...........The report was prepared by an internal working group on implementing CCCB in India, headed by RBI Executive Director B Mahapatra. The report said the credit-to-gross domestic product (GDP) ratio would be used to take decisions related to the CCCB. Factors such as growth in gross non-performing assets, incremental credit-deposit ratio for three years, interest coverage ratio and house price index also be considered..........
The very purpose of VITALINFO is to provide a platform for wider dissemination of updated information related to and happening of events in and around RBI.
Tuesday, July 22, 2014
Need to bolster our reserves
...............Besides short-term debt, sharp swings in capital flows are also a contingency that must be kept in mind in judging whether or not our reserves are adequate. This was highlighted by the SS Tarapore committee on capital account convertibility way back in 1997. One precondition was that cumulative portfolio investment inflows and short-term debt must not be more than 60 per cent of our foreign exchange reserves. In other words, our forex reserves must be plentiful – in fact, with a margin to spare — to take care of heightened volatility in capital flows in and out of the Indian economy and to meet our most pressing debt obligations without defaulting!............
Read - FPJ
Infra bond norms a plus for Indian banks: Moodys
.................The new regulations are also expected to foster an improvement of banks' competitive positioning vis-à-vis housing finance and infrastructure finance companies. Moody's said banks' lower cost of funding allows them to be much more competitive on pricing. This is especially relevant for basic mortgages, where............
Needed: A modern bankruptcy law for India’s financial markets
........Banks and NBFCs recovered loans through muscle men who even resorted to physical assault. Small borrowers faced hard times as they had borrowed to go with the tide of consumerism without being able to predict the disaster. Reports of suicides by defaulters surfaced. The Reserve Bank of India was forced to intervene and court orders were passed to stop banks from using muscle men. During this period voices for review of the personal insolvency laws surfaced. The terms insolvency and bankruptcy are not synonymous, though both deal with liabilities exceeding assets — insolvency refers to a ‘financial state’ and bankruptcy to the distinct legal ‘private state’. The laws regulating insolvency are the Presidency Town Insolvency Act of 1909 covering Kolkata, Chennai and Mumbai and the Provincial Insolvency Act, 1920 for the rest of India.......
Fixing NPA problem of banking sector, step by step:
..According to Kotak, potential economic recovery and lower interest rates over the next two-three years will improve banks’ and borrowers’ financial condition. Creation of a bad bank and transfer of impaired assets to the bad bank is a possible solution to this. Asset reconstruction companies can play a similar role in the Indian context. Lower interest rates can result in lower interest expenses for borrowers and investment gains for banks that can offset NPLs. A 100 bps decline in interest rates can add 1-3 percent to the net worth of certain PSU banks, the report adds. Apart from these generic solutions.........
Reserve Bank study finds Gujarat has to spend huge funds from coffers to pay up for interest taken on loan
A new study, “Debt Sustainability at the State Level in India”, by Balbir Kaur, Atri Mukherjee, Neeraj Kumar and Anand Prakash Ekka of the Department of Economic and Policy Research of the Reserve Bank of India (RBI), has found that, as of March-end 2013, a huge 17 per cent of the revenue expenditure of the Gujarat government goes into paying up interests on loan taken by it over the years, which is higher than most states. Suggesting that this is ........
KBS Local Area Bank may become a small bank
...........“The concept of small bank is interesting. From a strategic point of view it offers a lot of opportunity. But we will take a final decision after discussing the matter at the board level, and with our shareholders and investors,” Manmath Dalai, managing director and chief executive of KBS Local Area Bank, told......
Crop loan waiver: new twist to loan waiver
The waiver of crop loans in Telangana took a new turn with the RBI seeking a fresh report on the damage caused to crops on account of heavy rains/hailstorms due to the Phailin cyclone in October last year. The government had declared over 300 mandals as cyclone-affected to seek reschedulement of loans amounting to Rs 7,000 crore. However, the RBI wants to examine the cyclone effects on its own............
If merged, HDFC-HDFC Bank to be 2nd largest after SBI: IDFC
........According to Chowdhary, this merger will lessen the cost of merger entity and the cost of transition will also decline as cost of regulation reduces. Also, this merged entity would be the country’s second largest financial services player post State Bank of India (SBI). Chowdhary expects the merged entity to benefit HDFC Bank particularly. IDFC has an outperform rating on HDFC Bank as it expects the lender to continue posting healthy earnings going ahead..........
Why the HDFC Bank merger with HDFC does not make great economic sense
............ Their combined market valuation could top Rs 3,50,000 crore, leaving both State Bank of India (Rs 1,93,000 crore) and ICICI Bank (Rs 1,67,000 crore) far behind. However, beyond size and scale, the merger might not make too much economic sense to the combined entity, at least in the initial two or three years. This is because it will take the combined entity that much time to fully utilise the leeway provided by the central bank to raise long-term funds and generate cheaper current and savings liabilities matching its assets.............
HDFC, HDFC Bank say merger idea still premature
..........."The board of directors of both companies have met, but the merger proposal hasn't been considered yet. As a result, it will be too premature to say anything." Since HDFC is a non-banking finance company, CRR, SLR and PSL targets are applicable to it. However, if it goes for a merger, the merged entity will have to adhere to regulatory requirements on these fronts. Though RBI has granted forbearance to banks, the norms are applicable to future funds, not to existing books. This is seen as a hurdle to a merger........
Bank of Maharashtra to float infra bonds
.......“We hope to build up the infrastructure portfolio and go for infra bonds soon… maybe, earlier than six months,” Bank of Maharashtra CMD S Muhnot told media persons on the sidelines of a banking conclave, organized by Ficci. Muhnot said the funds raised would help the bank increase its exposure to the sector to about 17% of its loan portfolio by this fiscal-end from the current 14%.........
Monday, July 21, 2014
FinMin spanner in RBI's COO talks
.............The Union Budget was presented on July 10, the same day the RBI board was to meet in Chennai. This was a constraint for the government-nominated board members in attending. Shortly before the meeting, the finance secretary's office sent a letter to RBI stating such issues should be discussed only when the government nominees were present, according to a person with direct knowledge of the matter. The letter suggested RBI defer the issue till the next board meeting, where the government nominees will be present.......
Justice Srikrishna defends FSLRC recommendations
.........“Thankfully the independent academic Dr Rajan also disagrees with the RBI Governor Dr Rajan on this aspect. In his 2009 report, A Hundred Small Steps, Dr Rajan wrote, ‘regulatory actions should be subject to appeal to the financial sector appellate tribunal.’ This is the thinking that guided the FSLRC’s deliberations,and it is the position we still take today.”......
Common concerns over technology in financial sector
............We thank reader M. G. Warrier from Mumbai (mgwarrier@gmail.com) for his extremely perceptive observations in response to our last week’s article. He points out that the term ‘middle-class’ refers to “the majority of people sandwiched between the rich and the poor and facing extinction in the near future by migrating downwards to the BPL (below poverty line) category as and when the poverty line is drawn realistically.’’ That then is a vivid description of the deep insecurity the middle-class faces. There are several aspects to this — last week we raised a few issues and in this column we will try to discuss a few more. Examples are drawn from banks, but the observations are valid for the whole of financial sector..............
Con men pose as RBI officials, directly call victims
..............Fraudulent emails sent in the name of Reserve Bank of India Governor Raghuram Rajan to unsuspecting people, seeking details of their bank accounts to send 'income tax refunds' directly to them, are passe. Con men are now directly calling people and posing as senior officials from RBI, while seeking details of their debit cards. RBI, who have only just begun receiving complaints from people about the fraudulent calls, however, stress that they never seek such details for any purpose, and have warned members of the pubic to refrain from responding to bogus calls. ...........
RBI’s circular: Patil joins in chorus
..........According to the minister, the state govt is opposed to the RBI circular and would urge the central govt to get this circular withdrawn. If this step was not taken, it would mean depriving the cooperative sector of nearly 20 thousand crores of rupees. The state govt would soon send a delegation to New Delhi, the minister added...............
UFBU Meeting for Wage Revision Meeting Date!!!
New Govt has praised importance of Public Sector Banks but not cared about the pending wage revision of bank employees since November 2012. Now bank employees are compelled to call meeting on 15.07.2014 for urging date for wage revision meeting date...........
Obituary
A.BALAGURU, RBI, Chennai expired 18-07-2014. Funeral at 11 a.m. on 19-07-14. Mourned by Family & Friends. Contact: 8220019287 & 9841058245
Now a New Year deadline
........The reason for this being that notes printed and issued from 2005 onwards have better security features and cannot be easily counterfeited. However, that is not the case with pre-2005 notes which makes them susceptible to counterfeiting. The move is well-thought out drive to flush out the fake notes from the economy. The RBI governor Raghuram Rajan has already emphasized that this move is aimed not at demonetization but a technical action to reduce counterfeiting of banknotes and provide more reliable currency to the public. Having said that, RBI does recognize that withdrawal of pre-2005 notes on a nationwide scale is a time consuming affair...........
Now, taxman will contact you directly
............The move will not only secure communication between the IT Department and taxpayers, but also improve efficiency of the e-filing process. The directive states that the validation of the mobile number and e-mail ID is a one-time process. However, if the taxpayer changes his or her mobile number or e-mail address, he will have to register the new number or e-mail ID again. Taxpayers have also been directed to include e-mails from the IT Department in the `safe' or `white' list so that the communication from the department does not get blocked, rejected or end up in the spam folder, the directive states. A single mobile number or e mail ID can be used for a maximum of 10 accounts.........
Read - ET
Let your pot of gold create social impact
..........According to the RBI, 60 per cent of the population does not have a bank account. These people depend on money lenders. When a customer takes a loan from an MFI, he builds a credit history; now we also have credit bureaus that have close to 100 million records. MFIs get this section of the population into the mainstream. If banks want to lend to them at a later date, they have a credit history to base their decision upon. People doing small businesses or the unorganised sector, who do not have salary slips, PAN number, etc., now have proper records to back their income and cash flows......
The currency wars
In October 2012, then Reserve Bank of India governor D Subbarao had asked visiting US Fed chairman Ben Bernanke and treasury secretary Timothy Geithner for a rupee-US dollar swap arrangement. The two had refused, saying the Indian rupee was not fully convertible and so it would not be possible for a swap to work. Two months later, the RBI signed a swap deal for $15 billion with the Bank of Japan. It has now been extended to $50 billion..............
A Budget, not a moon shot
......... If these targets can be achieved they will help reduce inflation more rapidly and allow the Reserve Bank of India to reduce interest rates and help revive growth. With faster growth more revenues will make fiscal consolidation more achievable. Early introduction of the GST would help, as it will boost revenues albeit with some lags...........
Elusive revival
.........However, a sustained economic recovery is a complicated task if we look at the underlying trends. The government has committed itself to fiscal compression. Inflation is still enough of a problem for the Reserve Bank of India to shy away from rate cuts. Investment activity is still weak. The global economic recovery is uneven. A year after the............
Govt lines up big fin inclusion push
.....The proposed comprehensive financial inclusion programme envisaging insurance and pension cover, apart from a default cover for lenders is likely to envisage opening 15 crore more bank accounts, 12 crore of which will be in rural areas over next four years, according to a note sent to the Indian Banks Association (IBA) by financial services secretary G S Sandhu. According to the note, Modi’s new comprehensive financial inclusion programme has three major shifts from the one pursued by the previous government........
Government ARC: a bailout by another name
..............This is not the first time that a proposal for a public sector asset reconstruction company has been floated. A similar proposal came up during the first NDA regime as well, at a time when Indian industry was going through a recession, and bad loans in the banking system had spiked. Thankfully, the proposal was nixed at that time and instead a new regulatory framework for ARCs was created by legislating the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act in 2002. That act led to the setting up of the............
RBI starts scrutiny of cos suspected of illegal money raising
..................Sources said the Reserve Bank of India (RBI) has begun analysing details of entities, which are believed to have raised money from the public illegally without getting registered as NBFCs. The cases are being pursued after reference from the Corporate Affairs Ministry to probe 34,754 companies (other than those registered with RBI). NBFCs are regulated by the RBI........
Andhra Pradesh to mortgage institutions
.......... The government has decided to mobilise funds without depending on RBI rules to implement the waiver of farm loans. Another option under consideration by the state government is issue of development bonds. Mobilisation of additional funds to implement waiver of farm loans has become a big problem for the Andhra Pradesh government........
Infra financing: Barking up the wrong tree
.........So, are good days here for banks and companies setting up infrastructure projects? I’ve a slightly different take on RBI’s two-pronged approach to prop up infrastructure financing and protect banks from asset-liability mismatches. Since there is no cap on maturity of bank loans and no bar on refinancing loans, there is nothing new about the 5:25 model. Banks are always encouraged to resort to take-out financing—a method of providing finance for longer duration projects by sanctioning medium-term loans with an understanding that the loan will be taken out of books of the financing banks after a certain number of years. The take-out financing model has not taken off. So, RBI has tweaked it and................
Differentiating to include
.............The thrust of the RBI's strategy now is to move from mandate to viability, which requires a completely different model to address those three critical factors. De-risking is the key element of the payments banks proposal, while local knowledge is what is supposed to differentiate the small banks. By drawing boundaries on what both types of institutions can do, a separate space is being carved out, which is under no real threat from the bigger players. This also encourages a range of players to try their hand at it. However, it must also be recognised that........
Niche banking
.........The move to licence payments banks is an acknowledgement of the scope for niche banking in India. You don’t need all banks to do the same thing; in fact, technology already permits financial inclusion to be achieved in ways other than through the opening of more brick and mortar branches in remote locations. What matters eventually is that the delivery of financial services is economical — mobile firms charge about 1 per cent against the 5 per cent for sending money through India Post — while ensuring customer protection and no risk to financial stability. The latter concern is largely addressed by the stipulation that depositor monies be invested in government bonds below one-year maturity. The ultimate objective should be to enable every Indian to have a safe and secure bank account. Such .........
Some players likely to stay away from second round of bank licensing
Doubts over financial viability of small and payment banks could keep away some players from the second round of bank licensing. The central bank's proposal to ring-fence new banking entities from any financial or non-financial services of the promoter could also play a spoilsport. The Reserve Bank of India on July 18 kicked off the differentiated banking licence regime by proposing, in its draft guidelines on small banks and payments banks, to allow the ..........
India's youngest bank Bandhan to empower women, rural folk
......Ghosh said RBI Governor Raghuram Rajan wants the new bank (Bandhan) to penetrate poverty-hit rural areas to promote lending and saving among farmers, small businesses and others whom traditional banks have been reluctant to serve. "Bandhan is a third generation bank. Instead of ATM (Automated Teller Machine), our 275,000 human teller machines have been in constant touch with the rural people, specially women." Ghosh said that he had all the time given emphasis on the "practicability of the business, whatever may be the volume of trade.".....
Bandhan gets 25,000 applications for 15 posts in proposed bank
...........On July 2, Bandhan, the microfinance institution, which recently got an in-principal nod from the Reserve Bank of India to start a bank, came up with an advertisement for 15 posts in the proposed bank. In nearly 17 days, the MFI has received more than 25,000 applications for the posts, according to C S Ghosh, chairman and founder, Bandhan. In addition, several top-notch executives of the corporate world expressed interest in joining the bank, informed Ghosh.........
Road map for PSU banks fund-raising by next month
..................Next month, the government will frame a draft Cabinet note on equity dilution in State Bank of India (SBI), the country's largest bank. "We have not yet decided on SBI stake dilution. We are preparing a road map at the moment (for raising capital by public sector banks)," Financial Services Secretary G S Sandhu said at a Canara Bank event here............
Move over, big brother
.............It is too early to say whether these mechanisms will challenge the role of the International Bank for Reconstruction and Development (IBRD) or the World Bank and the International Monetary Fund (IMF), which have been the bedrock of the Bretton Woods system under U.S. hegemony. But they at least serve as a reminder that the era of Western and American dominance of the world is ending, giving way to a more complex and diversified world order: the multiplex world. The move by BRICS, though outwardly economic in nature, has serious geopolitical undertones...............
Questions remain on viability of proposed payments banks
...While most agree there is space for such banks in India, the restrictions and conditions proposed have raised questions on whether the model would be a viable business proposition. Payments banks are a new category of banks envisaged to provide limited services such as accepting savings deposits and remittances, particularly in rural areas. One key concern will be profitability. This is because payments banks will not be allowed to lend, effectively cutting off interest income—the main income source for a bank—although remittance services are permitted and could become the main income stream. Again,...............
BRICS Bank: Taking shape despite the fluidity around
..........So what actually will it be? The beginning of the end of western control over global financial systems, or an idea that will collapse as its members start to fight amongst themselves? I’m biased, of course. Like the Chinese ambassador to India, and Raghuram Rajan, I believe that developed countries still owe a debt to emerging nations for the aftermath of the 2008 financial crisis, which they’ve refused to pay. I can still be objective though. .......
Bharatiya Mahila Bank races past Rs 1 crore deposits in just seven months
........Interestingly, all the loans have been taken by women but in case of account holders, women make 98% of the total as men also have opened accounts in the state's only women's bank. The officials believe that the interesting loan schemes including loans for opening beauty parlour and kitchen modernization along with traditional house, car and education loans and lower interest rates on loans are the reason for the banks increasing popularity among women............
Set to grow faster, but won't sacrifice profitability: ICICI Bank
.............Kochhar, who implemented her famous '4C-strategy' at the bank soon after taking charge as Managing Director and CEO of India's biggest private sector bank in 2009, also said that this strategy has worked well and a foundation has been put in place now for the bank to grow at a faster pace than industry. However, this growth won't be at the cost of profitability or by getting into a high-risk business model, Kochhar told............
Banker Who Believes Client is Always King
.........But the grueling experience taught him to be calm and to be in control of his emotions, virtues that have rewarded him well during a career working in every department of the banking business and building relationships with clients. Mehra’s IIM batch incidentally was a year senior to that of Raghuram Rajan, now the Reserve Bank of India Governor..............
HDFC, HDFC Bank merger buzz restarts
The buzz over a possible merger between HDFC and HDFC Bank,which was talked about a decade ago in the aftermath of the ICICI-ICICIBank merger, has once again resumed. All the pieces appear to be falling into place with the RBI classifying low value home loans as infrastructure lending, which is exempt from reserve requirements such as CRR and SLR. HDFC has been disbursing loans efficiently and maintaining growth despite its size, and its sheer scale now makes it a strategically important institution. There is also a thinking that such a big organization should now be regulated as a bank. Should a merger happen, the new entity will be the second most valuable company in India after ONGC, considering that the combined value of the two institutions at current market prices is well over Rs 3.5 lakh crore.
HDFC Securities launches 'e-Will' writing service
.............There has been tremendous response to this product and a large number of customers across the country are getting themselves registered because of convience factor everyday, he said. To begin with, he said, 'Do it Yourself Will Service' would be available to customers of HDFC Bank having customer base of 2.8 crore. HDFC Securities has 20 lakh users. However, this service would be extended to non-HDFC Bank customers later ..........
SBI asked to pay Rs. 8 lakh in damages
..........The district consumer disputes redressal forum (DCDRF)–North has directed State Bank of India (SBI) and its insurance company to pay a compensation of Rs. 8.68 lakh for pre-closing the insurance policies of a consumer without prior information.......
Saturday, July 19, 2014
Need reforms but with foundations intact - M.G.Warrier
My View on "Can the government and the RBI work together?":
- M.G.Warrier
After 20 Months UFBU Still Struggling To Come to Consensus Among Themselves
........Thus, in nut shell we can say the meeting expressed unhappiness for the delay, and decided to request for another meeting with FM and shot a letter to IBA wherein it did not fit it even necessary to mention about meeting with FM. They will now try to come to a consensus for approaching IBA with that view..........
RBI asks banks not to charge usurious interest rates on loans
........“It is not proposed to issue any guidelines to the banks to offer loans to borrowers at uniform rate of interest in view of variation in their costs, business models, margins etc,” finance minister Arun Jaitley said in a reply to Lok Sabha. “Reserve Bank of India has advised boards of banks to lay out appropriate internal principles and procedures so that usurious interest (including processing and other charges) are not levied by them on loans and advances,” he said....................
Contingent liabilities of states a cause for concern, says RBI paper
...Stating this, a working paper of the Reserve Bank of India titled ``Debt sustainability at the State level in India’’ sounded a warning that the contingent liabilities, primarily in the form of issuance of guarantees by the state governments, remained an area of concern. ``The strong presence of contingent liabilities calls for a holistic assessment of debt position of states by reckoning their off-budget fiscal position, including the impact of operations of state public sector enterprises,’’ it said. Going forward, there could be downside risks in case the slowdown in growth......
67 years since partition, India still owes Pakistan Rs 5.6 billion
................From the first-ever Statement of Affairs that the SBP issued on its second day of existence — July 2, 1948 — to the latest one released on June 27, 2014, the central bank has listed the unsettled claims on the RBI among its “assets” unfailingly for the last 66 years. The SBP’s issue department — which deals with currency and the assets that underlie it — shows the outstanding claims on the RBI under two distinct categories, says the paper............
Sriram, Kannan appointed SBI Managing Directors
...........Both come to SBI from Group associates, where they held senior positions. Sriram, previously Managing Director of State Bank of Bikaner and Jaipur, will be handling international banking, while Kannan, who was MD and CEO, SBI Capital Markets, will be looking after associates and subsidiaries division of the country's top lender, a bank release said..........
Popularising RuPay
..........The State Bank of India, the largest public sector bank has started issuing RuPay card only three months back and has realised the benefits of the same. According to SBI officials, though it has long term agreement with Master and Visa cards, still it would be good for the bank to pay money to them and switch over completely to RuPay. Experts believe that if only SBI adopts RuPay fully, the scheme would be a success. Although for international operations, fee of RuPay is yet to be decided, the NPCI says that it would be better to keep it low to maintain it attractiveness in international business also..........
Sellers of National Pension System need better incentives
......The government must do two things. One, it should make better use of its pension subsidy. The government now offers a subsidy of Rs 1000 to encourage a poor person to join the NPS. A better way would be for the government to use the money to underwrite initial overhead costs in asset management, distribution and central record keeping. The wafer-thin asset management fee should be topped up..........
Milestones set, but road map not clear
.............Dividend contribution from the Reserve Bank of India (RBI) goes up by Rs. 13,000 crore. It must be noted that any outflow from the RBI has an expansionary effect. Taking all these factors into account, it appears that achieving the fiscal deficit of 4.1 per cent is going to be difficult. If the government is serious about adhering to the fiscal deficit target, it must be willing to cut expenditures as revenues fall short of budgeted levels. Pruning of expenditures must be done in such a way that this has the least adverse impact on the economy.........
Finally, small is beautiful in Indian banking
...............Narrow banking—or the model of investing the last penny of deposits in government bonds—ensures safety but it’s difficult to make such a bank profitable unless the employees see this as charity and don’t take a salary. I wonder why would anybody apply for a payments bank licence while such activities can be done through the small banks? Yes, the small banks are being allowed to do everything a commercial bank is expected to do but on a smaller scale................
The changing face of finance
...............This is the classic concept of narrow-banking, where banks only invest in government paper and hence avoid the pitfalls of NPAs or capital adequacy. Being driven by only technology, however, will not be feasible given the state of digital infrastructure and computer literacy in the country............
NBFCs perceive several constraints
........“We have to see what we can do and what we can’t. Prima facie, as compared to an universal banking model, it looks more doable. The lower capital requirement is a positive. However, many NBFCs have an all-India footprint. We have to see in how many districts small banks are allowed to operate. Whether it is 4 or 5 or 15 or 20, or even more? A realistic approach regarding footprint is required,” ........
Biyani may apply for payment bank
.........It would apply, now that supermarket chains have been permitted to float such banks, said an executive within the group. A payment bank is essentially an entity which can accept deposits and facilitate remittances and payments but cannot lend money. “We are applying,” the executive said. “We can easily do money transfers and take deposits. We had this mechanism when we used to run the NBFC (non-banking finance company).” ......
Can we bank on them?
This refers to the report on the RBI issuing guidelines on payment banks and small banks (July 18). The RBI has prescribed a capital adequacy ratio of 15 per cent for payment banks. As the proposed bank can only invest in government securities and no lending is permitted, this clause is unnecessary. Its outside liabilities cannot exceed 20 times of net worth, which takes care of the interest of depositors. As these banks can take only demand deposits, to maintain liquidity, a substantial portion of deposit has to be kept idle. They have to maintain CRR and SLR also. What is left can only go to government securities. One wonders how these banks will be able to pay interest on deposits.
- S Kalyanasundaram, Chennai
The RBI’s guidelines are a welcome step, which is an essential measure towards meeting the objective of financial inclusion. But the guidelines should be more prudent, and let this not be a repeat of the Local Area Banks, a concept that was launched some years ago.
- Lakshminarasimhan
HBL
Profitability of payment banks under question
.........Payment banks are expected to offer only demand deposits - current account and savings deposit products and not fixed deposits. Currently, the cost one-year fixed deposit is typically in the range of nine per cent. Keeping a tab on operational cost is also seen as a challenge. For instance, deposits being covered by the deposit insurance scheme would also hike the running cost for them due to higher premiums...........
Norms on small banks fail to impress micro lenders
........... "While the guidelines are progressive and consistent with the financial inclusion agenda, it is almost impossible for most microfinance companies to meet the norms and convert themselves into small banks. Following the crisis in the sector, barring a few, all microfinance institutions in Andhra Pradesh now have negative net worth,".....................
Tough to bank upon
........... Now the central bank has put out draft guidelines for payments banks—essentially to provide payments, remittance services and deposit products—and small banks that will operate in specific geographies catering to the credit needs of micro and small businesses and small farmers in unbanked and under-banked areas. Neither of the models appears to be a particularly enticing business proposition. ..........
Telcos may be First in Queue for Payment Bank Licence
.........Rajan Mathews, director general of Cellular Operators of Association of India (COAI), the lobby body representing GSM mobile operators, said the RBI move would boost mobile banking services and financial inclusion, saying the “biggest deterrent to expansion of mobile payments“ so far has been their inability to offer cash-out transactions. “Though RBI's proposals don't allow telcos setting up banks to lend, we believe they will allow cash-out transactions, which I reckon can be a game-changer to boost mobile payments and financial in clusion in India as in Africa,“ he said. The cash-out facility, Mathews said, would enable a person who has deposited money with a mobile company to withdraw it at any location he wishes............
As RBI opens floodgates, be ready for an Airtel Bank, or a Railway Bank
..........Assuming the promoters of Airtel pass the RBI’s fit-and-proper text for starting a payment bank, it could attract a substantial chunk of the dormant savings account balances from traditional banks – the low-cost CASA (current account, savings account) money that is just lying around, earning banks a huge margin. Most banks pay nothing on current accounts and just 4 percent on savings accounts. An Airtel Bank, if it comes to be, would have other advantages. It would need a starting capital of only around Rs 100 crore, and would need nothing more than an internet presence to start and run banking activities. The RBI guidelines specifically allow for internet-based banks........
Welcome Shift to Differentiated Banking
......... A banking licence will allow a telecom company to realise in full the phone's ability to function as a portable electronic vault that can be charged remotely and run down to make all kinds of payments. The only trouble with harnessing technology for remote area banking is the vulnerability of electronic networks to hacking. The RBI will have to draw up effective, stringent cyber security standards and..........
Local and Rural Banks a Failure
Apropos `Even a Telco may get a Banking Licence...' (ET, Jul 18), it is necessary for the RBI to examine why local area banks (LABs) and regional rural banks (RRBs) failed to boost financial inclusion. Deposit customers and borrowers found it more convenient to transact with scheduled banks in larger rural and semi-urban centres compared to LABs and RRBs, resulting in their operations becoming unviable. Extending banking services through business correspondents and post offices appears to be a better option. Mobile phone service providers can be used to speed up remittances.
- S SOLOMON RAJ MumbaiET
What BRICS bank presidency means for India
............The BRICS-promoted bank, with a subscribed capital of $50 billion, divided equally between the five nations and another $100 billion as currency reserves pool, addresses two major aspects of any growing economy: one, the need for funds for getting on to the map of the developed economy from a developing one, and, second, protecting each others’ currency caused by outflows of foreign exchange........
State at loggerheads with Center over RBI circular
.......... "We have heard that Acche Din Aa Gaye Hai, but this circular does not show that Acche Din Aaye Hai. Nabard officials should understand this circular and oppose it since the very existence of Nabard is based on the strength of the farmer who is dependent on cooperative sector in the state.".....
Amanath Bank: withdrawal limit stays, says court
............Justice Ram Mohan Reddy, who heard the submissions, has asked Canara Bank to go through the details of loans and value of the mortgaged assets with ACB to verify whether it is feasible to allow depositors to withdraw more money from their accounts during Ramadan. The next hearing is on July 21........
CBI files case against Dena bank manager
...............According to the CBI, Mr. Barot allegedly approached seven corporate firms posing as a representative of the bank. Claiming that they would get returns at a high interest rate, he allegedly convinced them to put huge sums of money with the bank as fixed deposits. “He represented himself as a financial advisor of the corporates and ‘facilitated’ the bank in mobilising term deposits to the tune of Rs. 256.49 crore from them. Against the deposits, the accused got sanctioned a total loan of Rs. 220 crore from the bank in conspiracy with the former Bank Manager and got the amount diverted to himself,” ...........
Friday, July 18, 2014
India under Narendra Modi, Raghuram Rajan may be best emerging market turnaround story: Nomura
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| File Photo |
Japanese brokerage Nomura today said India may become the biggest turnaround story among emerging markets in five years, given the decisive mandate received by the pro-growth Narendra Modi government and the Reserve Bank of India's (RBI) actions. "The landslide election victory by Prime Minister Narendra Modi, combined with Governor Raghuram Rajan at the helm of RBI, is a potential game changer for India," it said.............
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