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Monday, July 8, 2013
Raghuram Rajan leads race for RBI Governor post
Arvind Mayaram, Raghuram Rajan in fray for RBI Governor post
.......There is good chance that the government may give another year to the current Governor D Subbarao, whose term ends on September 4, to ensure continuity at a crucial time for the economy. If not, then either Arvind Mayaram, secretary department of economic affairs, or the chief economic advisor Raghuram Rajan could be headed to central bank. Of course, there are few others as well in the race in which the winner is declared by the prime minister in consultations with the finance minister. The current Sebi chief UK Sinha and a Deputy Governor at the RBI Urijit Patel also hold the outside chance of getting the high pressure job. Rajan, youngest chief economist of the IMF ever, who is widely credited with predicting the 2008 financial crisis, has impeccable credentials. And government insiders say has the backing of the prime minister...........
Birla should quit RBI board for sake of legacy
......Needless to say, “RBI” means “RBI Board” because as per the central bank’s website: “...the affairs of the apex banking institution and regulatory authority are governed by its board. The board's functions include general superintendence and direction of the bank's affairs.” Even if Birla recuses from the operative meeting, he will certainly receive the agenda papers and the recommendations of the HLC, right? So, Birla and his advisors must draw the fine line between his entitlement to a licence, and his continuation on the RBI board, a position he’s been holding for six years. At stake is Birla’s own reputation and brand value, something he covets dearly. There’s also an issue of legacy, which other RBI board members drawn from India Inc., not all of them angels, will cite in years to come, when they themselves think about becoming applicants in the coming years...........
Read.............
Three reports, one theme
Three reports of the Reserve Bank of India (RBI), all released on June 27, address the key issue of external sector weakness and the threat it poses to macro-economic stability. The Financial Stability Report (June 2013), India’s External Debt (end-March 2013) and the Developments in India’s Balance of Payments (BoP) during the Fourth Quarter (January-March 2013) assume an even greater significance than what they normally have, as purveyors of important statistics and opinions from the central bank.......
Regulator homes in
.....Indeed, the Reserve Bank of India’s recent move to introduce granularity to the risk weighting of commercial real estate (CRE) by introducing the lower-weighted CRE-RH (residential housing) category comes when US regulators too are revising the risk weights for different categories of residential mortgages from 35–200 per cent. In fact, a quick look at the two regulations reveal the nature of the two markets in terms of product differentiation and the willingness of regulators to create an incentive structure in a granular way. How effective are risk weights as a measure of micro- and macro-prudential regulation?.........
Indian central bank tipped to cut reserve ratio
..........“With good rains set to douse agflation, there is a strong case for monetary easing in our view. At the same time, the RBI may not want to court controversy by cutting repo rate if INR [Indian rupee] volatility persists. A CRR cut should help bring down lending rates by improving bank liquidity,” the bank said in its latest report. “We expect [the RBI] to cut the CRR on July 30, if INR remains volatile. This, in turn, will allow it to improve bank liquidity and bring down lending rates. At the same time, the RBI is unlikely to take any chances with the INR as the import cover of its foreign exchange reserves have halved to seven months in the past four years,”..........
Rural Banking Policy, India - Timely & Effective Use Of Technology And FI & FIT Funds Needed
.....With the evolution of Rural Banking Policy by the RBI slowly, steadily systematically and in a planned manner, the commercial banks in India showed impressive performance during 10 Year Plan. During 11 households in a village, initiate steps to establish Financial Literacy and Credit Counseling Centers, adopt Technology Applications, make timely and judicious use of Financial Inclusion Fund and Financial Technology Fund and voluntarily adopt Mutual Code of Conduct. In the process, the Government may consider creating enabling environment and building rural infrastructure to facilitate rural financial institutions to serve all the rural households by 2015.
Taking stock of the state of financial inclusion in India
With the Reserve Bank of India (RBI) moving forward on the process of granting new bank licences, with the stated aim of increasing financial inclusion in India, rating agency CRISIL has come out with a timely report on the progress of financial inclusion in India.............
Growing risks to stability
... Risks to the banking sector have increased marginally over the past six months, with tight liquidity and deteriorating asset quality being the main causes. In the RBI’s estimate, if current macroeconomic conditions continue, the credit quality of banks could deteriorate but all of them have enough capital to withstand pressures. Life insurance products are dominated by single premium policies..........
My View on "Make Aadhar common id for banks: RBI"
Good idea. The flip side is the AADHAR project itself is not progressing as expected. Awareness about AADHAR card as an acceptable identity proof has also not penetrated deep. A month back, the India Post messenger did not accept AADHAR card as identity proof for delivering a speedpost article(my wife’s renewed passport) in Thiruvananthapuram. He was happy to have a look at the bank pass book, instead. While on the issue of ID proof, let me quote a message sent to several newspapers last week, which was not found ‘printable’ for reasons best known to them: “Several cases of unauthorized use of credit/debit card are being reported in the media. The Railways are insisting on photo-ID with tickets booked through internet. Such a procedure, if insisted when credit/debit cards are used in shops and establishments other than banks and ATMs may reduce fraudulent use of credit/debit cards. When a genuine user is not carrying ID proof while shopping, taking a photo (charging a nominal fee) on a mobile will work as a deterrent against misuse.”
- M.G.Warrier
My View on "UTI finally gets a head, splits CMD post"
A second reading of the report brings forth the following disturbing truths: • It took 28 months to decide that one single person couldn’t fill the space vacated by U K Sinha. • Institutional shareholders could not guide UTI to find a suitable person to be appointed as CMD. • What prevailed was the view of a minority shareholder ‘from outside’ (the US firm which owned 26 per cent of UTI’s shares). • UTI did not have a succession plan in place for the top job and GOI or the public sector organisations which had majority shareholding did not take enough interest in sorting out issues, at various stages of selection process which led to rejection of a short-listed candidate. • While there is nothing inherently wrong in splitting the CMD’s post, the events that caused the split deserves study to avoid similar situations in any organisation in future. When organisations like RBI, which also depend on GOI to get its top jobs filled, can have all top vacancies filled reasonably fast, the UTI’s failure in this respect, which has partly contributed to stifling of the institution’s growth which has directly impacted the return on investments made by retail investors need to be probed for corrective action. Formulating and implementing succession plans for top government/public sector jobs with professionalism and efficiency in a graceful manner is imperative for allowing the institutions to function successfully in today’s environment where public sector organisations do not get a ‘level playing field’ as compared to private sector counterparts.
- M G Warrier, Mumbai
(Published in Business Standard)
How will RBI select entities for new bank licence?
......The most important category for me is the NBFC pure play. It is in a financial services sector and making an NBFC into a bank is a natural process of evolution, of a firm from one stage of existence to the other. So, government, Reserve Bank of India (RBI) should help these firms get into a higher form of organisation as it were. Second would be NBFCs with corporate banking. So, again I would prefer that, but one level lower than, so if I were to have a caste system of thinking, the highest, the Brahminical level really is the NBFC pure play. The second level is NBFC backed by corporates. Third I would look at.............
India to be rich with new banks
....The new banks will come up only 18 months after March 31, 2014, when a high-level committee (comprising top RBI officials and heads of public sector banks) approves the applications. The RBI is expected to be very stringent with the applications and could also look into the books of those who have applied for the bank licences. This is to prevent any siphoning of deposits or funds by the new banks into the applicants’ primary or other businesses. Meanwhile, most of the established players seem to be gung-ho about the new developments...........
Indian regulator relents on NBFCs
...........Yet, despite RBI’s softened stance on the timing of bond issues, the central bank was still intent on sending NBFCs a message that they needed to manage their liabilities more carefully, sources said.While RBI will not restrict the borrowers to issuance intervals of six months exactly, it still plans to place limits on what they can do. “A decision on the appropriate minimum time gap would be taken by the bank in due course,” the RBI said in last week’s notice. “NBFCs, in the meantime, are advised to put in place before the close of business on September 30 2013, a board approved policy for resource planning.”..........
New banks: more of the same
..........Finally, RBI will do well to look at a new bank for the new India. Not so much in terms of the rural and urban but in terms of the structure of the economy. The policy framework and regulatory institutions are still tailored for a world in which physical capital drove growth. So far, banking in India has been driven by project financing in the manufacturing sector. With the services sector contributes 55% (excluding construction) of the gross domestic product compared with 16% of manufacturing, large investments are being made in intangible assets.......
Bank licence will improve valuation of the listed parent
........The entire banking sector, including new licensees will have to raise huge sums in Tier-I capital over the next four years to meet Basel III norms. That means an expansion of capital base, including equity. In theory, that should reduce valuations. FPO and debenture issues will be successful only if floated by institutions with good reputations and decent balance sheets. The divide between low-valued PSU banks and high-valued private banks may grow. The RBI does a fair job in maintaining balance sheet standards. However, it cannot plug political gaps. It doesn't possess complete regulatory control of Cooperatives - most banking sector scams have a Co-op component. ..........
My View on "Post Bank of India?
India Post was toying with the idea of infusing professionalism and modern technology into its large banking business (let us accept the fact, though in a restricted way). No one can find fault with them for grabbing the present opportunity to express their wish. Some of the 26 applicants (there could be many who could not make it before the D-day) give a rough idea as to the kind of organisations which are serious about ‘converting’ the ‘money business’ they are already doing, into banking. At least in India, banks have more credibility and now there is a thinking that banking regulation will go into a ‘confusion state’ in the context of FSLRC which may allow certain applicants to have ‘best of both the worlds’. At the risk of repetition one is tempted to comment that opening of new banks should be an ongoing process based on need. Every organisation dealing with money need not be a bank. Organizational structure of banks in India needs a re-look in the context of various pending recommendations on financial sector reforms including those made by FSLRC. Bringing new players even before the rules of the game are settled may add to the confusion.
- M.G.Warrier
Overstepping the green shoots
............A Financial Chronicle Research Bureau analysis tracks the performance of the Indian economy on major economic indicators over the past one year and more, before and after the change of guard took place in North Block housing the finance ministry..............
Coop banks may get a breather
Cooperative banks are likely to get more time to comply with the new regulations of Reserve Bank of India (RBI) on banking operations as neither the Central government nor the regulatory bank has completed the preparations to switch over to the new payment regime. The RBI had set June 30 as the deadline for cooperative banks to abide by a four per cent capital adequacy norms and insisted that cooperative banks should make agriculture lending through RuPay cards. The RuPay-enabled credit card is the Indian domestic card payment network set up by the National Payment Corporation of India. The RBI had said that core banking solutions should be introduced in the primary cooperative banks through the District Cooperative Banks and agriculture lending should be routed through RuPay cards....
Banks urged to lend more for education, agriculture
.......The share of priority sector lending as on March 31 was 36.17 per cent against the required level of 40 per cent. As many as 2,537 education loans aggregating to Rs 53.45 crore were sanctioned during the quarter, taking the total outstanding to Rs 1,189.15 crore. Jayaprakash. K.R, Lead District Manager, Pradhan, AGM, RBI, V. Mohanan, AGM, Nabard, top officials from banks and various government departments participated in the meeting.
You have the right to privacy as a credit card customer
As a bank customer, you enjoy various rights to privacy and confidentiality when it comes to credit cards. The Reserve Bank of India has laid down various guidelines regarding the same and you are well within your rights to seek compensation if fair practices are not adopted by the credit card issuer...........
Battle against bulk deposits continues: Vijaya Bank CMD
........When the RBI cuts its repo rate (the rate at which banks borrow from RBI against the pledge of surplus government securities), it affects us very little. The portion of such borrowings in my total borrowings is abysmally small. Almost 95 per cent of my resources are from deposits. If the RBI tweaks the repo rate, there is hardly any cost implication, because my costs are not going to go down dramatically. I don’t think you can expect banks to react in a manner similar to the RBI. Repo rate cut is a signal from the RBI, and banks should look into it and explore possibilities of transmission. But the base rate decision is a function of cost. If cost undergoes a change, yes, there is a case for transmission.......
Flipkart moots easy gateway for online payments
The e-commerce major is getting RBI clearance for prepaid wallet service
.........e-Commerce retailer Flipkart launched its online payments solution, PayZippy, here earlier this week. Though currently it’s available only to merchants, the consumer-facing product that’s on the anvil will allow customers to save their card details and make easy transactions through their gateway..........
NSCB making ‘steady progress’ in the State
............On Reserve Bank of India’s instruction, NABARD had advised the State Governments to take necessary steps to improve the financial position of State Cooperative Banks so that it complies with the minimum CRAR requirement of 4% on or before June 30, 2013. The State government being a major shareholder of the Bank has, therefore infused Rs 1300.00 lakhs to stabilize the Tier-I capital to make it stronger as per the regulatory norms. The senior executives of the Bank in the meeting decided to launch vigorous recovery drive in all its 21 branches putting responsibility of each branch to senior officers. The bank also decided to publish the list of willful defaulters in the local dailies and to initiate legal action as per recovery act prevalent in the state...........
Irda asked to hold draft law on making bankers agents
.........The draft regulation had proposed a zonal system of bancassurance. Under this, the country was to be divided into three zones, and a bank could tie up with only one insurance company for a minimum of 10 regions and a maximum of 20. The three zones are divided into 40 regions. This meant banks had to tie up with a minimum of two insurance companies. In a communication to Irda recently, DFS said the exact purpose and rationale for taking up bancassurance on the geographical basis needed further discussions and clarity. It also suggested insurance penetration be increased through bancassurance in other ways rather than “disrupting the corporate agent arrangement on zonal basis”.............
State co-op bank set for recovery drive
..........“However the Reserve Bank of India has instructed all cooperative banks and National Bank for Agriculture and Rural Development (NABARD) has advised the state government to take necessary steps to improve the financial position of state cooperative banks so that it complies with the minimum Capital to Risk Weighted Asset Ratio (CRAR) requirement of 4% on or before June 30 2013,” ..............
Unruly protesters damage doctor's car
NAGPUR: Dr Ajay Soni, a pathologist, had a nightmarish experience near RBI square on Sunday when he was harassed by a group of protesters, who also damaged his car. The protesters had assembled at the spot over the serial bomb blasts in the temple city of Bodh Gaya. They ignored Dr Soni's repeated pleas to spare him, as he was heading to an emergency call from a patient's kin...........
Limiting the liaison office's boundaries
A liaison office of a foreign company is meant to explore/analyse the business options in a country. In India, such an office should obtain prior approval from the Reserve Bank of India and it cannot undertake income generating activities. Therefore, a liaison office is not taxable in India unlike a branch office, which is treated as a permanent establishment (PE) of the foreign company. The Karnataka High Court in the case of Jebon Corporation ruled that the Indian liaison office involved in price negotiations, securing orders, and so on would result in a PE. Whereas, in the recent case of Nike Inc, the court ruled that as the liaison office was limited to acting as a communication channel, more specifically for buying in India for exports, no income accrues or arises in India. The regulations have been clearly defined to limit a liaison office’s activity within RBI guidelines, beyond which Indian tax laws would apply.........
NPAs-The real picture
.......... By and large, PSBs concentrate on recoveries during the course of the year while major write-offs and prudential write-offs are done only in the last quarter. Therefore, the data for write-offs for almost all banks would be high in the fourth quarter compared to the recoveries........
Bank loans to small units may get cheaper
To encourage flow of credit to micro and small enterprises, the trust that provides guarantee cover on collateral-free loans extended by banks is considering lightening the annual guarantee fee burden. Once the guarantee fee gets rationalised, banks may be able to pare a tad the interest rate they charge borrowers in the micro and small enterprise (MSE) segment. The proposal being examined by the Credit Guarantee Fund Trust for Medium and Small Enterprises (CGTMSE) is that the annual guarantee fee should be payable on the sanctioned limit till the term loan is fully disbursed.................
RBI, SEBI to issue fresh warnings on Iran funds
To check flow of Iran money into the Indian banking system and capital markets, financial regulators RBI and SEBI will soon issue fresh warnings asking entities under their respective jurisdictions to remain vigilant about the entities and funds with Iranian links.......
QE3, weak basics’ role in June 2013 crash - DR. N. A. MUJUMDAR
.....The balance of payments current account deficit ( CAD) poses the biggest challenge to the Indian economy. The gap between investment and savings is reflected in the CAD. As a rule of thumb, a CAD of 2.5 per cent of GDP can be comfortably financed. With CAD soaring to 5 per cent of GDP in 2012- 13, the external payments position has become alarming. Although the CAD was financed without any significant loss of reserves so far, it should be realised that international capital inflows are capricious; and there could be large and sudden outflows, as we witnessed in June, which could disrupt the growth of the economy. Cutting down the size of CAD has thus become an immediate imperative. Unfortunately, our policy makers are focussing on financing the CAD, rather than on cutting down the dimension of CAD. This must change......
The colour of money
..........Dr Y V Reddy, former Governor of the Reserve Bank of India in his address on ‘ The role of financial education – the Indian case’ at the International Conference on Financial Education in 2006 had mentioned that “ Pursuant to the process of globalisation, the economic and financial landscape in India is undergoing a significant transformation. In the process, the economy has become more diversified with new sources of growth. In tandem with these changes, we have seen the modernisation of the financial sector that has also become increasingly more diversified to meet the new requirements of the economy.” In addition, he had mentioned that financial education assumes importance in this changed financial environment......
घसरत्या रुपयाचे अंतरंग - डॉ. आशुतोष रारावीकर
......रुपयाची सध्याची वेगवान घसरण रोखण्यासाठी रिझर्व्ह बॅंक व सरकारने निश्चितपणे उपाय अमलात आणले आहेत. (नाही तर रुपया आणखी घसरलेला आपल्याला दिसला असता.) परंतु याशिवाय काही दूरगामी गोष्टींची गरज आहे. निर्यातदारांनी नवनवीन बाजारपेठांमध्ये व "इनोव्हेटिव्ह' सुधारणा करून निर्यात वाढवली पाहिजे. देशातील थेट परकी गुंतवणूक, जी स्थिर रुपयाची असते, ती वाढली पाहिजे. त्यासाठी वेगाने परवाने द्यायला हवेत. लोकांनी सोन्याचे वेड कमी करून उत्पादनशील साधनांमध्ये गुंतवणूक करावी, ज्यायोगे सोन्याची आयात कमी होईल. रिझर्व्ह बॅंकेने जारी केलेल्या "इन्फ्लेशन इंडेक्स बॉंड'सारख्या रोख्यांमध्ये गुंतवणूक करावी...............
Will the party end?
.............It is possible to follow some simple rules. If both the US and Japan are up, India will open strong. If both are down, India will open weak. If one of those key markets is up and the other is down, the US is likely to be more influential. When the European markets open in mid-session IST, there could be a change in trend. On days when nothing much happens in the US or Japan, the Indian markets are also likely to range-trade. This pattern of correlation has held for the most part. The exceptional days have involved one of three things. There has been a policy review by the Reserve Bank of India. Or, some specific GDP-related Indian data has been released. Or, some local scam or another has highlighted political instability............
Less bang for your Rupee at Delhi airport’s forex counters
..........If you are going abroad or coming to India, don’t exchange foreign currency at the Delhi airport. In comparison to exchange counters in other parts of the Capital, here you will end up paying as much as Rs. 4-5 extra per dollar when you convert rupees into dollars. At the same time, you will lose roughly the same amount per dollar when you convert dollars into rupees. A similar disparity is observed in the case of other foreign currencies such as the euro as well...........
Speculation in forex market will continue
..........However, checking the speculation in the market has its own disadvantages. According to experts, RBI's decision to tighten its noose to curb speculations will drive investors to offshore markets, such as Singapore, through the non-deliverable forwards market. This will further worsen the situation. According to reports, the RBI's excessive intervention in the currency forwards and futures market in India, worth close to $9 billion, could result in a liquidity crunch and volatility, making it difficult for banks to look after the genuine currency needs of its clients.
How are exchange rates determined
How does a typical rupee depreciation or appreciation occur? While it may seem a complex process and in fact it is to some extent, but it’s not much different from how the prices of your mangoes are determined? While it may seem immature to compare currency movements with the prices of mangoes, the most important factor determining their price is the same – market forces of demand and supply...............
RBI wants curb on rupee forecast by bankers
.........Whether by communicating or by curtailing communication, the Reserve Bank of India (RBI) is taking all unconventional steps to arrest the fall in the rupee. In its latest move, RBI has told treasury officials of banks to not give rupee forecasts against the dollar - particularly to the media, analysts and in their reports. It affects market sentiments to a larger extent, particularly in a situation when rupee trading is volatile, it says.................
Read | Business Standard
Easy Money’s Over
...The
tightening of dollar inflows is a major inflexion point which signals
the end of the world of easy money. Global financial markets which
poured in
cheap dollars to buy up assets in developing countries, hoping to tap
demographic dividends and gain from the shift in global growth, will
lose the muscle to continue such flows...........
Now, Rahul Bajaj seeks RBI help to check Rupee volatility
..........Speaking to reporters here on Friday, Bajaj said that the Reserve Bank of India (RBI) should help avoid Rupee volatility. Otherwise, depreciation would result in all foreign exchange reserves disappearing. “This can be helped ultimately by increasing exports and decreasing imports,” he said. Questioning if there is a ‘right value’ for the Rupee vis-a-vis the (USA) dollar, Bajaj said, “ The ultimate sense is to be a real strong country.”...............
Govt set to review gold curbs
NEW DELHI: The recent measures to tighten gold imports have ended up creating a severe supply crunch for traders , prompting ministries to review the norms. Industry sources told TOI that gems and jewellery exporters are feeling the pinch as some banks have virtually stopped imports, while others supply with a lag. Besides, the import curbs have prompted banks through which shipments have to be routed to raise service charges, adding to the burden.............
Karnataka Bank shareholders agree to raising more capital via QIP
.......The resolution had stated that the aggregate amount to be raised through the QIP shall not exceed Rs 500 crore. Referring to the recent decision of Reserve Bank of India to issue new licences for banking in India, one of the shareholders wanted to know how it would affect Karnataka Bank. In his reply Ananthakrishna said that the bank would take all steps to improve its competitive edge. “Our staff members will respond to the competition and work for growth,” he said.................
Going back on gold import curbs now will be detrimental
..............So probably something is cooking. But one thing is for sure. If the government is going back on at least some of its steps, it will definitely push up the imports again and will be detrimental to the economy now. This is because things have only worsened over the last few months in the economy, with fast outflow of foreign capital weakening the rupee to record lows...............
Chit fund scam: Sri Chakra Gold Farms' managing director arrested
..........City police commissioner B Shivadhar Reddy told journalists that the company promised high returns on many daily investment schemes and has collected Rs 15 crore from around 32,000 investors and even started a fixed deposit scheme against the norms of the Reserve Bank of India. The company started Sri Chakra Schools, a supermarket and a shopping mall to convince investors about the firm's 'growth'............
Ponzi menace: Govt considering new law to plug regulatory gaps
........"Right now, it’s possible to design your company in such a manner and carry on your business in a way that you do not classify as an NBFC, a chit fund, or any other regulated entity," Chidambaram said in an interview. "These are regulatory gaps and what we are trying to do is to reduce these gaps to maximum possible extent, so that everyone falls either under the RBI, or SEBI, or the Registrar of Chits or under the state government, etc," he said............
CIBIL may now scrutinize your phone bill payment too
.............As per Reserve Bank of India’s guidelines, CIBIL can only share data with banks and not with individuals. On being asked if defaults on telephone bill payment could jeopardize the chances of an applicant receiving a housing loan or any other credit services, Chandorkar says: “This is part of data collection. How banks use such information depends on their credit policy. We collect and provide data; we do not issue any guidelines to banks about an individual’s creditworthiness.”...........
How to file I-T returns
........If you think you don't need to file the tax return because your only source of income is salary and the entire tax has been deducted at source, that is not the case. A tax return is a generally accepted proof of tax compliance for various purposes such as bank account opening, passport renewal, applying for loans, etc. Besides, if you have assets abroad, you will need to file a return. While the penalty for not filing income tax is only Rs 5,000, the failure to do so will result in your being shown as a 'defaulter' in government records, ...............
DBS to expand branch network 7 fold to build SME & HNI customer business
.............Development Bank of Singapore has 12 branches and has sought RBI's permission to open four more, in step with the Comprehensive Economic Co-operation Agreement between India and Singapore, which allows a maximum of 16 branches of Singapore based banks. It may open 80 branches in a decade. "Our hope is that this wholly owned subsidiary comes true. We will look to open 70-80 branches over the next decade that we can use to build our SME and high networth individual customer business," said Gupta...........
Taxpayers to get unique number for complaints
..."Whether the taxpayer files his rectification application by ordinary post, by hand or online, the receipt counter of the department will generate a special and unique acknowledgement number for the taxpayer by which he or she will be assured of solving the grievance within a stipulated time. The taxpayer can quote this number in any further communication with the department,".........
Saturday, July 6, 2013
Ambition sans innocence
........Whichever side of the debate one is on, there is no denying that the minimum that is needed for cash transfer is a system in place which can deliver the cash. The acknowledged fact is that there are hardly any banking services available to the poor. In illustration, this is what Dr Deepali Pant Joshi, Executive Director, RBI said in a talk delivered on 4 May 2013: “Under the roadmap for providing banking outlets in villages with population above 2000, banking outlets have been opened in hitherto 74199 unbanked villages comprising 2493 branches, 69374 Business Correspondents (BCs) and 2332 through other modes like ATMs, mobile van, etc.” And: “As per the roadmap drawn about 4,84,000 villages with population less than 2,000 have been allotted to various banks. Provision of banking services are to be made in the next three years.”.................
Welcome Women’s Bank, as Another Bank
......Now,
gender is not a good basis for licensing a bank. So, should we have one
more bank that will “mostly”, not solely, lend to women and employ
“predominantly” women? The simple answer is we need more banks. Yet
another bank makes eminent sense, as many people do not have access to formal credit. The RBI should allow more banks and also innovative forms of banking. The
government has done well to delink the licence for the state-owned
women’s bank from new private bank licences to be given by the RBI.
However, the need is to ensure that the upcoming bank to be called Bhartiya Mahila Bank, works on sound commercial principles...........
RBI campaign to create awareness on foreign exchange regulations
.......there has been a good response to the RBI programmes on financial literacy from all sections of the public, especially students. A.O Basheer, RBI General Manager (Mumbai), said the perils of financial illiteracy are too high to be ignored and therefore the public, the students in particular, should avail themselves of the outreach programmes of the RBI and learn to guard themselves...........
Foreign exchange expo
Reserve Bank of India unfurls its two-day exhibition on ‘Foreign Exchange for You’ at KRC Auditorium at GITAM University from Friday. Regional Director of RBI, Hyderabad A.S. Rao and a group of senior officials will be interacting with the visitors on foreign exchange transactions and help spread the awareness on its facilities available to residents and non-residents, rules involved in foreign direct investment in India and external commercial borrowings. The expo is open till Saturday between 10:30 a.m. and 5:30 p.m.
RBI Chief offers worship to Lord Venkateswara
............After an overnight stay on the hills, Subbarao and Urmila paid their obeisance to the presiding deity of Lord Venkateswara this morning and left the hills,................
Experian launches three new products
.......The theme for this year’s event was “The Next Frontier for Innovation, Competition and Productivity” and featured experienced and distinguished leaders from different industries, who shared their experiences on how they have leveraged data, insight and analytics in their respective organisations. The guest of honour at the conclave was Dr. K. C. Chakrabarty, Deputy Governor, Reserve Bank of India...........
'Allow banks to have pacts with up to five insurers'
.....There are other regulatory hurdles, too. RBI had said that banks assuming the role of insurance brokers could lead to a conflict of interests where the bank is also the promoter of an insurance company. “Further, some provisions of the exposure draft, if implemented, may expose the banks to reputational risks,” RBI had said in an earlier Financial Stability Report......
Make Aadhar common id for banks: RBI
........“Let us have only one ID, that is Aadhaar, which will be much more convenient to people and easier to identify,” said KC Chakrabarty, Deputy Governor, RBI. “The use of Aadhaar will help in rooting out many cases from identity frauds (due) to unauthorised documentations,”..........
All banks defy RBI circular on disclosing all service charges on their websites
.........During an ongoing research on bank charges, we discovered that banks are merrily flouting a directive by the Reserve Bank of India to disclose all charges on their websites.Not a single bank out of a sample of 20 (foreign, national and private banks), disclosed the complete list of basic banking service charges that a consumer would be charged during his day-to-day banking activities..............
Banking aspirants face a long road to Bharat
......... “Rural is going to be a challenge. It's difficult to comprehend risk because most of the rural population don't have income proofs and no proper documents. The second is that there are huge fixed costs involved; so small ticket sizes of businesses might not be enough for a branch that caters to a small area.” ...............
India's Risky Step to Boost Banks
............Experts worry that the RBI may not have the ability and staff to supervise all units and related parties of these proposed banks. "It's a challenge," said Thomas Richardson, India representative for the International Monetary Fund, adding that the RBI will need "to have additional skills and resources to keep track of the risks." But some experts say India could achieve some of this growth from existing banks itself..............
Indian Business = Good Banks
This
refers to ‘New Banks / Old Business’ (ET, Jul 5). Jaithirth Rao argues
against banking licences for industrial houses. Failed western banks
with diversified ownership structure were not controlled by industrial
conglomerates. The failure was largely due to the greed of professionals
to take advantage of the skewed incentive structure. Reference to the
late R K Hazari’s report, written in 1960s, is also not relevant as the
market conditions in India have substantially changed since then. Some
business houses, known for good governance, can add value to the banking
industry.
- S SOLOMON RAJ (ET)
- S SOLOMON RAJ (ET)
What is in new banking licence to attract companies?
.........What is in it for aspirants to get the banking license? This is the most important aspect of this analysis. The aspirants from the corporate sector have presence either in NBFC space or in financial markets or both. In the NBFC space, most are into lending to retail sector or commercial/ corporate sector or mix of both. The brokerage houses that are in the race have extended reach to mid to top end of the economic pyramid through their products and services across asset classes spanning equity, currency and commodity markets. So, for most aspirants, building client base and business around them is not an issue while the major advantage will be from building low-cost liability franchise through products that would involve use of checking accounts viz., savings and current account. The issue for them will be......
Post Bank of India?
...........The decision to foray into commercial banking now is only an extension of its presence in financial services through the post office savings bank which is used by millions across the country. Apart from offering savings schemes with attractive interest rates, post office savings bank accounts can be used normally like any other bank account. The name of the game in banking is an extensive branch network. And India Post is unbeatable in this with over 1.55 lakh post offices across the country, 90 per cent of them in rural areas. How many retail banks in the country can boast of such a network? The bank with the biggest network in India, SBI, has 14,816 branches; together with its associate banks the number will not exceed 20,000. Even if India Post were to convert just 10 per cent of its branches into banks, it will be larger than SBI.........
A Hobson’s choice
The Finance Minister, P. Chidambaram’s ‘advice’ to public sector banks to cut their base lending rates highlights the classic dilemma facing governments as both upholder of public interest and owner of firms – which, in this case, happen to be listed as well. There is no doubt that in the current circumstances, a cut in interest rates will do no harm to the economy. At the least, it will help companies to partially offset the cost push pressures from the rupee’s weakening and higher fuel prices, which they are unable to pass on in a weak demand environment. Thus, from a public interest perspective, Chidambaram’s resort to moral suasion is quite justifiable. But from the banks’ standpoint, a cut in base rates – below which they cannot lend – is easier said than done.........
Mr FM, interest rates in India should be at least 17%
.........the idea behind Chidambaram’s call for lower interest rates is that people are likely to borrow and spend more. And this in turn will get economic growth going again. Theoretically this just sounds perfect. But then theory does not always match practice. Banks raise deposits at a certain rate of interest and then give out loans at a higher rate of interest. So unless the interest rate offered on deposits goes down, the rate of interest charged on loans cannot come down..............
Now Chidambaram finds a friend in bank rate cut call
.....A day after Union Finance Minister P Chidambaram’s call to banks to pass on the benefit of rate cuts to customers, RBI Governor D Subbarao on Thursday said the central bank was also ‘very conscious’ of the need to be supportive of economic growth. On Wednesday, Chidambaram had exhorted banks to cut minimum or base lending rate in line with periodic interest rate cuts being made by the Reserve Bank of India (RBI).............
Poorvanchal gets first talking ATM
........The Talking ATM has a specially designed voice interface that enables the visually challenged customers to make transactions like pin change, balance enquiry and cash withdrawal independently just by following audio instructions that they will hear through the headphones both in Hindi and English specially made for the purpose. Also the ATM machine will have at several places, brail labels that will guide these customers as how to keep the machine display-screen blank while they are transacting............
Read - TOI
RBI to study fraud schemes targeting rural Tamilnadu populace
......In Tamil Nadu, the RBI would conduct an exploratory study in one district in consultation with the State government on why people became attracted towards fraudulent schemes and the modus operandi of the operators. “We will have 11 teams comprising junior RBI officers and each team will cover two or three villages,” Subbarao said. The RBI Governor also stressed the need to sensitise police officials on the issue and the need for track disposal of seized assets of the fraudsters to repay the public deposits. Stating that the Reserve Bank Staff College in the city would draw up a training capsule, especially for senior police officials, he exhorted the State government to help the Central bank in ramping up publicity about such fraudulent schemes. “The public can complain to any regulator and all regulators will coordinate resolution of complaints among themselves,” he said.............
Banks must improve Tripura’s credit-deposit ratio
KOLKATA, JULY 5:
Banks should take measures to improve the credit-deposit ratio of Tripura to 40 per cent by March 2014, up from 34 per cent as on March 2013. At the 105th SLBC (State level bankers’ committee) meeting held in Tripura recently, banks have been asked to set up branches in 80 locations and install 170 ATMs to enable financial inclusion..................
Police suspect persons outside law enforcement
.........The police are also not ruling out the possibility that any one of their own men, perhaps those moonlighting for private detective agencies contracted by certain victims of the financial fraud or others with strong political associations, could have sourced the call data record of Sarita through illegal means and leaked it to television channels. Investigators said that other than law enforcement agencies, only the Reserve Bank of India and the Securities and Exchange Board of India (SEBI) were recently given power to access CDRs to investigate cases of insider trading and money laundering..........
Scam-accused Kedar 'brokers' property deal for coop bank's revival
NAGPUR: The Nagpur District Central Cooperative Bank (NDCCB), which was left with a hole in its balance sheet due to the government securities scam which took place 11 years ago, is likely to get an indirect bailout package from the state government. The bank, which is facing strictures from the RBI, needs Rs 44 crore to wipe out its past losses due to the Rs150 crore scam, in which its former chairman, and now a Congress MLA, Sunil Kedar is one of the accused...........
UTI finally gets a head, splits CMD post
.........More recently, shareholders rejected Puri’s candidature after he was short-listed, citing lack of qualifications as mentioned in the advertisement. Puri has a dual Masters degree from Oxford and Cambridge, while the job advertisement required UTI’s CMD to have a management degree or chartered accountant. The requirement was revised later. After the split of the CMD post, the chairman’s post is likely to be taken up by a veteran public sector official in a non-executive role................
M.S. Raghavan takes charge as IDBI Bank CMD
M.S. Raghavan has taken charge as the Chairman and Managing Director of IDBI Bank. Prior to this, he was the Executive Director of Bank of India. Raghavan will be at the helm of IDBI Bank up to end-June 2015..........
Vijaya Bank’s ‘GenNext’ branch
....... “The younger generation, with high disposal income, exposure to latest trends and innate knowledge of technology, has specific banking needs. To cater to their needs, the GenNext branch is being opened.”.....
Nabard issues clarification
.....“The RBI has the responsibility to evolve a stable, safe and secure payment system. The financial transactions like ATMs work through their payment system. Therefore, the membership to the payment system is restricted only to banks. Thus, there were no instructions from Nabard specifically to primary agricultural cooperatives as to issuance of KCC to farmers. Cooperatives should understand the emerging reality,”............
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