LawMin to decide whether Aadhaar's e-KYC is valid

.....Several months after it was launched with much fanfare, the ambitious plan of the Unique Identification Authority of India, or UIDAI, to substitute physical verification with electronic know your customer (KYC) authentication as a means to provide government services, including opening bank accounts, is yet to take off. Reason: There are still doubts on the current legal sanctity of the proposal..............

Read | Business Standard

Account statement must be provided for free

The banking regulator has repeatedly instructed banks not to force periodic ‘statement of accounts’ on savings bank customers who prefer the passbook facility. Yet, some banks are neither listening to their customers nor the regulator. If you see the latest Master Circular on Customer Service, issued by the Reserve Bank of India (RBI) last week, there is a clear instruction to banks to offer pass book facility to all its savings bank account holders (individuals). “A passbook is a ready reckoner of transactions and is handy and compact and as such, is far more convenient to the small customer than a statement of account,” the RBI says........

Read - HT

Banking to be easy at home, away

...........According to RBI officials, the earlier regulatory prescription that 'charges should be reasonable' had not achieved its purpose and proper pricing of these basic banking services, especially for lower category of customers, had not been addressed. With the introduction of CBS, it was expected that customers of banks would be treated uniformly at any sales or service delivery point. "Some banks were discriminating against their own customers on the basis of one branch being designated as the 'home' or 'base' branch where charges are not levied for products/ services and other branches of the same bank being referred to as 'non-home' branches where charges are levied for the same products/ services," the RBI said........

Read - IE

Credit Information Companies: Seeking New Frontiers

........RBI has been rather proactive in adopting some of the global best practices of positive data sharing right from the inception. Even mature bureau markets like Brazil and Australia have started witnessing a move towards a limited positive data sharing environment only as late as 2013. Several other jurisdictions have also started evaluating the possibility of increasing the scope of credit reporting...........

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Global Regulator may Simplify Bank Rules

The world’s main bank regulator may simplify a mass of new rules coming in for the industry, a sign that watchdogs are still grappling with how best to keep banks in check nearly five years on from the financial crisis. The regulator, the Basel Committee on Banking Supervision, on Monday published suggestions on how to simplify its new regulations after an internal review of whether the rules, designed to safeguard the world’s financial system, had become too complex............

Read - ET

Financial inclusion: Rural credit architecture needs an overhaul - M.G.Warrier

........Rise in rural deposits and urban credit created imbalances and certain bypass routes were allowed for banks to achieve their priority lending targets. Like Mutual Funds (MFs) investing in schemes of other MFs to pair risks, banks started searching for other intermediaries like microfinance institutions (MFIs) for providing credit to small borrowers. MFIs, in some cases borrow from banks at low rates and lend at up to three times the borrowing rates, in the same area where bank branches function. So as long as banks source rural deposits, they should also shoulder the responsibility of providing credit in rural areas at reasonable interest rates. The situation calls for a review of the entire rural credit architecture for an overhaul.

Read - Moneylife

Present economic Situation and IMF loan - Dr.T.V.Gopalakrishnan

.......The Financial System has to be given a facelift and the initiative has to come from SEBI to attract NRIs to Indian market in a large scale.Better to avoid foreign debt particularly IMF loan as it may have its own baggage to be taken care of and that also will affect the masses. Any measures without taxing the ordinary masses are welcome.

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Ganesha coins minted in Germany, issued from Africa!

Dubbed as the first "currency coin" on Lord Ganesha, a limited collectors' edition minted in Germany is being issued by the government of the Ivory Coast in West Africa. The coins from Germany's Mayer mint are made of pure silver with a coloured image of Lord Ganesha on 'peepal' leaves inscribed with the Sanskrit 'sloka' 'Vakratunda Mahakaya'..................

Read - FE

India’s RBI Said to Discuss Dollar Purchases With Biggest Buyers

..........The central bank and the refiners are exploring the possibility of mandating a single state-run bank to sell dollars to the companies, eliminating bids that fuel speculation in the rupee, the person said, asking not to be identified because the matter is confidential. Another option is for the RBI to sell dollars directly to the oil companies, the person said..........

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The fall spells more trouble

..........The RBI, which has warned of upward risks to inflation on account of the rupee weakness, has kept on hold its indicative policy rate in the last June 17 policy meet. “We are afraid it may be forced to hold on to its rates even in the coming policy also if things do not improve on the rupee front. This, in turn, will further dampen investor sentiment and hurt stock markets,’’ the report added..........

Read - The Hindu

Managing the rupee fall

...........In other words, the government should let the rupee depreciate. A falling rupee is not a hit to national pride - it is merely a basic economic consequence of India's struggle to pay properly for its gold and fuel imports, and the invisible hand's way of counteracting that demand. It is precisely because the rupee is falling that the danger of a serious balance-of-payments crisis is not even more acute than it already is. The trouble is that some companies that have considerable external exposure will find themselves unable to cover their dollar debt. Again, given the nature of India's political economy, there will be pressure on the government to somehow bail those companies out..............

Read | Business Standard

The rupee's wake-up call

...........To dampen the additional inflationary pressures implied by a weaker rupee, more aggressive fiscal retrenchment is needed. Even so, a depreciated rupee will increase the burden of repaying foreign debt, and deepen the woes of domestic companies and banks.

To reclaim its promise, India must foster a new generation of productivity growth. The time for action is now. Unfortunately, a serious crisis may be required to initiate that response.

Read - FE

The weight of a sinking rupee

.....With the rupee having lost 9.27% so far this year and little sign of the trend reversing amid overall economic gloom, we look at how India is doing on various indicators and what’s likely to happen............

Read - Mint

Boost Economy, Rupee will Revive

........Once markets are thus encouraged to respond to fundamentals rather than to foreigner whim, the positives of US recovery for India will filter through. If the government stops merely monitoring project implementation and starts sacking non-performers instead, public investment would revive as well...........

Read - ET

RBI is likely to pause in July review of monetary policy: K Harihar, FirstRand Bank Ltd

............ In fact, the former Deputy Governor of the Reserve Bank of India, S S Tarapore, who is very well respected, he in fact urged that the rupee's real value, fair value should be something quite alarming at 70 to the dollar and while we might not go up to 70, is there a case for allowing the rupee to weaken further if only to restore competitiveness?...........

Read - ET

Hedging surge prompts central bank inquiry on rupee moves

The Reserve Bank of India (RBI), concerned about the fastest growth in currency derivatives trading in a little over three years, is asking foreign funds to prove they were not speculating on the rupee. Futures and options trading involving the currency rose 47 per cent to a daily average of Rs 38,770 crore ($6.4 billion) in June on the National Stock Exchange of India, the biggest jump since January 2010............

Read | Business Standard

Bank loan recasts top Rs. 2.5 trillion

.......Large-scale restructuring of loans given to firms began in the aftermath of the 2008 global financial crisis. A liquidity crunch that followed the crisis and the slowdown in global markets affected companies in India too, forcing banks to recast loans across sectors such as textiles, real estate, power, and gems and jewellery. About 10-15% of the loans restructured then are believed to have turned bad. This time the proportion could be higher, said analysts, because RBI has been slow to exit from its tight monetary stance. In 2008-09............

Read - Mint

SBI may raise home loan ticket size with likely spread cut

India's largest lender the State Bank of India (SBI) may launch a new home loan product that is expected to facilitate millions of home loan borrowers to avail higher credit limit at a lower interest rate. It is learnt to have already submitted the product proposal and it is awaiting for the final nod from an internal policy making body - CCPPC (Credit Pricing and Processing Committee)...........

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SBI launches State Bank Xpress Money prepaid card with UAE Exchange

State Bank of India (SBI) today launched State Bank Xpress Money Card a co-branded prepaid card  that can be loaded up to Rs 50,000 with UAE Exchange and Financial Services, for loading inward remittances received under money transfer service scheme (MTSS) of Reserve Bank of India (RBI), on VISA network............

Read | Business Standard

SEBI finally replies to former secretary Sarma on MLM menace

........While the RBI has maintained that the deposit-taking companies does not fall under its jurisdiction, market regulator SEBI tried to rein in such companies in the past under its CIS regulations. However, these companies managed to subvert the SEBI orders and continued to flourish with political patronage. In its reply to Mr Sarma, the market regulator said, “MLM schemes in the nature of money circulation schemes are banned under the central legislation titled Prize Chits and Money Circulation Schemes (Banning) Act 1978 (PCMCS Act) and as such these do not fall within the purview of SEBI”............

Read - Moneylife

Three YES Bank directors not 'fit and proper', says Madhu Kapur family

..............In rejoinders and draft amendments to their petition filed with the Bombay High Court today, the Kapur family has said "defendant numbers 7 (Nanda) and 9 (Srinivasan) do not meet the fit and proper requirement of age criteria of 35 to 65 years, as prescribed by the RBI circulars being relied upon...Both defendant numbers 7 and 9 as per the AGM (annual general meeting) notice are 69 years old."............

Read | Business Standard

In Diplomacy at Home, Govt Set to Repair Ties with RBI

......The government is moving to improve its relations with financial regulators, particularly the central bank, ahead of a possible coordinated effort to stem the rupee’s slide. There is concern that public airing of differences by policymakers is hurting management of the economy at a time the currency is plumbing new depths. One measure being considered is to appoint a senior official in the finance ministry to work closely with the regulators.  The initiative to fix the working relationship between the finance ministry and regulators comes amid a growing feeling at the top levels of the government and RBI that concerted action is needed to stop the slide of the rupee,.................

Read - ET

RBI top post: Saumitra Chaudhuri frontrunner

Planning Commission member Saumitra Chaudhuri has emerged as the frontrunner for the post of next Reserve Bank of India governor. The government plans to issue the orders once the appointment committee of the Cabinet formally approves Chaudhuri's name. The term of present Governor D Subbarao ends on September 5. Prime Minister Manmohan Singh is learnt to be in favour of Chaudhuri as India's monetary policy regulator, to work in tandem with the government at a time when the economy is facing a downturn.........

Read - IE

Raghuram Rajan leads race for RBI Governor post

NEW DELHI: With less than 60 days to go, government's chief economic adviser Raghuram Rajan is seen as the frontrunner to be the next Reserve Bank of India governor, the most sought after job in the financial sector. Although there is no decision on who will succeed D Subbarao on September 5, Rajan, the former IMF chief economist , has emerged as the key pointsman for finance minister P Chidambaram, dealing with issues as diverse as a new development index to calm down nerves in the markets.........

Read - TOI

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...........

Read - ET

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...........

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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.......

Read - The Hindu

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?.........

Read - HBL

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,”..........

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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.

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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.............

Read | Business Standard

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..........

Read - The Hindu

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.............

Read.........

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...........

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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.”..........

Read - IFR Asia

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.......

Read - Mint

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. ..........

Read | Business Standard

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..............

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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....

Read - The Hindu

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.

Read - HBL

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...........

Read - Mint

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.......

Read - HBL

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..........

Read - The Hindu

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...........

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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”.............

Read | Business Standard

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,” ..............

Read - Nagaland Post

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...........

Read - TOI

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.........

Read - HBL

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........

Read | Business Standard

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.................

Read - HBL

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.......

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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......

Read - FPJ

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......

Read - FPJ

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...............

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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............

Read | Business Standard

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...........

Read - HT

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.

Read - The Sunday Guardian

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...............

Read - HBL

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...........

Read - ET

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.”...............

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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.............

Read -TOI

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.................

Read - HBL

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...............

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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'............

Read - TOI

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............

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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.”...........

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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, ...............

Read | Business Standard

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...........

Read - ET

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,".........

Read | Business Standard

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.”.................

Read - The Statesman