IDRBT signs MoU with IIT-Kanpur for research collaboration

There is a need to integrate knowledge, business and technology to benefit the common man, says K C Chakrabarty. Hyderabad: Institute for Development and Research in Banking Technology (IDRBT), a Reserve Bank of India arm, on Friday signed a MoU with IIT, Kanpur for research and academic collaboration. K C Chakrabarty, Deputy Governor RBI and chairman of IDRBT, said there is a need to integrate knowledge, business and technology to benefit the common man. “There is need to exploit banking technology and take it to the people. We alone cannot do it. Institutions have to work together and leverage each other’s expertise to drive the benefits of research, academics and technology to drive critical initiatives like financial inclusion and take it to masses. Therefore the MoU with IIT-Kanpur has tremendous potential and is great beginning for two key institutions to work together in several areas of common interest,” Chakrabarty said. Prof. Sanjay G Dhande, Director IIT-K said there is an urgent requirement to marry the domain expertise in the banking sector with the new technologies and this MoU will provide a framework to forge productive relationship to make this happen. According to the MoU IDRBT and IIT-K will undertake joint projects, create centre of excellence in information security, cyber security and business intelligence, besides many other programmes.

Dams before cash in bank - RBI governor visit earns sops for Doba

Doba (Lohardaga), Dec. 18: What is life like at a water-strapped village, after its 15 minutes of fame? The hitherto nondescript Doba under Kudu block of Lohardaga district, with a population of less than 1,500, was thrust into flashbulbs during Wednesday’s high-profile visit of Reserve Bank of India (RBI) Governor D. Subbarao, who came with a team comprising Chief Secretary A.K. Singh and senior officials of nationalised banks. Not surprisingly, a hasty whitewash preceded the celebrity visit. The administration morphed into Santa and came to this tribal hamlet laden with goodies such as a revamped connecting road, water supply (restored after 20 years) and promise of 25 wells and a series of check dams.  Villager Bandi Oraon applauded the role of RBI and nationalised banks in adopting the village for the ambitious 100 per cent financial inclusion scheme. But he wondered: “How will villagers get money to put in banks, if there’s no water and if MGNREGS schemes pay so little?”  Villagers appealed to the chief secretary during his visit that the government should ensure the construction of a series of check dams by the banks of the Koel river that flows by the picturesque village dotted with sakhua trees. .

'Banks to play bigger role in MSME sector'

The role of banks to nurture the micro, small and medium enterprises (MSME) sector by going beyond just providing finance was underscored at a meeting organised by the Federation of Andhra Pradesh Chambers of Commerce and Industry as part of the nationwide India Corporate Week-2010 celebrations on Saturday.

Currency notes get a makeover to check forgery

Security Features Include Invisible Fibre,Colour Shift Ink & Machine-Readable Micro Text

A slew of new security features such as invisible fibre, colour shift ink and machine-readable micro text are on their way to prevent counterfeiting of currency notes.   The move comes amid a sharp surge in recovery of 1,000 counterfeit notes this year.  The government fears that counterfeit currency could be used to fund terror groups.  The security features have been selected by an inter-ministerial committee comprising representatives form RBI, finance ministry, security agencies and ministry of home affairs, a government official told ET.  “The menace of circulation of counterfeit currency in the country has been assuming alarming proportions,” a Parliamentary committee said in a recent report.  The government has now made a global request for qualification from manufacturers to incorporate the new security features in the currency.  Among the measures proposed by the panel are security thread with magnetic properties, variation in colour when viewed from different angles, foil or stripe with magnetic properties and micro text for currency notes.  These features were selected from responses received by the finance ministry to its request for security information in September. According to some estimates, eight in a million notes circulated in the country are fake.  The value of fake currency seized and recovered has increased from 8.39 crore in 2006 to 23 crore in 2008. As on October 31, 21.1 crore worth of fake currency has been found. India produces 18 billion pieces of bank notes of which about 50% is high denomination notes ( 100, 500 and 1,000).  Interestingly, the most popularly faked 500 note seems to be falling out of favour though it still is by far the biggest. The higher denomination 1,000 note seems to be the new favourite. In the first ten months of the current year more 1,000 counterfeits have been seized or recovered against that for entire 2009.  “..RBI should introduce easily recognisable and yet scoring high anticounterfeiting security features in the design of currency notes on the lines of advanced international practices,” the parliamentary committee had said.   The government has also constituted a high-level committee with the Union home secretary as its head to prepare a strategy to combat circulation of fake currency notes in the country. Parallel bodies have also been set up in the states. A directorate of currency has also been created in the finance ministry to coordinate and oversee acquisition and research and development of security features for currency notes. This followed recommendations of an expert panel chaired by Shilabhadra Banerjee, a former secretary to the government.  

Use of corp bond funds for infra push not a viable option: Reddy

Dr.Y.V.Reddy, former governor of Reserve Bank of India (RBI), has rejected the view held by his successor at the central bank that a developed corporate bond market is necessary to fund infrastructure.  Instead, he called for good governance by indicating that public policy should play an active role in funding infrastructure. “Bad governance will feed in itself for bad finance (and misallocation of resources),” he said.   Both Subir Gokarn, Deputy Governor, and Deepak Mohanty, Executive Director, called for a need to develop corporate bond market to help financing of infrastructure at a seminar on ‘Investment and Its Finance’ in Mumbai over the past two days.

Chinese Bank Enters India Market

With a branch planned in Mumbai, Industrial and Commercial Bank of China (ICBC) (601398,1398.HK) may become the first operational Chinese bank in India. The China Banking Regulatory Commission (CBRC) and the Reserve Bank of India (RBI) signed a memorandum in December 16. Ministry of Commerce representative Wu Donghua said many Chinese enterprises in India need capital support, and Chinese branches there address that need. Separately, China Development Bank signed a series of agreements with India telecom operator Reliance Communications, energy company Essar Group and ICICI Bank.

RBI to build strong corp bond market to fund infra

Developing Bond Market Critical To Revving Up Growth Engine, Says Gokarn

Reserve Bank Deputy Governor Subir Gokarn on Thursday said the central bank is focusing on developing a strong corporate bond market to fund infrastructure development that will require an estimated $1 trillion during the 12th Plan period.  “We are focusing on developing long-term corporate bond market to support banks in financing infrastructure projects,” he said. Mr Gokarn was delivering his keynote address at the ASEM (Asian-Europe) Conference organised by the Reserve Bank of India and the European Commission here this morning. “We need a strong corporate bond market as we have to take away the burden on banks from financing long-term funding needs of the infrastructure sector which is targeted at $1 trillion over the 5-year period beginning 2012,” he said.

RBI opts for growth over inflation for now

RBI kept key policy rates unchanged on Thursday, signalling that maintaining growth momentum was a priority while taking steps to infuse close to 50,000 crore of liquidity. This will ease pressure on banks to raise rates both on lending and deposits in the near term.  However, going by the hawkish tone of the mid-term policy review statement, the bond market is now bracing for a rise in interest rates in January when the next review is due. RBI has raised rates six times this year to fight inflation, and has warned that risk to its 5.5% inflation estimate in March is on the upside.   The mid-term review appeared to be more of a fire-fighting measure with attempts to pump money into the banking system, which saw a record deficit of 1.44 lakh crore as reflected in bank borrowings from RBI on Thursday. According to the apex bank, the deficit was making it tough for the banking system to sustain credit delivery.   RBI said although the liquidity crunch has helped achieve its objective by getting banks to raise rates, the shortfall was way outside its comfort zone.

Bank studies in school curriculum soon

The Reserve Bank of India has prepared a well-researched study material for school and college students which is soon going to be introduced in the school curriculum across the nation. Making this announcement here on Monday while addressing students of Ranchi University at the Senate hall, RBI governor, D Subbarao, said, "All schools in the country would include a chapter to promote financial deepening whereas colleges have been asked to include some module of finance in certain subjects," he said.  Acknowledging that only 40 per cent of the households have bank accounts, Subbarao said even among them very few are active accounts. "We give targets for financial inclusion to banks and they open the accounts but the idea is not paperwork but to make it functional, which can be achieved only when the account holder realizes the importance and operational benefits of his or her bank account, for which financial literacy is must," he said. Answering to a query raised by chief secretary, A K Singh, if there is any incongruity in written and verbal instructions issued by RBI, Subbarao admitted that certain RBI instructions are not followed by banks in letter and spirit. Singh raised the issue of banks refusing to extend credits to borrowers even in cases where the RBI has struck-off the need for collateral. Replying to this, Subbarao said that at a recent meeting with branch managers of different banks in Pune, he was apprised of the difficulty faced by banks. "Though there is technically no need for collateral for education loans upto Rs 4 lakh and loan for micro, small and medium enterprises upto Rs 1 crore, bankers have the onus of recovering the amount for which they want to take no risk," he said, adding that the RBI is strengthening its monitoring system and trying to find a viable solution for this.  Answering to a query raised by Rashid Anwar, an MBA student of Ranchi University, he spoke of a committee appointed by the RBI to make the inflation figure more generic and pragmatic. "We realise that one inflation figure for the entire nation cannot be appropriate in the light of the fact that different states have different income levels and consumption basket for which a rural and urban index is being considered to begin with," he said. In response to a question of Tanush Khatri, another student, Subbarao assured that he would take up the matter of ATMs churning out counterfeit currencies with the bank authorities in Jharkhand. "It has been reported many times, especially from bordering states, about counterfeit notes being included in circulation but the RBI is taking every possible step by educating masses, including bank officials about being able to identify," he said. However, he got a poor response from students when Subbarao asked if they have seen advertisements related to counterfeit currency in television and newspapers issued by the RBI from time to time.

Satellite banks and ATMs in Jharkhand soon: RBI

Reserve Bank of India is planning to set up satellite banks as well as ATMs in Jharkhand so as to make banking facilities reach out to villagers there. The idea was shared by RBI governor, D Subbarao. He said that during the initial level, the satellite banks will be made operational on weekly basis and with time get converted to full fledged branches. Report from state government officials read that out of the 4423 village panchayats in the state, 1540 were still in need for banking to reach out to them.

A day before policy, RBI governor gets a feel of 'discounted' Bharat

You might have expected Reserve Bank of India Governor D. Subbarao to ponder over the country's economic problems and banks' fund needs sitting at his freshly furnished swanky office a day before he brings out now what is known as the mid-quarter monetary policy review. Subbarao had something else in his mind. He landed up instead at a dusty village, 40 km west of Ranchi. "But you don't get to know how people are affected by RBI's policies sitting in Mumbai. Isn't it?" Subbarao asked in broken Hindi to an audience of villagers at what the financial regulator calls an outreach programme where few state-run banks put up stalls to showcase products of self-help groups they support and also the technologies they are using to achieve the seemingly elusive target of financial inclusion.  And it was a lesson on the limits of financial inclusion for the Governor. The outreach programme had various technology providers demonstrating how their hand-held devices armed with biometric identification feature can act as a bank branch for the largely un-banked villagers who mostly depend on a single crop paddy with no access to irrigation, and some sundry forest products. A villager, after being shown how he can withdraw Rs 100 from his account using that hand-held device, gingerly showed the receipt to Subbarao. “Just 300 rupees! Why? You should keep more money in your account!” a shocked Subbarao asked the villager looking at his account balance. At a loss for a reply, the villager climbed down the stage with a dry smile. “Welcome to Bharat!” a banker in the audience retorted with a grin. A hand-held device wouldn't possibly raise your income in hand, the banker might have thought. "Here people wait for months to encash their NREGA cheques so they trade in them: A Rs 100 cheque is sold for Rs 70,” said A.K. Singh, Jharkhand's chief secretary, who was on the podium along with Subbarao. The rate of cheque-discounting could be a unhappy lesson for Subbarao apart from the very need for a government-given cheque to be discounted in the first place.  From Bharat to India, the journey on the dirt road appears quite long.

ICBC applies to RBI as China banks line for India foray

Despite the signing of a framework joint financial-services agreement between India and China, it will be some time before the first bank from Beijing, the Industrial &Commercial Bank of China Ltd, opens its doors for business in India. The bank has applied to RBI for setting up branches in India but is yet to get a clearance from the top-level policy body that includes the Ministries of External Affairs and Finance,and RBI.

Jalan report anti-growth.....

MCX'SX has lambasted the Bimal Jalan report and said it seeks to "undo everything that has been achieved in the past few years" in the domestic capital markets.

FINMIN, PSB Chiefs to take up HR policy recast today

The ministry of finance has called a high-level meeting of chiefs of major public sector banks to discuss recast of HR policies on Thursday. Financial services secretary R Gopalan and Planning Commission member Arun Maira are likely to meet chiefs of five state-owned banks--State Bank of India, Punjab National Bank, Bank of Baroda, Union Bank of India and United Bank of India --to discuss Khandelwal committee report suggesting major changes in PSB's HR policies. The committee was appointed by the ministry of Finance(MoF)under the chairmanship Anil Khandelwal, former chairman of Bank of Baroda, to chart out action plans for PSBs on HR front. Sources said that a presentation will be made by the government before a select group of bankers and academicians during the meeting.  Representatives from premier management institutes like Indian Institute of Management(Ahmedabad)&IIM (Kolkata) and Indian School of Business (Hyderabad) are also likely to attend the meeting, added the source. Another committee formed under Alok Nigam, joint secretary MoF, to find out the ways to implement Khandelwal report, has also recently submitted its report. Khandelwal report has recommended bank specific wage and service conditions instead of industry-widesettlement. The report has also suggested that variable pay should be made a major component of wages and banks should to go in for cost to company (CTC) in the future.  Banks should also monitor staff costs and endeavour to achieve staff cost ratio of 50% in the next five years, said the report.  The report has advocated that based on well defined efficiency criteria major PSBs could be recognised and rewarded for their superior performance and excellence while some large well performing banks to be considered for `Navratna' status and smaller banks for `Mini Navratna' status. Large banks with business mix of over Rs 3 lakh crore to be provided ED (HR) to drive HR agenda from the top. A steering committee of the board on HR to be constituted to discuss critical HR issues, said the report. On manpower and recruitment planning, the report has said it should be an annual well structured and rigorous exercise for five yearperiod,factoringgapsin skills and competencies.

RBI board opposes govt grip on staff issues

The central board of Reserve Bank of India (RBI) has opposed a government move to have control over the central bank’s staff-related matters. The proposal to make staff regulations statutory and bring them under the subordinate regulation of Parliament was discussed at RBI’s board meeting in Kolkata last week. According to sources, RBI Governor D Subbarao mooted the proposal during the board meeting. But three board members and a few executive directors opposed it on the grounds that it would affect RBI’s independent functioning. The central bank would have to take the government’s approval on issues like salary, service conditions, promotions and incentives of its employees. Sources said following the opposition, the proposal has now been deferred. It is highly unusual for a proposal to meet with stiff resistance from RBI board members. The government has been putting pressure on RBI to make staff regulations statutory under Section 58 of the RBI Act, 1934, and bring them under the subordinate legislation of Parliament. The central board of RBI consists of the governor, all deputy governors and representatives from industry and government. At present, the government nominee on RBI’s board is Finance Secretary Ashok Chawla. Executive directors are not board members, but are invitees to the meeting. Recently, the government had asked RBI to take its approval before finalising central bank employees’ pay hikes, which the regulator had not initially agreed to. Later, the central bank agreed to ‘brief’ the finance ministry about the pay revision, but said it would not seek approval. During the year, there were at least two instances when the government’s actions prompted Subbarao to highlight the importance of RBI’s autonomy and independence. The first was over the ministry’s decision to refer all regulatory disputes on hybrid financial products to a committee headed by the finance minister. Later, RBI also expressed concern about the proposed Financial Stability & Development Council and said financial stability should be the exclusive mandate of the central bank.

Saraswat Co-op Bank seeks to become a private bank

To overcome the inherent restrictions in the co-operative banking model on raising capital, the country's largest co-operative bank is mulling the option of converting into a private sector bank. The Mumbai-headquartered Saraswat Co-operative Bank has apparently started working towards this end. A bigger play in the banking landscape by seeking the Reserve Bank of India's permission to spread its wings across the country – currently, it has presence in Maharashtra, Gujarat, Madhya Pradesh, Karnataka, Goa and Delhi – and giving stock options to employees are in the works. At present, co-operative banks can strengthen their core capital only by issuing shares at face value, ranging from Rs 10 to Rs 100, and plough back of profits. The capital market is off-limits for them. This restriction on bolstering core capital is proving to be a stumbling block for growing assets. The only urban co-operative bank that has converted (in 1995) into a private sector bank so far is the Development Co-operative Bank. This bank was re-christened as Development Credit Bank.

UK Sinha to succeed Bhave at SEBI

Senior bureaucrat and chairman of UTI Asset Management Co. Ltd U.K. Sinha will become the next chairman of the Securities and Exchange Board of India (Sebi). A Central government panel headed by cabinet secretary K.M. Chandrasekhar has chosen Sinha from a list of candidates including senior bankers and bureaucrats, according to three persons familiar with the development. A formal announcement by the government is expected in January. Sinha, who will assume office in the third week of February, declined comment.

Banking on a new era for micro lending

CHANDRA Shekhar Ghosh, the founder-chairman of Bandhan Financial Services, is waging a lone battle against the entry of private equity funds in the country’s microfinance sector. He has so far managed to keep the nineyear-old Bandhan, now the country’s fourth-largest microfinance institution by assets, free from the grips of private equity players despite the pressure of having to mobilise resources to fund its growth. Foreign private equities come in droves to encash the prospect of the booming local MFI sector. Many feel it becomes difficult for MFIs to keep the all-inclusive interest rates below 24% a year, once private money spinners fund them for returns as high as 25-30%. Even RBI is uncomfortable with private equities ruling the roost, but then for most large MFIs, it was rather easier to get private money from abroad than arranging funds from government agencies like SIDBI.

Now, village gets mobile banking service

Mobile banking services which was being concentrated in the urban areas of Karnataka till now, is being extended to rural areas also, taking rural masses towards economic empowerment.  For the first time in the state, the Reserve Bank of India has extended its mobile banking services to Harwada village in Ankola taluk through the Syndicate Bank. Harwada is mainly dominated by the fishermen community and all its 1,200 families residing in this village can avail the banking service. With this facility, the villagers of Harwada have become customers of Syndicate Bank, said bank officials.

RBI may get to oversee banks’ related outfits

THE government plans to empower the Reserve Bank of India (RBI) to allow it to inspect related arms of banks such as mutual funds and insurance companies to ensure their operations do not pose any systemic risk to the lenders.   The finance ministry plans to incorporate new provisions in amendments to a banking legislation to allow the central bank greater regulatory oversight over associate enterprises of banking companies such as mutual funds, insurance and factoring operations, said a senior official in the ministry.  The ministry plans to seek the approval of the cabinet this month for changes which will be part of the Banking Laws Bill. The official said the proposal seeking to provide more powers of oversight to RBI was taken after an assessment of emerging global regulations, especially in response to the crisis in the global financial markets that involved some systemically important financial institutions, the official said.