Earlier banks were mandated to send online alerts to cardholders for all credit as well as debit “card not present” transactions for values of Rs 5,000 and above. As per the Reserve Bank of India’s (RBI) circular, you will soon get online alerts for any transaction you make through your debit/credit card, irrespective of the amount, at various channels. RBI has asked all commercial banks to take steps to put in place a system for such online alerts by 30 June 2011. This will make tracking payments a lot easier for you. Until the guidelines were issued, banks were mandated to send online alerts to cardholders for all credit as well as debit “card not present” transactions (when you are not physically present for the transaction such as during online shopping) for values of Rs. 5,000 and above. So if you used your credit or debit card at an online shopping website and the transaction amount was Rs. 5,000 plus, you got an online alert. As per the latest guideline, irrespective of the fact whether it is a “card present transaction” (where you are physically present such as at the automated teller machine or ATM) or a “card not present” transaction, you will get an online alert. This alert is applicable on transactions made over the interactive voice response (IVR) and point of sales (PoS) as well. The mode of sending online alerts has been left to the banks. So you could get email alerts as well as SMS alerts if your email address and mobile number are registered with the bank. The good part is that most banks are already sending alerts to their customers. For instance, ICICI Bank Ltd and Axis Bank Ltd. Many customers have direct debit facility activated on their credit cards—to pay utility bills or even insurance premiums. In such cases, too, the bank will send an online alert. A few banks are already providing such a facility. There is no doubt that online as well as offline financial fraudulent deals are on the rise. In fact, according to RBI, unauthorized and fraudulent withdrawals at ATMs have also been noticed recently. This step will help arrest possible fraudulent activities on your cards, besides helping you track your payments.
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Monday, May 9, 2011
In high rates scenario, look for defensive bets
The Reserve Bank of India, in its monetary policy announced on May 3, raised the repo rate by 50 basis points to 7.25% and savings bank rate to 4% from 3.5%. With inflation and crude oil prices staying high, the central bank had little choice but to raise the rates. Soon after the rate hikes were announced, the markets went into a downward spiral. The Sensex lost as much as 617 points in the last week. Interest rate-sensitive sectors like banks, automobiles, real estate, construction and infrastructure fell much more. In response to the RBI policy, banks have raised base rates since their cost of funds has gone up. This would increase the borrowing costs for corporates, hitting their profitability. Market experts also worry that this may hamper growth in the near future. In such a scenario, what should the retail investors do with their portfolio?
NCP banks ensure their money is safe
NAGPUR: The NCP, which holds sway at Maharashtra State Cooperative Bank (MSCB) perhaps knew what was in store for the bank. Even before NABARD submitted a report to the state government damning the bank, five district central cooperative banks (DCCBs) withdrew their deposits amounting to Rs 3,305 crore. The list included the Pune DCCB, known to be the forte of deputy chief minister as well as state's finance minister Ajit Pawar. The other banks are from Ahmadnagar, Sangli, Satara and Kolhapur. The management in all these banks is dominated by NCP leaders. DCCBs and urban cooperative banks normally park their funds to meet the statutory liquidity ratio (SLR) requirements and for other purposes. "There is no urgency of withdrawing SLR money in totality as done by these banks," say sources. It was on the basis of this NABARD report the RBI finally ordered the state government to sack the board of directors. However, by withdrawing the money, the five banks were already safe. Only a select few were privy to the report as well as the likely decision on the board of directors being superseded. Sources say the NCP got a whiff of the likely move and five of its key DCCBs withdrew the money parked here. They probably smelt a rat when inspection notices were issued to MSCB. "The report was submitted to the state government on March 8 but withdrawals were already made. Even today the report remains to be a confidential document and the sudden decision to withdraw the money in lumpsum certainly raise eyebrows," said BJP MLA from Southwest Nagpur Devendra Fadnavis. This matter came to the fore through a legislative assembly question (LAQ) raised by Fadnavis in which the withdrawal was confirmed. The government justified the move saying that the deposits had matured. Even as a majority of the DCCBs in the state have the NCP dominance, these five banks are considered to be premium institutions in Maharashtra's cooperative fabric. It seems that the banks knew that MSCB board would be sacked leading to a panic run by the individual depositors. Though these deposits constitute a small part of the total figure, a run can certainly lead to a larger cooperative crisis with the funds parked by the banks also under threat. "The management seems to have showed financial prudence by acting on the insider information they received," alleges Fadnavis.
MFIs caught between RBI and AP Govt norms
Microfinance Institutions (MFIs) in Andhra Pradesh are in a state of confusion as some of the recommendations made by the Reserve Bank of India (RBI) for the sector are contradicting the rules prescribed by the State Government in its Microfinance Act. Andhra Pradesh accounts for almost 25% of the Rs 30,000-crore microfinance trade in the country. As many as 24 of the total 44 MFIs recognised by the RBI are operating in the State. The central bank, while accepting the Malegam Committee report, recently suggested that the repayment schedule (weekly or monthly) of loan can be chosen by the borrower. However, the AP Micro Finance Institutions (Regulation of Money Lending) Act, 2011 clearly says that the repayment cycle should not be less than a month. The dissimilarity may further affect the already crippling microfinance sector in the State, said Microfinance Institutions Network (MFIN), the representative body of micro lenders. "There is absolutely no clarity on the issue of repayments schedule. There are two people (AP government and RBI) trying to regulate the system. It can only increase the confusion. We will approach RBI, Finance Ministry and also the State Government for further clarity on the whole issue," Alok Prasad, Chief Executive Officer of MFIN, told PTI. The AP Government has no expertise in financial sector regulation. The RBI is the only institution that possesses the expertise and its regulation should be followed, he said. "There is a duality crisis in Andhra Pradesh. The AP government must step out from trying to regulate financial institutions," Prasad said. On the other hand, the state government is up in arms against the RBI's recommendations for the lenders. The government has decided to oppose some of the recommendations announced by the RBI last week as a part of the monetary policy announcement. Reddy Subrahmanyam, Principal Secretary (Rural Development), said the RBI did not address many critical matters like the issue of old loans extended by the MFIs at rates as high as 60%. The interest rate being charged by MFIs should have been capped at 24% as recommended by the Malegam Committee, instead of allowing it to be 26%, he said. "We are going to write a letter expressing our reservations to the RBI and Ministry of Finance," he added. The Rural Development Department of the state is gearing up take the apex bank head on. In a recent communication to its officials, the Society for Elimination of Rural Poverty (SERP), a state government body that is empowered to regulate MFIs, said despite the RBI's recommendations, the Microfinance Act will continue to apply to all MFI operations in AP. "The government has got legislation powers from the Constitution, whereas the RBI's power to issue executive instructions is a statutory power. Therefore, it is not in the domain of the RBI to annul the state legislation," a government circular said. "More so, the Act regulates the money lending aspects and transactions of the MFIs, which (fall) exclusively within the domain of the state government," it added.
Three factors that shaped the monetary policy
Three factors have shaped the outlook and monetary policy for 2011-12. First, global commodity prices, which have surged in recent months are, at best, likely to remain firm and may well increase further over the course of the year. This suggests that higher inflation will persist and may indeed get worse. Second, headline and core inflation have significantly overshot even the most pessimistic projections over the past few months. This raises concerns about inflation expectations becoming unhinged. The third factor, one countering the above forces, is the likely moderation in demand, which should help reduce pricing power and the extent of pass-through of commodity prices. This contra trend cannot be ignored in the policy calculation. However, a significant factor influencing aggregate demand during the year will be the “fiscal situation”. The budget estimates offered reassurance of a fiscal rollback. However, the critical assumption that petroleum and fertilizer subsidies would be capped, is bound to be seriously tested at prevailing crude oil prices. Even though an adjustment of domestic retail prices may add to the inflation rate in the short run, the Reserve Bank believes that this needs to be done “as soon as possible”. Otherwise, the fiscal deficit will widen and will counter the moderating trend in aggregate demand. The latter portion of the third factor is the operative and crucial part which shapes the monetary policy outlook for the current fiscal. The RBI is in a hurry to pass-through the high oil prices to consumers. Otherwise, navigating inflation to a soft landing of 6 per cent at end March 2012 would end up as an unfinished agenda for the central bank. The monetary policy trajectory that is being initiated in this annual statement is based on the basic premise that over the long run, high inflation is inimical to sustained growth as it harms investment by creating uncertainty. Current elevated rates of inflation pose significant risks to future growth. Bringing them down, therefore, even at the cost of some growth in the short-run, “should take precedence”.
Freeing the SB deposit rate
There has been much talk and debate about the Reserve Bank of India monetary policy that increased the key policy rate by half a percentage point. That headline grabber hogged so much limelight that the other significant prescription on increasing the savings bank accounts rate from 3.5 percent to 4 per cent almost went buried under the anti- inflationary hammer of the RBI. The monetary policy of last week marked a significant shift from drawing a balance between growth and inflation to fighting inflation and sacrificing growth. But no less significant was the RBI action on savings deposit rates which have remained unmoved for more than eight years. The increase in the rate of savings deposits has gone without due recognition that the RBI has used its mandate for the first time in many years to bring direct and immediate relief to the common depositors. It is pertinent to point out that in our country, the term “savings bank” is more of a misnomer: it brings access to the banking system but is not a tool to building savings. As such, the rate of 3.5 per cent has remained unchanged since as far back in time as March 1, 2003. The rate of interest on savings deposits was stipulated at 6 per cent in 1992. The rate has been progressively reduced by the RBI until we have arrived at this stage of 3.5 percent, and now 4 per cent with effect from last week. It is remarkable that in the period that saw the biggest and most successful push for liberalisation, a time when our leaders and policy makers repeatedly spoke of opening up the system to take our country on the road to a much touted economic stardom, the one rate that remained pegged and fixed at a ridiculously low level was for the money of the smallest of depositors who would add up to be the largest base of ordinary Indians in the banking system. As much as 84 per cent of the total savings deposits come from the household sector, according to the RBI. This is only typical of the Indian manner of governance where the one with the weakest voice is heard the least, and last. So it would be now in order to congratulate the RBI Governor for taking a step in favour of small depositors, embedded right within the monetary policy and for doing so at a time when the RBI has already put out a discussion paper on the deregulation of the savings bank deposit rate. There will be those who will argue that there was no need for the RBI to act on the savings bank rate even before the voice of the various participants on the discussion paper is heard. Indeed, there are already those who argue that the time is not right for freeing the savings rate, that the banks could suffer asset- liability mismatches and the net interest margins of banks would be badly hit. We have heard all of this before. As the RBI discussion paper itself points out, the central bank weighedin on the subject in 2002- 03 but held back the time was not considered right. It again came up in 2006- 07, when, interestingly, the Indian Banks’ Association (IBA) favoured deregulation “in the long run” but not just yet! The IBA wanted status quo; the RBI delivered it. It would be heartening to see the RBI not succumb this time. Already, the discussion paper has been praised for the quality of its inputs as well as its clear approach in favour of deregulation. This is the approach that sends out the right signals, that sets the ball rolling for change and will deliver the one message that the RBI must and needs to deliver -- that the marble white headquarters building is not an ivory tower for bureaucratic economists, that the RBI is an institution that will stand up for the common man. This is something that the RBI rightly aspires to. And it is the Governor, no less, who spelled out this aspiration earlier this year when speaking to graduate students at the University in Orissa. Here, Dr. D Subbarao candidly admitted that most people, even educated Indians, did not know much about what the RBI does. “ Many people think of the Reserve Bank as a mysterious institution, a sort of monolith doing obscure things that have no real relevance for the everyday lives of people,” the Governor told the audience at the University of Sambalpur. The perception needs to change. And it will change faster when the RBI stands up for the common man, the ordinary Indian and that faceless depositor whose money and trust is the real power behind all that the banking system delivers.
Sunday, May 8, 2011
RBI team to visit Moreh
Imphal, May 07 2011 : A four member team of officials of Reserve Bank of India, Foreign Exchange Department headed by DGM A Bhaskara Rao would visit Moreh tomorrow. The RBI team would convene a meeting of traders, importers and exporters of Moreh on May 9 at the Moreh Trade Centre. Later in the evening, another meeting of traders, exporters and importers of Manipur would be held at Classic Hotel here. The RBI team is expected to be accompanied by officials of other public and private sector banks. United Bank of India is coordinating the programme with the help of Government of Manipur. A team of UBI officials headed by Chief Manager Ananda Kumar would also visit Moreh along with the RBI team. The RBI team would take stock of logistics and infrastructure at Moreh and also visit UBI Moreh Branch, which is a B category authorised dealer of foreign exchange. This UBI branch is authorised for monitoring barter trade in the Moreh border for import and export of goods of value above $ 1000 to $ 20,000. Besides barter trade, other normal trade is also allowed through Moreh Land Customs Station but so far no normal trade except the barter trade through banking channel is materialised. The RBI officials would analyse the bottlenecks of formal trading through Moreh border and would take stock of the weaknesses of the banking channel, if any, conveyed a press release issued by the United Bank of India.
RBI dissolves board of Pawar-run co-op bank
MUMBAI: A day after the Reserve Bank of India dissolved the NCP-controlled Rs 20,000 crore Maharashtra state cooperative bank board for dismal performance, the Congress and the NCP seem to be on a collision course. Political analysts view the RBI's decision as a personal setback to agriculture minister Sharad Pawar and his nephew, deputy chief minister Ajit Pawar who were controlling the bank for over 15 years. On the recommendation of the National Bank for Agriculture and Rural Development ( NABARD), the RBI asked the Maharashtra government to forthwith dissolve the board of directors and appoint bank administrator. Chavan on Saturday appointed agriculture secretary Sudhirkumar Goel and planning secretary Sudhir Srivastava as administrators. They have already taken charge. Sharad Pawar was also in Satara. He took strong objection over the way administrators were appointed. "There was no corruption in the bank, there were certain irregularities, which could have been rectified after discussion, there was no need for dissolving the board of directors and appoint administrators on the bank," Pawar said. The cooperative bank chairman Manikrao Patil, a senior NCP leader, called it unfortunate since the bank had taken several corrective steps to restore its financial situation.
Sharad Pawar sore, others welcome change in Maharashtra bank
Mumbai, May 7 (IANS) The Reserve Bank of India’s (RBI) move to recommend supersession of the board of directors of the Maharashtra State Cooperative (MSC) Bank Saturday evoked mixed reactions from state politicians. Union Agriculture Minister Sharad Pawar expressed displeasure over the RBI move, saying it should have consulted the bank authorities before superseding the bank’s board of directors. ‘The RBI should have discussed the issue with the bank board before taking any steps,’ Pawar told reporters in Pune, some 160 km from here. To a question, Pawar denied that there were any financial irregularities in the MSC Bank. His nephew and state Deputy Chief Minister Ajit Pawar is on the board of directors. On the other hand, Chief Minister Prithviraj Chavan assured the peiople that strict action would be taken against anybody found guilty of irregularities in the bank. The bank had been served several warnings before the action was initiated and the depositors need not worry about their deposits with the bank, Chavan said Saturday afternoon in Satara, some 250 km from here. He said that the bank’s position would improve after the new developments and dismissed contentions that there was politics behind the move to supersede the board. Swabhimani Paksha MP from Hatkanangle in Kolhapur Raju Shetti welcomed the RBI move to supersede the bank board. Shetty alleged that the bank was exploited by various political parties to further their own interests over the past many years. Despite many complaints about the irregularities plaguing the bank, the state government failed to take any action, he said. ‘The government should probe the bank’s affairs and bring out a white paper on its finances. Those found guilty should be put behind bars,’ Shetti demanded.The MSC Bank’s board comprises leaders and legislators from different parties including Ajit Pawar, Diliprao Deshmukh, Anandrao Adsul, Diliprao Sopal, Minakshi Patil, Rajni A. Patil, Pandurang Phundkar, Vijaysinh Mohite-Patil, Rajan Telli, Vijay N. Vadettiwar, Yashwantrao Gadakh and others.
Pawar irked at RBI's call on Maha state co-op bank
PUNE: Union Agriculture Minister Sharad Pawar on Saturday expressed his displeasure over the Reserve Bank of India's decision to dissolve the board of directors of Maharashtra State Co-operative Bank Ltd (MSCB). Pawar said, "If an institution is performing well, it should be given some time to recover from the financial crisis." Pawar was speaking at the 60th foundation day of city-based Pune People's Cooperative Bank Ltd. The RBI on Friday evening dissolved the board of directors of the MSCB after finding deficiencies in the working of the bank. Dinesh Oulkar, temporarily holding the charge of cooperation commissioner and registrar, appointed Sudhir Kumar Goel, principal secretary (agriculture) and Sudhir Shrivastava, principal secretary (planning) as the members of the board of administrators on the MSC bank. Pawar said, "There have been allegations that the bank has not recovered outstanding loans worth Rs 1,000 crore. The recovery was slow but happening. For many loans, the state government is the guarantor, which means the loans are recoverable, but the RBI authorities ignored it." MSC bank, working as an apex bank for cooperative societies, sugar factories and other cooperative institutions in the state, has been a prominent political establishment. The bank, being a major source of funds for the cooperative establishments, has attracted political intervention in its functioning. There have been allegations against opposition parties as well as state leaders of Congress party for using the bank and network to make political gains. Based on the audit report of 2009-10 and statutory inspection of the bank, conducted by the National Bank for Agriculture and Rural Development, the cooperation department found adverse features and irregularities and violations of guidelines and laws. According to the corporation department's finding, as on March 31, 2d010, the net worth of paid up capital and reserve was estimated at Rs 144.22 crore and capital adequacy ratio was estimated at -1.5% in the report. The non-performing assets were at 13.12%, the report stated. Nabard's findings were also similar with the audit reports where progressive deterioration in the financial position was attributed to the sanctioning of loans without obtaining credit authorization for financing infrastructure projects. The letter has also claimed that some loans have been sanctioned contrary to recommendations made by the department. The decision was taken on a requisition sent by V K Sharma, Executive Director of RBI by a letter composed on May 4.
RBI doing its best to contain inflation
MANGALORE: Inflation is a major cause for worry. Liquidity management is a challenge for the Reserve Bank of India, which is doing its utmost to contain runaway inflation. In its latest monetary policy, the RBI has increased repo rate and reverse repo rate. It has also raised the savings bank rate from 3.5% to 4% thereby, bringing marginal relief to small savers. Moderation in CD ratio is being stressed in view of the mismatch between the two. Making this observation during regional heads review conference of city-based Karnataka Bank held at banks head office here on Saturday to review the performance of the regions for the quarter ended March 2011, P Jayaram Bhat, managing director of the bank said RBI is emphasizing the need for banks to reduce spread between deposit and lending rates. Under this emerging situation, the bank should look for low\no cost deposits, Bhat said. Further, the quality of assets is of vital importance. Non-performing advances should be curtailed, he said, calling upon the regional heads to understand their role well and guide the branches to achieve the desired results by improving operational efficiency and increasing fee based income as well. General manager P Jairama Hande welcomed the members and briefed them about the implications of monetary policy statement announced by the RBI.
Steroid Deficiency
Will the RBI’s balancing act revive flagging investment sentiments? More often than not, clarity emerges at times of immediate distress. Over the past year or so, we have been witness to a game of ping-pong between the government and the Reserve Bank of India over “spiralling” inflation. From the prime minister and finance minister onwards, the government has been claiming that high inflation is a corollary of high growth and has put the ball in the RBI’s court. RBI governor D. Subbarao’s recent statement and raising of rates for the ninth time in 14 months has reinforced that “there is no tradeoff at our levels of inflation” for high growth. That means two things. Despite repeated claims, the government has failed to control inflation, which still shows signs of reverting to double digits and remaining there for the next six months. And the RBI’s big rate hike reflects how inflation is now hurting the growth story. Scaling down the GDP growth forecast to 8 per cent—a percentage lower than the 9 per cent projected by the finance minister in the 2011-12 budget — Subbarao stated: “If inflation comes down to 6 per cent (by March 2012), then we can get on to a higher growth trajectory.” Defending the 9 per cent projection, “which was based on January data”, Planning Commission deputy chairman Montek Singh Ahluwalia stresses: “It is reasonable, in light of the subsequent data, to scale it down slightly to 8.25-8.5 per cent.” He, however, adds that growth projections are constantly changing. As such, he states: “We could have a better assessment in September.”
CBI has 10,000 pending cases: Director
Ghaziabad: About 10,000 criminal cases are pending with the Central Bureau of Investigation (CBI) due to severe shortage of staff, the probe agency's chief said here Saturday. CBI Director A.P. Singh said: 'We are short of officers. At least 30 percent of the posts within the CBI are vacant. The central and state governments are also not meeting our requirement through deputation of additional officers. We are loaded with the fresh cases from states, the union government and from the courts.' The director was the chief guest at the investiture ceremony of sub-inspectors at the CBI Academy here. He said that it had become the Herculean task for the agency to deal with the finance related crimes. 'We had requested the Reserve Bank of India (RBI) to provide us some skilled officers to deal with the financial crimes. But the RBI also had shown its inability to provide such skilled staff. Hence about 10,000 criminal cases are still pending,' the officer said. He said the agency is hopeful of early disposal of its cases as 71 new special CBI courts are being set up across the country.
Saturday, May 7, 2011
ICICI, five PSU banks hike rates
| Mumbai, May 6: ICICI Bank and five state-owned banks today raised their lending rates by about 50 basis points each, making auto, home and other loans expensive. The Union Bank of India, Indian Overseas Bank, the United Bank of India, Andhra Bank and the State Bank of Bikaner and Jaipur are the public sector banks that raised interest rates today. The decision of the banks to raise rates comes within days of the Reserve Bank increasing short term lending (repo) and borrowing (reverse repo) rates by 50 basis points (bps), with an aim to calm down inflation, which has hovered above the government’s comfort level. Several other banks, including Punjab National Bank, Canara Bank, the Bank of Baroda, Allahabad Bank and Indian Bank, have already increased their rates. ICICI Bank today raised its base rate by 50 bps to 9.25 per cent and the benchmark prime lending rate (BPLR) to 18 per cent. The new rates will come into effect from tomorrow, it said. A hike in lending rates will increase the cost of credit for new borrowers and the existing ones who had obtained loans at a floating interest rate. According to ICICI Bank, the floating reference rate, on the basis of which interest rates are determined for existing borrowers, will now be 15 per cent. The decision, the bank said, will not impact the customers who had obtained loans at fixed interest rate. After the hike, the base rate of the Union Bank of India, Indian Overseas Bank, the United Bank of India and Andhra Bank stands at 10 per cent. The base rate of State Bank of Bikaner and Jaipur will be 9.25 per cent. Besides, BPLR of all banks, except ICICI Bank, now stands at 14.25 per cent. The base rate system replaced the BPLR system from July 1, 2010. However, BPLR is applicable to older customers who took loans earlier. The higher lending rates would make loans dearer to both new and existing auto, home and corporate borrowers. Banks have been on a rate hike spree since the Reserve Bank’s decision to raise short-term key rates, including the repo and reverse repo by 50 basis points in its annual credit policy on May 3. The repo and reverse repo rates now stand at 7.25 and 6.25 basis points, respectively. Besides, the RBI also raised the savings bank deposit interest rate to 4 per cent from 3.5 per cent. |
'Monetary policy alone can't tackle inflation beyond a point' - Aditya Puri, HDFC Bank
Aditya Puri, managing director of the country’s second largest private sector lender, HDFC Bank, believes raising of rates would not suffice to control inflation; instead, it may slow the growth of the economy. He tells Somasroy Chakraborty how HDFC Bank plans to sustain its growth in this period of elevated interest rates.
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