Financial Inclusion – A major challenge for the Banking Industry

Shri. M.V. Tanksale, CMD, Central Bank of India (Third from the left) is seen being felicitated by Mrs Shyamala Gopinath, Former Dy.Governor. Shri. Kaushal Sampat, President & CEO, D&B Information Services India Pvt Ltd(extreme left) & Shri R.K. Dubey, ED, Central bank of India(extreme right) were also present on the occasion

Central Bank Of India's Chairman & Managing Director Shri M.V.Tanksale was felicitated at Dun & Bradstreet Information Services India Pvt Ltd's event for release of their publication 'India's Leading BFSI Companies 2011' on 28th February 2012. This was on the occasion of Central Bank of India completing 100 years (Centenary year) of banking service to our nation. Speaking on the occasion Mr. M.V.Tanksale said the major challenges before the Banking Industry are financial Inclusion, skill development & maintenance of asset quality of the Banks. Retirement of large number of skilled staff is also a challenge before Public sector banks. However, the Banks are gearing up to meet the challenges & convert them to opportunities for growth. 

http://www.4-traders.com/CENTRAL-BANK-OF-INDIA-9059895/news/CENTRAL-BANK-OF-INDIA-Financial-Inclusion-%96-A-major-challenge-for-the-Banking-Industry-14156044/

The Road to Financial Inclusion in India: Almost There, but Still A Long Way to Go

...... Based on the numbers released by the RBI, it is easy to view the first phase of the initiative as a success. Millions of Indians have gained access to financial services in the last few years. “What could not be done in the last 50 years has been done in the last six,” commented Usha Thorat, a retired RBI Deputy Governor, when speaking about the initiative’s impressive results. Indeed, the FPI has allowed many of the poorest in India to open bank accounts by easing the regulatory environment for banks to open branches in rural areas. However, most of this expansion has come through “business correspondents” (BCs) and not because of an increase in the number of banks operating in rural areas.........

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On microfinance

I would like to appreciate The Hindu for bringing to light the link between borrower-suicides and field practices of SKS Microfinance (“Small loans add up to lethal debts,” Feb. 26). But many microfinance institutions (MFIs) have focussed on community development and social initiatives while delivering access to financial services in a fair and responsible manner. MFIs have taken many social initiatives — such as running schools and tuition centres for borrowers' children, providing vocational training for income generation activities and conducting health camps for borrowers. The article seems to generalise the faulty practices of SKS Microfinance for the entire microfinance sector. While the microfinance sector, just as any other, might have its share of bad apples, it is unfair to blame the sector as well as borrowers based on the actions of one organisation. The SKS scenario will not recur because the RBI has notified clear guidelines for the sector. Microfinance may expect to see stable growth that benefits all stakeholders.

- M.B. Nirmal, Founder, ExNoRa International, Chennai (HBL)

ATM outsourcing by banks catching on

Public sector banks are increasingly looking at outsourcing the operation and maintenance of their automated teller machines (ATMs). As of now, tenders have been notified for over 40,000 ATMs in various States to outsource ATMs by a consortium of public sector banks. .....................

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RBI revises supervisory framework for urban co-operative banks

The Reserve Bank of India (RBI) on Thursday revised the supervisory action framework for urban co-operative banks, saying in case of financial woes, banks must be the first to take corrective steps…………..

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RBI for more Tier-I capital adequacy than Basel III norms

The Reserve Bank of India (RBI) on Thursday indicated it would prescribe higher capital adequacy norms than those proposed under the Basel III framework. This would help sustain the advantage of healthy financial profiles that Indian banks currently enjoy. At the Risk and Compliance Summit on Thursday, Deepak Singhal, Chief General Manager, RBI, said, “A requirement of one per cent above the floor set under Basel III would not impact Indian banks. RBI would not like our banks to be seen as laggards.” The central bank, in its draft guidelines issued in December, had proposed that the common equity Tier-I capital should be at least 5.5 per cent of risk weighted assets (RWAs). Basel III norms prescribe minimum common equity of 4.5 per cent.................

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Govt asks companies to lobby for rate cut

......... So far, it were companies that lobbied with the government. But roles seem to have reversed in recent months. With the Reserve Bank of India (RBI) unrelenting on demands for a reduction in interest rates, finance ministry officials have asked corporate houses and industry chambers to lobby with the central bank......

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Farm loan write-offs: One more thing for banks to worry about?

……….According to a Macquarie report, agri-loans contributed 44 percent to the incremental non-performing loans last year. They have made banks extremely wary of lending to the sector — credit to agriculture climbed by 6.3 percent in January 2012, down from 21.5 percent the previous year, according to Reserve Bank of India data. The banks that have the largest share of agri-loans in their portfolios and, therefore, more vulnerable are State Bank of India (15 percent), Canara Bank, PNB, Union Bank and Bank of Baroda (14 percent each), and Bank of India (13 percent).…………

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Government clears harmonised list; identifies sectors that should get infrastructure status

..... The RBI, perhaps, has the widest definition of infrastructure that includes construction of educational institutions and hospitals. The income-tax law has its own definition of infrastructure.  The new master list will serve as a guidepost for all the agencies responsible for supporting infrastructure in various ways. However, each agency will be free draw its own list of sub-sectors out of the master list, which it intends to support, with adequate justification for inclusion or exclusion. A special institutional mechanism will decide on the inclusion and exclusion of a subsectors after an "appropriate period" of time, the government said.  The panel would be chaired by secretary, department of economic affairs and have as members member-secretary, Planning Commission, secretary, department of revenue, chief economic adviser, one representative each of RBI, SEBI, IRDA, PFRDA and the secretary of the concerned administrative ministry and departments.

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Budget 2012: Finance ministry set to hike agriculture lending target despite sharp rise in NPAs

….RBI guidelines require banks to lend 40% of their adjusted net credit to the priority sector, which includes agriculture, small-scale industries and other weaker sections. If banks fail to meet the priority sector lending target they can buy loans of regional rural banks or micro-finance institutions. 

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Tight money policy for balancing growth & inflation: RBI

............”We are not raising interest rates to bring growth down. We are raising interest rates to bring growth down to a level that is consistent with a steady rate of inflation. "And if the potential (growth) is 8.5 per cent, then we are in recession and clearly there is an argument for a reversal, but then the inflation number should reflect that," RBI Deputy Governor Subir Gokarn told reporters..........

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There may not be big fall in inflation till March: C Rangarajan

.......... Speaking on 'dynamics of inflation' at the 48th annual conference of Indian Econometric Society at Pondicherry University, Rangarajan said the significant decline in headline inflation has been primarily due to strong decrease in food articles, particularly of vegetables...........

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The growth gamble

The wake-up call could not have been timed better. A fortnight ahead of the Budget and the mid-quarter review of monetary policy by the Reserve Bank of India comes the news of a sharp fall in economic growth in the third quarter of the current fiscal to 6.1 per cent.....................

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Economists differ on course of RBI policy action

Moderation in the third quarter GDP growth has left economists to wonder what policy action the Reserve Bank would resort to during its monetary policy review later this month. ...........

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Daily cash deficit in banking system touches record Rs.1.92 tn

Banks rushed to borrow a record Rs.1.92 trillion from the the Reserve Bank of India (RBI) on Thursday as the cash deficit in the banking system widened. Liquidity has dried up mainly because of RBI’s dollar sales from the market to support the local currency that was losing its value fast against the dollar. RBI, between September and December, sold $12.5 billion (around Rs.61,500 crore today) in the market to stop a rapid depreciation of the rupee. Besides, it also sold close to $3 billion in the forward markets…..
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Odds of RBI hiking rates up post poor Q3 GDP: HSBC Global

In an interview to CNBC-TV18, Leif Eskesen, chief economist - India & ASEAN, HSBC Global Research says the third quarter GDP number has left a lot to be desired. The likelihood that the Reserve Bank of India will increase interest rates at the March credit policy meeting has now gone up...................

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Huh! $5 bn FII money pumped in markets this Feb?

.... market analysts attributed strong FII inflows to signs of a reversal in RBI’s monetary policy and the subsequent impact of improved liquidity position. They expect the positive trend to continue further, given that the liquidity conditions remain strong.......

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Chaudhuri's crown of thorns

.......... But his problems were escalated by the under provisioning for employee gratuity and retirement benefits in the first three quarters. This led to a jump in the tax burden in the fourth quarter, when a big chunk of provisioning was done at one go. In addition, provisioning for teaser loans also had to be made. Though SBI sought to amortise this burden over time, RBI refused to let it do so..........

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Troubled Kingfisher puts bankers in a bind

....The largest lender to the airline, State Bank of India (SBI), should certainly be thinking about this possibility, being one of the promoters of the Asset Reconstruction Company of India Limited (ARCIL).However, asset reconstruction in India has not really taken off as an industry due to a host of factors. ARCIL has had problems of its own with an RBI inspection forcing a restatement of its accounts last year due to inappropriate accounting policies........

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Oriental Bank of Commerce sees 19% loan growth

State-owned Oriental Bank of Commerce (OBC) expects a loan growth rate of 19% this fiscal. "As against the industry growth of the 16% we will be growing at 19% during the current fiscal," OBC's Chairman and Managing Director SL Bansal said. Bansal, who took charge of CMD today, said the bank expects business growth of 20% during the current fiscal.

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Bank of Maharashtra - Change in Directorate

Bank of Maharashtra has informed BSE that the Government of India, Ministry of Finance, Department of Financial Services in consultation with the Reserve Bank of India vide their Notification dated March 01, 2012, has appointed Shri.C.V.R.Rajendran General Manager Corporation Bank, as Executive Director of the Bank with effect from the date of his taking over charge of the post till April 30, 2015, i.e. the date of his superannuation or until further orders whichever is earlier.

Moneycontrol

SEBI to debut on networking sites

................RBI is also considering a presence on social networking platforms like Twitter. Late last year, RBI conducted a survey to know whether it should make its web interface more interactive with features like discussion forums, live chats and blogs on its website, and have a Twitter presence for information dissemination..............

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Kotak Mahindra Bank implements Infosys' Finacle CBS platform

…………….."Banking in this era is technology-driven. To enhance our customer experience, we needed an advanced core banking platform like Finacle, to help us meet the dynamic needs of our customers,"…………

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3-day global meet on fin inclusion begins at XLRI

JAMSHEDPUR: XLRI has geared up to host the three-day global meet on financial inclusion commencing on Thursday. Noted personalities from the field of banking, finance services and insurance (BFSI) are scheduled to deliberate on ways and means to make finance and insurance work for the poor in the three-day meet. Reserve Bank of India CGM Deepali Pant Joshi, SBI MD and group executive A Krishna Kumar, BSE deputy CEO Ashish Chauhan, NABARD CGM Niraj Kumar Gupta, ICPRD chairperson Dr Nandini Azad and Dr David Dror, chairman, Micro Insurance Academy, among others, will be the key speakers at the meet. "Financial inclusion is a priority for India today and to ensure it, the biggest challenge is of inclusive growth. Moreover, a suitable framework for financial inclusion is also of paramount importance," said XLRI professor H K Pradhan.The meet will discuss and sketch a possible road map for building an inclusive financial sector, serving the poor and marginalized communities, including micro entrepreneurs, who belong to the lower rung of the economic strata. "The workshop will serve as a forum for intensive discussion among researchers, policy makers as well as field interveners involved in financial inclusion," said a member of the organizing committee. The event will also witness presentations of success stories by innovators that can be replicated everywhere.

TOI

A brave new world of microfinance

.............. For Andhra Pradesh-based MFIs, the worst is far from over. The latest blow comes from the new RBI regulations which said a non-banking finance company microfinance institution (NBFC-MFI) would have to make 100 per cent provisions on aggregate loan installments overdue for 180 days or more. The new norms are effective from April 1, 2012. As a result most Andhra Pradesh-based MFI, expect for SKS, run the risk of have a negative net worth if the guidelines are not revised…………………..

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M. G. Sanghvi is new CMD of Syndicate Bank

Mr Madhukant Girdharlal Sanghvi will be the Chairman and Managing Director of Syndicate Bank effective March 1, after the superannuation of Mr Basant Seth. Prior to this appointment, Mr Sanghvi was the Executive Director, Bank of Maharashtra.He has over 31 years of experience in various fields of banking, including branch/regional/zonal resources management, credit, treasury, planning, risk management, finance and accounts.  He began his banking career in Bank of Baroda in 1980, and later joined Dena Bank. He became a General Manager in Dena Bank in 2003. Mr Sanghvi became the Executive Director of Bank of Maharashtra in October 2008.

HBL

Mobiles as Banks

Why mobile phone companies should work as banks, for financial inclusion

India is one of the last large under-banked countries of the world. Nearly 500 million people, more than the combined populations of Brazil and the US, do not have a bank account. Many others have one, but can’t use it. The Reserve Bank of India (RBI) wants inclusive banking and claims that by June last year, banks have opened 80 million new accounts in more than 1,00,000 of India’s 6,30,000 villages. Unfortunately, that number hides a more sobering reality — only about 15 million of these accounts are active. The rest, for many reasons including the inability of unlettered people to fill out deposit or withdrawal forms, have only paltry sums of money and are unviable for users and banks. To reach the rural poor, banks were supposed to employ agents, called banking correspondents (BCs), who’d go around collecting deposits and delivering cash. The model has flopped, because the BCs are too few, get paid too little and are seldom there when people need them. Village headmen, who were supposed to keep off other people’s cash, are now getting their relatives appointed as BCs. Sarkari technocrats talk about inclusive banking, electronic fund transfers and weeding graft out of the subsidy and welfare delivery systems; the reality is harsher. Yet, there’s a way to cut through the tangled web of inefficiency, poor incentives and corruption. India’s telecom companies have spread to every corner of the country. All mobile companies have become adept at handling low-value transactions of very large volumes, for profit. This is a valuable skill. Why not give mobile companies, or joint ventures between phone companies and established banks, licences to act as banks in rural India? The SIM card vendor in rural India is also the local paanwallah or vegetable merchant: let the mobile bank company figure out how to use him to collect deposits and give out loans. The present model of using them as banking correspondents with limited payments and transfer functions fails to go the distance. Bankers and technocrats have tunnel vision; it’ll require political leadership to prod the administration to translate the power of our telecom revolution into inclusive banking.

TOI

Industry awaits clarity on white-label ATMs

In its attempt to hasten financial inclusion across the country, the Reserve Bank of India (RBI) has decided to allow non-banking entities to set up automated teller machines (ATMs). The central bank has issued a draft circular on this issue. ATM service providers, however, say clarity on the matter is awaited...................

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Banking On BCs

............For years, the RBI has tried to get banks to open branches and reach out to people in India’s 600,000 villages but to little avail — it’s just too cumbersome and expensive. Then in 2010, it extended the definition of BC to include for-profit organisations, and banks quickly made alliances with companies from diverse industries — from consumer goods to telecom and oil companies to agri service providers — that would give them unprecedented access to the unbanked millions. Now, individual agents from these companies double up as retail agents for banks, and use hand-held micro-ATMs to open accounts, collect deposits and hand out withdrawals on the bank’s ..............

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Yellow Fever

....Compounding the weak sentiment around the stock are instances of poor corporate governance. Recently, the RBI barred a promoter entity from using the listed entity’s network to raise deposits from the public. The other issue was that of an independent director selling 13.63 lakh shares just before RBI’s diktat was made public, after which the stock crashed.......

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RBI caught between inflation and slowdown

As GDP growth falls below the ‘new normal’, rate cuts seem inevitable

For a second straight quarter, the Indian economy has grown at a rate under seven per cent, which, according to Reserve Bank of India’ s (RBI) Governor D Subbarao, is the “new normal.”……………

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Expect RBI to infuse liquidity in mid-quarter policy: SBI

...... "Today, there is a lot of mystery about what is a restructured asset. Everything restructured is seen as equivalent to NPA (non-performing asset) ... the restructuring definition should have a timeline," State Bank of India Chairman Pratip Chaudhuri told reporters outside the RBI headquarters after a two-hour-long meeting with the Reserve Bank officials………

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Don’t get too excited about a CRR cut yet

.......... The RBI will cut CRR to improve system liquidity but it will not really help in easing liquidity by much. A 50 basis-point cut in CRR can add around Rs 32,000 crore to the system, which will not help much when liquidity is short by over Rs 2,00,000 crore. One-year CD (certificate of deposit) rates have gone up by 40 basis points to 10.2 percent over the past month and the rates will not come off by much on a CRR cut................

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Fiscal deficit to dictate RBI's move

..... But the big question is what sort of fiscal policy the Budget will outline and whether it will give RBI the space and the confidence to reverse its tight policy stance. Vohra is pessimistic, saying people should not expect miracles. "India's elephantine economy will continue to lumber on, but it is unlikely you will see it dancing in 2012," he says.

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RBI cap on online payment

The Reserve Bank of India is suggesting banks to limit online payments towards mobile phone bills. The move comes after the RBI detected an increase in online fraud...........

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RBI, banks spar over definition of bad loan

The Reserve Bank of India and bankers sparred over the definition of bad loans, leaving contradictory conclusions on the issue that some say could weaken the banking system's ability to lend in the coming years...........

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Banks seek clarity in classification of restructured loans

.....Chaudhuri attended a specially-convened meeting with RBI Deputy Governor K C Chakrabarty called to assess the bad asset situation in the banking system.Chaudhuri further said the classification of a recast account is a "gray area" now and hence banks have requested for a timeline of a year-long regular repayment by the restructured account to turn it as a standard asset........

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Govt plans to tweak farm lending norms to ease NPA pressure

...... In recent times, the finance ministry has told banks agricultural lending was an issue to be taken seriously, and had come down heavily on banks that missed farm sector lending targets. The ministry also asked banks not to deploy resources in low-yielding assets, like the National Bank of Agricultural and Rural Development’s Rural Infrastructure Development Fund (RIDF). Banks are mandated to lend 18 per cent of their net bank credit to the agricultural sector (with a sub target of 13.5 per cent to direct agriculture). If a bank fails to meet the target, it invests in RIDF bonds. Due to the rise in NPAs, lenders have been cautious in lending to the agricultural sector. The share of agricultural credit to the total outstanding non-food credit declined in 2010-11. According to RBI, as of March 31, 2011, the agricultural sector received only 13 per cent of the total non-food credit.

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Bad assets will pile up, but overall situation is under control: bankers

..... Tuesday’s discussion focused on four key points. Apart from getting bankers’ view on bad debts, RBI sought to know banks’ preparedness for advanced approach under Basel II norms. Banks are to apply to RBI by June or September stating their readiness to move on to the new system of monitoring loans and mitigate risks of bad debts.......

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Timely warning

......... Whatever the RBI has done in the past has proved to be too little, too late. The Q3 GDP numbers are a timely warning for the government and the central bank; both have an opportunity to make amends through the monetary policy review on March 15 and the Budget a day later.

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RBI cautions against bad debt in aviation, power

.....“RBI did not discuss about any particular company. It only said that banks should know the profile of their customers in these sectors well and should make steps to bring down NPAs,”......

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RBI allows NMIZs developers to raise ECB

Giving a push to the mega National Manufacturing Investment Zones (NMIZs), proposed under the new manufacturing policy, the RBI today allowed the developers to raise overseas loans under the ECB route..........

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Non-agri growth at same level as after Lehman bust

The GDP (gross domestic product) growth number that matters to the Reserve Bank of India (RBI) is non-agricultural growth, since monetary policy can have little impact on agricultural output......

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Patan rapist banks on HC order

................... When Parmar's application sent from the Sabarmati central jail came up for hearing before justices Jayant Patel and Paresh Upadhyay, they observed that the system of undertaking KYC even if it is under RBI guidelines or instructions, it can be done by calling upon the account holder to produce the photocopy of document or photograph……………

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Karnataka Bank launches gift, travel cards

Mangalore, Feb. 29: Karnataka Bank Ltd has launched two more products aimed at gift and travel segments. A bank release said here that it has launched ‘KBL Gift Card' and ‘KBL Travel Card'.Ms Usha Thorat, former Deputy Governor of the RBI and Director for CAFRAL (Centre for Advanced Financial Research and Learning), launched these new products in Mangalore recently. The release said that the ‘KBL Gift Card' is available in denominations starting from Rs 500 to Rs 25,000. ‘KBL Travel Card' is available in nine currencies. This card is accepted worldwide at over 1.6 million ATMs, 25 million merchant outlets and Web sites verified by VISA. On the refund of the balance amount in the card, the release said that balance amount can be exchanged at identified branches of the bank.

HBL

Banks still slack about security

…………….According to retired bank officer M Govinda Rao, police need to approach the Reserve Bank of India to force subordinate banks to install CCTVs and physically fit guards. "Banks are reluctant to spend money on such essentials and only RBI can force them to act,'' he said. He also deplored the tendency of banks to not ensure iron grills around the cashier's chamber. Anyone can take money out of a cash counter in the present situation, he added……………

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Conclave on agri agenda focusses on FARMER issues

Deputy Governor of Reserve Bank of India Harun R Khan on Friday suggested a framework, which has the acronym FARMER, to provide the much-needed momentum to a Second Green Revolution in the State. He was speaking at a conclave on agriculture agenda for Odisha with the theme — Towards Greater Production and Productivity of Agriculture in Odisha and Transformation of Subsistence Agriculture to Agri-Business. FARMER stands for Finance, Allied Activities, Risk Mitigation, Marketing Access, Extension of Research and Resources other than finance. Khan pointed out that while it is known to all that the Odisha University of Agriculture and Technology (OUAT) is celebrating its Golden Jubilee it is also the Golden Jubilee year of the RBI’s presence in Odisha. The conclave was organised by the RBI in association with the OUAT, NABARD and Government of Odisha. RBI Regional Director in Bhubaneswar BK Bhoi delivered the welcome address. OUAT Vice-Chancellor Prof DP Ray presented facts and figures relating to the state of agriculture in Odisha with the observation that growth in the agricultural sector contributes to faster economic growth of the poorest sections of people. State’s Principal Secretary Agriculture RL Jamuda appreciated the OUAT’s role in increasing productivity of crops and shifting the focus from sustenance agriculture to commercial agriculture. He discussed availability of resources including finance. Finance secretary JK Mohapatra appreciated the initiative of Khan in organising the conclave and assured the support of the Government in any recommendations of the conclave that dealt with finance issues. He was of the view that the constraints of small farm holdings in the state can be overcome with the use of technologies. Agriculture Production Commissioner RN Senapati observed that the Agriculture Policy 2008 of the State emphasises on a shift from subsistence agriculture to commercial agriculture, fiancé support to farmers and marketing linkage. Chief Secretary BK Patnaik gave a roundup of issues related to the subject and called for higher private participation in the agriculture sector of the State. General Manager of Rural Planning and Credit Department of RBI in Bhubaneswar Biplab Chakraborty delivered the vote of thanks. 

The Pioneer

Gold price correction to boost financial system: RBI paper

.....“Even empirical analysis provides credence to the view that any deep correction in gold prices would not have any adverse implications for financial stability. In fact the empirical results of this study provide support to a contrarian view that any correction in gold prices would cause stabilising impact on the financial indicators of the Indian financial system,” the report authored by Rabi N Mishra and G Jagan Mohan of the RBI’s Financial Stability Unit (FSU) said......

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RBI asks banks to appoint nodal officers to boost exports

Dehra Dun : The Reserve Bank of India (RBI) has asked banks to appoint nodal officers for boosting export credit and promote overseas shipments, a senior official of the central bank said today. "Under the new policy of RBI, all the banks are required to appoint nodal officers who can facilitate exports and related financial matters," Anup Kumar, Deputy General Manager [Foreign Exchange Department] at a meeting here organised by the sub-committee of the state level bankers committee (SLBC). Kumar also stressed upon the need to compile authentic data of exporters in Uttarakhand, which has a tremendous scope for exports. "Unless there is correct data, we cannot know which sector is facing what kind of problem," he said. The main purpose of the meeting, Kumar said, was to understand the problems faced by exporters and provide solutions. "We want to understand the problems of the exporters so that we can come out with the solutions," Kumar said. Kumar also advised the state government to activate its export promotion council which can facilitate exports for bringing foreign exchange. He also called for identifying exports clusters in the state which he said would help in boosting exports. Kumar also assured exporters that he would approach the central office to bring solutions to their problems.

BS

RBI to meet bankers today to take stock of bad loans

At a time when slow economic growth has raised concern over the asset quality of banks and prompted the Reserve Bank of India (RBI) to take stock of bad loans in the system, data from banks showed. Foreign and private sector lenders had managed non-performing assets (NPAs) better than their state-run rivals, since the global financial crisis of 2008. Based on their interaction with bankers, RBI Deputy Governors K C Chakrabarty (in charge of banking supervision) and Anand Sinha (in charge of banking operations and development) would prepare a report assessing the magnitude of NPAs................

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Banking to the poor mostly on paper

In 2009, frustrated by the crawl on financial inclusion, India's banking regulator cracked the whip. The Reserve Bank of India (RBI) set time-bound targets and assigned banks to reach the unbanked, who were estimated at 480 million and mostly living in India's 630,000 villages……………

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Mother of all battles

.....“On the face of it, the suggestions of the Planning Commission are not only sensible, they are overdue,” says author Githa Hariharan who took her fight for her right to be the “natural guardian” of her minor son to the Supreme Court in the 1990s. When she applied to the Reserve Bank of India (RBI) for a 9 per cent relief bond to be held in her minor son’s name along with an intimation that she was the “natural guardian” of her son for investment purposes, the RBI returned the application asking for the father’s signature. ......

Mother of all battles

Technology makes bank strikes irrelevant in urban India

.... While trade unions were on a day’s strike on Tuesday protesting against what they said were the government’s anti-labour policies and banking sector reforms among others, bank customers couldn’t have cared less, thanks to ATMs and electronic payment modes of transferring funds......

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Trade union strike hits defence production in city

Nagpur: ............ At RBI, the officers remained present even as clerical and Class IV employees went on strike. It was on the very day that interest on government securities was due to over 25 states. "The officers ensured it was paid in time and penalty avoided," said the spokesperson at RBI Nagpur. A source in the RBI said almost 25,000 cheques valued at close to Rs 300 crore were held up on Tuesday. People coming to pay taxes were turned back at RBI gate. "If I don't pay the luxury tax today, we will be charged a penalty," said representative of a hotel in the city who had come to RBI. President of All India Reserve Bank of India Employees Association Bidyut Chakraborty said the strike was total in clerical and the lower level cadre, hampering functions like collection of challans and clearing of cheques. Even as the strike was total in the public sector banks and Life Insurance Corporation, there was mixed response in the other central government offices. The state government departments remained open………

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Business as usual across metros

....Cheque clearing operations and cash transactions were partially hit. In treasury operations – forex, gilts and call markets – customer flows were lower than normal, due to some branches being shut. Retail operations were largely affected. High value transactions did not suffer due to online facilities like NEFT and RTGS. According to RBI data, 94 of the 95 clearing houses in Mumbai were operational. The volume of cheques cleared were 2-2.25 lakh, against an average of 7-7.5 lakh per day. The value of transactions was around Rs 1,500 crore, against an average of Rs 3,000-4,000 crore per day.......

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Nationwide trade union strike disrupts banking, transport services

…………. Many bank customers were left at sea as employees of PSU banks refused to conduct transactions as part of the protest. Employees of RBI in the capital held a protest outside their office and shouted slogans against the policies of the government............

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Mixed response to trade unions’ strike

..services especially public transport functioning as usual.“The shutdown in the banking and financial sectors has been complete. The RBI’s clearing houses are shut. So the private and foreign banks, where we do not a have a presence, also get affected,” General Secretary of All India Bank Employees Association, Mr Vishwas Utagi, claimed............

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Banks’ liquidity position worsens; CRR cut likely

The systemic liquidity position has deteriorated further with net daily liquidity injection by the Reserve Bank of India into the banking system rising to record levels, leading to speculation that the central bank may soon go for another cut in cash reserve ratio to boost the cash supply in the system........................

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BCSBI, customer service and consumer protection - issues and challenges

Inaugural address by Dr. K.C.Chakrabarty, Deputy Governor of the Reserve Bank of India at the Annual Conference of Principal Code Compliance Officers, Mumbai, 24 February 2012

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Indian Bank drops plans for standalone life insurance venture

.......Indian Bank, a public sector lender, has shelved plans to float a separate subsidiary for taking up life insurance business. Instead, the bank will focus on building a multiple-agency relationship system to augment business......

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‘Skimming' of credit cards largely at unguarded ATMs

....Mr M. Palanisamy, Banking Ombudsman – RBI – Karnataka region, said that there have been about 100 complaints of skimming of cards in the past four months in Karnataka. “We have now told banks to limit the number of payments for recharge of prepaid connections etc to telecom providers from a payment card to three hits,” he said.

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You can keep banking fraudsters at bay and how

Bangalore, Feb 28 (PTI) Have you used your birthday or wedding date as PIN or password in ATM, debit and credit cards or written those behind them? Then it's not the wisest move you could do to keep banking fraudsters at bay, say experts. "Best thing for any bank customer is to change the password on a regular basis," says Mahesh Rajaraman, Head-Risk Control, HDFC Bank. "Using birthday or wedding day as passwords would ensure that people close to you may try to use it at ATMs," he cautioned while talking to reporters here. No bank would ask its customer to share their credit card number and PIN, Rajaraman said, adding, customers should only use secured sites while transacting online. "Don't pass on personal information in social media", he warned. "People try to give their date of birth. It's important your password does not match that date". RBI Ombudsman, Karnataka, M Palanisamy, said fraudsters sometimes succeed because of banking customers being "careless". Phishing mails appear as if they are sent by concerned banks. "Never respond to any phishing mails," Rajaraman said. "Never part with your password and personal data with anybody".

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Insurance help online

.....For a long time, the judgements of the apex consumer court have been available on the website www.consumercom.nic.in. Subsequently, the orders of the consumer courts at the district and the state levels were also put up on this website. Similarly, on the banking regulator’s website — www.rbi.org.in — one could see the orders of the banking ombudsmen. The orders of the insurance ombudsmen, however, remained inaccessible to the public. Now finally, these orders have been made available.......

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Should banks sell insurance at all?

“…......as stated by the IBA (Indian Banks’ Association) representative, the banks are unwilling to assume any responsibility, or risk, of the result of their mis-selling. RBI is also wary of banks taking on the role of a ‘broker’ as it would mean that they assume the role of a ‘principal’ in the sales process with the consequential responsibility and potential risk. Possibly the banks are better aware of the deficiency in the sales process practices by them and hence their reluctance to assume any risk.”.......

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Rupee - What leads to the change in the currency's value?

.....The RBI manages the value of the rupee with several tools, which involve controlling its supply in the market and, thus, making it cheap or expensive. "Some ways through which the RBI controls the movement of the rupee are changes in interest rates, relaxation or tightening of rules for fund flows, tweaking the cash reserve ratio (the proportion of money banks have to keep with the central bank) and selling or buying dollars in the open market," ........

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At Dhanlaxmi, time for pay cuts, old-school banking, exits, gold loans

Dhanlaxmi Bank, the Thrissur, Kerala-based lender, is set to announce a 5-40% cut employee pay packages under a new dispensation after the surprise exit earlier this month of its managing director and CEO Amitabh Chaturvedi………….

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Dhanlaxmi Bank extends ED's term

The saga of leadership change at Dhanlaxmi Bank has taken a new turn, with the board offering chief executive designate P B Jayakumar an extension of two years as executive director — from March 1 to February 28, 2014. According to sources, Jayakumar’s retirement was due this month. His appointment as managing director and chief executive officer of the Thrissur-based lender is subject to the approval of the Reserve Bank of India (RBI). Since the central bank is yet to sanction his new role, the bank has decided to extend his term as an executive director to ensure he is still employed with the lender when the approval is secured..............

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RBI to assist in setting up vault for Padmanabha gold

A Supreme Court-appointed committee has directed the Reserve Bank of India ( RBI) to give technical handholding in setting up a foolproof state-of-the-art vault to preserve the Padmanabhaswamy temple treasure. ................

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Two more no more...............

I regret to advise you of the sad demise of Shri.K.N.Bhargava on Friday 24th, February 2012 in Ghatkopar, Mumbai. He was 79 years old and retired as F Grade officer from the then Exchange Control Department. May his soul rest in peace.

As reported by P.P.Ramachandran (via e-mail)

Regret to inform the sad demise of Shri B.G.Savanal, Ex Joint Controller ECD at PUNE on 26th February 2012. He was 87 years old. May his soul rest in peace.

As reported by M.M.S.Rekhrao (via e-mail)

Indian corporates struggle with FCCB redemptions

……….In a recent speech touching on the topic, V.K. Sharma, Executive Director at the Reserve Bank of India, criticised corporates for relying on FCCBs to convert to equity. “So I would urge business and industry to fully provide domestic rupee/foreign currency resources to meet potential liabilities under FCCBs, rather than hope that FCCBs will be converted.”......... 

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Help borrowers take informed decision, RBI tells banks

Mumbai: Concerned over reluctance of banks to provide loans on interest rates favourable to borrowers, the Reserve Bank has asked the lenders to share adequate information with them so that they can take informed decision. "How many banks are willing to go an extra mile and interpret the guidelines in favour of customers? The discriminatory practices that banks adopt while sanctioning loans on a floating interest rate basis to new borrowers is possibly the best example in this regard," RBI Deputy Governor K C Chakrabarty said here recently. He was speaking at the annual conference of Principal Code Compliance Officers on 'Banking Codes and Standards Board of India -- Customer Service and Consumer Protection-Issues and Challenges'..............................

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Banks achieve 100% financial inclusion in state

...... The Governor of the RBI, during the review meeting with the CMDs / top management of banks at Bangalore on January 30, 2012, had advised that a minimum of 15 per cent unbanked villages should be covered by brick and mortar branches and credit linkage should be raised from the present level of around 45 per cent to 50 per cent by July 31, 2012.

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Bank staff justified in their overhaul call

……These figures are calculated on the basis of banking sector analysts up to March 31, 2011 provided by research agency, ICRA, and the Reserve Bank of India (RBI), taking an error margin of 3 per cent into account. All the Central Trade Unions have jointly given a call for general strike tomorrow on February 28, 2012. Apart from wages, employment security, opposing Khandelwal Committee appointed to review the staff issues in the proposed Banking Law (amendment) Bill, and outsourcing of work, there are a few pertinent issues that are actually plaguing the banking sector among the demands raised by the staff unions……………..

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More coordination between central banks

.....In India, RBI had little to do except to make sure that the deficit financing needs of the government were met in an orderly way by a captive banking sector. Fighting inflation was not thought to be a task of monetary policy but tackled by rationing and price controls. The received wisdom used to be that physical planning had priority over merely financial accounting. RBI was a good research centre, but little else..........

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RBI mulls ‘annualised effective rate’ by banks

Reserve Bank of India Deputy Governor KC Chakrabarty has proposed the formation of an ‘Annualised Effective Rate’ to tackle the confusion arising from different services, incentives and charges by different banks. .............

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India thrives not by growth alone

...............There are academics who write about them without having the benefit of experience in government or the Reserve Bank of India. Then there are the ‘insiders' — those associated with policymaking or crisis management putting down their views after retirement. Finally, there is the ‘privileged' class of economists who have shared “revolving door” relations with the Washington-based Twins and the government. They are the blessed ones who carry sacerdotal authority and write for the pink papers. Shankar Acharya belongs to this class...........

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Why banks will ignore FinMin’s request to cut lending rates

.............. In other words, an inflation-wary RBI is unlikely to jump the gun on interest rates. Even if by some miracle the RBI does cut the repo rate, the benchmark policy rate that is currently at its highest since March 2008 at 8.5 percent, the truth is most banks will be unable to follow suit.........

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The dilemma ahead of midterm review of monetary policy

.............. RBI would continue to stay concerned both on inflation and growth going into FY13 and as of now bias seems to be on inflation. The external factors are not expected to turn growth supportive in the near future. While RBI’s priority would be to guide inflation into its tolerance level of 4.0-6.0%, it is also important to support the Government in its efforts to address fiscal issues through growth supportive monetary policy.............

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Responsible lending key to microfinance

Microfinance is a very emotional word and small credit plays an important role in taking small farmers and entrepreneurs out of poverty. But microfinance cannot bring the financial inclusion because in our system we don’t allow microfinance firms to accept deposits.............

I think it is important for any financial system that the credit culture is not eroded. What is worrying me is that the whole debt restructuring process is dependent on 50% recovery. The excesses happened in lending should also be kept in mind when we talk about such kind of reaction. There is a clear case of overlending and there is a clear case of forgiving that borrowing as well. So the message should be there has to be some kind of responsibility..............

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Microfinance industry may get a lifeline

….“The new guidelines, if implemented, are going to hugely help MFIs as banks will have to lend in large amounts to them to meet their lending targets. Since most of the NBFCs cater to priority sector related segments like agriculture, women and other weaker sections, NBFC-MFIs can expect a fair share of bank credit,”.....

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Fitch gives cautious outlook for NBFC sector

….Last year, the Reserve Bank of India (RBI) excluded bank loans to NBFCs from the priority sector category, thereby reducing banks' incentives for direct lending to NBFCs.  Presently, about 65 per cent of the NBFC funding comes from banks. The RBI's move "will increase funding costs for NBFCs in 2012 and beyond," Fitch said, adding that the outlook for 2012 is stable……

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Consolidation seen in NBFC space: Fitch

..... If the Usha Thorat Committee's recommendations, stipulating a minimum net worth of Rs 5 crore and asset size of Rs 50 crore for registration of NBFCs, are implemented, then the small NBFCs segment could undergo major consolidation, the agency said in a report. A majority of the non-deposit taking NBFCs are small in size and regulatory supervision becomes heavier only when their asset size exceeds Rs 100 crore.......

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On microfinance

The report “Small loans add up to lethal debts” (Feb. 26) on debtor suicides linked to microfinance companies was heart-rending. That the poor, who believe that small loans can improve their living, become victims of the companies run by so-called financial wizards, is unfortunate. It appears that the companies are no better than the mahajans of pre-independence days.

Aditya Anirudh, Bangalore

Micro-finance institutions, established to provide small loans to the disadvantaged sections, have been lured into the path of becoming for-profit organisations. Manmohanomics and Monteknology have played a crucial role in making India a global market in which retailers and middlemen become millionaires while food producers are left to kill themselves. The patrons of liberalisation have a lot to explain to the bereaved families of those who have committed suicide in the past two decades because of their inability to repay debts.

Krishnaprasad Balan, Chennai

The report is excellent but the readers should know the brighter side of microfinance too. Because of the Andhra Pradesh fiasco, institutional resources to MFIs virtually stopped for almost a year. The industry has just come out of the crisis, with the RBI intervening to soothe the market and funders realising that it is safe to lend to MFIs which operate in credit-ready markets initially developed by them. The borrowers, in repeat cycles of borrowing, see this transparent mechanism as a far cheaper and desirable option. Many MFIs graduated from the initial mission of empowerment and social development to become lenders. The RBI has now virtually capped the market by indirect regulation. Why did Rajyam, mentioned in the article, borrow Rs.1.18 lakh? If she needed the money to invest in her livelihood activity, it points to the failure of the banking system. It is precisely this unfilled space in the rural credit market that the MFIs have occupied. Borrowing from eight different MFIs indicates a sad feature of an unhealthy microfinance market. Rajyam borrowed beyond her capacity — a situation akin to the state of the urban credit card industry three years ago. In the case of Rajyam and many others, the over-enthusiastic “profit-only” MFIs were responsible for dumping money in unprepared markets.  The article should teach the nation what should not be done. But, let us not conclude that all microfinance is bad.

Ananda Mukherji, Chennai (HBL)

It's the Economy, Stupid!

It was as if someone flipped a switch at midnight, December 31, 2011. The flipping of that switch magically turned around all that was terrible about India’s economy into the zone of happy faces and markets headed north………………

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iCreate Software sponsors IBA Risk & Compliance 6th Annual Summit, 01 Mar 2012, Mumbai

Organized jointly by Indian Banks' Association and SP Media, publisher of India Banking Review, this is the country's flagship conference for policy level debate on issues related to risk management and regulatory compliance in banking……………..

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Governance and Financial Regulation to be the focus of Oxford India Business Forum 2012

....The panel will include Sir Thomas Harris, Special Advisor, Standard Chartered Bank; Usha Thorat, Director of the Centre for Advanced Financial Research and Learning (CAFRAL), Reserve Bank of India; Ms Chitra Ramkrishna, Joint Managing Director, National Stock Exchange........

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Indian Railways defies reform

.......A decade ago, Rakesh Mohan, an eminent economist and former Deputy Governor, RBI, in an exhaustive report on Indian Railways, observed that the contours of policy, regulatory and management functions of the railways are fuzzy. He also said that Indian Railways is perhaps the most studied institution in this planet. Perhaps, now, it is time to ask some eminent political economists why Railways remains static, despite so many study reports.

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Nehruvian rate of growth

..... The Reserve Bank of India (RBI) is unlikely to set monetary policy based on this new inflation measure in the near future, given that the data series is yet to be tested for consistency, etc. Nonetheless, the inflation rate is high enough to warrant tempering of rate cut expectations.....

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