Best wishes.....

                   



Dr Yashwant Thorat

Former Executive Director, RBI

Former Chairman, NABARD

Mob 09921111456



                    

Dear Mangesh,

Congratulation on the anniversary of VITALINFO.

Qulity conscious VITALINFO.......

Ratnakar Bank looking to double branch network

Private sector lender Ratnakar Bank plans to ramp up its branch network to 200 branches in the next 12-15 months, its Managing Director and CEO, Mr Vishwavir Ahuja, has said. Plans are afoot to open 30-35 branches in the next 4-5 months, including in Chennai and Hyderabad where the bank currently has no presence, Mr Ahuja told Business Line here. “We already have 30-35 branch licences from the RBI which will be used in the next 4-5 months,” he said. Mr Ahuja was in the Capital for the launch of Ratnakar Bank's Delhi main office and flagship branch at the commercial business district at Connaught Place, making this the 101st branch of the bank. The bank had in the beginning of this year raised Rs 700 crore from a group of investors to fund its growth.

HBL

Do we still need a microfinance Bill?

Now that RBI has defined the sector, it might be best left to the central bank to continue refining the regulation

...The MFIDR Bill makes RBI responsible for registration and supervision of the sector. Now that RBI has taken the initiative of defining this space, it might be best left to the central bank to continue refining the regulation than create confusion with multiple laws governing the same space..... 

Read........

Government to weigh restrictions on forex outflows

... The meeting next week, to be chaired by the Reserve Bank of India Governor, will evaluate the various weapons in the central bank and the government's armory should further pressure build on the rupee.....

Read.........

GOVT NEEDS TO TAKE ON UNIONS TO SAVE BANKS

... Twenty years ago, a panel headed by former Reserve Bank of India governor M. Narasimham, that looked into banking reforms, first mooted the idea of dismantling the industry-wide wage pact and recommended bank-specific compensation package. The industry does not need a standardized wage structure when productivity of employees and profitability of banks are different from each other......

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

Despite RBI reminders, state yet to notify Central Act

JAIPUR: The state government has not only failed in policing fraudulent financial activities but is also unsuccessful in regulating the existing law against such firms. So far, Rajasthan government has not notified the Central law - Prize Chits and Money Circulation Schemes (Banning) Act, 1978 - in the state despite repeated reminders from Reserve Bank of India. This Act covers the companies which operate in a similar manner like multi-level marketing companies. Money circulation schemes promises investors to become rich overnight. Such schemes work on the basis of enrolment of new members into process. A promoter promises that by enrolment of members into such a scheme, one would be getting back not only the initially paid investment but also keep gaining financially will further enrolment of new members into the chain. Thus, the number of members keeps increasing and the chain multiplies. The initial financial gains made by the earlier members encourage others to invest. However, at one stage, the bubble bursts, leaving several members at a loss but the promoters who are the initial investors in the chain kept the profits. Several firms are operating in the state using the modus operandi. "Many companies involved in money circulation are operating from the state. They lure investors by showing them big dreams. However, it turns out to be nightmare for them," an RBI official said. A chit fund company, which collects money from various investors and give prizes to few lucky investors through a lottery or some draw, can operate if approved by the state government. But Rajasthan has neither given consent by legalising it nor has made any efforts to restrict it so far. This leaves a grey area for fraudulent companies to run their dubious schemes. 

TOI

New law proposed to protect investors

...... Home department and RBI officials will meet on December 7 to chalk out the final details of the act. "We will try to formulate an act that is effective and prevents the defrauders from getting away. RBI, which plays an important role in regulating banking and financial transactions, has used its expertise in formulating the said draft,".......

Read..........

RBI unfazed by Moody's downgrade

...The RBI report counters Moody's rationale and highlights that the Indian banking system is healthy enough to withstand the deteriorating domestic and international economic conditions.....

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

Probe cash-rich cricket bodies, says parliamentary panel

...The committee has sought information from the Reserve Bank on what penal action it has taken against the Axis Bank, the HDFC Bank and the State Bank of Travancore for failing to comply with the Foreign Exchange Management Act....

Read..........

Slowdown messages

...There is more bad news. While consumption demand is sought to be reined in by the RBI (to check inflation), the scope for government spending to stimulate growth is limited..........

Read.....

Gold, Currency & Common Person

.....God created gold as a gift to mankind, but man's avarice for printed money resulted in a move away from gold. The restoration of gold to its natural pre- eminence would be of comfort to the Common Person. An international monetary system centred on gold would enable mankind to regain God's gift.

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

Use pre-payment penalty waiver to minimise debt

...If your bank has not announced removal of pre-payment penalty, don’t worry, because it is just a matter of time before banks do so. Regulatory pressure and market competition will force more banks to waive off pre-payment penalty on home loans......

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

Children shine at humour meet

The monthly meeting of the Besant Nagar Humour Club, conducted on November 20 in association with the Residents' Welfare Association of the RBI Staff Quarters, Besant Nagar, was extra special as it was devoted exclusively for children to commemorate Children's Day. Club chairman A. Kumar, while welcoming the large gathering, said the club always strove to bring out the hidden talents in children by providing them a platform at every meet. He appreciated the wholesome support given by the members and office-bearers of the RBI Staff Quarters Residents' Welfare Association for the successful running of the club for the last 10 years. G. Swminathan, the club's general secretary, conducted the open joke session for children, in which a large number of school children participated and cracked joke with spontaneity. Several other children performed on stage. The audience encouraged them with thunderous applause. Hakshitha played some popular numbers on the keyboard. Amirtha, rendered a devotional song. Abilasha Veeraraghavan presented an impressive Bharatanatyam recital on Dasavatharam. Her gurus Shivakumar and his wife were honoured by the club for their outstanding contribution to Bharathanatyam. T. Tamilselvan, convener, cultural sub-committee, RBI Residents' Welfare Association, proposed the vote of thanks. The next meeting of the club is being held today (Sunday). To contact the club, call 94447 55430, 94446 09467.

HBL 

The Financial Inclusion – Dr.Deepali Pant Joshi

IN THIS BOOK, THE AUTHOR SHOWS HOW FINANCIAL INCLUSION HAS ACQUIRED A POLICY PRIORITY EVEN IN DEVELOPED COUNTRIES - THE BOOK DISCUSSES THE CRUCIAL ROLE PLAYED BY BANKS AND THEIR LINKAGES WITH MICROFINANCE INSTITUTIONS AND SELF HELP GROUPS. THESE MADE AVAILABLE SUCCOUR TO THE POOREST OF THE POOR

- Book Review by P.P.Ramachandran

Kofi Annan, the former Secretary General of UN declared, " The stark reality is that most poor people in the world still lack access to sustainable financial services, whether it is saving, credit or insurance. The great challenge before us is to address the constraints that exclude people from full participation of the financial sector." Three billion people are excluded from access to financial services. In Less Developed Countries more than 90 percent are outside the pale.Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission got himself embroiled in a fierce controversy due to his submission in the Supreme Court that those who earn Rs 32 a day are below the poverty line. A storm of protest followed and the Planning Commission has adopted a revised norm for BPL. To get a clarification of the two points spelt out above and understand what is poverty and its ramifications one has only to carefully read the latest book of Dr.Deepali Pant Joshi. We had reviewed her earlier book ' Microfinance for Macro change challenges' in these columns. Joshi is one of the Chief General Mangers of the RBI, acting as Head of the RPCD. She is a Fellow of the Asia Centre of the University of Harvard. Her professional experience has endowed her with a keen ability to interpret problems of financial inclusion. Financial inclusion is the process of ensuring access to financial services and provision of timely and sufficient credit to weaker sections and low income groups at a cost they can bear. While liberalisation has led to enhanced financial products and services for some, there has been a denial of services for a large majority. High costs make banking services beyond the ken of the poor. Nonprice barriers also act as a deterrent to migratory populations.

The author shows how financial inclusion has acquired a policy priority even in developed countries. The impressive examples are ' The Financial Inclusion Task Force' of the UK and the ' Community Investment Act' of the USA. In India too initiatives for financial inclusion have been taken by Government and Reserve Bank at micro policy levels. The book discusses the crucial role played by banks and their linkages with microfinance institutions and Self Help Groups. These made available succour to the poorest of the poor. The author suggests some methods to enhance the demand for productive credit from the neglected sections for sustaining financial inclusion in the long run. Emphasis has been laid on priority to agriculture, poverty alleviation, infrastructure development and human resource development. Financial inclusion has emerged as a crucial parameter for ensuring rapid economic progress. Potential entrepreneurs and small enterprises fail due to denial of opportunities. Financial inclusion has to be pursued as a strategy for fostering economic growth. We find banks have taken positive action in this regard. According to Dr. Manmohan Singh, " The goal of development process must be to include every last member of our society, particularly those who are at the margins. This not only broadens the support base for development; it also strengthens government's ability to perform its core developmental role." The author has analysed succinctly all aspects of poverty. Banks should not merely provide credit but generate capacity within the population to prepare themselves for development. RBI has played a unique role of development in agriculture and rural areas. It has ensured that credit has gone to unbanked geographical regions and influenced sectoral orientation of bank lending. RBI monitors schemes such as SGS/ SJSM/ PMR/ DRI Schemes. It has created enabling regulatory environment to foster innovation and increase the outreach of the banking system. Commercial banks have also contributed and a few banks have introduced Smart Card Accounts in several districts. The Report of the ' Committee on Financial Inclusion' under the Chairmanship of Dr. C Rangarajan has been analysed in one chapter. The international experience has been recounted at length of UK, USA, Brazil, Europe and South Africa. An impressive bibliography and a large number of tables enhance the value of this resource book, which will be useful for planners, development economists, bankers and students.

FPJ

One ATM card for all of Bhutan and India

... The wait for it is over. From next week, any Bhutanese bank ATM card can be used in any ATM counter all over Bhutan and India. One need not look which bank the counter belongs to……….

Read..........

Changing contours of monetary policy in India

Speech by Mr. Deepak Mohanty, Executive Director of the Reserve Bank of India at the Royal Monetary Authority of Bhutan, Thimphu on 1 December 2011.

Read....... 

The RBI will now directly regulate microfinance sector

... The National Bank for Agriculture and Rural Development (Nabard) was one of the choices for regulating MFIs, but since it has its own lending exposures to rural areas, the mantle finally fell on the RBI itself.....

Read....... 

MP Board decides to include Gita in high school course

BHOPAL: Now it's official. A technical committee of the MP Board of Secondary Education has decided to include teachings of Bhagwad Gita in the curriculum of class 9th to 12 in schools run by the board. Along with the Gita verses, practical knowledge on farming and agriculture, revenue land records, ill effects of alcohol and narcotics and RBI initiative on financial education would also be imparted in the school text books, the press release of the Board informed further.

TOI

RBI reserves right to check rupee fall

The Reserve Bank of India (RBI) has asserted that it will not hesitate to use all available instruments to prevent downward rupee spiral “Usually RBI does not strongly intervene in the currency market to achieve specific exchange rate targets. However, in volatile market conditions that we see today, RBI intervention to keep markets orderly and prevent a downward spiral of rupee is justified,” said Reserve Bank of India Deputy Governor Subir Gokarn in a video message delivered to the delegates at the Confederation of Indian Industry's (CII), ‘The CFO Summit 2011' with the theme ‘Changing dynamics of finance leadership' here. “Our broad objective in such intervention is to ensure that we find a balance between the short-term risk of the rupee spiraling downward and the medium term risk of a loss of confidence in our ability to meet our external obligations. We do have instruments to do this in the form of strategic capital controls, which can be used to enhance supply of foreign exchange. These will be used when appropriate with the goal of ensuring that the availability of foreign exchange does not become a destabilising constraint. Beyond this, if we do see the short-term risk of a downward rupee spiral escalating we will not hesitate to use all available instruments,” Dr. Gokarn added. On rupee depreciation, he said, “Resisting currency depreciation is best done by increasing the supply of foreign currency and by expanding market participation.”

HBL 

Bank FDs: When less is more

... The nominal return of around nine per cent from a tax saving FD, seems low when you compare it with instruments that offer around 10.5-11 per cent per annum (p.a). Yet, the real effective rate is much higher. In case of individuals who fall in the 30 per cent tax bracket, the effective return is as high as 14.15 per cent p.a...

Read........

RBI may intervene in the currency market

NEW DELHI: The Reserve Bank of India (RBI) may intervene in the currency market to prevent the downward spiral of the rupee.  "Usually RBI does not strongly intervene in the currency market to achieve specific exchange rate targets. However, in volatile market conditions that we see today, RBI intervention to keep markets orderly and prevent a downward spiral of rupee is justified," RBI Deputy Governor Subir Gokarn said in a video message to a Confederation of Indian Industry (CII) event in Mumbai Saturday.  "Our broad objective in such intervention is to ensure that we find a balance between the short term risk of the rupee spiralling downward and the medium term risk of a loss of confidence in our ability to meet our external obligations," he added.

TOI

Ficci suggests peak I-T rate to kick in Rs 12L/year

... In a pre-budget memorandum to the ministry, the chamber suggested the 30 per cent tax rate be imposed on annual income of over Rs 12 lakh from the next financial year from the current Rs 8 lakh. "This should be further raised to Rs 15 lakh in the budget, thereafter. Of course, we will need to steadily go upwards, stabilising the same at Rs 25 lakh," it said in the memorandum.....

Read.........

Domestic liquidity conditions to ‘stay stretched for sometime'

Domestic liquidity conditions are expected to remain stretched for sometime, according to Dr Subir Gokarn, Deputy Governor, Reserve Bank of India. “For several weeks now, the tightness in domestic liquidity conditions has been highlighted by the fact that borrowing under the liquidity adjustment facility has been significantly above our comfort threshold…... “Some of the tightness is attributable to the smoothing interventions that were carried out in the foreign exchange market. But, that apart, given the overall conditions and the additional pressure, even if transitory, that will be exerted by the advance tax payments in mid-December, domestic liquidity conditions are expected to remain stretched for sometime,” said the Deputy Governor. Pointing out that the RBI has been injecting liquidity into the market through liquidity adjustment facility and open market operations and will continue to do so as conditions warrant, Dr Gokarn said, “we must guard against the risk of excessive accommodation, since this will conflict with our current (anti-inflationary) monetary policy stance.” Currently, the banking system as a whole holds government securities (statutory liquidity ratio) to the tune of 29 per cent of deposits, which is five per cent above the statutory requirement of 24 per cent. This, emphasised Dr Gokarn, reflects a relatively large capacity for liquidity infusions, about Rs 2.74 lakh crore, as and when the need arises. “OMOs are our first preference for liquidity injection, since they are tactical in nature and do not require a change in any policy stance, real or perceived. Further, although, OMOs are currently being used to make those infusions, the LAF window is always available to the system to the extent of this (SLR) surplus capacity. “In addition, the recently established Marginal Standing Facility (MSF) allows banks to use a further one per cent of their SLR holdings, which, given the interest rate structure, they will only do in situations of extreme stress,” said Dr Gokarn in his speech at a CII Summit.

HBL

Dues and woes

...Banks' asset quality has become a major concern for the RBI and it has asked lenders to monitor and tighten their credit management systems. “Rising interest rates and substantial amount of restructuring done during the crisis period, if not done with due care, are likely to put further pressure on asset quality of banks,” said a recent RBI report............

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

CM gives nod to RBI’s ‘Project Financial Literacy’

GUWAHATI: Schoolchildren in the state will soon be taught financial matters, from opening an account to more technical trading in the stock market as the Reserve Bank of India (RBI) has undertaken a project titled "Project Financial Literacy."  The objective of the project is to disseminate information regarding the central bank and general banking concepts to various target groups, including, school and college students, women, rural and urban poor, defence personnel and senior citizens.  The teaching material has already been prepared by the RBI and chief minister Tarun Gogoi has also given his nod to include these as a part of the school curriculum. The chief minister added, "The study material only needs to be translated into Assamese before introducing it as a part of the school curriculum."  The project has been designed to be implemented through comic book characters in which the character Money Kumar familiarises children with the role and functions of the Reserve Bank of India while another character Raju introduces them to banking concepts.  "Financial literacy is important as most of us are not familiar with financial matters, be it simple banking operations or trading in the stock market," Gogoi said.  Gogoi also sought the RBI governor's assurance for increasing the agriculture credit in the state. "Last year we were given Rs 2,900 crore as agriculture credit. Our target this year is Rs 4,500 crore and the RBI governor has agreed to direct all banks to facilitate this," Gogoi said.

TOI

RBI says it is constantly watching liquidity

Mumbai, Dec 2 : Reserve Bank is constantly monitoring the liquidity situation in the system and has been buying back Government bonds to ease the tight money supply, one of the Deputy Governors of the apex bank said today. "We have already done two buybacks of Government securities and are constantly looking at the liquidity situation," Deputy Governor H R Khan, who looks after financial institutions and bond markets at RBI, told reporters on the sidelines of an international banking expo here. To ease tight liquidity situation in the system, which is said to be at around Rs 1.2 trillion -- which is a tad over double the comfortable 1 per cent liquidity deficit that RBI has been maintaining for the past many months to tame inflation - it offered to buy back Government bonds worth Rs 20,000 crore in the past seven days. For instance, RBI bought back Gilts worth Rs 5,783 crore through open market operations yesterday against an offer of Rs 10,000-crore buyback and despite an offer worth over Rs 13,000 crore from the markets. Late last week too, it had bought Gilts worth Rs 9,435.5 crore this route. On the Finance Ministry's directive to state-run banks to install white-label ATMs and the reported differences RBI has on this, Khan said the regulator is looking at the viability of this model as it involves security issues. "We are looking at all the issues regarding the white- label ATMs, including cash management. We are specifically looking at the service bank or lead bank concept, which will be in charge of the shared ATMs," he said. Asked about the ability of banks to meet the financial inclusion deadline of March 2012, Khan said the banks are on course to meet the objective. Under the white-label ATM concept, no bank will be owning the cash vending machines and the entire work is outsourced. The move is aimed at reducing the cost on individual banks as also to increase penetration. This directive is part of Government decision to make the state-run banks to source all their software and hardware from the same vendor. 

IBN Live

Andhra Bank to expand its operations in Northern region

In order to reach out unbanked villages with population of more than 2,000 in the Northern region, public-sector lender Andhra Bank has written to lead bank of the respective state to allow banking services in these states through Business Correspondent(BC) model. Further, it is planning to strengthen its presence in the region by opening new branches. “We have written to the lead bank of the state falling in the Northern region, to allow us to serve the unbanked villages through BC model, and expects that they will permit us,” said, G P Bhatnagar, Zonal manager, Andhra Bank. The Northern region comprises of Chandigarh, Punjab, Haryana, Uttrakhand, Himachal Pradesh, Jammu & Kashmir. It is worth mentioning that The Reserve Bank of India(RBI) has already told banks that they must provide basic banking services in all villages with a population of 2,000 and more by March, 2012. The RBI has stressed the need to use technology like mobile technology, ICT model besides banking correspondents and brick and mortar model in reaching out to rural areas. Currently, the Bank has 39 branches in the Chandigarh zone. It has opened seven new branches in the current fiscal and further, it is planning to strengthen its number of branches in the region by opening five more branches. Also, it is planning to open 10 to 15 more branches by next year under Tier-III. By this the Bank will be having its branch at almost all district head quarters of Punjab and Haryana. The present business of Chandigarh Zone was 3352 crore as on September 30, 2011.

BS

Microfinance firms now non-bank finance cos

The Reserve Bank of India (RBI) on Friday said it was introducing micro-finance institutions (MFIs) as a new category of non-banking finance companies following the recommendations made by the Malegam Committee which submitted its report in January 2011. The Malegam committee was constituted as a panel of the Reserve Bank of India as announced in the November 2010 policy to study issues and concerns of the MFI sector, which has been hurt by state legislation in Andhra Pradesh, its biggest market. The central bank said the NBFC-MFI would have to be a non-deposit taking NBFC having minimum net owned funds of 50 million rupees with not less than 85 percent of its net assets being under "qualifying assets". The notification added that net assets would be total assets other than cash and bank balances and money market instruments while qualifying assets would mean loans satisfying certain criteria. The central bank also said that an NBFC which does not qualify as an NBFC-MFI will not be allowed to extend loans in excess of 10 percent of its total assets to the microfinance sector. All fresh NBFC-MFIs will have to maintain a capital adequacy ratio consisting of Tier 1 and Tier 11 Capital which should not be less than 15 percent of its aggregate risk weighted assets. All NBFC-MFIs shall maintain an aggregate margin cap of not more than 12 percent and interest on individual loans will not exceed 26 percent per annum and calculated on a reducing balance basis, it said. 

Yahoo News

RBI taking steps to deal with rupee fall

..."The main reason for depreciation of rupee against major international currencies is uncertain global economic environment, particularly unfolding of euro-zone sovereign debt crisis,"......

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

Growth paradox

...For now, the general view is that it will be three to nine months before prices get back into RBI’s comfort zone. There is near-unanimity that RBI has been left holding the inflation baby, with no balm of policy and fiscal instruments from the government. One thing that may have helped was flooding India with imported food and other items. But that did not happen....

Read..........

FII pullout of funds a matter of serious concern: Pranab

...“This would also enable us to grow faster,’’ he added. At the same time, he indicated that Reserve Bank of India (RBI) will adjust policy rates in tune with the price situation. “These are all .......

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

Focus on Northeast: RBI Governor to banks

“Focus on the northeast. This is relatively virgin territory as far as banking is concerned. Those banks which pursue financial inclusion in the north-east will be rewarded not only by business opportunities but by a fulfilling experience,” said Reserve Bank of India (RBI) Governor Dr. D. Subbarao in an interview to an Assamese newspaper recently.  The states governments of northeastern region (NER) and the banks should work in partnership to promote financial inclusion, spread banking facilities, and increase demand for credit including institutional credit, Dr. Subbarao said. He said that financial inclusion was a necessary pre-condition for inclusive growth and what the poor want is not doles, but opportunity to improve their incomes and thereby their quality of life. It helps the poor not only to raise their incomes but also to insulate their families against income shocks and meet emergencies such as loss of job, illness or death in the family. Talking in depth about a host of issues affecting RBI’s goal of promoting financial inclusion in the NER, Governor Subbarao said that the NE presented a complex challenge because of difficult terrain, lower population densities, poor infrastructure, inadequate communication facilities and law and order disruptions but the central bank wants to ensure that financial inclusion in NER is at par with that in the rest of the country. The progress in financial inclusion has been slow, but it has certainly picked up pace over the last several months. Banks across the country, including in the NER, are more enthusiastic about financial inclusion than before, the RBI Governor said.

Excerpts from the interview:

RBI plans banking access to all villages in the country with population of over 2000 by March 2012 either by opening a ‘brick and mortar’ branch or through the business correspondent model. Across the country, about 74,000 villages have been identified. There are 3250 villages in the north-eastern region (NER) falling into this category of over 2000 population with as yet no banking facility. Of these, only about 1031 villages were covered by end September 2011. Towards this end, we have a Special Dispensation Scheme for opening bank branches in NER. Under the Scheme, the Reserve Bank provides one-time capital cost and recurring costs for five years for supporting a bank branch. The State Government is required to provide the required premises, residential accommodation for the staff and security for the bank branch. The scheme is operated by calling for bids from banks for opening branches in agreed centres. Meghalaya was the first state to get off the block, but other NE states are now eager to take advantage of the scheme.  To promote the aforesaid objective, the RBI has liberalized branch licencing and domestic commercial banks are now free to open branches anywhere they like in towns and villages of upto 100,000 population. Banks are also required to ensure that at least a quarter of the branches they open are in villages with a maximum population of 10,000. To provide an incentive to banks, the Reserve Bank has also advised them that their performance in financial penetration will be a criterion in giving them authorization for branches in metros and other large urban areas, the RBI Governor said.  Doling out his advices for the banks, Dr. Subbarao said that the first thing banks should remember is that financial inclusion is more than getting a bank account for each household. It is also necessary that the bank account is active – which means that the household is using that account for saving, for remittance and is also getting credit and where necessary micro insurance. Only that makes a financial inclusion ‘meaningful’. Second, look upon financial inclusion not as an obligation, but as an opportunity. There is enormous ‘banking potential’ at the bottom of the pyramid, and first mover banks will be able to exploit that potential. Answering a question on agriculture credit in the NE, Subbarao said that agriculture is the life line of a majority of the people in the country including in the North East. Agriculture is one of the key priority sectors for lending by banks; under the priority sector lending sector, banks are required to ensure that at least 18% of their advances goes to agriculture.

Many steps have been taken in the NER to increase credit flow to agriculture. Since Assam is one of the states selected under the scheme of ‘Bringing Green Revolution in Eastern India’ implemented by the Government of India, the annual credit plan for agriculture for Assam has been revised upwards.  We want banks to sanction KCCs to all eligible farmers in the State. In Assam, block-wise weekly credit camps are being organised to bring more and more farmers under the KCC. The loan application format has been simplified and wherever land documents are not available, the Village Panchayat’s certification is considered sufficient for grant of a loan. The exercise is being replicated in other NER states as well.  Dr. Subbarao said Credit, however, is only one among several inputs needed for boosting agricultural production. Experience shows that the quality and reach of extension services is crucial. Clearly, there is need for greater effort at bringing extension services in NER at par with those in other States. Furthermore, the state governments have to ensure timely availability of fertilisers, procurement of food grains at the Minimum Support Price, storage and transportation facility, etc.  Even so, we are aware that millions of small farmers, many of them farming at subsistence levels, do not get access to credit for a variety of reasons. Simplified Know Your Customer guidelines, ‘no frill’ accounts, Kisan Credit Cards, General Credit Cards and overdraft facilities have all been designed keeping the rural borrower in mind.  The Reserve Bank also mandates that banks prepare Annual Credit Plans whose roll out which we closely monitor through the State Level Bankers’ Committee (SLBC). The SLBC, comprising banks, the state government, central government agencies, the Reserve Bank, NABARD and SIDBI meets every quarter to review the progress of institutional credit flow in the State. Progress under the Annual Credit Plan is one of the key issues on the agenda of every SLBC meeting.  Where there is slippage, SLBC initiates prompt corrective action. Similar committees function also at the District and the Block Levels. These meetings are also held at quarterly intervals and the Reserve Bank plays a pro-active role in these meetings.

http://isikkim.com/

RBI Governor inaugurates Town Hall SBI meeting

GUWAHATI : D Subbarao, the governor of the Reserve Bank of India, on Wednesday inaugurated a Town Hall meeting of the State Bank of India at NEDFI House in the city. SBI managing director and GE National Banking Group A Krishna Kumar assured customers of SBI the best services available in this industry. He said the bank was ready for the mission of being a banker to every Indian.  About 200 customers of SBI attended the meeting convened by Dipankar Purkayastha, deputy general manager, which also saw the presence of RK Garg, chief general manager, SBI, north eastern circle; Surekha Marandi, Regional Director of RBI, Guwahati, B.B.Sangma, Banking Ombudsman, Guwahati, Salil Saran and Bhaskar Jyoti Sarmah, General Managers.  Earlier on Tuesday, the State Bank of India donated a multi-utility vehicle to the Centre for North East Studies and Policy Research (C-NES) situated at Rajgarh Road in the city. A Krishna Kumar, managing director & group executive of SBI, Mumbai corporate centre, handed over the keys of the vehicle to Sanjay Hazarika, managing trustee of C-NES in presence of R K Garg, chief general manager of SBI (north eastern circle) and other senior functionaries of SBI and C-NES at a function held at the bank's local head office here.  Sanjay Hazarika thanked the bank authorities of the local head office for this gesture, adding that the vehicle will enable the C-NES programme management team better monitoring and mobility to health camps, help supervise the activities of the health teams carrying medical provisions to the 15 boat clinics in 13 districts of Assam and use the vehicle as an ambulance.  "The SBI has always been a socially responsible organization and besides its normal banking activities, it has, on many occasions, directly extended help by way of donation to benevolent and charitable organizations as a part of its corporate social responsibilities," said the managing director. Speaking on the occasion, R K Garg, said the SBI is helping and assisting the community by extending donations to charitable & philanthropic organizations and NGOs under its various community services banking programmes. 

TOI

Private banks in Northeast come in for flak

Private sector banks that have branches in the Northeast faced criticism from the industry for their alleged reluctance to lend to businesses in the region. Besides "engaging in retail activity", the industry alleged the role of private sector banks was "negligible" in the Northeast. The Federation of Industry and Commerce of North Eastern Region (FINER), the premier trade and industry body of the Northeast, has requested the Reserve Bank of India (RBI) to ensure private sector banks shed their conservative attitude in the region. "The role of private sector banks in the Northeast is negligible. These banks have plush branches, which are engaged in retail activity or raising deposits. Either no, or negligible, credit work is done in the branches. These banks include ICICI, HDFC Bank and Axis Bank, which are highly competitive in other parts of the country, but are reluctant to credit business in the northeastern region," FINER Chairman R S Joshi told RBI Governor D Subbarao, during the latter's two-day visit to Assam. "The industry in this region requires these banks to function with the same zeal and enthusiasm as that shown in other parts of the country," he added. Joshi also requested the RBI Governor to ensure commercial banks appoint their best talents in this region to fill the talent gap. "There is a talent gap in the Northeast, which would take some time to be bridged. The best people would always perform, which can be seen from the way some banks like the State Bank of India has progressed in the region, by putting their best people here, even for short stints. The region lacks credit skills development and postings to the region may be taken as good career moves by the brightest amongst bank officers. The Northeast should not be a dumping ground or punishment postings for officers," said Joshi. 

BS

VITALINFO - A must read..............

RBI official says current stance is anti-inflationary

The current monetary policy stance of the RBI remains anti-inflationary, said Deepak Mohanty, an Executive Director at the bank, on Thursday. The cumulative monetary policy action would have a desired impact on inflation, and it would come down to around 7 percent by the end of the current fiscal year in March, Mohanty said in a speech in Thimphu, the capital of mountain kingdom of Bhutan. The Reserve Bank of India in its last policy review on October 25 had indicated that it was likely to hold rates in its December 16 review, if inflation trajectory conformed to projections.

Reuters

Banks asked to adopt tech to grow, offer better service

Mumbai, Dec 1 : The Centre for Advanced Financial Research and Learning (Cafral), an organisation set up by RBI, today asked banks to use technology not only to scale up their operations but also to offer better services. "To be able to ensure that the challenges of banking the unbanked are met effectively and converted into a growing and sustainable business model, there is no alternative for banks to adopt ICT (information, communication and technology) solutions on a very large scale and range," Cafral director Usha Throat told a seminar on banking technology here. The former RBI deputy governor also said ICT solutions are required to capture customer details, facilitate unique identification, ensure reliable and uninterrupted connectivity to remote areas and across multiple channels of delivery. Thorat also stressed upon the importance of IT-enabled solutions to provide better customer service and bring the cost down. "Delivery of banking services through IT-based solutions, such as mobile phones and smart cards, while keeping costs low, enables scaling up and increasing outreach through a technology that is rapidly innovating," she said. Referring to the challenges faced by the domestic banking system, she said issues like increasing the outreach and rising competition in the financial services space are to be addressed by the banks in the future. "To meet the challenges of the next decade, banks will have to exploit technology, raise capital, gear up their capital planning, risk management, pricing systems and pursue HR policies to attract talent," she added.

MSN News

10 and 1,000 rupee notes to sport symbol soon

CHENNAI: Soon, the Reserve Bank of India will launch 10-rupee and 1,000-rupee notes with the symbol of the new rupee logo.  RBI officials said though coins had begun sporting the logo, it is for the first time that it would be used on currency notes. The notes are to be introduced during the festive season later this month.  Collectors are elated about the logo being printed on the rupee and the RBI officials expect a large number of them to be present at the bank to receive the notes on the launch. 

TOI

Baby Steps - India needs true mobile banking to achieve financial inclusion

Recently, HDFC Bank launched a form of mobile banking, using a Vodafone subsidiary as its corporate banking correspondent. This would allow Vodafone’s network of retailers and sub-agents to open and operate accounts, in remote areas outside the reach of the bank’s 2,150 branches in 1,141 towns. This is a great step forward for India’s restrictive banking regulation, but still a small step for mobile banking. The RBI appears to have removed its earlier, impractical condition that multiple banks would not be allowed to share the same banking correspondent. This would mean that the same bank can tie up with different telecom companies and each telco can service multiple banks. Airtel offers some limited stored-value transactions, under which the prepaid value on the phone can be run down by a customer for a limited number of payments in addition to normal telecom transactions. This again is a step forward from the situation that obtained earlier. However, all this does not quite become full-fledged mobile banking. For that, the mobile service provider itself must have a banking licence. In the present system, the mobile retailer can give out a fresh connection, taking proof of identity and so on as required for security purposes. But this form of identity proof will not suffice for the same subscriber to open a bank account. He would have to furnish a fresh set of documents meeting the RBI’s know-your-customer norms, which, then, would have to be processed by the nearest bank branch. This can go into a loop, once the numbers mount. Further, the Vodafone sub-agent is not in a position to process a loan application from a new mobile bank account holder. That would again require the services of that rural rarity, bank personnel. The core of financial inclusion is to let India’s rural masses access formal finance, thus displacing the moneylender as the primary source of credit. That would not be achieved with the modest form of mobile banking the RBI permits now.  The RBI must shed its conservatism and issue fresh banking licences to joint ventures between telcos and established banks, if not to telcos directly. The government can help the central bank make up its mind.

ET

Assam urges RBI to increase agriculture credit

Guwahati, Dec 1 : Assam has urged the Reserve Bank of India (RBI) to increase the state's agriculture credit to Rs 4500 crore this year, Chief Minister Tarun Gogoi said today. During a discussion with RBI governor Dr D Subbarao here, Gogoi told reporters today that he had pressed for the credit to be raised from last year's Rs 2900 crore. The apex bank was also urged to increase the credit ratio from the present 41 per cent, he said. The RBI chief also agreed to give priority to the hotel and tourism industry in view of their potential here and employment generation prospects. During the discussions, Subbarao stressed on the importance of financial literacy among the people to know the basics of the finance, banking system, the various instruments of savings, credit and loans, he said. In view of this, the chief minister said, financial literacy would be introduced in the high school curriculum to promote entrepreneurship among the students.

IBN Live

RBI guidelines on Credit Default Swap operational from today -

...The RBI observed that the objective of introducing CDS on corporate bonds is to provide market participants a tool to transfer and manage credit risk in an effective manner through redistribution of risk......

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

Equip ATMs to accept cash directly, suggests panel

A year down the line government-owned bank ATMs in urban as well as rural areas may start accepting cash (not in an envelope but directly), have solar powered back-up, and 24x7 surveillance...............

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

Use of fake notes to be treated as terror act

Union home ministry proposes to include fake Indian currency notes (FICN) in the Unlawful Activities (Prevention) Act

New Delhi: Alarmed by the rising use of fake currencies, the Union home ministry has decided to treat it as an act of terrorism. Accordingly, it proposes to include FICN in the Unlawful Activities (Prevention) Act, or UAPA, which entails more stringent provisions. Not only will it attract more punitive action, bail will also be more difficult to obtain. Only terrorist organizations and people associated with them are currently covered under the Act. Fake currency is among the “biggest threats” facing the country, said R.K. Singh, Union home secretary. That’s why “we are planning to include this in UAPA”. Singh added: “FICN circulation is not done by local gangsters. The quality of (fake notes) suggest that state actors are behind it. These state actors are getting it executed through non-state actors.”

Mint

Migrants new couriers for fake notes

Bangladesh, Thailand emerging as key conduits for routing fake notes, says study by CEIB

.... “The UID-based micro-ATM model (where money can be withdrawn anywhere, anytime), once scaled, could lead to reduction of fake currency in circulation,”.... 

Read........

RBI should allow rupee to fall – S.S.Tarapore

A policy of non-intervention when the rupee appreciates, and of intervening only when the rupee depreciates, is not sustainable, as India would run out of forex reserves.

December 1, 2011:  The nominal dollar-rupee exchange rate has been under pressure in recent weeks. India Inc has fired all cylinders, to force the authorities to stem the depreciation of the rupee. There is need to reflect on the fundamentals of exchange rate formation. A basic axiom is that if inflation in country A is higher relative to country B, country A has to depreciate its currency by the extent of the inflation rate differential. Importers root for an exchange rate appreciation while exporters advocate depreciation. The forex reserves represent the ammunition to smoothen out excessive swings in the exchange rate. In the case of India, the reserves are entirely built up by capital inflows. India is the only leading emerging market economy (EME) in Asia that has a persistent balance of payments current account deficit (CAD). Hence, the Indian forex reserves are vulnerable to the caprice of volatile capital movements.

RBI's policy shift

Until 1997, the Reserve Bank of India used the trade weighted six-country Real Effective Exchange Rate (REER) as a pole star. This was an index of the nominal exchange rate adjusted for inflation rate differentials. Since 1997, the RBI's deity continued to be the six- country REER, except that the deity was no longer on public display. The RBI progressively moved over to a hands-off exchange rate policy and the emphasis was on controlling “volatility”. For years the RBI accepted the need for the general theory of the second best wherein it tried to come as close as possible to the Impossible Trinity of an independent monetary policy, freer capital flows and a managed exchange rate. Forex reserves were built up during periods of heavy capital inflows to prevent excessive appreciation and utilised to prevent excessive depreciation of the rupee. This was the policy up to the latter part of 2008. In the more recent episode of exchange rate fluctuations, the RBI renounced its policy of buying up forex during periods of heavy capital inflows and the REER appreciated by 19 per cent by July 2011 on the basis of the six-country index. Having renounced buying while the rupee was appreciating it should have renounced selling when the rupee depreciated. Initially, the RBI held on to this very reasonable policy stance, but India Inc launched a massive campaign and the RBI was forced to stem the depreciation of the rupee. The actual extent of intervention would be known only after some time. A policy of non-intervention, when the rupee appreciates, and intervening when the rupee depreciates is not sustainable as, sooner or later, India would run out of forex reserves. The delightfully vague policy of “controlling volatility” takes away a reference point not only for the markets but, more importantly, the RBI no longer has a clear reference for turning points in its exchange rate management. Another way of assessing an appropriate exchange rate is to use the March 1993 base, when the dual exchange rates were merged and the market stabilised for a long period at $1= Rs 31.37 even though the RBI was buying forex over an extended period. Using this nominal exchange rate and a secular inflation rate differential of 5 per cent, between the US and India, the appropriate nominal exchange should be $ 1= Rs 63. Intervening at the present rate of around $ 1= Rs 52 would only dissipate the forex reserves. What the RBI needs to do is to sit back and let the rupee depreciate a little.

Importance of gold

Another important issue is the composition of the forex reserves. Countries have nowhere to hide as all reserve currencies are suspect. A multi-polar reserve currency system, advocated by a number of eminent experts, is a pipe dream. Such a system is bound to fail as it is a summation of the weaknesses of a number of reserve currencies. The international monetary system is condemned to massive instability as it stubbornly clings on to the reserve currency concept. Sooner or later, the international monetary system will have to give up the illusory reserve currency system and revert to a gold-linked international monetary order. While we continue to denigrate the gold bugs, the resurgence of gold is inevitable. Emerging market economies need to gradually increase the gold proportion in their total forex reserves. Those opposed to such a policy argue that gold prices are notoriously volatile. The critics of gold need to realise that a Chartist's approach to gold prices is inappropriate. No major central bank intends to sell gold in the ensuing period and as underground stocks of gold are rapidly dwindling, there is no way that gold prices can crash to the levels of the 1980s. Fiat currency carries with it stupendous risks. Despite all the intellectual backing for a multi-polar reserve currency system, the basic flaw of such a system cannot be wished away. Emerging market economies, including India, should not be deaf to the death knell of the reserve currency system and they would do well to gradually increase the proportion of gold in their forex reserves.

HBL

Where will the rupee be in six months?

... After an unbelievably long time, the Reserve Bank of India (RBI) has finally taken some action, and appears to be more proactive in managing this situation. Of course, the rupee is still on the ropes, since the twin pressures of a weakening euro and a still heavily short market have not gone away. I believe the RBI should be more aggressive, perhaps requiring banks to not hold long dollar positions overnight.....

Read....... 

In Defense of the Rupee

... The RBI has rightly taken action against inflation this year, but it will do better if it stems the rupee depreciation. So far the central bank has only intervened in patches when the trading got too wild—by some estimates.... 

Read........

MFIs take indirect route to tap FIIs

... The Reserve Bank of India’s Foreign Exchange Management Act (Fema) rules do not allow investments by FIIs in primary debt issuances. There is no such restriction on FII investments in listed securities, subject to overall limits allowed by the government. However, for the instruments to be listed on the exchanges, they must be first issued. This is where some institutions play a key role, of warehouses.....

Read........... 

Moderating GDP may prompt RBI to halt rate hike: Analysts

Moderating economic growth and easing inflation may prompt the Reserve Bank to halt interest rate hike in the upcoming mid-quarterly credit policy review later this month, according to analysts..............

Read.......

RBI not opposed to RBS-HSBC deal

Royal Bank of Scotland (RBS) on Thursday said the Reserve Bank of India (RBI) had not rejected its proposal to sell the bank’s retail and commercial banking businesses in India to Hongkong and Shanghai Banking Corporation (HSBC). “We can confirm the Reserve Bank of India is agreeable to the transfer of our retail and commercial businesses in India to HSBC. We continue to work closely with HSBC and the regulators to complete the transfer in a manner that is in the best interest of our clients and employees,” RBS said in an e-mailed statement. The deal, announced in July, 2010, was part of RBS' plan to retreat from some of its business in foreign markets. HSBC had agreed to pay premium of up to $95 million over the tangible net asset value of the businesses, once the deal was completed. The actual price, however, would depend on the quality of assets. The transaction was scheduled to be completed by September 30. RBI, however, has not approved the deal yet. According to sources, the banking regulator was not comfortable with RBS selling its branches to HSBC, though the lender would continue its wholesale banking operations in India. Sources said the banks were re-working the structure of the deal. Currently, HSBC has 50 branches in India, the second-most among foreign banks in the country. RBS has 31 branches. HSBC has maintained the bank continues to “engage positively with the regulator” for this transaction. In an interview with Business Standard, Naina Lal Kidwai, country head for HSBC in India, said the regulatory approval was taking time due to the unprecedented nature of the deal. RBS said India would continue to remain the third-largest employment centre for the group globally. “India remains one of the top three priority markets in the Asia-Pacific region for the RBS Group...Our commitment to India remains focused. We have been, and will continue to, invest strategically in India across our ‘go forward’ businesses,” it said. 

BS

Reserve Bank Cancels the Licence of Bharat Urban Co-operative Bank Ltd., Solapur (Maharashtra)

MUMBAI: The Reserve Bank has cancelled the licence of Maharashtra-based Bharat Urban Co-operative Bank as the lender has become insolvent. "In view of the fact that Bharat Urban Co-operative Bank Ltd, Solapur (Maharashtra), had ceased to be solvent... the Reserve Bank of India delivered the order cancelling its licence to the bank as on the close of business on November 25, 2011," the apex bank said in a statement. It said efforts to revive the bank in consultation with the Maharashtra government have failed and the depositors were being inconvenienced by continued uncertainty. The Registrar of Cooperative Societies, Maharashtra, has been requested to issue an order for winding up the bank and appoint a liquidator for the bank.  "... On liquidation, every depositor is entitled to repayment of his/her deposits up to a monetary ceiling of Rs 1 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC) under the usual terms and conditions," the statement said.

ET

Don't fret about the Rupee

... if the rupee is being depreciated for reasons unrelated to real activity in the domestic economy, there is reason to intervene. However, there is limited scope for conventional RBI intervention to prop up the rupee.....

Read.........

Nigerian nationals nabbed for cheating

Bangalore, Dec 1 (PTI) Four Nigerian nationals have been arrested here for cheating a person to the tune of over Rs 13 lakh, police said today. Momodu Prince Julius, Kofi Francis, Immanuel Ujunwa and Ibeh Ugochokwu had allegedly cheated Jayaprakash by sending him an e-mail that an Iraq Bomb Blast victim had deposited USD 22.5 million in a bank, 40 per cent of which, they said they would give to him in return of some amount, a police release said. They reportedly showed him fake death certificate, fixed deposit certificates and RBI receipts and after collecting the money vanished from the scene. Jayaprakash then lodged a complaint with police following which they were arrested on November 26. A laptop, modem and foreign currencies worth Rs 80,000 worth were seized from them. They have been remanded to judicial custody.

Moneycontrol

Bond prices soar after RBI unveils OMO plan

Government securities on Thursday shot up after the Reserve Bank of India (RBI) said it would buy back another Rs 10,000 crore worth of bonds under open market operations.....

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

Inflation will come down by March 2012: RBI Governor

Inflation will come down by March on the back of strengthening agro-based economy in the country, Reserve Bank of India (RBI) Governor D Subbarao said in Dungabori on Wednesday. "Inflation will come down because the production and agriculture sectors will boost up the rural agro-based economy of the country," Subbarao said at a RBI Financial Outreach Programme here in central Assam's Morigaon district. The Indian economy is stable and will grow despite the global economic slow down, the RBI Governor said. Proper coordination of farmers' loan recovery was the only way out to strengthen the agro-based economy of the country as well as the North East region, he said. Subbarao said that by March 2012 every village with a population of over 2000 people in the country will get a bank. On the need for financial inclusion, he advised the controlling heads of banks to realise that there exists tremendous business opportunity at the bottom of the pyramid. Financial inclusion aims at providing basic services to all with access to savings or current account, loans, insurance services. The RBI Governor also urged the rural population not to be lured by the offer of high rates interest on their money by unauthorised bodies. He appealed the students, farmers and self-help groups (SHG) to work for better financial coordination and literacy in society. One of the main purposes of conducting this Financial Outreach Programme was to spread awareness of the importance of financial inclusion, and the financial services and products available in the banking sector, Subbarao said.

HT