A crisis of confidence

The latest index of industrial production (IIP) numbers, showing growth for September at a two-year-low of 1.8 per cent, confirms what is by now obvious: The slowdown is real. It is hard to think that the Government is aware of it, if judged purely in terms of policy response. There are perhaps reasons — at least from the Reserve Bank of India's (RBI) side — for the silence, unlike in 2008-09 when it was quick to respond. Back then, the growth fell all of a sudden. The first half of that fiscal actually saw an average year-on-year IIP increase of 8.1 per cent. Then followed the global economic crisis, which resulted in an industrial slowdown from October and seven consecutive months of negative growth between December 2008 and June 2009 — making it a proper textbook ‘recession'. This time round, it has been a comparatively gradual affair. The April-June quarter recorded a fairly decent average growth of 7 per cent. Since then, it has declined to 3.8 per cent in July, 3.6 per cent in August and 1.8 per cent in September. It is this gentle slide — combined with a wholesale inflation of 8 per cent-plus persisting over 21 successive months — that has confused policymakers, especially the RBI. Its monetary tightening actions have, in the end, dented growth without really helping to “anchor inflationary expectations”. The only consolation is that there is just a ‘slowdown' and no ‘recession' as yet. Tempering this minor satisfaction, though, are two realities. The first is that, unlike in 2008, there is not much fiscal headroom today to pursue Keynesian expansionary policies. The Centre's revenue collections are down, made worse by the limited options for borrowing: Last week's auction of a 13-year paper devolved on primary dealers despite a 9.15 per cent yield offer. Secondly, in 2008, the ruling United Progressive Alliance (UPA) enjoyed a fair amount of credibility among investors and the wider public. That's why the 2008-09 recession, which was primarily about liquidity and demand constraints, was amenable to traditional monetary and fiscal quick-fixes. The current crisis is bigger — one of ‘confidence', which has dried up because of a Government that no longer has the stomach for taking major policy decisions. That being the case, the best way out now is to work on the second part of rebuilding confidence. It requires taking immediate action on a host of fronts: Granting firm coal linkages to power plants best placed to achieve early completion; framing policies to enable bleeding telecom or airline firms to exit easily (including selling out to foreign players); decontrolling sugar and urea; and getting major financial bills on insurance (allowing 49 per cent foreign direct investment), pension (according statutory status to the regulator) and the direct tax code passed in the coming winter session of Parliament. These measures would go some way in restoring investor confidence.

HBL

Economists sombre on industrial growth

... He expected industrial growth numbers to start heading up from August 2012 only, when the Reserve Bank of India is likely to begin cutting rates. RBI's tight monetary stance is being blamed for stifling growth numbers, while not impacting inflation much.....

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'Fiscal deficit target is difficult to meet'

... "It is a cause for concern and we don't want to be in a situation where our sovereign debt and fiscal deficit get too high and later become unmanageable."....

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More bad news for banks as NPAs swell by 33%

Is the economy heading for a crash landing?

... There was a collective sigh of relief when the next day another global rater, Standard and Poor’s, lifted the risk profile of the Indian banking industry by one notch, from 6 to 5, saying banking regulations in India are in line with international standards, and the banking regulator, the Reserve Bank of India (RBI), has a moderately successful track record....

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Focus has to be on long-term structural solutions to tackle inflation: Chanda Kochhar

...“Beyond a point, instead of controlling consumption we will have to focus on adding supply, thereby rectifying the supply-demand imbalance in order to be able to control inflation in the long-term. So, clearly, we have to focus on long-term structural solution to tackle inflation,” .......

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MFIs may be allowed to access public money

...The ministry last week finalized the structure of the legislation, which will be moved to the cabinet in the next two weeks, after the law ministry takes a look at it, the official said.
“RBI will be the sole regulator for the sector, and MFIs will be allowed to collect thrifts from self-help groups (SHGs),” said the official, who was part of the committee that finalized the draft. “Also, it’s logical that the new legislation will overrule all state laws on the subject.”.....

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ICICI: savings deregulation to hit retail loans

Retail consumers are unlikely to benefit much from the peaking of interest rate cycle in the near term, said Chanda Kochhar, managing director and CEO, ICICI Bank, on Sunday, on the sidelines of the India Economic Summit, organised by the World Economic Forum..........

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'13 rate hikes count to tame inflation is misleading'

With fears of slowdown rising high and the cause being attributed to the conventional policies of the Reserve Bank of India (RBI), a deputy governor of the central bank said it was “a bit misleading count” to say that interest rates have been raised on 13 times and inflation still has not come down. “Keep in mind, we started from a very very low base. In these 13 times, we also returned to normalcy. The crisis response took the call rate to 3.25 per cent. I think, to argue that we have raised interest rates 13 times and nothing has happened is an injustice,” said Subir Gokarn, deputy governor, RBI at a meeting recently. After the global economic crises of 2008, the RBI took immediate measures to keep the situation under control. The repo rate, which was at nine per cent in early October 2008, was slashed by 100 basis points (bsp)on October 20, then by 50 bsp on November 3 and again by 100 bsp on December 8 the same year. The repo rates went down to 4.75 in April 2009 and were kept stable till March 2010 when the rise began. At the same time, the reverse repo rates were slashed in December 2008 by 100 bps and were gradually brought down to 3.25 per cent by April 2009, from 6 per cent in October 2008. The high inflation of 9.89 per cent in February was followed by the first rise in policy rates on March 19, 2010. Since then, the rates have been raised 13 times from 3.25 per cent to 7.50 per cent for the reverse repo rates, while for the repo rates the rise started from 4.75 per cent and reached 8.50 per cent in the last policy review in October 2011. Justifying the action of the banking regulator, Gokarn said, “Moving from 3.25 to 6 or 7 per cent or whatever the neutral rate might be, was itself a process that would have happened in any case. But after that, we of course, had to deal with inflation pressures. In the last one year, clearly the impact of interest rate rise is visible on the growth momentum.” India’s economy expanded by six-quarter low of 7.7 per cent during April-June and signals of the second quarter of this financial year are also not promising. Industrial growth remained sub-five per cent in the second quarter and fell to a two-year low of 1.9 per cent in September.

BS

Economy: It’s like the 1990s again, so there’s hope yet

The current state of the market and the economy is reminiscent of the 1990s, when India had high inflation and bad loans. Twelve years later, it’s ditto. And the last time, India came out stronger due to forced reforms. Can it rebound thusly from the current mess too? Banks then were facing writedowns on loans given to sectors such as steel, textiles, power and cement and it had become a huge issue. The government had to recapitalise banks and protect institutions such as ICICI and IDBI from going under. Cut to the present and the government has to recapitalise banks as loans given to power, construction, airline and other sectors are going bad. The State Bank of India, the country’s largest lender, had net NPAs of 2.04% in the just-past second quarter against 1.7% in the same period a year ago. Inflation at 9.7% is way beyond the Reserve Bank of India’s (RBI) comfort zone, though RBI has forecast it will come off to 7% by next March end. Inflation in the beginning of the 1990s was consistently over 10% and interest rates were high on the back of high inflation. Ten-year government bond yields were above 10% in the late 1990s, even though inflation had started to trend down in the second half of 1990s. Ten-year yields at present are trading at multi-year highs of close to 9%. On the global front, the 1990s saw the burst of the Asian tiger economies’ bubble, while it is the turn of the developed economies to face the burden of debt at present. Global markets are in turmoil over debt issues of Greece and Italy. Italian bond yields have touched unsustainable levels of 7% given its total debt at $2.7 trillion or 120% of GDP. Markets are worried about the unsustainability of debt levels in European countries leading to a selloff in equities and currencies. European equity indices are down by over 12% since August 2011, while the euro has fallen by over 5% against the dollar on the back of the sovereign debt issues. How will markets behave going forward? The problems facing the economy and markets will not go away in a hurry. It is a slow process as governments cut down deficit and central banks fight inflationary pressures. The bright spot is that markets are forcing the government to do the right things. Euro zone governments are in austerity drives, while the Indian government is fighting to keep its deficit down. The RBI is focused on keeping inflation under control while lenders are becoming risk averse and are focusing on strengthening balance sheets. The effect of fighting turmoil tells on growth. The euro zone is likely to face a recession in 2012, while India’s GDP growth is forecast to drop by 1% in 2011-12. Indian is also facing pressures on its currency due to its current account deficit, which could cross 3% o  GDP this year on a widening trade gap. The trade deficit in October at $19.6 billion was a record high leading to worries on the current account. Markets will be volatile in the short term, but as the dust settles and effects of right policies tell on the economy, markets will look to factor in a stronger period of growth. The process could take at least six months. Till then, it will be a tough time for investors.

DNA

Banks to accept IT dues payment

The Reserve Bank of India on Saturday said it had authorised State Bank of India branches and also those of other nationalised banks to accept payment of income tax dues in cash or by cheque. In a press release here, it said it had opened additional counters to help the public pay their dues as quickly and easily as possible. However, the rush at the counters was increasing and people are forced to wait in queues for long hours. The RBI hoped the new measure would lessen the hardship in remitting tax dues.

HBL

‘Euro crisis may impact investment climate'

NEW DELHI: The Eurozone debt crisis and persistently high crude oil prices will have a direct bearing on future investment climate in India and make it challenging to manage the growth-inflation balance, RBI Deputy Governor Subir Gokarn said on Friday. Addressing an interactive meeting with industry organized by Assocham, Gokarn cautioned that these two external factors have already started taking a toll on Indian exports. However, the bank interest rate cycle appears to have peaked and further hikes may not be warranted, he said.  Gokarn noted that the external turbulence is also impacting currency exchange rates in emerging markets like India. “The rupee has become a floating currency now within the boundaries of structural capital controls. The rupee is the fourth most depreciated currency in Asian region in the past two-and-a-half months,” he said. Gokarn also dismissed any RBI move to interfere with the exchange rate and its monetary policy stance in the coming months would be determined by movement in inflation. The RBI will keep a watch on the liquidity situation to decide on open market operations, he said, ruling out any fundamental stress as of now on the Indian banking system. The RBI has raised interest rates 13 times since early 2010 but failed to rein in inflation, which remains above 9 per cent. Instead, asset quality at banks is eroding and economic growth in Asia’s third largest economy is slowing. Turbulence in the country’s biggest export markets – the US and Europe – have prompted many industry leaders and government officials to predict an exports lowdown and a worsening trade deficit in the second half of the fiscal year ending March 2012.

Gokarn accepted that from growth perspective, the country is facing a slowdown. “India’s economy is expected to grow around 7.5 to 7.6 per cent in the current fiscal,” he said, adding that the impact of rate hikes is visible on economic growth. “There is no point in running away from the fact that there is a slowdown,” said Gokarn, but defended the RBI’s policy, saying that the central bank’s tight monetary policy has slowed the economy’s growth momentum, which may help stabilise inflation. “There are signals that headline inflation may start coming down by January next year and level below 7 per cent in the first half of 2012-13,” he said.  Attributing high food inflation to increasing affluence and changing consumption patterns, Gokarn warned that a persistent risk of endemic food inflation remains.  Gokarn also said efforts should be made to remove infrastructural bottlenecks, speed up new development projects and bring fiscal deficit within manageable limits to contain rising inflation and maintain growth momentum.

Expressbuzz

Freeze

..“There is such overwhelming bad news—the external situation is a disaster, inflation is not under control and economic growth is faltering at home. Worse, nobody knows where we are headed,” says Sudipto Mundle, member of the Reserve Bank of India’s technical advisory committee that advices the central bank ahead of its monetary actions.............

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There’s a lot the ECB can learn from the RBI

....There is not a single case of a state defaulting on its debt as the RBI is actively involved in ensuring that states service their debt. The RBI also closely interacts with the finance secretaries of each state to make sure states do not go overboard in their borrowing and budgets are more or less balanced...........

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Loan growth falls below RBI projection

Banks’ loan growth fell below 18 per cent on a year-on-year basis for the first time in this financial year, with demand for credit showing no signs of pick up even as the busy season started. According to the Reserve Bank of India (RBI) data, loan growth as on 28 October was 17.9 per cent. In October, loan book of banks shrank nearly Rs 60,000 crore. It fell from a high 21.4 per cent at the beginning of the financial year. So far, loan growth has been 5.5 per cent. Banks also reduced their assets in October, with outstanding deposit in the system declining nearly Rs 70,000 crore and as a result year-on- year deposit growth fell to 13.5 per cent. With growth of retail deposits remaining healthy, banks have been shedding high cost bulk deposits to reduce their cost of funds. Loan growth has been tepid in the current financial year so far as interest rates remain high. RBI increased the repo rate 375 basis points in the last 20 months to control inflation.

BS

Money Alerts

....Is your bank not providing you a passbook for your savings bank account or where there is statement facility, refusing to provide monthly statements? Then you may demand it under RBI's circular dated..........

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High interest rate hurting growth, says Reserve Bank of India

NEW DELHI: Admitting that high interest rate is hurting economy, the Reserve Bank today said the country's growth rate is likely to moderate to 7.5-7.6 per cent this fiscal. "Since we had 7.7 per cent in first quarter of 2011-12, we should expect that average for the remaining part of the year to be 7.5-7.6 per cent. This is partly because we have been raising interest rates," RBI Deputy Governor Subir Gokarn told reporters here.

ET

Making wealth from waste

...Mr. Jayaraman further explained that the initiative will be extended to more areas. He said that he had spoken to RBI Colony, Kamaraj Salai and few other colonies. “It is being conducted at the convenience of the people. All they have to do it dump in appropriate bags,” .....

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Is rupee depreciation the new normal?

......Any move by the RBI to support the rupee would put further pressure on the already strained liquidity. Along with all these factors mentioned above, a heightening risk on the current account deficit front, the best for the rupee seems to be over and we are in a new normal where unless we bring inflation under control and reduce the supply-side constraint, the rupee is expected to depreciate further against the dollar.

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A modest, tastefully laid out home

The badminton star, Ashwini Ponnappa's fifth-floor three-bed room apartment in Begumpet in Hyderabad will come across as modest at first look.  That will only be the first impression, though.  A closer look at the interiors will reveal a tastefully laid-out array of finely crafted work, positioned with care, evidence of culture and refinement, rather than an ostentatious display of wealth and opulence. The flat's old-world charm is disarming, the presence of wood harking back to the family's roots in Coorg, Karnataka, the land of coffee and oranges, breathtaking in its beauty. Her Reserve Bank of India (RBI) Manager father M.A. Ponnappa and mother Cauvery, a relationship manager with New India Assurance, have moved house quite a few times in Bangalore and elsewhere.  “We have sent crates of prizes and books back to our ancestral home in Ammathi,” her mother says. “The RBI has been very kind and supportive to us, Ashwini's badminton career taking precedence even over the posting of my husband and in giving us fine accommodation such as this one,” Cauvery continues. There's cause for cheer too.

Healthy haven

From the balcony of Ashwini's and her parents' room, one sees a dense spread of foliage finding a healthy haven in the backyard of Hyderabad Public School. “The greenery is a blessing,” says Ashwini, whose apartment is located in the heart of the city.  “On the odd occasion, the Grey Hornbill can be sighted, although it's cackling can be quite jarring,” her mother chips in. The first artefact to catch one's eye is the money chest in the parlour, asandukamade of teak. Now it houses the photo albums of the family, a record of her father's days as a Karnataka state hockey player and avid golfer. The sofas, simply designed yet sturdy despite their age, are not surprisingly made of teak. Four chairs dot the corners, the craftsmanship contributing much to comfort of those who sink into its ergonomic embrace.  The eight-seater dining set, with its netted format, purchased from an upmarket department store, embodies an elegance all its own. Standing tall nearby is a three-door refrigerator. “I deliberately chose a smaller fridge, so that we store less and rely more on fresh food,” says Cauvery. A lengthy kitchen slab packs enough cooking paraphernalia to keep the family well nourished. “I binge on junk food when I'm not home,” says the shuttler, known for the sting in her smashes. “I don't cook at all but hope to some day,” she adds. Till then, her mum's goodies, including the pork curry patent to Coorg, fuel her exploits on court. A solitary mirror, over half a century old, overlooks Ashwini's room.  A rosewood round table holds varied knick-knacks, while the wardrobe is chock-a-block with clothes, shoes et al. An upright Li Ning bag in another corner carries her badminton gear. Mother and daughter have an eye for footwear, the duo possessing over 50 pairs, not including Ashwini's badminton sneakers. “I hope to study interior designing,” says the B Com graduate of St. Mary's College, Yousufguda. Further studies may have to wait as the badminton calendar keeps hers hands full, with much jet-setting still left to be done.

HBL

RBI Showcases rare currency Notes in Exhibition at Ahmedabad

FKCCI Interactive Meeting

Uma Shankar, Regional Director, RBI, Karnataka being greeted by JR Bangera, President, FKCCI during an interaction meeting at FKCCI also seen K Shiva Shanmugam, Senior Vice President, FKCCI and R Shivakumar, Vice President, FKCCI, in Bangalore on Friday 11th November 2011

 

Indian banks not facing any stress: RBI

Amid contradictory ratings by global agencies, the Reserve Bank today said Indian banking sector is not facing any stress, though state-owned lenders need capital infusion. "Overall, we don't see any fundamental stress on the banking system as a whole. So we are nowhere close to the problem," RBI Deputy Governor Subir Gokarn told reporters on the sidelines of an Assocham event here. His comments come within days of ratings firm Moody's downgrading the outlook of the Indian banking system to 'negative', from 'stable'. Another rating agency Standard & Poor's, however, upgraded the ranking saying domestic regulations in India are in line with global standards. "There are of course long term issues of capital. If the system is growing at 20% a year, it needs the capital to grow at 20% at a year... It is not any indication of systemic threat," Gokarn added. He, however, admitted that there could be some pressure points on the banking system on account of high interest rates. The capital requirement of PSU banks, including SBI, for the fiscal has been estimated at between Rs 10,000-20,000 crore. The government has already made a provision to infuse Rs 6,000 crore in public sector banks in the current fiscal. As regards the increase in non-performing assets (NPAs) of the banking sector, he said, "NPAs are increasing, but it is not dramatic". NPAs of state-owned banks have increased to 2.31% of their assets at the end of March 2011, from 2.27% in the year-ago period. As at the end of September quarter, the gross NPAs of country's largest lender SBI stood at 4.19%, higher than 3.38% in the year-ago period.

BS

Time for RBI to rethink its monetary tightening policy: Kaushik Basu

As growth in industrial production plunged to a two-year low of 1.9 per cent in September, a senior finance ministry official today said the time has come for the Reserve Bank to "rethink" its policy of monetary tightening.  "The conventional policy of interest rates ... now you do have to rethink on that," Chief Economic Advisor Kaushik Basu told reporters.......

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RBI deputy gov sees FY12 growth around 7.5-7.6 pc

NEW DELHI: The economy is expected to grow around 7.5 to 7.6 percent in the current fiscal year that ends in March, Subir Gokarn, a Deputy Governor of the RBI said on Friday, adding that the impact of rate hikes is visible on economic growth. Gokarn also said the economy is clearly in a slowdown mode. Earlier, industrial output grew at its slowest pace in two years in September, providing further evidence of deceleration in the economy and raising the odds of a pause in the central bank's 20-month-old policy tightening cycle. Production at factories, mines and utilities grew 1.9 percent from a year earlier in September, lower than an downwardly revised 3.6 percent growth a month ago and below the median forecast for a 3.5 percent rise in a Reuters poll. 

ET

RBI intervened in FX mkt in Sept after 9 mth hiatus

The Reserve Bank of India (RBI) intervened in the foreign exchange market in September, after following a hands-off approach for nine straight months, as the unit fell to its lowest level in more than two years, its monthly bulletin showed on Friday. The rupee had moved in a wide band of 45.79 per dollar to 49.90 in September. It had also dropped 8.8 percent between July and September, its worst quarterly fall in three years. The RBI has always maintained that it does not target any specific exchange rate on the rupee and only intervenes to prevent excessive volatility in the foreign exchange market. Reuters had reported in mid-September that the central bank likely sold dollars to prevent the rupee from falling sharply. RBI sold $845 million in September, while it did not buy any dollars, in its first intervention since November 2010, when it had bought $1.37 billion and sold $500 million, the bulletin showed. On a net basis, November 2010 was the RBI's biggest monthly intervention since June 2009, when it had bought $1.04 billion. In 2010, the central bank bought a net $1.85 billion, compared with net sales of $5.8 billion in 2009 when it intervened to prevent the rupee from depreciating sharply. On Friday, the partially convertible rupee closed at 50.1150/1250, 0.1 percent stronger than its Wednesday close of 50.1750/1850. Earlier in the day, it had dropped to 50.4200 against the dollar, a level last seen on April 28, 2009. 

Moneycontrol

RBI allows RRBs for third party account pay in drafts

The Reserve Bank of India (RBI) today allowed regional rural banks (RRBs) to collect account pay drafts, pay orders for crediting proceeds to third party accounts with certain restrictions. Till date, it was only allowed in case of cheques. As per the central bank, the account payee cheques or demand drafts or pay orders should not exceed Rs 50,000 for crediting it to third party account. Also, the account payee should be a customer of these cooperative credit societies. "RRBs may note that the... Prohibition and relaxation shall also extend to drafts, pay orders and bankers’ cheques," the central bank said in a notification today. Earlier, the RBI has put restriction on crediting proceeds to third party accounts by regional rural banks after the misuse of such fund transfer during initial public offers way back in 2006.

BS

Reserve Bank of India rule

RBI cancels licence of Maharashtras Solapur Nagari Audyogik Sahakari Bank Niyamit

Reserve Bank of India has cancelled the licence of Maharashtra's Solapur Nagari Audyogik Sahakari Bank Niyamit as the efforts to revive the insolvent bank proved futile. RBI said the bank is prohibited to do banking business from November 5, 2011. In a press statement issued on Friday, it said it took the extreme measure of cancelling the licence in the interest of depositors. The banking regulator has requested the state's registrar of co-operative societies to appoint a liquidator for the bank. It said Deposit Insurance and Credit Guarantee Corporation will repay deposits up to Rs one lakh to the bank customers as per the deposit insurance clause. The bank became insolvent in 2005 and its financial position continued to deteriorate in subsequent years. The banking regulator had tried to revive the bank in consultation with Maharashtra government. RBI had also levied a penalty of Rs 5 lakh earlier as it violated operational instructions issued by it in June 2006 and did not comply with it guidelines regarding maintenance of investments in government securities in 2009.

TOI

Banking industry’s 9/11

...RBI’s view has been asked for, but banks are supposed to evaluate turnaround plans, not RBI. The standard banker’s response is that .....

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Banks’ downgrade is latest warning

..................On inflation, the government has been trying to pass the buck to the RBI which has been issuing reminders to the government every three months of its fiscal responsibility. The RBI has literally been pleading with it to take steps to tackle the supply side, which is the real cause of inflation. The answer is an ominous silence. It will be interesting to see if Moody’s now downgrades India’s sovereign rating as well: it is due to have discussions with the government next week.

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UBI opens financial inclusion branches

....Speaking on the occasion, Mr. Gupta said that they have decided to open another specialised financial inclusion branch in Komati Kondapur village of Ibrahimpatnam mandal and two regular branches at Sircilla and Metpally mandal headquarters during this financial year. He called upon the farmers and others to avail loans from the bank and repay them promptly. .....

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Cure for bank failures

This refers to the article 'When Banks Turn Casinos' (ET, Nov, 10). It has observed that for reducing systematic risk in banking, limiting size is a better option compared to reducing scope. But any decree issued towards limiting the size of domestic banks would deprive these banks of their competitive edge in the international field vis-a-vis foreign banks.  However, to reduce the probability of failure of large-size banks and its consequent negative spillover on the economy, government and RBI can impose more stringent norms such as higher capital adequacy, stricter provisioning norms on non-performing loans, etc. This will help strengthen financial stability of banks. It will also allow them to reap the benefits expected from large-scale operations.

V Sridhar, Kolkata (ET)

Banks meet today as Kingfisher looks for additional support

.... Bankers said the Reserve Bank of India was unlikely to provide any leeway to the banks if loans were restructured. Banks' total exposure to Kingfisher is close to Rs 7,000 crore, of which around Rs 4,000 crore is in the form of term loans...

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In India Inc, managers' pay jumps, workers not so lucky

..............Statistics don't take into account factors such as rising efficiency where far lesser workers are needed in a plant than a decade ago. But in the financial sector, at least in commercial banks, the Reserve Bank of India keeps a close watch on top management pay......

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RBI releases its Monthly RBI Bulletin for November 2011

The Reserve Bank of India today released the November 2011 issue of its monthly RBI Bulletin . The Bulletin carries three articles by top management of the Reserve Bank and five special articles, namely, (i) Financial Inclusion : A road India needs to travel (ii) Monetary Policy: Key factors Shaping Trajectory (iii) Inflation: Decoding the Dynamics (iv) Developments in India's Balance of Payments during First Quarter (April-June) of 2011-12 (v) Composition and Ownership Pattern of Deposits with Scheduled Commercial Banks: March 2010 (vi) India’s External Debt: Trend, Policy Changes and Cross-country Comparison (vii) Finances of Foreign Direct Investment Companies: 2009-10 (viii) South-West Monsoon 2011 : A Review (June 1 to September 30, 2011)..........

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Savings bank deregulation

...What might have led RBI to take this (unexpected) step? The timing, not the decision itself, was the surprise, mind, since the deregulation had been accepted, in principle, as a critical part of financial sector reforms, particularly in enabling the emergence of a proper sovereign yield curve, which would ...

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11.11.11 bonanza for millions

No connection between high interest rate and low IIP: Montek Singh Ahluwalia

... "This probably reflects the impact of RBI's interest rate hikes together with the continuous rise in inflation. With the global economic scenario also deteriorating, the RBI should not only pause but begin to reverse its interest rate hikes,"....

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Salve for savers, toil for dodgers - Returns up; black money slot scrapped

Nov. 11: Small savers and taxpayers have something to cheer about and tax dodgers something to fret about.

The government has raised the rates of interest on small savings schemes and given taxpayers a little more headroom by raising the investment ceiling on the popular public provident fund (PPF) from Rs 70,000 to Rs 1 lakh.

The interest rate increases on the small savings instruments were generally higher than those recommended by a committee headed by RBI deputy governor Shyamala Gopinath, which submitted its report in early June after a comprehensive review of the national small savings fund (NSSF).

The interest rate on the post office savings accounts was raised to 4 per cent from 3.5 per cent. But it is difficult to say whether the small savers will be greatly enthused about the rate hike especially after the RBI recently deregulated savings bank rates, prompting several private banks to woo customers with the offer of as much as 6 per cent.

The new small savings rates will come into effect from dates that will be spelt out in a separate notification. “The interest rate for every financial year will be notified before April 1 of that year,” said a notification issued today.

The big change is that the government has accepted the committee’s recommendation to scrap the Kisan Vikas Patra (KVP) — a popular cash certificate which currently doubles investment in eight years and seven months. The committee had said that the KVP was a bearer-like certificate with a regulated premature closure facility and was open to abuse by tax dodgers. They can be bought or sold without going to the post offices.

The KVP accounted for 25.58 per cent of the total outstanding of Rs 619,908 crore under all small savings schemes at the end of March 2011. Once the scheme is wound up, black money operators who have used the KVP route for years will have to look for another place to hide their loot. The maximum investment in post office savings bank account has been kept unchanged at Rs 1 lakh for individual accounts and Rs 2 lakh for a joint account. The PPF account holders will be pleased to learn that they will now earn a rate of interest of 8.6 per cent against 8 per cent at present. However, there is a flip side: if they opt to take a loan from the PPF account, they will have to pay a higher rate of 2 per cent against 1 per cent at present.The National Savings Certificate (NSC) — a preferred tax-saving instrument — will now be offered in two maturity brackets of five and 10 years.The 5-year NSC will carry a rate of interest of 8.4 per cent against 8 per cent at present. The 10-year NSC will offer 8.7 per cent. The NSC, however, isn’t expected to qualify as a tax-saving instrument after April next year when the government is due to implement the direct tax code that awaits parliamentary approval.The maturity period on the evergreen post office monthly income scheme has been reduced to five years from six at present with the interest rate to be realigned to the five-year government security (G-Sec). It will pay 0.25 percentage point more than the yield on the five-year G-Sec. MIS account holders will, however, no longer get the 5 per cent bonus on maturity.The rate of interest on most small savings schemes will be linked to the government securities of similar maturity and usually offer 0.25 per cent more than the yield on the G-Sec.There are, however, two exceptions: the 10-year NSC will offer half a percentage point above the G-Sec yield. The senior citizens’ savings scheme will offer 1 percentage point more than the 15-year G-Sec.The investment ceiling of Rs 15 lakh on the senior citizens’ savings scheme hasn’t been changed. Interestingly, the government has decided to slap a penalty for premature withdrawal from post office fixed deposits. Until now, one could withdraw a post office fixed deposit without any penalty after the expiry of six months from opening the account.  Now, on premature withdrawal a year after opening the account, the applicable interest rate will be one percentage point less than the interest rate payable on fixed deposits of a similar maturity. If the fixed deposit is withdrawn before 12 months from opening the account, the depositor will get only 4 per cent interest.  The government has also changed the agency commission for small savings schemes. Agents selling post office small savings schemes will no longer earn any commission on selling PPF and senior citizen savings schemes (SCSS). For all other schemes, the agency commission has been reduced to 0.50 per cent from 1 per cent. The rationalisation of the small savings schemes became necessary because the asset-liability mismatch had reached an alarming level of Rs 36,932.38 crore, according to the report prepared by the review committee. Because of the loss on the income and expenditure account, there has been an excess of liabilities compared to assets built over the years, the report said.  “If the asset-liability mismatch is allowed to continue, it will create an unsustainable fiscal burden on the government,” said Ficci secretary general Rajiv Kumar, a member of the committee. 

The Telegraph

Govt hikes interest rates on post office savings

In a move to make small savings more lucrative, the government on Friday raised the interest rate on post office savings accounts to 4 per cent from the present 3.5 per cent. Similarly, the interest rates on PPF accounts were also increased to 8.6 per cent from the existing 8 per cent. The government also reduced the maturity period for Monthly Income Scheme (MIS) and National Saving Certificate (NSC) to five years from the current six-year-period. The five-year MIS will now yield 8.2 per cent interest, a finance ministry release said. Expanding the Public Provident Fund, the government raised the annual ceiling on investment under the scheme to Rs 1 lakh from the existing Rs 70,000. The interest on loans obtained from PPF will also be increased to 2 per cent per annum from existing 1 per cent, the notification said. In another relief to those seeking to withdraw money before the maturity period, it allowed pre-mature withdrawal from post office time deposits of one to five years. Other highlights of the decision were, a hike to the tune of 8 per cent on 5-year recurring deposits and a 7.7 per cent interest on one-year time deposit with the post office. It also sought to align the rate of interest on small savings schemes with G-Sec rates of similar maturity, with a spread of 25 basis points. The rate of interest on 10-year-National Savings Certificate, which will be introduced subsequently, will be 50 bps, whereas the interest on Senior Citizens Savings Scheme will be 100 bps, a finance ministry release said. The new interest rates will be applicable from the date of notification which will be announced soon, it said. The step has been taken following the recommendations of a committee set by the government under former Reserve Bank of India deputy governor Shyamala Gopinath, which sought reforms in the National Small Savings Fund (NSSF) by linking their interest rate with that of the market.

Kisan Vikas dropped

The Kisan Vikas Patras, which doubled investors’ money in eight years and seven months were, however, discontinued. The rates on small savings have been raised days after the RBI freed the interest rates on savings accounts in the banks, following which some of the lenders increased returns to the tune of 6 per cent on saving bank deposits making it more lucerative. The finance ministry also said the payment of commission on PPF schemes and senior citizens savings scheme will be discontinued and the agency commission under all other schemes (except Mahila Pradhan Kshetriya Bachat Yojana agents will be halved to 0.5 per cent.

DH

‘RBI actions to infuse healthy competition’

Pune: The steps taken by Reserve Bank of India will go a long way in bringing healthy competition among banks, said deputy governor H R Khan on Thursday. He was in the city to inaugurate the ATM gallery of the Bank of Maharashtra at the Bajirao Road. Speaking to the senior executives of the bank, he said that deregulation of interest rates on savings accounts, further liberalisation of branch authorisation policy and directions to banks for more transparency in loan pricing will help in bringing about healthy competition within the sector. Such ATM Galleries will help in reducing the cost of transactions for the bank and would also promote ‘Green Banking’, the bank said in a press release. The bank now has 500 ATMs across the country. The bank’s chairman and managing director A S Bhattacharya and executive director M G Sanghvi were also present during the inauguration.

TOI

Now, send money from ATM to mobile

Mumbai : In a bid to encourage the use of mobiles for banking transactions, the Reserve Bank of India has allowed the National Payments Corporation of India to facilitate money transfer by a bank customer from an ATM/Internet to a beneficiary's mobile phone. The RBI's permission to expand the scope of the money transfer mechanism through the NPCI-promoted Interbank Mobile Payment Service comes at a time when mobile banking transactions are growing at a slow pace.

Slow growth

Ever since IMPS was launched in August 2010, the number of mobile banking transactions nudged up from 430 mobile banking transactions aggregating Rs 5,142 in August 2010 to 12,511 transactions aggregating Rs 3.80 crore in October 2011. The number of banks which are members of IMPS has increased from four in August 2010 to 28 in October 2011. “The IMPS has so far facilitated instant inter-bank funds transfer between the sender and the receiver using the mobile. Now, following the RBI's permission, the IMPS will also facilitate funds transfer from ATM to mobile and the Internet to mobile,” said Mr A. P. Hota, Managing Director and CEO, NPCI. NPCI, which was set up in late 2009 as an umbrella institution for operating various retail payment systems in the country, is working with a few banks so that they can launch the facility to transfer funds from ATM to mobile and Internet to mobile. Once the IMPS picks up, long queues outside bank branches to make remittances will become a thing of the past. For example, auto-drivers and cabbies, who otherwise lose a part of their day's earnings as they have to queue up outside a bank branch during business hours for sending money home, could remit funds to their kin on the move any time of the day.  Neither bank holiday nor a bank strike will be a hindrance when it comes to remitting funds through IMPS using mobile, ATM or Internet, emphasised Mr Hota. IMPS enables bank customers to use the mobile instrument as a channel for accessing their banks accounts and remit funds. Payments, including merchant and financial inclusion-related, can be made with just the mobile number of the beneficiary.

The mechanics

For using mobile banking facility through IMPS, a remitter has to register with his bank and get seven-digit Mobile Money Identifier (MMID) number and Mobile Personal Identification Number (MPIN). The beneficiary has to link his mobile number to his bank account and get MMID from the bank. A remitter can initiate an IMPS transaction in four simple steps by keying the beneficiary/payee's mobile number, MMID, amount and MPIN. Both the remitter and the sender get SMS confirmation once the transaction is put through.

Limit per day

The RBI has set a daily cap of Rs 50,000 per customer, per day for both funds transfer and transactions involving purchase of goods and services under IMPS when the communication from the mobile handset to the bank's server or the server of the mobile payments service provider is encrypted. In case the communication is not encrypted then the transaction limit if Rs 5,000. Transferring funds from an ATM or Internet will be simpler as only the Mobile Money Identifier number of the beneficiary will be required. To improve the usage of mobile for banking transactions, Mr Hota said, banks have to create awareness among customers about the safety, simplicity, time and cost saving, and instant funds transfer features of mobile banking using IMPS.

HBL

RBI Deputy Governor to visit Seraikela on Nov 22

RANCHI: Reserve bank of India deputy governor Anand Sinha will visit Seraikela on November 22 to give an impetus to the financial inclusion drive. Under the financial outreach programme of RBI, senior officials of the apex bank will visit different districts across the country and encourage banks, financial institutions and local government to boost up economic activities to involve rural masses in particular. The Jharkhand regional office of the apex bank said Sinha would attend the daylong programme at Seraikela and address senior bank officials to ensure that performance of the national and private banks improve in not just Seraikela but all over the state. Earlier this year, RBI governor D Subbarao and erstwhile deputy governor Shyamala Gopinath had visited Jharkhand under financial outreach programme. While Subbarao visited Lohardaga, Gopinath went to Deoghar. Both the visits were beneficial for the rural populace in the districts as the banks were compelled to open branches and increase financial activities, particularly through business correspondents and virtual branches. The mineral-rich Seraikela-Kharsawan district, famous for its historic and cultural importance and Kuchai silk, has not seen light of development. At present, 27 branches of nationalized banks are operational in the district with Bank of India having the maximum of 15 branches. Most of the banks have opened one branch in Adityapur region which is considered as one of the largest industrial area in Asia. However, bank officials admit that the district is far from achieving 100% financial inclusion. Wide disparity in distribution of bank branches and lack of awareness to financial activities is common in the region. An RBI official in Ranchi said the role of the local administration and banks would be discussed during the daylong programme which is likely to encourage farmers and people associated with small scale industries to approach the banks and seek benefits of schemes offered by the Union government.

TOI

RBI bars Gujarat-based bank from fresh loans, investments

Mumbai: The RBI has barred Sabarkantha-based Khedbrahma Nagarik Sahakari Bank from undertaking any major activities like granting fresh loans and making new investments till its financial position improves. "RBI has issued certain directions to the Khedbrahma Nagarik Sahakari Bank Ltd, Khedbrahma, Sabarkantha (Gujarat), whereby as from the close of business as on October 31, 2011, the aforesaid bank shall not, without prior approval in writing from the RBI, grant or renew any loans and advances, make any investment...," the central bank said in a statement. In addition, the bank has been directed not to incur any liability toward borrowing and lending of funds or accept fresh deposits, other than disbursement of payments in discharge of its existing liabilities and obligations. The Reserve Bank has also barred it from entering into any arrangement to seal or transfer any of its properties or assets. The central bank, however, did not give any details on action being contemplated with respect to Khedbramha Nagarik Sahakari Bank. "The bank will continue to undertake banking business with the restrictions till its financial position improves," the RBI added. In a separate statement, the RBI said that it has imposed a penalty of Rs 5 lakh on Ahmedabad-based Shreenath Cooperative Bank for violation of various banking norms. "RBI has imposed a monetary penalty of Rs 5 lakh on Shreenath Cooperative Bank, Ahmedabad... for violation of RBI instructions on Know-Your-Customer norms and Anti-Money Laundering guidelines," it said. The RBI had earlier issued a show cause notice to the bank, in response to which Shreenath Cooperative Bank had submitted a written reply. "After considering the bank's reply in the matter and submission made during the personal hearing, the RBI came to the conclusion that the violation was substantiated and warranted imposition of the penalty," the statement said. 

Zee News

RBI, banks to accept advance income tax

MUMBAI: The Reserve Bank of India (RBI) and 926 computerised branches of public and private sector banks will receive advance income tax in Mumbai in a bid to give tax payers relief from long queues and inconvenience faced in filing returns. "These arrangements have been made for the convenience of the income tax assessees," the RBI said in a statement. Of the 926 bank branches, 862 branches will be of public sector banks. Among the private sector banks, the maximum number is of HDFC Bank - 35 branches. Other private sector bank branches include 10 branches of ICICI Bank and 19 of Axis Bank. RBI has advised income tax assessees to take advantage of these standing arrangements made for their convenience. "Long queues and inconveniences can be avoided at the Reserve Bank of India counters if the assessees in Mumbai and Navi Mumbai utilise the services being made available at various designated branches of banks and deposit their income tax dues well in advance of the last date," the RBI said. 

Expressbuzz

IBA's comment on pre-payment waiver on home loans soon : Mallya

Ahmedabad, Nov 10 : Indian Bank's Association, is expected to come out with its comments on the proposal to do away with pre-payment charges on the home loans in next seven to ten days, IBA Chairman said here today. "We are analysing the issue at the IBA level, we will come out with appropriate suggestions on that may be in next seven to ten days," IBA Chairman M D Mallya told PTI, on the sidelines of 12th Nirma University Convocation here. On being asked that will there be some relief for the home loan borrowers, Mallya, who is also chairman and managing director of Bank of Baroda (BoB) said "You will have to wait for an overall decision from IBA on the issue." 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 the customers, a bank official said. RBI, is considering a proposal of imposing a ban on levy of pre-payment charges on loans by banks, and has been waiting for the IBA comments on it. Earlier in September, the Banking Ombudsman had suggested banks should not impose pre-payment charges on loans with floating rate of interest. It had stated that banks may also offer long-term fixed rate housing loans to customers. The housing finance regulator National Housing Bank (NHB) has already directed all housing finance companies(HFCs) to desist from imposing a pre-payment penalty on home loan borrowers. The charges imposed by some HFCs and banks on pre-payment of housing loans are as high as 4 per cent in some cases.

IBN Live

Banks currently prefer CP over short-term credit

With increased concerns on asset quality amid high lending rates, banks are opting to invest in commercial paper (CP) issued by companies rather than extending short-term credit. According to the Reserve Bank of India (RBI), banks’ investments in CP have been steadily increasing, from Rs 12,309 crore as on March 25 to Rs 22,447 crore as on October 21. Most banks have either stopped or are going slow on giving out working capital loans. “There is bullet repayment in working capital loans, which makes it difficult for the borrower to pay off the dues in time when interest rates are high,” said a senior official from Bank of India. CP, on the other hand, is a tradable debt instrument with maturity of up to a year and can be issued by companies to meet short-term funding needs. When in need of liquidity, banks can offload these in the secondary debt market. Apart from non-banking finance companies and housing finance companies that regularly issue CP, known names such as Indian Oil Corporation, Renuka Sugars, Hindustan Construction Company and Gammon India are tapping the short-term debt market for funds, according to market participants. “Base rates have hardened over time, due to which companies that have access to the debt market are raising funds at cheaper rates,” said a bond dealer with a domestic brokerage. Presently, companies are able raise funds via CP at 9.6 per cent for three months and 9.8 per cent for six months, while banks are offering loans at 100-200 basis points (bps) above the base rate that ranges between 10 per cent and 10.75 per cent. Banks with ample liquidity are readily investing in short-term debt instruments instead of locking funds in loans. “We are borrowing from RBI under repo and investing in CP; there is good arbitrage opportunity there. We are not investing in treasury bills,” said the treasury official of a large public sector bank. CP spreads over comparative treasury bills have narrowed by around 50 bps since the end of the second quarter, as a result of higher demand from investors such as mutual funds and banks. Yields on treasury bills have also shot up on high supply, leading to contraction in the spreads.

BS

Weigh pros and cons before switching savings account

...All big banks have decided to adopt a wait-and-watch policy. However, in case, some more banks were to increase interest rate on savings bank account, should you switch banks?.....

Read..............

Austerity, not bailout, solution to EU crisis

The banking sector in India will take a hit due to the recent decision by Reserve Bank of India to deregulate the savings bank interest rates. For all these long years, the saving banks interest rates were regulated as result banks made huge profits as the cost of acquiring the funds was low. But the new saving bank interest rates offered are 6% and 7% by the public sector and the private banks, which means cost of acquiring the funds will go high. The whole game in the banking sector is the differential in the cost of acquiring the funds and the realisation. Within these parameters, the bank has to keep its cost under control, expanding its activity by opening up of new branches on national and international level and make good profits.  But as the interest rates in fixed deposit were continuously going up, it was necessary for the RBI to deregulate the savings bank interest rates, which were low at 3% causing great differential between the two interest rates. Secondly, because of high inflation and high interest rates, there are no new project financed. As a result, we will not see real growth in the banking sector.  The recent results of the state-owned Punjab National Bank has shown that the differential of 3.58%. The bank has made phenomenal profit but with higher efficiency in the private sector banking, it will do much better compared to the PSUs banks

The Euro Trouble

The Euro zone problem, particularly Greece, will turnout to be a big problem as the referendum process has been cancelled by government as the opposition party has agreed for the same.

A) India's trade with Greece has came down to half -- 480 million dollars

B) And also the trade with other European nation have taken a hit

C) The political turmoil in the middle east is a big threat

D) US is also not showing any science of recovery

E) Slow down in China.

All the above mentioned problems will bring in slow down in India's growth due to the cumulative effect. ECGC (Export credit Guarantee Corporation has sounded a cautious approach to all the Indian exporters. Today, we are looking at the problems of Greece tomorrow it could be Portugal, Italy and Spain. European banks have greater exposure in the Greek banks which is matter of concern, Greece without joining the union could have survived on its own but by joining the union and the money flowing in the from the rich countries Germany and France as bail out package creates distortions in the economy.

The solution to the Greece problem is not bail out package but austerity measures.

1. Reduce the expenditure / wages.

2. No frees bees to the people

3. High taxation to its rich people to generate more revenue

But this is not easy as Greece has always lived beyond its means

Moneycontrol

S&P balm for Indian banks

NEW DELHI: A day after ratings agency Moody's lowered the outlook on the Indian banking sector, rival Standard & Poor's on Thursday moved it a notch higher in the Banking Industry Country Risk Assessment (BICRA), a tool to evaluate and compare global systems. But the improvement had nothing to do with performance parameters but was the result of a change in methodology. "In our view, banking regulations in India are in line with international standards and the regulator has a moderately successful track record. The Reserve Bank of India (RBI) continually monitors the macroeconomic environment. The RBI also has introduced countercyclical measures and differentiated risk weights to moderate banks' risk appetite. We consider governance standards as generally adequate, though disclosures are somewhat inadequate," S&P said in a statement while upgrading the risk profile to Group 5. The industry risk score of 5 reflects high-risk assessments on the institutional framework and competitive dynamics and low risk regarding system-wide funding, the statement added. At the present level, the Indian banking sector is at par with markets such as China, Portugal, Thailand and Turkey. 

TOI

RBI initiative on wholly-owned subsidiary have allowed regional and foreign banks to increase their presence in India

.........The expansion in India by these banks is driven by the need to compensate for lower growth back home, coupled with the entrepreneurial spirit driving SMEs in the country........ 

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S&P upgrades Indian banking sector; says domestic regulations in line with international standards

”In our view, banking regulations in India are in line with international standards and the regulator ( RBI) has a moderately successful track record," S&P said while upgrading the risk profile (BICRA) a notch higher to 'Group 5'.....

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FinMin, Moody's to discuss India's sovereign rating next week

New Delhi, Nov 10 : Credit ratings agency Moody's, which lowered the outlook for Indian banking system, will hold consultations with finance ministry officials next week as part of the exercise to review the country's sovereign rating. "We are meeting Moody's on Monday (November 14) to discuss India's sovereign credit rating," a senior finance ministry official told PTI. The meeting is being held at a time when the Indian economy is passing through a rough patch. As per the Reserve Bank of India (RBI), the growth rate during the current fiscal is expected to moderate to 7.6 per cent from 8.5 per cent last year. The officials are likely to talk about the steps the government has been taking to reduce the fiscal deficit, reform direct and indirect taxation system and recapitalise the banking sector. The economy has been braving high inflation and the Centre's fiscal deficit may exceed budget estimate of 4.6 per cent in view of poor tax collection and low realisation from sale of government equity in state-owned companies. Moody's has assigned Baa3, the lowest investment grading rating, to India. The rating agency yesterday downgraded the outlook for the Indian banking system to "negative" from "stable" saying that economic slowdown would impact asset quality, capitalisation and profitability. However, differing with the downgrade accorded by Moody's, ratings agency Standard & Poor's today upgraded the Indian banking sector saying its domestic regulations are in line with international standards. Ratings are significant as they help the country and other entities to borrow funds globally at competitive rates.

IBN Live 

Higher borrowing of centre triggers banks’ cash crunch

...Some bank officials on condition of anonymity said that the high government demands on cash from the banking system also constrained the RBI from intervening in the foreign exchange market to prevent excessive volatility between the rupee and the dollar...

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90 and going strong...

........Meanwhile, the RBI Deputy Governor, in an order dated March 31, 2011 urged the 18 entities/ individuals to reduce their stake to less than 5 per cent by offloading their excess holding. .............

Read............

Monster ate my money

...The adjustable rate mortgage was a hit with sales reps, as they didn't disclose to buyers that interest rates were floating and would rise after the initial years. Now isn't that reminiscent of Indian teaser loans? Explains why RBI frowns on the practice.....

Read.................

Everyone here has access to banking

Rajansiriyur in Belur taluk achieves 100 per cent financial inclusion

Rajansiriyur village in Belur taluk has undergone a sea change in the last two years in terms of financial inclusion. The village has achieved 100 per cent financial inclusion with every family either borrowing or depositing money in banks. This achievement became possible after Canara Bank, lead bank for Hassan district, took the initiative to develop the village as a model one two years ago. The Reserve Bank of India (RBI) conducted an outreach programme in the village in November 2009 to popularise the benefits of the bank's schemes and Canara Bank deputed a business correspondent to the village.  In the last two years, the number of bank accounts in the village has gone up from 141 to 396. Similarly, the number of loan accounts has gone up from 223 in 2009 to 431 in the current year. The total advances in the village has also gone up from Rs. 98 lakh in 2009 to Rs. 1.02 crore and the total deposits has gone up from Rs. 90 lakh to Rs. 1.5 crore. The RBI conducted the second outreach programme in the village on Tuesday. P. Vijaya Bhaskar, Executive Director of the RBI, appreciated the efforts of the bank officers and role of the people in achieving good results.  Chairman and Managing Director of Canara Bank S. Raman said that the bank would set up a branch in the village soon. RBI Regional Director Uma Shankar called upon residents to support banking activities so that the banks could deliver better services.  On the occasion, the RBI screened short films on banking activities.

HBL

RBI directs Urban Cop banks to stick to FIU-India's new format

Mumbai: The Reserve Bank Wednesday directed urban cooperative banks to adhere to the new format developed by the Financial Intelligence Unit (FIU-India) for filing various reports, including those on cash transactions and suspicious transactions. "UCBs (urban cooperative banks) are advised to carefully go through the reporting formats and initiate urgent steps to build capacity to generate reports, which are compliant with the XML format specifications," the Reserve Bank of India (RBI) said in a notification. It added that the date of transition from the old reporting format to the new one will be communicated to the UCBs later. The Prevention of Money Laundering Act (PMLA) states that every reporting entity has to furnish to FIU-India details on Cash Transaction Reports (CTRs), Suspicious Transaction Reports (STRs), Counterfeit Currency Reports (CCRs) and Non Profit Organisation Transaction Reports (NTRs). "FIU-India has advised that the earlier prescribed multiple data files reporting format is being replaced by a new single XML file format and prepared a comprehensive reporting format guide, giving the specifications of the prescribed reports to be furnished to FIU-India," RBI said. The reporting format guide, along with the XML sheet and user guide, can be downloaded from the website of FIU-India.

Zeebiz