaining two will focus on building non-Andhra Pradesh microfinance portfolio and non-micro loans, respectively,” she said. The basic idea behind the proposal is to segregate ‘toxic portfolio' from other business operations in the three MFIs. “This will benefit all of us in terms of significantly improved capital adequacy ratio. In addition, securing loans will also not be a problem,” Ms Reddy explained. Apart from RBI approval, there is also a need to take permission from the consortium of banks that extended corporate debt restructuring packages, which, however, were ‘hinted' at the likelihood of the merger. But this would be done only after ascertaining RBI's view on the proposal, she added. The promoters of Spandana, Share and Asmita are tight-lipped about the valuations and other financial aspects of the merger plan.

HBL

Fahim for Pakistan-India fast track opening of bank branches

ISLAMABAD : Federal Minister for Commerce Makhdoom Amin Fahim on Tuesday stressed that Pakistan and India should fast track the process of opening of bank branches to facilitate the business community and to increase the trade volume between the two countries.Makdoom Amin Fahim, who is currently visiting India, said this while talking to Dr. Subir Vithal Gokaran, Deputy Governor, Reserve Bank of India who called on him in Mumbai (India), says a message received here on Tuesday. Dr. Gokaran expressed his optimism and agreed for increased cooperation between the two regulators.  Senior Minister is currently on an official visit to India, to discuss trade issues with India stressed the need for the opening of bank branches on reciprocal basis. It is also expected that a high-level delegation of RBI will visit Pakistan in the first half of October 2011 to discuss the modalities for opening of branches.  Secretary Commerce, CE TDAP, Pakistan High Commissioner to India and a representative of State Bank of Pakistan were also present in the meeting.

Associated Press of Pakistan

L&T Finance likely to apply for new banking license

L&T Finance, the non-banking finance arm of the infrastructure major Larsen & Toubro has hinted at applying for RBI's new banking license. The Reserve Bank of India has already charted out the draft guidelines for it in August. Amongst top prviate players, L&T Finance is perceived to be a major contender to start a fresh bank. "Being a dominant player in finance sector, we cannot ignore this option," N Sivaraman – president and whole time director, L&T Finance Holdings told Moneycontrol.com on the sidelines of a fund launch conference.  "We have expertise in finance and should look forward at banking business. We are waiting for final guidelines to come out. At this point of time, we cannot give any definite details. We will be closely watching each and every development relating new banking license," he said.

Even as India Inc awaits the final guidelines for new bank licences, the L&T Group, which has been a serious contender for the same, today expressed the feasibility of the strict entry norms that has been put forth in the draft paper by the RBI. The main issue of contention seems to be the 25% mandatory rural presence, as stipulated in the draft guidelines, issued by the Reserve Bank last month. "It is not easy to say that rural branches are viable or not. Is there any other mode of servicing the rural clients without the normal brick and mortar banks? These are areas that we really need to work on," L&T Finance Holdings President and Whole-Time Director N Sivaraman told reporters here. He was replying to a question whether the 25% stipulation for rural branches would deter for the new players. "All those evaluations will have to be completed. We definitely need to do a thorough evaluation on whether it will be worthwhile at this point of time," he added. However, Sivaraman was quick to add, "I will not say that we are not interested. Definitely, as a financial services player that is of great interest to us, and we will actively consider the prospect. "I think, it is an opportunity that is important for a financial services player. So we can not ignore it. We will have to wait for the final guidelines to come out. Once RBI announces its final guidelines we will definitely work on it," he said replying to a query on whether the group will pursue entering the banking space given the strict entry norms. The Reserve Bank last month had issued the draft guidelines on new bank licences, pegging the minimum required capital for the holding company at Rs 500 crore, and limits the foreign shareholding at 49 percent. At present, the minimum capital requirement for the banking sector is Rs 300 crore and the foreign shareholding in private sector banks is allowed up to 74% of the paid-up capital. 

Moneycontrol

One Has to Learn New Competencies: Kumar Mangalam Birla

I think financial inclusion is a very big part of issuing licences for the new bank. Given the fact that we have physical presence across so many points within the country, across the country and we do very significant CSR work across the country, for us to kind of get started in terms of the inclusion part of it would be very kind of easy and sots of fits in with our philosophy of doing things. Fits in with our social conscience. Clearly it is very important for RBI and the government as I understand it to have inclusion as a very big criteria for selection.

Business Today

Monetary Policy Dilemmas: Some RBI Perspectives

Read....... 

Was RBI’s monetary policy too hawkish or dovish? RBI has been criticised both ways recently. Some say it has been too dovish as it took baby steps to rising inflation in 2010. Some say it is too hawkish as it has raised rates sharply leading to slowdown in the economy. Subbarao says both need to be assessed given the context RBI was in......

Indian microfinance credit bureau: Why is it not fully operational yet?

.... hope that the proposed Microfinance Bill drafters, key regulators and the RBI take these aspects into account while formulating a strategy for implementing a microfinance credit bureau........

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83 % complaints against banks rejected due to procedural errors

PATNA: Because of the procedural mistakes, 83 per cent of the complaints made against bank officials to the Office of Banking Ombudsman, Bihar and Jharkhand, fail to withstand the scrutiny of law, according to the annual report of the Office of the Banking Ombudsman released on Monday. According to banking ombudsman, Patna, A F Naqvi, during 2010-11, as many as 2,201 complaints were settled, disposed and closed of which 1,838 complaints were rejected which comes to about 83.51 percent of the total complaints filed. On the other hand, as many as 363 cases were disposed of by mutual settlement/award, he said, adding percent-wise it comes to just 16.49 per cent. Segment-wise analysis of the annual report indicate that as many as 789 complaints against the banks came from urban areas, 588 from semi-urban areas, 504 from rural areas and 402 from Metropolitan areas. Maximum number of complaints were received against the State Bank of India (SBI), Naqvi said. According to the report, 1,004 complaints were received against the SBI followed by 866 against other nationalized banks. Private Banks fared better in this regard as only 205 complaints were filed against them, Naqvi added. Only 68 complaints were received against the Regional Rural Banks (RRBs), according to the report. According to the report, pensioners seem to be the worst victims of the banks as majority of the complaints was related to pension. According to the report, 423 complaints related to pension. According to the report, 1,529 complaints were received from Bihar, 582 from Jharkhand and 172 from other places. The report was released by Naqvi at a press conference. RBI DGM Swaroop Singh was also present on the occasion.
TOI

Why the 'historic' loan waiver is actually hurting small farmers

The government’s inability to promote more warehouses (under the Warehousing Development Regulations Act), and the state governments’ unwillingness to modify laws that could make such warehouses catalysts for rural prosperity and agricultural growth, is obviously going to hurt small farmers terribly in the coming years. It is possible that this is what K C Chakrabarty, Deputy Governor of the RBI, was hinting at in his address at the National Seminar on Productivity in Indian Agriculture, College of Agricultural Banking (CAB) earlier this month.

Read.......... 

RBI Board Reconstituted

The Government of India has reconstituted the Central Board of Directors of the Reserve Bank of India. In a notification issued on Friday, the Government of India has appointed seven new Directors on the Central Board of the Reserve Bank for a period of four years from the date indicated. The new Directors are:

1. Shri Dipankar Gupta, Sociologist, former Professor, Jawaharlal Nehru University, New Delhi (w.e.f. September 20, 2011).
2. Shri Najeeb Jung, Vice Chancellor, Jamia Millia Islamia, New Delhi (w.e.f. September 22, 2011).
3. Shri G. M. Rao, Chairman, GMR Group, Bengaluru (w.e.f. September 23, 2011).
4. Smt. Ela Bhatt, founder and General Secretary, of SEWA, the Self-Employed Women's Association, Ahmedabad (w.e.f. September 23, 2011).
5. Smt. Indira Rajaraman, Professor Emeritus, National Institute of Public Finance & Policy, New Delhi (w.e.f. September 23, 2011).
6. Shri Anil Kakodkar, Former Chairman, Atomic Energy Commission (Also Chairman, Northern Area Local Board) (w.e.f. September 23, 2011).
7. Shri Kiran Karnik, Former Chairman, NASSCOM, (Also, Chairman, Western Area Local Board) (w.e.f. September 23, 2011).

Apart from these new members, four existing members continue to be on the Reserve Bank Board for the present.

They are:

1. Shri K. M. Birla, Chairman, Aditya Birla Group of Companies
2. Shri Azim Premji, Chairman, WIPRO
3. Shri H. P. Ranina, Supreme Court Advocate, and
4. Shri Lakshmi Chand, IAS (Retd).

Prof. M.M. Sharma, Shri Sanjay Labroo, Shri Suresh Kumar Neotia, Dr. A. Vaidyanathan, Prof. U. R. Rao and Shri Y.H. Malegam retired as Directors of the Central Board of the Bank.

Moneycontrol

RBI to Issue New Rs 10 Notes with Rupee symbol

New Delhi, Sept, 25: The Reserve Bank of India, central bank of the country, has announced that it will issue Rs 10/- denomination banknotes with its symbol very soon. According to RBI, it will shortly issue Rs 10/- denomination banknotes without inset letter, in the Mahatma Gandhi Series with the signature of Dr. D. Subbarao, Governor, Reserve Bank of India. On the back of the Banknote, the year of printing (2011) would be printed with incorporation of rupee symbol. The design of these notes to be issued now is similar in all respects to the Banknotes issued in Mahatma Gandhi Series 2005 earlier except for the symbol. The Indian rupee symbol was officially adopted in 2010by the government, which is derived from the Devanagari consonant (Ra) with an added horizontal bar.  The symbol can also be derived from the Latin consonant "R" by removing the vertical line, and adding two horizontal bars (similar to the symbols for the Japanese Yen and the Euro are using).  The first series of coins with the rupee symbol was launched on 8 July 2011. Now, RBI is moving further by issuing Rs 10/- notes with this symbol. Slowly, all the denomination notes have Rupees symbol instead of Rs. RBI also mentioned that all the banknotes in the denomination of Rs 10/- issued by the Reserve Bank of India in the past will continue to be legal tender.

http://goindocal.com/india-%BB-general--rbi-to-issue-new-rs-10-notes-with-rupee-symbol-go-2666.htm

RBI eases overseas borrowing norms for infra companies

The Reserve Bank relaxed norms for infrastructure companies with direct foreign equity up to 25 % to raise fund overseas without government permission. On a review, it has been decided, to further liberalise the External Commercial Borrowings (ECBs) policy in respect of the infrastructure sector, RBI said in a statement. Direct foreign equity holder (holding minimum 25 % of the paid- up capital) and indirect foreign equity holder holding at least 51 % of the paid- up capital, will be permitted to provide credit enhancement for the domestic debt raised by Indian companies engaged exclusively in the development of infrastructure through issue of capital market instruments, it said. It includes Infrastructure Finance Companies ( IFCs) and no prior approval will be required from the Reserve Bank for providing such credit enhancements, it said. The company fulfilling foreign equity criteria does not require permission for raising ECB up to USD 5 million. Now onwards the term debt in the debt- equity ratio will be replaced with ECB liability and the ratio will be known as ECB liability- equity ratio to make the term signify true position as other borrowings or debt are not considered in working out this ratio, it said. Service sector units, in addition to those in hotels, hospitals and software, could also be considered as eligible borrowers if the loan is obtained from foreign equity holders, it said.

FPJ

The Long and Short of Microfinance

India’s Inflation ‘Fairly Stubborn,’ Central Bank Governor Subbarao Says

India’s inflation rate has been“fairly stubborn” and price pressures beyond a threshold are unacceptable, central bank Governor Duvvuri Subbarao said. “Inflation has been fairly stubborn,” Subbarao said in New York today. “Above a threshold, you can’t accept high inflation to have higher growth,” he said, adding that the price-rise limit is as much as 6 percent for the nation.  The Reserve Bank of India on Sept. 16 extended its record-interest rate increases to tame the fastest inflation among the so-called BRICS economies. India’s benchmark wholesale-price inflation accelerated to a 13-month high of 9.78 percent in August from a year earlier. Higher food and fuel costs and weakness in the rupee may keep boosting price pressures.  Subbarao today reiterated the upward pressure on prices. A rate of “4 to 6 percent is the short term comfort range” for inflation, he said. “We expect inflation to slow by March 2012, but more slowly than initially expected.” He has raised borrowing costs by a total of 350 basis points starting mid-March 2010, the fastest round of increases since the Reserve Bank of India was established in 1935, Bloomberg data show. “We are having structural supply shocks,”Subbarao said today in remarks at New York University’s Stern School of Business.  India needs to control rising prices to protect purchasing power and sustain growth, the Reserve Bank has said.   “Inflation remains high, generalized and much above the comfort zone of the Reserve Bank,” the RBI had said in its September 16 statement. “A premature change in the policy stance could harden inflationary expectations, thereby diluting the impact of past policy actions. It is therefore imperative to persist with the current anti-inflationary stance.”  The task of mitigating inflation also may be complicated by the weakening in the rupee. India’s rupee fell today for the fifth time in six days as concern that Europe’s debt crisis will escalate deterred risk-taking, spurring sales of emerging-market assets by overseas investors.  The currency extended this quarter’s loss to 9.7 percent, the most since 1992, and was at 49.46 per dollar at the 5 p.m. close in Mumbai. The rupee pared declines today on speculation the central bank will seek to slow the currency’s slide.  “Intervention in forex markets brings unexpected consequences,” Subbarao said today. Policy makers will monitor exchange-rate movements and will consider intervening in the currency market “as and when”required, Finance Minister Pranab Mukherjee said in Washington on Sept. 23. Central bank Deputy Governor Subir Gokarn said yesterday that while the rupee’s rapid drop is a concern, it has to be seen as part of “a global phenomenon,” and “there is nothing specific in the country that is driving this process.”  

http://www.bloomberg.com/news/2011-09-26/inflation-in-india-has-been-fairly-stubborn-rbi-governor-subbarao-says.html

RBI's Subbarao: Central Bank Have No `Template Solutions'

NEW YORK (Dow Jones)--India is not decoupled from whatever happens in Europe, said the country's top central banker on Monday. "Whatever happens in Europe will affect us" said Duvvuri Subbarao, governor of the Reserve Bank of India, speaking in New York. "If the crisis deepens, it will influence trade demand and commodity prices." Central banks have to be cautious in balancing between policies that affect growth and inflation he said. India's inflation is high--around 9%--but he estimates it could go down to a more comfortable 4 to 6% range by March 2012. Central banks don't have "template solutions," he said, adding that they have to be careful about communicating policies because they cannot be too transparent. If they provide caveats, markets invariably ignore these conditionalities. The financial crisis of 2008 has changed the thinking of some in the emerging markets. Before it, deploying capital controls was not considered positive but after the crisis, it is considered more viable. That said, a flood of capital would create instability so India prefers long-term investments. "No country gets enough capital at the time it wants," Subbarao said. There is a need for apolitical central banks in democracies because the fear is that monetary policy could become hostage to fiscal compulsion, he said. In India, monetary policy is carrying the burden of fiscal expansion, he added. The improvement of productivity in banking in India is a challenge, he said. The demand for credit is going up at a time when the cost of credit is going up so banks have to reduce their costs. Asked about capital adequacy at banks, he said Indian banks at aggregate levels have reached the norms required by the Basel III rules. The challenge though is that 70% of Indian banks are owned by the government so it is the government that would have to raise the capital.  Comparing the current crisis with the 2008 crisis, he said this time, central banks seem to have exhausted their firepower. The markets also feel there is less coordination this time around.

WSJ

Power to fight global slowdown lacking - Duvvuri Subbarao

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Policymakers around the world lack the monetary and fiscal fire power they possessed in 2008 to fight a renewed global slowdown, Reserve Bank of India governor Duvvuri Subbarao said on Monday. Central banks and governments today "have no fire power left: governments cannot raise fiscal stimulus and central banks have exhausted most conventional and unconventional" policies," Subbarao said during a question-and-answer session following a speech at New York University's Stern School of Business. Complicating matters further, Subbarao said, is the different stages of the business cycle seen in major world economies. Emerging markets such as India are still growing at a healthy clip while Europe, Japan and the United States are growing more slowly.

Subbarao’s view of the crisis

The crisis we are seeing in the markets today is a crisis of confidence. In a short but very sharp speech at the International Monetary Fund meeting on 23 September, Reserve Bank of India (RBI) governor D. Subbarao said precisely that. His insights were: one, everyone knows what needs to be done, the problem is political gridlock. Two, there’s no such thing as decoupling. Three, emerging market economies have been affected by the crisis in the euro zone, the slowdown in the US through risk aversion, slowing exports and lack of confidence, which could hurt investment and growth, which in turn could lead to bad loans at banks. He then, rather ominously, compared the current crisis with the Lehman one and said the situation was better then, because there was global co-ordination between policymakers, aggressive fiscal policy was an option, emerging market and developed economies were at the same stage of the business cycle, and while the public sector rescued the private in 2008 in the advanced economies, the public sector is now the focus of the crisis. But will the crisis force a change of monetary stance by RBI? The speech shows Subbarao is not underplaying the magnitude of the crisis and recognizes that it will affect growth in India. At the same time, he also thinks accommodative monetary policy in the developed world was keeping commodity prices unduly high. He says, “The negative outlook on growth should have driven down prices, but that has not been evident so far to any significant extent.” In other words, the slowdown in global growth may not lead to lower commodity prices and lower inflation. His remark that emerging countries are at a different stage of the business cycle hints at a restrictive monetary stance by emerging market central banks.

There’s also another issue the governor didn’t touch upon in his speech—the impact of rupee depreciation. This factor may offset the impact of lower global commodity prices. Further, it’s very likely the government’s disinvestment programme will be hit and that, combined with the slowdown, could affect the fiscal deficit. That would be another reason for RBI to not change its stance. Nevertheless, recent events have fanned hopes that RBI may decide to pause at its next meeting. Indranil Pan, chief economist at Kotak Mahindra Bank Ltd, says that in the past, the central bank has always paused when the inflation trajectory started coming down. Pan also expects that European policymakers will tie up funding for Greece in October, which could result in a rebound in the risk appetite. While that may be fleeting, it’s significant that while Subbarao mentions that policymakers do not have the luxury of using expansionary fiscal policy today, he remains silent about the monetary policy, implying that if things get sticky, there’s plenty of room to cut interest rates fast. That will provide support to the downside in the markets. But the trouble today, as it was after the Lehman crisis, is the threat of forced liquidation, as funds raise cash to meet redemption by selling assets. That has driven down prices of all assets in which investors were long. Look, for example, at gold. Look also how overweight markets such as Indonesia, Russia and China have been affected much more than the underweight Indian market this month.

Mint

Why the RBI will not mess with the rupee

....We tend to do wrong by focusing too much on the bilateral INR/USD rate. In the recent days of distress, as fear has resurged, people have taken money out of everything under the sun and put it into US Treasury bills. This has given a strong dollar at the expense of essentially every other currency.....

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Plan panel approves Post Bank concept with ATM facility

Soon, post offices in remote areas of the country will serve as banks and offer automated teller machine (ATM) facility. The Planning Commission of India has agreed to allow the Department of Postal Services to install ATMs in post offices. The postal department has a network of  1.44 lakh post offices across India with deposits worth Rs 5,60,000 crore. Minister of State for Telecom Sachin Pilot said the department proposed the Post Bank scheme in an attempt to use the huge network of post offices to foster inclusive growth and ensure people in far-flung areas get benefit from the government’s welfare schemes. Post offices have 25 crore accounts apart from five crore MGNREGA workers. The postal department has identified over 830 post offices where the ATMs will be installed. The department’s ATMs will be linked with other public sector banks too. “Their (post office) saving account will be just like any other bank account,” a senior government official said. The department provides various financial services, including a post office savings bank, postal life insurance, pension payments and money transfer services.The plan panel recently agreed to the department’s proposal and decided to sanction funds in the 12th five-year plan for installing ATMs in each post office. The panel had sanctioned Rs five crore in the 11th five year plan to conduct a study on the setting up Post Bank of India on lines of the ones in New Zealand and Japan. The decision is aimed at making the post offices as an important catalyst in improving the delivery of welfare schemes, for which the Central government allocated over Rs 1,80,000 crore in the budget of 2011-12. Already, a large number of people enrolled under Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGA) have their accounts in post offices where their wages get credited. But the limitation of being able to access their accounts during working hours of the post offices was a cause of inconvenience. 

HT

RBI: Foreign PE funds can guarantee infra debt

To enhance the creditworthiness of infrastructure projects, the Reserve Bank of India (RBI) has allowed foreign equity investors to issue guarantees for debt raised by companies involved in these. Such credit enhancement by investors reduces credit and default risks and helps secure funds at lower rates. Besides guarantees, credit enhancement can also be extended through additional collateral and insurance. Credit enhancement by non-resident entities would be permitted under the automatic route and these decisions would not require the prior approval of the central bank, RBI said on Monday. Credit enhancement is a method through which a company can improve its debt or credit worthiness. It provides reassurance that the borrower would honour the obligation. Those holding a direct stake of at least 25 per cent (for indirect foreign equity holders, the figure stands at a minimum of 51 per cent of the paid-up capital) can provide credit enhancement to Indian companies. The companies must exclusively be devoted to the development of infrastructure. Till date, only multilateral financial institutions and government-owned development financial institutions could offer credit enhancement for domestic debt raised through debentures and bonds. RBI has also rationalised the policy for extra commercial borrowings (ECBs). Instead of conventional debt-equity ratio, RBI would now look at the ECB liability, calculate ratio of ECB obligation to equity and excluding other borrowings and debt. The ECB liability would factor in the proposed borrowing, as well the outstanding ECB, from the same foreign equity holder lending the money. The ECB proposals from foreign equity holders and group companies would be taken up under the approval route. Service sector units, in addition to those in hotels, hospitals and software, could also be considered eligible borrowers if the loan is obtained from foreign equity holders. This would facilitate borrowing by training institutions, research and development companies and miscellaneous service companies.

BS

RBI must intervene

...RBI’s concern as a regulator is to intervene in any market when there is too much volatility. Bond price volatility is addressed through some large banks while stock prices are addressed by the insurance companies. For the forex market, when sentiment is quite adverse, direct intervention could be justified. The depreciation that we are witnessing has some important implications that can justify intervention if RBI is convinced that it is not being driven by only fundamentals....

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CBI got Rs 31,000 cr 2G loss from Subbarao; RBI chief may be key witness

...The Central Bureau of Investigation (CBI), which has put the loss from selling 2G spectrum at 2001 prices in 2008 at close to Rs 31,000 crore, did not pull this number out of thin air. It got this number from former Finance Secretary and present Reserve Bank Governor Duvvuri Subbarao. In his six-page submission, which is listed as a ‘relied-upon document’ with the serial number 106, Subbarao has applied a methodology and ...

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Wrong path

The article titled “Wrong approach to inflation” (Business Line, September 24) rightly explained how the RBI is pursuing a wrong path in the matter of containing inflation. At present we find declining growth alongside mounting inflation. The reason for this is the RBI's attempt to contain demand and consumption by adopting measures that curb production in different sectors, which again brings about shortages and higher prices.  Producers and manufacturers have been compelled to defer their expansion plans in view high cost of production due to rate hikes by the RBI. While it is in order to contain demand and consumption it will be suicidal to curb production as we have shortages of various products and manufactured articles. The latest rate hike by 25 basis points was uncalled for. Instead, the RBI should have taken a pause to assess the efficacy of the eleven earlier rate hikes. A positive move would have been to encourage production and capacity expansion, thereby making for greater employment generation, so necessary in an economy like India.

K.K.Ammannaya, Udupi (HBL)

RBI may allow banks to buy back gold from domestic market

Reserve Bank of India (RBI) may allow banks to buy back gold from domestic market. Preliminary discussions have ensued between the banks, finance ministry and the central bank to thrash out the modalities for making this process work. Senior bankers told Financial Chronicle that if RBI gives a nod to banks to buy back gold, it will help the country save foreign exchange as India imports about 800 tonnes of gold through the state-owned trading company Minerals and Metals Trading Corporation (MMTC) and other government-licenced age ncies such as banks and jewellers. It may also help in bringing unaccounted gold into the formal channels. At present, banks are allowed to sell gold, but barred from buying back gold from the local market. “RBI is open to allowing banks to buy back gold but final guidelines on this are still being worked out. We have had a few rounds of meetings with the RBI,” said a senior banker who was one of the participants in the meeting. The key challenge for the banks would be to establish a uniform purity of the gold when they buy it back and to provide storage facilities for the gold bought back. Besides they have to commit capital by purchasing it back. At present, banks import gold on a commission basis for jewellers. Banks are now only allowed to sell gold to retail and bulk customers. The only exception is the State Bank of India that can buy back gold but the minimum quantity is 500 gram.

China Business News

Riding out the storm

Following the 11.4 per cent decline in the dollar value of the rupee over barely a quarter, the sharp slump of last week has further complicated an already tricky situation for the Reserve Bank of India (RBI). Not surprisingly, RBI Deputy Governor Subir Gokarn has expressed “concern” about the sharp depreciation within “such a short period of time”. It is hard to predict what the ramifications will be, given that the depreciation has varying implications for different economic actors. While RBI has been slow to intervene in the foreign exchange market, and it had reasons for being slow, it may have no option but to act with greater alacrity in days to come. The depreciation in the dollar value of the rupee is evidently owing to foreign capital seeking a safe haven in the US dollar, in response to the volatility currently roiling global financial markets, especially the euro area. The immediate concern is whether delayed intervention by RBI would lead to a surge in “imported” inflation. If so, how would RBI respond? Raising interest rates has not proved effective so far and another round of interest rate hike will dampen business sentiment further. Since RBI has the required foreign exchange reserves, should it intervene more forcefully to pull the rupee up a bit? The jury is out on that question. On a positive note, it is likely that capital flows would reverse direction once volatility settles resulting in investors returning to emerging markets such as India, to leverage interest rate differentials between developed and emerging markets, in a replay of what happened two years ago. The rupee’s depreciation is, ceteris paribus, likely to benefit domestic exports, currently enjoying an unprecedented boom. It could potentially provide a shot in the arm to the software sector, which is currently languishing owing to deflated demand in the West. However, this optimism needs to be tempered given that economic conditions in India’s leading export markets – the United States, the euro zone and Japan – are unlikely to improve anytime soon! On the other hand, importers across the board will be adversely impacted. It is unfortunate that developments on the foreign exchange front have not enabled India to fully leverage the fall in commodity prices, particularly oil. Thus, any gains from a fall in commodity prices will be largely neutralised because India will have to pay more for the dollar at least in the short run. The same applies to imports of copper, nickel and other non-ferrous metals that India has been importing in significant amounts. In the case of coal, India is faced with the double whammy of escalating prices and a falling rupee. All things considered, India’s trade deficit is likely to widen, at least in the short term. India may be able to absorb these outflows into its current account deficit, which has been declining in recent quarters as a result of higher export earnings and remittances. However, alarm bells would start ringing as the current account-to-GDP ratio moves towards four per cent. It is difficult to hedge one’s bets on the duration of the current situation. If the previous episode of global volatility in 2008-09 is any indicator, the reversal of capital flows could take place just as suddenly. RBI would then be faced with the unedifying prospect of handling unbridled capital flows, which comes with its own set of problems. The dominant policy challenge for India remains finding the most efficient way to regain a high growth trajectory at the earliest. While it is impossible to remain impervious to external influences, the key to sustained growth lies in unleashing domestic productive capacities.

BS

Plea for panel to study impact of forex rates volatility

The Kerala Chamber of Commerce and Industry has urged the RBI to constitute a high level committee to study the impact of the frequent volatile fluctuation in the foreign exchange rates and to come out with suitable relief packages to entrepreneurs who has suffered considerable losses.

HBL

Aadhaar alone isn’t enough for a full-fledged bank account

... Aadhaar is one of the additional means we are giving people to open bank accounts; however, in itself not sufficient for large bank accounts,” said a finance ministry official who did not want to be identified.....

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Policy on ECBs needs to change

...The current RBI-mandated all-in-cost ceilings, in a sense, makes any proposed raising of the annual $ 30 billion ECB cap or the go-ahead for corporates to use ECB proceeds for redemption of foreign currency convertible bonds (said to aggregate $ 4.5 billion) practically redundant. ....

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Overseas borrowing window for India Inc. opened further

......“When the horse is not running, you have to show it the carrot. This is what the RBI has done by liberalising the ECB window. By allowing more players to access the ECB route, the central bank appears to be banking on the pull factor to attract foreign exchange inflows....

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Rupee Decline in ‘So Short a Time’ a Concern, Gokarn Says

The decline in the Indian rupee in “so short a time” is a concern and is a result of global financial-market conditions, Reserve Bank of India Deputy Governor Subir Gokarn said. Sharp movements in the currency can be disruptive and tend to trigger panic, he said in a speech in Washington today. India has not intervened with an exchange-rate target in mind for a long time and there are no plans to change the policy, he said. “It is a matter of some concern that we depreciate so much in so short a time but we have to put that into perspective,” Gokarn said. “This is a global phenomenon. There is nothing specific in the country that is driving this process.” Asian currencies had their biggest weekly drop since 1998 as concern the global economy is headed for a recession dimmed the outlook for exports and prompted investors to favor safer bets than emerging-market assets. India’s rupee ended its worst week in 18 years, losing 4.6 percent. The currency closed at 49.43 per dollar in Mumbai on Sept. 23. This month, the rupee has fallen 6.8 percent even as the Group of 20 Nations sought to quell the turmoil in financial markets. “We do see that very sharp movements intra-hour or intra- day can be disruptive,” Gokarn said. “They tend to trigger panic, entry or exit. In that situation, we feel that there is some merit in smoothing, infusing dollars to ensure that movement is moderated. That is something we would consider.” Inflation in India “remains high” and will probably remain in a range of 9 percent to 10 percent until November, Gokarn said. The Reserve Bank boosted India’s repurchase rate for the sixth time this year on Sept. 16, raising benchmark borrowing costs 25 basis points to 8.25 percent as policy makers seek to tame the fastest inflation among the biggest emerging markets. Indian wholesale prices rose 9.78 percent from a year earlier in August. Economic indicators are signaling a slowdown in growth, Gokarn said. India’s $1.7 trillion economy expanded 7.7 percent in the three months ended June 30 from a year earlier, the slowest pace of growth since the last quarter of 2009. “All of the momentum indicators are showing signs of moderation,” the deputy governor said. “Tax collections are starting to ease off. When we track growth, it’s clearly come down to below 8 percent.”

http://www.businessweek.com/news/2011-09-25/rupee-decline-in-so-short-a-time-a-concern-gokarn-says.html

Banking Laws bill flayed

Hundreds of bankers, who have gathered in Patiala for a conference, on Sunday criticized the Banking Laws (amendment) Bill, 2011, which seeks to strengthen the regulatory powers of the RBI. General sectary of All India Bank Employee Association (AIBEA) C H Venkatachalam said, "The new bill aims at privatization of banks. Recently even the Planning Commission had suggested that government's capital in nationalized banks can be reduced to less than 51% which means privatization of the banks."

TOI

Move to reduce commission of post offices' women agents slammed

MUMBAI: Women agents who sell post office saving schemes have sought finance minister Pranab Mukherjee's intervention after the RBI suggested their commission be reduced from 4% to 1%. A delegation of Mahila Pradhan Kshetriya Bachat Yorja (MPKBY) led by Congress MP Sanjay Nirupam recently met Mukherjee and urged him not to proceed with the RBI's recommendations made by the RBI. "Shyamala Gopinath – the former Deputy Governor of the RBI - in her report suggested reducing agents' commission from the existing 4% to 1%. The food prices have gone up. Inflation has made poor peoples' lives hard. There are nearly one lakh women agents working for the post office. If the commission is reduced by 75%, it will make the lives of many families miserable," Nirupam said. "In fact, the delegation told Mukherjee that the cost of living has gone up and instead of decreasing the agent commission, the finance department should consider revising the perks and increasing it to 6%," Nirupam said. The MPKBY agents, by persuading citizens to invest in the post office recurring deposit account (RDA) and other saving schemes offered by the post offices, annually make over hundreds of crores for the Government of India. Only women can become agents for these bank services. offered by all post offices in the country. The idea to appoint agents was to persuade an investor especially low income groups for a long terms savings in order to get a lump sum amount after five years or on the maturity of the scheme. Only females can become agent for these banking service offered by all the post office counters in the country. A senior government official attached to the state employment guarantee scheme and self-employment department said, "If the commission is reduced drastically, it will not only affect the families of the agents, but even the government. The collection made by these women adds to the Union government's kitty, which is redistributed by the Centre to states for carrying out the development work." The official added that taking into consideration the efforts made by the women agents, the Union government should introduce some special scheme to reward these women rather punishing them by slashing their income.

TOI